Tuesday, May 19, 2009

Half off sale!

Greetings good citizen,

Investors drove the market higher today and it finally occurred to me why these idiots are buying instead of running for the hills.

Our ‘best and brightest’ see something that you and I don’t see…mainly that the market is ‘half off’. While you and I see this as continued deterioration of our economic conditions, these ‘geniuses’ stupidly think the markets will return to their former totally bogus levels.

Understand good citizen, if the markets DO return to their former levels, you will need a million dollar bill in your pocket to run down to the ‘nearest’ (it won’t be local by any stretch of the imagination) store to buy a gallon of milk and a loaf of bread.

The fly in this ointment is you won’t be earning a million dollars an hour although you might make more than this a week…but not much more. So if you don’t personally know the guy with a cow (and have something he wants to trade you for some milk) and you don’t have the ingredients to make your own bread, you ain’t getting’ the sumbitch!

Okay, one of the comments I keep seeing is how the markets keep running up on ‘light volume’. This is one of the deceptive features of the stupidity ‘stock markets’, there’s no law against overpaying for a small number of stocks.

Since much of the investor classes wealth is derived from the price of their stock holdings, you can understand their interest in driving up the price of the stocks they hold.

Apparently the p/e ratio is a lagging indicator as it is only reported quarterly. Understand that last quarter many companies ‘beat’ earnings expectations…not by selling more but by reducing ‘overhead’.

How many quarters do you suppose they can keep pulling that rabbit out of the hat? Can they do it until we’re all unemployed?

Because that’s where this is headed.

Hopefully it is apparent to you what folly it is to keep pumping ‘funny money’ into the banking system…it’s directly related to the ‘slight of hand’ that keeps stock prices artificially high.

If you knew how much of the (recorded) US economy isn’t produced in the US, you’d revolt.

So we arrive at tonight’s offering
where we once again can only shake our heads in disbelief.

Wall Street Higher on a Buying Spree
Article Tools Sponsored By
Published: May 18, 2009

Wall Street’s recent buying spree, interrupted last week, revved up again on Monday.

Traders seized on last week’s stock declines as a chance to get back in at cheaper prices, and they pushed shares of financial firms sharply higher, bettering [betting?] that the markets would keep climbing. Rising oil prices lifted energy producers, and a better than-expected profit at the home-improvement chain Lowe’s helped to bolster consumer stocks. [There it is again! Why does anyone believe people (market analysts) that are so consistently wrong? Does anyone else smell a scam?]

Shortly before 1 p.m., the Dow Jones industrial average was up 185 points or 2.2 percent. The broader Standard & Poor’s 500-stock index was also 2.2 percent higher. The Dow fell 3 percent and the S.&P. 500 skidded 5 percent last week.

Shares of Bank of America were up 11.8 percent after analysts at Goldman Sachs named the company a “conviction buy,” and Citigroup rose 5.7 percent. [Um, neither of these stocks should be Dow components…and if Goldman Sachs is saying ‘buy’, I’m thinking ‘sell quick’!]

The financial services provider State Street Corporation rose 6 percent after announcing that it would raise more than $1 billion in stock and debt not backed up by the government’s liquidity-guarantee program as it seeks to pay back its bailout funds.

Bailout recipients like Wells Fargo to Morgan Stanley have been raising new unsecured capital in recent weeks, aiming to get out of the government’s Troubled Asset Relief Program.

Weaker retail sales helped to stifle some of the momentum of Wall Street’s recent rally last week, raising concerns that talk of glimmers of economic hope and “green shoots” of recovery could be overblown. But on Monday, many investors used the market dip as an excuse to buy. [Because these boneheads think the market is ‘half off’ rather than halfway to its new high…]

“The pullback last week created a little bit of breathing room, and buyers might be more apt to step in at these levels,” said Todd Salamone, senior vice president of research at Schaeffer’s Investment Research.

Shares of Lowe’s rose 6.2 percent after the home-improvement chain reported lower earnings that nevertheless beat analysts’ expectations. Shares of rival Home Depot were up nearly 5 percent, and other retailers also gained ground on hopes that wary consumers would come out of hibernation this spring.

Last week, the government threw some ice over hopes for a quick rebound in consumer spending when it reported that retail sales in April fell by a greater-than-expected 0.4 percent. Sales at restaurants, clothing stores, gasoline stations and electronics retailers were all lower for the month, the Commerce Department reported.

Although stock markets have surged more than 30 percent from their 12-year lows set in early March, some analysts warn that investors seem to be betting on a quick economic recovery, one that may not materialize.

“That’s going to be quite difficult,” said John Brady at MF Global. “Unemployment is going to move higher, and consumers are going to continue to increase savings.”

In Europe, the major exchanges were all more than 2.2 percent higher, and a closely watched gauge of bank willingness to lend showed more signs of improving. The three-month London interbank offered rate, a measure of how much banks charge each other to borrow money, fell to 0.79 percent, its lowest levels in years.

Britain’s economy is one of the few that is in worse shape than ours…thanks to US ‘financial innovation’. AIG fell into the now 180 billion-dollar hole its in due to the activities of its London office.

The current situation is NOT anything like the (first) Great Depression where ‘Keynesian stimulus’ worked because the money you put into people’s pockets was used to purchase goods that were domestically produced.

We’re in this pickle today because people spent money they didn’t have buying ‘imported’ goods. Is this an ‘oversimplification’? I don’t think so.

Until we restore the balance between what we produce and what we buy, what passes for ‘our’ economy will not improve.

As has too frequently been the case today’s ‘rally’ was led by the ‘financials’, the same troubled banks that have already swallowed nearly 12 trillion-dollars of taxpayer money.

What do you suppose it is that makes these deeply troubled institutions so attractive to investors? Are we dealing with a phenomenon akin to the one described in the title of this piece? Do investors look at the former prices these socks commanded (during the fraudulent bubble) and find their current pricing ‘irresistible?

Let’s make sure we all understand the banking ‘business model’. Besides late fees and overdraft charges, the banks charge a nominal fee to ‘handle’ your money…but this isn’t the ‘meat and potato’s’ of banking. Banks exist to loan money.

Bankers make their money by charging you interest to borrow ‘other people’s money’.
If there aren’t enough people willing to pay hefty interest charges then banks quite simply don’t make money.

This is where we are today and this is where we will be tomorrow and for a long time coming. There are too few people that have the wherewithal to borrow even small sums of money.

Worse, people that are already carrying more debt than they can comfortably handle are losing their jobs. This causes those people to default on debt they already had, income banks are counting on to continue operating. (If we removed the taxpayer spigot from the equation.)

Our man Timmy has pledged that he won’t let a ‘systemically important’ financial institution fail…and coincidentally, the stock of those same institutions are the ones that keep leading the run up of the Dow…

The housing, insurance and now the automotive sectors are on the ropes, two have already shed hundreds of thousands of workers…where oh where will those worker find employment that will even come close to replacing the wages they have lost?

Short answer, they won’t.

So how good does investing in financials look now?

Understand good citizen that the government isn’t a bottomless pit of money, if things keep on as they are, the government will place us on the hook for all of what currently passes for our economy.

While nothing is being done to restore balance to the economy, nothing.

Eek, eek, shriek, shriek…were all doomed! But that’s NOT what I’m saying.

What I’m saying is read ‘em and weep…this is the truth good citizen and I think you can handle it.

Thanks for letting me inside your head,


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