Stocks were up again today, and, truth be told, it's beginning to become a little bit sick and perverted, to think that US corporations are healthy and making money because they've been able to cut costs to the bone, costing US employees their jobs, or cutting the pay of those employees in order to please their investors. Soon enough, it will become truly sick and perverted, when these multi-national corporations begin to raise prices because they can't cut any more payroll or, like AT&T and Catterpillar, take huge write-offs and blame it on the increased costs of "ObamaCare," as they call it.
AT&T quietly announced late Friday that they would take a $1 billion charge because of all the evil new costs included in the heath care reform bill. One has to ask why they didn't mention this while the bill was in committee or on the senate and house floors. No, they just sat back and watched a billion dollars evaporate without raising their corporate voice?
Tell you what: any company that is that reckless with investor money should not be in your portfolio. If you own any AT&T stock, or the stock of any company that takes a write-off due to increased costs associated with the recently-passed health care reform bill, SELL IT, SELL ALL OF IT, SELL ALL OF IT NOW. They don't deserve your business, and furthermore, they're a sick, twisted bunch of creeps. Remember, AT&T was one of the companies which allowed the government unfettered access to YOUR phone calls, violated your privacy and probably broke numerous laws, but got away scott free. Screw them. They only care about themselves, not you, your cell phone or your land line. Just your money, that's all.
Not that I am particularly enamored with the health care legislation - I'm not - but AT&T is just using it as a scapegoat to cut employee benefits and/or hide other losses. Face it folks, these people are about as honest as Bernie Madoff's accountant.
Dow 10,895.86, +45.50 (0.42%)
NASDAQ 2,404.36, +9.23 (0.39%)
S&P 500 1,173.32, +6.73 (0.58%)
NYSE Composite 7,464.90, +61.32 (0.83%)
As usual, advancing issues outdid decliners, 4212-2245. There were 369 new highs and 42 new lows. So, nothing else has changed, except that volume returned to mostly insider trading. Participation levels are dropping like stones off a high bridge. It is possible that average people are awakening to the scheming ways of Wall Street after all. Most of the trading is being done by big banks, brokerages, hedge funds and mutual funds. Eventually, after they've fleeced the American - and foreign - public enough, they'll begin to eat each other's lunches and the market will be exposed for the grossly overvalued, manipulated joke it has become over the past two decades.
NYSE Volume 4,827,693,500
NASDAQ Volume 1,897,280,250
Oil was up $2.17, to $82.17, based on nothing but naked speculation and greed. Gold was up $6.10, to $1,110.30; silver higher by 48 cents, to $17.37, same reasons. Once again, in the face of a dawdling global economy and slack demand, prices continue to rise in stark contradiction to the "laws" of supply and demand.
Wake up, people. You toil all day, and sometimes part of your night, to do what? Pay utility bills, car payments, fuel, insurance and taxes. When that's all done you can look at what's left and Wall Street brokerages expect you to invest for your "retirement" or your kid's college education.
Get real. If retirement was such a grand idea, we'd do it when we're in our 20s or 30s not in our 70s and 80s. It's only because we're worth less as employees at that age: slower, less controllable, wiser, that companies want us to move along. You keep writing those checks. I'll keep telling you why it's a no-win situation.
Monday, March 29, 2010
Friday, March 26, 2010
Equities Break Down, Break Even
For the second straight day, a nascent rally in stocks was shut off by outside events, today's supposed culprit a South Korean military vessel apparently sunk by an enemy torpedo.
Who could be so brash, unkind, unthinking? Ah, yes, Kim Jung Il, that man everybody loves to hate, and the perfect scapegoat for any kind of unpleasantness. Last week I couldn't locate my car keys and, certain that the evil North Korean ruler was behind their disappearance, I rattled off a series of insulting emails demanding their return.
And it worked! The keys mysteriously showed up on the kitchen counter within minutes.
So, one can understand with all seriousness how the actions of a crazy, totalitarian slave-master would have such an immediate affect on all the stocks listed on the American exchanges. Surely, if North Korea wants to be provocative and warlike, then it can't be good for Proctor Gamble, Apple or any of the other 6000-odd equities trading on the NYSE or NASDAQ.
It just goes to show how ludicrous and deceptive the financial media has become. Once somebody comes up with an idea, it's run with, whether it makes sense or not, whether it has anything more to do with the value of stocks in play than the weather, or Tiger Wood's 9-hole score, or your kid's grade on a math test.
