All is not well on Wall Street.
Even though stocks continue climbing - the Dow made a four-year intra-day high in today's session - there's an underlying theme that profits and revenue aren't as good as they should be.
But, hey, the vast majority of those companies trading publicly on the exchanges - Groupon excluded - are making money, after all, so why the worry?
In a word, revenue. While second quarter profits were solid on an EPS basis, revenue beats were less frequent and minor, meaning companies have little room for error and even less inclination to hire new employees. Most public companies are running on fumes; in the private sector of small to medium businesses, those fumes have died out. Small business, the lifeblood of the economy, and, to some extent, to the larger public companies, are struggling just to hang on. Excessive regulation and taxation have small businesses on their knees, so to speak, begging for relief.
There's simply too much uncertainty for entrepreneurs to feel confident about starting new ventures or expanding existing ones. If growth is a bottom-up strategy, the federal government, with help from pencil-necked bureaucrats at the state and local levels, hasn't done a thing to assist small business or business creation. It could be assumed that they are impeding progress instead of promoting it.
This being a presidential election year, congress is not expected to make any dramatic legislative decisions, which will only exacerbate the current condition of loathsomeness, uncertainty and apathy, and that's the good news. What's troubling are the massive deficits being piled up second by second at the federal level and the coming debt ceiling debate (yes, you read that right; we're going to exceed our borrowing limit just a year after the debacle which cost the US its AAA credit rating last August.
At the current run-rate, the debt ceiling will be breached just in time for excessive and long-winded campaign speeches touting frugality, responsibility and discretion, all qualities the current occupants of our highest public offices have failed to achieve or even comprehend.
Thus it is that Wall Street is becoming a little nervous about the inability of government to do just about anything positive in a negatively-charged, partisan environment. Big business has gotten all the perks it needs, but still comes asking, with suitcases of campaign contributions, for more, and they're afraid they won't get enough to tide them over until a new regime takes hold in the nation's capitol. That's why stocks continue to make moves of trepidation, advancing slightly before taking back. Small business and individuals, meanwhile, have taken matters a step further: into black markets and a flourishing underground economy based entirely in cash, with disdain for taxes, laws and regulations.
A recent Bloomberg/BusinessWeek article pegged the US underground economy at a laughable nine percent, while quoting the black markets of other countries at levels as high as 47%. All of this erodes the government's ability to collect revenue, but not to spend, making their position all the more untenable and indefensible. The mega-corporations may survive under such conditions, but even the most honest of small businesspersons cannot long resist stiffing Uncle Sam to feed daughter Sally.
Wall Street, as much as it has become a mirage of the economic condition, is actually more resplendent as an amusement park, twisted mirror image reflection of the society underpinning its shattered facade.
Dow 13,279.32, +65.69 (0.50%)
NASDAQ 3,050.44, +4.08 (0.13%)
S&P 500 1,405.82, +7.91 (0.57%)
NYSE Composite 8,164.04, +44.97 (0.55%)
NASDAQ Volume 1,855,537,125
NYSE Volume 3,789,438,750
Combined NYSE & NASDAQ Advance - Decline: 3183-2336
Combined NYSE & NASDAQ New highs - New lows: 340-31
WTI crude oil: 106.16, +1.29
Gold: 1,662.40, -1.80
Silver: 30.93, -0.09
Tuesday, May 1, 2012
Monday, April 30, 2012
Window Dressing Day Spoiled by Chicago PMI; Fantasy Economics Meets Reality
Normally, the last day of the month is marked by incessant buying of momentum stocks by fund managers and other hucksters hoping to impress clients by owning shares of the most popular companies, but today's shopping spree was truncated by a terrible Chicago PMI report, which weighed down markets, sending all of the major indices into the red.
The PMI report, which was released to the public just fifteen minutes into the session, printed at 56.2, the lowest number since November, 2009, missing expectations of 60.0 by a country mile.
Despite any and all opinions to the contrary, this number was just another in a string of disappointing economic data, highlighted by last week's first estimate of first quarter GDP of 2.2% annualized growth. While commentators have thus far downplayed the importance of the GDP figure, the evidence is stark, especially when reinforced by the PMI today.
Not wishing to face the bitter truth that the US - and by many measures, the global - economy has stalled out once again, Wall Street refuses to set about the arduous task of taking profits and marking stocks down to reasonable valuations, whatever those might be. Stocks have been trading far from fundamentals and investors haven't paid heed to the undercurrents of decline in Europe, Asia and here in the Western Hemisphere, though that line of thinking may be changing soon.
