THE DRUNKEN WALK TAKES ANOTHER SUDDEN TURN

by ilene - February 25th, 2010 12:56 pm

THE DRUNKEN WALK TAKES ANOTHER SUDDEN TURN

Courtesy of The Pragmatic Capitalist

The drunk is having a particularly difficult time finding his way home this time. The market has now swung in opposing 1% directions on three consecutive days – a sure sign of near total confusion in the equity markets. Today’s swing comes courtesy of declining sentiment and weak jobs – the never ending thorn in this markets side.

Jobless claims rocketed higher to 496K and there were no administrative excuses behind this jump. Analysts had expected a reading of 460K. Continuing claims also climbed to 4.61MM. This doesn’t bode well for the monthly jobs report.

Reports of weak weather were already contributing to a potentially poor jobs figure, but this data all but seals the deal. The recovery on Main Street has been delayed for yet another month. Anyone who is big on chart reading does not like the recent uptick in claims. It certainly looks like the trend is higher to sideways from here.

showimage3 THE DRUNKEN WALK TAKES ANOTHER SUDDEN TURN

In other news, durable goods posted a gain of 0.3%, but was well below anlayst estimates of 1.3%. The durable goods data is notoriously volatile so it’s difficult to gauge too much from this data. The news is a bit mixed as transportation goods posted strong orders while non-transport related goods posted weak orders. The overall trend remains higher for now, however.

In other other news, the currency markets were once again shaken up as problems in Greece appear to be never ending. Ratings agencies are threatening downgrades of Greece as austerity looks like the country’s final resort. The Euro remains the worst house in a very bad neighborhood.

So where do we stand on this market? Uncertainty remains the name of the game and uncertainty is rarely good for a market. As earnings season comes to a close I fully expect the uncertainty level to pick it up a notch. There is very little positive news for investors to hang their hats on. For now, the macro trends of global rate increases, weak jobs, sovereign debt, regulation and the death of the reflation trade (thanks to the Euro) will dominate any short-term moves. In a partial mea culpa, I have been heavily in cash and fully hedged (though not short) from S&P 1,120 and remain so. I was tempted to remove hedges in recent weeks to gain upside exposure, but as I have said before, this downturn in stocks has a more sinister…

INSIDER BUYING DROPS TO LOWEST LEVELS IN A YEAR

by Insider Zone - January 19th, 2010 11:59 pm

INSIDER BUYING DROPS TO LOWEST LEVELS IN A YEAR

Courtesy of The Pragmatic Capitalist

As the recession on Main Street continues the negative trends in insider buying get even worse. Insider buying fell to a new low of $7.8MM on the week. Selling dropped from $318MM to $293.22MM, but remains at very high levels. I continue to believe this is a reflection of the ongoing secular bear market as corporate insiders see little to no real recovery in revenues and sustainable organic growth. Due to this, they have little to no faith in the long-term sustainability of future increases in their own corporation’s stock prices. This is best reflected in the incredibly lopsided insider transactions.

Notable selling:

it12 INSIDER BUYING DROPS TO LOWEST LEVELS IN A YEAR

Notable buying:

it22 INSIDER BUYING DROPS TO LOWEST LEVELS IN A YEAR

Tags: Economy, insider buying, insider selling, Main Street, Recovery, Wall Street

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Conversation with John Rubino

by ilene - January 3rd, 2010 8:56 pm

Conversation with John Rubino

John Rubino is the co-author, with GoldMoney’s James Turk, of The Collapse of the Dollar and How to Profit From It (Doubleday, 2007), and author of Clean Money: Picking Winners in the Green-Tech Boom (Wiley, 2008), How to Profit from the Coming Real Estate Bust (Rodale, 2003) and Main Street, Not Wall Street (Morrow, 1998). After earning a Finance MBA from New York University, he spent the 1980s on Wall Street, as a Eurodollar trader, equity analyst and junk bond analyst. During the 1990s he was a featured columnist with TheStreet.com and a frequent contributor to Individual Investor, Online Investor, and Consumers Digest, among many other publications. He now writes for CFA Magazine and manages and edits the terrific websites DollarCollapse.com and GreenStockInvesting.com.

