Morning Call [7:41am ET] Will our future be one of government austerity measures, economic contraction and deflation or will it be global expansion fueled by universal money printing, i.e., debt? Apparently, at the G-20 Summit in Toronto there was a split on this issue, with Pres. Obama one of the few who seems to be concerned about the prospects of Depression. On the other side, China, Germany and France, apparently, are prepared to pay the piper sooner than later for a string of years of widespread government deficits and the build-up of national debts that overwhelms the ability of their economies, i.e., GDP, to pay the interest on that debt.
With the prospects of prolonged recession quickly building, maybe it’s time we brush up on the definition of economic depression.
That seems fitting because, without prospects of wage and price inflation, the term economic stagflation does not apply.
http://en.wikipedia.org/wiki/Stagflation
Economists and market analysts will start writing a lot about this subject I presume because I know they love to write stuff. Whether it’s helpful or prescient, however, is anybody’s guess. But, at the end of the day, preparing for the worst will not be such a bad thing even if history proves it was unnecessary.
Before the market opened last Thursday, I wrote:
Yesterday for the hour and forty-five minutes after the FOMC report, the S&P 500 traded down, as I had forecasted earlier in the day – up at the open, then down with the new house sales report, then up til FOMC time, then a test of 1080 – and this morning there is a catch-up around the world. Traders everywhere are now concerned that the V-shaped economic recovery is not likely and they are selling stock. The primary support levels are being tested… Equity prices in Europe at this point today are weak. France is the weakest. Paris has always been a fashion leader. I don’t see any relief in the current chart… Nothing too serious at this point, but the S&P future is right on or about the 1080 technical support. A failure here would lead to 1050. A failure there would likely sink the S&P to 880. At that level, I believe, the mountain of cash will leave the sidelines and buy stocks, starting with the high dividend payers, and increasingly the quality growth ones that have a bit more risk attached. But that point, somewhere down near 880, if we reach it, would set the stage for a new Bull phase, one that would have more stability to it. At that point, I think, we all could get back to basics.
Following that June 24 report, the S&P 1080 support was broken with subsequent closes of 1073.69, 1076.76 and 1074.57, and today the 1050 will be tested. Beyond that, truly, the charts show no hope the market downturn that started in April (April 15 high was 1213.92) will be exhausted until the S&P reaches a level down near 880.
If you are prepared for such a market tumble, the outcome would not be such a bad thing.
During the 1930’s decade, referred to as the Great Depression, there were five (5) Bull phases that averaged close to +100% gains off the prior lows. Volatility was extreme then, as it is now, and fortunes were won and lost. As the capital market is just a matter of people acting like people, I anticipate a repeat of the price cycles – with differences of course for reasons that the political times and leadership are quite different today.
The bottom line to trading prices is that market trends and cycles move in rhythms from over-bought to over-sold. Over the long run, it pays to be on the right side of the trend while adapting to the market’s cyclic nature, i.e., reversion to the mean. In this regard, the market is a process, not a snapshot – in bookkeeping terms like a profit & loss summary and not a balance sheet. Processes are dynamic and must be managed by the participants. At every point in time, there is a different measure of risk and reward potential. During market downtrends the risks of capital loss exceed those of gains.
There is not a close enough correlation between the business cycles of economic expansion and contraction and the market bull and bear cycles to make proper buying and selling trading decisions. China’s economy, for instance, from early 4Q2007 through the end of 3Q2008, was growing at least 10% on an annual basis, yet the Shanghai Stock Exchange Composite Index collapsed from 6124 to 1665. But, you have to be aware of government economic expansion and tightening policies as well as the private business sector’s ability to operate at these times as well as the confidence of the people in terms of their income, spending, saving and investing situation.
At the end of the day, no journey is possible unless you have a map to guide you and it’s a fairly accurate one. If the destination were fixed, the task would be an easier one, but, not knowing the true intentions and resources of the governments and largest corporate players, it’s a moving target. To cope, we need to be flexible, and at times like this nimble. I try to help, but this is a journey we are all on, and nobody has all the answers. Even today, the leaders of the world economic powers have vastly different opinions. Like I say, trading is not easy.
Yesterday, I said I thought the political leaders and monetary authorities would this week be putting their “pedal to the metal” but near the close in New York yesterday, there was evidence in plunging prices that may not be the case. In fact, overnight in Asia-Pacific markets and this morning in Europe, prices are down a lot. Unless the Fed steps in with another round of quantitative easing, the S&P 1050 technical support level might not hold. After that, as I say, there really is no support all the way down to S&P 880.
