Investment Banking And Banks Take Stock Market Lower
Thursday, 10. April 2008, 03:23:36
I. Stocks Fall On Disappointing Earnings, Putting An End To The Federal Reserve And OFHEO Induced Rally
The investment banking, KCE, and banking, KBE, sectors are once again taking the stock market lower: the finance, IYF, real estate, IYR, retail, XRT, homebuiling, XHB, and consumer discretionary, VCR, sectors suffering the most loss.
The Russell 2000, IWM, comprised of small US companies highly dependent upon a functional credit system fell almost 2% today
Transports, IYT, being sensitive on oil prices fell.
The government sponsored mortgage enterprises, GSEs, Fannie Mae, FNM, and Freddie Mac, FRE, both fell for the fourth straight day.
Energy service provididers, OIH, are trading up as oil prices, USO, inflate higher to $112, as General David H. Petraeus, the commander of American forces in Iraq, and Ryan C. Crocker, the American Ambassador to Iraq, testify before Congress, and investor concerns grow over the Iraqi civil war and likely war on Iran.
Gold, GLD, rose as the Euro, FXE, rose to test its all time high.
Disinvestment continues from the emerging markets with China stocks, FXI, and China real estate, TAO, falling the most.
The chart of volatility, $VIX provided by Corey Rosenbloom, I believe indicates that volatility has bottomed out and is ready to assist the those short the stock market.
Rich Strehl writes of Yesterday's volatility and relates: "As I look at this chart of the VIX (volatility chart for S&P 500) I see us closing in on a long term ascending triangle pattern. Eventually the chart will have to make a choice...break up or break down. Hopefully we'll see a significant break to lead us to believe a solid direction will have formed. It's almost like hurricane season here in Florida when a storm is headed toward shore. The storm is definitely going to hit but exactly when and exactly where have yet to be determined.
Like Action Forex, I believe that the Euro/Yen, FXE:FXY, will decline soon which will cause an unwinding of Yen Carry Trade dollars which have been invested in Latin American companies such as America Movil whose weekly chart shows a triple top and Brazilian oil producer Petrobras.
II. Tombstones Of The Former Age Of Fiat Wealth And Credit Liquidity: These Charts Show The Extinguishment Of Capitalism Is Underway
Lehman Brothers, an investment banker
Wells Fargo, one of America's leading banks
Freddie Mac, one of the two government sponsored mortage providers
Credit Suisse, an international bank with a large holding of subprime mortgages
PMI Group, a mortgage insurer
High Yield Dividend Payers
NLY, a Mortgage REIT
Gilead Sciences, a leading biotech company and vaccine manufacturer
Lowes, America's leading home improvement and remodeling store
DR Horton, America's homebuilder
Bed, Bath And Beyond, a leading retailer of consumer discretionary household goods
YUM, a fast food restaurant manager
Amphenol, manufacturer of electronic and fiber optic connectors
Whirlpool
General Motors
Intuitive Surgical, a leading medical device manufacturer
American International Group, insurer
Valmont Industries, manufacturer of irrigation systems
Burlilngton Northern Railroad
Ryder Truck
Fedex
Simon Property Group, a leading retail REIT
Assisted Living Concepts, a leading long term care facility organization
III. We Have Likely Arrived At The End Of The Age Of Profitable Basic Material Investing
Exxon Mobil
Cabot Oil And Natural Gas
Massey Energy
CNX
Arch Coal
Schnitzer Steel
US Steel
Peru Copper
Potash Corp
IV. Today's Investment Commentary by Ellaine Meinel Supkis
Ms. Supkis writes regarding the FDIC history of home lending from LBJ to Bush Jr: "All the rules set up in the huge banking collapse were slowly or swiftly eroded. Rules stopping wild money making via reckless lending always die the same way: it gets in the way of people wishing to make lots of money, very fast. Since profits lie in fees and processing deals, the tendency of the bankers of all stripes is to have money be as easy as possible. To have the lowest reserves possible. To have low interest rates that can reset higher in the future so they can be peddled faster and the hope being, there will be enough inflation in assets BUT NOT IN COMMERCE to pay for all this.
