The general perception of the disaster in Japan - caused by a massive 9.0 earthquake and the resultant tsunami - is, as it should be, one that measures the human tragedy above the resultant damage to property and goods. Surely the people whose homes have been either crumpled by the force of the quake or simply washed away by the flooding sea waters face unknown futures.
It is still too early to tell how the government in Japan will deal with the now-homeless residents of the region most-affected, but the initial response has been less-than-heartening. The most glaring examples of ineptitude and unpreparedness have come in the form of communications surrounding the still-unfolding nuclear disaster, the third leg of the crisis and possibly the most severe.
Whether it is unwilling or simply unable to assess the situation at the various reactors that have been damaged, the government's response has been self-contradictory and incorrect at worst or unreliable and confusing at best. What is known is that two reactors at the Fukushima facility have suffered irreparable damage, suffered explosions and possibly begun to partially melt down. Radioactive gasses have been released both on purpose and by accident, though the danger of a full-blown nuclear nightmare still exists, despite many reports to the contrary.
Barring complete and concise factual information, a commodity in quite short supply in the island nation, there is simply no way of knowing exactly the conditions on the ground. As nuclear power events go, this one is still closer to the beginning than the end, though many experts are hopeful that the unstable rods can be quieted with a combination of sea water and boric acid. In any case, reactors #1 and #3 at the facility are kaput, with #2 also reportedly damaged.
An evacuation zone of some 20 kilometers suggests the release of radiation into the atmosphere has already gone well beyond a dangerous level to making the area in a 12-mile radius of the plant temporarily uninhabitable, as is the situation along miles of coastal land subsumed by the tsunami.
Capital and financial markets have done their level best to downplay the short and long term effects of the total disaster, though they too are fishing in a deep and muddied stream of information. There are still too many unknowns to make critical assessments and business decisions. One thing is for certain, that the costs will run much higher than initial estimates of $180 billion. Close to 10% of Japan's population has been directly affected, while the rest of the population has, and will, suffer tangential effects.
To a country as small - geographically - as Japan, this disaster is a game-changer. Even in well-protected Tokyo, there's incidental damage to personal property in addition to a high emotional toll, which would be a mistake to underestimate.
Being one of the largest economies in the world, though one of the least stable, Japan will recover and rebuild, but the effort will take years, not months, after the effects have long since dropped off the top of the news. That's why the markets probably will be unsettled to lower for the near term. The issues facing the Japanese people have the potential to have long-reaching effects into the global economy.
As such, stocks were off world-wide with a few exceptions; the Nikkei was down more than 6%.
In New York, the major indices reversed Friday's gains with a gap-down open, plunged through the morning, settled at resistance and gained into the close, though the effort was more day-trading than anything else. Volume was lower even than Friday, bordering on being one of the slowest trading days of the year.
Dow 11,993.16, -51.24 (0.43%)
NASDAQ 2,700.97, -14.64 (0.54%)
S&P 500 1,296.39, -7.89 (0.60%)
NYSE Composite 8,193.96, -54.57 (0.66%)
Losers backed down winners by a pretty healthy degree, 4416-2088. On the NASDAQ, new lows topped new highs for the third straight session, 75-33. Over on the NYSE, new highs narrowly nipped new lows, 37-30. It is advised to keep a close eye on the daily new highs/lows, because the markets are in flux and seeking direction. It's still looking like a 65-70% probability that the markets have already made a turn and the dominant direction for the next six to eighteen months will be lower.
NASDAQ Volume 1,810,942,250
NYSE Volume 4,571,130,500
Commodities were affected by the Japan disaster, though to a much smaller degree. Front end crude oil on the NYMEX spent most of the day under pressure, but ended up with a marginal gain of just 3 cents, at $101.19. Between the reduced demand in Japan and the still-unsettled situation in the Middle East, prices could go either way, but the trend seems to be following global trends lower.
Gold was up $3.10, to $1,424.90, but silver shed 10 cents, to $35.84. Both of the dominant precious metals are trading near record highs, consolidating for another leap forward. Any major global event of consequence will send both gold and silver off like bottle rockets, though with the momentum already built in, no further catalyst is really needed, as the continual, non-stop printing of fiat dollars, yen, yuan and euros is providing more than enough fuel for the PM fire.