Every day in the market, prices are subjected to pressures. Today, with concerns on the Jobs front with important data coming up this week in Japan and the US, traders are selling risk, including most equities and commodities. There are no bids to take equities broadly higher.
If there is going to be a change, I believe it will start from the offices of the FOMC trading desk at the Fed, under orders from the White House, and the first signs will be in the share prices of Goldman Sachs (GS), JP Morgan (JPM), Bank of America (BAC), and Morgan Stanley (MS). The price of gold and silver futures will also start to bounce, and the US Dollar and Bonds will pull back. This is where to focus today, and tomorrow and through the US Jobs report on Friday morning.
Starting at about 4:30am ET, there were signs that the Fed would ease the pressure somewhat. Then about 7:15am, the picture darkened. But this one is too close to call at this time.
Europe, including France, is looking dreadful, and so if we see the Fed step in, it’s likely that the Paris bourse will start looking less downcast.
Btw, the Tropical Storm Alex in the Gulf of Mexico will be named a hurricane today and will make landfall near the Texas-Mexico border. I found the reporting from the National Hurricane Center of the US to be a national disgrace, one more piece of shameful White House propaganda. As I pointed out in these pages in recent days, the National Weather Service reporting that there was nothing to be worried out at this time and they didn't even have to put their tracker planes in the sky, and that the oil spill will have no impact on storms in the Gulf, and so forth, is totally unacceptable service from the Administration. Mariners risk their lives on NOAA. To be totally misled deserves nothing less than criminal charges being laid.
Here is the projection for 11pm ET tonight.
Have a great day.
CTA Trading Desk Post-Close Report
World markets were rattled by a surprise reduction in China’s leading economic indicators, creating a downside vacuum in prices as US equities opened for trading. Traders were also skeptical the rollover of European debt would go smoothly given the illiquid conditions existing in many capital markets, putting additional pressure on stock prices.
By the end of the day heavy selling drove several indexes down near 2010 lows before a brief blip up in the final few minutes ever so slightly limited losses (S&P-3.1%).
So much for our thoughts the mild oversold condition and positive seasonality would lead to a modest low volume rally into the close Friday. Well, probabilities are not certainties so the best traders rarely place all their money in one stock, and always limit their losses – admitting their mistake and moving on. Taking a high probability trade that eventually is stopped out for a loss doesn’t mean you’re a bad trader, it’s merely a necessary cost of doing business. As long as you don’t suffer a catastrophic loss (either betting too much in one stock and/or not using well defined stops to limit exposure) you can live to trade again.
After all these weeks the S&P is finally testing 1040. For ultra-short-term traders it probably makes sense to fade an opening in either direction, simply putting a stop just outside the opening print extreme. If 1040 is decisively broken, initial support levels are 1005 and 945. The latter level makes a lot of sense being both the break-out level nearly one year ago and also the 50% retracement of the entire Bull advance off the March 2009 lows.
If the market manages to stabilize near 1040 it is hard to imagine a rally above 1100 without a lot of backing and filling.
Have a great evening.
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Comments
Cara 100 Ratings Changes
Good morning.
DIS - Disney upgraded to Buy from Neutral at Goldman. Target to $42 from $33.
MRK - Merck initiated with a Hold at Soleil. Target $36.
NE - Noble Corporation upgraded to Outperform from Market Perform at FBR Capital as it finds the company's acquisition of Frontier Drilling as smart and strategic. Target to $42 from $36.
FYI
Mr Cara, Very good write up today! Put together a chart of all the indicators [GS-->TLT] to watch today. I am 100% short so I finally find myself on the right side of the trend for a change.
For all the non petroleum engineers in the group here is a very good video of how BP plans to kill the well.
http://bp.concerts.com/gom/reliefwellgraphics06271...
MORE MONEY SUPPLY
ALOHA!!
Should we go ahead and count Qantas Mileage Points(frequent flier mileage) as money supply now? May as well since it seems the mainstream counts mortgage deeds and stock certificates.
QANTAS LINK: http://tinyurl.com/2dzwdn7
Real money is down 0.35% now while only the Yen is in total confirmation, while the Yuan, HK and Swissy are near confirmation, so four out of 14 currencies.
POG up $295.70USD or 31.55% over a one year period, at $1234USD. I have been posting here for years now and when the POG was at $500USD there were many naysayers. I often wonder where those people are now and what they did with their hard-earned precious capital. Maybe they bought AAPL when POG was at $500. Maybe they bought a condo in Las Vegas. Maybe they bought a yacht. Maybe they sat out the entire gold bull trend in "safe haven" US Savings Bonds. Hard to say ...
