The Instant Market: Draghi and Bank of America Take It Down Two Notches

Once again, we are treated to the new reality of the "instant market" wherein news, or rumor, directs the flow of funds into or out of select equities, and today's catalysts were, as usual, from Europe (must have some news from Europe to move markets: it's the law) and oddly enough, from our old friends at Bank of America (BAC).

First, Europe. US markets opened with some hope and small gains across the indices. That was, until shortly after 10:00 New York time, when ECB President Mario Draghi commented that the ECB would not step up it's bond purchases, noting that monetary financing of states was not part of the treaty upon which the EU was formed. (Imagine, a world political leader actually sticking to what was agreed upon. A novel approach.)

That took the markets down a big notch, with the Dow, after hitting its highs of the day earlier - up 60 points - falling a full 120 points - to down 60 - in about an hour's time after Draghi's comments.

Draghi also said that any talk of the Euro-zone breaking apart were "morbid" and that the Euro was going to remain intact as a viable currency. He punted this gem:

I have no doubts whatsoever about the strength of the euro, about its permanence, about its irreversibility. But you have a lot of people, especially outside the euro area, who spend a lot of time in what I call morbid speculation.

While Draghi may be right about the morbidity part, the thought that the Euro is irreplaceable or inviolate is nothing more than CYA job protection. He's paid to oversee the ECB, and talking up the currency is part of his job. Somebody ought to hand Draghi a history book. Greece fell, Rome fell, Germany rose and fell a couple of times, at least. Nothing lasts forever, and, with only 11 years of history under its belt, the Euro is experiencing something of a severe confidence crisis, if not a complete failure by some of its constituents.

Most of those "morbid" speculators give the Euro another six to eighteen months, tops. And while it may indeed survive, and prove Draghi correct in the near term, it's another bad idea stemming from too many government bureaucrats attempting to furnish a centrally-planned socialist solution where none was needed. In many ways, the Euro resembles the Medicare/Medicade mess in the US, wherein the government stepped all over the established free market to create a system that is out of control and benefits mostly large medical insurance companies instead of real people with health care needs. The Euro was supposed to affect the entire continent in magical, positive ways. It has, thus far, produced a great deal of pain, financial inequities and sparked a world-wide crisis, even though that crisis was well underway, being all about fiat money anyway.

Stocks drifted along until about 3:00 pm ET when the PPT or whomever was hitting the bid - for hours - on Bank of America at 5.00 - 5.03, stopped, failed and rolled over. The bank that many equate with the financial collapse of 2008, hit a fresh, 33-month low, hitting 4.92 prior to closing at 4.99, an important figure, since many funds, by charter, cannot trade in stocks priced under 5.00, or must severely limit the size of their investment in such low-priced equities.

With banks under pressure the entire session, the demise of BAC took the whole market down the second notch, into the close. So much for recovery, at least by the "well-capitalized" US banks, whose ledgers are an indecipherable miasma of imaginary valuations, off-balance-sheet assets and liabilities and mark-to-model fantasies. With books so complex and confusing most CPAs don't understand them and after relentless support from the federal government (much of it in secret), is there any doubt that most stock pickers have shied away from US financial stocks as a whole?

Bank of America, along with Citigroup and JP Morgan Chase, to name just a few, should have been broken up in 2008-09, when they were insolvent (and still are, largely), though that would have ended the near-total dominance of the Federal Reserve and its constituents over all transactions in the US economy and beyond, and the rich bankers and their supporters simply could not stand for that. Instead, it was easier for them to socialize the losses on the backs of the US taxpayers.

Bank of America's recent swoon is only a small chapter in the ongoing saga that will bring down the oligarchical nature of our corrupt political and financial system. 99%ers are celebrating.

A couple of items of note:

Ron Paul, the Republican presidential candidate that the establishment loves to hate, has taken the lead in Iowa accordind to the most recent polling by Public Policy Polling (PPP), one of a handful of organizations tracking the rise and fall of candidates in the upcoming (January 3) caucuses.

The results have Paul at 23%, leading Mitt Romney (20%) and a rapidly declining Newt Gingrich (14%), even though Romney recently picked up the endorsement of the the Des Moines Register, Iowa's leading newspaper. Paul is also reported to have taken in more than $4 million over the past weekend, and now is in second place, behind Romney, in New Hampshire.

Also, a searing report on where we're headed in 2012, called the Thunder Road Report, leading with the cryptic warning, "Dear Portfolio Manager, you are leaving the capitalist sector and heading into a full-spectrum crisis."

The entire report is available at the end of this post.

Anybody seen Santa?

Dow 11,766.26, -100.13 (0.84%)
NASDAQ 2,523.14, -32.19 (1.26%)
S&P 500 1,205.35, -14.31 (1.17%)
NYSE Composite 7,142.45, -95.21 (1.32%)
NASDAQ Volume 1,591,603,125
NYSE Volume 3,659,820,750
Combined NYSE & NASDAQ Advance - Decline: 1230-4469
Combined NYSE & NASDAQ New highs - New lows: 110-290 (blowing out)
WTI crude oil: 93.88, +0.35
Gold: 1,596.70, -1.20
Silver: 28.87, -0.80

TRoad25

Odd Flat Finish on Quadruple Witching Day

Four times a year, the markets encounter what are known as quadruple witching days, in which all four varieties of futures and options expire on a single day, normally the third Friday of the month, as today.

