Now that there's a rumor that Germany will bail out Greece from its long-term debt problems, it must be not only safe, but profitable, to invest in equities.
This is what substitutes for logic on Wall Street. A country of roughly 11 million, the government of Greece is having serious difficulties financing its debt burden, a fact that has not been lost on EU officials, the European Central Bank, or, your friendly, neighborhood shysters and hooligans in the investment business.
Normally, credit default of an entire nation is serious business. These days, rumors that somebody will issue more debt to "keep them afloat" is supposed to signal that better days lie ahead, not only for the beleaguered nation, but for the entire planet.
Nothing could be further from the truth and those who bought into today's rally were probably well aware of the risks involved with investing in anything at such a precarious economic juncture. Either that, or most investors are really just sheep being led to slaughter.
There's almost no way to put a positive spin on debt restructuring of a country roughly the size and population of New York; its yet another sad chapter in the all-pervasive world-wide debt bomb. Just as they have for the past year, cheery optimists claim that economies will rebound soon and all will be well. Global demand will improve with better economic conditions prevailing globally. Sadly, these prognostications of some recovery, rebound or reflation are little more then idle pipe dreams of crack-smoking Keynesian economists. More sober heads are pointing to Portugal, Italy, Greece and Spain (the PIGS as they are known) as the beginning of the end of not only the Euro as a viable currency, but for a continuation of the debt-leveraging that has led the global economy down the abyss.
Eventually, there must be losses in order to purge all the mal-investments made over the last 10-20 years - though mostly in the last 6 to 8 - and restore correct economic balance to the entire global system. These losses include everything from credit card defaults to mortgage write-downs to underfunded pension funds to failed governments. Everyone, from individuals to banks to governments and their currencies is going to take a hit, some ore severe than others. It's not very easy to do, certainly isn't pretty, but debt default will eventually restore - and much quicker, by the way - economies to reasonable levels of functionality. Until the debts are expunged, paid off, paid down, or otherwise disposed of, there can be no hope for any kind of lasting recovery and economic stability.
That's the part most "modern" economists just don't seem to get. Either that, or they know it and are just lining their cards up properly. My best guess is that the global economy is about 1/3 of the way through a process that began in August of 2007. Although it took awhile (a little over a year) before most people took notice, the de-levering had begun when real estate values began to slip. Then, by 2008, stocks took their hit (and subsequently recovered, but understand that this cyclical rally within a secular bear market has great downside risk later on), and the banks cried and wailed though gobs of taxpayer money, most of which is still owed.
By August of 2010, the world will be 3 years into the abyss and nowhere near the bottom, such bottom being measured as widespread unemployment which will dwarf what is prevalent today, homelessness, fear and, for some, starvation and death. That doomsday scenario is probably another 2-3 years away, possibly longer, depending on how long governments can hold onto whatever small shards of credibility they have before bombing and attacking each other.
Wars are the usual method by which the great powers sort out their financial differences, though these days, cyber-warfare is already well-underway as is various forms of economic ju-jitsu. You think Greece owing debt to Germany is such a good idea? Read up on some financial history prior to great wars and you'll get a little education. The aftermath of wars isn't such a rosy picture either, but we'll be getting to that - if still alive - upon the events.
For now, the best "investments" would be cash, clothing, transportation devices, canned food, arable land and tools of trades. All can be procured relatively cheaply and will serve one well in crisis conditions, for which, I believe, we are headed.
For today, investors thought stocks were hot and Greece wasn't much of a big deal. A few months and years from now, that thinking is likely to be looked back upon as foolish, unfounded optimism.
Dow 10,058.64, +150.25 (1.52%)
NASDAQ 2,150.87, +24.82 (1.17%)
S&P 500 1,070.52, +13.78 (1.30%)
NYSE Composite 6,835.16, +121.29 (1.81%)
Advancing issues finally had a day in which they exceeded decliners by a large margin, 4864-1651. There were 114 new highs as compared to 79 new lows. The divergence is still not great enough - and only one day's data - to conclude anything other than the negative bias remains in place. Volume was approaching the higher range, though despite the overall price gains, not equal to the volume on recent down days. We're likely to trend sideways to lower until a suitable catalyst provokes a movement in another direction. This market condition could persist for quite a long time as governments and media efforts seek to keep panic from occurring though future events may preclude them from doing so.
NYSE Volume 6,145,856,000
NASDAQ Volume 2,242,082,250
Oil, gold, silver and most other commodities improved. Despite today's moves, the overwhelming evidence of a widespread, nearly global deflationary environment continues to spread.
Governments and financial institutions have been proceeding at a snail's pace, putting profits before repair and political careers ahead of practical concerns. The recession isn't over, though some of the worst of it is. This second phase may last 2-4 years from here before true structural reforms - not yet even begun - start to have any affect on economies.
To get an idea of just how hard government and financial institutions and regulators are sitting on their collective hands, here's Larry Summers, White House Director of the National Economic Council and architect of the financial collapse, prattling on for 10 minutes on CNBC this morning, essentially saying nothing. Notice how his lips move but no meaningful words come out.
Tuesday, February 9, 2010
Monday, February 8, 2010
Thain at CIT; Stocks in a Funk
Obviously, John Thain is a hired henchman of the crime syndicate responsible for the financial meltdown of 2008, and all the associated scandals, including TARP, that were ancillary and antecedent to that event.
Why do I make such an overt claim, and just who is John Thain?
Well, John Thain has been around the Wall Street crime syndicate long enough to have attained a position of some authority within that circle. According to this article, Thain was the last chairman and chief executive officer of Merrill Lynch before its merger with Bank of America. Thain managed to get $29 per share ($50 billion) for Merrill, a 70% premium over its market price. Ken Lewis, then CEO of Bank of America, is currently under investigation by the NY State Attorney General, Andrew Cuomo.
