Regular readers of this blog will note that I have been completely wrong about the current stock market rally for more than a month. I apologize for any disservice I may have done to otherwise level-headed investors, but my position remains the same. This is a bear market rally, and, as such, any gains are subject to being wiped out at a moment's notice.
That said, I have and will try my level best to temper my opinion with facts and the facts should be sufficiently clear by now that the economy is far from any real recovery. It is also my opinion that the bottom reached in March was not the absolute bottom and that there are further hurdles ahead for stocks and the general economy.
One of those hurdles was pushed back a bit further, for a second or third time. I am talking about the release of the government stress test results on 19 of the nation's largest banking institutions. The release of this information has been pushed back to Thursday of this week. They were originally to be made public today.
The government's continued coddling of the banks and closeness to them is disconcerting, not only to me, but to a good number of economists and especially to Senator Dick Durbin, who last week announced that the banks "own the place," that place being the US congress.
So, just to be clear, I am mistrustful of Wall Street's ways and will continue to proclaim this rally as false. For more interesting reading on how corrupt the government and the banks have become, check out Rob Kirby's Market Observation from April 20, called "The Big Lie" in which he points out that foreign investors have already stopped buying US Treasuries and that the Federal Reserve likely has been engaged in more buying of Treasuries than the American public is being told.
With that information in hand, we may be witnessing the beginning of a great reflation of the economy. with stocks going up, commodities, and then, everything else (except wages, of course) will rise in price. Such a scenario - which the Fed is actively promoting - will signal the death knell of America as we once knew it. You will need to own more stocks at higher and higher prices just to keep up with the gallop of inflation. It is the worst of my fears. I would much rather see deflation take firm hold because at least it keeps food, fuel and other necessities of day-to-day living affordable.
Stocks were sent soaring on Monday after data showed construction spending and home sales both higher from the previous month.
While the pair of data sets were encouraging to many on Wall Street, closer inspection of the construction spending data showed that most of the increases were in commercial and government spending, not residential. The increase was likely the result of the nearly $1 Trillion federal stimulus bill, passed in February and now hitting the mainstream and Main Street. Despite the rise, construction spending - up a whopping 0.3% in March - is still 11.1% below 2008 levels.
And while more people may be buying existing homes, they are buying them for lower prices, with investors scooping up foreclosed properties as investments.
Nonetheless, investors looked the other way on any bad news, as they have for the past 8 weeks and sent stocks soaring to 4 month highs. Of the major indices, the NASDAQ and S&P 500 are now in positive territory for the year, though the dow is getting closer, having closed at 8776.39 on December 31, 2008.
Dow 8,426.74, +214.33 (2.61%)
NASDAQ 1,763.56, +44.36 (2.58%)
S&P 500 907.24, +29.72 (3.39%)
NYSE Compos 5,800.22, +231.46 (4.16%)
For the session, advancing issues far exceeded decliners, 5333-1261. New lows retained their edge over new highs, however, 101-66. Volume ticked up somewhat from last week's subdued levels, and it remains to be seen if investor interest will remain strong at such lofty levels. The odd characteristic of this rally is that there has been no significant pull-back at any juncture, somewhat difficult to believe in the current economic environment.
NYSE Volume 1,714,092,000
NASDAQ Volume 2,554,642,000
Commodities plowed ahead as well, with oil gaining $1.27, to $54.52. Gold rose $14.00, to $902.20, with silver adding 61 cents to settle at $13.11. Foodstuffs were mixed, but all energy-related commodities shot higher.
So, Wall Street has sounded the "all clear" once again and investors have responded like sheep instead of thinking, rational beings.
Here's Art Cashin on CNBC, talking about low volume rallies in bear markets and whether or not the markets are about to "roll over."
Monday, May 4, 2009
Friday, May 1, 2009
Despite Conditions, Stocks Continue to Gain
May came in with a whimper, but investors continued to bid stocks higher, despite continuing evidence that the financial underpinnings of the US economy is nowhere near any condition even remotely resembling healthy.
Economic reports were hardly encouraging. Factory orders for March fell more than expected, off 0.9%, when the anticipation was for a modest decline of 0.4. Additionally, the February figures were revised lower, from a gain of 1.8% to just 0.7% higher. Auto sales continued to slump. The major manufacturers reported another poor month, with overall sales down 30-40% from a year ago. Chrysler led the decline, with sales off by 48% in April. Ford and GM reported sales down 33% for the month.
Also, after the close, the FDIC shut down two banks, one in Georgia and one in New Jersey, bringing the number of bank closures this year to 31. 25 banks were shut down by government regulators in 2008.
