Saturday, November 27, 2010

Black Friday Fail

I had to laugh after reading this today:

"NEW YORK (AP) -- Shoppers crowded stores on Black Friday but spent just a little more than last year on the traditional start of the holiday shopping season, according to data released Saturday by a research firm.
Retail spending rose a slight 0.3 percent, to $10.69 billion, compared with $10.66 billion on the day after Thanksgiving last year, according to ShopperTrak"

Quick Take:

CNBC wasa pumping Black Friday all day yesterday.  They were using google maps to look at how much more filled the lots were this year versus last year.  The CNBC talking puppets were placed in malls all over the country to report on Black Friday traffic.  They all predictably raved about how full the malls were..

If the mall were indeed packed,  then the people weren't buying once they got in there. 

Should we really be surprised?

It's kinda hard to shop when your credit cards are maxed out, you have no job, and you are $100,000 underwater on your mortgage.

To be fair:  More and more people are shopping online so these numbers should decline over time.  This will eventually lead to more job losses as the malls begin to take huge revenue hits which is the last thing this country needs.

You would think the REIT's and commercial real estate would be dropping like a rock as as a result of both the death of the consumer and fewer people heading to malls for shopping.  Of course in this wacky market these stocks have done nothing but soar this year.  Some of the stocks like SPG are up over 300%.

It's amazing what stocks can do when they are manipulated by trading robots. 

Friday, November 26, 2010

Market Volume down 50% from last year

Hat tip to Zero Hedge for the chart.  I heard this on CNBC today.  Today's market volume was 50% lower than the black Friday trade last year.  It's also 50% lower than 2009's December holiday shortened session.

My Take:

It's becoming clearly evident that the retail investor increasingly wants nothing to do with the rigged predatory trading dominated cesspool that we call the stock market.

Why would anyone want to partake in such an investment vehicle where little black boxes hold positions for an average of 11 seconds as they trade with one another?

There is no such thing as investing in the stock market anymore.  P/E ratios, fundementals, and long term investing are things of the past in our new world of investing. 

As a result, the only thing you can do is walk away at this point.  Why play the game when you don't know or understand the rules? 

The Bottom Line

It's time for all of us to go on a buying strike until all of these trading scams are eliminated.  The SEC and FBI better kick things into high gear and end this stuff before all confidence is lost in our markets.

I am glad to see volumes fall of a cliff like this.  If we all stay away and "starve the beast" the predatory traders will be forced to steal from one another every 11 seconds instead of robbing your E-trade account on a daily basis.

As for the sell off today it's all about the Euro crisis.  I will have a lot more on this later.  Still busy with holiday stuff today.

Thursday, November 25, 2010

Howard Davidowitz: "We're Broke!"

I love it when someone is the media speaks the truth.  Check out this rant from HD.  BTW, Irish bond yields soared to over 9% in Europe during today's trading.  Needless to say this is not good.   When I get a chance I will expand.

Wednesday, November 24, 2010

Back to our Regularly Scheduled Housing Crash

It looks like things are starting to wind down for the holiday. 

One more post before I shut it down for turkey day new home sales. 

Housing has been placed on the backburner recently as the European debt crisis and insider trading probe have taken center stage.

We got the October new home sales data this morning and it was flat out dismal:

Here are the numbers from Reuters:

"(Reuters) - New U.S. single-family home sales fell unexpectedly in October and prices dropped to a seven-year low, a government report showed on Wednesday, pointing sustained weakness in the housing market following the end of a home-buyer tax credit.

The Commerce Department said sales dropped 8.1 percent to a 283,000 unit annual rate after an upwardly revised 308,000 unit pace in September.

October's weak sales pace pushed up the supply of new homes on the market to 8.6 months' worth from 7.9 months' worth in September. However, there were 202,000 new homes available for sale in October, the lowest since June 1968.

The median sale price for a new home dropped a record 13.9 percent last month from September to $194,900, the lowest since October 2003. Compared to October last year, the median price fell 9.4 percent, the largest drop since July 2009."

My Take:

The pricing data is even worse than the putrid number of new homes that were sold.   Home prices have now fallen back to where they were selling when the housing bubble really got going back in 2003.

