Market Observations Week Ending 01/16/08
Less steak dinners... ARG Enterprises, the operator of 69 Black Angus Steakhouse restaurants in seven states, sought bankruptcy protection.
More layoffs... GE's finance arm may cut 7,500 to 11,000 jobs, or at least 10% of its workforce,
because of the global financial slump, people familiar with the company’s plans said.
Alcoa, the world’s largest aluminum maker, last week reported a third major production cut...
and said it will reduce its global workforce by 13,500 after demand for the metal used in automobiles and appliances plunged.
Circuit City, after 60 years and once the largest consumer-electronics retailer,
will shut down all of its 567 U.S. stores and layoff 30,000 employees. The liquidation sale begins tomorrow.
Hisakazu Amano, head of fund management at T&D Asset Management, which oversees about $39 billion:
"With demand dropping like an ebb tide, manufacturers have no choice but to cut investments.
U.S. retail sales will remain poor for quite some time; demand there will not recover easily.”
First loss since 1991.... B of A posted its first quarterly loss in 17 years
and cut its dividend to 1 cent from 32 cents. The stock tumbled 14% even after getting a $138 billion federal lifeline.
The government agreed to invest $20 billion more in Bank of America and guarantee $118 billion in assets to help the lender absorb Merrill Lynch.
Sillybank... Citigroup slipped 8.6% to $3.50, after the bank posted an $8.29 billion Q4 loss
Less Than Honest Accounting… Ernst & Young LLP was auditor for Lehman Brothers and IndyMac.
KPMG LLP audited Wachovia. Deloitte & Touche had Washington Mutual and Fannie Mae.
PricewaterhouseCoopers LLP somehow missed that Freddie Mac’s books were a joke. PwC also audited American International Group.
At least there the firm had the good sense to tell us AIG’s accounting controls were weak
The Conterfeitors... The Fed balance sheet has has soared from $800 billion last August to more than $2.3 trillion currently.
With the latest bailouts and "Son of TARP" the financial engineers of doom will expand the balace sheet by another 50% to $3.5 trillion.
The Fed’s books already include short-term lending to insolvent banks and other financial institutions, as well as the purchase of promissory notes from...
insolvent U.S. corporations and mortgage bonds guaranteed by the insolvent GSE's Fannie Mae and Freddie Mac.
Bernanke said Tuesday that the Fed and Treasury Department next month will begin providing three-year loans to investors willing to...
purchase top-rated securities whose collateral is recently originated consumer and small-business loans.
By expanding the Fed’s balance sheet, Bernanke concedes, the Fed effectively is printing money, which history shows could sharply push up inflation.
Now, Bernanke said, the Fed wants to purchase longer-term securities issued by the Treasury Department to...
lower 15-year and 30-year fixed mortgage rates, boosting the housing market.
"In determining whether to proceed with such purchases, the committee will focus on their potential to improve conditions in private credit markets, such as mortgage markets."
Implicit in that statement, however, is that interest rates may have to increase more than many Americans are accustomed to,
or inflation may be higher than the Fed is comfortable with.
The Nattering One muses... the Fed will soon be issuing its own bonds.
Yes, the counterfeitors will be issuing their own debt to save their failed ponzi scheme.
James K. Galbraith, a University of Texas economist who thinks the current crisis will be prolonged and that the Fed’s actions will hurt long-term growth:
“We are not going to be back to normal in two years, where our problem will be controlling inflation and the budget deficit.
We are going to be dealing with a structural breakdown in the system that we have lived with for 50 years and we’re going to be dealing with it for quite some time."
Hiroshi Chano, who helps manage the equivalent of $7.3 billion at Yasuda Asset Management:
“The market is really not very cheap when examined from an earnings standpoint.
The market looks like it’s pointing down for now as investors are afraid of what could happen next.”
50% Retracement… The SP500 wiped out more than half its gain since rallying from an 11 year low in November...
a sign the benchmark for U.S. equities may drop more.
The SP500 fell 3.4% to 842.62 yesterday, below the 843.57 midpoint of its 24% advance from Nov. 20 to Jan. 6.
January Barometer... The 5.8% slide in the SP 500 so far this year suggests the so-called January barometer will signal a loss for 2009.
Since 1950, the January barometer has been at least 80% accurate.
The Nattering One has previously gone on record... You think this is the bottom? Not so fast Joe.... DJIA 5000 - 5800 i.e. a retrace to 1996 levels.
Joining in... Ralph Acampora, who retired from Knight Capital Group:
"Should the DJIA fall below the 7,552.29 it touched on Nov. 20, it might tumble to 6,000."
That’s 27% below yesterday’s close of 8,212.49 and a level last reached in October 1996.
Among Acampora’s past calls was a 1997 prediction that the Dow would reach 10,000. It rose to that level in March 1999.
John Murphy, chief technical analyst at StockCharts.com and the author of three books on market analysis said the November lows are likely to be broken...
in part because the dollar’s recent strength against the euro signals lower share prices globally, as foreign equity markets are correlated to local currencies.
The lows reached by the Dow average and the SP500 Index in November are...
“a very, very significant area” because they are roughly where the last bear market ended in 2003, said “If that’s broken, it becomes very negative.
There’s another down leg coming. Normally the market comes down in five legs. We’ve come down in two.
