As Crisis Fades, Banks Cling To Old Way of Doing Business
After staging one of the most remarkable comebacks in business history — because of taxpayer lifelines and other support from Washington — the giants of the banking industry are entering a new phase of the postbailout period.
While, for many Americans, the dark fears of the crisis have given way to indignation over the Lazarus-like recovery at big banks, few on Wall Street expect 2010 to be as profitable as 2009.
All told, the half dozen biggest banks have already made more than $50 billion in the first three quarters, and are on track to deliver a year of hefty profits — and bonuses — that could rival those of the boom years.
But at this pivotal moment, big questions loom: Will the economy stage a robust recovery or just muddle along? Will the stunning rally in the stock market last?
As the debate rages over how to prevent future crises, will Washington impose tough new rules on banks? More important, will banks fundamentally change the way they do business, or simply carry on as before?
“That is the larger issue hanging over the industry at this point,” said Lawrence H. Summers, the chief economic adviser to President Obama. “I think the view of some in Manhattan and the view from rest of the America, including the administration, is very different.”
Rarely has the divide been so deep between Wall Street and Main Street.
Even as Mr. Obama urges banking executives to do more to help the economy recover, many homeowners and small businesses say banks are reluctant to make loans. The banking industry has throttled back lending for the last 15 months, draining more than $3 trillion of credit from the economy.
When housing prices were rising, Peter M. Allen might have had little trouble refinancing the mortgage on his home in Palo Alto, Calif. Now, like millions of Americans, Mr. Allen, 50, is out of work, and the banks are turning him away.
“Things have changed,” Mr. Allen, an engineer, said. “They were basically closed for business.”
As banks enjoy a recovery, lending may slow further as the Federal Reserve shifts its focus from spurring growth to heading off inflation, reversing the current period of ultralow interest rates that has been a boon to banks.
Right now, low rates are fattening banks’ profit margins, since many lenders are not passing on their own low costs to borrowers. Lending rates will also spike as the government withdraws its trillion-dollar support of the mortgage market in the spring.
“Are they going to kill the housing market?” said Laurence D. Fink, chief executive of BlackRock, a big money management firm. “That is an issue.”
Most banks are hunkering down in anticipation of another big wave of real estate and consumer loan losses. Small and midsize banks are expected to be hit especially hard: They must absorb nearly $900 billion of commercial real estate losses over the next few years, causing several hundred banks to fail.
Wells Fargo Grants Stock Bonuses to Top ExecsRiskiest Lenders Were Also Fiercest Lobbyists: IMFVolatility Will Increase, US Will Lead in 2010: Marc FaberUS Banks May Only Be Deferring Anger on PayMorgan Stanley Sued Over Mortgage-Related Notes
The big banks, meanwhile, face a range of new regulations that take effect in 2010.
Rules curbing overdraft fees and predatory practices in the credit card business are expected to squeeze the flow of billions of dollars from penalty income. They will also have less wiggle room as regulators require them to hold larger cash reserves, reducing their returns and forcing them to be more conservative.
That heralds a sharp drop in profits, especially if the ebullient stock and bond markets, which generated billions in trading revenue last year for Goldman Sachs and other Wall Street giants, tapers off in 2010.
Analysts say that bank profitability might fall by a third from its precrisis levels, to where it was in the ’60s, ’70s and ’80s.
“We tend to believe it is back to the future,” said Frederick Cannon, a senior banking analyst at Keefe Bruyette & Woods.
Wall Street has responded by beefing up its financial lobby in Washington to win big concessions. Among other things, the industry is working to ease rules governing derivatives and to weaken a proposal for a consumer financial protection agency.
Already, there is the sense that the political momentum to force meaningful changes has ebbed as banks returned to profits and bonuses last year, and broke free of government control.
“This is no time for a return to business as usual,” Paul A. Volcker, the chairman of the president’s Economic Recovery Advisory Board, said in a recent speech in Germany. “The rally in world stock markets from recession lows has brought renewed hopes on Wall Street and the City of London for a return to outlandish bonuses for financial operators and a vigorous defense of established vested interests.”
The industry’s leading executives insist that they have cleaned up their act and that reforms dragging through Congress will draw a line under the crisis and correct the failings that caused it.
“There were significant flaws that came out of financial services,” said Jamie Dimon, JPMorgan Chase’s chairman and chief executive. “Some things are going to change forever.”
The question is how much.
Exotic financial products, like the so-called C.D.O.-squared, are unlikely to return. Bundled loans, which financed so much of the mortgage boom, will come back as a smaller, more conservative business.
Bankers, badly bruised by the crisis, are putting a dagger in the “Ninja” loan — which required “no income, no job or assets” to pass muster with a credit officer.
After two decades of deregulation, they will now have to contend with more stringent rules.
Some of the banks are cutting back on their risk-taking.
And while they are paying out heavy bonuses, they are making sure they can claw back the paychecks if employees make big losses in the future.
James P. Gorman, the next chief executive of Morgan Stanley, a Wall Street firm that nearly went under during the crisis, said: “There will be real progress in 2010. I am pretty optimistic.The industry understands what has happened and what needs to be done.”
But a year after the crisis, there is still a looming question about how to deal with banks that are too big to fail.
Despite heated debate, the government has still not decided how to support a failing bank without pumping in billions of taxpayers’ money to avoid contagion in the broader financial system.
But the banks that a year ago were too big to fail are now bigger than ever.
“Fear has dissipated, greed has returned — but these structural problems are still there,” said Peter Nerby, an analyst at Moody’s.
Without a plan for shutting down banks that stumble, the nation’s biggest banks still enjoy an implicit guarantee from the government: If they run into trouble the taxpayer will bail them out.
Economists worry this is only encouraging them to take risks again, which could mean another crisis in the future.
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Tuesday, December 29, 2009
Consumer Confidence beats expectations...or how did you feel in 1983
DJIA 10557 +10.53 SPX 1126.74 -1.04 VIX 19.94 +.01 Gold 1097 -9.60 Silver 17.44 -.098Oil 78.66 -.11 RBOB (Whsl Gasoline)2.01 -.005 Dollar Index 78.17 +.155 EURO 1.4355 -.0025 TLT (Long Term Gov Bonds)89.23 -.22 IEF (7-10 Yr Gov Bonds)88.63 -.17 XLK (Tech)23.02 -.06 XLE(Oil Index)57.40 -.51 (XLF Financials Index)14.46 -.02 XHB (Homebuilders Index)15.24 -.11 EEM (Emerging Markets)41.18 -.16 FXI (China Index)41.94 -.24 GDX (Gold Miners Index)46.50 -.37
In the convoluted world of economic statistic manipulation, headlines can be misleading. To wit, I present you the following article on consumer oonfidence.
Consumer Confidence Hits 3-Month High in December
Published: Tuesday, 29 Dec 2009 | 11:01 AM By: Reuters
U.S. consumer confidence improved more than expected in December, hitting a three-month high as job market pessimism eased and consumers' expectations reached a two-year high, according to a private report released on Tuesday.
Consumer confidence rose to 52.9 in December.
The Conference Board, an industry group, said its index of consumer attitudes rose to 52.9 in December from a revised 50.6 in November.
That beat analysts' forecast of 52.5, which was based on a Reuters poll that ranged from 46.0 to 57.0. Meanwhile, last month's revised reading was also higher than the originally reported 49.5.
The expectations index rose to 75.6 — the highest since December 2007 — from November's 70.3. Consumers' labor market assessment also showed some signs of improvement, with the "jobs hard to get" index decreasing to 48.6 from 49.2.
Despite the progress, however, the report reflected an economy that remained sluggish as it struggles to recover from the worst recession in decades.
Consumers rated their present situation the worst since February 1983, with that index falling to 18.8 from 21.2. The "jobs plentiful" index also fell, dropping to 2.9 — also its lowest since February 1983 — from 3.1.
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The best reading since 2007 but their present situation is the worst since 1983?
They use the word progress. Progress is not measured by tangible gains but by mood swings brought on by economic brainwashing. They report that the expectations index rose to 75.6 — the highest since December 2007. The what? The expectations index is about as phony as it gets. But hey it is the highest since 2007. GIVE ME A BREAK!
Who can put a number on the EXPECTATIONS INDEX and tell the public that things are looking up. The conference board that's who. Who the hell is the Conference Board and who did they contact and how are their numbers arrived at? Who funds the Conference Board? That is all that is left. That and made up corporate earnings reports and phony government stats on the economy.
The Conference Board is the economic equvalent to the National Board of Realtors. You know the guys that told us that housing was OK in 2006. The experts are they for us at every turn telling us it ok.
Oh by the way,
Consumers rated their present situation the worst since February 1983, with that index falling to 18.8 from 21.2. The "jobs plentiful" index also fell, dropping to 2.9 — also its lowest since February 1983 — from 3.1.
If you just read the headlines you may get the wrong idea. The market has not flashed sell yet but I will post it when it does.
Mikey
In the convoluted world of economic statistic manipulation, headlines can be misleading. To wit, I present you the following article on consumer oonfidence.
Consumer Confidence Hits 3-Month High in December
Published: Tuesday, 29 Dec 2009 | 11:01 AM By: Reuters
U.S. consumer confidence improved more than expected in December, hitting a three-month high as job market pessimism eased and consumers' expectations reached a two-year high, according to a private report released on Tuesday.
Consumer confidence rose to 52.9 in December.
The Conference Board, an industry group, said its index of consumer attitudes rose to 52.9 in December from a revised 50.6 in November.
That beat analysts' forecast of 52.5, which was based on a Reuters poll that ranged from 46.0 to 57.0. Meanwhile, last month's revised reading was also higher than the originally reported 49.5.
The expectations index rose to 75.6 — the highest since December 2007 — from November's 70.3. Consumers' labor market assessment also showed some signs of improvement, with the "jobs hard to get" index decreasing to 48.6 from 49.2.
Despite the progress, however, the report reflected an economy that remained sluggish as it struggles to recover from the worst recession in decades.
Consumers rated their present situation the worst since February 1983, with that index falling to 18.8 from 21.2. The "jobs plentiful" index also fell, dropping to 2.9 — also its lowest since February 1983 — from 3.1.
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The best reading since 2007 but their present situation is the worst since 1983?
They use the word progress. Progress is not measured by tangible gains but by mood swings brought on by economic brainwashing. They report that the expectations index rose to 75.6 — the highest since December 2007. The what? The expectations index is about as phony as it gets. But hey it is the highest since 2007. GIVE ME A BREAK!
Who can put a number on the EXPECTATIONS INDEX and tell the public that things are looking up. The conference board that's who. Who the hell is the Conference Board and who did they contact and how are their numbers arrived at? Who funds the Conference Board? That is all that is left. That and made up corporate earnings reports and phony government stats on the economy.
The Conference Board is the economic equvalent to the National Board of Realtors. You know the guys that told us that housing was OK in 2006. The experts are they for us at every turn telling us it ok.
