No Debt Ceiling Deal Sends Stocks Lower Again

While the plutocrats in Washington dither away valuable time trying to figure out the most politically-expedient way out of their self-imposed debt ceiling crisis, the rest of the world goes on, mostly oblivious to the debacle in the capitol.

Stocks, however, as money substitutes, aren't taking the "no news" as good news. In fact, markets are absolutely terrified, not that the current congress and president will find a solution by the artificial August 2 deadline, but that their efforts will be so futile and pointless that the ratings agencies will lower the US debt/credit rating from its now pristine AAA sovereign status.

While the majority of people neither understand nor care about this delicious little surprise coming down the road like a 60-ton freighter, Wall Street and other governments are frightened out of their boots because a drop in the US rating would add something like $100 billion of cost - in interest - to the annual federal budget, which is already way out of whack.

Whether it be Obama's refusal to put a concise deal on the table, or the Tea Party wing of the Republican party insistence that there be no revenue enhancements in any kind of deal, the result will be the same as it has been for the past 12 years for congress and the presidency: abject failure, and a hike in interest rates.

Without poring over details of how the past three years have played out, we are approaching a seminal moment in the history of the United States of America and in the financial policies post-Bretton Woods. Nixon's closure of the gold window was the first inflection point, at which currencies were no longer backed by gold. The accumulation of nearly $15 trillion in debt and the failure of government to not only foresee the problem, but then to not be able to deal with it, is the second great event.

With just seven days until the government begins defaulting on some debt, markets are skittering about like schoolchildren at recess and there's nobody in his or her right mind who wishes to be exposed to inordinate risk at this point. With each passing day that there is not a deal and signed legislation increasing the debt ceiling, expect markets to recoil in terror. By Friday, we could be witnessing an all-out crash as many participants choose to sit on the side rather than engage in the dizzying dance of death.

The outflows from stocks were seen mostly at the end of the day, when the major indices peaked just after 2:00 pm EDT. From there until the close it was nearly free-fall, with all of the day's tiny gains wiped out in a flurry of near-panic selling.

One hates to beat a dead horse, but this debt ceiling debate is still alive and kicking, barely, and it will dominate financial news until something - anything - is done to rectify the situation. Absolutely nobody is holding their breath waiting for that, however.

Naturally, there were swing trades and day trades made during the session, but nobody is staking out new positions in the most uncertain market of the past two-and-a-half years.

Dow 12,501.30, -91.50 (0.73%)
NASDAQ 2,839.96, -2.84 (0.10%)
S&P 500 1,331.94, -5.49 (0.41%)
NYSE Composite 8,331.67, -25.90 (0.31%)

Declining issues overwhelmed advancers for the second straight day this week, 4096-2434. NASDAQ new highs 29; new lows: 36. NYSE new highs: 44; new lows: 46. Combined totals: 73 new highs, 82 new lows, a slight shift to the negative for that particular indicator. Volume was reliatively light, as expected.

NASDAQ Volume 1,716,556,125
NYSE Volume 3,988,655,750

Crude oil advanced modestly, up 39 cents, to $99.59. Gold racked up another record high, gaining $4.60, to $1,616.80. Silver notched a 38 cent increase, to $40.70.

The S&P/Case-Shiller Home Price index showed marginal gains of one per cent in the month-to-month numbers, but most of the 20 cites surveyed showed declines on a year-over-year basis.

New home sales sunk to 312,000 on an annualized basis in June. Some analysts were calling the number "unexpected," while the home construction industry has been in outright depression for more than three years.

Any further declines will be "expected" and those acting surprised will be executed by a firing squad of Mexican construction workers, as soon as they can be rounded up from immigration detention centers. (That's a joke, folks.)

No Debt Ceiling Deal for Now; Markets Jittery

Just in case anyone was keeping score, the United States of America - the world's largest creditor, by far - will begin defaulting on its debts on August 2, 2011. That is a date just eight days away and Wall Street seems to not be enjoying the drama one bit.