Dow 8,212.41, +44.29 (0.54%)
NASDAQ 1,719.20, +1.90 (0.11%)
S&P 500 877.52, +4.71 (0.54%)
NYSE Composite 5,568.76, +55.40 (1.00%)
Still, investors insisted on keeping the rally going for the 8th week out of 9 for the Dow and S&P, and 9 straight for the NASDAQ. Advancing issues beat decliners, 3739-2721, but there were more new lows than highs, 77-32. Volume was dull, especially for a Friday.
NYSE Volume 1,335,943,500
NASDAQ Volume 2,152,036,000
The price of crude oil shot up $2.08, to $53.20, as is customary this time of year, though demand does not in any way warrant consumers paying more than $2.00 per gallon at the pump, which has been the case for some time. While the argument - that people drive more in warmer weather - is traditionally correct, current oversupply conditions indicate a lower price would be customary, though in the world of rigged markets, such as the consortium of five major oil companies controlling the price of gasoline worldwide, prices have remained at elevated levels, though certainly not those seen last summer.
Gold fell $3.00, to $888.20, and silver gained 18 cents, to close at $12.50 the ounce.
With another week of stock market gains in the books, one must realistically question the wisdom of buying stocks at this point. Stocks generally lag during the summer months and the major indices are up anywhere from 25-30% off their March lows. If economic recovery is at hand, then these prices and gains may be justified. However, most of the reportage of late has been very one-sided, nearly assuming that the recession/depression will be over and done with by the end of summer or early autumn.
That is quite a bit of wishful thinking, and the views of the cheerleaders in the financial media - whose job it is to promote investment in Wall Street stocks - can hardly be seen as unbiased. Realistic assumptions about the economy and its effect on publicly-traded companies should be made without the requisite commentary. In that regard, one cannot honestly suggest that economic conditions have improved to such a significant degree as to proclaim "recovery at hand," as many commentators have done during the course of this bear market rally.
Only time, and stock prices will tell whether investors were making wise bets during the past two months. It is usually understood that stocks climb a "wall of worry" even in the best of times. This current rally seems to have been built upon much misplaced hope and enthusiasm. It has been quick, abrupt and powerful, not what one would expect after such a precipitous decline.
The coming weeks and months will be interesting, indeed. The fireworks begin in earnest on Monday, when the government releases the results of their bank "stress tests." The weight of Chrysler's bankruptcy - and the fate of GM, soon to be determined - will also play a larger role in the direction of stocks.
Economic reports were hardly encouraging. Factory orders for March fell more than expected, off 0.9%, when the anticipation was for a modest decline of 0.4. Additionally, the February figures were revised lower, from a gain of 1.8% to just 0.7% higher. Auto sales continued to slump. The major manufacturers reported another poor month, with overall sales down 30-40% from a year ago. Chrysler led the decline, with sales off by 48% in April. Ford and GM reported sales down 33% for the month.
Also, after the close, the FDIC shut down two banks, one in Georgia and one in New Jersey, bringing the number of bank closures this year to 31. 25 banks were shut down by government regulators in 2008.
Dow 8,212.41, +44.29 (0.54%)
NASDAQ 1,719.20, +1.90 (0.11%)
S&P 500 877.52, +4.71 (0.54%)
NYSE Composite 5,568.76, +55.40 (1.00%)
Still, investors insisted on keeping the rally going for the 8th week out of 9 for the Dow and S&P, and 9 straight for the NASDAQ. Advancing issues beat decliners, 3739-2721, but there were more new lows than highs, 77-32. Volume was dull, especially for a Friday.
NYSE Volume 1,335,943,500
NASDAQ Volume 2,152,036,000
The price of crude oil shot up $2.08, to $53.20, as is customary this time of year, though demand does not in any way warrant consumers paying more than $2.00 per gallon at the pump, which has been the case for some time. While the argument - that people drive more in warmer weather - is traditionally correct, current oversupply conditions indicate a lower price would be customary, though in the world of rigged markets, such as the consortium of five major oil companies controlling the price of gasoline worldwide, prices have remained at elevated levels, though certainly not those seen last summer.
Gold fell $3.00, to $888.20, and silver gained 18 cents, to close at $12.50 the ounce.
With another week of stock market gains in the books, one must realistically question the wisdom of buying stocks at this point. Stocks generally lag during the summer months and the major indices are up anywhere from 25-30% off their March lows. If economic recovery is at hand, then these prices and gains may be justified. However, most of the reportage of late has been very one-sided, nearly assuming that the recession/depression will be over and done with by the end of summer or early autumn.
That is quite a bit of wishful thinking, and the views of the cheerleaders in the financial media - whose job it is to promote investment in Wall Street stocks - can hardly be seen as unbiased. Realistic assumptions about the economy and its effect on publicly-traded companies should be made without the requisite commentary. In that regard, one cannot honestly suggest that economic conditions have improved to such a significant degree as to proclaim "recovery at hand," as many commentators have done during the course of this bear market rally.
