Tuesday, August 30, 2011

More bad news, more advances for stocks

The data points continue to whiff but the computers don't care and they bought with two fists today because the S&P held 1200. I made the analogy last night that stocks no longer care about the underlying business activities that they represent. To make that case clear, consider what happened in DELL last week.

"On August 25, 2011 at 15:45:48, in a one second period of time, there were more than 10,000 quotes and exactly zero trades in DELL."

This wasn't a fluke or a mistake, it appears to have been a deliberate move to either prevent price discovery or manipulate price. I don't know about you but I can't type fast enough to place 1 order per second, let alone, place and cancel 10,000 orders per second.

Today's trader buys or sells based on data totally unrelated to what is happening in the economy. This is akin to choosing where to attend college based the ability of the girl's lacrosse team to beat the spread. Making a college selection like that might work for a time but eventually you may realize one day that you are studying Latin at Brown University paying $51.4k/year for that privilege.

Today's consumer confidence number fell to the lowest level since April 2009 (basically the bottom of the market) as a result of shaky markets and the Washington debate which removed any lingering confidence in our political leaders.

"The percent of respondents expecting more jobs to become available in the next six months fell to 11.4, the lowest since March 2009, from 16.9 the previous month. The proportion expecting their incomes to rise over the next six months declined to 14.3 from 15.9. The percent expecting a drop rose to 18.7, the highest since November 2009"

Fact of the day which is of particular interest for those of us in the Northeast:
"The Foreclosure Pipeline in New York is 693 months (over 57 years) and 621 Months (over 51 years) in New Jersey!"

Cheers!

Monday, August 29, 2011

Rally on!!!

To reiterate what I covered on Friday: Ben Bernanke did not outline future easing plans as expected but the market rallied because Goldman (again) said "Well, we think QE3 is still coming". Today we got another raging rally because one failing Greek Bank threw an anchor around the neck of another failing Greek bank. This led to the biggest rally in Greek stocks in 20+ years!!!

All of the news domestically continues to be dismal (Dallas Fed survey was awful) and while the market got excited about retail sales, that data is nearly 2 months old and represents sentiment before the debt debacle in Washington.

An important number that seemed to slip under the radar on Friday was the GDP data. The 4qtr trailing GDP growth rate is now at 1.5%. According to Bloomberg every time this data point has fallen under 2% since 1948 the US has slipped into recession. We'll see if this time it's really different.

Cheers!

Did "The Situation" join the NJ National Guard?

The flooding in many parts of NY, NJ and VT in the wake of Irene was significant and has disrupted life for many throughout the Northeast.

However, this video should make you question the NJ National Guard's ability to rescue you during the next big storm....



The people that filmed the video have noted that there were roads 100 feet away with no water on them, yet they chose to drive down a road with 9 feet of water.

* For the record, I don't know what he/she/it "the situation" is, but I've heard it referenced before in relation to the show Jersey Shore.

Friday, August 26, 2011

Well, we're 0-for-2

It's been a rough morning so far with the GDP revision knocking our economic output in the second quarter down to just 1% and Big Ben Bernanke failing to deliver the QE3 goods that the market was looking for.

Bernanke's speech was actually in line with what he has said in the past and that did not surprise me. However, it feels like someone wants to read between the lines again and goose the market.

If you remember his last major speech was viewed as a disappointment until Goldman decided that he was basically greenlighting QE3. That turned everything on a dime, even though there was no real evidence of that in the Chairman's statements.

Today's initial reaction was a sharp sell-off but again someone outside of the market seems to have interpreted things differently and the market has now gone green. This could be an interesting day.

Cheers!

Thursday, August 25, 2011

Buffett to the rescue again?

Warren Buffett jumped back into financials with both feet today plunking a boatload of cash in the coffers of "we don't need your stinkin capital" Bank of America. The stock popped sharply on the news but subsequently gave up many of those gains. Don't worry about Warren, he's a clever dealmaker and his deal will make money almost regardless of what happens to BofA.

