Markets Go Boom... and Bust

What happened of significance that stocks would sell of so drastically on Friday?

Was it the DOJ announcing that a criminal probe of Goldman Sach's was underway (And that the G-Men were looking at issues other than the ABACUS deal noted in the SEC charges.)? Shares of Goldman Sachs (GS) fell 15.04, to 145.20, a decline of 9.4%, during Friday's session.

That might be a good start for a general market decline.

Or maybe that oil spill in the Gulf of Mexico is causing more than average general ill-will to be directed at multi-national corporations who pollute, don't pay taxes and cause monstrous disasters such as is unfolding in the marshes along the Louisiana coastline?

What about Greece... and Portugal... and Spain... and Italy? Is the debt bomb exploding over Europe destined to visit mainland America? Finance ministers are meeting over the weekend in hopes of hammering out a bailout for the destitute Greeks (they won't).

Could it be that the Senate finally getting around to debating - after weeks of Republican stonewalling at the behest of the nation's largest financial firms - senator Dodd's financial regulation legislation that has, as one of its many tentacles, authority to liquidate firms that it deems insolvent (Bank of America, Wells Fargo and Citigroup come to mind) and a slew of other amendments which would make the kind of cowboy financial engineering that typified the sub-prime era difficult to repeat.

All of those are good starting points for argument, but there are two likely causes which intersect with all other issues. First quarter GDP was reported to be measured at 3.2%, annualized. That is after 4th quarter '09 coming in at 5.6%. Investors with even fifth grade educations can do the math: the economy is slowing again and that brings to the forefront the words everybody dreads: "double dip."

The second cause is likely more mechanical than analytical. Stocks have been hovering around multi-year highs. People with large stakes and large profits probably figured that today was a good day to sell, just like Wednesday was. The reason Wall Street more resembles a casino than an investment market is because the big money, the people calling the shots and pulling the levers are all gamblers at heart. And, as gambling operations generally produce few winners but lots of losers, the winners are likely getting out of town.

From an emotional chart perspective, one look at a two year Dow chart reveals that the index is bumping into the bottom of the pre-Lehman resistance of September '08. Since little has been done to correct the abuses of the time or restore credibility and liquidity to credit markets, it only stands to reason that there will be no move through that Dow resistance level from 11,200 to 11,750.

Flagging Friday finishes are always troubling, but today's should be marked with multiple red flags. The global economic model, based largely upon central banking, fractional reserve requirements, fiat currencies already heavily in debt (read: insolvent) and currently devolving into nation-gobbling monstrosities, is severely broken and thus, sliced, diced, ad whipsawed according to the prevailing tone.

Economies, from you next-door neighbor to the county seat, to states and nations, are tettering on a balance beam built on public good will and creditworthiness and there isn't much of either of those in quantity at the present time. One could purport that economic circumstances today are worse than they were in 2008. Massive borrowing and easy money policies have not stemmed the tide of deflation that continues to waffle through every aspect of civilization.

One area which experienced strong gains on Friday was commodities, especially gold. With uncertain times comes a need to hold something material and money flowed into tangible assets today in a scared trade. More evidence of widespread deflation came from the bond pits, where the 10-year treasury dipped to 3.65% yield today. Interest rates simply have nowhere to go but down in a slumping, or even stagnating, economy.

Dow 11,008.61, -158.71 (1.42%)
NASDAQ 2,461.19, -50.73 (2.02%)
S&P 500 1,186.68, -20.10 (1.67%)
NYSE Composite 7,474.40, -114.89 (1.51%

There were 4904 losing stocks to 1669 winners. 547 new highs dwarfed a mere 41 new lows. Volume was significant as it has been most of the past 8 trading days. Money is moving, from stocks to commodities, fixed income and cash, a perfect brew for a further deflationary spiral, which never really stopped moving, but was only slowed by monetary moves by the Fed and other central banks.

NYSE Volume 6,859,333,000.00
NASDAQ Volume 2,689,440,250.00

Crude oil rallied 98 cents, to $86.15. Gold built another $11.70 on top of recent gains, finishing the week at $1,180.10, a 2010 high. Silver also rose 6 cents, to $18.61.

There's a world of hurt gaining momentum out there, and you can bet your last Kentucky Derby (tomorrow), mint julep dollar that the famous schemers and weasels of Wall Street are going to be left holding the most recent bag of pain. No, that taks has been assigned, as usual, to the middle class, the little guy, the working class.

