US stocks could not rebound well from a week of fairly persistent selling pressure, finishing with a mixed session on Friday. Only the Dow closed lower on the day, but the other major indices were barely changed.
For the week, the Dow Jones Industrials lost 301 points, or about 3%. The NASDAQ shed 86 points and the S&P 500 was the worst hit, giving back 40 points, close to a 4% decline.
Persistent worries about the heath of the general economy, credit conditions and the overall global economy pushed all three indices, plus the NYSE Composite, back under their respective 200-day moving averages.
Dow 10,143.81, -8.99 (0.09%)
NASDAQ 2,223.48, +6.06 (0.27%)
S&P 500 1,076.76, +3.07 (0.29%)
NYSE Composite 6,763.93, +33.69 (0.50%)
Like stocks, internals were also mixed. Winners beat losers by a tally of 4593-1870, but new lows maintained their edge over new highs, 170-119. Volume was extraordinarily high, due to annual rebalancing of the Russell 2000.
NYSE Volume 7,031,487,500
NASDAQ Volume 3,283,513,000
Continuing to feel pressure, British Petroleum (BP) lost more value, closing at 27.02, a price not seen in the stock since 1993. Claims continue to mount, and there are concerns that the company will be forced to pay dearly for financing going forward, with credit default swaps inverted - costs to insure BPs financing for one year now costs more than insuring five years' debt on an annualized basis.
Commodities were worthwhile investments once more, with oil leading the way, thanks to fears of a tropical storm reaching the Gulf of Mexico within the next three to five days. Crude for August delivery rose $2.35, to $78.86.
Gold continued its ascent, gaining $10.30, to $1,255.80. Silver added 37 cents, to close the week at $19.10.
Stocks remained under pressure as the government third and final estimate of GDP growth came in lower than expected, at 2.7% (down from 3.0%), fueling renewed fears of either weak economic conditions going forward or the threat of a double dip, back into recession in 2011.
With the July 4th holiday beginning at the end of next week, traders will be focused on Friday's June non-farm payroll report, which is expected to show gains of 100,000 jobs, though just where those jobs might have been created remains a mystery. It's more likely that job growth will remain anemic through the summer and that stock market losses will accelerate.
Friday, June 25, 2010
Thursday, June 24, 2010
One More Ugly Day for Stocks Following Fed Statement
On the heels of the FOMC rate policy announcement - one which possibly reached new levels of double-talk and misleading innuendo - stocks sold off rapidly at the open and again into the close.
The simple fact of the matter is that heavy trading is normally done in two specific time periods - in the first half hour and in the final hour of trading. On Thursday, the Dow lost roughly 100 points by 10:00 am, and another 45 from 3:00 to 4:00 pm. That pretty much summed up how investors were feeling a day after the Fed threw itself on it own sword of interest rate policy and effectively left US markets to fend for themselves.
While the losses today were substantial, it is worth noting that volume wasn't particularly strong; however, that should be put into the perspective of an overall weak market - the case since the financial implosion of 2008. Trading volume may never recover to the glory days of the great bull run from 2003-2007 as many individuals and a spate of investment firms have permanently soured on US stocks.
Wild gyrations, uncertain times and volatile conditions do not a stable market make, and these times could hardly be described as stable. Government intervention into all areas of public and private finances also have made many shy away from investing in equities. Nonetheless, there are still those who will try to quantify risk - such as the friend who told me that he made a considerable investment in BP on Tuesday (I do not know what he deems "considerable," but in any case I felt impelled to tell him I thought it was a mistake, and he is already on the wrong side of the trade.) - in search of ever-elusive gains.
There are also pension funds, mutual funds, hedge funds and any manner of investment vehicles which are chartered to invest in stocks, like it or not, so there will likely always be ample supply of buyers and sellers no matter the level of greed, fear and risk tolerance.
Considering the current climate, stocks are not favorable investments for anybody except those with excess cash on hand (wealthy), and even then, investing today may be more akin to gambling or just plain flushing money down the nearest toilet.
Let's take a look:
Dow 10,152.80, -145.64 (1.41%)
NASDAQ 2,217.42, -36.81 (1.63%)
S&P 500 1,073.69, -18.35 (1.68%)
NYSE Composite 6,730.24, -119.81 (1.75%)
Not a very pretty picture, there. Declining issues beat down advancers once more, today by a wide margin, 4914-1535 (3:1). New lows screamed past new highs, 159-92. Volume was light, but not exceedingly so. There was some serious dumping of losers going on and the number of bulls in attendance were not nearly sufficient to scare off the short-siders.