Only time, and stock prices will tell whether investors were making wise bets during the past two months. It is usually understood that stocks climb a "wall of worry" even in the best of times. This current rally seems to have been built upon much misplaced hope and enthusiasm. It has been quick, abrupt and powerful, not what one would expect after such a precipitous decline.
The coming weeks and months will be interesting, indeed. The fireworks begin in earnest on Monday, when the government releases the results of their bank "stress tests." The weight of Chrysler's bankruptcy - and the fate of GM, soon to be determined - will also play a larger role in the direction of stocks.
Thursday, April 30, 2009
Turn of the Screw? Markets Start Higher, End Lower
After yesterday's extraordinary move forward, there was a sense - by the end of the session - that the rally had finally reached a turning point. Early on Thursday, however, not everyone was convinced as employment data seemed to indicate a further strengthening in the economy. But, even though first-time claims were lower, they were still at extreme levels. 631,000 Americans filed for unemployment insurance in the most recent week.
As much as anyone wanted to call that number "improvement," long-time market watchers and economists warned against extended confidence. Additionally, the failure of Chrysler to secure a merger with Fiat without heading to bankruptcy court first, sent shivers through the markets.
Shortly after 11:00 am, the bloom was off the rose. The Dow peaked above 8300 briefly, but sold off for the remainder of the day with the other major indices suffering similar fates. By the end of the day, only the NASDAQ was showing a positive result.
Dow 8,168.12, -17.61 (0.22%)
NASDAQ 1,717.30, +5.36 (0.31%)
S&P 500 872.81, -0.83 (0.10%)
NYSE Composite 5,513.36, -2.78 (0.05%)
While the losses were marginal, the turn in sentiment was noticeable, especially after weeks of gains. Anybody entering the market on the long side today was hoping against reality that the economy would continue to improve and stocks would not slide back to depressed levels.
The Chrysler story topped even the growing concern over the swine flu pandemic, which spread to more states and more countries as the day wore on. With closures of schools in Texas and elsewhere, residents in the heartland are more concerned over the future of their employment. Chrysler's demise and involuntary bankruptcy may cost tens of thousands of auto workers their jobs and ripple throughout the already weakened economy.
By the end of the session, advancing issues - thanks largely to the relative strength of small caps on the NYSE - beat decliners, 3485-3027. New lows once more finished ahead of new highs, 99-50. It was the highest number of new lows in more than a week, and the trend of more new lows than highs on a daily basis continued unabated for what now has become a span of 19 consecutive months, dating back to October, 2007. Trading volume was elevated, though not extreme.
NYSE Volume 1,740,450,000
NASDAQ Volume 2,845,180,000
Commodity markets felt the pain as well. Oil was down 24 cents, to $50.88. Gold fell $9.30, to $891.20, while silver slid 45 cents to $12.33. There was not much to get excited over, either in stocks or commodities. Chrysler's demise has cast a new pallor over the entire economy.
Stocks have been pushing the limits of this rally in recent days and it now appears certain to all but the most optimistic that further deterioration to the economy is dead ahead. Most of the companies which beat street estimates were beating lowered expectations and many of those same companies have slashed dividends or didn't supply them in the first place. Chrysler's condition is almost certain to result in more layoffs, which can only erode the economic landscape further.
After first quarter GDP was reported at a loss of 6.1% on Wednesday, some investors took that as a sign of improvement, since the 4th quarter of '08 checked in with a loss of 6.3%. While the most recent figures are subject to revision, there's every chance that the economy could have retrenched by an even larger amount.
In this kind of economic climate, it has been difficult to watch stocks gain so rapidly, armed with knowledge instead of hope and the cheerleading of the noise-machine at CNBC and Fox Financial Network (FNN). It finally appears that more reasonable expectations are going to have a hearing. In the course of the past two months, stocks have gone from falling off the planet to an overbought condition. With the consideration that this recession could still turn worse, into a full-fledged depression, the rapidity of investors bailing out of stocks could surprise many.
The US economy has suffered severe structural damage. It is still unclear whether the nation's largest banks are insolvent or otherwise incapable of leading the country out of this corrective period. Further, the will of the American people has been sorely tested and they are not in any kind of mood for more bank bailouts while workers are idled and state and municipal budgets are stressed.
We may be facing a real paradigm change in how much faith we will place in institutions going forward.
As much as anyone wanted to call that number "improvement," long-time market watchers and economists warned against extended confidence. Additionally, the failure of Chrysler to secure a merger with Fiat without heading to bankruptcy court first, sent shivers through the markets.
Shortly after 11:00 am, the bloom was off the rose. The Dow peaked above 8300 briefly, but sold off for the remainder of the day with the other major indices suffering similar fates. By the end of the day, only the NASDAQ was showing a positive result.
