With the markets closing Friday in a state of ebullience and optimism, the Monday morning hangover was worse than expected.
Stocks got out of the gate well, with the averages hitting their highs of the day early on, but there was no catalyst and thus, no enthusiasm for either buying or selling, though tech stocks suffered more than most.
Stocks drifted in listless fashion on what will almost certainly turn out to be one of the five lowest trading volume sessions of the year thus far. Appetite for risk has been muted by world events, the least of which being the continuing saga of the nuclear reactors melting down at Fukushima Daiichi facility in Japan.
High levels of radiation have been found hither and fro, even in the United States, where air and water readings were above safe levels in communities from the West coast all the way east to Pennsylvania.
As for Japan itself, the situation appears even more out of control, as both the government and TEPCO, the utility company responsible for the failures, have run out of viable options for containment. If not for the "fear factor" the mainstream media would be full of horror stories, but the prevailing wisdom is not to alarm the populace over what looks to be already as bad as or worse than the disaster of Chernobyl, 25 years ago, a man-made calamity now estimated to have caused over a million deaths and multiple times that number in birth defects, miscarriages, and diseases.
With Japan's nuclear woes - where the "dead zone" is expected to eventually be 30 to 40 miles in all directions from the plant - the general mood of the people is a thinly-disguised panic and a heightened level of distrust of authorities. Said distrust is with good cause. The officials handling the situation are either incompetent, stupid, afraid or a combination of all three, and have yet to reassure the Japanese people of anything, other than the situation remains a catastrophe with potential to become even worse.
High gas prices have also put a damper on the proceedings worldwide, with both Brent crude and West Texas Intermediate (WTI) hitting 33-month highs on the day. Continued unrest in the oil-rich Middle East and North African countries - Libya, Bahrain, Kuwait, Yemen and now Ivory Coast - haven't helped slow down the oil rally and the onset of $4/gallon gas in the US.
So, little surprise that nothing is moving in the world of high finance.
Dow 12,400.03, +23.31 (0.19%)
NASDAQ 2,789.19, -0.41 (0.01%)
S&P 500 1,332.87, +0.46 (0.03%)
NYSE Composite 8,482.41, +13.07 (0.15%)
The level of disdain could be clearly seen in market internals. Advancing issues narrowly bettered decliners on the day, 3006-2630, though NASDAQ new highs soared against new lows, 222-30, while on the NYSE, the bias was the same, with new highs beating new lows, 259-15. As mentioned earlier, volume was extremely light.
NASDAQ Volume 1,679,897,000
NYSE Volume 3,273,874,500
WTI crude futures hit $108.47, a gain of 53 cents, the highest level since June of 2008. Prices above $4.00 per gallon for regular unleaded have been reported in New York, Chicago and various California locales.
Gold inched closer to all-time highs, gaining $4.10, to $1,433.00, while silver exploded to 31-year highs, ending the NY session on the COMEX at $38.49, on a gain of 76 cents (2%).
The stark comparisons between the economic climate today and that of 2008 could not be clearer. High oil and gas prices, a stagnating stock market close to multi-year highs nearing the end of a long bull run, ramping foreclosures and falling real estate values, and political uncertainty carry all the trademarks which eventually led to the great unwinding in Fall 2008.
Three years hence, after trillions of dollars in stimulus, the very same banks that caused the calamity before are still leveraged to the hilt, hiding liabilities off the books and still in denial over their true, illiquid conditions.
For mood to change so impressively from good to bad over the weekend is stunning. Americans and the world at large should be prepared for another round of asset-crushing deflation once the Fed decides to stop printing dollars into existence come June.
Showing posts with label housing. Show all posts
Showing posts with label housing. Show all posts
Monday, April 04, 2011
Tuesday, March 29, 2011
While Japan Melts Down, US Stocks Melt Up
Though many doubted the thrust and wisdom of the Federal Reserve's QE2 and ZIRP efforts, the Fed can now claim some success.
That success, however, is limited to one's perception. If higher commodity, food and energy prices, a completely collapsed housing market and a stock market rally in which almost nobody participates is one's idea of success, then a big hand for Chairman Bernanke and his merry band of idiots otherwise known as the Board of Governors of the Fed.
It was reported yesterday in this space that trading volume had sunk to its lowest level of the year. Today's numbers were a mirror image, marking the two slowest trading days of the year, for sure, and possibly the lowest two-day total volume since sometime in 2009.
So much for the so-called wealth effect we hear so much about. The only investors actually trading are the Primary Dealers with their virtually-free POMO money. It's almost as though the markets have lost the confidence of the individual investor forever. Surely, those with pension funds tied to the market must be seeing better returns, but how long they will last is anyone's guess, though it's fair to say that as long as the Fed continues to throw $100 billion or more into the fray, stocks will keep rising. It's been about the easiest trade ever.
There isn't much more to say about today's gains other than they completely disregarded the situation at the Fukushima Daiichi nuclear plant in Japan, which is now almost completely out of control, as one reactor appears to have melted through its containment vessel.
The wild-eyed buyers of today also paid no heed to the S&P/Case-Shiller 20-city index, which confirmed that housing has entered the double-dip phase, falling for the sixth consecutive month. Of course, that would assume that one believes the first dip ever ended.
And everybody simply looked the other way when the Conference Board showed its index of consumer confidence fell to 63.4 this month, from a revised 72.0 in February.
Apparently, we mere mortals simply don't understand the stock market, where news is always bullish, no matter how bad it is. Supposedly, a comet obliterating all of Europe would be cause for a 1000-point rally according to the current metrics.
Whatever is going on down on the trading floors and at the desks of the biggest brokerages, it simply doesn't jibe with reality, but that's what we've got, a rogue market on its very own illogical trajectory.
Dow 12,279.01, +81.13 (0.67%)
NASDAQ 2,756.89, +26.21 (0.96%)
S&P 500 1,319.44, +9.25 (0.71%)
NYSE Composite 8,345.38, +48.86 (0.59%)
Advancers led decliners, 4381-2145. The NASDAQ reported 114 new highs and 27 new lows. On the NYSE, there were 117 new highs and 12 new lows.
NASDAQ Volume 1,610,826,875
NYSE Volume 3,856,315,250
Commodities were mixed, with oil up 81 cents on the front-end WTI contract, to $104.79. Gold slipped $3.70, to $1,416.20 and silver fell 10 cents, to $36.99 per ounce.
This represents one of the more confusing markets in history. Bad news simply will not move stocks to the downside, and any downward move is met with a rally in short order, wiping away any and all losses in a matter or days, or hours.
Hardly mentioned is the upcoming non-farm payroll data courtesy of the BLS on April 1, this Friday, though prior to that, on Wednesday, ADP will report their proprietary survey of private sector employment. That little nugget will be released at 8:15 am, EDT, though it's generally not a market mover, being widely discredited as being unreliable.
This is fun for somebody, but who that might be remains a mystery.
That success, however, is limited to one's perception. If higher commodity, food and energy prices, a completely collapsed housing market and a stock market rally in which almost nobody participates is one's idea of success, then a big hand for Chairman Bernanke and his merry band of idiots otherwise known as the Board of Governors of the Fed.
It was reported yesterday in this space that trading volume had sunk to its lowest level of the year. Today's numbers were a mirror image, marking the two slowest trading days of the year, for sure, and possibly the lowest two-day total volume since sometime in 2009.
So much for the so-called wealth effect we hear so much about. The only investors actually trading are the Primary Dealers with their virtually-free POMO money. It's almost as though the markets have lost the confidence of the individual investor forever. Surely, those with pension funds tied to the market must be seeing better returns, but how long they will last is anyone's guess, though it's fair to say that as long as the Fed continues to throw $100 billion or more into the fray, stocks will keep rising. It's been about the easiest trade ever.
There isn't much more to say about today's gains other than they completely disregarded the situation at the Fukushima Daiichi nuclear plant in Japan, which is now almost completely out of control, as one reactor appears to have melted through its containment vessel.
The wild-eyed buyers of today also paid no heed to the S&P/Case-Shiller 20-city index, which confirmed that housing has entered the double-dip phase, falling for the sixth consecutive month. Of course, that would assume that one believes the first dip ever ended.
And everybody simply looked the other way when the Conference Board showed its index of consumer confidence fell to 63.4 this month, from a revised 72.0 in February.
Apparently, we mere mortals simply don't understand the stock market, where news is always bullish, no matter how bad it is. Supposedly, a comet obliterating all of Europe would be cause for a 1000-point rally according to the current metrics.
Whatever is going on down on the trading floors and at the desks of the biggest brokerages, it simply doesn't jibe with reality, but that's what we've got, a rogue market on its very own illogical trajectory.
Dow 12,279.01, +81.13 (0.67%)
NASDAQ 2,756.89, +26.21 (0.96%)
S&P 500 1,319.44, +9.25 (0.71%)
NYSE Composite 8,345.38, +48.86 (0.59%)
Advancers led decliners, 4381-2145. The NASDAQ reported 114 new highs and 27 new lows. On the NYSE, there were 117 new highs and 12 new lows.
NASDAQ Volume 1,610,826,875
NYSE Volume 3,856,315,250
Commodities were mixed, with oil up 81 cents on the front-end WTI contract, to $104.79. Gold slipped $3.70, to $1,416.20 and silver fell 10 cents, to $36.99 per ounce.
This represents one of the more confusing markets in history. Bad news simply will not move stocks to the downside, and any downward move is met with a rally in short order, wiping away any and all losses in a matter or days, or hours.
Hardly mentioned is the upcoming non-farm payroll data courtesy of the BLS on April 1, this Friday, though prior to that, on Wednesday, ADP will report their proprietary survey of private sector employment. That little nugget will be released at 8:15 am, EDT, though it's generally not a market mover, being widely discredited as being unreliable.
This is fun for somebody, but who that might be remains a mystery.
