Markets continued their pattern of going nowhere in a hurry on Monday, but oil futures traders may have tipped their hands, sending the slippery stuff back below $80/barrel.
In Washington, meanwhile, Senator Dodd doodled with the financial reform bill, making the Fed the ultimate protector of consumers, a laughable situation. Remember, it was Dodd, along with his house counterpart Barney Frank, who oversaw the destruction of Freddie Mac and Fannie Mae, watched with gaping jaws as Goldman Sachs and Wall Street hijacked the nation's economy and now thinks anointing the Federal Reserve as the head of a consumer financial protection agency is a grand idea.
Actually, the politics of the situation speak more boldly than the white-haired Senator from Connecticut (many of his constituents are in the financial industry). Having the Fed as a consumer protector is akin to hiring Tiger Woods as a marriage counselor. It may appear good on the surface, but the reality is that only the banks will be protected since they're the ones to whom the Fed is tied. The Fed is not a government agency. It is a PRIVATE BANK. Dodd's bill suggests self-regulation again, the very concept that dynamited the underpinnings of the financial industry over the past ten years.
In essence, Dodd's bill is about as useful as a fire extinguisher in a forest fire. Consumers will be protected to the extent that they distrust the banks and financial companies with whom they deal. If Dodd and his congressional playmates were serious about financial reform, the very first thing they'd do is re-institute the usury laws they helped decimate in the 90s, but that's a pipe-dream in today's environment. Congress is merely a patsy for the banks and the Fed. Consumers are pigeons, to be taken and swindled at every opportunity, including at the teller window and the voting booth.
The legacy of this and the past 12-15 congresses will be one of patronage and passivity. Not a single piece of financial or regulatory legislation passed in the past 15 years has improved the lot of everyday Americans. Banks and Wall Street have flourished while Main Street and the middle class has floundered in a sea of red ink, debt and tiresome politics.
Generally speaking, anything passed by congress these days should be ignored, especially since they can't seem to find a copy of the constitution anywhere in the Capitol. Dodd's proposed bill, like the health care legislation, protects the people who pay for their election campaigns. In Dodd's case, the financial industry; in the matter of health care, the pharmaceutical companies and health insurers get all the benefit, just like they did with Bush's prescription drug bill.
As mentioned in a post over a year ago, we have entered the post-government era in America. Real progress is being made behind the scenes in the underground economy which doesn't pay taxes, doesn't follow local, state or federal mandates and deals largely in cash. It now comprises most small businesses, home businesses, illegal operations such as drug dealing, prostitution, gambling and work-for-hire operations. If government would step back and get the hell out of the way, the American engine of progress that is the able-bodied unemployed, underemployed and off-the-books employed could set sail on a new chapter in economic history.
Americans are so keen on getting government out of their lives, off of their backs and away from their employment that more and more people are simply playing the non-compliance game. The number of individuals not reporting income, cheating on their taxes and/or simply ignoring all of the paperwork and hassle involved in dealing with government regulations is swelling by vast numbers. It cannot be tracked, it cannot be traced and it cannot be stopped. Quietly, Americans have begun their own revolution, in a very stealthy, entrepreneurial and innovative manner.
Fed up with Washington's political bickering and squabbling which produces worthless legislation, government employees who are paid 50-100% more than private sector counterparts with benefits far in excess of what they could even imagine to afford, and lack of prosecution of bank thieves in pinstriped suits, small business Americans will and are striking back at the heart of the government's grand swindle. Without money in the form of tax receipts, government ceases to hold power over individuals. Without funds, their projects will run into more and more deficits, eventually resulting in wage and benefit cuts to the rank-and-file, or layoffs, which will engender strikes, walk-outs and a final breakdown of the entire government/industry/financial complex.
The movement is well underway. Groups like tea parties are only the beginning, the euphemistic tip of the iceberg. This revolution will not be televised. It is hardly even spoken of, much less broadcast, but it is growing daily as pent up disgust and hatred of institutionalized mediocrity seeks an outlet. Americans always have fended for themselves and joined with others of like minds, whether the enemy be Germans in submarines, terrorists or well-tailored officials. Washington and Wall Street will have only themselves to blame when the realization of lower tax receipts becomes clear and evident. They have overstepped their bounds by an order of degree and the American public has begun to lash back with a fury usually reserved for rapists and traitors, of which congress and Wall Street has in ample supply.
