News from the People's Republic of China (the most Westernized Communist nation ever) that imports rose 13.2% while exports fell 21.4% in June underscored the sheer depth of worldwide trade contraction (a better word than depression, but along the same meaning). In the prior month, China's trade balance fell to a paltry $8.25 billion, a far cry from the enormous trade surplus during the mid-2000s.
Since the US economy has contracted at an alarming rate over the past year, China has suffered the consequences of being too-highly dependent upon one major trading partner. For its part, the Chinese will likely devote heavy sums of its manpower and money to infrastructure development and strengthening the domestic economy over the next two to three years, areas ripe for growth.
Compared to the US, China can outspend America for years on building new bridges, buildings, rail and highways, and not bat an economic eyelash, most of its development financed by domestic banks. To the contrary, the US has to borrow its way back to "prosperity" and doesn't have nearly the real need for new infrastructure the Chinese do, though repairing much of the existing stock is a tall order.
In the end, somewhere around 2013, China will rival the United States as the dominant economic power in the world, and they'll have done so without firing a shot - although waging a military war with the Chinese is surely a last-gasp scenario in secret DC boardrooms.
There's little doubt that China is the ascendant power of the 21st century, just as America was the powerhouse in the century prior. Now that we have shipped our manufacturing over to mainland China, there's no chance of retaining our dominant position. It will not happen overnight, or suddenly, but slowly and less painfully for US interests, but betting on America's future is a fool's gambit. Our economy is shrinking while our debt enlarges. It is a recipe for catastrophe and the winner will be China.
Also of note on the final day of the week is the call by 3 Democrat and 14 Republican House members for the Obama administration to investigate the Federal Reserve over its role in the Bank of America/Merrill Lynch merger. While the House members' move sounds interesting and potentially a blockbuster, it's more than likely nothing more than bluster and grandstanding. The Administration is not going to peer too deeply or with any grand degree of rigor into the activities of its own operatives. While there's little doubt Henry Paulson and Ben Bernanke pressured BofA to do the deal and save Merrill from bankruptcy - which would have triggered more financial fallout and stock losses - nobody in the world is going to get anyone from Treasury or the Fed to 'fess up to that dirty deed.
The news did send some shockwaves across the market, however, as stocks continued to reel for a fourth straight week. On the Dow, the 8146 finish was the lowest since April 28 and a loss of 134 points on the week. All of the major indices except the NASDAQ opened on the negative side of the ledger and stayed there throughout the session. While NASDAQ finally finished in the green, damage was limited by a late-day short-covering rally on extremely low volume.
Nine of 12 sectors were lower, with Transportation, Consumer Cyclicals and Technology the only winners.
Dow 8,146.52, -36.65 (0.45%)
Nasdaq 1,756.03, +3.48 (0.20%)
S&P 500 879.13, -3.55 (0.40%)
NYSE Composite 5,627.52, -39.85 (0.70%)
Declining issues outweighed gainers, 3227-3021, but new lows continued to dominate new highs, 99-23, on the day. Volume again was anemic, appearing to be the lowest single-day number of shares traded since the first trading day of the year, January 2.
NYSE Volume 922,061,000
NASDAQ Volume 1,673,932,000
Crude oil for August delivery closed down 52 cents, passing the psychological $60 mark, at $59.89. Gold dipped $3.70, to $912.50, with silver down 29 cents to $12.65. If one is seeking a gauge for deflation, there's likely no better place to look than to commodities, a leading indicator. They have taken some time to fully commit, but there are indications aplenty that raw material prices have fallen and are staying down. Lack of demand will continue to erode raw material prices now that China has eased up on some of its buying. If there was a time to sell commodities - especially metals and energy - it was over the last two weeks. The stampede for the exits may only be beginning.
Looking ahead to next week, which will be chock-full of earnings reports, the banking sector may predominate, as Goldman Sachs (GS), JP Morgan Chase (JPM), Citigroup (C), and Bank of America (BAC) will all issue 2nd quarter results.