Label:
ADP,
Case-Shiller,
Conference Board,
Fukushima,
housing,
Japan,
non-farm payroll
Monday, February 14, 2011
MERS can't assign mortgages, judge rules
A personal victory today for me - and possibly hundreds of thousands of homeowners - thanks to U.S. Bankruptcy Judge Robert E. Grossman in Central Islip, New York, who ruled, last Thursday, that Merscorp has no legal right to transfer mortgages.
Anyone following the fiasco that is the housing market knows Merscorp better by MERS, as they were the "nominee" on millions of mortgages written in the housing "boom" of the 2000s. What the judge's ruling does is essentially invalidate most mortgages written between 2003 and 2008 (and some before and after that), because that was the time period in which the largest lenders - Countrywide (now BofA), JP Morgan Chase, WAMU and others used MERS to end-run the county recording offices and save on fees, then packaged and resold these mortgages to witless investors.
Now, the banks have no standing in courts to foreclose and the buyers of those ugly securitized mortgages want their money back. Banks are being forced into a corner, even after being bailed out by the Federal Reserve, TARP and taxpayer money. The ruling from that bankruptcy court and others should serve distressed homeowners well in fights with the banks over ownership rights as they set strong precedents and are are likely only to be overturned by individual state legislatures.
Even then, any new laws validating the banks' practices would have to be applied retroactively, an activity expressly forbidden by the US constitution (remember that?).
This is, in reality, the end of the game for the big banks, which should have been allowed to fail in the beginning. The American public has spent Trillions of dollars keeping these bodies afloat and they are still sinking, and fast. Little by little, Americans are learning to stand up to the banks, city hall, the states and the federal government and demand their rights.
The ruling from this past Thursday stands as a marker in the struggle for resumption of the RULE OF LAW, which has been kept bound and gagged by the current and former presidential administrations. The American public is tired of being lied to and robbed from and the time has come to choose sides. Either you side with the government, the banks and their crooked politics and practices or you side with the people, and seemingly, the courts and the lawyers.
This is a nation governed by the rule of law, not by force or money or politics. Choose now!
Meanwhile, the circus kept running at Wall and Broad.
Dow 12,268.19, -5.07 (0.04%)
NASDAQ 2,817.18, +7.74 (0.28%)
S&P 500 1,332.32, +3.17 (0.24%)
NYSE Composite 8,405.15, +30.26 (0.36%)
Despite the marginal gains, advancing issues led decliners overall, 3686-2856. There were 286 new highs and 23 new lows on the NASDAQ and 355 new highs and 11 new lows on the NYSE. Selected stocks are clearly stretched to the limits of affordability, though with price discovery a lost art in the algo-following world of computer trading, this alone will not foment an imminent collapse of values. However, the volume on the NYSE made another new low point today, just a week after setting the low mark of the year. Rising indices without full-blown participation is the very first tool in the analyst bag, though the rules have been changed so dramatically over the past few years that nothing is certain today.
Still, market manipulations cannot last forever. The rules of economics will eventually take out all of the excess and malinvestment. It has to or the entire market is a fraud.
NASDAQ Volume 1,985,633,750
NYSE Volume 3,959,988,500.00
Note the divergence in commodities. Oil continued down again today, losing another 77 cents, to $84.81, while the precious metals gained. Watch for oil prices to continue their plunge back below $80 and beyond. demand has dried up once the price for US unleaded gas exceeded $3.15 on a national basis. Since the $4.00 shock of 2008, American drivers have made adjustments: buying more fuel-efficient vehicles, driving less, driving smarter, conserving, car-pooling.
Besides the obvious adjustments, the US economy simply is not strong enough - nor is the world economy, for that matter - to justify high fuel prices. There is little to no growth and slack demand. Ergo, oil and gas prices should fall accordingly.
As for the PMs, well, they've resumed their ominous climb. Gold gained $4.70, to $1,365.10, but still remains stuck in a range, though the bottom is in at $1350.00. Silver popped another 54 cents, to $30.53, approaching the 30-year-highs last seen in December.
The lid is about to come off the entire global system of financial fraud, again.
Anyone following the fiasco that is the housing market knows Merscorp better by MERS, as they were the "nominee" on millions of mortgages written in the housing "boom" of the 2000s. What the judge's ruling does is essentially invalidate most mortgages written between 2003 and 2008 (and some before and after that), because that was the time period in which the largest lenders - Countrywide (now BofA), JP Morgan Chase, WAMU and others used MERS to end-run the county recording offices and save on fees, then packaged and resold these mortgages to witless investors.
Now, the banks have no standing in courts to foreclose and the buyers of those ugly securitized mortgages want their money back. Banks are being forced into a corner, even after being bailed out by the Federal Reserve, TARP and taxpayer money. The ruling from that bankruptcy court and others should serve distressed homeowners well in fights with the banks over ownership rights as they set strong precedents and are are likely only to be overturned by individual state legislatures.
Even then, any new laws validating the banks' practices would have to be applied retroactively, an activity expressly forbidden by the US constitution (remember that?).
This is, in reality, the end of the game for the big banks, which should have been allowed to fail in the beginning. The American public has spent Trillions of dollars keeping these bodies afloat and they are still sinking, and fast. Little by little, Americans are learning to stand up to the banks, city hall, the states and the federal government and demand their rights.
The ruling from this past Thursday stands as a marker in the struggle for resumption of the RULE OF LAW, which has been kept bound and gagged by the current and former presidential administrations. The American public is tired of being lied to and robbed from and the time has come to choose sides. Either you side with the government, the banks and their crooked politics and practices or you side with the people, and seemingly, the courts and the lawyers.
This is a nation governed by the rule of law, not by force or money or politics. Choose now!
Meanwhile, the circus kept running at Wall and Broad.
Dow 12,268.19, -5.07 (0.04%)
NASDAQ 2,817.18, +7.74 (0.28%)
S&P 500 1,332.32, +3.17 (0.24%)
NYSE Composite 8,405.15, +30.26 (0.36%)
Despite the marginal gains, advancing issues led decliners overall, 3686-2856. There were 286 new highs and 23 new lows on the NASDAQ and 355 new highs and 11 new lows on the NYSE. Selected stocks are clearly stretched to the limits of affordability, though with price discovery a lost art in the algo-following world of computer trading, this alone will not foment an imminent collapse of values. However, the volume on the NYSE made another new low point today, just a week after setting the low mark of the year. Rising indices without full-blown participation is the very first tool in the analyst bag, though the rules have been changed so dramatically over the past few years that nothing is certain today.
Still, market manipulations cannot last forever. The rules of economics will eventually take out all of the excess and malinvestment. It has to or the entire market is a fraud.
NASDAQ Volume 1,985,633,750
NYSE Volume 3,959,988,500.00
Note the divergence in commodities. Oil continued down again today, losing another 77 cents, to $84.81, while the precious metals gained. Watch for oil prices to continue their plunge back below $80 and beyond. demand has dried up once the price for US unleaded gas exceeded $3.15 on a national basis. Since the $4.00 shock of 2008, American drivers have made adjustments: buying more fuel-efficient vehicles, driving less, driving smarter, conserving, car-pooling.
Besides the obvious adjustments, the US economy simply is not strong enough - nor is the world economy, for that matter - to justify high fuel prices. There is little to no growth and slack demand. Ergo, oil and gas prices should fall accordingly.
As for the PMs, well, they've resumed their ominous climb. Gold gained $4.70, to $1,365.10, but still remains stuck in a range, though the bottom is in at $1350.00. Silver popped another 54 cents, to $30.53, approaching the 30-year-highs last seen in December.
The lid is about to come off the entire global system of financial fraud, again.
Label:
foreclosures,
housing,
MERS
Friday, September 17, 2010
Quotes for a Friday Afternoon
Before getting to the important part of this posting, a quick recap of the day on Wall Street is the usual requisite, so...
Here's what happened:
Dow 10,607.85. +13.02 (0.12%)
NASDAQ 2,315.61, +12.36 (0.54%)
S&P 500 1,125.59, +0.93 (0.08%)
NYSE Composite 7,154.64, -14.84 (0.21%)
NASDAQ Volume 2,174,708,250
NYSE Volume 4,437,062,000
Not much, even for a quad-witching options day, which is supposed to be "volatile." US markets are, if anything, operating on borrowed money and borrowed time. The money's been borrowed from the Fed and the time is just a matter of when somebody with a large enough stake says, "good-bye." It's a game of chicken and nobody wants to be the last one in the room.
Note that the NYSE, the broadest measure of equities, was the only one down, and also the only index usually not quoted by the major news services.
Advancing issues beat decliners, 3321-2395, but it's mostly just churning. New highs maintained their daily edge over new lows, 413-58, another meaningless metric, due to the large, unannounced number of issues de-listed in the past six to nine months. Volume was higher than normal, but still not of any degree anyone would get excited about. Most of the additional trading was due to the aforementioned quadruple-witching in options.
There was probably more action at Belmont Park than on the floor of the NYSE, and it was certainly more fun to watch.
Oil was hammered down another 91 cents lower, to $73.66, but remains stuck in a trading range, emblematic of the global economic condition. Gold closed up $3.70, at $1,275.60, another all-time high. Silver gathered only a nickel higher, to $20.79.
Then there was word on the housing market, from a number of economists, including the widely-quoted Mark Zandi of Moody's, who's been proven wrong so many times that most people have stopped counting.
Zandi believes housing prices will drop another 5% by 2013, and then says, "After reaching bottom, prices will gain at the historic annual pace of 3 percent..." He's probably wrong on the magnitude by a measure of three or four times. Residential real estate likely has 15-20% more to decline. As to his predicted annual growth pace of 3%, it's already well-established that home prices normally rise by about one per cent, not triple that.
Somebody ought to hand Zandi a golden parachute and shove him off a skyscraper so he can stop deluding himself that he's making sense. After all, he does work for one of the rating agencies which said all that toxic, sub-prime, re-packaged, securitized mortgage garbage was AAA-rated. The guy ought to be in jail rather than on CNBC.
