Greece Will Not Default... This Week, Maybe Next

The Markets

All you need to know about today's "out of the blue" rally.

According to a Bloomberg report:

"Greece is an integral part of the euro area and recent decisions to meet budget targets will help shield the economy," the Greek government said in a statement today following a call between Greek Prime Minister George Papandreou, German Chancellor Angela Merkel and French President Nicolas Sarkozy.

...and with that, it was off to the races for the algo-spitting machines which double for a perfectly-functioning market.

Seriously, there was nothing other than that, oh, well, both PPI and retail sales figures were unchanged from the prior month, so nothing to see, there, really, move along. Something (not sure what) spooked the machines at about 3:30, just after the major indices hit their highs of the day and were careening toward an even bigger ramp up, but whatever it was, it took 140 points off the Dow and made today's extraordinary rally look... ordinary.

So, if reading the Wall Street tea leaves correctly, all that has to happen is for Greece not to default and we'll see Dow 20,000 in a matter of months. That appears to be the general herd mentality.

Just for a reference point, take a look at how far below the April highs the S&P, NASDAQ and Dow are and then rethink that strategy of buying everything that has momentum, like Netflix or Apple or maybe LuluLemon. Here's a hint: the Dow closed at 12810.54 on April 29, the high for the year, and, since we're checking, the close on Decembre 31, 2010 was 11557.51, so we're down for the year and about 1500 points off the high.

So, when Greece does default - because they surely will at some point - whether it be orderly or not, what will stocks be worth then?

Dow 11,246.73, +140.88 (1.27%)
NASDAQ 2,572.55, +40.40 (1.60%)
S&P 500 1,188.68, +15.81 (1.35%)
NYSE Composite 7,199.12, +89.17 (1.25%)
NASDAQ Volume 2,300,166,500
NYSE Volume 4,961,128,500
Combined NYSE & NASDAQ Advance - Decline: 4804-1800
Combined NYSE & NASDAQ New highs - New lows: 52-110
WTI crude oil futures: 88.91, -1.30
Gold: 1819.70, -14.50
Silver: 40.69, -0.44

Calm Before the European Debt Storm

The Markets

An eerie calm settled over global markets on Tuesday. Maybe it was the mild late-summer weather, but most likely the dull, though uniformly positive trading sessions were not marred by any surprise announcements of China buying Italian debt or President Obama proposing another hare-brained multi-billion dollar stimulus program, and thus the machines went about their business of chasing momentum stocks into positive territory.

There actually was some somber news. It seems the 2008-and-beyond recession has yielded some stunning negatives on the American psyche. It seems, according the the Census Bureau, that the level of poverty in America has risen to its highest rate in 18 years, at 15.1 percent of all Americans, while the number of people living below the poverty line has risen to a record of 46.8 million in 2010. Both numbers are almost certain to be higher once they crunch the data from 2011.

Additionally, median household income in the United States in 2010 was $49,445, a 2.3 percent decline from the 2009 median, after adjusting for inflation.

Thank you presidents Bush and Obama, all the congresses of the past decade, rich bankers and uncaring CEOs one and all. You have succeeded in the first phase of turning a once prosperous, joyous nation into a third-world hell-hole. There's great certainty that the politicians, bankers and media will continue to pursue policies that are harmful to the lives of average Americans while at the same time denying them of basic human rights and those couched in the constitution. Please don't ever allow Rep. Ron Paul to speak during a presidential debate - all of which have been nothing more than jousting matches between two loser career politicians, Rick Perry and Mitt Romney - as he might awaken the slumbering middle class which you are going out of your way to destroy.

Of course, none of this meant anything to the wizards of Wall Street, who only see such statistics as meaning there will be more consumers for their goods and more government cheese and free money forever. Wall Streeters earn well beyond the median income. They cheat and steal even more.

These kinds of statistics are neither enjoyable to report nor meaningful in the fight against the government-banking kleptocracy because they simply don't care, have all the money at their disposal and will not change anything. Only when the monetary system finally implodes upon itself, when there are no more pigeons to fleece and no more suckers from which to take money will the government and business begin to function as intended, without interference and ridiculous taxes and entitlements.

Until then, we have Europe on our side, especially the Greeks, who openly oppose their government, willfully refusing to pay taxes and - for the most part - ignoring the doctrines and proclamations of the elitists. We should all take a lesson from them, just as their economy sinks into an inescapable indebtedness.