Cara 100 Update
AAPL - estimates, target raised at Citigroup. Shares are now seen reaching $330. Estimates also increased, to reflect better iPad and iPhone sales. Buy rating. *Ed. Note* - Now we couldn't have a ratings update without an Apple upgrade, could we?
BHP - BHP Billiton upgraded to Buy from Hold at Deutsche Bank.
DIS - As reported previously, Goldman upgraded Disney to Buy from Neutral. The firm upgraded shares based on a pricing recovery in parks and international box office trends but notes video content demand opportunities will be a driver. Target $42.
fiscal restraint = depression
Nobel laureate Paul Krugman has cautioned that the G20 call for fiscal restraint could lead to a depression.
http://thespec.com/News/Business/article/798375
Re: fiscal restraint = depression
Give Krugman a politically motivated prize (Nobel) and that makes him right? Heck, didn't Obama get one for peace? What a joke. He's spent more on military that Bush. Krugman's as dumb as Bernanke. At what point does the economy re-start? Trillions of dollars and the only job growth comes from the Census?
When fiscal restraint wins out, Krugman and Bernanke will be out on the street selling apples like the rest of us. This is what happened prior to WWII under FDR. Know your history and heed facts, not fiction.
Ahem. Has anyone else noticed...?
.... that the S&P broke 1050 within minutes?
BTW I just sold my USD back into pounds. I don't like the USD chart any longer, particularly the Fed's trade weighted index.
Re: fiscal restraint = depression
Clearly, you're not a fan of Krugman, Dr. Strangelove; but regardless of your affections, surely this comes down to where the balance is on the economic equation - pay me now or pay me later. If the G20 applies (too much) fiscal restraint, we pay for it now, possibly with a depression. I offered the info simply to share that there is indication that the G20 may go that way and I would then argue lower stock prices in the medium term future.
Re: Ahem. Has anyone else noticed...?
The market Gods are angry. The mortals are demanding at least an aperitif (nuther $trillion on the balance sheet?) before the QE II feast. If Mr. 880 (SPX) becomes a reality, the Wall Street spoon pounders will be quickly served.
Meanwhile main street is fed treacle in their porridge. This market has become truely offal. ;-)
The Next Crisis : Public Pension Funds
A good read on this growing problem from NY Times Magazine:
http://www.nytimes.com/2010/06/27/magazine/27fob-w...
Nuclear Alert
U.S. 10 Yr Bond now yielding less than 3.00 %
Better sleep in your washing machine.
Re: fiscal restraint = depression
manx928 -
"If the G20 applies (too much) fiscal restraint, we pay for it now, possibly with a depression. I offered the info simply to share that there is indication that the G20 may go that way and I would then argue lower stock prices in the medium term future."
It appears the Great Depression II is here. See shadowstats.com. G20 is not a consensus, just a suggestion box for nervous central bankers. As Armstrong points out, capital is now confused and therefore frequency and severity of price volatility is expected. Mr. Cara has suggested the same. Germany is leading the fiscal restraint along with new leadership in U.K., Australia, Japan, and starting in Nov with the U.S. elections. Fiscal restraint is a euphemism for Political FEAR.
Expect severely lower stock prices as well as severely higher stock prices in "the medium term future" as witnessed in past depressions.
Stay thirsty, my friend.
Why Friedrich Hayek Is Making a Comeback
Concise and well written article is well worth a read from Monday's WSJ:
http://online.wsj.com/article/SB100014240527487049...
"Why the sudden interest in the ideas of a Vienna-born, Nobel Prize-winning economist largely forgotten by mainstream economists? Hayek is not the only dead economist to have garnered new attention. Most of the living ones lost credibility when the Great Recession ended the much-hyped Great Moderation. And fears of another Great Depression caused a natural look to the past."
Krugman is a hack QE Fed-supportin' press corps dupe.
Cheers.
So VAD, Are we Gonna Punch thru 1040 Today on the S&P?? :)
Or we gonna wait until the jobs numbers (Initial claims, unemployment rate and nonfarm Payrolls figures) are out on Thursday then Friday?? :)
C fat finger trade?
3.32
Re: Why Friedrich Hayek Is Making a Comeback
good article, thanks for posting. I saw this one too that refuted Krugman's claims and argued that deflation is a healthy thing for the economy in the long run:
http://www.goldalert.com/stories/Gold-Price-Plunge...
