Business / Economic / Financial
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Buried Alive - Prominent Sell Signals , On Tuesday September 14, 2010 'A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty.' - Winston Churchill
’Does that mean that an optimist is always right? No. In fact, unfounded optimism is one of the biggest investment traps and most effective bear market tricks. On April 16, the ETF Profit Strategy Newsletter warned that: 'The message conveyed by the composite bullishness is unmistakably bearish. Most bulls have no clue why they are bullish except for the fact that they feel the need to play the momentum game. Sounds like 2000 and 2007 all over again.' When it comes to investing, emotions tend to get in the way of making money. It takes an opportunistic, yet realistic approach to profit in this market.
Parallels Between 2000, 2007, and Today
From a purely analytical point of view, the April ETF Profit Strategy Newsletter examined the 2000 and 2007 market tops and compared them with the 2010 price action, at a time when optimism was soaring sky-high. The parallels between the 2000, 2007 and forming 2010 tops were striking, that's why the newsletter concluded that: 'A comparison between the 2000 and 2007 double tops to the current constellations shows that the market may roll over at any time.' Similar to the January/April 2000 and July/October 2007 double tops, the April 2010 highs were preceded by a lower January top. But the parallels didn't stop there.
Major Tops Followed by Decoy Rallies
Following the initial 2007 decline, the April, May 2008 rally rekindled new hope and pushed the major indexes a la Dow Jones (DJI: ^DJI), S&P (SNP: ^GSPC), and Nasdaq (Nasdaq: ^IXIC) briefly above their 200-day moving average (MA). Following the initial April 2010 decline, the July/August rally also pushed the S&P briefly above the 200-day MA. Both, in 2008 and 2010, the indexes were rebuffed by the 200-day MA. The failure to stay above the 200-day MA in May 2008 was followed by a 53.75% decline in the S&P 500. Former performance leaders like the Financial Select Sector SPDRs (NYSEArca: XLF - News) and KBW Bank ETF (NYSEArca: KBE - News) tumbled 79%, the Technology Sector SPDRs (NYSEArca: XLK - News) dropped 49%. Even conservative sectors such as utilities (NYSEArca: XLU - News) and healthcare (NYSEArca: XLV - News) dropped another 35 - 45%. Like a free diver who comes up for air, the market tends to rally to keep investors engaged before the next leg down. The chart below - which plots bullish advisor sentiment against the price of the S&P 500 from June 2007 - September 2010, illustrates the market's cruel habit of spreading hope just before the hammer drops. [chart]
It Happened Before
Since we are talking about prior market tops, we can't help but mention the mother of all sucker rallies, which occurred in 1929/1930. Following the initial 1929 meltdown, the 1930 rally recouped 50% of the previously lost points. Ironically, the 1930 rally ended on April 16. The 2010 counter trend rally ran its course on April 26. In addition to a near identical termination date, the two rallies rekindled the same kind of bullish sentiment. Below are a few headlines and statement from April 1930. Keep in mind that the Dow went on to decline more than 80% thereafter. 'For the immediate future, the outlook is bright' - Irving Fisher, Ph. D. in Economics 'I see nothing in the present situation that is either menacing or warrants pessimism.' - Andrew W. Mellon, U. S. Secretary of the Treasury 'The depression is over' - Herbert Hoover, President If you escaped the market in time, you might be able to read the following April 2010 headlines with a fair shot of humor and realize the irony: 'As job worries ease, will anything stop the stock market?' – CNBC 'Dow 11,000 is only the beginning' - Wall Street Journal 'Check the real estate: It is time to delve in' - Wall Street Journal
It Happened Recently
It's easy to dismiss any parallels to the Great Depression simply because it happened 80 years ago. However, an 80% drop is nothing unusual and has been seen recently. The Nasdaq (Nasdaq: QQQQ - News) peaked in 2000 and tumbled 78.4% within less than two years. Much evidence suggests that the Nasdaq's woes are not yet over with more losses and lower lows on the horizon. Oil prices tumbled 77% after topping at $147.3 a barrel in 2008. Both, the Nasdaq and oil prices topped at a time when higher prices were a foregone conclusion. With regards to oil, the expectation for higher fuel prices moved all major car manufacturers to advertise and build low MPG cars. As soon as their commercials hit TVs, radios, and newspapers across the country, oil and fuel prices started to drop like a rock. Some still dismiss those declines as sector bubbles, not broad market declines.
It Happened to an Entire Country
The Nikkei is Japan's version of the S&P 500 and covers hundreds of stocks. In 1989, the Nikkei topped at 38,946. Since then, it has dropped over 80% to below 8,000 (see chart below, published in the April 2010 ETF Profit Strategy Newsletter). [chart] Throughout this 20-year decline, the Nikkei had eleven rallies of 20% or more and four that were 50% or more. In total, the Nikkei rallied well over 250,000 rally points, yet it remains 76% below its 1989 peak. The decline of Japan's stock market (NYSEArca: EWJ - News) and economy happened amidst a global bull market. Imagine what can happen to the U.S. stock market during a global recession spurred by European (NYSEArca: FEZ - News) debt woes and global stock market (NYSEArca: EFA - News) weakness. It's human nature to rationalize and invent reasons why something can't happen. It's the stock market's nature to prove investors wrong. Based on parallels that aren't farfetched by any means, a follow through of the post 2007 U.S. equity meltdown is more than just a possibility.
Fundamentals, Technicals, Valuations, and History in Agreement
Investing is about putting the odds in your favor. There is no such thing as a 100% certain profit opportunity. However, there are high probability profit opportunities where the odds of having a winning trade are high and the potential reward is much higher than the potential risk. Such high probability profit opportunities occur when as many indicators as possible point in the same direction. Right now, there is a near unanimous consent between fundamental and technical indicators, along with valuations and historic patterns. The latest ETF Profit Strategy Newsletter includes a detailed analysis of various market forecasting tools, along with a short, mid, and long-term outlook for the U.S. stock market and a target range for the ultimate market bottom. Even though the economic outlook is dim, realistic investors can feel optimistic about the opportunities in the months and years ahead.
Is the Stock Market Safe? [ This time the consensus is correct, in a ‘fish in a barrel’ kind of way! ]‘In a word, no. That’s the general consensus found in a survey of individual investors done by AP and CNBC this week. As if dealing with two major bear markets since the turn of the century wasn’t enough, all the talk about high frequency trading and the May 6th "Flash Crash" seems to have pushed individual investors over the edge in terms of their comfort level with the stock market. In fact, according to an AP/CNBC poll, 55% of those surveyed believe the stock market is fair only to some investors. The bottom line of this particular survey is that investors are now wary about the idea of using the stock market as a way to invest for retirement. Instead, the survey found that the vast majority of individual investors continue to pump unprecedented amounts of money into what many believe is the most overvalued asset class on the planet – government bonds. One result of the 10-plus year secular bear market in stocks is the gradual erosion of the public’s interest and confidence in stocks as an investment. Of course this HAS happened before. Anyone recall the 1982 cover of Time magazine with the title “The Death of Equities?” Although the cyclical bull market that began in March 2009 remains intact, the public has been pulling money out of the market on a monthly basis. Since January 2008, the Investment Company Institute reports that a total of $244 billion has been withdrawn from US equity funds. Yet at the same time, a total of more than $589 billion has poured into US bond mutual funds, which is an unparalleled amount. It appears that the "Flash Crash" may have been the straw that broke the camel’s back. For example, in the 11 weeks prior to May 6th the public pumped a strong $26.6 billion into equity mutual funds. This is hardly surprising since during that time the market was rising steadily and had gained more than 70% in the past 12 months. However, in the 16 weeks since the "Flash Crash," investors have been running scared. In fact, Investment Company Institute reports that the public has pulled money out of US equity funds each and every week since, with cumulative withdrawals now totaling $55.9 billion. Thus, it would appear that the market’s recent volatility has caused the investing public to lose confidence in the market. The AP/CNBC poll found that 61% of those surveyed felt the volatility has made them less confident about buying and selling stocks. There is also a widespread perception is that the market is rigged or unfair to the little guy. Nearly 90% of the survey respondents whose portfolios are less than $50,000 said the market is unfair to small investors. In addition, the public doesn’t seem to have much faith in the administration to fix the situation in the market. The poll found that just 8% expressed strong confidence in federal regulators while 50% expressed little-to-no confidence in those tasked with overseeing the markets. Does this mean it is time to give up on the stock market as an investment vehicle? We would respond with a resounding “no!” The trick is to understand that the game has changed. After an 18-year bull market, the tide has turned. As such, investors actually have to do something besides putting money into any old mutual fund and closing their eyes. Disclosure: No positions’ [Economists Herald New Great Depression The world is currently experiencing the modern day equivalent of the Great Depression, according to a prominent economist who has added his voice to scores of others now forecasting ongoing economic doom on a scale not seen since the 1930s.) , and my position and that of demographer Dent (This is a global depression. This is a secular bear market in a global depression. The past up move was a manipulated bull (s***) cycle in a secular bear market. This has been a typically manipulated bubble as has preceded the prior crashes with great regularity that the wall street frauds and insiders commission and sell into. This is a typical wall street churn and earn pass the hot potato scam / fraud as in prior crashes’. This national decline, economic and otherwise, will not end until justice is served and the wall street frauds et als are criminally prosecuted, jailed, fined, and disgorgement imposed. Krugman: It's All Downhill From Here Cullen Roche Love him or hate him Paul Krugman has been awfully right with regards to the macro picture in the last few years. He’s one of the rare economists who had the foresight to see the housing bubble and the likelihood of economic downturn that would result from it. Krugman recently caused a stir when he said the US economy was headed for the third depression. He isn’t back down from that outlook:
I’ve had a couple of conversations lately with people who follow politics and public affairs, but aren’t that close to the economic discussion — and I’ve discovered that there are two comforting delusions still out there.
Delusion #1 is that we’re on the road to recovery, just more slowly than we’d like; to be fair, the White House keeps saying this.
But it’s not at all true. GDP is growing below potential; employment, even if you focus just on private employment, is growing more slowly than the working-age population. If you ask how long it will take us to return to, say, 5 percent unemployment on the current track, the answer is forever.
Delusion #2 is the belief that the stimulus may yet do the trick, because there are still substantial funds unspent. I tried to deal with this last year. The level of GDP depends not on total funds spent, but on the rate at which funds are being spent, which has already peaked; GDP growth on the rate of change in the rate at which funds are being spent, which peaked last year. It’s all downhill from here.
If you can ignore the schizophrenic market for just a second it’s hard to reject Krugman’s macro outlook. The private sector has been running on fumes since the debt bubble burst in 2007. The government’s extraordinary actions helped bolster the economy, but merely papered over what was a very weak private sector. As we see the government step aside it’s difficult to imagine that the weakness at the private sector won’t again be exposed for what it really is.
Harry Dent, Jr. Economy will be in a Depression by 2011
The worst of this next depression is likely to hit between mid-2010 and mid-2013, especially around early 2011, but if the banking system continues to implode a deep downturn or depression could begin sometime in 2009 instead of 2010.