The upshot is that the banks have such a monster of a problem on their hands that they and the courts cannot handle it in a reasonably timely manner. The absolute implosion of the US housing market has left a crater in the economy the size of Rush Limbaugh's ego, and that's enormous. The basic paradigm for buying a house these days is to offer 30% below the asking price, and see how badly the owners - either a bank or a homeowner or a combination of both - want out of it.
Then try and get a mortgage. A million more laughs.
The glut of homes - unoccupied, unrented, in need of repair, under-water financially - is mammoth and everywhere. Count on a minimum of three and probably more like five more years of pain, price declines and associated nonsense about finding "the bottom," which will only be reached when the banks realize that it's not worth their time or expense to pursue further exposure and foreclosures and they become the party which "walks away." When the banks no longer want the properties, no longer feel there's any gain in bleeding consumers dry with fees and interest, and the property taxes, maintenance and insurance exceed what they can hope to recover on unsold inventory, there will be a bottom, and it's going to be one heck of a lot lower and a heck of a lot further out than most people anticipate.
Too many houses at prices too many people can't afford. Simple math.
Following are the promised quotes. Have a lovely weekend.
"I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs."
-- Thomas Jefferson, (Attributed)
3rd president of US (1743 - 1826)
"Permit me to issue and control the money of a nation, and I care not who makes its laws."
-- Mayer Amschel Rothschild
"Income tax is nothing but wage slavery. If you have payroll deductions, you are a slave. Only way to fix it is for everyone to quit, or, as in Europe, the whole nation goes on strike. It won't happen here. Americans are too stupid and too frightened by their own government. I am not. I could care less. Let them come and take my house and my belongings. I will start over, stronger. I love this country, but I hate the people who run it."
-- Ed.
Here's what happened:
Dow 10,607.85. +13.02 (0.12%)
NASDAQ 2,315.61, +12.36 (0.54%)
S&P 500 1,125.59, +0.93 (0.08%)
NYSE Composite 7,154.64, -14.84 (0.21%)
NASDAQ Volume 2,174,708,250
NYSE Volume 4,437,062,000
Not much, even for a quad-witching options day, which is supposed to be "volatile." US markets are, if anything, operating on borrowed money and borrowed time. The money's been borrowed from the Fed and the time is just a matter of when somebody with a large enough stake says, "good-bye." It's a game of chicken and nobody wants to be the last one in the room.
Note that the NYSE, the broadest measure of equities, was the only one down, and also the only index usually not quoted by the major news services.
Advancing issues beat decliners, 3321-2395, but it's mostly just churning. New highs maintained their daily edge over new lows, 413-58, another meaningless metric, due to the large, unannounced number of issues de-listed in the past six to nine months. Volume was higher than normal, but still not of any degree anyone would get excited about. Most of the additional trading was due to the aforementioned quadruple-witching in options.
There was probably more action at Belmont Park than on the floor of the NYSE, and it was certainly more fun to watch.
Oil was hammered down another 91 cents lower, to $73.66, but remains stuck in a trading range, emblematic of the global economic condition. Gold closed up $3.70, at $1,275.60, another all-time high. Silver gathered only a nickel higher, to $20.79.
Then there was word on the housing market, from a number of economists, including the widely-quoted Mark Zandi of Moody's, who's been proven wrong so many times that most people have stopped counting.
Zandi believes housing prices will drop another 5% by 2013, and then says, "After reaching bottom, prices will gain at the historic annual pace of 3 percent..." He's probably wrong on the magnitude by a measure of three or four times. Residential real estate likely has 15-20% more to decline. As to his predicted annual growth pace of 3%, it's already well-established that home prices normally rise by about one per cent, not triple that.
Somebody ought to hand Zandi a golden parachute and shove him off a skyscraper so he can stop deluding himself that he's making sense. After all, he does work for one of the rating agencies which said all that toxic, sub-prime, re-packaged, securitized mortgage garbage was AAA-rated. The guy ought to be in jail rather than on CNBC.
The upshot is that the banks have such a monster of a problem on their hands that they and the courts cannot handle it in a reasonably timely manner. The absolute implosion of the US housing market has left a crater in the economy the size of Rush Limbaugh's ego, and that's enormous. The basic paradigm for buying a house these days is to offer 30% below the asking price, and see how badly the owners - either a bank or a homeowner or a combination of both - want out of it.
Then try and get a mortgage. A million more laughs.
The glut of homes - unoccupied, unrented, in need of repair, under-water financially - is mammoth and everywhere. Count on a minimum of three and probably more like five more years of pain, price declines and associated nonsense about finding "the bottom," which will only be reached when the banks realize that it's not worth their time or expense to pursue further exposure and foreclosures and they become the party which "walks away." When the banks no longer want the properties, no longer feel there's any gain in bleeding consumers dry with fees and interest, and the property taxes, maintenance and insurance exceed what they can hope to recover on unsold inventory, there will be a bottom, and it's going to be one heck of a lot lower and a heck of a lot further out than most people anticipate.
Too many houses at prices too many people can't afford. Simple math.
Following are the promised quotes. Have a lovely weekend.
"I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs."
-- Thomas Jefferson, (Attributed)
3rd president of US (1743 - 1826)
"Permit me to issue and control the money of a nation, and I care not who makes its laws."
-- Mayer Amschel Rothschild
"Income tax is nothing but wage slavery. If you have payroll deductions, you are a slave. Only way to fix it is for everyone to quit, or, as in Europe, the whole nation goes on strike. It won't happen here. Americans are too stupid and too frightened by their own government. I am not. I could care less. Let them come and take my house and my belongings. I will start over, stronger. I love this country, but I hate the people who run it."
-- Ed.
Label:
housing,
Moody's,
options,
Thomas Jefferson,
Volume
Thursday, July 01, 2010
ISM Data, Home Sales Rattle Markets: Deflation Clearly Evident
The relentless slide in the markets continued on Thursday as the series of data releases evidencing poor economic performance across the entire global swath of markets added even more dour numbers.
Prior to the opening bell, the government-affiliated PMI for China fell to 52.1 in June from 53.9 in May and 55.7 in April, and the HSBC China Manufacturing PMI fell to 50.4 in June from 52.7 in May. HSBC reports their figure the lowest in a year, even though readings over 50 do indicate expansion.
First time unemployment claims came in at 472,000, a rise above the prior week's revised reading of 459,000 new claimants.
Once markets were open for trading, matters turned even worse when the US ISM Index dropped to 52.6 in June from 59.7 in May and pending home sales registered a 30% decline month-over-month.
Revealing in the ISM data was the 20.5% decline in prices. Overall, production slipped 5.2% and new orders were off 7.2%.
Much of the decline in housing starts was credited to the end of the government's tax credit on home purchases in April, but the 30% decline was more than twice what was expected, sending the index to an all-time low of 77.6 from a reading of 110.9 in April. The index is also is 15.9% below the May 2009 figure.
Stocks plunged when that disastrous duo came off the news wires, with the Dow quickly plummeting to its intra-day low of 9,621.89, with other indices following the path lower.
Markets tore through all levels of support, but regained composure midday and closed with relatively minor losses.
But serious technical damage had been done this day, as in days past. Concern over the shaky health of the US economy continued to dog investors at every turn and tomorrow's release of non-farms payroll from June hasn't offered much hope, though many are wondering whether or not the market is seriously oversold and the impact of the employment data already factored into prices.
More than likely, that is not the case, but rather the market was guided by insiders on the short side of many trades, covering today and re-instituting positions in anticipation of a tepid report before the beginning of Friday's trade. while that may seem cynical to some, it's how the market has been running for some time. It's a big boy's game and small investors do not stand a chance.
Unless, by some miracle of accounting, the government shows 50,000 or more private sector jobs created over the month just past, the markets are on course for one of their worst weeks in quite some time.
Dow 9,732.53, -41.49 (0.42%)
NASDAQ 2,101.36, -7.88 (0.37%)
S&P 500 1,027.37, -3.34 (0.32%)
NYSE Composite 6,462.03, -7.62 (0.12%)
Giving more credence to the bearish camp, decliners outstripped advancers by an unhealthy margin, 4052-2496, and new lows ramped past new highs, 439-101, the third straight day in which the lows have buried the highs and the largest margin of the three. Volume was also very heavy, the best showing of the week.
NASDAQ Volume 2,678,066,750
NYSE Volume 7,533,900,500
Today's sudden decline caused liquidation and winding down of many trades, particularly in the highly-hedged commodity arena. Oil saw its worst price decline in at least three months, losing $2.68, to $72.95. Gold was completely devastated, dropping $39.00, to $1,206.30 and even further - below $1200 - after the NY close. Silver also disappointed, dropping 91 cents (4.88%), to $17.76. Prices for the precious metals fell to levels not seen in over a month.
Continued weakness in global markets continue to stir fears of widening deflationary trends, particularly worrisome to those who carry heavy debt burdens, such as almost all government entities, hedge funds, banks and other financial institutions.
Global deflation, begun in earnest in August 2007, continues to gain momentum and shake existing financial infrastruture.
Prior to the opening bell, the government-affiliated PMI for China fell to 52.1 in June from 53.9 in May and 55.7 in April, and the HSBC China Manufacturing PMI fell to 50.4 in June from 52.7 in May. HSBC reports their figure the lowest in a year, even though readings over 50 do indicate expansion.
First time unemployment claims came in at 472,000, a rise above the prior week's revised reading of 459,000 new claimants.
Once markets were open for trading, matters turned even worse when the US ISM Index dropped to 52.6 in June from 59.7 in May and pending home sales registered a 30% decline month-over-month.
Revealing in the ISM data was the 20.5% decline in prices. Overall, production slipped 5.2% and new orders were off 7.2%.
Much of the decline in housing starts was credited to the end of the government's tax credit on home purchases in April, but the 30% decline was more than twice what was expected, sending the index to an all-time low of 77.6 from a reading of 110.9 in April. The index is also is 15.9% below the May 2009 figure.
Stocks plunged when that disastrous duo came off the news wires, with the Dow quickly plummeting to its intra-day low of 9,621.89, with other indices following the path lower.
