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HomeAguirre Addresses Likely Cause of Next Market Crisis: Selling Counterfeit Stock
Posted by Larry Doyle on November 1st, 2013 10:53 AM |
“The message is simple: Wall Street crime pays and there is no downside.”
Will there be another market crisis and if so what will precipitate it?
In what is an instant Sense on Cents classic, noted attorney and former SEC whistleblower Gary Aguirre takes us on a walk down the path that seems self-evident to me will cause our next market crisis.
Can you imagine if you discovered a businessman went about selling a product, collecting revenues on those sales, but never actually delivered the product sold?
Think that sort of fraud might attract the interest of the authorities? But what if the authorities, in this case our financial regulators, turned a blind eye to the practice? (more…)
Will There Be a QE3?
Posted by Larry Doyle on March 28th, 2011 7:56 AM |
Is there really any doubt that virtually all our markets, especially commodities and with the exception of real estate, have been propped higher as a direct or indirect result of the Federal Reserve’s policy of quantitative easing? I have no doubt.
The question remains outstanding just how far the Fed, in concert with its banking friends on Wall Street, has gone and will go to further manipulate our markets. That question may never be fully answered. What a shame! For those who believe a preponderance of truth, transparency, and integrity are the cornerstones for long term fiscal health and financial well being our markets remain a decidedly challenging arena.
In light of this reality and with the end of QE2 on the horizon this June, where do we go from here? A reader posed that very question the other day. (more…)
What Happens When Investors Lack Trust?
Posted by Larry Doyle on August 6th, 2010 1:05 PM |
Think the structure of the equity markets is broken? With the preponderance of equity volume now dominated by high frequency trading and true retail investors fleeing in droves, what do people think the chances are that we could experience another Flash Crash as we saw on May 6th?
Last evening, The Wall Street Journal ran an online poll on this topic in Legacy of the ‘Flash Crash.’ I have to admit, I was surprised by the results. Did you get concerned witnessing the 1000 point ‘whoosh’ in a very short time period on May 6th? An overwheming number of pollsters believe it can happen again.
With our computer-drive stock market, could a “flash crash’ happen again?
Where Is The Market Headed?
Posted by Larry Doyle on August 2nd, 2010 9:59 AM |
In commentary written specifically for Sense on Cents, our friends from Forextraders.com share some fabulous insights and perspectives on the ups and downs of the equity markets.
The Stock Market Is In Limbo—Which Way Will It Go?
An incredibly positive corporate earnings season in July has helped the market to discount immediate fears of a possible double dip recession. The strong corporate earnings reports, however, had to battle Ben Bernanke’s very dovish remarks, as he emphasized the slowing recovery in the U.S. and raised the possibility of Federal Reserve instituting further quantitative easing measures. Those bearish remarks by the Fed President regarding the possible future direction of the U.S. economy did cause equity markets to stall in the 3rd week of July, but now in the final week of the month, equity markets are again taking a shot at the HI’s from the month of June. (more…)
“You’re Playing with Sharks”
Posted by Larry Doyle on July 22nd, 2010 6:20 AM |
Is it safe to go in the water? In other words, is it safe to play in the markets under the current construct? Do small retail investors truly stand a chance against the ‘big boys’ on Wall Street running high powered algorithmic trading programs and assorted other high frequency trading mechanisms? Are fundamental traders being thrown around amidst the ‘high waves’ and ‘strong surf’ pounding the shore?
No doubt, the scene on Wall Street has changed dramatically over the years. The onslaught of high frequency trading complete with a wide array of ‘bait and tackle’ such as flash orders, dark pools, naked access, co-location, and much more make it extremely challenging — if not downright daunting — for those who believe they can navigate these waters with simple ‘rod and reel.’ (more…)
February 20, 2010: Market Week in Review
Posted by Larry Doyle on February 20th, 2010 7:54 AM |
Markets rebounded strongly this week. In the process, most of the major market equity averages, commodity indices, and bond ETFs recouped January’s declines and are now back close to their December 31, 2009 levels. What happened?