Dow will Fall to 3,800 – 4,500 by 2012
Nasdaq will Fall Below 1,100, its 2002 low, by late 2010 or mid-2012 at the latest.
Inflation will Increase until mid- 2010 and then turn to Deflation
Interest Rates will Increase
U.S. Dollar will Decline
Housing will Decline by 40 – 60% from Today’s Levels
Greatest Economic and Banking Crisis since the 1930s will Occur Between 2010 and 2012). ]
Handcuffs For Wall Street, Not Happy Talk Zach Carter | The fraud allegations that have emerged over the past year are not restricted to a few bad apples at shady companies — they involve some of the largest players in global finance.
Hatzius: The Risks Are Still to the Downside
Yen hits 15-year high vs dollar Reuters | The dollar hit a 15-year low against the yen on Tuesday, testing Japanese authorities’ resolve to stem the yen’s climb after Prime Minister Naoto Kan won a party leadership vote.
Six in 10 Canadians live pay to pay Globe and Mail | Fifty-nine per cent of Canadian workers say they would be in financial trouble if their paycheque was delayed by just a week.
IMF fears ‘social explosion’ from world jobs crisis Telegraph | America and Europe face the worst jobs crisis since the 1930s and risk “an explosion of social unrest” unless they tread carefully, the International Monetary Fund has warned.
‘The Great American Stickup’: It Was The Economy, Stupid It is not conspiratorial but rather accurate to suggest that blame can be assigned to those who consciously developed and implemented a policy of radical financial deregulation that led to a global recession.
John Williams Sees The Onset Of Hyperinflation In As Little As 6 To 9 Months As Fed “Tap Dances On A Land Mine” John Williams, arguably one of the best trackers of real, unmanipulated government data via his Shadow Stats blog, has just released a note to clients in which he warns that hyperinflation may hit as soon as 6 to 9 months from today.
Will the Basel III Bank Regulations Change Anything? The much-trumpeted Basel III increase in capital requirements will not be fully phased in until 2019.
Three Powerful Trends Will Push Gold Prices To $1600 UniCredit has upgraded their target price for gold from $1,250 to $1,600 by the end of 2012. The reason for the upgrade is based on three powerful trends: the fear over “money printing” at the Fed (QE), the idea that the Euro sovereign debt crisis represents a condemnation of fiat money and increasing demand for gold from China.
(9-14-10) Dow 10,526 -18 Nasdaq 2,289 +4 S&P 500 1,121 -1 [CLOSE- OIL $76.80 (-54% for year 2008) (RECORD TRADING HIGH $147.27) GAS $2.74 (reg. gas in LAND OF FRUITS AND NUTS $3.11 REG./ $3.26 MID-GRADE/ $3.35 PREM./ $3.69 DIESEL) / GOLD $1,272 (+24% for year 2009) / SILVER $20.43 (+47% for year 2009) PLATINUM $1,589 (+56% for year 2009) / DOLLAR= .77 EURO, 85 YEN, .64 POUND STERLING, ETC. (How low can you go - LOWER)/ 10 YR NOTE YIELD 2.68% …..… AP Business Highlights ...Yahoo Market Update... T. Rowe Price Weekly Recap – Stocks / Bonds / Currencies - Domestic / International This Is a Secular Bear Market and The End of Buy and Hold … and Hope MARKET MANIPULATION AND HOW THE LATEST BUBBLE-FRAUD PRE-COMING CRASH IS BEING ACCOMPLISHED 3-11-10 6 Theories On Why the Stock Market Has Rallied 3-9-10 [archived website file] Risks Lurk for ETF Investors The bull market that never was/were beyond wall street b.s. when measured in gold Property Values Projected to Fall 12% in 2010 Jan 31, 2010 The Week Ahead: Risk Is Off the Cliff; Unwind Has Begun Jan 31, 2010 01-13-10 Forecast for 2010 from Seeking Alpha Contributor THE COMING MARKET CRASH / CORRECTION 1-28-10 Maierhofer (01-15-10) 11 Clear Signs Economy Sinking Economic Black Hole 1-22-10: 20 Reasons Why The U.S. Economy Is Dying And Is Simply Not Going To Recover Current Economic / Fiscal Charts Trendsresearch.com forecast for 2009 1-7-10 Crash is coming! ‘WORST ECONOMIC COLLAPSE EVER’ Must Read Economic / Financial Data This Depression is just beginning The coming depression… thecomingdepression.net MUST READ: JEREMY GRANTHAM’S QUARTERLY UPDATE 25 January 2010 (850 on the S&P) by TPC The Next Wave of Collapse is Coming Sooner than you think Sliding Back Into the Great Depression ABSOLUTELY, ABSURDLY, RIDICULOUS! SELL / TAKE PROFITS WHILE YOU CAN SINCE MUCH, MUCH WORSE TO COME!
The Real Story Behind Bill Gates And “Death Panels” Bill Gates’ advocacy for “death panels” has caused controversy amongst conservative commentators, but the real outrage behind the story has been completely overlooked – the fact that Gates is a hardcore eugenicist and has called for lowering the global population through vaccines which his foundation funds to the tune of billions.
Ex-CIA Agents Confirm Torture at Polish Black Site Former CIA agents have confirmed rumors that the agency tortured terror suspects at a detention center in Poland. One agent allegedly held a drill to a prisoner’s head while he was naked and hooded.
Blair’s Journey: US medal for ‘war criminal’? Former British Prime Minister Tony Blair will receive a prestigious American medal for human rights work. But in his ten years as premier, Blair went from huge popularity to being called a U.S. poodle. His policies in Iraq and Afghanistan earned him accusations of having blood on his hands. And as Laura Emmett reports, many are outraged at his latest award.
Big Sis To Get Expanded Role In Policing Internet Two cybersecurity bills that would hand President Obama the power to shut down parts of the Internet in the event of a national emergency have now been merged into a single unified piece of legislation that Democrats will try to pass before the end of the year, with the Department of Homeland Security being given a larger role in policing the world wide web.
Peace Activist Cindy Sheehan: “I am A 9/11 Truther” Cindy Sheehan, the anti-war activist who lost her son to the ongoing war in Iraq, delivered an impassioned and emotional speech during which she specifically addressed concerns over the 9/11 attacks and stated that she believes they were orchestrated by elements of the U.S. government for political gain.
Soros Front Group Exploits Teenage Celebrity to Get Out Vote for War Party Soros and crew want to get out the vote at all cost, even if they have to exploit kids.
Gold and Silver Explode as Banksters Abandon Market Manipulation Gold has surged to a new high as the prospect of inflation reared its ugly head in the United Kingdom on bad news from a report indicating a weaker-than-expected eurozone industrial production. Germany and France, despite sovereign debt fears, have been able to manage anemic growth but today’s data signals a slow down.
Allegation: Americans Flooded Out Millions in Pakistan to Protect U.S. Drone Military Base Feryal Ali Gauhar served as a Goodwill Ambassador for the United Nations Population Fund and is the only UN Goodwill Ambassador who quit over the invasion of Iraq.
The Biocratic Utopians Part I: Prussian Grenadiers Jurriaan Maessen | The ambition of the biocrats is to create a “superior” class of men.
Gold and Silver Explode as Banksters Abandon Market Manipulation Kurt Nimmo | Gold traded as high as $1,261.90 on Tuesday.
Big Sis To Get Expanded Role In Policing Internet Paul Joseph Watson | Democrats want “Kill Switch” bill passed this year.
Soros Front Group Exploits Teenage Celebrity to Get Out Vote for War Party Kurt Nimmo | The Twitter crowd needs to know that the health of the state is perpetual war.
Expanding U.S.-Canada Security and Economic Partnership Dana Gabriel | NAFTA partners are pursuing a more bilateral agenda for advancing continental integration.
Drudgereport: 'Tea party' favorites lead in NH, Delaware...
Establishment Freaks...
Upsets...
RESULTS...
WIRE...
Doomsday warnings of US apocalypse gain ground...
US poverty on track to post record gain under Obama...
Last minute aid helps city dodge default...
REPUBLICAN ACCUSES WHITE HOUSE OF 'CLASS WARFARE'...
Paul says GOP shares blame for deficits...
Kerry flip-flops on tax cuts...
Muslims protest Quran-burning plan...
Florida pastor calls it off...
Christians rip pages from Muslim holy book in front of White House...
Man ignites Quran near Ground Zero...
VIDEO...
Mosque opponents, supporters face off in downtown NYC...
OBAMA: 'We are not and never will be at war with Islam'...
Finance groups: Long transition to ease new bank rules (Washington Post) [ Basel’s all the rage … Riiiiight! Bonkers for Basel, the thing in rally vogue this day … but, not Basil as in Basil Rathbone of super sleuth Sherlock Holmes film fame who’d make short shrift of this fraudulent wall street contagion that has swept over Europe in a manner to rightfully earn the moniker ‘eventual black Friday plague’ … and then there’s the ‘higher oil price’ part of the suckers’ rally. We can certainly expect Rosanne Rosanna Danna formerly of SNL fame, as night follows the day, to chime in with a reminder as her mama always used to say, ‘it’s always something’ … but unfortunately, that somethin’ is not reality. YAHOO [BRIEFING.COM]: ‘Broad-based buying on the back of Basel III boosted stocks to their fourth straight gain, or seventh advance in eight sessions. Still, participation remained unimpressive ... ‘ AP Business Highlights ‘… Banks get years to adjust to new global rules BASEL, Switzerland (AP) -- Bankers and analysts said new global rules could mean less money available to lend to businesses and consumers, but praised a decision to leave plenty of time -- until 2019 -- before the financial stability requirements come into full force ...’ ]Critics caution, however, that the requirements adopted by the Basel Committee on Banking Supervision fall short of what's needed to prevent another financial crisis.
Cuba to cut 500,000 workers, reform salaries (Washington Post) [ Boy, when Castro said communism wasn’t working for them anymore, he wasn’t kidding! No gloating for defacto bankrupt, pervasively corrupt america which is a far cry from capitalism and but a whisper from collapse itself.]
Banks miss TARP payments (Washington Post) [ Sounds like a plan! … Bank Failure Friday Continues at Seeking Alpha ‘…Bank Failure Friday continues with the total number of failures for 2010 now up to 119 on the way to 150 to 200, as the third quarter total ended September 10th at 33. During “The Great Credit Crunch” the FDIC only closed 25 banks during all of 2008. In 2009 the FDIC picked up the pace with 140 bank failures with a peak of 50 in the third quarter of 2009. So far in 2010 the FDIC closed 41 banks in the first quarter, another 45 in the second quarter, and so far 33 for the third quarter. With 119 bank failures so far in 2010 the total for “The Great Credit Crunch” is up to 284 continuing its path to my predicted 500 to 800 by the end of 2012 into 2013 … (see rest of article infra)]
Economy's fallout (Washington Post) The fallout of a troubled economy [ I’m sorry to say that … you ain’t seen nothing yet … much worse to come! ]From foreclosure to food shortages, the recession set in motion by the financial crisis of 2008 is having a broad and deeply-felt global impact.