With analysis such as comes from CNBC or any of a hundred or more boutique financial PR firms or thousands of press releases, no wonder trading stocks is so complicated and so often seemingly without rhyme nor reason. That's why having a nice, healthy horde of cash, diamonds, gold and other nifty stuff you can sell is always a good idea. If the world gets even crazier than it already is, you might have something that somebody wants, and they'll pay you for the pleasure of holding onto it. Seems almost barbaric, doesn't it?
Dow 10,850.36, +9.15 (0.08%)
NASDAQ 2,395.13, -2.28 (0.10%)
S&P 500 1,166.59, -0.86 (0.07%)
NYSE Composite 7,403.53, -17.93 (0.24%)
Regardless of what happened off the shores of the Korean peninsula, winners and losers were nearly evenly divided, the final score being, gainers: 3288; decliners: 3194. There was a dearth of new highs, just 296 of them, as today marked the one-year anniversary of a rather substantial move in the markets, a 175-point gain on the Dow (to 7925), making comparisons to a year ago somewhat less pronounced. Volume reverted back to the norm, sluggish.
NYSE Volume 5,382,776,500
NASDAQ Volume 2,172,191,000
Commodity prices continued the divergence which began yesterday, with oil down 53 cents, to an even $80 per barrel, but gold up $11.50, to $1,104.20, and silver tagging along, higher by 17 cents, to $16.89.
The government officially pegged 1st quarter GDP at 5.6%, The University of Michigan's consumer sentiment index improved to 73.6, from a downwardly-revised 72.5 in February.
Nothing really mattered. It was the best of times; it was the worst of times...
Enjoy the first weekend of Spring. If you're in the North, you should have seeds already germinating; if you're in the South, sprouts; and if you're in California, apparently you're growing stuff not to eat, but to smoke. Shameful.
Who could be so brash, unkind, unthinking? Ah, yes, Kim Jung Il, that man everybody loves to hate, and the perfect scapegoat for any kind of unpleasantness. Last week I couldn't locate my car keys and, certain that the evil North Korean ruler was behind their disappearance, I rattled off a series of insulting emails demanding their return.
And it worked! The keys mysteriously showed up on the kitchen counter within minutes.
So, one can understand with all seriousness how the actions of a crazy, totalitarian slave-master would have such an immediate affect on all the stocks listed on the American exchanges. Surely, if North Korea wants to be provocative and warlike, then it can't be good for Proctor Gamble, Apple or any of the other 6000-odd equities trading on the NYSE or NASDAQ.
It just goes to show how ludicrous and deceptive the financial media has become. Once somebody comes up with an idea, it's run with, whether it makes sense or not, whether it has anything more to do with the value of stocks in play than the weather, or Tiger Wood's 9-hole score, or your kid's grade on a math test.
With analysis such as comes from CNBC or any of a hundred or more boutique financial PR firms or thousands of press releases, no wonder trading stocks is so complicated and so often seemingly without rhyme nor reason. That's why having a nice, healthy horde of cash, diamonds, gold and other nifty stuff you can sell is always a good idea. If the world gets even crazier than it already is, you might have something that somebody wants, and they'll pay you for the pleasure of holding onto it. Seems almost barbaric, doesn't it?
Dow 10,850.36, +9.15 (0.08%)
NASDAQ 2,395.13, -2.28 (0.10%)
S&P 500 1,166.59, -0.86 (0.07%)
NYSE Composite 7,403.53, -17.93 (0.24%)
Regardless of what happened off the shores of the Korean peninsula, winners and losers were nearly evenly divided, the final score being, gainers: 3288; decliners: 3194. There was a dearth of new highs, just 296 of them, as today marked the one-year anniversary of a rather substantial move in the markets, a 175-point gain on the Dow (to 7925), making comparisons to a year ago somewhat less pronounced. Volume reverted back to the norm, sluggish.
NYSE Volume 5,382,776,500
NASDAQ Volume 2,172,191,000
Commodity prices continued the divergence which began yesterday, with oil down 53 cents, to an even $80 per barrel, but gold up $11.50, to $1,104.20, and silver tagging along, higher by 17 cents, to $16.89.
The government officially pegged 1st quarter GDP at 5.6%, The University of Michigan's consumer sentiment index improved to 73.6, from a downwardly-revised 72.5 in February.
Nothing really mattered. It was the best of times; it was the worst of times...
Enjoy the first weekend of Spring. If you're in the North, you should have seeds already germinating; if you're in the South, sprouts; and if you're in California, apparently you're growing stuff not to eat, but to smoke. Shameful.
Thursday, March 25, 2010
Turn-Around Thursday: Greece, US $$ Bury Stock Gains?