Dow 8,168.12, -17.61 (0.22%)
NASDAQ 1,717.30, +5.36 (0.31%)
S&P 500 872.81, -0.83 (0.10%)
NYSE Composite 5,513.36, -2.78 (0.05%)
While the losses were marginal, the turn in sentiment was noticeable, especially after weeks of gains. Anybody entering the market on the long side today was hoping against reality that the economy would continue to improve and stocks would not slide back to depressed levels.
The Chrysler story topped even the growing concern over the swine flu pandemic, which spread to more states and more countries as the day wore on. With closures of schools in Texas and elsewhere, residents in the heartland are more concerned over the future of their employment. Chrysler's demise and involuntary bankruptcy may cost tens of thousands of auto workers their jobs and ripple throughout the already weakened economy.
By the end of the session, advancing issues - thanks largely to the relative strength of small caps on the NYSE - beat decliners, 3485-3027. New lows once more finished ahead of new highs, 99-50. It was the highest number of new lows in more than a week, and the trend of more new lows than highs on a daily basis continued unabated for what now has become a span of 19 consecutive months, dating back to October, 2007. Trading volume was elevated, though not extreme.
NYSE Volume 1,740,450,000
NASDAQ Volume 2,845,180,000
Commodity markets felt the pain as well. Oil was down 24 cents, to $50.88. Gold fell $9.30, to $891.20, while silver slid 45 cents to $12.33. There was not much to get excited over, either in stocks or commodities. Chrysler's demise has cast a new pallor over the entire economy.
Stocks have been pushing the limits of this rally in recent days and it now appears certain to all but the most optimistic that further deterioration to the economy is dead ahead. Most of the companies which beat street estimates were beating lowered expectations and many of those same companies have slashed dividends or didn't supply them in the first place. Chrysler's condition is almost certain to result in more layoffs, which can only erode the economic landscape further.
After first quarter GDP was reported at a loss of 6.1% on Wednesday, some investors took that as a sign of improvement, since the 4th quarter of '08 checked in with a loss of 6.3%. While the most recent figures are subject to revision, there's every chance that the economy could have retrenched by an even larger amount.
In this kind of economic climate, it has been difficult to watch stocks gain so rapidly, armed with knowledge instead of hope and the cheerleading of the noise-machine at CNBC and Fox Financial Network (FNN). It finally appears that more reasonable expectations are going to have a hearing. In the course of the past two months, stocks have gone from falling off the planet to an overbought condition. With the consideration that this recession could still turn worse, into a full-fledged depression, the rapidity of investors bailing out of stocks could surprise many.
The US economy has suffered severe structural damage. It is still unclear whether the nation's largest banks are insolvent or otherwise incapable of leading the country out of this corrective period. Further, the will of the American people has been sorely tested and they are not in any kind of mood for more bank bailouts while workers are idled and state and municipal budgets are stressed.
We may be facing a real paradigm change in how much faith we will place in institutions going forward.
Wednesday, April 29, 2009
Preparing For the Next Crash
One would have assumed that if 1st quarter GDP had come in worse than expected this morning - expectations were around -5%, the actual figure was -6.1% - that stocks would sell off.
One would have been wrong - very wrong - as the market merely shrugged off another indication that the recession was worsening and headed off to new heights. This makes trading stocks on fundamentals, or even economic conditions, not only difficult, but impossible. Every day there are new signs that the economy is mired in a negative-growth trench, yet stocks continue to rally, seemingly without end.
Today's activity was probably the most remarkable event of the past two months, noting the considerable obstacles to economic growth standing in the way, huge unemployment numbers, continued weakness in residential housing and now commercial real estate and the continuing saga of the spreading Swine Flu.
It was remarkable in that while stocks were poised to jump start at the open even before the 8:30 am release of 1st quarter GDP figures, but even more remarkable in that stock futures didn't even blink when it was revealed that actual GDP was falling at a faster rate than anticipated. One can only assume that insiders already knew the figures or had already decided the day's direction for stocks and would not be dissuaded regardless of reality. Had the actual NY stock exchange been blown to bits, traders would still have pushed stocks higher, such was the plan for the day.
It's a scam, a complete and total rigging by the controllers of the market and the country. In the end they will bankrupt all of us, but for now, they are in the business of pushing stock prices higher. It will not last. It cannot last. The fundamentals of the economy are entirely too weak to sustain stock valuations bordering on the absurd.
