Investment

» BoltonCT - Market bath resumes?

Asian markets resumed their decline today. Shanghai Composite -5.50%, Hang Seng -1.35%, BSE -1.50%, Jakarta -3.10%, Nikkei -1.05%, NZSE -0.84%, Seoul Composite -1.06%.

The European markets are still open and down about 0.75%.

The American market futures are all down indicating a likely negative start for all of them. They were flat up against an upper resistance level for six days trying to stage a rally but did not succeed. Bob Brinker tried his best this weekend by predicting new highs this year. Today if they do not succeed again we can expect new lows in the coming weeks.

http://finance.yahoo.com/q/ta?s=%5EGSPC&...

http://finance.yahoo.com/q/ta?s=%5EDJA&t...

Once the corporations begin the bath and clean their income and balance sheets of all hyperbole the disguised losses of the past suddenly appear simultaneously with the decline in price. That hides the fact that the truthful PE ratio had be a lot higher than they quoted when analysts last fall were saying the PE ratio's were reasonable. Does everyone understand that?

For example:
Last fall a company that claimed a fictitious PE of 30 with say 50% higher income claimed than prudent... now sees a 33% price decline so their PE ratio should drop to PE=20. But instead they decide to remove 33% of the fluff, smoke and mirrors in their books so their PE ratio stays the same at PE=30 and they still have 17% fluff to remove in a further bath a few months from now. And so the naïve investor believes the PE ratios are fairly stable and reliable indicators of market health. The naïve investor thinks the PE is not very volatile.

But the truth is that at the market high the PE ratio of this company was actually at a relatively level of PE=60 (with truthful earnings) and today it is actually at a still high at PE=40. But because they are still hiding 17% of the fluff the naïve investor still thinks the PE is only PE= 30 not PE=40. So the naïve investor does not realize that when the bath is complete the income will be down another 17% and the price of the stock will likely decline another 17% as well along the way. Now this example does not even consider the fact that we could actually go into a recession and the real earning can also decline. This example was for the situation similar to 2000-2003 where the stock market collapsed but there was virtually no increase in unemployment, virtually no recession. The earnings collapse was almost entirely the write down of the DotCom fluff. You may remember the new creative business models that linked earnings to market share and used projections of the fictitious earnings rather than actual profitability because for the most part the DotCom companies were actually losing money hand over fist.

That is why it is not evident to novices that for the current American markets... and especially the Asian markets... that this market bath could go on for the rest of this year without the American economy even going into a recession.

-- posted by BoltonCT

» Normxxx - Lenders Of Last Resort... To Themselves

Lenders Of Last Resort... To Themselves
(With Taxpayers' Money... Of Course!)

http://normxxx.blogspot.com/2008/04/lend...

-- posted by Normxxx

» BoltonCT - IMF predicts 2-year slowdown

Oil surges to a new record today trading above $112 a barrel after supplies fell last week. So much for the theory two weeks ago that oil price inflation was part of a bubble that just then burst.

International Monetary Fund shows U.S. sliding into recession and pulling down economic growth around the world. See:

http://money.cnn.com/2008/04/09/news/int... m?postversion=2008040910

Summary:

The IMF, in a World Economic Outlook slashed growth projections for the United States - the epicenter of the global economy. Economic growth in the United States is expected to slow to a crawl of just 0.5% this year, which would mark the worst pace in 17 years, when the country last suffered through a recession. The United States won't fare much better next year; the IMF projected the U.S. economy will grow by a feeble 0.6% in 2009.

An increasing number of analysts think the U.S. economy, which grew by 2.2% in 2007, started shrinking in the first three months of this year and is still contracting.

"The financial market crisis that erupted in August 2007 has developed into the largest financial shock since the Great Depression," the IMF declared.

Problems started in the United States with risky "subprime" mortgages made to people with blemished credit and quickly spread into other areas, hitting more creditworthy borrowers. Foreclosures in the U.S. hit record highs and financial companies racked up multibillion-dollar losses as mortgage-backed investments soured with the collapse of the U.S. housing market.

The fallout gripped investors on Wall Street and in other countries, creating a panicky atmosphere that threatened to paralyze financial markets in the United States and beyond.

Global projections

"The global expansion is losing speed in the face of a major financial crisis," the IMF said. There's a risk that things could turn worse, it cautioned.

"The greatest risk comes from the still-unfolding events in financial markets, particularly the potential for deep losses" on complex investments linked to the U.S. subprime mortgage market, the IMF said.

While the IMF is worried about the dangers of weakening global economic growth, it also expressed concern about the potential for inflation to heat up around the world, given sharp increases in energy and other commodity prices. "Risks related to inflationary pressures have risen," the fund said.

-- posted by BoltonCT

» BoltonCT - The decline of the first true democracy

The Asian markets were mixed last night. Hang Seng +0.84%, Nikkei -1.27%. The European markets are down significantly at this point this morning. French CAC -1.26%, German DAX -1.38%, British FTSE -0.73%.

The American market futures seem ready to start with about 0.5% downward pressure now three hours before the open.