On those usually-volatile sessions, there's usually a good chance that stocks will finish strongly to the positive or the negative, so it was a bit of keeping with the current theme that stocks finished the week flat, though on higher volume than has been seen lately.

It's on these quiet days that, somewhat counter-intuitively, investors can find real diamonds in the rough, but, since many hedge funds have already closed their books for the year, and, taking into account the continuing crisis in Europe and the slow pace in the US, traders were focused more on catching the quickest train out of town for the weekend rather than researching or taking positions in fresh equities.

News flow was also quite on the light side, though Fitch Ratings did its best to unnerve already-skittish investors by lowering France's AAA credit outlook from stable to negative and placing six European nations - Belgium, Spain, Slovenia, Italy, Ireland and Cyprus - on ratings watch negative, putting the six on a heightened probability of downgrade once the company completes its review by the end of January 2012.

The economic data on Friday was also not inspiring to either bulls nor bears, as CPI for November was flat with the core CPI - excluding food and energy - was up 0.2%. More than likely, if one is to believe the government bean-counters, this is indicative of a slow economy leaving companies without much pricing power, and, intuitively, a harbinger of another small wave of deflation in the near term.

Thus, stocks ended the week with their first loss in the last three, though the vast majority of the damage was done on Tuesday, the other sessions more or less range-bound.

With just ten trading days remaining in the year, traders are keeping a sharp eye out for Santa Calus and his rally hat, though there have been no sightings of the jolly fat man nor of any catalyst to spark a significant year-end rally.

In the immortal words of George W. Bush, "go shopping."

Dow 11,866.39, -2.42 (0.02%)
NASDAQ 2,555.33, +14.32 (0.56%)
S&P 500 1,219.66, +3.91 (0.32%)
NYSE Compos 7,237.65, +20.55 (0.28%)
NASDAQ Volume 2,453,577,500
NYSE Volume 4,921,504,500
Combined NYSE & NASDAQ Advance - Decline: 3315-2258
Combined NYSE & NASDAQ New highs - New lows: 109-164
WTI crude oil: 93.53, -0.34
Gold: 1,597.90, +20.70
Silver: 29.67, +0.40

Low Mortgage Rates and Returning Vets Could Boost Real Estate

Yesterday, it was mentioned here that mortgage rates hit an all-time low, with a 30-year fixed mortgage going for the ultra-affordable rate of 3.94%, which, if you've got the down payment and can find a home in a price range you can live with, puts home ownership well within your grasp.

While residential real estate is still in a deep downturn, some markets could get a boost from the thousands of returning veterans from Iraq, now that the conflict has officially ended. Soldiers coming home will qualify for a Military VA Loan which carries the unique feature of requiring no down payment, a benefit for the danger these veterans endured.

Along with low, low rates on conventional mortgages, refinance mortgage rates are also at ridiculously low levels. Anyone paying anything North of 4.5% can probably save a bundle by refinancing and stretching out the term of the loan.

While having no mortgage is ideal, few people are in such a sweet spot. Foreclosure and short sales are still making up an unhealthy share of the residential market, but, for buyers, there are deals on good, quality homes in solid neighborhoods in almost all parts of the country.

Scanning the internet for deals on one's local craigslist might be a good start, but with home sales mostly down, there are likely plenty of professionals who will gladly show you a selection of suitable properties in your area because they will earn a commission if and when you buy. A competent Realtor can guide you to the right home at the right price and usually lead you to a lender that can handle all of the mortgage and paperwork details.

It's also prudent to hire a competent attorney with expertise in real estate to handle the closing. Clouded title issues are still predominant in areas hit hard by foreclosures and recession, so get an expert to make sure what you're buying will remain yours.

Competence and Industry Experience Essential in Business Expansion

Whatever the business climate, successful business people are always on the lookout for new opportunities, but today's sluggish economic environment makes this an excellent time to seek out a possible merger or take-over target to expand one's enterprise because some businesses have been hurt more than others and may be available for prices far lower than they were before the onset of the financial crisis.


Naturally, the desire to expand one's business carries risk, but lending costs for large and medium enterprises are new record lows and likely to remain there for some time.


Entering into negotiations to purchase a business or merge with a larger or smaller rival is a complicated process that requires levels of skill and expertise in investment banking, negotiations and it's always important to have somebody on your team that understands the business from hands-on experience.


For instance, you wouldn't want a banker who has done only retail business if you're in chemicals. In that instance, the expertise of an executive with experience in chemical investment banking - a very specialized, technical field, would be appropriate to your needs.

Additionally, somebody with chemical mergers and acquisitions would be ideal to handle negotiations and set up contracts because the technical jargon and specialized aspects of the chemical business would likely swamp even the best M&A expert without the requisite experience in the field.

