Wasn't it just a week or two ago that the world was about to end? Our global financial system was supposed to fall into some Keynesian Black Hole unless governments printed massive amounts of money and handed it over - pronto.
Well, that's what happened, kind of, and it worked, if you believe the whole story, from the blowup of Bear Stearns to the credit squeeze of September, to the "emergency" measures taken by the Fed, Treasury and the congress, whose members had that "deer in the headlights" blank stare throughout the whole process.
And glory be! Here we are with stocks around the world sporting gains like we cured the common cold, landed men on Mars and won the Triple Crown all in the same week.
The gains of the last week of October were nearly as robust as the losses earlier in the month, For the week just ended, the Dow Jones Industrials picked up 947 points; the NASDAQ ratcheted up 169 points; the S&P 500 got a 92-point boost and the NYSE Composite gained 674 points. Not bad, considering we were supposed to be facing down imminent economic collapse. Obviously, some people aren't buying the narrative.
Dow 9,325.01 +144.32; NASDAQ 1,720.95 +22.43; S&P 500 968.75 +14.66; NYSE Composite 6,061.09 +86.06
There are two dominant schools of thought at present. Both assume that the core of the crisis was a toxic combination of subprime mortgage loans, repackaged and sold as CDOs (collateralized debt obligations), plus bets against them in the form of credit default swaps and insurance on the bets (which is what AIG was holding when it blew up in their hands).
One school thinks the entire affair was above board and that the various government actions, including rate cuts, cash injections of billions of dollars, francs, yen and pounds into banks in developed countries, and a smattering of other "credit easing" measures were necessary and useful.
The more conspiratorial school believes the whole thing was cooked up by the banks and to varying extents, the governments involved, and that all the measures taken were just part of a high stakes con game in which Wall Street bankers stole billions.
How involved the two major political parties in America were involved is a matter of conjecture. Truth is that both were probably more deeply involved than we will ever know, but the end result is another free pass for the Bush thugs as they walk away with billions, and the ushering in of the Democratic party with full control and a somewhat busted budget.
If the crisis did anything, it assured the election of Barack Obama, which should have occurred any way, but also will help put a hard Democratic party majority in congress, to pass whatever legislation they see as suitable.
Whoever said, "fundamentals don't matter," hit it right on the nose for September and October of 2008. There was nothing fundamentally trackable throughout this entire episode. It was all political. Don't kid yourself.
On the day, the real fundamentals that mattered were very positive. Gainers outraced losers by a healthy margin, 4735-1640. New lows were once again far ahead of new lows, 205-18, though the number of both and the gap between them has stabilized into a range for now. Volume was moderate.
NYSE Volume 1,563,234,000
NASDAQ Volume 2,479,693,000
Commodities traded all over the board, but in the end, oil was up $1.85, to $67.81, gold lost another $20.30, to $718.20. Silver fell 6 cents to $9.73.
So, where are we now, and what's ahead? I thought you'd never ask. We have the federal funds rate at 1%, the Dow at 9300 and change and a recession that's probably already a year old. Oil is down, gold is moderating and $12 trillion dollars of wealth has just been whisked away, most of it into the ether. It's 2003 all over again! Time to start a war and buy some houses! And stocks are cheap, too! Break out the band, and have them play "Happy Days Are Here Again" until the horn section runs out of breath.
But wait, there are two big events next week. On Tuesday, we elect a new president, a whole new House of Representatives and a slew of Senators. On Friday, we get the Labor Department report on Nonfarm Payrolls from October. There will be a rally on Wednesday, for sure, and some give back on Friday, in all probability. But, not to worry, we're fine, just fine.
Have a pleasant weekend. Vote early and often.
Friday, October 31, 2008
Thursday, October 30, 2008
Contraction Confirmed; Stocks Jump
Wall Street is a strange and mystifying place. What often occurs on a given day often is the opposite of expectations. Thursday was one of those days.
The Commerce Department concluded, in their initial 3rd quarter estimate, that GDP contracted at an annual rate of 0.3%
Both the GDP report and the weekly initial unemployment claims figure of 475,000 were released an hour before markets opened, but investors seemingly have already discounted the news and were cheered that the GDP figure was less of a contraction than predicted.
