With only a half-session scheduled for Friday, investors took note of some economic news that was not all bad for a change and threw some more money at stocks on Wednesday, in anticipation of better days ahead.
By the time the session had ended, all major indices were sporting healthy gains, with the Dow and S&P 500 up for the fourth straight session, the first time that had happened on the S&P - since May.
Investors were a little less hesitant after yesterday's consumer confidence numbers turned up better than expected - at 44.9 after October's dismal 38.1 reading. Of course, this was the first survey taken since the election, and probably was influenced by a preponderance of opinion that we were about to replace one of America's worst presidents with one who could not possibly do any worse. Naturally, some were of the opinion that Mr. Obama would be a far better president than Mr. Bush, whose policies have turned out to be verifiable disasters.
On top of that, the most recent new filings for unemployment were down from the previous week, though still abnormally high, at 529,000 for the week ended 11/22. That was about it for positive news. The rest of the day's data was pretty dour, but expected to be so.
While personal income rose 0.3% in October, personal spending was down a full 1%. What's this? Americans earning more and spending less, resulting in net saving? Frugality seems to be back in style. On that fashion note, however, comes the caveat that saving money instead of spending it is bad for business. It's effects on the economy at-large, in the longer term, though, are positive. More money in savings means there's just more money around. Economists and business school graduates call it pent-up demand, but what do they really know?
To the casual observer, the events of the past 3-12 months may have looked rather normal. To economists and stock market gurus, they were anything but. The near-collapse of the worldwide banking system, replete with governments throwing wads of cash at the $8-14 trillion problem caused by subprime loans, was more like a revisit from the ghosts of 1929, when the market actually did crash and a worldwide economic depression ensued. The actions by central banks and treasuries around the globe may have prevented nothing more than a serious recession. We are, nonetheless, now saddled with all the trappings of government bailouts, fixes, patches, interest rate game and assorted nonsense because GDP is sliding instead of advancing.
On the surface, modern economics is ludicrous. If there is ever a hint of stability - that the normal swings of the supply-demand dynamic seem to be headed for a perfectly-natural downturn - our leaders rush around making dubious fixes in the middle of the night and over weekends, shoring up those stalwart idiots who run banks, insurance companies and other financial, non-work companies. We will be paying for the excessive under-and-over-regulation and care for generations, but, worry not, today will be fine and the holiday season will be full of mirth, merriment and plenty of credit card charges.
So, our GDP decreases by 2%, if that, and the leaders of the world act like the whole shooting match is about to go down in flames. Idiots, every one of them.
The continued not-so-bad news delivered to Wall Street included a pair of business surveys and both the Chicago PMI and the Michigan consumer sentiment data were lower. The PMI fell to 33.8, from 37.8, which the consumer sentiment index dropped to 55.3, from 57.9. Not everyone is convinced, it seems.
The general feeling is that while we will soon be turning a corner when Mr. Obama and the Democrats take control of the White House and both chambers of congress come January 20, we are not quite there yet. There's still Christmas and the doleful doubts that will be raised by slow spending at retailers. If that is all we have to worry about - that Nordstrom's sales are off 12%, or that J.C. Penny sells a little less than last year - we've really got little reason to be concerned. The average working stiff will still be getting a paycheck at regular intervals and the government will still confiscate a large portion of that pay. Life will proceed with little change for the majority of folks. Those at the very top of the income and wealth scale have already taken huge losses, but those can be recouped. It's not like any billionaires are starving. We shall all be fine, just fine, when the next boom begins and the wizards of Wall Street can go about finding ways to muck it all up again.
Dow 8,726.61, +247.14
NASDAQ 1,532.10, +67.37
S&P 500 887.68, +30.29
NYSE Composite 5,547.38, +172.02
For the day, advancing issues beat decliners by a wide margin, 5373-1176. New lows continued to dominate new highs, 220-24, though the number of new lows has diminished greatly over the past week. Volume was relatively relaxed, though stable.