Re: fiscal restraint = depression
manx, I would slightly reword what you said. I would say "today's society pays now with a depression and with a lower standard of living, or our kids and grandkids pay later with a depression and reduced standard of living that will be 1000 times worse".
Clearly, you're not a fan of Krugman, Dr. Strangelove; but regardless of your affections, surely this comes down to where the balance is on the economic equation - pay me now or pay me later. If the G20 applies (too much) fiscal restraint, we pay for it now, possibly with a depression. I offered the info simply to share that there is indication that the G20 may go that way and I would then argue lower stock prices in the medium term future.
Re: So VAD, Are we Gonna Punch thru 1040 Today on the S&P?? :)
I've no idea... I am not in prediction business, remember? :)
As far as current chart reads, reversal to the upside did not confirm itself when SPY retested 110 from above and couldn't hold it. 104.30 - 104.50 support is being tested as we speak (write?) Doesn't look like it's going to hold but things change very rapidly these days.
To give visual to above, let me re-post the chart I posted a while back with comment:
- descending triangle has formed;
- breaking above descending line, then breaking above 110, retesting it from above and holding it is a condition to turn bullish.
The part in bold font had failed.
Re: fiscal restraint = depression
IMO the depression was caused by the 80's and 90's bubble fostered/created by the Fed allowing excess credit and debt, and started with the NASDAQ crash. Its been papered over 92 ways to Sunday since 2000, even resorting to creating wars to end it, and only resulting in more and more ever sillier and unpayable debt.
IMO, it doesn't end till the debt is cleared, repaid, or reduced to a reasonable level, by hook or by crook. Look to Japan for an example of how to screw it up, and we are trying to follow their footsteps, minus of course the Japanese work and savings ethic, LOL.
The foolish Keynesians will bankrupt us all, to the last man, woman or child, before its done...
Another FAT Finger Selling Citi Shares :).
Citi shares went down to 3.32 today then circuit breaker kicked in and halted the trading in it for a short time. Now it's trading down 5.5% after trading was resumed. Another FAT Finger you say :)).
Re: Why Friedrich Hayek Is Making a Comeback
Dear Doctor, I remember reading FA Hayeks book "The Road to Serfdom" which he wrote sometime in the 1940s.
I remember my liberal teacher hated him and his ideas. Hayek was a defender of Capitalism and limited government. RTS has many liberal critics because it struck against the core beliefs of socialism & marxism and he included, at that time, National Socialism (Nazism) as well. Not to mention the danger to the Liberal Democracies of today. His fear of arbitrary growth of power of government via central planning of the economy, would require the acceptance of central control by the few and all the dire consequences that would result.
Psychology
Market Cycle Psychology chart.
Re: So VAD, Are we Gonna Punch thru 1040 Today on the S&P?? :)
CAT FDX GE have all continued to worsen percentage wise since this morning. This is from GOOG finance, so it is delayed...but it could be worse or better.
EDit: I looked at real time, its scary, but on the positive side the volume is not indicative of a panic yet.
Re: fiscal restraint = depression
Dr. and manx928,
I think the basic problem is people who are so arrogant as to think an economy can be, or needs to be "managed" by anyone.
If markets were left to self-adjust none of this would be happening.
How much do you want for your product or service?
Yes, I will buy.
Or:
Too much. I will buy elsewhere.
Or:
Your price is good, too bad the quality isn't adequate.
No need for a third party at all.
Re: Psychology
We are at "denial", at the moment, me thinks...
rally off 1040
Possible the move to 1041 was just a head fake? We're back up 7 points in 30 minutes, practically straight up. If it can move above 1050 resistance the short covering should be impressive.
If this happens, I have to say, it sure faked me out. I closed several put writes earlier today after it broke through 1050.
Re: fiscal restraint = depression
cheapy -
"IMO the depression was caused by the 80's and 90's bubble fostered/created by the Fed allowing excess credit and debt, and started with the NASDAQ crash."
Remember when France sent its battleship to a New York harbor to take delivery of French gold from the vault of the New York Fed Reserve Bank in late 1971? Nixon closed the gold window to foreigners and that was the final nail in the U.S. gold standard's coffin. Excess credit and debt started with the devaluation of the USD in 1911 through the creation of a central bank (the Fed) and the gradual removal of a hard currency standard. Public spending (Congress/debt) and money creation (QE) kicked in under FDR and never stopped (deficit growth) even after WWII. Now it's a runaway train. These cycles take place over longer periods than a lifetime.
Cheers.