Markets tore through all levels of support, but regained composure midday and closed with relatively minor losses.
But serious technical damage had been done this day, as in days past. Concern over the shaky health of the US economy continued to dog investors at every turn and tomorrow's release of non-farms payroll from June hasn't offered much hope, though many are wondering whether or not the market is seriously oversold and the impact of the employment data already factored into prices.
More than likely, that is not the case, but rather the market was guided by insiders on the short side of many trades, covering today and re-instituting positions in anticipation of a tepid report before the beginning of Friday's trade. while that may seem cynical to some, it's how the market has been running for some time. It's a big boy's game and small investors do not stand a chance.
Unless, by some miracle of accounting, the government shows 50,000 or more private sector jobs created over the month just past, the markets are on course for one of their worst weeks in quite some time.
Dow 9,732.53, -41.49 (0.42%)
NASDAQ 2,101.36, -7.88 (0.37%)
S&P 500 1,027.37, -3.34 (0.32%)
NYSE Composite 6,462.03, -7.62 (0.12%)
Giving more credence to the bearish camp, decliners outstripped advancers by an unhealthy margin, 4052-2496, and new lows ramped past new highs, 439-101, the third straight day in which the lows have buried the highs and the largest margin of the three. Volume was also very heavy, the best showing of the week.
NASDAQ Volume 2,678,066,750
NYSE Volume 7,533,900,500
Today's sudden decline caused liquidation and winding down of many trades, particularly in the highly-hedged commodity arena. Oil saw its worst price decline in at least three months, losing $2.68, to $72.95. Gold was completely devastated, dropping $39.00, to $1,206.30 and even further - below $1200 - after the NY close. Silver also disappointed, dropping 91 cents (4.88%), to $17.76. Prices for the precious metals fell to levels not seen in over a month.
Continued weakness in global markets continue to stir fears of widening deflationary trends, particularly worrisome to those who carry heavy debt burdens, such as almost all government entities, hedge funds, banks and other financial institutions.
Global deflation, begun in earnest in August 2007, continues to gain momentum and shake existing financial infrastruture.
Label:
deflation,
housing,
ISM,
New lows,
pending home sales
Tuesday, April 13, 2010
Greece Gets Great Loans; Talbot's a Loser; Stocks Tack on More Gains
If anybody out there can offer advice on how to write the same story 33 different ways, I'll be your first subscriber, because that has been my primary task since February 8, the date of the last interim bottom on the Dow.
While the index hasn't been going straight up, it often seems that way, as, over the span of the past 44 trading days, the Dow has advanced 33 of them. That's a 3-1 ratio of up days over down, and a winning investing formula in anyone's book. I admit, due to my disbelief in the overall economic recovery that everyone keeps talking about but nobody sees, to have completely missed this 1100+ point rally.
That's my fault, but I'm also not about to jump in at these seemingly inflated levels, either. I remain steadfastly, stubbornly, in cash, and it's not a matter of wanting to catch the next low, because I probably won't be investing in stocks for the next few years, at least not US stocks.
Today was more of the broken record variety of days on the Street. Stocks were up, though not by much. Earnings are beginning to trickle into investor equations, with Alcoa (AA) announcing earnings in line with forecasts on Monday at 10 cents per share in the 1st quarter on revenue of $4.9 billion, lower than consensus estimates of $5.24 billion.
After the closing bell today, Intel (INTC) announced 1st quarter results of 43 cents per share, beating the street consensus of 38 cents. Revenue for the chip giant was $10.3 billion, on expectations of $9.84 billion.
Earnings season is off to a good start. Even a company like Talbot's showed a profit of 7 cents per share, even better if you exclude one-time items (Why not? It's a party!). The women's retailer then shows 13 cents per share.
The company had been on the brink of failure, but has redefined itself over the past two years. Still, it's profit was a mere $4.1 million for the quarter, but shares rose significantly due to the amount of short interest. Selling at nearly $15 per share, investors are taking a pretty heavy risk with Talbot's. The company shows negative return on equity, virtually no growth, a p/e of 27 and nearly a half billion dollars in debt. That debt burden alone is enough to keep heavy volume investors away and the shorts making their downside bets.
Talbot's looks a lot like the nation of Greece, which should be the subject of some focus due to the favorable loans it secured from the EU and IMF. Greece will be able to finance its debts at around 5%, or about 100-120 basis points below market rates. The unusually-generous terms have been applied because all of the European finance ministers understand that a Greek default would likely have a severe domino effect on countries like Portugal, Italy, Ireland and Spain. The stronger nations, especially Germany, would likewise be affected, either having to underwrite immense losses or suffer a collapse of its own economy or the Euro.
While a decoupling from the Euro might be the very best thing for the Germans and the continent as a whole, scrapping the entire Euro project has not been something widely anticipated, though it could very well happen within the next 2-3 years. The Southern countries aren't nearly as industrious as their Northern neighbors, and the German populace isn't taking kindly to the concept of bailing out countries which cannot manage their internal budgets. Giving Greece better terms than the very best borrowers, when they are, in fact, sub-prime, at best, reeks of the kind of unfair "picking winners" that was a hallmark of the infamous bank bailouts in the US.
With Greece, failure is being rewarded. With Talbot's, failure has only been delayed. The losers will be the investors who could not judge the risk, as it should be.
Dow 11,019.42, +13.45 (0.12%)
NASDAQ 2,465.99, +8.12 (0.33%)
S&P 500 1,197.30, +0.82 (0.07%)
NYSE Composite 7,638.35, -3.40 (0.04%)
Volume was a little bit perkier than normal, possibly owing to options expiration on Friday or the flood of earnings announcements due out over the next two weeks. Advancing issues outnumbered losers, though marginally, 3362-3108. New highs bettered new lows, 646-50.
NYSE Volume 5,806,878,000
NASDAQ Volume 2,557,582,750
As oil dropped for the fifth straight day, CNN Money ran this headline, Oil declines on oversupply worries. All we can say, after watching naked speculation take the price above $87 last week is, "no kidding?" Crude dropped another 29 cents, to $84.05 on the day, which is still $20-35 above where it should be. The oil speculators are so concerned about keeping the price this high due to imminent, continuing threats of production cuts by the oil-rich nations of the mid-East. Their economies are teetering on insolvency and a price of at least $80 per barrel is needed to keep them current on payments. Eventually, somebody's going to see the light and force the price lower, despite the economic realities facing the royal Suadis and other potentates in the region. Maybe Russia.
Gold dropped $8.80, to $1,152.80, while silver slid 16 cents to $18.24. Once again, the metals are unable to break out to new highs, for reasons that should, by now, be pretty obvious to everyone.
Where are the jobs, and how about that housing market?
While the index hasn't been going straight up, it often seems that way, as, over the span of the past 44 trading days, the Dow has advanced 33 of them. That's a 3-1 ratio of up days over down, and a winning investing formula in anyone's book. I admit, due to my disbelief in the overall economic recovery that everyone keeps talking about but nobody sees, to have completely missed this 1100+ point rally.
That's my fault, but I'm also not about to jump in at these seemingly inflated levels, either. I remain steadfastly, stubbornly, in cash, and it's not a matter of wanting to catch the next low, because I probably won't be investing in stocks for the next few years, at least not US stocks.
Today was more of the broken record variety of days on the Street. Stocks were up, though not by much. Earnings are beginning to trickle into investor equations, with Alcoa (AA) announcing earnings in line with forecasts on Monday at 10 cents per share in the 1st quarter on revenue of $4.9 billion, lower than consensus estimates of $5.24 billion.
After the closing bell today, Intel (INTC) announced 1st quarter results of 43 cents per share, beating the street consensus of 38 cents. Revenue for the chip giant was $10.3 billion, on expectations of $9.84 billion.
Earnings season is off to a good start. Even a company like Talbot's showed a profit of 7 cents per share, even better if you exclude one-time items (Why not? It's a party!). The women's retailer then shows 13 cents per share.
The company had been on the brink of failure, but has redefined itself over the past two years. Still, it's profit was a mere $4.1 million for the quarter, but shares rose significantly due to the amount of short interest. Selling at nearly $15 per share, investors are taking a pretty heavy risk with Talbot's. The company shows negative return on equity, virtually no growth, a p/e of 27 and nearly a half billion dollars in debt. That debt burden alone is enough to keep heavy volume investors away and the shorts making their downside bets.
Talbot's looks a lot like the nation of Greece, which should be the subject of some focus due to the favorable loans it secured from the EU and IMF. Greece will be able to finance its debts at around 5%, or about 100-120 basis points below market rates. The unusually-generous terms have been applied because all of the European finance ministers understand that a Greek default would likely have a severe domino effect on countries like Portugal, Italy, Ireland and Spain. The stronger nations, especially Germany, would likewise be affected, either having to underwrite immense losses or suffer a collapse of its own economy or the Euro.
While a decoupling from the Euro might be the very best thing for the Germans and the continent as a whole, scrapping the entire Euro project has not been something widely anticipated, though it could very well happen within the next 2-3 years. The Southern countries aren't nearly as industrious as their Northern neighbors, and the German populace isn't taking kindly to the concept of bailing out countries which cannot manage their internal budgets. Giving Greece better terms than the very best borrowers, when they are, in fact, sub-prime, at best, reeks of the kind of unfair "picking winners" that was a hallmark of the infamous bank bailouts in the US.
With Greece, failure is being rewarded. With Talbot's, failure has only been delayed. The losers will be the investors who could not judge the risk, as it should be.
Dow 11,019.42, +13.45 (0.12%)
NASDAQ 2,465.99, +8.12 (0.33%)
S&P 500 1,197.30, +0.82 (0.07%)
NYSE Composite 7,638.35, -3.40 (0.04%)
Volume was a little bit perkier than normal, possibly owing to options expiration on Friday or the flood of earnings announcements due out over the next two weeks. Advancing issues outnumbered losers, though marginally, 3362-3108. New highs bettered new lows, 646-50.
