retirement interruptus: That Was The Week That Was-4th Week June

Seven weeks out of the past eight its been losing sessions for the Bulls. You’d think we’d get a break but last week it was all about Greece and then manipulating oil prices and back to Greece again. Italian bank bad news snuck in on Friday… so here is the play by play…
Monday last started off slow but ended with all indices up, including oil but not gold. All it took was a whiff of a possible solution to the Greek crisis and it gave the markets confidence to move forward.
Death Cross? For chart watchers –the technical support number, according to Douglas Fabian, for the S&P 500 index is 1,259. The good news is that the market refuses to fall below its 200 day moving average. However, the day that the markets fall below their 50 day moving average and if that number also falls below the 200 day moving average, that cross pattern is considered a Death Cross and bad things happen. The 50 day moving average is currently (as of last Monday) 1,322.
The argument persists if we’re heading into a double dip, are we in another recession and just don’t know it or is this simply a normal market adjustment.
Fed-Ex predicts Rosy forecast Wednesday morning before the bell.
Jimmy ‘The Mouth’ Cramer sounded like heading for the Fall-Out shelter Monday as he derided the domestic market, the politics and the global markets. In a Street Only interview he said he didn’t like any of the charts and suggested safe havens for clients such as Clorox, Coke and Proctor and Gamble. I don’t get this guy. On his show Monday a caller asked what Cramer thought of owning Ford and Cramer answered, ‘… no matter how much I like a company if the CEO lies to me… then he had…well…you know what I think.’ (Can anyone tell me what’s with this guy?) It was that strange with no answer to the question. Did Ford CEO Mulally lie to Cramer?
Those that believe we’re in deep do-do include MarketWatch writer Douglas McIntyre who reports that the double dip recession has begun and gives the following reasons: U.S. Debt, Housing (always Housing), Unemployment (even CBS new got in the act showing graphics on Monday’s broadcast and stating it would be two more years before unemployment fell to 8%); and the China slowdown.
On the Flip Side Jeff Reeves, writes why stocks will come storming back: Companies are flush with cash; Treasury rates stink (but still investors are climbing into that rowboat); Big dividends in stocks; Bargain valuations for stocks (but nothing spells trouble like saying a stock is a bargain and cannot fall further and it does); IPO boom (you gotta give him that); Steep market declines signal a buying opportunity; Floods, tornados and tsunamis are not permanent and finally the U.S. and the world economies are still growing. Go ahead, hang your cappy on anything you feel comfortable with.
From The Department of So Much Confusion: Molycorp’s (the rare earth company) CEO dumped another $8.9 million onto the market, the third such sale. Share down from $79.16 in May to $52.80 Monday last. Still Piper Jaffray analyst Michael Cox upgraded shares to Overweight.
China’s inflation heads to the USA. A lot of imports are coming in with higher price tags. The WSJ reported that most economists thought the U.S. should import less and export more. (honest- it wrote that!)
Banker CEO’s won’t go to jail even though some should. The Fed suing JP Morgan and Royal Bank of Scotland for duping (the Fed’s words) credit unions into buying more than $3 billion mortgage bonds that went south and was the chief cause of some 40 credit unions to fail. Credit Unions never pretend to have the most sophisticated people on board to direct their investments. The stuff they bought was all labeled AA or better, according to WSJ and other sources. So why aren’t the ratings firms being sued, too? I ask nicely.
JP Morgan settles $153.6 million in a mortgage bond deal that was crafted by JP, sold by JP and known to fail before it was sold to investors by JP. And JP profited!
The Greece crisis averted…for a bit. With a midnight Greek government confidence vote- needed in order to get money from EU –demonstrators huddled outside the offices last Tuesday. This was the first step in another austerity plan. Next will be more cuts to social welfare programs and even higher taxes. Greece plans on selling pieces of itself off to foreign bidders to pay off its debt. China stands in the wings with checkbook in hand.