NYSE Volume 1,423,623,000
NASDAQ Volume 2,003,840,000
All of this good, or not-so-bad news was reflected in commodity pricing, which is bad for the consumer overall. A lid should be put on commodities so that inflation does not creep back into the picture. The last thing we need is companies boosting their prices. They are just fine were they are, and could even fall a bit more without everyone not wanting to bail out miners, oil riggers and cattlemen. Some price deflation would be welcome relief, as we've all seen with gasoline prices. A reduction in the size of winter heating bills would free up more money for real, discretionary purposes.
But the commodity markets didn't see it that way on Wednesday, as oil gained $3.93, to close at $54.70. The metal were more restrained, with gold losing $6.20, to $8.14, and silver up just 4 cents, to $10.34. Precious metals investors have been the least damaged by recent market turmoil. Gold is only down some 20%, though silver is off by 50%. The yellow metal should decline back into the $630-690 area early next year as the prospects for catastrophe diminish.
As John McLaughlin might say, gobble, gobble. Enjoy the holiday.
Wednesday, November 26, 2008
Tuesday, November 25, 2008
Quiet Day Welcome on Wall Street
On Tuesday, stocks took a bit of a breather from their wild zig-zagging, with the major indices ending with the smallest point changes in weeks.
Dow 8,479.47 +36.08; NASDAQ 1,464.73 -7.29; S&P 500 857.39 +5.58; NYSE Composite 5,375.36 +61.60
While the NASDAQ ended the session on the downside, the other indices were all on the uptick as the government announced a massive plan to boost consumer spending and credit.
The $800 billion plan, approved by Fed head Ben Bernank and eannounced today by outgoing (and not a moment too soon) Treasury Secretary Hank Paulson, targets buyouts of debt-backed securities, specifically, $200 billion for credit card backed securities and $600 billion to buy up mortgage-backed securities held by Fannie Mae and Freddie Mac along with mortgages issued by those firms.
Sounds like more of the same kind of nonsense that got us into the mess in the first place. The government is simply churning all kinds of money through major institutions while the people who are doing the real suffering, the American taxpayer, are getting nothing in return. $800 billion is indeed a tidy sum. It amounts to more than $2500 for every US citizen. It still seems that simply doling out that kind of cash directly to individuals and families would make a whole lot more sense and actually get the economy moving in a big way forward.
However, we have numbskulls continuing to run the USA into the ground in their final two months in office. Bush and Paulson have practically bankrupted the entire nation in just the past two years. They obviously are not through spending money that won't likely be repaid for a generation, if at all.
On the day, advancing issues outperformed decliners, 4102-2450. There were 305 new lows and 13 new highs. Volume was moderate, slightly to the heavy side.
NYSE Volume 1,871,699,000
NASDAQ Volume 2,440,636,000
Oil gained 15 cents, to $50.92. Gold fell $2.20, to $818.30. Silver lost a penny to $10.30.
The government also reported that the third quarter was poorer in performance than their earlier estimate, revising their GDP estimate from a -0.3 to -0.5.
Wednesday marks the last full day of trading for November. With the Thanksgiving holiday Thursday, a half-session is planned for Friday.
Dow 8,479.47 +36.08; NASDAQ 1,464.73 -7.29; S&P 500 857.39 +5.58; NYSE Composite 5,375.36 +61.60
While the NASDAQ ended the session on the downside, the other indices were all on the uptick as the government announced a massive plan to boost consumer spending and credit.
The $800 billion plan, approved by Fed head Ben Bernank and eannounced today by outgoing (and not a moment too soon) Treasury Secretary Hank Paulson, targets buyouts of debt-backed securities, specifically, $200 billion for credit card backed securities and $600 billion to buy up mortgage-backed securities held by Fannie Mae and Freddie Mac along with mortgages issued by those firms.
Sounds like more of the same kind of nonsense that got us into the mess in the first place. The government is simply churning all kinds of money through major institutions while the people who are doing the real suffering, the American taxpayer, are getting nothing in return. $800 billion is indeed a tidy sum. It amounts to more than $2500 for every US citizen. It still seems that simply doling out that kind of cash directly to individuals and families would make a whole lot more sense and actually get the economy moving in a big way forward.
However, we have numbskulls continuing to run the USA into the ground in their final two months in office. Bush and Paulson have practically bankrupted the entire nation in just the past two years. They obviously are not through spending money that won't likely be repaid for a generation, if at all.
