NEW YORK (AP) -- Citigroup Inc., one of the biggest recipients of government bailout money, gave employees $5.33 billion in bonuses for 2008, New York's attorney general said Thursday in a report detailing the payouts by nine big banks.
The report from Attorney General Andrew Cuomo's office focused on 2008 bonuses paid to the initial nine banks that received loans under the government's Troubled Asset Relief Program last fall. Cuomo has joined other government officials in criticizing the banks for paying out big bonuses while accepting taxpayer money.
Citigroup, which is now one-third owned by the government as a result of the bailout, gave 738 of its employees bonuses of at least $1 million, even after it lost $18.7 billion during the year, Cuomo's office said. The bank's top four recipients received a combined $43.7 million.
Bank of America, which also received $45 billion in TARP money, paid $3.3 billion in bonuses, with 172 employees receiving at least $1 million and the top four recipients receiving a combined $64 million. Merrill Lynch, which Charlotte, N.C.-based Bank of America acquired during the credit crisis, paid out $3.6 billion, including a combined $121 million to four top employees.
Bank of America earned $2.56 billion in 2008, while Merrill lost $30.48 billion. Cuomo's office said Merrill Lynch doled out 696 bonuses of at least $1 million for 2008.
Goldman gave 953 workers bonuses of at least $1 million, with its four most highly compensated employees receiving a combined total of nearly $46 million. JPMorgan gave 1,626 employees at least $1 million, and its top four recipients received a combined $74.8 million. The two banks each gave more than 200 employees bonuses in excess of $3 million.
Friday, July 31, 2009
Thursday, July 30, 2009
Wall Street Analysts Keep Telling Big Earnings Lie
"At a time when the financial industry’s credibility is at an all-time low, you would think Wall Street’s finest would break their necks providing transparency.
Not so. Stock analysts continue to promote corporate earnings lies, insisting that net income isn’t really what investors need to know.
Instead, their earnings estimates ignore often huge expenditures that can’t help but affect a company’s health.
In analystspeak, Intel Corp. wasn’t hit with a $1.45 billion fine from the European Union in the second quarter for anti-competitive practices.
After setting aside funds to cover the fine, which Intel is appealing, the semiconductor-maker had a quarterly loss of $398 million, or 7 cents a share. Disregarding the fine altogether, analysts maintain the company earned 18 cents a share, beating their average estimate of 8 cents.
As Wall Street tells it, the employee stock options Google Inc. granted in the second quarter didn’t cost its shareholders $293 million.
Google, according to generally accepted accounting principles, earned $1.48 billion, or $4.66 a share, in the period. Not enough for Wall Street, which prefers to say the company earned $5.36 a share, leaving out the cost of stock options."
For the full article, go to Bloomberg.
Not so. Stock analysts continue to promote corporate earnings lies, insisting that net income isn’t really what investors need to know.
Instead, their earnings estimates ignore often huge expenditures that can’t help but affect a company’s health.
In analystspeak, Intel Corp. wasn’t hit with a $1.45 billion fine from the European Union in the second quarter for anti-competitive practices.
After setting aside funds to cover the fine, which Intel is appealing, the semiconductor-maker had a quarterly loss of $398 million, or 7 cents a share. Disregarding the fine altogether, analysts maintain the company earned 18 cents a share, beating their average estimate of 8 cents.
As Wall Street tells it, the employee stock options Google Inc. granted in the second quarter didn’t cost its shareholders $293 million.
Google, according to generally accepted accounting principles, earned $1.48 billion, or $4.66 a share, in the period. Not enough for Wall Street, which prefers to say the company earned $5.36 a share, leaving out the cost of stock options."
For the full article, go to Bloomberg.
Wednesday, July 29, 2009
Hot Off the Press!
Newsweek declares the recession is over. (LOL) Boy, have I been waiting for this news. We can all sleep better tonight knowing that good times are here again. Thank you, Newsweek.
Let's see. From the $787 billion stimulus plan, the government only had to spend 5% ($39 billion) of it to get us out of the recession. Will Congress now cancel the remaining $748 billion part of the stimulus package?
Let's see. From the $787 billion stimulus plan, the government only had to spend 5% ($39 billion) of it to get us out of the recession. Will Congress now cancel the remaining $748 billion part of the stimulus package?
Government Approval Index
I wish someone, say the ProFunds Group, would come up with an exchange traded note (ETN) that measures an approval index for Congress. We have indexes to trade on just about everything else, why not Congress? Boy, would that be fun to trade.
Government Discovers That Paper Has Two Sides!
Governmental Agencies responded to a presidential savings challenge by trimming 0.006% off the $2 trillion deficit. Among the cuts: close unused email accounts and photocopy both sides of a page. Don't just love the overall "efficiency" of our government. Just think of the efficiencies and savings that we will reap when the government takes over health care.
