STOCK MARKET WATCH, Friday 9 January (#1)

[ozymandius]

Friday January 9, 2004

COUNTING THE DAYS
DAYS REMAINING IN THE * REGIME 381
REICH-WING RUBBERSTAMP-Congress = DAY 000
DAYS SINCE DEMOCRACY DIED (12/12/00) 3 YEARS, 28 DAYS
WHERE'S OSAMA BIN-LADEN? 2 YEARS, 80 DAYS
WHERE ARE SADDAM'S WMD? - DAY 292
DAYS SINCE ENRON COLLAPSE = 776
Number of Enron Execs in handcuffs = 17
ENRON EXECS CONVICTED = 1
Other Arrests of Execs = 53

U.S. FUTURES & MARKETS INDICATORS
NASDAQ FUTURES-----------------------------S&P FUTURES




AT THE CLOSING BELL ON January 8, 2004

Dow... 10,592.44 +63.41 (+0.60%)
Nasdaq... 2,100.25 +22.57 (+1.09%)
S&P 500... 1,131.92 +5.59 (+0.50%)
10-Yr Bond... 4.25% +0.00 (+0.07%)
Gold future... 424.40 +2.10 (+0.50%)

DOW..........................NASDAQ.......................S&P

||


GOLD, EURO, YEN and Dollars


~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
PIEHOLE ALERT

Heads Up!
Preliminary info on appearances by Bush & Co. throughout the country. Details & links are added as they become available so check back. And if you know more, are organizing something, or would like to, contact [e-mail]

For information on protests and other actions Citizens For Legitimate Government

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

[DUreader]

1. How About a Name Change? Stock Bubble Watch

goodmorning all

[ozymandius]

3. Nice idea!

I have considered 'Casino Watch' and 'Lemming Watch'. 'Stock Bubble Watch'....hmmm.

[JNelson6563]

9. haha Good one!

All excellent choices! :toast:

Julie

[ozymandius]

2. WrapUp by Martin Goldberg

"Right and Busted! The Peril of a Stubborn or Emotional Short Seller"
(Homebuilder Discussion/Tech Analysis Follows)

Any one with sanity and knowledge of business fundamentals knows that we are now in the 2nd or 3rd biggest American stock market mania of modern times. Still it is clear to me that as crazy as things are at present, they can get even crazier. Protecting yourself from losses on the short side is always necessary, but especially so in this market. I thought it would be relevant to share with you an excerpt from Edwin Lefevre’s Reminiscences of a Stock Operator (page 95), the story of legendary trader Jessie Livermore. (‘Livingston’, in the fictionalized book.) This excerpt is still relevant almost 100 years later. In 1906 Livermore was very bearish and was trading his bearishness while letting his fundamental analysis and emotions cloud his better judgment.

“…Between my first glimpse of the storm cloud and the time for cashing in on the big break the stretch was evidently so much than I had thought that I began to wonder whether I really saw what I thought I saw so clearly. We had had many warnings and sensational ascensions in call-money rates. Still some of the great financiers talked hopefully - at least to newspaper reporters - and the ensuing rallies in the stock market gave the lie to the calamity howlers. Was I fundamentally wrong in being bearish or merely temporarily wrong in having begun to sell short too soon?

<cut>
Is the Fun Over for Homebuilder Shareholders?

Is there a residential real estate bubble as some bears have suggested? Or is there more significant upside to the homebuilding stocks, as many Wall Street analysts are still shouting at us? There are always market inefficiencies that cause company shares including homebuilders to be over- and under- priced. For example, as the chart below indicates, during 1991 and 1992, you could have bought shares of NVR Homebuilders (AMEX: NVR) for less than one dollar ($1). Today the same shares sell for over $430. Since that time through the bullish 90’s, shares of NVR have soared. About $400 dollars invested in NVR shares in 1990, would have financed 4 years of private college in today’s dollars. Fantastic!

more about unaccounted fundamental changs to the industry

[ozymandius]

4. Suspected BoJ intervention drives dollar up

The dollar jumped sharply higher against the yen on Friday on what market participants firmly believed was further intervention by the Bank of Japan to curb the yen's appreciation against the weakening dollar.

The dollar had held very tightly at Y106.15 for the previous three days amid a belief the BoJ was behind the constant dollar bids at that level. It crept up to Y106.6 in Tokyo trading on Friday before a concerted wave of yen selling by a number of banks sent the US currency rocketing to Y108.23 in less than 10 minutes.

Neil Mellor, strategist at Bank of New York, said the move "once again bore all the hallmarks of a heavy dose of BOJ intervention".

story

[JNelson6563]

10. and it's back to 106 now

There goes 5 billion down the drain. Not very smart BOJ.