Re: fiscal restraint = depression
double post
Re: fiscal restraint = depression
Grym -
That's a good theory until you add leverage, banking, fiat currency, and runaway fiscal spending to win elections ...
Re: fiscal restraint = depression
Ah, yes. Now we're back to those arrogant folks who want to tinker ;-)
Wasn't it Shakespeare who said something about "...neither a borrower nor a lender be"?
I think we may have reached that point by default — banks won't lend to those who need money and people who don't need it don't want to borrow.
Re: Why Friedrich Hayek Is Making a Comeback
Bruce Thomas -
"I remember my liberal teacher hated him and his ideas. Hayek was a defender of Capitalism and limited government."
All history is biased but economics based on faddish and expeditious politcal party support in our halls of higher education should be grounds for revoking tenure through a special heinious educators' court using publically elected judges and a jury selected from the student body of the school's greatest athletic rival.
Re: Why Friedrich Hayek Is Making a Comeback
Profound.
VZ and the iPhone
http://www.bloomberg.com/news/2010-06-29/verizon-w...
Oil
All the oilers are down hard with the price per barrel except for BP, up over 3%. Could this be BP's bottom? Don't believe BP can be allowed to go under as that would be 10x worse than Lehman's Bros. Think of all the big industry that relies on BP's supply and credit for energy. There's a job killer if there ever was one.
Although a tragic disaster, warm waters will clear this spill faster than in the frigid waters of the Exxon Valdez spill. Comparison should be to Ixtoc I spill of 1979-80 in the Gulf of Mexico which was almost 13x larger in tonnage spilled but cleared 100x faster than Valdez. Oil evaporation doubles for every 10 degrees increase in temperature.
http://en.wikipedia.org/wiki/Ixtoc_I_oil_spill
No position in BP.
A Desperate FIGHT to CLOSE above 1040 on the S&P
14 min to go, any bets around here whether it will hold today or not :)
Is it time to hold some Inverse ETF's overnight on <1040 S&P Clo
se?
thinking about holding SPXU overnight.
Only long I didnt stop out of today was VZ
EDIT-sold it at close flat with 1041 close..missed a chance to cover it for profit.
Re: Oil
Hi Dr. - Noted this excerpt in one of the financial reports sent to me by a trader buddy. Thought of the Day – Relief Well Success Could Set the Stage For a Rally – Our math leads us to believe that the interception of the relief well with the casing is 8 - 10 days away and with success rates very high once intercepted, the oil could stop flowing relatively quickly after that event. Although the operator is conservatively saying August, discussions with experts in well control and relief operations have us convinced that the probability is high that Macondo is no longer flowing within a fortnight(14 days), setting up a nice rally for energy as a whole. Happy Trading
looks can be decieving
nothing is what it seems these days, but my feeling is we are seeing the makings of a big crunch in the commodity stocks.
the venture exchange is doing what it has before large market falls, just moving sideways on up days on the broad market and down hard on any broad market weakness days.
gold stocks continuing to be negatively affected by the slump in the market but gold itself is looking like it has a flimsy grasp on any new highs.
not liking what im seeing. and because of that who knows now the market coudl scream 300 points higher in a day just to mess up all the smart bears.
gold is doing what it can to shake us loose as it will make many a gold bug sorry on its way to record highs over the years. it will move up when many claim conditions are ripe for it to fall and it will fall hard during periods when people believe it should rise. gold's thrusts upwards have occurred while most were either skeptical or unsure.
good luck gang.
Re: looks can be decieving
This is why I am nearly 95% cash yet again. I am not making any killings this year again, but I remain nearly flat. Tough market to swing trade.
Re: looks can be decieving
I think Gold climbs a wall of dr.cosa's worry. I swear, I don't recall the last time dr.cosa posted anything about gold that wasn't liberally sprinkled with fret, worry, and bother. And gold has been above its 50 dma since April!
Perhaps when he turns unabashedly bullish, that's the time to REALLY start worrying! :)
Lasorda and the Fed
http://ronsen.blogspot.com/2010/06/lasorda-and-fed...
The ball rests squarely on the goal line...can the bears punch it in?
dark cross
Way back when, in the summer of 2009 TOF pointed out that a golden cross usually heralded good things to come. And lo, good things came. Today Barry Ritholtz points out that a Dark Cross is upon us - the 50 dma crossing the 200 dma. The last time this happened was early in 2007.
http://www.ritholtz.com/blog/2010/06/golden-cross-...
Off topic: Reference the Russian spy ring
(Reuters) - Moscow said Tuesday that the suspects in an alleged spy ring in the United States were Russian citizens.
