WMT reports before the open...at 52 week lows today
2/13/09
USO - watching for new lows to go long..Watching for RSI to get down to 30 or below
it tried to hold it today but doesn't look good - 2% now 25.62...freaking XLE up 1.2%...whatever!
Sorry, But this Bill isn't for THE PEOPLE
The House votes on the stimulus package. Seems somehow appropriate that the vote happens on Friday the 13th The Stimulus Package provides $1.10 per day in tax relief to America's workers, while saddling every American family with $9,400 in extra debt.
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------
What’s in the Bill for You By RON LIEBER
All the talk the last couple of days about the stimulus bill was about compromise and slimming down. What is left, though, is a huge spending bill, with well over $100 billion in tax breaks and handouts for individuals.
And most of us will be able to use at least one of them, though it will be difficult to get much money immediately, unlike the stimulus checks that went out last year.
What follows is a list of some of the biggest provisions in the bill that will hit you directly in the wallet. Keep in mind that the language in the measure isn’t quite final and the Senate and House still have to vote to approve it.
INCOME TAX: In 2009 and 2010, there is a tax credit of up to $400 for individuals and $800 for married couples filing their taxes jointly. You calculate your credit, subtracted from other federal taxes you owe, by taking 6.2 percent of your earned income.
Your eligibility for this credit begins to phase out if you’re an individual with an adjusted gross income over $75,000 or a couple with income higher than $150,000.
Employers may end up adjusting tax withholdings on paychecks so that this credit trickles into your bank account over the course of the year. People who are self-employed can adjust their quarterly tax filings to account for the credit.
This credit is refundable, according to a summary of the stimulus bill that the Senate Finance and House Ways and Means committees released Thursday. That means that even if you have no federal income tax liability, you will still get the money.
UNEMPLOYMENT: Normally, you pay federal income taxes on federal unemployment benefits. In 2009, however, you won’t have to pay taxes on the first $2,400 in benefits you receive.
HEALTH INSURANCE: If you get fired, your company is required, thanks to a law known as Cobra, to allow you to pay to keep your health insurance, generally for up to 18 months.
The problem is, it can cost you $1,000 a month or more to keep the coverage.
Now, the federal government will subsidize 65 percent of the premium for up to nine months. To be eligible, you need to have been forced out of your job between Sept. 1, 2008, and Dec. 31, 2009. Also, your income in the year you receive the subsidy cannot be more than $125,000 for individuals or $250,000 for married couples filing their taxes jointly. ...
SOCIAL SECURITY: In 2009 a number of retirees and disabled people, including Social Security recipients, will receive a $250 refundable tax credit. The money would arrive within 120 days of the bill’s signing.
CAR BUYER TAX DEDUCTION: For the rest of 2009, you’ll be able to deduct the state and local sales and excise taxes you pay on the purchase of a new (not used) car, light truck, recreational vehicle or motorcycle. ...
Eligibility for this tax break begins to phase out for single people with adjusted gross income over $125,000 or $250,000 for married couples filing jointly. And the deduction does not apply on spending above $49,500.
PELL GRANT: According to a summary from the office of House Speaker Nancy Pelosi, the maximum Pell Grant will increase by $500, to $5,350 in 2009 and $5,550 in 2010. The grants are generally for low-income students.
HIGHER EDUCATION TAX CREDIT: This credit covers up to $2,500 of the cost of college tuition and other related expenses in 2009 and 2010. You’ll need to spend at least $4,000 in a single year to get the full credit. The credit begins to phase out for individual taxpayers with adjusted gross incomes over $80,000 or $160,000 for married couples filing jointly.
Forty percent of the credit is refundable, which benefits low-income students paying their way through school (who may owe no federal income taxes).
529 PLAN EXPANSION: When you withdraw money from a 529 college savings plan, you can use it for tuition, room, board, books and other college expenses. In 2009 and 2010, families can also use the money for computers and computer technology, which could include educational software and Internet service for students living at home.
FIRST-TIME HOME BUYER CREDIT: First-time home buyers are eligible for a refundable tax credit equal to 10 percent of the purchase price of their home, up to $8,000, if they made the purchase after Jan. 1, 2009, but before Dec. 1, 2009.
Unlike a similar credit that Congress provided last year, you don’t have to pay this one back over 15 years. The new credit, however, does phase out for individuals with incomes over $75,000 or married couples with incomes over $150,000 who file their taxes jointly. Also, you forfeit the credit if you sell the house within three years.
TRANSIT ACCOUNTS: If you commute to work via public transportation, your employer may allow you to set aside pretax money from your paycheck to pay for the bus, train or parking. Currently, you can put aside only $120 a month for mass transit while those who drive and park can save $230. This year and next, those who take mass transit will also be able to put aside $230 each month.
