The US stock markets are volatile enough to drive a sober man to drink. Of course, adroit options players are having a field day on the wild swings with naked straddles and bets one way or the other.
But the noise has to be filtered out and I found an exceptional article on cnn.com by economist Jeffrey Miron which expresses a belief that bankruptcy, not bailout, is the correct solution, something that's been opined ad nauseum on this blog.
The American public made it unquestionably clear that they opposed a massive taxpayer-funded bailout of failed financial institutions. Congress, as of yesterday, apparently got the message, sending the measure down to defeat, but somehow, hundreds of thousands of phone calls and emails from everyday citizens can't keep the morons on Capitol Hill from trying again.
So, today, one day after the largest single-day point decline in the history of the Dow Jones Industrials, investors were busily picking up the broken pieces - by the handfuls. All indices were up sharply from the outset and finished by recovering more than half of Monday's declines. The conventional wisdom says that congress is still going to produce some kind of bailout bill, so investing is still a safe game.
My opinion, and that of others who see this entire "sky is falling" scenario as little more than political posturing and craftiness, is that the real players in the market found incredible gems at unbelievably low prices on Tuesday.
Dow 10,850.66 +485.21; NASDAQ 2,082.33 +98.60; S&P 500 1,164.74 +58.35; NYSE Composite 7,532.92 +328.91
Essentially, the markets are going to gyrate until the congress goes on recess, with or without a bill. What's clear is that, to many lawmakers, winning re-election is likely more important than "saving" the economy. This is more about politics than money, but the politicians and Wall Street schemers - Treasury Secretary Paulson chief amongst them - are playing with $700 billion, the US economy and the free market.
I'll not pretend to have a crystal ball, but reiterate that Wall Street needs to take its medicine and congress needs to go on vacation, as previously planned, without passing anything. Take the posturing and fake sincerity back to your states and districts. See how it plays in Peoria.
One possible bit of arsenic in the broth could be this: hedge funds are expecting a flood of redemptions or cash-outs after they report results for September. So far, it doesn't seem to be any more troubling than what we've already witnessed so far this year and is probably more a canard than a canary in the mine shaft.
On the day, advancing issues far exceeded decliners, 4653-1795. New lows outweighed new highs, 602-22, a margin befitting the absurdity of the current condition. Market volume was moderate.
NYSE Volume 1,599,455,000
NASDAQ Volume 2,387,042,000
Oil finished the day with a gain of $4.27, at $100.64. Gold closed down on the day, at $880.80, losing $13.60. Silver also offered no safe haven, dropping 75 cents to $12.28.
Is it just me, or is the feeling that the storm has pretty much passed becoming more and more prevalent? Checking Fibonacci numbers and a variety of charts and indicators, we should be nearing a bottom in stocks. The major indices are already off 25% or more from a year ago, so how much further can they go? The largest failures have likely already occurred. The "economic tsunami" being predicted by politicians and the media may be more smoke and mirrors and scare mongering than reality.
Tuesday, September 30, 2008
Monday, September 29, 2008
As Wall Street Tumbles, Main Street Cheers
With the ill-advise and hastily-prepared Emergency Economic Stabilization Act of 2008 failing in the House of Representatives, conservatives and liberal alike are cheering the 228 members who voted against the measure.
The actual votes cast by each member of the House can be seen here.
Failing largely along party lines, the measure now seems doomed to permanent defeat even though stocks - particularly those in the financial sector - have suffered one of their worst days of all time.
Repeatedly told that the entire US and global financial system was at risk, especially by President Bush, Treasury Secretary Paulson and congressional leaders of the Democratic party, the stock market seems to have fulfilled the prophecy.
Dow 10,365.45 -777.68 (6.98%); NASDAQ 1,983.73 -199.61 (9.14%); S&P 500 1,107.06 -105.95 (8.73%) NYSE Composite 7,207.02 Down 683.35 (8.66%)
What has never been fully explained is just how the economy would be brought to its knees. With catch-phrases of "frozen credit markets" and "failing institutions" being tossed about for at least the prior two weeks, the actual fallout at the close of trading today is spectacular, but in no way catastrophic.