On the day, advancing issues outperformed decliners, 4102-2450. There were 305 new lows and 13 new highs. Volume was moderate, slightly to the heavy side.
NYSE Volume 1,871,699,000
NASDAQ Volume 2,440,636,000
Oil gained 15 cents, to $50.92. Gold fell $2.20, to $818.30. Silver lost a penny to $10.30.
The government also reported that the third quarter was poorer in performance than their earlier estimate, revising their GDP estimate from a -0.3 to -0.5.
Wednesday marks the last full day of trading for November. With the Thanksgiving holiday Thursday, a half-session is planned for Friday.
Monday, November 24, 2008
Citigroup Bailout Boosts Stocks
For the second consecutive session, stocks rallied as the federal government made steps toward stabilizing the fragile US economy. On Friday, it was the leaked announcement of Timothy Geithner to head up President-elect Obama's Treasury Department that caused a late-day rally. Monday's moves were attributed to Obama's transition team making Geithner and other appointments official, plus word that beleaguered Citigroup would receive additional financing to help weather the economic storm from bad loans and equally bad quarterly reports.
The bank has shown substantial losses in each of the last four quarters as its stock price sank below $5 per share, a point at which many institutions could not - under their charters - continue to be holders of the security. Shares of Citigroup (C) closed 57% to the good, at 5.95, still far below their value of just months ago.
Dow 8,443.39 +396.97 (4.93%); NASDAQ 1,472.02 +87.67; S&P 500 851.81 +51.78 (6.47%); NYSE Composite 5,313.76 +353.97 (7.14%)
Market internals continued their alignment to headline numbers. Advancing issues overwhelmed decliners, 5472-1213. There was also a major drawdown in the number of new lows, which had reached historic proportions last week. While there were just 5 recorded new highs, the number of new lows shank considerably from Thursday and Friday's figures, down to 418, as compared to the more than 2000 new lows on Friday. Volume was on the high side, another positive development.
NYSE Volume 2,034,090,000
NASDAQ Volume 2,590,952,000
Commodities staged a rally all their own. Crude oil jumped $4.14 to $54.07. Gold added $29.00, to $821.40, marking the first time gold has been over $800 in a number of weeks. Silver gained by more than 10%, up $1.00, to finish at $10.51 per ounce.
While these numbers in commodities and the general stock market all look good today and are signs of confidence in the new administration, there are still rough patches through which the US economy must travel. Though the days of bank bailouts may be behind us for now, there still are underlying issues in mainstream companies, notably, lower earnings and coming layoffs. These are bound to follow on shortly and carry through into the first quarter of 2009.
The bank has shown substantial losses in each of the last four quarters as its stock price sank below $5 per share, a point at which many institutions could not - under their charters - continue to be holders of the security. Shares of Citigroup (C) closed 57% to the good, at 5.95, still far below their value of just months ago.
Dow 8,443.39 +396.97 (4.93%); NASDAQ 1,472.02 +87.67; S&P 500 851.81 +51.78 (6.47%); NYSE Composite 5,313.76 +353.97 (7.14%)
Market internals continued their alignment to headline numbers. Advancing issues overwhelmed decliners, 5472-1213. There was also a major drawdown in the number of new lows, which had reached historic proportions last week. While there were just 5 recorded new highs, the number of new lows shank considerably from Thursday and Friday's figures, down to 418, as compared to the more than 2000 new lows on Friday. Volume was on the high side, another positive development.
NYSE Volume 2,034,090,000
NASDAQ Volume 2,590,952,000
Commodities staged a rally all their own. Crude oil jumped $4.14 to $54.07. Gold added $29.00, to $821.40, marking the first time gold has been over $800 in a number of weeks. Silver gained by more than 10%, up $1.00, to finish at $10.51 per ounce.
While these numbers in commodities and the general stock market all look good today and are signs of confidence in the new administration, there are still rough patches through which the US economy must travel. Though the days of bank bailouts may be behind us for now, there still are underlying issues in mainstream companies, notably, lower earnings and coming layoffs. These are bound to follow on shortly and carry through into the first quarter of 2009.