A.M.T. PATCH: Each year, Congress creates a temporary fix to keep millions of people from paying the alternative minimum tax. This year, the patch is part of the stimulus bill. “If you didn’t pay the A.M.T. last year, you probably won’t this year,” said Mr. Stretch of Deloitte. “For most people, this is a nonevent. They didn’t even realize they were in danger of being shot in the head by the A.M.T.”
USO Trade is a bust below 25.50, XLP is a Bust below 21.40
Transports had a 10% move off the call now fully revesed...busted below 2950 if still long.
Thursday rally was short covering IMO and gave a bunch of false signals
Thursday rally was short covering IMO and gave a bunch of false signals
2/12/09
That's why those trend lines are there
to get out or reverse positions like today.
RANGES for SPX Friday
Summary: XLP good bottom today, USO RSI did turn up and looks like a good bottom, XLF held the uptrend line as did the SPX.
Told ya the rest of the week would be insane
US eyes home loan subsidies in rescue plan-sources
UPDATE 1-US eyes home loan subsidies in rescue plan-sources
Thu Feb 12, 2009 3:22pm EST Email | Print | Share| Reprints | Single Page[-] Text [+]
Market News
Economic worry sends Wall St. lower | Video
U.S. crude drops 5.5 percent on supply glut
Gold sets record highs as global stocks slide
More Business & Investing News... (Adds detail, background, byline)
By Patrick Rucker
WASHINGTON, Feb 12 (Reuters) - The Obama administration is hammering out a program to subsidize mortgage payments for troubled homeowners who have gone through a standardized re-appraisal and affordability test, sources familiar with the plan said on Thursday.
The program would be a major break from existing aid programs, which are triggered once homeowners fall into arrears.
Under the plan being contemplated, mortgage companies would use a uniform eligibility test even before a borrower becomes delinquent, sources said.
The administration hopes the mortgage industry will soon agree to a set of standards that will allow it to move quickly to modify many home loans.
Sources said government-controlled housing finance companies Fannie Mae and Freddie Mac would play a supporting role in the government's new plan, but said they are not expected to expand their securitization of loans.
In an interview, James Lockhart, the regulator that oversees Fannie Mae (FNM.P) and Freddie Mac (FRE.P), said the mortgage finance industry was eager to have a standardized mortgage modification standard.
"I've talked to all the major servicers -- both the big bank ones and the big independent ones -- and they are all ready to go, they're chomping at the bit," Lockhart, the director of the Federal Housing Finance Agency, said. "The other thing they're asking for standardization."
Under the plan being mulled, homeowners would have to make a case of hardship to qualify for new loan terms.
Housing policymakers weighed but have for now shelved one plan that would have seen the government stand behind low-cost mortgages of between 4 and 4.5 percent, sources said.
Lockhart said that policymakers are eager to prevent a large drop in home values from their current, deflated levels.
"Just as we had a large overshooting to the upside. Is there any way to prevent going much further to the downside? That will cause tremendous harm to the U.S. economy, to the financial system and it's not necessary," he said. (Reporting by Patrick Rucker)
Thu Feb 12, 2009 3:22pm EST Email | Print | Share| Reprints | Single Page[-] Text [+]
Market News
Economic worry sends Wall St. lower | Video
U.S. crude drops 5.5 percent on supply glut
Gold sets record highs as global stocks slide
More Business & Investing News... (Adds detail, background, byline)
By Patrick Rucker
WASHINGTON, Feb 12 (Reuters) - The Obama administration is hammering out a program to subsidize mortgage payments for troubled homeowners who have gone through a standardized re-appraisal and affordability test, sources familiar with the plan said on Thursday.
The program would be a major break from existing aid programs, which are triggered once homeowners fall into arrears.
Under the plan being contemplated, mortgage companies would use a uniform eligibility test even before a borrower becomes delinquent, sources said.
The administration hopes the mortgage industry will soon agree to a set of standards that will allow it to move quickly to modify many home loans.
Sources said government-controlled housing finance companies Fannie Mae and Freddie Mac would play a supporting role in the government's new plan, but said they are not expected to expand their securitization of loans.
In an interview, James Lockhart, the regulator that oversees Fannie Mae (FNM.P) and Freddie Mac (FRE.P), said the mortgage finance industry was eager to have a standardized mortgage modification standard.
"I've talked to all the major servicers -- both the big bank ones and the big independent ones -- and they are all ready to go, they're chomping at the bit," Lockhart, the director of the Federal Housing Finance Agency, said. "The other thing they're asking for standardization."
Under the plan being mulled, homeowners would have to make a case of hardship to qualify for new loan terms.
Housing policymakers weighed but have for now shelved one plan that would have seen the government stand behind low-cost mortgages of between 4 and 4.5 percent, sources said.
Lockhart said that policymakers are eager to prevent a large drop in home values from their current, deflated levels.