The Politics of Oil Speculation: Pre-emptive Scapegoating Over Rising Oil Prices
The following excepts are from today's WSJ's "Opinion Page (editorial insights)." I want to draw your attention to the second paragraph that puts forth an hypothesis for the real reason behind the CFTC pronouncement yesterday.
"Last summer, as oil prices were peaking, the Commodity Futures Trading Commission "CFTC" launched an investigation into whether $100-plus oil was the result of market manipulation by those “speculators.” That interim report, issued in July 2008, concluded that price movements were largely driven by—wait for it— supply and demand. The report noted, among other findings, that so-called speculators were net short during some of the biggest run-ups in oil prices over the past several years. In other words, they were, if anything, putting downward pressure on prices during some big spikes. The CFTC also found that markets in which futures trading is outlawed altogether—such as onions (yes, onions)—price volatility tended to be even greater than in commodities like oil with deep and efficient futures markets."
"So the CFTC is now poised to issue a follow-up repudiating the commission’s earlier findings. This week’s hearings are being held without the benefit of the CFTC’s actual findings, which are due out in August—but no matter. The CFTC’s about-face is all about the politics, not the economics, of price discovery. And the real goal is not to blame the evil speculators for last year’s price spike or this year’s oil rally, but to lay the groundwork for explaining away the commodity-price bull run that we’re likely to see as a result of the Federal Reserve’s easy money and the Obama Administration’s spending and debt party."
"Last summer, as oil prices were peaking, the Commodity Futures Trading Commission "CFTC" launched an investigation into whether $100-plus oil was the result of market manipulation by those “speculators.” That interim report, issued in July 2008, concluded that price movements were largely driven by—wait for it— supply and demand. The report noted, among other findings, that so-called speculators were net short during some of the biggest run-ups in oil prices over the past several years. In other words, they were, if anything, putting downward pressure on prices during some big spikes. The CFTC also found that markets in which futures trading is outlawed altogether—such as onions (yes, onions)—price volatility tended to be even greater than in commodities like oil with deep and efficient futures markets."
"So the CFTC is now poised to issue a follow-up repudiating the commission’s earlier findings. This week’s hearings are being held without the benefit of the CFTC’s actual findings, which are due out in August—but no matter. The CFTC’s about-face is all about the politics, not the economics, of price discovery. And the real goal is not to blame the evil speculators for last year’s price spike or this year’s oil rally, but to lay the groundwork for explaining away the commodity-price bull run that we’re likely to see as a result of the Federal Reserve’s easy money and the Obama Administration’s spending and debt party."
Saturday, July 25, 2009
Equity Index Exchange Traded Funds (ETFs)
As an investor, you have two to three choices as it pertains to the amount of leverage that you want to assume if and when the exponential moving average triggers a buy signal (See the following Bullish Investment Strategy). For example, in the following table, SPY (+1x) means that you are purchasing an ETF on the S&P 500 that replicates the move in the underlying security (one for one). In other words, if the S&P 500 increases by 5%, SPY would replicate the 5% move. If you want more leverage, say 300% or 3x, you would purchase the UPRO (+3x). Now, if the S&P 500 increases by 5%, the UPRO would increase by 15%, or 3x the increase in the S&P 500.
Bullish Investment Strategy: When the 15-week EMA exceeds the 40-EMA on the S&P 500 (weekly close), which would trigger a bullish signal, you have to decide on the amount of leverage (risk) that you want to assume. Let’s assume that you have $300 dollar portfolio. In addition, you do not want to assume risk greater than that associated with the S&P 500. Given that scenario, you have three strategies that you could implement: (1) purchase $300 worth of SPY, which would replicate the price movement of the S&P 500, one for one, (2) purchase $150 worth of SSO, which would replicate 2x the movement in the S&P 500 and invest the remaining $150 in a money market instrument, such as BIL that replicates the return on 1-3 month Treasury bills (Your overall risk would be approximately the same as in strategy 1, but you are earning interest on the $150 invested in a money market instrument.), (3) purchase $100 worth of UPRO, which would replicate 3x the movement in the S&P 500 and invest the remaining $200 in a money market instrument, such as BIL (Your overall investment risk would be the same as in strategy 1 as delineated under strategy 2.).
Note: To enlarge the table, double-click inside of it.
Bullish Investment Strategy: When the 15-week EMA exceeds the 40-EMA on the S&P 500 (weekly close), which would trigger a bullish signal, you have to decide on the amount of leverage (risk) that you want to assume. Let’s assume that you have $300 dollar portfolio. In addition, you do not want to assume risk greater than that associated with the S&P 500. Given that scenario, you have three strategies that you could implement: (1) purchase $300 worth of SPY, which would replicate the price movement of the S&P 500, one for one, (2) purchase $150 worth of SSO, which would replicate 2x the movement in the S&P 500 and invest the remaining $150 in a money market instrument, such as BIL that replicates the return on 1-3 month Treasury bills (Your overall risk would be approximately the same as in strategy 1, but you are earning interest on the $150 invested in a money market instrument.), (3) purchase $100 worth of UPRO, which would replicate 3x the movement in the S&P 500 and invest the remaining $200 in a money market instrument, such as BIL (Your overall investment risk would be the same as in strategy 1 as delineated under strategy 2.).