NYSE Volume 5,806,878,000
NASDAQ Volume 2,557,582,750
As oil dropped for the fifth straight day, CNN Money ran this headline, Oil declines on oversupply worries. All we can say, after watching naked speculation take the price above $87 last week is, "no kidding?" Crude dropped another 29 cents, to $84.05 on the day, which is still $20-35 above where it should be. The oil speculators are so concerned about keeping the price this high due to imminent, continuing threats of production cuts by the oil-rich nations of the mid-East. Their economies are teetering on insolvency and a price of at least $80 per barrel is needed to keep them current on payments. Eventually, somebody's going to see the light and force the price lower, despite the economic realities facing the royal Suadis and other potentates in the region. Maybe Russia.
Gold dropped $8.80, to $1,152.80, while silver slid 16 cents to $18.24. Once again, the metals are unable to break out to new highs, for reasons that should, by now, be pretty obvious to everyone.
Where are the jobs, and how about that housing market?
Tuesday, February 23, 2010
Real Estate, Low Confidence Crush Stocks
It didn't take long for the market to re-establish some sense of direction after drifting sideways the past two sessions.
Hopes for an economic recovery were dashed with the release of two separate reports. First, at 9:00 am, the monthly S&P/Case-Shiller 20-city index showed an overall 3.2% decline from a year ago. While several cities - San Francisco, San Diego, Denver, Washington, DC and Dallas - showed home prices improving modestly, most of the cities in the survey displayed continued carnage, with the worst being Las Vegas (-20.6%), followed by Tampa (-11.0%), Detroit (-10.3%), Miami (-9.9%) and Seattle, Washington (-7.8%).
Widespread continuing weakness in the real estate market has been attributed to poor underwriting standards during the boom years, 2000-2006, though more and more declining property values are being cited as an effect of worsening unemployment conditions. Foreclosures keep rising without abating in most large cities and even more so in smaller communities which have a less-robust employer base. Even though delinquencies are reported, banks have been reluctant to foreclose, and there's widespread belief that a so-called "shadow inventory" of non-foreclosed and bank owned property still awaits to hit the market with a deadening thud.
Even a small addition of unsold properties reaching various markets over the next six to eighteen months would send real estate prices down even lower, but the quantities may be more of a torrent rather than a trickle. With Fannie Mae and Freddie Mac already in deep trouble, the residential real estate market is looking more and more like a wasteland and less like a "recovering" market.
That report alone was not enough to dampen spirits on Wall Street, as stocks, after opening slightly lower, were up steadily in the early going, until the second blast of negative news reached. When the Conference Board's Consumer Confidence Index for February came in at 46.0, down from 56.5 in January, all hope for a continuation of any rally was lost. Commentators on CNBC and elsewhere were aghast at the "unexpected" decline, mostly by the size of it. The one-month drop of more than 10 points was the most anyone could remember.
Ancillary indices, such as the present situation, also dropped sharply, from 25.2 to 19.4, its lowest level in 27 years. The expectations index declined to 63.8, from 77.3 in January. That was more than enough to send the Dow to a 100-point loss, with the other major indices in tow.
Those two reports brought the bears and bearish analysts out from the woodwork. The sheer number of people expressing negative viewpoints - on TV, radio, the internet and in print - was stunning.
Dow 10,282.41, -100.97 (0.97%)
NASDAQ 2,213.44, -28.59 (1.28%)
S&P 500 1,094.60, -13.41 (1.21%)
NYSE Composite 6,974.60, -103.93 (1.47%)
Declining issues took the edge over advancers, 4457-2057. New highs came back to earth at 202, with only 31 new lows, though, it must be pointed out that these figures are going to be skewed wildly by comparisons to stocks at market bottoms from last year. It won't be until late March or later that the high-low metric will offer much of a reliable glimpse. Volume was a bit better than yesterday's no-show, but there is now likely much more downside risk than in recent days.
NYSE Volume 4,971,602,500
NASDAQ Volume 2,139,569,750
Commodities took it on the chin as well. Crude oil for April delivery, in just the second day of the contract, fell $1.45, to $78.86. Gold lost $10.10, to close at $1,103.00. Silver fell 34 cents, to $15.91.
The onslaught of data today may be just the beginning of poor economic news heading to kill off the incipient rally in equities. While Wall Street may be reveling, most of Main Street is reeling. The persistent and deep declines in prices and markets will leave no asset class untouched, equities and commodities included.
Be aware that stocks could tumble off another cliff at any time without warning. The US and global markets have not made enough real, structural changes and are not yet strong enough to offset the overwhelming deflationary spiral that continues to plague economies from households to cities and states, to entire nations.
In the meantime, could somebody please tell the programming executives at CNBC that curling has to be the most uninteresting, boring, exasperatingly dull event to ever be afforded significant air time? Enough, already!
Hopes for an economic recovery were dashed with the release of two separate reports. First, at 9:00 am, the monthly S&P/Case-Shiller 20-city index showed an overall 3.2% decline from a year ago. While several cities - San Francisco, San Diego, Denver, Washington, DC and Dallas - showed home prices improving modestly, most of the cities in the survey displayed continued carnage, with the worst being Las Vegas (-20.6%), followed by Tampa (-11.0%), Detroit (-10.3%), Miami (-9.9%) and Seattle, Washington (-7.8%).
Widespread continuing weakness in the real estate market has been attributed to poor underwriting standards during the boom years, 2000-2006, though more and more declining property values are being cited as an effect of worsening unemployment conditions. Foreclosures keep rising without abating in most large cities and even more so in smaller communities which have a less-robust employer base. Even though delinquencies are reported, banks have been reluctant to foreclose, and there's widespread belief that a so-called "shadow inventory" of non-foreclosed and bank owned property still awaits to hit the market with a deadening thud.
Even a small addition of unsold properties reaching various markets over the next six to eighteen months would send real estate prices down even lower, but the quantities may be more of a torrent rather than a trickle. With Fannie Mae and Freddie Mac already in deep trouble, the residential real estate market is looking more and more like a wasteland and less like a "recovering" market.
That report alone was not enough to dampen spirits on Wall Street, as stocks, after opening slightly lower, were up steadily in the early going, until the second blast of negative news reached. When the Conference Board's Consumer Confidence Index for February came in at 46.0, down from 56.5 in January, all hope for a continuation of any rally was lost. Commentators on CNBC and elsewhere were aghast at the "unexpected" decline, mostly by the size of it. The one-month drop of more than 10 points was the most anyone could remember.
Ancillary indices, such as the present situation, also dropped sharply, from 25.2 to 19.4, its lowest level in 27 years. The expectations index declined to 63.8, from 77.3 in January. That was more than enough to send the Dow to a 100-point loss, with the other major indices in tow.
Those two reports brought the bears and bearish analysts out from the woodwork. The sheer number of people expressing negative viewpoints - on TV, radio, the internet and in print - was stunning.
Dow 10,282.41, -100.97 (0.97%)
NASDAQ 2,213.44, -28.59 (1.28%)
S&P 500 1,094.60, -13.41 (1.21%)
NYSE Composite 6,974.60, -103.93 (1.47%)
Declining issues took the edge over advancers, 4457-2057. New highs came back to earth at 202, with only 31 new lows, though, it must be pointed out that these figures are going to be skewed wildly by comparisons to stocks at market bottoms from last year. It won't be until late March or later that the high-low metric will offer much of a reliable glimpse. Volume was a bit better than yesterday's no-show, but there is now likely much more downside risk than in recent days.
NYSE Volume 4,971,602,500
NASDAQ Volume 2,139,569,750
Commodities took it on the chin as well. Crude oil for April delivery, in just the second day of the contract, fell $1.45, to $78.86. Gold lost $10.10, to close at $1,103.00. Silver fell 34 cents, to $15.91.
The onslaught of data today may be just the beginning of poor economic news heading to kill off the incipient rally in equities. While Wall Street may be reveling, most of Main Street is reeling. The persistent and deep declines in prices and markets will leave no asset class untouched, equities and commodities included.
Be aware that stocks could tumble off another cliff at any time without warning. The US and global markets have not made enough real, structural changes and are not yet strong enough to offset the overwhelming deflationary spiral that continues to plague economies from households to cities and states, to entire nations.
In the meantime, could somebody please tell the programming executives at CNBC that curling has to be the most uninteresting, boring, exasperatingly dull event to ever be afforded significant air time? Enough, already!
Thursday, January 28, 2010
Stocks Continue Taking It on the Chin
Today's market - no, check that, the past two weeks - have been similar to watching an overmatched heavyweight slogging through the late rounds of a fight. The stumbling, grasping hulk is doing everything he can to stay on his feet, but his opponent, peppering him with body shots and head blows, is wearing him down, and eventually, that's where he's going: down to the mat for a long rest.
After a stirring speech by President Obama in the State of the Union Wednesday night, there were ample amounts of optimism, though not enough to lift stocks off the break even mark at the open. Jobless claims once again disappointed, and durable goods orders, which were expected to grow by as much as 2% in December, came in at a feeble 0.3%, giving even more credence to the thinking that the nascent recovery is giving way to larger pressures.
The deflationary cycle will not relent. Consumers aren't spending, which means companies won't hire, which will eventually be reflected in slower sales, weaker earnings and potentially even more job losses. Unemployment continues to be the weight on the economy, though housing isn't far behind.
Just an anecdotal reference from my vantage point bears reflection on where housing prices are headed. Three months ago, here in an upstate New York suburb, I searched the local multiple listing service site for homes under $90,000, and found four. Now, this is a relatively modest area, which wasn't damaged by the ups and downs of the housing boom and subsequent bust. Prices remained fairly stable throughout the years from 2003-2009. However, when I checked the same reference with the same parameters, my search showed 49 properties under $90,000, a 10-fold increase since late October, with the lowest price coming in at $36,500.
I was absolutely stunned to see so many properties around me at such low prices. In many cases, the property taxes would exceed the monthly mortgage payment on a 30-year fixed rate loan at 5.5%. I can only imagine the number of bank-owned properties that are being kept off the market (the so-called "shadow inventory") and the heartache and pain many of my neighbors are suffering.
