Housing down, economy tanking, another rate cut likely ... and the Dow is up 335 points?

[Newsjock]

Just wanted to make sure I had this all figured out.

Yes, I know that many of us are invested in the market, and the gain is a good thing. But I can't help thinking that the markets are increasingly becoming a contrary indicator to what the rest of us are experiencing these days.

Sure, some folks in the upper-middle class will benefit from these gains, but the lion's share of the profits to be made will undoubtedly go to that top 1% (or even 0.1%) of Americans who are crushing the rest of us.

Feel free to cast this as "another liberal who can't accept good news" if you wish. But the fundamentals are simply not good, yet Wall Street seems to be practically gloating over the collapse of the middle class.

[Cosmocat]

1. You hit the nail on the head ....

The ownership of shares in the speculative market are so disproportionately owned by those in the upper income brackets, that "the market" IS an inverse representation of what exists for the overwhelming majority of people ...

They keep readjusting the formula for inflation to not include those things that they then reference in relation to it, but the fact is, those things we HAVE to spend money on are just skyrocketing right now ... Gas, and as a result most goods, medical costs ...

[spanone]

2. the volatility is obvious when someone utters 'rate cut' and the dow jumps

[dmallind]

29. Well rate cuts ARE good for most stocks

cheaper access to capital means lowering costs for expansion, or debt. Given the dollar's weakness expansion of US business in some segments is very plausible. Debt is a given.

But to be honest, and fully recognizing that guessing at the reason for short term fluctuations is just that, I'd say it's people buying at lower prices after several days of decline, thus driving prices up. Recently relatively large daily swings in both directions have become the norm. No substantive cogent reasons are often available.

[porphyrian]

3. The best way for a company to get a big stock bump is to fire 40,000 workers.

Wall Street success has almost nothing to with the majority of us, except perhaps in an inverse relationship.

[leftynyc]

24. You're absolutely right

A very good friend who worked Wall Street for 20 years lived by the mantra that if it's bad for Main Street, it's good for Wall Street (and obviously visa versa)

[porphyrian]

38. That's something not likely to be reported on corporate media. -n/t

[Speck Tater]

4. In the LONG run, fundamentals rule. But

in the short term, markets are driven by emotions, hopes, wishes, fears, etc. When the fundamentals are so uniformly bad, but people don't want to believe how bad things really are, the fundamentals will continue to push the market down, down, down, but people will get carried away with wishful thinking and the net result is high volatility. The markets start bouncing up and down, swinging more and more wildly as reality and wishful thinking alternately push and pull on the prices.

[whistle]

5. Wait until all those worthless hedge funds are dumped onto unsuspecting

...investors who can't find any value out of them by early next year

[Warpy]

8. That's already pretty much happened.

Merrill Lynch was pushing them at me, and I do mean pushing.

I'm no longer with Merrill Lynch.

[sandnsea]

6. Abu Dhabi bought 5% of Citibank

Yep, Citibank needed saving.

"Arab stake in Citibank boosts Dow"

http://www.washingtontimes.com/article/20071128/BUSINESS/111280029/1006

[hatrack]

22. Yes, and guess how much Abu Dhabi will be charging Citibank for pulling the chesnuts out of the fire

11% interest.

Tasty!

[sandnsea]

30. Oh My God

I am honestly getting a little terrified.

[robertpaulsen]

47. And the details of Citigroup's bailout are "too scary to release to the public."

rony-Capitalists Fiddle While Main Street Burns
Crashing Citigroup

By PAM MARTENS

The saga of how the top minds in Washington and on Wall Street have dealt with the deepening financial crisis in the U.S. would make a great Hollywood screenplay, except for this: it's absurdly unbelievable.

Storyline: The largest bank in the United States (by assets), Citigroup, is discovered to have stashed away over $80 Billion of Byzantine securities off its balance sheet in secretive Cayman Islands vehicles with an impenetrable curtain around them. Citigroup calls this black hole a Structured Investment Vehicle or SIV. Wall Street insiders call it a "sieve" that is linked to the breakdown in trading of debt instruments around the globe and the erosion of wealth in assets as diverse as stock prices to home values. Additionally, tens of billions of dollars in short term commercial paper backed by these and similar Alice in Wonderland assets are sitting in Mom and Pop money market funds at the largest financial institutions in America, with a AAA rating from our renown credit rating agencies.