Inventories continued to rise in October as buyers remained on the sidelines despite record low interest rates and a huge correction in prices. 

The housing market was hopeful that the rebound seen in September was the beginning of a recovery.  Today's data blows that theory right out the window.

The Bottom Line 

As I have said all along, housing is not coming back anytime soon and it will likely never get back to selling where it was at the peak.

Housing prices are only heading in one direction and that is down.  The fact that no demand has been created with the combination of record low rates and huge price drops tells you that there is a ways to go as the bubble pops.

I see another 20-40% price correction from today's price levels depending on what market you live in.  I say this because once the mentality of deflation kicks in it's almost impossible to stop.  Just ask Japan.

The psychology of deflation is devastating once it takes hold. 

It works like this:  People stop buying and prices then begin to drop.   As buyers see prices drop they sit on the sidelines thinking that they might drop some more.  Eventually prices drop again due to lack of demand.  Buyers react by holding out some more because they think they can get an even better deal if they wait just a little longer.

Making matters worse:  As prices continue to drop, buyers become afraid of catching a falling knife which just exacerbates the problem. 

This all becomes a viscous cycle where all pricing power is lost. This is how deflationary death spirals are created. Many economists refer to this as a positive feedback loop.

The fallout of the housing crash will fall on the shoulders of the banks because they are the ones who will be saddled with the losses.  Of course, when it's all said and done, we get stuck with the tab because our stupid government decided to backstop the losses which ultimately means the US taxpayer foots the bill.

I expect most of the "mortgage slaves" will continue to default or just walk away from their homes as this death spiral intensifies and they watch their loans fall deeper and deeper underwater. 

The banks will be crippled by this because their balance sheets are filled with bloated McMansions loans that will never be paid back.

The trading algo's of course ignored this news today and focused on the weekly jobless claims data which was better than expected.  The bond market remained weak but steadied after the 7 year bond auction got done. 

If you are in the market to buy a home do yourself a favor and wait.  Prices will only continue to drop as the economy remains weak.

Before I finish up I want to wish everyone a very Happy Thanksgiving!  I will hop on when I get a chance in the oncoming days.

"Houston, We have a Problem"

Don't look now but the bond market is falling apart. 

Take a look at the 10 year:

Quick Take:

The trading robots are enjoying a nice Turkey Day rally for now but this type of price action in bonds will stop the bullfest in its tracks if it continues.

Remember folks, we are in the middle of a debt crisis.  These trading algos love to forget about this as they trade with one another and take the market higher. 

The fact remains that the world's debt markets are facing a funding problem and the bond vigilantes continue to rear their ugly heads.

Tuesday, November 23, 2010

Stocks Tumble as the Credit Markets Rumble

Stocks sold of hard as debt concerns continue to haunt the market.
Investors initially ran to the safety of bonds until the 5 year Treasury auction was announced today:

"The bond market rally eased in the afternoon session as lower yields tempered demand on a $35 billion sale in five-year notes. Dealers pushed up bond yields from session lows to set up for $29 billion seven-year notes sale due Wednesday afternoon.

The Treasury Department sold the five-year notes at a yield of 1.411%, compared to 1.396% right before the auction. The higher yield signals weaker bidding prices. The auction was 2.65 times oversubscribed, compared with the average of 2.92 for the previous four sales."

My Take:

The bond market didn't like this 5 year auction at all and the 10 year sold off as a result:

The selling in treasuries could have been much worse if stocks hadn't performed so badly today.  At this point, investors really don't know where to run  hide. 

Bonds don't look attractive right now because there are fears that the debt contagion could eventually hit our bond market.  After all, the reality is we are in no better fiscal shape than Greece or Ireland. 

However, risk is relative so the money still flocks to the US when it looks like the crap is about to hit the fan because it appears that we will be the last country that goes down for the count. 

The dollar soared today as the European financial system continues to hang on by a thread:

The US is basically the least worst choice of all investing options at this point.  The European disaster has created a nice positive for the Fed:  It has taken a lot of the QE pressure off as the dollar strengthens.