Well, it's simply not all sunshine and roses out there after all. On a day in which market pumpers from the major brokerages were attempting to take the Dow over the magical 11,000 mark, turmoil in the Eurozone and strength of the US dollar killed all hopes of a smooth recovery.
The headlines from the various media would have you believe that investors are snapping up stocks like jelly beans on Easter morning and that the bad, old world of Europe, which just can't get its own house in order caused so much worry that everybody sold at once around 3:00 in the afternoon.
Folks, don't be silly. The selling began as soon as the dow crossed the threshold of 10,500, around 1:30 pm. There was no news at that point, except some rumors that Jean Claude Trichet, president of the Europen Central Bank, warned that the bailout of Greece should not involve the International Monetary Fund (IMF), a US export which has consistently stolen wealth from less-fortunate or less-well-armed nations. As it turns out, the EU will be in partnership with the IMF, with the latter handling 1/3 of the Greece debt solution. Good for us, though only if you agree with bullying smaller countries.
It's a working plan, without firm details, though Greece's senior notes are now graded as junk, BBB-. What happened at 3:00? Nothing, except that an ordinary time of day for heavy traders to make moves. And they did all move almost at once, selling, so as to lock in their profits from earlier in the session. This is nothing new. It is a normal trading day move, and nothing more. Reading anything more into a mid-session reversal is usually a bad idea, though this kind of thing could become more commonplace. If stocks continue to gallop higher, look for astute traders to take day-trade profits over and over again.
Dollar strength is good for the US economy, folks. Don't let anybody try to tell you otherwise. A stronger dollar means imports cost less. Sure, exports are more expensive and thus, less marketable around the world, but that shouldn't matter - either to you or most multi-national corporations - you don't export and the big companies nowadays have their manufacturing offshore, in other countries, where labor is cheaper. Besides, they're selling things like industrial tractors, nuclear plants and other extremely high-ticket items where price pretty much takes a back seat to other functions like delivery time and overall quality.
So, sure, the US dollar was marked up today, not because the US is in such outstanding shape, but because Europe is a basket case. US dollars just looked better by comparison, at least for the short term. The trend is positive for US consumers, maybe not for US companies as a rule, but, by no means is a stronger dollar anything but good.
Thus, trader sentiment, and the lust for a quick profit, had more to do with turning a 90-point move higher on the dow into a 5-point gain at the close, and a 25-point NASDAQ gain into a small loss. Tough cookies. Live with it.
Dow 10,841.21, +5.06 (0.05%)
NASDAQ 2,397.41, -1.35 (0.06%)
S&P 500 1,165.73, -1.99 (0.17%)
NYSE Composite 7,385.60, -22.56 (0.30%)
Surprisingly, volume was excellent, though most of the moves were made in the latter part of the day, when selling was the correct option. Losers outslugged winners, 3936-2583. There were 751 new highs to just 85 new lows.
NYSE Volume 6,429,545,000
NASDAQ Volume 2,589,351,750
The rise in the dollar shot dead a rally in oil and the metals. Crude for May delivery fell 8 cents, to $80.53. Gold, which was up sharply, closed with a gain of just $4.10, at $1,092.70. Silver picked up 10 cents, to close at $16.73 per ounce.
In two stories which have importance only in the context of a post-government era of semi-autonomous anarchy, California will vote in November to legalize marijuana and former Assistant Secretary of the Treasury and popular truth-telling writer Paul Craig Roberts said he is retiring from the writing business, ending his last column with the words, "As the pen is censored and its might extinguished, I am signing off."
The headlines from the various media would have you believe that investors are snapping up stocks like jelly beans on Easter morning and that the bad, old world of Europe, which just can't get its own house in order caused so much worry that everybody sold at once around 3:00 in the afternoon.
Folks, don't be silly. The selling began as soon as the dow crossed the threshold of 10,500, around 1:30 pm. There was no news at that point, except some rumors that Jean Claude Trichet, president of the Europen Central Bank, warned that the bailout of Greece should not involve the International Monetary Fund (IMF), a US export which has consistently stolen wealth from less-fortunate or less-well-armed nations. As it turns out, the EU will be in partnership with the IMF, with the latter handling 1/3 of the Greece debt solution. Good for us, though only if you agree with bullying smaller countries.
It's a working plan, without firm details, though Greece's senior notes are now graded as junk, BBB-. What happened at 3:00? Nothing, except that an ordinary time of day for heavy traders to make moves. And they did all move almost at once, selling, so as to lock in their profits from earlier in the session. This is nothing new. It is a normal trading day move, and nothing more. Reading anything more into a mid-session reversal is usually a bad idea, though this kind of thing could become more commonplace. If stocks continue to gallop higher, look for astute traders to take day-trade profits over and over again.