It's odd, considering how many of the professional politicians in DC have been hired, bought and paid for by the elite banking and corporate interests of Wall Street. Have the patsy politicians found a new sugar daddy? Are they just "acting out?" No matter the case, there's no deal on raising the debt ceiling, though there are competing scenarios and bills floating around the nation's capitol.

Other than the usual market noise about earnings reports, there was little else to report from the global financial capitol, except that they were all waiting on some clarity from Washington.

Thus, a day which started badly and in the middle was looking good, ended badly, as stocks fell in the final hour of trading. So long as the clown show in Washington continues, putting the finances of the entire world in a cross between jeopardy and limbo, expect more of these kinds of days in stocks. Wash, rinse, repeat until the weekend.

Dow 12,592.80, -88.36 (0.70%)
NASDAQ 2,842.80, -16.03 (0.56%)
S&P 500 1,337.43, -7.59 (0.56%)
NYSE Composite 8,357.57, -50.63 (0.60%)

Losers dominated winners, with 1474 stocks up ad 5133 down. On the NASDAQ, there were 41 new highs and 26 new lows. Over at the NYSE, a similar scenario, with 58 new highs and 38 new lows. The combined total of 99 new highs and 64 new lows suggests a very soft market, struggling to justify value. Volume was at an even slower pace than normal, which is uncomfortable, to say the least, and downright discouraging, in a real sense.

NASDAQ Volume 1,585,768,125
NYSE Volume 3,560,761,250

With the dollar up strongly against the Euro, oil took a bit of a breather, losing 67 cents to finish the day at $99.20. With all of the uncertainty in global finance, gold investors are stocking up, sending the yellow metal to a record close of $1,612.20, up $11.20 on the day. Silver did not fare quite as well, but still managed a healthy gain of 24 cents, at $40.36 per ounce.

Thirty-two NFL player reps ratified a new labor agreement which will be presented to players for final approval, ending the 132-day lockout and settling one of the more thorny issues of the summer. Now, if congress could only act like responsible adults and do what the NFL and its owners and players have done...

UPDATE: After the closing bell, Netflix (NFLX) beat earnings estimates but came up short on total revenues, sending the stock down more than 8% in after-hours trading.

A new nominee has emerged for Analyst Moron of the Month as Randall Dishmon, portfolio manager for the Oppenheimer Global Value fund, explains why its time to get bullish on Citigroup (C) and Bank of America (BAC).

Dishmon, who desperately needs a new barber, says BofA is "wildly misunderstood" and that Citigroup is "one of the best, if not the best internatonal banking franchise ever assembled."

Among other Dishmon recommendations are Google (GOOG) - now that it's gone up 140 points in the past month - and Diagio (DEO), on the assumption that China and India want to imbibe regularly on their premium liquor brands. Diagio has nearly doubled in the past 18 months.

Maybe, just maybe, Dishmon should lay off the Diaigio booze and stick to plain old hookers and coke.

Week Ends with Split Decision; Gold, Silver on the Rise

After a week of ups and downs, it's probably appropriate the Friday ended with a bifurcated market: the Dow and NYSE down and the S&P and NASDAQ up.

It makes little sense to the casual observer, though the condition becomes more understandable if one is an insider, playing long and short, hedging positions, trading momentum and running super-fast computers in the 2011 version of "timing the market."

For the rest of us, forget it. Stocks have become nearly impossible to trade with any success unless one is truly gifted or just dumb lucky.

The White House and congress still haven't decided what to do about raising the debt ceiling. The Republicans' ploy of passing their ridiculous Cut, Cap and Balance bill in the House is a desperate and dangerous maneuver, costing more time as the ratings agencies and the rest of the civilized planet look on with alternate views of shock, horror and amusement. The continued stalemate virtually assures that the United States will receive a number of ratings downgrades no matter what happens from here on out.

By comparison, Europe appears far worse, though they have more than enough gall and arrogance to keep the media and the ratings agencies in check for the time being. With all of the Mediterranean nations in some sort of trouble or already having been bailed out, the European Union seems to be held together by duct tape and crewing gum.