Friday, July 10, 2009
Thursday, July 9, 2009
Why Debate? The Economy Stinks, So Do Stocks
It's becoming somewhat amusing to listen and read the various pundits, analysts and stock jockeys who are still buying the "green shoots" recovery mantra propagated so often by the feds and the media this past Spring. Amusing, and maybe a little sad, especially since the Obama administration has quietly wandered away from that framework, having more recently adopted the "going to get worse before it gets better" approach of tamping down expectations, or, a Joe Biden has opined, "we underestimated the recession."
There's hardly any debate worth considering except how best to get out of the way of falling stocks once the carnage of second quarter earnings results commences. Yesterday, Alcoa (AA) kicked off earnings season by announcing a loss, but one that was not as bad as analysts had expected. Now, while that may have worked with first quarter results, the logic is wearing thin. After Alcoa was pumped in after-hour trading on Wednesday, and opened higher Thursday, it ended the session down 23 cents.
Talk about separating a pigeon from his money! Anyone who bought in the brief euphoria period overnight and into the first hour of trading is now sitting on a pile of losses which will likely only deteriorate over the coming days and weeks.
The rally from March through June has topped out. In case those with a bullish bias haven't noticed, it's July, and time for stocks - and traders - to take a breather. Economic reports of late have been either benign or sorry, indicating that recovery, once thought to be just around the corner, has taken a detour into a dark alley and can't be located.
Topping off everything else are the state-by-state tales of woe and despair. Most of the comptrollers or treasurers who put together budgets were hoodwinked into thinking that tax receipts would somehow miraculously keep pace with those of the past three years. They were also bailed out largely by the federal government (taxpayers borrowing) and failed to make the most modest of adjustments in spending. California is passing out IOUs, New York will be next, likely followed by Pennsylvania, Florida, Nevada and Arizona. State budgets are so far outside the realm of reality one wonders how we evey survived so long.
While the economy erodes daily, the news media ponders the feds' next move, pointing toward another stimulus of some kind, instead of doing what has been needed all along, cutting spending, freezing hiring and slashing salaries. The one segment of the population that hasn't suffered layoffs is government, and while they remain insulated, the correct approach should be to cut workdays or pay rates. States, municipalities and the federal government would be doing themselves a favor by slicing salaries by 10-15% all around and renegotiating health care contracts. Such a move would position the politicians as egalitarian, and, despite the howls and yelps from the minions of government workers, those could be reminded that they still have jobs and should be happy for that.
It sounds like a great plan, but it will never happen. We're moving along the path of cradle-to-grave socialism, and unless there's a quick and radical shift in thinking in government circles, they'll simply print more worthless paper before taking real action on spending.
Dow 8,183.17, +4.76 (0.06%)
NASDAQ 1,752.55, +5.38 (0.31%)
S&P 500 882.68, +3.12 (0.35%)
NYSE Composite 5,667.37, +42.80 (0.76%)
Today's minute gains underscores the futility of trading in such an environment. There simply aren't many stocks that look good over any horizon, especially, short-to-medium term. On the day, advancing issues managed to beat out decliners, 3642-2698. New lows are beginning to persistently beat back new highs; today, they won again, 81-25. Volume, however, was the real story. There just wasn't much action to be had.
NYSE Volume 1,006,111,000
NASDAQ Volume 1,892,060,000
Commodities muddled through a session without much in the way of direction. Oil gained 11 cents, to $60.25. Gold reversed its recent downtrend, adding $6.90, to close at $916.20. Silver was up as well, picking up 8 cents, to $12.94.
All tolled, the day was unspectacular and probably more worrisome than it appeared. Investors - those still left standing and/or holding - seem to be on edge, awaiting the next round of dismal news. That could come any day, but probably not until next week, when a slew of big names will be reporting earnings and losses.