The markets today were hit by the weaker than expected initial jobless claims data even though this data appears to have been skewed by large numbers of striking Verizon workers filing for benefits (am I the only one who did not know you could go on strike AND file for unemployment?). There was a brief rumor of a downgrade pending of Germany that really shook the market around noon. The German DAX tumbled about 4% in 10 minutes before recovering about 1/2 of that loss.

Tomorrow could be very eventful:

Q2 GDP release at 8:30.

Bernanke will reveal QEx tomorrow.

Oh, and NJ is ordering an evacuation of 750,000 residents of Cape May, NYC has cancelled all mass transit on Saturday, Wall Street sits in lower Manhattan which is just 1-4 meters above sea level. I remember a powerful Noreaster in 1990 that washed about 3 feet of water up over the sea wall and Sea Bass were swimming on the aptly named Water St.

It should be interesting!

Wednesday, August 24, 2011

RiverRat Triathlon Sunday 8/28 9am!!

I'm just a bit player on the committee that organizes the Clayton River Rat Triathlon but I'd encourage you all to come out to race, cheer or maybe volunteer this Sunday.

You can check out the full triathlon website here.

We are rapidly approaching our maximum number of participants so I'd suggest registering online by 8/25 or showing up very early on Sunday if you want a spot.

The swim/bike/run transition area is located on the shore of the beautiful St. Lawrence River and offers a great way to be a part of the action. The new finish line this year will take runners down Riverside Drive which should be a great experience.

So grab your cowbell and spend some time in our little corner of the world in Clayton.

Bernanke rally keeps on chugging

At this point fundamentals are clearly out the window and all of the focus is on what words we'll hear from Chairman Bernanke on Friday.

Consider:

* European banks had to borrow more than expected from the European Central Bank.

* The Greek bailout part 2 is showing cracks. 2yr Greek debt is now yielding 44%!!

* Mortgage applications dipped and the purchase index dipped to its lowest level since 1996.

* Miles driven in the US fell 1.4% in June (before the July/August dip and the gov't debacle).

* Philly Fed coincident indicators are turning south.

---- via Calculated Risk.

What is the market looking for? While the focus of the reaction will be the stock market, it's important to watch moves in commodities and the bond market. The current thinking is that the Fed is going to focus on trying to make the following moves:

Lowing 30 year interest rate, raising the 10 yr interest rates which might finally pop the bubble in bonds. This would force people to seek alternative investments....namely stocks.

One point: the interest rate on the 10 year note dictates average mortgage rates. If the Fed is targeting a move to increase these interest rates it will lead to higher mortgage rates and threaten to weaken the shaky real estate market even further.

Tonight gold is under severe pressure again overseas and the news about Steve Jobs is definitely going to hit Apple (but that has to be priced in to some degree). It's worth noting that over 180 hedge funds and numerous pension plans are heavily invested in Apple.

Cheers!

Tuesday, August 23, 2011

No little earthquake can stop this rally!

I'll follow-up with more thoughts tonight but given the sharp rally today when nothing but bad news hit the wires, I thought I should comment.

The market not only expects Ben Bernanke to save the day again at his Jackson Hole speech with promises of more heroi..... I mean, easing, but moves like today show that the market is demanding that Chairman Bernanke do as they say.

There are a number of things that could happen this week:

* We could keep getting 3-4% up days until the speech. At that point most of the benefit of QE3 might be priced in.

* QE3 is not a foregone conclusion and as we get closer people might get more nervous.

Someone pointed out gold fell $60/oz today. If we were going to get more easing gold should be rising, not falling. That's not a good sign for the stock bulls.

Finally, to all of the Californians that are complaining about our coverage of the VA quake - 1) East coast bedrock makes this quake different than yours and 2) Pipe down the next time it rains 0.01" and traffic backs up 10 miles on the 405 :)

Cheers!

Sunday, August 21, 2011

The week ahead

It looks like the Libyan rebels have taken Tripoli but I'm not sure that's any reason to celebrate. Every other country that has had a revolution - Tunisia, Egypt, etc - has struggled to transition to anything resembling a stable government.