Note: To enlarge the table, double-click inside of it.
Comprehensive Exchange Traded Fund (ETF) Guide
As I prepare to post some of my favorite "bullish and bearish" ETFs, I thought it would be a good idea to provide some background information on exchange traded funds. A great source is at ETF Guide.
Friday, July 24, 2009
S&P 500 Update for the Week Ending July 14, 2009: Moment of Truth
The first chart provides the 15-week EMA and the 40-week EMA, which is still bearish (15-week EMA < 40-week EMA). The second chart utilizes two simple moving averages (10-week and 40-week), which has turned bullish. Which one has an unblemished record over the past decade? Answer: EMA. That is why I monitor the 15-week EMA and 40-week EMA for my investment signals. Keep-in-mind that since weekly data is involved, the signal is taken at the close of the week (Friday). Therefore, if we have a buy signal (15-week EMA > 40-week EMA) on a Friday, one would move into equities, preferably exchange traded funds (ETFs) on Monday. I will provide a list of my favorite ETFs on my next post. Have a great weekend!
Note: To enlarge the chart, double-click inside of it.
To enlarge the chart, double-click inside of it.
Note: To enlarge the chart, double-click inside of it.
To enlarge the chart, double-click inside of it.
Stock Market Exuberance
Wow! The bulls are definitely back in town. I want to provide some of my reasons for the strong market performance here lately. I will start with the consumer and provide my reasons why the consumer will not lead us into the next economic recovery. Then, I will focus on corporate profits and some selective components of GDP.
Consumer spending is about 70% of GDP. Therefore, I contend that no consumer spending, no substantial growth to GDP. Further, consumer spending cannot increase materially as unemployment heads to 10%+ (The employment growth for the current decade will clearly be negative by the end of this year.), wages are stagnant, in spite of the minimum wage going to $7.25, capacity utilization rests at the lowest level ever recorded (67%), and average hours worked hit a record low in June, as did the year over year change in aggregate weekly hours. In addition, since consumer credit hit a top of $2 trillion in January of 2009, only $60 billion has been reduced. No, the consumer deleveraging is not complete. And, credit card companies are aggressively cutting credit lines back significantly, in some cases to open balance amounts. These facts simply suggest that the consumer is not ready to aggressively lead this economy forward.
If these are indeed the sober facts, then why has the market acted so well? The answer is based on corporate cost cutting that has definitely enhanced the performance of corporate earnings during the current quarter. Let me explain it in the following way. The largest corporate expenditure is labor cost, and labor cuts have definitely boosted the corporate bottom lines. That is why Wall Street has responded in such a positive way. However, can the US economy recover and begin to grow based on labor cost cutting measures? What is good for corporate bottom lines is not good for employee wages, job growth, and, of course, consumer spending! Something has to give. What we have seen so far this quarter is that corporate earnings have come in above expectations (Market has loved it.), because of the cost cutting endeavors by corporate America. But, the revenues were below expectations. Corporate earnings increased solely on cost cutting measures, especially labor, not revenue growth. That is a real problem. Wall Street definitely is placing a lot of hope on revenue expanding during the second half of the year. I just don’t see it happening as long as the labor cuts continue, and the consumer continues to deleverage.
As just mentioned, I firmly believe the consumer will not be the catalyst for the next economic recovery phase, based on my aforementioned rationale. And, it is hard to see the catalyst being corporate America. I believe the true harbinger for “true” economic growth will only come from growth in capital expenditures and, of course, corporate labor numbers, which are currently dismal. Keep your eyes on those two measures. If those measures do not rebound quickly, I believe Wall Street is going to be in for a big awakening.
Another reason for the market gains is simply mathematics. In recent quarters, several critical components of GDP have declined at astounding negative annual rates (30% to 40%), such as housing, automobiles and business investment and inventories. Eventually, those huge negative numbers on a year over year basis will start to look a whole lot better. As an example, let’s say that housing on a year over year basis from June 2008 to June 2009 is down 40%. Next month (July), the housing numbers are still negative but on a year over year, they are down 10%. That change alone would have a positive impact to GDP growth. Notice that the move from -40% to 10% doesn’t constitute a boom, but merely slowing in the decline. Housing constitutes approximately 3% of GDP. In my example, that improvement, even still negative, would add about 1% to GDP.
Many analysts think housing may in fact bottom out in the third or fourth quarter of this year. Autos may already have passed their low point. Over the past year, inventories have been liquidated at an unprecedented rate. That, too, must come to an end. As inventory change turns from a large negative number into a less negative number. GDP will get another a big boost. Therefore, the numbers, year over year, are bound to look better.
