The current market rally is not based on a self-sustained typical economic recovery, but on blind faith that the Fed can pull out a magic wand and cure everything with another round of quantitative easing (QE2). As we pointed out last week, this a desperate attempt by the Fed to try non-conventional means to get the economy going again after a massive dose of conventional measures resulted in failure. The members of the FOMC know this, but with further fiscal measures off the table, they are aware that they are the only game in town. The Fed’s acknowledgement that the economy is in trouble is again highlighted by the latest Beige Book released yesterday. The following are some excerpts from the report:
“National economic activity continued to rise, albeit at a modest pace..consumer spending was steady to up slightly, but consumers remained price-sensitive, and purchases were mostly limited to necessities and non-discretionary items..Housing markets remained weak..Most reports suggested overall home sales were sluggish or declining..Home inventories were elevated or rising..Conditions in the commercial real estate market were subdued, and construction was expected to remain weak.Reports suggested that rental rates continued to decline for most commercial property types..industry contacts appeared to believe that the commercial real estate and construction sectors would remain weak for some time..Hiring remained limited, with many firms reluctant to add to permanent payrolls, given economic softness..Future capital spending plans appeared to be limited”
So there you have an outline of the anemic economic picture in the Fed’s own words. To be sure, they indicated some strong points as well. But the weakness in consumer spending, housing, capital expenditures, commercial real estate and employment pretty much accounts for some 85% of the overall economy.
In addition some of the major problems that worried the market earlier have not really gone away. The sovereign debt problems of the weaker EU nations have been papered over without being solved and are still lingering just beneath the surface. The looming currency wars that were shoved down the road by the recent G-20 meeting are also a major threat to the global economy.
Furthermore the Chinese housing bubble previously highlighted by bearish investor Jim Chanos and others has now appeared on the front page of the New York Times. A new district of the city of Ordos,…
Pacific Investment Management Co., BlackRock Inc. and the Federal Reserve Bank of New York are seeking to force Bank of America Corp. to repurchase soured mortgages packaged into $47 billion of bonds by its Countrywide Financial Corp. unit, people familiar with the matter said.
A group of bondholders wrote a letter to Bank of America and Bank of New York Mellon Corp., the debt’s trustee, citing alleged failures by Countrywide to service loans properly, their lawyer said yesterday in a statement that didn’t name the firms. The New York Fed acquired mortgage debt through its 2008 rescues of Bear Stearns Cos. and American International Group Inc.
Investors are stepping up efforts to recoup losses on mortgage bonds, which plummeted in value amid the worst slump in home prices since the 1930s. Last month, BNY Mellon declined to investigate mortgage files in response to a demand from the bondholder group, which has since expanded. Countrywide’s servicing failures, including insufficient record keeping, may open the door for investors to seek repurchases by bypassing the trustee, said Kathy Patrick, their lawyer at Gibbs & Bruns LLP.
Patrick represents investors who own at least 25 percent of so-called voting rights in the deals and stand to recover “many billions of dollars,” Patrick said.
Countrywide hasn’t met its contractual obligations as a servicer also because it hasn’t asked for loan repurchases and is taking too long with foreclosures, Patrick said. The delays stem from missing documents, process mistakes and insufficient staffing to evaluate borrowers for loan modifications, she said.
If Countrywide doesn’t correct the servicing problems within a few months, her clients could have the right to pursue legal action against Bank of America, Bank of New York or both, she said. “None of the bondholders are opposed to modifications for deserving borrowers, but you’ve got to get it done” in a timely fashion, she added.
Mortgage-bond contracts are explicit in requiring repurchases of loans when their
Short Term Market Condition: Oversold (short term bullish)
Short Term Trend: Neutral
Just about everyone has heard about or read “The Black Swan: The Impact of the Highly Improbable” by Nassim Nicholas Taleb in which he describes how unexpected, highly improbable events can have massive impact.