"Just as we had a large overshooting to the upside. Is there any way to prevent going much further to the downside? That will cause tremendous harm to the U.S. economy, to the financial system and it's not necessary," he said. (Reporting by Patrick Rucker)
Got to Love trading
Always a rumor or news item planted 1 hour or 30 min before the close
nice short covering rally here SPX -2 DOW -37 NAZ up 4..
USO -.4% any higher and the RSI could point our way...10 min to go...might wait till Friday
nice short covering rally here SPX -2 DOW -37 NAZ up 4..
USO -.4% any higher and the RSI could point our way...10 min to go...might wait till Friday
30 Min to go - Housing Credit News ?
big bounce from 808 to 825....Gov't is Trying to make the street happy....
TECH's !
Helping to fight back, RIMM QCOMM AAPL GOOG up 1% plus. DOW -109 SPX -10.
2 Dow Stocks green now KFT and KO.
XLE bounce to -0.8% on Oil / USO bounce - 0.65%
2 Dow Stocks green now KFT and KO.
XLE bounce to -0.8% on Oil / USO bounce - 0.65%
Keep an EYE out for USO
Traded at new 52 week lows. Watching to see when / if the daily RSI turns up whenever to get long.
SPX Bounce to 821 and gets turned back
This is an interesting and critical day as to if we test the 741 lows or not.
804 is the next support if we go below 811
XLP new .05 from new 52 week lows
Consumer Staples are supposed to be the best play in down markets....hummm.
Stimulus?
We get $13.00 extra a paycheck while Bonus money paid with bailout money is in the billions....Seems fair...not
GAP Down on open - Premarket at 821 on SPX
SPX 804 has to hold....
Umemployment claims 600k plus downward rev of Dec retail sales (but Jan sales were up YOY)
Oil / USO fresh 52 week lows down 2.6% USO 25.40, which has XLE down 1.7%...how long can XLE hold off a plunge with Oil skidding
Umemployment claims 600k plus downward rev of Dec retail sales (but Jan sales were up YOY)
Oil / USO fresh 52 week lows down 2.6% USO 25.40, which has XLE down 1.7%...how long can XLE hold off a plunge with Oil skidding
2/11/09
More Karl
I'll Drink To That ( http://market-ticker.denninger.net/ )
From Marketwatch:
HONG KONG (MarketWatch) -- A Chinese court has sentenced the former chairman of a state-owned holding company overseeing 30 airports, including Beijing International, to death for bribery and embezzlement amounting to more than 100 million yuan ($14.6 million), according to a report late Tuesday by the state-run Xinhua News Agency.
During The Panic of 1873 bankers were literally dragged out of their offices by angry mobs and hung on the spot. In America.
If the law enforcement agencies in this nation do not start prosecuting the fraudsters in our banking and investment industry that caused this economic collapse (and "token prosecutions" like Madoff will not cut it), and our lawmakers (and President) do not stand up darn soon and call for this prosecutorial action in public there is a very real risk that a repeat of those sordid affairs will soon arrive.
Certainly, if we have another 50% selloff in the markets, people's 401ks (now 201ks) are reduced to 101ks, and 20% of the S&P 500 go under (which WILL occur if that selloff happens) the concept of "containing" 20% or more of the population that suddenly finds itself homeless, jobless and hungry, when everyone in this country knows who's to blame for the mess, is laughable.
While I cannot support such summary judgment as we have a right to the presumption of innocence and to be judged by a jury of one's peers prior to imposition of sentence, it is a fact that when the people lose faith in the justice system there is a very high probability of them taking the law into their own hands and grabbing for the nearest coil of rope.
This much is clear to me - high-dollar white-collar crimes, certainly those with an impact greater in aggregate than we currently value a single human life (which various estimates put somewhere between $5 and $50 million each) are deserving of punishment equivalent to murder, meaning either (depending on state law) life imprisonment without possibility of parole or a sentence of death.
We need to put this change into the law as a deterrent against such acts in the future.
From Marketwatch:
HONG KONG (MarketWatch) -- A Chinese court has sentenced the former chairman of a state-owned holding company overseeing 30 airports, including Beijing International, to death for bribery and embezzlement amounting to more than 100 million yuan ($14.6 million), according to a report late Tuesday by the state-run Xinhua News Agency.
During The Panic of 1873 bankers were literally dragged out of their offices by angry mobs and hung on the spot. In America.
If the law enforcement agencies in this nation do not start prosecuting the fraudsters in our banking and investment industry that caused this economic collapse (and "token prosecutions" like Madoff will not cut it), and our lawmakers (and President) do not stand up darn soon and call for this prosecutorial action in public there is a very real risk that a repeat of those sordid affairs will soon arrive.