With opinions on whether or not we're in a recession ranged from the taciturn and pedantic - recession is defined as two consecutive quarters of contraction - to the ridiculous and sublime. Nouriel Robini, the economist from NYU who has been predicting a harsh recession for some time, testified at a congressional hearing, "if it walks and quacks like a recession duck, it is a recession duck and we are in a recession."
Dow 9,180.69 +189.73; NASDAQ 1,698.52 +41.31; S&P 500 954.09 +24.00; NYSE Composite 5,975.03 +200.14
Roubini, who made the same kind of quirky quack on his blog in July pointed out then that the recession may have begun in the 4th quarter of 2007.
Roubini is obviously on the right track. Considering how desperate Republicans were to steer clear of a recession with the all-important election coming up in 2008, it doesn't take such a leap of faith to believe that 2008 1st and 2nd quarter GDP figures were largely fudged to obfuscate the obvious and that we've been in the throes of a contracting economy for more than a year.
Why else would stocks take their cue and rise smartly on the news of a smallish contraction? Smart money on Wall Street is betting that the recession will be largely over by the 2nd quarter of 2009 at the latest, making it a rather long and deep one, but one which is now in its latter stages.
Also weighing into the equation no doubt it the upcoming election, in which almost all indications favor the election of Barack Obama as the nation's first black president and a powerful majority in congress for the Democrats. Investors seem to not mind at all that Obama is a Democrat or that both the executive and legislative branches of government will both be in Democratic Party control.
That big money interests would think along those lines also does not take much of an imagination. Apparently, not many in the financial and business realm are too worried that Obama is going to do anything that will significantly upset the economy. All through the long primary and election seasons, Obama has displayed a cool and calm demeanor - and business loves predictability and a sure hand.
Just watch over the next few months how the argument shifts away from the economy. The banking crisis is now becoming ancient history. The Fed and Treasury panicked and congress went along to give banks much more assurance than they ever needed. As the money is now rolling out of the government coffers and into the hands of the slimy, scheming bankers, they'll be sure to cooperate lest Mr. Obama and a forthright congress take away their fat bonuses. That cake - and the deal - has probably already been taken and eaten. With Nancy (off the table) Pelosi in the mix, there's probably no chance of prosecution of these conniving masters of shadow finance, either.
The trading on Wall Street also was much calmer than it has been lately, a sign that volatility is on the wane. The extremes seen over the past month are difficult to maintain for long. Eventually, everything returns to some semblance of sanity and normalcy, even Wall Street.
On the day, advancing issues galloped past decliners, 4866-1401. The gap between new lows and new highs also continued to compress. There were 244 new lows, and just 13 new highs, but the difference is much smaller than it was just a few days ago.
This could be setting up for an enduring bounce rally extending through election day, when there will finally be some assurance of a positive change of leadership in Washington.
Crude oil took another small step backwards, losing $1.54, to close at $65.96 on the December contract. Gold got back to losing value, dropping $15.50, to $738.50. Silver lost 2 cents to finish at $9.79.
Exchange volume was moderate.
NYSE Volume 1,375,164,000
NASDAQ Volume 2,591,070,000
The Commerce Department concluded, in their initial 3rd quarter estimate, that GDP contracted at an annual rate of 0.3%
Both the GDP report and the weekly initial unemployment claims figure of 475,000 were released an hour before markets opened, but investors seemingly have already discounted the news and were cheered that the GDP figure was less of a contraction than predicted.
With opinions on whether or not we're in a recession ranged from the taciturn and pedantic - recession is defined as two consecutive quarters of contraction - to the ridiculous and sublime. Nouriel Robini, the economist from NYU who has been predicting a harsh recession for some time, testified at a congressional hearing, "if it walks and quacks like a recession duck, it is a recession duck and we are in a recession."
Dow 9,180.69 +189.73; NASDAQ 1,698.52 +41.31; S&P 500 954.09 +24.00; NYSE Composite 5,975.03 +200.14
Roubini, who made the same kind of quirky quack on his blog in July pointed out then that the recession may have begun in the 4th quarter of 2007.
Roubini is obviously on the right track. Considering how desperate Republicans were to steer clear of a recession with the all-important election coming up in 2008, it doesn't take such a leap of faith to believe that 2008 1st and 2nd quarter GDP figures were largely fudged to obfuscate the obvious and that we've been in the throes of a contracting economy for more than a year.