Therefore, Wall Street recent gains have been based on better than expected corporate profits that are based solely on cost containment and reduction, not revenue growth, and year over year improvements in the statistics on housing, auto, and business inventory numbers. I, for one, do not believe that Wall Street has fully comprehended the possibility that these statistical improvements may turn out to be nothing more than a shooting star.
I will have the weekly exponential moving updates on the S&P 500 either later tonight or over the weekend. We are nearing a critical junction in relations to the 15- and 40-week EMA. One stock market model that I track had the market bottoming in April 2009, which, so far, the low was March, and topping in June 2011. To say the least, I really did anticipate that the S&P 500 would trade in the 800 to 850 levels before it would trade at 979. However, let’s keep in mind that the exponential moving average strategy moved us out of equities in January 2008 when the S&P 500 was at 1,401. At today’s close of 979 on the S&P 500, that is still down 30% from January 2008 level.
Consumer spending is about 70% of GDP. Therefore, I contend that no consumer spending, no substantial growth to GDP. Further, consumer spending cannot increase materially as unemployment heads to 10%+ (The employment growth for the current decade will clearly be negative by the end of this year.), wages are stagnant, in spite of the minimum wage going to $7.25, capacity utilization rests at the lowest level ever recorded (67%), and average hours worked hit a record low in June, as did the year over year change in aggregate weekly hours. In addition, since consumer credit hit a top of $2 trillion in January of 2009, only $60 billion has been reduced. No, the consumer deleveraging is not complete. And, credit card companies are aggressively cutting credit lines back significantly, in some cases to open balance amounts. These facts simply suggest that the consumer is not ready to aggressively lead this economy forward.
If these are indeed the sober facts, then why has the market acted so well? The answer is based on corporate cost cutting that has definitely enhanced the performance of corporate earnings during the current quarter. Let me explain it in the following way. The largest corporate expenditure is labor cost, and labor cuts have definitely boosted the corporate bottom lines. That is why Wall Street has responded in such a positive way. However, can the US economy recover and begin to grow based on labor cost cutting measures? What is good for corporate bottom lines is not good for employee wages, job growth, and, of course, consumer spending! Something has to give. What we have seen so far this quarter is that corporate earnings have come in above expectations (Market has loved it.), because of the cost cutting endeavors by corporate America. But, the revenues were below expectations. Corporate earnings increased solely on cost cutting measures, especially labor, not revenue growth. That is a real problem. Wall Street definitely is placing a lot of hope on revenue expanding during the second half of the year. I just don’t see it happening as long as the labor cuts continue, and the consumer continues to deleverage.
As just mentioned, I firmly believe the consumer will not be the catalyst for the next economic recovery phase, based on my aforementioned rationale. And, it is hard to see the catalyst being corporate America. I believe the true harbinger for “true” economic growth will only come from growth in capital expenditures and, of course, corporate labor numbers, which are currently dismal. Keep your eyes on those two measures. If those measures do not rebound quickly, I believe Wall Street is going to be in for a big awakening.
Another reason for the market gains is simply mathematics. In recent quarters, several critical components of GDP have declined at astounding negative annual rates (30% to 40%), such as housing, automobiles and business investment and inventories. Eventually, those huge negative numbers on a year over year basis will start to look a whole lot better. As an example, let’s say that housing on a year over year basis from June 2008 to June 2009 is down 40%. Next month (July), the housing numbers are still negative but on a year over year, they are down 10%. That change alone would have a positive impact to GDP growth. Notice that the move from -40% to 10% doesn’t constitute a boom, but merely slowing in the decline. Housing constitutes approximately 3% of GDP. In my example, that improvement, even still negative, would add about 1% to GDP.
Many analysts think housing may in fact bottom out in the third or fourth quarter of this year. Autos may already have passed their low point. Over the past year, inventories have been liquidated at an unprecedented rate. That, too, must come to an end. As inventory change turns from a large negative number into a less negative number. GDP will get another a big boost. Therefore, the numbers, year over year, are bound to look better.
Therefore, Wall Street recent gains have been based on better than expected corporate profits that are based solely on cost containment and reduction, not revenue growth, and year over year improvements in the statistics on housing, auto, and business inventory numbers. I, for one, do not believe that Wall Street has fully comprehended the possibility that these statistical improvements may turn out to be nothing more than a shooting star.
I will have the weekly exponential moving updates on the S&P 500 either later tonight or over the weekend. We are nearing a critical junction in relations to the 15- and 40-week EMA. One stock market model that I track had the market bottoming in April 2009, which, so far, the low was March, and topping in June 2011. To say the least, I really did anticipate that the S&P 500 would trade in the 800 to 850 levels before it would trade at 979. However, let’s keep in mind that the exponential moving average strategy moved us out of equities in January 2008 when the S&P 500 was at 1,401. At today’s close of 979 on the S&P 500, that is still down 30% from January 2008 level.