Friday, November 21, 2008
Geithner Appointment Boosts Stocks in Final Hour
I used to call this kind of activity "proof" of the existence of the PPT (Plunge Protection Team), though such wild trading swings have become so commonplace that one has to question exactly what is going on.
There seems to be such a high level of concentrated insider trading on Wall Street that major moves - both up and down - have to be viewed with a large dose of skepticism.
Surely, stocks are down in a major way from a year ago, but the evidence that there is a global recession in progress has yet to manifest itself in major ways. Maybe that is only my perception, and to a large degree it must be, though there are some indications that the economic downturn is still affecting only peripherally.
Most people still have jobs and are not in any immediate jeopardy of losing them. Gas prices are much lower than just months ago, and half what they were a year ago. The only visible signs of any crisis are evident only on Wall Street and in Washington, D.C. The tail is wagging the dog.
Today's final hour boost was credited to a news leak of President-Elect Barack Obama's imminent appointment of Timothy Geithner as Treasury Secretary. Anonymous sources were credited by various news outlets, also mentioning that Lawrence Summers would become a senior advisor and New Mexico Governor Bill Richardson would be appointed Commerce Secretary on Monday, November 24.
Dow 8,046.42 +494.13 (6.54%); NASDAQ 1,384.35 +68.23 (5.18%); S&P 500 800.03 +47.59 (6.32%); NYSE Composite 4,959.79 +308.58 (6.63%)
The day's trade generally vacillated along the break-even line until the 3:00 hour, and at that point began a wicked ascent which wiped away the losses incurred on Thursday on the Dow. Significant advances were made on the other major indices. Advancing issues surpassed declining ones, 4157-2514. New lows overwhelmed new highs 2575-46. Nearly 40% off all listed securities on the NASDAQ and NYSE fell to fresh lows today on significant volume.
NYSE Volume 2,372,786,000
NASDAQ Volume 3,128,916,000
Commodities all gained. Oil was higher by 51 cents, to $49.93. Gold was up a massive $43.10, to $791.80. Silver advanced 46 cents, to $9.51.
The average investor has to be confused with recent market volatility, and with good cause. It is unprecedented.
Have we seen the bottom? Who knows?
There seems to be such a high level of concentrated insider trading on Wall Street that major moves - both up and down - have to be viewed with a large dose of skepticism.
Surely, stocks are down in a major way from a year ago, but the evidence that there is a global recession in progress has yet to manifest itself in major ways. Maybe that is only my perception, and to a large degree it must be, though there are some indications that the economic downturn is still affecting only peripherally.
Most people still have jobs and are not in any immediate jeopardy of losing them. Gas prices are much lower than just months ago, and half what they were a year ago. The only visible signs of any crisis are evident only on Wall Street and in Washington, D.C. The tail is wagging the dog.
Today's final hour boost was credited to a news leak of President-Elect Barack Obama's imminent appointment of Timothy Geithner as Treasury Secretary. Anonymous sources were credited by various news outlets, also mentioning that Lawrence Summers would become a senior advisor and New Mexico Governor Bill Richardson would be appointed Commerce Secretary on Monday, November 24.
Dow 8,046.42 +494.13 (6.54%); NASDAQ 1,384.35 +68.23 (5.18%); S&P 500 800.03 +47.59 (6.32%); NYSE Composite 4,959.79 +308.58 (6.63%)
The day's trade generally vacillated along the break-even line until the 3:00 hour, and at that point began a wicked ascent which wiped away the losses incurred on Thursday on the Dow. Significant advances were made on the other major indices. Advancing issues surpassed declining ones, 4157-2514. New lows overwhelmed new highs 2575-46. Nearly 40% off all listed securities on the NASDAQ and NYSE fell to fresh lows today on significant volume.
NYSE Volume 2,372,786,000
NASDAQ Volume 3,128,916,000
Commodities all gained. Oil was higher by 51 cents, to $49.93. Gold was up a massive $43.10, to $791.80. Silver advanced 46 cents, to $9.51.
The average investor has to be confused with recent market volatility, and with good cause. It is unprecedented.