Why else would stocks take their cue and rise smartly on the news of a smallish contraction? Smart money on Wall Street is betting that the recession will be largely over by the 2nd quarter of 2009 at the latest, making it a rather long and deep one, but one which is now in its latter stages.
Also weighing into the equation no doubt it the upcoming election, in which almost all indications favor the election of Barack Obama as the nation's first black president and a powerful majority in congress for the Democrats. Investors seem to not mind at all that Obama is a Democrat or that both the executive and legislative branches of government will both be in Democratic Party control.
That big money interests would think along those lines also does not take much of an imagination. Apparently, not many in the financial and business realm are too worried that Obama is going to do anything that will significantly upset the economy. All through the long primary and election seasons, Obama has displayed a cool and calm demeanor - and business loves predictability and a sure hand.
Just watch over the next few months how the argument shifts away from the economy. The banking crisis is now becoming ancient history. The Fed and Treasury panicked and congress went along to give banks much more assurance than they ever needed. As the money is now rolling out of the government coffers and into the hands of the slimy, scheming bankers, they'll be sure to cooperate lest Mr. Obama and a forthright congress take away their fat bonuses. That cake - and the deal - has probably already been taken and eaten. With Nancy (off the table) Pelosi in the mix, there's probably no chance of prosecution of these conniving masters of shadow finance, either.
The trading on Wall Street also was much calmer than it has been lately, a sign that volatility is on the wane. The extremes seen over the past month are difficult to maintain for long. Eventually, everything returns to some semblance of sanity and normalcy, even Wall Street.
On the day, advancing issues galloped past decliners, 4866-1401. The gap between new lows and new highs also continued to compress. There were 244 new lows, and just 13 new highs, but the difference is much smaller than it was just a few days ago.
This could be setting up for an enduring bounce rally extending through election day, when there will finally be some assurance of a positive change of leadership in Washington.
Crude oil took another small step backwards, losing $1.54, to close at $65.96 on the December contract. Gold got back to losing value, dropping $15.50, to $738.50. Silver lost 2 cents to finish at $9.79.
Exchange volume was moderate.
NYSE Volume 1,375,164,000
NASDAQ Volume 2,591,070,000
Wednesday, October 29, 2008
Wall Street Whiners Can't Get Enough Free Money
The FOMC of the Federal Reserve lowered interest rates by 50 basis points - 0.5% - but it wasn't enough for the pampered, worthless lot of business morons on Wall Street.
Instead of greeting the rate cut (unnecessary and mostly inconsequential) with open arms, stocks took another loss. It was just another example of how overfed Wall Street has become. They can't even make good money with the federal funds rate at 1%, which, incidentally, was the rate at which the whole subprime mess began.
Thankfully, hopefully, there will be a change of administration in Washington which will begin to detach itself from the single-minded preoccupation with banks and the workings of Wall Street and begin to address the issues which will really matter to Americans: jobs, infrastructure, extricating ourselves from never-ending wars and solving global warming by instituting policy initiatives which promote conservation, alternative energy, reuse and recycling.
There are days which try one's will and one's nerves and this was surely one of them. With just three more working days before the election, the ongoing "crisis" mentality that pervades every aspect of the news, along with the long election coverage, is wearing extremely thin.
That investors can't see value in stocks at these levels and express themselves by torpedoing the markets is childish and churlish at the same time. One hopes and prays that the election will proceed without too many glitches and we, as a nation, can move on from the overwhelmingly loathsome conditions brought to bear by a madman president and a bunch of policy-makers who had their own way and still managed to make things worse for most of it.
Dow 8,990.96 -74.16; NASDAQ 1,657.21 +7.74 (0.47%) S&P 500 930.09 -10.42; NYSE Composite 5,774.8901 +41.43
Well, maybe it wasn't all that bad. At least the NASDAQ and the Comp. were higher.
Market internals also improved. Advancing issued outnumbered decliners, 3893-2381. New lows beat new highs, 319-8. Volume again was moderate.