NYSE Volume 5,595,221,000
NASDAQ Volume 2,049,015,500
About the only place to make money was in the precious metals, though it wasn't much. Gold finished at $1,245.50, a gain of $11.40. Silver pushed ahead 28 cents, to $18.73. Crude oil fared less well, with futures for August delivery up a scrawny 16 cents, to $76.51.
The only economic news of any importance was prior to the open. Durable goods orders for May declined 1.1%. The weekly initial jobless claims stayed at about the same level they've been at for months, with 457,000 new unemployment applications.
With poor data setting the tone, stocks slumped. On Friday, the government releases its third and final estimate of 1st quarter GDP, expected to remain stable at 3%. With the release at 8:30 am, that should have little impact on the week's last day of trading.
The simple fact of the matter is that heavy trading is normally done in two specific time periods - in the first half hour and in the final hour of trading. On Thursday, the Dow lost roughly 100 points by 10:00 am, and another 45 from 3:00 to 4:00 pm. That pretty much summed up how investors were feeling a day after the Fed threw itself on it own sword of interest rate policy and effectively left US markets to fend for themselves.
While the losses today were substantial, it is worth noting that volume wasn't particularly strong; however, that should be put into the perspective of an overall weak market - the case since the financial implosion of 2008. Trading volume may never recover to the glory days of the great bull run from 2003-2007 as many individuals and a spate of investment firms have permanently soured on US stocks.
Wild gyrations, uncertain times and volatile conditions do not a stable market make, and these times could hardly be described as stable. Government intervention into all areas of public and private finances also have made many shy away from investing in equities. Nonetheless, there are still those who will try to quantify risk - such as the friend who told me that he made a considerable investment in BP on Tuesday (I do not know what he deems "considerable," but in any case I felt impelled to tell him I thought it was a mistake, and he is already on the wrong side of the trade.) - in search of ever-elusive gains.
There are also pension funds, mutual funds, hedge funds and any manner of investment vehicles which are chartered to invest in stocks, like it or not, so there will likely always be ample supply of buyers and sellers no matter the level of greed, fear and risk tolerance.
Considering the current climate, stocks are not favorable investments for anybody except those with excess cash on hand (wealthy), and even then, investing today may be more akin to gambling or just plain flushing money down the nearest toilet.
Let's take a look:
Dow 10,152.80, -145.64 (1.41%)
NASDAQ 2,217.42, -36.81 (1.63%)
S&P 500 1,073.69, -18.35 (1.68%)
NYSE Composite 6,730.24, -119.81 (1.75%)
Not a very pretty picture, there. Declining issues beat down advancers once more, today by a wide margin, 4914-1535 (3:1). New lows screamed past new highs, 159-92. Volume was light, but not exceedingly so. There was some serious dumping of losers going on and the number of bulls in attendance were not nearly sufficient to scare off the short-siders.
NYSE Volume 5,595,221,000
NASDAQ Volume 2,049,015,500
About the only place to make money was in the precious metals, though it wasn't much. Gold finished at $1,245.50, a gain of $11.40. Silver pushed ahead 28 cents, to $18.73. Crude oil fared less well, with futures for August delivery up a scrawny 16 cents, to $76.51.
The only economic news of any importance was prior to the open. Durable goods orders for May declined 1.1%. The weekly initial jobless claims stayed at about the same level they've been at for months, with 457,000 new unemployment applications.
With poor data setting the tone, stocks slumped. On Friday, the government releases its third and final estimate of 1st quarter GDP, expected to remain stable at 3%. With the release at 8:30 am, that should have little impact on the week's last day of trading.
Wednesday, June 23, 2010
Federal Reserve Throws Up White Flag, Surrenders Authority
Stocks ended mixed after the Federal Open Market Committee of the Federal Reserve issued the following statement at 2:15 pm EDT. I have decided to republish the entire release, interspersed with my notes in italics. It is also quite noteworthy that this is by far the most terse statement the Fed has released in many years. My feelings, essentially, are, that since they have little to do to stem the continuation of dour economic conditions within an essentially deflationary environment, they have little to say. For that, they deserve some small credit. For the rest, they deserve what currency manipulators always earn: ire and scorn.
Release Date: June 23, 2010
For immediate release
Information received since the Federal Open Market Committee met in April suggests that the economic recovery is proceeding and that the labor market is improving gradually.
