When CNBC's Maria Bartiroma blurts out, "It's four o'clock on Wall Street; do you know where your money is?" the resounding chorus from average Americans (people who work and make between $12,000 and $75,000 a year - about 65% of the population) should be "NO!" because, in reality, you don't.
Think about it. Your money, or what you believe to be your money, is all over the place. You've got some in your pocket, wallet or purse, in a drawer, a piggy bank, maybe buried in the ground in your back yard or stuffed inside a wall in your house. Some of it may be in a coin or stamp collection, or any other kind of collection. some of it is in the bank, some of it is reflected as credit on credit cards, or a home equity loan. Then there's investments, individual stocks, mutual funds, 401ks, Keogh funds, college funds, retirement funds, and so on.
Add to that the promised or held money, as in pension plans, social security, medicare, payroll withholding taxes, money in health care plans, etc., and you can easily understand that most Americans have no idea where their money really is, and, what's worse, who's using it, for what purposes and when. This is what makes investing absolutely the greatest gamble of your life. Playing roulette with real money you depend upon for anything other than fun is simply foolish. If you're a winning investor (about 12% of individual investors over the past 10 years), you may scoff at the tone of this post, but you have to admit that you sometimes have had doubts.
Watching the foolery on Wall Street this week was a real eye-opener. After Monday's sharp sell-off, there were two major gaps of more than 100 points apiece - on Tuesday's open and today's open - Tuesday up and today down, and six separate "pumping" events (three today) which managed to keep stocks in a fairly tight range and close slightly positive for the week. The scorecard still reads: 2 up weeks and 4 down for the year so far, a discouraging sign.
The various gaps and pumps (typified by large advances over a period of usually less than an hour) were all insider-driven, indicating quite clearly that the individual investor was at the mercy of the insiders and professionals. Anybody who made a dime trading this week who isn't wired directly into the Wall Street elite or a broker or trader, is either a genius or extremely lucky. The deck was so severely stacked against the little guy, he didn't stand a chance. while that's usually the case, this week was particularly volatile, a friendly partner of the pros, forcing more trades and more brokerage commissions while the investor is left holding a bag, suitably deflated.
Dow 10,099.14, -45.05 (0.44%)
NASDAQ 2,183.53, +6.12 (0.28%)
S&P 500 1,075.51, -2.96 (0.27%)
NYSE Composite 6,875.18, -23.54 (0.34%)
As if to throw cold water in the face of the market, advancers managed to finish ahead of decliners, 3398-2998, in opposition to the headline numbers and following an early-session trade which saw declining issues beating gainers by a 6-1 ratio. Truly, on the low volume reading, the market was yanked around by inside elements and manipulators. There is absolutely no doubt about it. There were 154 new highs to 59 new lows. Even though the gap continued to expand this week, the high-low indicator is becoming less and less meaningful as the calendar draws closer to March 9, the one year anniversary of the bottom. Stocks making new lows in comparison to last year have to be real stinkers. The high-low indicator may not make much sense as a trend indicator until maybe June or July.
NYSE Volume 5,202,259,500
NASDAQ Volume 2,168,768,250
Commodities did not participate in the rigged equity rally, and suffered nearly across-the-board losses. Crude oil dipped $1.08, to $74.20. Gold slipped $4.50, to $1,090.20. Silver fell 18 cents, to $15.41.
Besides commodities being stuck in a range, stocks, outside stellar performers and outright losers, haven't budged in 4-5 months. The top was really around Dow 10,300, back in early December. The rest of it on the high side was froth, or waste. The key numbers now are 10,050 and 9900 on the Dow, both of which should be tested within days. With all the turmoil in world markets - Greece, China, Dubai, elsewhere - the major indices are being held together by raw nerve. The inside game is still playing the "recovery" card until they're good and ready to dump out of all positions in a radical race lower.
They may all exit at once or continue the slow, Chinese water torture treatment of two days up and three days down for weeks and weeks, but, unless there's clear resolution on jobs (there aren't any new ones being created) and foreclosures (they continue to rise, year over year), the trend remains down. That's the bad news.