Let there be no doubt. The American public is willing and able to break laws and conventions in order to save democracy and this current struggle - largely a financial one - is no different than the labor movements of the 30s or the war protests of the 60s. By November, with rancor drowning out campaign rhetoric, the voice of the people will wail the loudest by either disposing of incumbents or eschewing the polls altogether, as the issue is not Republican or Democrat, but politics as usual, which doesn't work, hasn't worked and never will work.
The struggle continues.
Meanwhile, in the caverns of Wall Street, confusion reigns supreme. With two of the major indices up and two down, there's an obvious lack of direction, though, just in case anybody cares to notice, the Dow Jones Transports and Industrials have diverged, as has the Dow and the NASDAQ. The NASDAQ cannot lead other indices higher. Every instance in which the NASDAQ has exceeded a previous high and the Dow did not follow has produced a nearly-immediate sell-off in all indices. Worse, the Dow Transportation Index, which broke to new highs last week, was not followed by the Industrials, a classic non-confirmation which spells disaster for the now over-extended bear market rally.
Thus far, the markets have resisted corrections, first, in June of last year and most recently in February, never falling into the -10% area that would indicate true corrective activity. Instead, the few players remaining in the bowels of the markets have intervened, producing a rally that is neither believable nor sustainable. However, since most Americans are now cheating the government in order to keep food on the table and heat in the furnace, don't be surprised if corporations haven't devised equally devious manners to inflate profits, hide losses and artificially grow earnings. The Ponzi scheme has become the norm for finances in the USA.
Dow 10,642.15, +17.46 (0.16%)
NASDAQ 2,362.21, -5.45 (0.23%)
S&P 500 1,150.51, +0.52 (0.05%)
NYSE Composite 7,350.96, -11.89 (0.16%)
Giving credence to the falsity of the markets, advancers were beaten badly by decliners on Monday, with losers ahead, 3791-2689. That's a notable divergence and should set off alarm bells in brokerages. The long-anticipated selling spree is about to commence. New highs moderated down to 475, but new lows fell to a mere 32. Trading volume was dismal, as befits an overbought market that cannot climb to new heights because the underlying fundamentals simply aren't there.
NYSE Volume 4,680,055,500
NASDAQ Volume 1,909,806,375
In another sign that the gloves are off and it's every trader for him or herself, oil slid $1.44, to $79.80, abruptly ending the three-week rally that brought it all the way to $83. The price of oil is inexorably tied to economic conditions. Despite the best work of hedge funds and market interventionists, the price of oil will someday revert to following supply-demand dictates from the market. That day cannot come soon enough.
Gold gained $3.60, to $1,105.10. Silver was up 6 cents, to $17.08 per ounce.
On Tuesday, the FOMC releases their latest policy dictate. They will change nothing and the market will, in turn, not react. Stocks are already pricey and cash is king. Sooner or later, the Wall Street moguls will find out that much of the paper they're trading is pure nonsense.
Monday, March 15, 2010
Friday, March 12, 2010
Sellers Creeping into Market
Call it what you will, but today's action was indicative - as all of the past week has been - of uncertainty about further stock market advances and profit-taking.
Stocks have stalled on low volume, though with the steady supply of cheap money being fed into the system, the small, fractional gains could continue, though sharper players probably have already exited profitable positions.
Dow 10,624.69, +12.85 (0.12%)
NASDAQ 2,367.66, -0.80 (0.03%)
S&P 500 1,149.99, -0.25 (0.02%)
NYSE Composite 7,362.85, +9.61 (0.13%)
Internal indicators are still positive, however, with advancing issues eking out a win over decliners, 3378-3127. That was the closest margin in days, if not weeks. New highs came in explosively, at 805, but the number of new lows also climbed, to 69 on the day. Volume continues to be stuck in neutral; very low participation is indicated.