Have we seen the bottom? Who knows?
Thursday, November 20, 2008
America 40-60% Off; Detroit's Real Problem
Congressional leaders said today that there would be no bailout money for Detroit's Big Three automakers - Ford, GM and Chrysler - until the companies offer some kind of business plan outlining how they would use the money to make their businesses more competitive. Auto executives have been in Washington the past two days begging for $25 billion in immediate funding.
At long last, congress has come up with an idea that makes sense: require companies to submit detailed spending plans before granting or loaning them massive amounts of money. The move, largely the idea of congressional Democrats, may be more of a stall than anything else, keeping the bailout ball in the air until President-Elect Obama and a fresh congress are put officially in charge come January. As it now stands, both houses of congress plan to go into recess for the Thanksgiving holiday this Friday and return on December 2. (Yes, congress gets a week off for Thanksgiving.)
Even if that is the case, it's certainly better than just handing over $25 billion to another bunch of whining corporate executives who are now begging the government to help them out of a tight spot. Truth is a troublesome thing, but the auto industry has been in deep trouble for years. US manufacturers kept insisting on building cars that guzzled gas, or that most Americans could not afford. Producing a low-priced economical car was never in the plans of any Detroit-based automaker as they misjudged the market completely.
The reason Ford, GM and Chrysler need cash from taxpayers is simple: American automobiles are too expensive. Everything in America is now 40-60% off or will soon be. Stocks, real estate, food, clothing, almost everything is dropping in price or soon will be forced lower for the simple reason that people will not buy because they don't have the money. Simple supply and demand economics will change life in America and deflate prices back to 1970s levels in pretty short order, maybe two to three years.
So, the dynamic for the next five years for smart entrepreneurs and business operatives should include lower production costs, fixed costs and labor costs resulting in products which will produce profit margins at lower price points. Detroit, pay attention.
In response to congress telling the auto CEOs to basically take a hike, investors panicked once again, supposedly on the belief that what the CEOs have been saying may be true, that if they didn't get their $25 billion pound of flesh from the US taxpayer immediately, that the economy would sink into a grave depression. Too bad. More people lost more money today on false assumptions. America, and Detroit, and the hundreds of thousands of auto workers will muddle through until January. Don't worry, be happy. You may be able to buy that Cadillac for about $20,000 less next year, or maybe next month.
Stocks went a long way toward finding a bottom on Thursday. In addition to the auto executives getting the stiff job by congress, unemployment figures released prior to the market open were shocking. For the week ended 11/15, there were 542,000 new unemployment claims. Nobody should be shocked, however. The truly large layoffs haven't even begun. By January, we're likely to see 650,000 new claims in a given week.
In any case, by the end of the day, the Dow took another major one-day loss. On a percentage basis, it was the smallest of the major indices.
Dow 7,553.56 -443.72 (5.27%); NASDAQ 1,316.12 -70.30 (5.07%) S&P 500 752.45 -54.13 (6.71%); NYSE Composite 4,651.26 -360.73 (7.20%)
Market internals were roughly as bad or worse than yesterday's horrific numbers. Declining issues outnumbered advancers, 5940-760. New lows reached a truly historic number of 2956 on the session. Interestingly, new highs were up again, to 47 today, from 22 yesterday. This is a phenomenon to which one should pay attention. The new highs are likely being made by companies that were battered in 2007 and are now in the process of recovery. This could provide somewhat of a clue to where stocks will find a real bottom. We're certainly getting closer to it, no matter what.
NYSE Volume 2,222,210,000
NASDAQ Volume 3,175,616,000
Volume was extremely high, indicating the level of panic in the markets. It's a shame, really. All of these people selling now could have done so months ago. Now they've lost all hope, usually a sign of a bottoming out or the bottom falling out. If it's the latter, forget 6500-7200 which I mentioned as the bottom yesterday. We'd more likely be looking at 3000.
Commodities were mixed again. Oil fell by more than 8% as slack demand continues to drive prices down. Crude for January delivery fell $4.45, to $49.65. Gold bugs see opportunity in the yellow metal, driving the price up $12.70, to $748.70 an ounce. Silver fell again, losing 29 cents to $9.05. The metals, in comparison to other commodities, are probably 20-25% overvalued still.