In fact, compared to the closing lows of Wednesday, September 17, the Dow is only 244 points lower. On that day, a day before Paulson announced consideration of the "bailout" plan, the Dow closed at 10,609.66. The NASDAQ, which suffered the worst percentage loss today, finished at 2098.85 and the S&P closed at 1156.39 on the 17th.
So, in retrospect, the declines of Monday, September 29, when viewed in a larger perspective, were not all that incredible. Wall Street thought they were going to get a free lunch courtesy of the US taxpayer and had bid themselves back upwards. Once the free money was swept away by the House of Representatives, they expressed their anger by selling, even though today's sell-off was far from a panic. In fact, the Dow's decline over the last 8 days of trading is less than 3%.
Let the bargain hunting begin.
The day was largely a rout, however, with declining issues outnumbering advancers, 5897-619 and new lows trouncing new highs, 1740-39.
Volume was heavy, but especially so in the final 1 1/2 hours of trading, after the House defeated the bailout measure.
NYSE Volume 1,969,514,000
NASDAQ Volume 2,843,311,000
Oil took a significant hit, down $10.52, to $96.37. Gold gained just $5.90, to $894.40, while silver actually lost 48 cents, closing at $13.03.
This aberrant behavior in the commodities markets confirms that the financial underpinnings are not endangered, though the potential for a serious deflationary spiral continue to form in the background.
As I've been saying here for at least the past three months and probably longer, deflation is the real issue. For some, especially businesses trying to keep prices stable, this is troubling. For consumers and small business, however, a spate of deflation is welcome, as small merchants and companies are better prepared to adjust pricing "on the fly" so to speak.
What is occurring could be considered the beginning of an American - and to a larger extent, global - Renaissance, in which the excesses of Wall Street are replaced by innovation and the micro-economics of local and middle-class commerce, which is less orderly, though eminently more egalitarian.
Wall Street may be suffering through one of the worst periods in its long and highly-checkered history of booms and busts. In the long run, though, Main Street and the US consumer may become the ultimate victor.
The actual votes cast by each member of the House can be seen here.
Failing largely along party lines, the measure now seems doomed to permanent defeat even though stocks - particularly those in the financial sector - have suffered one of their worst days of all time.
Repeatedly told that the entire US and global financial system was at risk, especially by President Bush, Treasury Secretary Paulson and congressional leaders of the Democratic party, the stock market seems to have fulfilled the prophecy.
Dow 10,365.45 -777.68 (6.98%); NASDAQ 1,983.73 -199.61 (9.14%); S&P 500 1,107.06 -105.95 (8.73%) NYSE Composite 7,207.02 Down 683.35 (8.66%)
What has never been fully explained is just how the economy would be brought to its knees. With catch-phrases of "frozen credit markets" and "failing institutions" being tossed about for at least the prior two weeks, the actual fallout at the close of trading today is spectacular, but in no way catastrophic.
In fact, compared to the closing lows of Wednesday, September 17, the Dow is only 244 points lower. On that day, a day before Paulson announced consideration of the "bailout" plan, the Dow closed at 10,609.66. The NASDAQ, which suffered the worst percentage loss today, finished at 2098.85 and the S&P closed at 1156.39 on the 17th.
So, in retrospect, the declines of Monday, September 29, when viewed in a larger perspective, were not all that incredible. Wall Street thought they were going to get a free lunch courtesy of the US taxpayer and had bid themselves back upwards. Once the free money was swept away by the House of Representatives, they expressed their anger by selling, even though today's sell-off was far from a panic. In fact, the Dow's decline over the last 8 days of trading is less than 3%.
Let the bargain hunting begin.
The day was largely a rout, however, with declining issues outnumbering advancers, 5897-619 and new lows trouncing new highs, 1740-39.