Sell in May and Stay Away goes the timeless adage. Why stocks should encounter such a seasonal variation is of questionable veracity, but if oil prices (which declined today) remain elevated as they have been through the summer, the banking and investing goons and their paid servants in Washington DC might get a dose of bad medicine courtesy of Mr. Market, delivered by Adam Smith's fabled invisible hand that routinely cycles in and out of market dynamics and pays special attention to bubbles and irrationality.
Beyond high oil prices, the US housing industry is still in a shambles, despite the clarion call to investors rushing in to snatch up foreclosed properties with the intent to turn them into rentals. This current calamity-in-the-making ignores the most basic tenet of community: home ownership is an issue of pride. Taking what were once owner-occupied dwellings and turning them into rentals (to whom and at what price we do not know) is a basic destructor of neighborhoods and communities. The dwellings fall into disrepair, the neighborhood deteriorates and eventually, the fine "rental investment" becomes a rat hole and drug house, surrounded by wary neighbors who decry their falling property values and eventually abandon the area.
Once a neighborhood changes from owner-occupied to rental status, the changes, though subtle, are irreversible, the tipping point likely reached when at least 40% of the properties assume rental status. The changes may take years or even decades in normal times, though in the current situation, in which home values have already been whacked for a loop, buying at bargain basement prices, while alluring to investors and productive of cash flow, may turn out to be just the beginning of a non-virtuous cycle. Renters move in, neighborhoods decline, property values continue to fall and recouping the original investment may never materialize. The next step in the process is that of the investors walking away, having milked the value from the properties via rental income, the community destroyed by their ravenous profit appetite. That's why neighborhoods become ghettos in the first place and stay ghettos, ever after. Wash, rinse, repeat.
Beside the ill-conceived notion that the real estate market has bottomed (a laughable and lamentable idea if ever there was one - it was the topic of a one-page feature in the current issue of Esquire, so there's that canard), the Fed is stalling on plans for more stimulus, which is apparently needed, even though it doesn't work long run, and Europe is fast-falling into recession. China's growth is being internalized, austerity policies haven't done squiddly-doo to revamp broken sovereign balance sheets and the debt bubble continues to expand.
Some day, the Keynesians in and out of government and the policy houses will finally be outed by forces of markets which are stronger than any academic noise and nonsense. The real world doesn't always cooperate with economic theory and we are seeing it played out at breathtaking pace.
There's truly only one solution for an overhang of malinvestment and debt: loss. And it will surely visit those who have the most to lose.
Mark down April as the worst month for stocks thus far, but lay bets that there will be worse to come.
Dow 13,213.63, -14.68 (0.11%)
NASDAQ 3,046.36, -22.84 (0.74%)
S&P 500 1,397.91, -5.45 (0.39%)
NYSE Composite 8,118.95, -32.96 (0.40%)
NASDAQ Volume 1,585,325,125
NYSE Volume 3,379,976,250
Combined NYSE & NASDAQ Advance - Decline: 2056-3568
Combined NYSE & NASDAQ New highs - New lows: 190-40
WTI crude oil: 104.87, -0.06
Gold: 1,664.20, -0.60
Silver: 30.96, -0.39
The PMI report, which was released to the public just fifteen minutes into the session, printed at 56.2, the lowest number since November, 2009, missing expectations of 60.0 by a country mile.
Despite any and all opinions to the contrary, this number was just another in a string of disappointing economic data, highlighted by last week's first estimate of first quarter GDP of 2.2% annualized growth. While commentators have thus far downplayed the importance of the GDP figure, the evidence is stark, especially when reinforced by the PMI today.
Not wishing to face the bitter truth that the US - and by many measures, the global - economy has stalled out once again, Wall Street refuses to set about the arduous task of taking profits and marking stocks down to reasonable valuations, whatever those might be. Stocks have been trading far from fundamentals and investors haven't paid heed to the undercurrents of decline in Europe, Asia and here in the Western Hemisphere, though that line of thinking may be changing soon.
Sell in May and Stay Away goes the timeless adage. Why stocks should encounter such a seasonal variation is of questionable veracity, but if oil prices (which declined today) remain elevated as they have been through the summer, the banking and investing goons and their paid servants in Washington DC might get a dose of bad medicine courtesy of Mr. Market, delivered by Adam Smith's fabled invisible hand that routinely cycles in and out of market dynamics and pays special attention to bubbles and irrationality.