Doomsday warnings of US apocalypse gain ground AFP | Economists peddling dire warnings that the world’s number one economy is on the brink of collapse.
A subtler tack to fight Afghan corruption? (Washington Post) [ How about a not so subtler tack to fight corruption starting right here in the u.s. of a. where corruption and crime are pervasive and in fact, at the root of the Afghanistan problems, from american reinvigorated heroin trade to bribery attendant thereto to killing civilians, etc.. Defacto Bankrupt, Meaningfully Lawless, War Criminal Nation america, the leader of nations … in crime:
Though having but 5% of the world’s population, america can boast 76% of the world’s serial killers, followed by Europe with England/UK then Germany leading the way for the eu [excerpt, 6 minute video, Serial Killers: Real Life Hannibal Lechters http://www.albertpeia.com/realifeamericaserialkillers.mpg (as is consistent with crime generally, see infra)]. Defacto bankrupt, fraudulent america also spends more on offensive (defensive a misnomer / propaganda) military spending than all the nations of the world combined, and by a large margin at that. Do you see a pattern emerging here [ I unfortunately only belatedly did, and the feds, fed employees, cia, all 3 branches of the u.s. government, etc., are included in this evolved american trait of inherent criminality in the most nefarious sense ( http://www.albertpeia.com/112208opocoan/ricosummarytoFBIunderpenaltyofperjury.pdf http://www.albertpeia.com/112208opocoan/PeiavCoanetals.htm ) ]:
CRIME STATISTICS > TOTAL CRIMES (MOST RECENT) BY COUNTRY SHOWING LATEST AVAILABLE DATA (america’s No. 1).
| Rank | |||
| # 1 | 11,877,218 |
| |
| # 2 | 6,523,706 |
| |
| # 3 | 6,507,394 |
|
… ]
Doomsday warnings of US apocalypse gain ground AFP | Economists peddling dire warnings that the world’s number one economy is on the brink of collapse.
Handcuffs For Wall Street, Not Happy Talk Zach Carter | The fraud allegations that have emerged over the past year are not restricted to a few bad apples at shady companies — they involve some of the largest players in global finance.
Why New Bank Capital Rules Could Make Things Worse CNBC | Early reports suggest the required levels of capital will be much lower than feared, and the kinds of assets that can be used to meet the requirements more expansive than earlier proposals suggested.
Economic Docs Find Remedy Amid Bubble Rubble Even the most casual observer of the events of the last five years — the housing bubble, the bust and the digging-out process — would be struck by the similarities between the policies that got us into this mess and the prescriptions for getting us out.
World Panel Backs Rules to Avert Banking Crises Top central bankers and bank regulators agreed Sunday on far-reaching new rules for the global banking industry that are designed to avert future financial disasters, but could also dampen bank profits and strain weaker institutions.
Tim Geithner Warns: The US Is At Risk Of A 1930s Repeat If the government become paralyzed — as is arguably the case already, and is clearly a serious risk should the GOP take over — the US risks a 1930s-like scenario. At least according to Tim Geithner.
M2 Surges By $30 Billion In Past Week To Highest Ever, Even As Monetary Base Declines Another week in which the M2 jumped to a fresh all time high, increasing by $30 billion W/W to just under $8.7 trillion.
Bank Failure Friday Continues at Seeking Alpha ‘…Bank Failure Friday continues with the total number of failures for 2010 now up to 119 on the way to 150 to 200, as the third quarter total ended September 10th at 33. During “The Great Credit Crunch” the FDIC only closed 25 banks during all of 2008. In 2009 the FDIC picked up the pace with 140 bank failures with a peak of 50 in the third quarter of 2009. So far in 2010 the FDIC closed 41 banks in the first quarter, another 45 in the second quarter, and so far 33 for the third quarter. With 119 bank failures so far in 2010 the total for “The Great Credit Crunch” is up to 284 continuing its path to my predicted 500 to 800 by the end of 2012 into 2013.
The failed bank was publicly-traded Horizon Bank (HZNB.OB), which had huge overexposures to C&D and CRE loans with risk ratios of 358% and 1769% versus the ignored regulatory guidelines of 100% and 300% of risk-based capital. The commitment pipeline of commercial real estate loans was 99% funded as “extend and pretend” caused this failure. The consolidator bank has been used before by the FDIC; Bank of the Ozarks (OZRK) which has a HOLD rating according to ValuEngine.
Here are some statistics from the FDIC for the Second Quarter 2010: There were 45 bank failures in the second quarter, and we ended the quarter with the number of FDIC-insured financial institutions declining to 7,893, of which 1306 are publicly-traded.
· 1172 of all community banks (14.8%) are overexposed to Construction & Development Loans.
· 1432 or 18.1% are overexposed to Nonfarm / Nonresidential real estate loans.
· 2504 or 31.7% are thus overexposed to Commercial Real Estate loans.
· 1317 or 16.7% have a real estate loan pipeline that’s 100% funded.
· 2622 or 33.2% have a pipeline that’s between 80% and 100% funded.
· 3939 of 49.9% of all banks have a pipeline that’s 80% or more funded. So half the community banks in America remain overleveraged to Commercial Real Estate and the possible losses remain about $1.5 trillion.
Publicly-Traded Banks:
· 293 of the 1306 publicly-traded banks are overexposed to C&D loans
· 394 are overexposed to Nonfarm / Nonresidential real estate loans.
· 687 or 52.6% of the publicly-traded banks are thus overexposed to Commercial Real Estate loans. We publish this list as the ValuEngine List of Problem Banks.
· 234 publicly-traded banks have a real estate loan portfolio that’s 100% funded.
· 463 have a real estate loan portfolio between 80% and 100% funded.
· 697 thus have significant real estate loan pipeline stress.
Problem Banks at the end of the Second Quarter versus the First Quarter:
· Given the waves of bank failures the total assets among the 686 Publicly-Traded Problem Banks declined to $135.9 billion from $164.7 billion in the first quarter. C&D loans declined to $12.7 billion from $16.4 billion with a CRE loan pipeline steady at 78.1% versus 78.0%.
· Assets among the 91 Deadbeat Banks, (those in arrears on making TARP dividend payments), totals $99.9 billion with C&D loans at $10.9 billion and a CRE pipeline of 80.9%.
· Assets among failed publicly-traded banks increased to $122.5 billion from $116.7 billion in the first quarter. C&D loans increased to $22.3 billion from $21.5 billion. The CRE loan pipeline increased a tick to 90.4% from 90.3%.
Assets among banks with a CRE pipeline of 80% or more funded increased to $3.84 trillion including $121.3 billion in C&D loans. The average pipeline for 3939 banks is 92.0%. Among this list are four big banks that will likely see waves of write-offs in upcoming quarters.
· JP Morgan Chase (JPM) with $1.72 trillion in assets has a pipeline of 80%.
· SunTrust Banks (STI) has $160.5 billion in assets with an 83% pipeline.
· BB&T Corp (BBT) has $149.2 billion in assets with an 84% pipeline.
· Fifth Third Bank (FITB) has 100.0 billion in assets with an 84% pipeline.
Disclosure: No positions’
U.S. Trade Deficit Still Growing
Why New Bank Capital Rules Could Make Things Worse CNBC | Early reports suggest the required levels of capital will be much lower than feared, and the kinds of assets that can be used to meet the requirements more expansive than earlier proposals suggested.
Too Big To Fail Global Banks Will Collapse Between Now and First Quarter 2011 Matthias Chang | Quantitative Easing spearheaded by the Chairman of Federal Reserve, Ben Bernanke, delayed the inevitable demise of the fiat shadow money banking system slightly over 18 months.
Defacto Bankrupt, Meaningfully Lawless, War Criminal Nation america, the leader of nations … in crime:
Though having but 5% of the world’s population, america can boast 76% of the world’s serial killers, followed by Europe with England/UK then Germany leading the way for the eu [excerpt, 6 minute video, Serial Killers: Real Life Hannibal Lechters http://www.albertpeia.com/realifeamericaserialkillers.mpg (as is consistent with crime generally, see infra)]. Defacto bankrupt, fraudulent america also spends more on offensive (defensive a misnomer / propaganda) military spending than all the nations of the world combined, and by a large margin at that. Do you see a pattern emerging here [ I unfortunately only belatedly did, and the feds, fed employees, cia, all 3 branches of the u.s. government, etc., are included in this evolved american trait of inherent criminality in the most nefarious sense ( http://www.albertpeia.com/112208opocoan/ricosummarytoFBIunderpenaltyofperjury.pdf http://www.albertpeia.com/112208opocoan/PeiavCoanetals.htm ) ]:
CRIME STATISTICS > TOTAL CRIMES (MOST RECENT) BY COUNTRY SHOWING LATEST AVAILABLE DATA (america’s No. 1).
| Rank | |||
| # 1 | 11,877,218 |
| |
| # 2 | 6,523,706 |
| |
| # 3 | 6,507,394 |
| |
| # 4 | 3,771,850 |
| |
| # 5 | 2,952,370 |
| |
| # 6 | 2,853,739 |
| |
| # 7 | 2,683,849 |
| |
| # 8 | 2,516,918 |
| |
| # 9 | 2,231,550 |
| |
| # 10 | 1,764,630 |
| |
| # 11 | 1,543,220 |
| |
| # 12 | 1,516,029 |
| |
| # 13 | 1,422,863 |
| |
| # 14 | 1,404,229 |
| |
| # 15 | 1,340,529 |
| |
| # 16 | 1,234,784 |
| |
| # 17 | 973,548 |
| |
| # 18 | 923,271 |
| |
| # 19 | 593,997 |
| |
| # 20 | 565,108 |
| |
| # 21 | 553,594 |
| |
| # 22 | 552,411 |
| |
| # 23 | 520,194 |
| |
| # 24 | 491,026 |
| |
| # 25 | 427,230 |
| |
| # 26 | 420,782 |
| |
| # 27 | 372,341 |
| |
| # 28 | 351,153 |
| |
| # 29 | 330,071 |
| |
| # 30 | 312,204 |
| |
| # 31 | 307,631 |
| |
| # 32 | 286,482 |
| |
| # 33 | 283,702 |
| |
| # 34 | 236,165 |
| |
| # 35 | 218,360 |
| |
| # 36 | 214,192 |
| |
| # 37 | 167,173 |
| |
| # 38 | Peru: | 161,621 |
|
| # 39 | 148,915 |
| |
| # 40 | 134,010 |
| |
| # 41 | 132,867 |
| |
| # 42 | 130,375 |
| |
| # 43 | 107,373 |
| |
| # 44 | 102,783 |
| |
| # 45 | 101,853 |
| |
| # 46 | 92,646 |
| |
| # 47 | 85,776 |
| |
| # 48 | 84,599 |
| |
| # 49 | 81,697 |
| |
| # 50 | 81,274 |
| |
| # 51 | 80,592 |
| |
| # 52 | 60,242 |
| |
| # 53 | 59,426 |
| |
| # 54 | 57,799 |
| |
| # 55 | 49,329 |
| |
| # 56 | 44,762 |
| |
| # 57 | 40,263 |
| |
| # 58 | 39,188 |
| |
| # 59 | 38,620 |
| |
| # 60 | 36,302 |
| |
| # 61 | 35,943 |
| |
| # 62 | 31,138 |
| |
| # 63 | 26,046 |
| |
| # 64 | 24,066 |
| |
| # 65 | 21,058 |
| |
| # 66 | 19,814 |
| |
| # 67 | 19,350 |
| |
| # 68 | 18,301 |
| |
| # 69 | 17,023 |
| |
| # 70 | 15,520 |
| |
| # 71 | 15,029 |
| |
| # 72 | 13,292 |
| |
| # 73 | 13,023 |
| |
| # 74 | 12,048 |
| |
| # 75 | Oman: | 11,782 |
|
| # 76 | 8,872 |
| |
| # 77 | 7,857 |
| |
| # 78 | 7,026 |
| |
| # 79 | 5,838 |
| |
| # 80 | 5,303 |
| |
| # 81 | 4,297 |
| |
| # 82 | 751 |
| |
|
| Total: | 63,531,202 |
|
|
| Weighted average: | 774,770.8 |
|
DEFINITION: Note: Crime statistics are often better indicators of prevalence of law enforcement and willingness to report crime (I believe, and facts support, crime in america to be substantially under-reported and under-prosecuted owing to pervasive corruption, arbitrary enforcement of the law, etc.) than actual prevalence.