Prior to being at Merrill, Thain was president of the NYSE, from 2004 through 2007, meaning he oversaw much of the wheeling and dealing on the exchange and also turned a blind eye to the criminal practices of Bernard Madoff. Prior to that, Thain was at Goldman Sachs, as head of the mortgage desk from 1985 to 1990, and president and co-COO from 1999 to 2004.
Given his history, it's surprising that Thain isn't Secretary of the Treasury or head of one of the regional Federal Reserves, but that's probably because John Thain is basically a bag man. He hides money for his friends. So, what better place for him to resurface after his sudden departure from Merrill Lynch (after he helped inflate its value and 11 top brokers fled to London) in January 2009, than at the beleaguered commercial lender, CIT.
Today, Thain was named CEO of CIT, apparently because CIT's bankruptcy has not worked out to full advantage for the syndicate. Thain will make sure that taxpayers are screwed some more, as one would suppose that stealing $2.3 billion, via TARP would be considered small peanuts in his circles.
With Thain at CIT, one should expect all manner of nastiness, including, but not limited to, falsified accounting, seizure of assets, pleas to the federal government for more bailout money and other not-so-niceties. If John Thain is running a company, one can only expect what he's always provided: fraud, falsity, obfuscation of facts, missing money, missing documents and generally, another round of financial panic.
You have been duly warned. With his track record or greed (he's one of the highest paid on Wall St.) and reputation (a lot of people will speak highly of him in public, because crossing him or the people he's associated with could be harmful to one's health - financial and otherwise) Thain should not be trusted. In any case, having him at CIT virtually assures that financial stocks will be hammered and the economy will suffer through a reprise of the fall of 2008.
With that as background, stocks, led by, you guessed it, large banks, generally fell, putting to rest any notion that Friday's 180-point "turnaround" was anything other than intervention by the PPT (Thain's buddies). It's been 18 months since the breakdown of finance, and since nothing's been done to fix the system - though the bankers and various federal government officials will tell you that MUCH has been done - the usual crowd is back for another round of feeding at investor and taxpayer expense.
Their greed knows no bounds. Not content with breaking the global financial system, they're committed to plunging much of the world - particularly the rich United States of America - into a financial holocaust. Naturally, none of the widespread carnage will affect any of them; they will be above the fray, sitting like vultures with cash in hand to buy up distressed assets at bargain-basement prices. Their true goal is to incite anarchy and revolt, and they're doing a nice job of it thus far. Don't think for a moment that Sarah Palin addressing the Tea Party Convention this weekend was an accident. If the American public is too squeamish to foment revolution, they've got Palin, the absolute perfect Manchurian Candidate, to push us over the edge.
Already, the Tea Parties, originally an amalgamation of loosely-aligned local groups opposed to bank bailouts and financial fraud, have devolved into right-wing bravado-fests, complete with guns, anti-government (and anti-democrat) signs and the tacit support of the the likes of Rush Limbaugh, Sean Hannity and FOX News.
It's a two-pronged attack on liberty and rights, using politics and money to separate middle-class people from theirs. The ultimate goal is a state of neo-anarchy and martial law in America, and they're well on their way.
Dow 9,908.39, -103.84 (1.04%)
NASDAQ 2,126.05, -15.07 (0.70%)
S&P 500 1,066.18, -0.01 (0.00%)
NYSE Composite 6,713.87, -68.88 (1.02%)
Advancing issues were trampled upon by decliners, 4120-2442. New highs actually eked out a slight edge over new lows, 86-73, but volume was light, since all the big money already exited on Friday.
NYSE Volume 4,913,621,000
NASDAQ Volume 2,059,284,875
Commodities staged a little bit of a comeback. Oil, gold and silver all finished their trading sessions slightly higher.
The repugnant conditions which prevail in America today have long ceased being casual conspiracy banter or any kind of laughing matter. Lawlessness prevails. Rules, if there are any, are made up on the fly, to suit those who seek to break them. More than just your money is at risk. Beware.
Why do I make such an overt claim, and just who is John Thain?
Well, John Thain has been around the Wall Street crime syndicate long enough to have attained a position of some authority within that circle. According to this article, Thain was the last chairman and chief executive officer of Merrill Lynch before its merger with Bank of America. Thain managed to get $29 per share ($50 billion) for Merrill, a 70% premium over its market price. Ken Lewis, then CEO of Bank of America, is currently under investigation by the NY State Attorney General, Andrew Cuomo.
Prior to being at Merrill, Thain was president of the NYSE, from 2004 through 2007, meaning he oversaw much of the wheeling and dealing on the exchange and also turned a blind eye to the criminal practices of Bernard Madoff. Prior to that, Thain was at Goldman Sachs, as head of the mortgage desk from 1985 to 1990, and president and co-COO from 1999 to 2004.
Given his history, it's surprising that Thain isn't Secretary of the Treasury or head of one of the regional Federal Reserves, but that's probably because John Thain is basically a bag man. He hides money for his friends. So, what better place for him to resurface after his sudden departure from Merrill Lynch (after he helped inflate its value and 11 top brokers fled to London) in January 2009, than at the beleaguered commercial lender, CIT.
Today, Thain was named CEO of CIT, apparently because CIT's bankruptcy has not worked out to full advantage for the syndicate. Thain will make sure that taxpayers are screwed some more, as one would suppose that stealing $2.3 billion, via TARP would be considered small peanuts in his circles.
With Thain at CIT, one should expect all manner of nastiness, including, but not limited to, falsified accounting, seizure of assets, pleas to the federal government for more bailout money and other not-so-niceties. If John Thain is running a company, one can only expect what he's always provided: fraud, falsity, obfuscation of facts, missing money, missing documents and generally, another round of financial panic.