Beyond high oil prices, the US housing industry is still in a shambles, despite the clarion call to investors rushing in to snatch up foreclosed properties with the intent to turn them into rentals. This current calamity-in-the-making ignores the most basic tenet of community: home ownership is an issue of pride. Taking what were once owner-occupied dwellings and turning them into rentals (to whom and at what price we do not know) is a basic destructor of neighborhoods and communities. The dwellings fall into disrepair, the neighborhood deteriorates and eventually, the fine "rental investment" becomes a rat hole and drug house, surrounded by wary neighbors who decry their falling property values and eventually abandon the area.
Once a neighborhood changes from owner-occupied to rental status, the changes, though subtle, are irreversible, the tipping point likely reached when at least 40% of the properties assume rental status. The changes may take years or even decades in normal times, though in the current situation, in which home values have already been whacked for a loop, buying at bargain basement prices, while alluring to investors and productive of cash flow, may turn out to be just the beginning of a non-virtuous cycle. Renters move in, neighborhoods decline, property values continue to fall and recouping the original investment may never materialize. The next step in the process is that of the investors walking away, having milked the value from the properties via rental income, the community destroyed by their ravenous profit appetite. That's why neighborhoods become ghettos in the first place and stay ghettos, ever after. Wash, rinse, repeat.
Beside the ill-conceived notion that the real estate market has bottomed (a laughable and lamentable idea if ever there was one - it was the topic of a one-page feature in the current issue of Esquire, so there's that canard), the Fed is stalling on plans for more stimulus, which is apparently needed, even though it doesn't work long run, and Europe is fast-falling into recession. China's growth is being internalized, austerity policies haven't done squiddly-doo to revamp broken sovereign balance sheets and the debt bubble continues to expand.
Some day, the Keynesians in and out of government and the policy houses will finally be outed by forces of markets which are stronger than any academic noise and nonsense. The real world doesn't always cooperate with economic theory and we are seeing it played out at breathtaking pace.
There's truly only one solution for an overhang of malinvestment and debt: loss. And it will surely visit those who have the most to lose.
Mark down April as the worst month for stocks thus far, but lay bets that there will be worse to come.
Dow 13,213.63, -14.68 (0.11%)
NASDAQ 3,046.36, -22.84 (0.74%)
S&P 500 1,397.91, -5.45 (0.39%)
NYSE Composite 8,118.95, -32.96 (0.40%)
NASDAQ Volume 1,585,325,125
NYSE Volume 3,379,976,250
Combined NYSE & NASDAQ Advance - Decline: 2056-3568
Combined NYSE & NASDAQ New highs - New lows: 190-40
WTI crude oil: 104.87, -0.06
Gold: 1,664.20, -0.60
Silver: 30.96, -0.39
Saturday, April 28, 2012
Debt Collection Agencies Must Follow the Law
The financial calamity of 2008 and the recession it produced took its toll on business and consumers across America. Personal and business bankruptcies have been a common thread to the weak recovery since the near-fatal economic collapse, and many people still struggle with high debt loads and unrealistic repayment schedules.
Conditions such as have existed for most of the past four years have led to a boom in collections, but also a great deal of abuse by banks, phony credit counseling agencies and the collections firms themselves. Mostly innocent consumers have been berated by phone calls, threatening letters and outlandish demands from unscrupulous operators seeking to capitalize on the misfortune of others.
Fortunately, there are strict laws in almost every state and federal statutes that prohibit many of these bad practices, such as threats of job loss, excessive phone calls at unusual hours and other abhorrent behavior. while the majority of collection firms abide by the laws, there are shady operators who skirt the boundaries and make life miserable for many.
In the Golden State, where the calamity of mortgage debt, job scarcity and personal indebtedness have created a perfect storm for collection agencies, there are many law firms and counseling centers which help stop collection harassment California through advocacy, letter writing and legal tactics that often bring the violators to justice.
Proper procedures must be followed by the collection companies, and they are enumerated by a strong set of laws throughout the country which can help stop collection harassment for good. Collectors, for instance, are prohibited from threatening or harassing consumers. The proper and prohibited procedures are spelled out in simple language in the Fair Debt Collections Practices Act (FDCPA), which gives power back to the people instead of in the hands of the banks and collections agencies.