How scary is it that our dollar is rising sharply only a few weeks after the Fed announced that they are money printing? 

I guess a little money printing doesn't look so bad when you live on a continent with 4 countries that appear to be on the brink of default.

Investors also flocked to gold today as stocks and bonds continue to wobble.

The Bottom Line

I don't know where this all leads to folks.  This all feels surreal to me at times.  It's like a bad dream that you never wake up from.

The Fed minutes came out today predicting that the unemployment rate will fall to 8% with 4% GDP growth by 2012. 

Yeah OK says who?

They must smoke some seriously awesome crack when they sit in these meetings.  I would love to know which Fed committee's members ass they pulled these numbers from.

Aren't these the same clowns that told us "subprime is contained" and used 10% as the maximum possible unemployment rate when they conducted the banking stress tests?

Excuse me for being a cynic but I call bull on these numbers.  The market did too as stocks sold off a bit on the release of the news.

When it comes to investing in this market all I can say is stay diversified.  There are no good options at this point.  Cash could crash as fast as gold could depending on what monetary policy path we take to get out of this mess.

The Fed's zero interest rates policy have put almost every asset class at risk because bubbles have been blown everywhere...Stocks, bonds, gold anyone?

IMO, Inflation still appears to me to be the end result if rates stay this low, but we could see a bout of nasty deflation before we get there.

I continue to sit in cash, gold, and some short hedges.  I continue to drool over the idea of shorting treasuries, but the European mess could create a short term move higher in bonds so I will sit on my hands before making this trade.

The price action this week has been amazing given how close we are to a major holiday.  Futures are down a tad again tonight so tomorrow could be interesting.

European Debt Contagion Spreading Like Wildfire

Don't be fooled by today folks.  This sell off is not about North Korea.

We have a full blown debt contagion crisis on our hands in Europe as Portugal and Spain enter center stage following the Ireland bailout.

Spain had a short term debt auction that was basically a disaster per FT-Alphaville:

"Spanish 3-month bill auction fail - debt agency sells €3.26bn vs €4-5bn indicated, at avg yield of 1.743% vs 0.951% prior"

Germany's chancellor is warning that the Euro is in trouble per Bloomberg.  Here is another report on some of Merkel's comments per Dow Jones.

"Germany's Merkel: Euro Facing Serious Situation

BERLIN -(Dow Jones)- German Chancellor Angela Merkel Tuesday underlined the grave situation facing the single currency in the wake of the financial woes facing Ireland.

"We're in an extraordinarily serious situation, as far as the situation of the euro is concerned," Merkel said during a speech at the German employers association annual conference.

She labelled the Irish crisis "very worrying" but different from that faced by Greece in spring this year."

My Take:

The spanish debt auction is a disaster folks.  THIS IS SHORT TERM FUNDING.  Yields basically had to double in order to get the auction done.

There are also rumors out there that Portugal is facing a Moody's debt downgrade.

Folks, the Ireland bailout has apparantly lit a fuse that has triggered a debt panic across the pond.  It reminds me of our Lehman weekend.  Went they went down the market immediately started asking: Who's next?

I think we are seeing something similiar over in Europe.

If Spain goes down it's game over.  Their economy is larger than Portugal, Ireland, and Greece combined. The fact that investors demanded a much higher yield on 3 month paper tells me there is no confidence at all in Spain's fiscal situation.

I don't see how there is enough money to bailout Spain given the grave debt situation in Europe.  The money simply isn't there, and they can't print out of this like we can because of the Euro.

North Korea certainly didn't help things after their attack on the South last night. 

Stay tuned.  I will be monitoring things very carefully.

Monday, November 22, 2010

The System is Broken

I don't know how else to describe it.  I wanted to highlight two excellent tech tickers tonight.

The first one talks about the "professionalization" of how the markets trade.  I have been beating on this drum for awhile now, and the ticker guys below do a great job discussing it

Folks, you basically have no chance trading against Wall St at this point. The  Elliot Waves, Fibonacci's, and other programs that retail investors use to trade are now antiquated tools that have been replaced with high speed sophisticated trading programs.  These "old school" trading approaches will do nothing but lead you directly to slaughter.