So, I asked myself, how did Greece get in such a mess? Then I remembered ages ago an acquaintance who day-dreamed of moving to Italy because everyone got to retire at the age of 50. The same happened to be true of Greece. The problem has been too many social state programs, too much spending and not enough money to continue to make Utopia happen.
Greeks riot just the same as we will when our government eventually awakens and cuts social security and Medicare. You wait, you betchum.
According to authors Reinhart and Rogoff in their book, ‘This Time Is Different- Eight Centuries of Financial Folly’ - Ever since 1832 Greece has spent half its time in various stages of default with debt obligations. At one point in the mid-19th century- Greece was in default for 53 straight years!
Why not apply Latin American rules to the Greek problem and re-write all the old unaffordable debt and rewrite it for new more affordable debt? On the present course of action its only time before Greece finally default. See the last word on this…
The largest Hedge Funds just got bigger by $10 billion. Bridgewater posted a positive return in 2008. It continues to be a moderately conservative fund in a land of gun-slingers. The hedge fund industry has had its assets pass the $2 trillion mark.
Stocks moved up on the anticipation of the Greek vote Tuesday in a stacked deck with over half the government members of the same party. Like Sara Palin would tweet. this is exactly how traders like to roll –knowing the odds were in their favor and the markets were all up in a broad based rally. The game of global chicken continues with the stronger members of the EU supporting the weaker until concessions are granted and eventually the country ends up selling everything they own to pay their bills. (This will include utilities, transportation, parks, ports, airports and anything of value.) Greece is a tourist town and not a strategic trading partner with anyone. What happens to Greece is being watched closely by other weak EU members like Italy, Spain, Portugal and Ireland.
Earning season next on tap here at home. The S&P 500 trades at 12xs 2012 forecasts and either is cheap or can go down a lot from here. Woody Dorsey, proprietor of Market Semiotics, predicted a short-term bottom around June 21-July1st and a short-term recovery high around July 18-22nd.
Morningstar likes Apple a whole lot – fifty percent more lot.
Greek politicians waffling- afraid of being voted out of office or doing the right thing Wednesday as U.S. futures lower before the open. Just wait until some gutsy U.S. politician starts the campaign to fix entitlement programs SSA and Medicare. The howling from those who would be close to getting benefits will make the Greek revolt seem minor. A mere piffle…
The Ben Bernanke spoke (‘No Mas’) and markets fell Wednesday last. Depending on the frequency setting of your hearing-aide the speech by the Fed Chairman was either sobering or a rationalization that the Fed has done what its done and cannot do more. (He didn’t say a thing we didn’t know before.) Rates will stand where they are at almost zero and the rest is for the markets and the economy to heal itself. The John Maynard Keynes prescription of printing money and creating massive deficits to shake the economies loose from depression have so far not been 100% successful. The Ben Bernanke glumly offered up:
Cheap money is a necessary but not sufficient solution to the debt-deflation problem.
Fed forecast for 2011 revised 2.7%-2.9% down from the 3%-3.3%.
2012 unemployment revised to decline 7.8% – 8.2%.
Inflation revised for 2011 to 2.3-2.5% from 2.1-2.8%.
Coke is mixing it up with Goldman Sachs. Coke is accusing GS of limiting the amount of aluminum (needed for bottling of Coca-Cola product) leaving the GS warehouses and thereby artificially hiking prices. Goldman has a huge aluminum stockpile, including a warehouse facility in Detroit. Stockpiling has become an efficient method of artificially creating price hikes but GS has just messed with one of America’s largest companies and biggest users of aluminum and may have met its match. Expect action in the metal soon.
From the School of Jethro Bodine Economic Study the U.S. and others have decided to clamp jumper cables onto the ‘oil bidness’ and release strategic oil stockpiles. The idea is to flood the market and to reduce the price of crude and therefore gasoline and jump start the economy. Traders, caught by surprise, saw crude fall to under $90 but ended the day up over $91 on Thursday. This deep thinking has the rational of supposedly make traders nervous about making big bets on oil rising and keep the ‘fools’ from pushing the price up. There is only so much strategic resources a country can use up before it becomes imprudent and traders will pounce on the first sign of weakness driving prices higher. It’ll be such an ‘in-your-face’ hammer to drive home a lesson not to try and manipulate the markets….you wait…a costly investment.