Dollar strength is good for the US economy, folks. Don't let anybody try to tell you otherwise. A stronger dollar means imports cost less. Sure, exports are more expensive and thus, less marketable around the world, but that shouldn't matter - either to you or most multi-national corporations - you don't export and the big companies nowadays have their manufacturing offshore, in other countries, where labor is cheaper. Besides, they're selling things like industrial tractors, nuclear plants and other extremely high-ticket items where price pretty much takes a back seat to other functions like delivery time and overall quality.
So, sure, the US dollar was marked up today, not because the US is in such outstanding shape, but because Europe is a basket case. US dollars just looked better by comparison, at least for the short term. The trend is positive for US consumers, maybe not for US companies as a rule, but, by no means is a stronger dollar anything but good.
Thus, trader sentiment, and the lust for a quick profit, had more to do with turning a 90-point move higher on the dow into a 5-point gain at the close, and a 25-point NASDAQ gain into a small loss. Tough cookies. Live with it.
Dow 10,841.21, +5.06 (0.05%)
NASDAQ 2,397.41, -1.35 (0.06%)
S&P 500 1,165.73, -1.99 (0.17%)
NYSE Composite 7,385.60, -22.56 (0.30%)
Surprisingly, volume was excellent, though most of the moves were made in the latter part of the day, when selling was the correct option. Losers outslugged winners, 3936-2583. There were 751 new highs to just 85 new lows.
NYSE Volume 6,429,545,000
NASDAQ Volume 2,589,351,750
The rise in the dollar shot dead a rally in oil and the metals. Crude for May delivery fell 8 cents, to $80.53. Gold, which was up sharply, closed with a gain of just $4.10, at $1,092.70. Silver picked up 10 cents, to close at $16.73 per ounce.
In two stories which have importance only in the context of a post-government era of semi-autonomous anarchy, California will vote in November to legalize marijuana and former Assistant Secretary of the Treasury and popular truth-telling writer Paul Craig Roberts said he is retiring from the writing business, ending his last column with the words, "As the pen is censored and its might extinguished, I am signing off."
Wednesday, March 24, 2010
BofA's Write-down Gambit
Bank of America, allegedly holding 1.5 million loans that are 60 days or more behind on mortgage payments, today announced a new plan designed to write down principal values on a variety of loans to their most troubled homeowners.
The most affected groups will be those who took loans that were largely responsible for the meltdown in the mortgage securities market and eventually, the larger economy, over the past two years: sub-prime, interest-only and other variable rate products.
Prompted by lawsuits which alleged that Bank of America "strung out, delayed and otherwise hindered" efforts to resolve mortgage issues on homeowners in the state of Washington, the nation's largest mortgage servicer outlined the new program, which at first glance appears to have some value, though the gamble is that by lowering principal on loans in which the property values are lower than the original purchase price - often called "underwater" - the bank will further depress real estate values amid a market that is already under considerable strain.
The bank's plan is somewhat crafty, in that it works down principal balances over a period of five years and is tied to homeowners continuing to make mortgage payments. While it sounds hopeful on the surface, the plan may only prove to drive home prices down further, especially if economic conditions remain subdued or worsen.
In practice, principal write-downs are usually a last resort for lenders, who routinely hold out for the original, agree-upon value at the time of purchase. However, such as are conditions across a wide swath of the US real estate landscape, the bank seemingly is agreeing to take a "haircut" on its investment. Under BofA's plan, investors in mortgages would not suffer actual principal losses, but they would not make as much as originally planned.
No matter what, a haircut is still a haircut, so the very next thing to expect are lawsuits by mortgage investors. Some have already commenced. The bank is in a box because of its lending practices back in the boom days from 200-2007, when regulators looked askance at all manner of exotic mortgage products and real estate prices skyrocketed because of the lax standards.
In effect, this just buys the zombie bank more leverage and time to sort through the incredible mortgage morass. Within weeks or months, expect to see more banks offering more exotic plans to remediate troubled mortgage loans. All of them will be met with skepticism, most of them won't go far enough, the end result being a further breakdown in prices for residential real estate.
Most of the major mortgage lenders - Citigroup, JP Morgan, Wells Fargo - in addition to BofA, are in an untenable situation between foreclosure and principal write-downs. Both solutions are wrought with conflict and offer no guarantee of a positive outcome. The best most of the banks can hope for now is that they aren't damaged too badly, though they have nobody but themselves to blame.
News of the bank's most recent maneuver was met with mostly positive reaction, though the real effects will not be known probably for years, if ever.