There is pretty consistent talk starting to leak from people in the know that the US (and maybe the G-7) needs to embark on ANOTHER giant stimulus program of some sort. The numbers I've seen have been between $1-$2 trillion which seems shockingly aggressive given the bickering that occurred in Washington over cutting about a $1 trillion from the budget.

The most prominent idea seems to be an "infrastructure bank" which was an idea that I was in favor of back in 2007/2008. Prior to the giant bank and auto bailouts and before the explosion of other spending, this idea seemed like a smart way to leverage our shrinking resources. However, after watching the debacle in Washington two weeks ago I don't think there is any appetite to do anything grand like this.

You'll also hear a great deal this week on Chairman Bernanke's upcoming Jackson Hole speech. Last year at this speech Mr. Bernanke leaked QE2 news and sparked a sharp stock rally that continued through November. The market has clearly indicated it wants a similar speech this year.

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I'll let you google it yourself but there's still some interesting news "leaking" out of the Gulf of Mexico re: BP's Deepwater Horizon's rig that was lost last year.

Cheers!

Thursday, August 18, 2011

This is starting to get serious

Today was shaping up to be a fairly weak day in the markets but no one was prepared for the Philly Fed data which pulled the proverbial rug out from under us.


There are so many data points that hit the market every month it's hard to keep track of them all but this is an important bit of data and it wasn't just bad, it was off the charts bad. The last time the number missed expectations like this was over a decade ago. The Philly Fed survey measures business activity in NJ, PA and Delaware. A positive number indicates growth and a negative number indicates contraction. The expectation was for a relatively flat reading but the number reported was -30.7. Since 1960 the Philly Fed number has hit -30 eight times and each time it has forecast the US entering a recession.


This number was such an outlier that I think there may be other factors at play. During the survey period the debt debacle in Washington was fresh in business owners minds and I think that overhang may have skewed the results. Things are looking bleak but I'm not sure they are just that bleak --- yet.

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This is another telling chart of the day. You'll have to excuse the sizing - I can never get these google trend charts to size properly - but the blue line represents searches on Google for "Food Stamps" while the red line represents searches for "pawn shop".

Note that both have spiked in the past 2 months.




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My quote of the day courtesy of Carl Sagan published in 1995:

"Science is more than a body of knowledge; it is a way of thinking.

I have a foreboding of an America in my children’s or grandchildren’s time — when the United States is a service and information economy;

when nearly all the key manufacturing industries have slipped away to other countries;

when awesome technological powers are in the hands of a very few, and no one representing the public interest can even grasp the issues;

when the people have lost the ability to set their own agendas or knowledgeably question those in authority;

when, clutching our crystals and nervously consulting our horoscopes, our critical faculties in decline, unable to distinguish between what feels good and what’s true, we slide, almost without noticing, back into superstition and darkness."

Wow, talk about having a vision of the future of America. Sagan hit the nail on a head in 16 years ago.

Cheers! We all need a strong beverage tonight.





Wednesday, August 17, 2011

Is is 2013 yet?

The constant barrage of news coming out of Iowa this week makes my head hurt thinking about another Presidential election in 2012. If there was a way to press fast forward and skip to 2013, I'd be all for it.

I read this note from a small business owner yesterday and thought it was pretty telling. I think players from both parties should take note because I think it is true and reflects the current status of our economy.

"Cut my taxes and I'll say thank you, but I'm not hiring until I see a pick up in end demand."

Republicans like to paint over every problem with a "cut taxes" brush.

Democrats like to use the "jump start the economy" brush (ie, spend our way to prosperity).

Neither of these solutions will lead to sustainable changes in our employment picture. Business owners hire when demand exceeds their capacity to meet that demand and we are not in that environment right now.

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On a related note, this story from the Washington Post should make both Republican and Democrats scratch their heads. The wealthiest enclaves in America our now outside of Washington, DC partly because of runaway government spending but the tricky part is that much of this spending is going toward private contractors.

So, the Republican loves the small business success stories but would want to cut the pipeline of money pouring out of Washington.

While the Democrat is okay with spending but bothered by the concept of someone paying $15 for a drink with artisanal ice.