The good news is that there are only 36 days until Spring, baseball players report to Spring training next week and there are exceptional bargains in arable land, tools of trade and certain transportation devices (bicycles are cheap and riding them is very health-promoting). Seeds are - pardon the pun - dirt cheap.
Stop investing and start growing.
Friday, February 12, 2010
Thursday, February 11, 2010
The Diversification Lie
Whenever and wherever investment strategies are the topic of discussion, sure as the sun sets in the West, somebody will open their yap about the need to be diversified, of not having all of your eggs in one basket, of segmenting your portfolio to match your investment style and other such sage advice, all of which serves to increase trading activity, market liquidity, but mostly, the size of your broker's monthly commission check.
Unless you are sufficiently wealthy (in which case, you'd probably be in TIPS or Treasuries or another high-yielding asset class), diversifying your portfolio usually means spreading out your risk over a number of different stocks or a combination of stocks, bonds, mutual funds and money markets. All of this results in a higher transaction rate, good for the financial services industry and bad for you. It's just plain money out of your pocket, and diversification, as has been proven in bear markets and bulls, isn't a safeguard against risk, nor does it help maximize profits. At best, diversified portfolios amplify losses and reduce profitability.
What we'd all like is a couple of dead-nuts winners and no losers. Diversifying, spreading out and trading frequently only reinforces the desire to trade - or, gamble, which is exactly what it always has been and always will be - while virtually guaranteeing mediocre results. The normal result of spreading, if you're lucky, is a couple of winners, a couple of losers and an overall performance that will be somewhere close to the averages. You might as well just buy index funds or play index futures or options, forget everything about charts and fundamentals and timing and just bet one way or the other. Like any other wager, you'll win some and lose some and probably come out a loser, which is how most people doing their own trading end up.
Mediocrity is what keeps brokerages and professionals in business. Sooner or later, all those day-trading wizards burn out because, just like in Las Vegas, they can't beat the house, which on Wall Street is better known as the inside money - the very brokers who use your money to gamble and hedge against. Individual investors surely don't stand a snowball's chance in hell in today's trading environment, when stocks turn on a rumor, phrase or the whim of the inside money, so diversification only accelerates the losing process, all to the great satisfaction of the Fat Cats.
The only way to win in stocks, just like gambling, is to make large, smart moves and make them as infrequently as possible. Buy and hold is still a viable strategy, but the trick is knowing not only what to buy, but when, and when to get out. A single big winner is still the best strategy. All the diversification talk is pure bunk, made for fools who think they're actually "investing."
Get real. Save your money. In a sock. When you've got $100,000, think about how badly you'd feel losing 10 or 20% of it, or more. You'll forget investing and go back to saving. Believe me, I spent years analyzing stocks, markets, investments, the economy and more, and I WON'T PUT A PLUGGED NICKEL INTO STOCKS, mostly because I know the pros still have a huge edge.
Think it over. Do you have 8 to 10 hours a day to plot your moves and act upon them? Do you have other people backing you who will support your trades with trades of their own? Do you have huge sums of money to hedge and cause market runs and momentum shifts? Obviously not.
A case in point is today's rally, yesterday's decline, the rally the day before, the sharp drop the day before that. do you have the stomach for that kind of volatility? Up one minute and down the next? I didn't think so.
Dow 10,144.19, +105.81 (1.05%)
NASDAQ 2,177.41, +29.54 (1.38%)
S&P 500 1,078.47, +10.34 (0.97%)
NYSE Composite 6,898.72, +79.60 (1.17%
Advancing issues beat back decliners, 4874-1598 (3-1); 140 new highs, 65 new lows, still not enough of a spread to call any change in direction. Volume was average.
NYSE Volume 5,165,277,500
NASDAQ Volume 2,149,687,500
Stocks remain in a consolidation phase around Dow 10,000, which could last a few more weeks before a breakdown occurs. Upside potential remains weak due to current economic conditions.
Commodities caught some fire on Thursday, though oil was down 2 cents, to $75.28. Gold added $18.90, to $1,095.20. Silver ended 29 cents higher, at $15.59.