You have been duly warned. With his track record or greed (he's one of the highest paid on Wall St.) and reputation (a lot of people will speak highly of him in public, because crossing him or the people he's associated with could be harmful to one's health - financial and otherwise) Thain should not be trusted. In any case, having him at CIT virtually assures that financial stocks will be hammered and the economy will suffer through a reprise of the fall of 2008.
With that as background, stocks, led by, you guessed it, large banks, generally fell, putting to rest any notion that Friday's 180-point "turnaround" was anything other than intervention by the PPT (Thain's buddies). It's been 18 months since the breakdown of finance, and since nothing's been done to fix the system - though the bankers and various federal government officials will tell you that MUCH has been done - the usual crowd is back for another round of feeding at investor and taxpayer expense.
Their greed knows no bounds. Not content with breaking the global financial system, they're committed to plunging much of the world - particularly the rich United States of America - into a financial holocaust. Naturally, none of the widespread carnage will affect any of them; they will be above the fray, sitting like vultures with cash in hand to buy up distressed assets at bargain-basement prices. Their true goal is to incite anarchy and revolt, and they're doing a nice job of it thus far. Don't think for a moment that Sarah Palin addressing the Tea Party Convention this weekend was an accident. If the American public is too squeamish to foment revolution, they've got Palin, the absolute perfect Manchurian Candidate, to push us over the edge.
Already, the Tea Parties, originally an amalgamation of loosely-aligned local groups opposed to bank bailouts and financial fraud, have devolved into right-wing bravado-fests, complete with guns, anti-government (and anti-democrat) signs and the tacit support of the the likes of Rush Limbaugh, Sean Hannity and FOX News.
It's a two-pronged attack on liberty and rights, using politics and money to separate middle-class people from theirs. The ultimate goal is a state of neo-anarchy and martial law in America, and they're well on their way.
Dow 9,908.39, -103.84 (1.04%)
NASDAQ 2,126.05, -15.07 (0.70%)
S&P 500 1,066.18, -0.01 (0.00%)
NYSE Composite 6,713.87, -68.88 (1.02%)
Advancing issues were trampled upon by decliners, 4120-2442. New highs actually eked out a slight edge over new lows, 86-73, but volume was light, since all the big money already exited on Friday.
NYSE Volume 4,913,621,000
NASDAQ Volume 2,059,284,875
Commodities staged a little bit of a comeback. Oil, gold and silver all finished their trading sessions slightly higher.
The repugnant conditions which prevail in America today have long ceased being casual conspiracy banter or any kind of laughing matter. Lawlessness prevails. Rules, if there are any, are made up on the fly, to suit those who seek to break them. More than just your money is at risk. Beware.
Friday, February 5, 2010
PPT Fingerprints All Over Late-Day Rally
If you're unfamiliar with the term "PPT," you haven't been reading about economic conditions very deeply. The Plunge protection Team (PPT) stems from a presidential order (Reagan) that gives the Treasury Secretary, Fed Chairman and others extraordinary powers to combat financial firestorms, one of which is direct intervention into capital and equity markets, and, presumably, any other market.
Stocks began the day trying to overcome the lingering effects of Thursday's drubbing, and, after January Non-farms payroll data turned out to be more confusing than anything else, began to sell off, until, by 2:00 pm, the Dow had sunk another 167 points, pounding resistance. The S&P, already shattered, was being likewise battered.
That, however, proved to be the bottom for the day, and the week. Stocks quickly re-gathered and regained momentum without any catalyst, a tell-tale sign of intervention, something the PPT has been doing with regularity since 2000. From 3:00 to 3:15 pm, the Dow gained 100 points, putting the index near unchanged. The rest of the session was spent by the underpinning PPT and their henchmen making sure the Dow finished above 10,000 (it did) and all fears would be soothed over the weekend.
Their work is a fool's gambit, always has been and always will be. The problem is that they can play it because nobody is auditing them or their activities. The banks and the superstructure above it are irresponsible because they've been allowed to be and they will continue to be irresponsible until they destroy the economic system (almost did) or are destroyed themselves. But don't start holding your breath. The powers that be are incredible entrenched. Prepare for the worst four years of your economic life.
Dow 10,012.23, +10.05 (0.10%)
NASDAQ 2,141.12, +15.69 (0.74%)
S&P 500 1,066.19, +3.08 (0.29%)
NYSE Composite 6,782.75, -5.11 (0.08%)
As more evidence of the manipulative element in today's trading, consider that decliners beat advancers handily, 3476-3039. 149 new lows beat 96 new highs. Both of those indicators are contrary to the headline numbers. Volume was magnificent, owing both the the depth of selling and to the amount of financial heft necessary to keep the market from collapsing. But make no mistake about it. The decline will continue. The markets put in new lows which must be tested before any meaningful advance can occur. Chances are, today's lows will be surpassed to the downside within short order. Todays' reprieve was only necessary to avert a panic and to give insiders more opportunity to profit from the next leg down.
NYSE Volume 7,762,321,000
NASDAQ Volume 2,836,146,250
Oil closed at $71.19, down $2.98, at its lowest price since mid-December. Gold finished down $9.50, at $1,053.50 and silver finished down 47 cents, at $14.88. The commodities were only benefitted after their New York closes, not quite as fortunate as the equity markets.
Stocks began the day trying to overcome the lingering effects of Thursday's drubbing, and, after January Non-farms payroll data turned out to be more confusing than anything else, began to sell off, until, by 2:00 pm, the Dow had sunk another 167 points, pounding resistance. The S&P, already shattered, was being likewise battered.
