Posts Tagged ‘stock prices’

JOHN HUSSMAN ISSUES A RECESSION WARNING

JOHN HUSSMAN ISSUES A RECESSION WARNING

Courtesy of The Pragmatic Capitalist

John Hussman is officially sounding the double dip siren.  He issued a similar call in November of 2007:

Based on evidence that has always and only been observed during or immediately prior to U.S. recessions, the U.S. economy appears headed into a second leg of an unusually challenging downturn.

A few weeks ago, I noted that our recession warning composite was on the brink of a signal that has always and only occurred during or immediately prior to U.S. recessions, the last signal being the warning I reported in the November 12, 2007 weekly comment Expecting A Recession. While the set of criteria I noted then would still require a decline in the ISM Purchasing Managers Index to 54 or less to complete a recession warning, what prompts my immediate concern is that the growth rate of the ECRI Weekly Leading Index has now declined to -6.9%. The WLI growth rate has historically demonstrated a strong correlation with the ISM Purchasing Managers Index, with the correlation being highest at a lead time of 13 weeks.

wmc100628a JOHN HUSSMAN ISSUES A RECESSION WARNING

Taking the growth rate of the WLI as a single indicator, the only instance when a level of -6.9% was not associated with an actual recession was a single observation in 1988. But as I’ve long noted, recession evidence is best taken as a syndrome of multiple conditions, including the behavior of the yield curve, credit spreads, stock prices, and employment growth. Given that the WLI growth rate leads the PMI by about 13 weeks, I substituted the WLI growth rate for the PMI criterion in condition 4 of our recession warning composite. As you can see, the results are nearly identical, and not surprisingly, are slightly more timely than using the PMI. The blue line indicates recession warning signals from the composite of indicators, while the red blocks indicate official U.S. recessions as identified by the National Bureau of Economic Research.

Read the full article here.

Source: Hussman Funds 


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The Shanghai market isn’t really predicting anything

The Shanghai market isn’t really predicting anything

Courtesy of Michael Pettis 

A man looks at an electronic board at a brokerage house in Shanghai

It has not been a good year for the Shanghai stock market.  Since its closing peak at 6092 in October 2007, the closing high in the past year or so on Shanghai’s SSE composite was 3471, on August 4 last year.  Since then the market has been pretty bleak.  The SSE Composite finished 2009 by dropping nearly 6% from that high, to close at 3277.

This year things got only worse.  By May 20 the market had dropped a further 22% to close at 2556, and then bounced around for the past ten days closing yesterday at 2568.  In my May 12 blog entry, I finished the piece by saying “Last Friday the SSE Composite closed at 2688.  I bet it is much higher by the end of the summer.” 

Obviously my timing was off.  Within a week of my prediction the market had managed to lose another 132 points.  I still believe that the market will be higher by the end of this summer, and that within weeks we will see moves by the regulators to prop it up.  With all the liquidity sloshing around, all we need is a reasonable period off stability before the market comes roaring back, I suspect.

So am I predicting a strong economy?  Not really.  It is tempting to read falling stock prices as an indication that Chinese investors believe that the economy is poised to slow dramatically, and if the market surges, that Chinese growth is back, but we should be very cautious about how we interpret the meaning of the gyrations in Chinese stocks. 

We’re used to thinking about stock markets as expected-cash-flow discounting machines, and we assume that stock price levels generally represent the market’s best estimate of future growth prospects, but this is not always the case, and it is certainly not the case in China.  I am often asked to comment on big price moves on the Chinese stock markets and what they mean about growth expectations, but I usually try to caution people from reading too much meaning into the market.

Three investment strategies

To see why, it is probably useful to understand how investors make trading decisions.  This blog entry is going to be a pretty abstract piece on how I think about the underlying dynamics of a well-functioning capital market, and how these…
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DID GOLDMAN SACHS MANIPULATE JOURNALISTS AND STOCK PRICE ON SAME DAY AS SENATE TESTIMONY?