I leave you today with a string of two-worded advisories: Remain calm; don't panic; spend frugally; save daily; promote discounts.
At long last, congress has come up with an idea that makes sense: require companies to submit detailed spending plans before granting or loaning them massive amounts of money. The move, largely the idea of congressional Democrats, may be more of a stall than anything else, keeping the bailout ball in the air until President-Elect Obama and a fresh congress are put officially in charge come January. As it now stands, both houses of congress plan to go into recess for the Thanksgiving holiday this Friday and return on December 2. (Yes, congress gets a week off for Thanksgiving.)
Even if that is the case, it's certainly better than just handing over $25 billion to another bunch of whining corporate executives who are now begging the government to help them out of a tight spot. Truth is a troublesome thing, but the auto industry has been in deep trouble for years. US manufacturers kept insisting on building cars that guzzled gas, or that most Americans could not afford. Producing a low-priced economical car was never in the plans of any Detroit-based automaker as they misjudged the market completely.
The reason Ford, GM and Chrysler need cash from taxpayers is simple: American automobiles are too expensive. Everything in America is now 40-60% off or will soon be. Stocks, real estate, food, clothing, almost everything is dropping in price or soon will be forced lower for the simple reason that people will not buy because they don't have the money. Simple supply and demand economics will change life in America and deflate prices back to 1970s levels in pretty short order, maybe two to three years.
So, the dynamic for the next five years for smart entrepreneurs and business operatives should include lower production costs, fixed costs and labor costs resulting in products which will produce profit margins at lower price points. Detroit, pay attention.
In response to congress telling the auto CEOs to basically take a hike, investors panicked once again, supposedly on the belief that what the CEOs have been saying may be true, that if they didn't get their $25 billion pound of flesh from the US taxpayer immediately, that the economy would sink into a grave depression. Too bad. More people lost more money today on false assumptions. America, and Detroit, and the hundreds of thousands of auto workers will muddle through until January. Don't worry, be happy. You may be able to buy that Cadillac for about $20,000 less next year, or maybe next month.
Stocks went a long way toward finding a bottom on Thursday. In addition to the auto executives getting the stiff job by congress, unemployment figures released prior to the market open were shocking. For the week ended 11/15, there were 542,000 new unemployment claims. Nobody should be shocked, however. The truly large layoffs haven't even begun. By January, we're likely to see 650,000 new claims in a given week.
In any case, by the end of the day, the Dow took another major one-day loss. On a percentage basis, it was the smallest of the major indices.
Dow 7,553.56 -443.72 (5.27%); NASDAQ 1,316.12 -70.30 (5.07%) S&P 500 752.45 -54.13 (6.71%); NYSE Composite 4,651.26 -360.73 (7.20%)
Market internals were roughly as bad or worse than yesterday's horrific numbers. Declining issues outnumbered advancers, 5940-760. New lows reached a truly historic number of 2956 on the session. Interestingly, new highs were up again, to 47 today, from 22 yesterday. This is a phenomenon to which one should pay attention. The new highs are likely being made by companies that were battered in 2007 and are now in the process of recovery. This could provide somewhat of a clue to where stocks will find a real bottom. We're certainly getting closer to it, no matter what.
NYSE Volume 2,222,210,000
NASDAQ Volume 3,175,616,000
Volume was extremely high, indicating the level of panic in the markets. It's a shame, really. All of these people selling now could have done so months ago. Now they've lost all hope, usually a sign of a bottoming out or the bottom falling out. If it's the latter, forget 6500-7200 which I mentioned as the bottom yesterday. We'd more likely be looking at 3000.
Commodities were mixed again. Oil fell by more than 8% as slack demand continues to drive prices down. Crude for January delivery fell $4.45, to $49.65. Gold bugs see opportunity in the yellow metal, driving the price up $12.70, to $748.70 an ounce. Silver fell again, losing 29 cents to $9.05. The metals, in comparison to other commodities, are probably 20-25% overvalued still.
I leave you today with a string of two-worded advisories: Remain calm; don't panic; spend frugally; save daily; promote discounts.
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