There's hardly any debate worth considering except how best to get out of the way of falling stocks once the carnage of second quarter earnings results commences. Yesterday, Alcoa (AA) kicked off earnings season by announcing a loss, but one that was not as bad as analysts had expected. Now, while that may have worked with first quarter results, the logic is wearing thin. After Alcoa was pumped in after-hour trading on Wednesday, and opened higher Thursday, it ended the session down 23 cents.
Talk about separating a pigeon from his money! Anyone who bought in the brief euphoria period overnight and into the first hour of trading is now sitting on a pile of losses which will likely only deteriorate over the coming days and weeks.
The rally from March through June has topped out. In case those with a bullish bias haven't noticed, it's July, and time for stocks - and traders - to take a breather. Economic reports of late have been either benign or sorry, indicating that recovery, once thought to be just around the corner, has taken a detour into a dark alley and can't be located.
Topping off everything else are the state-by-state tales of woe and despair. Most of the comptrollers or treasurers who put together budgets were hoodwinked into thinking that tax receipts would somehow miraculously keep pace with those of the past three years. They were also bailed out largely by the federal government (taxpayers borrowing) and failed to make the most modest of adjustments in spending. California is passing out IOUs, New York will be next, likely followed by Pennsylvania, Florida, Nevada and Arizona. State budgets are so far outside the realm of reality one wonders how we evey survived so long.
While the economy erodes daily, the news media ponders the feds' next move, pointing toward another stimulus of some kind, instead of doing what has been needed all along, cutting spending, freezing hiring and slashing salaries. The one segment of the population that hasn't suffered layoffs is government, and while they remain insulated, the correct approach should be to cut workdays or pay rates. States, municipalities and the federal government would be doing themselves a favor by slicing salaries by 10-15% all around and renegotiating health care contracts. Such a move would position the politicians as egalitarian, and, despite the howls and yelps from the minions of government workers, those could be reminded that they still have jobs and should be happy for that.
It sounds like a great plan, but it will never happen. We're moving along the path of cradle-to-grave socialism, and unless there's a quick and radical shift in thinking in government circles, they'll simply print more worthless paper before taking real action on spending.
Dow 8,183.17, +4.76 (0.06%)
NASDAQ 1,752.55, +5.38 (0.31%)
S&P 500 882.68, +3.12 (0.35%)
NYSE Composite 5,667.37, +42.80 (0.76%)
Today's minute gains underscores the futility of trading in such an environment. There simply aren't many stocks that look good over any horizon, especially, short-to-medium term. On the day, advancing issues managed to beat out decliners, 3642-2698. New lows are beginning to persistently beat back new highs; today, they won again, 81-25. Volume, however, was the real story. There just wasn't much action to be had.
NYSE Volume 1,006,111,000
NASDAQ Volume 1,892,060,000
Commodities muddled through a session without much in the way of direction. Oil gained 11 cents, to $60.25. Gold reversed its recent downtrend, adding $6.90, to close at $916.20. Silver was up as well, picking up 8 cents, to $12.94.
All tolled, the day was unspectacular and probably more worrisome than it appeared. Investors - those still left standing and/or holding - seem to be on edge, awaiting the next round of dismal news. That could come any day, but probably not until next week, when a slew of big names will be reporting earnings and losses.
Wednesday, July 8, 2009
Observations In Present Time Forecasting Dim Future
There's a great degree of anxiety over the health of the US and world economies, and for good reason. Countries are experiencing contractions in trade that they have heretofore never before seen, such as Japan's 40% drop in exports and the mounting stockpiles of cars, trucks and other vehicles in US storage lots.
As expected, disruptions in the business cycle are everywhere, and Wall Street insiders are reeling from the pressure while putting on a game face as companies and their CEOs get set to face the music when 2nd quarter earnings are reported.
Meanwhile, beneath the veneer of stocks, bonds and assets, the banking crisis has not gone away, but has been merely submerged by the government and the compliant financial media.