Mark Ames, co-editor of The eXiled, suggests Goldman Sachs’s tentacles extend even farther than we may have imagined. Mark’s thought-provoking articles, such as "Confessions of a Wall St. Nihilist: Forget about Goldman Sachs, our Entire Economcy is Built on Fraud" and "Fraudonomics: 10 Fun Fraud Facts" are published at Mark’s online home, The-eXiled, and at the NY Press’s Fraudonomics

The eXiled itself has fascinating history, being the second incarnation of The eXile, The eXile was a "Moscow-based English-language biweekly free tabloid newspaper, aimed at the city’s expatriate community, [combining] outrageous, sometimes satirical, content with investigative reporting" (wikipedia).  Vanity Fair described The eXile as subversive, “gutsy …direct, visceral… serious journalism… abusive, defamatory… poignant… paranoid." The written version in Russia was closed down in 2008. The online sequel lives on.  - Ilene 

DID GOLDMAN SACHS MANIPULATE JOURNALISTS AND STOCK PRICE ON SAME DAY AS SENATE TESTIMONY?

Courtesy of Mark Ames  

William Hogarth's print

A reader brought to my attention a new rumor going around about the strange behavior of Goldman Sachs’s stock price. On April 27, the day Blankfein was dragged before Congress to testify about fraud, Goldman’s stock rose–even though every other financial stock in the S&P 500 dropped, all 78 of them, on a day when the overall S&P average tanked 2.3 percent.

According to Bloomberg that day:

Goldman Sachs Group Inc. had the only gain among 79 financial companies in the Standard & Poor’s 500 Indexas executives testified to a Senate subcommittee about mortgage securities.

Goldman Sachs advanced 0.7 percent to $153.04, while theS&P 500 Financials Index retreated 3.4 percent.

It’s an obvious question, just wondering if anyone has looked into this because as one reader wrote, “it makes no sense whatsoever.” Except as an expensive PR exercise funded by the bank’s insiders.

Whatever the case, that unexpected stock jump turned out to be wonderful news, the billionaires’ smackdown on all the resentful parasites trying to take down Goldman Sachs–this according to all sorts of media lickspittles who are rooting for Goldman. Here for example is The New York Daily News gloating over Goldman’s unexpected stock price rise:

I would be happy to let the whole United States Senate curse at me for just a fraction of the $2.8 million Goldman Sachs CEO Lloyd Blankfein made while he was testifying before a subcommittee this week.

The opinions of the senators carry so little weight that


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Carte Blanche for the Banksters

Carte Blanche for the Banksters

By MIKE WHITNEY writing at CounterPunch

Rear view of woman wearing fairy costume walking down a dirt road

Housing is still on the rocks and prices are headed lower. Master illusionist Ben Bernanke has managed to engineer a modest 7-month uptick in sales, but the fairydust is set to wear off later this month when the Fed stops purchasing mortgage-backed securities (MBS). When the program ends, long-term interest rates will creep higher and sales will begin to flag. The objective of Bernanke’s $1.25 trillion quantitative easing program was to transfer the banks’ toxic assets onto the Fed’s balance sheet.  Having achieved that goal, Bernanke will now have to find a way to unload those same assets onto the public. Freddie and Fannie, which have already been used as a government-backed off-balance-sheet dumping ground, appear to be the most likely candidates.

Bernanke’s liquidity injections have helped to buoy stock prices and stabilize housing, but the economy is still weak. There’s just too much inventory and  too few buyers. Now that the Fed is withdrawing its support, matters will only get worse.

Of course, that hasn’t stopped the folks at Bloomberg News from cheerleading the "nascent" housing rebound. Here’s a clip from Monday’s column:

"The U.S. housing market is poised to withstand the removal of government and Federal Reserve stimulus programs and rebound later in the year, contributing to annual economic growth for the first time since 2006. Increases in jobs, credit and affordable homes will help offset the end of the Fed’s purchases of mortgage-backed securities this month and the expiration of a federal homebuyer tax credit in April. ‘The underlying trend is turning positive,’ said Bruce Kasman, chief economist at JPMorgan Chase & Co. in New York."

Just for the record; there have been no "increases in jobs".  Unemployment is stuck at 9.7 percent with underemployment checking in at 16.8 percent. There’s no chance of housing rebound until payrolls start to rise. Jobless people cannot afford to buy homes.

Also, while it is true that the federal homebuyer tax credit did cause a spike in home purchases its effect has been short-lived and sales are gradually returning to normal. It’s generally believed that  "cash for clunker-type" programs (like the homebuyer tax credit) merely move demand forward and have no meaningful long-term impact.

So, it’s likely that housing prices — particularly on the higher end — will continue to fall until…
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How much money is Wells Fargo really making?

How much money is Wells Fargo really making?

Courtesy of Edward Harrison at Credit Writedowns

Wells FargoThe positive earnings announcement by Wells Fargo on Wednesday was marred by a sell recommendation from Dick Bove and a lot of chatter about credit writedowns and mortgage servicing rights (MSRs). I wanted to add a few words about the report, MSRs, and bank stocks more generally.

