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HomeMidday Market Update . . . U-G-L-Y
Posted by Larry Doyle on March 5th, 2009 12:45 PM |
I had written that yesterday’s 2-3% upward move in the market was very likely a Dead Cat Bounce. Well, that cat is burrowing further into the ground as markets have more than fully retraced yesterday’s upward move and are making new lows. This type of price action, known as lower highs and lower lows, confirms bearish trends.
I hope our readers know that all financial information you could possibly want is on the Market Data tab on the Sense on Cents header. That resource provided by the Wall Street Journal is not only a great way to get a quick and comprehensive snapshot of all sectors of the market, but also a great way to keep your brokers and financial planners on their toes and working for you!!
Let’s take a quick look at the markets and then I will offer some commentary. (more…)
Could The FDIC Go Broke?
Posted by Larry Doyle on March 5th, 2009 9:45 AM |
In very short order, the FDIC (Federal Deposit Insurance Corporation) has seen its reserves plummet from $50 billion to $18.9 billion at the end of 2008. At that pace and with the expectation of more bank failures, could this bedrock of our national banking system go broke? Well, FDIC’s Bair Says Insurance Fund Could Be Insolvent This Year. Is Sheila Bair unnecessarily sounding warning signals? Am I running to the bank to withdraw my money? No and no.
Sheila Bair is proactively managing expectations for all concerned, those being politicians, regulators, bankers, and consumers. In fact, if she did not highlight the current state of the FDIC reserve fund and expectations for future declines, she would not be fulfilling her obligations. (more…)
Sold Out
Posted by Larry Doyle on March 4th, 2009 1:12 PM |
Our loyal reader Fiscal Liberal shared a report from Wall Street Watch called Sold Out that I want to make sure is properly highlighted. In this report, I was taken by the quote on page 2 of the executive summary:
the financial sector showered campaign contributions on politicians from both parties, invested heavily in a legion of lobbyists, paid academics and think tanks to justify their preferred policy positions and cultivated a pliant media–especially a cheerleading business media complex.
That statement is a strong indictment of our entire system of government, commerce, academia, and media. It is not a stretch to formulate a tidy little conspiracy. The most important question, though, is who is looking out for the general public?
Thank you Fiscal Liberal for sharing the report. I strongly recommend this piece to everyone.
LD
Mo’ Money…
Posted by Larry Doyle on March 3rd, 2009 2:48 PM |
There are a string of events in the market today that all highlight the need for entities to refinance debt and raise capital. Given the tightness of credit and the onerous terms being exacted within the bond market, many firms are massively capital constrained. These issues are global in nature. From our friends at Bloomberg, I offer the links to a number of these situations. In light of these types of situations, one does not need to be in a hurry to buy stocks. Additionally, given the demands for capital, I still maintain that rates are headed higher.
I will share with you some of the current problem situations getting serious attention:
1. GE Falls Below $7 on Concern Finance Unit May Need More Capital
2. Corporate Bond Losses Drive Investors ‘to the Bunker’
3. Metlife, Lincoln Sink as U.S. Stock Rout Increases Capital Need
4. German Real Estate Firms Owe Billions, Face Deadlines
LD
Why is George Soros Short the Euro? MUST READ!
Posted by Larry Doyle on March 3rd, 2009 6:10 AM |
In very short order, I have gained a deep respect and regard for our Economic All-Star, John Mauldin. I have come to appreciate that Mauldin and I view the market through the same lens focused on the global economy. While many media outlets focus on the day to day, if not hour to hour trading activity, I believe they are truly missing the forest for the trees.
While I have written twice over the last week about eastern Europe being the weakest link in the world of global finance, Mauldin and his colleague Niels Jensen of Absolute Return Partners provided insights and analysis that is numbing.
Why is George Soros short the euro? Let me provide a synopsis of Mauldin’s and Jensen’s “Europe On the Ropes.” Assuming those visiting Sense on Cents have an interest in the markets and economy, this piece is somewhat lengthy, but a MUST READ!! A link is provided at the end of my review. (more…)
A Virtual Smorgasbord
Posted by Larry Doyle on March 2nd, 2009 4:24 PM |
On the heels of the news about AIG, Berkshire, and HSBC, the equity markets have found no support today and are down 4%. While the malaise of the markets has much of the focus, let’s review a few other items that I see on today’s menu:
1. In regard to AIG, current CEO Edward Liddy and former CEO Hank Greenberg have started some public feuding over the nature of AIG’s problems. Greenberg is trying to make the case that the risks underwritten at AIG occurred after his departure. Liddy responded that the culture, the compensation system, and the division housing the bulk of AIG’s risk all developed under Greenberg. Wow!! When our country is screaming for leadership, we have senior executives playing the blame game and pointing fingers. How pathetic!! (more…)
The Weakest Link is Weakening
Posted by Larry Doyle on March 2nd, 2009 6:00 AM |
The other day I highlighted the fact that 12 eastern European countries would solicit a bailout from the European Union over the weekend in Brussels. I defined this bloc of eastern European countries as currently the Weakest Link in the global economy. Well, if they were the weakest link then they just got weaker as they were rebuffed in their request for aid.
The dynamic at work in the weekend’s emergency meeting held in Brussels is a play on beggar-thy-neighbor policies implemented during times of economic stress.
There are actually a number of factors influencing the European Union’s refusal to provide bailout money to these eastern European nations. Included in these factors are the following: (more…)
Why Are Interest Rates Headed Higher?
Posted by Larry Doyle on March 1st, 2009 3:57 PM |
While our domestic stock markets are down approximately 50% over the last 14 months, there has been a rush of cash into short term money market funds, government bond funds, and in the last few months corporate bond funds and municipal bond funds. As I mentioned in my February 2009 Market Review, I am increasingly nervous about bond investments at this juncture. Why? I’m glad you asked.
1. Primarily due to the massive global government funding needs which are just starting to hit the market. In a recent piece, the highly regarded Financial Times projects global government debt issuance to TRIPLE in 2009.
German Prime Minister Angela Merkel is concerned about European countries looking to tap the markets on or near the same dates. She is proposing global coordination of debt issuance so as to insure that rates are not DRIVEN higher. (more…)
