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Trez bond market gonna be tough, increasingly bloody
been thinking a lot about the dollar and trez bond market
one must always be careful to distinguish between the various bond markets
trez, muni, mortbackeds, corporate
as well as debt collaterized obligations
the battle within the treasury arena will be a long and grueling
it will become a choppy top market as titanic forces pulling with deflation (safehaven toward lower rates, recession toward lower rates) and pushing with national fundamentals (escalating debt toward higher rates, excess trade gap toward higher rates, failing stock and credit markets toward higher rates), leading eventually to politically motivated assistance to America, then simple capital preservation
the result will be a long and grueling tug & pull with a wide rounded top on principal value corresponding to a wide rounded bottom on rates
right now the trendline is clearly down with a narrow channel
check it out on ^TNX (TENS yield chart)
http://finance.yahoo.com/q?s=^TNX&d=c&k=c1&a=v&p=s&t=1y&l=off&z=m&q=....
not a great chart but you can see the clear trend
all last winter following the failed attempt by the FedReserve to bring down TENS yield (via killing the THIRTYS), the Fed showed frustration and even spoke publicly about that frustration
now, they are in for a nasty surprise
they succeeded, and now sit vulnerable to a Liquidity Trap of international magnitude
they pushed the Trez market over the edge with regional banks purchasing unprecedented amounts of TENS notes
but that has set off a chain of events
it has drawn money from the stock market into the bond market
it has led FannyMae to hedge with massive Trez purchases
it has triggered an international influx into our bonds
it has stabilized the USdollar... for now
when the Trez market gets choppy, the dollar problem will resume
The Fed's next moves will demonstrate their rising desperation to avoid the accelerating grip of this deflation
THE FED WILL SOON MONETIZE DEBT
AND EVEN MONETIZE IN HIDDEN FASHION S&P STOCK SUPPORT
this will be kept from the public as long as possible
the report card for Fed success if the Corp Trez Bond Spread
it is rising, except for the last couple days
as the Spread remains high, corporate real borrowing costs remain high, thus contradicting all Fed efforts to cheapen money
Puplava continues to mention the Trez market as the next bubble
Sinclair continues to mention the Trez market decline as the last requirement for GOLD rising
cracks are forming on closely aligned bond securities like FannyMae and MGIC
cracks are forming on closely aligned moneycenter banks like JPMorgan
the battleground will be the trez bond market
RichRussell expect 3.0% as target bottom on rates
inferring from Pup/Sincl leads one to expect a higher bottom
I continue to believe little is spoken regarding a "RISK PREMIUM" to foreigners for our twin tower debts (fed, trade) since we in no way resemble Japan internally
they suffered an exporters deflationary liquidity trap
we are to suffer an importers deflationary liquidity trap
these are without precedent in modern world history
lessons can be learned from Japan, but not many
mistakes will be made, since central differences between importers and exporters and national debt levesl
I continue to believe some big events (internal or external) will trigger a change in the world view of financing US Trez debt
for now, the motive is profit since rates are dropping
soon, it could easily morph into "saving America"
later, nothing but self-preservation will be front & center
I ramble in my skivvies, unshaven, unkempt, and offending mine own self with a mild stench
/ jim
real nice critter messages brung from JayChen to doghouse
he has a way of putting a crystal clear frame on things
this USdollar issue is soon to be a worldwide issue, a hot potato, a point that even our US leaders (esp CEO's) will harp about as we move into a new stage of desperation...
we will beg for the USdollar to go lower
and stay lower
and continue to go lower still
BUT THE WORLD'S OTHER CENTRAL BANKS WILL RESIST MIGHTILY
the buck will become a staggering colossal ball & chain
what many top pundits like John Mauldin are overlooking each week in their excellent messages are...
each major economic continental financial engine will undermine and cheapen their PAPER (currency, the "national sovereign stock issue)
which serves as a tightening crippling deflationary force
since both Asian mfr nations will lower their nation's prices while Western consumer nations experience continued slowing
this will accelerate the worldwide deflation Liquidity Trap
END RESULT: gold will be the only only only remaining avenue
as all paper is debased relative to an unseen base anchor
that anchoring base is the unspoken financial commodity GOLD
if gold is not an anchor, it is at least a point of reference!!!
all roads are being destroyed, sequentially and systematically
first stocks
then junk bonds
then corporate bonds
then municipal bonds
then foreign currencies
then foreign sovereign debt
then mortgage-backed securities
then insurance companies
lastly, the big mother -- US Treasury Bonds, USDollar
as the vice tightens, the imbalances thru our entire economy, and among all its trading nations, and felt by our demographic groups... will tighten so much as to cause social chaos
coming up -- SOCIAL CHAOS
just learned some trivia
a high school friend (lost touch over years) in my older brother's class is now Governor of Iowa
Tommy Vilsack
big kid back in younger years
he was 6 inches taller and 30 lbs heavier, which made it frustrating for him to gain entrance to movie theatres as a low cost kid
/ jim
DONT BE SHINING MY ASS !!!
been waiting for a nice opportunity to say that
I always wonder how many folks on SI lurk and read and study and question and scratch their heads (crotches too), but seldom post a message expressing an opinion for whatever reason
Nixon called them the Silent Majority
I believe SI has 20 non-posting members for every quiet type member
I have had the pleasure of talking and meeting a few in my days
your words mean a lot to me
well, thanks, PaintMan
my stay in the Doghouse will not deter me in any way
still maintain my daily regimen
watching an old re-run on USA Network tv
"Sleepers" was an excellent excellent unheralded movie
with Robt Redford, Sydney Poitier, Dan Aykroyd, Ben Kingsley
Ben said something very relevant in it
"wars are not fought with guns & bullets anymore
they are now fought over the control of information"
tremendous battles are being waged right now, right now
regarding Iraq, terrorists, banks, the economy, and most importantly the many bits and bytes on economic deterioration evidence, massaged manipulated distorted thru selective reporting thru favorable seasonal adjustments thru incorrect comparison thru naked attempts to paint a nice face on an aging wrinkled badbreathed bitch with matted hair and a whiskey voice wearing way way too much makeup that still doesnt hide the truth
this thread will be some fun
who knows?
it might become an SI Jailhouse thread that some regular devotees frequent for the benefit of the bit-based oppressed
enough, take it easy, nice to meet you
/ jim
Friday, October 11, 2002 (Puplava Friday market wrap)
Bottoms UP!
Was it earnings? No. Was it economic news? No. Was it political news? No. The market rallied because it was technically oversold. By Wednesday of this week they (Wall Street) needed to get something going. The economic news wasn't getting any better, corporate earnings were coming in way below expectations and troubles were brewing in the financial sector. J.P. Morgan got hit with another credit downgrade as the bank's profitability continues to decline. On the Street everyone knew that the economic numbers this week weren't going to look good. They didn't. Bad loans are growing in the banking sector and talk was everywhere about systemic risks in the financial system. The major averages were hovering at key support levels. If those levels were breached, then it was, "Katie, bar the doors" to lower levels. How low? Possible lows for the major indexes would be in the 6,000 range for the Dow, somewhere in the 600's for the S&P, and 900+ for the NASDAQ. Something needed to be done to keep the market from crashing to new lows. What Wall Street didn't want to see is investor capitulation. There is still a lot of money sitting in mutual funds, which are hemorrhaging. If major averages headed lower, the market could experience a series of 90% downside days or a washout for the markets. A 90% downside day is an event where downside volume equals 90% or more of the downside and the upside volume and when points lost in the market equal 90% of points lost and points gained. Historically a bottom is reached after 3 to 4 90% down days that are followed by several 90% upside days.
We haven't experienced a series of 90% down days typical of bear market bottoms. There has been no clear evidence that a major market bottom has been put in place. What happened is that the markets responded to oversold technical indicators. After hitting a peak of 962.7 on August 22nd we have experienced six weeks of declines in all major indexes. The rally in late July and August was feeble at best with no accompanying volume. The rally in July came quickly in a series of big point gains and then quickly fizzled. The rapid point gains were attributed to short covering. Afterwards there wasn't anything to write home about as hopes were dashed as the rally ended in late August. The public was absent from most of the August rally with money flowing out of mutual funds until the very end of the rally.
The Four-Step Rally
The new sequence of engineering a rally seems to be following a four-step process:
Phase 1 One-two-day wonder rally, with intervention.
Phase 2 Short covering drives violent upside surge in indexes.
Phase 3 Day traders and technical traders come in a play rally bounce.
Phase 4 John Q comes in at end of rally after uptrend has run out.
After the rally plays out as nothing more than a technical bounce, the bad news sets in as expectations are readjusted and the markets head lower. Notice that you no longer hear about the second half recovery in earnings or the economy. Third quarter pro forma profits have gone from 30% to 5%. The fourth quarter has gone from 40% to below 20% and is still headed lower. Wall Street has plenty of history to fall back on to justify and spin a new rally with talk such as "this market has bottomed," "stocks do well in an election year," "this market has already lost close to 50%, therefore we've hit bottom," "the Fed will lower interest rates," etc. There is no end to the spin, but the spin can't hide the fact that this is the longest running bear market since the Great Depression. Stocks aren't cheap. They have gone from mania like valuations to becoming simply expensive. That's all. There is nothing compelling to entice investors to want to own stocks other than to trade this market technically.
Reading Between The Lines
Now let's look at some of the news. Retail sales fell in September by 1.2% along with consumer sentiment. Consumer confidence hit a 9-year low. The University of Michigan's Consumer Sentiment Index fell to levels not seen since September of 1993. Sales are coming in weaker than forecasts as debt burdened consumers begin to retrench. Lower retail sales at Wal-Mart and J.C. Penney indicate the consumer, who accounts for two-thirds of the US economy, is slowing down on spending plans. Auto sales declined in September despite zero percent loans and now zero down payments. GM, which had pulled back on zero percent loans, has had to revive them adding to it, zero down payment and zero percent interest to get buyers into showrooms. Most retailers, from discounters to general department stores, are seeing sales volume drop. More is expected in the months ahead, especially during the key fourth quarter Christmas season. Retailers will also have to deal with the possibility of war next month and the effects of a West Coast port shutdown. Many retailers are reporting late receipt of holiday goods and higher freight costs.