Isn't it time to stop believing in the fairy tales of high finance and posturing politicians?

Speaks for itself

Dow 11,167.32, +122.05 (1.10%)
NASDAQ 2,511.92, +40.19 (1.63%)
S&P 500 1,206.78, +15.42 (1.29%)
NYSE Composite 7,589.29, +89.57 (1.19%)

Advancers: 4907; Decliners: 1651
New Highs: 561; New Lows: 34

NYSE Volume 6,715,091,500.00
NASDAQ Volume 3,001,973,750.00

Oil: +$1.95, $85.17
Gold: -$2.90, $1,168.40
Silver: +$0.44, $18.55

Initial Unemployment Claims: 448K

Financial Regulation stalled in Senate.

Why the FOMC Didn't Hike Rates; Tweet this. Or Don't.

I'm not going to win a Pulitzer Prize for this, but the reason the Fed did nothing again today is pretty simple.

1. The economy is being kept afloat by money being shoveled to banks, via nearly no interest loans, and people, via what the government likes to call "transfer payments," which are the usual, unemployment checks, social security checks, military and other federal retirement checks, disability checks, welfare checks.

2. The middle class pays most of their bills. They pay mortgages, taxes, utilities and they pay for necessities such as food, fuel, etc. Can anybody begrudge them the occasional splurge for a new shirt, car or iPad?

3. Private sector employment is becoming a myth and the more the government tries to tax every aspect of employment, the worse it's going to get. Private businesses must cut every imaginable corner just to stay in business.

Conclusion: the economy is still on the ropes. "Recovery" is an absolute joke. We are, as a nation, still scraping along the bottom. Public confidence in government is low and waning. Politicians grandstand for votes. Wall Street is still nothing more than a big casino. The Fed knows all of this and much more. They're scared to death. Eventually, the banks must give back all the money they stole from the middle class or the nation will never recover, probably splintering into a kind of new age Europe, which may, in fact, be the best thing that can happen.

Here's a plan: Expect the worst; enjoy what you have; don't pay retail for anything (including taxes; if you can get a deal on utilities, let me know how).

Dow 11,045.27, +53.28 (0.48%)
NASDAQ 2,471.73, +0.26 (0.01%)
S&P 500 1,191.36, +7.65 (0.65%)
NYSE Composite 7,499.72, +36.63 (0.49%)

Advancing issues, as expected, beat decliners, 3659-2857; there were 244 new highs (the lowest number in a month, at least) and just 48 new lows. Volume was solid.

NYSE Volume 7,046,415,500
NASDAQ Volume 2,728,942,500

Oil gained 78 cents, to $83.22. CNN Money ran a headline touting, Oil rises on Fed rate decision as if the two are somehow co-aligned. Maybe they are, but one has to really stretch imagination to figure out how that is.

Gold added $9.60, to $1,171.30, while silver fell a penny, to $18.11.

Goldman Execs Grilled; Market Stumbles as Greek Tragedy Unfolds

Aeschylus or Sophocles could not have written such a story as is unfolding in the finances of the nation of Greece and the Senate hearings on Goldman Sachs. It is as though the Gods themselves have delivered their wrath upon the wealthy, the greedy and the high-and-mighty of society.

On Capitol Hill, Senator Levin opened the current round of hearings in the Senate Permanent Subcommittee on Investigations by outlining the purported abuses by Goldman Sachs which helped lead the US real estate market and the general economy into what some are calling the "Great Recession" of 2008.

As the day and the questioning wore on, Goldman Sachs executives squirmed and cajoled and grimaced through arguments designed to clear them of even the appearance of impropriety in their mortgage securitization dealings and subsequent profiteering off the collapse of such investment vehicles. The polished and evidently well-trained Goldman executives kept a sombre tone as they alternately denied wrongdoing and admitted "mistakes" in the handling of their own and clients' money as the real estate market ballooned, popped and dropped from 2006 through 2008.

The questioning focused on a key point: whether Goldman Sachs was purposely betting it's own money against the very investments it had sold to clients. The firm admits losing money as the market cascaded lower, but then making more by buying credit default swaps which eventually paid off as the CDO market crashed. Goldman executives have steadfastly denied making trades at odds with those of their clients, though the argument is paper-thin and the Senate investigation has unearthed scores of examples exactly the opposite. Goldman calls their investments in credit default swaps pure hedging, but the tide certainly seems to be working against them, both in the hearing room and in the court of public opinion.