First of all, this has been a very good quarter for bank earnings. Many of the big names globally have surprised to the upside. this includes Goldman Sachs, Morgan Stanley, JPMorgan Chase, Wells Fargo, US Bancorp, SEB in Sweden, Credit Suisse in Switzerland and on down the line. As one would expect, most banks are profiting from record low interest rates.

The question for the big banks is whether the huge writedowns they are still taking and the run-up in their stock prices since march limits any upside in valuation. For smaller banks, we should expect weaker results as they are more leveraged to the sectors of the economy like commercial real estate and construction loans which are still suffering.  Goldman and Morgan Stanley should do relatively better as they are really broker-dealers and both investment banking and sales & trading are doing well right now. On the whole, I have said I think upside is limited for the sector, but downside is vast. Hence I am bearish on bank stocks.

Let’s look at Wells Fargo (WFC) as an example of what is happening.

Wells reports record profits

Wells reported net income of $32 billion, a robust operating pre-tax profit of $10.8 billion, and record net income of $3.2 billion. Sounds wonderful. What’s not to like?  That was bank analysts Dick Bove’s initial impression as well. Live on-air at CNBC, he said Wells Fargo “is proving itself to be a standout.”


But, once Bove got a peek under the hood and started to crunch the numbers at Wells, he was significantly less impressed – so much so that he issued a sell rating literally nine hours later. And he took a lot of flak for this about-face.

The Wall Street Journal’s Market Beat reports:

Prominent banking analyst Dick Bove, who caused a stir Wednesday with seemingly contradictory remarks on Wells Fargo, has decided he’ll no longer provide immediate earnings commentary on air.

“I’m not


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Why Goldman Sachs Is Bullish, Sort Of

Why Goldman Sachs Is Bullish, Sort Of

Goldman Sachs, stock marketCourtesy of TIME

It’s a bit odd these days that some of the most bullish things driving stock prices are not facts but opinions. Earlier in July there was a nice market bounce thanks to bullish comments by long bearish analyst Meredith Whitney. On Monday it was an opinion coming from the investment strategy team at Goldman Sachs, which reported that the firm was raising its estimate for what companies in the S&P 500 would earn this year and next.

Goldman’s strategists raised their expectation for 2009 earnings by 30%, and they hiked the 2010 outlook by 19%. With that boost, the 2010 earnings for S&P 500 companies should be 45% higher than 2009, Goldman says. Those hefty upward revisions, which sent investors on a buying spree, didn’t come because consumers are suddenly spending more, nor because housing is bouncing back, neither of which Goldman asserts. The lion’s share of Goldman’s new optimism derives from the fact that banks look more profitable now than they did several months ago. (Read "How to Know When the Economy Is Turning Up.")

Banks are seeing some light in their trading operations—Goldman Sachs is a star performer in that category—there’s more mortgage refinancing happening, and credit card problems may be bottoming, all good stuff, say Goldman’s strategists. But there’s another important reason the earnings for S&P financial stocks are looking better— many of the sickies are gone from the index, including Lehman Brothers, Fannie Mae and Freddie Mac.

It’s not just the banking stock group that benefits by offloading its weaklings. A stock sector known an ‘Consumer Discretionary,’ which includes everything from automakers to fast-food retailers, is enjoying a more bullish earnings outlook too, thanks— you guessed it— to the dropping of GM stock, which had been a load of lead to this sector’s profitability. As a result of offloading GM, earnings for the group are expected to rise by 35% in 2009 and 40% in 2010.

Investors may respond with huge cheers to the new earnings forecasts, but Goldman Sachs is not so ebullient. In fact, the firm goes to great lengths to point out the distortions to its growth projections, and adds that without the GM affect the consumer-discretionary stock group would see a far more modest 17% growth next year—not bad, but no blowout.

The other sobering note in Goldman’s bullish report today…
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Zero Hedge

Trump Sues Manhattan D.A. In Response To Subpoenas

Courtesy of ZeroHedge View original post here.

And now a plot twist: with Trump under relentless attack for the past three years to disclose his tax returns, on Thursday morning the president struck back, suing Manhattan District Attorney Cyrus Vance to block an attempt by New York state prosecutors to obtain eight years of the president’s tax returns in a probe of whether the Trump Organization falsified business records.   

...