Certainly, if we have another 50% selloff in the markets, people's 401ks (now 201ks) are reduced to 101ks, and 20% of the S&P 500 go under (which WILL occur if that selloff happens) the concept of "containing" 20% or more of the population that suddenly finds itself homeless, jobless and hungry, when everyone in this country knows who's to blame for the mess, is laughable.
While I cannot support such summary judgment as we have a right to the presumption of innocence and to be judged by a jury of one's peers prior to imposition of sentence, it is a fact that when the people lose faith in the justice system there is a very high probability of them taking the law into their own hands and grabbing for the nearest coil of rope.
This much is clear to me - high-dollar white-collar crimes, certainly those with an impact greater in aggregate than we currently value a single human life (which various estimates put somewhere between $5 and $50 million each) are deserving of punishment equivalent to murder, meaning either (depending on state law) life imprisonment without possibility of parole or a sentence of death.
We need to put this change into the law as a deterrent against such acts in the future.
XLF up 4% hod
Oil may be the weak link later here down 1.3%.
SPX XLF will be over extended soon
DOW up 74 on Banks
SPX XLF will be over extended soon
DOW up 74 on Banks
USO / Oil Testing lows again
Bottom play... XLE must be on pins and needles that it may dive again because XLE has been hanging in there...matter of time before they coorellate again
I Like Karl - I hope he doesn't have a Heart Attack getting this worked up
The Final Countdown
Well, here's what The Market thought of Tim Geithner, Bernanke and Obama Tuesday:
That, however, is not the chart that ought to cause President Obama to loose sleep. This one is:
The Triangle on that chart has a target ~3700 points lower, or if we were to break it tomorrow, approximately DOW 4200.
And that's the most bullish of the primary indices, all of which are sporting similar formations, and all of which closed right on the bottom boundary. Those of you who read The Ticker regularly know what my target is on the downside for the S&P 500 if this triangle breaks.
For the record, December closed at 8776 on the Dow Jones. The target on this technical formation is for a loss of another 50% from there, and as I said, that's the most bullish of the primary indices.
That would be back-to-back roughly 50% losses.
So if you think your 401k has been damaged (e.g. it turned into a 201k) there is a very high probability that it is about to be turned into a 101k.
What's worse is that this will be symptomatic of the broader economy. If you think the jobs lost and economic malaise are bad so far, you've seen nothing yet.
Why?
Because of President Obama and Tim Geithner.
The pair of them along with Obama's economic team have had three full months to figure out what to do about the economic mess.
Then, after priming the market for a big announcement on how they were going to deal with the banks, the gist of the announcement was "we don't know what the hell we're doing."
There were no specifics that mattered.
It gets worse. Bloomberg has article up which says:
"China should seek guarantees that its $682 billion holdings of U.S. government debt won’t be eroded by “reckless policies,” said Yu Yongding, a former adviser to the central bank.
The U.S. “should make the Chinese feel confident that the value of the assets at least will not be eroded in a significant way,” Yu, who now heads the World Economics and Politics Institute at the Chinese Academy of Social Sciences, said in response to e-mailed questions yesterday from Beijing. He declined to elaborate on the assurances needed by China, the biggest foreign holder of U.S. government debt."
Uh huh. You mean we shouldn't try to print our way out of this mess? That Bernanke should not buy the long end of the bond curve, devaluing the currency, or if we do, that we should tell Beijing first so they can be the first ones in line to tender into it?
Geithner's testimony didn't help. Asked specifically if the banks were insolvent, he refused to answer the question. That's a "yes" my friends; a question like that which has a "no" answer (that is, it's all ok) is perfectly safe to answer under oath. The Market was wise enough to properly interpret that answer as "they're all broke" and did so, tanking further.
After weeks of pumping the market with claims of a solution, this sort of reaction to what was clearly a load of hot air should have been expected.
On top of that President Obama has been yelling like a petulant child that Congress "must pass his stimulus bill or the economy will never come out of the slump."
The problem with such pronouncements is that there is no way to win. If the bill passes and it is judged that the bill does little or nothing for the broader economy, then your credibility is destroyed, just as it is when you claim you're going to present a "comprehensive" bank solution and come up empty-handed on the details.
What has been the near $9 trillion in direct stimulus and guarantees pumped into the economy thus far - money we don't have? Are you trying to tell me that after having blasted that sort of fire-hose of debt into the economy, all without salutary effect, another $800 billion of spraying money around - again, money we don't have - will do the job?
Someone either has forgotten or is ignorant of this chart:
The more debt you pump, the less you get for it. Have we reached the point where it goes negative yet? I don't know, but the reaction of the economy and markets is suggesting that we are approaching the event horizon - a point beyond which the choices that must be made are between "bad" and "truly awful", yet like I mentioned in "Monetary Flat Spin" they are also counter-intuitive.
If President Obama thinks that Wall Street sold off hard because it is looking for "simple solutions" then he is truly tone deaf.