Setting: Picture the Titanic shortly after it crashed into the iceberg. Imagine that its officers want to pretend to all its passengers and crew and investors that there is no serious damage because the giant floating Citi did not really hit an iceberg; it just hit a wall of worry. It will be able to right itself in no time at all as long as everyone remains calm. Even though the lavishly appointed ship is dangerously listing (stock price fading daily) it says it can stay afloat by an ingenious bailout plan. Everyone just needs to walk calmly to the dining room, collect a tea cup, and pitch in with the bailout.

This is effectively what the U.S. Treasury has anointed as a game plan: Citigroup, the gargantuan and troubled bank, will be bailed out by virtue of all of its smaller competitors chipping in some money to a SuperSIV, a kind of Big Daddy Black Hole whose details are apparently too scary to release to the public. These are the very same competitors who lost market share to Citigroup because Federal regulators allowed it to grow fat and sassy by playing dirty, including collecting massive fees for hiding debt for bankrupt Enron, WorldCom and Italian dairy giant, Parmalat.

more...

http://www.counterpunch.org/martens11272007.html

[Warpy]

7. I keep telling people there's more holding the market up right now

than there is pushing it down. It might continue a slide, but it'll be a slow one with peaks and valleys.

The main question is just how far deregulated banking paper has gone through brokerages, insurance companies and banks and what is going to be done about it. Other areas of the market are about as sound as they can be in an economy that is in grave risk of shutting down its consumer market. Until that happens, and it's likely to happen slowly as people can no longer afford to service more debt and start spending only on food, most of the market will stay sound. Where else is investment money going to go?

[whistle]

13. I give the accounting firms two quarters to expose the cover up

...the current quarter we are in and the next quarter ending March 31, 2008. After that point, no auditor can continue to play along fudging all this worthless paper that these major mortgage investment concerns and Central Banks are holding. The meltdown will be like ten Niagara Falls' flowing over Wall Street. Can the Federal Reserve Chairman Ben Bernanke's helicopter money dumping policies cover $45.0 trillion in new money required? I doubt it.

[Warpy]

14. There will be some major shakeouts

of banks and brokerages, with fire sales gobbling them up as the full extent of stupid investing policies within them become known.

If we're very, very lucky, we'll get Democrats back into Congress and the presidency and get common sense regulation reinstituted.

Deregulation only opens the door to thieves. Always has, always will.

[Johonny]

9. The Dow

is basically flat and has been for months. It's basically bouncing around, with gains and loses in the noise.

[Jackpine Radical]

10. A few thoughts on that...

First, the last couple days been "uppers," following on a bunch of "downers." The key fact to which I orient is not the upness or downness of the moment, but the incredible volatility being displayed here. Company X is suddenly worth a lot more than it was yesterday, but tomorrow it loses all that gain in value and more. What changed? They still produce the same thing, have the same employees and equipment, etc. What changed was the expectations of the stockholders, and the reason for that change in expectations may be totally irrelevant in the long run. Right now they're all ecstatic over rumors of a drop in the prime interest rate or something. Whoopee, the market is up!! Tomorrow the price of crude will go up for some reason, or some bank will come clean about how much trouble it's in, and the market nosedives. It's like watching someone with a Borderline Personality Disorder playing Monopoly. Overall, I take the persistent market lability as a very bad sign. Nobody knows what's going on, so everyone is orienting to irrelevant cues.

Meanwhile, looking beyond these momentary fluctuations, there are some very bad things going on in the world at large, and everyone is in denial about them. The dollar is in considerable peril, and could lose 90% of its value in 6 months. Our balance of trade is outright scary. We have lost our national economic base--we don't make anything anymore. A lot of what we do make isn't very good, and nobody wants it. Fossil fuel prices will trend upwards, regardless of momentary deflections. We're taking really stupid steps to create alternative energy sources--ethanol for example. Europe and other areas of the world are investing in wind, solar, energy conservatin, etc. & will have energy when we have none.