With real estate in such a dreadful condition, if the stock market takes an extended dive - which it appears to be doing - many more families are going to be hurt, especially those with kids in college or nearing retirement. Their two great stores of value - their home and their retirement savings - are both losing value simultaneously, an unsustainable condition.
America sits on the precipice of a grand collapse and there aren't many people offering solutions, especially in Washington, where the fight is mostly political. It's almost comical to watch the daily panorama of posturing from a detached position; who in their right mind would want to be in a political position of power at this juncture? Maybe politicians are all just closet masochists, waiting to be flogged by an angry populace.
Wall Street seems to have noticed. Over the last seven sessions, the Dow has dropped 605 points, or nearly 5%. If the downdraft turns into a full-blown correction - a likely scenario - another 8-15% could be shaved off in short order, bringing the Dow not only back below the 10,000 mark, but even below 9000, a place where fear and panic both reside. It just doesn't look very pretty right now.
Dow 10,120.46, -115.70 (1.13%)
NASDAQ 2,179.00, -42.41 (1.91%)
S&P 500 1,084.53, -12.97 (1.18%)
NYSE Composite 6,956.99, -78.62 (1.12%)
Declining issues easily outdistanced gainers, 4690-1826. New highs remained modestly ahead of new lows, 131-79. Volume was strong.
NYSE Volume 6,385,494,500
NASDAQ Volume 2,906,497,750
Commodities were steady, after a few weeks of declines. Oil gained 11 cents, to $73.75; gold lost $1.20, to $1,084.50; silver finished at 16.21, down 23 cents on the day.
Friday offers the first government estimate on 4th quarter GDP, at 8:30 am, prior the the opening bell. experts are looking for gains of 4.7% to 6.8% over last year. The projects may appear overly optimistic, and may well be, but, then again, the final quarter of 2008 was one of the worst in years. Some improvement is surely there in the economy, the larger question is whether it will last.
After a stirring speech by President Obama in the State of the Union Wednesday night, there were ample amounts of optimism, though not enough to lift stocks off the break even mark at the open. Jobless claims once again disappointed, and durable goods orders, which were expected to grow by as much as 2% in December, came in at a feeble 0.3%, giving even more credence to the thinking that the nascent recovery is giving way to larger pressures.
The deflationary cycle will not relent. Consumers aren't spending, which means companies won't hire, which will eventually be reflected in slower sales, weaker earnings and potentially even more job losses. Unemployment continues to be the weight on the economy, though housing isn't far behind.
Just an anecdotal reference from my vantage point bears reflection on where housing prices are headed. Three months ago, here in an upstate New York suburb, I searched the local multiple listing service site for homes under $90,000, and found four. Now, this is a relatively modest area, which wasn't damaged by the ups and downs of the housing boom and subsequent bust. Prices remained fairly stable throughout the years from 2003-2009. However, when I checked the same reference with the same parameters, my search showed 49 properties under $90,000, a 10-fold increase since late October, with the lowest price coming in at $36,500.
I was absolutely stunned to see so many properties around me at such low prices. In many cases, the property taxes would exceed the monthly mortgage payment on a 30-year fixed rate loan at 5.5%. I can only imagine the number of bank-owned properties that are being kept off the market (the so-called "shadow inventory") and the heartache and pain many of my neighbors are suffering.
With real estate in such a dreadful condition, if the stock market takes an extended dive - which it appears to be doing - many more families are going to be hurt, especially those with kids in college or nearing retirement. Their two great stores of value - their home and their retirement savings - are both losing value simultaneously, an unsustainable condition.
America sits on the precipice of a grand collapse and there aren't many people offering solutions, especially in Washington, where the fight is mostly political. It's almost comical to watch the daily panorama of posturing from a detached position; who in their right mind would want to be in a political position of power at this juncture? Maybe politicians are all just closet masochists, waiting to be flogged by an angry populace.
Wall Street seems to have noticed. Over the last seven sessions, the Dow has dropped 605 points, or nearly 5%. If the downdraft turns into a full-blown correction - a likely scenario - another 8-15% could be shaved off in short order, bringing the Dow not only back below the 10,000 mark, but even below 9000, a place where fear and panic both reside. It just doesn't look very pretty right now.
Dow 10,120.46, -115.70 (1.13%)
NASDAQ 2,179.00, -42.41 (1.91%)
S&P 500 1,084.53, -12.97 (1.18%)
NYSE Composite 6,956.99, -78.62 (1.12%)
Declining issues easily outdistanced gainers, 4690-1826. New highs remained modestly ahead of new lows, 131-79. Volume was strong.
NYSE Volume 6,385,494,500
NASDAQ Volume 2,906,497,750
Commodities were steady, after a few weeks of declines. Oil gained 11 cents, to $73.75; gold lost $1.20, to $1,084.50; silver finished at 16.21, down 23 cents on the day.
Friday offers the first government estimate on 4th quarter GDP, at 8:30 am, prior the the opening bell. experts are looking for gains of 4.7% to 6.8% over last year. The projects may appear overly optimistic, and may well be, but, then again, the final quarter of 2008 was one of the worst in years. Some improvement is surely there in the economy, the larger question is whether it will last.
Label:
housing,
Obama,
unemployment,
unemployment claims
Tuesday, March 03, 2009
Weary Market Stuck on Red
Stocks zig-zagged across the unchanged line on Tuesday, with investors assessing the damage from Monday's drama.
There were equal amounts of bargain-hunting and hand-wringing as the major indices registers small losses, but overall, there was no good new upon which to launch any meaningful rally.
Housing data - which crossed the wires at 10:00 am - sparked more selling, as the numbers were far worse than even the most dismal expectations. New home sales for January fell 7.7%; construction spending dropped 3.3% for the same period.
Following those figures were numbers from the major auto makers, which posted the worst sales declines since the economy began to really sour in September of 2008.
Compared to the same period one year ago, General Motors (GM) said their light-vehicle sales dropped 53% in February, while Ford's declined 48%, with Toyota posting a 40% drop.
Ford's car sales dropped 48%, with sport-utility vehicles off a whopping 71%. Toyota's car sales fell 36%; GM's were off 50%.
Apparently, traders were too worn out from Monday's rout to engage in yet another sell-off session.
Dow 6,726.02, -37.27 (0.55%)
NASDAQ 1,321.01, -1.84 (0.14%)
S&P 500 696.33, -4.49 (0.64%)
NYSE Composite 4,334.70, -26.28 (0.60%)
Declining issues outweighed advancers, 4274-2343. New lows continued to dominate over new highs, as investors continued shedding outright losers, 1512-15. Volume was still very high, despite the minor movement in the market.
NYSE Volume 1,825,373,000
NASDAQ Volume 2,368,833,000
Oil gained $1.50, to $41.65. Gold tumbled $26.40, to 913.60; silver continued to correct, down 36 cents, at $12.72.
In another note on what I have coined the Post-Government Era, Pat Buchanan recently penned an interestingly-titled essay in which he correctly points out just how brutally federal, state and local taxes are bearing down on working, productive Americans. Mr. Buchanan fails to cross the line - in Pitchfork Time - from conjecture to the outright rebellion the title suggests, placing most of the blame on President Obama's budget proposal rather than rightfully on the monstrous policy decisions at every level of government over the course of the past 30 years.
While Buchanan may be stirring up the spirits of rebellion, he's dead on when it comes to the issue of taxation. Americans are being taxed out of their jobs, homes and security, though this condition has been existent for many years.
The current economic climate has only recently awakened the slumbering US middle class, though by many accounts, it's already too late.
Dow components finished with 17 up and 13 down. All the major indices extended their nearly 12-year lows.
There were equal amounts of bargain-hunting and hand-wringing as the major indices registers small losses, but overall, there was no good new upon which to launch any meaningful rally.
Housing data - which crossed the wires at 10:00 am - sparked more selling, as the numbers were far worse than even the most dismal expectations. New home sales for January fell 7.7%; construction spending dropped 3.3% for the same period.
Following those figures were numbers from the major auto makers, which posted the worst sales declines since the economy began to really sour in September of 2008.
Compared to the same period one year ago, General Motors (GM) said their light-vehicle sales dropped 53% in February, while Ford's declined 48%, with Toyota posting a 40% drop.
Ford's car sales dropped 48%, with sport-utility vehicles off a whopping 71%. Toyota's car sales fell 36%; GM's were off 50%.
Apparently, traders were too worn out from Monday's rout to engage in yet another sell-off session.
Dow 6,726.02, -37.27 (0.55%)
NASDAQ 1,321.01, -1.84 (0.14%)
S&P 500 696.33, -4.49 (0.64%)
NYSE Composite 4,334.70, -26.28 (0.60%)
Declining issues outweighed advancers, 4274-2343. New lows continued to dominate over new highs, as investors continued shedding outright losers, 1512-15. Volume was still very high, despite the minor movement in the market.
NYSE Volume 1,825,373,000
NASDAQ Volume 2,368,833,000
Oil gained $1.50, to $41.65. Gold tumbled $26.40, to 913.60; silver continued to correct, down 36 cents, at $12.72.
In another note on what I have coined the Post-Government Era, Pat Buchanan recently penned an interestingly-titled essay in which he correctly points out just how brutally federal, state and local taxes are bearing down on working, productive Americans. Mr. Buchanan fails to cross the line - in Pitchfork Time - from conjecture to the outright rebellion the title suggests, placing most of the blame on President Obama's budget proposal rather than rightfully on the monstrous policy decisions at every level of government over the course of the past 30 years.
While Buchanan may be stirring up the spirits of rebellion, he's dead on when it comes to the issue of taxation. Americans are being taxed out of their jobs, homes and security, though this condition has been existent for many years.
The current economic climate has only recently awakened the slumbering US middle class, though by many accounts, it's already too late.
Dow components finished with 17 up and 13 down. All the major indices extended their nearly 12-year lows.