The desire for assets held by banks, rising, is very strong. It allows them to increase lending without increasing reserves. We see today how the opposite works. Reserves vanish as loans go belly up or people sensibly refuse to buy up older loans, freeing up banks for more business. When the present regulators of our banking system read this timeline, it should become crystal clear to them, the process they launched in 2000 is a replication of this timeline only speeded up in spades. And now it is unwinding just like back then. The FDIC was pushed literally to bankruptcy thanks to lax lending laws and regulations imposed on them by the Federal Government itself. Corrupt politicians working for sharpsters and con men, worked tirelessly to undermine and destroy regulations and controls. Then they bailed out the banking system using the wallet of the American People. This caused our national debt to rise, of course.
As the present rescue shall do. Virtually nothing has changed except the names of the organizations involved in all this. The names of the individual humans also remains remarkably the same. Indeed, McCain is rising in the world, not festering in prison again."
And she writes regarding the 'Regulatory Relief Act' which gives the Federal Reserve Board Of Directors the discretion, effective as of October 1, 2011, to lower the ratio of reserves that a depository institution must maintain against its transaction accounts below the ranges currently established by law, including potentially establishing a zero reserve ratio: " And here we are: after a long circuitous route, we learn what this Regulatory Relief Act really is -- THE ELIMINATION OF RESERVES!!!! HELL'S BELLS!!!! Are they insane? Help! My god! Talk about totally insane and utterly irresponsible."
In summary she writes: "The US has negative savings. Interest rates are well below the rate of inflation. Wild overspending is bankrupting our banking system and our government. Wild over-importation is killing our national worth. America is being destroyed from within and without due to NO SAVINGS. Our national banking system has the lowest reserves ON EARTH. We are a dead whale on the economic beach and we stink. And sea gulls are tearing out our eyes as we lay helpless on the beach. And we need LIQUIDITY and what the hell is that?
We had fake savings & loans that were not required to hold or offer savings. Now our entire banking system from top to bottom has no savings. And this is the problem, Wiley E. Bernanke! The Roadrunner can out run you because you have no savings, not a lack of liquidity. And dropping rates to Japanese levels will make this WORSE, not better."
V. Today's Investment Commentary by the Financial Ninja
The Financial Ninja writes that the: "mortgage insurers are (quietly) downgraded and that the Credit Default Swaps, CDS, are screaming trouble. I’ve put up the Credit Default Swap (CDS) spread charts up. To keep it simple, high spreads are bad. The higher the spread, the greater the cost of buying insurance against default. Big, sudden spikes represent the rapid deterioration of perceived credit quality. Any spreads near 1000 start to get problematic. When spreads are high enough, sellers of insurance will demand the spread plus an up front lump sum. This lump sum is not represented on these charts. Consequently, these charts UNDERSTATE current credit risk. Notice how the credit stress isn’t just concentrated among the Guarantee companies, but spread nicely among everybody from the Banks, Brokers, Builders, and REITS? That’s why it’s called a GLOBAL credit bubble and a GLOBAL credit crunch."
VI. Today Marks A Pivotal Day In Investment History
not only have US Treasury Bonds turned lower, but now, stocks also have too; it's a Alf Field wrote in his early January article, fiat wealth of stocks and bonds are headed off into the abyss while gold is headed much, much higher.
And Mr. Field writing in Elliott Wave Gold Update 18 suggests the following timing information for buying gold: "a “normal” large correction of 16% from $1011 would produce a target of around $850. A 12% correction, which is possible in these circumstances, would produce a target of about $890. If the 12% decline is calculated from the cash market high price of $1033, the target becomes about $910. It seems that any price below $900 represents a buying opportunity, especially when we consider what comes next in this gold bull market."
Today's chart of gold, $gold, shows a close up at $934; and the US Dollar, $USD, which generally trades inversely of gold, closed down at $71.88.
VII. Fed Weighs Its Options, Risk Of Run On The Dollar And Run On Treasuries Manifests
I've presented at length that the banks are insolvent, that a run on the US Dollar has commenced, and a run on US Treasuries has commenced as well; it appears that the latter two issues are about to intensify as Mike Sheldon in The Fed Is Terrified writes referring to Greg Ip's Wall Streeet Journal articlethat: "The Federal Reserve is considering contingency plans for expanding its lending power in the event its recent steps to unfreeze credit markets fail."
