Money, Power and Wall Street
by phil - April 28th, 2012 6:57 am
Have you seen this?
Frontline did this very good documentary and I'd file it under "those who forget the past are CONDEMNED to repeat it" – let's all TRY not to repeat the mistakes of 2008… "Wall Street got bailed out and Main Street didn't" is the quote that neatly sums up the present situation. Wall Street and the top 10% of this country – of this World – are partying like it's 1999 while the bottom 90% continue to languish in the worst Recession since the Great Depression.
Despite a myriad of worrying data, the Corporate Media is in full-blown promotional mode – pushing stocks as if it were modern snake oil – the panacea that will cure all your ills. We often forget that essentially ALL of our news sources are publicly traded companies and have a vested interest in the stock market going higher. Hell, we have an interest in that too, as our longer-term virtual porfolios are entirely bullish - but that shouldn't preclude us from making a realistic assessment of the CURRENT situation, should it?
Caterpillar, 3M, United Technologies and ABB are among the manufacturers that have reported weak performances in China in the first quarter as economic growth has slowed nearly to a three-year low. Caterpillar’s sales in China fell between $250 million and $300 million in the first quarter, pushing the company, the world’s largest maker of earth-moving equipment, to export to other countries a large share of the equipment it made in China.
Concerns about China overshadowed better-than-expected earnings at the company, which is based in Peoria, Illinois, and led investors to push the stock down 5 percent Wednesday, which was great for us as CAT was on our Long Put List.
ABB, a maker of power equipment, reported profits in the past week that were below analysts’ expectations, caused by weak Chinese demand. “It was a very slow start to the year for China. China in January was extremely weak,” ABB’s chief financial officer, Michel Demaré, said Wednesday.
“Our business in China is off to a slow start,” said Gregory J. Hayes, the chief financial officer of United Technologies, whose Otis arm is the world’s biggest maker of elevators. The unit’s China sales dropped 9 percent in the first quarter. “The ongoing government…
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Top 1% Tuesday – $105,637 for Me, $80 for You!
by phil - March 27th, 2012 7:34 am
Wheeeeeee – isn't this economy FANTASTIC?
It sure is for those of us in the top 1% (1.4M) - people earning over $352,000 in annual income. We made $105,637 more Dollars in 2010 than we did in 2009 – thanks in large part to the Fed's fantastic policy of printing more and more money, which lets us borrow cheaply or invest with leverage in inflating equity as the Dollar collapses. Sure the Dollar collapsing hurts everyone – but an extra $105,637 keeps us ahead of inflation, right?
I'm stil jealous of course (good Capitalists are always jealous), as the top .01% (14,000 of us) – who earn an average of $23.8M, were able to add another $4.2M to their annual incomes in 2010. That's 52,500 TIMES the average $80 increase earned by the bottom 99% (thank goodness we're not one of THEM!). That's right, somehow, the riff-raff in the bottom 99% managed to grab 7% of the Nation's total increase in income – clearly Congress needs to make immediate changes to prevent this travesty from happening again!
Steve Rattner has a different opinion, saying: "The only way to redress the income imbalance is by implementing policies that are oriented toward reversing the forces that caused it. That means letting the Bush tax cuts expire for the wealthy and adding money to some of the programs that House Republicans seek to cut. Allowing this disparity to continue is both bad economic policy and bad social policy. We owe those at the bottom a fairer shot at moving up."
That's Commie talk! If we allow the bottom 99% to make a fair share of the money, they would make 5% more and you know they would only SPEND it on stuff they need TO LIVE. Then our companies would have to provide more goods and services to the bottom 99% and jobs would be created and we, at the top, would have to WAIT for the money to trickle UP from the bottom as only companies that do a good job servicing the bottom 99% would increase in value. Even worse, we may have to WORK (a four-letter word) to provide goods and services for the people who have money in order to EARN (another four-letter word) our Incomes. That's no fun for us at all!
We like it when we get ALL the money and we create just the jobs we choose by buying really…
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China’s Top 10 Business Stories in 2011
by ilene - January 3rd, 2012 1:43 pm
Courtesy of Patrick Chovanec
As the year comes to a close, and we look forward to 2012, I continue the tradition I started last year and offer a brief look at the top stories that shaped China’s business and economic climate in 2011:
1. High-Speed Rail. It was the best of times, it was the worst of times — China’s ambitious high-speed rail program embodied the highest highs and the lowest lows the country experienced this year. In January, President Obama cited the planned 20,000km network in his annual State of the Union address as a prime example of how America need to catch up to the Chinese. As if to prove his point, June saw the grand opening of the much-heralded Beijing-Shanghai line, timed to coincide with the Communist Party’s 90th anniversary celebrations. But even before then, there were signs of trouble on the horizon, starting in February when the powerful head of China’s railway ministry — the project’s godfather — was abruptly fired as part of a massive corruption scandal. Then a crash on a line near Wenzhou, in which at least 35 people were killed, unleashed a wave of fury on the Chinese internet, forcing the government to re-think the entire project amid charges of cover-up and sloppy construction. By November, with high-speed trains running at chronically low capacity and construction debts piling up, the railway ministry was asking Beijing for a rumored RMB 800 billion (US$ 126 billion) bailout just to pay the money it owed suppliers.
