While one hates to gloat over predictable bad news, that's the condition in which I find myself at the close of the Friday session.
Not only have I been lambasting politicians and stock jockeys for months that the "recovery" was nothing more than an illusion created by lazy media and a crooked, manipulated, insider-trading Wall Street machine, but I also pointed out yesterday - and the month before, and for many months before that - that the ADP private sector employment numbers were more realistic than those released by the government.
When the BLS put out its monthly non farm payroll report at 8:30 am, it was as though somebody had shot a cannonball through the front of the NY Stock exchange building. Traders went scurrying for cover as quickly as they could, primarily because what they were led to believe was going to be a positive report, showing robust job creation in America during the month of May, turned out to be such a big-time stinker that all bets on economic recovery were put onto back burners or otherwise discarded.
The government showed a gain of 431,000 jobs for the month of May, but 411,000 of those were temporary hires related to completing the 2010 census, and even those jobs fell under considerable scrutiny later in the day as analysts began scouring around for a supposed army of nearly 1/2 million census workers. These workers were ostensibly hired to piece together missing data in the simple census form which was mailed to millions of homes back in February and March.
Simple math alone tells us that these 411,000 "workers" would have to individually count a total of about 750 people each to get around to the number of people in America, a job that should take maybe a week. We're told that many of these temporary census workers will be on the job until sometime in the fall, meaning that, like most government work, they'll just have to do little more than show up in order to get paid. Maybe I'm old-fashioned, but hiring 400,000 people for three months to do head-counting seems a little extreme, especially given that most (something on the order of 60%) Americans sent their census forms in through the mail, as required.
Besides the absurdity of the census, misleading statements by both the president and vice president earlier this week, and by once-again discredited Goldman Sachs' analyst Jan Hatzius, who predicted on Thursday that the May figure would come in at 600,000, there are some questions of impropriety which likely will never be addressed, including why the two top officials in this administration and an analyst working for a Wall Street firm under investigation for fraud, would so willingly lead people to believe that the jobs figure would be a solid one?
Not to jump on the conspiracy bandwagon wearing a tin-foil hat, but after government has shown an unseemly willingness to do whatever the lords of Wall Street seem to want, the old qui bono? (who benefits?) must be on the mind of more Americans than just little old me.
Whatever the case, the horrible jobs report, even though it was the most jobs created in one month since March 2003, was so pathetically bad that investors, traders and fund managers got very busy, dumping stocks all day long.
Dow 9,931.97, -323.31 (3.15%)
NASDAQ 2,219.17, -83.86 (3.64%)
S&P 500 1,064.88, -37.95 (3.44%)
NYSE Composite 6,600.28, -260.11 (3.79%)
Declining issues swallowed up advancers in a sea of red, 5786-796, or a better than 6:1 ratio, and new lows took back the advantage from new highs, 173-93. Volume was elevated to levels not seen in over a week, but nothing extreme, leading one to believe that a lot of smart sellers were already out of the way before the jobs data was released.
NYSE Volume 7,241,763,000
NASDAQ Volume 2,338,401,500
Oil was slammed, losing $3.10, to $71.51. Gold gained $7.90, to $1,216.20, but silver a a major loser, down 63 cents (3 1/2%) to $17.29.
Damage inflicted on holders of equities was severe. The Dow suffered its fifth weekly loss in the last six, and finished at its lowest point since February 8, 2010, though markets now appear poised to take out even lower levels. With so many investors sucked into the recovery mantra, economic data over the next four to five weeks will be crucial, leading up to an even more critical 2nd quarter earnings season.
More troubling news came from Europe, with Hungary now suggesting it is close to sovereign default, putting more pressure on the Euro, which fell below 1.20 to the dollar, a level not seen since 2006. The global debt crisis still not anywhere near resolution, expectations from honest economists are for significant slowing of global growth, especially among developed nations.
Rosy projections for 3.5 to 4% growth in US GDP for the year are being reassessed due to evidence that the recovery - if one eve exists at all - will be sluggish at best.
Holders of gold, cash and tools of trades should pat themselves on their collective backs on days like today, but not too vigorously, as more of them are likely to occur during the next 18 to 36 months.
Sorry to sound so negative on a lovely Friday afternoon, but facts are facts, and the US government has dug us a hole of debt so deep as to undermine the very existence of what would be considered a normal, functioning economy. Other developed nations, particularly those in the Euro-zone, have done similar harm to their own economies, We continue to wade through the throes of an enormously deflationary event, caused by 25 years of profligate spending by governments, businesses and households alike.
Two types of belts are encouraged. One for tightening, and another, of your favorite pain-relieving decoction.
Friday, June 4, 2010
Thursday, June 3, 2010
Amidst Confusion, NASDAQ Gains; Jobs Data Looms
There are more than just a few trades riding on the release of tomorrow's BLS non farm payroll report for May. Estimates for the number of jobs created in the US economy during the month run the gamut from 250,000 to 600,000, the latter number suggested as a best guess by the intrepid mind of Jan Hatzius at Goldman Sachs, who has a history of being generally close, often far off, but almost always too optimistic.
The Hatzius estimate is anecdotally cute, in that he calls for private sector job growth of just 150,000, with the rest of the number comprised of temporary census hires.
A couple of hints as to how strong the job growth was during the month came from a few sources. On Wednesday, both President Obama and Vice President Biden hinted strongly in separate speeches that the figures would be substantial, but on Thursday, two real pieces of economic data, the ADP private sector report [PDF] and the weekly report of new and continuing unemployment claims, suggested something of the opposite.