"The Fed is seeking ways to expand its balance sheet without causing the federal funds rate to drop. The likeliest option, one the Fed and Treasury have discussed, is for the Treasury to issue more debt than it needs to fund government operations. The extra cash would be left on deposit at the Fed, where it would be separate from bank reserves on deposit and thus would have no impact on interest rates. The Fed would use the cash to purchase an offsetting amount of Treasurys in the open market; for legal reasons, it generally cannot buy them directly from Treasury. Treasury's principal constraint is the statutory limit debt. Treasury debt was $453 billion below the limit Monday. In the past, Congress always has responded to administration requests to raise the limit, sometimes only after political theatrics."
Another option for the Fed is that: "of the Fed issuing its own debt and using the proceeds to purchase other assets or make loans. It has never done so; the legality is unclear. Some foreign central banks, such as the Bank of Japan, do so. The Fed is now considering borrowing from the Treasury (US taxpayers). Were the Fed to have to do this to remain whole, i.e., have the Treasury underwrite the Fed's balance sheet, the US central bank would be de facto insolvent, having insufficient assets to carry out its mandate."
Yes, some new framework agreement is likely forth coming from Bernanke at the Federal Reserve in addition to TAF, TSLF, and PDCF; he is just one many government leaders who act together with stakeholders in finance, commerce and trade forming a plato oliarchy, which is led in the military sphere by General Petraeus who gave the Senate a blueprint for an unending occupation of Iraq; and Bloomberg reports Petraeus saying that Iranian-backed groups are the greatest threat to Iraq: the futures investors are confirming an Iran war by calling oil to $110.
Capitalism died when the Federal Reserve acted to underwrite the buyout of Bear Stearns, BSC; now the word, the will and the way of the oligarchs is the law of the North American Continent, replacing sovereign nations, constitutions and their traditional laws.
VIII. Investment Application
I recommend that one immediately dollar cost average purchases of gold at BullionVault.com as a resolution of the the two greatest risks now facing the investor: one, not having 100% access to one's cash or money wealth in a system wide financial emergency, and two, the risk of investing in gold, and seeing it depreciate in value until it rises again due to a hord of investors seeking safety in hard metals.
The investment banking, KCE, and banking, KBE, sectors are once again taking the stock market lower: the finance, IYF, real estate, IYR, retail, XRT, homebuiling, XHB, and consumer discretionary, VCR, sectors suffering the most loss.
The Russell 2000, IWM, comprised of small US companies highly dependent upon a functional credit system fell almost 2% today
Transports, IYT, being sensitive on oil prices fell.
The government sponsored mortgage enterprises, GSEs, Fannie Mae, FNM, and Freddie Mac, FRE, both fell for the fourth straight day.
Energy service provididers, OIH, are trading up as oil prices, USO, inflate higher to $112, as General David H. Petraeus, the commander of American forces in Iraq, and Ryan C. Crocker, the American Ambassador to Iraq, testify before Congress, and investor concerns grow over the Iraqi civil war and likely war on Iran.
Gold, GLD, rose as the Euro, FXE, rose to test its all time high.
Disinvestment continues from the emerging markets with China stocks, FXI, and China real estate, TAO, falling the most.
The chart of volatility, $VIX provided by Corey Rosenbloom, I believe indicates that volatility has bottomed out and is ready to assist the those short the stock market.
Rich Strehl writes of Yesterday's volatility and relates: "As I look at this chart of the VIX (volatility chart for S&P 500) I see us closing in on a long term ascending triangle pattern. Eventually the chart will have to make a choice...break up or break down. Hopefully we'll see a significant break to lead us to believe a solid direction will have formed. It's almost like hurricane season here in Florida when a storm is headed toward shore. The storm is definitely going to hit but exactly when and exactly where have yet to be determined.
Like Action Forex, I believe that the Euro/Yen, FXE:FXY, will decline soon which will cause an unwinding of Yen Carry Trade dollars which have been invested in Latin American companies such as America Movil whose weekly chart shows a triple top and Brazilian oil producer Petrobras.