Adding to the real estate woes was a Commerce Department report on new home sales for February, which fell 2.2% to an annual pace of 308,000. That was the lowest figure since data has been monitored: 1963, when the price of a middle-class suburban home was close to $30,000. The number of new homes being built underscores the actual depth of the real estate collapse and augers for even further declines in home values. With median household incomes virtually stagnant since the 1980s, home values should not have appreciated as much as they did, nor as quickly.
A reversion to a level more in line with actual economic conditions now seems absolute. With household income struggling to keep pace with expenses, the correct path is toward lower prices, not just on real estate, but tangentially, on everything from garden gnomes to restaurant dinners.
The deflationary spiral the Fed, the government and Wall Street most want to avoid now seems to be what it always was: unavoidable. Efforts to stem the flow have only served to buy time, temporarily propping up prices on stocks, gold and assorted other assets, but now, as evidenced by the non-ending housing crisis and associated unemployment condition (at multi-year highs), the death dance can engage in earnest.
Truth be told, economists are grasping at straws when seeking solutions to stem deflation and depression. No good solution has ever been made available at any time, other than the traditional - and painful - exercise of writing down or writing off bad assets and bad debts. Be prepared for another three to four years of dismal conditions, though, as readers of this missive already know, there are a wide variety of ways to mitigate the damage and actually come away less-damaged than your neighbors.
Bank of America has now stepped over a critical line and will not be able to step back. Cries of "foul" from homeowners diligently paying on their mortgage obligations will be loud and resonant. In a relentless search for the bottom, prices will proceed downward at an accelerating pace over the next 18-36 months.
Governments and financial wizards can only distort the truth to varying degrees. eventually, Actions like Bank of America's and data like the February new home sales reveal the true condition and it is far from pretty.
As for Wall Street, reality may be setting in that the overall economy is being kept floating by bailout money, productivity gains and government debt purchases rather than real, productive enterprises. Stocks slipped early in the day and remained lower throughout the session.
Dow 10,836.15, -52.68 (0.48%)
NASDAQ 2,398.76, -16.48 (0.68%)
S&P 500 1,167.72, -6.45 (0.55%)
NYSE Composite 7,408.20, -70.56 (0.94%)
Declining issues outpaced advancers by a wide margin, 4471-2033. New highs came down precipitously, to 417, though there were still only 40 new lows. Volume was about normal, though slightly elevated off some of the low-volume days of gains lately.
NYSE Volume 5,284,420,000
NASDAQ Volume 2,309,833,750
Commodities were also feeling the sting of reality. Off a report of higher crude inventory, oil fell $1.30, to $80.61. Gold was whipsawed $14.90 lower, to $1,088.60. Silver plummeted 39 cents, to $16.63.
If any of this activity looks like selling, you may have it nailed. Stocks and commodities have been driven up by hope and market insiders, and their values are highly inflated. Another downturn in the economy is already underway. The media, government and especially YOUR BROKER - all co-conspirators in the worst deceit in the long history of finance - simply refuse to own up to the truth.
Be certain you fully understand the frail condition of not only the US economy, but the entire world to some degree, and weigh the implications as they relate to your specific conditions. Only then can you devise a workable plan of action that will save you from desperation and ruin.
The most affected groups will be those who took loans that were largely responsible for the meltdown in the mortgage securities market and eventually, the larger economy, over the past two years: sub-prime, interest-only and other variable rate products.
Prompted by lawsuits which alleged that Bank of America "strung out, delayed and otherwise hindered" efforts to resolve mortgage issues on homeowners in the state of Washington, the nation's largest mortgage servicer outlined the new program, which at first glance appears to have some value, though the gamble is that by lowering principal on loans in which the property values are lower than the original purchase price - often called "underwater" - the bank will further depress real estate values amid a market that is already under considerable strain.
The bank's plan is somewhat crafty, in that it works down principal balances over a period of five years and is tied to homeowners continuing to make mortgage payments. While it sounds hopeful on the surface, the plan may only prove to drive home prices down further, especially if economic conditions remain subdued or worsen.
In practice, principal write-downs are usually a last resort for lenders, who routinely hold out for the original, agree-upon value at the time of purchase. However, such as are conditions across a wide swath of the US real estate landscape, the bank seemingly is agreeing to take a "haircut" on its investment. Under BofA's plan, investors in mortgages would not suffer actual principal losses, but they would not make as much as originally planned.
No matter what, a haircut is still a haircut, so the very next thing to expect are lawsuits by mortgage investors. Some have already commenced. The bank is in a box because of its lending practices back in the boom days from 200-2007, when regulators looked askance at all manner of exotic mortgage products and real estate prices skyrocketed because of the lax standards.