I think that recent developments in U.S. financial markets could be a “black turkey,” larger, more destructive and uglier than any black swan ever could be.
In recent days, a “black swan” event, or even worse, a potential “black turkey” event has surfaced that is just beginning to impact financial markets and could have far reaching effects going forward.
I’m talking about “Foreclosuregate” or the “robo signing” scandal that has been rocking financial markets over the past several days and that this action could be just the beginning of a major unforeseen, black swan event.
Of course the details are still murky but the Attorneys General in all 50 states have launched an investigation to see if false documents and forged signatures were used in their foreclosure procedures.
All the big names could be involved, including Ally Financial, Bank of America and JP Morgan, among others, and the ramifications could be huge as this situation could throw the whole foreclosure process into question and uncertainty.
Today’s selloff appeared to be what could be the first salvo in a bloody war as PIMCO, Blackrock and the New York Federal Reserve went to Bank of America with a demand for $47 billion of mortgage repurchases. These entities are all huge players with similar interests and to have them square off against each other is certainly an unexpected event.
Bank of America will fight this, of course, but the “black turkey” here is that nobody knows how large the liability or how far reaching the claims might go if “robo signing” spreads.
JP Morgan estimates liabilities of as high as $120 Billion but if the $47 Billion at Bank of America is accurate, total industry liabilities could be much higher.
And here’s where the “black turkey” really could really get ugly. As we know, the market hates uncertainty…
The news had a significant impact on the market because of the parties involved in suing Bank of America. The loans were originated by CountryWide, which had been acquired by BofA. It is ironic that Countrywide CEO Angelo Mozilo just settled with the SEC admitting no wrongdoing and merely paid a fine which was a small percentage of his financial gains.
It is nothing new for bondholders and the common people to sue some of the big Wall Street Banks for fraud.
But when the plaintiffs include some of the most important financial institutions in the country the market has to sit up and take notice.
It’s nice to see some outrage being expressed, even if it is among the privileged few. Watching Bloomberg television was particularly difficult today as the apologetics and cheerleading for the financial sector among its guests and newspeople is almost shameless.
Pacific Investment Management Co., BlackRock Inc. and the Federal Reserve Bank of New York are seeking to force Bank of America Corp. to repurchase soured mortgages packaged into $47 billion of bonds by its Countrywide Financial Corp. unit, people familiar with the matter said.
A group of bondholders wrote a letter to Bank of America and Bank of New York Mellon Corp., the debt’s trustee, citing alleged failures by Countrywide to service loans properly, their lawyer said yesterday in a statement that didn’t name the firms. The New York Fed acquired mortgage debt through its 2008 rescues of Bear Stearns Cos. and American International Group Inc.
Investors are stepping up efforts to recoup losses on mortgage bonds, which plummeted in value amid the worst slump in home prices since the 1930s. Last month, BNY Mellon declined to investigate mortgage files in response to a demand from the bondholder group, which has since expanded. Countrywide’s servicing failures, including insufficient record keeping, may open the door for investors to seek repurchases by bypassing the trustee, said Kathy Patrick, their lawyer at Gibbs & Bruns LLP.
This report was originally released as a six-part series. The first part was published on February 15, 2010. The last part was published on February 27, 2010.
“The American oligarchy spares no pains in promoting the belief that it does not exist,
but the success of its disappearing act depends on equally strenuous efforts
on the part of an American public anxious to believe in egalitarian fictions
and unwilling to see what is hidden in plain sight.”
– Michael Lind, To Have and to Have Not
It’s time for 99% of Americans to mobilize and aggressively move on common sense political reforms.
Yes, of course, we all have very strong differences of opinion on many issues. However, like our Founding Fathers before us, we must put aside our differences and unite to fight a common enemy.