Markets don't get much more distorted and unpredictable than when a major natural disaster unfolds. Putting that on top of an already shaky foundation and wasteful stimulus is a witches brew of unknowable mystical monetary force.
Monday, March 14, 2011
Friday, March 11, 2011
World Down, Americas Up, Why?; What BTFDYFI Means
The devastation form the largest ever recorded earthquake in Japan is pretty severe. Markets worldwide sold off, all of them, in uniform fashion, except for those in the Western Hemisphere.
Why?
Good question, and the only plausible response available is that the US and Western Hemisphere gains comparative advantage for any other global setbacks that aren't in our immediate physical hemisphere, though it's probably not quite that simple.
The US, Canada, Mexico and South America surely aren't isolated in any manner from Japan. Devastation there will have a negative effect to some degree on global trade. The real difference here is that US markets are not free, not liquid and prone to machinations of madmen like the one who sits as Chairman of the Federal Reserve Corporation (a Delaware corporation). The other markets - in particular the Canadian and Brazilian markets; Mexico was down sharply - are actually in our global proximity and economic sphere of influence, so it is likely that once events in Japan had been digested and recognized as not a huge problem for the US, the marketeers went to work with the zero-interest rate free money on hand and BTFD.
(Those not well-versed in the acronym world of high finance, BTFD stands for Buy The F---ing Dip. BTFDYFI stands for Buy The F---ing Dip You F---ing Idiot.)
And so it is. Stocks ended the week with nice gains on a day that millions of Japanese people have suffered tremendous personal and financial losses. It takes a really cold indifference to human suffering to buy stocks in the face of devastating circumstances. Fortunately, there were not many people doing that; volume on the major exchanges was severely thin. Only the worst of Wall Street - meaning insiders from major banks, brokerages and hedge funds - were in on the dip-buying today. Hopefully, they will be richly rewarded with losses in coming days.
Dow 12,044.09, +59.48 (0.50%)
NASDAQ 2,715.61, +14.59 (0.54%)
S&P 500 1,304.28, +9.17 (0.71%)
NYSE Composite 8,248.53, +48.46 (0.59%)
Gainers turned the tables on losers, 3861-2613. New lows out-polled new highs on the NASDAQ, 71-31, but the result was just the opposite on the NYSE, with 32 new highs and 19 new lows.
NASDAQ Volume 1,825,802,625
NYSE Volume 4,237,853,500
The day was more eventful for commodities. Crude oil on the NYMEX front futures contract fell $1.54, to $101.16, as the Middle East's "day of rage" turned out to be more a stroll through the city square than full-throated protestations. Maybe the Arabs with government grievances should hire a few of the rent-a-thugs from Wisconsin, since they are no longer needed there.
Gold and silver got a boost on rumors that a furtherance of the Fed's easy money policies were in the bag. Gold, after trading lower through the early portions of the New York session, finished with a gain of $9.30, at $1,421.80. Silver, under similar circumstances, shot up 87 cents, to $35.94. The confidence of precious metals holders and traders is extremely high and rising. while there may be occasional setbacks along the way, the only way for the metals to go is higher, probably much higher, doubling or tripling in value from here over the next three to five years, though especially silver, which underperformed gold in the 2000s, but is quickly making up for lost time.
At last, we arrive at the weekend, with the major indices suffering roughly 1% losses for the week. The trend apparently having reversed over the past few weeks, remember that it is your friend.
Enjoy the NCAA conference tournaments this weekend and get ready for some wild action on the courts and in the markets in weeks ahead.
Why?
Good question, and the only plausible response available is that the US and Western Hemisphere gains comparative advantage for any other global setbacks that aren't in our immediate physical hemisphere, though it's probably not quite that simple.
The US, Canada, Mexico and South America surely aren't isolated in any manner from Japan. Devastation there will have a negative effect to some degree on global trade. The real difference here is that US markets are not free, not liquid and prone to machinations of madmen like the one who sits as Chairman of the Federal Reserve Corporation (a Delaware corporation). The other markets - in particular the Canadian and Brazilian markets; Mexico was down sharply - are actually in our global proximity and economic sphere of influence, so it is likely that once events in Japan had been digested and recognized as not a huge problem for the US, the marketeers went to work with the zero-interest rate free money on hand and BTFD.