This opening statement is an absolute lie. If anybody should know a thing or two about economic conditions and the labor market, it would be the Fed. Even as a casual observer, it is quite easy to refute the foregoing statement. Labor conditions continue to worsen and the economy is embarking upon another retraction.
Household spending is increasing but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit.
I won't even bother to check. Maybe "official" government statistics show household spending increasing, but anyone who's worked for a living in the private sector knows that wages have been stagnant for at least the last 20 years. Any excess spending is likely coming from people who are not paying their mortgage or from government subsidies. So, the statement may be true, but look at their qualifiers, then, add mine.
Business spending on equipment and software has risen significantly; however, investment in nonresidential structures continues to be weak and employers remain reluctant to add to payrolls.
Business spending on infrastructure is probably increasing, but most businesses are also hoarding cash. The telling statement is "investment in nonresidential structures continues to be weak." Commercial real estate is in free-fall. Note that they mention unemployment again as an impediment to growth.
Housing starts remain at a depressed level.
Obviously.
Financial conditions have become less supportive of economic growth on balance, largely reflecting developments abroad.
Read the first part of the sentence. The second part desires to shift blame to Europe. It's BS. We have enough of our own problems. Europe's only make them worse.
Bank lending has continued to contract in recent months.
Actually, I am somewhat surprised they would say this, as bank lending has been depressed since 2008.
Nonetheless, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, although the pace of economic recovery is likely to be moderate for a time.
This statement is just a wish. There is no evidence that the economy will grow substantially in the near term. Watch what happens to the term, "resource utilization" in the remainder of the statement. Also, make note of their mention of price stability and inflation, never using the term, "deflation." The "D-word" scares them to death, because they, and all other Keynesian economists have no answers for the bottomless pit of deflation.
Prices of energy and other commodities have declined somewhat in recent months, and underlying inflation has trended lower.
Deflation.
With substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to be subdued for some time.
Deflation.
The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period.
In other words, they've thrown up the white flag of surrender here. They admit that they have no solutions except to keep lending money at ZERO percent. THEY cannot make money. They have failed. The US economy, from which, over the past nearly 100 years, the Federal Reserve has stolen almost all wealth from the nation, is bankrupt. There needs to be no more evidence than this statement to make the case that the Federal Reserve should be dissolved. Their policies, over the course of the past 96 years, has destroyed the capacity for the US economy to produce and grow. Ben Bernanke should step down and the governors of the Fed should declare bankruptcy and turn their assets over to the United States government for proper disposal.
Make particular note that they mention "low rates of resource utilization" when in the previous paragraph they said, "the Committee anticipates a gradual return to higher levels of resource utilization..." They are wishing. They are clueless. They have nothing. "Gradual" could mean six months just as easily as six years.
The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to promote economic recovery and price stability.
They have no more policy tools to employ. They have no more gimmicks to steal more money from the Treasury. They have nothing. They are worthless and defunct. Ordinary Americans have more power to promote economic prosperity - by hiring a kid to mow a lawn - than the Federal Reserve and they openly admit it.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Donald L. Kohn; Sandra Pianalto; Eric S. Rosengren; Daniel K. Tarullo; and Kevin M. Warsh. Voting against the policy action was Thomas M. Hoenig, who believed that continuing to express the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted because it could lead to a build-up of future imbalances and increase risks to longer-run macroeconomic and financial stability, while limiting the Committee’s flexibility to begin raising rates modestly.
This final piece was probably entered upon the insistence of Mr. Hoenig, who, for whatever purpose (maybe to avoid hanging) wishes to separate himself from the lying majority. His effort to save himself should be applauded, though the addition of this statement is more than likely the most damaging blow to the unity of the Federal Reserve board of governors since its inception.
------------------------- End of FOMC Statement ---------------------------------
OK, readers can agree with my assessment in whole or in part or disagree as they please. In a nutshell, I'd say that we, as a nation, are in for a world of hurt. As I've been saying for the better part of the last three years, maybe four, our current economic path is unsustainable, and here is a stab to the heart of the US economy. The Federal Reserve today serves our nation no useful purpose except to delay the inevitable, while their cronies and friends steal as much more wealth as possible before they flee the country.
As for our friendly criminal enterprise known as Wall Street, well, they couldn't just sell everything all at once, could they? Their response was measured and cynical. They realize that the Fed has failed and that the underground economy - the part of the nation that avoids taxes, regulations and government intervention - will flourish far beyond the prospects of the "measured" economy.
