Sunday, October 25, 2009

Stock Market Review - 10/23/2009

We the Sheeple

Do not go any further until you review this video on YouTube:
You have just witnessed Mr. Bernanke talking economics. Seriously. The tape don't lie.

Now go to this link and pay close attention to what Mr. Bernanke says at the 1:24 mark of the interview:
Mr. Bernanke says that 'the American public doesn't want Congress setting monetary policy. Now read the Constitution. Under Article I, Section 8, it clearly spells out the responsibility of coining money and setting its value to be that of Congress and Congress only. However, Mr. Bernanke and I agree on one thing. I don't want Congress setting the policy on anything. Everything they have ever done has been to the detriment of the average US citizen. Incompetence has never climbed a higher mountain. I would prefer they leave all of us alone and ditto for Mr. B.

Hey, did you see the US pay Czar has cut the pay for leaders of financial institutions that still owe TARP money? Great. Now if they would cut the pay for all the other people that were involved and complicit in the financial sewer that now runs down every street in the world. How about cutting the pay of Barney Frank, Chris Dodd, and even Bernanke himself? Why don't they also share the responsibility? And now, Dodd and Frank are still at it crafting regulations that will surely be circumvented by the elite while the same players turn their heads in deference. Yeah, this is 'recovery'.

Maybe we need a new Constitution. Since we continue to be led by the incompetent, maybe it should start with 'We the Sheeple'.

Friday, October 16, 2009

Stock Market Review - 10/16/2009

A Stagger at 10000

BofA, IBM, and GE disappointed investors with sub par earnings this week. Yet, the Dow pierced 10000, but just couldn't hold on as it closed Friday at 9995. What is the significance of Dow 10000? Probably not much. It is a big round number and over the years, we have danced around this number quite a bit. The key now is to finally surmount the big round number and then hold it. Then the bulls can pump their chests out a bit.

Most economists have declared the recession 'over'. Maybe. Depends on the definition. Unemployment is still double digits and climbing. Foreclosures are still high. 99 banks have failed this year. The trio of companies mentioned above give a pretty good snapshot of reality. Banks are still struggling to find credit-worthy borrowers. IBM is of course the gorilla of technology and business. They are still not strong. GE? I read a stat one time that one out of every $100 dollars spent in the US went to GE. If things are really picking up, why are they not beating expectations?

Absent stimulus and subsidy, it still looks like a slippery slope back to prosperity. Maybe we can borrow our way back to the top of the mountain. Maybe we can print enough money to buy a ladder to get there. Maybe once our esteemed Congress and House manage to turn health care into a gargantuan taxation program the economy will respond for the first time in history with growth in the face of higher taxation. Maybe we should all believe in miracles.

In the meantime, patience is in play for now. We will have to see how the market responds to the 10000 level. So far, it has managed to ignore reality and valuation. Who knows - maybe the new market will decide that double digit unemployment is a good thing? Well, at least if we wait long enough, all those unemployed people will eventually run out of benefits and then they will just disappear. It's a patience game.

Monday, October 12, 2009

Stock Market Review - 10/10/2009

Sellers Remorse

You may be familiar with the term 'buyers remorse'. This is when a buyer suffers anxiety and remorse after a purchase. Maybe they bought the wrong item. Maybe they paid too much. Either way, the buyer is sorry they handed over their cash. In the stock market, we are seeing sellers remorse. This has occurred every time investors have looked through the microscope of reality and pulled money from the stock market. We all know the drill. Real estate is bad and getting worse. Unemployment is horrible and getting worse. We have allowed manufacturing jobs to relocate abroad. We have a new administration focused on 'spreading the wealth around a bit' through higher taxation. The central bank is focused on ruining the currency to save their big banker friends while they watch small banks drown and vanish. But each bout of reality based selling has been met with an exuberant stock rally fueled by the Federal Reserve. Either they bailed somebody out or they injected trillions or they exchanged trillions for toxic assets. The bottom line is that selling stocks has become a losing strategy.