The ADP report, which is generally reliable to be as accurate or even moreso than the overly-massaged government figures, pegged private sector job growth for May at a fairly tepid 55,000. Initial unemployment claims came in at 453,000, still stubbornly high, with continuing claims at 4.67 million, a staggering figure and suggestive that job creation simply isn't occurring in the private sector, or at least that permanent jobs are not being created.
Meanwhile, pesky problems such as the European debt crisis, the Gulf of Mexico oil slick, and China canceling a planned trip to the country by US Secretary of Defense Robert Gates, dogged investors throughout the session.
Stocks zig-zagged all over the map, with internals reflecting the rocky trading. The Dow was up 65 points early, down 75 points by midday, and rallied off the lows into the close for a fairly flat trade. The NASDAQ demonstrated leadership in energy and tech shares, the index positive throughout the session.
The NASDAQ is also the only one of the majors to show positive returns for the year.
Dow 10,255.28, +5.74 (0.06%)
NASDAQ 2,303.03, +21.96 (0.96%)
S&P 500 1,102.83, +4.45 (0.41%)
NYSE Composite 6,860.43, +20.82 (0.30%)
By the end of the session, advancers held a solid advantage over declining issues, 5015-2447, and new highs took back the edge over new lows, 154-70. Volume was light once again, as many traders have stepped away in advance of the non farm payroll report.
NYSE Volume 5,404,948,000.00
NASDAQ Volume 2,063,167,375.00
Commodities were mixed. Crude oil for July delivery gained $1.75, to $74.61, on a government report that showed a decrease in supply. The oddity of the oil market is its apparent one-way bias. During the winter, when the same weekly report as today's continually showed excess supply, the price advanced regardless. With supply down, it's logical for prices to rise, though the opposite should be true on oversupply, but it isn't.
Gold fell sharply, down one percent, or $12.30, to $1,208.30. Silver also lost ground, giving up 38 cents, to settle at $17.92.
As is usually the case the first week of any month, too much emphasis is being placed on the jobs data, especially considering that the numbers coming from government are often wildly off-the-mark and subject to massive revisions in future months.
After Wednesday's huge run-up and the flatness of Thursday's trade, it appears that a robust number has already been priced in, and traders could be in for a rout. The alternative, under consideration that the jobs numbers come in solid or surprisingly better than expected, is for investors and momentum players to swing sentiment to wildly optimistic and end the week with another mammoth gain.
Either scenario could emerge, though this may prove to be the economy's last stand before more realistic data confirms or denies the existence of any kind of recovery. From what's been shown thus far, the billions and trillions of dollars thrown into stimulus and for the sake of saving numerous financial institutions has produced at best a weak rebound.
The Hatzius estimate is anecdotally cute, in that he calls for private sector job growth of just 150,000, with the rest of the number comprised of temporary census hires.
A couple of hints as to how strong the job growth was during the month came from a few sources. On Wednesday, both President Obama and Vice President Biden hinted strongly in separate speeches that the figures would be substantial, but on Thursday, two real pieces of economic data, the ADP private sector report [PDF] and the weekly report of new and continuing unemployment claims, suggested something of the opposite.
The ADP report, which is generally reliable to be as accurate or even moreso than the overly-massaged government figures, pegged private sector job growth for May at a fairly tepid 55,000. Initial unemployment claims came in at 453,000, still stubbornly high, with continuing claims at 4.67 million, a staggering figure and suggestive that job creation simply isn't occurring in the private sector, or at least that permanent jobs are not being created.
Meanwhile, pesky problems such as the European debt crisis, the Gulf of Mexico oil slick, and China canceling a planned trip to the country by US Secretary of Defense Robert Gates, dogged investors throughout the session.
Stocks zig-zagged all over the map, with internals reflecting the rocky trading. The Dow was up 65 points early, down 75 points by midday, and rallied off the lows into the close for a fairly flat trade. The NASDAQ demonstrated leadership in energy and tech shares, the index positive throughout the session.
The NASDAQ is also the only one of the majors to show positive returns for the year.
Dow 10,255.28, +5.74 (0.06%)
NASDAQ 2,303.03, +21.96 (0.96%)
S&P 500 1,102.83, +4.45 (0.41%)
NYSE Composite 6,860.43, +20.82 (0.30%)
By the end of the session, advancers held a solid advantage over declining issues, 5015-2447, and new highs took back the edge over new lows, 154-70. Volume was light once again, as many traders have stepped away in advance of the non farm payroll report.
NYSE Volume 5,404,948,000.00
NASDAQ Volume 2,063,167,375.00
Commodities were mixed. Crude oil for July delivery gained $1.75, to $74.61, on a government report that showed a decrease in supply. The oddity of the oil market is its apparent one-way bias. During the winter, when the same weekly report as today's continually showed excess supply, the price advanced regardless. With supply down, it's logical for prices to rise, though the opposite should be true on oversupply, but it isn't.
Gold fell sharply, down one percent, or $12.30, to $1,208.30. Silver also lost ground, giving up 38 cents, to settle at $17.92.
As is usually the case the first week of any month, too much emphasis is being placed on the jobs data, especially considering that the numbers coming from government are often wildly off-the-mark and subject to massive revisions in future months.
After Wednesday's huge run-up and the flatness of Thursday's trade, it appears that a robust number has already been priced in, and traders could be in for a rout. The alternative, under consideration that the jobs numbers come in solid or surprisingly better than expected, is for investors and momentum players to swing sentiment to wildly optimistic and end the week with another mammoth gain.
Either scenario could emerge, though this may prove to be the economy's last stand before more realistic data confirms or denies the existence of any kind of recovery. From what's been shown thus far, the billions and trillions of dollars thrown into stimulus and for the sake of saving numerous financial institutions has produced at best a weak rebound.