Oh by the way,
Consumers rated their present situation the worst since February 1983, with that index falling to 18.8 from 21.2. The "jobs plentiful" index also fell, dropping to 2.9 — also its lowest since February 1983 — from 3.1.
If you just read the headlines you may get the wrong idea. The market has not flashed sell yet but I will post it when it does.
Mikey
Monday, December 21, 2009
Where is Waldo?
DJIA 10426 +97.34 SPX 1114.83 +12.36 VIX 20.33 -1.45 Gold 1094 -16.70 Silver 17.02 -.295 Oil 72.55 -.81 RBOB (Whsl Gasoline)1.87 -.023 Dollar Index 78.35 +.19 EURO 1.4344 +.0025 TLT (Long Term Gov Bonds)91.27 -1.51 IEF (7-10 Yr Gov Bonds)89.86 -.86 XLK (Tech)22.55 +.22 XLE(Oil Index)58.85 +.70 (XLF Financials Index)14.39 +.17 XHB (Homebuilders Index)15.08 +.18 EEM (Emerging Markets)40.38 +.02 FXI (China Index)41.33 -.17 GDX (Gold Miners Index)45.21 -1.08
Waldo is the public. What was was the big story this last 4 months? It was weak dollar, strong Gold, reemerging Emerging marksts and China.
Here are some 3 month charts that show that those ideas are losing steam.
Gold and the GDX
Silver
Oil and the XLE
China (FXI) and Emerging Market(EEM) and Brazil(EWZ)
The DJIA is making new highs and Waldo is still in the foreign markets, Gold and Commodities. He is now being told that the US economy is bottoming. The EEM and EWZ are just now joining the sell off party. The techs are the newest hype XLK chart is on the high. It looks like the EEM in early December.
XLK
The DJIA looks like the GDX in late Novemebr early December
GDX
DJIA
Waldo is now being told to buy the Market..especially the techs. Why? The Techs are the misdirection the Wizard uses as he sneaks the rest of the Market down. Last Friday great earnings were posted for ORCL and RIMM. Today the market is up because of INTC upgrade. How can the market go down with these stocks being upgraded. Stay tuned because Wlado is being told to buy the techs.
You tell me where Waldo is going to lose money next?
The following are ETF shorts that I own or will own soon. I am not reccomending them. These are only trades for my account
The short ETF for China is FXP 2X short 8.79
The Short ETF for Emerging Markets is EDZ(3X short) 5.51
The short ETF for Gold Is GLL 2X Short 10.34
The short ETFfor Silver is ZSL 2X short 4.70
The short ETF for Brazil is BZG 2X short 25.31
The short ETF for Techs is TYP 3X short 9.20
The short EFT for DJIA is BGZ 3X short 17.16
Notes: The Vix 20.33 is at its lows of 10/21 and 11/25 both at market highs and both right after options expiration. Options expired last friday
Mikey
Waldo is the public. What was was the big story this last 4 months? It was weak dollar, strong Gold, reemerging Emerging marksts and China.
Here are some 3 month charts that show that those ideas are losing steam.
Gold and the GDX
Silver
Oil and the XLE
China (FXI) and Emerging Market(EEM) and Brazil(EWZ)
The DJIA is making new highs and Waldo is still in the foreign markets, Gold and Commodities. He is now being told that the US economy is bottoming. The EEM and EWZ are just now joining the sell off party. The techs are the newest hype XLK chart is on the high. It looks like the EEM in early December.
XLK
The DJIA looks like the GDX in late Novemebr early December
GDX
DJIA
Waldo is now being told to buy the Market..especially the techs. Why? The Techs are the misdirection the Wizard uses as he sneaks the rest of the Market down. Last Friday great earnings were posted for ORCL and RIMM. Today the market is up because of INTC upgrade. How can the market go down with these stocks being upgraded. Stay tuned because Wlado is being told to buy the techs.
You tell me where Waldo is going to lose money next?
The following are ETF shorts that I own or will own soon. I am not reccomending them. These are only trades for my account
The short ETF for China is FXP 2X short 8.79
The Short ETF for Emerging Markets is EDZ(3X short) 5.51
The short ETF for Gold Is GLL 2X Short 10.34
The short ETFfor Silver is ZSL 2X short 4.70
The short ETF for Brazil is BZG 2X short 25.31
The short ETF for Techs is TYP 3X short 9.20
The short EFT for DJIA is BGZ 3X short 17.16
Notes: The Vix 20.33 is at its lows of 10/21 and 11/25 both at market highs and both right after options expiration. Options expired last friday
Mikey
Saturday, December 19, 2009
Fed Policy Statement..No Change...Read the fine Print
No Change at the FedBy: Dirk van Dijk, CFA
December 16, 2009
The Fed just wrapped up its last FOMC meeting of the year, and as expected it did not change the fed funds rate. The policy statement was substantially the same as the one they released after the last meeting in early November. While the Fed Funds rate is not going up anytime soon, the Fed looks like it is ending the loosening programs that went above and beyond a 0% short-term interest rate. My reaction and translation follows each matched paragraph.
Information received since the Federal Open Market Committee met in November suggests that economic activity has continued to pick up and that the deterioration in the labor market is abating. The housing sector has shown some signs of improvement over recent months. Household spending appears to be expanding at a moderate rate, though it remains constrained by a weak labor market, modest income growth, lower housing wealth, and tight credit.
Businesses are still cutting back on fixed investment, though at a slower pace, and remain reluctant to add to payrolls; they continue to make progress in bringing inventory stocks into better alignment with sales. Financial market conditions have become more supportive of economic growth.
Although economic activity is likely to remain weak for a time, the Committee anticipates that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will contribute to a strengthening of economic growth and a gradual return to higher levels of resource utilization in a context of price stability.
Information received since the Federal Open Market Committee met in September suggests that economic activity has continued to pick up. Conditions in financial markets were roughly unchanged, on balance, over the intermeeting period. Activity in the housing sector has increased over recent months. Household spending appears to be expanding but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit.
Businesses are still cutting back on fixed investment and staffing, though at a slower pace; they continue to make progress in bringing inventory stocks into better alignment with sales.
Although economic activity is likely to remain weak for a time, the Committee anticipates that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will support a strengthening of economic growth and a gradual return to higher levels of resource utilization in a context of price stability.
They noted that the job market is finally showing some positive signs, something that on the margin makes this statement a bit more hawkish than the last one. They added in the term "moderate rate" with regards to household spending, which to my ear sounds softer than just expanding.
They noted a better tone to financial market conditions. Overall, I would say the Fed sounds a bit more upbeat about the economy now than they did in the November meeting.
With substantial resource slack likely to continue to dampen cost pressures and with longer-term inflation expectations stable, the Committee expects that inflation will remain subdued for some time.
With substantial resource slack likely to continue to dampen cost pressures and with longer-term inflation expectations stable, the Committee expects that inflation will remain subdued for some time.
No change at all -- the Fed still realizes that the biggest problem the economy faces is slow growth and the associated high unemployment rate and low rates of capacity utilization.
The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends and stable inflation expectations are likely to warrant exceptionally low levels of the federal funds rate for an extended period.
To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve is in the process of purchasing $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt. In order to promote a smooth transition in markets, the Committee is gradually slowing the pace of these purchases, and it anticipates that these transactions will be executed by the end of the first quarter of 2010.
The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets.
In these circumstances, the Federal Reserve will continue to employ a wide range of tools to promote economic recovery and to preserve price stability. The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period.
To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt. The amount of agency debt purchases, while somewhat less than the previously announced maximum of $200 billion, is consistent with the recent path of purchases and reflects the limited availability of agency debt.
In order to promote a smooth transition in markets, the Committee will gradually slow the pace of its purchases of both agency debt and agency mortgage-backed securities and anticipates that these transactions will be executed by the end of the first quarter of 2010.
The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets. The Federal Reserve is monitoring the size and composition of its balance sheet and will make adjustments to its credit and liquidity programs as warranted.
The quantitative easing program -- buying up the Fannie Mae (FNM - Snapshot Report) and Freddie Mac (FRE - Analyst Report) mortgage-backed securities and debt -- is now about 85% complete, and it does not sound like they are planning on extending it. Recently the pace has been about $17 billion a week, and if they were to finish the program at the end of March as they indicate, that means that on average they would be spending about $12 billion a week.
The Fed buying has probably lowered mortgage rates by about 0.50% from where rates would otherwise be (based on historical spreads of mortgage rates over the 10-year T-note). How much of a hit the housing market will take if mortgages were to rise by that amount after they finish up is still and open question.
They kept the key phrase of "exceptionally low levels of the federal funds rate for an extended period." They did, however, drop the language of using a wide range of tools. In other words, they are not going to try to pull another rabbit out of their hat to try to increase liquidity further in the face of the zero boundary on the fed funds rate. The Fed thinks we have successfully escaped from the liquidity trap.
In light of ongoing improvements in the functioning of financial markets, the Committee and the Board of Governors anticipate that most of the Federal Reserve’s special liquidity facilities will expire on February 1, 2010, consistent with the Federal Reserve’s announcement of June 25, 2009. These facilities include the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility, the Commercial Paper Funding Facility, the Primary Dealer Credit Facility, and the Term Securities Lending Facility.
The Federal Reserve will also be working with its central bank counterparties to close its temporary liquidity swap arrangements by February 1. The Federal Reserve expects that amounts provided under the Term Auction Facility will continue to be scaled back in early 2010.
The anticipated expiration dates for the Term Asset-Backed Securities Loan Facility remain set at June 30, 2010, for loans backed by new-issue commercial mortgage-backed securities and March 31, 2010, for loans backed by all other types of collateral. The Federal Reserve is prepared to modify these plans if necessary to support financial stability and economic growth.
Note that this whole section is new. Essentially, the Fed is looking for a return to normality, and letting the alphabet soup of special lending facilities die a quite death. They did their job and prevented a total implosion of the financial system (the partial implosion was nasty enough) and the Fed thinks that it can now rely on its conventional, long-standing tools to keep the financial plumbing of the economy unclogged. While this is not close to a raising of the fed funds rate, it will effectively be a bit of a monetary tightening.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Donald L. Kohn; Jeffrey M. Lacker; Dennis P. Lockhart; Daniel K. Tarullo; Kevin M. Warsh; and Janet L. Yellen.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Donald L. Kohn; Jeffrey M. Lacker; Dennis P. Lockhart; Daniel K. Tarullo; Kevin M. Warsh; and Janet L. Yellen.
While the Fed made it clear that they are NOT going to raise the fed funds rate anytime soon, they are going to take some steps to bring things back to normal. Effectively, by not embarking on another spree of quantitative easing, the Fed will be a bit tighter than it has been. It clearly sees some significant improvement in the economy, and feels that it can now drop the innovative emergency measures they put in place during the collapse last year.
I would interpret the phrase “extended period” to mean a minimum of six months, and more likely a year. Historically, the Fed has always waited until well after the Unemployment rate had peaked to start to raise the fed funds rate. Last time for a year past the peak, and the time before that for 18 months. Both those recessions were extremely mild relative to the one we are just climbing out of now.