Unless tomorrow is a huge day to the downside, stocks are on track for a winning week, which would end a string of four straight losers. That's a bet worth taking. The only other week stocks finished higher in 2010 was the first week of the year.
Unless you are sufficiently wealthy (in which case, you'd probably be in TIPS or Treasuries or another high-yielding asset class), diversifying your portfolio usually means spreading out your risk over a number of different stocks or a combination of stocks, bonds, mutual funds and money markets. All of this results in a higher transaction rate, good for the financial services industry and bad for you. It's just plain money out of your pocket, and diversification, as has been proven in bear markets and bulls, isn't a safeguard against risk, nor does it help maximize profits. At best, diversified portfolios amplify losses and reduce profitability.
What we'd all like is a couple of dead-nuts winners and no losers. Diversifying, spreading out and trading frequently only reinforces the desire to trade - or, gamble, which is exactly what it always has been and always will be - while virtually guaranteeing mediocre results. The normal result of spreading, if you're lucky, is a couple of winners, a couple of losers and an overall performance that will be somewhere close to the averages. You might as well just buy index funds or play index futures or options, forget everything about charts and fundamentals and timing and just bet one way or the other. Like any other wager, you'll win some and lose some and probably come out a loser, which is how most people doing their own trading end up.
Mediocrity is what keeps brokerages and professionals in business. Sooner or later, all those day-trading wizards burn out because, just like in Las Vegas, they can't beat the house, which on Wall Street is better known as the inside money - the very brokers who use your money to gamble and hedge against. Individual investors surely don't stand a snowball's chance in hell in today's trading environment, when stocks turn on a rumor, phrase or the whim of the inside money, so diversification only accelerates the losing process, all to the great satisfaction of the Fat Cats.
The only way to win in stocks, just like gambling, is to make large, smart moves and make them as infrequently as possible. Buy and hold is still a viable strategy, but the trick is knowing not only what to buy, but when, and when to get out. A single big winner is still the best strategy. All the diversification talk is pure bunk, made for fools who think they're actually "investing."
Get real. Save your money. In a sock. When you've got $100,000, think about how badly you'd feel losing 10 or 20% of it, or more. You'll forget investing and go back to saving. Believe me, I spent years analyzing stocks, markets, investments, the economy and more, and I WON'T PUT A PLUGGED NICKEL INTO STOCKS, mostly because I know the pros still have a huge edge.
Think it over. Do you have 8 to 10 hours a day to plot your moves and act upon them? Do you have other people backing you who will support your trades with trades of their own? Do you have huge sums of money to hedge and cause market runs and momentum shifts? Obviously not.
A case in point is today's rally, yesterday's decline, the rally the day before, the sharp drop the day before that. do you have the stomach for that kind of volatility? Up one minute and down the next? I didn't think so.
Dow 10,144.19, +105.81 (1.05%)
NASDAQ 2,177.41, +29.54 (1.38%)
S&P 500 1,078.47, +10.34 (0.97%)
NYSE Composite 6,898.72, +79.60 (1.17%
Advancing issues beat back decliners, 4874-1598 (3-1); 140 new highs, 65 new lows, still not enough of a spread to call any change in direction. Volume was average.
NYSE Volume 5,165,277,500
NASDAQ Volume 2,149,687,500
Stocks remain in a consolidation phase around Dow 10,000, which could last a few more weeks before a breakdown occurs. Upside potential remains weak due to current economic conditions.
Commodities caught some fire on Thursday, though oil was down 2 cents, to $75.28. Gold added $18.90, to $1,095.20. Silver ended 29 cents higher, at $15.59.
Unless tomorrow is a huge day to the downside, stocks are on track for a winning week, which would end a string of four straight losers. That's a bet worth taking. The only other week stocks finished higher in 2010 was the first week of the year.
Wednesday, February 10, 2010
Bernanke's Naked Put Signals End of Fed
Once upon a time, I owned a fairly successful, profitable newspaper publishing business. Due to events mostly beyond my control the business declined and eventually was bankrupted. During the phase of decline, my father, knowing the challenges and tribulations I faced on a daily basis, used to say, "I don't know how you keep going."