Expect unreported income to far outstrip the GDP over the next 3-5 years. Expect small businesses to alternately fail and prosper, depending on how well they are able to skirt the laws and taxation. Expect a renaissance of personal responsibility and resourcefulness and the utter destruction of governance.
Greed, corruption, theft and incompetence have their consequences. This is the second phase of the post-government era, in which individuals will take matters even more into their own hands. Millionaires will mysteriously appear from the dust of destroyed cities. The stock market will crash or be held afloat by the criminals who operate under the now-discredited idea that big business is at the heart of American prosperity.
Economic and social dislocation will occur on a daily, even momentary basis, as individuals seize monetary power from the dethroned "masters of the universe" embodied in the money center banks and publicly-owned firms in general.
Today's market data is meaningful only in the internals.
Dow 10,298.44, +4.92 (0.05%)
NASDAQ 2,254.23, -7.57 (0.33%)
S&P 500 1,092.04, -3.27 (0.30%)
NYSE Composite 6,850.05, -8.90 (0.13%)
NOTABLE: declining issues led advancers, 3441-2978. NOTABLE: new lows surpassed new highs, 116-73. NOTABLE: Volume was anemic. Fear has fully gripped the trading community.
NYSE Volume 5,294,169,500
NASDAQ Volume 1,895,673,875
One would have expected gold and silver to rise off the back of the Fed announcement. Since they are serially controlled and manipulated by central banks and money center banks, they did not. Gold dipped $5.40, to $1,234.10. Silver fell 44 cents, to $18.45. These price levels will not maintain. Either there will be massive liquidation shortly, due to another financial crisis, or the dye has already been cast, that fiat money is dead and a new gold standard is about to emerge, the eventuality of which is now without doubt. It may not be advisable to buy gold or silver at these prices, but by no means should anybody be selling any until the prevailing economic conditions are resolved and the global economies are at healthy status.
Prices may decline for some time, but they will surely rise, most likely well beyond these levels. Cash or land are now useful converters into gold. If you find somebody willing to exchange equities or bonds for gold or silver, by all means take their hard assets at whatever discount comforts you. Gold and silver will endure. Paper money and certificates will not.
Oil dropped $1.50, to $76.35. Expect this price to settle at its true level of $35/barrel within the next three years. Outside of absolute manipulation, oil will not see $80/barrel for at least another 15 years.
Had enough?
I'll be back tomorrow, and the next day and many more after that. The party is just getting interesting.
Release Date: June 23, 2010
For immediate release
Information received since the Federal Open Market Committee met in April suggests that the economic recovery is proceeding and that the labor market is improving gradually.
This opening statement is an absolute lie. If anybody should know a thing or two about economic conditions and the labor market, it would be the Fed. Even as a casual observer, it is quite easy to refute the foregoing statement. Labor conditions continue to worsen and the economy is embarking upon another retraction.
Household spending is increasing but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit.
I won't even bother to check. Maybe "official" government statistics show household spending increasing, but anyone who's worked for a living in the private sector knows that wages have been stagnant for at least the last 20 years. Any excess spending is likely coming from people who are not paying their mortgage or from government subsidies. So, the statement may be true, but look at their qualifiers, then, add mine.
Business spending on equipment and software has risen significantly; however, investment in nonresidential structures continues to be weak and employers remain reluctant to add to payrolls.
Business spending on infrastructure is probably increasing, but most businesses are also hoarding cash. The telling statement is "investment in nonresidential structures continues to be weak." Commercial real estate is in free-fall. Note that they mention unemployment again as an impediment to growth.
Housing starts remain at a depressed level.
Obviously.
Financial conditions have become less supportive of economic growth on balance, largely reflecting developments abroad.
Read the first part of the sentence. The second part desires to shift blame to Europe. It's BS. We have enough of our own problems. Europe's only make them worse.
Bank lending has continued to contract in recent months.
Actually, I am somewhat surprised they would say this, as bank lending has been depressed since 2008.
Nonetheless, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, although the pace of economic recovery is likely to be moderate for a time.
This statement is just a wish. There is no evidence that the economy will grow substantially in the near term. Watch what happens to the term, "resource utilization" in the remainder of the statement. Also, make note of their mention of price stability and inflation, never using the term, "deflation." The "D-word" scares them to death, because they, and all other Keynesian economists have no answers for the bottomless pit of deflation.
Prices of energy and other commodities have declined somewhat in recent months, and underlying inflation has trended lower.
Deflation.
With substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to be subdued for some time.
Deflation.
The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period.