Volume was heavy, but especially so in the final 1 1/2 hours of trading, after the House defeated the bailout measure.
NYSE Volume 1,969,514,000
NASDAQ Volume 2,843,311,000
Oil took a significant hit, down $10.52, to $96.37. Gold gained just $5.90, to $894.40, while silver actually lost 48 cents, closing at $13.03.
This aberrant behavior in the commodities markets confirms that the financial underpinnings are not endangered, though the potential for a serious deflationary spiral continue to form in the background.
As I've been saying here for at least the past three months and probably longer, deflation is the real issue. For some, especially businesses trying to keep prices stable, this is troubling. For consumers and small business, however, a spate of deflation is welcome, as small merchants and companies are better prepared to adjust pricing "on the fly" so to speak.
What is occurring could be considered the beginning of an American - and to a larger extent, global - Renaissance, in which the excesses of Wall Street are replaced by innovation and the micro-economics of local and middle-class commerce, which is less orderly, though eminently more egalitarian.
Wall Street may be suffering through one of the worst periods in its long and highly-checkered history of booms and busts. In the long run, though, Main Street and the US consumer may become the ultimate victor.
House Votes Down Bailout, Saves America
The House of Representatives, for once heeding the overwhelming voice of the public, voted down the massive $700 billion bailout of Wall Street banking interests.
By a vote of 228-205, the Emergency Economic Stabilization Act of 2008 bill was defeated across party lines, with rank-and-file Democrats and Republicans defeating the measure.
As expected, Wall Street reacted with shock and horror. The Dow Jones Industrials, already down 300 points, briefly dropped as much as 700 points before recovering somewhat. At this writing, the Dow is down 450 points. The NASDAQ is down roughly 125 points as Wall Street heads towards the close of the session.
It was obvious this morning that the authors of the bill - the administration and Treasury Secretary Henry Paulson, along with Democratic party leaders - did not have enough votes to pass the measure. The vote on the bill was delayed into the early afternoon, but once brought to a vote, the measure was soundly defeated.
It is unclear whether reconsideration will occur.
For the time being, the measure is dead. Now all the American people have to do is convince congress to recess, leave Washington and go back to their districts until the election is over. All members of the House of Representatives face reelection this year.
By a vote of 228-205, the Emergency Economic Stabilization Act of 2008 bill was defeated across party lines, with rank-and-file Democrats and Republicans defeating the measure.
As expected, Wall Street reacted with shock and horror. The Dow Jones Industrials, already down 300 points, briefly dropped as much as 700 points before recovering somewhat. At this writing, the Dow is down 450 points. The NASDAQ is down roughly 125 points as Wall Street heads towards the close of the session.
It was obvious this morning that the authors of the bill - the administration and Treasury Secretary Henry Paulson, along with Democratic party leaders - did not have enough votes to pass the measure. The vote on the bill was delayed into the early afternoon, but once brought to a vote, the measure was soundly defeated.
It is unclear whether reconsideration will occur.
For the time being, the measure is dead. Now all the American people have to do is convince congress to recess, leave Washington and go back to their districts until the election is over. All members of the House of Representatives face reelection this year.
Bailout Plan Is Complete Garbage
The proposed federal bailout plan which is scheduled for a vote in the House of Representatives today, Monday, September 29, 2008, is nothing more than a $700 billion expense to taxpayers, with limited congressional oversight and no hard provisions to limit executive enrichment or protect either homeowners or taxpayers.
In the bill, known as the Emergency Economic Stabilization Act of 2008, and available at publicmarkup.org here. enables the Secretary of the Treasury (currently, but hopefully for not much longer, Henry Paulson) to purchase a broad swatch of assets from virtually any type of American business.
The limits on spending (to buy bad debts and other assets) are initially $250 billion, but the mechanism for the Treasury Secretary to increase the spending amount up to and beyond $700 billion is quite easily facilitated.