“This is the end of a long era and the beginning of another that is not going to be nearly as nice.” John Rubino

Our first conversation was on the phone, the day Ben Bernanke was named “Person of the Year” by Time Magazine.

Ilene: So what do you think of Ben Bernanke winning the Time’s person of the year award?

John: First, this was obviously a lame year – not much competition. Second, it’s a great negative indicator, like Time’s “Home Sweet Home” edition just prior to the housing collapse. Ben Bernanke is part of the old monetary order, in which it was acceptable to create paper money in infinite amounts to finance a growing government. The peak of his popularity coincides with the end of the system he helped design.

Ilene: Do you think Bernanke will get reappointed?

John: Oh yes, he fits the times perfectly. Most of the people in charge think he did a great job. He’ll be reappointed and he and Alan Greenspan will be identified with the future crisis, they’ll be the guys who are in the history books as the Fed Chairmen who ran us off a cliff. And it couldn’t happen to two nicer guys as far as I’m concerned.

Ilene: What are your thoughts regarding our economy in 2010, and the stock market?

John: In the short run, anything can happen. It’s unknowable since there are so many competing forces. The government pumping liquidity into the system can produce some nice corporate earnings reports, which pumps up the stock market in the short run. Or we could have Greece or some other bankrupt country default and send global markets into a tailspin. There’s no real way to know. Both are reasonably likely, so you…

Tags: Alan Greenspan, Ben Bernanke, Clean tech, Commodities, currency crisis, Dollar, Economy, Federal Reserve, Gold, GoldMoney’s James Turk, government, hard assets, hyperinflation, inflation, John Rubino, Main Street, Real Estate, silver, The Collapse of the Dollar and How to Profit From It, Wall Street

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2009: The Year Wall Street Bounced Back and Main Street Got Shafted

by ilene - December 27th, 2009 6:36 pm

2009: The Year Wall Street Bounced Back and Main Street Got Shafted

Courtesy of Robert Reich, of Robert Reich’s Blog

Mature businessman dancing along street with briefcase and umbrella

In September 2008, as the worst of the financial crisis engulfed Wall Street, George W. Bush issued a warning: "This sucker could go down." Around the same time, as Congress hashed out a bailout bill, New Hampshire Sen. Judd Gregg, the leading Republican negotiator of the bill, warned that "if we do not do this, the trauma, the chaos and the disruption to everyday Americans’ lives will be overwhelming, and that’s a price we can’t afford to risk paying."

In less than a year, Wall Street was back. The five largest remaining banks are today larger, their executives and traders richer, their strategies of placing large bets with other people’s money no less bold than before the meltdown. The possibility of new regulations emanating from Congress has barely inhibited the Street’s exuberance.

But if Wall Street is back on top, the everyday lives of large numbers of Americans continue to be subject to overwhelming trauma, chaos and disruption.

View of town's main street with mountains in the distance

It is commonplace among policymakers to fervently and sincerely believe that Wall Street’s financial health is not only a precondition for a prosperous real economy but that when the former thrives, the latter will necessarily follow. Few fictions of modern economic life are more assiduously defended than the central importance of the Street to the well-being of the rest of us, as has been proved in 2009.

Inhabitants of the real economy are dependent on the financial economy to borrow money. But their overwhelming reliance on Wall Street is a relatively recent phenomenon. Back when middle-class Americans earned enough to be able to save more of their incomes, they borrowed from one another, largely through local and regional banks. Small businesses also did.

It’s easy to understand economic policymakers being seduced by the great flows of wealth created among Wall Streeters, from whom they invariably seek advice. One of the basic assumptions of capitalism is that anyone paid huge sums of money must be very smart.