Welcome to our Sense on Cents Week in Review where I provide a streamlined recap of the major economic data and news, along with month-to-date market returns.
ECONOMIC DATA
A lot of news and data this week. Some good. Some not so good. Let’s dive right in. (more…)
February 6, 2010: Market Week in Review
Posted by Larry Doyle on February 6th, 2010 7:37 AM |
Global risks remain high. Global supports remain strapped. What are the results? Markets remain volatile and skittish. Why? Our global economy along with our domestic economy remain under the pressure of massive debts and deficits across the sovereign, corporate, and consumer spectrum.
Global governments can not prop economies and markets forever, try as they might. Can 2010 successfully transition from these total government supported and propped markets to a hoped for return to private enterprise with private capital? The year to date results of this transition are not pretty. We remain a long way from being out of the woods. Pack lightly and lets navigate.
Welcome to our Sense on Cents Week in Review where I provide a streamlined recap of the major economic news and month-to-date market returns. (more…)
If The Market Declined 15% . . .
Posted by Larry Doyle on October 28th, 2009 9:22 AM |
. . . would you be surprised? What would you do? What if the market declined by 20%? Would you be surprised? What would you do? How about if the market rose by 10% to 20%? Would you be surprised? I would.
The reason I ask these questions is an attempt to address the fundamental question as to what the market is telling us and what American consumers believe.
The equity market has traditionally been a reliable indicator of the future economy. The market provides a discounted valuation of future earnings. Those earnings drive companies and the economy at large.
As the market declines and prospects wane, businesses and consumers react accordingly. On the other side of the coin, as the market improves forecasting an improving economy, businesses and consumers react accordingly . . . until now. What is going on? (more…)
Retail Sales Stronger Than Expected? But What About The Revisions?
Posted by Larry Doyle on October 14th, 2009 9:54 AM |
When the going gets tough…the tough American consumer goes shopping, right? Do the virtues of thrift and frugality truly stand a chance in America? Let’s review the recently released Retail Sales report and navigate this leg of our economic landscape.
The Wall Street Journal provides a snapshot of the surprisingly strong headline number, but dare I say the WSJ does not provide a full comprehensive review. That’s ok, though, because the equity market futures are driving higher on the headline so why should we dig deeper and spoil the fun? Well, I’d be neglecting my mission here at Sense on Cents. Let’s navigate.
Highlights
The consumer pulled back sharply in September-but it was mostly due to the post-“clunkers” drop in auto sales. Otherwise, the numbers were surprisingly healthy for the most part. Overall retail sales in September dropped 1.5 percent after a 2.2 percent spike the month before. The September drop in sales was not as severe as the market forecast for a 2.1 percent fall. The decline was led by a 10.4 percent plunge in auto sales after a 7.8 percent boost in August. Excluding motor vehicles, retail sales advanced 0.5 percent, following a 1.0 percent jump in August. The consensus had expected a 0.3 percent rise for September.
In typical fashion, the focus on the current month’s outperformance is not properly measured in the context of the previous month’s downward revision. If The WSJ wanted to provide real integrity in its reporting, it would provide an equal weighting to the revision in conjunction with the actual report. In doing so, we witness that this month’s so called outperformance is almost uniformly balanced by last month’s downward revision. We witness a similar dynamic at work in Retail Sales excluding auto sales, as well.
By incorporating the revisions, retail sales over the last two months show a marginally positive trend, but hardly the ‘surprisingly healthy’ review provided by The WSJ and other market mavens.
Checking on the other volatile component, gasoline sales provided lift, gaining 1.1 percent in the latest month.
Is this an indication of increased consumer confidence and thus the willingness to travel more, or merely a function of increased prices for gas . . . or perhaps a combination of the two? To tout it as a pure positive is disingenuous.