Let's state the obvious at this point:  The game is rigged and it's getting worse by the second as a result of Wall St's ability to cheat in terms of getting information illegally before you do without getting caught. 

The market is also become more and more professionally based as frustrated retail traders pick up their toys and decide to leave the trading sand box after getting crushed by the big boys.  

90% of the trading volume now consists of HFT's, hedge funds, and institutional investors.  As a result of this new world, retail investors have no business trading this market unless they have direct access to the same information that they do.  Remember:  90% of "E-traders" lose money.

Don't get me wrong here:  If you want to invest that's one thing.  However, swimming with the sharks via day trading is a recipe for disaster because you are nothing but chum in the shark tank.   Their access to information and sophisticated trading algo's are simply too much to overcome. 

Politics and Economics:

The boys are on a roll today.  This is one of the main reasons why I think this country is doomed.  We have seen zero signs that our two political parties are willing to come together and fix this broken nation. 

The nation is so polarized politically that both parties will destroy this country in order to take down each other.  It's like watching a train wreck in slow motion at this point.  There is no partnering or meeting of the minds going on.

The Republicans are obsessed with taking down Obama.  The special interests continue to own both parties and the system shows no signs of changing.  The corruption on both sides continues to reach all times highs. 

The Bottom Line

All of the issues above have basically created a system that the people no longer have any faith in.  Bonds and gold are once again moving higher.  This happened today despite a stronger dollar.  To me, this signals fear and lack of confidence.

Our whole way of life is falling apart, and our government appears to lack the leadership that's needed to fix it.

Stocks rallied back after selling off early in the session.  Why?  Who knows at this point?  The market is so beyond screwed up you are wasting your time trying to figure out why it does what it does.

Nothing makes sense anymore and trying to interpret the daily insanity we see in the markets looks more and more like a fools game. 

The pros have taken over Wall St.  Trying to interpret their predatory trading behaviours is close to impossible.  Most trades are aimed at specific vulnerable stocks from what I can see at this point.

Their super computers look to buy stocks with high short interest in order to create a short covering rally.  They could care less about the fundamentals.  They only own the positions for 11 seconds so who cares?

The problem with this game is the pros will run out of suckers over time because the retail investor will get tired of getting repeatedly raped by these vultures.

They will be left sniping at each other as they try and grab a few pennies on each trade.  No one will want to be involved at this point.  The pros are laughing now but it won't be funny when they are left destroying each other.

A market that lacks regulation and fundamentals is a market that no one will want to be involved with.

It's time to accept the radical changes we are witnessing in terms of the way the market works.  Stocks no longer react to what's going on in the economy.  They react to trading algos.  The market is now filled with snipers that are looking to blow your head off as soon as you take a position.

You are basically being looted everytime you take a position trading a stock.  The only way left that Wall St can make money other than accepting our tax dollars is via trading.

As a result, there is no way to analyze anything that we are witnessing because the system is fixed. 

The insanity of our markets that has been created by these snipers is easy to see.  Ask yourself the following questions and you can see how badly distorted the market has become:

How does printing more currency via QE in order to finance our debt make any sense?

How does the market rally over 70% when unemployment, tent cites, and food stamp usage are soaring to near all time highs?

How do bonds hit the lowest yields in history when the risk of default in this country has never been higher?

How does the market soar when America has basically all but bailed on the stock market?

There are no justifiable answers to these questions.  The guys running the computer trading algos see the same things you do.  They know we are screwed.  These people may be a lot of things but they are not stupid.

However, knowing what the herd will do gives them "the edge" that they need.  They use this herd like thinking to their advantage by taking positions against what the herd does.  They could totally agree with you philosophically but they can make much more money betting in the other direction because they know it will create short covering rallies.

This type of predatory action has now destroyed the markets.  It may take a generation before anyone ever comes back.

I don't know what to tell you folks.  Somewhere along the line we lost our way and the system is now broken because of it.

I will continue to try and find answers, but I must admit it's all starting to look more and more hopeless.

Irish Tension Rattle the Markets.

Euphoria switched to fear overnight amid the anger and political turmoil that was seen in Ireland today.