2. Inflation. Few issues preoccupied the average Chinese citizen — or Chinese policymakers — this year as much as rapidly rising prices. The consumer inflation rate, which began the year just shy of 5%,rose to 6.5% by July. The increase was led by food prices, particularly pork – a staple part of the Chinese diet — which skyrocketed by more than 50%. Keenly aware of the potential for popular unrest, Beijing made containing prices its top economic priority — even if that meant reining in growth. Throughout the year, the central bank repeatedly raised interest rates and bank reserve requirements, in an effort to bring the pace of credit expansion back under control. The powerful state planning bureau leaned heavily on Chinese companies not to raise prices, and even hit consumer goods giant Unilever with a stiff antitrust fine for publicly discussing possible price hikes. While CPI did decline to 4.2% by…
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Flip Flop Futures Thursday – What Next?
by phil - November 3rd, 2011 7:59 am
You got to be crazy, you gotta have a real need
You gotta sleep on your toes and when you’re on the street
You got to be able to pick out the easy meat with your eyes closed
And then moving in silently, down wind and out of sight
You gotta strike when the moment is right without thinking – Floyd
You have got to be crazy to play this market!
Forget dogs – it was the early birds who made money this morning as I finally had a web connection at home and, as we expected due to the time changes, our usual 3am trade came late in the Futures as relentlessly bad news (see Member Chat for details) sank the indexes all the way back down to Tuesday’s close.
We reviewed all the news, both good and bad and I decided it was worth taking a chance on some futures long plays at 3:48 in Member Chat, saying:
The RUT futures are holding 715 so I like a long there (/TF) with tight stops below.
Nas Futures are holding 2,275 and I like a bullish play (/NQ) with tight stops on that line.
Oil is at $91.37 and that may be the low but it’s gasoline we like to get bullish on into the weekend and gasoline (/RB) is down to $2.5999 so let’s go bullish there over $2.60 with tight stops.
EU opens in 10 minutes and their futures are down 2.5% and I could be wrong but I think we’re being manipulated lower into the ECB meeting and the Merkozy statement on Greece.
As you can see from the chart, that was pretty good timing and we stopped out 3 hours later, at…
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Thrill-Ride Thursday
by phil - October 13th, 2011 8:24 am
Wheeeee, what a ride!
I hate to say I told you so but I did tell you so in yesterday’s morning post when I said: "Not to be cynical but, if you are going to have some Slovakian Government officials torpedo a vote that will tank the markets – isn’t it a good idea to run them up first and bring in a bunch of suckers to sell to? We remain a bit skeptical until we get back over our "Must Hold" levels and hold them for more than a day." As you can see from David Fry’s chart, a little cynicism is a good thing in these markets as the Slovakian vote was delayed again and the FT rumor popped the day’s bubble.
We discussed shorting oil at $86 (now $84) and gold at $1,695 (now $1,670) as good plays off the morning pump and, as usual, shorting TLT was a winner but now we’re near their theoretical support by the Fed so we’d rather see a run-up to $120 before we play them again. At 1pm, we have a 30-year note auction of just $13Bn but, as I pointed out to Members in Chat, this makes $52.5Bn of 30-year borrowing since August 15th – that’s not even two months!
Who can keep funding this kind of debt load? And it’s not just the US that’s borrowing at an ever-increasing pace – the EU is borrowing as much as we are and Japan is borrowing and Russia is borrowing and Brazil and India are borrowing – Africa would borrow if anyone would lend it to them and our NAFTA buddies, Canada and Mexico, who also borrow about $50Bn a year to fund their own deficits.
How is it possible, a logical person may ask, for almost every single country in the World to run a deficit at the same time? Either A) China has so much of a surplus that they are funding everyone else or B) Everyone is printing money 24/7 to pay bills they don’t have the income for and, if B is the case – where’s the inflation? Is it really possible that, on a planet with a $60Tn GDP and a $4Tn annual deficit (and yes, half of it is ours!) that prices go up less than the 6.66% (why does that number come up so often) printing of…
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TGIF – Dollar Done Diving or Destined to Drop?
by phil - May 27th, 2011 8:19 am
It is ALL about the Dollar.