(Those not well-versed in the acronym world of high finance, BTFD stands for Buy The F---ing Dip. BTFDYFI stands for Buy The F---ing Dip You F---ing Idiot.)
And so it is. Stocks ended the week with nice gains on a day that millions of Japanese people have suffered tremendous personal and financial losses. It takes a really cold indifference to human suffering to buy stocks in the face of devastating circumstances. Fortunately, there were not many people doing that; volume on the major exchanges was severely thin. Only the worst of Wall Street - meaning insiders from major banks, brokerages and hedge funds - were in on the dip-buying today. Hopefully, they will be richly rewarded with losses in coming days.
Dow 12,044.09, +59.48 (0.50%)
NASDAQ 2,715.61, +14.59 (0.54%)
S&P 500 1,304.28, +9.17 (0.71%)
NYSE Composite 8,248.53, +48.46 (0.59%)
Gainers turned the tables on losers, 3861-2613. New lows out-polled new highs on the NASDAQ, 71-31, but the result was just the opposite on the NYSE, with 32 new highs and 19 new lows.
NASDAQ Volume 1,825,802,625
NYSE Volume 4,237,853,500
The day was more eventful for commodities. Crude oil on the NYMEX front futures contract fell $1.54, to $101.16, as the Middle East's "day of rage" turned out to be more a stroll through the city square than full-throated protestations. Maybe the Arabs with government grievances should hire a few of the rent-a-thugs from Wisconsin, since they are no longer needed there.
Gold and silver got a boost on rumors that a furtherance of the Fed's easy money policies were in the bag. Gold, after trading lower through the early portions of the New York session, finished with a gain of $9.30, at $1,421.80. Silver, under similar circumstances, shot up 87 cents, to $35.94. The confidence of precious metals holders and traders is extremely high and rising. while there may be occasional setbacks along the way, the only way for the metals to go is higher, probably much higher, doubling or tripling in value from here over the next three to five years, though especially silver, which underperformed gold in the 2000s, but is quickly making up for lost time.
At last, we arrive at the weekend, with the major indices suffering roughly 1% losses for the week. The trend apparently having reversed over the past few weeks, remember that it is your friend.
Enjoy the NCAA conference tournaments this weekend and get ready for some wild action on the courts and in the markets in weeks ahead.
Thursday, March 10, 2011
It's Not as Good as They're Saying; Lows-Highs Flip
To anyone who follows capital markets and the world of high finance closely, the material deficiencies in the US and global "growth" stories are glaring and have been for many months. While the financial press - CNBC, the Wall Street Journal, Bloomberg - and the spokespeople for the various central governments around the world continue to feed the public the "recovery" fable, the facts, now beginning to see the light of day, contend that the global economy is still, two-and-a-half years after the grand cascading crash of 2008, in precarious straits.
Five separate stories sealed the fate for global markets today, beginning with China's announcement late Wednesday night (in America) that their trade balance was negative for the month of February.
About the same time, RealtyTrac delivered news that foreclosures had come to nearly a halt in the United States, with their numbers for February dropping 14 percent from the previous month and a 27 percent decrease from February 2010. Normally, that would be good news, but in the current environment of illegal and unethical actions by large, foreclosing banks, it meant that the mess that began in October, 2010 with the robo-signing scandal, was keeping banks from courthouses and clogging up the real estate market in a worsening manner.
Prior to the market opening, two more news items spooked the investment community. First, Moody's downgraded Spain's debt (about time for that!) to Aa2 and then, at 8:30 am on the East coast, the double whammy of new unemployment claims (397,000) and the US trade deficit, which expanded to -$46.3 billion in January.
Then, in mid-afternoon, as if the market had not received enough bad news, a story out of Saudi Arabia said that protesters had been fired upon by government troops.
That final bit of news sent the major indices - which had recovered somewhat off the day's lows - down once more, and stocks finished the session breaking into new depths.
The Dow and S&P broke through various levels of support, with the Dow finishing under the 12,000 mark for the first time in two months and the S&P crashing through it's 55-DMA. The NASDAQ and NYSE Composite each suffered similar pain.