I think we’re going to test those lows at the very least, and eventually probably take them out.”
More layoffs... GE's finance arm may cut 7,500 to 11,000 jobs, or at least 10% of its workforce,
because of the global financial slump, people familiar with the company’s plans said.
Alcoa, the world’s largest aluminum maker, last week reported a third major production cut...
and said it will reduce its global workforce by 13,500 after demand for the metal used in automobiles and appliances plunged.
Circuit City, after 60 years and once the largest consumer-electronics retailer,
will shut down all of its 567 U.S. stores and layoff 30,000 employees. The liquidation sale begins tomorrow.
Hisakazu Amano, head of fund management at T&D Asset Management, which oversees about $39 billion:
"With demand dropping like an ebb tide, manufacturers have no choice but to cut investments.
U.S. retail sales will remain poor for quite some time; demand there will not recover easily.”
First loss since 1991.... B of A posted its first quarterly loss in 17 years
and cut its dividend to 1 cent from 32 cents. The stock tumbled 14% even after getting a $138 billion federal lifeline.
The government agreed to invest $20 billion more in Bank of America and guarantee $118 billion in assets to help the lender absorb Merrill Lynch.
Sillybank... Citigroup slipped 8.6% to $3.50, after the bank posted an $8.29 billion Q4 loss
Less Than Honest Accounting… Ernst & Young LLP was auditor for Lehman Brothers and IndyMac.
KPMG LLP audited Wachovia. Deloitte & Touche had Washington Mutual and Fannie Mae.
PricewaterhouseCoopers LLP somehow missed that Freddie Mac’s books were a joke. PwC also audited American International Group.
At least there the firm had the good sense to tell us AIG’s accounting controls were weak
The Conterfeitors... The Fed balance sheet has has soared from $800 billion last August to more than $2.3 trillion currently.
With the latest bailouts and "Son of TARP" the financial engineers of doom will expand the balace sheet by another 50% to $3.5 trillion.
The Fed’s books already include short-term lending to insolvent banks and other financial institutions, as well as the purchase of promissory notes from...
insolvent U.S. corporations and mortgage bonds guaranteed by the insolvent GSE's Fannie Mae and Freddie Mac.
Bernanke said Tuesday that the Fed and Treasury Department next month will begin providing three-year loans to investors willing to...
purchase top-rated securities whose collateral is recently originated consumer and small-business loans.
By expanding the Fed’s balance sheet, Bernanke concedes, the Fed effectively is printing money, which history shows could sharply push up inflation.
Now, Bernanke said, the Fed wants to purchase longer-term securities issued by the Treasury Department to...
lower 15-year and 30-year fixed mortgage rates, boosting the housing market.
"In determining whether to proceed with such purchases, the committee will focus on their potential to improve conditions in private credit markets, such as mortgage markets."
Implicit in that statement, however, is that interest rates may have to increase more than many Americans are accustomed to,
or inflation may be higher than the Fed is comfortable with.
The Nattering One muses... the Fed will soon be issuing its own bonds.
Yes, the counterfeitors will be issuing their own debt to save their failed ponzi scheme.
James K. Galbraith, a University of Texas economist who thinks the current crisis will be prolonged and that the Fed’s actions will hurt long-term growth:
“We are not going to be back to normal in two years, where our problem will be controlling inflation and the budget deficit.
We are going to be dealing with a structural breakdown in the system that we have lived with for 50 years and we’re going to be dealing with it for quite some time."
Hiroshi Chano, who helps manage the equivalent of $7.3 billion at Yasuda Asset Management:
“The market is really not very cheap when examined from an earnings standpoint.
The market looks like it’s pointing down for now as investors are afraid of what could happen next.”
50% Retracement… The SP500 wiped out more than half its gain since rallying from an 11 year low in November...
a sign the benchmark for U.S. equities may drop more.
The SP500 fell 3.4% to 842.62 yesterday, below the 843.57 midpoint of its 24% advance from Nov. 20 to Jan. 6.
January Barometer... The 5.8% slide in the SP 500 so far this year suggests the so-called January barometer will signal a loss for 2009.
Since 1950, the January barometer has been at least 80% accurate.
The Nattering One has previously gone on record... You think this is the bottom? Not so fast Joe.... DJIA 5000 - 5800 i.e. a retrace to 1996 levels.
Joining in... Ralph Acampora, who retired from Knight Capital Group:
"Should the DJIA fall below the 7,552.29 it touched on Nov. 20, it might tumble to 6,000."
That’s 27% below yesterday’s close of 8,212.49 and a level last reached in October 1996.
Among Acampora’s past calls was a 1997 prediction that the Dow would reach 10,000. It rose to that level in March 1999.
John Murphy, chief technical analyst at StockCharts.com and the author of three books on market analysis said the November lows are likely to be broken...
in part because the dollar’s recent strength against the euro signals lower share prices globally, as foreign equity markets are correlated to local currencies.
The lows reached by the Dow average and the SP500 Index in November are...
“a very, very significant area” because they are roughly where the last bear market ended in 2003, said “If that’s broken, it becomes very negative.
There’s another down leg coming. Normally the market comes down in five legs. We’ve come down in two.
I think we’re going to test those lows at the very least, and eventually probably take them out.”
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