SOURCE: The Eighth United Nations Survey on Crime Trends and the Operations of Criminal Justice Systems (2002) (United Nations Office on Drugs and Crime, Centre for International Crime Prevention)
The New Terrorist Threat To America: Drunk British Teenagers Brandishing Insults Steve Watson | College student banned from US for life for name calling email to White House. I’m sure he’s crying both night and day … you know, from prospective loss of that new global roach motel (once you go in, you never come out); viz., the disunited states of america; and wow, talk about thin skin; who can’t think of far worse to call wobama; and then, there’s the real terror threat.
Big Sis Iris Scanners: The Prison Without Bars Paul Joseph Watson | Americans will be forced to prove they are well-behaved serfs to be able to do anything.
Dick Gregory Announces Hunger Strike for 9/11 Truth Dick Gregory | I am announcing today that I will be consuming only liquids beginning Sunday until my eightieth birthday in 2012 and until the real truth of what truly happened on that day emerges and is publicly known.
9/11 – State of Emergency: An Era of Madness and Despair The Excavator | All the freedoms of the American people that are being stripped by the U.S. government under national emergency are rationalized because of the terrorist attacks on September 11.
Doomsday warnings of US apocalypse gain ground Economists peddling dire warnings that the world’s number one economy is on the brink of collapse, amid high rates of unemployment and a spiraling public deficit, are flourishing here.
Greek Default: Why It’s Only A Matter Of Time Is Greek default only a matter of time? According to the Council on Foreign Relations that’s the story the bond market is currently telling us.
Zionists are behind Quran desecration: Iran FM Iranian Foreign Minister Manouchehr Mottaki has described the Quran-burning plan as a Zionist-orchestrated scheme.
Google ‘damages users’ brains’ Google damages the brains of its users by offering too much assistance in solving problems, an author has claimed.
Feds Spent $800,000 of Economic Stimulus on African Genital-Washing Program The National Institute of Mental Health (NIMH), a division of the National Institutes of Health (NIH), spent $823,200 of economic stimulus funds in 2009 on a study by a UCLA research team to teach uncircumcised African men how to wash their genitals after having sex.
Ground Zero Mosque Controversy: A CIA Orchestrated Event Kurt Nimmo | The Ground Zero mosque event was designed to reinvigorate the manufactured Global War on Manufactured Terror.
Obama Touts Inefficient Program to Defend Stimulus: $1.4m per Green Job Created Activist Post | Only 390 jobs were created from the $548 million taxpayer investment, or about $1.4 million per job.
British troops in Afghanistan face heroin smuggling probe British military police are investigating claims that the country’s servicemen may have, with the americans, trafficked heroin out of Afghanistan, the Ministry of Defence in London said Sunday.
United States Joint Forces Command Warns that Huge U.S. Debt Will Lead to Military Impotence, Default or Revolution [ Little bit late for that … the warning thing! ] American military and intelligence leaders say that debt is the main national security threat to the U.S.
Korans vandalized in New York, Washington on 9/11 anniversary Two religious leaders at a recently-founded offshoot of the Baptist church burned Korans in a Tennessee back yard on the anniversary of the 9/11 attacks, reports the NBC affiliate in Nashville.
September 11 anniversary marked by noise and recrimination The September 11 anniversary is usually a day of quiet reflection. But this year the furore over plans for a mosque near Ground Zero led to a day of noise and recrimination.
Nine Years After 9/11, Only 1% See Terrorism as Top U.S. Problem Nine years after the terrorist attacks of Sept. 11, 2001, 1% of Americans mention terrorism as the most important problem facing the country, down from 46% just after the attacks.
Nine years, two wars, hundreds of thousands dead – and nothing learnt Did 9/11 make us all mad? Our memorial to the innocents who died nine years ago has been a holocaust of fire and blood.
When Will the Bad Dream End? Anthony Gregory | It has been nine whole years since 9/11, and it is starting to look like the “post-9/11″ insanity has become a permanent feature of the American landscape.
The Silence of September 11 Infowars.com | Silence has followed ever since the attack and continues until this day, as Peter Dale Scott explains.
Wikileaks to Release Massive Document Collection on Iraq War Ahmad F Al-Shagra | The Iraq War report is larger than the Afghan War documents made available for advance review to The New York Times, The Guardian, and Der Spiegel.
Pastor at centre of Koran-burning controversy flies to New York for September 11th The pastor who planned to burn Korans on today’s ninth anniversary of the September 11th attacks has flown to New York to challenge the controversial proposed Islamic centre close to the Ground Zero site.
Koran-burning pastor ‘has gone mad’ and ‘needs help,’ daughter says The estranged daughter of a Florida pastor who has threatened to burn copies of the Koran believes he has gone mad and needs help, she said in a German media interview conducted on Friday.
DHS: Another Attack Could Be On The Way “We can’t guarantee there won’t be another successful terrorist attack,” Napolitano will tell first responders and emergency workers.
We have failed, admits UN, as fresh wave of Congo rapes emerges The United Nations has been urged to go back to basics in protecting civilians in Eastern Congo after admitting that 500 rapes in the space of a single month amounted to a serious failure in its mission.
9 Years Later, Nearly 900 9/11 Responders Have Died, Survivors Fight for Compensation The victims of 9/11 are being remembered in many places around the world, Russia among them. Dozens have come to lay flowers at the US Embassy in the Russian capital.
“We’re dead men walking”: The toxic legacy of 9/11 More than 10,000 Ground Zero workers – known as “first responders” – are suffering from serious and even fatal illnesses after inhaling the toxic dust cloud caused by the crumbling towers.
Firefighter battles cancer he got from 9/11 toxins Nine years after the attacks of 9/11, many heroes from that day are still fighting for their lives. One of them is a firefighter, who is struggling to stay alive for his family.
Compensation for 9/11 First Responders to Be Revisited in Congress With the nine-year commemoration of the Sept. 11 terrorist attacks on the World Trade Center approaching on Saturday, thousands of victims, many of whom risked their lives to save others, are speaking out and saying that the government has abandoned them in their time of need.
9/11 responders demand justice Last month RT filmed this emotional footage of 9/11 first responders pouring their hearts out at a speech just blocks away from where the twin towers fell. The rally was in response to Congress defeating a federal bill that would have provided billions of dollars in health care for those sickened by toxins released by the collapse of the World Trade Center towers Sept. 11, 2001.
America’s Torture Doctrine John Galt | We idolize torturers in our favorite TV programs, and are happy to see our enemies (real and imagined) vicariously taken apart in order to protect our beacon of freedom.
The Anniversary of 9/11 Washington’s Blog | If even the 9/11 Commissioners don’t buy the official story, why do you?
Drudgereport: Doomsday warnings of US apocalypse gain ground...
US poverty on track to post record gain under Obama...
Last minute aid helps city dodge default...
REPUBLICAN ACCUSES WHITE HOUSE OF 'CLASS WARFARE'...
Paul says GOP shares blame for deficits...
Kerry flip-flops on tax cuts...
Muslims protest Quran-burning plan...
Florida pastor calls it off...
Christians rip pages from Muslim holy book in front of White House...
Man ignites Quran near Ground Zero...
VIDEO...
Mosque opponents, supporters face off in downtown NYC...
OBAMA: 'We are not and never will be at war with Islam'...
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When Will the Bad Dream End? Anthony Gregory | It has been nine whole years since 9/11, and it is starting to look like the “post-9/11″ insanity has become a permanent feature of the American landscape.
Nine years, two wars, hundreds of thousands dead – and nothing learnt Did 9/11 make us all mad? Our memorial to the innocents who died nine years ago has been a holocaust of fire and blood.
Koran-burning pastor ‘has gone mad’ and ‘needs help,’ daughter says The estranged daughter of a Florida pastor who has threatened to burn copies of the Koran believes he has gone mad and needs help, she said in a German media interview conducted on Friday.
We have failed, admits UN, as fresh wave of Congo rapes emerges The United Nations has been urged to go back to basics in protecting civilians in Eastern Congo after admitting that 500 rapes in the space of a single month amounted to a serious failure in its mission.
9 Years Later, Nearly 900 9/11 Responders Have Died, Survivors Fight for Compensation The victims of 9/11 are being remembered in many places around the world, Russia among them. Dozens have come to lay flowers at the US Embassy in the Russian capital.
“We’re dead men walking”: The toxic legacy of 9/11 More than 10,000 Ground Zero workers – known as “first responders” – are suffering from serious and even fatal illnesses after inhaling the toxic dust cloud caused by the crumbling towers.
Firefighter battles cancer he got from 9/11 toxins Nine years after the attacks of 9/11, many heroes from that day are still fighting for their lives. One of them is a firefighter, who is struggling to stay alive for his family.
The Anniversary of 9/11 Washington’s Blog | If even the 9/11 Commissioners don’t buy the official story, why do you?
Execs with criminal records slip through FHA crackdown (Washington Post) A crackdown on reckless mortgage lenders has failed to root out several executives with criminal records whose firms continue to do business with the agency in violation of federal law.
Obama defends Democrats' economic initiatives (Washington Post) [ What initiatives? Hands off fraudulent wall street by no prosecutions, fines, jail, disgorgement which would have gone a long way to cleansing / righting the economic / financial system? Rallying congress (see infra – new FASB rule change to mark to anything valuation of worthless assets and the 157 Rule change that allowed banks to park all their losses in a bucket called other comprehensive income (OCI). OCI appears on the balance sheet, but not on the income statement and thus does not affect earnings ) toward greater obfuscation of continuing economic dilemma / debacle? Fake data as in the most recent batch of estimated unemployment claims? Increased war spending in Afghanistan despite defacto bankruptcy of the nation? ] Obama said he would use the fall campaign season to remind voters of the sinking economy he inherited when he took office and what measures he has since put in place.
