By John Galt
June 15, 2009
The President freaked out today when he heard the market report from his economic team!
Hopefully they can push his hair down before he speaks tomorrow about the new seizing of financial corporation’s freedoms when he introduces a new level of bureaucracy guaranteed to expedite the exodus out of our nation’s financial system. The news is not good and a lot of it will not be reported on by the Bubblemedia and of course not by the United States Department of Obama Propaganda (USDOOP). The USDOOP crowd will instead focus on our tribal leader’s imminently more important plan to insure that Grandma Crackers living in a shoebox under an overpass in Washington, D.C. will have access to a public health care insurance program where she can get her corns treated after a hard night of panhandling on K Street. Of course the fact that Grandma Crackers is living in that shoe box under the bridge because one of her Wall Street based brokers took her entire retirement program and doubled down on the now government owned Freddie Mac, Fannie Mae, General Motors and Citigroup will never be revealed. Hell at $30 plus per share each, it sounded plausible that stocks, like real estate would never go down, right?
Story#1: New Trend or Running for the Lifeboats?
The start of the run for the lifeboats may have begun in April, but it is way to early to tell. The TIC report was issued today and for those of you who did not read the story from Reuters today:
let me just extract a key point:
“Total net foreign purchases of U.S. equities plunged to $4.58 billion in April from $13.15 billion in March. Meanwhile, foreign investors sold $9.73 billion worth of U.S. corporate bonds in April, compared with purchases totaling $3.54 billion in March.”
But don’t worry, nationalization sprees by President Buckwheat did NOTHING to impact the decision of foreign buyers of our corporate bonds and equities, right? Now that you have stopped laughing and wiped the cocktail off of your keyboard and monitor, the TIC report also reveals that some of the banksters were allowed to have their island entities sell some bonds apparently:
Good thing we still have those banksters on the taxpayer dole to buy up any more slack that appears in the Treasury market because I can not believe the old Pirates down there in the islands would stop at $200 billion or even $300 billion to keep the yields in a moderate range between 3-6% on the 10 year Treasury. Remember one other bit of data we’ve been tracking here in bananaland; the 1-3-6 month Treasury yields are still quite low (1700 ET tonight: 0.05%, 0.15%, 0.26% respectively) and that tells me the parking in short term yields for safety is a trend that will persist. There was heavy foreign demand for the six month Treasury today at the auction.
Story#2: Would you buy Insurance from this man?
Apparently no one else is either. These headlines caught my eye on the feeds today:
and these are not good signs of good things to come. If you look at the chart of the S&P 500 Insurance Industry Index indicated that the death cross experienced back in 2007:
I fear we are about to see the insurers start to drop a hint along with the regional banking index and some of the other “superstars” like Citi begin to roll and barf up a hairball taking us to a retest toward the March lows. There is no guarantee that we will get there but a failure by the Fed to support a very weak financial system could easily turn a normal low volume down day like today into a major implosion that cripples equities for the rest of the year. Any hint of tightening up on the liquidity spigots would go against his protestations about the Great Depression and could extend this recession into the second quarter of next year. Watch the insurers gang because as the jobs go, the luxury of life, casualty and property, and auto insurance is often moved into the discretionary spending category in a household of the unemployed.
Story#3: What if you had a Stock Market Rally and Everyone got Bored and Went Home?
First the S&P 500 Volume chart and note the trend since the early May volume peak in both charts:
And now the NYSE volume chart:
The trend is identical and not an indication of a bullish base building for a new long term move. If we can get one good downturn with a massive volume surge toward the March lows or even a break below them, then we could probably see a long term bottom in this secular bear market.
To make matters worse, the bananas, who have been sunning themselves on the beach and working on a new book,
finally got to take a break and enjoy some downhill summer skiing courtesy of today’s UTT-BUGLY Chart of the Day, that’s right our beloved Dow:
With that being identified as a potential new break to the downside we will all just have to wait and see if the S&P holds the 892 level or if we get one more ramp job going into options expiration this Friday. My money is it is a new break as Doug Kass went to cash and expects at least a 5-10% correction in the short term.
Hope it doesn’t happen in one day Doug or we’ll all be freaking out and we’ll lose a lot of bananas due to skiing accidents.
Until tomorrow night’s fun accelerates with the BRIC meeting and the new regulatory regime from our fearless leaders are announced…..