Making matters even more ridiculous, the Fed announced no change in interest rate policy - widely expected - but hinted that there were signs of "recovery" in the US economy. Though the press release announcing that the Federal Funds rate would remain between 0 and 0.25% (read: free money) was among the shortest on record, the following passage provided more insight than any other verbiage in the text:
Reading that sentence carefully, the Committee (FOMC: Federal Open Market Committee) is trying to avoid using the word "deflation," which is occurring across a wide swath of the economic landscape. They are also trying to rectify "inflation" and "price stability." In other words, the Fed isn't really promoting "price stability" as they are so chartered. They are hell-bent on inducing inflation, the very same inflation that has wrecked our economy for so many years, for as long as the Federal Reserve has operated as the nation's central bank there has been unstoppable, rampant inflation which has destroyed the value of the dollar and kept wages at poverty levels for a majority of the working population.
They simply cannot have inflation and price stability at the same time. The two are not polar opposites - inflation and deflation are - but price stability means equilibrium, a condition which spells death for the US economy, built on debt and tied inexorably to inflation and wealth destruction.
So, it is time to prepare for the next crash, which, in light of current economic policies of the Fed, is inevitable. The market's aberrant behavior is sending the strongest sell signal I've ever seen, violating all manner of resistance in charts and basic fundamental trading regimens.
It is time to unload all stocks, at once, because the retracement back to the March lows will commence shortly.
I wrote the above line at 3:03 pm EDT, after the Dow peaked at 8250 and was beginning to retreat. By the end of the day, the sell-off was in full bloom, just before last-minute buying punched stocks ahead right at the close (painting the tape).
Dow 8,185.73, +168.78 (2.11%)
NASDAQ 1,711.94, +38.13 (2.28%)
S&P 500 873.64, +18.48 (2.16%)
NYSE Composite 5,516.14, +146.29 (2.72%)
Just to illuminate my position that the recent advances in stock prices are unsustainable, below are some of the headlines for today, with links to the underlying articles:
CNN Money: Economy falls much more than expected
Associated Press: Jobless rates rise in all US metro areas in March
Reuters: U.S. to pay off mortgage investors
Do any of those headlines encourage you enough to go out and buy stocks? No? I didn't think so. The economy is sinking into a black hole, the United States is becoming even more of a welfare state than it already was and hope for lasting, robust recovery is nothing more than a fantasy. If you don't think so, I encourage you to read this exceptional article: Economic Obsolescence, by Andrew McKillop. Be forewarned. It is quite deep and lengthy, but filled with insights and observations you won't find on CNBC or any other fraudulent financial reporting service.
My message is simple. Wall Street, stocks, retirement plans, 401k plans and the like are a scam. You're better off investing in your own home, planting a garden, cutting your expenses and going back to a simpler lifestyle. However, depending upon where you live, you may need high walls and security devices to keep out intruders, because many of the people in the USA are going to face horrific economic conditions over the next 6-12 years. Six years of pain and no growth are in the cards at a minimum. Higher taxes, higher crime rates, rioting, corruption in government and an overwhelming debt burden on families and the government are inevitable. Bank failures have thus far been avoided only due to manipulation and intervention by the Fed and general obfuscation and outright lying by both the Treasury and the banksters (bank gangsters).
The longer we hand out money to the undeserving - be they banks or welfare recipients - the longer it will take and the harder it will be to restore any semblance of a functioning economy. Right now, the economy is on extended life support, but the patient, for all intents and purposes, is a vegetable, incapable of ever returning to a functional lifestyle. The government bailouts and stimulus plans, plus the heavy debt imposed by the upcoming federal budget, is tantamount to throwing money into a blazing bonfire. It will all go for naught, not for investment, and therefore will result in DEFLATION, not inflation, a point sorely missed by the ignorant morons at the Fed and at the top positions of government. Their actions are making the road to recovery longer and actually exacerbating the depth of the depression.
There is good news. The country formerly known as the land of the free and the home of the brave is now full of people living on government hand-outs, with steady incomes and no clue as to value. And don't believe that just welfare recipients - those with the plasma TVs, all the cable channels and usually a late-model car in the driveway - are alone in their status of money-takers. Add to it anybody on any government payroll anywhere: cops, teachers, mayors, social service workers; and retirees on military pensions, social security, what have you. There has never been a better time to screw people out of their money. The nation is full of dupes, dopes, pigeons and rubes, standing in line to be taken directly to the cleaners. That is the end result of the welfare state, where money is disrespected because it was not earned.
So, if you have an idea and some motivation, crooked or honest, you should do well. People just can't stop spending and the government is actually encouraging waste on a gigantic scale. The money is out there. You just need to go get it.
On the day, internals were mixed, though advancing issues outnumbered declining ones by a wide margin, 5233-1265. New highs came close to overtaking new lows, but failed with 93 new 52-week lows being reported to 55 new highs. Both numbers are elevated from previous readings but have not diverged significantly. They will - one way or the other - soon. A breakout or breakdown is overdue.