The House of Representatives is scheduled to vote on the measure shortly after noon Eastern time, though passage is far from certain. Public opposition has been nearly universal. Rank-and-file Republicans and Democrats are seen to be the major opposition to the bill, which is being supported by the President and the Democratic party leadership. Both House and Senate Republicans are largely divided on the issue.
Wall Street is providing few clues as to whether passage of the bill is necessary or wanted. The Dow is down 277.26, with the NASDAQ off 84.61 with a little more than an hour before the critical House vote.
If the measure succeeds, there is no guarantee that all of this spending will change anything in either the short or long term.
It is the position of this writer that the American public would be best served by the congress voting down this horrible piece of legislation, recessing and doing nothing. If the stock market is going to crash and the credit markets completely freeze up, then Wall Street and investors will receive exactly what they deserve. The plan proposed by the administration and changed only cosmetically by congress won't change much, if anything.
Additional information will be posted as events warrant.
In the bill, known as the Emergency Economic Stabilization Act of 2008, and available at publicmarkup.org here. enables the Secretary of the Treasury (currently, but hopefully for not much longer, Henry Paulson) to purchase a broad swatch of assets from virtually any type of American business.
The limits on spending (to buy bad debts and other assets) are initially $250 billion, but the mechanism for the Treasury Secretary to increase the spending amount up to and beyond $700 billion is quite easily facilitated.
The House of Representatives is scheduled to vote on the measure shortly after noon Eastern time, though passage is far from certain. Public opposition has been nearly universal. Rank-and-file Republicans and Democrats are seen to be the major opposition to the bill, which is being supported by the President and the Democratic party leadership. Both House and Senate Republicans are largely divided on the issue.
Wall Street is providing few clues as to whether passage of the bill is necessary or wanted. The Dow is down 277.26, with the NASDAQ off 84.61 with a little more than an hour before the critical House vote.
If the measure succeeds, there is no guarantee that all of this spending will change anything in either the short or long term.
It is the position of this writer that the American public would be best served by the congress voting down this horrible piece of legislation, recessing and doing nothing. If the stock market is going to crash and the credit markets completely freeze up, then Wall Street and investors will receive exactly what they deserve. The plan proposed by the administration and changed only cosmetically by congress won't change much, if anything.
Additional information will be posted as events warrant.
Friday, September 26, 2008
Dow Ends Higher; What Happened to the Crisis?
Well, the markets gave us all the answer we were seeking. There really wasn't a "severe financial crisis" such as was being peddled by Henry Paulson and the Bush administration. It was all scare tactics designed to steal $700 billion dollars from US taxpayers and give the Treasury Secretary unimpeachable powers.
They failed. Miserably.
The Dow finished up 118 points on Friday and is up a very healthy 550 points since the low last Wednesday of 10,609. Wasn't it supposed to crash? My point exactly. This whole sordid affair is a massive fraud perpetrated by the White House and Treasury. There's no chance of passage by congress of anything even remotely resembling Paulson's original 3-page draft proposal.
Wall Street, at this point, doesn't really care. They seem to have matters under control. The media, however, are very confused. While many outlets are saying that McCain blew up the meeting at the White House, some right-wing radio hosts, especially Rush Limbaugh, are blaming Obama for killing the deal.
The NY Times provides some background to suggest that neither had much to do with killing the proposal.
Whatever the case, the White House was generally thwarted by rank-and-file Republicans in the House and Democrats in both houses. By doing nothing, so far, congress has saved us $700 billion. Paulson's plan was panned by Senator Richard Shelby and 200 economists as unworkable.
If the US economy was in serious circumstances, we could surely count on the current cast running the federal government to make a mess of it by playing politics, as they do, all the time, non-stop.
The blame for this one, though, falls surely on the Republicans, specifically the White House, for proposing the bailout to being with.
There may be a deal tonight, tomorrow, Sunday, Monday or never. At some point all of the congresspeople will want to get out of town and back to their districts and states for a recess until the election. Many are in tight races which could help explain the Republican motives at the start. By keeping incumbents in D.C., the challengers of many first-term Democrats would have an edge.