Wednesday, June 2, 2010
Stocks Surging in Advance of Jobs, Retail Data
Apparently, market participants are of a mind that upcoming jobs reports, in the form of the May ADP private sector report, Thursday's usual unemployment claims and Friday's BLS non farm payroll report, will outweigh most of the other issues that have been dragging stocks lower recently.
Of course, it could all be a one-day burp in advance of Thursday's retail figures - expected to disappoint - for suckers, or be really nothing at all.
Stocks have been trading in a range, and the only key figure to keep a close eye upon is Dow 11,205.03. That's the most recent closing high, hit back on April 26. If the Dow cannot climb up to and surpass that mark, expect trading to become either range-bound or negative for an extended period. With earnings reports still 5-6 weeks in the future, there needs to be some kind of catalyst, and the gut feeling around here is that the negativity spewing out from the floor of the Gulf of Mexico - in addition to ongoing, overhanging debt fears globally - will be sufficient enough to keep investor optimism constrained.
Today's quick-hit rally, mostly occurring after 2:00 pm, has little meaning in the overall context, especially considering the oversold condition of the market. Another 300-400 points higher on the Dow would not be out of the question over the next two to three weeks, just as a continuation of the downdraft would surprise nobody.
Generally speaking, it's never a good idea to base very much on one day's trading. The remaining days of the week should provide more clarity.
Dow 10,249.54, +225.52 (2.25%)
NASDAQ 2,281.07, +58.74 (2.64%)
S&P 500 1,098.38, +27.67 (2.58%)
NYSE Composite 6,839.54, +178.44 (2.68%)
Advancers climbed all over decliners, 5353-1220, a 9:2 margin, though our tried and true indicator showed that new highs could not overwhelm new lows, which carried the day, 127-105. Though that margin is narrow, the trend of more new lows than new highs indicates that the market is meeting overhead resistance, and that the market is at least fully priced. Volume, low for the session for the fourth day in a row, indicates the lack of conviction, even in spite of today's outsized headline numbers.
NYSE Volume 5,837,430,000
NASDAQ Volume 2,171,016,000
Oil grabbed a negligible bid of 28 cents, gaining to $72.86. Gold sold off by $4.20, finishing in New York at $1,220.60. Silver was lower as well, losing 24 cents, to $18.30.
While today's gains were overall outstanding, they may be nothing more than an overreaction to a paucity of news, much of which has been bad of late. Bulls being what they are, the momentum could last until something comes along to derail it or send prices even higher, mostly a countertrend move inside overall bear market conditions.
There's also some divergence within the various indices. While the Dow and S&P still trade below their 200-day moving averages, the NASDAQ is poised above its 200 day MA. These conditions usually end up favoring the bearish camp in the long run, but the market being as unpredictable an animal as ever walked out of the jungle, anything is possible.
Of course, it could all be a one-day burp in advance of Thursday's retail figures - expected to disappoint - for suckers, or be really nothing at all.
Stocks have been trading in a range, and the only key figure to keep a close eye upon is Dow 11,205.03. That's the most recent closing high, hit back on April 26. If the Dow cannot climb up to and surpass that mark, expect trading to become either range-bound or negative for an extended period. With earnings reports still 5-6 weeks in the future, there needs to be some kind of catalyst, and the gut feeling around here is that the negativity spewing out from the floor of the Gulf of Mexico - in addition to ongoing, overhanging debt fears globally - will be sufficient enough to keep investor optimism constrained.
Today's quick-hit rally, mostly occurring after 2:00 pm, has little meaning in the overall context, especially considering the oversold condition of the market. Another 300-400 points higher on the Dow would not be out of the question over the next two to three weeks, just as a continuation of the downdraft would surprise nobody.
Generally speaking, it's never a good idea to base very much on one day's trading. The remaining days of the week should provide more clarity.
Dow 10,249.54, +225.52 (2.25%)
NASDAQ 2,281.07, +58.74 (2.64%)
S&P 500 1,098.38, +27.67 (2.58%)
NYSE Composite 6,839.54, +178.44 (2.68%)
Advancers climbed all over decliners, 5353-1220, a 9:2 margin, though our tried and true indicator showed that new highs could not overwhelm new lows, which carried the day, 127-105. Though that margin is narrow, the trend of more new lows than new highs indicates that the market is meeting overhead resistance, and that the market is at least fully priced. Volume, low for the session for the fourth day in a row, indicates the lack of conviction, even in spite of today's outsized headline numbers.
NYSE Volume 5,837,430,000
NASDAQ Volume 2,171,016,000
Oil grabbed a negligible bid of 28 cents, gaining to $72.86. Gold sold off by $4.20, finishing in New York at $1,220.60. Silver was lower as well, losing 24 cents, to $18.30.
While today's gains were overall outstanding, they may be nothing more than an overreaction to a paucity of news, much of which has been bad of late. Bulls being what they are, the momentum could last until something comes along to derail it or send prices even higher, mostly a countertrend move inside overall bear market conditions.
There's also some divergence within the various indices. While the Dow and S&P still trade below their 200-day moving averages, the NASDAQ is poised above its 200 day MA. These conditions usually end up favoring the bearish camp in the long run, but the market being as unpredictable an animal as ever walked out of the jungle, anything is possible.
Tuesday, June 1, 2010
US Markets the World's Laughing Stock; Second Great Depression Still Looming
US equity markets must be the laughing stock of the entire planet. Whenever there's a risk of a serious downturn, especially on days in which Asian and European markets have already taken a hit, the globalists can count on a comedic interlude supplied by insider trading schemes run amok here in the cradle of free market economics and democracy.