NYSE Volume 8,913,934,000
NASDAQ Volume 2,361,983,750
Commodities were mostly higher. Oil gained $1.05, to $50.80. Gold was up $6.90, to $900.50. Silver gained 35 cents, to $12.78. Pork bellies sold off, down $1.93, to $75.88 per pound, though live hog prices stabilized and were actually moderately higher.
Make no doubt about it. Today's late-day sell-off was just the opening salvo. Volume spiked incredibly after 2:30, when the Dow lost more than 100 points into the close. The selling will accelerate soon, maybe tomorrow, maybe Friday, maybe not even until next week, but it will come and it will be swift and severe. Count on it.
Keep an eye on the equally-bogus "swine flu pandemic" which will be blamed for the coming market downturn. More deaths will be caused by trying to prevent the disease - watch how Tamiflu and other medicines will be promoted - and the sure-to-come vaccine, than the disease itself, though the media will not report that fact.
One would have been wrong - very wrong - as the market merely shrugged off another indication that the recession was worsening and headed off to new heights. This makes trading stocks on fundamentals, or even economic conditions, not only difficult, but impossible. Every day there are new signs that the economy is mired in a negative-growth trench, yet stocks continue to rally, seemingly without end.
Today's activity was probably the most remarkable event of the past two months, noting the considerable obstacles to economic growth standing in the way, huge unemployment numbers, continued weakness in residential housing and now commercial real estate and the continuing saga of the spreading Swine Flu.
It was remarkable in that while stocks were poised to jump start at the open even before the 8:30 am release of 1st quarter GDP figures, but even more remarkable in that stock futures didn't even blink when it was revealed that actual GDP was falling at a faster rate than anticipated. One can only assume that insiders already knew the figures or had already decided the day's direction for stocks and would not be dissuaded regardless of reality. Had the actual NY stock exchange been blown to bits, traders would still have pushed stocks higher, such was the plan for the day.
It's a scam, a complete and total rigging by the controllers of the market and the country. In the end they will bankrupt all of us, but for now, they are in the business of pushing stock prices higher. It will not last. It cannot last. The fundamentals of the economy are entirely too weak to sustain stock valuations bordering on the absurd.
Making matters even more ridiculous, the Fed announced no change in interest rate policy - widely expected - but hinted that there were signs of "recovery" in the US economy. Though the press release announcing that the Federal Funds rate would remain between 0 and 0.25% (read: free money) was among the shortest on record, the following passage provided more insight than any other verbiage in the text:
"In light of increasing economic slack here and abroad, the Committee expects that inflation will remain subdued. Moreover, the Committee sees some risk that inflation could persist for a time below rates that best foster economic growth and price stability in the longer term."
Reading that sentence carefully, the Committee (FOMC: Federal Open Market Committee) is trying to avoid using the word "deflation," which is occurring across a wide swath of the economic landscape. They are also trying to rectify "inflation" and "price stability." In other words, the Fed isn't really promoting "price stability" as they are so chartered. They are hell-bent on inducing inflation, the very same inflation that has wrecked our economy for so many years, for as long as the Federal Reserve has operated as the nation's central bank there has been unstoppable, rampant inflation which has destroyed the value of the dollar and kept wages at poverty levels for a majority of the working population.
They simply cannot have inflation and price stability at the same time. The two are not polar opposites - inflation and deflation are - but price stability means equilibrium, a condition which spells death for the US economy, built on debt and tied inexorably to inflation and wealth destruction.
So, it is time to prepare for the next crash, which, in light of current economic policies of the Fed, is inevitable. The market's aberrant behavior is sending the strongest sell signal I've ever seen, violating all manner of resistance in charts and basic fundamental trading regimens.
It is time to unload all stocks, at once, because the retracement back to the March lows will commence shortly.
I wrote the above line at 3:03 pm EDT, after the Dow peaked at 8250 and was beginning to retreat. By the end of the day, the sell-off was in full bloom, just before last-minute buying punched stocks ahead right at the close (painting the tape).
Dow 8,185.73, +168.78 (2.11%)
NASDAQ 1,711.94, +38.13 (2.28%)
S&P 500 873.64, +18.48 (2.16%)
NYSE Composite 5,516.14, +146.29 (2.72%)
Just to illuminate my position that the recent advances in stock prices are unsustainable, below are some of the headlines for today, with links to the underlying articles:
CNN Money: Economy falls much more than expected
Associated Press: Jobless rates rise in all US metro areas in March
Reuters: U.S. to pay off mortgage investors
Do any of those headlines encourage you enough to go out and buy stocks? No? I didn't think so. The economy is sinking into a black hole, the United States is becoming even more of a welfare state than it already was and hope for lasting, robust recovery is nothing more than a fantasy. If you don't think so, I encourage you to read this exceptional article: Economic Obsolescence, by Andrew McKillop. Be forewarned. It is quite deep and lengthy, but filled with insights and observations you won't find on CNBC or any other fraudulent financial reporting service.