Dow 11,105.85, +44.73 (0.40%)
NASDAQ 2,532.15, +37.06 (1.49%)
S&P 500 1,172.87, +10.60 (0.91%)
NYSE Composite 7,109.95, +62.83 (0.89%)
NASDAQ Volume 1,943,776,750.00
NYSE Volume 4,648,729,000
Combined NYSE & NASDAQ Advance - Decline: 4865-1635
Combined NYSE & NASDAQ New highs - New lows: 25-114
WTI crude oil futures: 90.21, +2.02 (absurd)
Gold: 1833.30, +18.90
Silver: 41.01, +0.72

BUMMER: The Plunge Protection Team Is Back in Action!

The Markets

Let's face it. US equity and commodity markets are completely, irretrievably, unconscionably manipulated beyond any basic sense of fairness.

On the morning of the first trading day of the week, US equity scalpers were met with futures that forecast a dismal Monday. Every index in every foreign country was lower on the day. In Asia, the Hang Seng led the way with a loss of greater than 4%. European bourses, shattered for the better part of the past three months, were all lower, the French CAC-40 taking over from the German DAX in leading the way to oblivion with a 4% decline.

But here in America, we have advantages. We have Ben Bernanke, the brilliant, often uninspiring and always shaking Chairman of the Federal Reserve. We have Timothy Geithner, the diminutive (matching his brain power) Treasury Secretary who keeps a watchful eye over the nation's exploding debt.

And we have printing presses (actually, they've been replaced by computers) spitting out US dollars faster than a 9th Avenue hobo picks up pennies thrown his way.

More than anything else, however, we have the fabled Plunge Protection Team (PPT), aka the President's Working Group on Financial Markets created by President Reagan in the aftermath of the LTCM blowup in 1987.

According to Executive Order 12631, the "Working Group" was established explicitly in response to events in the financial markets surrounding October 19, 1987 ("Black Monday") to give recommendations for legislative and private sector solutions for "enhancing the integrity, efficiency, orderliness, and competitiveness of [United States] financial markets and maintaining investor confidence.

In other words, when the markets are crashing, the Working Group, or PPT, springs, like trained attack Dobermans, into action to rescue witless investors from parting with their increasingly worthless cash.

Today, the PPT got busy early on. Stocks were hammered at the open, in response to the rest of the world in a near panic over Greece potentially defaulting and European credit market spreads blowing out all over the place. Stocks were down huge in the opening minutes of trading, as an extension of Friday's selloff and the continuing global debt implosion. The fact that Greece will eventually default on a large portion of their debt and ungraciously remove itself from the Euro standard (back to the Drachma) is unimportant to the functioning of the PPT. They buy futures. They buy stocks. They buy whatever is falling fastest, which on Monday, was just about anything that had a ticker symbol.

The PPT doesn't always prompt rallies. Their normal function is to keep US indices from falling too far, too fast, like today, like about six times in the past three weeks, like about a thousand times since the dotcom crash of 2000. And today was no different. They kept he markets in a sane neighborhood, down somewhere between a half and one per cent, until, that is, all the lights turned green.

Around 2:30, the Financial Times, another overstuffed relic from the days of ink and newsprint, ran a story that China was interested in buying Italian bonds, many of which will go up for bid this week as the Italian government seeks to finance its long-standing tradition of turning investor dough into pasta salad, along with assorted mafia side dishes and Berlusconi desserts.

Since noodles are noodles, whether they're doused in marinara or lobster sauce, the nitwits on CNBC were led to believe that this was a great idea, and the markets turned from merely moribund to miraculously magnificent in the final hour-and-a-half of trading. The US wins again. All of the US indices ended the day in positive territory.

Now, some may cheer that the US government has investor's backs, but the stark reality is that the PPT is all that's left between regular day-to-day life and a most serious, full-blown market crash of stupefying proportions. The global economy is on its knees due to too much debt, too many goods and too many currencies trying vainly to devalue themselves. The entire affair is deflationary in the most absolute sense as goods and services become more and more worthless, while the relative value of the currencies which buy such goods plummets into an phalanx of money-crunching debt.

Ah, for the good old days of really free, open markets, like back in the sixties and seventies, when a stock could be worthwhile returning a reasonable four to five per cent dividend along with annualized growth of 15-20%. A quarter point here, a half point there. We were all invested and looking forward to a safe, sensible and sane retirement.

Nostalgia. It's what one gets when one sees the fruits of labor lavished on the already rich.

And by the way, the day should not pass without acknowledging that Jaime Dimon, CEO of JP Morgan Chase, thinks the Basel 3 rules requiring the largest banks, such as his, to hold 9.5% of tier one capital, are "un-American." Right. FU, Jaime. Is JPM the next bank to start selling off assets? Probably should, but probably won't. Hey, the world is an imperfect place, suitable for misfit rich kids like Jaime.