"Washingtonians now enjoy the highest median household income of any metropolitan area in the country, and five of the top 10 jurisdictions in America — Loudoun, Howard and Fairfax counties, and Falls Church and Fairfax City — are here, census data shows.

The signs of that wealth are on display all over, from the string of luxury boutiques such as Gucci and Tory Burch opening at Tysons Galleria to the $15 cocktails served over artisanal ice at the W Hotel in the District to the ever-larger houses rising off River Road in Potomac.

Sixteen percent of Great Falls households earn $500,000 or above a year, and more than half make at least $250,000, according to Nielsen Claritas. By comparison, 11 percent of households in Potomac earn $500,000 or more, and McLean and Bethesda each boast 10 percent at that level.

More than $80 billion in federal contracting dollars will flow to the region this year, up from $4.2 billion in 1980, according to Stephen Fuller, director of the Center for Regional Analysis at George Mason University. Adjusted for inflation, that’s a seven-fold increase. A third of the region’s gross regional product now comes from federal spending."

Tuesday, August 16, 2011

What downgrade?

So despite all of the breathless talk over the past week about market collapses, the stock market is now back to flat after the S&P downgrade of the US. Clearly, the market expects more Fed easing (the bond market currently believes QE3 will be between $300-$400 billion) and that's the heroin that this market needs to keep us afloat. It's not healthy and it's not sustainable, but the alternative is not very appealing to politicians of both parties.

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This chart is a little hard to read but if you can see the two lines you'll get the point. The red line represents the Japanese stock market and the green line represents the US market. It may be a coincidence but it appears as though there is a pretty clear lag between the US and Japan. Our markets are basically marching in lockstep with an 11 year lag. Remember Japan is about 21 years into this current soft patch.



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Yesterday we got news that the Japanese economy shrank and stocks soared but today we get news that Europe's growth slowed and things have turned south.

Perhaps most disturbing is news that the German economy has basically stalled. Germany has been a beacon of strength in a very bleak European landscape but if Germany begins to stall we could see a new period of uncertainty in the European markets.

Cheers!

Friday, August 12, 2011

A quick PSA

You may hear news over the weekend that "Jefferson County" has filed for Chap 9 bankruptcy protection. While this will be important news, it should be noted for North Country readers that the Jefferson County in question is Jefferson County Alabama, not NY :)

Retail sales were slightly better than expectations and really reflected data that we already knew because most retailers reported monthly sales last week, but that was enough to kick start the market today which also seems pleased with the European short selling ban.

Consumer confidence hit it's lowest level since 1980!!! as a result of the political bickering in Washington but that doesn't matter today.

Cheers!

Thursday, August 11, 2011

The best day in the markets since you last saw happy traders (on Tuesday!)

The market continues to act in very strange ways. A slight (and I mean slight) outperformance on the number of new jobless claims started the rally but it was really lit on fire when news broke that the EU was going to ban short-selling across Europe.

Here we go again. This can create a quick pop because some thinks this removes speculation from the market. Unfortunately, it has been proven time and time again that what removing short sellers really does is create market imbalances.

If someone is worried that stock XYZ is in trouble they might want to sell it. In a normal market after a stock declines, some short sellers will step in and buy the stock to close their positions. This provides natural demand for a stock that is often desperate for buyers. Without short sellers in the market to buy, you can create a vacuum in the market which often leads to massive downdrafts in stocks. Again, this makes for good headlines but bad policy.

After the US market closed the EU announced they couldn't come to an agreement on banning short selling. Not to be deterred, Italy, Spain, France and Belgium said they were going ahead with their own bans. In a market that has gone basically nowhere for 13 years you have to be able to make money going up and coming down.

The Japanese slashed their GDP forecasts and that's taken some of the wind out of the global stock explosion we had today. However, I'm sure this will changed direction 6 times between now and 9am tomorrow.

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Wish me luck on Saturday as I try to survive the NYC Warrior Dash at Windham, NY.

Check out the complete race map with interesting obstacles like the Deadman's Drop and The Warrior Roast.

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Finally, a little comic relief in a crazy week. Ron Swanson on Birthdays.



I think I'm going to dress up as Ron Swanson for Halloween :)

Cheers!