In other news on the corporate side, companies are still announcing massive layoffs. Lucent today announced that it would lay off another 10,000 workers to reduce costs and help stave off bankruptcy. The company had 123,000 employees two years ago. Plans are to reduce employment to 35,000 by the end of 2003 -- a reduction of over 71% of its workforce. The biggest maker of telephone equipment will also take another $3 billion restructuring charge. Lucent looks like it will not make it and could be closing its doors soon if it isn't taken over. The company cancelled $1.5 billion in a line of credit and another $500 million facility to head off an anticipated default by violating its debt covenants. The company may seek a reverse stock split to boost its share price and avoid being delisted.
The key to the tech outlook next year is what companies will be saying about employment as they release third quarter results. If they plan on letting go of more workers, then it will tell you that capital spending plans are still weak. If that is the case and we have a retrenching consumer, then what is going to give us the 3-4% economic growth that forecasters are calling for in the fourth quarter and for next year? To avoid looking stupid, major investment strategists on Wall Street have not only been trimming earnings forecasts, but also trimming back their ridiculous forecasts for the major indexes by the end of the year. Many strategists now refuse to go on the air. There are many fallen gurus and divas of the investment world that prefer not to be seen or questioned. Their calls have been an embarrassment over the last three years. In 2000 they told us it was merely a correction and in 2001 it was the terrorist attacks on the Trade Center and Pentagon. Maybe this year they will get lucky and blame it on the war if it starts, as I believe, next month.
Then there are earnings. GE helped to ignite today's rally by reporting earnings that grew by 25% during the third quarter. GE has been both a catalyst for a rally and for a decline. They helped to spark a short-term rally several weeks ago by announcing they would meet third quarter estimates. They then helped to trigger a major selloff by warning they would have difficulty achieving double-digit gains next year. The 25% third quarter gain [for GE] was helped by the sale of its electronic-commerce unit as reinsurance and private investment businesses experienced their second straight quarter of losses. The weakening economy has slowed down revenues and profits at the company's two large industrial divisions. The company is running out of rabbits to meet demanding expectations on Wall Street. At the moment, the company is meeting earnings estimates through acquisitions and cost cutting.
Yahoo! beat the Street with revenues and earnings that rose from very depressed levels from last year. Comparisons to last year should be easy this quarter because of the huge writedowns companies took last year at this time. We don't count huge losses and writedowns when they occur, but include them when we want to make earnings comparisons. That is how the earnings game is played. Analysts lower earnings estimates and exclude large writeoffs, and companies pretend things are going well by playing along with beating lower estimates. Shares of Yahoo! are up over 30% this week with a current PE multiple of 103. I think we can dispense with the notion that this is a 30-50% earnings-generating growth company. Yahoo! has become nothing more than a tradable tech stock. It is doubtful it will ever become a great profit generator.
The best thing that can be said about this market is that the little guy hasn't jumped ship. John Q is still holding on in the hopes that he will break even. As the graph of mutual fund inflows show, the vast majority of investors came into this market in its final third phase, which began in 1995 when the Clinton-Greenspan bubble began. That is when the Clinton Administration greased the wheels of the economy with easy money creating the bubble economy. Now we have multiple bubbles as a result of the continuation of easy money and ample credit. I've already covered the various bubbles in "Bubble Troubles."
What's Ahead of Us?
So where do we go from here? It is my guess that this rally may follow a similar path as the late July early August rally. We could get several days of strong point surges that are then followed by a weakening rally as the shorts cover their gains. A rise in stock prices will be capped off by a declining economy, worsening earnings, and emerging market debt defaults. Watch Brazil, and the prospects for war. In the end this will be nothing more than a tradable rally. For tech traders it will be a few more days, or maybe weeks of fun, and then it will be time to add to short positions again. There are no firm convictions in this market. Opinions change daily, weekly and monthly with the whims of the market. The amazing fact to me is that there are gullible people that still believe we are in a bull market and that stock prices are coming back. The bull market ended in the first quarter of 2000. A new bull market began in "things" such as commodities, which also includes gold and silver. Just like the bull market that began in stocks in August of 1982, very few people believed in it. It wasn't until 1995 that the vast majority of money came into this market, which was during the third and final phase of the last bull market.
Become A Believer in Things
That is where we find ourselves with gold and silver today. Very few people believe in it. There is no widespread public participation nor is there widespread institutional ownership of this new bull market in "things'. All you find is disbelief, which is how I like it. The old adage buy low and sell high has never been more appropriate. Precious metals stocks of unhedged producers have only experienced the first phase bull market run up. They have retraced a good portion of those gains, but are still up significantly. It looks very similar to what happened in 1982-83 followed by the selloff in 1984. I don't intend to elaborate on the bull market fundamentals that are now in place. I've already written about them and more recently James Sinclair has waxed eloquently about gold's fundamentals. The financial world is still in denial, while the public is playing ostrich. That is where how bear markets end and bull markets begin. I would suggest that the intelligent investor consider and read more on these topics as elaborated in my Storm, Storm Updates, and PowerShift series and draw your own conclusions.
I will end this part of my weekend WrapUp with a chart of the market and financial cycles from my Storm series. The reader will notice that there are long periods of rising stock prices that are followed by periods of long declines. During these periods of decline, the commodity markets are experiencing periods of rising prices. These cycles seem to reappear every 20-30 years. This graph needs to be studied for it will cure the reader of the illusion that good times are permanent. One market's summer is another market's winter. I would suggest that the world of paper whether stocks, bonds, or currencies are heading from fall into winter; while commodities or "things" are coming out of winter and entering spring.
In summary a bear market in paper is entering its second phase and is far from a bottom. A new bull market in commodities from oil, grains to precious metals have just begun.
The Markets This Week
The Dow and the S&P 500 rose 4.3 percent this week while the NASDAQ advanced 6.2 percent. This leaves the losses down year-to-date for the Dow to 21.67 percent, 27.24 percent for the S&P 500, and 37.94 percent for the NASDAQ. This week looks more and more like a temporary snapback triggered by short covering. To get any more legs, this market still needs the day traders to come in and finally the investment public at the very end of the rally.
Economists are still calling for 3.6 percent economic growth this quarter and possibly 4 percent for the fourth quarter. Analysts are still bullish with CRAP or pro forma earnings estimates for the fourth quarter. They have now lowered pro forma earnings so low that any company experiencing declining profitability is now bound to look good. The GAAP PE ratio for the S&P 500 is close to 30 and the dividend yield is 1.9 percent. Wall Street and the financial media use the CRAP PE ratio, which is 17. It still doesn't make stocks cheap, but it makes them look less expensive. The Dow still trades at 22 times earnings with a dividend yield of 2.4 percent. At 3 percent the Dow will be fair valued which necessitate a drop to around 6,200, which is where I expect we will be when this next leg of the bear reasserts itself. The NASDAQ, well what can I say other than that it has no earnings. The NASDAQ 100 still sells at 37 times earnings with declining earnings and growth rates.
No, Virginia, this isn't the bottom.
This is a trading rally only with key resistance levels of 8,000 for the Dow, 850 for the S&P 500, and around 1,240 for the NASDAQ.
Money flew out of stocks this week with Trim Tabs reporting that mutual funds saw an exodus of $4.2 billion this week following last weeks $2 billion inflow. Money keeps flowing into bond funds with bond funds taking in $2.3 billion this week after taking in $1.7 billion last week. This is the next bubble to burst. Even Vanguard is warning its bond investors to diversify and not just buy bonds. The bursting of the bond market bubble will be the last leg of a five-leg fundamental set for gold's new bull market. Once the bond market bursts, then there will no longer be a safe haven left in paper.
Overseas Markets
European stocks gained as J Sainsbury Plc, Porsche AG and Deutsche Lufthansa AG indicated earnings expectations for this year might be too low. The Dow Jones Stoxx 50 Index recorded its second weekly gain in seven, climbing 5% to 2457.24. It has gained 8% since closing at a 5 1/2-year low Sept. 24. All eight major European markets were up during today's trading.
Asian stocks rose after a rally in U.S. shares and signs of a recovery in the world's largest economy boosted optimism that demand will increase for Canon Inc., Samsung Electronics Co. and other exporters. Japan's Nikkei 225 Stock Average advanced 1.6% to 8572.51. South Korea's Kospi index climbed 1.2% as the government said it will announce stock-boosting measures today.
Bond Market
Treasury issues got slammed for a second session as equities registered more heady gains. Treasuries closed at 2 p.m. ahead of the Columbus Day holiday and will be close on Monday. The 10-year Treasury note surrendered 1 7/32 to yield 3.80% while the 30-year government bond lost a whopping 1 20/32 to yield 4.815%.
© Copyright Jim Puplava, October 11, 2002
Wayne, just read your DISS of GoalTudor
nice job
mine was brief by comparison
are you sure you were writing it to please yourself?
sure... but amusing
that bitch doubtfully made it thru the second paragraph
this part was my favorite
"you are a boil on the net that needs to be lanced"
got a long chuckle out of me
a man after my own heart
welcome again to where the jailhouse rocks
/ jim
Pops, I am suspended until Oct 24th
when they busted me for the 2ndAlias "Keynes_Harlot"
I was given another two weeks
noontime Oct 24th
the old thread will hang in there, maybe deteriorate a little
dont worry, nobody is too important
some good stuff posted
many good people, just too many liberals
I tend to agree with your less aggressive scenario
another week or more of this sucker's rally
then the floor falls out
/ jim
financial firm will face complete instant annihilation ???
[valuable external view of Puplava and his JPMorgan opinions
Puplava manages $200 Million, sat for interview with Task
JPMorgan owns 20x the derivative pyramid versus LTCM's
institutions are offloading risk, while JPM takes on that risk]
By Aaron L. Task
Senior Writer
10/11/2002 03:00 PM EDT
A Potential Pothole on Rally Road
The stock market rallied big Thursday and was soaring again midday Friday. A continuation of the technical factors that contributed to Thursday's gains, along with a Lehman Brothers upgrade of IBM and relief that General Electric's results weren't worse were fueling big gains for major averages Friday afternoon. Everything may suddenly appear "okey-dokey" but a large number of market participants remain worried about the potential for some upheaval in the financial system.
"I will venture there is an outside chance that in the very near future, during a momentous market upheaval, a major financial participant will face complete and instant annihilation," Fari Hamzei of Hamzei Analytics in Los Angeles commented recently.
For some time now, J.P. Morgan has been the name most often cited as a potential trouble spot. In an interview Thursday, Hamzei said J.P. Morgan is on his short list of financial firms about whose "annihilation" he is concerned. Admittedly, that's a dramatic description for what others contend may be a forced sale or, at the very least, more pain for J.P. Morgan's stock and bondholders. Specifically, concerns remain about the bank's exposure to derivatives, financial instruments that derive their value from other securities and are designed to offset risk -- although history suggests they often have the opposite effect.
