Answering the question posed on Monday, the suckers are about to be reeled in.
After Meredith Whitney singlehandedly boosted the Dow by 185 points - the best performance in 6 weeks - with her call for an ever-higher, ever-growing Goldman Sachs, Tuesday's follow-through was nothing more than a gaping, loud yawn which could be heard booming down the canyons of Wall Street all the way to the beaches at Del Mar.
Action was spotty and choppy as the indices see-sawed across the break-even line. Eventually, some brave bulls hung in until the final bell, but the sentiment was far from universal. In fact, Goldman Sachs, which reported better-than-expected earnings for the second quarter, and was up 7 points Monday, finished the day up a very modest 22 cents.
Dow 8,359.49, +27.81 (0.33%)
Nasdaq 1,799.73, +6.52 (0.36%)
S&P 500 905.84, +4.79 (0.53%)
NYSE Composite 5,805.58, +44.21 (0.77%)
Although advances were broad-based with winners getting past losers, 4054-2274, new lows retained their edge over new highs, 59-56, and volume was pretty much confined to the boys at Goldman and JP Morgan plus a few hedge funds in New Canaan, CT. Everyone else, it seems, is where they should be: on vacation.
NYSE Volume 978,933,000
Nasdaq Volume 1,890,954,000
On a happier note, Bernie Madoff began serving his 150-year prison sentence at the Butner Federal Correctional Complex, in Durham, North Carolina, today. Bernie will be in good company. The prison also houses John Rigas, the Aldephia Communications scoundrel among other tax cheats, forgers and scammers. I case you want to check on Bernie's well-being, he can be found under prison number 61727-054, at the federal prison system's web site.
Commodity traders apparently aren't sold on either recovery or recession, as prices stalled out on Tuesday. Oil fell 17 cents, to $59.52, gold gained 30 cents, to $922.80, while silver tacked on 7 cents, to $12.86. Most other commodities were traded within small ranges.
The Bureau of Labor statistics released the Producer Price Index for June, showing a 1.8% seasonally-adjusted gain over May, which is a little bit misleading since the finished goods prices declined 4.6% over the past year. While the 1.6% gain in one month may be alarming to some, most of the veterans on Wall Street realize we're in a bit of deflation, so the number didn't engender more "inflation" talk.
After the close, Yum Brands (YUM) and Intel (INTC) both issued 2nd quarter results that beat the street. The rally could have been merely taking a breather, though investors may also be getting pickier with earnings increases slim.
Tuesday, July 14, 2009
Monday, July 13, 2009
Financials Fun or Another Sucker Rally?
With 2nd quarter earnings about to begin rolling out tomorrow, Monday's movement in the markets was something to ponder befor possibly jumping into the breach. Leading the way were financials, the very same banks that caused huge financial failures less than a year ago.
Are the banks fully rejuvenated? Can they be trusted as guardians of important capital - for mortgages, college, retirement, etc. - or have investors forgotten so soon how cavalier these same bankers were with other people's money. Sadly, I am of the camp that says they cannot be trusted. Every time financial stocks lead rallies, I see the same fraudulent faces, the same lying CEOs, none of whom have been rightfully indicted, prosecuted and jailed for their various crimes: collusion, delusion, evasion and deceit.
After falling for four straight weeks, maybe the market was prime for gains, but one must bear in mind where we are in the greater cycle. Stocks are just coming off highs, and, with the economy still struggling, one has to question the wisdom of jumping in at this particular juncture. Maybe for short term profits, this is the right move, but longer term, stocks could easily become cheaper in months ahead. If this is a short term timing rally and an in-and-out play, which is predominantly what our markets have become, this may be worthwhile, but waiting until the first few days' worth of earnings results come to the fore seems to be a more prudent position.
In any case, stocks were brought higher by the banks, which lifted every sector by at least 1%.
Dow 8,331.68, +185.16 (2.27%)
NASDAQ 1,793.21, +37.18 (2.12%)
S&P 500 901.05, +21.92 (2.49%)
NYSE Composite 5,761.37, +133.85 (2.38%)
The movement was broad based, with advancing issues beating out decliners, 4980-1400. New lows, however, maintained their edge over new highs, 79-40. Volume was nothing about which to get excited, another indication that not all hands are on board with this move. Weak volume has been an consistent feature marking the end of the rally and the beginning of the correction four weeks ago.
NYSE Volume 1,189,460,000
NASDAQ Volume 1,921,335,000
Commodities were all over the map. Those in the energy-related sector followed oil's downward draft of 20 cents, closing at $59.69. The metals were all up, with gold higher by $10.00, to $922.50, and silver up 14 cents, to $12.79. Livestock and foodstuffs finished in mixed fashion.
Banks will be in focus the rest of this week as a number of big names announce earnings. Goldman Sachs, a particularly important bellwether, reports tomorrow.
Are the banks fully rejuvenated? Can they be trusted as guardians of important capital - for mortgages, college, retirement, etc. - or have investors forgotten so soon how cavalier these same bankers were with other people's money. Sadly, I am of the camp that says they cannot be trusted. Every time financial stocks lead rallies, I see the same fraudulent faces, the same lying CEOs, none of whom have been rightfully indicted, prosecuted and jailed for their various crimes: collusion, delusion, evasion and deceit.
After falling for four straight weeks, maybe the market was prime for gains, but one must bear in mind where we are in the greater cycle. Stocks are just coming off highs, and, with the economy still struggling, one has to question the wisdom of jumping in at this particular juncture. Maybe for short term profits, this is the right move, but longer term, stocks could easily become cheaper in months ahead. If this is a short term timing rally and an in-and-out play, which is predominantly what our markets have become, this may be worthwhile, but waiting until the first few days' worth of earnings results come to the fore seems to be a more prudent position.
In any case, stocks were brought higher by the banks, which lifted every sector by at least 1%.
Dow 8,331.68, +185.16 (2.27%)
NASDAQ 1,793.21, +37.18 (2.12%)
S&P 500 901.05, +21.92 (2.49%)
NYSE Composite 5,761.37, +133.85 (2.38%)
The movement was broad based, with advancing issues beating out decliners, 4980-1400. New lows, however, maintained their edge over new highs, 79-40. Volume was nothing about which to get excited, another indication that not all hands are on board with this move. Weak volume has been an consistent feature marking the end of the rally and the beginning of the correction four weeks ago.
NYSE Volume 1,189,460,000
NASDAQ Volume 1,921,335,000
Commodities were all over the map. Those in the energy-related sector followed oil's downward draft of 20 cents, closing at $59.69. The metals were all up, with gold higher by $10.00, to $922.50, and silver up 14 cents, to $12.79. Livestock and foodstuffs finished in mixed fashion.
Banks will be in focus the rest of this week as a number of big names announce earnings. Goldman Sachs, a particularly important bellwether, reports tomorrow.
Friday, July 10, 2009
China Exports, Fed Investigation Fuel US Stock Sell-Off
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.
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.
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.
Subscribe to:
Comments (Atom)
Posts