Julie

[54anickel]

12. Morning Julie. They spent 28.25 billion on Monday & Tuesday alone.

Couldn't sleep again last night, so was surfing a bit. I checked the charts while all that excitement was going on (yep, I'm easily entertained these days). Was pretty neat to watch. Anyway, came across this little blurb of explanation.

http://www.reuters.com/financeArticle.jhtml?storyID=4098566&newsType=usDollarRpt&menuType=currencies

The Ministry of Finance declined to comment on the apparent intervention but a ministry official said the yen's recent strength was due to speculation and not based on economic fundamentals.

A market source said Japan, worried that a strong yen could hurt an export-led recovery in its economy, spent about three trillion yen ($28.25 billion) in intervention on Monday and Tuesday.

However, the yen fell to a three-year low of 105.90 yen per dollar on Wednesday.

In 2003, MOF spent a record 20 trillion yen in intervention. ($1=106.19 Yen)

[JNelson6563]

31. They will run out of money sooner or later

How many hits will Japan take for us?

Julie

[54anickel]

15. Good Morning Ozy - Sweetening the pot, eh? My what might that mean for

the future?

[Maeve]

5. And today's subject--Jobs

U.S. markets await December employment report
At 5:40 a.m. ET, futures pointed to a lower open for stocks. But that's subject to change when the jobs report is released at 8:30 a.m. ET.

Economists surveyed by Briefing.com expect to see 148,000 jobs added in December, compared with 57,000 in November. But the unemployment rate is seen remaining at 5.9 percent. Such a report would ease, though probably not end, talk of a "jobless recovery" for the nation's economy.

"There are plenty of signs that we're really on the cusp of much better job growth -- it may be a month or two away, but it should be happening any month now," said Henry Willmore, chief economist at Barclays Capital.
~~~~~~~~~~~~~~~~~~

Or, for a REALLY optimistic view on the job front, this little thread that sank like a rock over in GD last night:
http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=104&topic_id=997328&mesg_id=997328
:eyes::eyes::eyes:

[ozymandius]

6. Good morning Maeve and everyone!

:donut: :donut: :donut: :donut: :donut:

This is encouraging news - but I'm always wary of the caveat "any month now". I recall hearing a lot of that talk in the past year of how the next quarter is going to be better than the next.

BTW, I went on a job interview yesterday that resulted from a cold call. The interview went well, got a grand tour of the place, but there was nothing they could immediately offer me. They are looking forward to May when the next level of broadcast technology will be implemented. In May, a new hi-def network is supposed to be launched and that means new machines, new software and new people might be needed to engineer such things. It could be even as early as a year from now before they have a clear picture of their needs.

[Maeve]

8. Best wishes, ozy!

Hubby once got a job from a cold call--he'd been tipped to the possibility by a friend who met a company employee in a bar on Good Friday; they were the only two in the place and ended up chatting. The job turned out to be a stinker, but led down a twisty path to his current happy state of work.

You never know where the path will lead; here's hoping the journey is good!

[Maeve]

13. Job news--mixed to bad

CBS MarketWatch
U.S. Dec. jobless rate falls to 5.7%; payrolls up 1,000 By Rex Nutting
WASHINGTON (CBS.MW) - The U.S. unemployment rate unexpectedly sank to a 14-month low of 5.7 percent in December, despite virtually no growth in nonfarm payrolls, the Labor Department reported Friday. Nonfarm payrolls increased by 1,000, far below the 136,000 expected by Wall Street economists and the 181,000 expected by Wall Street traders. Job growth in the previous four months was revised lower by a total of 66,000. Manufacturing industries cut 26,000 jobs, while temp help companies added 30,000. Average hourly earnings rose 0.2 percent to $15.50, bringing the year-over-year gain to 2 percent, the worst in 16 years. Total hours worked in the economy fell 0.6 percent.

[JNelson6563]

14. I heard a cheerleader this morning

happily declaring the numbers would be 148,000 jobs created.

There's a guy on CNBC right now who is on when job #s come out. He is brutally honest and you should see the Bush schills trying to shut him down. I think his name is Bill Sullivan.

This is going to make for a brutal day.

Julie

[Maeve]

16. Take a look at the futures

Dropped like a Chevy off a cliff when the job news came out.

[Robbien]

21. The NYT headline reads "U.S. Companies Added Few Workers in December"

So, when expecting payrolls to rise 130,000 and they only rise 1,000, the Times headline is truly misleading. Even the article itself was confusing. It is so full of gobbledygook that is was hard to find out what the numbers were. Expectations numbers were in one paragraph and actual numbers were talked about later.

These guys have no shame.

[Maeve]

34. However, this part is important

"The 0.2 percentage point drop in the jobless rate occurred because fewer people were looking for work, the Labor Department said Friday. More than 300,000 people gave up their search for jobs and dropped out of the pool of available workers.
``The rate is going down, but it is going down for the wrong reasons,'' said Bill Cheney, chief economist at John Hancock Financial Services, noting that it fell not because people were finding work. ``That doesn't make you feel really good about the state of the jobs market.''"
http://www.nytimes.com/aponline/business/AP-Economy.html

[Robbien]

43. I was just looking at the drop in rate at the bls gov site

According to the tables

Total civilian workforce dropped 309,000 people
Total unemployed dropped 255,000 people

Where did most of these people go?

Why, to the next category

People not in the workforce (people who gave up) increased by 538,000 people.

[Timefortruth]

27. That's right, prosperity is just around the corner.

Didn't a Republican President who presided over a disastrous economy say that once? Or did Bush say it yesterday? or is there any difference?

[ozymandius]

7. Folks, I have to run.

I'll check in later this morning. There's work to finish at the old wood shop.

Ozy

:donut:

[JNelson6563]

11. Good morning Ozy, Maeve and all!

Good luck on your quest Ozy! Absolutely love the toon BTW.

Well what will the jobs report say? Hmmm. Anybody's guess. I wonder if expectations are too high again. 148,000? We'll see.

Oil's high, gold is hanging in there, the dollar is on a precipice and the lemmings are lining up. Could be a fun ride.

Julie

[54anickel]

17. Dollar Watch

http://quotes.ino.com/chart/?s=NYBOT_DXY0&v=s

Last trade 85.73 Change +0.16 (+0.19%)

Settle 85.57 Settle Time 23:34

Open 85.61 Previous Close 85.57

High 85.94 Low 85.44


Interesting to look at Japans 5 day chart, nice flat line in the middle with a spike at each end. Compared to the buck 5 day.

http://quotes.ino.com/chart/?s=FOREX_USDJPY&v=w

http://quotes.ino.com/chart/?s=NYBOT_DXY0&v=w

[KayLaw]

49. Thanks for the answers

Maybe I'm wrong, but I believe someone should be held responsible for this misinformation. People buy stocks and make important decisions based on what they're told by these experts and if someone is deliberately misleading them, there should be, in my opinion, consequences.

[Maeve]

18. Too many people thinking the same thing--CNN commentary

Consensus Inc
NEW YORK (CNN/Money) - Stop me if you've heard this before.

U.S. stocks will perform well in the front half of the year, in the second half they'll run into some trouble. Overseas equities will outdo their U.S. counterparts, with emerging markets -- emphasis on Asia -- doing the best. Within the U.S. market, it's time to shift out of last year's highfliers into more stodgy fare, like consumer staples. Energy stocks look good, too.

The dollar will fall, Treasurys will run into trouble. The U.S. economy will continue to grow at a healthy clip, and the global economic recovery will keep on getting on.

Yes, it's the 2004 edition of the Wall Street consensus, and what's surprising is how widespread it is. So many strategists and portfolio managers have come to the same conclusions that it's almost embarrassing.
~~~~~~~~~~~~~~~~~~
I'm starting to like Lahart--he has to be read with the right amount of salt, but.....