My nominee for job title of the year

I'll get to the manic state of the markets later tonight, but this job is worthy of its own post.

Job Title: Associate Administrator for Administration
Department: Department Of Transportation

If you're in need of a $120-$180k/year job being the Assoc. Admin for Admin the Federal Government wants to hear from you :)

The actual job posting is located here.

Wednesday, August 10, 2011

The worst day since you last saw sad traders with their head in their hands

The concerns in the market were varied but it seems that two issues keep resurrecting themselves: how sound are the US banks and what's really going on in Europe?

The US banking issues seem to be focused around Bank of America right now and their conference call this evening seems to have calmed the market a bit. The Asian markets are still mostly down but they've trimmed their losses as the US futures have stabilized. This could completely shift again by tomorrow when Europe jumps to the forefront again.

Regarding Europe, I think we're all flying by the seat of our pants. For some time there has been concern that one or more French or Italian banks could be in trouble. Many of these stocks have had a difficult time staying open - every time they open they seem to gap down.

One thing, I will say, market crashes are great for bloggers. Traffic is up about 200% this week.

Look for more detailed info tomorrow.

Yeah, about that "disaster averted" headline...

Can you imagine writing something that has to be published on paper? By the time the newspapers hit the streets this morning proclaiming a giant rebound in stocks, the European sell-off had commenced and US stocks are now back to where they were roughly before the Fed announcement yesterday.

The rumor mill is generating some crazy stories out of Europe but if any of them turn out to be true it could be a very scary time in the markets. I try not to deal in rumors so when I hear something concrete I'll tweet it or post it here.

Right now it's get your popcorn time because the markets are much more entertaining than anything on TV :)

Tuesday, August 09, 2011

Disaster averted. Rally on!

Well, that was interesting. About midnight last night it was clear that the global markets were turned onto the rumor that the Fed was going to save the day with some grand policy statement. The expectations were some comments about a further easing and maybe even a hint at the size of the program.

The US market was up sharply at the start of the day, but that confidence seemed to fade as we headed toward the actual Fed announcement. Once that press release hit the wire, I had the same reaction as the market: What, that's it? All of the major indexes quickly dipped into the red and it looked like the rout was about to begin.

However, Goldman rode in on a White Horse to claim that the vague wording which included different "policies" that may be available was actually code for the "Fed free money train is back in business". With 3 dissenting votes (the most since 1992) I don't see how anyone reaches this conclusion but this was all the market needed to hear and it was off to the races.

In effect, the Fed told us today that they expect the US economy to be weak for the next 2 years, possibly even slipping into a recession. When S&P said our political leadership, debt burden and weak outlook meant a downgrade the market tanks and the White House calls them irresponsible. When the Fed says the economy has weakened substantially and that it may stay that way until 2013 the market has it's biggest rally in 2 years.

Long-time readers will remember the wild ups and downs in 2008 when the market had huge swings on little or no concrete news. This feels so much like 2008 it is scary.

Calm before the storm?

Well, after a wild ride overnight, the futures are nearly flat and stocks in Europe have stabilized. All is well, right? Well.......

Here's how we got to this point since we went to sleep:

* The European Central Bank (their Fed) has again entered the market buying Italian and Spanish bonds.

* Greece and South Korea announced bans on short selling. I won't go into why this is a terrible idea that leads to FURTHER stock market declines. I'll let the Greek's and Korean's find out for themselves in about 3 weeks.

* Taiwan’s government gave up trying to act as an independent observer and actively BOUGHT STOCKS IN THE MARKET.

* However, the biggest cause of the spike has been the widely rumored emergency Fed announcement. Goldman came out today practically begging for a new round of easing and what Goldman wants, Goldman usually gets.

More to come throughout the day.

Monday, August 08, 2011

Turmoil continues to roll across the globe

The sell-off has continued overnight with the Nikkei down 4%+ and the Hang Seng down nearly 8% already. The US futures look pretty bleak right now but in markets like these 11 hours (when the US opens) is an eternity.

If the markets were to open at these levels though it would not be pretty because we would be around 1095 for the S&P 500 which is solidly below the last major floor that the ruler users (ie, chart readers and computer traders) have as their line in the sand - roughly 1120.