Cash for Clunkers
Cash for your clunker starts today! Here's how it works: If you own a 1984 or newer vehicle that has been insured and registered to you for the past year and gets a "combined" 18 miles to the gallon or less, you can qualify. The car must also be drivable.
If you trade it in for a car that gets an additional four more miles per gallon or more, your reward is a $3,500 voucher, which can be used toward purchasing a new car. If you switch to a vehicle that gets 10 miles-per-gallon or more in fuel efficiency, then the government gives you $4,500.
To see if your used car has a qualifying miles-per-gallon rating, the Department of Energy has set up a Web site with the official used car mileage ratings called Fuel Economy. By the way, the site also provide the "carbon footprint" for you vehicle(s). This knowledge will assist you in determining how much extra in taxes that you will eventual have to pay when the "Cap and Trade Bill" is finally passed.
For me, my carbon footprints for my 2007 Honda Civic, 2005 Honda Pilot, 1995 Mazda Millenia, and 1989 Isuzu Pickup are 6.3, 10.8, 9.2, and 11.4, respectively.
If you trade it in for a car that gets an additional four more miles per gallon or more, your reward is a $3,500 voucher, which can be used toward purchasing a new car. If you switch to a vehicle that gets 10 miles-per-gallon or more in fuel efficiency, then the government gives you $4,500.
To see if your used car has a qualifying miles-per-gallon rating, the Department of Energy has set up a Web site with the official used car mileage ratings called Fuel Economy. By the way, the site also provide the "carbon footprint" for you vehicle(s). This knowledge will assist you in determining how much extra in taxes that you will eventual have to pay when the "Cap and Trade Bill" is finally passed.
For me, my carbon footprints for my 2007 Honda Civic, 2005 Honda Pilot, 1995 Mazda Millenia, and 1989 Isuzu Pickup are 6.3, 10.8, 9.2, and 11.4, respectively.
Monday, July 20, 2009
TWENTY-FOUR TRILLION DOLLARS ($24,000,000,000,000)
The government’s top watchdog, Neil Barofsky, over the $700 billion TARP financial rescue package said the Treasury Department has "repeatedly failed" to adopt his recommendations that would make the program more transparent and accountable to taxpayers.
He will tell lawmakers on Tuesday that taxpayers are being left in the dark about what banks are doing with bailout money, don't know the value of the government's investments, and will not know the full extent of how the money is invested. [Once again, these are the folks that want to run our health care system!]
Barofsky said that while the TARP program that Congress passed amounts to $700 billion, the total federal government support since 2007 for the economy and the financial sector could reach a far higher figure of $23.7 trillion. That is approximately $80,000 for every legal man, woman, and child in the U.S.
We have no one to blame except our selves. This is blatantly unconstitutional. We're talking about nearly double the nation's GDP in debt commitments and more than thirty-three times the amount authorized by Congress. What is going on? Where was the Congressional appropriation for that $24,000,000,000,000?
For the complete article, click-on the Hill.
He will tell lawmakers on Tuesday that taxpayers are being left in the dark about what banks are doing with bailout money, don't know the value of the government's investments, and will not know the full extent of how the money is invested. [Once again, these are the folks that want to run our health care system!]
Barofsky said that while the TARP program that Congress passed amounts to $700 billion, the total federal government support since 2007 for the economy and the financial sector could reach a far higher figure of $23.7 trillion. That is approximately $80,000 for every legal man, woman, and child in the U.S.
We have no one to blame except our selves. This is blatantly unconstitutional. We're talking about nearly double the nation's GDP in debt commitments and more than thirty-three times the amount authorized by Congress. What is going on? Where was the Congressional appropriation for that $24,000,000,000,000?
For the complete article, click-on the Hill.
Ham Update
The references to "2 pound frozen ham sliced" are to the sizes of the packaging. The contract in question purchased 760,000 pounds of ham for $1.191 million, at a cost of approximately $1.50 per pound. Now, I don't know about you, but I can purchase that same size ham for approximately $.75 per pound. Check it out the next time you are at your local grocery store. Oh, this is the same government that is telling us that through government efficiencies of running our health care system, they will save billions of dollars. Does anyone out there really believe the government's rhetoric?
Recovery.Gov
The $787 billion stimulus plan was sold on the underlying concepts of "job creation." So far, that concept is no where to be found. However, some of stimulus money went to fund, not create new jobs, the following items: $2.5 million for ham, water added, cooked, frozen, and sliced, $1.2 million for two pound frozen ham sliced, $350,000 for replace and upgrade a dumbwaiter, $1.6 million for cheese, $16 million for canned pork, and $1.4 million for door repairs. Good site to visit is Recovery.gov.