My message is simple. Wall Street, stocks, retirement plans, 401k plans and the like are a scam. You're better off investing in your own home, planting a garden, cutting your expenses and going back to a simpler lifestyle. However, depending upon where you live, you may need high walls and security devices to keep out intruders, because many of the people in the USA are going to face horrific economic conditions over the next 6-12 years. Six years of pain and no growth are in the cards at a minimum. Higher taxes, higher crime rates, rioting, corruption in government and an overwhelming debt burden on families and the government are inevitable. Bank failures have thus far been avoided only due to manipulation and intervention by the Fed and general obfuscation and outright lying by both the Treasury and the banksters (bank gangsters).
The longer we hand out money to the undeserving - be they banks or welfare recipients - the longer it will take and the harder it will be to restore any semblance of a functioning economy. Right now, the economy is on extended life support, but the patient, for all intents and purposes, is a vegetable, incapable of ever returning to a functional lifestyle. The government bailouts and stimulus plans, plus the heavy debt imposed by the upcoming federal budget, is tantamount to throwing money into a blazing bonfire. It will all go for naught, not for investment, and therefore will result in DEFLATION, not inflation, a point sorely missed by the ignorant morons at the Fed and at the top positions of government. Their actions are making the road to recovery longer and actually exacerbating the depth of the depression.
There is good news. The country formerly known as the land of the free and the home of the brave is now full of people living on government hand-outs, with steady incomes and no clue as to value. And don't believe that just welfare recipients - those with the plasma TVs, all the cable channels and usually a late-model car in the driveway - are alone in their status of money-takers. Add to it anybody on any government payroll anywhere: cops, teachers, mayors, social service workers; and retirees on military pensions, social security, what have you. There has never been a better time to screw people out of their money. The nation is full of dupes, dopes, pigeons and rubes, standing in line to be taken directly to the cleaners. That is the end result of the welfare state, where money is disrespected because it was not earned.
So, if you have an idea and some motivation, crooked or honest, you should do well. People just can't stop spending and the government is actually encouraging waste on a gigantic scale. The money is out there. You just need to go get it.
On the day, internals were mixed, though advancing issues outnumbered declining ones by a wide margin, 5233-1265. New highs came close to overtaking new lows, but failed with 93 new 52-week lows being reported to 55 new highs. Both numbers are elevated from previous readings but have not diverged significantly. They will - one way or the other - soon. A breakout or breakdown is overdue.
NYSE Volume 8,913,934,000
NASDAQ Volume 2,361,983,750
Commodities were mostly higher. Oil gained $1.05, to $50.80. Gold was up $6.90, to $900.50. Silver gained 35 cents, to $12.78. Pork bellies sold off, down $1.93, to $75.88 per pound, though live hog prices stabilized and were actually moderately higher.
Make no doubt about it. Today's late-day sell-off was just the opening salvo. Volume spiked incredibly after 2:30, when the Dow lost more than 100 points into the close. The selling will accelerate soon, maybe tomorrow, maybe Friday, maybe not even until next week, but it will come and it will be swift and severe. Count on it.
Keep an eye on the equally-bogus "swine flu pandemic" which will be blamed for the coming market downturn. More deaths will be caused by trying to prevent the disease - watch how Tamiflu and other medicines will be promoted - and the sure-to-come vaccine, than the disease itself, though the media will not report that fact.
Tuesday, April 28, 2009
Live Hogs, Pork Bellies Down on Swine Flu Paranoia
Maybe I could just re-post yesterday's scribble about "trading sideways... or down", but that would be redundant. Still, just what was that market doing today? Where was the volatility, the movement, the fear factor, the monumental moves attributed to the "recovery" or earnings reports?
Today may have been the dullest day for trading stocks in many years, though it wasn't that much different than the past two. After an initial dip to 7950 - a loss of 70 points on the Dow - it quickly recovered and spent the rest of the day vacillating over and under the break even line and in between 8005 and 8090. It was a big, fat yawning festival.
While investors await either first quarter GDP (tomorrow) or more insight into the spread of swine flu (spreading fast: by this time next week, expect it to be a full blown pandemic with outbreaks in no less than 30 countries and deaths in 12), investors were pretty much stuck with what they'd bid up over the past 7 weeks, so, good luck to them. Meanwhile, there's no indication that the US and global economies are in any better condition than they were 6 months ago despite trillions of dollars n stimulus and bailouts and assorted programs.