Soros says he has shorted American stocks, and currency and put his money abroad. Apparently he also shorted treasuries and has lost money there. A fortune is being invested in Obama's campaign. Hillary is getting about half of what Obama gets, but Hillary still gets in a month what the other candidate gets in about a year. But that other guy is known to be and American patriot. There is no one running for office that stands for sound economic policy or an America with national borders. The American Empire appears to have entered the last stage now. It is like when Rome could no longer control her borders and the Visigoths and Vandals came in so the Romans gave them welfare and bought off all the leadership of the illiterate mobs. That sounds like America today. Eventually when the money ran out the Vandals and Visigoths sacked Rome and defined the new word called vandalism. The Visigoths were one of the tribes that had first settled Sweden and then came down and marauded throughout Europe. The vandals were more eastern and Hunnish in origin and did not go much further west than the Mediterranean countries. That was the beginning of the "Dark Ages" of feudal warlords in Europe.

Then in around 800 the Roman Catholic Church crowned "Charlemagne" and he began the "Holy Roman Empire". He lived in Aachen Germany and started the first dynasty of Kings of Western Europe. That worked and we had a Renaissance for a while but they became corrupt and then ran their empires kind of like a family of greedy corporation executives controlling the worlds wealth and destructively competing with each other. They lavished the spoils on themselves even as their empires collapsed. That also sounds like America today.

America today does not have a single candidate that realizes that control of America's national borders is essential to survival. Corporation managers now run America and other wealthy feudal warlords such as Soros and wealthy politicians and families, that are unethical, corrupt, corrupting They buy votes as we all pretend America is still a democracy. Thomas Jefferson warned of the "Tyranny of the Majority" when the ignorant elect the corrupt who in turn throw them some bread. It is the corrupt leaders that destroy the civilization because while initially it only takes a little bread to control the mobs... ultimately the mobs think they are better than the corrupt leaders. The good honest hard working people have no say and they are plundered first. Then the corrupt are plundered and then comes the starvation, disease, and dark ages. Finally the society realizes that nothing lasts unless there is honesty, ethics, hard work, trust, kindness, love, freedom and control of the borders (nationalism). America was once a nation.

A nation has one flag that the people honor; one language and culture the people respect and are willing to join while giving up their old cultures that are often patently and obviously corrupt. A collapsing empire tolerates corruption and everyone eventually wants a piece of the action. They are quickly reduced to the lowest common denominator.

To become a nation, approximately 25% of our population were forced to leave. They were loyalists of the King who did not salute and pledge allegiance to our flag. America did not tolerate the culture dominant in Europe at that time. They even tar and feathered some of the people who thought they could keep their old ways and stay in America. Eventually that was no longer necessary, and we just deported them as fast as they came in.

-- posted by BoltonCT

» BoltonCT - American dollar finally holding against the Looney and the peso

The American dollar is finally holding its own against the Looney and the peso.

In spite of the failed Herculean efforts of the FED and President Bush to ignite Wall Street by flooding lower Manhattan with US Dollars and condoning their crimes against mankind, the Dollar has been able to finally stabilize against the Canadian Looney and the Mexican peso. I hope I have not spoken too soon.
See:
http://www.tfc-charts.w2d.com/chart/CD/W

http://www.tfc-charts.w2d.com/chart/MP/W

-- posted by BoltonCT

» BoltonCT - Coincident correlation or predictive?

The Asian markets were up last night. Hang Seng +1.99%, Nikkei +2.92%. The European markets are up slightly at this point this morning. French CAC +.32%, German DAX +.51%, and British FTSE +.72%.

Yesterday the American market futures were down about 0.5% and the market started that way and ended the day up slightly more than 0.5%. Today the futures were first up about 0.5% indicating the American markets would start with a continuation of yesterday's muted enthusiasm caused by Microsoft trying to become yet a larger monopoly by acquiring Yahoo. People have not yet started thinking about how much more the EU will want to fine Microsoft and obstruct Microsoft's business in Europe.

Consumer Sentiment/ Confidence among U.S. consumers sank to a 16-year low this month as the labor market continued to weaken and gasoline prices rose, economists said ahead of a private report today. Bullishness, unemployment, bearishness, and consumer confidence are all proven coincident indicators with the underlying markets or economy. They have no predictive value. Because confidence is low reflects thing are not that great and does not indicate things will get better or worse. Likewise because people are now a little more bullish on stocks and gold does not mean stocks or gold will go lower or higher. Studies have proven they are coincident indicators of the current mind set not at all good for predicting the future course of the economy or markets.

Therefore when you read that an advisor is using these old wives tales you can be sure they are wrong in most of their analysis and are living in a by-gone age of either miss-information or they have taken a market position and are intentionally trying to miss direct others into the position they have taken. For instance Gold correlates with two factors: 1) international market uncertainty and distress, and 2) Inflation that lifts all commodities. Bullishness or bearishness of investors in gold is coincident with the general direction of the gold market. It is proven to correlate with the current state and not the future direction of the Gold market.

Likewise the price of oil correlates with oil demand and the direction that oil inventories take tells if demand has increased or decreased. Just because Arabs are happy does not mean anything more than times are good for the Arabs. Arabs being happy does not predict that the future direction of oil prices is either up or down.