NYSE Volume 5,506,876,500
NASDAQ Volume 2,035,983,000
Commodities were flat, with oil dipping 6 cents, to $81.24. Gold lost $1.20, to $1,107.00, and silver fell 17 cents, to $17.03. An interesting indicator is the gold-silver ratio, which has been out of whack since 2003, but on pull-backs, silver, with more industrial uses than gold, usually gets hit harder. It's an interesting dynamic. Silver will follow gold to the upside, but generally underperform it. On the downside, it may be instructive as a predictor of future gold moves. Since silver is more closely tied to the real economy, it goes to reason that it would feel the pinch prior to its cousin gold, which is almost entirely an investment instrument.
A couple of data points should have moved the market, and might have been partially responsible for the poor showing on Friday. Retail sales were strong in February, up 0.3%, but january was revised sharply lower, from +0.5 to +0.1. That revision may have put a scare into investors, sensing that the current numbers were likely overstated. If so, that would jibe with the Michigan Sentiment survey, which fell to 72.5 from 73.6 in February.
Additionally, inventories were flat when the expectation was for a noticeable build. It didn't occur, thus, skepticism prevailed, and the market doesn't appreciate any kind of uncertainty, of which there is more than enough to go around.
At least the weather is improving and can't be blamed for anything.
Stocks have stalled on low volume, though with the steady supply of cheap money being fed into the system, the small, fractional gains could continue, though sharper players probably have already exited profitable positions.
Dow 10,624.69, +12.85 (0.12%)
NASDAQ 2,367.66, -0.80 (0.03%)
S&P 500 1,149.99, -0.25 (0.02%)
NYSE Composite 7,362.85, +9.61 (0.13%)
Internal indicators are still positive, however, with advancing issues eking out a win over decliners, 3378-3127. That was the closest margin in days, if not weeks. New highs came in explosively, at 805, but the number of new lows also climbed, to 69 on the day. Volume continues to be stuck in neutral; very low participation is indicated.
NYSE Volume 5,506,876,500
NASDAQ Volume 2,035,983,000
Commodities were flat, with oil dipping 6 cents, to $81.24. Gold lost $1.20, to $1,107.00, and silver fell 17 cents, to $17.03. An interesting indicator is the gold-silver ratio, which has been out of whack since 2003, but on pull-backs, silver, with more industrial uses than gold, usually gets hit harder. It's an interesting dynamic. Silver will follow gold to the upside, but generally underperform it. On the downside, it may be instructive as a predictor of future gold moves. Since silver is more closely tied to the real economy, it goes to reason that it would feel the pinch prior to its cousin gold, which is almost entirely an investment instrument.
A couple of data points should have moved the market, and might have been partially responsible for the poor showing on Friday. Retail sales were strong in February, up 0.3%, but january was revised sharply lower, from +0.5 to +0.1. That revision may have put a scare into investors, sensing that the current numbers were likely overstated. If so, that would jibe with the Michigan Sentiment survey, which fell to 72.5 from 73.6 in February.
Additionally, inventories were flat when the expectation was for a noticeable build. It didn't occur, thus, skepticism prevailed, and the market doesn't appreciate any kind of uncertainty, of which there is more than enough to go around.
At least the weather is improving and can't be blamed for anything.
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With investment strategies designed by some of the most capable minds in the field, like David Swensen of Yale, John Bogle, founder of the Vanguard group of funds, Burton Malkiel of Princeton and Dr. William Sharpe of Stanford, investing doesn't have to be a guessing game any more.
The proper asset allocation will help achieve the long-term goals you desire from your portfolio and allow you to rest easy during turbulent market conditions.
Advanced portfolio management designed by professionals could be the key to success in the market, whether you're a frequent trader into small caps, large caps, or need to execute a 401k rollover or are saving and planning for retirement or a college education. Going it alone, rather than relying on trusted, proven advice, discipline and strategies, could actually cost you more than you know.
Thursday, March 11, 2010
No Change Must Be Good
Nothing much of importance happened today, giving market participants yet another opportunity to do what they've been doing for nine of the last twelve sessions: bid stocks higher.