I agree that inflation, particularly core inflation, is going to stay low for the foreseeable future. The low fed funds rate will put upward pressure on the prices of commodities (and thus we might see a pick-up in headline inflation) and downward pressure on the dollar. While both of those effects imply higher inflation, there is more than enough slack in the system and other deflationary forces elsewhere in the economy to offset those pressures.
The very low fed funds rate also means that the yield curve will remain extremely steep. This will help allow the banks to earn their way out of their balance-sheet mess. The money from the big net interest margins will help pay for the big loan losses that many of them will still have to take, most notably on commercial real estate, but also still on residential mortgages if we see another wave of foreclosures in 2010 (as I think is likely).
Dirk van Dijk, CFA is the Chief Equity Strategist for Zacks.com. With more than 25 years investment experience he has become a popular commentator appearing in the Wall Street Journal and on CNBC. Dirk is also the Editor in charge of the market-beating Zacks Strategic Investor service.
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This statement stands out in my mind:
In light of ongoing improvements in the functioning of financial markets, the Committee and the Board of Governors anticipate that most of the Federal Reserve’s special liquidity facilities will expire on February 1, 2010, consistent with the Federal Reserve’s announcement of June 25, 2009. These facilities include the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility, the Commercial Paper Funding Facility, the Primary Dealer Credit Facility, and the Term Securities Lending Facility.
To me this means we are going to let the markets trade on their own merits. I say its about freaking time. Let the chips fall where they may. The dollar is reacting to that now
Mikey
December 16, 2009
The Fed just wrapped up its last FOMC meeting of the year, and as expected it did not change the fed funds rate. The policy statement was substantially the same as the one they released after the last meeting in early November. While the Fed Funds rate is not going up anytime soon, the Fed looks like it is ending the loosening programs that went above and beyond a 0% short-term interest rate. My reaction and translation follows each matched paragraph.
Information received since the Federal Open Market Committee met in November suggests that economic activity has continued to pick up and that the deterioration in the labor market is abating. The housing sector has shown some signs of improvement over recent months. Household spending appears to be expanding at a moderate rate, though it remains constrained by a weak labor market, modest income growth, lower housing wealth, and tight credit.
Businesses are still cutting back on fixed investment, though at a slower pace, and remain reluctant to add to payrolls; they continue to make progress in bringing inventory stocks into better alignment with sales. Financial market conditions have become more supportive of economic growth.
Although economic activity is likely to remain weak for a time, the Committee anticipates that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will contribute to a strengthening of economic growth and a gradual return to higher levels of resource utilization in a context of price stability.
Information received since the Federal Open Market Committee met in September suggests that economic activity has continued to pick up. Conditions in financial markets were roughly unchanged, on balance, over the intermeeting period. Activity in the housing sector has increased over recent months. Household spending appears to be expanding but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit.
Businesses are still cutting back on fixed investment and staffing, though at a slower pace; they continue to make progress in bringing inventory stocks into better alignment with sales.
Although economic activity is likely to remain weak for a time, the Committee anticipates that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will support a strengthening of economic growth and a gradual return to higher levels of resource utilization in a context of price stability.
They noted that the job market is finally showing some positive signs, something that on the margin makes this statement a bit more hawkish than the last one. They added in the term "moderate rate" with regards to household spending, which to my ear sounds softer than just expanding.
They noted a better tone to financial market conditions. Overall, I would say the Fed sounds a bit more upbeat about the economy now than they did in the November meeting.
With substantial resource slack likely to continue to dampen cost pressures and with longer-term inflation expectations stable, the Committee expects that inflation will remain subdued for some time.
With substantial resource slack likely to continue to dampen cost pressures and with longer-term inflation expectations stable, the Committee expects that inflation will remain subdued for some time.
No change at all -- the Fed still realizes that the biggest problem the economy faces is slow growth and the associated high unemployment rate and low rates of capacity utilization.
The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends and stable inflation expectations are likely to warrant exceptionally low levels of the federal funds rate for an extended period.
To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve is in the process of purchasing $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt. In order to promote a smooth transition in markets, the Committee is gradually slowing the pace of these purchases, and it anticipates that these transactions will be executed by the end of the first quarter of 2010.
The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets.
In these circumstances, the Federal Reserve will continue to employ a wide range of tools to promote economic recovery and to preserve price stability. The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period.
To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt. The amount of agency debt purchases, while somewhat less than the previously announced maximum of $200 billion, is consistent with the recent path of purchases and reflects the limited availability of agency debt.
In order to promote a smooth transition in markets, the Committee will gradually slow the pace of its purchases of both agency debt and agency mortgage-backed securities and anticipates that these transactions will be executed by the end of the first quarter of 2010.
The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets. The Federal Reserve is monitoring the size and composition of its balance sheet and will make adjustments to its credit and liquidity programs as warranted.
The quantitative easing program -- buying up the Fannie Mae (FNM - Snapshot Report) and Freddie Mac (FRE - Analyst Report) mortgage-backed securities and debt -- is now about 85% complete, and it does not sound like they are planning on extending it. Recently the pace has been about $17 billion a week, and if they were to finish the program at the end of March as they indicate, that means that on average they would be spending about $12 billion a week.
The Fed buying has probably lowered mortgage rates by about 0.50% from where rates would otherwise be (based on historical spreads of mortgage rates over the 10-year T-note). How much of a hit the housing market will take if mortgages were to rise by that amount after they finish up is still and open question.
They kept the key phrase of "exceptionally low levels of the federal funds rate for an extended period." They did, however, drop the language of using a wide range of tools. In other words, they are not going to try to pull another rabbit out of their hat to try to increase liquidity further in the face of the zero boundary on the fed funds rate. The Fed thinks we have successfully escaped from the liquidity trap.
In light of ongoing improvements in the functioning of financial markets, the Committee and the Board of Governors anticipate that most of the Federal Reserve’s special liquidity facilities will expire on February 1, 2010, consistent with the Federal Reserve’s announcement of June 25, 2009. These facilities include the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility, the Commercial Paper Funding Facility, the Primary Dealer Credit Facility, and the Term Securities Lending Facility.
The Federal Reserve will also be working with its central bank counterparties to close its temporary liquidity swap arrangements by February 1. The Federal Reserve expects that amounts provided under the Term Auction Facility will continue to be scaled back in early 2010.
The anticipated expiration dates for the Term Asset-Backed Securities Loan Facility remain set at June 30, 2010, for loans backed by new-issue commercial mortgage-backed securities and March 31, 2010, for loans backed by all other types of collateral. The Federal Reserve is prepared to modify these plans if necessary to support financial stability and economic growth.
Note that this whole section is new. Essentially, the Fed is looking for a return to normality, and letting the alphabet soup of special lending facilities die a quite death. They did their job and prevented a total implosion of the financial system (the partial implosion was nasty enough) and the Fed thinks that it can now rely on its conventional, long-standing tools to keep the financial plumbing of the economy unclogged. While this is not close to a raising of the fed funds rate, it will effectively be a bit of a monetary tightening.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Donald L. Kohn; Jeffrey M. Lacker; Dennis P. Lockhart; Daniel K. Tarullo; Kevin M. Warsh; and Janet L. Yellen.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Donald L. Kohn; Jeffrey M. Lacker; Dennis P. Lockhart; Daniel K. Tarullo; Kevin M. Warsh; and Janet L. Yellen.
While the Fed made it clear that they are NOT going to raise the fed funds rate anytime soon, they are going to take some steps to bring things back to normal. Effectively, by not embarking on another spree of quantitative easing, the Fed will be a bit tighter than it has been. It clearly sees some significant improvement in the economy, and feels that it can now drop the innovative emergency measures they put in place during the collapse last year.
I would interpret the phrase “extended period” to mean a minimum of six months, and more likely a year. Historically, the Fed has always waited until well after the Unemployment rate had peaked to start to raise the fed funds rate. Last time for a year past the peak, and the time before that for 18 months. Both those recessions were extremely mild relative to the one we are just climbing out of now.
I agree that inflation, particularly core inflation, is going to stay low for the foreseeable future. The low fed funds rate will put upward pressure on the prices of commodities (and thus we might see a pick-up in headline inflation) and downward pressure on the dollar. While both of those effects imply higher inflation, there is more than enough slack in the system and other deflationary forces elsewhere in the economy to offset those pressures.
The very low fed funds rate also means that the yield curve will remain extremely steep. This will help allow the banks to earn their way out of their balance-sheet mess. The money from the big net interest margins will help pay for the big loan losses that many of them will still have to take, most notably on commercial real estate, but also still on residential mortgages if we see another wave of foreclosures in 2010 (as I think is likely).
Dirk van Dijk, CFA is the Chief Equity Strategist for Zacks.com. With more than 25 years investment experience he has become a popular commentator appearing in the Wall Street Journal and on CNBC. Dirk is also the Editor in charge of the market-beating Zacks Strategic Investor service.
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This statement stands out in my mind:
In light of ongoing improvements in the functioning of financial markets, the Committee and the Board of Governors anticipate that most of the Federal Reserve’s special liquidity facilities will expire on February 1, 2010, consistent with the Federal Reserve’s announcement of June 25, 2009. These facilities include the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility, the Commercial Paper Funding Facility, the Primary Dealer Credit Facility, and the Term Securities Lending Facility.
To me this means we are going to let the markets trade on their own merits. I say its about freaking time. Let the chips fall where they may. The dollar is reacting to that now
Mikey
Friday, December 18, 2009
The truth about Capitalism...A tax on its citizens
I want to show you how the system imposes a cruel tax on it's citizens by looking at the 3 different bond markets.
The first is the TLT or long term government market. Notice the spike in late 2008 and early 2009. That is when the world was coming to an end. Fear was running wild and you can see how government bonds reacted.
The next market is the Muni market. As fear came in the money left the Muni market. The Muni bond holders ran to cover.
The third market is the high Yield
Notice how, at the end of last year money was chased into Government Bonds and out of the Muni and High yield markets. Suddenly, safety of principle was more important than yield. The same time the Fed had put rates at zero. That mean't that the government could borrow money at historically low rates. How convenient at a time that they needed to raise money for the bailout.
The sellers, Mom and Pop, who had worked hard and played by the rules sold their minis and corporate bonds and went to the banks that were paying almost nothing in interest. They were happy to get nothing because they thought they could lose everything they had worked for.
We fast foreword to today. The charts show that Mom and Pop are tired of getting
.0025 interest and are going back into the same things they sold at the end of last year. They are being told that the economy is bottoming and inflation is coming and the dollar is going to go down.
Sound familiar? Yes that is what they were told in 2007 and 2008. The Fed's was a big buyer of governments at that time and sold them big time in early 2009 during the panic. Today, they are playing the same old song they were playing in early 2008 and you know what the Fed is buying bonds big time again.
Mom and Pop are about to get clocked again except this time they also own Gold.
Income funds are going to get murdered again.
