Dow Jones Masochism
by ilene - May 30th, 2010 3:25 pm
Dow Jones Masochism
Courtesy of Joshua M. Brown, The Reformed Broker
Brett Arends has a story up over at WSJ that makes the case for more pain – that the March ’09 bottom wasn’t quite painful enough to have been THE bottom for this cycle. The article’s an amusement park for shorts, but does a nice job categorizing the items that could lead to another brutal beating for stocks.
The slide that began in 1969 didn’t end until 1982. The slump after 1929 didn’t give way until the late 1940s. Japan’s gloom is still with us.
In general, the bigger the bull-market boom, the bigger and nastier the bear market that follows. The bull market of the ’80s and ’90s was the biggest on record. So expect the bear that follows to be ugly and tenacious.
And for some perspective, Lisa Haney throws in this Dow Jones Industrial Average bear market guide…
The 2007-2009 plunge is the worst on record, but according to some, not nearly damaging enough considering the run-up in asset prices that preceeded it.
Source:
May’s Big Selloff Could Be Just The Beginning (WSJ)
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DiggBP Abandons Top Kill; More Images; Failed Politics and Policies; Can BP do Anything Right?
by ilene - May 30th, 2010 1:28 pm
BP Abandons Top Kill; More Images; Failed Politics and Policies; Can BP do Anything Right?
Courtesy of Mish
It’s back to the drawing board. BP has given up with the idea of sinking mud, golf balls, tires, and other junk into the well to plug it. Top Kill is officially dead.
Bloomberg reports BP Abandons ‘Top Kill’ Plan That Failed to Cap Leak.
BP Plc said it will switch to a new strategy to cap a leaking oil well in the Gulf of Mexico after a three-day effort to stop the flow with a blast of pressurized fluids was unsuccessful.
At a press conference today, Doug Suttles, the BP executive in charge of the spill response, said the top kill strategy didn’t work. BP will now try a containment device known as a lower-marine riser package cap, Suttles said.
Oil from the spill may have spread underwater for 22 miles toward Mobile, Alabama, researchers aboard a University of South Florida vessel reported May 27. Initial tests aboard the Weatherbird II show the highest concentrations of “dissolved hydrocarbons” were 400 meters (1,312 feet) below the surface.
BP plans to install the new blowout preventer on top of the existing one, Suttles said. BP will then try to use the valves on the new blowout preventer to stop the flow.
“We’re still looking at a month before we get this thing killed,” Les Ply, a retired mud engineering consultant for the oil industry, said today in a telephone interview. “I think we’re looking at a week to 10 days to get this riser and cap in place.”
The new method, if successful, would stop the leak long enough for a so-called relief well to be drilled nearby and provide a permanent seal.
Crews are ahead of schedule in drilling a relief well and are about halfway to the end, with around 6,000 feet left to go, Suttles said. Completion of the well is still expected by about early August, he said.
Drilling on the second of two relief wells, which was temporarily suspended so that its blowout preventer could be available if the top kill failed, is expected to resume “shortly,” David Nicholas, a spokesman for BP, said today in a telephone interview.
BP’s costs from the spill rose to $940 million, the London- based company, the largest producer of oil and gas from the
…
Oil Drilling Liability Cap Led To The Gulf Spill
by ilene - May 30th, 2010 1:20 pm
Oil Drilling Liability Cap Led To The Gulf Spill
Courtesy of Jeff Harding, The Daily Capitalist
I never ever thought I would agree with Nancy Pelosi on anything, yet here it is:
U.S. House Speaker Nancy Pelosi said Congress should consider eliminating any cap on the damages a company such as BP Plc might have to pay for harm caused by oil spills.
“There is a movement afoot in Congress for that. Why have a cap?” Pelosi said in an interview on Bloomberg Television’s “Political Capital with Al Hunt” to air this weekend.
Pelosi had previously voiced support for a proposal under consideration to raise the existing $75 million cap to $10 billion for economic damages caused by each environmental disaster. After being thwarted March 13 in the Senate, backers of that legislation have vowed to renew efforts to win passage.
“You would hope that there would not be more than $10 billion of damage, but understand it is for each episode,” she said. Asked about eliminating the cap altogether, Pelosi said: “I think it’s worthy of looking at.”
I’m not against Big Oil, Little Oil, or anyone in the Oil Patch, but the liability cap is just another example of how industry uses the government to gain market advantages at the expense of someone else. In this case it is the Gulf Coast inhabitants and those that live off of that huge resource.
As I understand the law, BP is responsible to pay 100% of the cost of the clean-up. What the liability cap does is to cap economic damages to $75 million. What that means is if anyone suffers a loss of income or property as a result of a spill, BP is only obligated to pay $75 million even though the losses may be in the billions. That is not right.
Businesses seeking advantages from legislators is not news. While lobbying is often a proper and necessary response of business to legislation that would be harmful to them, it is a two-edged sword when they try to gain economic or competitive advantage. Our history is full of examples, most recently, tire import tariffs. While it is right to condemn business for this we should blame legislators who have the primary duty to act…
What You Can Do To Bring Wall Street Under Control
by ilene - May 30th, 2010 1:13 pm
What You Can Do To Bring Wall Street Under Control
Courtesy of Robert Reich
The most important remaining battle to rein in Wall Street is over Senator Blanche Lincoln’s measure to stop the big banks from being subsidized by taxpayers for their risky derivative trades. Miraculously, it’s still in the bill but it’s on life support. The bill has now gone to the conference committee where differences between the House and Senate bills are to be ironed out.
But official Washington (read: dependent on Wall Street for money) is dead set against it. Even Barney Frank — who Massachusetts voters used to consider a reliable progressive until he became chair of the House Financial Services Committee — has vowed to kill Lincoln’s provision. And the White House says the measure is “not core,” which in Washington-lingo means “you’re free to dump it.”
Big, big money is at stake. Wall Street’s five largest banks have a corner on the trade, raking in about in about $30 billion in over-the-counter derivatives last year. It’s the single largest reason they’re too big to fail. So they’re spending like mad on Washington lobbyists and campaign donations in order to keep the subsidy in place. (Lincoln’s provision doesn’t force them to give up derivative trading, by the way; it only forces them to do it in a separate entity that doesn’t get subsidized by deposit insurance or the Fed’s discount window).
All the guns are aimed at this measure. But it’s still possible that the people can prevail, if we’re organized and active. Here’s a list of all the Dems on the Senate Banking and House Finance Committee, as well as Republican conferees. All conferees are indicated by ->.
Organize and mobilize your friends and acquaintances, especially those who live in these states or districts, to call their members and make their voices heard. Tell them you want Lincoln’s measure (Section 716 of the Senate bill) to remain in the final bill. Say you’ll hold them responsible if it goes.
Alabama -> Senator Richard C. Shelby (202) 224-5744
Arkansas -> Senator Blanche Lincoln (202) 224-4843
California -> Rep. Maxine Waters (202) 225-2201 (California-11)
Rep. Brad Sherman, CA (202) 225-5911
Rep. Jackie Speier, CA (202) 225-3531
Rep. Joe Baca, CA (202)225-6161
Colorado -> Senator Michael Bennet (D-CO) (202) 224-5852
Rep. Ed Perlmutter, CO 202.225.2645
Connecticut -> Chairman Christopher J. Dodd…
Mr. Denninger and Gold or Why the Dollar-Deflationists Are Wrong
by Zero Hedge - May 30th, 2010 1:04 pm
Courtesy of Gordon_Gekko
Those who know Mr. Denninger know that he, well, for lack of a better word, hates Gold. It only goes to show the level of disinformation and ignorance prevalent in our society when even smart people like Karl fail to get it. From what I hear anybody even mentioning the word Gold runs the risk of being permanently banned from one of his “forums”. In a recent commentary entitled “Ten Things for 2010″ he was at it again bashing Gold. Here is what he had to say:
We’re not looking at hyperinflation folks, in my view – we’re looking at a deflationary collapse…If you fear hyperinflation do not look to Gold, instead buy a small (5% of your total portfolio) position in far out of the money LEAP CALLS on the major indices, spread across them. Why? Because (1) the tax structure on gold is unfavorable, (2) gold has never performed well on a contemporary basis .vs. inflation and (3) you can’t eat it. If you try to get around the tax man structure you’re going to get creamed; governments can and WILL prevent that from working. My recommendation thus is to buy insurance against a hyperinflationary event using instruments that do not try to evade the formal financial structure, are levered (to get around the tax hit) and are defined risk (so as to avoid losing your ass if you’re wrong.)
Really Karl? LEAP Calls? In a hyperinflation? That’s a good way to lose 5% your portfolio. I’m assuming you know what hyperinflation is – in a hyperinflation the currency becomes worthless, as in toilet-paper. Why would anyone want to get paid their “winnings” in a worthless currency, assuming there are stock indices and counterparties left who can pay off these worthless winnings when countries collapse?
And the tax structure is FAR more favorable for Gold than ANYTHING else, if only you are not in the habit of bending over. Buy cash and keep your mouth shut – it’s very simple – or just move to another country where the government is not as intent on raping its citizens. I know privacy is a foreign concept in America these days, but still. All your other assets, including stock market profits, are fully open to the government and there…
Dylan Grice Finds Value Within The Printing Orgy
by Zero Hedge - May 30th, 2010 11:16 am
Courtesy of Tyler Durden
This weekend’s must read note, from SocGen’s Dylan Grice – Print baby, print… emerging value and the quest to buy inflation
Russell Napier On When To Expect The Treasury Bubble Crash
by Zero Hedge - May 30th, 2010 10:54 am
Courtesy of Tyler Durden
A week ago at the CFA Institute’s 2010 Annual Dinner, Baupost’s Seth Klarman stole the spotlight by announcing to everyone that he was “more worried about the world than ever” while making it clear that he was on the same Jim Grant and Julian Robertson “Treasury put” bandwagon. Yet another speaker present at the event, who undeservedly received much less attention, was CLSA’a Russell Napier, who has long been warning about precisely the thing that all asset managers are realizing rather belatedly, that Treasuries are a very “fundamental asset bubble.” The only relevant questions, which Napier has previously discussed extensively, are “when do treasuries crash” and “what do you do” when that happens. The attached presentation provides some color on both.
Russell Napier, whose Anatomy of the Bear (available for a pdf-special $3.95 steal on DocStoc) is one of the better market analysis books available, had one quite insightful observation. As the CFA noted in its press release on the matter, “One point that Mr. Napier made toward the end of his presentation was that the difference between current borrowing and previous peaks in government debt is that previous surges in the debt load were linked with the financing of conflict. As he put it, the current borrowing is to keep people alive rather than to kill. The implication for the global economy of this key difference is that social programs to subsidize a certain quality of life are not a profit-making endeavor in the same way as traditional twentieth century conflicts.” We wish we were as sanguine about this conclusion as Mr. Napier. With a rapidly deteriorating geopolitical situation in both the Middle and Far East, perhaps the massive entitlement spending has been nothing short of a diversion from the the traditionally massive “defense” spending. After all, there have been over $257 billion in defense vendor payments by the US Treasury since October, an outlay smaller only than Social Security Outlays and Medicare.
And since Napier’s perspective has been largely ignored by the Mainstream media, we provide a link to his most recent comprehensive presentation on the topic of the Treasury bubble from earlier this year. In it, Napier takes (apriori) on a point made last week by Albert Edwards, an states that “balance of payments is key, not current account” pointing out that…
Investor Sentiment: The Fat Pitch
by Zero Hedge - May 30th, 2010 10:12 am
Courtesy of thetechnicaltake
I am not a baseball person, but we all know what a “fat pitch” is. It is an easy one to hit. It doesn’t mean you will always hit it or even get a homerun, but if you see a “fat pitch” coming, you better take a swing. Investor sentiment has turned bearish here, and this is our “fat pitch”. This is a bullish signal because if the market turns higher, we are likely to see accelerated gains over the time that investors are bearish.
{to view larger charts just click on them}
Guest Post: Preparing For What's Next
by Zero Hedge - May 30th, 2010 9:59 am
Courtesy of Tyler Durden
Submitted by David Galland of The Casey Report
Oh, what a tangled web we live in.
On one side of the Atlantic, there is a fundamentally broke European Union. On the other, the world’s largest debtor nation, these United States.
Rotate the globe and you discover China, the world’s most populous nation: a nation whose economy is desperately dependent on export revenues, without which its government may find it hard to meet the population’s soaring aspirations. And who is China’s largest trading partner? The European Union, that’s who.
The web also encompasses the role that the U.S. dollar plays in the relationship between the European Union and the Chinese. Or, more specifically, the role the peg plays that China maintains with the U.S. dollar. As long as the U.S. dollar is weak, the Chinese yuan is weak and therefore competitive in European markets.
The problem now is that, with the euro falling, in order to remain competitive, Chinese companies must reduce their margins. Therein lies the rub, because the razor-thin margins of the Chinese companies – estimated to be on the order of just 2% — face the very real danger of thinning to the vanishing point. After which the best a Chinese company will be able to hope for is to make up its losses on volume.
That was a joke.
It gets more tangled. Because as the euro falls, the competitiveness of eurozone companies on world markets rises, adding further pressures on the trade that China so desperately needs (and that the U.S. would like more of as well). In this race to the bottom that the editors of The Casey Report have been warning of, the latest leg goes to the Europeans, though no conceivable improvement in their exports will offset the crushing debt burden that is now laying the continent low.
While this chapter in the unfolding saga may not end with the phrase, “And so it was that the eurozone collapsed and its common currency passed into the annals of history,” as this chapter is still being worked on, it could end that way.
Likewise, with China’s #1 market on the thin edge of becoming uneconomic, so, too, the current chapter might end with the myth of the Chinese miracle being shattered. And the U.S.?
To get to a rational assumption about the U.S.,…
Guest Post: Preparing For What’s Next
by Zero Hedge - May 30th, 2010 9:59 am
Courtesy of Tyler Durden
Submitted by David Galland of The Casey Report
Oh, what a tangled web we live in.
On one side of the Atlantic, there is a fundamentally broke European Union. On the other, the world’s largest debtor nation, these United States.
Rotate the globe and you discover China, the world’s most populous nation: a nation whose economy is desperately dependent on export revenues, without which its government may find it hard to meet the population’s soaring aspirations. And who is China’s largest trading partner? The European Union, that’s who.
The web also encompasses the role that the U.S. dollar plays in the relationship between the European Union and the Chinese. Or, more specifically, the role the peg plays that China maintains with the U.S. dollar. As long as the U.S. dollar is weak, the Chinese yuan is weak and therefore competitive in European markets.
The problem now is that, with the euro falling, in order to remain competitive, Chinese companies must reduce their margins. Therein lies the rub, because the razor-thin margins of the Chinese companies – estimated to be on the order of just 2% — face the very real danger of thinning to the vanishing point. After which the best a Chinese company will be able to hope for is to make up its losses on volume.
That was a joke.
It gets more tangled. Because as the euro falls, the competitiveness of eurozone companies on world markets rises, adding further pressures on the trade that China so desperately needs (and that the U.S. would like more of as well). In this race to the bottom that the editors of The Casey Report have been warning of, the latest leg goes to the Europeans, though no conceivable improvement in their exports will offset the crushing debt burden that is now laying the continent low.
While this chapter in the unfolding saga may not end with the phrase, “And so it was that the eurozone collapsed and its common currency passed into the annals of history,” as this chapter is still being worked on, it could end that way.
Likewise, with China’s #1 market on the thin edge of becoming uneconomic, so, too, the current chapter might end with the myth of the Chinese miracle being shattered. And the U.S.?
To get to a rational assumption about the U.S.,…
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