NYSE Volume 1,619,567,000
NASDAQ Volume 2,771,578,000
One noticeable effect of the Fed's rate cut was in the price of crude oil, which gained $4.77, to $67.50. Gold was up $13.50, to $754.00, while silver added a massive $1.02, to $9.81.
Six days and counting until the election. These are times which try men's souls.
Instead of greeting the rate cut (unnecessary and mostly inconsequential) with open arms, stocks took another loss. It was just another example of how overfed Wall Street has become. They can't even make good money with the federal funds rate at 1%, which, incidentally, was the rate at which the whole subprime mess began.
Thankfully, hopefully, there will be a change of administration in Washington which will begin to detach itself from the single-minded preoccupation with banks and the workings of Wall Street and begin to address the issues which will really matter to Americans: jobs, infrastructure, extricating ourselves from never-ending wars and solving global warming by instituting policy initiatives which promote conservation, alternative energy, reuse and recycling.
There are days which try one's will and one's nerves and this was surely one of them. With just three more working days before the election, the ongoing "crisis" mentality that pervades every aspect of the news, along with the long election coverage, is wearing extremely thin.
That investors can't see value in stocks at these levels and express themselves by torpedoing the markets is childish and churlish at the same time. One hopes and prays that the election will proceed without too many glitches and we, as a nation, can move on from the overwhelmingly loathsome conditions brought to bear by a madman president and a bunch of policy-makers who had their own way and still managed to make things worse for most of it.
Dow 8,990.96 -74.16; NASDAQ 1,657.21 +7.74 (0.47%) S&P 500 930.09 -10.42; NYSE Composite 5,774.8901 +41.43
Well, maybe it wasn't all that bad. At least the NASDAQ and the Comp. were higher.
Market internals also improved. Advancing issued outnumbered decliners, 3893-2381. New lows beat new highs, 319-8. Volume again was moderate.
NYSE Volume 1,619,567,000
NASDAQ Volume 2,771,578,000
One noticeable effect of the Fed's rate cut was in the price of crude oil, which gained $4.77, to $67.50. Gold was up $13.50, to $754.00, while silver added a massive $1.02, to $9.81.
Six days and counting until the election. These are times which try men's souls.
Tuesday, October 28, 2008
Wall Street's Huge Rally Not Unexpected
Economic news on Tuesday was not cheery. Not even close.
Standard & Poor's/Case-Shiller 20-city housing index dropped a record 16.6 % from a year ago, the largest year-over-year decline in the survey's 8-year history.
The Conference Board issued its monthly statement of consumer confidence at a previously-unseen level of 38. Analysts were expecting a drop to 51, from a reading of 59.8 in September.
Still, by 2:00 pm, all major indices were sporting healthy gains... and then they really took off, resulting in massive gains in all manner of equity investments. The Dow alone rose over 600 points in the final two hours of trading.
Dow 9,065.12 +889.35; NASDAQ 1,649.47 +143.57; S&P 500 940.51 +91.59; NYSE Composite 5,733.4399 +536.91
The most obvious cause for the outsized gains is anticipation of a 50-to-100 basis point (0.5-1.0%) reduction in the federal funds rate when the FOMC meets and issues a policy statement tomorrow.
While another rate cut may not seem like such a big deal in these turbulent times, investors seemed to be betting on improving conditions and made moves on stocks - and a general market - that has been exhibiting technical oversold signs. On Monday, the major indices registered new bear market lows, so a move upwards did not catch anyone by surprise, though the size of the gain may have stunned a few short-sellers, feeding into the rally.
So, instead of breaking below 8,000, the Dow ended the day surpassing the 9,000 mark. All but the NASDAQ saw gains of more than 10% for the day. The NASDAQ was up 9.5%.
Market internals confirmed much of the massive gain. Advancing issues outpaced decliners, 4699-1624. New lows remained persistent, however, beating down new highs, 1256-3. Volume was a little higher than Monday's, but not overwhelming, an indication that this rally will be short-lived and without legs as bargain hunters staked out positions and short sellers covered positions.
NYSE Volume 1,723,708,000
NASDAQ Volume 2,811,333,000
Commodity prices remained marginally in the red. Crude oil was down another 49 cents, closing at $62.73. Gold ended lower by $2.40, to $740.50, stopping a two-day winning streak. Silver crashed through the $9.00 level, losing 41 cents per ounce, to end the day at $8.79.