Label:
auto sales,
Ford,
GM,
housing,
silver
Friday, January 30, 2009
January Barometer Predicts Down Year
For all of the optimism associated with a 3-or-4-day winning streak (depending on the index) and a big upside day on Wednesday, it may come as somewhat of a surprise to some that the major US equity indices all ended the week with losses.
The widely-watched Dow Jones Industrial Average tacked on more losses to Thursday's massive beat-down in Friday's one-sided trade, sending the index into negative ground, down 77 points for the week. The NASDAQ fared better, down less than a point since last Friday. The S&P 500 gave back 6 points, while the NYSE Composite finished higher by a slim 0.28 points.
Were the markets stabilizing? Hardly. Investors not only had to navigate through a slew of 4th quarter and full year 2008 earnings reports, but the stew of demoralizing economic reports continued in deluge fashion. There were some hopeful signs - like the government's initial estimate of 4th quarter '08 GDP posting a decline of 3.8% (better than estimates) - but not enough to keep serious money on the sidelines or increasingly heading toward bonds and precious metals.
Dow 8,000.86, -148.15 (1.82%)
NASDAQ 1,476.42, -31.42 (2.08%)
S&P 500 825.88, -19.26 (2.28%)
NYSE Composite 5,195.83, -105.07 (1.98%)
Also, the averages are not showing any signs of making upside progress. Since the fallout of November 20, they have recovered slightly, but mostly went sideways.
This being the final trading day of January, it should come as no comfort that the January Barometer is clearly indicating a down year for stocks in 2009, with all major indices closing the month anywhere from 7 to 9% lower than they had begun. Based on the adage "as goes January, so goes the year," the January Barometer has as solid a track record as any simple indicator, with accuracy in the range of upwards of 80%, depending on which sources are cited.
The day's internals were as unappealing as the headline numbers. Declining issues outflanked advancers, 4558-1903. There were more new lows than new highs, 253-12. This is the most troubling of all indicators, due entirely to its persistence. There have been only a handful of days where this condition did not persist - i.e., more new lows than highs in the daily data - since I have been tracking it since October 31, 2007. This is a 15-month, one-sided trend that has always declared general direction.
Of course, this was the natural conclusion of a 54 or 58-week bull market from 2003-2007 - one of the longest in history - built mostly on bad investments, incompetent fiscal policy, absence of regulations and general thievery. That's why the correction has been so severe. The foundation of the previous bull was built on sand.
Volume was as strong on Friday as it was on Tuesday's 200-point Dow rally, which also is not encouraging for stocks. Not to worry, the same kind of serious correction is occurring around the globe.
NYSE Volume 1,500,684,000
NASDAQ Volume 2,108,279,000
Commodities were the place to be. Crude oil was up 24 cents, to $41.68, though natural gas futures fell to $4.39, an obviator of oversupply. Gold zipped ahead $21.90, to $928.40, a multi-week high. Silver advanced 42 cents, to $12.57, making silver no longer a bargain and possibly short-term oversold, though it may be risky to rest on that assumption.
Employment and housing continue to be the main trouble spots in the economy, and those areas are likely to continue to deteriorate until there's some real relief for the middle class in government policy, namely, immediate tax relief via relaxed withholding, though our pals in Washington don't seem to like that idea. Since asking for a government wage and spending freeze would likely be too much, I won't bother to ask for actual spending cuts. The so-called "leaders" of our age are proving to be among the most incompetent bunch in history (unless you buy the conspiracy side of the argument for "big government"), unable to manage affairs of state effectively.
The world will wait while Washington winces, whines and wails. That's unfortunate because people must move on towards an improved existence. It is the history of civilization and should not be short-circuited by failures of financial creations.
To replace the broken models of the past, new ideas must be developed .
The widely-watched Dow Jones Industrial Average tacked on more losses to Thursday's massive beat-down in Friday's one-sided trade, sending the index into negative ground, down 77 points for the week. The NASDAQ fared better, down less than a point since last Friday. The S&P 500 gave back 6 points, while the NYSE Composite finished higher by a slim 0.28 points.
Were the markets stabilizing? Hardly. Investors not only had to navigate through a slew of 4th quarter and full year 2008 earnings reports, but the stew of demoralizing economic reports continued in deluge fashion. There were some hopeful signs - like the government's initial estimate of 4th quarter '08 GDP posting a decline of 3.8% (better than estimates) - but not enough to keep serious money on the sidelines or increasingly heading toward bonds and precious metals.
Dow 8,000.86, -148.15 (1.82%)
NASDAQ 1,476.42, -31.42 (2.08%)
S&P 500 825.88, -19.26 (2.28%)
NYSE Composite 5,195.83, -105.07 (1.98%)
Also, the averages are not showing any signs of making upside progress. Since the fallout of November 20, they have recovered slightly, but mostly went sideways.
This being the final trading day of January, it should come as no comfort that the January Barometer is clearly indicating a down year for stocks in 2009, with all major indices closing the month anywhere from 7 to 9% lower than they had begun. Based on the adage "as goes January, so goes the year," the January Barometer has as solid a track record as any simple indicator, with accuracy in the range of upwards of 80%, depending on which sources are cited.
The day's internals were as unappealing as the headline numbers. Declining issues outflanked advancers, 4558-1903. There were more new lows than new highs, 253-12. This is the most troubling of all indicators, due entirely to its persistence. There have been only a handful of days where this condition did not persist - i.e., more new lows than highs in the daily data - since I have been tracking it since October 31, 2007. This is a 15-month, one-sided trend that has always declared general direction.
Of course, this was the natural conclusion of a 54 or 58-week bull market from 2003-2007 - one of the longest in history - built mostly on bad investments, incompetent fiscal policy, absence of regulations and general thievery. That's why the correction has been so severe. The foundation of the previous bull was built on sand.
Volume was as strong on Friday as it was on Tuesday's 200-point Dow rally, which also is not encouraging for stocks. Not to worry, the same kind of serious correction is occurring around the globe.
NYSE Volume 1,500,684,000
NASDAQ Volume 2,108,279,000
Commodities were the place to be. Crude oil was up 24 cents, to $41.68, though natural gas futures fell to $4.39, an obviator of oversupply. Gold zipped ahead $21.90, to $928.40, a multi-week high. Silver advanced 42 cents, to $12.57, making silver no longer a bargain and possibly short-term oversold, though it may be risky to rest on that assumption.
Employment and housing continue to be the main trouble spots in the economy, and those areas are likely to continue to deteriorate until there's some real relief for the middle class in government policy, namely, immediate tax relief via relaxed withholding, though our pals in Washington don't seem to like that idea. Since asking for a government wage and spending freeze would likely be too much, I won't bother to ask for actual spending cuts. The so-called "leaders" of our age are proving to be among the most incompetent bunch in history (unless you buy the conspiracy side of the argument for "big government"), unable to manage affairs of state effectively.
The world will wait while Washington winces, whines and wails. That's unfortunate because people must move on towards an improved existence. It is the history of civilization and should not be short-circuited by failures of financial creations.
To replace the broken models of the past, new ideas must be developed .
Label:
employment,
housing,
January Barometer,
New lows
Monday, June 02, 2008
June Swoon: Stocks Tank on Bank Boos
June began about as badly as any month could with the markets battered on all sides, but mostly in the finance/banking areas, as Standard & Poors downgraded the credit ratings of three giant brokerages - Lehman Brothers (LEH), Merrill Lynch (MER) and Morgan Stanley (MS).
Along the way, the ratings agency made sure to revise its ratings on Bank Of America (BAC) and JP Morgan Chase (JPM) to negative, thereby branding the two banks as damaged goods.
Additionally Washington Mutual (WM) and Wachovia (WB) each had their issues, resulting in changes of top management.
It was not a good day to be in the business of banking. Nor was it one to be holding stocks of almost any kind (something I've been repeating often since October of last year). Only frantic buying in the last half hour of trading saved the markets from a complete meltdown.
Dow 12,503.82 -134.50; NASDAQ 2,491.53 -31.13; S&P 500 1,385.67 -14.71; NYSE Composite 9,316.52 -84.56
The Dow, in particular, tested the lows of May 23 (12,479.63), but essentially put in what can only be seen as a double bottom on an intraday basis, at today's low of 12,427. Since the Dow is still below both its 50 and 200-day moving averages, all that can be said of last week's 4-day rally is that it was mostly a mirage. There's little upside to the market considering all the turbulence in the credit markets.
For a change, the commodities markets didn't have much of an impact on equity trading. Oil gained a marginal 41 cents, to 127.76, while gold added $5.50, to $897.00. Silver ended up 5 cents, to $16.91.
The highlight of economic releases was this morning's reading on April construction spending, which was down only 0.4% due to growth of commercial building and multi-housing units, which offset another horrid month in home building. The residential real estate market is still searching for a bottom which is likely to not be reached until sometime during the winter of '08-'09 - and that is still a long way off.
High gas and food prices, a seized-up credit market and continuing foreclosures and bank writedowns, there's really no catalyst for any upside market moves. Any rallies will be met with suspicion and pessimism as the US economy suffers through a deep and long recession, which, according to official figures, hasn't even begun.
The balance of this week is a little light on the economic news front until Friday's Non-Farm Payrolls data for May. Auto and truck sales for May roll out on Tuesday, as do April Factory Orders. After that, just a revision to first quarter productivity on Wednesday and the usual Thursday Unemployment Claims.
The Non-Farms Payroll figure for May should be interesting following the very suspect -20,000 reported for April. The expectations are for a loss of another 50,000 to 60,000 jobs - not what the market needs at this juncture. Even if the report is highly fudged, any rally caused by it will be short-lived as stocks are sure to retest the January and March bottoms.
Best advice is to take some profits here if you have any, and stay out of the markets this week. On Saturday, place a sizable bet on Big Brown to win the Belmont Stakes and complete racing's Triple Crown. He may be close to even money or even 4-5 by post time, but that's a much better return - with a lot less risk - than anything you'll find in US equity markets for now.