Tuesday was just another shining example of how rigged and moronic US stock markets have become after years of manipulation by government operatives generally identified as the President's Working Group on Financial Markets, created in 1988 after the blowup of Long-Term Capital Management (LTCM), by then-president Ronald Reagan with Executive Order 13621, along with complicity by major banking and trading firms such as Goldman Sachs, JP Morgan Chase, Bank of America and Citigroup.
While the existence of the "Working Group" (or PWG, as it has evolved) is a matter of fact, some decry the operations of the group as clandestine market participants (formerly known as the Plunge Protection Team, or PPT), such as this blog entry by Barry Ritholtz, complete with an array of illuminating comments and links.
It's more than plain and obvious that government is working in collusion with major banks, though whether or not they are involved in significant "market pumping" is still an unresolved question. Market volatility has become a semi-permanent fixture in US equity (and other) markets for many years, and recent policy decisions mostly made by the Federal Reserve, to ensure liquidity, and the Senate, to bail out generally-insolvent banks and states suffering from enormous budget shortfalls, beg the question.
The Fed's official federal funds interest rate has been at it's lowest level in history for 18 months (since December 2008) and while equity markets have bounced off their March 2009 significantly, there's worry that the momentum cannot be maintained. The Fed is pretty much out of bullets, but underhanded trading schemes should be able to avert another major market collapse for the near term.
That's the general condition of US equity markets today: volatile, manipulated and operating on the adrenaline of fear while the talking heads on CNBC glad-hand the purveyors of the pump all day, every day, relentlessly trotting out this or that analyst or trader with positive spin, keeping the whole charade of "recovery, growth and prosperity" churning along.
Meanwhile, the major indices have fallen below their 50-day moving averages and a sitting upon their 200-day MAs for the most part. Like all other government work, whatever the PWG is doing to prop up markets, they're doing a pretty shabby job of it. The entire US - and, to a large extent, global - financial system resembles a creaking ship adrift at sea, burdened by an overload of bad debt, faulty rigging and deficits billowing out of its hold.
Intra-day market actions only help to keep the ship afloat, hoping it can reach shallow enough waters so that when it does sink, it won't be resting too far below the surface.
In sum, market manipulation always fails. One only has to bear witness to the magnificent drops in markets in 2000 and 2008 to verify that point. Government intervention only works in the near-term, pushing the longer-term, systemic issues further out into the future, for another generation or another government to handle. The game cannot continue for long without some major disruption. We've just been through the worst month of May on the markets since 1940, and while the "double-dipsters" have been effectively silenced by the media, the level of fear and apprehension is still palpable.
Pushing markets off their lows through whatever conception available still seems to be bad business and one that cannot eventually, effectively halt the onslaught of dreadful deflation in assets of all classes. Globalization began the deflation process; the banks and inept or corrupt government operators witlessly helped it along. With no way out of what has morphed into a global currency "race to the bottom," equities will eventually falter, flat line or die. The only question is how long it's going to take.
History, always a great guide and usually ignored, provides the best answer, with the operative time period being the Great Depression of 1929-1942. Taking Fall of 2008 as the starting point, we're at roughly the equivalent of September, 1930.
On August 3, 1929, the Dow closed at 381.17. Then came the crash in October and November, with the Dow falling from aournd 352.86 on the 10th of October to 198.69 on the 13th of November, a 44% drop in just over a month, which compares to the Fall of 2008 and Winter, 2009, quite favorably. On the 17th of April, 1930, the Dow rebounded and stood at 294.07, a 48% gain off the lows and a level it would not approach again for nearly 24 years.
Yes, you read that right, 24 years. After the crash of 1929, the market rebounded, just as it did in recent history, from its bottom of 6,547.05, on March 9, 2009, to a peak of 10,725.43 on January 19, 2010, a gain of nearly 64%, though still well short of its all-time high of 14,164.53 on October 9, 2007.
President Herbert Hoover and his Republican counterparts in the banking community and the congress could not revive the slumping US economy, however. On July 8, 1932, the Dow Jones Industrial Average fell to it's all-time low of 41.22, helping usher in FDR and his New Deal policies. Elected in November, 1932, Roosevelt worked quickly to keep Americans out of financial misery, but for many it was too late. The country survived, barely, through the 30s and into World War II, which had been raging in Europe for more than 5 years before the US formally became involved in 1942. It wasn't until February 26, 1954 that the Dow surpassed that 1930 high, closing on that date at 294.54.
Thus, contrary to widely-held beliefs, the crash of 1929 was just a prelude for more pain to come. From the peak in August, 1929, to the bottom in July of 1932, the Dow lost nearly 90% of its value. A similar slide in today's terms would wipe the Dow all the way down to 1450.00, a number not seen since late November 1985, about 9 months into Ronald Reagan's second term as president, in the full throes of the supply side financial revolution.
It's an interesting point in history. From November 1985 to October, 2007, a period of nearly 23 years, the Dow Jones Industrials increased in value some ten-fold. That kind of expansion is unprecedented in economic history and it was largely fueled by low tax rates on wealthy individuals, lax tax compliance by major corporations, and, notably, little advance in the overall wealth, prosperity or wages of the middle class. So, a major, dramatic fall, similar to that of 1930-1932, might still be ahead for those of us who still give a damn.
The timeline of history is not without flaws, to be certain, but, taking the case of a largely manipulated market which is the current, dominant theme in American finances, the overhang of burgeoning federal and state deficits, unresolved banking issues from 2008, it is not outside the realm of possibility that stock markets and the global economy could suffer a blow even more dreadful than the shock of 2008-09. In fact, we are looking at January, 2010 as comparable to April 1930, we have an eerily-similar timeline, with the worst yet to come.