II. Tombstones Of The Former Age Of Fiat Wealth And Credit Liquidity: These Charts Show The Extinguishment Of Capitalism Is Underway
Lehman Brothers, an investment banker
Wells Fargo, one of America's leading banks
Freddie Mac, one of the two government sponsored mortage providers
Credit Suisse, an international bank with a large holding of subprime mortgages
PMI Group, a mortgage insurer
High Yield Dividend Payers
NLY, a Mortgage REIT
Gilead Sciences, a leading biotech company and vaccine manufacturer
Lowes, America's leading home improvement and remodeling store
DR Horton, America's homebuilder
Bed, Bath And Beyond, a leading retailer of consumer discretionary household goods
YUM, a fast food restaurant manager
Amphenol, manufacturer of electronic and fiber optic connectors
Whirlpool
General Motors
Intuitive Surgical, a leading medical device manufacturer
American International Group, insurer
Valmont Industries, manufacturer of irrigation systems
Burlilngton Northern Railroad
Ryder Truck
Fedex
Simon Property Group, a leading retail REIT
Assisted Living Concepts, a leading long term care facility organization
III. We Have Likely Arrived At The End Of The Age Of Profitable Basic Material Investing
Exxon Mobil
Cabot Oil And Natural Gas
Massey Energy
CNX
Arch Coal
Schnitzer Steel
US Steel
Peru Copper
Potash Corp
IV. Today's Investment Commentary by Ellaine Meinel Supkis
Ms. Supkis writes regarding the FDIC history of home lending from LBJ to Bush Jr: "All the rules set up in the huge banking collapse were slowly or swiftly eroded. Rules stopping wild money making via reckless lending always die the same way: it gets in the way of people wishing to make lots of money, very fast. Since profits lie in fees and processing deals, the tendency of the bankers of all stripes is to have money be as easy as possible. To have the lowest reserves possible. To have low interest rates that can reset higher in the future so they can be peddled faster and the hope being, there will be enough inflation in assets BUT NOT IN COMMERCE to pay for all this.
The desire for assets held by banks, rising, is very strong. It allows them to increase lending without increasing reserves. We see today how the opposite works. Reserves vanish as loans go belly up or people sensibly refuse to buy up older loans, freeing up banks for more business. When the present regulators of our banking system read this timeline, it should become crystal clear to them, the process they launched in 2000 is a replication of this timeline only speeded up in spades. And now it is unwinding just like back then. The FDIC was pushed literally to bankruptcy thanks to lax lending laws and regulations imposed on them by the Federal Government itself. Corrupt politicians working for sharpsters and con men, worked tirelessly to undermine and destroy regulations and controls. Then they bailed out the banking system using the wallet of the American People. This caused our national debt to rise, of course.
As the present rescue shall do. Virtually nothing has changed except the names of the organizations involved in all this. The names of the individual humans also remains remarkably the same. Indeed, McCain is rising in the world, not festering in prison again."
And she writes regarding the 'Regulatory Relief Act' which gives the Federal Reserve Board Of Directors the discretion, effective as of October 1, 2011, to lower the ratio of reserves that a depository institution must maintain against its transaction accounts below the ranges currently established by law, including potentially establishing a zero reserve ratio: " And here we are: after a long circuitous route, we learn what this Regulatory Relief Act really is -- THE ELIMINATION OF RESERVES!!!! HELL'S BELLS!!!! Are they insane? Help! My god! Talk about totally insane and utterly irresponsible."
In summary she writes: "The US has negative savings. Interest rates are well below the rate of inflation. Wild overspending is bankrupting our banking system and our government. Wild over-importation is killing our national worth. America is being destroyed from within and without due to NO SAVINGS. Our national banking system has the lowest reserves ON EARTH. We are a dead whale on the economic beach and we stink. And sea gulls are tearing out our eyes as we lay helpless on the beach. And we need LIQUIDITY and what the hell is that?
We had fake savings & loans that were not required to hold or offer savings. Now our entire banking system from top to bottom has no savings. And this is the problem, Wiley E. Bernanke! The Roadrunner can out run you because you have no savings, not a lack of liquidity. And dropping rates to Japanese levels will make this WORSE, not better."