Dow 11,061.12, +68.99 (0.63%)
NASDAQ 2,495.09, +27.10 (1.10%)
S&P 500 1,162.27, +8.04 (0.70%)
NYSE Composite 7,047.12, +2.11 (0.03%)
NASDAQ Volume 1,994,098,375
NYSE Volume 5,034,112,500
Combined NYSE & NASDAQ Advance - Decline: 3178-3364
Combined NYSE & NASDAQ New highs - new lows: 19-514
WTI crude oil futures: 88.19, +0.95
Gold: 1815.80, -42.80
Silver: 40.29, -1.09

Astute readers will understand what it means when all the major indices are up, but the A-D line is negative and especially when the new highs - new lows are tilted so heavily in favor of the lows. For those who still need guidance, it's a con, a complete, total, 100% sham. That oil futures are up while gold and silver suffer heavy losses really cinches it.

Idea: Fresh out, though working hard on "Making a budget and sticking to it," and "Saving 10% of your income." More tomorrow.

Obama Speech a Big Flop; Greece May Default Over Weekend

The Markets

The rhetoric in President Obama's address to a joint session of congress last night was so far over the top with his screeching, "Pass this jobs bill" over and over ad nauseam that the conclusion is that congress, though they may like some of it, will do everything in its power to delay, disrupt, debate and defeat Obama's American Jobs Act (AJA), and this time they would be doing everyone a favor.

Here's a Daily Kos blogger who lavishes on the praise for Obama's oratorial skill a bit too heavily (for our tastes), but basically has most of the details right.

Here's NPR's take:


The very last thing we need in this country is a bill wrapped in the flag (lest we forget the president advising congressional Republicans to put "country over party") which delivers little more than promises of tax credits to small business, but spends billions on teachers ($35 billion to be exact), repairing schools (the bulk of the $100 billion in infrastructure spending) and cuts the payroll tax contributions for both individuals and small businesses.

If this jobs bill is passed in any form, it's effect on unemployment will be minimal because businesses hire when they need work done, as in servicing more customers, and that just isn't happening in many small, medium and large American businesses. Consumers have been cutting back, and business cuts back to accommodate the slackening demand for their goods and/or services. Nobody hires because the government offers an incentive to do so, except those wishing to game the system, and there are plenty of those around.

No, the congress should delay and defeat any bill which proposes to spend more money we don't have. The first Obama stimulus - a much larger package - has already proven to be a failure, and this bill comes a number of months late and many dollars - and ideas - short.

The reaction from the markets on Friday was a collective sigh and a return to the "sell" button.

Obama's public bust was not the only item that rattled traders over the final session of the week. European markets were hammered down again, and that sent the dollar soaring against the Euro, which meant that the carry trade of shorting the dollar and buying stocks has gone up in smoke and the machines don't have an algo for that.

Persistent rumors that Greece was about to default, possibly over the weekend, sent European bourses down in droves and sent the US Treasury 10-year note to a record low yield of 1.92%. Also roiling markets was the abrupt resignation of ECB chief economist Juergen Stark, apparently over the continued buying of bonds by the ECB.

The combination of the European crisis escalating again and the failure of the president to offer any convincing plan to combat unemployment sent stocks back to levels not seen in nearly three weeks with the Dow closing below 11,000 for the first time since August 22nd.

The S&P 500 broke through several support levels and is only 31 points away from its August 8 closing low of 1119. The NASDAQ fared better, though not by much, finishing 126 points above its August 19 closing low of 2341.84.

If the rumors about Greece prove true, monday's markets could prove a bloodbath of monstrous proportions, but, even if the Greeks decide to play along, the European financial crisis won't simply fade away, nor will the sluggish environment in which the United States is currently embrolied.

Dow 10,992.13, -303.68 (2.69%)
NASDAQ 2,467.99, -61.15 (2.42%)
S&P 500 1,154.23, -31.67 (2.67%)
NYSE Composite 7,045.01, -212.35 (2.93%)
NASDAQ Volume 2,066,526,125
NYSE Volume 5,467,812,500
Combined NYSE & NASDAQ Advance - Decline: 1083-5459
Combined NYSE & NASDAQ New highs - New lows: 22-353
WTI crude oil futures: 87.24, -1.81
Gold: 1859.00, -10.60
Silver: 41.60, -0.74

The woes of Bank of America continue. They and other banks tied up in the robo-signing scandal may still face extensive civil and criminal charges after the 50-state Attorneys General reaches a "global solution" which has been rumored to be about $20 billion. New York AG Eric Schneiderman has been pursuing Bank of America through his own offices and is not participating in the investigation by the other 49 state AGs. Schneiderman is pushing to claim that BofA and others fraudulently transferred securities to investors, pledging the same notes to more than one group. His investigation continues.