There must be something quite enticing about owning stocks nowadays because there seems to be no shortage of buyers. Whatever the reasons, stocks continue to add to gains, day after day after day. It's becoming something of a bore.
Suppose the congress went home for a month, two months, six months, or just simply hung around and enacted no new legislation. Suppose the Fed kept short term interest rates permanently at zero. Suppose government debt was paid for with more government debt and that banks could continue to keep poisoned, rotten assets off their balance sheets.
Add in real unemployment at about 16%, 15% of all homeowners either behind on mortgage payments or already in foreclosure.
We'd have exactly the conditions we have today, though how all of that relates to being positive for stocks or the more general economy is a quizzer.
As for that final piece of the puzzle, the 15% of the "better off" homeowners in America falling behind, that info comes via the Mortgage Bankers Association, a group which should know the reality of homeownership, in this Washington Post article from February 20, 2010. Maybe you missed it.
The key passages are these:
"About 9.47 percent of all borrowers were delinquent on mortgages during the fourth quarter, according to a survey. The number is down slightly from the previous quarter, the highest on record, but was the second-highest level ever seen. An additional 4.58 percent of homeowners were somewhere in the foreclosure process.
This means that about 15 percent, or 7.9 million mortgages, were in trouble during the quarter, according to the industry group. It is the highest level recorded by the survey, which has been conducted since 1972, and up from 11 percent, or 6.4 million loans, during the corresponding period in 2008."
That is simply not encouraging.
As for unemployment, the weekly initial claims data was released early today, showing another 462,000 people filed new claims in the most recent reporting period. There were also more than 4,500,000 people still collecting unemployment benefits and congress just approved another extension. There are people out there who have been receiving benefits since March, 2008. Maybe you know some of them.
The 9.7% unemployment rate the government likes to tout is a neat fabrication which doesn't include "discouraged" workers or those who have taken lower-paying part-time jobs. As claimed earlier, real unemployment is about 16% of the available labor pool. It's much higher for specific groups, such as teens and minorities.
Somehow, all of this makes stocks good investments. Sorry, but some of us disagree. Anybody buying stocks with real money these days is simply gambling, and much of what's out there appear to be bad bets.
Dow 10,611.84, +44.51 (0.42%)
NASDAQ 2,368.46, +9.51 (0.40%)
S&P 500 1,150.24, +4.63 (0.40%)
NYSE Composite 7,353.21, +25.54 (0.35%)
Advancers beat down decliners, 3690-2702. New highs beat new lows, 563-51. That gap will begin to slowly decline. By August or September, possibly sooner, new lows should retake the advantage. Volume continued at a trickle. Goldman Sachs alone is probably responsible for 30% off all the trading volume on the exchanges, possibly as much as 45%.
NYSE Volume 5,093,085,000
NASDAQ Volume 2,093,398,875
Commodity prices moderated. Oil only gained 16 cents, but is priced now at $82.25 per barrel. Gold was absolutely flat, at $1108.10. Silver gained 15 cents, to $17.17.
There will be a reckoning for the current rallying folly. And it really is foolishness of a high degree. Stocks are close to recent highs, so when were we supposed to buy stocks? When they were high? We all know the answer to that question.
Friday will bring some economic data. Retail sales for February, along with the Michigan Sentiment survey for March and January business inventories will cumulatively tell us that nothing is going on in one way or another.
Stocks will rise again.
There must be something quite enticing about owning stocks nowadays because there seems to be no shortage of buyers. Whatever the reasons, stocks continue to add to gains, day after day after day. It's becoming something of a bore.
Suppose the congress went home for a month, two months, six months, or just simply hung around and enacted no new legislation. Suppose the Fed kept short term interest rates permanently at zero. Suppose government debt was paid for with more government debt and that banks could continue to keep poisoned, rotten assets off their balance sheets.
Add in real unemployment at about 16%, 15% of all homeowners either behind on mortgage payments or already in foreclosure.
We'd have exactly the conditions we have today, though how all of that relates to being positive for stocks or the more general economy is a quizzer.