That, however, proved to be the bottom for the day, and the week. Stocks quickly re-gathered and regained momentum without any catalyst, a tell-tale sign of intervention, something the PPT has been doing with regularity since 2000. From 3:00 to 3:15 pm, the Dow gained 100 points, putting the index near unchanged. The rest of the session was spent by the underpinning PPT and their henchmen making sure the Dow finished above 10,000 (it did) and all fears would be soothed over the weekend.
Their work is a fool's gambit, always has been and always will be. The problem is that they can play it because nobody is auditing them or their activities. The banks and the superstructure above it are irresponsible because they've been allowed to be and they will continue to be irresponsible until they destroy the economic system (almost did) or are destroyed themselves. But don't start holding your breath. The powers that be are incredible entrenched. Prepare for the worst four years of your economic life.
Dow 10,012.23, +10.05 (0.10%)
NASDAQ 2,141.12, +15.69 (0.74%)
S&P 500 1,066.19, +3.08 (0.29%)
NYSE Composite 6,782.75, -5.11 (0.08%)
As more evidence of the manipulative element in today's trading, consider that decliners beat advancers handily, 3476-3039. 149 new lows beat 96 new highs. Both of those indicators are contrary to the headline numbers. Volume was magnificent, owing both the the depth of selling and to the amount of financial heft necessary to keep the market from collapsing. But make no mistake about it. The decline will continue. The markets put in new lows which must be tested before any meaningful advance can occur. Chances are, today's lows will be surpassed to the downside within short order. Todays' reprieve was only necessary to avert a panic and to give insiders more opportunity to profit from the next leg down.
NYSE Volume 7,762,321,000
NASDAQ Volume 2,836,146,250
Oil closed at $71.19, down $2.98, at its lowest price since mid-December. Gold finished down $9.50, at $1,053.50 and silver finished down 47 cents, at $14.88. The commodities were only benefitted after their New York closes, not quite as fortunate as the equity markets.
Thursday, February 4, 2010
Deflation Storm Raging Globally
Thursday, February 4, 2010, may be a date to mark down as a pivotal one in the global economic cycle. As companies, consumers and nations struggle to rebound and refocus from the financial catastrophe of 2008 (actually the end result of decades of loose credit), more and more negative signs point to continued deterioration in capital, labor, commodity and equity markets.
What set the wheels in motion for a disastrous trading day in almost every global stock market, was the failed bond auction in tiny Portugal on Wednesday. The country failed to sell an expected 500 million Euros worth of one-year notes, as participation yielded the sale of only 300 million.
Early in the morning on Thursday, Moody's downgraded the outlook on the government of another tiny Eurozone nation, Lithuania, to negative, citing increased pressure due to a long-lingering recession and high debt-to-GDP ratio.
The two nations join Greece on the European list of sick economies, with no relief in sight. The global credit crunch continues to hamper the governments of smaller countries to borrow and spend. Fewer and fewer participants in government bond functions is like a loud bell clanging the death knell of debt-financed capitalist nations. Despite efforts by the US media to paper over our own failures in the bond market, news is gradually emerging, primarily from sources such as Robert Prechter of Elliott Wave and Jim Willie of Golden Jackass, that the entire US bond-debt function is a colossal sham, with government bonds being purchased by primary dealers and then repurchased by the Fed within a week's time.
The Chinese have virtually ceased participation in anything but the shortest-duration auctions, and other foreigners have followed suit. The Fed's policy of "quantitative easing" (printing money with no backing) was supposed to have ended in November, and, according to the Fed, it has stopped outright purchases of Treasuries, but the quiet, behind-the-scenes purchases of bonds from primary dealers - who cannot sell what they bought - works out to being exactly the same thing in practice.
All of these events are part of the positive feedback loop caused by the over-extension of credit without controls or proper risk analysis. What began in 2007 as the sub-prime mortgage crisis has extended to prime loans, commercial loans, junk bonds, corporate bonds, and finally all the way up the food chain to government bonds. Both Prechter and Willie predict that US Treasury bond defaults are bound to occur, though not until significant damage is done to other nations, particularly in Europe, already well underway.
What our "best and brightest" economists fail to either understand or are unwilling to admit, is that all of this nasty unwinding of credit and economy is the natural outcome of failed credit policies. Everyone, from college students all the way to the federal government, borrowed too much and now servicing the interest and principle payments are killing them. Residential and commercial real estate defaults are continuing to rise, another natural outcome of a bloated (by easy credit), overextended, mythical real estate boom. Today's global events are just another symptom of the same sickness, only to a greater degree.
Barely noticed amid the pre-market futures meltdown caused by another horrific reading of initial jobless claims - 480K - were the postponment of a pair of IPOs that were supposed to have priced overnight and sold into the market today. FriendFinder Networks (FFN) and Imperial Capital Group Inc (ICG) both were supposed to have gone off this week, but, due to weak market demand, neither went ahead with their offerings. Meanwhile, Ironwood Pharmaceuticals priced its offering of 16.7 million shares for $11.25 after its offering at $14 to $16 per share had met with considerable resistance. At the lowered price, Ironwood raised only 75% of their expected amount.
IPOs are having a truly difficult time coming to market. Investors are already highly risk-averse, and new issuance is seen as too risky. This is yet another deflationary signal as assets of all variety are put under microscopes and downgraded.
Then there's the firestorm surrounding Toyota. Problems keep propping up for the world's leading automaker. First, sticking gas pedals have forced a gigantic recall, and now, the brakes on their premium "green" maching, the Prius, are under scrutiny after having been the proximate cause for at least four US crashes. It's interesting speculation, but worth noting in an age of skulldruggery at the highest levels, that these problems should be happening to a foreign automaker just as American car companies find themselves in severe economic conditions. Most of the accidents are occurring in the US, where, incidentally, the parts, and, to some extent, the entire vehicles, were manufactured.