[Timefortruth]

30. Stocks will do fine until the end of the year.

Come hell or high water.

[Sir_Shrek]

45. Emerging Markets...

By 2025, some of the emerging markets (places like Asia) are projected to be about as big as the largest markets in the world now. By 2050, it may even surpass it. If you're patient and young enough to reap some nice rewards, EMs look pretty good. A classic ground floor opportunity.

[JNelson6563]

19. The revisions for Nov and Oct

have been pretty crappy too. Way fewer jobs created those months than preciously reported. I am shocked I tell you, shocked! It's almost as though they were cooking the books. ;-)

Julie

[54anickel]

24. Well, it must now be time to freeze them. Need to justify keeping the

interest rates low.
So, with all this great news, should I really even bother working on that resume? Maybe I should start my own business, oh wait that's right the SBA is outta bucks. :evilgrin:

[Robbien]

25. What makes me believe they chose that 1,000 number

just to make sure the headlines would read an increase in jobs for December. The October original numbers were revised down by 37,000 and the November numbers were revised down by 14,000. When they get around to revising December, they will have to get out the red ink.

[Coventina]

20. The "I Ching" on today's market

Hello everyone!

I'm sorry I've been so undependable lately.
:-(

I really am trying to get my act together.

Today's reading is SUBORDINATE with no changing lines. Here is a quote: "In political matters and questions of power, it is better, now, to withdraw into the background than to give evidence of your impotence. Use your energies instead to strengthen your inner vision."
Here is another good one: "The time when you are forced to Subordinate yourself is best spent in thought of the future. Develop and cling to a long-range ideal. This will take you beyond this difficult time, with few mistakes and increasing clarity of purpose."

I am going to predict a down day today. See y'all Monday, and have a great weekend!
:hi:

[JNelson6563]

26. Very interesting read today!

Withdraw rather than display your impotence. Very insightful.

Good to see you Coventina! Hope it's all good with you! :hi:

Julie

[54anickel]

36. Ha! Nah, I'm not touchin' that one!

[JNelson6563]

55. <snarf>

You are wicked! haha

[KayLaw]

22. Questions here

My son and I were talking as I drove him to school and our conversation left me wondering a couple of things.