Of all the bright guys out there who cover finance, bank analyst Chris Whalen, the founder and managing director of Institutional Risk Analytics, is among the very brightest of all, so when he says Bank of America (BAC) should file for bankruptcy, maybe CEO Brian Moynihan and others should listen. See Whalen make his case in the video below.

Markets Down Without Cause; Bike Riding offers Solutions

The Markets

Stocks could not follow through - as expected - yesterday's momentum rally, despite there being a paucity of news - good or bad. The only actionable events were the pre-open release of weekly unemployment claims, which came in poorly again, at 414,000, up 2,000 from an upwardly-revised 412,000 in the prior week.

Other than that, the ECB and Bank of England kept key interest rates unchanged, so all there was to do was to sell those stocks which were profitable in yesterday's trading and sit in cash until after the president's 7:00 pm EDT speech in which he is supposed to unveil some sort of jobs program.

The Bernanke speech in Milwaukee was a disappointment to those who wished he would announce QE3 - it's not going to happen - and consisted mainly of the Fed chairman droning on about how weak the economy is and how the Fed stands vigilant to do whatever it can to fix it. The takeaway was that the fed really doesn't have much power any more, having used up all the bullets in their six-shooter. The speech, thus, was a big non-event.

While there's been a multitude of opinion surrounding what the president might say in his speech tonight, whatever his jobs program might be, it's proabably going to consist mainly of an extension of the payroll tax holiday, tax credits to businesses who hire new employees (a program that has great potential to be scammed heavily), some kind of infrastructure "bank" (read: borrow and spend, also great scam potential) to repair more highways, bridges and tunnels, and little else.

The president is relying on bad economic information, which he has since he took office. Mr. Obama neither understands the US economy nor the travails of the average American. If he truly wanted to fix things in this country, he'd force phone, cable and power companies to cut their exorbitant rates, put a nationwide cap of $3.00 per gallon on gasoline at retail, announce a larger and more-encompassing tax holiday, slash medicare and social security contributions and simultaneously cut the pay of every federal government employee by five to ten percent (the tax cuts would ease the pain completely), and repeal the monstrosity that is known as Obamacare.

That isn't going to happen, so expect the US economy to remain moribund for at least another year, probably 18 months, and quite possibly longer. Until the government gets it's act together and begins to understand that the problem is that there aren't enough real jobs in the country to re-employ the 14 million out of work and that borrowing more on band-aid programs aren't going to jump start anything any time soon. The time is right for fundamental changes to entitlements and the grotesque tax code. Whether there's the political will to make these changes is highly doubtful, especially when all the politicians are focused only on keeping their jobs and fighting for control of the White House. The election is still 14 months away, but that's all that occupies the minds of our beloved "leaders."

Dow 11,295.81, -119.05 (1.04%)
NASDAQ 2,529.14, -19.80 (0.78%)
S&P 500 1,185.90, -12.72 (1.06%)
NYSE Compos 7,257.36, -97.81 (1.33%)
NASDAQ Volume 1,951,654,250
NYSE Volume 4,277,785,000
Combined NYSE & NASDAQ Advance - Decline: 1603-4886
Combined NYSE & NASDAQ New highs - New lows: 58-56
WTI crude oil futures: 89.05, -0.29
Gold: 1865.80, +48.50
Silver: 42.34, +0.79

Idea: Ride a Bike Whenever Practical or Possible

It's been said that when you learn how to ride a bike, you never forget, and since most Americans grew up riding bikes as kids and teens, there's probably about 150-200,000 million of us who could get on one and ride without fear of falling off. For many, especially those whose diets have caused them to become grossly overweight or obese, a good, sturdy mountain bike and a two mile ride every day would go a long way toward reducing both their weight and future medical costs from everything from diabetes to heart disease.

The advantages of riding a bike are probably too numerous to mention, but beyond the obvious health benefits, bikes require no fuel at all, except that which comes from the furious pedaling of our little legs. With the price of gas hovering near $4.00 a gallon, every mile trekked on a bicycle is a savings in fuel use and expense. Not only does the savings accrue to the individual, but if enough people substituted driving their cars for trips of under two miles and instead rode a bike, it wouldn't be long before those ridiculous gas prices began coming down, providing a benefit to the whole country.

Economic change is usually accomplished at the fringes, and promoting bike riding as a health and financial benefit is right out there on the outer limits, where economists are generally blind.