The next case is commodities. Oil, gold and silver are being hammered yet again, though this should come as no surprise. Oil consumption continues to be driven down by slack demand, in addition to artificial overpricing, and, while gold and silver are fine hedges against inflation, they can't escape the inevitable vortex of deflation. Like any other asset, they will be devalued, especially gold, which has been on a tear to the upside for the past decade. All those companies which were advertising "cash for gold" are going to end up just like buyers of overpriced homes in Southern California, upside-down and hopelessly in debt, though some may fare better than others as the metals are at least a somewhat reliable store of value, better than beanie babies, stocks or lawn furniture, though neither, in their raw investment form, have any functional purpose.
All of this sent investors scrambling on Thursday in advance of Friday morning's Non-farm payroll data. Anyone with half a brain is getting out of the way today, selling shares in anticipation of yet another disappointment.
Here's another mention of Great Depression II, only this time, it's in the mainstream.
I sold all my gold today before it went any lower. I received a good price, all cash, and now will watch as its price erodes. Cash is KING!
On Wall Street, they're beginning to run scared. All the talk this AM on CNBC (pays to watch it so you know what NOT to do) was about retail sales, and how the major chain stores reported better-than-expected results for January. But, let's ask, better than what? Last January, which stuck to high heaven? Exactly, and nobody bothered to mention that people who are shopping at Kohl's, Macy's et.al. are idiots with free money from unemployment, SS, disability, etc. The real carnage came from unemployment and the Sovereign Debt crisis mentioned at the beginning of this post.
Here's how stocks looked at the end of the day:
Dow 10,002.18, -268.37 (2.61%)
NASDAQ 2,125.43, -65.48 (2.99%)
S&P 500 1,063.11, -34.17 (3.11%)
NYSE Composite 6,787.86, -254.76 (3.62%)
Those are some pug-ugly numbers, and the volume was elevated, meaning the rush for the exits has begun. You, and your silly 401k or retirement plan, are trapped. Get ready for another colossal blow to your dreams and aspirations, because it's coming and this time it has been telegraphed loud and clear. Declining issues trampled all over the few gainers, 5566-828, a huge 7-1 ratio. And, as I've been saying would happen the past few weeks, the new highs-new lows indicators finally rolled over. There were 117 new lows and just 96 new highs. Folks, it's OVER.
NYSE Volume 6,857,842,500
NASDAQ Volume 2,819,441,000
The Dow finished at its lowest level since November 4, 2009, almost exactly 3 months. The S&P broke through key support levels at 1071 and 1065 and appears doomed for a return to 960 in short order. The NASDAQ didn't do any better, finishing just above its November 6 close.
Commodities were savaged as investors sold to raise cash. Oil lost $4.01, to $72.97. Gold fell $48.00, to $1064 per ounce. Silver shed 99 cents - an enormous 7% decline - to finish at $15.33.
What's truly frightening this time around is that this is only the beginning. All talk of the V-shaped recovery is now being laughed right out of town. Owning anything - stocks, bonds, homes, commercial real estate, art, gold, silver, barrels of oil, sports cards, you name it - may prove fatal to your financial health.
Here's a tip: If you're buying anything today, look at the price, offer 25% less, and you just may get it. One caveat, it still may not be a good deal six months from now. Be careful.
READ THE POST BELOW
What set the wheels in motion for a disastrous trading day in almost every global stock market, was the failed bond auction in tiny Portugal on Wednesday. The country failed to sell an expected 500 million Euros worth of one-year notes, as participation yielded the sale of only 300 million.
Early in the morning on Thursday, Moody's downgraded the outlook on the government of another tiny Eurozone nation, Lithuania, to negative, citing increased pressure due to a long-lingering recession and high debt-to-GDP ratio.
The two nations join Greece on the European list of sick economies, with no relief in sight. The global credit crunch continues to hamper the governments of smaller countries to borrow and spend. Fewer and fewer participants in government bond functions is like a loud bell clanging the death knell of debt-financed capitalist nations. Despite efforts by the US media to paper over our own failures in the bond market, news is gradually emerging, primarily from sources such as Robert Prechter of Elliott Wave and Jim Willie of Golden Jackass, that the entire US bond-debt function is a colossal sham, with government bonds being purchased by primary dealers and then repurchased by the Fed within a week's time.
The Chinese have virtually ceased participation in anything but the shortest-duration auctions, and other foreigners have followed suit. The Fed's policy of "quantitative easing" (printing money with no backing) was supposed to have ended in November, and, according to the Fed, it has stopped outright purchases of Treasuries, but the quiet, behind-the-scenes purchases of bonds from primary dealers - who cannot sell what they bought - works out to being exactly the same thing in practice.
All of these events are part of the positive feedback loop caused by the over-extension of credit without controls or proper risk analysis. What began in 2007 as the sub-prime mortgage crisis has extended to prime loans, commercial loans, junk bonds, corporate bonds, and finally all the way up the food chain to government bonds. Both Prechter and Willie predict that US Treasury bond defaults are bound to occur, though not until significant damage is done to other nations, particularly in Europe, already well underway.
What our "best and brightest" economists fail to either understand or are unwilling to admit, is that all of this nasty unwinding of credit and economy is the natural outcome of failed credit policies. Everyone, from college students all the way to the federal government, borrowed too much and now servicing the interest and principle payments are killing them. Residential and commercial real estate defaults are continuing to rise, another natural outcome of a bloated (by easy credit), overextended, mythical real estate boom. Today's global events are just another symptom of the same sickness, only to a greater degree.