First, how do all these experts get the information that let them guess how many jobs were created in December, and how could they be so completely off the mark, as to be laughable?

And how do other nations - especially those who own our debt - look at these wildly incorrect estimates?

[JNelson6563]

29. Excellent questions

I think they pick a number out of a hat. ;-)

I suspect others who hold our debt are troubled by these constant revisions view our government's numbers as less creible all the time. Team Bush cooking the books isn't going to help us at all, they do it for short term gain.

Julie

[54anickel]

32. New laws of economics - Wishful thinking. But seriously, most are

not to be faulted as media whores (although a lot do fall into that category). They apply the true laws of economics to the totally artificial economy created by the stimulus of this mis-administration. That just doesn't work. Those that DO know the truth just don't get reported in the mainstream media.

[Sir_Shrek]

47. Models

No, not supermodels....

They probably look at other projections, historical trends, news stories (companies announcing hirings or firings), etc etc etc. I would bet that if you asked 10 different professional economic analysts how they project job gains/losses, you'll get ten different (though not widely varying answers).

As for other nations reactions, I don't think they really consider it too much as compared to actual numbers. A lot of these foreign countries probably have their own economists coming up with the same or similar projections. I doubt they would completely rely on only US analysts for their information.

[Maeve]

23. And we're off! Definitely off

Dow 10,531.40 -61.04 (-0.58%)
Nasdaq 2,082.87 -17.38 (-0.83%)
S&P 500 1,125.72 -6.20 (-0.55%)
10-Yr Bond 4.117% -0.132

[SahaleArm]

28. Get ready for a bath - Dow down 94 and Nasdaq down 23 n/t

[JNelson6563]

33. They are dancing in Treasuries!

Holy cow! Yields down over 14 basis points already!

Dow 10,504.89 -87.55 (-0.83%)
Nasdaq 2,080.35 -19.90 (-0.95%)
S&P 500 1,123.42 -8.50 (-0.75%)
10-Yr Bond 4.105% -0.144

Party on Treasuries folks!!

Julie

[54anickel]

38. Someday I'm gonna get a better handle on this Treasuries "stuff"

[Sir_Shrek]

44. It's easy....

Yield up, Price down - good for buyers, bad for sellers/holders
Price up, Yield down - good for holders/sellers, bad for buyers

I think of bonds and bond traders as bearish...generally bad economic news helps bonds. When the economy does well, one of the side effects of that performance is inflation, or at least predicted inflation. Bonds generally don't like inflation, and they don't like rising interest rates.

[Maeve]

35. 10:05 and climbing...climbing..(pant! pant!)

Dow 10,542.00 -50.44 (-0.48%)
Nasdaq 2,092.69 -7.56 (-0.36%)
S&P 500 1,128.17 -3.75 (-0.33%)
10-Yr Bond 4.089% -0.160

[54anickel]

37. The buck fell off a cliff at 8:30am Getting close to 84 (85.11)

http://quotes.ino.com/chart/?s=NYBOT_DXY0&v=s

Last trade 85.29 Change -0.28 (-0.33%)

High 85.94 Low 85.11

[54anickel]

39. WTF, Yen had a corresponding DROP at the same time?

Am I thinking backwards due to my lack of sleep and not enough coffee? Doesn't the buck go UP as the Yen goes down?

I'm so confused! :wtf:

[54anickel]

40. Euro had a corresponding JUMP. It's a shell game now. Where's the money?

http://quotes.ino.com/chart/?s=FOREX_EURUSD&v=s

Last trade 1.2832 Change +0.008100 (+0.64%)

High 1.2852 Low 1.270200

[Maeve]

41. Sigh...when we were in Ireland this summer

The worse euro to dollar rate we saw was 1.24 (and that was a rip-off with the actual rate @ 1.18 at worst)

It's gonna be a while before we can afford to get back at this rate. And it just keeps getting more expensive....:cry:

[54anickel]

42. Never mind....

:dunce: :hangover:

http://www.smartmoney.com/bn/ON/index.cfm?story=ON-20040109-000404-0950

snip>
The dollar plunged to new lows against its major European rivals Friday in New York after the release of much-weaker-than expected U.S. jobs data, which suggest interest rates will remain low for some time to come.

The dollar hit new record lows against the euro and multiyear lows against sterling and the Swiss franc.

In morning trading, the euro was at $1.2818, up from $1.2761 late Thursday in New York after smashing through its previous high of $1.2813. It did peak at $1.2852 Friday.

snip>
Against the yen, the dollar was actually up at 106.42 from 106.17 Thursday, but only thanks to the massive intervention effort overnight in Asia from Japanese monetary authorities which had sent the dollar soaring two yen to a month-high of 108.29.

snip>
"This is unambiguously bad for the dollar, not just because of the number itself, but because of the implications it has for U.S. interest rates," said Rebecca Patterson, senior currency strategist at JP Morgan in New York.