V. Today's Investment Commentary by the Financial Ninja
The Financial Ninja writes that the: "mortgage insurers are (quietly) downgraded and that the Credit Default Swaps, CDS, are screaming trouble. I’ve put up the Credit Default Swap (CDS) spread charts up. To keep it simple, high spreads are bad. The higher the spread, the greater the cost of buying insurance against default. Big, sudden spikes represent the rapid deterioration of perceived credit quality. Any spreads near 1000 start to get problematic. When spreads are high enough, sellers of insurance will demand the spread plus an up front lump sum. This lump sum is not represented on these charts. Consequently, these charts UNDERSTATE current credit risk. Notice how the credit stress isn’t just concentrated among the Guarantee companies, but spread nicely among everybody from the Banks, Brokers, Builders, and REITS? That’s why it’s called a GLOBAL credit bubble and a GLOBAL credit crunch."
VI. Today Marks A Pivotal Day In Investment History
not only have US Treasury Bonds turned lower, but now, stocks also have too; it's a Alf Field wrote in his early January article, fiat wealth of stocks and bonds are headed off into the abyss while gold is headed much, much higher.
And Mr. Field writing in Elliott Wave Gold Update 18 suggests the following timing information for buying gold: "a “normal” large correction of 16% from $1011 would produce a target of around $850. A 12% correction, which is possible in these circumstances, would produce a target of about $890. If the 12% decline is calculated from the cash market high price of $1033, the target becomes about $910. It seems that any price below $900 represents a buying opportunity, especially when we consider what comes next in this gold bull market."
Today's chart of gold, $gold, shows a close up at $934; and the US Dollar, $USD, which generally trades inversely of gold, closed down at $71.88.
VII. Fed Weighs Its Options, Risk Of Run On The Dollar And Run On Treasuries Manifests
I've presented at length that the banks are insolvent, that a run on the US Dollar has commenced, and a run on US Treasuries has commenced as well; it appears that the latter two issues are about to intensify as Mike Sheldon in The Fed Is Terrified writes referring to Greg Ip's Wall Streeet Journal articlethat: "The Federal Reserve is considering contingency plans for expanding its lending power in the event its recent steps to unfreeze credit markets fail."
"The Fed is seeking ways to expand its balance sheet without causing the federal funds rate to drop. The likeliest option, one the Fed and Treasury have discussed, is for the Treasury to issue more debt than it needs to fund government operations. The extra cash would be left on deposit at the Fed, where it would be separate from bank reserves on deposit and thus would have no impact on interest rates. The Fed would use the cash to purchase an offsetting amount of Treasurys in the open market; for legal reasons, it generally cannot buy them directly from Treasury. Treasury's principal constraint is the statutory limit debt. Treasury debt was $453 billion below the limit Monday. In the past, Congress always has responded to administration requests to raise the limit, sometimes only after political theatrics."
Another option for the Fed is that: "of the Fed issuing its own debt and using the proceeds to purchase other assets or make loans. It has never done so; the legality is unclear. Some foreign central banks, such as the Bank of Japan, do so. The Fed is now considering borrowing from the Treasury (US taxpayers). Were the Fed to have to do this to remain whole, i.e., have the Treasury underwrite the Fed's balance sheet, the US central bank would be de facto insolvent, having insufficient assets to carry out its mandate."
Yes, some new framework agreement is likely forth coming from Bernanke at the Federal Reserve in addition to TAF, TSLF, and PDCF; he is just one many government leaders who act together with stakeholders in finance, commerce and trade forming a plato oliarchy, which is led in the military sphere by General Petraeus who gave the Senate a blueprint for an unending occupation of Iraq; and Bloomberg reports Petraeus saying that Iranian-backed groups are the greatest threat to Iraq: the futures investors are confirming an Iran war by calling oil to $110.
Capitalism died when the Federal Reserve acted to underwrite the buyout of Bear Stearns, BSC; now the word, the will and the way of the oligarchs is the law of the North American Continent, replacing sovereign nations, constitutions and their traditional laws.
VIII. Investment Application
I recommend that one immediately dollar cost average purchases of gold at BullionVault.com as a resolution of the the two greatest risks now facing the investor: one, not having 100% access to one's cash or money wealth in a system wide financial emergency, and two, the risk of investing in gold, and seeing it depreciate in value until it rises again due to a hord of investors seeking safety in hard metals.
WIDGETIZE