It's becoming plain and clear to everybody living in the real world - not the fantasy land of fund managers, politicians and central bankers - that things are not going so well. Housing is an absolute catastrophe, global trade is grinding down due to higher imput costs and soaring energy prices, Europe is a full-blown basket case on the brink of dissolving, and US stocks are so wickedly overvalued that the path of least resistance is to sell them all, hurriedly, on the first sign of negative news, and there certainly was plenty of that to go around today.
Dow 11,984.61, -228.48 (1.87%)
NASDAQ 2,701.02, -50.70 (1.84%)
S&P 500 1,295.11, -24.91 (1.89%)
NYSE Composite 8,200.07, -179.37 (2.14%)
Declining issues led advancers, 5501-1072, a ratio of better than 5:1. New highs on the NASDAQ were just 33, overtaken by 68 new lows. On the NYSE, just 27 new highs and 31 new lows. This is a critical juncture for the markets, because if the number of new lows remain higher than new highs on a daily basis for long, say, six to eight trading days, it would confirm a hard change of direction, which has been in the cards since the double-engulfing session last Tuesday.
Volume was elevated as is the usual case when sellers outnumber buyers.
NASDAQ Volume 2,374,073,000
NYSE Volume 5,320,324,500
Commodities also took it on the chin, though in not such a dramatic fashion as stocks. Crude oil futures on the NYMEX fell $1.68, to $102.70, due to massive oversupply in the US of unrefined crude. Gold slipped $17.10, but remained below the psychologically-important $1400 level, ending the day at $1,412.50. Silver also was sold off, losing $98 cents, to finish at $35.07, though it should be noted that on days of hard reversals, a lot of precious metals are liquidated by speculators to cover margin calls.
A final note should not be ignored. Bill Gross' PIMCO, the world's largest fixed income family of funds, has slashed its holdings of Treasuries to ZERO. This news, first reported by the avant garde financial blog, zerohedge.com, holds unknown, but potentially damaging conditions. Gross and PIMCO have more or less registered a vote of "no confidence" on the policies of the US government and the Federal Reserve Corporation.
With stocks hammered down repeatedly over the past two weeks, the highs of February 18 look like specs on the horizon and the truth about the real conditions in the global and US markets is finally coming out. The cataclysm begun by the Wall Street banks in 2003-2006 and accelerated by then-Treasury Secretary's $700 billion holdup of the US mint in October, 2008, has many more acts still to be played out.
The rush for the exits began a week ago and the passageway out is beginning to get quite crowded.
Five separate stories sealed the fate for global markets today, beginning with China's announcement late Wednesday night (in America) that their trade balance was negative for the month of February.
About the same time, RealtyTrac delivered news that foreclosures had come to nearly a halt in the United States, with their numbers for February dropping 14 percent from the previous month and a 27 percent decrease from February 2010. Normally, that would be good news, but in the current environment of illegal and unethical actions by large, foreclosing banks, it meant that the mess that began in October, 2010 with the robo-signing scandal, was keeping banks from courthouses and clogging up the real estate market in a worsening manner.
Prior to the market opening, two more news items spooked the investment community. First, Moody's downgraded Spain's debt (about time for that!) to Aa2 and then, at 8:30 am on the East coast, the double whammy of new unemployment claims (397,000) and the US trade deficit, which expanded to -$46.3 billion in January.
Then, in mid-afternoon, as if the market had not received enough bad news, a story out of Saudi Arabia said that protesters had been fired upon by government troops.
That final bit of news sent the major indices - which had recovered somewhat off the day's lows - down once more, and stocks finished the session breaking into new depths.
The Dow and S&P broke through various levels of support, with the Dow finishing under the 12,000 mark for the first time in two months and the S&P crashing through it's 55-DMA. The NASDAQ and NYSE Composite each suffered similar pain.
It's becoming plain and clear to everybody living in the real world - not the fantasy land of fund managers, politicians and central bankers - that things are not going so well. Housing is an absolute catastrophe, global trade is grinding down due to higher imput costs and soaring energy prices, Europe is a full-blown basket case on the brink of dissolving, and US stocks are so wickedly overvalued that the path of least resistance is to sell them all, hurriedly, on the first sign of negative news, and there certainly was plenty of that to go around today.