A continent away, Greek bond yields soared to over 18% on 2-year notes, as S&P cut its rating to junk status. Greece continues to struggle through one of its worst fiscal and monetary crises of the modern age, with government pay, pensions and entitlements pushing the government close to default. Today's development come in the wake of weeks of negotiations by the IMF and EU on a bailout package for the southern European nation.

There seems to be little doubt that Greece will default in part or in total, with Portugal, Italy and Spain next in line for the pain of financial armageddon. What worries officials in other European nations is the fate of the European Union itself and the ten-year experiment with the unified currency, the Euro.

Reaction was mostly aligned to the Greek story, though the Goldman Sachs hearings were riveting attention as well. Stocks in Europe suffered huge losses in all of its equity markets, with values of the major nation indices falling anywhere from 2% to nearly 4%. France's CAC 40 fell the most, down 3.82% on the day.

In the Americas, a similar story, with major indices piling on losses. The Canadian markets fared best of all, losing just more than 1 percent.

US stock losses come fast on the heels of an 8-week buying splurge despite signs everywhere that the global economy and sovereign debt issues were coming to a head. Even though it's the height of earnings season in the US, nothing could stem the stampede of sellers which descended on Wall Street. Stocks fell by their largest one-day amounts in months, on heavy volume, signaling that the worst may be yet to come.

Dow 10,991.99, -213.04 (1.90%)
NASDAQ 2,471.47, -51.48 (2.04%)
S&P 500 1,183.71, -28.34 (2.34%)
NYSE Composite 7,463.09, -214.56 (2.79%)

Declining issues overwhelmed advancers, 5396-1220, a better-than 4:1 ratio. The number of new highs was shaved down to 407, with 51 stocks recording new lows.

NYSE Volume 8,348,664,500.00
NASDAQ Volume 2,766,927,750.00

Commodity prices were mixed, due to differences in their utility. Crude oil, which is consumed worldwide, fell $1.76, to $82.44, mostly on fears of reduced demand. Gold, primarily a store of wealth or a hedge against currencies, was higher by $8.10, finishing at $1,161.70. Silver, however, which carries investment qualities and industrial functions, dropped 22 cents, to $18.12.

Elsewhere, consumer confidence in April galloped ahead to 57.9, from a March reading of 52.3, though the encouraging number was largely ignored. The Case-Shiller 20-City Real Estate index rose a disappointing 0.64% year-over-year for the month of February, stirring speculation that the US residential real estate market may be months - if not years - from recovery, with the potential for another 15% downturn still on the horizon.

All is not well in our financial world. Titans are being brought under the whip, nations may fail, social unrest may reach a fever pitch by the time our next federal elections roll around in November. With the usually-slow months of summer approaching, stocks seem unstable investments, at best.

Cash, equivalents, Treasuries and other highly-liquid assets are being preferred for the moment.

Making matters even more convoluted, on Monday, Republicans in the Senate blocked debate on Senator Dodds' Financial Reform legislation by a 57-40 vote. 60 votes are needed to bring the bill to the Senate floor. Another test vote failed on Monday, with Republicans grandstanding, saying dishonestly that the bill would reach deep “into every nook and cranny of American business.”

Bring on the sirens and the wailing.

No Doubt About It: The Banks Stole Your Money

So much for my triple-top theory.

With the Dow putting on gains to close out the week - finishing at new highs for the 8th consecutive week - the world's most watched index is now at 18-month highs, leaving the memories of Lehman Bros., TARP and the painful housing crisis far behind in the memory hole.

But while stocks and traders are rejoicing over their riches, they fail to see, or even understand, the devastation caused by kicking 2 million families out of their homes or 8 million (probably more) out of jobs. Wall Street pros have stars on their foreheads and in their eyes. They obviously do not share the same values as most middle-class Americans.

The rally which began on March 10, 2009 has now reached extraordinary status. It is a full 12 1/2 months old, and the percentage gains off the bottom are simply spectacular.

Let's Recap:

The following are the March 9, 2009 lows, then today's closing prices, followed by the percentage gains.