-----------------------------------------------------------------------------------
Look at this article from CNBC
After Big Year, Junk Bonds May Have Smaller Gains in 2010
Talk about a dash to trash.
Investors have poured over $30 billion dollars into junk bond funds this year, according to AMG Data Services, after a flight to quality in 2008 crushed prices of low-grade corporate debt.
Junk bonds have returned a monstrous 56% thus far this year, according to Morningstar—10 percentage points better than the previous record gain set in 1991. Over the same period, the total return on US Treasurys is down 2.4 percent..
“For performance-chasing investors, junk was the only game in town,” says John Lonski, chief economist at Moody’s Capital Markets Group.
But is the game in what’s now a near trillion-dollar market over?
With the current spread between high-yield bonds and Treasurys about 1.3 percentage points above the long-term average, experts say there is still room to run. Just adjust your expectations, they say. The current spread is down from an eye-popping 20 percentage points last fall.
“This suggests that most of the profits have already been squeezed out of this sector, and the easy money’s been made,” says Lonski.
That’s not to say returns won’t be healthy going forward, says Martin Fridson of Fridson Investment Advisors. In fact, he expects junk to outperform other credit instruments in 2010.
“Because high-yield bonds rise and fall with the trends in corporate earnings, they stand to benefit more than other sectors of the fixed-income market from further improvement in the economy.”
And, if interest rates rise next year, as many economists expect, Fridson says high-yield bonds will be in a “favorable position” because they’re less rate-sensitive than higher quality issues.
Fridson is expecting a 10 percent return over the next 12 months—assuming the economic recovery continues and that there’s no double dip recession. His projection also assumes a stabilizing default rate of 5 percent—down from 12.7% over the past 12 months, according to Moody’s, and just one percentage point above the historical average of 4 percent.
-----------------------------------------------------------------------------------
Junk bonds, Corporate bonds, and Muni's are a DISASTER NEXT YEAR.
This heads up brought to you by Mikey
The first is the TLT or long term government market. Notice the spike in late 2008 and early 2009. That is when the world was coming to an end. Fear was running wild and you can see how government bonds reacted.
The next market is the Muni market. As fear came in the money left the Muni market. The Muni bond holders ran to cover.
The third market is the high Yield
Notice how, at the end of last year money was chased into Government Bonds and out of the Muni and High yield markets. Suddenly, safety of principle was more important than yield. The same time the Fed had put rates at zero. That mean't that the government could borrow money at historically low rates. How convenient at a time that they needed to raise money for the bailout.
The sellers, Mom and Pop, who had worked hard and played by the rules sold their minis and corporate bonds and went to the banks that were paying almost nothing in interest. They were happy to get nothing because they thought they could lose everything they had worked for.
We fast foreword to today. The charts show that Mom and Pop are tired of getting
.0025 interest and are going back into the same things they sold at the end of last year. They are being told that the economy is bottoming and inflation is coming and the dollar is going to go down.
Sound familiar? Yes that is what they were told in 2007 and 2008. The Fed's was a big buyer of governments at that time and sold them big time in early 2009 during the panic. Today, they are playing the same old song they were playing in early 2008 and you know what the Fed is buying bonds big time again.
Mom and Pop are about to get clocked again except this time they also own Gold.
Income funds are going to get murdered again.
-----------------------------------------------------------------------------------
Look at this article from CNBC
After Big Year, Junk Bonds May Have Smaller Gains in 2010
Talk about a dash to trash.
Investors have poured over $30 billion dollars into junk bond funds this year, according to AMG Data Services, after a flight to quality in 2008 crushed prices of low-grade corporate debt.
Junk bonds have returned a monstrous 56% thus far this year, according to Morningstar—10 percentage points better than the previous record gain set in 1991. Over the same period, the total return on US Treasurys is down 2.4 percent..
“For performance-chasing investors, junk was the only game in town,” says John Lonski, chief economist at Moody’s Capital Markets Group.
But is the game in what’s now a near trillion-dollar market over?
With the current spread between high-yield bonds and Treasurys about 1.3 percentage points above the long-term average, experts say there is still room to run. Just adjust your expectations, they say. The current spread is down from an eye-popping 20 percentage points last fall.
“This suggests that most of the profits have already been squeezed out of this sector, and the easy money’s been made,” says Lonski.
That’s not to say returns won’t be healthy going forward, says Martin Fridson of Fridson Investment Advisors. In fact, he expects junk to outperform other credit instruments in 2010.
“Because high-yield bonds rise and fall with the trends in corporate earnings, they stand to benefit more than other sectors of the fixed-income market from further improvement in the economy.”
And, if interest rates rise next year, as many economists expect, Fridson says high-yield bonds will be in a “favorable position” because they’re less rate-sensitive than higher quality issues.
Fridson is expecting a 10 percent return over the next 12 months—assuming the economic recovery continues and that there’s no double dip recession. His projection also assumes a stabilizing default rate of 5 percent—down from 12.7% over the past 12 months, according to Moody’s, and just one percentage point above the historical average of 4 percent.
-----------------------------------------------------------------------------------
Junk bonds, Corporate bonds, and Muni's are a DISASTER NEXT YEAR.
This heads up brought to you by Mikey
3 stocks hanging on by a thread
These 3 are very close to coming unglued
Nordstrom JWN 34.84
American Express AXP 40.07
Apple AAPL 193.18
Nordstrom JWN 34.84
American Express AXP 40.07
Apple AAPL 193.18
Aussie Aussie Aussie...oy oy oy.......Oh Canada...Oh Canada...You are a bad Loonie
The next currencies to get their butts kicked are the Auzie Dollar and the Canadian Loonie. Note that the Aussie is tied more to Gold and commodities than the Euro and the Loonie is ties to Oil. The Euro is the leader see the charts below.
The Euro
Aussie Dollar.... .8852 Projects to .84
The Loonie.. .9325 Projects to 88
These are 6 month charts. The Aussie needs to drop below 84 to catch up with the Euro and the Loonie to 88
Mikey
The Euro
Aussie Dollar.... .8852 Projects to .84
The Loonie.. .9325 Projects to 88
These are 6 month charts. The Aussie needs to drop below 84 to catch up with the Euro and the Loonie to 88
Mikey
Thursday, December 17, 2009
Gold Stocks break..Plays catchup with falling Euro...The Stock Market is next!!
DJIA 10314 -126 SPX 1096 -13.03 VIX 22.42 +1.88 Gold 1106 -29.70 Silver 17.189 -.50Oil 72.62 --.93 RBOB (Whsl Gasoline)1.8345 -.0394 Dollar Index 78.22 +.86 EURO 1.4310 -.027 TLT (Long Term Gov Bonds)82.85 +1.17 IEF (7-10 Yr Gov Bonds)91.04 +.66 XLK (Tech)22.08 -.27 XLE(Oil Index)56.39 -.24 (XLF Financials Index)14.11 -.22 XHB (Homebuilders Index)14.84 -.025 EEM (Emerging Markets)40.30 -1.14 FXI (China Index)41.84 -1.10 GDX (Gold Miners Index)45.75 -2.46
EURO (FXE) 143.10 ...The Euro has completely reversed its breakout of 9/08/09 and anyone who bought the hype of a weak dollar and bought the Euro after 9/8 is now losing.
GDX 45.75 ...Gold miners index broke out at the same time as the Euro and has reversed its breakout..after all the hype on Gold if you bought after 9/8 you are losing
Gold 1109 is lagging the GDX and Euro should go straight to 980
Oil (XLE) 56.40 has already broken and bounced back to its breakdown at 57. I say it rolls over now from here. Look at the charts on JPM and GS that I posted on Tues 12/14. They broke and rallied back to their breakdown on 11/11 and then rolled over. They are our leaders
China(FXI) 41.88 looks identical to the rest and is back below its 9/8 breakout
The The Emerging Markets (EEM) 40.41 is just starting to break
THE STOCK MARKET IS THE NEXT ONE TO GO
DJIA 10335
I am raising my sell signal on the stock market to 10300...more to follow. My guess is that the first sell off should be to around the 9800 area..a bounce and then to 8900...Tomorrow is options expiration's day
Notes...Visa (V) 85.82 looks really ripe here
Mikey
EURO (FXE) 143.10 ...The Euro has completely reversed its breakout of 9/08/09 and anyone who bought the hype of a weak dollar and bought the Euro after 9/8 is now losing.
GDX 45.75 ...Gold miners index broke out at the same time as the Euro and has reversed its breakout..after all the hype on Gold if you bought after 9/8 you are losing
Gold 1109 is lagging the GDX and Euro should go straight to 980
Oil (XLE) 56.40 has already broken and bounced back to its breakdown at 57. I say it rolls over now from here. Look at the charts on JPM and GS that I posted on Tues 12/14. They broke and rallied back to their breakdown on 11/11 and then rolled over. They are our leaders
China(FXI) 41.88 looks identical to the rest and is back below its 9/8 breakout
The The Emerging Markets (EEM) 40.41 is just starting to break
THE STOCK MARKET IS THE NEXT ONE TO GO
DJIA 10335
I am raising my sell signal on the stock market to 10300...more to follow. My guess is that the first sell off should be to around the 9800 area..a bounce and then to 8900...Tomorrow is options expiration's day
Notes...Visa (V) 85.82 looks really ripe here
Mikey
Tuesday, December 15, 2009
This thing is close ...Some broken charts
These are big name stocks that have broken. Goldman lead the rally up. I will chase any weakness
Inflation? Bottoming Economy?
DJIA 10482 -18.44 SPX 1112.10 -2.01 VIX 21.20 +.05 Gold 1120 -3.30 Silver 17.35 -.15Oil 70.64 +1.13 RBOB (Whsl Gasoline)1.85 +.02 Dollar Index 77.32 +.59 EURO 1.4515 -.00136 TLT (Long Term Gov Bonds)91.59 -.61 IEF (7-10 Yr Gov Bonds)90.22 -.45 XLK (Tech)22.38 -.04 XLE(Oil Index)56.47 +.37 (XLF Financials Index)14.33 -.14 XHB (Homebuilders Index)14.72 +.01 EEM (Emerging Markets)41.40 -.22 FXI (China Index)43.47 -.29 GDX (Gold Miners Index)48.00 -.46
Euro
Oil
Gold
Today they released the PPI:
Stock futures dropped and the dollar rallied as the PPI figures were higher than expected, while the Empire Manufacturing survey was weaker than expected.
The dollar has rallied 3.3 percent this month, including an 0.9 percent gain overnight. U.S. stock futures are down, but only by a couple points.
US producer prices rose more than expected in November, lifted by a surge in energy costs, and recorded the first year-on-year gain since last November, according to a government report on Tuesday.
Separately, New York state manufacturing unexpectedly weakened in December, signaling the recent revival in the factory sector is slowing, the New York Federal Reserve said.
Although these reports were not seen as positive signs for the economy, the industrial production report was more encouraging. That showed industrial output rose firmly in November as the manufacturing sector extended a recovery that economists hope will help turn around the ailing labor market.