Wall Street sold off because investors are tired of being lied to and what Washington has been doing over the last eighteen months is lying, abusing this crisis to benefit their cronies and refusing to go after the people who robbed America blind and lock them up in prison where they belong.
Big banks were down 20-30%, wiping out the gains of the last few sessions. But the selloff wasn't limited to banks - it hit everything, because the market and economy has dealt with 18 months of lies and government obfuscation - propping up the bankrupt - and after rallying hard when such nonsense was put forward in the past only to have hopes dashed, now the market's reaction is to shoot first and ask questions never.
Unfortunately the broader economy is going to go down the precise same road, and if President Obama is not careful he is going to initiate a spiral of job losses that will make what occurred in the last quarter of 2008 look like a Girl Scout picnic.
President Obama's administration cannot get away with the false hope and disaster capitalism game, and neither can the stooges in Congress who float rumors about "Mark to Market" - if you're going to introduce a bill to suspend it Mr. Frank, then just do it.
The constant change of the rules in the middle of the game destroys confidence and that loss of confidence a huge part of why the market and economy totally fell apart last fall. It both can and will happen again if this pattern is not interrupted right now.
President Bush's Administration trashed its reputation and credibility and the result was a loss of fifty percent in the stock indices and fully 50% of the job losses taken in this recession happening in just three months.
Yesterday we came within a few hundred points of those levels on the DOW under Obama's Administration.
This is twice that President Obama has utterly dashed hopes in the market, with the first being his inauguration when the S&P 500 dropped 45 points.
Yesterday it also dropped 45 points, with both losses registering at roughly 5%.
Companies will not invest until the markets stabilize. You cannot expect firms to quit cutting staff and become hopeful for the future until the market stops gyrating widely as a consequence of Washington DC sticking its fingers in every orifice the market has, diddling this knob and jawboning that, leaving investors and executives unable to run their businesses and place trades in the belief that the rules are known and analysis of a firm's future prospects can be undertaken. It is that simple.
Mr. President, hope is not an investment strategy, speechifying doesn't do a thing and there are no Unicorns that crap out pretty colored candies. When you make a promise to the market, you either keep it or you provoke this sort of sell-off. When you provoke this sort of sell-off near a critical support level you risk an all-on crash - a crash that can initiate as soon as the same or next day - which will ripple through to the broader economy.
Days like yesterday in the market are responsible for one to two hundred thousand job losses each due to lost confidence - and lost wealth.
Once "purge-style" selling initiates it does not stop until it has run its course; until all the margin calls have been made and met, the investors wiped out and the last man stops screaming "SELL! SELL! SELL!", keeling over from heart failure. We saw this sort of cascade downward in September and October and all the press conferences in the world simply made it worse, because credibility was just flat-out gone.
From a technical perspective the market is in much worse shape than it was on the 20th of January, after which it bounced strongly. It is coming off overbought levels and as of tonight is sitting right on critical support. Should that support break the expected move is a full fifty percent down from where we are now.
If President Obama is to stop this an actual fully-baked plan must be put in place and all in the administration, including and most especially Geithner must stop lying.
Specifically:
Most of the big banks are insolvent. They know it and so does everyone else. Get it over with. Send in the examiners, mark to market on today's market values and then cram down debt to equity. If a bank cannot be restored to health in this fashion then wipe 'em out, sell off the good assets to regional and local banks, take over the bad assets in the FDIC and either sell 'em or run 'em down. Period. Suspend trading of all of these shares at once for two weeks and have at it. Those that are ok re-open on the exchanges; those that are not reopen too, but with the crammed-down bondholders as the new stockholders; the old stockholders are wiped out and management is removed.
Yes, I know there's a problem with the CDS. Issue an executive order declaring any naked CS to be contrary to public policy as instruments intended to manipulate the market and thus void. Let the Hedgies sue; I wish 'em "bonne chance" suing The Federal Government. Bingo - problem solved while allowing the legitimate protection for actual bonds to be purchased.
Our financial system has come to the brink of implosion as a consequence of the acts of these banksters. This was not the consequence of accidents - it was a consequence of intentional acts going back more than 20 years. We must have clawbacks, investigations and, if federal fraud indictments are indicated, bring 'em. Start now. The people will not accept the current and future pain that we will take without those responsible for intentional acts being held to account. Your mollycoddling of these malfeasors is an outrage after your claim to be "for the common man." Time to put up or shut up Mr. President.
Speaking of banksters, Fannie and Freddie are an abject mess. This problem must be solved, not swept under the rug. The fact of the matter is that the issues surrounding Fannie and Freddie's collapse devolve into inside dealing, cozy revolving door policies between these two firms and Congress along with outrageous pressure tactics and more. The cesspool must be drained.