The green party is demanding new elections in January.  Stocks were down sharply after rallying on the bailout news last night.

All eyes now turn to Portugal as their debt issues continue to resurface. 

Despite all of the craziness over in the Eurozone, I don't expect anything too crazy this week from a [price action standpoint with turkey day coming in a few days.

Moving forward things are definitely going to become more interesting as the world realizes they are getting shafted by the bankers in these bailouts.

Social and political tensions should continue to soar as the debt skeletons continue to be exposed. 

This won't end until the bankers end up dead or in prison.  At this point this race is too early to call.

Either way, I wouldn't be feeling to comfortable being a banker right now.  I think it's time for them to stop thinking about money for the first time in their lives and start focusing on self preservation. 

If they don't, they could very well find themselves hanging from lamp posts.

Sunday, November 21, 2010

Will This Be Our Future?

Since no network will air this I will:)  I hope this ad goes viral.  Wake up people!

Hat tip to Karl Denninger:

TSA Humor:

Irish Bailout Announced

This is getting old:

"Taoiseach Brian Cowen has confirmed that a major financial assistance plan for Ireland has been agreed with the EU.

He said the terms of the funding being sought would be the subject of negotiations and would be used to put the Irish banking system back on its own two feet and to address the current deficit."

My Take:

Good luck Ireland.  Selling your soul to the devil usually doesn't work out well.  The number appears to be around $100 billion for the bailout.  The terms are still being negotiated.

The stock futures up sharply on the news.  The markets have been "saved" once again so the street loves it.  The reality is all this does is kick the can down the road. 

Just look at Greece.  It's been one year since their bailout and the country remains a mess.  Their citizens are tired of austerity.  The sheeple are getting increasingly angry because they are being forced to live in misery in order to pay for the bankers mistakes.

There will come a tipping point where the people aren't going to take it anymore.  They will start asking themselves:  Why in the hell should I live like this when this whole thing wasn't my fault?

The next question they will start asking themselves is why are the people who made the mistakes that created this crisis not being punished? 

Don't be fooled folks.  Social chaos is right around the corner because papering over losses DOES NOT WORK.  It only delays the pain.

As the world's economies continue to deteriorate there will come a tipping point where people won't take it anymore.  Mark my words.

We saw a taste of it in the Irish parliamentary today.  Let's hope we see more politicians tell the system to "*uck off":

Stocks are pumping the news tonight because the bankers basically won again when Ireland caved and took the money.

The European banks had $650 BILLION of exposure to Ireland.  If the Irish hadn't taken the bailout the Euro banking system was likely toast.

I am amazed that these bailouts continue to get cheered by the stock market.  The financial system once again almost imploded. 
How in the hell is this good news?

The Bottom Line

I am not confident this pump will last into tomorrow's trading session. 

I say this because was another big story this weekend and if this thing gets legs it's going to be huge:

"Federal authorities, capping a three-year investigation, are preparing insider-trading charges that could ensnare consultants, investment bankers, hedge-fund and mutual-fund traders, and analysts across the nation, according to people familiar with the matter.

In another aspect of the probes, prosecutors and regulators are examining whether Goldman Sachs Group Inc. bankers leaked information about transactions, including health-care mergers, in ways that benefited certain investors, the people say. Goldman declined to comment.

The investigations have been conducted by federal prosecutors in New York, the FBI and the Securities and Exchange Commission. Representatives of the Manhattan U.S. Attorney's office, the FBI and the SEC declined to comment.

A First New York spokesman said: "We are one of more than three dozen firms that have been asked by regulators to provide general information in a widespread inquiry; we have cooperated fully." He added: "We stand behind our traders and our systems and policies in place that ensure full regulatory compliance."

Key parts of the probes are at a late stage.

The SEC has been investigating potential leaks on takeover deals going back to at least 2007 amid an explosion of deals leading up to the financial crisis. The SEC sent subpoenas last autumn to more than 30 hedge funds and other investors."

Continued Bottom Line:

Stay tuned on this one folks.  These are serious investigations and the implications here are mind boggling.

Wall St owns DC right now so I won't too excited about this until I hear more details.

Until tomorrow!