James Grant, editor of Grant’s Interest Rate Observer recently said, “If the Fed examiners were set upon the Fed’s own documents - unlabeled documents - to pass judgment on the Fed’s capacity to survive the difficulties it faces in credit, it would shut this institution down. The Fed is undercapitalized in a way that Citicorp is undercapitalized.”
When I saw Grant's quotes, it reminded me of something I actually pondered a few months back, actually, January 23, 2009, in a post entitled Who Flipped the Switch? and, Is the Fed Busted?
Well, I guess we have our answer now. Thank you, Mr. Grant.
Actually, the plight of the Federal Reserve, though inexorably tied to that of the US government and eventually you and me, continues to deteriorate. There are only so many bad assets you can carry on your books before you start stinking up the place all by yourself. Confidence in the unofficial US central bank (a private institution, mind you) has fallen to new lows and congress, finally, reluctantly, is refusing to broaden its powers. Having the federal government and the Federal Reserve at loggerheads might actually be beneficial. Neither can point fingers for fiscal irresponsibility, for both are guilty. Should push actually come to shove, the government can simply legislate the Fed out of existence. That day may be coming sooner than anyone dares think. (Not a few people have suggested that severing ties to the Fed should have happened years ago.)
Bank of America is probably still insolvent, as is Citigroup (recently removed from the Dow Jones Industrials), JP Morgan Chase and Wells Fargo. After the next public stimulus, there will be another round of bank refinancing, as the last $700 billion will have proven to have fallen just a little - like $2.5 trillion - short of the mark.
Dow 8,178.41, +14.81 (0.18%)
NASDAQ 1,747.17, +1.00 (0.06%)
S&P 500 879.56, -1.47 (0.17%)
NYSE Composite 5,624.57, -30.07 (0.53%)
The various indices finished in mixed fashion once again, a fashion that's become a trend over the past three weeks. Overall, though, stocks were lower as declining issues far outpaced advancers, 4258-2118 (2:1) and new lows raced past new highs, 102-28, the largest margin in that metric in over a month. Volume was higher than recent days, indicating that stealth selling was being undertaken in a big way. Brokerages were likely unloading losers and ridding themselves of excess shares bought as window dressing at the close of the last quarter.
NYSE Volume 1,437,925,000
NASDAQ Volume 2,497,659,000
There is little doubt that investors are expecting the worst from the coming earnings seasons and have taken profits in a wide swath of securities. A major sell-off - something on the magnitude of 300-400 points on the Dow - could occur at any time while upside potential appears to be severely limited. Whatever the news or the government has been saying about the economy improving, Wall Street isn't buying it, and neither should the American public. The so-called "second shoe" is about to drop.
Even though stocks were spared somewhat during Wednesday's session, the economic currents have not been misread by commodity traders. Oil fell for the sixth straight session, losing $2.79, to close at $60.14, after US stockpiles were more robust than expected and an OPEC report suggested that production levels and therefore, the price of crude could be under pressure until 2013 due to a prolonged business downturn.
Gold fell by $19.80, to $909.30, getting precariously close to the $900 level, when most of the "gold bugs" have been screaming that gold will soar over $1000. That scenario looks to be more and more unlikely each passing day, as deflation continues to tighten its grip. Gold usually rises on fears of inflation, but in times like this, reacts like any other asset or commodity. If there's slack demand, there cannot be a rise in price. The same goes for silver, which lost another 37 cents on the day, closing at $12.85. Expect the metals to retrace prices from earlier this year or from last fall. For silver that would be $8.80-$11.60. For gold the range is from $712 to $880. If commodities as a whole continue to deteriorate along with world economies, expect gold and silver to decline along with them. Deflation is an all-inclusive club.
As expected, disruptions in the business cycle are everywhere, and Wall Street insiders are reeling from the pressure while putting on a game face as companies and their CEOs get set to face the music when 2nd quarter earnings are reported.
Meanwhile, beneath the veneer of stocks, bonds and assets, the banking crisis has not gone away, but has been merely submerged by the government and the compliant financial media.