Growing a business takes plenty of time, experience and savvy, but buying or merging a business is an area in which most entrepreneurs are not well-equipped. That's why it's important to do research and find a company that specializes not only in M&A, but also is experienced in your particular line of endeavor.

Getting the wrong advice on a merger or company acquisition could be a costly mistake that could end up putting your own business on the block, at a drastically reduced price. Find a company that has a solid, proven track record of success, without glitches in the process and your expansion plans should proceed without a hitch.

Despite Positive Data, Market Rally Fizzles; Something About Ties Is Untrustworthy

You might as well call this a down day for the US markets.

Stocks were up at the open on some positive economic data, but, thanks to Christine Legarde, head of the IMF, the fear of Europe sent traders scurrying for the sell buttons.

Hop-scotching the Headlines (trust, this will all tie together):

Initial unemployment claims reached a level not seen in 3 1/2 years, falling to 366,000, though, as expressed in a post a few days back, government numbers may not be the most trustworthy. Unadjusted figures totaled 433,287 in the week ending December 10, a decrease of 95,506 from the previous week, which implies that last week's numbers may have been abnormally LOW. Some people are paying attention to the unadjusted, non-politicized data.

PPI for November was up 0.3%. Core PPI was up 0.1%. No surprises there.

The NYS Manufacturing Index came in at 9.53 for December, a dramatic rise from November's reading of 0.61. Similarly, the Philadelphia Fed's index read at 10.3, a majestic rise from November's 3.60. Those were somewhat of a surprise, though the data is supplied by the Federal Reserve. Trust them? Maybe. Maybe not.

Industrial Production: -0.2%; Capacity Utilization was 77.8%. Both of those figures were fairly static.

So, the markets opened with healthy gains until Lagarde, on her megaphone from Europe, said that no country was immune from Europe's crisis and that the outlook for the world economy was "quite gloomy." Her words. She's not very funny, which, being French, partially explains why French people think Jerry Lewis is a comic genius.

(In a conversation with a postal employee today, I joked that maybe I was getting so many orders from Europe lately because they want to spend their Euros before they become worthless. I may be on to something.)

No matter what, Lagarde's comments put the markets into a tailspin, from which they did not recover. Stocks ended the day down about 60% from their highs. It was not pretty, nor exciting. Volume was, using CNBC's Bob Pisani's word, "anemic."

Morgan Stanley plans on cutting 1600 jobs, which is about 3% of their workforce. That's limited in comparison to other cuts in the finance business. Globally, more than 200,000 wheeler-dealers are going to be slashed, downsized and dumped.

Freddie Mac (the firm which paid Newt Gingrich over a million dollar in consulting fees) says that mortgage rates have hit all-time lows, with 30-year fixed loans at 3.94 and 15-year fixed at 3.21, but, nobody's buying.

Really, nobody. The National Association of Realtors is going to revise existing home sales for the past five years, dating back to 2007 (incidentally, when the real estate boom went bust) on Hanukkah, which is December 21. If that's just bad timing on their part, well, Happy Hanukkah! But, but, but, maybe we can't trust numbers supplied by realtors, either. Add them to bankers, accountants, government officials, meteorologists (yes, the National Hurricane Center said recently that their last 20 years of forecasting seasonal hurricanes was rubbish. Look it up. ON BING.), judges and lawyers. Oddly enough, all of these types wear ties when they're working. As far as can be told, none of them sleep naked, either. Very strange.

In a grossly under-reported story, OPEC ministers set a production ceiling of 30 million barrels a day, which begs the question about oil prices in the $90+ per barrel range. There's enough and demand is slack. It should be cheaper and it got cheaper today.

And just in case anyone hasn't noticed, tomorrow is December options expiry, which usually implies a massive ramp up in prices for stocks leading into it, but, but, but, stocks have been getting beaten down mercilessly for the past week. Is that bullish? Probably not.

Oh, and the CME group wants to know where that missing money from MF Global (Does the MF really stand for that vulgar ghetto slang term? Probably.) is. Top executives of the firm are suing Jon Corzine and other top executives of MF Global for undisclosed amounts and damages. They are seeking class action status. According to Business Insider, the brainchild of former Wall Street analyst Henry Blodget (who wears a tie, but can probably be trusted since he is barred from all Wall Street trading and "official" analysis and probably sleeps naked on occasion) the suit was filed a week ago, on December 8, and nobody noticed until today.

So, that's what moved US markets today, except that the level of fear on Wall Street is probably at a point so high that Charlie Sheen, even on his finest cocaine-and-liquor float, couldn't get up there.

Psst, wanna buy some stocks?

Dow 11,868.81, +45.33 (0.38%)
NASDAQ 2,541.01, +1.70 (0.07%)
S&P 500 1,215.75, +3.93 (0.32%)
NYSE Composite 7,217.12, +32.37 (0.45%)
NASDAQ Volume 1,750,499,375
NYSE Volume 3,767,349,000
Combined NYSE & NASDAQ Advance - Decline: 3399-2200
Combined NYSE & NASDAQ New highs - New lows: 72-179
WTI crude oil: 93.87, -1.08
Gold: 1,577.20, -9.70
Silver: 29.27, +0.34