In other words, they've thrown up the white flag of surrender here. They admit that they have no solutions except to keep lending money at ZERO percent. THEY cannot make money. They have failed. The US economy, from which, over the past nearly 100 years, the Federal Reserve has stolen almost all wealth from the nation, is bankrupt. There needs to be no more evidence than this statement to make the case that the Federal Reserve should be dissolved. Their policies, over the course of the past 96 years, has destroyed the capacity for the US economy to produce and grow. Ben Bernanke should step down and the governors of the Fed should declare bankruptcy and turn their assets over to the United States government for proper disposal.
Make particular note that they mention "low rates of resource utilization" when in the previous paragraph they said, "the Committee anticipates a gradual return to higher levels of resource utilization..." They are wishing. They are clueless. They have nothing. "Gradual" could mean six months just as easily as six years.
The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to promote economic recovery and price stability.
They have no more policy tools to employ. They have no more gimmicks to steal more money from the Treasury. They have nothing. They are worthless and defunct. Ordinary Americans have more power to promote economic prosperity - by hiring a kid to mow a lawn - than the Federal Reserve and they openly admit it.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Donald L. Kohn; Sandra Pianalto; Eric S. Rosengren; Daniel K. Tarullo; and Kevin M. Warsh. Voting against the policy action was Thomas M. Hoenig, who believed that continuing to express the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted because it could lead to a build-up of future imbalances and increase risks to longer-run macroeconomic and financial stability, while limiting the Committee’s flexibility to begin raising rates modestly.
This final piece was probably entered upon the insistence of Mr. Hoenig, who, for whatever purpose (maybe to avoid hanging) wishes to separate himself from the lying majority. His effort to save himself should be applauded, though the addition of this statement is more than likely the most damaging blow to the unity of the Federal Reserve board of governors since its inception.
------------------------- End of FOMC Statement ---------------------------------
OK, readers can agree with my assessment in whole or in part or disagree as they please. In a nutshell, I'd say that we, as a nation, are in for a world of hurt. As I've been saying for the better part of the last three years, maybe four, our current economic path is unsustainable, and here is a stab to the heart of the US economy. The Federal Reserve today serves our nation no useful purpose except to delay the inevitable, while their cronies and friends steal as much more wealth as possible before they flee the country.
As for our friendly criminal enterprise known as Wall Street, well, they couldn't just sell everything all at once, could they? Their response was measured and cynical. They realize that the Fed has failed and that the underground economy - the part of the nation that avoids taxes, regulations and government intervention - will flourish far beyond the prospects of the "measured" economy.
Expect unreported income to far outstrip the GDP over the next 3-5 years. Expect small businesses to alternately fail and prosper, depending on how well they are able to skirt the laws and taxation. Expect a renaissance of personal responsibility and resourcefulness and the utter destruction of governance.
Greed, corruption, theft and incompetence have their consequences. This is the second phase of the post-government era, in which individuals will take matters even more into their own hands. Millionaires will mysteriously appear from the dust of destroyed cities. The stock market will crash or be held afloat by the criminals who operate under the now-discredited idea that big business is at the heart of American prosperity.
Economic and social dislocation will occur on a daily, even momentary basis, as individuals seize monetary power from the dethroned "masters of the universe" embodied in the money center banks and publicly-owned firms in general.
Today's market data is meaningful only in the internals.
Dow 10,298.44, +4.92 (0.05%)
NASDAQ 2,254.23, -7.57 (0.33%)
S&P 500 1,092.04, -3.27 (0.30%)
NYSE Composite 6,850.05, -8.90 (0.13%)
NOTABLE: declining issues led advancers, 3441-2978. NOTABLE: new lows surpassed new highs, 116-73. NOTABLE: Volume was anemic. Fear has fully gripped the trading community.
NYSE Volume 5,294,169,500
NASDAQ Volume 1,895,673,875
One would have expected gold and silver to rise off the back of the Fed announcement. Since they are serially controlled and manipulated by central banks and money center banks, they did not. Gold dipped $5.40, to $1,234.10. Silver fell 44 cents, to $18.45. These price levels will not maintain. Either there will be massive liquidation shortly, due to another financial crisis, or the dye has already been cast, that fiat money is dead and a new gold standard is about to emerge, the eventuality of which is now without doubt. It may not be advisable to buy gold or silver at these prices, but by no means should anybody be selling any until the prevailing economic conditions are resolved and the global economies are at healthy status.