Having excessive debt isn't always one's own fault, nor is the inability to make timely payments. Fortunately, there are laws which protect consumers and good-hearted companies and lawyers that can help make dealing with debt collectors a little less daunting and in line with the law.
Conditions such as have existed for most of the past four years have led to a boom in collections, but also a great deal of abuse by banks, phony credit counseling agencies and the collections firms themselves. Mostly innocent consumers have been berated by phone calls, threatening letters and outlandish demands from unscrupulous operators seeking to capitalize on the misfortune of others.
Fortunately, there are strict laws in almost every state and federal statutes that prohibit many of these bad practices, such as threats of job loss, excessive phone calls at unusual hours and other abhorrent behavior. while the majority of collection firms abide by the laws, there are shady operators who skirt the boundaries and make life miserable for many.
In the Golden State, where the calamity of mortgage debt, job scarcity and personal indebtedness have created a perfect storm for collection agencies, there are many law firms and counseling centers which help stop collection harassment California through advocacy, letter writing and legal tactics that often bring the violators to justice.
Proper procedures must be followed by the collection companies, and they are enumerated by a strong set of laws throughout the country which can help stop collection harassment for good. Collectors, for instance, are prohibited from threatening or harassing consumers. The proper and prohibited procedures are spelled out in simple language in the Fair Debt Collections Practices Act (FDCPA), which gives power back to the people instead of in the hands of the banks and collections agencies.
Having excessive debt isn't always one's own fault, nor is the inability to make timely payments. Fortunately, there are laws which protect consumers and good-hearted companies and lawyers that can help make dealing with debt collectors a little less daunting and in line with the law.
Friday, April 27, 2012
Stocks Finish Week Dull; 2.2% GDP Gives Pause
Despite first quarter GDP printing at 2.2% prior to the opening bell, there was simply no holding back the animal spirits, as investors continued to shrug off any hint of bad news for the economy and push stocks to nosebleed levels.
Though gains were modest, they nevertheless were gains, based on nothing other than sentiment and greed. New highs expanded dramatically over a paucity of new lows.
Oil, gold and silver all posted modest gains. Overall, it was one of the duller sessions of the year, the typical low volume dynamic fully in play.
Dow 13,228.31, +23.69 (0.18%)
NASDAQ 3,069.20, +18.59 (0.61%)
S&P 500 1,403.36, +3.38 (0.24%)
NYSE Composite 8,151.91, +28.84 (0.36%)
NASDAQ Volume 1,807,514,500
NYSE Volume 3,645,831,750
Combined NYSE & NASDAQ Advance - Decline: 3714-1855
Combined NYSE & NASDAQ New highs - New lows: 347-42
WTI crude oil: 104.93, +0.38
Gold: 1,664.80, +4.30
Silver: 31.35, +0.14
Though gains were modest, they nevertheless were gains, based on nothing other than sentiment and greed. New highs expanded dramatically over a paucity of new lows.
Oil, gold and silver all posted modest gains. Overall, it was one of the duller sessions of the year, the typical low volume dynamic fully in play.
Dow 13,228.31, +23.69 (0.18%)
NASDAQ 3,069.20, +18.59 (0.61%)
S&P 500 1,403.36, +3.38 (0.24%)
NYSE Composite 8,151.91, +28.84 (0.36%)
NASDAQ Volume 1,807,514,500
NYSE Volume 3,645,831,750
Combined NYSE & NASDAQ Advance - Decline: 3714-1855
Combined NYSE & NASDAQ New highs - New lows: 347-42
WTI crude oil: 104.93, +0.38
Gold: 1,664.80, +4.30
Silver: 31.35, +0.14
Thursday, April 26, 2012
Markets Churn Higher on Absence of Data
There was little to move stocks in either direction today, but the algorithm-driven dynamic kept the same tone as it has pretty much since October and churned higher without any heed to downside risk.
Initial unemployment claims continued to be elevated, coming in at 388K after last week's revised 389K reading. The most positive news was pending home sales for March coming in 4.1% higher, a significant beat of expectations of a mere 0.5% gain.
Otherwise, there were a number of misses on corporate first quarter earnings reports, including UPS (UPS) and Dow Chemical (DD), but that didn't hold back stocks in the least as they started the day slowly and continued higher throughout the session, reaching the highs for the day shortly after 3:00 pm EDT.
There was a slight pullback into the close, but the final figures left the Dow Jones Industrials just 60 points from fresh four-year highs and the S&P 500 closing just two cents shy of 1400, a mark the index has not closed above since April 3rd.