Low interest rates are unattractive to foreign investors, especially when they can get much higher yield elsewhere. And the U.S. needs that foreign capital to fund its massive current account deficit, which is running in excess of $500 billion a year.

snip>
Estimates on the size of intervention by Japanese monetary authorities during Asian trade Friday vary depending on who you talk to. Dealers in Asia earlier estimated up to $5 billion, a foreign exchange sales trader at a Japanese bank in London said around $6 billion, while analysts at a large European bank reckoned as much as $15 billion.

Whatever the actual amount, it was enough to prove that Japan's finance ministry is determined to ensure the dollar's relentless slide against virtually every other currency isn't replicated against the yen. This is because a weaker yen helps Japan's exporters remain competitive on global markets, a key element to Japan's economic recovery.

But this is practically the only source of support for the dollar right now. The U.S. jobs report was a shocker for currency traders and a shocker for the dollar.

"Overall, there is no denying this is a fundamentally weak report, with little in the way of mitigating factors in the detail," wrote Adam Cole, senior economist at Credit Agricole Indosuez in London, in a note Friday. "Expect rate futures to rally substantially as the market pushes back the timing of the first rate hike... the dollar should suffer a further significant blow."

[Beetwasher]

46. That's a very ugly and scary story...

But that's the Bushconomy for ya! Ugly and scary!

[hatrack]

48. BOJ can't keep this up forever

I'd give them another week or two, and then sayonara.

[aneerkoinos]

51. Not forever, but for long time

Japan is printing new yens and can do that for a long time. Japan has suffered from deflation and zero interest rate for years, and loves to have inflation. Also, Japan is even more heavily debted than US. The whole thing is a big scheme to monetize both US and Japan debts. Japan bears most of the inflation and US tries to hide it's own. Very risky business, all in all.

[JNelson6563]

54. my thinking too

Japan doesn'thave an endless supply of money. Who will save us then? :shrug:

Julie

[Robbien]

68. What is the difference of a few yen

From your article

Estimates on the size of intervention by Japanese monetary authorities during Asian trade Friday vary depending on who you talk to. Dealers in Asia earlier estimated up to $5 billion, a foreign exchange sales trader at a Japanese bank in London said around $6 billion, while analysts at a large European bank reckoned as much as $15 billion.

Forbes is now reporting:
http://www.forbes.com/markets/newswire/2004/01/09/rtr1205144.html

At around 2 p.m. Tokyo time on Friday, "the government and BOJ sporadically intervened in the market," selling 500 billion yen for dollars, helping to prop up the U.S. currency immediately from the mid-106 yen level to 108.30 yen, the Nikkei report, monitored in New York, said.

"Since the beginning of the year, the government and Bank of Japan have conducted numerous yen-selling interventions in a bid to curb excessive rises in the yen," the report said. "But the latest intervention was their first aimed at actually pushing the yen lower," the report added.

Yikes, and yikes again.

[54anickel]

69. Oh CRAP! So I wasn't seeing upside down and inside out this morning!

"But the latest intervention was their first aimed at actually pushing the yen lower," the report added.

I really need a good night's rest tonight, damn it. I hope UpInArms is back next week. I am loosing it, this is just getting way too confusing!

:crazy:

[Robbien]

76. BoJ's intervention also effected PM trading

Silver bounced to an all time high of $6.45, up from Thursday's close of $6.22. And gold ended up $2.40 at $426.80 an ounce.

Japan has all its marbles in this game and it is playing for keeps.

[54anickel]

78. PMs rising is effect of dollar fall, that's pretty normal. It's related

to Japans intervention but not directly.

Manipulation of PMs is a whole different topic best not to get into here in the SMW. Much news vs rumors in that subject.

[54anickel]

70. A bit more here

http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullStory&c=StoryFT&cid=1073280921338

Derek Halpenny, currency economist at Bank of Tokyo Mitsubishi, said the closeness of the exchange rate to Y100 was a key factor.

"Last time it broke below Y100 in 1995 the dollar dropped to Y80 in three months and the risk is we get a repetition of that," he said.

"Japanese companies may already be starting to hedge more aggressively with that in mind and the authorities are very eager to avoid a repetition of 1995."

More aggressive hedging will put further pressure on the dollar, and if corporate treasurers lose confidence in the Bank of Japan's ability to hold the dollar-yen rate, they could inc rease the selling pressure by repatriating dollars at these levels instead of hoping for a stronger dollar.

There were signs of hasty selling in the dollar's rapid retreat from its high against the yen. Minutes after peaking at Y108.23, the dollar had slid back to Y107.5 and was at Y106.4 b y the close of trade in London.

[Robbien]

77. Yup, this is a life or death match for them

Darn Greenspan and his crappy game.