Just as in the Spring of 1930, politicians and financial experts explain how we averted crisis and survived a major financial event. Back then, just as today, nobody knew what was ahead, though today's "experts" apparently have not done a detailed analysis of history, though the one man who may know more about the subject than anyone on the planet, Fed Chairman Ben Bernanke, hasn't exactly sounded the "all-clear" alert. In fact, Bernanke has been assiduously most cautious during this critical period. Though he has reassured the nation that the recession has ended, his remarks of late - few that they are - have been quite tempered and reasoned. Certainly, he reasons that more trouble may lie ahead and his actions - keeping rates low and maintaining full liquidity - speak volumes about his inner thinking.
Should the "recovery" stumble and the economy remain weak, stocks could face armageddon again, though this time, it will be long-lasting and severe, making the episode of 2008-09 look like a walk in the park by comparison.
I'm going to reiterate some of the things I've said repeatedly in various posts over the past three to four years, but they should be maintained within the context of the foregoing discussion. Jobs will continue to be scarce. Prices for everything from gold, to homes, to food, to shoes, will fall demonstrably. The goals of many will be survival, not prosperity. By the time the bulk of the baby boomer generation reaches retirement age - within the next 5-7 years, the Social Security system - already broke - will be running a deficit so large that it will break the will of the markets and the government completely. That event could come sooner, though by no means later than 2017, unless radical changes are made today, and, considering the dithering aspect of the current congress, that doesn't seem likely.
Mortgage interest rates will likely fall to below 3%. Some friends have already told me that their home equity lines are hovering around 2%. Most banks cannot make money with rates at 3-4% long term. More bank failures are a near certainty, possibly peaking in 2012, with the number in the thousands, rather than today's hundreds. Foreclosures and bankruptcies will overwhelm court systems which are already stressed beyond a level at which they can operate efficiently. Inner cities, many already slums of third world order, will become hell-holes of crime and depravity. Suburbs will become vacuous spaces for survivors of the crisis. Most people will cash out of their retirement plans if they can, because they need the cash. The next few years will be telling times indeed.
Now, back to our normally scheduled daily market recap:
The number of bank failures in 2010 reached 78 on Friday, with the FDIC closing down 5 more - three in Florida and one each in Nevada and California.
At the current pace, bank failures this year will easily surpass the total of 140 from 2009. Regulators will likely shut down between 180 and 200 banks this year as the real estate and banking bust widens and deepens.
When markets opened for trading following the three-day holiday, futures pointed to a lower open and that's exactly what occurred, with the Dow off by 80 points and the other major indices following suit... for about five minutes. That's when the usual/unusual pattern reappeared, buyers emerged and by 10:00 am - just 1/2 hour into the trading day - the indices were all either positive or close to it. With the Dow gaining steadily, then leveling off, finally reaching a peak of 10,218, some 84 points above the previous close, the chicanery was in full blossom.
But, by 1:30 in the afternoon, the bloom was off the rose, and stocks began to sell off, just as Asian and European markets had earlier in the day. Finally settling at the break even line about 3:30 pm, the Dow and other indices took on all of their losses in the final half hour of trading, closing at their lowest levels of the day. One can only wonder where stocks might have been had it not been for the underhanded intervention which has become commonplace and remarkably humorous.
Dow 10,024.02, -112.61 (1.11%)
NASDAQ 2,222.33, -34.71 (1.54%)
S&P 500 1,070.71, -18.70 (1.72%)
NYSE Composite 6,661.10, -130.47 (1.92%)
Declining issues eventually overcame advancers, 5170-1374, and the pattern of new lows surpassing new highs emerged once more, 121-98. Volume was very light, a feature that could endure the entire summer and possibly extend deeper into the year.
NYSE Volume 5,695,913,500.00
NASDAQ Volume 2,001,166,750.00
Commodities tried to play along, though there seems to be no saving grace for the price of oil, which fell again today, losing $1.39, to $72.58 on the July contract. Gold bugs were busy at work, snatching up hat they believe to be the "new" currency (and they may be right), boosting the price $12.60, to $1,224.80. Silver also sported a gain, of 13 cents, to $18.54. Prices for gold and silver should be stable to higher at worst, until deflation grabs hold of them and their ardent admirers as well.
With the action on our horribly-manipulated markets notwithstanding, the global economic crisis seems to have entered a new phase, with governments seriously looking at options from reflation to default and everything in between. It's becoming a something of a game of chicken as currencies take turns being beaten down to levels at which their products can compete in various foreign markets.
Here's a new feature:
Death Spiral Watch List:
I'm opening this one up with two companies which seem to be living on borrowed time. One is obvious, that being British Petroleum (BP), which lost another 15% today, down 6.43, to $36.52, as the federal government announced today that it was opening investigations into potential criminal and civil lawsuits (about time). TARGET=6.00
The second may not be such an apparent loser, but it is eBay (EBAY), formerly the world's online auction giant, which, through a series of ill-conceived management decisions launched by CEO John Donahoe, has effectively destroyed the trust of millions of small merchants globally. Ebay has embarked upon a path of dealing comfortably with larger concerns, offering them much lower fees than are afforded the average small business or occasional seller. It's a long, sad and sordid tale, but ebay has been turning the screws on small business with great force for the past two years, and sellers are actively seeking other platforms, tired of the endless game-changing and lack of responsible management. ebay closed down 0.45, to 20.96. Target=4.50
I call this the death spiral syndrome, recalling the demise of Countrywide Financial in 2007-08. The company was once the darling of Wall Street, at one time originating more than 50% of all mortgage loans nationally. Then came the sub-prime crisis and the company, and the rest, as they say, was history. Bank of America finally took over the company for $2/share, which makes one believe that maybe BofA might someday make this list itself. Time will tell.
