Who's Buying Bank Stocks?

Apparently, the very same banks that were bailed out by the TAXPAYERS over the last six months are now the hottest properties on the stock market. For those of you out there buying these broken-down businesses stuffed with toxic debt and run by managers who are part of a criminal syndicate, all the best.

To the rest of the investing crowd, there aren't a lot of good investments out there right now, since stocks have already made a 30% move off the lows experienced in March. So, how much higher can these pricey investments go? Remember, price-earnings ratios of 15-20 are for high-fliers, not run-of-the-mill companies, many of which are actually showing signs of slowing, rather than improving.

Today's big move was based on less than nothing. There were no revelations of fresh health for the US economy, which continues to sink further into a black hole of debt and job destruction. When a market watcher as astute as Bob Brinker, host of radio show "Money Talk," says that the US economy is a "fiscal train wreck" one can only assume that more trouble is dead ahead. The light at the end of the tunnel is not a sign of hope, but the oncoming engine of destruction known as quantitative easing and inflation.

Dow 8,504.08, +235.44 (2.85%)
NASDAQ 1,732.36, +52.22 (3.11%)
S&P 500 909.71, +26.83 (3.04%)
NYSE Composite 5,865.87. +202.98 (3.58%)

Advancing issues buried decliners, 5465-1096, a better than 5-1 ratio. Today was abnormal for many reasons, but surely one has to the the extreme disparity in the A-D line. Stocks were already near a recent peak, but this activity is just more piling on to a rally that should have run out of steam long ago. The market is being played higher by big money presently. As soon as enough small investors jump in, the money flow will reverse. New highs nearly surpassed new lows today, marking the closest margin between the two in many, many months. New lows continued to hold their advantage, as they have for 19 months, 68-57. Today's volume was rather squeamish, putting a somewhat questionable tone on the big advance. Were there an actual reason for stocks to be bid higher, volume would have been more pronounced.

NYSE Volume 1,423,339,000
NASDAQ Volume 2,002,612,000

Oil gained $2.69, to $59.03. Gold was lower by $3.20, to $918.50. Silver finished down 7 cents, to $13.76.

There's still a crowd talking about the economy "bottoming out" which has provided much of the fuel of recent sentiment. Actual evidence that the economy is improving is still rather difficult to find. There haven't been this many bulls roaming Wall Street since the area was a pasture. Beware you don't get trampled as they rush out at the next reality check.

Slow Death Torture for Investors

Another down day for stocks on Friday ends just the the first negative week in the last 10, but it's the beginning of a trend which investors would be prescient to note. Stocks, in the past 10 weeks, went from falling off a cliff to overvalued. They are reverting to something resembling fair value in an orderly fashion, though nobody really has a grip on what "fair value" really means today.

In more sensible times, fair value may have been something along the lines of a stock which returns a 4-5% dividend, a price-earnings ratio of anywhere from 6-12 and a reasonably good chance at appreciating in value over time. These, however, are anything but sensible times. The US economy is on its deathbed, being kept on life support by fresh injections of capital, government entitlements (welfare, social security, disability benefits, government and military pensions, unemployment insurance, etc.) and a steady infusion of fresh capital from the Federal Reserve.

There is very little left of the private sector, and even less opportunity for new business ventures. Taxes and regulations have crowded out innovation, and that condition will only worsen as the current crop of legislators in Washington work to codify everything from health care to working conditions in every business with more than five employees. More than half of the country's GDP is a product of government spending, much of it on borrowed money. And the money being borrowed is probably not going to be paid back.

As for the social programs - Social Security and Medicare - if you are under 50 years of age, you might as well kiss that money you contribute every week goodbye, because there is absolutely no way on earth that the government will be able to fulfill those obligations. As the economy shrinks, less tax revenue will be collected and these programs will be cut back severely. America is being purposely devolved into a third-world nation, complete with unpayable debts, widespread poverty and a gap between rich and poor wider than the Grand Canyon.

For those of you still investing in corporate America via stocks or mutual funds, we wish you only the best of luck. You would be better served playing the horses or betting on sporting events. At least there you have a fighting chance. Once the summer is over and it becomes clear that the economy is mired in a semi-permanent state of stagnation, the stock market will fall like dandruff from a bum's locks. After the slow decline back to the 6500 level on the Dow, the plunge to below 5000 will be swift and fatal.

Some companies will survive, but a wave of bankruptcies will make the current hilarity of GM and Chrysler look like a summertime picnic.

Dow 8,268.64, -62.68 (0.75%)
NASDAQ 1,680.14, -9.07 (0.54%)
S&P 500 882.88, -10.19 (1.14%)
NYSE Composite 5,662.89, -70.56 (1.23%)

On Friday, declining issues outnumbered advancing ones, 5017-2392. New lows: 65; New highs: 16. Volume was poor. Everybody wants to hold here, though some are taking profits. Faith in the markets is a very dangerous virtue.