I asked Tyler at Zero Hedge about this and he explained that Blackrock is probably aggregating its ETF exposure by buying iShares which it now owns. In other words, it’s netting out existing (short) ETF exposure and hedging by going long the stocks. Blackrock’s net exposure is likely negligible. - Ilene
One might conjecture from this enormous number of 13G filings noted below that Blackrock has taken what appears to be new 5+% stakes in over 1,800 US equities.
"We counted over 1,800 13Gs that Blackrock dumped on Friday…For those less familiar with the 13G…it’s a requirement when ownership exceeds 5% of the outstanding shares…these filings represented new positions for Blackrock since we only counted 11 amended 13Gs, which in itself seems very surprising, given the long list of stocks."
Holy guacamole!
Perhaps this is an error, or a misreading of the data. Someone ‘fat-fingered’ the Edgar filing button.
We are incredulous that a private investment firm, no matter how well connected, could have taken 5+% positions in most of the NY listed equity market so quickly. Driven madly bullish, with enormously deep pockets, and an abiding faith in their ability to defy the odds? Facilitating the hostile takeover of the rest of US real economy by a cabal of bonus taking Bonapartes? Starting a new Blackrock 1800 index fund from the bottom up, build it and they will come? LOL
Certainly the SEC will inquire as to their intentions, which is the purpose of such filings, and an explanation to the investment public will be forthcoming.
We suggested the other day that Blackrock and the NY Fed might turn out to be Obama’s Halliburton and KBR – private contractors fulfilling administration policy. NY Fed Conspired to Hide Details of AIG There are repeated rumours of an invisible hand in several markets, as an arm of Washington. But this is a bit much.
The Robert Rubin Rule of Financial Crisis Management was stated in the mid 1990′s. It held that buying SP futures to prop the stock market was cheaper than trying to clean up the mess after a stock market panic. But this was not about actually buying the market; it was about using price to manage perception, in the manner recommended by Edward Bernays.
The Oxen Group, for Monday, sees a rather bearish market going into Monday. There is little to no economic news coming out tomorrow of much importance. Without much fundamental bullishness, it may mean that the market will ultimately see a sell off because the market will need something to drive it with its overbought technicals. Further, the futures are down for the market for Monday for the Dow and S&P. What we see as fundamentally bullish, however, is the BlackRock Inc. hopeful acquistion of iShares from Barclays Global, which will make BlackRock the largest fund manager in the world. This offer to buy iShares is huge for BlackRock, and it should drive its stock extremely higher on Monday. The market will be looking for data that they can bank on, and the BlackRock deal is definitely one that will scare up some significant buying. Technically, however, BlackRock is somewhat overbought and overvalued on RSI. That will mean that after BlackRock sees a runup in the early morning there should be profit taking. This will be a chance to buy in on the pullback as the possible merger should continue to move the stock up. There has been some selling for BLK in the past few days, creating some room to the upper bollinger bands, and the fast stochasics have moved downwards with some room for possible growth as well. Be sure to buy in on a pullback, however, because this news is great for BLK.
Entry: Recommend buying within first 15-30 minutes after slight pullback.
Exit: We recommend exiting after a 2-4% increase.
Upper Resistance: 175.00
Interesting interview with Justice Antonin Scalia (below). Click here for a free subscription to PSW Report, it’s really easy and you’ll have immediate access to all the articles. – Ilene
Global X, the New York-based ETF sponsor known for its unique lineup of commodities and emerging markets funds, announced six of its ETFs will be reverse split, including three gold mining-related funds.
The $29.4 million Global X Gold Explorers ETF (NYSE: GLDX) will undergo a 1-for-4 reverse split while the $2.78 million Global X Junior Miners ETF (NYSE: JUNR) will see a 1-for-3 reverse split. The Global X Pure Gold Miners ETF (NYSE: ...
For the fourth consecutive week, the worldwide rally continues unabated. Seven of the eight indexes on my watchlist posted strong gains with Japan again topping the list with its 3.63% advance. Hong Kong's Hang Seng was the one index to take a breather. Amazingly enough, that Nikkei surge was three percent smaller than the previous week's 6.67%.