Dow 11,984.61, -228.48 (1.87%)
NASDAQ 2,701.02, -50.70 (1.84%)
S&P 500 1,295.11, -24.91 (1.89%)
NYSE Composite 8,200.07, -179.37 (2.14%)
Declining issues led advancers, 5501-1072, a ratio of better than 5:1. New highs on the NASDAQ were just 33, overtaken by 68 new lows. On the NYSE, just 27 new highs and 31 new lows. This is a critical juncture for the markets, because if the number of new lows remain higher than new highs on a daily basis for long, say, six to eight trading days, it would confirm a hard change of direction, which has been in the cards since the double-engulfing session last Tuesday.
Volume was elevated as is the usual case when sellers outnumber buyers.
NASDAQ Volume 2,374,073,000
NYSE Volume 5,320,324,500
Commodities also took it on the chin, though in not such a dramatic fashion as stocks. Crude oil futures on the NYMEX fell $1.68, to $102.70, due to massive oversupply in the US of unrefined crude. Gold slipped $17.10, but remained below the psychologically-important $1400 level, ending the day at $1,412.50. Silver also was sold off, losing $98 cents, to finish at $35.07, though it should be noted that on days of hard reversals, a lot of precious metals are liquidated by speculators to cover margin calls.
A final note should not be ignored. Bill Gross' PIMCO, the world's largest fixed income family of funds, has slashed its holdings of Treasuries to ZERO. This news, first reported by the avant garde financial blog, zerohedge.com, holds unknown, but potentially damaging conditions. Gross and PIMCO have more or less registered a vote of "no confidence" on the policies of the US government and the Federal Reserve Corporation.
With stocks hammered down repeatedly over the past two weeks, the highs of February 18 look like specs on the horizon and the truth about the real conditions in the global and US markets is finally coming out. The cataclysm begun by the Wall Street banks in 2003-2006 and accelerated by then-Treasury Secretary's $700 billion holdup of the US mint in October, 2008, has many more acts still to be played out.
The rush for the exits began a week ago and the passageway out is beginning to get quite crowded.
Wednesday, March 9, 2011
No Follow-Through in Sluggish Equity Trading
After Tuesday's excellent ramp-up, traders took a break and squared up (or down) positions as the major indices all finished marginally lower on a day marked by extremely sluggish trading.
Following an early sell-off across the board, stocks regained their footing, hitting highs at midday, but sputtering all afternoon with a squeamish close.
Dow 12,213.09, -1.29 (0.01%)
NASDAQ 2,751.72, -14.05 (0.51%)
S&P 500 1,320.02, -1.80 (0.14%)
NYSE Composite 8,379.44, -14.60 (0.17%)
Declining issues finished ahead of gainers, 3567-2915. There were 92 new highs on the NASDAQ, versus 33 new lows. The NYSE saw 157 stocks hit new highs, with 10 registering new lows. Volume was in the dumpster again, as there seems to be little commitment by traders to take positions or hold them for periods longer than a few days, preferring instead to lock in profits when they appear. With options expiration a little over a week away, a move to the upside would normally be in the cards, but there's a ceiling of resistance about 1-1 1/2% above where the averages sit, so this may be a very quiet period with no major firms reporting quarterly results (that's next month) and scant economic data.
NASDAQ Volume 1,980,708,625
NYSE Volume 4,144,978,250
West Texas Intermediate on the NYMEX traded lower by 64 cents, as conditions in Libya and the Middle East did not change materially, finishing the session at $104.38. Gold gained $2.40, to $1,429.60, while silver was up nicely, gaining 39 cents to $36.05, another new 31-year high.
This kind of choppy trading should continue near-term, or at least until conditions in Libya and elsewhere show signs of stabilizing or going further out of control. In the interim, gold, silver and other hard assets still appear to be the best investments.
Following an early sell-off across the board, stocks regained their footing, hitting highs at midday, but sputtering all afternoon with a squeamish close.