Europe finished mixed, though the gains and losses of the particular exchanges were marginal. As has been the case over the past six to seven months, the absence of any kind of news out of Europe - which has been routinely bad - gives US markets a nudge higher, and such was the case on today's trading.
Analysts are hopeful that the week's gains can be sustained after Friday's first estimate of first quarter 2012 GDP, which will be announced prior to the market open. Market expectations are for somewhere between 2.5% and 3.0% growth, which would not be surprising, given a US economy that is being spoon-fed by government largesse, with more than 45 million Americans on food stamps and millions more receiving some form of government assistance while the Fed continues to dole out money hand over fist through its Operation Twist.
While all this stealth stimulus may be giving stocks a relatively easy time of it, at some point the government will have to deal with the monstrous deficits and the growing underfunding of the entitlement programs.
Being an election year, however, neither congress nor the president will go legislatively within earshot of those issues except in well-rehearsed campaign speeches, so, the current conditions will continue uninterrupted - barring some unforeseen event - until November. On the other hand, the Fed's current easing cycle will end in June, and it will be interesting to note how well the markets handle any lack of support.
Until further notice, it appears to be smooth sailing for stock hawkers, traders and investors. Somewhat counterintuitive, the precious metals had their best showing in weeks, though they remain range-bound.
Dow 13,204.62, +113.90 (0.87%)
NASDAQ 3,050.61, +20.98 (0.69%)
S&P 500 1,399.98, +9.29 (0.67%)
NYSE Composite 8,123.07, +52.29 (0.65%)
NASDAQ Volume 1,722,965,375
NYSE Volume 3,864,227,750
Combined NYSE & NASDAQ Advance - Decline: 3682-1910
Combined NYSE & NASDAQ New highs - New lows: 259-46
WTI crude oil: 104.55, +0.43
Gold: 1,660.50, +18.20
Silver: 31.21, +0.85
Initial unemployment claims continued to be elevated, coming in at 388K after last week's revised 389K reading. The most positive news was pending home sales for March coming in 4.1% higher, a significant beat of expectations of a mere 0.5% gain.
Otherwise, there were a number of misses on corporate first quarter earnings reports, including UPS (UPS) and Dow Chemical (DD), but that didn't hold back stocks in the least as they started the day slowly and continued higher throughout the session, reaching the highs for the day shortly after 3:00 pm EDT.
There was a slight pullback into the close, but the final figures left the Dow Jones Industrials just 60 points from fresh four-year highs and the S&P 500 closing just two cents shy of 1400, a mark the index has not closed above since April 3rd.
Europe finished mixed, though the gains and losses of the particular exchanges were marginal. As has been the case over the past six to seven months, the absence of any kind of news out of Europe - which has been routinely bad - gives US markets a nudge higher, and such was the case on today's trading.
Analysts are hopeful that the week's gains can be sustained after Friday's first estimate of first quarter 2012 GDP, which will be announced prior to the market open. Market expectations are for somewhere between 2.5% and 3.0% growth, which would not be surprising, given a US economy that is being spoon-fed by government largesse, with more than 45 million Americans on food stamps and millions more receiving some form of government assistance while the Fed continues to dole out money hand over fist through its Operation Twist.
While all this stealth stimulus may be giving stocks a relatively easy time of it, at some point the government will have to deal with the monstrous deficits and the growing underfunding of the entitlement programs.
Being an election year, however, neither congress nor the president will go legislatively within earshot of those issues except in well-rehearsed campaign speeches, so, the current conditions will continue uninterrupted - barring some unforeseen event - until November. On the other hand, the Fed's current easing cycle will end in June, and it will be interesting to note how well the markets handle any lack of support.
Until further notice, it appears to be smooth sailing for stock hawkers, traders and investors. Somewhat counterintuitive, the precious metals had their best showing in weeks, though they remain range-bound.
Dow 13,204.62, +113.90 (0.87%)
NASDAQ 3,050.61, +20.98 (0.69%)
S&P 500 1,399.98, +9.29 (0.67%)
NYSE Composite 8,123.07, +52.29 (0.65%)
NASDAQ Volume 1,722,965,375
NYSE Volume 3,864,227,750
Combined NYSE & NASDAQ Advance - Decline: 3682-1910
Combined NYSE & NASDAQ New highs - New lows: 259-46
WTI crude oil: 104.55, +0.43
Gold: 1,660.50, +18.20
Silver: 31.21, +0.85
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