The Labor Department said the seasonally adjusted index for prices paid at the farm and factory gate jumped 1.8 percent, the largest gain in three months, following a 0.3 percent rise in October.
----------------------------------------------------------------------------------
Rising energy prices?....look at the chart on oil. You can see from the charts above that inflation is not going to be a problem. It is the cover story to move the dollar higher and Gold lower. The Wizard is on full misdirection and confusion mode now. The bottom line is that there will be DEFLATION and a weaker economy NOT inflation and a strong economy. The numbers are absurd and are laughable.
The only story more ridiculous than inflation is the economy is bottoming story.
Here is thae state of the US consumer:
Capital One, Discover Credit Card Charge-Offs Rise
Capital One Financial and Discover Financial Services reported that credit-card charge-offs rose in November -- a sign that consumers remain under stress.
In a regulatory filing Tuesday, Capital One [COF 40.18 -0.87 (-2.12%) ] said the annualized net charge-off rate -- debts the company believes it will never collect -- for U.S. credit cards rose to 9.60 percent in November from 9.04 percent in October.
In another regulatory filing, Discover [DFS 16.30 -0.19 (-1.15%) ] said its charge-off rate rose to 8.98 percent from 8.54 percent after two months of declines.
"American consumers are still hurting and especially coming into the Christmas season," said Ken Crawford, senior portfolio manager at Argent Capital Management.
Capital One, the third-largest U.S. issuer of Visa-branded credit cards, said the accounts at least 30 days delinquent -- an indicator of future loan losses -- went up to 5.87 percent from 5.72 percent.
However, Discover showed a small decline in its delinquency rate to 5.65 percent from 5.72 percent.
Credit-card charge-offs and delinquencies usually track unemployment, which inched down in November to 10.0 percent from a 26-1/2-year high of 10.2 percent in October.
Still, 11,000 people lost their jobs last month, and analysts estimate unemployment will remain at high levels through 2010.
As card losses rose to record highs in recent months, lenders closed millions of accounts, trimmed credit limits and slashed rewards. The companies are also raising fees and interest rates ahead of a new consumer-protection law.
THE ECONOMY IS BASED ON CREDIT AND JOBS EXPANSION. THE WORLD ECONOMY IS BASED ON THE US CONSUMER!!!!!!!
The idea that there is infaltion and the dollar rises and Gold drops has to blow the minds of the traders. If you hold Gold the inflation numbers make you want to hold Gold and short the dollar. The Wizard is good at what he does. Up is down and left is right. Keep your eye on the final destination.
Notes:
GDX 48 is just below 50 average for the second time in a month. MACD is below zero I'm guessing that after all the hype on Gold it will break this time support is at early november low near 42.
Yesterday the Wiz added V to the S&P 500. The stock has made a new hgh at 85 today ...see news above on COF
Remember Friday about the confident consumer and increased consumer spending?????
Mikey
Euro
Oil
Gold
Today they released the PPI:
Stock futures dropped and the dollar rallied as the PPI figures were higher than expected, while the Empire Manufacturing survey was weaker than expected.
The dollar has rallied 3.3 percent this month, including an 0.9 percent gain overnight. U.S. stock futures are down, but only by a couple points.
US producer prices rose more than expected in November, lifted by a surge in energy costs, and recorded the first year-on-year gain since last November, according to a government report on Tuesday.
Separately, New York state manufacturing unexpectedly weakened in December, signaling the recent revival in the factory sector is slowing, the New York Federal Reserve said.
Although these reports were not seen as positive signs for the economy, the industrial production report was more encouraging. That showed industrial output rose firmly in November as the manufacturing sector extended a recovery that economists hope will help turn around the ailing labor market.
The Labor Department said the seasonally adjusted index for prices paid at the farm and factory gate jumped 1.8 percent, the largest gain in three months, following a 0.3 percent rise in October.
----------------------------------------------------------------------------------
Rising energy prices?....look at the chart on oil. You can see from the charts above that inflation is not going to be a problem. It is the cover story to move the dollar higher and Gold lower. The Wizard is on full misdirection and confusion mode now. The bottom line is that there will be DEFLATION and a weaker economy NOT inflation and a strong economy. The numbers are absurd and are laughable.
The only story more ridiculous than inflation is the economy is bottoming story.
Here is thae state of the US consumer:
Capital One, Discover Credit Card Charge-Offs Rise
Capital One Financial and Discover Financial Services reported that credit-card charge-offs rose in November -- a sign that consumers remain under stress.
In a regulatory filing Tuesday, Capital One [COF 40.18 -0.87 (-2.12%) ] said the annualized net charge-off rate -- debts the company believes it will never collect -- for U.S. credit cards rose to 9.60 percent in November from 9.04 percent in October.
In another regulatory filing, Discover [DFS 16.30 -0.19 (-1.15%) ] said its charge-off rate rose to 8.98 percent from 8.54 percent after two months of declines.
"American consumers are still hurting and especially coming into the Christmas season," said Ken Crawford, senior portfolio manager at Argent Capital Management.
Capital One, the third-largest U.S. issuer of Visa-branded credit cards, said the accounts at least 30 days delinquent -- an indicator of future loan losses -- went up to 5.87 percent from 5.72 percent.
However, Discover showed a small decline in its delinquency rate to 5.65 percent from 5.72 percent.
Credit-card charge-offs and delinquencies usually track unemployment, which inched down in November to 10.0 percent from a 26-1/2-year high of 10.2 percent in October.
Still, 11,000 people lost their jobs last month, and analysts estimate unemployment will remain at high levels through 2010.
As card losses rose to record highs in recent months, lenders closed millions of accounts, trimmed credit limits and slashed rewards. The companies are also raising fees and interest rates ahead of a new consumer-protection law.
THE ECONOMY IS BASED ON CREDIT AND JOBS EXPANSION. THE WORLD ECONOMY IS BASED ON THE US CONSUMER!!!!!!!
The idea that there is infaltion and the dollar rises and Gold drops has to blow the minds of the traders. If you hold Gold the inflation numbers make you want to hold Gold and short the dollar. The Wizard is good at what he does. Up is down and left is right. Keep your eye on the final destination.
Notes:
GDX 48 is just below 50 average for the second time in a month. MACD is below zero I'm guessing that after all the hype on Gold it will break this time support is at early november low near 42.
Yesterday the Wiz added V to the S&P 500. The stock has made a new hgh at 85 today ...see news above on COF
Remember Friday about the confident consumer and increased consumer spending?????
Mikey
Friday, December 11, 2009
Great looking shorts
Brazil...EWZ 77.51 CNBC is braodcasting from Brazil today...Enough said
Freeport Copper and Gold FCX 76.74
Visa V 81.29
Potash POT 118.18
Merry Xmas...Mikey
Freeport Copper and Gold FCX 76.74
Visa V 81.29
Potash POT 118.18
Merry Xmas...Mikey
Dollar Strong on US economy or World Weakness?
The strength in the dollar is about world weakness and not strength in the US economy. Look at the chart on the Bank of Greece this is after Dubai blew up last week.
The world financial system is all based on high commodity prices and growth. The story is that this is coming next year with the renewal of the economy. This is exactly what happened in the US in 2007. That year the banks blew up because Real Estate values got hit in 2006. The loans went bad and the leverage killed the banks.
Now the commodity loans are starting to blow up those loans will start taking down the world economy. The dollar is strong not because the US economy is strong but because the rest of the world is weaker. Lower commodity prices are a really bad thing and the system is doing all it can to lie about the recovery and prop up those prices. You can see that oil prices and starting to cave in and that ain't good for their story.
Gold is also rolling over that is the one that tells everyone that inflation is coming. Bit by bit the story will unravel just like real estate and the real estate loans. Next year looks real bad to me.
Mikey
The world financial system is all based on high commodity prices and growth. The story is that this is coming next year with the renewal of the economy. This is exactly what happened in the US in 2007. That year the banks blew up because Real Estate values got hit in 2006. The loans went bad and the leverage killed the banks.
Now the commodity loans are starting to blow up those loans will start taking down the world economy. The dollar is strong not because the US economy is strong but because the rest of the world is weaker. Lower commodity prices are a really bad thing and the system is doing all it can to lie about the recovery and prop up those prices. You can see that oil prices and starting to cave in and that ain't good for their story.
Gold is also rolling over that is the one that tells everyone that inflation is coming. Bit by bit the story will unravel just like real estate and the real estate loans. Next year looks real bad to me.
Mikey
Another day ...another story
The consumer is optimistic and spending...Say What?
US Consumer Is More Upbeat —And Spending More, Too
Published: Friday, 11 Dec 2009 | 10:48 AM ET Text Size By: Reuters
US consumers stepped up their spending in November and grew more optimistic this month, data showed on Friday, raising hopes a self-sustaining economic recovery was starting to unfold.
The Commerce Department said total retail sales increased 1.3 percent last month, the largest advance since August, after rising 1.1 percent in October.
It was the second straight monthly gain and beat market expectations for a 0.7 percent gain.
A separate report showed consumer sentiment improved in early December on signs of stabilization in the labor market.
The data were the latest in a series showing the economy may expand at a brisker pace in the fourth quarter than the 2.8 percent annual rate in the July-September period.
"The improvement in confidence is a complement to the good retail sales. It suggests that the consumer is slowly turning upward," said Alan Gayle, senior investment strategist, Ridgeworth Investments in Richmond, Virginia The data lifted U.S stock indexes and the U.S. dollar rose sharply against the yen and euro.
The Reuters/University of Michigan Surveys of Consumers said its preliminary index of sentiment for December rose to 73.4, just a touch below the year's high set in September. This was above the 67.4 for November and exceeded economists' expectations of a reading of 68.5.
The data eased concerns that the economy's recovery could falter because of lackluster consumer spending. The economy resumed growing in the third quarter, fueled mostly by government stimulus.
With the labor market starting to stabilize and household wealth rising, there is growing optimism that consumer spending will soon pick up.
Overall sales in November were boosted by strong receipts from gasoline stations, increased purchases of motor vehicles and parts, building materials and electronic goods among others.
"The numbers were a pleasant surprise. Consumers are starting to spend a little more freely than they have been and that is going to be an important source of sustainable growth," said David Resler, chief economist at Nomura Securities International in New York.
Despite slightly lower gasoline prices at the end of November from the end of October, sales at service stations surged 6 percent, the largest increase since June.
Compared to November last year, overall retail sales were up 1.9 percent, the first year-on-year gain since August 2008, a Commerce official said.
Some analysts said the unexpectedly strong data could cause problems for the U.S. Federal Reserve.
The U.S. central bank, which meets next week, has committed to keep interest rates near zero for an "extended period", while watching to see if the recovery will pick up steam.
Retail Gains Point to Improving EconomyHappy Holiday—Then What?'Tis the Season for $10 GiftsConsumer Nation Blog
"The big picture...is that the recovery looks to be more on track. That combination of improvements in the labor market and improvements in consumer spending is a strong signal that we're not at this point entering into a double-dip scenario," said Torsten Slok, senior economist at Deutsche Bank in New York.