Dow 12,213.09, -1.29 (0.01%)
NASDAQ 2,751.72, -14.05 (0.51%)
S&P 500 1,320.02, -1.80 (0.14%)
NYSE Composite 8,379.44, -14.60 (0.17%)
Declining issues finished ahead of gainers, 3567-2915. There were 92 new highs on the NASDAQ, versus 33 new lows. The NYSE saw 157 stocks hit new highs, with 10 registering new lows. Volume was in the dumpster again, as there seems to be little commitment by traders to take positions or hold them for periods longer than a few days, preferring instead to lock in profits when they appear. With options expiration a little over a week away, a move to the upside would normally be in the cards, but there's a ceiling of resistance about 1-1 1/2% above where the averages sit, so this may be a very quiet period with no major firms reporting quarterly results (that's next month) and scant economic data.
NASDAQ Volume 1,980,708,625
NYSE Volume 4,144,978,250
West Texas Intermediate on the NYMEX traded lower by 64 cents, as conditions in Libya and the Middle East did not change materially, finishing the session at $104.38. Gold gained $2.40, to $1,429.60, while silver was up nicely, gaining 39 cents to $36.05, another new 31-year high.
This kind of choppy trading should continue near-term, or at least until conditions in Libya and elsewhere show signs of stabilizing or going further out of control. In the interim, gold, silver and other hard assets still appear to be the best investments.
Tuesday, March 8, 2011
Don't Fight the Fed
Today's overgrown gains on the US stock indices stand as an object lesson of how Fed monetization of US debt trumps everything.
While oil took a brief respite, thanks, without doubt to pressure on traders to "cool it", the Fed flipped back to the Primary Dealers some $7.657 billion, more than half of it in the form of repurchasing notes just auctioned off two weeks ago.
That money went straight into stocks, which, by the way, were already overpriced.
Dow 12,214.38, +124.35 (1.03%)
NASDAQ 2,765.77, +20.14 (0.73%)
S&P 500 1,321.82, +11.69 (0.89%)
NYSE Composite 8,394.04, +57.02 (0.68%)
Advancers took the high road over declining issues, 4225-1491. There were 95 new highs and 34 new lows on the NASDAQ, while on the NYSE, 149 new highs to a mere 10 new lows. Volume, as expected, was very light. The move was not liquid.
NASDAQ Volume 1,869,438,750
NYSE Volume 4,451,904,000
NYMEX crude oil front-month futures eased 52 cents, to $105.02. Gold shed $7.30, to $1,427.20. Silver lost 21 cents, to close in NY at $35.66. The small downside in the precious metals and oil should be examined more closely, as they are just profit-taking and natural rotation on a "risk on" day for the casino gamblers.
The trend remains in place for commodities over the short, medium and long term along with significant downside risk for equities short term and longer. The major indices are treading water carelessly on seas of free money. With QE2 due to expire by the end of June, expect a pullback in equities unless the Fed announces further quantitative easing and the indices remain below their February 18 highs.
In the meantime, it's a good moment to snatch up precious metals.
While oil took a brief respite, thanks, without doubt to pressure on traders to "cool it", the Fed flipped back to the Primary Dealers some $7.657 billion, more than half of it in the form of repurchasing notes just auctioned off two weeks ago.
That money went straight into stocks, which, by the way, were already overpriced.
Dow 12,214.38, +124.35 (1.03%)
NASDAQ 2,765.77, +20.14 (0.73%)
S&P 500 1,321.82, +11.69 (0.89%)
NYSE Composite 8,394.04, +57.02 (0.68%)
Advancers took the high road over declining issues, 4225-1491. There were 95 new highs and 34 new lows on the NASDAQ, while on the NYSE, 149 new highs to a mere 10 new lows. Volume, as expected, was very light. The move was not liquid.
NASDAQ Volume 1,869,438,750
NYSE Volume 4,451,904,000
NYMEX crude oil front-month futures eased 52 cents, to $105.02. Gold shed $7.30, to $1,427.20. Silver lost 21 cents, to close in NY at $35.66. The small downside in the precious metals and oil should be examined more closely, as they are just profit-taking and natural rotation on a "risk on" day for the casino gamblers.
The trend remains in place for commodities over the short, medium and long term along with significant downside risk for equities short term and longer. The major indices are treading water carelessly on seas of free money. With QE2 due to expire by the end of June, expect a pullback in equities unless the Fed announces further quantitative easing and the indices remain below their February 18 highs.
In the meantime, it's a good moment to snatch up precious metals.
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