Saturday, July 18, 2009
S&P 500 Update for the Week Ending July 17, 2009
S&P 500 closed the week at 940.38, which is right at the 40-week EMA. Since the 15-week EMA is still beneath the 40-week EMA, investors are still in a defensive position. However, saying that, notice how the 15-week EMA is rising; and the 40-week EMA has flattened out. Also, notice the potential "Head and Shoulder Bottom Formation," which does have bullish implications. In addition, the RSI has once again moved back above 50.
I am still in the bearish school, because the 15-week EMA < 40-week EMA. However, when and if the 15-week EMA > 40-week EMA, I will immediately become "BULLISH."
Note: To enlarge the chart, double-click inside of it.
Over the next week, I will be providing a number of "bullish" index ETFs for you to start tracking.
I am still in the bearish school, because the 15-week EMA < 40-week EMA. However, when and if the 15-week EMA > 40-week EMA, I will immediately become "BULLISH."
Note: To enlarge the chart, double-click inside of it.Over the next week, I will be providing a number of "bullish" index ETFs for you to start tracking.
Thursday, July 16, 2009
Joe Biden: We Have to Go Spend Money to Keep From Going Bankrupt
Vice President Joe Biden told people attending an AARP town hall meeting that unless the Democrat-supported health care plan becomes law the nation will go bankrupt and that the only way to avoid that fate is for the government to spend more money. And many thought Dick Chaney was a poor excuse for a Vice President, but Biden takes the prize for being completely economic illiterate.
July 2009: Deadliest for U.S. Forces in Afghanistan
Twenty-four (24) Americans have been killed in Afghanistan this month, according to statements by the U.S. The rate of deaths in July is approaching some of the highest levels of the Iraq war.
Question: Why aren't the main-stream media sources reporting these deaths as they did on a nightly basis during the Irag war? Answer: The Irag war was Bush's war. The Afghan war is Obama's war, and he can do no wrong.
Question: Why aren't the main-stream media sources reporting these deaths as they did on a nightly basis during the Irag war? Answer: The Irag war was Bush's war. The Afghan war is Obama's war, and he can do no wrong.
CIT Rescue Talks Collapse
The "Wall Street Journal reports CIT reported Wednesday "that there is no appreciable likelihood" it will receive fresh government support in the near future." "Talks with the government were complicated by conflicting signals over who was leading them. Some say Treasury officials were in charge, others say the Federal Reserve headed the talks, while still others say that the main focus was on decisions at the FDIC."
Therefore, because of the bureaucracy involved between and among the Federal Reserve, Treasury, and FDIC, there were no clear lines of authority about who should decide about granting a bailout to CIT. So, by default nothing was done! I would consider that to be a moral victory by default. You have to love it, but, then again, this is a perfect example of governmental bureaucracy at its best.
Now, let the market place decide the fate of CIT.
Therefore, because of the bureaucracy involved between and among the Federal Reserve, Treasury, and FDIC, there were no clear lines of authority about who should decide about granting a bailout to CIT. So, by default nothing was done! I would consider that to be a moral victory by default. You have to love it, but, then again, this is a perfect example of governmental bureaucracy at its best.
Now, let the market place decide the fate of CIT.
Tuesday, July 14, 2009
Here We Go Again: CIT
CIT, you had more than a year to get your house in order. You had more than two years of watching your stock plummet, from a high of $61.59 in the early 2007 to $1.35 yesterday. During this time, your only strategy was to to form a bank-holding company to get a government bailout. The reason that your strategy has not worked is because the FDIC was against it. Good for them! But, now the Federal Reserve and the Treasury are involved, which quite frankly probably means a bail-out for you. Bad for the U.S. taxpayer and shame on the Fed and Treasury!
We cannot, as a nation, keep doing these bailouts. Sooner or later, if we continue down this path of bailing out everyone, we will find ourselves in a total economic collapse. I, for one, am rapidly losing faith that we will survive as an economic power.
We cannot, as a nation, keep doing these bailouts. Sooner or later, if we continue down this path of bailing out everyone, we will find ourselves in a total economic collapse. I, for one, am rapidly losing faith that we will survive as an economic power.
Monday, July 13, 2009
Next Nationalized Industry: Airlines?
"The Wall Street Journal reported today that the recession, plunging travel demand, and a tough lending environment are battering U.S. airlines, raising the prospect of a liquidity squeeze that could lead to bankruptcy filings by winter if conditions don't improve. The five largest carriers are expected to report second-quarter losses."
"Some carriers may have no choice but to seek protection from creditors this winter, or as early as this fall, when cash flow typically dries up. United, American and US Airways are the most vulnerable among large carriers, according to credit-rating agencies and Wall Street investment houses." (Start using up your frequent flier miles now before it is too late!)
"Some carriers may have no choice but to seek protection from creditors this winter, or as early as this fall, when cash flow typically dries up. United, American and US Airways are the most vulnerable among large carriers, according to credit-rating agencies and Wall Street investment houses." (Start using up your frequent flier miles now before it is too late!)