Being a resourceful and resolute sort, I usually replied that the alternative would be to ball up in a corner and cry.
Nowadays, I laugh. I laugh quite a bit. And, what keeps me laughing the most is the outright insanity of the global economy and the people who are supposed to be running it. That idea alone, that a few people, like Fed Chairman Ben Bernanke and heads of foreign central banks, are supposed to keep the global machinery of commerce well-maintained and regulated.
HAHAHAHAHAHAHAHA!!!!! Financial mismanagement of far-flung enterprises, like nations, began with the creation of money, but didn't really gather momentum until the Fed was created in 1913 (just before the Great Depression, I should add) and John Maynard Keynes began commenting and writing on economics. The art was nearly perfected by the expansionist Maestro himself, Alan Greenspan, and is today being expanded to the nth degree of absurdity by Chairman Bernanke.
Today was a literal laugh riot. Bernanke released a transcript of his remarks prepared for testimony before the Committee on Financial Services, U.S. House of Representatives. His actual appearance was postponed since the nation's capitol is currently under two to three feet of snow (this is a probably a good thing that won't last), but Chairman Ben decided to unveil it today, since he probably wanted to get the blueprint outlining the devastation of a nation's finances out for inspection by his central banker buddies around the world.
The text of his remarks, lined above, reads like a fantasy. It is almost all fiction and represents the hopes and prayers of the fed Chariman, because, technically, with the federal funds rate essentially at zero and there being no economic conditions which would cause the FOMC to change its policy stance, i.e., raising the rate, the Fed has NO WAY TO INFLUENCE INTEREST RATES.
What our ingenious Chairman has suggested in this little piece of fiction, is that interest rate policy will be tied to interest paid on member bank reserves. In other words, Bernanke has suggested a game-changer because the usual federal funds rate is going to stay at ZERO for much longer than he or anyone else in the banking industry ever imagined it would.
Essentially, he's saying - despite his claims that the economy is improving - that conditions continue to deteriorate and will continue to deteriorate for as far as the eye can see. Inside his veiled statement of "change" (we've heard that one before) is the seed of truth: the Fed has failed in its responsibility to promote a sound economy and stable prices. They have been unable to shake loose from their accommodative posture because the debt burden is still too severe and getting worse.
The only way out for them is to pay interest on their money they themselves hold and hope that credit markets respond in kind to yet another inflationary gesture. In all probability, it won't work, for two good reasons. First, the entire structure of the Fed is based on lending out money at interest, not paying interest on money held in reserve. Their plan is entirely a chimera, a sham, a puppet show. Second, the private markets will not adjust to the "new, improved" interest-on-reserves-as-the-basis-for-all-lending program. Markets, regional and local, have their own priorities and standards and will shake free from the Fed umbrella. Growing markets will encourage higher interest rates. Slowing or stagnant markets, that being most of the nation, will not be able to raise rates with any success.
Bernanke's plan is as boneheaded as most of the ideas spawned by the minds of these Lilliputian thinkers. More than anything else, the Chairman has issued the first statement signaling the end of the Federal Reserve. He admits that the economy's problems began in August of 2007, as I have repeatedly stated at various times on this blog and elsewhere. His highly-fictionalized account of the proceeding events fail to hide the fact that the Fed and his counterparts at the US Treasury have been entirely unable to correct the prevailing conditions of decline.
He is admitting defeat, The US economic system, as it has been engineered by the Federal Reserve, is broken beyond repair. The fed funds rate is ZERO, and will remain at ZERO forever, or, until the Federal Reserve Act is either amended or revoked. Since the Federal Reserve Act did not include a charter or set term for the operation of the Fed, there is no renewal or expiration. They operate in perpetuity, thus, the only way to dispose of or abolish this abominable creation is by an act of congress, so don't hold your breath. By the time the numbskulls in DC come to the realization that the Fed has bankrupted the nation, it will be too late. Besides, the federal government has done their own demolition job with entitlements, deficits and the burgeoning national debt.