The death spiral watch list tracks companies which I believe are headed for insolvency - a list that may grow to unprecedented levels should economic conditions continue to worsen.
An interesting point made today on Yahoo! Tech Ticker, which points to the uncertainty we all face:
Tuesday was just another shining example of how rigged and moronic US stock markets have become after years of manipulation by government operatives generally identified as the President's Working Group on Financial Markets, created in 1988 after the blowup of Long-Term Capital Management (LTCM), by then-president Ronald Reagan with Executive Order 13621, along with complicity by major banking and trading firms such as Goldman Sachs, JP Morgan Chase, Bank of America and Citigroup.
While the existence of the "Working Group" (or PWG, as it has evolved) is a matter of fact, some decry the operations of the group as clandestine market participants (formerly known as the Plunge Protection Team, or PPT), such as this blog entry by Barry Ritholtz, complete with an array of illuminating comments and links.
It's more than plain and obvious that government is working in collusion with major banks, though whether or not they are involved in significant "market pumping" is still an unresolved question. Market volatility has become a semi-permanent fixture in US equity (and other) markets for many years, and recent policy decisions mostly made by the Federal Reserve, to ensure liquidity, and the Senate, to bail out generally-insolvent banks and states suffering from enormous budget shortfalls, beg the question.
The Fed's official federal funds interest rate has been at it's lowest level in history for 18 months (since December 2008) and while equity markets have bounced off their March 2009 significantly, there's worry that the momentum cannot be maintained. The Fed is pretty much out of bullets, but underhanded trading schemes should be able to avert another major market collapse for the near term.
That's the general condition of US equity markets today: volatile, manipulated and operating on the adrenaline of fear while the talking heads on CNBC glad-hand the purveyors of the pump all day, every day, relentlessly trotting out this or that analyst or trader with positive spin, keeping the whole charade of "recovery, growth and prosperity" churning along.
Meanwhile, the major indices have fallen below their 50-day moving averages and a sitting upon their 200-day MAs for the most part. Like all other government work, whatever the PWG is doing to prop up markets, they're doing a pretty shabby job of it. The entire US - and, to a large extent, global - financial system resembles a creaking ship adrift at sea, burdened by an overload of bad debt, faulty rigging and deficits billowing out of its hold.
Intra-day market actions only help to keep the ship afloat, hoping it can reach shallow enough waters so that when it does sink, it won't be resting too far below the surface.
In sum, market manipulation always fails. One only has to bear witness to the magnificent drops in markets in 2000 and 2008 to verify that point. Government intervention only works in the near-term, pushing the longer-term, systemic issues further out into the future, for another generation or another government to handle. The game cannot continue for long without some major disruption. We've just been through the worst month of May on the markets since 1940, and while the "double-dipsters" have been effectively silenced by the media, the level of fear and apprehension is still palpable.
Pushing markets off their lows through whatever conception available still seems to be bad business and one that cannot eventually, effectively halt the onslaught of dreadful deflation in assets of all classes. Globalization began the deflation process; the banks and inept or corrupt government operators witlessly helped it along. With no way out of what has morphed into a global currency "race to the bottom," equities will eventually falter, flat line or die. The only question is how long it's going to take.
History, always a great guide and usually ignored, provides the best answer, with the operative time period being the Great Depression of 1929-1942. Taking Fall of 2008 as the starting point, we're at roughly the equivalent of September, 1930.
On August 3, 1929, the Dow closed at 381.17. Then came the crash in October and November, with the Dow falling from aournd 352.86 on the 10th of October to 198.69 on the 13th of November, a 44% drop in just over a month, which compares to the Fall of 2008 and Winter, 2009, quite favorably. On the 17th of April, 1930, the Dow rebounded and stood at 294.07, a 48% gain off the lows and a level it would not approach again for nearly 24 years.
Yes, you read that right, 24 years. After the crash of 1929, the market rebounded, just as it did in recent history, from its bottom of 6,547.05, on March 9, 2009, to a peak of 10,725.43 on January 19, 2010, a gain of nearly 64%, though still well short of its all-time high of 14,164.53 on October 9, 2007.
President Herbert Hoover and his Republican counterparts in the banking community and the congress could not revive the slumping US economy, however. On July 8, 1932, the Dow Jones Industrial Average fell to it's all-time low of 41.22, helping usher in FDR and his New Deal policies. Elected in November, 1932, Roosevelt worked quickly to keep Americans out of financial misery, but for many it was too late. The country survived, barely, through the 30s and into World War II, which had been raging in Europe for more than 5 years before the US formally became involved in 1942. It wasn't until February 26, 1954 that the Dow surpassed that 1930 high, closing on that date at 294.54.
Thus, contrary to widely-held beliefs, the crash of 1929 was just a prelude for more pain to come. From the peak in August, 1929, to the bottom in July of 1932, the Dow lost nearly 90% of its value. A similar slide in today's terms would wipe the Dow all the way down to 1450.00, a number not seen since late November 1985, about 9 months into Ronald Reagan's second term as president, in the full throes of the supply side financial revolution.
It's an interesting point in history. From November 1985 to October, 2007, a period of nearly 23 years, the Dow Jones Industrials increased in value some ten-fold. That kind of expansion is unprecedented in economic history and it was largely fueled by low tax rates on wealthy individuals, lax tax compliance by major corporations, and, notably, little advance in the overall wealth, prosperity or wages of the middle class. So, a major, dramatic fall, similar to that of 1930-1932, might still be ahead for those of us who still give a damn.