Barely noticed amid the pre-market futures meltdown caused by another horrific reading of initial jobless claims - 480K - were the postponment of a pair of IPOs that were supposed to have priced overnight and sold into the market today. FriendFinder Networks (FFN) and Imperial Capital Group Inc (ICG) both were supposed to have gone off this week, but, due to weak market demand, neither went ahead with their offerings. Meanwhile, Ironwood Pharmaceuticals priced its offering of 16.7 million shares for $11.25 after its offering at $14 to $16 per share had met with considerable resistance. At the lowered price, Ironwood raised only 75% of their expected amount.
IPOs are having a truly difficult time coming to market. Investors are already highly risk-averse, and new issuance is seen as too risky. This is yet another deflationary signal as assets of all variety are put under microscopes and downgraded.
Then there's the firestorm surrounding Toyota. Problems keep propping up for the world's leading automaker. First, sticking gas pedals have forced a gigantic recall, and now, the brakes on their premium "green" maching, the Prius, are under scrutiny after having been the proximate cause for at least four US crashes. It's interesting speculation, but worth noting in an age of skulldruggery at the highest levels, that these problems should be happening to a foreign automaker just as American car companies find themselves in severe economic conditions. Most of the accidents are occurring in the US, where, incidentally, the parts, and, to some extent, the entire vehicles, were manufactured.
The next case is commodities. Oil, gold and silver are being hammered yet again, though this should come as no surprise. Oil consumption continues to be driven down by slack demand, in addition to artificial overpricing, and, while gold and silver are fine hedges against inflation, they can't escape the inevitable vortex of deflation. Like any other asset, they will be devalued, especially gold, which has been on a tear to the upside for the past decade. All those companies which were advertising "cash for gold" are going to end up just like buyers of overpriced homes in Southern California, upside-down and hopelessly in debt, though some may fare better than others as the metals are at least a somewhat reliable store of value, better than beanie babies, stocks or lawn furniture, though neither, in their raw investment form, have any functional purpose.
All of this sent investors scrambling on Thursday in advance of Friday morning's Non-farm payroll data. Anyone with half a brain is getting out of the way today, selling shares in anticipation of yet another disappointment.
Here's another mention of Great Depression II, only this time, it's in the mainstream.
I sold all my gold today before it went any lower. I received a good price, all cash, and now will watch as its price erodes. Cash is KING!
On Wall Street, they're beginning to run scared. All the talk this AM on CNBC (pays to watch it so you know what NOT to do) was about retail sales, and how the major chain stores reported better-than-expected results for January. But, let's ask, better than what? Last January, which stuck to high heaven? Exactly, and nobody bothered to mention that people who are shopping at Kohl's, Macy's et.al. are idiots with free money from unemployment, SS, disability, etc. The real carnage came from unemployment and the Sovereign Debt crisis mentioned at the beginning of this post.
Here's how stocks looked at the end of the day:
Dow 10,002.18, -268.37 (2.61%)
NASDAQ 2,125.43, -65.48 (2.99%)
S&P 500 1,063.11, -34.17 (3.11%)
NYSE Composite 6,787.86, -254.76 (3.62%)
Those are some pug-ugly numbers, and the volume was elevated, meaning the rush for the exits has begun. You, and your silly 401k or retirement plan, are trapped. Get ready for another colossal blow to your dreams and aspirations, because it's coming and this time it has been telegraphed loud and clear. Declining issues trampled all over the few gainers, 5566-828, a huge 7-1 ratio. And, as I've been saying would happen the past few weeks, the new highs-new lows indicators finally rolled over. There were 117 new lows and just 96 new highs. Folks, it's OVER.
NYSE Volume 6,857,842,500
NASDAQ Volume 2,819,441,000
The Dow finished at its lowest level since November 4, 2009, almost exactly 3 months. The S&P broke through key support levels at 1071 and 1065 and appears doomed for a return to 960 in short order. The NASDAQ didn't do any better, finishing just above its November 6 close.
Commodities were savaged as investors sold to raise cash. Oil lost $4.01, to $72.97. Gold fell $48.00, to $1064 per ounce. Silver shed 99 cents - an enormous 7% decline - to finish at $15.33.
What's truly frightening this time around is that this is only the beginning. All talk of the V-shaped recovery is now being laughed right out of town. Owning anything - stocks, bonds, homes, commercial real estate, art, gold, silver, barrels of oil, sports cards, you name it - may prove fatal to your financial health.
Here's a tip: If you're buying anything today, look at the price, offer 25% less, and you just may get it. One caveat, it still may not be a good deal six months from now. Be careful.
READ THE POST BELOW
Wednesday, February 3, 2010
Signs of Stupidity, Deflation and Depression
We've all heard about how Ben Bernanke, Tim Geithner and Hank Paulson saved the world from imminent financial collapse. Oddly enough, there was a Time Magazine cover story from 1999 about a similar trio of swashbuckling economists - Alan Greenspan, Robert Rubin and Lawrence Summers - who were then called the "Committee to Save the World."
Hmmm... 1999. Do we all remember what happened after this bunch - as Time loudly proclaimed on their cover - prevented a global economic meltdown?
What are we, stupid? I guess so. How is it that just 10 years ago we hailed the Fed Chairman and two Treasury Secretaries as "saviors" just before the whole country went kaput, and are doing the exact same thing again right now? Americans, and probably the majority of the world's population has the word "STUPID" printed on their foreheads in invisible ink which only economists can see through the aid of their special contact lenses and eyeglasses. Thus, their ability to hoodwink us into trusting them and then to hail them as heroes is entirely of our own making. We are their enablers.
So, don't blame them for the problems we face. Blame yourself. Did you take out too many loans? Did you overspend? Did you run up non-payable credit card debt? Did you not save a nickel during all those "boom" years, first in the 90s and more recently, from 2003-2008?