Prices may decline for some time, but they will surely rise, most likely well beyond these levels. Cash or land are now useful converters into gold. If you find somebody willing to exchange equities or bonds for gold or silver, by all means take their hard assets at whatever discount comforts you. Gold and silver will endure. Paper money and certificates will not.
Oil dropped $1.50, to $76.35. Expect this price to settle at its true level of $35/barrel within the next three years. Outside of absolute manipulation, oil will not see $80/barrel for at least another 15 years.
Had enough?
I'll be back tomorrow, and the next day and many more after that. The party is just getting interesting.
New Home Sales Bomb; Market Reaction: Numb
If there was any more proof needed that the US residential housing market was about to take another turn for the worse, May data on new homes sales may have not only provided that, but threaten to push the entire economy into another recession.
Dogged by relentlessly-high unemployment, tight financing issues and coming the first month after expiration of the government's new home buyer tax credit, May new home sales fell to a record low of 300,000 units (seasonally adjusted), the worst sales figure since data was recorded, back in 1963.
Not only was the number 32.7% below April's downwardly-revised figure of 446,000, but the decline was also 18.6% lower year-over-year. The news, which was released at 10:00 am EDT, was met with little more than a yawn on Wall Street, where stocks were marginally lower in anticipation of the Fed's rate policy decision later in the day (2:00 pm EDT).
Traders may be disappointed by whatever it is the Fed will do as they already have the fed funds rate at ZERO, so they have no loosening mechanism left in place to staunch another economic downturn except a couple of bad choices, those being, reinstitution of quantitative easing (printing money to buy more Treasury debt), or, expansion of the already-bloated balance sheet with the purchase of more mortgage debt, most of it toxic sludge which nobody wants to touch.
What the Fed does today will be important only in the minds of those who actually believe that they and the federal government can rescue the economy from the worst economic nightmare since the Great Depression, possibly the worst economic slowdown of all time. While most lame media pundits still put some degree of faith in the exigencies of Keynesian economics, more stable-minded Austrian thinkers feel that nothing can be done to stem the deflationary decline except writing off bad investments, involving a great deal of pain and suffering, much more than is currently being felt in the grandest global economies.
The FMOC rate decision will be released shortly after 2:00 pm ET. A full report, with closing numbers, will be reported in a subsequent post after the close of trading today.
Dogged by relentlessly-high unemployment, tight financing issues and coming the first month after expiration of the government's new home buyer tax credit, May new home sales fell to a record low of 300,000 units (seasonally adjusted), the worst sales figure since data was recorded, back in 1963.
Not only was the number 32.7% below April's downwardly-revised figure of 446,000, but the decline was also 18.6% lower year-over-year. The news, which was released at 10:00 am EDT, was met with little more than a yawn on Wall Street, where stocks were marginally lower in anticipation of the Fed's rate policy decision later in the day (2:00 pm EDT).
Traders may be disappointed by whatever it is the Fed will do as they already have the fed funds rate at ZERO, so they have no loosening mechanism left in place to staunch another economic downturn except a couple of bad choices, those being, reinstitution of quantitative easing (printing money to buy more Treasury debt), or, expansion of the already-bloated balance sheet with the purchase of more mortgage debt, most of it toxic sludge which nobody wants to touch.
What the Fed does today will be important only in the minds of those who actually believe that they and the federal government can rescue the economy from the worst economic nightmare since the Great Depression, possibly the worst economic slowdown of all time. While most lame media pundits still put some degree of faith in the exigencies of Keynesian economics, more stable-minded Austrian thinkers feel that nothing can be done to stem the deflationary decline except writing off bad investments, involving a great deal of pain and suffering, much more than is currently being felt in the grandest global economies.
The FMOC rate decision will be released shortly after 2:00 pm ET. A full report, with closing numbers, will be reported in a subsequent post after the close of trading today.
Tuesday, June 22, 2010
All Global Markets Feeling the Pinch; Jobs, Housing Apply Pressure
Maybe I was a bit too harsh in recent postings, calling US stock exchanges things like, "the laughing stock of the world," and "overtly manipulated."
This was the conclusion I came to after seeing this headline: Europe shares fall, ending 9-day rally; BP slides, as I had no idea that the European bourses had embarked upon such a ridiculous rally. Knowing they had been advancing in recent days, along with the Euro itself, seemed commonplace, until the headline shook me out of the doldrums and back to reality.