There was nearly nothing worth reporting about this week, as the Ponzi schemers made it through another week without anybody receiving a subpoena or getting caught cheating. Score another one for the rich guys.

Dow 12,681.16, -43.25 (0.34%)
NASDAQ 2,858.83, +24.40 (0.86%)
S&P 500 1,345.02, +1.22 (0.09%)
NYSE Composite 8,408.20, -3.25 (0.04%)

Advancing issues narrowly beat decliners, 3293-3194. The NASDAQ showed 79 new highs and 23 new lows, while the NYSE registered 102 new highs and 24 new lows. The combined total of 181 new highs and 47 new lows is about par for the course in an upward-sloping market. Volume, however, dipped back into apathetic mid-summer malaise.

NASDAQ Volume 1,674,379,250
NYSE Volume 3,538,032,250

The commodity markets gave both good and bad news. Oil was up another 74 cents, to $99.87, which is bad news for everybody except oil company executives and Arab sheiks. The precious metals bore most of the good news, with gold up $14.50, to $1,601.50, and silver higher by $1.17, to $40.12. Silver appears ready to head into orbit, now that the new Hong Kong silver futures vehicle is offering some variation in pricing.

As the US economy becomes more and more bad theater, expect gold and silver to grind higher, with most of the explosive moves in silver, which is still underpriced at a 40-1 gold-silver ratio. The long-term trend is 16-1.

Today, House Republican "leader" John Boehner walked out of debt ceiling negotiations with the president, saying the two sides, "couldn't connect." No kidding, John, when you won't even allow for closing tax loopholes on millionaires and billionaires when we're suffering the worst depression of all time.

Boehner, and the rest of the "Tea Party" Nancies ought to be ashamed of what they're doing to the country. When the collapse comes, they should be handed the great bulk of the blame. President Obama has tried to deal with them, but it has become a losing battle.

God save us.

Investment Ideas: Gold, Silver or Penny Stocks?

If you're young and brash, or even if you're old and still have some risk appetite, you may be looking around for new investment ideas.

Trouble is, you probably won't find any on CNBC, Fox Business or any of the traditional media outlets. You'll have to dig a little deeper, maybe even start researching financial blogs, but there are literally thousands of them. Finding the right kind of investing advice for your particular risk level can be as daunting a task as picking a particular stock out of thousands of those listed on the major exchanges.

For some, whose primary goal is to protect wealth, the answer is simple. Gold, gold and more gold, but make sure it's physical and you can keep it in your own possession. Playing around with the SPDR Gold Trust EFT (GLD) may bring you profits, but in the end you have paper, not gold. You want physical, and it's as easy to get as a trip to a local coin or precious metals dealer or from various international dealers such as AMPEX or KITCO, who generally can suit the needs whether you're spending $10,000 or $10 million.

Those same coin shops and dealers usually also do a brisk business in silver, which is a little more speculative, but carries the same kind of wealth protection as gold, but at a fraction of the cost (the current gold:silver ratio is right around 40:1, though it's traditionally been closer to 16:1).

Another place to buy silver and gold is - of all places - eBay, where there are hundreds, if not thousands of auctions for gold and silver every day. The prices are fair, usually around spot, often less, and the action is fast-paced and addictive.

For those who are tired of the mainstream stocks, many of which have been gyrating and grinding higher and lower without any regard to fundamentals, a more rigorous test of one's due diligence comes in the form of penny stocks, which are just what they sound like, small companies selling shares in a smaller, and consequently, less liquid, market, known in the trade as the "pink sheets" or simply, "the pinks."

Penny stocks are not for conservative investors; they carry a high level of risk. Many of these companies aren't even known to the general investing public and most of them are unprofitable or just barely turning a small profit. The key is to know which ones are actually going somewhere, have good management and are on their way to becoming the next Microsoft or Google. Most companies start small and penny stocks offer investors to get in on the ground floor, before their idea, application, service or product goes viral or mainstream.