As reported previously, J.P. Morgan is far and away the largest dealer of derivatives -- involved in $25.9 trillion, or 51%, of the $50.8 trillion notional value of contracts involving U.S. commercial banks and trust companies at the end of the second quarter, according to the Office of the Comptroller of the Currency. Given its dominance, J.P. Morgan is an obvious bogeyman for those concerned about derivatives in general.
A midweek downgrade by Moody's put those concerns back on the front burner. A J.P. Morgan spokesman said the bank doesn't comment on rating actions. But in a conference call after its profit warning last month, Dina Dublon, J.P. Morgan's head of finance, said a Standard & Poor's downgrade at the time would have but a "small impact" on J.P. Morgan's derivatives business. In cutting $42 billion of J.P. Morgan's long-term debt to A-1 from Aa3 and its bank subsidiary debt to Aa3 from Aa2, Moody's ratings are now in line with S&P's.
The spokesman said he was not aware of any customers seeking alternatives to J.P. Morgan's derivatives desk, or leaving altogether, as has been reported elsewhere. Indeed, with assets of $741 billion and shareholder equity exceeding $40 billion at the end of the second quarter, there appears to be no imminent threat to the firm's financial wherewithal. Moody's said Wednesday that J.P. Morgan's liquidity "remains strong," and its risk-weighted capital ratios are good. After declining over 56% year to date previously, J.P. Morgan's shares rose 3.2% Thursday and were up another 7.7% Friday afternoon.
Still, many on Wall Street fret that time, and the markets, are not on J.P. Morgan's side.
Stressed Out
Hamzei, who runs a quantitative analytics firm, is mainly focused on issues such as on-balance volume. That measure of whether a stock is under accumulation or distribution shows "money has exited [J.P. Morgan's] stock at a horrendous rate," he said.
But he also cited the "extreme levels at which the global debt and equity securities and derivatives are currently trading," which have been and presumably continue to put stress on J.P. Morgan's proprietary trading and derivatives portfolios.
Prior to Thursday's advance, yields on investment-grade corporate bonds were at their widest spread to Treasuries in a decade, while the S&P Speculative Grade Index, which mirrors the trend in spreads between high-yield bonds and Treasuries, hit an all-time high of 1573.9 on Thursday. S&P's Investment Grade Credit Index also hit a record high on Thursday. Corporate default rates are up markedly this year and Fitch Investors reported 40% of junk bonds issued from 1997 to 1999 are now in default. RealMoneyPro.com's Brian Reynolds observed that corporate spreads were "narrowing significantly" Friday morning, which would be welcome news for the corporate bond market and J.P. Morgan in particular if it continues.
In previous times of such financial market stress, "somebody's derivatives book gets out of whack," Hamzei said, recalling Victor Niederhoffer's hedge fund in 1997 and Long Term Capital Management in 1998, among others. Because J.P. Morgan was intimately involved as a lender to Enron, Global Crossing, WorldCom, Tyco, Kmart and a host of other bankrupt or teetering telecoms, investors' faith in its risk management strategies has eroded.
Concerns abound that, among others, the firm's financial models are not functioning properly in the current environment of 40-year-low interest rates and extensive year-to-date declines in major equity proxies for a third-straight year. Former employees say the current leadership, which is largely the old Chemical Bank team, is ill-prepared to handle such extreme market events.
Thus, the firm's repeated declarations, which a spokesman reiterated Friday, that its derivatives exposure is far less than the notional value of contracts it's engaged in and that the bulk are with highly rated counterparties, are increasingly failing to mollify its critics.
"Everyone knows J.P. Morgan Chase is in deep trouble," commented Jim Puplava, president of Puplava Financial Services, a Poway, Calif.-based firm with about $200 million under management. "It is a bank in all the wrong places and it is hemorrhaging from multiple sides of its businesses." Puplava, whose firm has no positions in J.P. Morgan, compared derivatives to an insurance policy, and derivative dealers as providers of such policies.
Describing today's financial markets as a "100-year storm" or a "major earthquake," the money manager suggested "the problem we have today [is that] risk has been concentrated on one particular insurer: J.P. Morgan."
Because much of J.P. Morgan's derivatives book are "highly specialized and customized contracts," Puplava suggested it's difficult to assess the true value of the portfolio. It is "highly illiquid and vulnerable to panic selling in the event of a crisis," he argued, recalling that when credit spreads widened in 1998, Long Term Capital Management's risk multiplied as it found itself unable to offload losing positions.
As word got out they were in trouble, traders began to press Long Term's positions, which exacerbated its troubles. The cycle continued, culminating with a run on the hedge fund and a bailout by its lenders, as brokered by the Federal Reserve.
"If Long Term Capital's $1.25 trillion derivatives book almost took down Wall Street, what do you do with a firm with $26 trillion?" Puplava wondered. "The problem in this derivative market is that everyone is trying to offload risk" rather than taking on more.
In broad terms, Puplava expressed concern that because of its lowered credit ratings, J.P. Morgan is facing increased borrowing costs, as well as the potential diminishment of revenue from its derivatives business. The combination could put further pressure on the bank's profitability, causing further downgrades and more problems with its derivatives business, and so on and so on.
Having said that, the money manager admitted having no specific knowledge of J.P. Morgan's derivatives book or alleged problems therein. "The only ones who know are J.P. Morgan and the Feds," he said, criticizing Alan Greenspan for consistently speaking out against more disclosure and regulation of bank derivatives positions. "But if they were doing something right, why have profits declined persistently? Any time there's trouble, J.P. Morgan is always on the scene. Let's hope J.P. Morgan's board is asking question Enron's should have been."
Whether or not J.P. Morgan has to pay the ultimate price for its derivative activities remains to be seen. But Wall Street is watching very closely.
-end-
Goldman Sachs, Under U.S. Probe, Fights SEC Proposal (Update5)
By Neil Roland (Oct. 10 )
Washington, (Bloomberg) -- Goldman Sachs Group Inc., which employs 300 analysts covering 2,000 companies worldwide, said researchers shouldn't be held personally responsible for their stock recommendations.
The Securities and Exchange Commission wants analysts to certify the integrity of their research as part of an effort to boost investor confidence after accounting scandals at Enron Corp., WorldCom Inc. and other companies. Goldman Sachs is among a dozen financial services firms under investigation for allegedly recommending stocks to win investment-banking business.
Goldman said the SEC's plan doesn't consider changes made to analysts' reports by their supervisors, which may mean that stock selections and commentary don't reflect the views of researchers. Goldman's position contrasts with rivals, such as Citigroup Inc., Merrill Lynch & Co. and Credit Suisse First Boston, which have endorsed the SEC proposal.
The certification ``of personal views' doesn't take into account the ``fact that the firm may legitimately influence the views of the analyst in a report,' Goldman Sachs General Counsel John W. Curtis wrote in a Sept. 23 letter to the SEC.
The SEC proposal should be changed to make analysts certify their work ``subject to supervision policies of the broker or dealer applicable to all research published by it,' Curtis said.
Goldman Chairman Henry Paulson has been working on a Wall Street plan to end federal and state investigations of securities firms. Congress, the SEC and state regulators, including New York Attorney General Eliot Spitzer, are probing whether brokerages promoted shares of clients and gave executives shares from initial public offerings to win investment-banking fees.
Shares Plunge
The shares of securities firms plunged this year amid the investigations and slumping demand for firms' services. Bloomberg's Wall Street Index has dropped 38 percent. Goldman shares, down 34 percent this year, rose $1.81 to $61.07 at 12:52 p.m. in New York Stock Exchange composite trading.
``Our letter is a legitimate response on the merits to an important proposal, and has no bearing on the SEC's investigations,' said Goldman spokesman Lucas Van Praag. ``It seems bizarre that anyone would criticize us for responding to a letter we were asked to comment on.'
Banks had ``difficulty insulating the research analysts from the problems, both real and perceived, resulting from the relentless and sometimes intense pressure' coming from clients, Paulson told the Committee on the Investment of Employee Benefit Assets in Washington, the Financial Times said today.
Salomon has already put the SEC recommendation in place. Salomon General Counsel Marcy Engel said in a Sept. 27 letter to the SEC that supervision of analysts shouldn't prevent researchers from certifying the accuracy of reports.
``The analyst can properly certify that the research report accurately reflects his or her views, even if those views have changed as part of the supervisory process,' Engel wrote.
Little Influence
The Goldman letter, which was issued during the SEC's public comment period, may have little influence on the SEC's deliberations, a legal expert said. ``Goldman's political capital with the SEC is at a low ebb,' said Adam Pritchard, a visiting Georgetown University law professor who was a senior SEC lawyer.
SEC spokesman John Heine declined to comment. The SEC has said its proposal seeks to ``bolster investor confidence in the quality of research.' The plan ``creates an incentive for analysts to examine, even more carefully, the basis and foundations' for their views, the SEC said in its proposal.
The SEC comment period ended Sept. 23. Agency staff will review the letters and decide whether to recommend any changes in the proposal before commissioners cast a final vote.
``It's an awkward time for Goldman to raise these issues,' Southern Methodist University law professor Alan Bromberg said. ``But it's their chance to make reasonable points and try to influence a rule. And it puts the SEC on notice about the defense Goldman would offer if any of their analysts are charged.'
Merrill Fine
Merrill Lynch agreed to pay $100 million earlier this year to settle an investigation by Spitzer, who released e-mails showing analysts disparaging stocks that they publicly touted.
Spitzer also released e-mails and memos from Salomon Smith Barney that showed former telecommunications analyst Jack Grubman criticizing investment banking clients while issuing favorable research reports at the behest of Salomon bankers.
Massachusetts regulators this week uncovered Credit Suisse First Boston e-mails that they said showed the company used analyst recommendations to win banking business.
A group of state regulators expressed doubt that the SEC analyst rule would enhance the integrity of stock research. The Securities Industry Association, which represents large firms, said certification should be required only of the lead analyst on a report, not everyone who worked on it.