And beyond all this, the market is grossly overvalued. P/E ratios are not irrelevant like some would have you believe. Hell, the Dow was at about 6K when Greenspan started warning about "irrational exuberance."

All in all, I have one major question.

What the hell are they planning to do with all those tulips?

[Clark2008]

32. I agree with you entirely - except for one point.

What Americans do make IS good. I've never had an issue with an American-made product in the least. In fact, that may be contributing to the company's ROI... I don't have to buy a new, cheap Chinese-made vaccum cleaner every other year because my 17 year old Kenmore keeps working. I won't buy another Ford for another 10 years because Mustangs are dang good cars (I had my last one 13 years).

I always point this out when people complain that I'm 'elitist' when I sneer at Walmart. I tell them they aren't really saving anything since they have to keep going back and re-purchasing the same equipment/clothes/shoes etc. because it's so cheap it falls apart - and then they get it.

[Jackpine Radical]

42. A good many American cars are junk.

IMHO, of course.

My wife and I have driven Hondas, Toyotas, Nissans & Subarus for a lot of years & been pretty happy with them. (Do have one old '88 Ford pickup around, though.) Of course a lot of those "foreign" cars come off American assembly lines. It's not American workers I'm pissed at; it's the MBAs trying to squeeze profits by cutting quality.

[chaska]

11. And we dems want to inherit this mess??? Think about it, ya'll.

All indications are that things are going to get much worse ... in the near term. In fact, I'm hearing that a big stock market crash is coming in '08.

Maybe the GOP should clean up after themselves ... just this once.

BTW, I'm not saying I'm planning to vote for 'em, now (that will never happen). I'm just thinking outloud.

[cornfedyank]

12. the cheap dollar attracts foreign investment

[enid602]

15. dollars

Remember, progress with re: to the DJIA is measured in terms of dollars. The dollar's lost about 10% of its value (vis-a-vis hard currencies) so far this year; as such, a 10% rise in the Dow really means that your even for the year.

[high density]

20. Not really

I buy things in dollars, not Euros or some other currency. Your argument is only going to hold up with foreign investors. The guy in Germany with money in the US stock market will see the effects of the currency rates and I'll see the same thing in an inverse way when buying European stocks. For most of the people on this forum who live in the USA and get paid in US dollars, the fluctuations in currency rates do not mean much in regards to US stock market returns. It may hit the returns of companies like Wal-Mart that import a lot of stuff, but that's another can of worms.

[enid602]

21. 10%

Well, unless you buy only US-produced petroleum, cars, toys, knick-knacks, etc., the purchasing price of your dollar has gone down by 10% over the last year. Even if you can somehow avoid imports, many of the components of US-produced goods are imported. One of George Bush's crowning acheivements has been his ability to prove to the masses that inflation is low, while our currency continues to devalue.

[high density]

34. Yes, purchasing power of a dollar in regards to foreign stuff is declining

But in your original post you're talking about US stock market returns, not purchasing power. :)

[Double T]

16. The core problems with our economy and financial disaster aren't........

being addressed or talked about and today's wall street surge is just another bounce on our way to economic ruination that will last for several decades.

[blondeatlast]

17. The stock markets are manipulated--and I know you know there are two economies.

The one percent economy--and the rest of us sorry excuses who work, have mortgages, college funds, and heating bills...

[Turbineguy]

18. End of tax loss selling?

possibly.

[high density]

19. It's impossible to figure out the short term fluctuations of the stock market

I don't think anybody can understand it, though the media loves to try and put reasons on it. That's why it's usually a losing battle to "buy low, sell high." Just buy a cheap index fund at Vanguard and take the ride with the market. Develop a mix of stock and bonds that lets you sleep at night. Long term (10+ years) the market is going to go up, or else we're really screwed and stock market losses will probably be the least of our worries.

I watch the short term fluctuations with a sense of amusement more than anything else.

[Matariki]

23. Rate cuts, and rumors of rate cuts traditionally drive the market up

http://news.morningstar.com/news/ViewNews.asp?article=/DJ/200711281407DOWJONESDJONLINE000850_univ.xml&pgid=hparticle

[spanone]

25. It's 343 now

[jaksavage]

26. The Federal Reserve

just dumped another 50 billion into the market, for liquidity. I think that is @ 200 billion they have kicked in so far. Keep the glass house standing.