Glass-Steagall, formal and inescapable reserve requirements (that cannot be "gamed" via sweep accounts and similar) applying to all deposits, an end to off-balance-sheet anything and an absolute ban on regulated financial institutions owning derivative-based "assets" must be put back in place immediately. This mess was caused by excessive leverage, off-balance-sheet game-playing, gaming of reserve requirements and creation of synthetic instruments that are in fact based on nothing but thin air. When the coupon payments stop on these synthetics they are literally worth zero because there is no hard asset (e.g. a house with a mortgage on it) behind them!
All of the existing "23A Exemptions" and other game-playing must be terminated right here and now. This must be done when the examiners show up and future use of these exemptions must be prohibited. If necessary, The Fed must be prohibited from granting such exemptions without explicit authorization of Congress.
Congress must restore the statutory reserve requirement that was removed by the EESA/TARP legislation. This is critical to the safety of the banking system and must be done immediately. The former level required was 8%, although I would argue that 10% is more appropriate and sound.
Leverage must be strictly regulated at no more than 12:1 for all United States institutions. Credit bubbles rely on the ability to obtain and abuse extreme leverage. Stop that, credit bubbles cannot form or be maintained. Period.
The Fed must be forced to consolidate and disclose all Fed District Bank activity on a nightly basis including loans outstanding, to which institution they are outstanding, and the collateral accepted along with the haircut applied in sufficient detail that any person desiring to do so can independently value it in the market on any given day.
Facilities at The Fed that amount to taking an equity position such as the Bear Stearns asset backstop ("Maiden Lane") and any other instance of non-recourse lending must cease immediately. The Fed is only permitted to "discount a note" - that is, make a loan. It does not have the statutory authority, exigent circumstances or no, to take equity positions in any instrument or institution. All such existing facilities must be shut down and disgorged immediately.
We understand that the issues are complex Mr. President. But what we as investors do not understand and refuse to accept are misrepresentations and broken promises.
We are in this mess as a direct and proximate result of that activity by those who allegedly were acting in the public trust and for our benefit in their granting of credit. This is now known not to be the case; they were acting for their benefit and to our detriment, and they gamed the system to keep from being held to account.
The market will not stabilize until trust is restored. Trust will not be restored until we have a trustworthy leader who keeps his promises and speaks the truth.
Period.
President Obama can either take these actions now - immediately - or he is consigned to suffer the consequences should the market and economy decide to discount a new Presidency less than one month in as a continuation of the Bush/Paulson regime - and go straight down the toilet along with the entirety of his political capital.
Your move Mr. President; in the meantime, I hope the market bounces today.
I really do.
But if it does not, I'm prepared to go "all in" short.
If President Obama insists on flushing this economy and market down the toilet all he will leave me with is attempting to make money on the ride into the sewer.
Comments
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Well, here's what The Market thought of Tim Geithner, Bernanke and Obama Tuesday:
That, however, is not the chart that ought to cause President Obama to loose sleep. This one is:
The Triangle on that chart has a target ~3700 points lower, or if we were to break it tomorrow, approximately DOW 4200.
And that's the most bullish of the primary indices, all of which are sporting similar formations, and all of which closed right on the bottom boundary. Those of you who read The Ticker regularly know what my target is on the downside for the S&P 500 if this triangle breaks.
For the record, December closed at 8776 on the Dow Jones. The target on this technical formation is for a loss of another 50% from there, and as I said, that's the most bullish of the primary indices.
That would be back-to-back roughly 50% losses.
So if you think your 401k has been damaged (e.g. it turned into a 201k) there is a very high probability that it is about to be turned into a 101k.
What's worse is that this will be symptomatic of the broader economy. If you think the jobs lost and economic malaise are bad so far, you've seen nothing yet.
Why?
Because of President Obama and Tim Geithner.
The pair of them along with Obama's economic team have had three full months to figure out what to do about the economic mess.
Then, after priming the market for a big announcement on how they were going to deal with the banks, the gist of the announcement was "we don't know what the hell we're doing."
There were no specifics that mattered.
It gets worse. Bloomberg has article up which says:
"China should seek guarantees that its $682 billion holdings of U.S. government debt won’t be eroded by “reckless policies,” said Yu Yongding, a former adviser to the central bank.
The U.S. “should make the Chinese feel confident that the value of the assets at least will not be eroded in a significant way,” Yu, who now heads the World Economics and Politics Institute at the Chinese Academy of Social Sciences, said in response to e-mailed questions yesterday from Beijing. He declined to elaborate on the assurances needed by China, the biggest foreign holder of U.S. government debt."
Uh huh. You mean we shouldn't try to print our way out of this mess? That Bernanke should not buy the long end of the bond curve, devaluing the currency, or if we do, that we should tell Beijing first so they can be the first ones in line to tender into it?