-end-
Mike, below is a section taken from Roach on consumers
Modigliani makes an outstanding point, highlighted in bold
this lower rate REFI phenomenon will backfire on lenders
(just when we are focused on the homeowner benefits)
this lower rate environmt will backfire on certain consumers
(just when we think it helps them)
very intriguing, more than mere ideas, but macro thinking
if money is coming too easy to borrowers, like in REFI's, then the loss comes from someone's or some company's hide
NAMELY MORTG-BACKED SECURITY HOLDER, BANKERS, MGIC INSURERS
according to Dept Commerce, for 2001,
$1090 B/yr in interest income verus $590B in interest expense paid
so lower rates are subsidizing the younger indebted homeowners at the expense of the older retired citizens living off interest and dividends
wow, well put, parts already known, but now succinctly clear
so banks and bondholders will be weakened further
so older consumers are hurt, offsetting young overconsumers
net damage to the economy on both counts
that is a major reason why lower rates beget even lower rates
and the Liquidity Trap acts like a BLACK HOLE !!!
Roach concludes a major adjustment is coming for American consumers
just a matter of when
the relevant passages:
We also spent some time discussing the latest rage in Wall Street consumer theories -- that low interest rates would provide a windfall to household income that would keep the consumer afloat. The record refinancing bonanza now under way certainly seems to hint at just such an outcome. But Professor Modigliani sounded a note of caution on this count as well. "For every borrower who gets a boost in purchasing power, there is a lender who loses." He went on to add that "they may be different people (borrowers and lenders), but it is the net effect that matters for the macro economy."
At that point, a light bulb went on in my own atrophied brain. Years ago, my research revealed that there was a certain perversity to the response of US consumers to fluctuations in interest rates -- rising rates didn't seem to hurt nearly as much as most of us thought. It turns out that's because consumers are net lenders to the rest of the economy -- their interest income is well in excess of their interest payments. That still holds true today. For example, in 2001, US Commerce Department data show that households received some $1,091 billion in interest income, well in excess of the $592 billion paid in interest expenses. In other words, while refis help in a lower interest rate climate, those dependent on interest income -- especially retirees -- are hurt. And to the extent that the consumer sector has more interest income than debt service, it may simply be wrong to conclude that surging refis are always accompanied by booming consumption.
In my opinion, the combination of these two theories sends an unmistakable message: The carnage of a popped equity bubble spells a major adjustment for the saving-short American consumer. It's just a matter of when.
/ jim
Barry Bonds can kiss my ass
the most insufferably arrogant superstar ever to wear spikes
he is a posterboy for the antithesis of a team player
he is one phoney, falsely modest, piece of shit
no team photos, no team appearances, late for practice, double player locker room stall, badmouths teammates, fights with Kent, hated by teammates and players thru the league, speaks about team to the press hypocritically while all behavior is of SELF
a great quote by a former Bonds teammate:
"better to lose on another team than to win on his team"
I would like an all-California World Serious
Angels vs Giants
lets see how much of the 370 pt gain is held today on DeadDow
my guess is +230 pts (5/8-ths of the gain)
getting rid of a goodly amount of oversold condition, eh?
/ jim
as in Wayne? way to go, hats off to you, Laddy
FreeMemberships have some decent privileges over here in Absentia
from 3-4pm on M-W-F your membership has all the full features
so you can post on other threads, send PMemos, view several messages at once, etc
3pm Happy Hour is approaching
I cannot wait to take on GoldTitless when I return
have a plan all set
I hope you realize I never put myself in the same class as Russell, Puplava, Sinclair, Grant
but three of the four have names of Jim
that has to count for something
pray please, tell me what your smoking gun was with GT
the gun above your belt (mouth), not below
I am jealous, since my jailhouse tenancy will last another 11 days
it wasnt just the beauteous flame, but the attempt to post messages with a 30-day trial membership under a 2nd name
I was "Keynes_Harlot", which you might not have guessed
it was fun while it lasted for a mere 18 hours
stupid SIAdmin accused me also of badgering SI members under Harlot
I only flicked the noses of buddies of mine, each forewarned privately
I didnt cover my tracks too well, electronically
those SIAdmin guys have no sense of humor
a sample from the manharlot...
you yanks seem intent on taking on notes upon notes you do
we should send over to Iraq all manner of bankers
by the time they were thru with Saddam's boys
they could not tell whether a scirocco from morocco had a hickey or a dickey
i could take care of my johnny, work up a sweat we did
never should have married that spindly wench lydia
apalogies to all for the mess my johnnyM made
duncan (oooxxxooo)
/ jim
Amos Tversky's partner was Kahneman, way cool
I have cited Tversky's "loss aversion motive" several times
it says: "the pain of loss was found to be well in excess of the joy of gain... a powerful asymmetrical wealth effect"
if you start with a bunch of money, then lose your gains, you tend not to change your spending pattern
if you later lose some of your original stake, then YOU TEND TO SPEND LESS
when investors lost huge money in 2000 then 2001, they tended to continue spending, possibly because they lost their gains from 1995 to 2000
now they have lost a piece of their original stake
hence
CONSUMERS WILL SPEND LESS
end of story, as Nobel Prize Factory acknowledges that consumers are about to change spending patterns in a manner that adversely affects the economy, despite the denial by liars and other cheerleader whores from Wall Street
/ jim
some observations on big tickets
gold is flat at #316, not reacting negatively to an absurd cover Dow +300 pt rally... seeing nice support reasonably close to the dangerous ground at #325... as long as it stays within shooting distance of #325, it will eventually crease, crush, and move higher
USdollar is flat at 107.25, not benefitting from this Dow rally... so two big updays has lifted the buck from 106.9 to barely over 107, pathetic... indicative of a domestic disturbance within the US shores, or shall I say a "CIRCLE JERK BETWEEN HEDGE FUNDS AND HOUSES", with retail investors paying up for the rights to see how big their shlongs are
HUI and XAU are each up about 3%, punctuating the end to inverse correlation between Dow, S&P and HUI, XAU... so a decent episode of support at the 200-day Moving Avgs
Dow Transports give the major indexes a reprieve from LongTerm bear confirmation, with a refusal to make new lower lows than seen in July... so far Dow has made lower lows, but S&P has not really... tells me that mutual funds are seeing massive redemptions, with managers seeking greater liquidity cash flows in the high volume Dow stocks
yeah, plenty of hidden stress with banks... I suspect the stories behind the bank failures will not see the light of daytime newspapers, FOR THE GREATER GOOD... which extrapolates to a realization that JPMorgo might fail, and we wont hear about it, until after its obligations are assumed by the Fed
hmmmm
JPMorgo getting a stay of execution yday/today, up to 17.7... big effing deal... way below the magic 18-20 critical levels... my guess is they are buying mui mucho gold short futures contracts back, supporting gold... a likely scenario is for continuation of this support for several weeks, or months, if they survive that long
/ jim
have come to conclusion on Stephen Leeb of "Personal Finance"
he is clueless on commodities, but sees a very big opportunity in this sector
he doesnt understand precious metals at all
his latest newsletter urges investors to load up on resource stocks
he likes oil service stocks
he likes Apex Silver
he likes Barrick Gold, which he called seriously undervalued
I wont go on with more details
at least he understands the unique commodity opp
but selecting Barrick as his only gold reveals an ignorance of very large proportions
he has no clue about hedging forward sales, nor the founding charter of Barrick by Wall Street financiers for crushing the gold market in the 1990's
in the August and September issues, based solely upon falling sentiment, he became BULLISH on the stock market
he is a PhD Psychologist, who must integrate more than psychology and Fed rate cuts into his formula
how can he ignore the bank sector, the falling dollar, trade gap widening, federal deficits rising, weakening in housing, erosion in retail, and the effect whereby rising commodities will cut deeply into profit margins for the entire economy ???
I will be requesting a refund from Leeb, even if small
yes, TonkMan... desperation lies over a thin line of aggressive marketing
the $5K discount is for 2002 models only
2003 models arrive in two weeks, thus the discount
so those 2002 cars will depreciate 20% then another 10% right away
the auto sector has killed itself, draining future demand !!!
next spring the United Auto Workers have a labor contract renewal
that is when I expect some massive fireworks, like Calif Dockworkers
UAW and Dock effects on the economy are equally huge
/ jim
not only are XAU,HUI oversold, but check volumes
I just checked my usual dozen gold/silver WATCH LIST
at least six of them have volume running about 50% of avgdaily
a couple have volume running about 20-30% of avgdaily
only one (Kinross=KGC) had higher than avg volume
by "running" I mean accounting for the pace during the day,
and the fact that the day is half over
"on pace for" ...
this is a typical feature of the end of downdraft corrections
sure is oversold on golds
they are clearing a path for JPMorgo to cover large quantities of gold
standard practice when times turn dark gloomy ominous
I have tried to coalesce various opinions on GOLD recently
Sinclair has strong views on the dollar crisis and gold's role as a tempering force of stability... he is losing patience with the absurdly illiterate masses who dont understand much of anything financial, regard gold stocks much like tech fast movers... but now he is attempting to calm folks down
Russell very confidently states his strong views that all paper-based assets will be threatened, including TrezBonds, and gold will be the best performing asset on the planet soon, like when the 90% downvolume days occur... he mentions a perceived 3.0% target for TENS yield... he makes no mention of how bad a storm we might get, never talks about derivative events... he concludes that investors are not yet ready for gold, implying they will, since all signals point to a deepening recession
Puplava is unflappable about the unfolding of a PERFECT STORM, and sees evidence everywhere he looks... he cites the new trend of rising commodity prices... he cites rising risk of damaging derivative events... he is confident that gold will be soon pursued vigorously, and never seems to show much emotion such as impatience... very patient
Jim Grant doesnt make it to my table much, when he does, his message is that gold will soon be widely regarded as the best performing asset, while the world financial crisis worsens... he impugns Greenspam regularly as a charlatan
Jim Willie likes gold nearterm and longterm... he accumulates regularly over time... he gets discouraged from time to time... he sees rising storm clouds thru the ENTIRE financial sector... he expects gold to become pursued eventually, and when it does, to be pursued by THE ENTIRE WORLD SIMULTANEOUSLY... he will be putting $20 bills in garter belts before the next decade... he remains a jackass of unprecedented proportions, realizing that accurate self-awareness is the key to wisdom
/ jim
To The Gold Community, from Jim Sinclair (general message)
The present reaction in gold and gold shares coming so soon on the heals of the June-September experience has caused many of you, most certainly those new to this field, significant discontent. I understand that. However, I stake my 43 years of experience and my hard won reputation on what I am about to say to you.