But if 2009 has proved anything, it’s that the bailout of Wall Street didn’t trickle down to Main Street. Mortgage delinquencies continue to rise. Small businesses can’t get credit. And people everywhere, it seems, are worried about losing their jobs. Wall Street is the only place where money is flowing and pay is escalating. Top executives and traders on the Street will…

Tags: income gap, Main Street, real economy, Recession, Robert Reich, Wall Street, wealth

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‘Overvalued, Check. Overbought, Check. Overbullish, Check….’

by ilene - December 24th, 2009 3:44 am

‘Overvalued, Check. Overbought, Check. Overbullish, Check….’

Courtesy of Michael Panzner at Financial Armageddon, and John Hussman

German Stock Exchange Opens After Wall Street Crash

I’ve written a fair number of posts highlighting the disconnect between Wall Street and Main Street (far more than I can remember, in fact). But even if you ignore what is happening in the real economy (you know, like Wall Street usually does), share prices are out of whack — with their own history. In "Clarity and Valuation," John P. Hussman, President of Hussman Investment Trust, discusses that very issue in this week’s edition of Hussman Funds’ Weekly Market Comment:

Last week, the dividend yield on the S&P 500 dropped below 2%, versus a historical average closer to double that level. While part of the reason for the paucity of yield in the current market can be explained by the 20% plunge in dividend payouts over the past year, as financial companies have cut or halted dividends to conserve cash, the fact is that current payouts are not at all out of line with their historical relationship to revenues, and even a full recovery of the past year’s dividend cuts would still leave the yield at a paltry 2.5%. The October 1987 crash occurred from a yield of 2.65%, which was, at the time, the lowest yield observed in history, matched only by the 1972 peak prior to the brutal 1973-74 bear market.

Those two periods had a few other things in common. In the weeks immediately preceding the market downturn, stocks were overbought, had advanced significantly over prior weeks, bond yields were creeping higher, and investment advisory bearishness had dropped below 19%. All of those features should be familiar, because we observed them at the 1987 and 1972 peaks, and we observe them now.

On the basis of normalized profit margins, the average price/earnings ratio for the S&P 500, prior to 1995, was only about 13. Higher historical “norms” reflect the addition into that average of extremely high “recession P/Es,” based on dividing the S&P 500 by extremely low, but temporarily depressed earnings. For example, the P/E for the S&P 500 currently is 86, because earnings have been devastated, but it would be foolish to take that figure at face value, and equally foolish to work it into a historical “average” P/E. The pre-1995 norm of 13 for price-to-normalized earnings is important, because at present – and again, we are not using current depressed earnings, but properly normalized values…

Tags: Clarity and Valuation, John Hussman, Main Street, Stock Market, valuations, Wall Street

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Main Street: Can We Have a Recovery Too?

by ilene - October 12th, 2009 6:37 pm

Main Street: Can We Have a Recovery Too?

Courtesy of Joshua M Brown, The Reformed Broker

Plante/ Tulsa World

Here’s a pair of headlines that I thought were fantastic in a juxtapositional way:

Goldman Faces PR Dilemna Over Huge Bonuses (CNBC)

Debt, Unemployment Weigh on Recovery (WSJ)

Both articles out on the same day. Today. Only in America.

Cartoon Source: TIME

Tags: Economy, Goldman Sachs Bonuses, Main Street, Recession, Recovery, Wall Street

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Economic No Spin Zone

by ilene - August 22nd, 2009 4:39 pm

Economic No Spin Zone

Courtesy of Michael Panzner at Financial Armageddon

According to the experts, things are looking up. Central bankers have expressed "growing confidence…that the worst of the financial crisis [is] over and that a global economic recovery [is] beginning to take shape." A well known strategist asserts that the "recession is ending ‘right now.’" President Obama has said "the economy is ‘pointed in the right direction.’"

However, consumers aren’t so convinced. Homeowners and young job seekers aren’t buying it, either. Nor are those who battle it out each day on Main Street’s front lines, as the Charlotte Business Journal reveals in "Small-Business Owners’ Outlook Dims":

Small-business owners aren’t convinced the recession is ending and their outlooks darkened in July, according to a monthly survey conducted by the National Federation of Independent Business.