James Grant, editor of Grant’s Interest Rate Observer recently said, “If the Fed examiners were set upon the Fed’s own documents - unlabeled documents - to pass judgment on the Fed’s capacity to survive the difficulties it faces in credit, it would shut this institution down. The Fed is undercapitalized in a way that Citicorp is undercapitalized.”
When I saw Grant's quotes, it reminded me of something I actually pondered a few months back, actually, January 23, 2009, in a post entitled Who Flipped the Switch? and, Is the Fed Busted?
Well, I guess we have our answer now. Thank you, Mr. Grant.
Actually, the plight of the Federal Reserve, though inexorably tied to that of the US government and eventually you and me, continues to deteriorate. There are only so many bad assets you can carry on your books before you start stinking up the place all by yourself. Confidence in the unofficial US central bank (a private institution, mind you) has fallen to new lows and congress, finally, reluctantly, is refusing to broaden its powers. Having the federal government and the Federal Reserve at loggerheads might actually be beneficial. Neither can point fingers for fiscal irresponsibility, for both are guilty. Should push actually come to shove, the government can simply legislate the Fed out of existence. That day may be coming sooner than anyone dares think. (Not a few people have suggested that severing ties to the Fed should have happened years ago.)
Bank of America is probably still insolvent, as is Citigroup (recently removed from the Dow Jones Industrials), JP Morgan Chase and Wells Fargo. After the next public stimulus, there will be another round of bank refinancing, as the last $700 billion will have proven to have fallen just a little - like $2.5 trillion - short of the mark.
Dow 8,178.41, +14.81 (0.18%)
NASDAQ 1,747.17, +1.00 (0.06%)
S&P 500 879.56, -1.47 (0.17%)
NYSE Composite 5,624.57, -30.07 (0.53%)
The various indices finished in mixed fashion once again, a fashion that's become a trend over the past three weeks. Overall, though, stocks were lower as declining issues far outpaced advancers, 4258-2118 (2:1) and new lows raced past new highs, 102-28, the largest margin in that metric in over a month. Volume was higher than recent days, indicating that stealth selling was being undertaken in a big way. Brokerages were likely unloading losers and ridding themselves of excess shares bought as window dressing at the close of the last quarter.
NYSE Volume 1,437,925,000
NASDAQ Volume 2,497,659,000
There is little doubt that investors are expecting the worst from the coming earnings seasons and have taken profits in a wide swath of securities. A major sell-off - something on the magnitude of 300-400 points on the Dow - could occur at any time while upside potential appears to be severely limited. Whatever the news or the government has been saying about the economy improving, Wall Street isn't buying it, and neither should the American public. The so-called "second shoe" is about to drop.
Even though stocks were spared somewhat during Wednesday's session, the economic currents have not been misread by commodity traders. Oil fell for the sixth straight session, losing $2.79, to close at $60.14, after US stockpiles were more robust than expected and an OPEC report suggested that production levels and therefore, the price of crude could be under pressure until 2013 due to a prolonged business downturn.
Gold fell by $19.80, to $909.30, getting precariously close to the $900 level, when most of the "gold bugs" have been screaming that gold will soar over $1000. That scenario looks to be more and more unlikely each passing day, as deflation continues to tighten its grip. Gold usually rises on fears of inflation, but in times like this, reacts like any other asset or commodity. If there's slack demand, there cannot be a rise in price. The same goes for silver, which lost another 37 cents on the day, closing at $12.85. Expect the metals to retrace prices from earlier this year or from last fall. For silver that would be $8.80-$11.60. For gold the range is from $712 to $880. If commodities as a whole continue to deteriorate along with world economies, expect gold and silver to decline along with them. Deflation is an all-inclusive club.