Sunday, July 12, 2009
Brilliant Political Strategy or What?
We are being told that only 10% of the original $787 billion stimuli plan has been expended. The remaining 90% will finally get into the economy during the next one to two years. With unemployment at 9.5% (U6 rate of unemployment is already 16.5%, which is the true rate of the unemployment percentage.), which equates to something like 15 million people out of work, there is clamor by some on the Hill for another stimuli package. http://www.bls.gov/news.release/empsit.t12.htm
I, for one, consider that the Obama team really believes the eventual time horizon for that remaining 90% is a brilliant political move on their part. Why else would they delay 90% of the expenditures until next year? My reasoning will follow shortly.
No one can doubt his overall popularity and what it has gotten him so far. For instance, in his first six months, he has been able to nationalized specific segments of the financial industry and, of course, the auto industry. Now, he wants to nationalized our health-care system and has introduce the largest indirect tax on the American people through the “Cap and Trade” bill, which has been passed by the House and currently being debated in the Senate. Now, popularity only goes so far in Washington, D.C., as witnessed by the fact that more people currently disagree with his handling of the economy than approve of his handling of it.
Now, because of his popularity and the Democratic controlled Congress, President Obama will probably get his social agenda passed in one form or another. However, in doing so, he will have used up most of his political capital this year. I believe that the electorate will become increasing disenchanted with President Obama as the unemployment rate heads above 10%. Remember President Clinton saying during his campaign for the presidency that "it is about the economy." Obama knows that, and he knows that so very well. But again, when will that 90% of the $787 billion get into the economy? Of course, that 90% will start stimulating the economy in 2010. And, what happens in 2010? The mid-term Congressional elections will occur. Obama believes that the 90% will be more than sufficient to not only stimulate the economy out of the recession, for which he and the Democrats get the credit, but to assist in electing Democrats back to Congress next year. This time lag, stimuli strategy is brilliant. However, if the economy does not improve next year, and the Democrats lose seats in the upcoming mid-term election; President Obama can still push through a “second” stimulus plan to assist him in his 2012 reelection campaign. Time will tell if this is a brilliant strategy after all or not.
Saying all that, I don’t believe the stimuli will grow the economy in real terms. I firmly believe that we cannot spend our way out of this economic malaise in a time when the American people are deleveraging themselves from debt. It has not worked in the past, and it will not work now. Real economic growth occurs through real investments/savings, not by government spending through monetarization.
I, for one, consider that the Obama team really believes the eventual time horizon for that remaining 90% is a brilliant political move on their part. Why else would they delay 90% of the expenditures until next year? My reasoning will follow shortly.
No one can doubt his overall popularity and what it has gotten him so far. For instance, in his first six months, he has been able to nationalized specific segments of the financial industry and, of course, the auto industry. Now, he wants to nationalized our health-care system and has introduce the largest indirect tax on the American people through the “Cap and Trade” bill, which has been passed by the House and currently being debated in the Senate. Now, popularity only goes so far in Washington, D.C., as witnessed by the fact that more people currently disagree with his handling of the economy than approve of his handling of it.
Now, because of his popularity and the Democratic controlled Congress, President Obama will probably get his social agenda passed in one form or another. However, in doing so, he will have used up most of his political capital this year. I believe that the electorate will become increasing disenchanted with President Obama as the unemployment rate heads above 10%. Remember President Clinton saying during his campaign for the presidency that "it is about the economy." Obama knows that, and he knows that so very well. But again, when will that 90% of the $787 billion get into the economy? Of course, that 90% will start stimulating the economy in 2010. And, what happens in 2010? The mid-term Congressional elections will occur. Obama believes that the 90% will be more than sufficient to not only stimulate the economy out of the recession, for which he and the Democrats get the credit, but to assist in electing Democrats back to Congress next year. This time lag, stimuli strategy is brilliant. However, if the economy does not improve next year, and the Democrats lose seats in the upcoming mid-term election; President Obama can still push through a “second” stimulus plan to assist him in his 2012 reelection campaign. Time will tell if this is a brilliant strategy after all or not.
Saying all that, I don’t believe the stimuli will grow the economy in real terms. I firmly believe that we cannot spend our way out of this economic malaise in a time when the American people are deleveraging themselves from debt. It has not worked in the past, and it will not work now. Real economic growth occurs through real investments/savings, not by government spending through monetarization.
Saturday, July 11, 2009
Stashing Cash in Banks: Is it Really Safe?
The FDIC has a calculator on its site called EDIE, or Electronic Deposit Insurance Estimator, to help determine whether you are fully covered at your bank. You can determine if you are covered by clicking on EDIE and going through a few calculations.