For some reason the names "Richard Murphy" and "Cynthia Murphy" as well as “Donald Howard Heathfield” just don’t sound Russian to me. Guess the world is changing faster than I thought.
Off topic II: Speaking of Russia . . .
Remember those Somali pirates who seized a Russian tanker in the Indian Ocean within the last year?
The Euro Union navy that patrols those waters allegedly did not interfere due to casualty concerns.
That didn’t stop the Russians from responding.
Below is a link to part of a videotape showing the Russian Navy commandos on the Somalian pirate ship. All discussion is in Russian with an exception or two when there is a wounded pirate who exchanges a little English claiming it’s a fishing vessel; all other conversations are between the commandos.
The soldiers had freed their compatriots and moved all the pirates to their pirate ship. They searched the pirate ship for weapons and explosives.
Then they left the ship and exploded it with all the pirates aboard.
They used the anti-piracy laws of the 18th and the 19th centuries: The Captain of the rescuing ship has the right to decide what to do with the
pirates. Usually, they were hung.
Note there haven’t been any more reports of Somalia pirate seizures of Russian vessels.
Caution: Not for everyone, some foul language
http://true-turtle.livejournal.com/85315.html
paper gold market meltdown trade
Here's a possibly interesting paper gold market meltdown trade. My guess is, in the instances when gold will REALLY take off, this trade will perform astonishingly well - and in the meantime, you are not exposed to the fluctuations of the physical metal.
Long GTU short GLD.
Currently GTU's premium to NAV is 4%. I'd expect in a real crisis of paper vs "real assets" GTU would do substantially better than GLD. Imagine if there was an actual COMEX default, and then word got out that GLD didn't actually hold gold, but had paper gold instead. The mind boggles. GLD would trade at a discount, GTU at a premium, and POG itself would really spike. GLD itself might even be a zero. How fun would that be?
Costs of carry on this trade are not great, either. Max downside risk seems to be 4%, barring some sinkhole devouring the bank where GTU holds its gold bars.
I don't have this trade on, but I'm thinking about it!
Not everything is tanking
The Bombay stock exchange is just a few percent from its high of the year. Quite a nice chart actually (in comparison with other indices), but resistance is near.
Tesla Motors debuted by advancing +40% today.
Gold is still holding up and posted a gain on this bloody day.
........
option exercise expires aug. 31, at .28... counted coup has allowed for a ladder step-up till that reference date.. maybe one more brief push back to .30.. thinking first leg will be + 30% ( .45 ish ).. watching for volume confirmation in next 2 days (looking for the 10 M soon).. 2 M today... shrt at lowest year level.. grid storage
ABDA
It may be time to form the American Bank Depositors Association (ABDA). I think it would be possible to voluntarily raise say $50 million or more from citizens who have bank accounts. Not a big number considering how many accounts there are in the system.
The objective of this association would be to pay a bounty to any individual who kills a person caught in the act of robbing a bank. The precendent for this comes from the 'Dead Bank Robber Reward Program' established by the Texas Bankers Association (TBA) in the fall of 1927. It declared that it would pay $5,000 to anybody who killed an individual caught in the act of robbing a Texas bank. To clear up any misunderstanding the association added that it would not pay a single penny for live robbers. Alas this program was recinded in 1964.
I suggest we broaden the definition of robbery to include embezzlement by an act of a board of directors as well as looting and insurance fraud against the FDIC since the depositors are the guarantees of same. It should also include All American banks as well as the evil spawn of foreign institutions.
To be fair, inflation adjusted bounty payouts probably need to be $100,000 per robber killed. As was the experience in Texas, innocent people were killed for the bounty. Some were 'set up' and others killed in frauds by local law enforcement. The TBA made it clear that they would only pay for 'legally killed bank robbers.' The ABDA needs to make this clear, upfront!
Mistakes will be made. In an effort to mitigate collateral damage, the ADBA will commission an actuarial study so that the killing of innocent bankers will be kept to an acceptable number. We may also commission Fitch or Moodys to attest to the soundness of our endeavour, cost benefit wise.
I offer this to the tax paying, bank account holding, hard working publik as a first step in shearing away the shackles of your bankster tyrants!!!
But this is only a "modest proposal."
Time to shut down the US Federal Reserve?
" Debt draws forward prosperity, which leads to powerful overhang effects that are not properly incorporated into Fed models. That is the key reason why Ben Bernanke’s Fed was caught flat-footed when the crisis hit, and kept misjudging it until the events started to spin out of control.