Interestingly the American futures just plummeted in the last five minutes due to GE's earnings announcement. That tells you how nervous and bipolar the American investors are becoming.

GE profits dropped 11% last quarter. It normally takes a full year before businesses finish taking their baths. How they clean up their books has a dramatic effect on their future illusions of profit growth. They want to be able to start over from a low point to maximize future rate of growth but they do not want to show a negative profit in any quarter because that blows up half their financial ratios and is a waste of a quarterly report.

Most advisors as well as investors have no understanding of financial ratios and are clueless as to selecting stocks and timing. The information we have is a mine field and the funds move like a pack of wolves through investors because investors and most of their advisors believe old wives tails and do not understand how financial data is used and manipulated.

When the funds attack they usually select a sector and sell out and then go short. After the pack has attacked the advisors and investors think the decline in the sector is predictive of a continued decline instead of realizing it is coincident with the attack that occurred. So the investors sell out low and that allows the wolves to cover their shorts with a great profit. The wolves operate in a similar way when they buy into a sector. Most of their profits are made rotating through different sectors of the market. That is why investors can lose so much even in a bull market when the wolves move out of the sector that the investor thought would go up forever.

-- posted by BoltonCT

» Normxxx - Financial Black Death

The Black Death Of Financial Collapse

http://normxxx.blogspot.com/2008/04/fina...

-- posted by Normxxx

» BoltonCT - Brinker seems complacent

Chairman Volker ended the inflation of the Jimmy Carter era. Now Jimmy Carter stalks the world as a negotiator with terrorist organizations. Bob Brinker still buys the core inflation-Ritalin therapy for keeping Americans complacent while Bernanke shoots up Wall Street with cash. He criticized Volker this weekend because Volker sees the real danger is inflation. To Bob Brinker the only real danger is to his reputation if Bernanke doesn't start another stock market bubble soon. The heck with America, Bob is upset because he failed to call the stock market top,

-- posted by BoltonCT

» BoltonCT - Market moral relativism

The bear market was in force in Asia last night. Shanghai Composite -(5.62%, Hang Seng -3.47%, Jakarta Composite -1.37%, Nikkei 225 -3.05%, Straits Times -2.68%, and Seoul Composite -1.85%.

European markets were generally down less than 1% thus far and American market futures are down indicating the stock market will show early weakness.

GE was down over 10% as Wall Street analysts continue to punish truthful reporting and in this case a corporate bath now under way. That is a risk corporate executives are willing to take when they see a long enough market decline to cover all the scrubbing and write-offs that will be needed. GE will end up being a favorite again when it is all over in about a year. In the mean time Hedge funds will continue to sell off GE stock and GE will continue the write off such that it will be impossible to know that the tail (the market analysts valuation) is wagging the dog (the balance sheet) just as it did near the bubble top when the analysts demanded financial ratio innovation to compensate for the flattening of product demand. As we showed in other blogs, this conceals the volatility of PE ratio and the fact that it is grossly distorted lower than reality during a bubble. It is legal and within the freedom of the range of human judgement but it needs to be understood by investors so that they get on the sidelines before a bubble bursts. Usually a bubble burst is much faster than this one has been. But usually the FED does not give in to the analyst's pressures to manipulate finances the way corporations give in. Bernanke has bowed to Wall Street this time the way corporations are forced to do or Wall Street shuns them.

http://finance.yahoo.com/q/ta?t=3m&l=on&...

When a corporation is shunned by Wall Street it trades at a distorted lower PE ratio and that makes it difficult to raise cash by selling stock. Wall Street demands favors such as impossible pro forma predictions which the corporations (quite ridiculously) are forced to match to the penny so the analyst looks smart. Failure to meet the pro forma prediction is penalized as GE was last Friday. Truth is of no importance to Wall Street Analysts. On Wall Street, truth is meaningless. WS is a place of moral relativism where the individual's bonus and the parachute are all that count.

Once again as the market declines it is possible it will finally bottom out and rally. We are still searching for the market bottom and will keep you posted. The longer term financial market trend however is still down.

-- posted by BoltonCT

» BoltonCT - Asia today

I could have said:

"As expected, Asian markets were down sharply last night, catching up to the big decline in the U.S. on Friday, of 2% on the Dow."

But that would have been wrong. 20-20 hindsight would say that is the right thing to say because Americans like to think the world always follows America. But there are many days when that simply is not true. Yet that is what talking empty heads do. But it only makes sense to people who have long-term memory problems.

But I did not say that this morning because I knew it was not true. The reason for the American decline was because GE is a large percentage of the American indices. But GE is not part of the Asian market indices. Did GE become Asian bell weather? Not recently.

A more likely explanation is that the foreign markets are worrying more that the USA is tipping into recession because they are aware that their prosperity depends more on American consumption (trade) than does American prosperity. No if it was the American market response to just GE on Friday... then Asia would respond less, not more than the American response. After all Hong Kong and China closed down more than 3% and China down more than 6%... three times the drop in America.

-- posted by BoltonCT