Thats the good news the bad news is that the Dollar is starting to rally sending commodities lower...The top chart is the Euro, the middle chart is the CRB, the third chart is Oil and the lower chart is Gold.
The stronger dollar is starting to pop the commodity bubble ...the stock market is next
US Consumer Is More Upbeat —And Spending More, Too
Published: Friday, 11 Dec 2009 | 10:48 AM ET Text Size By: Reuters
US consumers stepped up their spending in November and grew more optimistic this month, data showed on Friday, raising hopes a self-sustaining economic recovery was starting to unfold.
The Commerce Department said total retail sales increased 1.3 percent last month, the largest advance since August, after rising 1.1 percent in October.
It was the second straight monthly gain and beat market expectations for a 0.7 percent gain.
A separate report showed consumer sentiment improved in early December on signs of stabilization in the labor market.
The data were the latest in a series showing the economy may expand at a brisker pace in the fourth quarter than the 2.8 percent annual rate in the July-September period.
"The improvement in confidence is a complement to the good retail sales. It suggests that the consumer is slowly turning upward," said Alan Gayle, senior investment strategist, Ridgeworth Investments in Richmond, Virginia The data lifted U.S stock indexes and the U.S. dollar rose sharply against the yen and euro.
The Reuters/University of Michigan Surveys of Consumers said its preliminary index of sentiment for December rose to 73.4, just a touch below the year's high set in September. This was above the 67.4 for November and exceeded economists' expectations of a reading of 68.5.
The data eased concerns that the economy's recovery could falter because of lackluster consumer spending. The economy resumed growing in the third quarter, fueled mostly by government stimulus.
With the labor market starting to stabilize and household wealth rising, there is growing optimism that consumer spending will soon pick up.
Overall sales in November were boosted by strong receipts from gasoline stations, increased purchases of motor vehicles and parts, building materials and electronic goods among others.
"The numbers were a pleasant surprise. Consumers are starting to spend a little more freely than they have been and that is going to be an important source of sustainable growth," said David Resler, chief economist at Nomura Securities International in New York.
Despite slightly lower gasoline prices at the end of November from the end of October, sales at service stations surged 6 percent, the largest increase since June.
Compared to November last year, overall retail sales were up 1.9 percent, the first year-on-year gain since August 2008, a Commerce official said.
Some analysts said the unexpectedly strong data could cause problems for the U.S. Federal Reserve.
The U.S. central bank, which meets next week, has committed to keep interest rates near zero for an "extended period", while watching to see if the recovery will pick up steam.
Retail Gains Point to Improving EconomyHappy Holiday—Then What?'Tis the Season for $10 GiftsConsumer Nation Blog
"The big picture...is that the recovery looks to be more on track. That combination of improvements in the labor market and improvements in consumer spending is a strong signal that we're not at this point entering into a double-dip scenario," said Torsten Slok, senior economist at Deutsche Bank in New York.
Thats the good news the bad news is that the Dollar is starting to rally sending commodities lower...The top chart is the Euro, the middle chart is the CRB, the third chart is Oil and the lower chart is Gold.
The stronger dollar is starting to pop the commodity bubble ...the stock market is next
Tuesday, December 8, 2009
This says it all
DJIA 10322 -68 SPX 1096 -6.30 VIX 22.88 +.78 Gold 1150 -13.70 Silver 17.85 -.481 Oil 72.73 -1.20 RBOB (Whsl Gasoline)1.9127 -.0279 Dollar Index 76.16 +.355 EURO 1.4733 -.0087 TLT (Long Term Gov Bonds)93.77 +.31 IEF (7-10 Yr Gov Bonds)91.63 +.34 XLK (Tech)22.12 -.06 XLE(Oil Index)55.04 -.72 (XLF Financials Index)14.29 -.099 XHB (Homebuilders Index)14.49 -.03 EEM (Emerging Markets)40.93 -.54 FXI (China Index)43.93 -.71 GDX (Gold Miners Index)48.67 -1.09
Government 'Out of Bullets,' Consumers in Trouble: Whitney
The government is running out of ways to help the economy as the US faces major issues regarding credit and employment ahead, banking analyst Meredith Whitney told CNBC.
"I think they're out of bullets," Whitney said in an interview during which she reinforced remarks she made last month indicating she is strongly pessimistic about the prospects for recovery.
Primary among her concerns is the lack of credit access for consumers who she said are "getting kicked out of the financial system." She said that will be the prevailing trend in 2010.
Despite being able to borrow at near-zero percent interest, banks are not taking that money and putting it back into the marketplace. The Federal Reserve said Monday that consumer lending dropped 1.7 percent on an annualized basis in October, the ninth straight monthly decline.
With consumer spending making up about 70 percent of gross domestic product, the inability of even credit-worthy consumers being able to be able to borrow could put a severe crimp in future growth.
"What's so frustrating is you have an administration that is arguing such a populist (ideology) and not appreciating all the unintended consequences that the consumer and small businesses have far less credit," Whitney said.
"You're going to get a situation where you revert from a consumer standpoint," she added, "where those that had bank accounts for the first time, credit cards for the first time, homes for the first time get kicked out of the system and then fall prey to real predatory lenders."
The problems taken together also will pose difficulties for investors.
"I have 100 percent conviction that the consumer is not getting any better and there's not more liquidity," Whitney said. "So if everything touching the consumer is going to be represented in the S&P, then the S&P is going to be under pressure."
The solution, she said, is for the government to take proactive steps that will give consumers more money to spend.
"I don't think you can cut taxes enough to stimulate demand," Whitney said. "For a 2010 prediction, which is so disturbing on so many levels to have so many Americans be kicked out of the financial system and the consequences both political and economic of that, it's a real issue. You can't get around it. This has never happened before in this country."
Noteable:
XLE (oil Index) 55.08 off high 60.56 on 10/21 Down 10%
GDX Gold Index 48.67 off high of 55.40 on 12/2 Down 12%
FXE (Euro) 147.20 off high of 151.27 on 11/25 Down 3%
Dollar Index 76.04 off lows of 74.22 of 11/25 on downtrend line drawn through March and April highs.
Conclusion: A trade above 77 on Dollar Index should be the end of the "Risk" trade.
Only sell signal is in Oil and Oil Index ...Gold stocks have reversed most recent break out
Shorted EWZ again @ 78.25 yesterday
10200 remains my sell signal on the DJIA
Mikey
Government 'Out of Bullets,' Consumers in Trouble: Whitney
The government is running out of ways to help the economy as the US faces major issues regarding credit and employment ahead, banking analyst Meredith Whitney told CNBC.
"I think they're out of bullets," Whitney said in an interview during which she reinforced remarks she made last month indicating she is strongly pessimistic about the prospects for recovery.
Primary among her concerns is the lack of credit access for consumers who she said are "getting kicked out of the financial system." She said that will be the prevailing trend in 2010.
Despite being able to borrow at near-zero percent interest, banks are not taking that money and putting it back into the marketplace. The Federal Reserve said Monday that consumer lending dropped 1.7 percent on an annualized basis in October, the ninth straight monthly decline.
With consumer spending making up about 70 percent of gross domestic product, the inability of even credit-worthy consumers being able to be able to borrow could put a severe crimp in future growth.
"What's so frustrating is you have an administration that is arguing such a populist (ideology) and not appreciating all the unintended consequences that the consumer and small businesses have far less credit," Whitney said.
"You're going to get a situation where you revert from a consumer standpoint," she added, "where those that had bank accounts for the first time, credit cards for the first time, homes for the first time get kicked out of the system and then fall prey to real predatory lenders."
The problems taken together also will pose difficulties for investors.
"I have 100 percent conviction that the consumer is not getting any better and there's not more liquidity," Whitney said. "So if everything touching the consumer is going to be represented in the S&P, then the S&P is going to be under pressure."
The solution, she said, is for the government to take proactive steps that will give consumers more money to spend.
"I don't think you can cut taxes enough to stimulate demand," Whitney said. "For a 2010 prediction, which is so disturbing on so many levels to have so many Americans be kicked out of the financial system and the consequences both political and economic of that, it's a real issue. You can't get around it. This has never happened before in this country."
Noteable:
XLE (oil Index) 55.08 off high 60.56 on 10/21 Down 10%
GDX Gold Index 48.67 off high of 55.40 on 12/2 Down 12%
FXE (Euro) 147.20 off high of 151.27 on 11/25 Down 3%
Dollar Index 76.04 off lows of 74.22 of 11/25 on downtrend line drawn through March and April highs.
Conclusion: A trade above 77 on Dollar Index should be the end of the "Risk" trade.
Only sell signal is in Oil and Oil Index ...Gold stocks have reversed most recent break out
Shorted EWZ again @ 78.25 yesterday
10200 remains my sell signal on the DJIA
Mikey
Friday, December 4, 2009
You want a good jobs report...No Problem
Jobs Report: 'Numbers Are Almost Too Good to Be True'
Published: Friday, 4 Dec 2009 | 9:45 AM ET Text Size By: Reuters
US employers cut far fewer jobs than expected last month in the best showing for the labor market since the recession began, boosting the U.S. dollar and global stock prices on hopes for a strong economic recovery.
The economy shed only 11,000 jobs in November, well below the 130,000 loss financial markets had braced for, while the unemployment rate unexpectedly dropped to 10 percent from October's 10.2 percent, a government report on Friday showed.
The labor market improvement was broad based and 159,000 fewer jobs were lost in September and October than previously thought, according to the Labor Department data.
"These numbers are almost too good to be true," said Tom Sowanick, chief investment officer at the OmniVest Group in Princeton, New Jersey.
US stocks opened sharply higher and global stocks erased losses, while prices for US Treasury debt fell and the US dollar firmed as traders speculated the data could lead the Federal Reserve to raise interest rates sooner than had been thought.
"We're almost back to normal," said Chris Rupkey, chief financial economist at Bank of Tokyo/Mistubishi UFJ in New York. "The economy is lifting at a much greater rate than expected."
Analysts had expected the unemployment rate to hold steady at a 26-1/2 year high of 10.2 percent.
Soaring unemployment had become a political headache for President Barack Obama and his fellow Democrats, who are worried they will loose seats in Congress next November without a faster recovery.
On Thursday, Obama had appealed to the corporate sector to join in the administration's employment-creation efforts.
While the economy has resumed growth after four straight quarters of decline, economists have been concerned labor market weakness would prevent the recovery from becoming self-sustaining.
"The data point to a transition in the economy from a deep recession to a modest recovery," said William Sullivan, chief economist at JVB Financial Group in Boca Raton, Florida.
"This will encourage the Fed to be more vocal about an exit strategy from their highly accommodative posture," he said.
The Fed cut benchmark interest rates close to zero last December and has pumped more than $1 trillion into the economy to try to spur recovery from the worst recession in 70 years.