[Double T]

49. Inbound meteor heading straight for the glass house.

Don't forget to duck.

[blondeatlast]

27. Black Friday results, MSM style: "Fewer customers but spending more money. All is peachy-keen!"

Longtime retail employee style: "Less customers, more oeverhead, less profit, RED 4th quarters--and it's no lovely holiday red either."

Black Friday doorbusters exist for a reason: MORE customers spending less money equals more profit than fewer customers spending more. But that isn't at all how the MSM painted it, now, is it?

[NewJeffCT]

28. The housing downturn was expected, the anticipated rate cut was not

Wall Street likes lower interest rates. To them, it was a positive surprise.

They already expected consumer confidence & housing to be down, so they were not surprised.

[leftofthedial]

31. wall street is owned by the super wealthy

ordinary people get to provide a little fiber to their raw meat diet, but basically, the death of the middle class is a big win for them

the market always likes it when the little people suffer--job cuts are the prime example.

[Vinca]

33. As long as the rich get richer, all is well.

Any chance we can vote them in another tax cut for the holidays?

[LSK]

35. because those who play the market nowadays are incredibly short sighted

Todays news is the only thing that matter.

[Mutineer]

36. Bargain hunters

looking for a good buy now that prices have corrected on stocks. ALso, oil took a dip in prices-it's now down near $90/barrel instead of being close to $100. Rumors that the fed is going to cut the interest rate again too.

[nadinbrzezinski]

37. They are reacting to the infusion of cheap money

the problem is that this will be a short thing, as they usually are

[Mike03]

46. Hi Nadin, you were right about the readjusting of Black Friday

coming on Monday morning.

Congratulations. To be honest, I thought you were totally wrong about that, but damned if you were not right.

[sicksicksick_N_tired]

39. Information control aka psyops. eom

[Mike03]

40. The markets are not a reflection of the health of the economy

This is not an easy concept for most people to grasp; at least it was not for me.

In particular, the U.S. markets now are volatile beyond belief, and they respond to the most irrational triggers for excuses for exhuberance.

Most of the intelligent investors I know are carrying cash or inverse equities right now. It's an extremely dangerous, precarious market.

[blondeatlast]

43. You seem knowledgable--do you think they can (or even are) manipulated?

We have a few mutual funds through our employers, nothing major, but after Enron, I find nearly all big drops and gains on Wall Street very suspicious. Granted, I'm not an economic wonk by any means, but it makes me wonder if Wall Street has any bearing in the "real" world?

[Mike03]

44. Markets are manipulated all the time, but that is the nature of the beast,

especially now that these humungous hedge funds have become involved in buying and selling. They are so leveraged that when they make a move the market shudders. But that is also true of nations; for example, when China buys or sells gold.

I empathize with anyone who holds large-scale funds, such as mutual funds or ETFs. Whether they are vulnerable to a downturn or not depends on what sort of funds they are.

Some funds are extremely specific, such as "health care," or "gold", "foreign currencies," "energy," etc...

Other funds invest heavily in U.S. equities, including banks, financial stocks, Fannie Mae, Freddie Mac, real estate and so forth--these are the funds I would worry about.

I'm not a licensed money manager, but I do more less make my living off of investing, and all I can do is urge people to be extremely careful right now, unless you are quite young and can sustain extended losses.

Even in giving that advice, I feel uncertain, because we are seeing some trends and new developments worldwide that make me cautious about even investing or keeping money in certain banks altogether.

I know that's not very hopeful or helpful. That's just my best estimate at this moment. I do not think we have hit the bottom yet, by a longshot.

[Lydia Leftcoast]

41. Any link between the Dow and reality is purely coincidental

:-)

Here in Minneapolis, I'm closer to Wall Street than Wall Street is to Reality.

[Mike03]

45. Kick because this is an important thread!

Most people don't understand all of this, and it's not their fault. It's complicated.

[sarcasmo]

48. All a shell game that will crumble and make the Depression look fun.