NYSE Volume 1,480,708,000
NASDAQ Volume 2,214,244,000

Finally, the market is beginning to reawaken to the new reality of slack demand. Oil fell $2.28, to $56.34, which is still probably $10-20 higher than what the real price should be. Gold advanced again, gaining $2.90, to $931.30. Silver slipped a bit, down 3 cents, to $14.01. Most other energy and food commodities were lower on the day.

The feds offered more bailout money to a variety of insurance companies, though a few say they don't want the money. Still, how many more companies involved in the dirty money dealing is the government going to give taxpayer funds? The bill is already too high, but the feds seem to know no limit to America's largess. The absurdity continues to amaze fundamentalist economists.

To get a grip on where we're heading, one need look no further than April's CPI numbers, which fell by 0.7% year-over-year, the largest decline since the mid-50s. The deflationary spiral which began at least 18 months ago (don't believe the government numbers) is now gathering momentum. Pricing power for companies is kaput. Deflation, hated by the Fed, may be the only true salvation for the nation.

A sign of the times comes from the Buffalo News, in a story about billionaire Tom Golisano, who made his fortune by founding and running Rochester-based Paychex, Inc. (PAYX). Golisano, long a critic of NY politics and unions, announced that he was leaving the state and moving to Florida, saying he will save $13,000 a day in taxes. That amounts to a revenue loss of $4,745,000 over a year's time.

Golisano is not alone. Radio talk show host Rush Limbaugh has already stated that he too would leave the state. Truth of the matter for Mr. Limbaugh is that he spends little time in the state, but has various businesses registered there. With the exodus of rich folks from the state, one might as well throw budget estimates out the window.

Enjoy the Preakness tomorrow. That filly is a good one.

A Bounce for Good Luck

If you're scoring at home - or even if you're alone - stocks spent the entire session trading in a narrow range to the positive side of the ledger. In the longer outlook, today's trading meant absolutely nothing. In the short term, it may have meant even less. After hearing that unemployment claims were "unexpectedly" higher - by a good amount - the crooked traders who control probably half the volume on a daily basis made sure to keep the indices from falling again, as would have been the normal reaction.

The usual suspects expected fresh unemployment claims to come in at around 580,000, which would have been the lowest in months. Instead, the Labor Dept. reported 637,000 new filings, putting to rest all the cheerleading about an early recovery, at least for the day. PPI also showed a slight increase - up 0.3%, which, supposedly, was hailed as good news. In the upside-down world that is Wall Street, any inflationary pressure is considered "healthy," when in fact, deflation has set upon US markets like a swarm of angry bees.

Dow 8,331.32, +46.43 (0.56%)
NASDAQ 1,689.21, +25.02 (1.50%)
S&P 500 893.07, +9.15 (1.04%)
NYSE Composite 5,733.45, +66.98 (1.18%)

One can hardly blame the criminal syndicate banksters for having to control everything from money supply to the ups and downs in the markets; they are, for the most part, broke, and holding onto $ trillions in near-worthless assets, hiding them from public view with the assistance from the corrupt and morally-bankrupt Obama administration (yes, I voted for the man, and, yes, I am severely disappointed up to this point).

Advancing issues kicked past decliners, 4510-1914. New lows showed better than new highs, 71-17. Volume was somewhat sluggish, yet another indication of the scared mood which has befallen the formerly great and glorious brokerages.

NYSE Volume 1,525,371,000
NASDAQ Volume 2,205,699,000

With stocks barely budging, commodity trading nearly ground to a halt. Oil was up a mere 2 cents, to $58.68; gold gained $2.50, to $928.40; silver also upped the ante 2 cents, to $14.04.

In related news, Chrysler told bankruptcy officers that they plan to close 789 dealerships across the country, which should result in the loss of jobs for about 14,000 employees nationwide. Chrysler plans to close more dealerships as it wades through its bankruptcy filing. With that news, GM's restructuring plan faces a deadline in just 16 more days, or it too will be forced into a similar situation.

Might as well face facts, Americans. The only stable US car manufacturer left standing is going to be Ford, and they're not doing a bang-up business themselves. Just keep following the lead of the Obama administration to certain economic destruction. It's coming to a mall, car dealership or municipal government near you, soon.

'Green Shoots' Shot Down

For weeks we've been hearing about how the economy is improving, though the data released hardly supported the theory.

Many economic numbers were slightly better than anticipated, and earnings for many companies beat watered-down expectations, but overall, evidence that the economy was actually on the mend was scant.

Today's release of retail sales figures for April sent investors scurrying to take profits and close down option positions en masse. Retail sales were off 0.4%, when expectations were a decline of just 0.2%. March figures were also revised lower. As those numbers hit the street prior to the market's opening, selling commenced right from the opening bell and didn't ease up much all day.

Separately, a report from Realty-Trac showed foreclosures hitting yet another record in April.

Dow 8,284.89, -184.22 (2.18%)
NASDAQ 1,664.19, -51.73 (3.01%)
S&P 500 883.92. -24.43 (2.69%)
NYSE Composite 5,666.47, -192.67 (3.29%)

The broad-based decline was confirmed by market internals. Decliners were handily ahead of advancing issues, 5602-936. The 6-1 ratio was the worst since the markets were bottoming out in early March. The steadfast new lows - new highs ratio remained stubbornly tilted downward, with 76 new lows to a mere 16 new highs, also a low number of new highs not evidenced since March. Volume was not fantastic, but solid and mostly on the sell side.