The next stops for the S&P 500 would be around 1020-1040 or another 4-5% in rapid fashion. My thinking is that the markets may be very volatile tomorrow as the global sell-off gains steam but some are hinting that they expect the Fed to announce some form of further easing. Again, while the S&P downgrade and the shenanigans in Washington contributed to this decline I think the roots of this drop can be traced to the ending of the Fed's QE2. Without the Fed in the market to offer up free money to the banks the markets have become a one way street back to 2008. As I've said repeatedly since 2008 the banks and Wall Street in general, have become so accustomed to Fed easing that they can't function without more easing. Any easing will just delay the inevitable, but if it is sized properly it could lead to vicious rally in stocks.

The difficulty in markets like these is that there is no protection in diversification. Every one of the stocks in the S&P500 was down today. That sort of correlation makes it hard to keep your head above water.

Also note that the S&P was at 1,113 on June 5th, 1998. We'll probably break that tomorrow which means that despite all of the rah-rah Wall Street cheerleading and talk of 10% annual returns over the "long-run", the reality is that 13 years after that date we've gone nowhere.

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Strangest Headline of the Day in a day of strange headlines: "The BBC using words like 'No Go Zone' to describe parts of London."

Again, follow the twitter stream @ grindstone_fin or updates on the right hand side of this page.

Lookout below

It's really hard to keep up with the volume of info hitting the markets today. The US downgrade is playing a role and as predicted the NASDAQ is taking the brunt of the abuse today.

The more shocking news is really coming out of the financial sector where giants like Bank of America (remember they bought up all of the pieces of Merrill Lynch and Countrywide after financial crisis Part 1), AIG - a stock that is now down 60% in the last 8 mths - and Citigroup are tumbling.

As someone said this morning - "It appears as though AIG is making an effort to collapse the global economy for a second time as they filed a $10 billion lawsuit against Bank of America". The insurance against a Bank of America bankruptcy is skyrocketing today and there are some rumors (much like the old days of Lehman) that the big B word is being floated at BofA.

This is all gathering steam and the market looks terrible right now but I'll be watching for a ridiculous snapback rally at some point if we don't dip another 5%. If we breakdown from here the program trades will go crazy chasing the market back toward 2009 and maybe even 2008 levels if we're unlucky. If, however, we hang right in here the computers could take that as buy signal and there is the remote possibility of another TARP style bank bailout (however, I can't imagine Congress signing off on that given the current climate in Congress) and/or news leaking of further Fed interventions to prop up the market.

Wild times to be sure.

Watch my twitter feed for info as it breaks @ grindstone_fin.

Sunday, August 07, 2011

Well, here we go...

To recap:

* S&P downgrades the US credit rating to AA+ and says there is a 1/3rd chance of further downgrades next year.

* Germany balks at bailout a country the size of Italy.

* BUT, the G7 has publicly said they will act to stabilize markets.

In case you've forgotten the G7 include - France, Germany, Italy, Japan, UK, US and Canada.

Boy, that's some list.
France is next up to lose their AAA rating

Italy is the current cause of the Euro crisis

Japan is struggling post earthquake/tsunami/fukushima

the UK makes the US look like a picture of financial health

the US was just downgraded and Canada is well....Canada :)

So, to stabilize the global markets that the G7 are rattling with their debt ladden economies, the G7 are pledging to borrow more so they can buy bonds in the open market. Sheesh, it would be funny if it wasn't our futures they are toying with.

Right now the futures market has opened and the initial trades indicate a 2-3% dip for the US markets but I'm going to offer up a crazy possibility here - there will be buyers and maybe big buyers in the market tomorrow. Why? Well, many of the algorithms trading the market are not concerned with fundamentals but rather what is happening elsewhere in the global markets. The US dollar has hit new lows over the past 3 hours and one of the most popular models in the market is "buy stocks when the dollar falls". While this seems counter intuitive, there is real chance of this happening tomorrow.