[Maeve]

50. 11:31 and struggling higher

Dow 10,549.55 -42.89 (-0.40%)
Nasdaq 2,105.46 +5.21 (+0.25%)
S&P 500 1,129.80 -2.12 (-0.19%)
10-Yr Bond 4.113% -0.136

[54anickel]

52. Interesting analysis from 3 years ago.

It's a rather long read, but I've snipped the last few articles that give a pretty good summary.

http://www.prudentbear.com/archive_comm_article.asp?category=Credit+Bubble+Bulletin&content_idx=9091

While the severity of structural economic distortions are becoming more conspicuous by the week, the heart and soul of Financial Fragility lies imperceptibly within the U.S. financial sector. Here, unprecedented leveraging and unfathomable derivative positions has created the proverbial house of cards. We have in the past often stated that when the financial sector loses its ability to leverage, the game is over. The financial sector ended the third quarter with $8.15 trillion of borrowings, an increase of $2.7 trillion, or 50%, in less than three years. However, this is the key area where Greenspan has great influence and the ability to prolong the game, albeit with incredible costs. And while the historic GSE bubble grows to unimaginable proportions, only time will tell as to what extent the US household sector takes the bait and piles on another layer of mortgage debt. We are in the midst of a major refinancing boom with attractive interest rates and years of extraordinary housing inflation providing the fodder for potentially unprecedented borrowings. Back in 1998 the average household was said to have extracted $15,000 of equity during refinancing. Taking a very conservative view with 5 million households pulling $20,000 of equity, $100 billion of additional purchasing power is created. This number could easily go much higher. Not only is such credit creation potentially destabilizing and inflationary, it will no doubt prove a very difficult burden come the inevitable piercing of the real estate bubble. Federal Reserve rate cuts are a fire hose showering gasoline onto the real estate finance bonfire, greatly exacerbating Financial Fragility.

The bottom line is that for years the financial system and economy have fallen terribly off course. Endemic over borrowing, massive over consumption, reckless speculation and incredible malinvestment have brought us to today’s critical juncture. The situation beckons for what would be a difficult but necessary business cycle downturn, the only means of beginning the process of getting back on a track of sound money and healthy economic expansion. Perpetuating the current destructive process is an unmitigated disaster. Fighting Financial Fragility with only more monetary excess is a war that cannot be won. In fact, the present course guarantees that things go terribly wrong.

In a world where analysis seems all too often to be “turned on its head,” I’ll admit that the most perplexing commentary I have seen recently comes from Pimco’s Bill Gross:

“And the most recent economic news suggests that the slowdown is picking up speed. So much so that if we aren’t already in a recession, we are very close. Confidence in the economy is crumbling. Business confidence has plunged, capital investment is slowing and production is contracting. Consumer confidence is clearly in a downtrend. This indicator is key as consumers account for as much as two-thirds of economic growth. Confidence needs to turn back up for the economy to recover. We think the Fed will ease as much as necessary to restore confidence. That means the Fed Funds rate, which stands at 5.5% today, could be pushed down to 4% or lower.”

I know that if I were the largest investor in the world in the US bond market, I would look with great consternation at the inflationary course set by Greenspan. But, then again, the bond market vigilantes are a relic from days long past.

I will end with several additional quotes that I see as particularly timely in this most fascinating environment.

“If we are dealing with a closed system, so that there is only the condition of internal equilibrium to fulfill, an appropriate banking policy is always capable of preventing any serious disturbance to the status quo from developing at all…But when the condition of external equilibrium must also be fulfilled, then there will be no banking policy capable of avoiding disturbance to the internal system.” John Maynard Keynes 812

“…We have seen that having a widely accepted medium of exchange is of critical importance for any functioning complex society. No money can serve that function unless its nominal quantity is limited.” Milton Friedman, Money Mischief 1992 MM42

“There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.” John Maynard Keynes, 1920 (MM 189)

“(Federal Reserve Bank of Dallas President Robert) McTeer concluded his speech by driving home the message that consumers do their part to keep the economic expansion going. He implored the audience: ‘Go out and buy something.’ Dow Jones News 2/2/01

“If we all join hands together and buy a new SUV, everything will be OK.” Robert McTeer, Associated Press, 2/2/01

[Maeve]

53. 12:56 lunchtime break

Grazing time...
Dow 10,530.74 -61.70 (-0.58%)
Nasdaq 2,106.03 +5.78 (+0.28%)
S&P 500 1,128.57 -3.35 (-0.30%)
10-Yr Bond 4.113% -0.136

[JNelson6563]

56. PPT hard at work today!

Save the usurper! haha

Like the BOJ though, I don't think they can hold it at bay forever. ;-)

1:24 and here's where they're managing to hold things:

Dow 10,543.92 -48.52 (-0.46%)
Nasdaq 2,112.62 +12.37 (+0.59%)
S&P 500 1,130.95 -0.97 (-0.09%)
10-Yr Bond 4.119% -0.130

Mighty pretty Treasury action. :loveya: Gold is rockin' too!