Nonetheless, excluding motor vehicles and gasoline, retail sales rose 0.4 percent, following a 0.6 percent gain the previous month. Although core components were mixed, they were mostly positive and reflected sizeable gains. Apparently, the consumers that have jobs are a little more optimistic and are willing to spend.
Again, not a clear cut overwhelmingly positive trendline, despite what The WSJ may want to report. I still maintain we are, at best, a third of the way into our marathon towards a newly defined Uncle Sam economy. As such, it is still prudent to assess where we are in the grand scheme. To that end:
Overall retail sales on a year-ago basis in September improved marginally to down 5.7 percent, from down 5.8 percent in August. Excluding motor vehicles, the year-on-year rate increased to minus 4.9 percent in September from down 6.3 percent the previous month.
Enjoy the ride higher in equities, but don’t get overly caught up in the euphoria. Analysts may neglect to properly measure revisions, but we do it at our peril if we want to properly navigate the economic landscape.
LD
U.S. Markets Play “Follow the Leader”
Posted by Larry Doyle on October 7th, 2009 9:40 AM |
Yesterday’s rise in rates by the Australian central bank is a bellweather sign of the global shift in the balance of economic power. While the rise in rates by the Aussies is the first central bank move, it certainly will not be the last. Why did the Aussies raise rates and what does it mean both in the short term and for the long haul? Let’s navigate.
The Australian economy did not have near the level of debt that burdens the U.S. and Europe and thus they did not need near the amount of monetary stimulus to weather this global recession. Additionally, Australia has benefited from extensive trade in the Asian hemisphere.
The knee jerk reaction in the markets was focused primarily on a selloff in the greenback which supported a move higher in commodities and global equities via the ‘positive carry trade.’ The commodity which garnered the greatest focus was gold, which moved toward $1040/ounce.
What do these moves mean? I see cross currents on the economic landscape, including:
1. The dollar may not necessarily continue to weaken, but given its current weakness it will support those companies which garner a greater degree of sales overseas.
2. A weak dollar is usually affiliated with inflation. I do not think we are in a position to look at prices in terms of one overall index. Why? Given the technical and fundamental factors in our economy, certain price components will likely project increased inflation while others will not.
To be more specific, given the labor situation in our country, I do not see any appreciable increase in wages anytime soon. In fact, I think it is likely wages will trend lower.
Given the glut of supply and vacancies in both the residential and commercial real estate markets, I have a tough time believing these prices will move appreciably higher anytime soon.
Commodities may very well move higher. Why? High five to MC for sharing with me that there is increased dialogue in the international trade community to move oil away from trading in dollars. In fact, that story likely had a big impact in yesterday’s trading. Even if there is not an immediate shift in this market dynamic, the mere fact that it is being discussed will support oil specifically, oil-based products broadly, and other commodities as well.
Given that these commodities are primarily inputs, the prices for the outputs will likely move higher. This development is clearly inflationary.
3. What happens to interest rates here in the United States? While on one hand we have some deflationary forces at work which would keep rates low, we have the tug of other factors pushing them higher. How does it play out? My gut instinct tells me that overall pools of capital will be flowing away from the United States and, as such, people and private corporations will have to pay more to attract capital here in our country. I think those entities which focus the bulk of their economic activity here in the United States will be forced to pay higher rates to attract funding.
4. What about our equity markets and the Fed? While the Fed will want to keep our rates low for an ‘extended period,’ they may not have that luxury. If other nations follow Australia in raising rates, the U.S. may need to withdraw some liquidity sooner rather than later. Kansas City Fed chair Thomas Hoenig made this very assertion yesterday.
What would higher rates mean or even the thought of higher rates mean? Slower growth and a tough road for equities going forward.
Thoughts, comments, questions always appreciated.
LD
Related Sense on Cents Commentary
Dollar Carry Trade Drives Global Equities (September 16, 2009)