If it does, you'll hear commentators on the TV cheering "YOU SEE, THIS DOWNGRADE WAS ALREADY IN THE MARKET. REJOICE AND GET THEE TO THE MALL!!!". But, you my good friend will be smart enough to realize that it has nothing to do with fundamentals, but rather the falling dollar that drives the computers into a buying frenzy.

However, it's worth noting that if the market does gain some steam heading south this has the potential to get really ugly. I'm not a chart reader and I don't play one on TV, but technical analysis rules the day in the markets right now. We have about an 8% buffer in the S&P 500 and the Dow right now (the NASDAQ is on really thin ice here). If we were to fall another 8% or so then things get really interesting because we could retest the 2010 lows (1020 for the S&P). IF (and it's a big if) but if we broke those levels the charts say we're heading back toward 2008 levels. This isn't investment advice but it's information that you should have at the ready in case things get sketchy this week.

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The White House/Geithner/Buffett S&P bashing is getting a little silly. Yes, S&P has made some errors in the past, but to imply that S&P is off their rocker because they downgraded the US a notch after the comedy of errors in Washington over the past month is either disingenuous, ignorant or both.

Mr. Buffett has been (and will be all over the TV tomorrow) preaching how Moody's got it right leaving the US rating at AAA while "S&P's downgrade doesn't make sense". I'm sure that's his completely unbiased opinion, right? I'm sure that the fact that Mr. Buffett (through Berkshire) owns roughly 30 million shares of Moody's has not colored his viewpoint at all....

Keep checking in and I'll try to update as markets open around the world.

Friday, August 05, 2011

Jobs report what would have been a miss becomes a win!!

This is like the old game of "beating your earnings estimates" that companies used to play on Wall Street. If the analysts expected your firm to earn $0.25 in the quarter you would quietly talk the analysts into lowering their estimates to $0.23. Then when you report $0.24 what would have been a miss becomes "exceeded expectations".

Well, so far we just have the headlines but that appears to be what happened with the jobs report. The original estimates were for 122k jobs but that fell to 84k jobs by last night. I think many of the "analysts" failed to realize that the survey dates were July 12th which was well before the Washington drama unfolded so that had little impact on the data.

Now when we report 117k jobs what would have been a miss, EXCEEDS lowered expectations. #Winning!

It's hard to pull data off the bls site because it is being besieged by people trying to access it right now. On the surface, everything looks good - unemployment down, jobs up slightly.

This won't help the argument of the banks that we need more Fed intervention (so in today's perverse markets might be a negative for stocks). Right now stocks are up about 1% on the news.

Jobs report

The consensus is for just 84k jobs which has fallen nearly 20k in the past 2 weeks (the estimates on July 22nd were for 113k jobs created).

I think the fact that President Obama is going to speak on jobs at 11am says something about this number. QE3 or more stimulus is in the on deck circle??

Jobs report coming at 8:30am

Thursday, August 04, 2011

Is it 2008 all over again?

Well, it certainly feels that way. That was a serious sell-off today that never really relented. There were a couple of efforts to defend key technical areas but once they failed it was lights out for the market.

There will be lots of handwringing over why the market fell but put it in context. The market is still up roughly 10%/year over the last 2 years despite Middle East upheaval, Japan's earthquake/tsunami/&Fukushima, US debt dilemmas, etc.

The scariest thing making the rounds tonight is talk of bank runs in Italy and the need for a TARP style bailout of many European banks. It's worth noting that many US banks are also back at multi-year lows. If the tone doesn't change overnight, tomorrow could be very tough again. The jobs data has the potential to pivot the whole market but many people are really expecting a weak number (as well they should given the ISM service and manufacturing numbers earlier this week). The good news is that we'll know by 8:30am what the jobs situation is, but the bad news is that most won't have a way to trade around it until 9:30.

The market acted very poorly around this time last year which led to Bernanke embarking on QElite (which led to QE2) after a 8/9 speech at Jackson Hole. We'll see what happens in 2012!

You'll hear a boatload of pundits telling you why the markets were down but it's really quite simple:

* A weaker global economic outlook.

* The Fed has no way to rescue the market this time.

* People have suddenly realized the US has a debt issue.