Since December 2007, when the recession began, 7.2 million jobs have been lost, the Labor Department said.
But the pace of layoffs has slowed sharply from early this year.
The report suggested the bruised job market may be close to turning the corner, with jobs growth likely early next year, although some analysts remained skeptical.
The economy has shed jobs for 23 straight months and the November data was was the strongest since December 2007, when nonfarm payrolls increased by 120,000.
Four sectors, including the government, added jobs last month. Manufacturing payrolls fell 41,000 after dropping 51,000 in October. The construction sector shed 27,000 jobs, a sharp slowdown from the average 63,000 decline seen in the prior six months, while the service-providing sector added 58,000 workers.
Professional and business services added 86,000 jobs, while education and health services increased payrolls by 40,000.
Temporary help employment rose by 52,400, building on other recent gains.
The average workweek, which closely correlates with overall output and gives clues on when firms will start hiring, rose to 33.2 hours from 33 hours in October. That was the highest since February. Average hourly earnings inched up to $18.74 from $18.73.
---------------------------------------------------------------------------------
No one will believe this story including me.
Notes:
Gold 1188 - 30
The Dollar index has reversed a breakdown and is 75.37 + .70
Oil is 77.47 +1.01
The market is 10457 +89
I have short term sell signals on Gold and the Euro
Stock market is still has not broken
Still not adding on will wait until dust settles. I want to see how they respond to the sell off in Gold before I add.
Their risk trade story of weak dollar strong stocks is upside down today. The dollar is up strong and so is the market. I think before its all over both the market and Gold will get nailed and the dollar will take off.
This report aside my beliefs remain the same. I read a report from China that is complaining about how the weak dollar is killing the world economic recovery. The key there is that the World recovery is weakening. I suspect that the dollar will rally for that reason and not because our economy is so strong. That is why I like the EDZ (3X emerging markets short)
Still waiting to add to Gold shorts as I need further weakness and I want to see the reaction to the sell off. I would like to see 1120 go.
I think this is going to confuse alot of traders. I would suspect that they are moving to the sidelines. Should the dollar rollover again they will be back on Gold again. This decline needs to be a little stronger before I will say that it is over now.
The sell signal on the market is still 10200 to me and 1120 on Gold
No trades today, Gols closed at 1170 -46 and the Dollar index at 75.87 +1.20. I think this is similar to the Dubai hit and they will off this sell off next week.
Mikey
I am still waiting for the
Published: Friday, 4 Dec 2009 | 9:45 AM ET Text Size By: Reuters
US employers cut far fewer jobs than expected last month in the best showing for the labor market since the recession began, boosting the U.S. dollar and global stock prices on hopes for a strong economic recovery.
The economy shed only 11,000 jobs in November, well below the 130,000 loss financial markets had braced for, while the unemployment rate unexpectedly dropped to 10 percent from October's 10.2 percent, a government report on Friday showed.
The labor market improvement was broad based and 159,000 fewer jobs were lost in September and October than previously thought, according to the Labor Department data.
"These numbers are almost too good to be true," said Tom Sowanick, chief investment officer at the OmniVest Group in Princeton, New Jersey.
US stocks opened sharply higher and global stocks erased losses, while prices for US Treasury debt fell and the US dollar firmed as traders speculated the data could lead the Federal Reserve to raise interest rates sooner than had been thought.
"We're almost back to normal," said Chris Rupkey, chief financial economist at Bank of Tokyo/Mistubishi UFJ in New York. "The economy is lifting at a much greater rate than expected."
Analysts had expected the unemployment rate to hold steady at a 26-1/2 year high of 10.2 percent.
Soaring unemployment had become a political headache for President Barack Obama and his fellow Democrats, who are worried they will loose seats in Congress next November without a faster recovery.
On Thursday, Obama had appealed to the corporate sector to join in the administration's employment-creation efforts.
While the economy has resumed growth after four straight quarters of decline, economists have been concerned labor market weakness would prevent the recovery from becoming self-sustaining.
"The data point to a transition in the economy from a deep recession to a modest recovery," said William Sullivan, chief economist at JVB Financial Group in Boca Raton, Florida.
"This will encourage the Fed to be more vocal about an exit strategy from their highly accommodative posture," he said.
The Fed cut benchmark interest rates close to zero last December and has pumped more than $1 trillion into the economy to try to spur recovery from the worst recession in 70 years.
Since December 2007, when the recession began, 7.2 million jobs have been lost, the Labor Department said.
But the pace of layoffs has slowed sharply from early this year.
The report suggested the bruised job market may be close to turning the corner, with jobs growth likely early next year, although some analysts remained skeptical.
The economy has shed jobs for 23 straight months and the November data was was the strongest since December 2007, when nonfarm payrolls increased by 120,000.
Four sectors, including the government, added jobs last month. Manufacturing payrolls fell 41,000 after dropping 51,000 in October. The construction sector shed 27,000 jobs, a sharp slowdown from the average 63,000 decline seen in the prior six months, while the service-providing sector added 58,000 workers.
Professional and business services added 86,000 jobs, while education and health services increased payrolls by 40,000.
Temporary help employment rose by 52,400, building on other recent gains.
The average workweek, which closely correlates with overall output and gives clues on when firms will start hiring, rose to 33.2 hours from 33 hours in October. That was the highest since February. Average hourly earnings inched up to $18.74 from $18.73.
---------------------------------------------------------------------------------
No one will believe this story including me.
Notes:
Gold 1188 - 30
The Dollar index has reversed a breakdown and is 75.37 + .70
Oil is 77.47 +1.01
The market is 10457 +89
I have short term sell signals on Gold and the Euro
Stock market is still has not broken
Still not adding on will wait until dust settles. I want to see how they respond to the sell off in Gold before I add.
Their risk trade story of weak dollar strong stocks is upside down today. The dollar is up strong and so is the market. I think before its all over both the market and Gold will get nailed and the dollar will take off.
This report aside my beliefs remain the same. I read a report from China that is complaining about how the weak dollar is killing the world economic recovery. The key there is that the World recovery is weakening. I suspect that the dollar will rally for that reason and not because our economy is so strong. That is why I like the EDZ (3X emerging markets short)
Still waiting to add to Gold shorts as I need further weakness and I want to see the reaction to the sell off. I would like to see 1120 go.
I think this is going to confuse alot of traders. I would suspect that they are moving to the sidelines. Should the dollar rollover again they will be back on Gold again. This decline needs to be a little stronger before I will say that it is over now.
The sell signal on the market is still 10200 to me and 1120 on Gold
No trades today, Gols closed at 1170 -46 and the Dollar index at 75.87 +1.20. I think this is similar to the Dubai hit and they will off this sell off next week.
Mikey
I am still waiting for the
Wednesday, December 2, 2009
Magic..Turning Deflation into Inflation
How do you convince the public that there is inflation when a deflation is going on?
1. You tell them that the Fed is printing new dollars and convince them that this will be going on a long time. you keep telling them this story for months and months and put it in the news everyday.
2. You fix the price of Gold at a nominal new high everyday for months. Hey if Gold is going up there must be inflation..right?
3. You put the word out to your stooges (investment advisers) to sell this story hard to the public investor.
4. You chum the water with free sardines and let the fish eat all they want everyday. In other words, anyone who buys this story gets to make easy money quickly.
5. You tell the story that the market sees the future and is going up because the MARKET KNOWS what is going to happen and discounts it in advance.
All the while asset prices decline and loans and Banks keep blowing up. The jobs market continues to collapse. Public sector jobs start to be cut and States become insolvent. That is deflation and deleveraging, not inflation but the Wizard can control the economic stats, the Market and Commodity prices in the short run.
Just ask any one if there is going to be inflation and they will tell you without hesitation that inflation is coming. That is what the Wizard is all about. In the end the economy wins out and the public is left holding the bag.
Mikey
1. You tell them that the Fed is printing new dollars and convince them that this will be going on a long time. you keep telling them this story for months and months and put it in the news everyday.
2. You fix the price of Gold at a nominal new high everyday for months. Hey if Gold is going up there must be inflation..right?
3. You put the word out to your stooges (investment advisers) to sell this story hard to the public investor.
4. You chum the water with free sardines and let the fish eat all they want everyday. In other words, anyone who buys this story gets to make easy money quickly.
5. You tell the story that the market sees the future and is going up because the MARKET KNOWS what is going to happen and discounts it in advance.
All the while asset prices decline and loans and Banks keep blowing up. The jobs market continues to collapse. Public sector jobs start to be cut and States become insolvent. That is deflation and deleveraging, not inflation but the Wizard can control the economic stats, the Market and Commodity prices in the short run.
Just ask any one if there is going to be inflation and they will tell you without hesitation that inflation is coming. That is what the Wizard is all about. In the end the economy wins out and the public is left holding the bag.
Mikey
A re post of my 11/24 Blog...Keep this in mind
Every market cycle ends with a disconnect. A disconnect from the reality of the economy and the prices of stocks. Why? The reason is that, in the end, the Wizard wants to distribute stocks but to the knowledgeable trader it is obvious that the economy is waning. That creates a situation where the sellers come in before Wizard is ready to sell. So Wizard wants to sell at the same time the sellers do.
What the Wizards must do is create a misdirection. He must create a story that makes the economy irrelevant. Something that drives prices that appears to be greater than what is going on in the economy. If the Wizard does that long enough it will crush the sellers and create a situation where, if you want to make money, you have to capitulate and buy.
In the end, IT IS ALL ABOUT PRICE. The trade becomes a momentum trade. Don't fight the tape. Regardless of the economy if you are a trader you have to be in. If you look at the charts even my kid could tell you that you don't want to be a short you have to be a buyer, "everyone knows that". The economy becomes irrelevant and like a pack of lemmings the crowd runs off the cliff.
The misdirection now is the weak dollar. The Wizard calls this the risk trade. Every time the dollar drops the market goes up. The focus is on the Fed "printing" so much money that inflation and a growth economy is coming. The Wizard has the traders watching the dollar and not the economy. Hey it must be true look at Gold. The risk trade is the misdirection that the Wizard needs to distribute his stocks now.
The truth is that in the end the economy which does not matter now will matter in the end. The misdirection has the effect of getting all of the traders and the public long and in the wrong stocks for the next business cycle as the Wizard moves on.
The Wizard is selling his commodity stocks and using the money to buy government bonds. Those bonds while being held are not increasing liquidity in the system. The system is starved for cash and the Wizard will only put in liquidity when the bonds are sold. The Wizard will only be able to sell these bonds in a very negative economic environment. Those assets that are being pushed now will be the ones that will tell the traders to buy bonds.
The Wizard works his magic when he lays down the bread crumbs for the Lemmings and the Lemmings get to eat. It is so easy that they willingly follow the bread willingly eating. The problem is that the trail goes off of the cliff.