In effect, this just buys the zombie bank more leverage and time to sort through the incredible mortgage morass. Within weeks or months, expect to see more banks offering more exotic plans to remediate troubled mortgage loans. All of them will be met with skepticism, most of them won't go far enough, the end result being a further breakdown in prices for residential real estate.
Most of the major mortgage lenders - Citigroup, JP Morgan, Wells Fargo - in addition to BofA, are in an untenable situation between foreclosure and principal write-downs. Both solutions are wrought with conflict and offer no guarantee of a positive outcome. The best most of the banks can hope for now is that they aren't damaged too badly, though they have nobody but themselves to blame.
News of the bank's most recent maneuver was met with mostly positive reaction, though the real effects will not be known probably for years, if ever.
Adding to the real estate woes was a Commerce Department report on new home sales for February, which fell 2.2% to an annual pace of 308,000. That was the lowest figure since data has been monitored: 1963, when the price of a middle-class suburban home was close to $30,000. The number of new homes being built underscores the actual depth of the real estate collapse and augers for even further declines in home values. With median household incomes virtually stagnant since the 1980s, home values should not have appreciated as much as they did, nor as quickly.
A reversion to a level more in line with actual economic conditions now seems absolute. With household income struggling to keep pace with expenses, the correct path is toward lower prices, not just on real estate, but tangentially, on everything from garden gnomes to restaurant dinners.
The deflationary spiral the Fed, the government and Wall Street most want to avoid now seems to be what it always was: unavoidable. Efforts to stem the flow have only served to buy time, temporarily propping up prices on stocks, gold and assorted other assets, but now, as evidenced by the non-ending housing crisis and associated unemployment condition (at multi-year highs), the death dance can engage in earnest.
Truth be told, economists are grasping at straws when seeking solutions to stem deflation and depression. No good solution has ever been made available at any time, other than the traditional - and painful - exercise of writing down or writing off bad assets and bad debts. Be prepared for another three to four years of dismal conditions, though, as readers of this missive already know, there are a wide variety of ways to mitigate the damage and actually come away less-damaged than your neighbors.
Bank of America has now stepped over a critical line and will not be able to step back. Cries of "foul" from homeowners diligently paying on their mortgage obligations will be loud and resonant. In a relentless search for the bottom, prices will proceed downward at an accelerating pace over the next 18-36 months.
Governments and financial wizards can only distort the truth to varying degrees. eventually, Actions like Bank of America's and data like the February new home sales reveal the true condition and it is far from pretty.
As for Wall Street, reality may be setting in that the overall economy is being kept floating by bailout money, productivity gains and government debt purchases rather than real, productive enterprises. Stocks slipped early in the day and remained lower throughout the session.
Dow 10,836.15, -52.68 (0.48%)
NASDAQ 2,398.76, -16.48 (0.68%)
S&P 500 1,167.72, -6.45 (0.55%)
NYSE Composite 7,408.20, -70.56 (0.94%)
Declining issues outpaced advancers by a wide margin, 4471-2033. New highs came down precipitously, to 417, though there were still only 40 new lows. Volume was about normal, though slightly elevated off some of the low-volume days of gains lately.
NYSE Volume 5,284,420,000
NASDAQ Volume 2,309,833,750
Commodities were also feeling the sting of reality. Off a report of higher crude inventory, oil fell $1.30, to $80.61. Gold was whipsawed $14.90 lower, to $1,088.60. Silver plummeted 39 cents, to $16.63.
If any of this activity looks like selling, you may have it nailed. Stocks and commodities have been driven up by hope and market insiders, and their values are highly inflated. Another downturn in the economy is already underway. The media, government and especially YOUR BROKER - all co-conspirators in the worst deceit in the long history of finance - simply refuse to own up to the truth.
Be certain you fully understand the frail condition of not only the US economy, but the entire world to some degree, and weigh the implications as they relate to your specific conditions. Only then can you devise a workable plan of action that will save you from desperation and ruin.
Tuesday, March 23, 2010
Stocks Climb to Fresh Highs; Housing Still Slumping
I'll begin where I left off yesterday. My final words were:
"Wall Street will continue to trade in what it knows best: equities. And until there comes an alternative, they will continue to rise."
I have now no doubt attained the status of a genius, but I cannot explain the explosiveness of today's venture into equity-land, but I'll attempt to make some sense of it.
Stocks, without alternatives, will no doubt provide positive returns. Since there are few alternatives in today's environment - real estate is a mess, bond returns are paltry, art is illiquid, over-priced and risky - all the money is going into stocks.