NFIB’s index of small-business indicators fell 1.3 points last month to 86.5, the second consecutive monthly decline. The biggest reason was a drop in the number of small-business owners who expect the economy to improve in the next six months.

“The recession is wearing Main Street folks down,” says Bill Dunkelberg, NFIB chief economist. “And unfortunately, lawmakers in Washington are doing more to scare small-business owners than to reassure them of an economic recovery.”

Small-business owners are worried about higher taxes and proposed mandates to provide health insurance, Dunkelberg says. Taxes were cited as the No. 1 business problem by 22 percent of the small-business owners surveyed.

A bigger problem, cited by 32 percent, was poor sales.

Hmmm, I wonder which group – those who are supposedly in the know or those who are struggling to get by – is living in the economic no-spin zone?

Tags: Economy, Financial Crisis, Main Street, Obama, poor sales, Recession, Small-business owners, Washington

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THE SECRET OF CHINA’S MIRACLE ECONOMY

by ilene - August 20th, 2009 1:48 am

Here’s a unique perspective on China’s continued economic growth by Ellen Brown. Indirectly, she highlights the flaws in our own response to the credit crisis - a source of outrage - making China, not known for freedom and justice, look good.

THE SECRET OF CHINA’S MIRACLE ECONOMY:
THE GOVERNMENT OWNS THE BANKS RATHER THAN THE REVERSE

Beijingwestint Courtesy of Ellen Brown at Web of Debt

“The banks — hard to believe in a time when we’re facing a banking crisis that many of the banks created — are still the most powerful lobby on Capitol Hill. They frankly own the place.”

– U.S. Senator Dick Durbin, Democratic Party Whip, April 30, 2009

While the U.S. spends trillions of dollars to bail out its banking system, leaving its economy to languish, China is being called a “miracle economy” that has decoupled from the rest of the world. As the rest of the world sinks into the worst recession since the 1930s, China has maintained a phenomenal 8% annual growth rate. Those are the reports, but commentators are dubious. They ask how that growth is possible, when other countries relying heavily on exports have suffered major downturns and remain in the doldrums. Economist Richard Wolff skeptically observes:

We now have a situation in the world where we have a global capitalist crisis. Everywhere, consumption is down. Everywhere, people are buying fewer goods, including goods from China. How is it possible that in that society, so dependent on the world economy, they could now have an explosive growth? Their stock market is now 100 percent higher than at its low — nothing remotely like that hardly anywhere in the world, certainly not in the United States or Europe. How is that possible? In order to believe what the Chinese are saying, you would have to agree that in a matter of months, at most a year, no more, they have been able to transform their economy from an export-based powerhouse to a domestically focused industrial engine. Nowhere in the world has that ever taken less than decades.”

How can China’s stimulus plan be working so well, when ours is barely working at all? The answer may be simple: China has not let its banking system run roughshod over its productive economy. Chinese banks work for the people rather than the reverse. So says Samah El-Shahat, a presenter for Al Jazeera English who has a doctorate in economics from the University of London. In an…

Tags: Banks, capitalism, CHINA, Ellen Brown, government, Main Street, the Chinese solution, Wall Street

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Wall Street’s Gains Equal Main Street’s Loss?

by ilene - July 25th, 2009 9:08 pm

My Latest Huffington Post Column: ‘Wall Street’s Gains Equal Main Street’s Loss?’

Courtesy of Michael Panzner at Financial Armageddon

Below is my latest column for the Huffington Post, entitled "Wall Street’s Gains Equal Main Street’s Loss?":

Stock prices have been on a tear lately, bolstered by quarterly earnings reports that have in many cases outpaced expectations and growing optimism that the worst of the crisis-cum-downturn is behind us.

The S&P 500 index, for instance, is up more than 40 percent since its early-March lows, while the technology-laden Nasdaq Composite has scored a 13 percent gain — and, through yesterday, a 12-session winning streak — in the last two weeks alone.

Ordinarily, a bull run like this would be cause for optimism, on the belief that savvy investors see a light at the end of the tunnel. But in the currrent environment, could the good news that is powering share prices be bad news for the economy?