Economics should never be treated as a science. Its claims are not falsifiable, which is why economists can disagree so violently among themselves: a rarer spectacle in science, where disputes are usually resolved one way or another by hard data.
It is a branch of anthropology and psychology, a moral discipline if you like. Anybody who loses sight of this is a public nuisance, starting with Dr Athreya.
As for the Fed, I venture to say that a common jury of 12 American men and women placed on the Federal Open Market Committee would have done a better job of setting monetary policy over the last 20 years than Doctors Bernanke and Greenspan. " Also we should copy Canada , where when a bank writes a mortgage , the bank by law can not sell the mortgage but must hold it , and live with it and the mortgage holder. http://tinyurl.com/29uygzw An interesting article by Ambrose Evans-Pritchard , Bob.
japan, then greece
Here's how I see this sovereign crisis possibly playing out here in the US.
We are both like Japan, and Greece at the same time.
Japan:
* real estate bubble that popped
* stock market crash
* private debt defaults are causing deflation
* debt denominated in our own currency
Greece:
* net importer
* dependent on foreigners funding a big deficit
So my guess is, for a time we will be like Japan. That path is stimulus, money printing (QE), extend & pretend, zombie banks, and deflation via bankruptcy, declines in lending, and private debt default. Then, "something" will cause a crisis of confidence for foreign investors, and there will be a run on the dollar (and/or a flight out of treasuries), but nobody will be there who can bail us out. Then we will find ourselves like Greece, since at that moment there will only be two choices: QE to fund the debt (killing the buck) or a severe drop in long term treasuries, and a rapid rise in long rates.
This is because we are beholden to foreigners to fund our deficit - like Greece - but Japan is not.
The trade - deep OTM puts on USD futures. USD SEP 80 puts cost $120 each, and if USD went back down to 74, they would expire at $6000. Remember that prices on Greek debt moved very rapidly once the crisis occurred, which is why I think these relatively near-term options might be a decent choice.
It's a Nick Taleb style trade, and it is only interesting if you think the options are mis-priced for this particular risk. The other risk of course is counterparty risk - if things really do happen this way, what are the chances of not getting paid for this trade...
Re: fiscal restraint = depression
Grym,
Banks are still lending to people who need money AND can afford it. Every expert on the block says 'banks aren't lending' so the very people we can lend to don't hear the news that 4.5% fixed for 30 years is actually truly doable with decent credit and a job today. Amazing what we choose to believe and act upon.
200-day MA flat; Descending MA Trifecta Next ....read this..
Found this interesting analysis on one of the sites, please take a look..
"Go back 201 days (Sept.15,'09) and you will notice that the closing price of SPY on that date was $105.72, which is ABOVE the closing price of $104.21 from Tuesday (June 29,'10).
That means the higher price from 201 days ago was dropped from calculating the 200-day MA and replaced by a lower price. The result is that the 200-day MA actually decreased, although mathematically the drop was only by a fraction of a penny (which is why Monday's 200-day MA and Tuesday's 200-day MA are the same at $111.42).
You will also notice that all but three of the closing prices on days 200-170 are ABOVE Tuesdays closing price. This means any close in SPY below $105 will cause the 200-day MA to DESCEND - visually. This will result in the "Descending MA Trifecta" - the Kodiak of bear signals when the 200, 100, and 50-day MA's are one above the other in that respective order, and all are descending.
Now, factor in the pending Death Cross of the 50-day MA crossing below the 200-day MA on what will be almost the exact same day the 200-day descends, and a major support level is broken, and you have a recipe for several more months of further declines. THAT IS AN HISTORIC FACT!
Want proof? Just look at the historic charts - it's right there is black and white. Look at the historic charts of the SP500 or the DJIA and you will find that in every single instance of the "Descending MA Trifecta" where such a trend lasted for more than 14 days, not once did it ever occur that it took less than 3 months (and often many more months than that) before the index climbed back up to the closing price on the first day the Death Cross occured.
Year after year, decade after decade, for an entire century there has been no exception to "Descending MA Trifecta" effect.
Game over "
Warning signals of a double-dip recession
"The yield on two-year US Treasuries has fallen to a record low of 0.61pc in a flight to safety, a level not seen during the depths of the Great Depression. Ten-year yields dropped below the psychologically sensitive level of 2.96pc.
Such levels are clearly incompatible with assumptions on Wall Street for 3pc growth in the second half of this year. “If the bond market is correct then this recovery could be dead in the water,” said Jim Reid, credit strategist at Deutsche Bank. The credit markets tend to sniff out trouble first and have acted as an early warning alert at every stage of the financial crisis over the past three years.