NYSE Volume 1,766,071,000
NASDAQ Volume 2,404,441,000

Crude oil fell 23 cents, to close at $57.79. Gold fluctuated, eventually finishing $2.00 higher, at $925.90. Silver took a breather after a more than $1.00 week-long run up, losing 20 cents, to $14.02.

The S&P fell for the third straight session, the longest such streak since a five-day losing skein February 24 - March 3. The consecutive declines are a strong signal of general weakness, as investors and working people struggle for clarity.

Just a week after the much-ballyhooed bank "stress tests" the markets seem to have soured, as rosy predictions of a quick turnaround have given way to more disciplined and rigorous outlooks that see the USA struggling for years to come. Government efforts to conceal bank losses have not be lost on average Americans, who feel short-changed, cheated and lied to by bankers and the political elite.

Investing over the past two months time has been an effort in near-total delusion. The US economy cannot be seen as improving when the Federal Reserve is monetizing Treasury debt as the federal government piles up mountains of unpayable notes overwhelming the public. Foreign investors have seriously curtailed Treasury purchases, especially China.

To make matters worse, the Obama administration seems hell-bent on socializing industry and demolishing what little is left of American entrepreneurism with odious taxes, regulations and heavy-handed wealth redistribution measures. Without a clear reversal of policy - from tax and spend to fiscal austerity - from government at all levels, the American public will continue to lose faith in government's promise to repair the private sector. Further Keynesian tinkering by the Fed and Treasury will only result in a deeper and longer lasting depression.

Make no doubt about it. We entered dangerous waters in 2007 and conditions have only worsened since. Government efforts to revive the economy with the magic bullet of increasing money supply and handouts have thus far only made the situation worse. Beware the summer months, but be even more attuned to the period between August and October. If real progress has not been made by then, expect living conditions in many US cities to deteriorate to near-third world status.

No Stopping the Industrial Giants

The stock markets are rigged. There, I said it. somebody mentioned that Goldman Sachs handles 20% of all the trades on the NYSE and NASDAQ exchanges. I tend to believe that, especially considering how one-sided the markets have become over the past two months.

It's a one-way bet, just like it was during the post-9/11 era, or, actually, as soon as the Iraq war began. Everything just keeps going up.

Now, I have nothing against profitable trading, I just think profits should be made by investing in companies with good fundamentals, growing earnings, dividends, things like that. The biggest leaders of the recent climb have been banks, many of which were on the brink of failure just a few months back, and were saved by infusions of cash from taxpayers.

That's not what I call sustainable or sound business. Eventually, I will be found to have been right all along. It will become apparent that Citigroup and Bank of America are insolvent. That JP Morgan has too much derivative exposure that they don't like to talk about, and that Goldman Sachs does manipulate the market at the behest of the Federal Reserve, itself a chimera of an organization, one which creates currency out of thin air. How can that be a viable business?

Others agree with me that the "dead cat bounce" has been overdone. Here's one.

Then there's talk of Social Security and Medicare going belly-up before they're supposed to. Well, even the idea that they are going to go broke should be cause enough to reform or dispose of these awful entitlements which are bankrupting the country, turning productive people and resources into wards of the state and, though they provide capital into the system, are nothing more than the manifestation of the worst form of the welfare state.

Dow 8,469.11, +50.34 (0.60%)
NASDAQ 1,715.92, -15.32 (0.88%)
S&P 500 908.35, -0.89 (0.10%)
NYSE Composite 5,859.14, +9.84 (0.17%)

Yesterday, I was reporting how the NASDAQ stocks fared much better than their counterpart indices. Today the opposite is the case, with Dow stocks leading the way. So, which is it? Old, stodgy industrials or new-age tech companies at which we should be throwing our money? Neither is likely the case. Gold or silver will outperform them both, as they have for the past five years.

Just to confuse matters further on one of the more confounding sessions of late, declining issues dominated advancers, 3885-2650. New lows: 73; New highs: 38. Volume was light.

NYSE Volume 1,611,161,000
NASDAQ Volume 2,529,090,000

The government continues to borrow and spend at a record-shattering pace. Americans will be paying through their eyeteeth until their dying breath just for the money being wasted trying to prevent the economy falling into an orderly and well-deserved depression. All they're doing is delaying the inevitable and making matters worse. The luckiest people on the planet today are those who know they don't have long to live. They won't be around to witness or deal with the devastation.

Crude oil was up another 35 cents, to $58.69, but gold gained more, rising $10.40, to $923.90. Silver shot up another 31 cents, to $14.22. They're probably all overpriced, but especially oil. When PPI and CPI figures are released later this week, there's likely to be some pull-back in all commodity prices. The economy is still just puttering along at a snail's pace. Growth is more than 9 months away.

Bonds were unmoved and the dollar was descending last we noticed.