Consider the following recent reports from a cross-section of corporate America:

Microsoft announced that revenues declined more than 17 percent amid falling global demand for PCs and servers. According to the Financial Times, the world’s largest software company "sounded a far more cautious note about the prospects for a recovery in the second half of 2009" and its CFO said ‘it’s going to be difficult for the rest of the year….We’re really still not sure we’re out of the woods.’"

The CFO of UPS, the 100-year old package delivery giant with a presence in 200 countries, warned the company didn’t have "any confidence that either demand or activity is going to pick up substantially" in the next several months.

Diversified manufacturer 3M, with operations in 60 countries, cautioned that it’s "still facing a challenging sales environment with no meaningful improvement in demand yet from several major industrial customers," the Wall Street Journal reported. "He added there is a risk that recent upticks in orders could be a ‘false dawn’ caused by an over-correction in inventory levels earlier this year by 3M’s customers rather than a sustainable recovery in demand."

Texas Instruments, the second largest U.S. chipmaker, said "there’s little evidence yet that real growth — based on an improving market for cell phones, computers and other tech products, instead of inventory corrections — is on the horizon."

The CEO of WPP, the world’s largest advertising company, was less-than-diplomatic when he noted publicly that he saw "no green shoots", "no yellow shoots" and "no moss"…

Tags: Commercial Real Estate, credit markets, earnings, Main Street, Stock Market, Wall Street

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Wall Street vs. Main Street: The Regulatory Battle Begins Tomorrow

by ilene - June 16th, 2009 1:39 pm

Wall Street vs. Main Street: The Regulatory Battle Begins Tomorrow

By Shah Gilani
Contributing Editor, Money Morning

U.S. Treasury Secretary Timothy F. Geithner says the Obama administration’s overhaul of U.S. financial regulations is aimed at creating a "boring" financial system.

But after President Barack Obama unveils this boring - and not-so-new - regulatory structure tomorrow (Wednesday), expect a pitched battle that will pit the interests of Wall Street players against those of everyday Main Street investors.

The outcome could well determine how quickly and completely this country’s financial system rebounds from the ongoing crisis. And that outcome will also likely determine whether or not we’ll ever have to face something as dangerous and damaging as this again.

By unveiling its proposals for revamping the U.S. regulatory architecture that houses the agencies and watchdogs responsible for safeguarding the financial system that supports our way of life, President Obama is touching off a bruising battle - but one that probably has an unfortunate, and predictable, outcome. Unlike the more-aggressive overhaul proposals Money Morning previously outlined for both the regulatory system and the U.S. banking system, the reality here is that the current set of regulators will survive.

The $64 trillion dollar question was whether or not the existing limp and dysfunctional alphabet soup of regulators that were supposed to be the watchdogs of our way of life will actually be reconstituted into a new stew with the same ingredients - or whether a new kitchen crew would be empowered to stop Wall Street from force-feeding the public its same old toxic menu.

Thanks to details that have already been leaked to the public, the answer is already clear.

Front running its own public offering of a regulatory makeover, the Obama administration has been systematically leaking the guts of the "white paper" it plans to deliver tomorrow. The reason for the soft opening is that President Obama wanted to avoid a knee-jerk reaction in the financial markets. Plus, there’s a history of political backlash and negative public opinion when it comes to any balancing act regulating the powerful cabal of bankers and brokers.

The crazy patchwork quilt of regulators overseeing our banks, bankers, brokers, investment products and markets is an inventory of acronyms that includes:

The Federal Reserve Board (FRB).
The Office of the Comptroller of the Currency (OCC).
The Office of Thrift Supervision (OTS).
The Federal Deposit Insurance Corporation (FDIC).
The National Credit Union Administration (NCUA).
And the U.S. Securities and Exchange Commission (SEC).

But that’s not the end of it.…

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“This is the end of a long era and the beginning of another that is not going to be nearly as nice.” John Rubino

Wall Street vs. Main Street: The Regulatory Battle Begins Tomorrow

By Andrew Wilkinson

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