This week, the Dollar was smacked down from 76.37 on Monday to 75.04 early this morning for a 1.7% drop on the week, costing US citizens $1.7Tn of their lifetime savings in order for Goldman Sachs to close out their month on a high note as commodities, once again, skyrocketed – pushing the key wholesale price of gasoline back over $3 so gas stations could mark it up to $4 at the pump and charge US consumers $1.15 more per gallon than last year (up 41%) for an estimated $3.75Bn of additional charges levied against 150M US drivers in the next 3 days.
Hey, that’s only $25 per driver, right? That’s totally right! If you are going to steal $2.5Bn, that’s exactly the way to do it – in small amounts over and over again. If you steal $2.5Bn from one person or from several people, like Madoff, you go to jail but if you steal $25 from every family in America – you go on the cover of Forbes and get to advise the President on Economic policy!
Also, Madoff’s big mistake was robbing rich people. That’s a big no-no in America but robbing poor people is called Capitalism and, if you complain about it, you are some sort of Communist and will be thrown off the island so shut up and give us your $25! Ah, ain’t that America?
As I mentioned yesterday, we won many thousands of tanks of gas betting against $101 oil in the fake rally and this morning we picked up another .40 win in the futures as I sent out an early morning Alert to Members to short oil at $100.90 and we got a nice ride back to $100.50. 40 cents may not sound like much but the QM futures contracts pay $12.50 per penny per contact so that little move nets $812.50 per contract – that’s enough to tank up the Range Rover AND take care of the monthly lease payment!
This is why the investor class doesn’t give a damn about a $25 rise in the price of gas – we may pay $25 just like the little people but we OWN the oil companies and the refiners and the gas stations and even the commodities and we pay $25 but collect $8,000 on just 10 contracts in…
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Housing Market Double Dip Surprises Economists – Just as Original Crash Did
by ilene - May 9th, 2011 2:09 pm
Courtesy of Trader Mark at Fund My Mutual Fund
The same economists shocked by the original housing crash (prices can’t go up forever?), now appear to be in the fetal position as the much too obvious second leg of the downturn has arrived. While I do have an economist degree, living in the locale experiencing a 1 state Depression [Jan 27, 2011: Metro Detroit Home Prices Back to 1994 Levels...Before Accounting for Inflation] had me much more negative than those who live in the ivory towers of Manhattan or D.C.. I wrote a few years ago about a few articles that also opened my eyes to what was going on out there in the rest of the country. [May 30, 2005 - Fortune: Riding the Boom] [Sep 11, 2006: Option ARMs - Nightmare Mortgages] Hence in late 07, I showed with simple math why we were in for a doozy of a drop in the housing market. [Dec 6, 2007: What Should Median Housing Prices be Today?]
As you can see from the mid/late 1970s to 2001/2002 the ratio was consistent in a tight range between 2.6x to 3.0x. Essentially this means the median home price in this country was 2.6x – 3.0x median household income. And it’s been right around 2.8x for most of that time. That’s 30 years….
Then in 2002+, we had innovation…. great innovation… and 1% interest rates. Easy money. No mortgage regulation. Happy times. And crazy housing prices that detached from reality. In 2006 at the height of ‘innovation’ (where were these politicians 1 year ago? seriously), the ratio went "off" the chart, it appears 4.0x. After the ‘correction’ we’ve had, that ratio has fallen all the way to…. 3.8x.
In July 2006 at the height of insanity the median price of a home was $230,200
It has already fallen in less than a year (October 2006) to $207,800
Pain over, correction done – time to party. Right? Wrong.
What are median incomes nowadays? As of 2006 the median household income was $48,201.
$48,201 x 2.8 ratio
…
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Thoughtful Thursday – What’s Our Money Worth?
by phil - May 5th, 2011 8:18 am
How low can we go?
I made a bottom call on the Dollar at 73 (and a top call on the markets) last week, not because the Dollar is strong but because the alternatives aren’t so hot either. While we have dipped a bit below that line, we are in serious danger of recovering now and I say danger because – as I have pointed out in Tuesday’s post and discussed yesterday as well and as we have long been discussing in Stock World Weekly, the recent equity and commodity gains are nothing more than an illusion based on the fact that their value has been calculated in an ever-weakening dollar.
This is not a small correlation – this is almost an exact correlation between the Dollar (using the UUP ultra-ETF), the S&P (red), oil (green) and gold (gold – that one worked out). I couldn’t put silver (SLV) on the chart because silver is up a ridiculous 120% in the same period and distorts the rest (was 170% last week) but you can view that set here. Note how we’re pulling back this week just because the Dollar STOPPED going lower – what will happen if it actually goes higher?