* Good luck passing another stimulus program.

*Europe's problem dwarf our own.

Cheers! You'll need it.

Wednesday, August 03, 2011

I'll take one round trip ticket please...

Well, that was one wild ride today. The markets took it on the chin after another weak data reading (ISM service). Stocks quickly sold off to within about 1/4% of their key technical support levels.

Rumors (more likely wishful thinking) then entered the market that the Fed would begin another round of easing in order to save the markets. However, I think the Fed is still painted in a corner with gas at $4 and food inflation running rampant in the grocery stores.

Tonight Japan has decided to stem the rise of the Yen by intervening in the currency markets. This will have broad implications for global markets if a "currency war" of sorts breaks out but so far this is just one move by the Japanese.

Italy will face a critical test tomorrow when they attempt a bond sale that may find few buyers. Italy and Spain will probably be the stories of the day until we start to focus on the US jobs number on Friday.

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Some interesting news on unemployment benefits that I was unaware of until today:


1)NELP’s new analysis shows that in 2011, six states cut the maximum number of weeks that jobless workers can receive unemployment insurance to less than 26 weeks—a threshold that had served as a standard for all 50 states for more than half a century, until this year. Michigan, Missouri, and South Carolina cut their available weeks down to 20; Arkansas and Illinois cut down to 25; and Florida cut to between 12 and 23 weeks.

2)Throughout the recession, states with inadequate unemployment insurance trust fund reserves have relied on loans from the federal government to pay state unemployment insurance benefits. This September, states will begin paying interest on these loans, and starting in 2012, the federal government will raise taxes on employers in borrowing states until loans are paid in full, as required by the law.

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I hate to keep harping on the Fukushima issue but the news coming out Japan just doesn't seem to be getting any better but we never hear a peep about it.

•Tepco Says Highest Radiation Yet Is Detected at Fukushima Dai-Ichi

•10+ sieverts per hour means there is direct exposure to fuel rods or spent fuel ponds: Australia’s former top radiation official

•Tepco: Ultra-high radiation levels may be from melted fuel that leaked out of containment vessel

•Paper: TEPCO needs to check if high radiation doses are “spreading elsewhere” — Two more spots appear to be above 10 sieverts per hour, but no plans to actually take measurements

•New indoor radiation dose record at Fukushima … May be higher as it exceeded capacity of measuring device

•New York Times: Fatal Radiation Level Found at Fukushima — “Exceeded” 10 sieverts per hour, measuring device was maxed out

•Experts: Melt-through scenario means even higher radiation readings to come — Likely many more reports of deadly radiation in future

courtesy Naked Capitalism

Tuesday, August 02, 2011

Well, it's a good thing we got that debt deal done

or else the market might have crashed :)

The last time the Dow went down for 8 straight days? October 2008 which was pretty much depths of the financial crisis. Today the markets opened facing some uncertainty about the future of our debt rating (Moody's affirmed our AAA rating, China's rating agency cut us to A with a neg outlook) but the bigger story was the charts. I hate to say that people have given up entirely on fundamental research but that appears to be the case.

The story of the day today was "Can the Dow defend 12,000?". When it became clear that there was not going to be a 3:30pm stick save the markets sold off aggressively and are all now roughly flat for the year. Technical analysis is an imperfect art but the next threshold people will be watching will be 11,550-11,600. If these areas are crossed it could trigger a major rush for the exits. Fun times!

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This sounds pretty ominous...

"Plunging rates for chartering container vessels that carry sneakers, furniture and flat-screen TVs may signal a U.S. consumer slowdown and losses for shipping lines in what is traditionally their busiest time of the year.

Fees for hiring vessels have fallen 9.3 percent since the end of April, according to the Howe Robinson Container Index, which tracks charter rates for a range of vessels. Last year, the index surged 56 percent in the period, as lines added ships on demand from U.S. and European retailers restocking for the back-to-school and holiday shopping periods.

“The troubling part is that charter rates are falling in the peak season,” said Johnson Leung, head of regional transport at Jefferies Group Inc. in Hong Kong. “Sentiment among consumers and retailers isn’t very strong.”


Cheers!