Go ahead and cry, it's OK. I did it too. But, there's a happy ending to this story. Well, maybe not exactly "happy," but maybe not tragic either. Now that we're all broke and penniless, or soon to be so, we're all in it together, down here scratching for scraps of food and any kind of work. An old adage suggests that "misery loves company," and in this instance, it could not ring more truly. With the accumulated debt of the nation approaching $13 trillion (not including $4 trillion from Fannie Mae and Freddie Mac, or about $59 trillion from unfunded Social Security, Medicare or federal retirement benefits - or is it $107 trillion?), millions of our countrymen and women out of work, foreclosures continuing to rise and a federal government bent on nationalizing everything from banks to car manufacturing to health care, bells and buzzers should be going off all over the place, yet we, yes, we dopes with STUPID surreptitiously stamped upon our foreheads, continue to work and spend and pay and worry and buy and pay, invest and lose, leaving our money in the same hands of the same greedy bankers who took us down this path to ruin.
We all deserve to be lined up and summarily executed, along with the congress and every member of the administration (people we voted into office). That would leave just little kids with no understanding of debt, the ultimate solution. I pray that my little tirade of sarcasm hasn't scared you into thinking it might just turn out that way. It might. It shouldn't, but to think that the people we call our heroes, but are actually a lying bunch of hoodlums, scoundrels and crooks, would be plotting the decimation of the world's finest democracy doesn't take much of a stretch of credulity.
There are things you and I can do before the situation gets much worse. I'll be discussing them in future posts as we wend our way through this sad, messy chapter of American history. But, just for starters, two things that won't work are: 1. leaving the country; 2. Staying put in a job you hate that doesn't pay you what you're worth.
The first doesn't work because other countries are in just as bad, if not worse, conditions than ours, and the second doesn't make any sense, right from Jump Street. Why anyone would want to waste their time on the planet toiling for people they don't like in a job they hate is beyond me. It sounds so masochistic. For a real solution, try watching the movie "Fight Club" until you either puke from disgust or actually come to an understanding of the deeper, hidden message in that film. Or, if you just need a good regurgitation, read Camus' "Nausea." I've heard it's even better in French.
As for the markets, the place people go when they wish to flush money away, stocks were generally weak and going nowhere. The daily movements of the stock market really don't stack up to a hill of fried chicken anymore, so thick is the distrust of counter-parties. Nobody really wants to be left holding the bag, and some estimates suggest that 40% of all trading is done by insiders, with insiders, and most of them work at Goldman Sachs. Funny, they say the same thing about betting on horses. 40% of all the action is carried out by owners, trainers, jockeys, grooms and even stewards. So, how are you supposed to win at that game? You're not. Get it?
Dow 10,270.55, -26.30 (0.26%)
NASDAQ 2,190.91, +0.85 (0.04%)
S&P 500 1,097.28, -6.04 (0.55%)
NYSE Composite 7,042.62, -58.82 (0.83%)
Losers beat gainers, 3910-2504. New highs beat new lows, 172-57, mostly due to the fact that at this time last year, stocks were falling faster than meteors from 13 miles above ground. Volume? Well, it absolutely sucked, just as it has for most of this miracle rally period since last March. With insiders trading mostly with insiders, what do you expect? There are fewer and fewer people willing to put money at risk every day. If you ave a 401k or other retirement plan, they're playing with your money, too. Isn't that a thought that makes you sleep well at night? If you're getting the idea that I'm just a little bit soured on the stock market and the general economy, you're beginning to get the message. However, unlike you, I'm fighting back. I've done some things to protect myself and eventually prosper from the obvious deflation that's been in place since the latter months of 2007.
NYSE Volume 4,917,465,000
NASDAQ Volume 2,341,595,500
Commodities were also weak. Oil, gold and silver were all lower. All the quotes I'm getting are different, depending on the source, so, for now, I'm not quoting specific prices, which is just what the market makers want: confusion. Haven't you ever wondered why currencies are so difficult to figure? The quotes most commonly used are Dollar:Yen, Euro:Dollar, Pound:Dollar. The Euro and Pound prices are inverted from the Yen, making comparisons and the real value of the dollar difficult, if not impossible, to decipher. It's a very confusing breakdown, but nobody cares to fix it? Why? Because it is confusing. Precisely.
According to Robert Prechter of the Elliott Wave, "a deflationary crash is characterized in part by a persistent, sustained, deep, general decline in people's desire and ability to lend and borrow. A depression is characterized in part by a persistent, sustained, deep general decline in production." (Conquer the Crash, Chapter 9)
Both of those conditions have been in place and at work since August, 2007. Efforts by the Fed, Treasury and the brilliant geniuses who troll Wall Street looking for suckers with money to forestall the inevitable have only lengthened the duration of the decline, then and now. Conditions seem to change with each month, quarter, economic or jobs report, but not much. Government statistics are so mangled that they no longer make sense or can be used as a true yardstick of economic vitality or disease.
We are in the throes of the worst depression the country has ever seen, kept afloat by federal payments to states, states to cites and so on, and by unemployment benefits, medicare transfers, retirement benefits, Social Security payments, and other seamless, unseen transfers of money like TARP, TALF, HAMP and other Federal Reserve machinations. Unemployment keeps rising, people keep losing their homes and most of us just go about their business as if things were normal.
Things are far from normal.
Hmmm... 1999. Do we all remember what happened after this bunch - as Time loudly proclaimed on their cover - prevented a global economic meltdown?
What are we, stupid? I guess so. How is it that just 10 years ago we hailed the Fed Chairman and two Treasury Secretaries as "saviors" just before the whole country went kaput, and are doing the exact same thing again right now? Americans, and probably the majority of the world's population has the word "STUPID" printed on their foreheads in invisible ink which only economists can see through the aid of their special contact lenses and eyeglasses. Thus, their ability to hoodwink us into trusting them and then to hail them as heroes is entirely of our own making. We are their enablers.