Dow... 6,547.05 ... 11,204.28 ... +71,13%
S&P 500... 676.53 ... 1,217.28 ... +79.93
NASDAQ... 1,268.64 ... 2,530.15 ... +99.44
NYSE Comp. ... 4,226.31 ... 7,701.61 ... +82.23

There you have it. All anyone had to really do to turn $10,000 into roughly $18,000 over the course of the past 13 months was to buy all the stocks in any index and let it ride. For the rich and powerful, such as the lead traders at Goldman Sachs, the trick was to turn $1 billion or $10 billion into $1.8 billion or $18 billion. Being even more sophisticated, they probably had returns which far outstripped those of the entire indices.

Is there any wonder how the biggest frauds and thieves eve to walk the face of the earth (the leaders of Citigroup, Bank of America, Goldman Sachs, et. al.) were all able to pay back the government's (read: taxpayers) TARP money within a year's time?

Not only did the financial calamity which took the stock market down in the Fall of 2008 through the Winter of 2009 appear to be contrived and driven by the same people who created it, so too the "miraculous" recovery of stocks overall, and their very own firms, to boot.

On March 9, 2009, Bank of America (BAC) closed at 3.74. Citigroup (C) finished the session at 1.05; Goldman Sachs (GS), 73.28; Morgan Stanley (MS), 16.34; JP Morgan Chase (JPM), 15.79; Wells Fargo (WFC), 9.89 (actually closed at 8.06 on March 5).

Today, Bank of America finished the session at 18.43; Citigroup, 4.86; Goldman Sachs, 157.40; Morgan Stanley, 31.94; JP Morgan Chase, 44.94; and Wells Fargo, 33.48.

These are the five largest private sector financial institutions in the country. They've all done exceedingly well over the past 13 months, mostly at the expense of foreclosed-upon homeowners, people strung out on credit cards carrying rates that used to be called usury and millions of unemployed workers who lost their jobs because these bankers and traders convinced most of corporate America that the sky was falling. That the crisis occurred at the very end of the Bush administration's reign of terror was no coincidence. It was easily the greatest crime of all time.

All of these firms ruthlessly cut their dividend payouts to shreds at the height of the crisis and are still paying out less than 1% each. Citigroup pays no dividend. Goldman Sachs is the most generous, at 0.90%, at a time in which they paid their employees 43% of profits. These guys never learned to share.

Wall Street has changed dramatically from the days in which prices were quoted in eighths and sixteenths. Today's "titans" need billions of dollars to fill up their coffers in the highly rigged game of liar's poker. As a market observer - and sometimes participant - of over 35 years, I can safely say I have never seen a crash nor a rally quite as spectacular as the ones witnessed over the past 19 months. And, as the saying goes, "if it looks to good to be true, it probably isn't."

I don't know where this rally will end, or how, but it will, I imagine. Maybe it won't. Maybe the "masters of the universe" will keep stocks on a permanent upward slope in order to capture even more of the world's money supply. After all, government's just keep printing the stuff, so the bankers and frauds have to use up more of it, don't they?

I've been out of this market since December of 2009 and won't venture back in until I see some of these companies' CEOs in leg irons, which means I've probably already made my last investment in equities. I consider the current regime of manipulators and skimmers to be nothing better than common crooks. Having already stolen much of America's private wealth, they're no doubt scheming to steal the rest. At the risk of sounding like a curmudgeon, I'll keep the reporting in this same vein.

Wall Street is the biggest fraud most of us will ever see. enjoy it while it lasts.

Dow 11,204.28 69.99 (0.63%)
NASDAQ 2,530.15 11.08 (0.44%)
S&P 500 1,217.28 8.61 (0.71%)
NYSE Compos 7,701.61 58.78 (0.77%)

Advancers led decliners by a wide margin, 4406-2097. So too, new highs, all 1130 of them, crushed the 68 new lows. Volume was slimmed down from the levels earlier in the week.

NYSE Volume 5,888,237,000.00
NASDAQ Volume 2,434,851,250.00

Oil gained $1.42, to $85.12. Gold gained $10.80, to $1,153.10. Silver was higher by 18 cents, finishing at $18.19.

Everything went up today except your paycheck. Seriously, working has become the toil of suckers. If the "retirement investments" aren't wiped out by the frauds of finance, the taxman will take whatever else there is.

Good grief. Good luck.