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Phil's Favorites

At Press Conference, Fed Chair Powell Refuses to Answer Whether Wall Street Banks Are Too Big to Manage

Courtesy of Pam Martens

Fed Chairman Jerome Powell at Press Conference, September 18, 2019

Following a lack of liquidity on Wall Street, which necessitated the Federal Reserve having to provide $53 billion on Tuesday and another $75 billion on Wednesday to normalize overnight lending in the repo market, the Chairman of the Fed, Jerome (Jay) Powell held his press conference at 2:30 p.m. yesterday. The press gathering followed both a one-quarter point cut in the Fed Funds rate by the Fed yesterday as well as the first intervention by the Fed in the overnight lending market since the financi...



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Insider Scoop

How Cheapskates Can Access Mid Caps

Courtesy of Benzinga

For investors that don't like stocks but do enjoy saving money on fund fees, exchange traded funds are highly desirable destinations. And for those looking to dance with mid-cap stocks, a desirable asset class, there are plenty of compelling ETFs for cost-conscious investors to consider.

What Happened

The Schwab U.S. Mid-Cap ETF (NYSE: ...



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The Technical Traders

SAFE ASSETS - A TRADING STRATEGY FOR UTILITIES, GOLD, AND BONDS

Courtesy of Technical Traders

Chris Vermeulen, Founder of The Technical Traders shares his trading strategy for safer assets. While precious metals and bonds had a great run, the charts are showing the utilities could be the place to be in the short term. It’s important to note we are not saying the other safe havens are going to crash but it’s all about the time frame and playing the sector that could pop first.

LISTEN HERE NOW

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Kimble Charting Solutions

Stocks, Oil, and Bond Yields At Critical Bullish Breakout Tests!

Courtesy of Chris Kimble

It’s not often that three asset classes reach similar important trading points all at once.

But that’s exactly what’s happening right now with stocks, crude oil, and treasury bond yields.

And this is occurring on Federal Reserve day no less! Something has got to give.

In the chart above y...



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Lee's Free Thinking

Is The Drone Strike a Black Swan?

Courtesy of Lee Adler

Pundits are calling yesterday’s drone strke a “black swan.” Can a drone strike on a Saudi oil facility, be a “black swan.”

According to Investopedia:

A black swan is an unpredictable event that is beyond what is normally expected of a situation and has potentially severe consequences. Black swan events are characterized by their extreme rarity, their severe impact, and the practice of explaining widespread failure to predict them as simple folly in hindsight.

I seriously doubt that no one expected or could have predicted a drone strike on a Saudi oil facility.

Call Me A B...

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Chart School

Crude Oil Cycle Bottom aligns with Saudi Oil Attack

Courtesy of Read the Ticker

Do the cycles know? Funny how cycle lows attract the need for higher prices, no matter what the news is!

These are the questions before markets on on Monday 16th Aug 2019:

1) A much higher oil price in quick time can not be tolerated by the consumer, as it gives birth to much higher inflation and a tax on the average Joe disposable income. This is recessionary pressure.

2) With (1) above the real issue will be the higher interest rate and US dollar effect on the SP500 near all time highs.

3) A moderately higher oil price is likely to be absorbed and be bullish as it creates income for struggling energy companies and the inflation shock may be muted. 

We shall see. 

...

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Digital Currencies

China Crypto Miners Wiped Out By Flood; Bitcoin Hash Rate Hits ATHs

Courtesy of ZeroHedge View original post here.

Last week, a devastating rainstorm in China's Sichuan province triggered mudslides, forcing local hydropower plants and cryptocurrency miners to halt operations, reported CoinDesk.

Torrential rains flooded some parts of Sichuan's mountainous Aba prefecture last Monday, with mudslides seen across 17 counties in the area, according to local government posts on Weibo. 

One of the worst-hit areas was Wenchuan county, ...



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Biotech

The Big Pharma Takeover of Medical Cannabis

Reminder: We are available to chat with Members, comments are found below each post.

 

The Big Pharma Takeover of Medical Cannabis

Courtesy of  , Visual Capitalist

The Big Pharma Takeover of Medical Cannabis

As evidence of cannabis’ many benefits mounts, so does the interest from the global pharmaceutical industry, known as Big Pharma. The entrance of such behemoths will radically transform the cannabis industry—once heavily stigmatized, it is now a potentially game-changing source of growth for countless co...



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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

...

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Members' Corner

Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

Are you ready to retire?  

For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic - to say the least - with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives.  A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

Still, the stock market has been better over the last 10 (7%) an...



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In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

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