So, don't blame them for the problems we face. Blame yourself. Did you take out too many loans? Did you overspend? Did you run up non-payable credit card debt? Did you not save a nickel during all those "boom" years, first in the 90s and more recently, from 2003-2008?
Go ahead and cry, it's OK. I did it too. But, there's a happy ending to this story. Well, maybe not exactly "happy," but maybe not tragic either. Now that we're all broke and penniless, or soon to be so, we're all in it together, down here scratching for scraps of food and any kind of work. An old adage suggests that "misery loves company," and in this instance, it could not ring more truly. With the accumulated debt of the nation approaching $13 trillion (not including $4 trillion from Fannie Mae and Freddie Mac, or about $59 trillion from unfunded Social Security, Medicare or federal retirement benefits - or is it $107 trillion?), millions of our countrymen and women out of work, foreclosures continuing to rise and a federal government bent on nationalizing everything from banks to car manufacturing to health care, bells and buzzers should be going off all over the place, yet we, yes, we dopes with STUPID surreptitiously stamped upon our foreheads, continue to work and spend and pay and worry and buy and pay, invest and lose, leaving our money in the same hands of the same greedy bankers who took us down this path to ruin.
We all deserve to be lined up and summarily executed, along with the congress and every member of the administration (people we voted into office). That would leave just little kids with no understanding of debt, the ultimate solution. I pray that my little tirade of sarcasm hasn't scared you into thinking it might just turn out that way. It might. It shouldn't, but to think that the people we call our heroes, but are actually a lying bunch of hoodlums, scoundrels and crooks, would be plotting the decimation of the world's finest democracy doesn't take much of a stretch of credulity.
There are things you and I can do before the situation gets much worse. I'll be discussing them in future posts as we wend our way through this sad, messy chapter of American history. But, just for starters, two things that won't work are: 1. leaving the country; 2. Staying put in a job you hate that doesn't pay you what you're worth.
The first doesn't work because other countries are in just as bad, if not worse, conditions than ours, and the second doesn't make any sense, right from Jump Street. Why anyone would want to waste their time on the planet toiling for people they don't like in a job they hate is beyond me. It sounds so masochistic. For a real solution, try watching the movie "Fight Club" until you either puke from disgust or actually come to an understanding of the deeper, hidden message in that film. Or, if you just need a good regurgitation, read Camus' "Nausea." I've heard it's even better in French.
As for the markets, the place people go when they wish to flush money away, stocks were generally weak and going nowhere. The daily movements of the stock market really don't stack up to a hill of fried chicken anymore, so thick is the distrust of counter-parties. Nobody really wants to be left holding the bag, and some estimates suggest that 40% of all trading is done by insiders, with insiders, and most of them work at Goldman Sachs. Funny, they say the same thing about betting on horses. 40% of all the action is carried out by owners, trainers, jockeys, grooms and even stewards. So, how are you supposed to win at that game? You're not. Get it?
Dow 10,270.55, -26.30 (0.26%)
NASDAQ 2,190.91, +0.85 (0.04%)
S&P 500 1,097.28, -6.04 (0.55%)
NYSE Composite 7,042.62, -58.82 (0.83%)
Losers beat gainers, 3910-2504. New highs beat new lows, 172-57, mostly due to the fact that at this time last year, stocks were falling faster than meteors from 13 miles above ground. Volume? Well, it absolutely sucked, just as it has for most of this miracle rally period since last March. With insiders trading mostly with insiders, what do you expect? There are fewer and fewer people willing to put money at risk every day. If you ave a 401k or other retirement plan, they're playing with your money, too. Isn't that a thought that makes you sleep well at night? If you're getting the idea that I'm just a little bit soured on the stock market and the general economy, you're beginning to get the message. However, unlike you, I'm fighting back. I've done some things to protect myself and eventually prosper from the obvious deflation that's been in place since the latter months of 2007.
NYSE Volume 4,917,465,000
NASDAQ Volume 2,341,595,500
Commodities were also weak. Oil, gold and silver were all lower. All the quotes I'm getting are different, depending on the source, so, for now, I'm not quoting specific prices, which is just what the market makers want: confusion. Haven't you ever wondered why currencies are so difficult to figure? The quotes most commonly used are Dollar:Yen, Euro:Dollar, Pound:Dollar. The Euro and Pound prices are inverted from the Yen, making comparisons and the real value of the dollar difficult, if not impossible, to decipher. It's a very confusing breakdown, but nobody cares to fix it? Why? Because it is confusing. Precisely.
According to Robert Prechter of the Elliott Wave, "a deflationary crash is characterized in part by a persistent, sustained, deep, general decline in people's desire and ability to lend and borrow. A depression is characterized in part by a persistent, sustained, deep general decline in production." (Conquer the Crash, Chapter 9)
Both of those conditions have been in place and at work since August, 2007. Efforts by the Fed, Treasury and the brilliant geniuses who troll Wall Street looking for suckers with money to forestall the inevitable have only lengthened the duration of the decline, then and now. Conditions seem to change with each month, quarter, economic or jobs report, but not much. Government statistics are so mangled that they no longer make sense or can be used as a true yardstick of economic vitality or disease.
We are in the throes of the worst depression the country has ever seen, kept afloat by federal payments to states, states to cites and so on, and by unemployment benefits, medicare transfers, retirement benefits, Social Security payments, and other seamless, unseen transfers of money like TARP, TALF, HAMP and other Federal Reserve machinations. Unemployment keeps rising, people keep losing their homes and most of us just go about their business as if things were normal.
Things are far from normal.
Subscribe to:
Posts (Atom)
Posts