Julie

[54anickel]

60. So does that mean the bond market is not buying Greenman's schpeel

that rates do not have to go up?

Still trying to grasp this idea. Got this from an older article:

In the past, bond investors have acted as vigilantes of Fed policy. In the 1990s the Fed tamed the bond markets through disinformation and pacification. The Fed must convince bond investors that there is no need for interest rates to head higher. So far the Fed has managed to convince the bond market that it intends to keep rates low for the foreseeable future, but for how long?

on edit, never mind. It means they DO believe rates will stay down.
:crazy:

http://money.cnn.com/2004/01/09/markets/bondcenter/bonds/index.htm

[54anickel]

57. A great article from the archives

An excellent (IMHO) article. Again, some snippets.

http://www.financialsense.com/stormwatch/update.htm

The 'OK' Economy

snip>
It has become a start and stop economy for the last two years. The economy picks up steam after stimulus is applied, then it begins to fizzle once that stimulus has been exhausted. Without the constant input of new stimulus—either through interest rate or tax cuts or deficit spending—the economy rolls over. It is a bubble economy where real economic growth has been anemic, job growth has been nonexistent, and business fixed investment has been absent.

This sputtering economy requires an ongoing stream of new stimulus just in order to keep it afloat. Compared to past recoveries, economic growth has been half of what it has averaged over the last half century. It is also the first time in history that the economy went into recession against a backdrop of rabid money and credit growth. Fed stimulus failed to keep the economy out of recession.

What makes this situation more worrisome is that it has taken 13 rate cuts, three tax cuts, massive government deficits, and record growth in money and credit just to keep the economy growing. In economic terms, it is the largest fiscal and monetary stimulus the world has ever seen. What does the Fed have to show for its efforts other than multiple bubbles and the return of speculation to the financial markets?

snip>
...It has now become a matter of inflate or die. The U.S. debt imbalances and liabilities have become so large that the only way out of this credit predicament will be partial default through dollar depreciation. The U.S. will do what other third world countries have always done. It will debase its currency. It remains only a question of how this debasement will take place. Will it be orderly or will it be chaotic and abrupt? I believe the latter is more likely.

snip>
Today consumption makes up almost 90% of GDP. Wall Street and Washington believe if consumption can increase, business spending and investment will follow. In effect they have put the cart in front of the horse. It is business spending on capital plant and equipment that drives real economic growth. Investment in new plant and equipment creates demand and jobs as capital goods are produced. Once capital investments have been made, the capacity is then in place to satisfy demand.

Contrast this savings and investment scenario with what is currently being pursued in the U.S. and it becomes clear why the economy is creating no new jobs and why business is reluctant to spend money on capital investments. U.S. workers spend more of their wages on foreign-made goods. This is visible by the graph of America’s huge trade deficits. When an American worker spends his wages on foreign-made goods, those wages are transferred outside the U.S. economy and into the pockets of foreign manufacturers. The money spent on foreign-made goods is money that is not going back into the U.S. economy. U.S. businesses are deprived of these sales and are therefore reluctant to spend money on new plant and equipment or hire new workers. In fact, as companies come under attack by new regulations, new taxes and frivolous law suits, more companies have chosen to close up shop and transfer manufacturing facilities overseas where the regulatory environment is more favorable, tax rates are lower and labor is cheaper.

snip>
.....On the corporate front, companies have chosen to grow their businesses by merger and acquisition rather than invest in new plant and equipment to grow the business internally. If there are new plants and equipment being built or purchased, it is being done overseas and not in the U.S. Companies are relocating their manufacturing facilities to Asia and Latin America while they move their service functions to India. Once again is it any surprise why new job growth has been nonexistent? How do more credit, more taxes and new entitlement programs rectify this process?

snip>
...In essence, interest rates here in the United States will be determined more by the actions of foreign central banks and currency traders than decisions by the Fed or the U.S. Treasury. The U.S. may be a global superpower, but it is a superpower that is totally financed by foreign capital. Asian central banks keep 80-90 percent of their foreign currency reserves in dollars. It is those foreign currency reserves that finance the U.S. economy.

snip>
Mutual fund flows are also expected to be positive for September. Another positive factor is that most investors aren’t reading the financial statements or perusing the economic numbers to find out if they are real or what is driving them. It is a great time to be investing, if you don’t understand financial statements or know how to read. In this market all you need is a rising stock price and investors are all over it.

Meanwhile, insider selling continues at a record pace. It is currently running at a rate of 34:1. Insider selling has always been considered a leading indicator. The fact that it is this prolific is telling us that something is wrong with this rally. At some point in the near future, it will be time to fish or cut bait with the economic and earnings numbers. You can only drive stock prices so high on hope and hype before the real fundamentals have to start kicking in.


lots more......

[JNelson6563]

64. Very good article, I printed it out

Thanks for posting that gem. :toast:

Julie

[54anickel]

67. Amazing how hind-sight works. Suddenly something you didn't think

was so significant becomes a keeper.