Geithner's testimony didn't help. Asked specifically if the banks were insolvent, he refused to answer the question. That's a "yes" my friends; a question like that which has a "no" answer (that is, it's all ok) is perfectly safe to answer under oath. The Market was wise enough to properly interpret that answer as "they're all broke" and did so, tanking further.
After weeks of pumping the market with claims of a solution, this sort of reaction to what was clearly a load of hot air should have been expected.
On top of that President Obama has been yelling like a petulant child that Congress "must pass his stimulus bill or the economy will never come out of the slump."
The problem with such pronouncements is that there is no way to win. If the bill passes and it is judged that the bill does little or nothing for the broader economy, then your credibility is destroyed, just as it is when you claim you're going to present a "comprehensive" bank solution and come up empty-handed on the details.
What has been the near $9 trillion in direct stimulus and guarantees pumped into the economy thus far - money we don't have? Are you trying to tell me that after having blasted that sort of fire-hose of debt into the economy, all without salutary effect, another $800 billion of spraying money around - again, money we don't have - will do the job?
Someone either has forgotten or is ignorant of this chart:
The more debt you pump, the less you get for it. Have we reached the point where it goes negative yet? I don't know, but the reaction of the economy and markets is suggesting that we are approaching the event horizon - a point beyond which the choices that must be made are between "bad" and "truly awful", yet like I mentioned in "Monetary Flat Spin" they are also counter-intuitive.
If President Obama thinks that Wall Street sold off hard because it is looking for "simple solutions" then he is truly tone deaf.
Wall Street sold off because investors are tired of being lied to and what Washington has been doing over the last eighteen months is lying, abusing this crisis to benefit their cronies and refusing to go after the people who robbed America blind and lock them up in prison where they belong.
Big banks were down 20-30%, wiping out the gains of the last few sessions. But the selloff wasn't limited to banks - it hit everything, because the market and economy has dealt with 18 months of lies and government obfuscation - propping up the bankrupt - and after rallying hard when such nonsense was put forward in the past only to have hopes dashed, now the market's reaction is to shoot first and ask questions never.
Unfortunately the broader economy is going to go down the precise same road, and if President Obama is not careful he is going to initiate a spiral of job losses that will make what occurred in the last quarter of 2008 look like a Girl Scout picnic.
President Obama's administration cannot get away with the false hope and disaster capitalism game, and neither can the stooges in Congress who float rumors about "Mark to Market" - if you're going to introduce a bill to suspend it Mr. Frank, then just do it.
The constant change of the rules in the middle of the game destroys confidence and that loss of confidence a huge part of why the market and economy totally fell apart last fall. It both can and will happen again if this pattern is not interrupted right now.
President Bush's Administration trashed its reputation and credibility and the result was a loss of fifty percent in the stock indices and fully 50% of the job losses taken in this recession happening in just three months.
Yesterday we came within a few hundred points of those levels on the DOW under Obama's Administration.
This is twice that President Obama has utterly dashed hopes in the market, with the first being his inauguration when the S&P 500 dropped 45 points.
Yesterday it also dropped 45 points, with both losses registering at roughly 5%.
Companies will not invest until the markets stabilize. You cannot expect firms to quit cutting staff and become hopeful for the future until the market stops gyrating widely as a consequence of Washington DC sticking its fingers in every orifice the market has, diddling this knob and jawboning that, leaving investors and executives unable to run their businesses and place trades in the belief that the rules are known and analysis of a firm's future prospects can be undertaken. It is that simple.
Mr. President, hope is not an investment strategy, speechifying doesn't do a thing and there are no Unicorns that crap out pretty colored candies. When you make a promise to the market, you either keep it or you provoke this sort of sell-off. When you provoke this sort of sell-off near a critical support level you risk an all-on crash - a crash that can initiate as soon as the same or next day - which will ripple through to the broader economy.
Days like yesterday in the market are responsible for one to two hundred thousand job losses each due to lost confidence - and lost wealth.
Once "purge-style" selling initiates it does not stop until it has run its course; until all the margin calls have been made and met, the investors wiped out and the last man stops screaming "SELL! SELL! SELL!", keeling over from heart failure. We saw this sort of cascade downward in September and October and all the press conferences in the world simply made it worse, because credibility was just flat-out gone.
From a technical perspective the market is in much worse shape than it was on the 20th of January, after which it bounced strongly. It is coming off overbought levels and as of tonight is sitting right on critical support. Should that support break the expected move is a full fifty percent down from where we are now.
If President Obama is to stop this an actual fully-baked plan must be put in place and all in the administration, including and most especially Geithner must stop lying.
Specifically:
Most of the big banks are insolvent. They know it and so does everyone else. Get it over with. Send in the examiners, mark to market on today's market values and then cram down debt to equity. If a bank cannot be restored to health in this fashion then wipe 'em out, sell off the good assets to regional and local banks, take over the bad assets in the FDIC and either sell 'em or run 'em down. Period. Suspend trading of all of these shares at once for two weeks and have at it. Those that are ok re-open on the exchanges; those that are not reopen too, but with the crammed-down bondholders as the new stockholders; the old stockholders are wiped out and management is removed.