The Fed meeting tomorrow should help boost spirits, but another in a series of expected rate cuts has already been largely priced into the market. There is the distinct possibility that even though the Fed comes through on the rate cut, investors will "sell the news," being that it has been telegraphed to this skittish market.
More wild swings are a near-certainty, leading up to and beyond the November 4 Election day, given the volatility that has been the one constant through the wrenching downturn and sparkling rallies.
The market continues to attempt setting a bottom, though the pattern remains the same, with each successive low being superseded by a following test.
Standard & Poor's/Case-Shiller 20-city housing index dropped a record 16.6 % from a year ago, the largest year-over-year decline in the survey's 8-year history.
The Conference Board issued its monthly statement of consumer confidence at a previously-unseen level of 38. Analysts were expecting a drop to 51, from a reading of 59.8 in September.
Still, by 2:00 pm, all major indices were sporting healthy gains... and then they really took off, resulting in massive gains in all manner of equity investments. The Dow alone rose over 600 points in the final two hours of trading.
Dow 9,065.12 +889.35; NASDAQ 1,649.47 +143.57; S&P 500 940.51 +91.59; NYSE Composite 5,733.4399 +536.91
The most obvious cause for the outsized gains is anticipation of a 50-to-100 basis point (0.5-1.0%) reduction in the federal funds rate when the FOMC meets and issues a policy statement tomorrow.
While another rate cut may not seem like such a big deal in these turbulent times, investors seemed to be betting on improving conditions and made moves on stocks - and a general market - that has been exhibiting technical oversold signs. On Monday, the major indices registered new bear market lows, so a move upwards did not catch anyone by surprise, though the size of the gain may have stunned a few short-sellers, feeding into the rally.
So, instead of breaking below 8,000, the Dow ended the day surpassing the 9,000 mark. All but the NASDAQ saw gains of more than 10% for the day. The NASDAQ was up 9.5%.
Market internals confirmed much of the massive gain. Advancing issues outpaced decliners, 4699-1624. New lows remained persistent, however, beating down new highs, 1256-3. Volume was a little higher than Monday's, but not overwhelming, an indication that this rally will be short-lived and without legs as bargain hunters staked out positions and short sellers covered positions.
NYSE Volume 1,723,708,000
NASDAQ Volume 2,811,333,000
Commodity prices remained marginally in the red. Crude oil was down another 49 cents, closing at $62.73. Gold ended lower by $2.40, to $740.50, stopping a two-day winning streak. Silver crashed through the $9.00 level, losing 41 cents per ounce, to end the day at $8.79.
The Fed meeting tomorrow should help boost spirits, but another in a series of expected rate cuts has already been largely priced into the market. There is the distinct possibility that even though the Fed comes through on the rate cut, investors will "sell the news," being that it has been telegraphed to this skittish market.
More wild swings are a near-certainty, leading up to and beyond the November 4 Election day, given the volatility that has been the one constant through the wrenching downturn and sparkling rallies.
The market continues to attempt setting a bottom, though the pattern remains the same, with each successive low being superseded by a following test.
Monday, October 27, 2008
New Lows All Around
Stocks swung in a 400-point range on the Dow, but ended with sizable losses once more, sending all the major indices to fresh lows.
The markets opened to the downside, after news that Japan's NIKKEI index had suffered another 6% decline, hitting a 26-year low. US stocks shook that off and headed higher in the first hour, but vacillated throughout the session, finally giving way for good late in the day.
Investors still seem concerned that the fallout from the banking and credit issues still hasn't been fully reflected in stocks and across the general economy. Fear continues to grip investors with few grabbing for bargains despite stocks being down significantly over the past month and year.
Among companies posting losses or missing 3rd quarter estimates were hardware and home repair chain Lowes (L, 25.65 -5.66), which took a loss for the period of 31 cents a share, compared to a 77¢ profit a year ago, and health care provider Humana (HUM, 30.80 -5.47), which saw profits shaved by 40% from the same period a year ago due to higher operating costs.
Verizon (VZ, 27.61 +2.53) reported earnings in line with estimates, bucking the trend on a slow earnings news day.