Partially to blame for Wall Street's current bubbly stock markets is the near-complete meltdown in the mortgage securitization market. It's a two-pronged attack that has virtually frozen the market for what just 5 years ago was the whitest-hot money machine in the world.
First, Fannie Mae and Freddie Mac have already announced that they would be prepaying a large number of soured loans. In other words, investors will be paid a lump sum - the remaining principal - on loans delinquent by more than 120 days, decimating their long-term value and consistent cash flow. Once these and other quasi-federal agencies own the loans, they're combing through them, looking for discrepancies and hammering the banks that issued them. One such instance is a recently-filed lawsuit by the Federal Home Loan Bank of San Francisco, seeking $5.4 billion from the usual suspects including Deutsche Bank; Bear Stearns; Countrywide Securities, a division of Countrywide Financial (now Bank of America); Credit Suisse Securities; and Merrill Lynch (also Bank of America).
So, where's the money? And, where's it going? Simply put, there must be a lot of mortgage investors out there sitting on large chunks of cash, because Fannie and Freddie have no doubt begun the process of prepayment. Stuck in the middle are the large banks which originated the mortgage melee in the first place, having first to pay back investors and then, sweat out the heat from the G-men scouring the bad loans for errors, omissions or outright fraud.
It doesn't require a huge leap of faith to believe that both the investors who have been made whole (Here's a dirty little secret, though: those investors, including the banks servicing the loans, don't get hurt from day 1 when a mortgagor defaults if it's a Fannie or Freddie loan. The agencies make the payments) and the banks, each looking for places to make money might dip a toe into equities. The banks would no doubt be the more aggressive and the parties with more money to move, which makes the recent rally all that more suspect.
Loads of liquidity are thus fueling the stock market rally, and, as usual, the Fed is sitting on its hands, watching the bubble inflate. With the NASDAQ already back to the level before the economic collapse of 2008 and the Dow and S&P fast approaching theirs, shouldn't the Fed be raising interest rates to slow down the rampant speculation?
You'd think so, but the Fed is in a box. Any rate hike - even a tiny 25 basis points - would kill the stock rally. Worse, it would likely touch off discussions of the broader economy and the unseemly truth that jobs aren't being created, banks aren't lending and most consumers are still stretched pretty thin. Even worse, all of the recently-issued government debt would begin to cost more to service. The Fed is quite literally dammed if they do and dammed if they don't, but the Wall Street money-grabbers are having a field day.
The sorriest part of the story is going to be the ending, other than the idea that most small investors haven't fully participated in the most recent money party. They are still too scared of the markets after the horrifying events of 2008.
Major banks and brokerages are now in nearly-complete control of the stock markets, so they're not trustworthy. Most of the current financial commentary resides somewhere below the ethereal, along the lines of, "this or that stock is up; it must be a good buy."
The oldest adage on the Street is to buy low and sell high. Since the Dow was languishing around 6600 a year ago and today its closing in on 11,000, even a third-grader would know that now is not the optimum time to buy stocks.
During the housing boom, the attitude filling the balloon was that housing prices would always go up. We know how wrong that was. Now, it appears that stocks will continue to rise. I remain on the bearish side of that statement, awaiting the eventual collapse. We have gone too far, too fast.
Dow 10,888.83, +102.94 (0.95%)
NASDAQ 2,415.24, +19.84 (0.83%)
S&P 500 1,174.17, +8.36 (0.72%)
NYSE Composite 7,478.76, +59.74 (0.81%
Advancers pounded decliners, 4550-1942. New highs exploded to 757, to just 73 new lows. Volume was actually good, especially on the NASDAQ.
NYSE Volume 4,955,676,500
NASDAQ Volume 2,305,962,750
Oil drifted 31 cents higher, to $81.91. Gold also was up $4.20, to $1,103.50. Silver gained 9 cents, to $17.01. All three commodities remain stuck in a range they've maintained for close to 9 months.
The National Association of Realtors (NAR) announced that existing home sales slipped 0.6% nationally for the month of February, but that inventory of unsold homes rose 9.5%, the largest jump in 20 years. The increase is due to banks finally releasing some of their foreclosure inventory onto the market and the overall lack of qualified buyers.
The sales rate improved in the Northeast and Midwest, but fell in the South and West, which has generally been the story for the past two years.
Better? That's a no.
"Wall Street will continue to trade in what it knows best: equities. And until there comes an alternative, they will continue to rise."
I have now no doubt attained the status of a genius, but I cannot explain the explosiveness of today's venture into equity-land, but I'll attempt to make some sense of it.