Many of these companies are bought out by larger firms, resulting in hefty profits for shareholders, but finding the good ones takes time and research, to say nothing of an iron stomach.

There are dozens of sites offering penny stock picks but clicking the preceding link will take you to one that has a proven track record, offers quality content and does great research on companies you may have never heard of but could be regional powerhouses, national or global leaders years from now.

So, there you have it: three investments for three different levels of risk appetite. Low: Gold; Medium: Silver; High: Penny Stocks. And you don't have to watch a minute of CNBC for any of them.

Correlation Trade, Weak Dollar, Hot Air Boost Stocks

About the only thing hotter than stocks on this 21st of July, 2011, was the weather, with temperatures hovering around the 100-degree mark in much of the nation, but especially in the Midwest, Mid-Atlantic and East coast. But the correlation trade - short dollars, long stocks - was in effect throughout the session, which meant that stocks had to soar... and they did, closing in on the nearly three-year highs set back in late April.

Coming off a string of recent earnings report beats by the likes of Google (GOOG), Apple (AAPL) and IBM, one would have expected the NASDAQ to lead the way, but it was the S&P and Dow Industrials which showed the greatest percentage gains of the day.

It's obvious to anyone with more than a passing interest that the banks have been at their manipulative best of late as financial stocks have led the way each of the past two sessions, even as these very banks put in quarterly earnings showing losses, pay no dividends, are largely insolvent and the nation lurches ever closer to a debt default and ratings downgrade, the latter being all but inevitable after the well-rehearsed clown show in Washington, DC.

One can hardly blame the elitist banking class for boosting their own portfolios at this juncture. After all, its been proven that whatever risks they take will be guaranteed to win, since the US government is back-stopping the whole TBTF crowd. They might as well take while the taking is good. It may not be the same in a fortnight or so.

For the rest of us, the alternative for the day was to find air-conditioning, drink plenty of fluids and watch the circus from afar. The risks of trading in stocks is far too high for the average plebeian. And so it goes, that the rich get richer. The poor, and, especially those stuck in the middle, may get the ultimate revenge as more and more people turn their backs on the world's most corrupt system of governance and finance and default in record numbers on school loans, car loans, mortgages, credit cards and all manner of financial obligations.

The end to this grand farce of fiat money is coming, regardless of the degree of normalcy bias built into us all from TV and the media. The waiting, admittedly, is a royal pain. Either way, it's death by deflation or inflation (which seems to be winning lately), or both.

Dow 12,724.41, +152.50 (1.21%)
NASDAQ 2,834.43, +20.20 (0.72%)
S&P 500 1,343.80, +17.96 (1.35%)
NYSE Composite 8,411.45, +129.62 (1.57%)

As one would expect, advancing stocks beat back decliners in a big way, 4901-1692. On the NASDAQ new highs reached 88, while new lows came in at 25. The NYSE had even more of a pronounced bias, with 154 new highs and 20 new lows. The combined total of 242 new highs and 45 new lows would seem to suggest that the rally has legs, though one never knows when or if Europe will fall completely apart at the seams, sending the Euro lower, the dollar higher and stocks down. Volume was actually quite fantastic. Perhaps some new suckers (investors) were brought into the foray.

NASDAQ Volume 2,253,718,500
NYSE Volume 4,812,432,500

As goes the dollar, so - in the opposite direction - goes oil, and with the dollar down, WTI crude leapt back over the $100/barrel mark in the early part of the session, but backed off to close up only 73 cents, at $99.13.

Naturally, gold and silver were hammered to death, with gold losing $9.90, to $1,587.00, and silver falling 61 cents, to $38.95 per ounce.

The conditions are about to change - for silver, at least - as the Hong Kong Exchange will introduce a silver futures trading mechanism at the open of business on Friday, which will be shortly after 8:00 pm EDT. By this time tomorrow, the price in Hong Kong may be $44 per ounce and quite a bit lower here in the states.

We shall see soon enough.