Dow 8,175.77 -203.18; NASDAQ 1,505.90 -46.13; S&P 500 848.92 -27.85; NYSE Composite 5,196.53 -231.01
Market internals matched the headline numbers, with losers beating gainers by a score of 4948-1351. New lows once more finished far ahead of new highs, 1329-9. Clearly, there is no appetite for speculation at this juncture. With the critical US elections now just one week away, investors are clutching their cash close, making no forays into a severely troubled market. Volume was moderate, reflecting the overall lack of buying interest.
NYSE Volume 1,338,367,000
NASDAQ Volume 2,273,988,000
Commodity prices remained subdued. Oil lost another 93 cents, closing at $63.22. Gold gained for the second straight session, up $12.60, to $742.90, still more than 25% off recent highs. Silver lost another 10 cents, to $9.20.
Considering the timing dynamics involved, especially those concerning the potential massive shift of power in Washington, the declining trend should remain in place until at least Tuesday, November 4, election day in the USA. After that, there should be some kind of sober reassessment of Wall Street risk and reward, though the generally poor economic conditions - which should prevail for at least another two or three quarters - will likely keep a secure lid on equity prices.
The other factor at play is that of falling commodity prices, which should begin to manifest itself across a broad spectrum of commercial activity. While the most obvious price relief is at the gas pumps and in home heating bills, price pressure should become more evident in mainstream goods and services at the very worst of time: the Christmas season. The fallout will likely be the shuttering of marginal stores in malls across America, more retail job losses and possibly a number of bankruptcies. The Fed doesn't bail out retailers, only banks and cheating financial institutions.
On that note, more bank failures are almost sure to occur before Christmas causing even further deterioration to the banking/finance sector.
The markets opened to the downside, after news that Japan's NIKKEI index had suffered another 6% decline, hitting a 26-year low. US stocks shook that off and headed higher in the first hour, but vacillated throughout the session, finally giving way for good late in the day.
Investors still seem concerned that the fallout from the banking and credit issues still hasn't been fully reflected in stocks and across the general economy. Fear continues to grip investors with few grabbing for bargains despite stocks being down significantly over the past month and year.
Among companies posting losses or missing 3rd quarter estimates were hardware and home repair chain Lowes (L, 25.65 -5.66), which took a loss for the period of 31 cents a share, compared to a 77¢ profit a year ago, and health care provider Humana (HUM, 30.80 -5.47), which saw profits shaved by 40% from the same period a year ago due to higher operating costs.
Verizon (VZ, 27.61 +2.53) reported earnings in line with estimates, bucking the trend on a slow earnings news day.
Dow 8,175.77 -203.18; NASDAQ 1,505.90 -46.13; S&P 500 848.92 -27.85; NYSE Composite 5,196.53 -231.01
Market internals matched the headline numbers, with losers beating gainers by a score of 4948-1351. New lows once more finished far ahead of new highs, 1329-9. Clearly, there is no appetite for speculation at this juncture. With the critical US elections now just one week away, investors are clutching their cash close, making no forays into a severely troubled market. Volume was moderate, reflecting the overall lack of buying interest.
NYSE Volume 1,338,367,000
NASDAQ Volume 2,273,988,000
Commodity prices remained subdued. Oil lost another 93 cents, closing at $63.22. Gold gained for the second straight session, up $12.60, to $742.90, still more than 25% off recent highs. Silver lost another 10 cents, to $9.20.
Considering the timing dynamics involved, especially those concerning the potential massive shift of power in Washington, the declining trend should remain in place until at least Tuesday, November 4, election day in the USA. After that, there should be some kind of sober reassessment of Wall Street risk and reward, though the generally poor economic conditions - which should prevail for at least another two or three quarters - will likely keep a secure lid on equity prices.
The other factor at play is that of falling commodity prices, which should begin to manifest itself across a broad spectrum of commercial activity. While the most obvious price relief is at the gas pumps and in home heating bills, price pressure should become more evident in mainstream goods and services at the very worst of time: the Christmas season. The fallout will likely be the shuttering of marginal stores in malls across America, more retail job losses and possibly a number of bankruptcies. The Fed doesn't bail out retailers, only banks and cheating financial institutions.
On that note, more bank failures are almost sure to occur before Christmas causing even further deterioration to the banking/finance sector.
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