Take heart. This decline is short-term and only a natural reaction in gold shares which will run its course on the downside, IMO, by October 19th to October 23rd. Many of these share will establish new highs thereafter. Four of the five required fundamentals are in for a long term gold bull market. I am convinced that the "5th Element," a long-term top in 30-year US Treasury bonds will join before much longer.
IMO, having not acted to reduce your exposure by 1/3 on my 9/23 VIP on this site, you should hold your fully paid cash positions in gold equities. I say this because I believe it and I am concerned by your many messages to me seeking my help. My advice to you is my advice to myself.
Regards,
James E. Sinclair
October 10, 2002
me:
two major pillars are holding up this economy
AUTO SALES, HOUSING
today a big deal was made to put the best face on lousy retail sales by removing the weakening auto sales, which now are being widely recognized as weakening
(even Ford Motor is being threatened now)
so ex-autos, retail sales was ONLY down 1.2% over last month
THAT SUCKS, THAT IS SHITTY AS HELL
YESTERDAY UNDERWEAR SMELL BETTER THAN THAT !!!
next will be further weakening in housing
spin spin spin ... what bullshit
/ jim
for many of these credit card banks, expanding business equates to offering more credit lines to more unworthy customers, possibly even much worse customers
but growth is growth, right?
no way
these guys are stepping in deep shit
RoseyBabes,
XAU is threatening its 200MA
so is the HUI
a break below for either is mui bad
a break below for both is mui mui bad
that be kindergarten of technical analcyst
unlike LittleJoe's pessimism, I look to two signals on gold
strong Jap Hammers on HUI and several key golds yday
gold lease rates just doubled overnight
(indicates unwillingness to lend to JPMorgo !!!)
days like today seem to be saying
as Ron Insana of CNBC likes to say (message of the market)
THE NUMBERS ARE ALL REAL BAD, BUT WE ARE GONNA RALLY TODAY
WHY? BECAUSE WE CAN, AND WE ARE TIRED OF DAILY DECLINES
today only serves to set up the next leg down, or legs down
serious badass wicked shitful mighty declines are coming
today helps to rebuild COMPLACENCY
/ jim
Consumer sentiment sinks in October to 80.5
Consumer sentiment dropped sharply in early October, according to media reports on the University of Michigan consumer sentiment index. The index fell to 80.4 in October from 86.2 in September. The current conditions index dropped to 92.9 from 95.8 while the expectations index sank to 72.4 from 79.9 in September. Economists were expecting a smaller drop in the index to around 85.7
these fools rallying the S&P are just leading a cover rally
GE offers bad news, GE offers good news, GE offers bad news, GE offers good news
IBM was down to 55, now over 60, oversold condition now gone
the retail news was interesting
Sept was down 1.2% sequentially (meaning from August)
but not down as badly as expected !!!
and therefore good news ???
how about instead -- next three months will SUCKKKKKKKK
Back-to-School season was real bad, harbinger of poor Christmas
combined with horrrrrrrible Consumer Sentiment numbers just now,we have the conditions for a Perfect Storm in Retail
rally rally rally... why?
because oversold conditions created an opportunity to cover those shorts (but not panties), thus creating an improved liquidity environment from which to sell to lower levels
RRussell put it very well yesterday...
we are bleeding lower and lower without anything closely resembling an increase in fear or remotely panic
therefore, when the 90% downvolume days come, we will conclude AT MUCH MUCH LOWER LEVELS
the widespread relative complacency indicates the bear market first leg will be more brutal than otherwise expected
party on, fools
he emphasizes watching Dow Transports closely here
Dow Utilities already indicate a deep recession
Trannys bounced off critical support yesterday
if Dow Transp goes below 2000, then look out, confirmed LongTerm Bear !!
meanwhile, despite growing evidence of deflation, e.g. PPI today flat as pancake, gold is holding up reasonably well in the #315-325 range
treading water below the Walls of Jericho
a tidbit borrowed from Strictly Drilling II
Sinclair warned that we should watch for rising gold lease rates
(interest rates charged by corrupt borrowing of gold, for the purpose of dumping on the gold market, and selling gold which Manhattan BlueBloods believe they still own)
---1M ------ 2M ------ 3M ----- 6M ----- 1Yr
0.180% 0.225% 0.290% 0.430% 0.597% Oct 10
0.457% 0.545% 0.644% 0.681% 0.902% Oct 11
they have risen more than double !!!
something is brewing
rumors swirling that Microsoft is considering a hostile takeover of Siebel Systems, hmmmm
/ jim
playing one foolish MC banker against another is smart
I have a small balance for one MCard at 5%
might find another
it can become a trap though
after some introductory period, you could be stuck with 19%
or worse
goodnight all
/ jim
JW, Fleck is right on
gold wont take off unless/until a few things happen:
(I know, I am preaching to a fellow believer)
- panic sets in
- bonds fail as a haven
- the dollar resumes its dive
I believe we have moved from complacency to deep concern
Fleck makes a great point about the public investment community simply not grasping the gravity of the economic situation
they still regard the stock market as the "aberration" that incorrectly reflects an "improving economy"
but they are illiterates, clinging to hope more than clear study
the stock market has always been the best forecaster of the economy, even more effectively than the Leading Econ Indicators, of which the S&P is but one of many contributors
boy oh boy, are they gonna be shocked at the rapid decay
RRussell said they will not be able to recognize the economy in 12 months
that is a great summary byline
today, I had a reply email from a very bright college roommate
he lives in Vermont, an old Grateful DeadHead
he works as a Burlington City small business town consultant
he is real wise to the ways of the world of business
but he has bought all the garbage put out by liberal & financial press nonsense
he has said to me in a long July conversation of 90 minutes...
- the stock market always comes back
- longterm buy & hold has always been very profitable
- the govt wont allow it to get out of control
- lower interest rates will have a big effect eventually
- our banking system is strong
- our brand of capitalism has a long proven record
- the US dollar is the strongest currency in the world
- there is no gold conspiracy by the Federal Reserve
last week I warned him that we are fast approaching a very very dangerous situation with our banking and financial interconnected system
I cited the deteriorating ill health of JPMorgan
he used to live and work in NYCity, and dismisses all such concern
today he replied with a simple message that the USGovt will not allow JPMorgan to fail, since it is too big
he is not aware of what derivatives are, or their complex role
he is not aware of the collective losses from their mass of failed loans, including Argentina
of course, I calmly cited a dozen points
highlighted by the LTCM parallel, only 15x larger
I cited the potential loss liabilities of JPM at perhaps $1 trillion
he is aware of LTCM, but not the details on its leverage
JW, it is a waste of time
I selected by good friend to continue warning because I love him and his wife, solid friends for 30 years
he has toiled at low pay for all these years
saved and saved in a 401k, watched it rise to $350k
now it is less than half that
in late July he boasted that I was wrong, the S&P rallied 14% from the July lows
but it was only slightly higher than when I first warned him in early July
I tried, but I continue to fail
they dont get it
in early August, I asked if he wanted more warnings
I dont just send a trite warning with no backing
I send a clip from RRussell, or a detail like how last week had a +200 Dow day, but the week lost 2%
he said to go ahead, knock myself out, he would benefit from my experience, BUT THAT I HAVE BEEN WRONG BEFORE, LIKE IN 2000
I dont warn anyone else, nobody, not one other friend
about 6-8 other friends have heard enough, they want no more
I expect some of them to phone me before Christmas, panicky
I should tell them to fook off, but I wont ever do that
I am too nice a guy, care too much, what a mensch I am?
those who lost big in 2000 are discredited in their eyes
I continue, but now with less enthusiasm or frequency
there is still passion in my dire pleadings
I describe the "peeling of the onion" from one level of risk-takers to the next, with conservatives being the last losers
no diff
a couple mocked me in the summer
I am tired of all that, no more, just one key friend
he is one of us four musketeers, one of whom has fallen victim to harsh alcoholism, losing track with us at our wishes
the other is a friend recently laid off in Ohio, tearing into his savings now, eager to buy gold shares but more intent on finding employment now
hey, RRussell expects Trez yields to bottom at 3% flat
golly gee, do you think gold will fook around for a couple more months while bond yields scrape down to 3% ???
I think it is possible
I just hope golds dont wither
the 200dayMA is providing support now for HUI
I dont mind more stalling, as long as I can accumulate further
I sold most of my mint-state silver coins and plan to put the money into more Novagold, or possibly Seabridge
maybe something else, but I doubt it
I get really loyal
Seabridge just announced pursuit of several Nevada properties for exploration purposes
Novagold had great exploration news last week on their big Nome Alaska property
I ramble, watching the StLouis Cardinals go down
they might pull it out
a brilliant suicide squeeze bunt by SFran Giants, niiiiiiccce
I want Barry Bonds to be denied further limelight from which to feed his oversized ego
he is NOT a team player, caring only about himself
he is the penultimate jagoff
thanks for the Fleck clip, and for visiting
/ jim
p.s. I expect a little more continuation of this stock rally
but it is to be caught deep in the teeth of the downtrend channel
big bullish Japanese "HAMMER" today on HUI index
http://finance.yahoo.com/q?s=^HUI&d=c&k=c1&a=v&p=s&t=1d&l=on&z=m&q=l
a HAMMER is characterized as an open followed by a strong downdraft, a recovery, then a close near the open, so that all the intraday price action lies below the open and close
(the Hi-Lo-Open-Close chart entry for the day resembles a hammer head with a handle)
a HAMMER often indicates unwillingness to allow a low-priced opportunity to just sit there, without taking advantage of it
YA MON
just a single day, and not a highly reliable pattern
since only one day
I was very surprised to see it though
shows some resilience
kind of like my stinky sox, good strength, if only one day
Novagold looked just fine today, up nicely until end
in the green on this tough day were: NRI.TO, KGC, GG, GFI, HL
tough day for silvers
/ jim
these credit card companies are no different from mortgage originators
someone is rewarded for securing new loans extended
the painful consequences later are someone else's problem
namely, upper mgmt and shholders
Prudent Bear's Noland pointed out something I had not heard before about the securitizing of mortgages
apparently socialist pressures force the marginal borrowers to be lumped in with creditworthy borrowers in MortBack bonds
the best loans are lumped with the questionable loans
they cannot legally be separated into high, medium, low quality
so the whole mess will be "homogenized" into mediocre
this financial sector is beginning to smell like a dead dog after it was run over in the street and left as a rotting carcass for days
every single niche within financials is stinking to high heaven with risk
I am reminded of a point made by somebody whose identity I cannot recall
THE CO-CONSPIRATOR TO THE TECH/TELECOM/DOTCOM FRAUD WAS FINANCE
TTD HAD ITS SPECTACULAR FAILURE, BUST, WITH FRAUD PROSECUTION
NOW IT IS THE FINANCE SECTOR'S TURN FOR A SPECTACULAR FAILURE
ONLY THIS WILL BE BIGGER, SINCE IT IS THE ECONOMY'S FOUNDATION
gonna be horrendous, esp after real estate prices decline
why dont people regard the skyrocketing housing prices as abnormal within historically dangerous deflationary times ???