The standard insurance amount currently is $250,000 per depositor. The $250,000 limit is
permanent for certain retirement accounts, which includes IRAs. The $250,000 limit is temporary for all other deposit accounts through December 31, 2013. On January 1, 2014, the standard insurance amount will return to $100,000 per depositor for all account categories except certain retirement accounts, which will remain at $250,000 per depositor. However, structure your holdings correctly and, as an individual, you can obtain more than $1 million in coverage per bank. A couple can get about $2 million in coverage per bank. Click-on "FDIC Coverage" for a synopsis.
The standard insurance amount currently is $250,000 per depositor. The $250,000 limit is
permanent for certain retirement accounts, which includes IRAs. The $250,000 limit is temporary for all other deposit accounts through December 31, 2013. On January 1, 2014, the standard insurance amount will return to $100,000 per depositor for all account categories except certain retirement accounts, which will remain at $250,000 per depositor. However, structure your holdings correctly and, as an individual, you can obtain more than $1 million in coverage per bank. A couple can get about $2 million in coverage per bank. Click-on "FDIC Coverage" for a synopsis.
Friday, July 10, 2009
DXO: Ultra-long Oil
$3.50 still remains the critical price mass for DXO. Technically speaking, the price could decline to $3.40 and still remain bullish. Anything less than $3.40 would generate a "High-Pole Formation," which would render a bearish scenario. (See comments within chart.)
Note: To enlarge the chart, double-click inside of it.
Note: To enlarge the chart, double-click inside of it.
Tuesday, July 07, 2009
Today's Comments
Comments for today, July 7, can be read at Twitter. Currently, I am looking for some near term market relieve to eliminate some of the oversold conditions as seen on the hourly charts. S&P 500 is poised to drop to the 800 level.
Sunday, July 05, 2009
Saturday, July 04, 2009
Friday, July 03, 2009
Bollinger Bands
Developed by John Bollinger, Bollinger Bands are an indicator that allows users to compare volatility and relative price levels over a period time. The indicator consists of three bands designed to encompass the majority of a security's price action.
1. A simple moving average in the middle
2. An upper band [SMA plus 2 standard deviations (SD)]
3. A lower band [SMA minus 2 standard deviations (SD)]
For general time frames, Bollinger recommends a 10-day simple moving average (SMA) for the short term, a 20-day simple moving average (SMA) for the intermediate term and 50-day simple moving average for the long term.
BigCharts use a 20-day SMA but does not display the SMA in the chart. It incorporates the upper band (2 SD above SMA) and lower band (2 SD below the SMA). Notice how well the Bollinger Bands contained the weekly closing prices of the S&P 500 over the past ten years, especially the price activity over the past several weeks! See the following chart.
Note: To enlarge chart, double-click inside of it.
It should be noted that Bollinger did not use this indicator to generate buy and sell signals when prices reach the upper or lower bands. Such levels merely indicate that prices are high or low on a relative basis. A security can become overbought or oversold for an extended period of time. However, knowing whether or not prices are high or low on a relative basis should assist and enhance one’s buying and/or selling decisions.
Source: StockCharts.Com
1. A simple moving average in the middle
2. An upper band [SMA plus 2 standard deviations (SD)]
3. A lower band [SMA minus 2 standard deviations (SD)]
For general time frames, Bollinger recommends a 10-day simple moving average (SMA) for the short term, a 20-day simple moving average (SMA) for the intermediate term and 50-day simple moving average for the long term.
BigCharts use a 20-day SMA but does not display the SMA in the chart. It incorporates the upper band (2 SD above SMA) and lower band (2 SD below the SMA). Notice how well the Bollinger Bands contained the weekly closing prices of the S&P 500 over the past ten years, especially the price activity over the past several weeks! See the following chart.
Note: To enlarge chart, double-click inside of it.It should be noted that Bollinger did not use this indicator to generate buy and sell signals when prices reach the upper or lower bands. Such levels merely indicate that prices are high or low on a relative basis. A security can become overbought or oversold for an extended period of time. However, knowing whether or not prices are high or low on a relative basis should assist and enhance one’s buying and/or selling decisions.
Source: StockCharts.Com
S&P 500 Update for the Week Ending July 2, 2009
The S&P 500 was repelled at the “declining” 40-Week EMA and is now right on support (896), which is the rising 15-Week EMA. See the following chart. [In order to give a valid “buy signal,” the 15-week EMA must be rising when it penetrates the 40-Week EMA, which also must be rising.] Also, the relative strength chart (RSI) has now turned down from slightly above 50 to slightly below it. In bull markets, RSI remains consistently above 50, and in bear markets, RSI remains consistently below 50. See the following chart.
Therefore, the critical price is 896. A weekly close below this level would probably foreshadow a decline to 800-850.
Note: To enlarge the chart, double-click inside of it.
Therefore, the critical price is 896. A weekly close below this level would probably foreshadow a decline to 800-850.
Note: To enlarge the chart, double-click inside of it.
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