In 2007, I suggested taking all money out of the stock market and putting it into cash. This new twist on the entire structure of money reinforces my ideas from yesterday that the only place to put money now is in foodstocks that can be stored, reliable transportation, clothing, arable land and tools of trade. Obviously, an investment in a sewing machine or any kind of gardening instrument would be a worthwhile use of your money in light of today's developments.
The Fed's failure may result in very unusual movements in currency markets. An absolute breakdown of global trade is not out of the question as more and more individuals and countries question the viability of fiat currencies as a whole. The alternatives to our busted system of credit are gold, silver and barter. However, since gold and silver have been highly commoditized and traded as investments, they may be less reliable as stores of wealth as their values should fall along with all other asset classes, albeit to a lesser degree. Add to the list, seeds, for vegetables. They're cheap, and everybody needs to eat more veggies.
The market reaction to Bernanke's comments, released about 10:00 am, was complete horror. Stocks immediately sold off on the very thought that the fed would even consider ending their free-money regime. Cooler heads prevailed, however, sending stocks back up and into a stable area for much of the remaining session. Overhanging everything was the snowstorm ravaging the East coast, which kept Washington shut down and many traders away from their desks. Volume was a dribble and the major indices ended the day without much change, though all were down.
Dow 10,038.38, -20.26 (0.20%)
NASDAQ 2,147.87, -3.00 (0.14%)
S&P 500 1,068.13, -2.39 (0.22%)
NYSE Composite 6,819.12, -16.04 (0.23%)
Declining issues beat advancers, 3271-3086. New highs: 113; New lows: 53. Still no perceptible break in these indicators. Volume was on the low side.
NYSE Volume 4,982,940,500
NASDAQ Volume 2,039,927,875
Commodities were split. Crude oil gained 17 cents, to $74.69. That's about to change. Look for crude at $65 within months, possibly sooner and possibly lower. Gold lost $1.10, to $1,076.10. Silver edged down 11 cents, to $15.33.
Just to reinforce how grossly mismanaged the US economy is, I cite this mainstream article, called, Is America about to go broke?, a brief, yet exceptional insight to the unfunded liabilities of Social Security and Medicare by Scott Burns.
Having previously written on this topic just a few days or weeks ago, I discovered that the unfunded liabilities were an amorphous blob, with estimates ranging from $69 to $99 trillion. Burns pegs it at a "mere" $42.9 trillion, citing the actual 2008 Trustee's Report as his source. Burns makes more claims in his article, the most compelling being that the total expense for SS and Medicare will outstrip revenue sometime between 2010 and 2015. Previous estimates had this date pegged as 2037, quite a few years off. Burns also pegs Alan Greenspan as the architect for the detonation of the entitlement time bomb, a point on which he is probably correct.
But then Burns makes the leap to inflation, purporting that in order to keep the payments system going, the Fed will have to print more money. That's where he and I part company. The Fed has been printing money as fast as it can for years. Inflation has not occurred because the banks are hoarding it, keeping an ungodly amount as reserves within the Federal Reserve. Just printing money doesn't cause inflation. It has to be put into circulation, and currently, its not. And, as we learned today, the Fed is going to pay interest on all this money the banks have stored within the Fed as reserves. There's the final solution. The US economy is kaput, forcibly being thrown down a deflationist hole by the Federal Reserve and its member banks.
The plan by the Fed is ingenious, yet utterly transparent. They'll inflate when they see fit. When they have every mortgage in America underwater, when real estate values have plummeted to 30-40% of what they are today, that's when they'll release a torrent of previously-reserved money as they buy up every depressed property in America, converting the nation's most valuable assets from the hands of homeowners, Fannie Mae and Freddie Mac, to their own. Oh, yes, and then, once Americans already have been forced out of their homes, the prices of everything - from food, to fuel to every imported good - will rise out of their buying range.
Yes, we will have inflation, but not before we encounter years and years of crushing deflation.
I'm not laughing as hard as I was earlier, because the conditions are dire indeed. However, the proposed solutions and what passes today for economic analysis are absolutely side-splitting.