NYSE Volume 1,073,309,000
NASDAQ Volume 1,950,997,000
Along the way, the ratings agency made sure to revise its ratings on Bank Of America (BAC) and JP Morgan Chase (JPM) to negative, thereby branding the two banks as damaged goods.
Additionally Washington Mutual (WM) and Wachovia (WB) each had their issues, resulting in changes of top management.
It was not a good day to be in the business of banking. Nor was it one to be holding stocks of almost any kind (something I've been repeating often since October of last year). Only frantic buying in the last half hour of trading saved the markets from a complete meltdown.
Dow 12,503.82 -134.50; NASDAQ 2,491.53 -31.13; S&P 500 1,385.67 -14.71; NYSE Composite 9,316.52 -84.56
The Dow, in particular, tested the lows of May 23 (12,479.63), but essentially put in what can only be seen as a double bottom on an intraday basis, at today's low of 12,427. Since the Dow is still below both its 50 and 200-day moving averages, all that can be said of last week's 4-day rally is that it was mostly a mirage. There's little upside to the market considering all the turbulence in the credit markets.
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On the day, declining issues hammered advancers by a margin of more than 5-2. 4366 stocks were down, while only 1919 ended with gains. New lows finished ahead of new highs, 221-132, but the spread expanded significantly, signaling more losses for the markets ahead.The Path of Substantial Wealth and Riches: Your Parents' Influence on Your Finances
substantialincomes.com
For a change, the commodities markets didn't have much of an impact on equity trading. Oil gained a marginal 41 cents, to 127.76, while gold added $5.50, to $897.00. Silver ended up 5 cents, to $16.91.
The highlight of economic releases was this morning's reading on April construction spending, which was down only 0.4% due to growth of commercial building and multi-housing units, which offset another horrid month in home building. The residential real estate market is still searching for a bottom which is likely to not be reached until sometime during the winter of '08-'09 - and that is still a long way off.
High gas and food prices, a seized-up credit market and continuing foreclosures and bank writedowns, there's really no catalyst for any upside market moves. Any rallies will be met with suspicion and pessimism as the US economy suffers through a deep and long recession, which, according to official figures, hasn't even begun.
The balance of this week is a little light on the economic news front until Friday's Non-Farm Payrolls data for May. Auto and truck sales for May roll out on Tuesday, as do April Factory Orders. After that, just a revision to first quarter productivity on Wednesday and the usual Thursday Unemployment Claims.
The Non-Farms Payroll figure for May should be interesting following the very suspect -20,000 reported for April. The expectations are for a loss of another 50,000 to 60,000 jobs - not what the market needs at this juncture. Even if the report is highly fudged, any rally caused by it will be short-lived as stocks are sure to retest the January and March bottoms.
Best advice is to take some profits here if you have any, and stay out of the markets this week. On Saturday, place a sizable bet on Big Brown to win the Belmont Stakes and complete racing's Triple Crown. He may be close to even money or even 4-5 by post time, but that's a much better return - with a lot less risk - than anything you'll find in US equity markets for now.
NYSE Volume 1,073,309,000
NASDAQ Volume 1,950,997,000
Tuesday, March 13, 2007
Sub-prime Submersion
As noted yesterday, dark clouds appeared over Wall Street in the form of defaulting sub-prime lenders, notably, New Century Financial (NEW), and sent the indices reeling on Tuesday.
New Century, which specialized in sub-prime mortgage loans, said on Monday that it may not be able to meet financial obligations of more than $8 billion. Trading on the shares were halted at 1.66 Monday, a loss of more than 96% from its high of 51.97, reached about a year ago. The stock briefly traded higher than 60 in December 2004. Trading continued to be suspended on the issue throughout Tuesday as the NYSE considered delisting and a criminal probe was initiated.
It was a truly horrible day to own stocks. The Dow, S&P, NASDAQ and NYSE Composite all opened lower and continued selling throughout the session, closing at or near the lows of the day.
Dow 12,075.96 -242.66; NASDAQ 2,350.57 -51.72; S&P 500 1,377.95 -28.65; NYSE Composite 8,926.28 -194.05
According to thestreet.com, shares of Bear Stearns (BSC), Lehman (LEH) and Morgan Stanley (MS) experienced losses of 6% or more on exposure to the bad debts of the beleaguered sub-prime market.
Apparently, the damage from mortgage defaults is more severe than those involved have been letting on. It's been suggested that as many as 25% of sub-prime mortgages initiated between 2003 and early 2006 - at the height of the real estate boom - may result in foreclosure and default.
The fault lies not only in the borrowers, whose desire to own an American home outstripped their ability to pay, but in the lenders, whose shady dealings and unethical practices put people who could scarcely afford them into homes with little or no down payment.
The terms of some of these loans are so onerous as to make normal lenders shriek with horror. Interest only loans with increasing principle were all the rage near the end of the boom. Another contributing factor was the rampant speculation on housing which pushed prices beyond normal affordability.
Real estate prices in some of the more overheated markets, such as Southern California, Washington, D.C., Boston and Florida, will take years to weed out the excesses. Homes that typically were selling in the range of 400,000-500,000 in 2005, today will fetch little more than half that amount, leaving many homeowners upside down - mortgage balances higher than the value of their homes. With unappetizing options of staying put and paying or selling at a loss, there are serious grumblings in suburbia.
Of course, with every loser there is a winner or two. Those homeowners who sold at the top of the market and downsized are likely ahead by tens of thousands of dollars. But there's little to no free cash floating around for investment in stocks, and that's crippling Wall Street today and will have a longer term affect as the housing bust deepens.
As this correction and mortgage blow-up extends, more days like this should be expected. Suburban middle and upper-middle class homeowners with little disposable income is not going to boost the economy. On the heels 4th quarter 2006 GDP growth of merely 2.2%, the 1st quarter of 2007 isn't shaping up to be much better. When economic indicators - like today's stalled retail numbers - begin to show little to no growth or outright declines, the other shoe shall have fallen.
Almost unnoticed amid the carnage was another decline in the price of oil, which lost 98 cents to close at $57.93, its lowest close in 3 weeks. Gold and silver continued their long, slow, clumsy, rangebound trade. Gold ended fixed at 649.40, -0.90. Silver ended the day at 12.96, a loss of 13 cents.
Declining issues outpaced advancing ones by a nearly 5-1 margin, while the measure of new highs to new lows flipped over, an ominous signal going forward. There were a combined 154 new highs to 225 new lows on the NYSE and NASDAQ.
New lows must reach a number beyond 350 before a bottom can even be considered close. We're not there yet. In fact, the Dow is still above the March 5 interim low of 12,039.11. There's more - probably much more - selling to come.
New Century, which specialized in sub-prime mortgage loans, said on Monday that it may not be able to meet financial obligations of more than $8 billion. Trading on the shares were halted at 1.66 Monday, a loss of more than 96% from its high of 51.97, reached about a year ago. The stock briefly traded higher than 60 in December 2004. Trading continued to be suspended on the issue throughout Tuesday as the NYSE considered delisting and a criminal probe was initiated.
It was a truly horrible day to own stocks. The Dow, S&P, NASDAQ and NYSE Composite all opened lower and continued selling throughout the session, closing at or near the lows of the day.
Dow 12,075.96 -242.66; NASDAQ 2,350.57 -51.72; S&P 500 1,377.95 -28.65; NYSE Composite 8,926.28 -194.05
According to thestreet.com, shares of Bear Stearns (BSC), Lehman (LEH) and Morgan Stanley (MS) experienced losses of 6% or more on exposure to the bad debts of the beleaguered sub-prime market.
Apparently, the damage from mortgage defaults is more severe than those involved have been letting on. It's been suggested that as many as 25% of sub-prime mortgages initiated between 2003 and early 2006 - at the height of the real estate boom - may result in foreclosure and default.
The fault lies not only in the borrowers, whose desire to own an American home outstripped their ability to pay, but in the lenders, whose shady dealings and unethical practices put people who could scarcely afford them into homes with little or no down payment.
The terms of some of these loans are so onerous as to make normal lenders shriek with horror. Interest only loans with increasing principle were all the rage near the end of the boom. Another contributing factor was the rampant speculation on housing which pushed prices beyond normal affordability.
Real estate prices in some of the more overheated markets, such as Southern California, Washington, D.C., Boston and Florida, will take years to weed out the excesses. Homes that typically were selling in the range of 400,000-500,000 in 2005, today will fetch little more than half that amount, leaving many homeowners upside down - mortgage balances higher than the value of their homes. With unappetizing options of staying put and paying or selling at a loss, there are serious grumblings in suburbia.
Of course, with every loser there is a winner or two. Those homeowners who sold at the top of the market and downsized are likely ahead by tens of thousands of dollars. But there's little to no free cash floating around for investment in stocks, and that's crippling Wall Street today and will have a longer term affect as the housing bust deepens.
As this correction and mortgage blow-up extends, more days like this should be expected. Suburban middle and upper-middle class homeowners with little disposable income is not going to boost the economy. On the heels 4th quarter 2006 GDP growth of merely 2.2%, the 1st quarter of 2007 isn't shaping up to be much better. When economic indicators - like today's stalled retail numbers - begin to show little to no growth or outright declines, the other shoe shall have fallen.
Almost unnoticed amid the carnage was another decline in the price of oil, which lost 98 cents to close at $57.93, its lowest close in 3 weeks. Gold and silver continued their long, slow, clumsy, rangebound trade. Gold ended fixed at 649.40, -0.90. Silver ended the day at 12.96, a loss of 13 cents.
Declining issues outpaced advancing ones by a nearly 5-1 margin, while the measure of new highs to new lows flipped over, an ominous signal going forward. There were a combined 154 new highs to 225 new lows on the NYSE and NASDAQ.
New lows must reach a number beyond 350 before a bottom can even be considered close. We're not there yet. In fact, the Dow is still above the March 5 interim low of 12,039.11. There's more - probably much more - selling to come.
Label:
Dow,
housing,
Real Estate,
sub-prime lenders
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