The timeline of history is not without flaws, to be certain, but, taking the case of a largely manipulated market which is the current, dominant theme in American finances, the overhang of burgeoning federal and state deficits, unresolved banking issues from 2008, it is not outside the realm of possibility that stock markets and the global economy could suffer a blow even more dreadful than the shock of 2008-09. In fact, we are looking at January, 2010 as comparable to April 1930, we have an eerily-similar timeline, with the worst yet to come.
Just as in the Spring of 1930, politicians and financial experts explain how we averted crisis and survived a major financial event. Back then, just as today, nobody knew what was ahead, though today's "experts" apparently have not done a detailed analysis of history, though the one man who may know more about the subject than anyone on the planet, Fed Chairman Ben Bernanke, hasn't exactly sounded the "all-clear" alert. In fact, Bernanke has been assiduously most cautious during this critical period. Though he has reassured the nation that the recession has ended, his remarks of late - few that they are - have been quite tempered and reasoned. Certainly, he reasons that more trouble may lie ahead and his actions - keeping rates low and maintaining full liquidity - speak volumes about his inner thinking.
Should the "recovery" stumble and the economy remain weak, stocks could face armageddon again, though this time, it will be long-lasting and severe, making the episode of 2008-09 look like a walk in the park by comparison.
I'm going to reiterate some of the things I've said repeatedly in various posts over the past three to four years, but they should be maintained within the context of the foregoing discussion. Jobs will continue to be scarce. Prices for everything from gold, to homes, to food, to shoes, will fall demonstrably. The goals of many will be survival, not prosperity. By the time the bulk of the baby boomer generation reaches retirement age - within the next 5-7 years, the Social Security system - already broke - will be running a deficit so large that it will break the will of the markets and the government completely. That event could come sooner, though by no means later than 2017, unless radical changes are made today, and, considering the dithering aspect of the current congress, that doesn't seem likely.
Mortgage interest rates will likely fall to below 3%. Some friends have already told me that their home equity lines are hovering around 2%. Most banks cannot make money with rates at 3-4% long term. More bank failures are a near certainty, possibly peaking in 2012, with the number in the thousands, rather than today's hundreds. Foreclosures and bankruptcies will overwhelm court systems which are already stressed beyond a level at which they can operate efficiently. Inner cities, many already slums of third world order, will become hell-holes of crime and depravity. Suburbs will become vacuous spaces for survivors of the crisis. Most people will cash out of their retirement plans if they can, because they need the cash. The next few years will be telling times indeed.
Now, back to our normally scheduled daily market recap:
The number of bank failures in 2010 reached 78 on Friday, with the FDIC closing down 5 more - three in Florida and one each in Nevada and California.
At the current pace, bank failures this year will easily surpass the total of 140 from 2009. Regulators will likely shut down between 180 and 200 banks this year as the real estate and banking bust widens and deepens.
When markets opened for trading following the three-day holiday, futures pointed to a lower open and that's exactly what occurred, with the Dow off by 80 points and the other major indices following suit... for about five minutes. That's when the usual/unusual pattern reappeared, buyers emerged and by 10:00 am - just 1/2 hour into the trading day - the indices were all either positive or close to it. With the Dow gaining steadily, then leveling off, finally reaching a peak of 10,218, some 84 points above the previous close, the chicanery was in full blossom.
But, by 1:30 in the afternoon, the bloom was off the rose, and stocks began to sell off, just as Asian and European markets had earlier in the day. Finally settling at the break even line about 3:30 pm, the Dow and other indices took on all of their losses in the final half hour of trading, closing at their lowest levels of the day. One can only wonder where stocks might have been had it not been for the underhanded intervention which has become commonplace and remarkably humorous.
Dow 10,024.02, -112.61 (1.11%)
NASDAQ 2,222.33, -34.71 (1.54%)
S&P 500 1,070.71, -18.70 (1.72%)
NYSE Composite 6,661.10, -130.47 (1.92%)
Declining issues eventually overcame advancers, 5170-1374, and the pattern of new lows surpassing new highs emerged once more, 121-98. Volume was very light, a feature that could endure the entire summer and possibly extend deeper into the year.
NYSE Volume 5,695,913,500.00
NASDAQ Volume 2,001,166,750.00
Commodities tried to play along, though there seems to be no saving grace for the price of oil, which fell again today, losing $1.39, to $72.58 on the July contract. Gold bugs were busy at work, snatching up hat they believe to be the "new" currency (and they may be right), boosting the price $12.60, to $1,224.80. Silver also sported a gain, of 13 cents, to $18.54. Prices for gold and silver should be stable to higher at worst, until deflation grabs hold of them and their ardent admirers as well.
With the action on our horribly-manipulated markets notwithstanding, the global economic crisis seems to have entered a new phase, with governments seriously looking at options from reflation to default and everything in between. It's becoming a something of a game of chicken as currencies take turns being beaten down to levels at which their products can compete in various foreign markets.