Stocks, without alternatives, will no doubt provide positive returns. Since there are few alternatives in today's environment - real estate is a mess, bond returns are paltry, art is illiquid, over-priced and risky - all the money is going into stocks.
Partially to blame for Wall Street's current bubbly stock markets is the near-complete meltdown in the mortgage securitization market. It's a two-pronged attack that has virtually frozen the market for what just 5 years ago was the whitest-hot money machine in the world.
First, Fannie Mae and Freddie Mac have already announced that they would be prepaying a large number of soured loans. In other words, investors will be paid a lump sum - the remaining principal - on loans delinquent by more than 120 days, decimating their long-term value and consistent cash flow. Once these and other quasi-federal agencies own the loans, they're combing through them, looking for discrepancies and hammering the banks that issued them. One such instance is a recently-filed lawsuit by the Federal Home Loan Bank of San Francisco, seeking $5.4 billion from the usual suspects including Deutsche Bank; Bear Stearns; Countrywide Securities, a division of Countrywide Financial (now Bank of America); Credit Suisse Securities; and Merrill Lynch (also Bank of America).
So, where's the money? And, where's it going? Simply put, there must be a lot of mortgage investors out there sitting on large chunks of cash, because Fannie and Freddie have no doubt begun the process of prepayment. Stuck in the middle are the large banks which originated the mortgage melee in the first place, having first to pay back investors and then, sweat out the heat from the G-men scouring the bad loans for errors, omissions or outright fraud.
It doesn't require a huge leap of faith to believe that both the investors who have been made whole (Here's a dirty little secret, though: those investors, including the banks servicing the loans, don't get hurt from day 1 when a mortgagor defaults if it's a Fannie or Freddie loan. The agencies make the payments) and the banks, each looking for places to make money might dip a toe into equities. The banks would no doubt be the more aggressive and the parties with more money to move, which makes the recent rally all that more suspect.
Loads of liquidity are thus fueling the stock market rally, and, as usual, the Fed is sitting on its hands, watching the bubble inflate. With the NASDAQ already back to the level before the economic collapse of 2008 and the Dow and S&P fast approaching theirs, shouldn't the Fed be raising interest rates to slow down the rampant speculation?
You'd think so, but the Fed is in a box. Any rate hike - even a tiny 25 basis points - would kill the stock rally. Worse, it would likely touch off discussions of the broader economy and the unseemly truth that jobs aren't being created, banks aren't lending and most consumers are still stretched pretty thin. Even worse, all of the recently-issued government debt would begin to cost more to service. The Fed is quite literally dammed if they do and dammed if they don't, but the Wall Street money-grabbers are having a field day.
The sorriest part of the story is going to be the ending, other than the idea that most small investors haven't fully participated in the most recent money party. They are still too scared of the markets after the horrifying events of 2008.
Major banks and brokerages are now in nearly-complete control of the stock markets, so they're not trustworthy. Most of the current financial commentary resides somewhere below the ethereal, along the lines of, "this or that stock is up; it must be a good buy."
The oldest adage on the Street is to buy low and sell high. Since the Dow was languishing around 6600 a year ago and today its closing in on 11,000, even a third-grader would know that now is not the optimum time to buy stocks.
During the housing boom, the attitude filling the balloon was that housing prices would always go up. We know how wrong that was. Now, it appears that stocks will continue to rise. I remain on the bearish side of that statement, awaiting the eventual collapse. We have gone too far, too fast.
Dow 10,888.83, +102.94 (0.95%)
NASDAQ 2,415.24, +19.84 (0.83%)
S&P 500 1,174.17, +8.36 (0.72%)
NYSE Composite 7,478.76, +59.74 (0.81%
Advancers pounded decliners, 4550-1942. New highs exploded to 757, to just 73 new lows. Volume was actually good, especially on the NASDAQ.
NYSE Volume 4,955,676,500
NASDAQ Volume 2,305,962,750
Oil drifted 31 cents higher, to $81.91. Gold also was up $4.20, to $1,103.50. Silver gained 9 cents, to $17.01. All three commodities remain stuck in a range they've maintained for close to 9 months.
The National Association of Realtors (NAR) announced that existing home sales slipped 0.6% nationally for the month of February, but that inventory of unsold homes rose 9.5%, the largest jump in 20 years. The increase is due to banks finally releasing some of their foreclosure inventory onto the market and the overall lack of qualified buyers.
The sales rate improved in the Northeast and Midwest, but fell in the South and West, which has generally been the story for the past two years.
Better? That's a no.
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