I suppose if somebody paid you $200 for your Radio Flyer wagon,
you would take it
and continue to purchase new RF wagons at higher prices
only because buyers would pay up
hey, they only cost $39 to build !!!
this too will end ugly
/ jim
US is not in danger of deflation, by Glenn Hubbard
Published: October 9 2002 22:19 (Financial Times)
big caveat:
The writer is chairman of the US president's council of economic advisers
For most of the postwar era, deflation has been off on the radar screen of economic policymakers in the industrialised world. The United States has not experienced a sustained fall in prices since the Great Depression. Fighting inflation, not deflation, has been the main goal of most central banks. Yet today's newspapers are filled with claims that a ruinous 1930s-style deflation lies just ahead.
The story goes something like this: the end of a stock market bubble causes consumer spending and business investment to collapse. The subsequent fall in aggregate demand puts downward pressure on prices. Once deflation begins, the real burden of debt increases, so borrowers must cut their spending to pay off the real value of their debts and the cycle continues.
The new twist in the modern retelling of this story is the link between the fall in the stock market and the rise in housing values since 1997. Some have argued that the inevitable decline in consumption has been delayed by consumers refinancing their mortgages, extracting equity so that consumption levels are maintained, for a time. But the day of reckoning will eventually arrive, consumption will fall and the deflationary spiral will begin.
This modern deflation scenario seems to make a lot of sense - until you get out your calculator. When you do, the basic features of the US economy look quite good and deflation appears unlikely. To start with, analysis of the productivity data over the past six quarters confirms some of the best news that economists have delivered in a generation - the acceleration in productivity growth that began in 1995 continues unabated. Thanks to this, today's consumers can look forward to real incomes that grow much more quickly than they have during the past 30 years - a good omen for current consumption.
But even if the future looks good, what about the present? Won't the decline in the stock market - and the consequent loss in current wealth - reduce consumption today? It is true that the decline in equity markets have removed wealth from the economy, which tends to depress consumption. Research suggests that a loss of one dollar in stock market wealth reduces consumption by about three to five cents over the following three years, holding other factors constant. But other factors have not been constant. Disposable personal income - the amount of current income that consumers can spend - has held up much better over the current business cycle than in previous recessions.
Of course, one can point to the strength of the housing market as a factor keeping consumption strong. House values have risen and low mortgage rates have encouraged homeowners to take out some of the equity in their homes through refinancing. But while this process has been a part of healthy consumption growth, it has been only a part. A study by the Federal Reserve of the home refinancing wave of 1998-99 found that it added only about $10bn to consumption expenditure, which totalled $6,200bn in 1989. Home refinancing has also been high in the past two years but the same lesson seems to apply.
The question of why house prices have risen so much in the past few years is interesting. The surge in immigration during the 1990s and the lack of land suitable for new housing in some cities with tight zoning restrictions are probably part of the answer. But fears that the US housing market is in the midst of a bubble are unwarranted. Behind any bubble is the hope that an investor can purchase an asset for one price and sell it quickly for a higher price. This is hard to achieve with houses, because of the high transaction costs in housing markets. And without a rapid and nationwide decline in housing wealth, it is hard to see how deflation can occur.
Last, one cannot discuss deflation without an examination of the price data themselves. First, falling prices are not always bad - indeed, in most cases they are a crucial stabilising feature of modern economies. For evidence, just ask your local car salesperson. The surge in car sales brought about by zero per cent financing offers should add from ? to 1 full percentage point to gross domestic product growth in the third quarter.
Second, a sustained decline in prices that magnifies the real burden of debtors is not likely. In fact, the inflation rate for consumer commodities, which turned negative in 2001, has turned round and is now headed for positive territory. Moreover, the inflation rate for consumer services has stabilised at little more than 3 per cent a year. Private forecasters expect the overall rate of consumer inflation to rise to about 2.4 per cent in 2003 as the recovery takes hold.
In short, the stock market decline will not cause consumption expenditure to collapse. House price inflation may well moderate in the next few years but there is no housing bubble about to be pricked. Refinancing has helped maintain consumption growth but has not propped it up. And the economic fundamentals are sound.
While in the long run deflation - like inflation - is a monetary phenomenon, low aggregate demand is not likely to push the US toward deflation any time soon. It is a pretty boring story, compared with those told by the deflationists. But it does pretty well when confronted with the facts.
JP, I had a very difficult bowel movement this morning
badly tapered stool, challenging sfinktah adjustment
nothing I cannot handle though
by late morning, my manager and I had it figured out
not quite enough challenge of work on the job
I confessed I had my thumb up my ass too much lately
seriously....
Yahoo and Aetna and fewer jobless claims are NOT the prime reasons for today's rally
real reasons:
- severe oversold condition needed a cover rally plus some numbnuts to enter with "fresh paper", thereby producing a more workable climate for continued liquidity to handle further selling
- PPTeam at work, desperately attempting to rescue the most important sector out there -- BANKING
JPM is still pathetic, dead in the derivative waters
a derelict at sea, listing 15.95 degrees off center
could not even hold 16 !!!
BKX (bank sector index) is up 5%, but below last Friday level
some fibrillation if you ask me
Tuesday close to Wedday open, big gap down
some hugely nasty warnings and debt losses thru entire sector
then you have the putrid mortgage insurance, credit card, etc, the other financial sectors that suck wind & eggs
the path is clear now for a sizeable down day tomorrow
if not, then a real dangerous early next week
warnings season is coming to an end
next comes actual shit earnings with shittier forward guidance
a recession is as a recession does
witnesses declines in sales and profits
more of the same will be arriving in the next few weeks
not much wisdom here, just a cover rally, a fool's rally
I dont lend much credence to the jobless data
it is fully treated, doctored, massaged, and masturbated
the usual culprit is seasonalizing to dress it up pretty
/ jim
internet access might be problem only at my office
we are having email problems now
email attempt via AOL Anywhere to inquire about failure,
it also failed
nevermind my conspiracy theory suspicion
looks like oversold market enabled a nice rally today
gives 1000's of investors an opportunity to sell
my guess is hedge funds are playing with themselves
and PPTeam is providing an undercurrent
how many times will we see a big +200pt single day sandwiched between numerous -150pt days to make for a big lousy losing week ???
this week might shape up like last week
but imho PPTeam is active in trying to rescue bank sector
JPM share only 16.5 or so, no rescue there, dead meat, rotting flesh
/ jim
Mike, I cannot explain it
combination of limited insight, ribald commentary, irreverance to the establishment, suspicion of the powers that be, finger on the many right pulses, and honesty about my shortcomings
a suspicion: Puplava's Financial Sense website has been censored
he is announcing publicly the high rising risk of systemic breakdown in the US financial industry in all its niches
try accessing his "www.financialsense.com" and you get this....
Site Not Found
The Web Site you are trying to reach has been misconfigured or has discontinued their service with CTSnet.
If you feel you have reached this message in error, please contact webmaster@cts.com. Please include as much information as possible about the site you're trying to reach.
I would attempt an email to CTS.com, except my firm's email is down
maybe thru AOL Anywhere, hmmmm
yeah yeah, that's the ticket, sending it now
I would regard the inaccessibility as freakish, except it follows a dire warning of DERIVATIVE RISK COLLAPSE
glad I grabbed his report last night
it was dated Oct 9th at 11pm, post #179
wow, almost 200 messages from the DogHouse
for the greater good?
/ jim
govt clearing a path for JPMorgo gold covering
no specific evidence, but RRussell identifies it
gold getting pushed down, miner stocks getting hit
the silvers are feeling it worst
good thing I bailed on Tuesday in the first 45 minutes
it is one thing to make a mistake on silver
it is another to compound it with inactivity, thumb up ass
Novagold and Seabridge are holding up just fine
but tomorrow is another story
late last week I mentioned JPMorgo threatened existence would invite a govt response
we are seeing it
I wish it werent so hard to sit back uninvested during such a response
http://finance.yahoo.com/q?s=^hui+^xau+nem+kgc+gg+gfi+glg+hgmcy+drooy+hl+ssri+sil+paas+sea.v+nri.to&...
thanks to all for visiting me in the doghouse
lonely over here, GoldJackass thread going to hell
/ jim
OTC is OverTheCounter, and can be highly illiquid
meaning in panicky times, not many buyers out there
so prices tank quickly with devastating effects
what is the PussBag doing over here???
hello, Klappy KlapTrap von Trapp, son of GonorrheaMan
imagine you own a Nazdaq dog stock with some real bad things happening one day
suddenly, no buyers, and the price drops 57%
that is a consequence of OTC markets
grossly insufficient number of buyers
as opposed to NYSE, which is highly liquid
that is why you are seeing Dow and S&P stocks drop harder now than the Naz stocks
since NYSE is more liquid, mutual funds are selling those stocks
because they need to raise gargantuan amounts of money for redemptions in mutual funds
OTC is notoriously slow in money flow during bad times
the effect on price is often devastating
JPMorgan will have trouble unloading OTC-type derivative contracts
esp the strange contracts called EXOTICS
they are multi-product contracts interlinked with trip wires
I hope this helps
/ jim
The Unthinkable is Not Impossible (Jim Puplava)
Wednesday, October 9, 2002
Unsinkable ships sink
Unbreakable walls break
Sometimes the things you think could never happen
Happen just like that
Unbendable steel bends
If the fury of the wind is unstoppable
I've learned to never underestimate the impossible
~ words from "The Impossible" by Joe Nichols ~
On Wall Street, they are worried. At the Fed, they are burning the midnight oil. In bank boardrooms, they are passing out Maalox. The unthinkable may be about to happen. A systemic risk that causes the financial system to implode is now a distinct possibility. The $110 trillion worldwide derivative market may be about to unleash a storm of undetermined consequences. Nobody has a model that can predict the possible outcome. How do you account for something never seen before? It has been more than 70 years since a storm of this magnitude has been seen or experienced. Most who work on the Street or in the trading rooms of large financial entities have never seen a 100-year storm. Very few alive today remember the consequences, much less lived through the carnage of the Great Depression and the stock market crash that preceded it. To many, seeing the Dow lose 88% of its value as it did during the bear market of 1929-32 is inconceivable. The fact that the Japanese Nikkei has lost 78% or that the NASDAQ is down 78% doesn't seem to register. Everyone expects a market bottom and the worst of the storm is over. Nobody is watching the barometer; which is dropping rapidly.