Here's a new feature:
Death Spiral Watch List:
I'm opening this one up with two companies which seem to be living on borrowed time. One is obvious, that being British Petroleum (BP), which lost another 15% today, down 6.43, to $36.52, as the federal government announced today that it was opening investigations into potential criminal and civil lawsuits (about time). TARGET=6.00
The second may not be such an apparent loser, but it is eBay (EBAY), formerly the world's online auction giant, which, through a series of ill-conceived management decisions launched by CEO John Donahoe, has effectively destroyed the trust of millions of small merchants globally. Ebay has embarked upon a path of dealing comfortably with larger concerns, offering them much lower fees than are afforded the average small business or occasional seller. It's a long, sad and sordid tale, but ebay has been turning the screws on small business with great force for the past two years, and sellers are actively seeking other platforms, tired of the endless game-changing and lack of responsible management. ebay closed down 0.45, to 20.96. Target=4.50
I call this the death spiral syndrome, recalling the demise of Countrywide Financial in 2007-08. The company was once the darling of Wall Street, at one time originating more than 50% of all mortgage loans nationally. Then came the sub-prime crisis and the company, and the rest, as they say, was history. Bank of America finally took over the company for $2/share, which makes one believe that maybe BofA might someday make this list itself. Time will tell.
The death spiral watch list tracks companies which I believe are headed for insolvency - a list that may grow to unprecedented levels should economic conditions continue to worsen.
An interesting point made today on Yahoo! Tech Ticker, which points to the uncertainty we all face:
Friday, May 28, 2010
Nose-Diving into the Weekend
At least stocks didn't gap up or down radically at the open today. Instead, they automatically reversed course against Thursday's gains, sending the major averages into a week-ending tailspin under pressure from foreign as well as domestic turbulence.
Prior to the open, personal income was shown to have grown 0.4% in April, most of the gain due to increases in government payrolls. Just before 10:00 am, the markets were dealt another blow of reality when both the Chicago PMI and University of Michigan comsumer sentiment index came in below expectations. Added to the 460,000 initial unemployment claims and lowered GDP estimate for the first quarter (to 3.0% from 3.2%) from Thursday, stocks were indeed lucky to receive any bids as the month of May for 2010 went down in the record books as the worst for stocks since 1940 - 70 whole years!
Those who insist that the US is on the road to recovery, or, already well down that road, are either not telling the truth or just too damn stupid to see the all-too-obvious signs on the road to ruin, the one the US has actually embarked upon.
The current and future fate of these United States was summed up brilliantly by casino-operator and real estate mogul, Steve Wynn, who, along with other gems of insight invoked Alexis de Touqueville, who predicted in 1909 that "the American system of democracy will prevail until that moment when the politicians discover that they can bribe the electorate with their own money." More of Wynn's caustic, cutting remarks can be viewed in the video below.
Dow 10,136.63, -122.36 (1.19%)
NASDAQ 2,257.04, -20.64 (0.91%)
S&P 500 1,089.41, -13.65 (1.24%)
NYSE Composite 6,791.57, -101.72 (1.48%)
Decliners laid over advancers largely, 4332-2135, or better than 2:1. New highs edged new lows, 107-73, but the margin being so close that it favors a negative outlook short term. So too, Friday's volume, which partly could be blamed on complacency and early departures, though it has been heading lower all week long.
NYSE Volume 5,757,302,000.00
NASDAQ Volume 2,185,725,000.00
The commodity complex was little changed, perhaps offering a glimpse at a more sober understanding of supply-demand dynamics for the coming months. Crude fell 58 cents, to a goosed-up $73.97. Gold gained 40 cents, to $1,212.20. Silver fell a nickel, to $18.41.
Remember, this weekend, those who served to make America great and gave their lives in defense of liberty, especially when driving through a police check-point or being harassed by some pompous low-level government official who wants to ruin your outing with nonsensical regulations. Remember that liberty is gained, not given. Earned, not handed out.
Prior to the open, personal income was shown to have grown 0.4% in April, most of the gain due to increases in government payrolls. Just before 10:00 am, the markets were dealt another blow of reality when both the Chicago PMI and University of Michigan comsumer sentiment index came in below expectations. Added to the 460,000 initial unemployment claims and lowered GDP estimate for the first quarter (to 3.0% from 3.2%) from Thursday, stocks were indeed lucky to receive any bids as the month of May for 2010 went down in the record books as the worst for stocks since 1940 - 70 whole years!
Those who insist that the US is on the road to recovery, or, already well down that road, are either not telling the truth or just too damn stupid to see the all-too-obvious signs on the road to ruin, the one the US has actually embarked upon.
The current and future fate of these United States was summed up brilliantly by casino-operator and real estate mogul, Steve Wynn, who, along with other gems of insight invoked Alexis de Touqueville, who predicted in 1909 that "the American system of democracy will prevail until that moment when the politicians discover that they can bribe the electorate with their own money." More of Wynn's caustic, cutting remarks can be viewed in the video below.
Dow 10,136.63, -122.36 (1.19%)
NASDAQ 2,257.04, -20.64 (0.91%)
S&P 500 1,089.41, -13.65 (1.24%)
NYSE Composite 6,791.57, -101.72 (1.48%)
Decliners laid over advancers largely, 4332-2135, or better than 2:1. New highs edged new lows, 107-73, but the margin being so close that it favors a negative outlook short term. So too, Friday's volume, which partly could be blamed on complacency and early departures, though it has been heading lower all week long.
NYSE Volume 5,757,302,000.00
NASDAQ Volume 2,185,725,000.00
The commodity complex was little changed, perhaps offering a glimpse at a more sober understanding of supply-demand dynamics for the coming months. Crude fell 58 cents, to a goosed-up $73.97. Gold gained 40 cents, to $1,212.20. Silver fell a nickel, to $18.41.
Remember, this weekend, those who served to make America great and gave their lives in defense of liberty, especially when driving through a police check-point or being harassed by some pompous low-level government official who wants to ruin your outing with nonsensical regulations. Remember that liberty is gained, not given. Earned, not handed out.
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