Yes, I know there's a problem with the CDS. Issue an executive order declaring any naked CS to be contrary to public policy as instruments intended to manipulate the market and thus void. Let the Hedgies sue; I wish 'em "bonne chance" suing The Federal Government. Bingo - problem solved while allowing the legitimate protection for actual bonds to be purchased.
Our financial system has come to the brink of implosion as a consequence of the acts of these banksters. This was not the consequence of accidents - it was a consequence of intentional acts going back more than 20 years. We must have clawbacks, investigations and, if federal fraud indictments are indicated, bring 'em. Start now. The people will not accept the current and future pain that we will take without those responsible for intentional acts being held to account. Your mollycoddling of these malfeasors is an outrage after your claim to be "for the common man." Time to put up or shut up Mr. President.
Speaking of banksters, Fannie and Freddie are an abject mess. This problem must be solved, not swept under the rug. The fact of the matter is that the issues surrounding Fannie and Freddie's collapse devolve into inside dealing, cozy revolving door policies between these two firms and Congress along with outrageous pressure tactics and more. The cesspool must be drained.
Glass-Steagall, formal and inescapable reserve requirements (that cannot be "gamed" via sweep accounts and similar) applying to all deposits, an end to off-balance-sheet anything and an absolute ban on regulated financial institutions owning derivative-based "assets" must be put back in place immediately. This mess was caused by excessive leverage, off-balance-sheet game-playing, gaming of reserve requirements and creation of synthetic instruments that are in fact based on nothing but thin air. When the coupon payments stop on these synthetics they are literally worth zero because there is no hard asset (e.g. a house with a mortgage on it) behind them!
All of the existing "23A Exemptions" and other game-playing must be terminated right here and now. This must be done when the examiners show up and future use of these exemptions must be prohibited. If necessary, The Fed must be prohibited from granting such exemptions without explicit authorization of Congress.
Congress must restore the statutory reserve requirement that was removed by the EESA/TARP legislation. This is critical to the safety of the banking system and must be done immediately. The former level required was 8%, although I would argue that 10% is more appropriate and sound.
Leverage must be strictly regulated at no more than 12:1 for all United States institutions. Credit bubbles rely on the ability to obtain and abuse extreme leverage. Stop that, credit bubbles cannot form or be maintained. Period.
The Fed must be forced to consolidate and disclose all Fed District Bank activity on a nightly basis including loans outstanding, to which institution they are outstanding, and the collateral accepted along with the haircut applied in sufficient detail that any person desiring to do so can independently value it in the market on any given day.
Facilities at The Fed that amount to taking an equity position such as the Bear Stearns asset backstop ("Maiden Lane") and any other instance of non-recourse lending must cease immediately. The Fed is only permitted to "discount a note" - that is, make a loan. It does not have the statutory authority, exigent circumstances or no, to take equity positions in any instrument or institution. All such existing facilities must be shut down and disgorged immediately.
We understand that the issues are complex Mr. President. But what we as investors do not understand and refuse to accept are misrepresentations and broken promises.
We are in this mess as a direct and proximate result of that activity by those who allegedly were acting in the public trust and for our benefit in their granting of credit. This is now known not to be the case; they were acting for their benefit and to our detriment, and they gamed the system to keep from being held to account.
The market will not stabilize until trust is restored. Trust will not be restored until we have a trustworthy leader who keeps his promises and speaks the truth.
Period.
President Obama can either take these actions now - immediately - or he is consigned to suffer the consequences should the market and economy decide to discount a new Presidency less than one month in as a continuation of the Bush/Paulson regime - and go straight down the toilet along with the entirety of his political capital.
Your move Mr. President; in the meantime, I hope the market bounces today.
I really do.
But if it does not, I'm prepared to go "all in" short.
If President Obama insists on flushing this economy and market down the toilet all he will leave me with is attempting to make money on the ride into the sewer.
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XLF bounces up 3.5%
XLE AND XLY leading here behind XLF....lots of people WANT the bottom in financials....
RIMM Update - Pre market under $50 from $60 High
Large correction to under $50 Premarket. Been looking for a top but this would be too easy from 60 (although it should have and was sold with the RSI up where it was. I think this is a total buy down here somewhere (48 to say 43). tight stop to your risk level off the 15 min chart. My main point is that RIMM should exceed the old $60 high and we watch for the RSI to not confirm the new price high. THIS IS A gift for a long trade....but even more if we can short it up around $65 - 70 ish GIVEN the RSI cooperates...if not, it becomes a hold and we ride the MA's till it violates it...
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