REMEMBER THIS: THE TOP DOES NOT COME UNTIL THERE IS NO ARGUMENT BECAUSE PRICE IS EVERYTHING. THOSE WHO POINT TO THE FUNDAMENTALS ARE IDIOTS. WHEN PRICE IS SO DRAMATIC THAT FUNDAMENTALS MEAN NOTHING. THE PRICE MUST GO MUCH FURTHER THAN YOU THINK IT CAN POSSIBLY GO. WHEN YOU GET WEAKNESS OFF OF THAT MOVE THAT IS IT!!!!.
What the Wizard is selling: Gold, China, Emerging Markets, Oil, Techs, Commodity related, Banks.
Sell Signal below 10200 and Gold 1120
Notes: Euro is weak today I have a short term sell signal
What the Wizards must do is create a misdirection. He must create a story that makes the economy irrelevant. Something that drives prices that appears to be greater than what is going on in the economy. If the Wizard does that long enough it will crush the sellers and create a situation where, if you want to make money, you have to capitulate and buy.
In the end, IT IS ALL ABOUT PRICE. The trade becomes a momentum trade. Don't fight the tape. Regardless of the economy if you are a trader you have to be in. If you look at the charts even my kid could tell you that you don't want to be a short you have to be a buyer, "everyone knows that". The economy becomes irrelevant and like a pack of lemmings the crowd runs off the cliff.
The misdirection now is the weak dollar. The Wizard calls this the risk trade. Every time the dollar drops the market goes up. The focus is on the Fed "printing" so much money that inflation and a growth economy is coming. The Wizard has the traders watching the dollar and not the economy. Hey it must be true look at Gold. The risk trade is the misdirection that the Wizard needs to distribute his stocks now.
The truth is that in the end the economy which does not matter now will matter in the end. The misdirection has the effect of getting all of the traders and the public long and in the wrong stocks for the next business cycle as the Wizard moves on.
The Wizard is selling his commodity stocks and using the money to buy government bonds. Those bonds while being held are not increasing liquidity in the system. The system is starved for cash and the Wizard will only put in liquidity when the bonds are sold. The Wizard will only be able to sell these bonds in a very negative economic environment. Those assets that are being pushed now will be the ones that will tell the traders to buy bonds.
The Wizard works his magic when he lays down the bread crumbs for the Lemmings and the Lemmings get to eat. It is so easy that they willingly follow the bread willingly eating. The problem is that the trail goes off of the cliff.
REMEMBER THIS: THE TOP DOES NOT COME UNTIL THERE IS NO ARGUMENT BECAUSE PRICE IS EVERYTHING. THOSE WHO POINT TO THE FUNDAMENTALS ARE IDIOTS. WHEN PRICE IS SO DRAMATIC THAT FUNDAMENTALS MEAN NOTHING. THE PRICE MUST GO MUCH FURTHER THAN YOU THINK IT CAN POSSIBLY GO. WHEN YOU GET WEAKNESS OFF OF THAT MOVE THAT IS IT!!!!.
What the Wizard is selling: Gold, China, Emerging Markets, Oil, Techs, Commodity related, Banks.
Sell Signal below 10200 and Gold 1120
Notes: Euro is weak today I have a short term sell signal
Tuesday, December 1, 2009
Experts giddy about year end rally..I don't think we make to the end of the year
From CNBC:
Stocks Likely Don't Need Santa To Keep Rally Going This Year
Santa Claus can skip Wall Street this year.
With stocks on a seemingly relentless tear higher, the elves can go to the Bahamas and Rudolph can rest his red nose.
So long as the dollar stays weak, the economy continues to show signs of improvement and no major geopolitical events explode on the horizon, most analysts think the market is headed higher regardless of a Santa Claus rally.
"If I had to lean one way or the other towards a Santa Claus rally I'd lean towards it," says Darrin Pope, chief investment officer at United Advisors in Secaucus, N.J. "But this year has been one of those years where it's been a different dynamic than in the past."
Pope thinks the end-of-year rally will be more about Fed Chairman Ben Bernanke and Washington policy makers than about the North Pole's most famous resident.
"The singular theme that everybody is talking about is really the fiscal responsibility-weak dollar play," he says. "Clearly we're seeing people pile into the market on areas that play on that theme."
Strictly speaking a Santa Claus rally is defined as a trend upwards in the week between Christmas and New Year's, when holiday buoyancy tends to lift markets higher. But market pros often use the term more generically to describe any type of rally that coincides with the holiday season.
This year, though, the market seems to need little help from the jolly fat man in the bright red suit.
The "fiscal responsibility-weak dollar" play to which Pope refers describes the government's willingness to keep the US currency weak and deficit-spend to generate economic growth. Analysts see the cheap dollar as the key ingredient towards keeping assets inexpensive and luring investors into risk.
It's a trade that has held up through spring, fall and the early signs of winter, unwilling to be derailed even by global tremors such as the credit crisis that surfaced last week in Dubai.
If Santa wants to join the party, all's the better.
"People are talking about a Santa Claus rally and seasonality," says Richard Sparks, senior analyst at Schaeffer's Investment Research in Cincinnati. "I see more the mechanics of the market driving it higher. There's a lot of cash still out there on the sidelines. Institutions were overweight on cash and underweight on stocks and they've been forced to participate in the rally."
If there's any disagreement about the rally, it's what will be the specific growth areas of the market.
Lower-quality companies that were decimated during the market's plunge from October 2007 to March 2009 have joined commodities to lead this year's rally.
Some analysts think the next leg up will be led by large-cap companies that underperformed during the market's 60 percent bounce off this year's lows. Holding bluechips could be especially important if the market enters any kind of correction phase where high-beta stocks give back some gains.
"You have to stick to large-caps here in order to protect yourself," says Michael Cohn, chief investment strategist at Global Arena Investment Management in New York. "The large-caps are OK because they have business, they can borrow money, they don't have a credit crisis anymore for the most part. Small businesses are still in a credit crunch and I don't see that changing anytime soon."
Analysts at BofA Merrill Lynch Global Research recently observed that commodities are showing "signs of excess speculation" and warned that a correction could be coming for that group—though not for the broader stock market—before the end of the year.
"The market is building a tactical bear market rally for the US Dollar in our view, and this would be a short-term negative for commodities," analyst Mary Ann Bartels wrote in a research note.
But with stocks moving higher, United's Pope suggests continuing to play the weak dollar over the longer term with "gold, hard assets, multinationals, international markets...anything that plays on the weak dollar. I think that's where people are playing this now."
To be sure, the market faces headwinds.
Quick action in the Dubai situation helped mitigate damage to markets, but fear persists that the situation in the Middle East crossroads could be the precursor for similar troubles in other countries.
Friday's unemployment number also could shake investors if the jobless rate continues to rise. A Wall Street Journal report Tuesday indicated that highway construction jobs created through government stimulus are winding down and could pose trouble for the employment situation.
"I personally think we're trading on hope," says Kathy Boyle, president of Chapin Hill Advisors in New York. "We're at the top end of the range."
Yet even Boyle, who takes mostly bearish positions on the market, acknowledges the strength of the rally.
"Could we go another 5 to 10 percent higher? Absolutely," she says. "We still think there's going to be a major correction coming."
-------------------------------------------------------------------------------------
I don't think we make to the end of the year...Mikey
Stocks Likely Don't Need Santa To Keep Rally Going This Year
Santa Claus can skip Wall Street this year.
With stocks on a seemingly relentless tear higher, the elves can go to the Bahamas and Rudolph can rest his red nose.
So long as the dollar stays weak, the economy continues to show signs of improvement and no major geopolitical events explode on the horizon, most analysts think the market is headed higher regardless of a Santa Claus rally.
"If I had to lean one way or the other towards a Santa Claus rally I'd lean towards it," says Darrin Pope, chief investment officer at United Advisors in Secaucus, N.J. "But this year has been one of those years where it's been a different dynamic than in the past."
Pope thinks the end-of-year rally will be more about Fed Chairman Ben Bernanke and Washington policy makers than about the North Pole's most famous resident.
"The singular theme that everybody is talking about is really the fiscal responsibility-weak dollar play," he says. "Clearly we're seeing people pile into the market on areas that play on that theme."
Strictly speaking a Santa Claus rally is defined as a trend upwards in the week between Christmas and New Year's, when holiday buoyancy tends to lift markets higher. But market pros often use the term more generically to describe any type of rally that coincides with the holiday season.
This year, though, the market seems to need little help from the jolly fat man in the bright red suit.
The "fiscal responsibility-weak dollar" play to which Pope refers describes the government's willingness to keep the US currency weak and deficit-spend to generate economic growth. Analysts see the cheap dollar as the key ingredient towards keeping assets inexpensive and luring investors into risk.
It's a trade that has held up through spring, fall and the early signs of winter, unwilling to be derailed even by global tremors such as the credit crisis that surfaced last week in Dubai.
If Santa wants to join the party, all's the better.
"People are talking about a Santa Claus rally and seasonality," says Richard Sparks, senior analyst at Schaeffer's Investment Research in Cincinnati. "I see more the mechanics of the market driving it higher. There's a lot of cash still out there on the sidelines. Institutions were overweight on cash and underweight on stocks and they've been forced to participate in the rally."
If there's any disagreement about the rally, it's what will be the specific growth areas of the market.
Lower-quality companies that were decimated during the market's plunge from October 2007 to March 2009 have joined commodities to lead this year's rally.
Some analysts think the next leg up will be led by large-cap companies that underperformed during the market's 60 percent bounce off this year's lows. Holding bluechips could be especially important if the market enters any kind of correction phase where high-beta stocks give back some gains.
"You have to stick to large-caps here in order to protect yourself," says Michael Cohn, chief investment strategist at Global Arena Investment Management in New York. "The large-caps are OK because they have business, they can borrow money, they don't have a credit crisis anymore for the most part. Small businesses are still in a credit crunch and I don't see that changing anytime soon."
Analysts at BofA Merrill Lynch Global Research recently observed that commodities are showing "signs of excess speculation" and warned that a correction could be coming for that group—though not for the broader stock market—before the end of the year.
"The market is building a tactical bear market rally for the US Dollar in our view, and this would be a short-term negative for commodities," analyst Mary Ann Bartels wrote in a research note.
But with stocks moving higher, United's Pope suggests continuing to play the weak dollar over the longer term with "gold, hard assets, multinationals, international markets...anything that plays on the weak dollar. I think that's where people are playing this now."
To be sure, the market faces headwinds.
Quick action in the Dubai situation helped mitigate damage to markets, but fear persists that the situation in the Middle East crossroads could be the precursor for similar troubles in other countries.
Friday's unemployment number also could shake investors if the jobless rate continues to rise. A Wall Street Journal report Tuesday indicated that highway construction jobs created through government stimulus are winding down and could pose trouble for the employment situation.
"I personally think we're trading on hope," says Kathy Boyle, president of Chapin Hill Advisors in New York. "We're at the top end of the range."
Yet even Boyle, who takes mostly bearish positions on the market, acknowledges the strength of the rally.
"Could we go another 5 to 10 percent higher? Absolutely," she says. "We still think there's going to be a major correction coming."
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I don't think we make to the end of the year...Mikey
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