In Europe, investors remain jittery as the European Central Bank prepares to shut its emergency facility of €442bn (£361bn) of one-year loans, the largest sum ever lent by a central bank.
A report in the Financial Times that Spanish banks have been begging the ECB to extend the one-year scheme has heightened fears that they are totally shut out of the interbank markets. The shares of BBVA fell 7pc and Santander fell 7pc... Foreign capital flight is under way."
http://www.telegraph.co.uk/finance/financetopics/f...
Ted Spread not yet screaming blue murder. Wondering if central banks stepped in to halt the Ted Spread's normal range of 10-50bps - can they?
http://www.bloomberg.com/apps/quote?ticker=.TEDSP:IND
On a personal note I'm pretty certain I wanna hit the bank for a 3 year, 1.5% fixed rate following expiration of the present contract in October. I think we're in this for the long haul, there being no easy answers despite Obama's efforts to convince the world otherwise.
http://www.youtube.com/watch?v=zhhkF3dqXR0
Re: ABDA
Ross-too funny. But if ever was established it would need much more money. Just GS alone would bankrupt the fund.
European banks up after borrowing less than expected from ECB
Although I'm trying to get my head around this statement:
"The Frankfurt-based ECB still lends banks as much cash as they want at its benchmark rate of 1 percent for periods of up to six months. It said 171 banks asked for the three-month funds today. Banks can currently borrow three-month money from each other in the market at about 0.76 percent."
Obviously if they can borrow from each other at cheaper rates than the ECB than they will do so. So my guess is that the affected banks around the Med are the ones that continue to return to the ECB for borrowings.
As the article continues, cheap money is only good for carry trades and playing the yield curves (which banks are eschewing right now) so today's small auction means less than what the headlines are trumpeting. I guess the risk is still there, which most banks aren't borrowing against, at least not from big brother.
http://www.bloomberg.com/news/2010-06-30/ecb-lends...
European autos are up, so if I understand Bill correctly risk is being bought today.
Re: European banks up after borrowing less than expected ...
Les,
Spot on. Maybe you'd like to write the morning call tomorrow, and give me some time off?
:-)
I hope this commentary is helping everybody get a sense of the market structure, so that you can make better decisions.
By now I know most of you understand the reasons I am so down on media propaganda, whether it be purposeful or of the mindless variety. When money is on the line, there is a reason for everything; but, the media, no longer independent and objective, leads people to make bad decisions by giving them misinformation.
The discussion on this blog helps in getting people to question everything they read, and to follow the price action with an understanding of the market structure and the reason why prices move up and down. It's not rocket science, and these bankers are not the only people who have expertise in financial matters. Given the training, and the time, we can all make our own decisions.
Re: fiscal restraint = depression
Loannetter,
"Banks are still lending to people who need money AND can afford it."
By "can afford it" I assume you refer to people who still have a job.
By "banks won't lend to those who need money and people who don't need it don't want to borrow." I mean people without money (need it) and people with money don't need to borrow more.
Just my super-conservative self popping up. Except for our house, which I paid off ASAP, I have always saved until I could pay or "borrowed" from my own assets in a margin account.
People too often confuse the two words — need and want.
IMO, interest is something to collect rather than pay. (Except in dire short term emergencies)
Re: fiscal restraint = depression
I obtained a variable rate line of credit on my home to finish my attic. Just finished the project- it took a bit over a year. I had absolutely no trouble getting approved. But I own my house outright, have money in the bank, and some IRA/ retirement funds. I tapped very little of the credit line. I used some of my savings and spent money that I otherwise would have saved.
Re: fiscal restraint = depression
Many people like yourself have equity. That money is locked up without your being able to access it unless you get a line of credit or refinance. Like you suggest it's easy to do and at these rates very attractive to consider that interest will be easily made up by investing wisely.
Grym, folks over 62 don't need a job or income go get an FHA Insured Reverse mortgage and tap their equity. That could mean living a reasonable life vs. eeking out a life on Social Security. We only recommmend FHA insured Reverse products as your estate is protected by the FHA guarfantee and cannot be foreclosed even if you outlive the equity and/or the value falls below your loan balance.
Re: fiscal restraint = depression
Thanks Loannetter.
That's good to know and keep in mind as an ace in the hole.
I see the present economic malaise as a long term mess and think taxes are my biggest, worse case scenario right now.
If they can't regulate it, hock it or confiscate it — I'm sure "they" will find way to tax it.
Government... Too much of a Bad Thing and getting worser all the time;-(