One hundred year storms have a way of surfacing when you least expect it. In the financial world, bear markets have a way of fooling the majority of investors most of the time. Just when you think it's over, it isn't. Just when you think a bottom is in, the market heads lower. When you think the news can't get any worse, it worsens. The truth of the matter is nobody knows where the current storm will head and what damage it will bring. All that the experts can do is bet on probabilities. What lies on the tail end of the curve is that 10-sigma event that is incalculable. The models don't factor it in -- just the probability of its occurrence. The extent of the damage, the long-term consequences, the impact upon lives, economies and governments can only be a guess. History can only alert us to the consequences and remind us that these storms do reappear throughout history. An archduke is shot, a naval base is bombed, a dictator rises to power, a government is overthrown, and suddenly 10-sigma events erupt and a daisy chain of dominoes begin to fall in unison.
Business cycles, market crashes, depressions and wars haven't been eliminated despite the reassurance from experts and politicians that they will no longer happen. Economic and financial modeling is good at giving you probabilities, but not predictions. They can tell you about the probability of the unexpected, but not when they will occur. Nor can they predict the consequences. The truth is that no one knows what fury a $110 trillion derivative market will unleash if it does in fact implode. In 1998 a hedge fund called LTCM with 1.25 trillion in derivatives nearly brought the financial system to its knees. It would take the Fed, along with 14 other banks, to organize a private sector bailout. At stake were LTCM's lenders who could be dragged along with it. An emergency bailout package was put together and a crisis was averted.
A Bank in All The Wrong Places
A lesson should have been learned, precautions taken and safety measures put into place. They weren't. Instead the world of derivatives has grown by over 20% a year since then. More importantly, the players in the derivatives market have become more concentrated. One bank alone, J.P. Morgan Chase, accounts for $26 trillion of this $110 trillion market. Everyone knows J.P. Morgan Chase is in deep trouble. This bank accounts for over one half of the US bank held derivatives and nearly 25% of all derivatives held worldwide. It is a bank in all the wrong places and it is hemorrhaging from multiple sides of its businesses. The problem in this derivative market is that everyone is trying to offload risk. Hedging risk costs money. The greater the risk, the higher the price of covering that risk. Unexpected events such as hurricanes, floods, fires, mudslides or earthquakes raise the cost of insurance premiums. Hedging risks in the financial markets operate in the same way. When markets plunge and gyrate daily, when borrowers default, when profits evaporate, when credit spreads widen, when bond ratings are lowered, or when geopolitical events surface as in war or terrorism, risk premiums soar.
Playing Hot Potato
Off loading risk suddenly becomes a financial hot potato. In the derivative market, because of the degree of leverage and risk involved, everyone is trying to pass that risk on to someone else and net out their risk to zero. That seldom happens because someone somewhere is stuck holding the hot potato. You don't always know who that is until the storm hits. Those who thought they were hedged suddenly find they are left exposed because the counter parties to their hedges have now become insolvent. It is a lot like having an insurance policy to cover against earthquakes. Suddenly a major quake occurs with damages so severe, that all insurers are suddenly at risk. That is the problem we have today with the greatest insurer covering over 50% of the US market and 25% of the market worldwide. Risk has been concentrated on one particular insurer: J.P. Morgan. Derivatives now account for anywhere from 20-40% of the bank's revenues. The word "bank" is used loosely because J.P. Morgan looks and acts more like a hedge fund run on methamphetamines and steroids. Morgan's $26 trillion derivative book is highly illiquid because most of its derivatives are of the OTC variety. These are highly specialized and customized contracts whose real value isn't known until they are sold.
Most OTC derivatives are custom tailored to meet the needs of specific clients with specified risks. This makes them highly illiquid and vulnerable to panic selling in the event of a crisis. This proved to be LTCM's undoing when it occurred. In the volatile markets of 1997-98 when credit spreads widened, risks multiplied. Instead of going from divergence to convergence, divergences widened as they are today. In the corporate debt markets, the yields on investment grade bonds are now 2.5% above Treasuries of the same duration, the widest in at least 10 years. Junk bond defaults are averaging 9-10%. Gaps between junk bonds and Treasuries are now approaching 11%. According to today's Bloomberg, the spreads between Treasuries and junk bonds first hit the 10% level on August 14th and have breached that level 11 times since then.
Never Underestimate the Impossible
The reason this is important is that the majority of derivatives (85%) are interest rate related. Somebody big is sitting on the wrong side of that divergence. The mathematical models aren't very good at predicting if and when a 10-sigma event will occur. They happen and then the models try to adjust. But these models are not dealing with the impossible at a time when impossible lurks everywhere. Talk is beginning to surface everywhere in financial circles of the possibility of systemic risks resurfacing in a possible implosion. HSBC Holdings has voiced concern of the impact on banks and insurers. Merrill Lynch's chief financial officer, Douglas Flint, told a press conference, "We do worry about systemic risk." Germany's third largest bank, Commerzbank AG, was forced to deny rumors this past weekend that it was experiencing a liquidity crisis. The OECD (The Organization for Economic Co-operation and Development) is stepping up it's monitoring of reinsurance firms. Insurance companies and money center banks, especially the big ones, have now become the center of attention as credit agencies, government entitles, and world organizations monitor a rapidly dropping financial monitor. Everyone is praying that the storm clouds will disappear. They are getting darker instead. Can the impossible or the unthinkable occur? In the words of singer/songwriter Joe Nichols, "I've learned to never underestimate the impossible."
Complacency Rules
Meanwhile on Main Street, the vast majority of investors still have their heads in the sand playing ostrich. Complacency is everywhere despite market losses of over 27% in the Dow of over 27%, 32% in the S&P 500, and 43% in the NASDAQ. I can't remember a time such as this when risks were so prevalent, yet sentiment was so complacent. Wall Street keeps reassuring the general investment public that things will be okay. You often hear the mantra, "This is it, we have now hit bottom," and yet prices go lower. Some are selling, but we haven't reached that panic state yet. We haven't experienced a series of 90% down days, which are characteristic of bear market bottoms. Even yesterday, with the markets rallying, it was only a surface rally. Market strength was only skin deep. Declining issues beat advancing issues on both the NYSE and the NASDAQ. Down volume swamped up volume on the NASDAQ. There are no signs of market leadership emerging other than the subtle strength of gold. The markets will have to digest the beginning of third quarter earnings season which kicks off next week. Pro forma earnings have lowered to such a low level that companies will no longer need pole vaults to hurdle them. Comparisons on a pro forma basis to last year after the events of 9-11 will make this quarter look good. Pro forma profit targets have been lowered from 30% at the beginning of the year, 17% as of July, to today's projections for little more than 5%. Still there is an even more important element to come into play. What will companies say will happen in the fourth quarter when estimates still remain too high? As actual results come in, the markets should be set up for greater volatility characterized by sudden plunges and parabolic lifts.
Today's Market
Today's headlines point to more stresses in the financial system and in the economy. Job layoffs were a common theme along with possible bankruptcies. Abbott Labs will cut 3% of its workforce. AT&T, the perpetual restructuring company, will cut 4.3% of its cable-television payroll. EDS will be sued by employees for a loss of $407 million in its employee's 401(k) plan due to a drop in the company's stock. SunTrust reported that it would take a $98.7 million charge for bad loans as non-performing assets rose by 14% to $594.7 million. TXU, the Texas power company, is asking banks to drop terms forcing it to pay $500 million should a European unit of the company default as energy trading plunges.
Meanwhile the day's headlines point to more stresses in the financial system and in the economy. Job layoffs were a common theme along with possible bankruptcies. Abbott labs will cut 3 percent of its workforce. AT&T, the perpetual restructuring company will cut 4.3 percent of its cable-television payroll. EDS will be sued by employees for a loss of $407 million in its employee's 401(k) plan due to a drop in the company's stock. SunTrust reported that it would take a $98.7 million charge for bad loans as non-performing assets rose by 14 percent to $594.7 million. TXU, the Texas power company is asking banks to drop terms forcing it to pay $500 million should a European unit of the company default as energy trading plunges.
These are just today's business headlines. On the political front, the socialist candidate Lula in Brazil is emerging as the likely winner of Brazil's run off election. Venezuela is on the verge of a political coup as Hugo Chavez begins a political witch-hunt of his opposition and citizens riot in the street. Venezuela is the 4th largest oil exporter of oil to the US. A war against Iraq is looking more likely and the government is alerting us that renewed attacks of terrorism are possible. These are the kind of headlines that don't breed confidence in the markets.
This lack of confidence and risk in the financial markets explains much of gold bullion's strength. The latest sell off in shares of gold and silver companies is another leg of a wider sell off by weak hands into stronger hands. A lot of the share accumulation of precious metals stocks over the last few quarters has come from the day-trading crowd looking for a way to make a fast buck. They neither understand nor comprehend that they are dealing with a precious commodity that is returning to its historical role as money. Those in the know, and who have strong financial hands are accumulating at the expense of the ignorant and ill-informed. They will be back in the metals after they explode. Several key silver stocks are looking to break out as option spreads and short positions are unwound. The metals markets are a lot like a volcano. You never know when they are going to erupt. But when they do, it will be similar to the eruption of Mt. St. Helens. Gold and silver are commodities that are in short supply, with growing investment demand, and limited options for investment. When they take off, their rise will be parabolic -- not gradual. The residents below aren't aware that the volcano is rumbling. Short-sellers, take care.