Defense cuts could slow D.C. economy for years (Washington Post) [ Well, giving credence to the 9/11 Truthers and a reason why the attacks were allowed to go forward and even in part why those mossad agents on the banks of the Hudson in Weehawken, n.j. were cheering as the twin towers were in flames, war, both legal and illegal when they’re greedy enough which is almost always, and war profiteering specifically, is very big business; but alas, more destructive, both home and abroad, than constructive in both real and economic terms; and then of course, the geopolitical toll which will linger far longer than the ephemeral short-term gains for the unscrupulous few. ( I had a full-professor who was also a CPA for my Cost Accounting Course as required for my MBA in Finance, evening program, NYU GBA. He referenced his own military experience in pointing out the folly of much of the military budgetary / spending process in terms of his duties which included each day firing off munitions (small mortars, ‘rockets’, etc.) at nothing whatsoever at all, if only to make sure at the end of the month (longer periods) more munitions / spending would have to be budgeted and purchased and so on. They’ve certainly come a long way in the ‘budgetary / spending’ process by creating wars to maintain same. This can never be justified; and, after all, the nation’s defacto bankrupt. ). What isn’t corrupt / fraudulent in washington d.c., or in America generally, for that matter? ] After surging during post-9/11 era, the industry now braces for a major contraction and layoffs that could produce a significant drag on region.
Unemployment Claims Not as Bullish as They Seem (Why? Kudrna:‘The Labor Department reported Thursday morning that new claims for unemployment dropped a seasonally adjusted 27,000 to 451,000. Unexpected bullish news, right? The markets immediately gapped-up on this information as the bulls found good reason to buy. Unexpected positive news is almost always met with a bullish move north as it’s rarely priced in. However, a useful tidbit of information about that shockingly large drop came out after the gap-up. Bloomberg reported that nine states didn't file claims data to the Labor Department in Washington because of the Labor Day holiday earlier this week. California and Virginia estimated their figures and the U.S. government estimated the other seven. Coincidence in the large drop or not? We will see when the next revision comes out but usually those revisions fail to make headlines as we are already focusing on future claims. This has been a great cover-up method for a long time…’
How Government Reporting Will Intensify the Inevitable , On Friday September 10, 2010, 12:41 pm EDT ‘Natural carbonation keeps a champagne bottle under constant pressure. The more you shake the bottle, the higher the pressure gets and the further the cork will eventually fly. Figuratively speaking, the government has been shaking the bottle. Watch out when the cork pops. On August 10, the Associated Press reported that the Federal Reserve has found a new trick to jumpstart the economy. Below is the full quote that shows why we probably can't expect unbiased assessments coming out of Washington, or the Fed's corner: 'The Federal Reserve policymakers are pondering ways to jumpstart the economic recovery. The trick: making sure whatever they do or say doesn't rattle Wall Street.' Some of the recent government statistics have been 'interesting' no doubt, and we know the administration has spent trillions in an attempt to lift the economy, but would it go as far as actually fudging statistics? We'll examine potential cases for 'data spiking' in a moment, but for now we'll take a look at one of the most popular government statistics, which is misleading to say the least.
GDP - Like a Flag in the Wind
GDP reports are prepared by the Bureau of Economic Analysis (BEA) and are a science all in itself. GDP reports are often revised. The 'advance' estimate is published at the end of the first month following the close of a quarter. In addition to the 'advance' estimate, there are first and second revisions called the 'preliminary' and 'final' estimates. The 'final' estimate is reviewed annually, usually in July. Once every several years, the BEA reviews all data back to 1929. On July 30, the BEA lowered Q2 2010 growth from an estimated 2.7% to 2.4%. The real GDP for all three previous years was revised as well. It was lowered by 0.2% for 2007, it was lowered by 0.6% for 2008 and it was lowered by 0.4% for 2009 (see chart below)[chart]. In percentage terms, the real GDP for 2007 was revised down from 2.5% growth to 2.3%. The 2008 decrease was lowered from 1.9% to 2.8%, and 2009 growth was revised up from a 0.1% to a 0.2% increase. In essence, the BEA proved that the recession was (or is) much deeper and the alleged recovery much weaker than previously reported. Imagine if you would have based your 2007 and 2008 investment decisions on GDP reports. But wait, there is more. On August 27, the BEA lowered the Q2 2010 GDP growth from 2.4% to 1.6%. The financial media, however, applauded the reduction since the final 1.6 number was still higher than the 1.4% economists expected. Stocks rallied over 2% that day.
Unemployment Numbers - Not Deserving of Your Trust
Unemployment in August increased from 9.5% to 9.6%, but that's ok. Why? According to the financial media, the increase of unemployment was due to an increase in labor force. An estimated 6.6 million students will be graduating and joining the labor force this year. An increasing labor force is a reality, not an excuse to rationalize higher unemployment numbers. The real unemployment rate (U-6) reported by the BLS (but neglected by the financial media) jumped from 16.5% to 16.7%. Nevertheless, stocks rallied nearly 3% when unemployment figures were released on September 3rd. According to the BLS, the manufacturing sector lost 27,000 jobs in August. This, however, contradicts the positive August ISM manufacturing report, which rose from 55.5% to 56.3%. Here is the analysis from the Institute for Supply Management: 'A PMI in excess of 42 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the PMI indicates growth for the 16th consecutive month in the overall economy, as well as expansion in the manufacturing sector for the 13th consecutive month.' If you ask the unemployed, it doesn't feel like the manufacturing sector is improving.
Changing Rules to Accommodate Growth
Amidst the biggest financial meltdown since the Great Depression, the administration had to act quickly. The sheer amount of toxic assets overwhelmed the banking (NYSEArca: KBE - News) and financial sectors (NYSEArca: XLF - News), which led to the fall of Lehman Brothers and credit contraction around the globe (NYSEArca: EFA - News). It was impossible to eliminate trillions of bad loans or revive the ailing real estate market (NYSEArca: IYR - News). It was impossible to prop up faltering sectors like consumer discretionary (NYSEArca: XLY - News) and technology (NYSEArca: XLK - News). In short, it was impossible to change reality. It was, however, possible to change the prevailing perception and hide the root problems. In fact, it wasn't just possible; it proved to be fairly easy. The government simply urged the Financial Accounting Standards Board (FASB) to change some rules. On April 2, 2009, the FASB changed Rule 157. The ripple effect caused by massive real estate losses suffered by the 'too big to fail' banks (NYSEArca: IYF - News), as well as regional banks (NYSEArca: KRE - News), threatened the integrity of the entire system. The 157 Rule change allowed banks to park all their losses in a bucket called other comprehensive income (OCI). OCI appears on the balance sheet, but not on the income statement and thus does not affect earnings. In late 2009 and early 2010, banks exceeded their earnings expectations - at least on paper - which created the perception that the economy was recovering. As it turns out, the timing for the Rule 157 change was perfect and coincided with the biggest stock market rally in recent history. A 50%+ run in the Dow Jones (DJI: ^DJI), S&P (SNP: ^GSPC), and Nasdaq (Nasdaq: ^IXIC) intensified the perception that the economy was on the mend. Before the accounting rule change and other government efforts, the ETF Profit Strategy Newsletter predicted the biggest rally since the October 2007 all-time highs. Via the March 2nd Trend Change Alert, the newsletter advised to close out previously recommended short positions (some gained 100% and more) and buy long and leveraged ETFs, many of which gained 50%, 100% or more.
Back to the Future
All was well until April 2010. Prior to the April highs, Mr. Bernanke, Mr. Geithner, and the President were campaigning for their fair share of credit for rescuing and reviving the country. Rather than examining and disclosing some of the government's questionable methods, the media jumped on the bandwagon and tickled the alleged 'saviors' egos. By doing so, the pressure in the champagne bottle was increased. More investors bought stocks under the mistaken view the economy had improved. This increased the pool of stock owners and the pipeline of sellers. As per the most recent GDP numbers, investors found out that the state of the economy is worse than previously thought. Furthermore, the government has lost credibility and some of its associated ability to inflate stock market confidence. Watch out, once the cork blows! Investors leaving the market could send prices falling as fast as champagne gushing out of a bottle. In fact, this exodus probably started already. On April 16, the ETF Profit Strategy Newsletter noted that: 'The cork seems to have popped. Reality is setting in. The pieces are in place for a major decline.' Following the April highs, the ensuing decline erased eight months worth of gains in a mere 22 trading days. An initial wave of somewhat critical media reports quickly faded as the stock market stabilized. Sideways trading tends to calm the nerves and get investors re-engaged before the hammer drops again. What's the moral of the story? Faulty government data and trend-following media reports tend to distort the real picture and postpone and intensify the inevitable.
The ETF Profit Strategy Newsletter combines the analysis of various indicators with common sense and out-of-the-box thinking to formulate a short, mid, and long-term forecast.’
Successful Economic Policies? For Whom? Last week, in the wake of another uptick in the official unemployment rate, the administration continued to claim that their economic policies were working, just not fast enough.
Can America Recover When The Majority Of Americans See A Double Dip, And Think The Country Is Fundamentally Broken? Earlier this week we asked, can the economy really recover when 92% of the population says the economy is garbage in a survey? That was the number in a WSJ/NBC poll, and it would seem to indicate a major headwind in terms of sentiment.
IMF Resumes Direct Gold Dumping, Sells 10 Tons Of The Shiny Metal To Bangladesh It has been a while since the IMF sold gold directly to sovereign countries.
U.S. drops in competitiveness ( Washington Post ) [ Fourth place for pervasively corrupt, defacto bankrupt america? I don’t think so; not in their wildest dreams, and there’s a lot of that in america these days, but little else. Reality says america’s place should be in the twenties at best.
Obama rating hits new low Overall, 41% of voters say they at least somewhat approve of the president’s performance. Fifty-eight percent (58%) disapprove.
The Anniversary of 9/11 Washington’s Blog | If even the 9/11 Commissioners don’t buy the official story, why do you?
Congressman Ron Paul Hints At 2012 Presidential Campaign Steve Watson | “It’s something I think about every single day.”
Hamilton and Kean Call for Domestic Terrorism Agency Kurt Nimmo | A bipartisan effort is underway to demonize patriotic Americans as domestic terrorists.
Doctors Giving Veterans Questionnaire to Determine Mental Illness Infowars.com | In 2007, a bill passed in the House and Senate allowing government to deny Second Amendment to veterans.
Drudgereport: Thousands of Afghans protest Quran-burning plan...
Tennessee preacher to burn Quran...
Topeka, Kansas church vows burning...
Protester plans to burn on Wyoming's Capitol steps...
FLASHBACK: Muslims Burn Bibles and Destroy Crosses...
Ground Zero imam ignores pastor's two-hour deadline...