As for that final piece of the puzzle, the 15% of the "better off" homeowners in America falling behind, that info comes via the Mortgage Bankers Association, a group which should know the reality of homeownership, in this Washington Post article from February 20, 2010. Maybe you missed it.
The key passages are these:
"About 9.47 percent of all borrowers were delinquent on mortgages during the fourth quarter, according to a survey. The number is down slightly from the previous quarter, the highest on record, but was the second-highest level ever seen. An additional 4.58 percent of homeowners were somewhere in the foreclosure process.
This means that about 15 percent, or 7.9 million mortgages, were in trouble during the quarter, according to the industry group. It is the highest level recorded by the survey, which has been conducted since 1972, and up from 11 percent, or 6.4 million loans, during the corresponding period in 2008."
That is simply not encouraging.
As for unemployment, the weekly initial claims data was released early today, showing another 462,000 people filed new claims in the most recent reporting period. There were also more than 4,500,000 people still collecting unemployment benefits and congress just approved another extension. There are people out there who have been receiving benefits since March, 2008. Maybe you know some of them.
The 9.7% unemployment rate the government likes to tout is a neat fabrication which doesn't include "discouraged" workers or those who have taken lower-paying part-time jobs. As claimed earlier, real unemployment is about 16% of the available labor pool. It's much higher for specific groups, such as teens and minorities.
Somehow, all of this makes stocks good investments. Sorry, but some of us disagree. Anybody buying stocks with real money these days is simply gambling, and much of what's out there appear to be bad bets.
Dow 10,611.84, +44.51 (0.42%)
NASDAQ 2,368.46, +9.51 (0.40%)
S&P 500 1,150.24, +4.63 (0.40%)
NYSE Composite 7,353.21, +25.54 (0.35%)
Advancers beat down decliners, 3690-2702. New highs beat new lows, 563-51. That gap will begin to slowly decline. By August or September, possibly sooner, new lows should retake the advantage. Volume continued at a trickle. Goldman Sachs alone is probably responsible for 30% off all the trading volume on the exchanges, possibly as much as 45%.
NYSE Volume 5,093,085,000
NASDAQ Volume 2,093,398,875
Commodity prices moderated. Oil only gained 16 cents, but is priced now at $82.25 per barrel. Gold was absolutely flat, at $1108.10. Silver gained 15 cents, to $17.17.
There will be a reckoning for the current rallying folly. And it really is foolishness of a high degree. Stocks are close to recent highs, so when were we supposed to buy stocks? When they were high? We all know the answer to that question.
Friday will bring some economic data. Retail sales for February, along with the Michigan Sentiment survey for March and January business inventories will cumulatively tell us that nothing is going on in one way or another.
Stocks will rise again.
Wednesday, March 10, 2010
Oy! Tech Keeps Stocks on the Upswing
Tech stocks continued to dominate the gainers once again as stocks continued their month-long ascent. The NASDAQ easily outpaced the other major averages. Investors are coming to realize that tech companies are more financially capable and less in debt than their traditional industrial, material or financial counterparts.
It goes to reason, since most of the strong tech companies - Apple, Cisco, Amazon in particular - are young and have little to no debt service, separating them in material ways from other companies which may be struggling with finances, debt service, bond issuance and legacy costs (pensions, health care, etc.).
The general economy is still somewhat in a confused state of non-denial. While most indicators are benign or improving - other than housing and employment (Is there anything else that matters?) - sentiment remains steadfastly cautious. It actually has set up a nice paradigm for traders, especially those with more guile and shorter time horizons. In other words, the majority of the market is running on momentum, a tricky mistress, which can turn on a dime.
So long as stocks continue to gain in value, I'll reassert that they're not sufficiently discounting the future, which looks horrid. The government's plan seems to be to continually kick the can further down the road, applying patches along the way. There cannot be stability or prosperity until the government sector cleans up its act and tackles the issues of debt and entitlements head on, something few elected officials wish to do.