That doesn't seem to have worked out, however. Congress will recess sometime next week, if not over the weekend. There's no crisis and no need to rush any legislation. Both the congress and president will be lame ducks in less than 40 days. It's time for them to go home.
Dow 11,143.13 +121.07; NASDAQ 2,183.34 -3.23; S&P 500 1,213.27 +4.09; NYSE Composite 7,890.46 -37.41
On the day, though, the indices were split, decliners were far ahead of advancing issues, 3977-2362. The Dow, in particular, was aided by AIG being replaced with Kraft (KFT). New lows soared beyond new highs, 484-20.
There's obviously still considerable weakness in the markets, but nothing of the scale the public has been told. Further declines are ahead, maybe on the order of 10-20%, and we're in a slight recession which is likely to get worse before it gets better.
The upshot of all this malaise and confusion is that Main Street is one heck of a lot healthier than Wall Street. Small business should thrive over the coming months and years. Stocks may be under pressure for some time to come.
Oil slipped $1.13, closing at $106.89. Gold gained $6.50, to $888.50. Silver ended at $13.50, up 23 cents.
Volume was moderate to light, very un-crash-like.
NYSE Volume 1,169,676,000
NASDAQ Volume 1,986,540,000
They failed. Miserably.
The Dow finished up 118 points on Friday and is up a very healthy 550 points since the low last Wednesday of 10,609. Wasn't it supposed to crash? My point exactly. This whole sordid affair is a massive fraud perpetrated by the White House and Treasury. There's no chance of passage by congress of anything even remotely resembling Paulson's original 3-page draft proposal.
Wall Street, at this point, doesn't really care. They seem to have matters under control. The media, however, are very confused. While many outlets are saying that McCain blew up the meeting at the White House, some right-wing radio hosts, especially Rush Limbaugh, are blaming Obama for killing the deal.
The NY Times provides some background to suggest that neither had much to do with killing the proposal.
Whatever the case, the White House was generally thwarted by rank-and-file Republicans in the House and Democrats in both houses. By doing nothing, so far, congress has saved us $700 billion. Paulson's plan was panned by Senator Richard Shelby and 200 economists as unworkable.
If the US economy was in serious circumstances, we could surely count on the current cast running the federal government to make a mess of it by playing politics, as they do, all the time, non-stop.
The blame for this one, though, falls surely on the Republicans, specifically the White House, for proposing the bailout to being with.
There may be a deal tonight, tomorrow, Sunday, Monday or never. At some point all of the congresspeople will want to get out of town and back to their districts and states for a recess until the election. Many are in tight races which could help explain the Republican motives at the start. By keeping incumbents in D.C., the challengers of many first-term Democrats would have an edge.
That doesn't seem to have worked out, however. Congress will recess sometime next week, if not over the weekend. There's no crisis and no need to rush any legislation. Both the congress and president will be lame ducks in less than 40 days. It's time for them to go home.
Dow 11,143.13 +121.07; NASDAQ 2,183.34 -3.23; S&P 500 1,213.27 +4.09; NYSE Composite 7,890.46 -37.41
On the day, though, the indices were split, decliners were far ahead of advancing issues, 3977-2362. The Dow, in particular, was aided by AIG being replaced with Kraft (KFT). New lows soared beyond new highs, 484-20.
There's obviously still considerable weakness in the markets, but nothing of the scale the public has been told. Further declines are ahead, maybe on the order of 10-20%, and we're in a slight recession which is likely to get worse before it gets better.
The upshot of all this malaise and confusion is that Main Street is one heck of a lot healthier than Wall Street. Small business should thrive over the coming months and years. Stocks may be under pressure for some time to come.
Oil slipped $1.13, closing at $106.89. Gold gained $6.50, to $888.50. Silver ended at $13.50, up 23 cents.
Volume was moderate to light, very un-crash-like.
NYSE Volume 1,169,676,000
NASDAQ Volume 1,986,540,000
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