It makes a great deal of sense, realistically, that the Euro-zone nations would ply the same heavy-handed collusion that makes US markets zig, zag, sway to and fro on a moments notice, with or without news or even rumors, until after the fact. All of the European economies and those in North America are under the same gun: they must print money or die, as their currencies become more and more worthless pieces of paper. Accordingly, officials at the various central banks must look dutiful, despite knowing their vain efforts will eventually come to naught.
A nine-day rally across the continent is thus no surprise, merely an extension of the supra-market powers held by the major banks and financial institutions, blessed by the central banking cartel. Their only option is to inflate assets, create money and pray that they may liquidate their own assets and run to a developing nation before the populace comes for them with pitchforks in hand and torches ablaze.
This makes even more sense in light of Monday's faux rally, based entirely on hopes that China's revaluation of the Yuan might stimulate some economic activity for their beleaguered economies. Apparently, most of the insider financiers forgot that China is primarily an importer of raw materials and an exporter of finished goods, and that condition doesn't necessarily stack up to much of anything positive for the Euro-Anglo-American alliance, which has gone from Empire to empty over the past 60 years.
China continues on a powerful growth pathway, along with India, Brazil, Russia and many other previously-underdeveloped countries which now benefit from globalization without the excessive burden of decades worth of unfunded liabilities in health care and pensions. One can also throw Japan into the failing-developed world mix, since they began an accelerated path of destruction nearly twenty years ago and haven't been able to shake off persistent deflation in their internal economy.
Once it was clear that European markets were heading South, it didn't take long for the US to follow the lead on Tuesday. With the S&P and Dow crossing over the flat line throughout the morning and early afternoon, the NASDAQ finally succumbed and headed permanently into the red zone after 2:00 pm as stocks closed at or near session lows for the second straight day. Losses in all the major US indices accelerated through the closing hour of trade. The Dow and S&P closed below their respective 200-day moving averages, while the NASDAQ finished precariously hovering over its own 200-day MA.
Adding to the nightmarish scenario was more data suggesting another round of price declines in the US housing market, though much different in quality from the subprime bust of 2008-2009. The new paradigm is closely related to jobs, which still are not being created in the private sector and likely won't. No jobs means no mortgage payment and further defaults and foreclosures for the major banks.
The vicious deflationary cycle is gaining momentum on the back of deplorable employment and housing environments. Today's release of existing home sales for May by the NAR evidenced a 2.2% decline month-over-month. The weak housing market is being exacerbated by continued weakness in the jobs market and resetting of millions of adjustable rate mortgages sold from 2005-2006, most of which carry a balloon second loan set to expire - and need to be refinanced - this year and next.
With employment conditions as poor as they are, many homeowners in this condition will not be able to secure bridge financing and will fall into default and foreclosure, adding more of a glut to an already-over-saturated residential market. The result will be another breakdown in price by anywhere from 10-25%, depending on the market.
Dow 10,293.52, -148.89 (1.43%)
NASDAQ 2,261.80, -27.29 (1.19%)
S&P 500 1,095.31, -17.89 (1.61%)
NYSE Composite 6,858.95, -119.91 (1.72%)
Declining issues continued to dominate advancers, just as they had on Monday, 5054-1483, but the bearish camp had additional ammunition for their argument Tuesday as new lows nearly surpassed new highs, losing out narrowly, 105-93. Volume was decidedly thin, though velocity may not be an issue during what seems to be setting up as a long, hot summer of decline.
NYSE Volume 5,205,686,000
NASDAQ Volume 1,801,127,500
Commodities did little better than equities on the day. Oil lost 61 cents, to $77.21, while gold added a marginal gain of 20 cents to finish at $1,239.90. Silver added 9 cents in price, to $18.90.
Stocks continue to be highly speculative, volatile and risky in this environment and no place for retirement savings, which is, unfortunately, where most of Americans are invested, either through their own 401K plans or state-funded pensions. Another severe downturn in stocks could easily spark a panic similar to the one in 2008, though this time the consequences may be even more severe.
The doomsday scenario may take as long as another five to seven years in which to be played out, so many investors and hard-working middle class Americans may still have time to fortify their financial defenses.
Reiterating the advice of the past year and a half: Cash and equivalents, arable land and tools of trade are suitable long-term investments for financial survival.
A double dip in virtually all important measures of economic activity seems almost a certainty at this point. Stocks could tumble as much as 30% by year's end, if not more.
This was the conclusion I came to after seeing this headline: Europe shares fall, ending 9-day rally; BP slides, as I had no idea that the European bourses had embarked upon such a ridiculous rally. Knowing they had been advancing in recent days, along with the Euro itself, seemed commonplace, until the headline shook me out of the doldrums and back to reality.