A 1% increase in the 10-year Treasury will result in a loss of 8.22% of the bond’s value. Recent noise by some Fed official(s) to begin raising rates but Bernanke is firm in holding off both for political and debt repayment reasons.
Thursday markets off 112 by noon with gold off $33 and the Naz showing a slight gain. Markets came back a bunch closed at off 60 and gold off a tad. Banks hit. IBM up.
The Street reported how some of the brightest hedge fund managers have lost Biiiiig Time betting on China small caps. The idea some of us ‘regular’ folk think of following these ‘smart’ money people, who have surely done their homework, with our money is flawed. According to the Street the list of geniuses who have been suckered in includes: John Paulson, Hank Greenberg (of AIG fame), Wellington Management (same folk who manage some Vanguard stuff), David Rubenstein of Carlyle, one of the largest equity firms and our old friends at Goldman Sachs. The cause of most losses has been lies and forged documents.
Shortly after Goldman Sachs sent a letter to clients to short the Chinese Yuan the Premier of China announced that the country has inflation under control.
Morningstar- buy Ford $14, fair value $24, sell $40.
How goes the second half? According to Mark Hulbert and his research: When the Dow falls in the first half the Dow rises in the second half 60.6%; when the Dow rises in the first half the Dow rises 71% of the time and these numbers are true 66.7% of the time since 1896.
I keep hearing whispers on bio-tech. Jimmy ‘The Mouth’ wrote about watching Dendreon (DNDN) and Barrons does a piece Saturday on Gilead Sciences.
Italian bank shares swooned and trading cut short when regulators were not confirming that a stress test in July would not be successful. News was not helpful Friday and contributed to the ‘I-don’t- know-what-the-hell-is-happening’ method of investing. Naturally stocks fell here.
Week ended with Gold down on Friday – metals having a torturous time. Oil inched up over $91- almost daring the release from SPR. And no word from Washington on making a deal to keep country running and increase debt.
Individual stock strategists- those that concentrate on an individual company or industry are especially optimistic, according to WSJ June 27th edition, on corporate earnings for the current quarter. Earnings have underpinned the stock market’s rise from its 2009 depths and is especially important now. This in the face of economists who are much more fearful. Matthew Lloyd, chief investment strategist at Advisors Asset Management, says he values the focus of stock analysts on the fortunes of individual companies over strategists and economists.
Finally – in a not so widely publicized interview in The Weekend Australian- Jamie Dimon, CEO of JP Morgan was struck by the gloomy similarity between the Aussies and the U.S. He said Greece would not default on its debt but if it did it would be survivable. Other countries have defaulted including Russia, Argentina and Mexico and the world has survived. The U.S. has deep capital markets, innovation, capital expenditure and one of the mighty economies in the globe. So sayeth the Dimon.
China has stepped up its commitment to the EU and Euro as it has reduced its holding of U.S. debt and, according to Sunday’s WSJ, increased its EU bond holdings. The Chinese have foreign exchange reserves of more than $3 trillion and has said that it is willing to ‘seize the opportunity to support the quickest possible recovery of the global economy and stabilize growth’.
The Very Last Word – From Morningstar and senior analysts Pina and Davis interviewed on Friday by Jeremy Glaser who reported, ‘Its not a question of if Greece will defaults but when. It could be two or three years down the road. ‘Banks are simply buying time as debt holders will eventually tire of extending the debt. The question is what and who gets hurt the worst.’ Which explains all the stress testing in Europe and the U.S. and the recent addition of higher cap reserves for certain banks. It also explains why bank stocks are not performing and traders are looking at regional banks and not the majors.