Tuesday, July 7, 2009
Bears Bag More Bulls
Those "green shoots" we heard so much about in April and May have apparently withered and died with the onset of summer. Fact of the matter is that the US economy is being kept afloat by a combination of stimulus money, bank accounting rules changes, gobs and gobs of fresh currency via the Federal Reserve and the burgeoning welfare-government state.
US consumers are alternately tapped out or scared, or both, and the tiny steps the federal government has employed thus far have done little to stimulate the economy. Trade flows are down, sales everywhere have redlined and state governments are on the verge of default. In California and New York, the two largest states by population, tax revenues have not kept pace with projections. Incomes are stagnant and tax increases have not filled the budget gaps which threaten to implode the entire apparatus of those two state governments.
With the economy in such desperate throes, stocks - and, for that matter, all other asset classes - cannot sustain current price levels, especially after the huge run-up from March through June. Stocks fell to their worst levels in two months as the Obama administration begins touting another round of stimulus, the latest trial balloon coming from presidential advisor Laura Tyson.
The problem with more stimulus is that it is exactly what won't work. Job creation programs for small business and fiscal restraint from Capitol Hill and state assemblies are the proper medicine. Government spending, the Keynesian solution, is simply piling up new debt that has to be repaid at some later date. The American people have had their fill of deficit spending, but the voices calling for restraint have been silenced and neutered by congress, the administration and the mainstream media. Instead of solving the crisis with spending cuts, the plain truth is that the government now is in a no-win position in which it has to keep spending to prevent the economy from falling even deeper into a deflationary spiral.
Government payments to welfare moms, disabled persons, and the aged are all that's keeping the US economy from complete collapse and taking down most of the rest of the world economies with it.
In all likelihood there will be another stimulus bill, aimed at selected, favored industry groups with their hands always out, instead of the rock-solid small business segment from which 2/3rds of all new jobs are created. We are entering an even more dangerous phase of the recession cycle: another retreat and round of job cuts is not far off. There simply has been no new job creation for more than 18 months, and with the recession by most accounts now stretching into month 20 or longer, it's time for the big wigs to admit that this one is different, longer, deeper and more serious than anyone has previously thought.
We're hurtling headlong into the most severe crisis in the history of our nation. Worse than the Great Depression and possibly even the Civil War. We are looking at the complete destruction of our financial system, fiat currency, Federal Reserve system and all the rest. The damage done by years of neglect, greed and horrible decisions by the Fed and Treasury is likely far beyond the understanding of even the brightest economists. We are in uncharted territory and the crowd which got us into it - the Larry Summers, Ben Bernankes, Tim Geithners, et. al., are uniquely unequipped to get us out of it.
By this time next year we could see vast segments of the economy completely wiped away, the currency (Federal Reserve Notes) unwanted by foreigners and US citizens alike, and a return to hard cash and barter. Nothing the government has done or will do (unless they have some miracle cure) will save us from currency debasement. It's going to be a long, hard time for many and not over in just a couple of months or years. This depression will last well into the next decade, probably until at least 2013.
On the day, stocks continued their descent back to the March lows. There's almost no doubt that we'll revisit the 6500 level on the Dow before year's end. The Dow has lost some 637 points since its close of 8799 on June 12.
Dow 8,163.60, -161.27 (1.94%)
Nasdaq 1,746.17, -41.23 (2.31%)
S&P 500 881.03, -17.69 (1.97%)
NYSE Composite 5,654.64, -115.36 (2.00%)
Today's trading was a continuation of Monday's downbeat tone, but with more participants on the selling side. Advancing issues were bludgeoned by losers, with declining issues ahead, 4879-1498. New lows continued their recent trend of outnumbering new highs, 76-43. Volume continued to be anemic, but these low trading levels are becoming a permanent feature of the market as many participants have either tapped out or left for either safer or more lucrative venues.
NYSE Volume 1,107,764,000
Nasdaq Volume 2,047,618,000
Oil took it on the chin again, losing $1.12, to $62.93. Other energy-related commodities registered similar declines. Gold bucked the trend with a gain of $4.80, finishing at $929.10. Silver lost 2 cents, to $13.22, just below the point at which old silver coins produce a melt value 10 times their face value.