It makes a great deal of sense, realistically, that the Euro-zone nations would ply the same heavy-handed collusion that makes US markets zig, zag, sway to and fro on a moments notice, with or without news or even rumors, until after the fact. All of the European economies and those in North America are under the same gun: they must print money or die, as their currencies become more and more worthless pieces of paper. Accordingly, officials at the various central banks must look dutiful, despite knowing their vain efforts will eventually come to naught.
A nine-day rally across the continent is thus no surprise, merely an extension of the supra-market powers held by the major banks and financial institutions, blessed by the central banking cartel. Their only option is to inflate assets, create money and pray that they may liquidate their own assets and run to a developing nation before the populace comes for them with pitchforks in hand and torches ablaze.
This makes even more sense in light of Monday's faux rally, based entirely on hopes that China's revaluation of the Yuan might stimulate some economic activity for their beleaguered economies. Apparently, most of the insider financiers forgot that China is primarily an importer of raw materials and an exporter of finished goods, and that condition doesn't necessarily stack up to much of anything positive for the Euro-Anglo-American alliance, which has gone from Empire to empty over the past 60 years.
China continues on a powerful growth pathway, along with India, Brazil, Russia and many other previously-underdeveloped countries which now benefit from globalization without the excessive burden of decades worth of unfunded liabilities in health care and pensions. One can also throw Japan into the failing-developed world mix, since they began an accelerated path of destruction nearly twenty years ago and haven't been able to shake off persistent deflation in their internal economy.
Once it was clear that European markets were heading South, it didn't take long for the US to follow the lead on Tuesday. With the S&P and Dow crossing over the flat line throughout the morning and early afternoon, the NASDAQ finally succumbed and headed permanently into the red zone after 2:00 pm as stocks closed at or near session lows for the second straight day. Losses in all the major US indices accelerated through the closing hour of trade. The Dow and S&P closed below their respective 200-day moving averages, while the NASDAQ finished precariously hovering over its own 200-day MA.
Adding to the nightmarish scenario was more data suggesting another round of price declines in the US housing market, though much different in quality from the subprime bust of 2008-2009. The new paradigm is closely related to jobs, which still are not being created in the private sector and likely won't. No jobs means no mortgage payment and further defaults and foreclosures for the major banks.
The vicious deflationary cycle is gaining momentum on the back of deplorable employment and housing environments. Today's release of existing home sales for May by the NAR evidenced a 2.2% decline month-over-month. The weak housing market is being exacerbated by continued weakness in the jobs market and resetting of millions of adjustable rate mortgages sold from 2005-2006, most of which carry a balloon second loan set to expire - and need to be refinanced - this year and next.
With employment conditions as poor as they are, many homeowners in this condition will not be able to secure bridge financing and will fall into default and foreclosure, adding more of a glut to an already-over-saturated residential market. The result will be another breakdown in price by anywhere from 10-25%, depending on the market.
Dow 10,293.52, -148.89 (1.43%)
NASDAQ 2,261.80, -27.29 (1.19%)
S&P 500 1,095.31, -17.89 (1.61%)
NYSE Composite 6,858.95, -119.91 (1.72%)
Declining issues continued to dominate advancers, just as they had on Monday, 5054-1483, but the bearish camp had additional ammunition for their argument Tuesday as new lows nearly surpassed new highs, losing out narrowly, 105-93. Volume was decidedly thin, though velocity may not be an issue during what seems to be setting up as a long, hot summer of decline.
NYSE Volume 5,205,686,000
NASDAQ Volume 1,801,127,500
Commodities did little better than equities on the day. Oil lost 61 cents, to $77.21, while gold added a marginal gain of 20 cents to finish at $1,239.90. Silver added 9 cents in price, to $18.90.
Stocks continue to be highly speculative, volatile and risky in this environment and no place for retirement savings, which is, unfortunately, where most of Americans are invested, either through their own 401K plans or state-funded pensions. Another severe downturn in stocks could easily spark a panic similar to the one in 2008, though this time the consequences may be even more severe.
The doomsday scenario may take as long as another five to seven years in which to be played out, so many investors and hard-working middle class Americans may still have time to fortify their financial defenses.
Reiterating the advice of the past year and a half: Cash and equivalents, arable land and tools of trade are suitable long-term investments for financial survival.
A double dip in virtually all important measures of economic activity seems almost a certainty at this point. Stocks could tumble as much as 30% by year's end, if not more.
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