Eventually, piling debt upon debt is going to cause an implosion and dislocation, as it did in the fall of 2008. Current policies are leading to more spectacular failures, as exposure is now greater and includes not only financial institutions, but government entities such as the Fed, Treasury, and the unmentionable messes contained within Fannie Mae, Freddie Mac and the soon-to-flame-out FHA.
Fixed income gains are increasingly scarce and many unstable. Witness the note redemptions by Fannie and Freddie on defaulted mortgages within MBS, tight spreads and few alternatives. Flat-lining fixed income is inducing more equity investment, forcing stocks higher, eventually to unsustainable levels. It's a no-win, unless you're completely in cash because of declining asset values almost everywhere else. The stock market is nothing more than a chimera, an abstraction of the global economy and plenty of opinions. Short-term gains are possible. So are permanent losses.
Dow 10,567.33, +2.95 (0.03%)
NASDAQ 2,358.95, +18.27 (0.78%)
S&P 500 1,145.61, +5.17 (0.45%)
NYSE Composite 7,327.67, +33.65 (0.46%)
Winners beat losers, 4325-2192. New Highs: 773; New Lows: 51. Volume was substantially better than recent sluggish sessions. Lots of stock changed hands, but movement was constrained.
NYSE Volume 6,089,594,500
NASDAQ Volume 2,502,965,000
Oil posted another ridiculous gain of 51 cents, to $82.09, despite another in a series of inventory builds. The energy complex is wickedly overpriced and reversion is a certainty. Current prices cannot be maintained with reduced demand levels. Gold fell $14.10, to $1,108.20. Silver dipped 3 cents to $17.31.
Economic data has been slim and incapable of providing direction.
It goes to reason, since most of the strong tech companies - Apple, Cisco, Amazon in particular - are young and have little to no debt service, separating them in material ways from other companies which may be struggling with finances, debt service, bond issuance and legacy costs (pensions, health care, etc.).
The general economy is still somewhat in a confused state of non-denial. While most indicators are benign or improving - other than housing and employment (Is there anything else that matters?) - sentiment remains steadfastly cautious. It actually has set up a nice paradigm for traders, especially those with more guile and shorter time horizons. In other words, the majority of the market is running on momentum, a tricky mistress, which can turn on a dime.
So long as stocks continue to gain in value, I'll reassert that they're not sufficiently discounting the future, which looks horrid. The government's plan seems to be to continually kick the can further down the road, applying patches along the way. There cannot be stability or prosperity until the government sector cleans up its act and tackles the issues of debt and entitlements head on, something few elected officials wish to do.
Eventually, piling debt upon debt is going to cause an implosion and dislocation, as it did in the fall of 2008. Current policies are leading to more spectacular failures, as exposure is now greater and includes not only financial institutions, but government entities such as the Fed, Treasury, and the unmentionable messes contained within Fannie Mae, Freddie Mac and the soon-to-flame-out FHA.
Fixed income gains are increasingly scarce and many unstable. Witness the note redemptions by Fannie and Freddie on defaulted mortgages within MBS, tight spreads and few alternatives. Flat-lining fixed income is inducing more equity investment, forcing stocks higher, eventually to unsustainable levels. It's a no-win, unless you're completely in cash because of declining asset values almost everywhere else. The stock market is nothing more than a chimera, an abstraction of the global economy and plenty of opinions. Short-term gains are possible. So are permanent losses.
Dow 10,567.33, +2.95 (0.03%)
NASDAQ 2,358.95, +18.27 (0.78%)
S&P 500 1,145.61, +5.17 (0.45%)
NYSE Composite 7,327.67, +33.65 (0.46%)
Winners beat losers, 4325-2192. New Highs: 773; New Lows: 51. Volume was substantially better than recent sluggish sessions. Lots of stock changed hands, but movement was constrained.
NYSE Volume 6,089,594,500
NASDAQ Volume 2,502,965,000
Oil posted another ridiculous gain of 51 cents, to $82.09, despite another in a series of inventory builds. The energy complex is wickedly overpriced and reversion is a certainty. Current prices cannot be maintained with reduced demand levels. Gold fell $14.10, to $1,108.20. Silver dipped 3 cents to $17.31.
Economic data has been slim and incapable of providing direction.
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