Stocks and commodities should continue to fall over the next few weeks and continue their downward trajectory into the late summer and fall months. Second quarter earnings from US corporations are predicted to be marginally better than those from the first quarter, and how investors treat the news should provide direction for the overall market. The betting is that most will not be happy with "less bad" at this juncture. Investors with cash on the line will want to see actual improvement in reports. If not, profits will be quickly taken off the table, leading to another round of outright selling in which nobody wants to be left holding the bag. The final week of July and first two weeks of August could be quite disruptive to many portfolios, rivaling the declines seen last fall and earlier this year.
We are headed for a sizable shakeout. Alcoa (AA) starts the earnings parade on Wednesday.
US consumers are alternately tapped out or scared, or both, and the tiny steps the federal government has employed thus far have done little to stimulate the economy. Trade flows are down, sales everywhere have redlined and state governments are on the verge of default. In California and New York, the two largest states by population, tax revenues have not kept pace with projections. Incomes are stagnant and tax increases have not filled the budget gaps which threaten to implode the entire apparatus of those two state governments.
With the economy in such desperate throes, stocks - and, for that matter, all other asset classes - cannot sustain current price levels, especially after the huge run-up from March through June. Stocks fell to their worst levels in two months as the Obama administration begins touting another round of stimulus, the latest trial balloon coming from presidential advisor Laura Tyson.
The problem with more stimulus is that it is exactly what won't work. Job creation programs for small business and fiscal restraint from Capitol Hill and state assemblies are the proper medicine. Government spending, the Keynesian solution, is simply piling up new debt that has to be repaid at some later date. The American people have had their fill of deficit spending, but the voices calling for restraint have been silenced and neutered by congress, the administration and the mainstream media. Instead of solving the crisis with spending cuts, the plain truth is that the government now is in a no-win position in which it has to keep spending to prevent the economy from falling even deeper into a deflationary spiral.
Government payments to welfare moms, disabled persons, and the aged are all that's keeping the US economy from complete collapse and taking down most of the rest of the world economies with it.
In all likelihood there will be another stimulus bill, aimed at selected, favored industry groups with their hands always out, instead of the rock-solid small business segment from which 2/3rds of all new jobs are created. We are entering an even more dangerous phase of the recession cycle: another retreat and round of job cuts is not far off. There simply has been no new job creation for more than 18 months, and with the recession by most accounts now stretching into month 20 or longer, it's time for the big wigs to admit that this one is different, longer, deeper and more serious than anyone has previously thought.
We're hurtling headlong into the most severe crisis in the history of our nation. Worse than the Great Depression and possibly even the Civil War. We are looking at the complete destruction of our financial system, fiat currency, Federal Reserve system and all the rest. The damage done by years of neglect, greed and horrible decisions by the Fed and Treasury is likely far beyond the understanding of even the brightest economists. We are in uncharted territory and the crowd which got us into it - the Larry Summers, Ben Bernankes, Tim Geithners, et. al., are uniquely unequipped to get us out of it.
By this time next year we could see vast segments of the economy completely wiped away, the currency (Federal Reserve Notes) unwanted by foreigners and US citizens alike, and a return to hard cash and barter. Nothing the government has done or will do (unless they have some miracle cure) will save us from currency debasement. It's going to be a long, hard time for many and not over in just a couple of months or years. This depression will last well into the next decade, probably until at least 2013.
On the day, stocks continued their descent back to the March lows. There's almost no doubt that we'll revisit the 6500 level on the Dow before year's end. The Dow has lost some 637 points since its close of 8799 on June 12.