The Shanghai remains the only index on the watch list in bear territory -- the traditional designation for a 20% decline from an interim high. See the table inset (lower right) in the chart below. The index is down over 34% from its interim high of August 2009. At the other end of the inset -- four indexes, the ones for Germany, the UK, and J...
Public health historians discuss thwarted efforts to hold the lead industry accountable for toxic exposure threatening American children.
Science can be a battleground — witness the politics of climate change, the teaching of evolution, the uncharted terrain of genetic modification and stem cell research, among other contentious issues. But when industries release untested chemicals into our environment — putting profits before public health — our children are the first to suffer. Nowhere is this more troubling than in the ongoing story of lead poisoning.
Bill talks with David Rosner and Gerald Markowitz, public health historians who’ve been taking on the chemical industry for years — writing about the hazards of in...
Not a day passes without the financial media denouncing gold as an investment option and hailing the bureaucrats heading the world's monopolist monetary central planning agencies as superheroes. It began prior to gold's recent breakdown, with widely cited bearish reports on gold published by Credit Suisse and Goldman Sachs, among others. Never mind that most of their arguments were easily unmasked as spurious. ...
To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...
It seems that every Tuesday in 2013 since January 8 has been positive on the Dow. And this past Tuesday was no exception. Now that sounds like a trend to put money on -- buy the SPDR Dow Jones Industrial Average ETF (DIA) at the close each Monday and close out the position late on Tuesday.
The Dow and S&P 500 both hit new all-time highs once again on Wednesday, while the Nasdaq hit its highest level since November 2000. The “risk on” allocation of new investment capital into cyclicals continues, although Wednesday saw leadership from defensive sectors Consumer Staples, Utilities, and Telecom, along with Financials. Nevertheless, ConvergEx reports that the average correlation of the ten S&P business sectors to the overall index averaged 82% last month. While that is below the 86% averag...
BMY - Bristol-Myers Squibb Co. – Shares in drug maker, Bristol-Myers Squibb Co., are ripping higher today, up 6.5% at $44.94, the highest level in more than a decade, ahead of the release of the American Society of Clinical Oncology (ASCO) 2013 Annual Meeting abstracts tonight. The ASCO Annual Meeting begins on May 31st in Chicago. Options on BMY are far more active than usual today, with overall volume topping 64,000 contracts by 12:25 p.m. ET, versus average daily volume of around 11,400 c...
We are starting to see some very extreme readings on our monthly and weekly index charts since there has been no correction this year. I posted below first the monthly chart of the S&P 500 going back 15 years showing bollinger bands – rarely do we get above the upper one, and never have we been this far above. Then below that I posted (with 4 charts of 4 years each) the weekly data and you can see we are at a rare time we are above the weekly bollinger band as well. This non stop rally is getting very historical.
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Stock market posts another record setting week, but the big news came after Friday’s close.
Courtesy of NASA
The stock market put on another record setting show with the Dow Jones Industrial Average (NYSEARCA:DIA) closing at a record high 15,118 and the S&P 500 (NYSEARCA:SPY) closing at 1633.70, another all time closing high.
For the week, the Dow Jones Industrial Average (NYSEARCA:DIA) gained 1%, the S&P 500 (NYSEARCA:SPY) climbed 1.2%, the Nasdaq Composite (NYSEARCA:...
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Well, well, well....it is good to know that there are others in the scientific arena who believed that YMI Bioscience's data (cough - Gilead) is a better drug than Incyte's Jakafi. Now, the definitive data are still unknown, but there was enough evidence from a Phase 2 trial to take a small risk for a huge reward. So, let's forget about Apple (AAPL), and do nothing but biotechs from now until Congress passes universal health care coverage for prescriptions....and drive the prices down so that research and development is no longer feasible to conduct in the US. Even Seattle Genetics (SGEN) has been on a tear as of late...
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the Favorites backup site
(