Being a resourceful and resolute sort, I usually replied that the alternative would be to ball up in a corner and cry.
Nowadays, I laugh. I laugh quite a bit. And, what keeps me laughing the most is the outright insanity of the global economy and the people who are supposed to be running it. That idea alone, that a few people, like Fed Chairman Ben Bernanke and heads of foreign central banks, are supposed to keep the global machinery of commerce well-maintained and regulated.
HAHAHAHAHAHAHAHA!!!!! Financial mismanagement of far-flung enterprises, like nations, began with the creation of money, but didn't really gather momentum until the Fed was created in 1913 (just before the Great Depression, I should add) and John Maynard Keynes began commenting and writing on economics. The art was nearly perfected by the expansionist Maestro himself, Alan Greenspan, and is today being expanded to the nth degree of absurdity by Chairman Bernanke.
Today was a literal laugh riot. Bernanke released a transcript of his remarks prepared for testimony before the Committee on Financial Services, U.S. House of Representatives. His actual appearance was postponed since the nation's capitol is currently under two to three feet of snow (this is a probably a good thing that won't last), but Chairman Ben decided to unveil it today, since he probably wanted to get the blueprint outlining the devastation of a nation's finances out for inspection by his central banker buddies around the world.
The text of his remarks, lined above, reads like a fantasy. It is almost all fiction and represents the hopes and prayers of the fed Chariman, because, technically, with the federal funds rate essentially at zero and there being no economic conditions which would cause the FOMC to change its policy stance, i.e., raising the rate, the Fed has NO WAY TO INFLUENCE INTEREST RATES.
What our ingenious Chairman has suggested in this little piece of fiction, is that interest rate policy will be tied to interest paid on member bank reserves. In other words, Bernanke has suggested a game-changer because the usual federal funds rate is going to stay at ZERO for much longer than he or anyone else in the banking industry ever imagined it would.
Essentially, he's saying - despite his claims that the economy is improving - that conditions continue to deteriorate and will continue to deteriorate for as far as the eye can see. Inside his veiled statement of "change" (we've heard that one before) is the seed of truth: the Fed has failed in its responsibility to promote a sound economy and stable prices. They have been unable to shake loose from their accommodative posture because the debt burden is still too severe and getting worse.
The only way out for them is to pay interest on their money they themselves hold and hope that credit markets respond in kind to yet another inflationary gesture. In all probability, it won't work, for two good reasons. First, the entire structure of the Fed is based on lending out money at interest, not paying interest on money held in reserve. Their plan is entirely a chimera, a sham, a puppet show. Second, the private markets will not adjust to the "new, improved" interest-on-reserves-as-the-basis-for-all-lending program. Markets, regional and local, have their own priorities and standards and will shake free from the Fed umbrella. Growing markets will encourage higher interest rates. Slowing or stagnant markets, that being most of the nation, will not be able to raise rates with any success.
Bernanke's plan is as boneheaded as most of the ideas spawned by the minds of these Lilliputian thinkers. More than anything else, the Chairman has issued the first statement signaling the end of the Federal Reserve. He admits that the economy's problems began in August of 2007, as I have repeatedly stated at various times on this blog and elsewhere. His highly-fictionalized account of the proceeding events fail to hide the fact that the Fed and his counterparts at the US Treasury have been entirely unable to correct the prevailing conditions of decline.
He is admitting defeat, The US economic system, as it has been engineered by the Federal Reserve, is broken beyond repair. The fed funds rate is ZERO, and will remain at ZERO forever, or, until the Federal Reserve Act is either amended or revoked. Since the Federal Reserve Act did not include a charter or set term for the operation of the Fed, there is no renewal or expiration. They operate in perpetuity, thus, the only way to dispose of or abolish this abominable creation is by an act of congress, so don't hold your breath. By the time the numbskulls in DC come to the realization that the Fed has bankrupted the nation, it will be too late. Besides, the federal government has done their own demolition job with entitlements, deficits and the burgeoning national debt.