U.S. drops in competitiveness ( Washington Post ) [ Fourth place for pervasively corrupt, defacto bankrupt america? I don’t think so; not in their wildest dreams, and there’s a lot of that in america these days, but little else. Reality says america’s place should be in the twenties at best. Previous: U.S. drops in competitiveness (Washington Post) [ Singapore, Sweden, … ? Don’t make me laugh! From defacto bankrupt, meaningfully lawless america’s perspective, this fallen ranking was a gift and one must be asking, what were they smoking (or whose money were they taking?) and is the rest of the world really that bad off? ] Large deficits and a weakened financial system make the U.S. less competitive in the global economy, according to World Economic Forum's new ranking. Sweden Is A Better Place To Do Business Than The U.S. – [Well, that part is true, but …]. ‘…Sweden, by contrast, has “the world’s most transparent and efficient public institutions, with very low levels of corruption and undue influence.” Which loosely translated from wonk-speak sounds like, “You’re better off dealing with honest socialists than crony capitalists.”’ [ True enough, but I still don’t buy it (the rankings), especially america’s fourth place (as opposed to lower) ranking.]
Capitol Hill workers rack up back taxes ( Washington Post ) [ When you consider the pervasive corruption in their ranks and the redundancy / non-productive nature of government jobs, the case becomes irrefutably stronger for the abolition of same; particularly the lifetime appointees along with their plush accouterments, courts, etc.. Then there’s tiny tim geithner’s tax red flag, scofflaw hypocrit that he is. ] Capitol Hill employees owed $9.3 million in overdue taxes at the end of last year, a sliver of the $1 billion owed by federal workers nationwide but one with potential political ramifications for members of Congress.
Yeah! The lack of prosecutions and teeth therein has led to continued and bolder frauds and a complicit u.s. government! Stocks extend gains after drop in jobless claims [ Washington Post ] I was very disappointed to see this headline without disclaimor. Very disheartening.
[ It’s really quite amazing, and you won’t get this from the ‘money honeys’ or other mainstream drivel (actually I got this from the CBS news reporter, 1070am radio, but NOT their business report), the so-called better than expected jobs report (albeit bad at 451,000 continuing claims) was actually based upon federal government estimates for those reports that were not submitted owing to the holiday … and we all know how conservative the u.s. government is in making estimates, especially in election cycles when desperation abounds … riiiiight! ( Drudgereport: GOV'T MAKES IT UP: JOBS NUMBERS 'ESTIMATED' FOR WEEK... 'BETTER THAN EXPECTED'... ) Then there’s the ‘need more capital’ news from among the strongest players in the European sector, viz., Germany’s Deutsch Bank, which can only mean, particularly in light of their adoption of the fraudulent wall street american mark to anything valuation of worthless paper, still out there in the many (hundreds?) of trillions. (see infra, ‘…ECB chief economist Jurgen Stark tells German MPs that the banking system is insolvent. This led to complete shock because the newspaper headlines from July suggested the opposite. The German policy establishment is under the illusion that its banking system is sound because it passed what turned out to be fraudulent stress test…’) Now, if the German banking system’s insolvent, is there a term for double, triple, quadrupal, etc., insolvent for what the american banking system must be? One doesn’t need clairvoyance to know that only bodes ill. Stocks Cling to Skinny Gains, Can't Shake Banking Concerns ]
The Eerie Implications of Market Volume and Mutual Fund Flows ‘… Here's a more compelling question: If two-thirds or more of daily volume is a function of high-frequency trading, what are the implications for index prices over the long haul? A year has passed since I posted some charts illustrating the incredible ratio of S&P 500 volume devoted to five financial stocks. Today's game is no doubt different from last September. It may be about making money, but it probably has little to do with investing — which may explain a lot about current volume metrics and mutual fund flows. I'll update these volume charts periodically in the months ahead.’
Report From Europe: Fall in U.S. Weekly Jobless Claims Cheers Stocks The Mole … Today is Rosh Hashanah, the jewish New Year, in which it is believed the names of the righteous are recorded in the book of life, those in the middle ground are given ten days to repent and become good, while the wicked are deleted from the book of life. In essence, it is make or break time for the year. One wonders if we might be entering a similar phase for Ireland with landmark decisions over the fate of Anglo Irish Bank taken (with the cost of the funeral to be know in early October) and the funding cliff for Irish banks to refund some €25bn of maturing debt this month pending (though I feel fears over their capacity to roll this debt is way overblown)… Today’s Market Moving Stories
- Figures showed that the July US trade deficit declined more than expected today and reached -$42.8bn. Thus, June’s spurt to $-49.8bn seems to have been a blip in the data. In July, total exports gained M/M 1.8 percent while imports decreased 2.1 percent. As for growth, foreign trade is still set to be a slight drag on GDP in 2010Q3. After all, imports started into Q3 on a very elevated level (and significantly above the 2010Q2 average). However, the drag will be much less than Q2’s -3.4pp.
- While US initial jobless claims fell 27k to 451k last week. Claims moved sideways since the start of the year (the average since Jan is 466k), indicating that the improvement on the labour market did make scant headway. All in all, after a long spell of weak data, today’s releases offer some respite.
- In a combative speech, Obama conceded his policies have “fed the perception that Washington is still ignoring the middle class,” was billed as a major economic address to unveil a new round of proposals to kick-start a flagging economic recovery. The president did introduce three new policy proposals the White House has been rolling out for nearly a week: $50 billion in additional infrastructure spending, a permanent and expanded research and experimentation tax credit and a measure allowing businesses to write 100 percent of their investment costs off their taxes through 2011. But Mr. Obama’s speech was far more about politics than economics.
- ECB chief economist Jurgen Stark tells German MPs that the banking system is insolvent. This led to complete shock because the newspaper headlines from July suggested the opposite. The German policy establishment is under the illusion that its banking system is sound because it passed what turned out to be fraudulent stress test. Jurgen Stark is reported to have told a group of Christian Democrat MPs in Berlin that the German banking sector as a whole is undercapitalised. More controversially, he advised them to privatise the saving banks – the ultimate taboo because the savings banks are consider sacrosanct. FT Deutschland reported that Stark also relayed the assessment of US bankers that the German system could not conceivably survive the introduction of the tougher capital rules of Basel III.
- Japan has no choice but to intervene in currency markets to prevent the yen’s strength from decimating the nation’s industry, Barclays Capital said. The yen reached 83.35 versus the dollar yesterday, the highest since May 1995, threatening Japan’s export-led recovery. Industry and jobs won’t likely return from abroad even if the currency weakens eventually, and that prospect may force policy makers to intervene “in the immediate future,” said Tetsufumi Yamakawa, co-head of Japan research at Barclays. “If the yen’s strength lasts at current levels, factories, investment and jobs will all move overseas,” Yamakawa said at a forum in Tokyo yesterday.
- Australian job growth exceeded forecasts in August, sending the unemployment rate down to 5.1% and driving the nation’s currency higher on speculation the central bank will resume raising interest rates. Employers added 30,900 workers in August, exceeding the median forecast for 25,000 in a Bloomberg News survey of 25 economists, the statistics bureau said in Sydney today. The jobless rate matched the lowest level since January 2009.,,
Worth a read: Michael Lewis has a field day: Beware of Greeks Bearing Bonds (Vanity Fair)
Tiny tim geithner Says China Needs to Let Market Drive Up Yuan Bloomberg | U.S. Treasury Secretary Tiny tim geithner said China must let the yuan rise more quickly to show trading partners that it’s following through on its promises [ Riiiiight! … Everyone’s just clamoring for american advice on the global meltdown precipitated by ‘american advice and consent’.]
Bad Math - Why The Bullish Case Doesn't Add Up , On Wednesday September 8, 2010, 3:19 pm EDT
1+1=2 2+2=4
The simplicity and accuracy of those calculations is undeniable. How about this equation? Fundamental Weakness + Technical Sell Signals + Overpriced Stocks = Lower Stock Prices. This calculation also seems to be simple and accurate. Let's look at some equations that don't make sense.
1+1=3 or Better Earnings = Higher Stock Prices
2+2=5 or Weaker than Expected Economy = Rising Stock Prices
3+3=7 or Positive Analyst Estimates = Higher Stock Prices
4+4=9 or Technical Sell Signals = Higher Stock Prices
5+5=11 or Overvalued Stocks = Higher Prices
Too Big To Fail Global Banks Will Collapse Between Now and First Quarter 2011 Matthias Chang | Quantitative Easing spearheaded by the Chairman of Federal Reserve, Ben Bernanke, delayed the inevitable demise of the fiat shadow money banking system slightly over 18 months.
“I Am Jim Cramer And I Approve Of The President’s Message (Because The Market Moved Up By 3 Points)” There are women (and men) who will do anything for a price. Then there is Jim Cramer.
Jim Sinclair: Strap In For Gold’s Move To $1650 By January Now that expectations for Gold at very significant prices are being offered by various rational sources, there is one thing you can be sure of. That one thing is $1650.
Obama Added More to National Debt in First 19 Months Than All Presidents from Washington Through Reagan Combined, Says Gov’t Data In the first 19 months of the Obama administration, the federal debt held by the public increased by $2.5260 trillion, which is more than the cumulative total of the national debt held by the public that was amassed by all U.S. presidents from George Washington through Ronald Reagan.
Here Are 13 Signs That We’re Actually In A Depression Right Now Gregory White | David Rosenberg has outlined, in his latest letter, the 13 reasons with this so-called recovery is actually a depression.
Castro Admits Communist Economics a Failure
Pastor Terry Jones Calls off Koran Burning, Ground Zero Mosque May Be Moved Pastor Terry Jones today canceled his plan to burn Korans at his Florida church after claiming he has struck a deal with a New York Muslim cleric to relocate the so-called Ground Zero mosque.
UN Blueprint: Dismantle Middle Class, Build World Government A UN blueprint for putting the organization back at the forefront of global governance alarmingly reveals the agenda to re-brand global warming as “overpopulation” as a means of dismantling the middle classes while using “global redistribution of wealth” and increased immigration to reinvigorate the pursuit of a one world government.
US soldier ‘kept Afghan body parts’ At least two of the five US soldiers charged in the deaths of three Afghan civilians had kept body parts taken from Afghan corpses and threatened subordinates, according to new documents released by the US army.
Random Pat-Downs Turn PATCO Into Police State “We can conduct any kind of search we want,” said McClintock. “We could ask TSA to bring wands or X-ray machines like they have in airports, though we don’t think that’s appropriate for PATCO riders at this time.”
Gerald Celente Calls Out General Petraeus On Koran Warning Hypocrisy “You hear someone like General Petraeus saying burning the Koran could be dangerous to American troops – hey General Petraeus – how about invading Arab countries and occupying them and killing innocent people? You think that could be dangerous to American troops? Oh no no, our foreign policy has nothing to do with this – they don’t like Americans because we go to Disneyland and shop at Walmart.”
Ground Zero Mosque Imam: If You Don’t Build It, They Will Attack Moving the project to another location would strengthen Islamist radicals’ ability to recruit followers and will likely increase violence against Americans, the imam said.”
Clinton Talks World Government at the Council On Foreign Relations Kurt Nimmo | Simply substitute the phrase “American leadership” with “leadership by the globalist cabal.”