Sort of like when you realize you were down to that last
M&M in the bag.

"Oh, I should have sucked that one!" :D

(Elaine Boozler)

[mrsteve]

58. 1:55 - Howdy, y'all

Looks like the unemployment report has hit the NYSE (despite obvious attempts by the usual suspects to spin it), but the Nasdaq shook the news off.

Treasuries are having a big in-flux today, which is unsurprising.

Dow 10,526.44 -66.00 (-0.62%)
Nasdaq 2,108.57 +8.32 (+0.40%)
S&P 500 1,129.09 -2.83 (-0.25%)
10-Yr Bond 4.109% -0.140

All in all, based upon everyone's comments, quite the gloomy Friday in the US economy.

[mrsteve]

59. Some great quotes from CNN/Money

Original article:
(snip)
"What's happening is that the interest rate sensitive sectors are doing well today after the payroll news, and separately high-tech is coming back a bit," said Peter Green, a market analyst at MKM Partners. Green cited companies in homebuilding and mortgage lenders especially.

The unemployment rate dropped to 5.7 percent from 5.9 percent in December, a bigger drop than had been expected. However, only 1,000 jobs were added to non-farm payrolls in the last month of 2003, when economists were expecting employers to create 148,000 new jobs. In addition, the previous month's payroll number was downwardly revised.

December was the fifth month of minimal additions to payrolls, even as the economy has been growing and the stock market surging.

"At face value, when the report first came out, people got nervous, thinking that jobs aren't being created," Green added. "However, the focus on the economy this year is moving to how corporations will spend and it's clear that this interest rate environment is good for corporations, and that's why you're not seeing that big of a selloff today."

(snip)

So, the job-loss recovery doesn't really disturb Wall Street, but just the threat of new corporate spending throws everyone into a happy tizzy.

Sheesh. Money whores.

[Frodo]

61. 3:00pm Some big moves down

BIG dip back down towards lows for the day Dow & S&P down about 1% Nasdaq back into negative territory down .5%



edit - OK 1% isn't exatly "big", but it was a quick move. Can't find a story yet as to "why".

[hatrack]

62. Wow, that was a plunge! Whahappen?

Maybe the Dow really didn't like the "improved" UE numbers!

[Frodo]

65. Unlikely, the market doesn't move that slow

except during the holidays.

Though it could be that a few bulls were buying into the dip expecting a bounce back and that money is drying up while short-term bearish sentiment remains.

It was still a bit more sudden than I would expect. I was looking for some major component company to havfe a sharp drop after bad news to explain it.

[Maeve]

71. there are two "normal" times for big moves on Wall Street

At 10 am, when the big boys make their first moves and during the final hour of trading. And you can usually snooze from 11:30 until 1 or 1:30 for lunch.

there is usually immediate reaction to major news--look back at the futures this morning right after the unemployment news came out and you'll see the cliff they dropped off. We've also seen jumps or dips when rumors zip thru Manhattan.

[Maeve]

63. Not unusual for afternoon, and a Friday at that

No real reason needed, other than the lack of support for a climb.

After watching the Casino this closely for a year and a half, I'm getting jaded...

Dow 10,467.41 -125.03 (-1.18%)
Nasdaq 2,086.59 -13.66 (-0.65%)
S&P 500 1,122.18 -9.74 (-0.86%)
10-Yr Bond 4.098% -0.151

[JNelson6563]

66. $$ flowing freely into Treasuries

What a party their having!

Julie

[Maeve]

73. And the final figures for the day

(so mrsteve won't have to post them this evening! Heh, heh...)

Dow 10,458.89 -133.55 (-1.26%)
Nasdaq 2,086.92 -13.33 (-0.63%)
S&P 500 1,121.85 -10.07 (-0.89%)
10-Yr Bond 4.086% -0.163

[hatrack]

74. Well, that was smelly!

Ugly, too.

[JNelson6563]

79. Painful bruising

But Tresuries did very, very well!!

Catch you all on Monday Marketeers! :hi:

Julie

[spotbird]

72. Is this the first blip?

Every time there is a noticeable drop I wonder if this is the beginning of the end. Deep down I figure they will be able to avoid the certain disaster until November, but other times I wonder whether they have that much control.

[54anickel]

75. UH-OH, I hope this guy doesn't represent the views of Japans MOF

This is an UGLY commentary, I haven't even finished reading it all yet. This is NOT a good sign.

http://www.atimes.com/atimes/Global_Economy/FA10Dj01.html

:scared:

[Robbien]

80. Thanks for posting the article

Am going to print it out for reading later tonight.

[salin]

81. Kudos to the market thread-ers!

Always great links to informative articles, good discussions as well as tracking the days events. A :toast: to you all!

[54anickel]

82. On behalf of the Marketeers, we thank you for your kind words.

To better tomorrows :toast: