S&P 500: Dull Day But Up 5.42% for the Quarter
by Chart School - March 31st, 2011 4:35 pm
Courtesy of Doug Short
The S&P 500 closed the day up 0.67% and is now up 5.62% year-to-date. The index is 96.3% above the March 9 2009 closing low, which puts it 15.1% below the nominal all-time high of October 2007.
For a better sense of how these declines figure into a larger historical context, here’s a long-term view of secular bull and bear markets in the S&P Composite since 1871.
For a bit of international flavor, here’s a chart series that includes an overlay of the S&P 500, the Dow Crash of 1929 and Great Depression, and the so-called L-shaped “recovery” of the Nikkei 225. I update these weekly.
These charts are not intended as a forecast but rather as a way to study the current market in relation to historic market cycles.
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DiggLooking Like You Know What You’re Talking About Doesn’t Mean That You Do
by Zero Hedge - March 31st, 2011 4:28 pm
Courtesy of Phoenix Capital Research
Enough is enough.
The mainstream financial media always tries to offer fundamental reasons for why stocks do what they do. If stocks rally it’s because on good earnings or improved consumer confidence or some other development.
On the surface, this approach is valid: the markets are meant to react to economic and financial developments. However, the problems with the mainstream media’s attempts to explain the market’s actions today are:
1) These people are journalists, NOT investors or businesspeople.
2) None of them know what they’re talking about.
3) The markets haven’t moved based on fundamentals since 2008
4) Most if not ALL of the data coming out of the US is massaged at best or fraudulent at worst.
Let’s start of with the first two points. The people on the mainstream financial media channels talking about investing aren’t investors themselves. They’re not entrepreneurs or businesspeople either. As such they have little if any actual experience in the markets other than as observers (on the outside I might add).
However, this doesn’t mean that they’re not very good at acting knowledgeable or convincing on camera. And this is where things become confusing for viewers. Oftentimes the people speaking on camera is so good at looking confident and knowledgeable that you are tempted to believe what they say.
However, if you listen closely to what they’re actually saying, it’s clear they do not actually understand what they’re talking about. Yes, they have the right vocabulary and have some basic grasp of the terms and relationships they’re describing, but that’s as far as it goes.
Case in point, when was the last time ANYONE reporting for a mainstream financial media outlet pointed out that the US’s GDP, employment, and inflation numbers are an absolute crock?
Name one time a talking head addressed the fact that the…
Alice Schroeder’s Scathing Take On Lubri-Gate
by Zero Hedge - March 31st, 2011 4:17 pm
Courtesy of Tyler Durden
Alice Schroeder, who once upon a time was the current “Becky Quicky” of Buffett’s inner circle (although to her not so great loss not allowed in the inner sanctum of the NetJets mile high club) until she turned rogue on the billionaire and wrote something not quite so flattering about the Octogenarian of Omaha, whose bubble of unparalleled hypocrisy has just popped, has now burned every last bridge to the annual borg collective meeting at Borsheims, writing the most scathing narrative of the revalations from the last 24 hours. Oh well, we can only advise Buffett and his sidekick Munger to suck it up, now that the dirty laundry of America’s dream wealth creator is exposed for all to see.
From Bloomberg
Buffett Misses Chance to Show Moral Courage
What were they thinking? How could Warren Buffett excuse David Sokol’s trading in Lubrizol Corp. (LZ) stock while Sokol was pitching the company to Berkshire Hathaway Inc. (BRK/A) as an acquisition candidate?
Buffett and Sokol both say that nothing “unlawful” was going on (Sokol even went so far as to tell CNBC he did nothing inappropriate). Their explanation is that, because a deal with Lubrizol hadn’t actually been struck and wasn’t likely when Sokol bought his shares, it was all right for Sokol to profit from his knowledge of a possible deal.
On Wall Street, we call this kind of trading front-running, and everybody knows that it is wrong. People get fired for doing it. Sokol said that he is leaving Berkshire to pursue other business interests, and the timing is linked to Berkshire’s April 30 annual shareholder meeting, which is attended by tens of thousands of people. That’s probably true, in a sense. Buffett must want this mess cleared up and out of the way before he has to take questions from shareholders.
Buffett gave out a few facts in his press release yesterday, but the Schedule 14A filed with the Securities and Exchange Commission by Lubrizol fills in the damning pieces. After deciding to pursue Lubrizol as an acquisition candidate for Berkshire in the fall of 2010, Sokol tried to buy 50,000 shares on Dec. 13, the day he presented Berkshire’s possible interest to Citigroup Inc. and asked it to set up a meeting with Lubrizol’s management. He was able to acquire only 2,300 shares, and sold them a week later.…
Minneapolis Fed’s Kocherlakota: “Fed Funds Rate May Need To Rise 75 bps By End Of 2011″
by Zero Hedge - March 31st, 2011 4:01 pm
Courtesy of Tyler Durden
Minneapolis Fed’s Kocherlakota, who is not scheduled to speak today, and who in the past has exhibited both hawkish and dovish tendencies is on the wire, saying the the Fed Funds rate may need to rise 75 bps by late 2011. He is also quoted as saying that QE2 boosted inflation expectations more than he anticipated (oh look, another confirmation of Fed ineptitude but only in retrospect), and that higher short-term rates certainly possible in late 2011. In other words, the hawks in the Fed are once again getting very vocal… Just like in March of 2010, and before the market tanked, opening the door for QE2, and when all the hawks kept their mouths shut.
From MarketWatch:
Narayana Kocherlakota, in an interview with Dow Jones Newswires and The Wall Street Journal, said that if the U.S. economy grows at about 3% this year, as he expects, and underlying inflation ticks higher, as he expects, then the Fed will end its $600 billion bond-buying program as planned in June.
He expects core inflation (inflation excluding volatile food and energy prices) will rise from about 0.8% late last year, when the Fed launched its bond-buying to about 1.3% by year end, he said. As a result, lifting the Fed’s target for short-term interest rates by more than half a percentage point late this year is “certainly possible.” He noted that the often-cited Taylor Rule, named for the Stanford University professor who devised it, would in that circumstance call for a ¾-percentage-point increase in rates.
“If you consider monetary policy was appropriate at the end of 2010…and then you see core inflation go up by 50 basis points over the course of 2011..the usual response that we know from 20 years of thinking about monetary policy (or even more) is to raise the target rate by even more than that increase in observed inflation,” he said. “So that means you should be raising the target rate by more than 50 basis points.”
The Fed dropped its short-term interest-rate target nearly to zero in December 2008 during the financial crisis, and promised to keep it there for “an extended period.” Trading in futures suggests markets anticipate a Fed increase to 0.5% early in 2012.
Mr. Kocherlakota is one of the five regional Fed presidents with a vote…
Guest Post: Extend And Pretend Is Wall Street’s Friend
by Zero Hedge - March 31st, 2011 3:54 pm
Courtesy of Tyler Durden
Submitted by Jim Quinn of The Burning Platform
Extend And Pretend Is Wall Street’s Friend
“We now have an economy in which five banks control over 50 percent of the entire banking industry, four or five corporations own most of the mainstream media, and the top one percent of families hold a greater share of the nation’s wealth than any time since 1930. This sort of concentration of wealth and power is a classic setup for the failure of a democratic republic and the stifling of organic economic growth.” - Jesse – http://jessescrossroadscafe.blogspot.com/
Source: Barry Ritholtz
“All of the old-timers knew that subprime mortgages were what we called neutron loans — they killed the people and left the houses.” - Louis S. Barnes, 58, a partner at Boulder West, a mortgage banking firm in Lafayette, Colo
The storyline that has been sold to the public by the Federal government, Wall Street, and the corporate mainstream media over the last two years is the economy is recovering and the banking system has recovered from its near death experience in 2008. Wall Street profits in 2009 & 2010 totaled approximately $80 billion. The stock market has risen almost 100% since the March 2009 lows. Wall Street CEOs were so impressed by this fantastic performance they dished out $43 billion in bonuses over the two year period to their thousands of Harvard MBA paper pushers. It is amazing that an industry that was effectively insolvent in October 2008 has made such a spectacular miraculous recovery. The truth is recovery is simple when you control the politicians and regulators, and own the organization that prints the money.
A systematic plan to create the illusion of stability and provide no-risk profits to the mega-Wall Street banks was implemented in early 2009 and continues today. The plan was developed by Ben Bernanke, Hank Paulson, Tim Geithner and the CEOs of the criminal Wall Street banking syndicate. The plan has been enabled by the FASB, SEC, IRS, FDIC and corrupt politicians in Washington D.C. This master plan has funneled hundreds of billions from taxpayers to the banks that created the greatest financial collapse in world history. The authorities had a choice. This country has bankruptcy laws. The criminally negligent Wall Street banks could have been liquidated in an orderly bankruptcy. Their good assets could have been sold off to banks that did not take their extreme greed based…
Fukushima Update
by ilene - March 31st, 2011 3:49 pm
Watch the latest update on Fukushima by Arnie Gundersen at Fairewinds Associates Inc. Arnie Gundersen is an energy advisor with 39 years of nuclear power engineering experience, a former nuclear industry executive, and was a licensed reactor operator. During this crisis in Japan, Arnie’s become a premier expert offering frequent videos updates on Fairewinds’ website. - Ilene
Update on Fukushima: Discussion of High Level Radiation Releases and the Previous "Worse Case Senario" Planned for by The Indust from Fairewinds Associates on Vimeo.
Gundersen describes the Fukushima plant as stable, but precarious. In this update, he discusses the high levels of radiation (2 Million disintegrations/second being found on the ground as far as 25 miles from the plant site.) He also addresses a New York Times report of hundreds of tons of water being put into the reactors each day. Gundersen points out that all of the water going in to the reactors is being irradiated, leaking out, and polluting the Ocean. He concludes by discussing the differences between the accident scenarios that the nuclear industry previously planned for and what has actually happened.
See also:
Bodies of 1,000 victims of Japan earthquake left uncollected because of fears of high levels of radiation
By RICHARD SHEARS, Mail Online
It comes after Japan finally conceded defeat in the battle to contain radiation at four of Fukushima’s crippled reactors. They will now be shut down.
Details of how this will be done are yet to be revealed, but officials said it would mean switching off all power and abandoning attempts to keep the nuclear fuel rods cool.
The final move would involve pouring tonnes of concrete on the reactors to seal them in tombs and ensure radiation does not leak out.
The country’s nuclear safety agency revealed levels of radiation in the ocean near the crippled Fukushima Daiichi plant had surged to 4,385 times the regulatory limit.
The dramatic announcement that the four reactors are out of control and will have to be decommissioned was made yesterday by the chairman of the electric company operating the Fukushima plant.
With a deep bow and a grimace, Mr Tsunehisa
…
Why Is The Fed Redacting Bank Of Canada’s Presence In FX Swap Lines, And Hiding The Terms Of Its Currency Transactions?
by Zero Hedge - March 31st, 2011 3:42 pm
Courtesy of Tyler Durden
While many will focus on the borrowings by various insolvent banks from the Discount Window (yes, we know Bank of America/Merrill Lynch was broke and went to town with taxpayer money after Lehman blew up, and it also was the bank most impacted by the quant blow up in August 2007 when it borrowed $500 million from the Fed on 3 occasions), a possibly far more important question is why does the Fed persist in its secrecy even when supposedly forced to disclose unredacted data. While total discount window borrowings peaked at just over $110 billion, this is nothing compared to FX swap lines between the Fed and other banks, which as we said before was the means by which the Fed bailed out the world (even as Belgian Dexia and German Defma were the biggest borrowers from the Discount Window in those days in early November) amounted to $529.4 billion at the peak. So we decided to look at just what the terms were on these various borrowings and to our surprise were met with a whole lot of “NR”, aka redacted data. The data on par lent out, par received, net change, limit and undrawn available, which is critical to determine whether the Fed actually lost money on its FX swap transactions is not available. And what is even more stunning is that one of the banks in the list, which we believe can only be the Bank Of Canada is purposefully and diligently redacted out of the 977 pages in the document highlighting the currency swap data. We have a simple question: why? And why pretend that the Fed is following court transparency orders if it continues to censor such critical information on how it actually impacts markets through its operations.
Exhibit A: the email from Brian Candler highlighting bank participation including on NR bank – Bank of Canada?
Exhibit B: the full breakdown of FX transaction on the peak day of FX swap transactions: November 3, 2008.
Full filing for those who wish to scratch their heads some more.
Unemployment Claims: Headlines vs. Upward Revisions
by Chart School - March 31st, 2011 3:35 pm
Courtesy of Doug Short
The Department of Labor’s Unemployment Insurance Weekly Claims Report was released this morning for last week. As we saw in the previous week, the headline number is a decrease from the previous week (good news), but the previous week had been upwardly revised — in this case, double the headline decrease (the bracketed bold text below is my annotation). But check out the positive spin on CNBC and Bloomberg. Here is the official statement from the Department of Labor:
| In the week ending March 26, the advance figure for seasonally adjusted initial claims was 388,000, a decrease of 6,000 from the previous week’s revised figure of 394,000 [up 12,000 from 382,000]. The 4-week moving average was 394,250, a increase of 3,250 from the previous week’s revised average of 391,000.
The advance seasonally adjusted insured unemployment rate was 3.0 percent for the week ending March 19, unchanged from the prior week’s unrevised rate of 3.0 percent. The advance number for seasonally adjusted insured unemployment during the week ending March 19 was 3,714,000, a decrease of 51,000 from the preceding week’s revised level of 3,765,000. The 4-week moving average was 3,765,250, a decrease of 32,750 from the preceding week’s revised average of 3,798,000. |
Today’s number was above the Briefing.com consensus estimate of 383,000 claims. (Briefing.com’s own estimate was for an extremely optimistic 370,000).
As we can see, there’s a good bit of volatility in this indicator, which is why the 4-week moving average (shown in the callouts) is a more useful number than the weekly data.
Occasionally I see articles critical of seasonal adjustment, especially when the non-adjusted number better suits the author’s bias. But a comparison of these two charts clearly shows extreme volatility of the non-adjusted data, and the 4-week MA gives an indication of the recurring pattern of seasonal change in the second chart (note, for example, those regular January spikes).
Because of the extreme volatility of the non-adjusted…
Wal-Mart US CEO To America: “Prepare For Serious Inflation”
by ilene - March 31st, 2011 3:04 pm
Courtesy of Tyler Durden
To those who think that buying food in the corner deli is becoming a luxury, we have five words: you ain’t seen nuthin’ yet. U.S. consumers face "serious" inflation in the months ahead for clothing, food and other products, the head of Wal-Mart’s U.S. operations warned Wednesday talking to USA Today. And if Wal-Mart which is at the very bottom of commoditized consumer retail, and at the very peak of avoiding reexporting of US inflation by way of China is concerned, it may be time to panic, or at least cancel those plane tickets to Zimbabwe, which is soon coming to us.
The world’s largest retailer is working with suppliers to minimize the effect of cost increases and believes its low-cost business model will position it better than its competitors.
Still, inflation is "going to be serious," Wal-Mart U.S. CEO Bill Simon said during a meeting with USA TODAY’s editorial board. "We’re seeing cost increases starting to come through at a pretty rapid rate."
Along with steep increases in raw material costs, John Long, a retail strategist at Kurt Salmon, says labor costs in China and fuel costs for transportation are weighing heavily on retailers. He predicts prices will start increasing at all retailers in June.
"Every single retailer has and is paying more for the items they sell, and retailers will be passing some of these costs along," Long says. "Except for fuel costs, U.S. consumers haven’t seen much in the way of inflation for almost a decade, so a broad-based increase in prices will be unprecedented in recent memory."
Consumer prices — or the consumer price index — rose 0.5% in February, the most since mid-2009, largely because of surging food and gasoline prices. Core inflation, which excludes volatile food and energy costs, rose a more modest 0.2%, though that still exceeded estimates.
Add to this the shock that was today’s grains report, and the summer is about to seem like straight out of Harare.
Farmers will struggle to replenish rapidly shrinking U.S. grain stocks this year, despite plans to sow the most land to corn since World War Two and near-record acreage to soybeans, two U.S. government reports showed on Thursday.
Chicago corn prices surged their daily limit, while soybeans and wheat jumped more than 3 percent as traders looked past higher-than-expected figures in the
…
Crude Closes At Highest Since Summer Of 2008, As Energy Prices Post QE2 Rising Faster Than In 2007-2008
by Zero Hedge - March 31st, 2011 2:58 pm
Courtesy of Tyler Durden
Another “War On, War Off” day results in huge pain for all those who had expected oil to finally trend lower. Instead, the schizophrenic market decided to finally read the headlines from the past 3 days confirming that K-Daf is winning the war against Libyan rebels, even without an airforce, and despite the US’ not so secret anymore CIA involvement, which among other things is likely funding and arming Al Qaeda. The end result was crude surging by nearly $3 intraday to the highest closing since August 2008, and Brent almost at $120 again while at the same time guaranteeing nosebleed(ing) inflation in Europe now that gasoline is on its way to $10/gallon. Within a day we will see just how serious OPEC was about that $120/barrel limit before it increases output, especially since it is now known that most of that excess capacity is a myth. What is far scarier, is that the annualized growth rate in Brent is higher since the Jackson Hole speech (at 127%) compared to the rate of rise entering into the Great Depression (104.25%) when the world had to blow up to bring energy prices lower. In other words, the Fed is once again back in the box where it needs to create a massive market crash to put energy prices back in their “deflationary” place.
Note the comparable rates of change going into the Great Redepression and into QE2:
And here is the market’s assessment of the No QE3 argument:
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