Today's market was predictable. The major averages suffered their broadest decline in over four years as many analysts lowered their profit expectations on GM and GE. The S&P 500 hit a new five-year low; while the venerable Dow closed below 7,300 -- something we haven't seen since October of 1997. We seem to be slipping back to the past at ever increasing speeds. It also looks like the inevitable may have a possibility of occurring. After the market close, Moody's Investor Services cut J.P. Morgan's long-term debt rating one more level, citing the bank's inability to maintain acceptable profitability. As the bank's credit rating is lowered, it begins to raise the issue of counterparty risk. The downgrade is causing many of the bank's customers to take their business elsewhere because of Morgan's growing risks. As earnings falter, it leads to more downgrades. At some point, the bank may be swamped as it finds itself with more at risk in the derivatives market than it has capital to support. Many experts estimate that the bank's value at risk runs in the tens of billions. A failure by Morgan could become the first of many ten-sigma events. For greater understanding of derivates I would suggest reading Rogue Waves Part II, and Rogue Waves and Standard Deviations Part 1 and Part 2.
Volume came in at 1.82 billion on the NYSE and 1.75 billion on the NASDAQ. Market breath was horrific with losers outdistancing winners by a wide margin, 28-5 on the big board and by 26-9 on the NASDAQ. We may be seeing the impossible. Time will tell.
Overseas Markets
European stocks fell, led by auto manufacturers including DaimlerChrysler and PSA Peugeot Citroen after Morgan Stanley lowered profit forecasts for companies in the industry. Fiat SpA dropped as company executives met with labor unions to discuss more job cuts amid sliding sales. The Dow Jones Stoxx 50 Index slid 0.5% to 2277.00, retreating for a fifth day. It has lost 7.4% since last Wednesday's close. Seven of the eight major European markets were down during today's trading.
Japanese stocks fell, driving the Nikkei 225 Stock Average to a 19-year low for a fourth time this month. Mizuho Holdings Inc. and UFJ Holdings Inc. slumped to their lowest levels since they first started trading. The Nikkei lost 2% to 8539.34. The average has lost more than a fifth of its value in the past three months. The Topix index shed 1.9% to 844.29.
Bond Market
Government bonds remained well bid across the board as fixed-income investors reacted to more troubles for equities. The 10-year Treasury note climbed 17/32 to yield 3.57% while the 30-year government bond gained 20/32 to yield 4.66%.
© Copyright Jim Puplava, October 9, 2002
time primping, braiding the shoulder hair / jw
just read Noland (Prudent Bear) report from last week
I skimmed a few paragraphs on Sunday
what a crystal clear mind he has, when building a summary
several points worth repeating:
- the telecom debt bust might provide a similar preview of what might happen to real estate, but RE will be more slowmotion
- the bigger the bubble, and longer the timespan for its expansion, the bigger the bust, the longer the dissipation
- the more fraud or stretched rules or grouping of worth with unworthy, as in RE, the uglier the resolution
- the entire banking foundation is slowly disintegrating !!!
(in almost every single facet niche, every single one)
- insurance companies are the other increasingly sick partner in finance, joining banks
- structured finance is mostly dressed up marketed fraud, or else a massive stretch of credit
- economic consensus is more wishful than well-founded, not based upon solid competent analysis
- 18 months after severe reduction in interest rates, and the economy is badly faltering, OY
- FannyMae's Franklin Raines (CEO) is the new mini-Greenspam, who will follow GreenDork into villainy
- the US Economy is an interconnected system of imbalances, distortions, suffering from colossal debt
- THE ENTIRE US ECONOMY IS LIKE A TWISTED PATHETIC LABORATORY ANIMAL GENETICALLY PRODUCED
/ jim
I would appreciate a little more respect
being a manharlot is a tough job
/ duncan (oooxxxooo)
not sure what exactly LG was saying, not clear
I think he was referring to me supporting Voltaire in 2000
yes, part of the education process
sorry to admit, but I bought the NewEconomy bullshit story
so now 7800 Dow serves as support (losing its grip)
and S&P 800 serves as support (losing its grip)
and 1000 Naz should serve as support next ?
this is where we are currently dancing now, S&P 760
a titanic struggle to find support, but failing
Art Cashin said we might see a huge high-volume selloff anyday
I love the disrespect shown AbbyJo
when the Queen from GoldmanSux is mocked, shunned, challenged, and sneered at, then you know times have changed mightily
she used to relish appearances on CNBC to claim credit for the booming rallies back in 1998-1999-2000
no more
now she is a critical piece within the MOSAIC OF WALL STREET FRAUD
also discredited is Tom Galvin of DLJ
he was surely the AbbyJo of TechLand
Barton Biggs is such a joke, like a buffoon out of uniform
/ jim
p.s. go Anaheim Angels
USdollar is very close to breaking its bear pennant flag
I refer to the support line in this flag pause pattern clearly evident in July, August, September, and into Ocotober
http://stockcharts.com/def/servlet/SC.web?c=$usd,uu[h,a]daclyyay[dc][pb50!d20,2!f][vc60][iUb14!Uh15,....
check the line support connecting the following points:
(main price chart)
103.5 in mid-July
105.4 in early Sept
106.5 and 106.95 in early October
while a move below 105.5 would not mean a break below the critical July lows, it WOULD mean a nearterm breakdown in the pause pennant pattern
pause pennants allow a market to take some time, reflect, examine the fundamentals (all worsening), and then to resume after the oversold condition is resolved
the USdollar oversold condition is long gone
two other fine points to mention:
the Relative Strenk is weakening, now below midrange 50
no evident gain of strenk for the buck since July
that is in the top cycle chart
the Daily Stochastix is showing a Bearish Divergence
notice in mid-August and early-Sept the big black wavey line shows a downtrend pattern
from 85 top to 70 top, now turning down at 50
that identifies a Bearish Divergence, whereby the dollar is rising in a weak upward pennant, but the downtrend DStoch is a sign of weakness
now in early-Oct, we have the potential for that DStoch downtrend to have a third top to occur, as it is turning down now
I have personally seen dozens of such patterns
Bear Divergences and Bull Divergences are very reliable
when the nearterm support breaks, things start to unravel
we will see very soon
October is such a deadly month, as is September
GOLD will go nowhere unless/until USdollar breaks down
or until TrezBonds reverse toward higher rates
or BOTH, probably BOTH, since investors as so stupid
/ jim
I am deeply disappointed by gold lately
not enough to back out
the paper-addicted investment world is totally totally totally hooked on paper securities
and right now, TREASURY BONDS AND NOTES ARE WORKING FOR THEM
Soros sent me the Russell article to my office email
thanks though, if already on SI PM, then fine, thanks
it took me a few weeks to get the 4figure AU also
I felt dense too
he made some vague reference to his nifty moniker
only then did I figure it out
I have recommended that he change it, several times,
to 4figureAU
the difference between us is that you are not dense
BUT I STILL AM
investors didnt learn about the overvalued stocks until it blew up in their (our) faces
same story must occur with bonds in the Treasury market
right now, even the corporate bond holders are moving into Trez bonds
even FannyMae is hedging with Trez bonds
the USGovt is reluctantly encouraging Trez bonds
the whole world is buying US Trez bonds
NOT UNTIL TREZ BONDS LEAD TO LOSSES WILL GOLD TAKE OFF !!!
AND THEIR INITIAL MOVE WILL BE BACK INTO STOCKS
WHERE THEIR LOSSES WILL MOUNT HIGHER, ON FALSE RALLY
it is as simple as that, since learning is too difficult
even Sinclair is getting pissed off, unimpressed
gold will build pressure in the #315-325 range for a while
like a volcano
the paper machier of short gold futures and Trez bonds will end up all over investors and bankers faces
USdollar fell badly today, but it all occurred within its recent range
as long as US$ remains within 105 to 108, gold is stuck
Sinclair cites 104.5 as the critical support break level
makes perfect sense, even a T/A amateur can see that
US investors only know one way: PUMP IT UP UNTIL IT KILLS
just like obesity
American investors are not very intelligent, never were
why expect them to get smart now?
they are pursuing real estate with bond hands
remember: this is an economically and financially illiterate nation
their discovery of GOLD will not come easily
they will have to get in line BEHIND THE ASIANS
Americans will jump on the Golden Wagon only after #400
/ jim
you are largebone, Scooter
you are a perfect counter-example to that simplistic BMI formula
as a statistician, I hereby declare BMI as inadequate
it needs a coefficient multiplier for large, then medium, then small bone
I once in gradschool saw a great predictive model for weight
it has several ingredients
- height
- hip circumference
- hand wrist circumference
- shoulder breadth
that is how to do it
but for alerting the obese that they are obese,
WHATEVER IT TAKES
/ jim
Ned Davis states that never has an economy seen a favorable environment with a recovery following a bear market of these proportions
he cited Japan as suffering through a multi-year recession, bordering on a depression, following their busted Nikkei bust
some points:
the bigger the stock bull market, the bigger and longer the hangover bear market
debt levels are still at record levels
foreclosures and bankruptcies are nowhere near resolution
WE ARE NOT GOING TO HAVE A PARTY FOR A LONG TIME
we are in a secular, not a cyclical, bear market
November and December usually begin the new bulls following devastating bears
but he doesnt expect much this late autumn
he is looking for a record down Dow day on record volume
he recommends for those interested in buying stocks here with a longterm perspective, to employ dollar cost averaging purchases
i.e. equal spacing of time or price points
me:
TODAY WAS A 85% DOWN VOLUME DAY, STILL NOT OVER 90%
/ jim
heard a good quote made by Europeans, made of Americans
"AMERICANS ARE THE ONLY PEOPLE ON EARTH WHO CALCULATE
THEIR NET WORTH HOURLY"
/ jim
not much excess on your cute little bones, Aunt Rosey / jw
it's about time press/media confronts AMERICAN OBESITY
the BMI formula is too simple, not addressing bigbone versus smallbone
personally, I am 6'0" and 178 lbs with medium bones
my reading is BMI=24.1
they regard overweight at 25
obese at 30
extremely obese at 40
BMI claims 35% of Americans are obese, and 3% extremely obese
BMI formula is .....
divide weight in lbs by height in inches
now divide the result again by height in inches
now multiply by 703
I think they should have a different multiplier for smallbone, mediumbone, bigbone
I might be 5-8 lbs overweight, but cut incredibly, nice peccs
with a tight ass, rounded shoulders, big arms, massive calves
certainly not burdened by any excess hair weighing my head down
sooner or later, press/media will make the connection between excessive debt and excessive weight
big common denominators -- laziness, immediate gratification
I decided to gawk of obese people a few months ago
if a guy walked by with two heads or a garden rake sticking out his ass, I would do a double-take for that also
when in my cafeteria, I check as a hobby what guys and gals eat who are at least 50 lbs overweight
usually their lunch includes french fries and a soda drink
often a big plate of pasta in some form
strong parallel with obesity and indebtedness
/ jim