Dow 8,163.60, -161.27 (1.94%)
Nasdaq 1,746.17, -41.23 (2.31%)
S&P 500 881.03, -17.69 (1.97%)
NYSE Composite 5,654.64, -115.36 (2.00%)
Today's trading was a continuation of Monday's downbeat tone, but with more participants on the selling side. Advancing issues were bludgeoned by losers, with declining issues ahead, 4879-1498. New lows continued their recent trend of outnumbering new highs, 76-43. Volume continued to be anemic, but these low trading levels are becoming a permanent feature of the market as many participants have either tapped out or left for either safer or more lucrative venues.
NYSE Volume 1,107,764,000
Nasdaq Volume 2,047,618,000
Oil took it on the chin again, losing $1.12, to $62.93. Other energy-related commodities registered similar declines. Gold bucked the trend with a gain of $4.80, finishing at $929.10. Silver lost 2 cents, to $13.22, just below the point at which old silver coins produce a melt value 10 times their face value.
Stocks and commodities should continue to fall over the next few weeks and continue their downward trajectory into the late summer and fall months. Second quarter earnings from US corporations are predicted to be marginally better than those from the first quarter, and how investors treat the news should provide direction for the overall market. The betting is that most will not be happy with "less bad" at this juncture. Investors with cash on the line will want to see actual improvement in reports. If not, profits will be quickly taken off the table, leading to another round of outright selling in which nobody wants to be left holding the bag. The final week of July and first two weeks of August could be quite disruptive to many portfolios, rivaling the declines seen last fall and earlier this year.
We are headed for a sizable shakeout. Alcoa (AA) starts the earnings parade on Wednesday.
Monday, July 6, 2009
Deflating Away
Stocks traded in different directions on different exchanges, with the Dow and S&P up and the NASDAQ and NYSE Comp. lower. This has been a recurring theme of late due to the diversity of opinion on market direction and the relative benefits and deficiencies of various sectors in play.
The bottom line is that no sector has been a safe haven and that stocks as a whole have withered over the past month. With earnings reports coming out soon, stocks are sure to be under pressure for the next three to five weeks.
All of the major indices spent most of the day in the red, though there was noticeable buying effort in the afternoon, mostly among financials and health care-related issues.
Dow 8,324.87, +44.13 (0.53%)
NASDAQ 1,787.40, -9.12 (0.51%)
S&P 500 898.72, +2.30 (0.26%)
NYSE Composite 5,770.00, -5.24 (0.09%)
While the headline numbers may have been confusing, there was clarity in the internals, as declining issues raced past gainers, 3932-2446. New lows checked in at 83, with only 34 stocks making new highs. Volume remained at embarrassingly low levels.
NYSE Volume 1,140,635,000
NASDAQ Volume 1,996,618,000
Commodities continued to take on water, as they did at the end of last week. Oil sank to its lowest level in six weeks, closing down $2.68, at $64.05. Gold was down $6.70, to $924.30. Silver fell 17 cents to $13.24.
Deflationary pressure remains a key issue for economists world-wide.
The bottom line is that no sector has been a safe haven and that stocks as a whole have withered over the past month. With earnings reports coming out soon, stocks are sure to be under pressure for the next three to five weeks.
All of the major indices spent most of the day in the red, though there was noticeable buying effort in the afternoon, mostly among financials and health care-related issues.
Dow 8,324.87, +44.13 (0.53%)
NASDAQ 1,787.40, -9.12 (0.51%)
S&P 500 898.72, +2.30 (0.26%)
NYSE Composite 5,770.00, -5.24 (0.09%)
While the headline numbers may have been confusing, there was clarity in the internals, as declining issues raced past gainers, 3932-2446. New lows checked in at 83, with only 34 stocks making new highs. Volume remained at embarrassingly low levels.
NYSE Volume 1,140,635,000
NASDAQ Volume 1,996,618,000
Commodities continued to take on water, as they did at the end of last week. Oil sank to its lowest level in six weeks, closing down $2.68, at $64.05. Gold was down $6.70, to $924.30. Silver fell 17 cents to $13.24.
Deflationary pressure remains a key issue for economists world-wide.
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