Fundamentals are a complete waste of time. Yes, the stock market indices have risen smartly since the Fed through in the kitchen sink on March 9. But so too has the home builder index and none of them have made a dime in the last year. The point is selling is for losers. All we have to do is buy stocks and wait for the Fed to blow the wind in our sails. Up, up, up we go. Bubbles are delicious and they are the specialty of the Fed. The chart below is a one-week look at the Dow in candlesticks and the 10-year US Treasury yield in green. The bars are 60-minute bars. Obviously the rally in the Dow is still in play. Look at Friday. Each hour was a positive hour. There was hardly a seller to be found at the exchange. Tuesday, Wednesday, and Thursday found the Treasury issuing tens of billions of bonds to pay our country's debt. Of course, this required the attention of the so-called primary dealers to acquire this paper as is their duty. The market staggered a bit for those three days but as soon as the manipulation of the bond market ended, they went back to manipulating the stock market. Isn't it odd that the bond yield fell each day debt issuance? Isn't it odd that the yields went up on Friday when there was no issuance? If there was really demand for the debt as our government would have us believe, wouldn't owners of such debt hold on to it? No, the bond world is not real and it is now driven by derivatives, market manipulators, and a Fed determined to keep interest rates at record lows. Mortgage rates continue to fall and fixed rates are now below 5%. I suspect they will continue to fall as the Fed subsidizes housing. They already do to a large degree with Fannie and Freddie but also with the $8,000 housing kick back for new buyers. The government has ventured into the car business by subsidizing new purchases in the 'clunker' program. Now it appears they are subsidizing the stock market as well. Absent any sellers, the sky is the limit.

Dow in candlestick, TNX in green - 5 day hourly ending 10/10/09
Chart courtesy

Monday, October 5, 2009

Stock Market Review - 10/2/09

Don't Eat the Brown Acid

Remember the announcement at Woodstock over 40 years ago? Apparently there was some bad LSD getting passed around so the announcement was made at center stage to 'don't eat the brown acid'. Why do I bring this up? The job loss number was released on Friday morning and it was half a million plus. That was 'worse than expected' and the stock market headed south. Bloomberg television always brings on my favorite comedian, Christine Romer (White Economic Advisor) to chat about the number. As usual, Ms. Romer had me in stitches babbling on and on about how the number really wasn't so bad and certainly not as bad as the numbers released in the previous administration. You know the one. Bush was responsible for everything bad and poor Obama has been trying to right the ship ever since getting his key to the Oval Office. Ms. Romer explained that it could be worse but this was typical of any economic recovery. She was grinning and cooing and selling the 'recovery' story like Zig Ziglar selling condoms at the South Carolina Governor's Mansion. However, instead of the usual brain dead talking head media pretties they have on the set they happened to have Kenneth Langone (former co-founder of Home Depot) sitting there. He didn't waste time. He launched right into this cock-a-mamee nonsense and told this poor disseminator of disingenuousness that if the leaders of public companies intentionally misled the public the regulator bodies would pounce. There was of course more but I have to say it is nice that I am beginning to see other people swim over to the island of Barry and join me in embracing the truth. Yes, unemployment is rising. Job losses are growing. The government is still lying about everything. Brothers and Sisters, we are all alone. Our country has abandoned us and has sided with the central bank who now pulls their strings. We must ignore the government talkers as they are not capable of addressing the truth. They think they can lie and print their way out of every bad situation.

Timmy Geithner also kills me. He was babbling about some insanity concerning our government's desire to keep the dollar strong. Excuse me a moment - I'm still laughing about that one. Whew! What a funny guy. He really should put one of those arrows on his head like Steve Martin used to use when he used to be funny. If you listen closely when Geithner and Romer speak, you can almost hear the entire world laughing at their buffoonery. So, all I can tell you is 'don't eat the brown acid'.

If you want to believe an economic recovery is underway, then God bless you. Everyone should always strive to be as positive as possible. However, printing money and giving it to broke bankers always weakens the dollar and destroys the economy. This is why the Chinese are so mad with the Fed. People like Geithner are brown acid pushers. Economic recovery? Please. Rail car usage is down 20% from a year ago. If we produce and consume, we have to ship the stuff we make and consume. The chart below is the Baltic Dry Index. This index tracks the price charged to ship dry goods like coal, copper, wheat, and so on around the world. As you can see, one of the lines is the BDI and the other is the Dow. They follow each other very closely and the BDI is now in a steep dive. The Dow is either hesitating in its current rally or showing signs of rolling over. If the BDI keeps diving, it is almost inconceivable that the Dow could keep going up. Beware - reality is telling us something far different than what governmental propaganda puppets are selling.

5 year - Dow in candlestick, BDI in green (weekly)
Chart courtesy