As I pointed out on Monday, silver was beyond ridiculous when you look at it in terms of the value of your home. The "value" of your home has dropped 78% when priced in silver in just 3 years. Are we to extrapolate that in 3 more years you will have to accept an pound of silver for your home? Surely you have more silver IN YOUR HOME than that!
Homes are something people NEED, food is another thing people NEED, fuel is something people WANT, while metals are things people DESIRE. Thus, as we move from NEED to DESIRE, prices are able to get less and less realistic. This is, in part because we do not have enough metals or even fuel to fulfill everyone’s desires but food is grown and houses are built as the need arises. Yes there are occasional gluts and shortages but, Malthus aside (and, over 100 years later, can we finally put that aside?), we make enough stuff to fulfill people’s needs – most shortages are a distribution problem – including starvation in Africa, a problem that was addressed accurately by the late Sam Kinnison:
Of course…
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Case Shiller’s Double Dip Has Come and Gone
by ilene - April 27th, 2011 2:25 am
Courtesy of Lee Adler at Wall Street Examiner
The S&P/Case Shiller Home Price Indices reported Tuesday are, as usual, so far behind the curve that not only did they miss the “double dip” that has come and gone, it will be at least July or August before it reports an apparent upturn in prices in March and April. S&P’s view of the data was dour. “There is very little, if any, good news about housing. Prices continue to weaken, trends in sales and construction are disappointing, ” said S&P’s David Blitzer. “The 20-City Composite is within a hair’s breadth of a double dip.”
There’s just one problem with that. Other price indicators that are not constructed with the Case Shiller’s large built in lag, passed the 2009-2010 low months ago. The FHFA (the Federal Agency that runs Fannie and Freddie) price index showed a low in March 2010 that was broken in June 2010 and never looked back. That index is now 5.6% below the March 2010 low. Zillow.com’s proprietary value model never even bounced. It shows a year over year decline of 8.2% as of February. Zillow’s listing price index shows a low of $200,000 in November 2009, followed by a flat period lasting 6 months. As of March 31, that index stood at $187,500, down 6.25% from the 2009-2010 low for data.
The Case Shiller Indices for February held slightly above the January level (not seasonally adjusted). I follow their 10 City Index due to its longer history. It was at 153.70 in February versus 152.70 in January. These levels are still above the low of 150.44 set in April 2009.
The Case Shiller index showed a recovery in prices in 2009-10 only because of the weird methodology it uses. Not only does it exclude the impact of distress sales that have been such a big part of the market, but it takes the average of 3 months of data instead of using just the most recent available month. The current data purports to represent prices as of February. In fact, it represents the average price for December, January, and February, with a time mid point of mid February. These are closed sales which generally represented contracts entered in mid to late November, on average. That means that the current Case Shiller index actually represents market conditions as of 5 months ago. Things can change in 5…
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Enjoying Coffee in the Lodge with Jesse
by ilene - March 17th, 2011 3:45 pm
THE BANKS MUST BE RESTRAINED, AND THE FINANCIAL SYSTEM REFORMED, WITH BALANCE RESTORED TO THE ECONOMY, BEFORE THERE CAN BE ANY SUSTAINED RECOVERY – Jesse
Enjoying Coffee at the Lodge with Jesse
By Ilene
I have long been a fan of Jesse’s Café Américain. Jesse is a brilliant writer and a deep thinker who uniquely transcends politics, easily seeing through lies and disinformation. He has a great feel for what really matters, and the courage to speak out about it. Jesse and I have spoken before about the economy, markets and politics, and being at a crossroads once again, it was a perfect time to catch up.
****
Ilene: Hi Jesse, since our last interview, I would guess that we’d both agree that nothing has been done to clean up the financial system – the banks and government interconnectedness, conflicts of interest, and out-and-out fraudulent activities. Are things better or worse, or in line, with what you were expecting over a year ago?
Jesse: I think things are progressing in line with what I had expected, with the Fed and the government trying to prop up an unsustainable status quo by monetizing debt. I am still a little shocked by the brazen manner in which the financial markets are being conducted and regulated, and the news is reported in the US. It is one thing to hold a theory that says something will happen, but it is quite another to see it actually happening, and so blatantly, almost without a word of protest.
Ilene: How do you view our financial system and the global financial system now, with no progress towards any kind of reform?
Jesse: The US is now being run by an oligarchy, with lip service being paid to the electorate in allowing the people to vote for the candidates that the parties and the powers will put forward. There will be no recovery for the middle class until they assert themselves. I know I have stated this often in my tag phrase, “The banks must be restrained…” But it is the case.
There are areas of resistance to this trend on what one might call ‘the fringes of Empire,’ those client states which have been ruled by powerful cliques with the support and the protection of the US. Although certainly not a great analogy, it does remind one of…
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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
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