Dow 8,016.95, -8.05 (0.10%)
NASDAQ 1,673.81, -5.60 (0.33%)
S&P 500 855.16, -2.35 (0.27%)
NYSE Composite 5,369.85, -19.98 (0.37%)
On the day, advancing issues beat out decliners, 3449-2949, and new lows surpassed new highs, 69-32. Most importantly, today was the second straight session in which volume was subdued, well below levels seen over the past few weeks of furious buying activity. We are now poised for a sell-off of major proportions. The trickle of selling the past two days will quickly turn to a raging torrent on any bad news. Investors are seeking reasons to take profits and disbelieve the "recovery" claptrap.
NYSE Volume 1,251,073,000
NASDAQ Volume 2,103,607,000
The somnambulant nature of the equity markets did not translate into commodities, where there were wild and wide price swings. Crude oil fell 22 cents, to $49.58, but bigger hits were taken in gold, down $14.60, to $893.60, silver, off 56 cents, to $12.43, lean hogs, down $2.35, to $66.30, and pork bellies, which fell $3.00, to $77.80. The falls in hogs and bellies were almost exclusively tied to swine flu paranoia, though there is absolutely no evidence that consumption of pork can lead to obtaining the flu virus.
Since markets are emotional by nature, expect what happened to pork bellies and the price of pork to occur in various other investment strata, including equities of all kinds. The argument that travel restrictions to some countries may hamper the earnings of some airlines, hotels and cruise lines may be plausible, but extending the argument - that overall swine flu fear might keep more people in their homes and away from large gatherings - takes a leap of faith.
Of course, one could blame the swine flu for further deterioration in the economy instead of admitting that the government's plans so far have failed. That's an easy one, and likely to be coming to a headline near you soon.
By 8:30 am tomorrow, when the Commerce Department releases its advance estimate on 1st quarter GDP, we should have a relatively good understanding of where we sit and how far stocks will need to be sold off. As corporate earnings dissipate from the scene, the market will be looking for other signals.
Deaths from swine flu will become a leading indicator of worldwide distress. You heard it here first.
Today may have been the dullest day for trading stocks in many years, though it wasn't that much different than the past two. After an initial dip to 7950 - a loss of 70 points on the Dow - it quickly recovered and spent the rest of the day vacillating over and under the break even line and in between 8005 and 8090. It was a big, fat yawning festival.
While investors await either first quarter GDP (tomorrow) or more insight into the spread of swine flu (spreading fast: by this time next week, expect it to be a full blown pandemic with outbreaks in no less than 30 countries and deaths in 12), investors were pretty much stuck with what they'd bid up over the past 7 weeks, so, good luck to them. Meanwhile, there's no indication that the US and global economies are in any better condition than they were 6 months ago despite trillions of dollars n stimulus and bailouts and assorted programs.
Dow 8,016.95, -8.05 (0.10%)
NASDAQ 1,673.81, -5.60 (0.33%)
S&P 500 855.16, -2.35 (0.27%)
NYSE Composite 5,369.85, -19.98 (0.37%)
On the day, advancing issues beat out decliners, 3449-2949, and new lows surpassed new highs, 69-32. Most importantly, today was the second straight session in which volume was subdued, well below levels seen over the past few weeks of furious buying activity. We are now poised for a sell-off of major proportions. The trickle of selling the past two days will quickly turn to a raging torrent on any bad news. Investors are seeking reasons to take profits and disbelieve the "recovery" claptrap.
NYSE Volume 1,251,073,000
NASDAQ Volume 2,103,607,000
The somnambulant nature of the equity markets did not translate into commodities, where there were wild and wide price swings. Crude oil fell 22 cents, to $49.58, but bigger hits were taken in gold, down $14.60, to $893.60, silver, off 56 cents, to $12.43, lean hogs, down $2.35, to $66.30, and pork bellies, which fell $3.00, to $77.80. The falls in hogs and bellies were almost exclusively tied to swine flu paranoia, though there is absolutely no evidence that consumption of pork can lead to obtaining the flu virus.
Since markets are emotional by nature, expect what happened to pork bellies and the price of pork to occur in various other investment strata, including equities of all kinds. The argument that travel restrictions to some countries may hamper the earnings of some airlines, hotels and cruise lines may be plausible, but extending the argument - that overall swine flu fear might keep more people in their homes and away from large gatherings - takes a leap of faith.
Of course, one could blame the swine flu for further deterioration in the economy instead of admitting that the government's plans so far have failed. That's an easy one, and likely to be coming to a headline near you soon.
By 8:30 am tomorrow, when the Commerce Department releases its advance estimate on 1st quarter GDP, we should have a relatively good understanding of where we sit and how far stocks will need to be sold off. As corporate earnings dissipate from the scene, the market will be looking for other signals.
Deaths from swine flu will become a leading indicator of worldwide distress. You heard it here first.
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