In 2007, I suggested taking all money out of the stock market and putting it into cash. This new twist on the entire structure of money reinforces my ideas from yesterday that the only place to put money now is in foodstocks that can be stored, reliable transportation, clothing, arable land and tools of trade. Obviously, an investment in a sewing machine or any kind of gardening instrument would be a worthwhile use of your money in light of today's developments.
The Fed's failure may result in very unusual movements in currency markets. An absolute breakdown of global trade is not out of the question as more and more individuals and countries question the viability of fiat currencies as a whole. The alternatives to our busted system of credit are gold, silver and barter. However, since gold and silver have been highly commoditized and traded as investments, they may be less reliable as stores of wealth as their values should fall along with all other asset classes, albeit to a lesser degree. Add to the list, seeds, for vegetables. They're cheap, and everybody needs to eat more veggies.
The market reaction to Bernanke's comments, released about 10:00 am, was complete horror. Stocks immediately sold off on the very thought that the fed would even consider ending their free-money regime. Cooler heads prevailed, however, sending stocks back up and into a stable area for much of the remaining session. Overhanging everything was the snowstorm ravaging the East coast, which kept Washington shut down and many traders away from their desks. Volume was a dribble and the major indices ended the day without much change, though all were down.
Dow 10,038.38, -20.26 (0.20%)
NASDAQ 2,147.87, -3.00 (0.14%)
S&P 500 1,068.13, -2.39 (0.22%)
NYSE Composite 6,819.12, -16.04 (0.23%)
Declining issues beat advancers, 3271-3086. New highs: 113; New lows: 53. Still no perceptible break in these indicators. Volume was on the low side.
NYSE Volume 4,982,940,500
NASDAQ Volume 2,039,927,875
Commodities were split. Crude oil gained 17 cents, to $74.69. That's about to change. Look for crude at $65 within months, possibly sooner and possibly lower. Gold lost $1.10, to $1,076.10. Silver edged down 11 cents, to $15.33.
Just to reinforce how grossly mismanaged the US economy is, I cite this mainstream article, called, Is America about to go broke?, a brief, yet exceptional insight to the unfunded liabilities of Social Security and Medicare by Scott Burns.
Having previously written on this topic just a few days or weeks ago, I discovered that the unfunded liabilities were an amorphous blob, with estimates ranging from $69 to $99 trillion. Burns pegs it at a "mere" $42.9 trillion, citing the actual 2008 Trustee's Report as his source. Burns makes more claims in his article, the most compelling being that the total expense for SS and Medicare will outstrip revenue sometime between 2010 and 2015. Previous estimates had this date pegged as 2037, quite a few years off. Burns also pegs Alan Greenspan as the architect for the detonation of the entitlement time bomb, a point on which he is probably correct.
But then Burns makes the leap to inflation, purporting that in order to keep the payments system going, the Fed will have to print more money. That's where he and I part company. The Fed has been printing money as fast as it can for years. Inflation has not occurred because the banks are hoarding it, keeping an ungodly amount as reserves within the Federal Reserve. Just printing money doesn't cause inflation. It has to be put into circulation, and currently, its not. And, as we learned today, the Fed is going to pay interest on all this money the banks have stored within the Fed as reserves. There's the final solution. The US economy is kaput, forcibly being thrown down a deflationist hole by the Federal Reserve and its member banks.
The plan by the Fed is ingenious, yet utterly transparent. They'll inflate when they see fit. When they have every mortgage in America underwater, when real estate values have plummeted to 30-40% of what they are today, that's when they'll release a torrent of previously-reserved money as they buy up every depressed property in America, converting the nation's most valuable assets from the hands of homeowners, Fannie Mae and Freddie Mac, to their own. Oh, yes, and then, once Americans already have been forced out of their homes, the prices of everything - from food, to fuel to every imported good - will rise out of their buying range.
Yes, we will have inflation, but not before we encounter years and years of crushing deflation.
I'm not laughing as hard as I was earlier, because the conditions are dire indeed. However, the proposed solutions and what passes today for economic analysis are absolutely side-splitting.
Tuesday, February 9, 2010
Panic Buying on Rumored Greece Debt Solution
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.
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.
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.
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