Barack Obama: Puppet on a String Jurriaan Maessen | The United States is unfolding an agenda that has been pushed for by international banks in conjunction with the CIA.
Business as Usual: Fed Court Slaps Down Torture Lawsuit Against CIA Kurt Nimmo | Once again, national security trumps the rule of law and the corporate media provides cover.
UN Blueprint: Dismantle Middle Class, Build World Government Paul Joseph Watson | Globalists set out agenda to re-brand global warming as overpopulation in bid to impose carbon taxes.
Claims of Recovery But Results Nowhere To Be Found Bob Chapman | The American public is alarmed at what they see going on.
Drudgereport: GOV'T MAKES IT UP: JOBS NUMBERS 'ESTIMATED' FOR WEEK...
'BETTER THAN EXPECTED'...
Treasuries Tumble Following Weak 30-Year Sale...
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600 Lockheed execs take buyout (Washington Post) [ Talk about having your fingers on the economic / fiscal pulse of the nation. This should be a new leading economic indicator which, unlike many of the others, is less prone to manipulation. All hail, the ‘golden goose’ is dead! Drudgereport: MORGAN STANLEY: U.S. Government Bond Defaults Inevitable … This is a global depression. This is a secular bear market in a global depression. The past up move was a manipulated bull (s***) cycle in a secular bear market. This has been a typically manipulated bubble as has preceded the prior crashes with great regularity that the wall street frauds and insiders commission and sell into. This is a typical wall street churn and earn pass the hot potato scam / fraud as in prior crashes’. This national decline, economic and otherwise, will not end until justice is served and the wall street frauds et als are criminally prosecuted, jailed, fined, and disgorgement imposed. ] The move reflects a shift underway as defense contractors scramble to prepare for Pentagon budget cuts.
Reform's unexpected fallout (Washington Post) [ Riiiiight! That reform thing … everything but prosecution of the perps who are back to their churn and earn ways as some of their worthless paper moving ways have been legislatively sanctioned / adopted in the form of mark to anything valuation of worthless assets / paper which debacle is waiting to rear that ugly head! ] Nation's battle for regulatory reform wasn't supposed to have this kind of collateral damage. But the new law is threatening the existence of a day-care center, which has operated for 24 years in the District.
U.S. drops in competitiveness (Washington Post) [ Singapore, Sweden, … ? Don’t make me laugh! From defacto bankrupt, meaningfully lawless america’s perspective, this fallen ranking was a gift and one must be asking, what were they smoking (or whose money were they taking?) and is the rest of the world really that bad off? ] Large deficits and a weakened financial system make the U.S. less competitive in the global economy, according to World Economic Forum's new ranking. Sweden Is A Better Place To Do Business Than The U.S. – [Well, that part is true, but …]. ‘…Sweden, by contrast, has “the world’s most transparent and efficient public institutions, with very low levels of corruption and undue influence.” Which loosely translated from wonk-speak sounds like, “You’re better off dealing with honest socialists than crony capitalists.”’ [ True enough, but I still don’t buy it (the rankings), especially america’s fourth place (as opposed to lower) ranking.]
Afghans question U.S.-style capitalism (Washington Post) [ As indeed they should inasmuch as the same is neither capitalism nor american style in the traditional sense referenced here. Defacto bankrupt, in decline, and pervasively corrupt, meaningfully lawless america is a nation unworthy of emulation! ] Kabul Bank became the pride of Afghanistan's financial system by offering the conveniences and thrills of 21st-century capitalism. But the scene outside the bank's headquarters Wednesday was far from that modern ideal.
Fed sees widespread slowdown of growth (Washington Post) [ Stocks rally anyway … the ‘miracle of computerized programmed trading’ even if the math and fundamentals don’t add up …
Bad Math - Why The Bullish Case Doesn't Add Up , On Wednesday September 8, 2010, 3:19 pm EDT
1+1=2 2+2=4
The simplicity and accuracy of those calculations is undeniable. How about this equation? Fundamental Weakness + Technical Sell Signals + Overpriced Stocks = Lower Stock Prices. This calculation also seems to be simple and accurate. Let's look at some equations that don't make sense.
1+1=3 or Better Earnings = Higher Stock Prices
Earnings season is over. Most companies beat earnings but issued cautious forecasts. This is particularly true of the tech (NYSEArca: XLK - News) and financial sectors (NYSEArca: XLF - News). By large, profits are still driven by cost-cutting, not organic growth. Retail sales, which make up about one third of the economy, continued to fall after the second quarter ended. Additionally, the expectation that taxes will go up might have moved some companies to pull some of next year's income into this year. This can't be good for Q3 and Q4 profits. As we've seen in January and April of 2010, positive earnings reports are not bullish for stocks, especially if future guidance is weak.
2+2=5 or Weaker than Expected Economy = Rising Stock Prices
On July 30, the Bureau of Economic Analysis (BEA) lowered the Q2 Gross Domestic Product (GD) growth from an estimated 2.7% to 2.4%. On August 27, the Q2 GDP was lowered further to a jaw-dropping 1.6%. But it didn't stop there. The real GDP for all three previous years was revised as well. It was lowered by 0.2% for 2007, it was lowered by 0.6% for 2008, and it was lowered by 0.4% for 2009. In percentage terms, the real GDP for 2007 was revised down from 2.5% growth to 2.3%. The 2008 decrease was lowered from 1.9% to 2.8% and 2009 growth was revised up from a 0.1% to a 0.2% increase. In essence, the BEA proved that the recession was (or is) much deeper than perceived and the alleged recovery much weaker than previously reported. This comes as no surprise, as the key sector of the financial debacle - real estate (NYSEArca: IYR - News) - remains in a funk. The U.S. Census Bureau reported that the number of vacant properties, including foreclosures, residences for sale, and vacation homes, reached 18.9 million. Fannie Mae and Freddie Mac continue to lose money. Has anyone ever wondered how banks (NYSEArca: KBE - News) can make money on the same kind of loans that pushed Fannie and Freddie to the brink of ruin? Since bad real estate loans triggered the post 2007 economic meltdown, how can the economy recover without real estate leading the way?
3+3=7 or Positive Analyst Estimates = Higher Stock Prices
A recent Associated Press article observed that 'analysts only seem to hit the mark with their estimates in the strongest economic times (2003 - 2006).' Why? 'The problem is that analysts get most of their information from the companies they cover. Corporate managers have every incentive to stay positive for as long as they can.' Is that true; as true as 1+1=2? On April 26, the day the S&P (SNP: ^GSPC) topped at 1,219, the Dow (DJI: ^DJI) at 11,258, the Nasdaq (Nasdaq: ^IXIC) at 2,535, Bloomberg reported the following: 'U.S. stocks cheapest since 1990 on analyst estimates.' Contrary to analyst estimates, the ETF Profit Strategy Newsletter stated that 'the potential exists that Monday's high marked a significant top.' Since April, the broad market dropped as much as 17%. In March 2009, with the Dow below 7000 and the S&P below 700, analysts lowered their earnings forecasts from $113 in April 2008 to $40. On March 2nd, the ETF Profit Strategy Newsletter sent out a Trend Change Alert and recommended to buy long and leveraged long ETFs such as the Direxion Daily Financial Bull 3X Shares (NYSEArca: FAS - News) and Ultra S&P 500 ProShares (NYSEArca: SSO - News).
If you care to know, until recently, analysts estimated that earnings for the S&P 500 will exceed their 2006 all-time high, in 2011. Based on that assumption, stocks are cheap. How about that for flawed math?
4+4=9 or Technical Sell Signals = Higher Stock Prices
The 200-day moving average (MA) is one of the best-known technical indicators, as it provides delineation between technically healthy and sick stocks. On May 20, the S&P closed below the 200-day MA for the first time since late 2007. Every attempt to rally and stay above it has since failed miserably. On July 2, the 50-day MA for the S&P dropped below its 200-day MA for the first time since late 2007. The same holds true for mid caps (NYSEArca: MDY - News), small caps (NYSEArca: IWM - News) and nearly all individual sector indexes. For good reason, this is called a Death Cross. Over the past ten years, the death cross has been accurate 75% of the time, with a 19.72% average return on six winning trades and 6.95% average return on two losing trades. [chart] In addition to the Death Cross, there are two head and shoulders patterns, one in the making for over 10 years, and the other has the breadth suggestive of a major meltdown (see September ETF Profit Strategy Newsletter).
5+5=11 or Overvalued Stocks = Higher Prices
As explained above, based on overly optimistic earnings estimates, analysts believe that stocks are cheap. Rather than basing a future outlook on estimates, it makes sense to use facts as a foundation for any outlook. Why add an extra variable to what's already an unpredictable market? Ask Yale Professor Robert Shiller, who's done extensive research on the subject of valuations, and he'll tell you stocks are historically overvalued based on the current P/E ratio. Compare today's P/E ratio with the P/E ratio seen at major market bottoms, and you'll see that stocks are overvalued by more than 50%. Another gauge that doesn't lie is dividend yields. A company's dividends are a direct reflection of cash flow and financial health. The current yield is 2.65% for the Dow and 2.05% for the S&P. Dividends are close to their all-time low set in 1999 (we know what happened then). This means that companies are cash strapped and overvalued. Looking at a long-term chart of dividend yields plotted against stock prices shows clearly that markets don't bottom until dividends skyrocket. Just as ice doesn't thaw unless the temperature moves above 32 degrees, the economy won't thaw and show signs of life unless P/E ratios drop to, and dividend yields rise to, levels seen at major market bottoms. The ETF Profit Strategy Newsletter includes a detailed analysis of four valuation metrics, along with short-term target ranges for stocks and the ultimate market bottom. Based on simple math and common sense, the July lows are certainly in danger. But it doesn't stop there.
Report From Europe: Panic Amongst the PIIGS (Seeking Alpha – The Mole) [ Sounds far from hunky-dory to me and as the wall street frauds would have you believe and used as a rallying point this day. Total b*** s***! ] ‘U.S. stocks fell for the first time in five days Tuesday, ending the longest streak of gains for the S&P 500 Index since July, on concern the European debt crisis may worsen and hamper global growth. Bank of America (BAC) and Citigroup (C) fell at least 2% as European banks slid on concern stress tests understated potential losses from sovereign debt. Meanwhile ConocoPhillips (COP) and Chevron (CVX) slumped more than 1.2% as crude oil fell the most in a week. But Oracle (ORCL) rallied 5.9% after naming Mark Hurd, former chief executive officer of Hewlett-Packard (HPQ) as president. Today, despite some token buying by the ECB and a decent Portuguese bond auction, the bond vigilantes have again been out doing their worst pushing the Irish / German 10 year spread out to levels not seem since 1988 when the debt GDP ratio was 118% . Indeed yesterday saw the worst single daily performance by Irish Government bonds ever in terms of spread widening. Greece is also back in the crosshairs in response to a downward revision to Q2 Greek GDP to -1.8% from -1.5% originally, and on news the National Bank of Greece plans to raise Eur2.8 bln of capital. The latter may be especially alarming in the current environment, but really reflects a desire for extra security and also a cash hoard to potentially spend on weaker rivals. ATEbank stands prominently in this respect. (picture)
Today’s Market Moving Stories
The stand-out mover in FX today was GBP, which rallied sharply, largely it would seem on news that Vodafone (VOD) has sold its stake in China Mobile and intends to use 70% of the proceeds (£4.2bn) to fund share buybacks. The macros community had started to build GBP shorts in recent days and this M&A flow prompted a flurry of short-covering, assisted as well by better than feared Halifax house price data.
Irish Banking
According to the Irish Times this morning, the bank’s chairman has stated that a statement on Anglo should be expected today. Who will make it or what the nature of the announcement will be is not evident, but keep eyes peeled around 4pm. Recent media reports have indicated strongly that an orderly wind down of the bank over 10-15yrs is the new preferred option. But what the markets are really looking for is an update on the total FINAL bottom line kitchen sink cost of the bailout and whether its closer to Eur 25bn or S&P’s recent & much criticized Eur 35bn figure. UPDATE – SEE VERY BOTTOM OF THIS POST. ..
Japan
Japanese Finance Minister Yoshihiko Noda said he is prepared to take “bold” action on currencies, including intervention in foreign-exchange markets, after the yen reached a 15-year high against the dollar. “We will take bold action if necessary and naturally that can include intervention,” Noda told lawmakers in parliament today. “We have to use every option available as a strong yen is likely to have a severe impact on companies.” The yen rose to 83.52 per dollar yesterday, the highest level since June 1995, as concerns about weakening growth in the U.S. and Europe bolstered the currency’s appeal as a refuge.
UK Outlook
A U.K. index of hiring for permanent jobs in August showed the slowest growth pace in 10 months, KPMG LLP and the Recruitment and Employment Confederation said. The gauge of full-time job placements dropped to 56.3 from 60.2 in July, the groups said in an e-mailed report today in London. That’s the slowest pace since October. Readings above 50 indicate an increase in hiring. The U.K. is bracing itself for a period of austerity as Prime Minister David Cameron pledges to reduce the country’s record budget deficit. U.K. shop price inflation accelerated in August as the price of food rose at the quickest annual pace in over a year, a survey showed Tuesday. Total shop price inflation was 1.7% on the year in August and 0.1% on the month, compared with a 1.5% annual rate and 0.1% monthly decline in prices in July, the monthly survey by the British Retail Consortium showed. That was due to a more-than-one percentage point rise in the cost of food. Food prices were 3.8% higher in August than a year earlier, while food prices rose 0.2% from July. And July’s UK industrial production figures suggest that the manufacturing sector continues to enjoy steady, if unspectacular, growth. The 0.3% rise in manufacturing output was the third such gain in a row and pushed the yoy rate of output growth up to a new cycle high of 4.9%. Overall industrial production saw a similar monthly gain. For now, then, the output data are defying the rather gloomier tone of some of the recent industrial surveys, such as last week’s CIPS report on manufacturing. But it is worth remembering that the surveys normally lead the hard data by a few months, so it would be no surprise if output growth were to start to weaken over the next few months. And even if output posts similar increases in August and September, industry won’t make as strong a contribution to GDP growth in Q3 as it did in Q2. Overall, UK industry is still doing pretty well, but it may not last too much longer. (picture)
Company / Equity News
- UK homebuilder Berkeley Group has issued an interim management statement this morning covering the period from 1st May 2010 to 31st August 2010. The group pointed out that demand for properties over the period has been resilient, particularly in London which has a shortage of supply and specific demand from international purchasers. Outside of London, which is more reliant on the UK domestic economy, a lack of credit availability and weak consumer confidence is weighing on transactions currently.
- Barratt Developments also reported full year results this morning. The group reported a full-year loss of £118.4m compared to a loss of £468.6m. Market expectations were for a loss of £125m. Revenue declined by 11% to 2.04bn with the group selling 11,377 homes during the period, compared with 13,277 last year. The group’s operating margin increased to 5.9% from 1.8% a year earlier. The group expects a ‘modest’ increase in average selling price this year, however the group noted that the outlook for new housing ‘remains challenging’. For clients looking for exposure to a UK home builder, Persimmon is my preferred play.
- Securities firms (investment banks) around the world will cut as many as 80,000 jobs in the next 18 months as revenue growth begins to slow, said Meredith Whitney, the former Oppenheimer & Co. analyst who now runs her own firm. The reductions, about 10 percent of current levels, will come after 2010 compensation payments. “The key product drivers of Wall Street’s revenues and profits over the past decade have been in a structural decline over the past three years,” Whitney said in the report. “2010 marks the first year in many in which Wall Street-centric firms will go through structural changes.”
- Vodafone’s $6.6 billion sale of its stake in China Mobile Ltd. is the biggest divestment since Chief Executive Officer Vittorio Colao took charge in 2008. Investors want to know what’s next. Vodafone sold its 3.2 percent stake in China’s largest mobile phone company today. About 70 percent of the proceeds will be returned to shareholders through a stock repurchase and the rest will be used to pay down debt, Newbury, England-based Vodafone said in a statement yesterday.
- Nokia Oyj, the world’s biggest maker of mobile phones, has a lot riding on its annual showcase event next week as it tries to claw back lost ground to Apple Inc.’s (AAPL) iPhone and devices based on Google’s (GOOG) Android software. The Finnish company is likely to focus attention at Nokia World in London on its high-end Symbian smartphone line, including the touch screen N8, its latest effort to take on Android and iPhone handsets.
- Google’s CEO Eric Schmidt said the company plans to extend its Web television service from U.S. viewers to global consumers in 2011. Google has an agreement with Sony Corp. (SNE) to launch Web TV in the U.S. this fall, while Samsung Electronics Co. (SSNLF.PK), the world’s largest television manufacturer, said today it may make sets run by Google’s software to compete with Sony and Apple Inc. in the market for TVs that access movies, shows and games online.
- The life of Germany’s nuclear power plants will be extended by up to 15 years under a deal agreed between energy companies and the government of Chancellor Angela Merkel. Germany’s energy giants will pay [euro]15 billion to fund research into renewable energy and Berlin will, in return, set aside a 2000 agreement forced by the Schroder government to wind down all nuclear energy plants by 2025.
- According to the FT, Ryanair (RYAAY) may return to the market for a purchase of up to 300 airplanes, the Financial Times said late Tuesday, citing an interview with chief executive Michael O’ Leary. O’Leary told the FT his company also plans on writing to aviation authorities asking to use a single pilot for short-haul flights, the report on the FT website said.
- Evidence emerged yesterday that the strained relations of late between Tullow (TUWOY.PK) and the Ugandan Government over the issue of tax arising from the Heritage Oil transaction eased somewhat based on comments attributed to the Energy Minister. Questioned on the Government stance regarding the recently rescinded Kingfisher licence in Block 3A and Tullow’s ability to redress the situation, the Energy Minister appeared to soften the Government position indicating a favorable response should Tullow apply.
- Dana Petroleum (DNPXF.PK) offered a strong defence this morning against the unsolicited offer of £18 per share from the Korean National Oil Company (KNOC) and also announced the widely anticipated acquisition of Petro-Canada’s UK assets for a cash consideration of £240m ($372m).
And finally UPDATE – Text of announcement on Anglo Irish
The Minister for Finance today briefed his Government colleagues on the strategic options for the future of Anglo Irish Bank. The Minister conveyed to the Government the views of the Board of Anglo Irish Bank, the Central Bank, the National Treasury Management Agency, the Department of Finance, the EU Commission and his own assessment of the position.The Government decided that Anglo Irish Bank will be split into a Funding Bank and an Asset Recovery Bank. Anglo Irish Bank has not expanded its loan book since it was nationalised in early 2009 and this will remain the case. It is intended that in due course the Recovery Bank will be sold in whole or in part or that its assets will be run off over a period of time. The guaranteed position of depositors will be unchanged by the new arrangements and no action is required of them as a result of today’s announcement. The depositors will become customers of the Funding Bank which will be fully capitalized and continue as a regulated bank. In order to restore the reputation of the Irish Financial System it is essential to bring finality to the problem of Anglo Irish Bank – our most distressed institution. The Government’s primary objective in dealing with Anglo Irish Bank has been to minimise the cost of this distressed bank to the Irish taxpayer. The Board of Anglo Irish Bank submitted its preferred option to the Minister and to the European Commission at the end of May for consideration under State Aid rules. The board’s plan envisaged splitting the bank into an asset management company and a new good bank. The asset management company would have managed out over time the bank’s lower quality assets remaining after the transfers to NAMA. The new good bank would have managed the remaining share of the loan book, retained the bank’s deposit funding and sought new lending opportunities to grow the bank. The Minister acknowledges the good faith and hard work of the board in producing a credible proposal for the future of the bank. However, the Government has concluded that this plan in its current form does not now provide the most viable and sustainable solution to ensure the continued stability of the Irish banking system.
Resolution Proposal
In these circumstances, the Government has decided to opt for a variation of the board’s restructuring proposal. The Government’s decision does not affect existing guarantee arrangements. Under the restructuring plan, the Funding Bank will be a Government-backed/guaranteed specialist deposit bank which will contain the bank’s deposit book. It will be a stand-alone, regulated bank, completely separated from Anglo’s loan assets and it will be owned directly by the Minister for Finance. This bank will not engage in any lending, but will provide a secure home for Anglo’s depositors and any new customers who wish to deposit their funds with it. Depositors with the Funding Bank will be completely insulated from the future performance of the rest of the current Anglo Irish Bank loan book. The Asset Recovery Bank will also be a licensed regulated bank. Its dedicated focus will be on the work-out over a period of time of the assets not being transferred to NAMA in a manner which maximises the return to the taxpayer.
Costs
The Government believes that it is essential to identify, with as much certainty as possible, the final cost for the restructuring and resolution of the bank. This will underpin international financial confidence in Ireland. Accordingly, the Central Bank will determine the appropriate levels of capital needed in both institutions. Its decision will be announced by October.
EU Commission
The Department of Finance has conducted intensive discussions with the EU Commission in recent weeks about the future of Anglo Irish Bank. The Minister for Finance met Commissioner Almunia last Monday to discuss the issue. A formal detailed plan is being prepared for submission to the Commission for approval.
The Minister said: “Today’s decision by the Government will provide certainty about the future of Anglo Irish Bank. Resolution of this, our most distressed institution, is essential to the promotion of confidence and stability in our financial system.”
8th September 2010
ENDS
Brian Meenan
Press Office
PH: 6045875
email: brian.meenan@finance.gov.ie ‘
Here Are 13 Signs That We’re Actually In A Depression Right Now Gregory White | David Rosenberg has outlined, in his latest letter, the 13 reasons with this so-called recovery is actually a depression… David Rosenberg has outlined, in his latest letter, the 13 reasons with this so-called recovery is actually a depression.Rosenberg sums it up like this:
This is what a depression is all about — an economy that 33 months after a recession begins, with zero policy rates, a stuffed central bank sheet, and a 10% deficit-to-GDP ratio, is still in need of government help for its sustenance.
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