Tuesday, March 19, 2013

A NEVER ENDING QUESTION

It's a never ending question. 

Just whom does one believe?

Last week big banks JP Morgan and Goldman Sacs drew some criticism from the Federal Reserve over the capital plans of the two giants. JP Morgan CEO Jamie Diamond also faced claims that he tried to cover up a $6.2 billion trading loss by misleading regulators and investors.

For weeks now, especially since the run-up in the stock market, just about all we've been hearing is how much better prepared for an economic downturn, should it occur, the big banking industry is.

Neil Barofsky is a name most likely unfamiliar to many.  A senior fellow at New York University, Barofsky is also a former special inspector general of the 2008-2009-born TARP or the $700 billion Troubled Asset Relief Program. The one used to supposedly right the USS Big Banking.

Barron's this past weekend ran a blurb, "Banking's Bitter Harvest," quoting Barofsky: "It's foolish to believe we're not on a path to another crisis."  Now for the skeptics, it's true Barofsky has a new best-selling book out, "Bailout." 

But nevertheless his point should be of interest. He says the big banks are even bigger today than before the bailout and still viewed as too big to fail.

 Part of restoring public confidence is assuring that the banks have learned their lesson and are more financially sound for their ordeal. In many ways it's tied to the wealth effect the MSM pushes. 

Take a look at this from The Big Picture.
http://t.ritholtz.com/bigpicture/#!/entry/discuss-customers-who-distrust-their-banks,5147ab21d7fc7b5670738c90

Or here.
http://bucks.blogs.nytimes.com/2010/02/03/the-least-trusted-banks-in-america/




Monday, March 18, 2013

THE NANNY STATE CONTINUES TO GROW

A recent article about the explosion of Americans on food stamps, a fact many believe contributes to escalating food prices, quickly deteriorated in the comments section to a racial discussion.

And some people wonder why websites and even some in MSM are either considering or are blocking their comments sections. Too often the comments completely sidestep the issue and sink into ad hominid. 

Dumb is what we say. Not too different from pretending that painful rock in your brogans ain't there.

The nanny state of which food stamps is only a part continues to grow. Think for a second of it as home prices or tech stocks or swamp land in the 1920s in Florida, one great big giant bubble.  Bubbles have a way of getting pricked.

Discourse about how much is too much is futile. Like the federal deficit, we're long past that point. If you think it's painful now, just wait around. The paucity of real leadership in the world today is frightening.

If you need a clear example, see Cyprus. In the meantime here is a further insight into the growing nanny statehttp://www.goldmoney.com/gold-research/alasdair-macleod/welfare-costs-rapidly-escalating-everywhere.html

Make the mistake that the US is different if you want.  Truth is welfare has become the proverbial room full of measles. 

CYPRUS

A butterfly flaps its wings in Asia and causes a tsunami of the coast of Florida.

Now that may not happen given the latest news about bank deposits in tiny Cyprus, an island of roughly one million off the coast of Greece.

The Cyprus government bought some more time earlier today when it apparently decided to delay any vote on the matter until Tuesday.

But don't be mislead by the smallness of Cyprus.

It is a full-fledged member of the EU and people are not so dense as to recognize that what happens in Cyprus doesn't always stay in Cyprus. Italy, Greece and Spain have bank depositors, too.

And they are not alone when it comes to the possibility of further assistance.

This has always been a northern versus southern riff with fiscally sounder northern countries like Germany and Finland reluctant to bail out its weaker, southern members of the EU.   

Like most cases there are unforeseen ripples that become visible later. The UK has a military presence in Cyprus and with reportedly over 1.5 billion euros deposited there. Any tax would, whether Britain is compensated in some way, send further ripples back to the UK where many oppose any connection with the Eurozone.

Many Brits oppose giving up its sovereign currency. And this could easily fuel more I-told-you-so talk. 

Russia may have a say. Initial response from Moscow has been critical. Russia supplies much of the EU's natural gas thirst, so it is hardly without bargaining chips.

As for Americans who for the most part are getting next nothing on their bank deposits, perception becomes even more important. It can happen here with revenue hungry federal, state and local governments conspicuously on the prowl.

Recall that many big banks here not that long ago wanted to charge ATM fees for withdrawing your own money. A fee is a tax whether it's imposed by private or public entities.

Read the Cyprus story carefully and you won't have any difficulty finding the tax term.

MONDAY MORNING READS


FED TAPERING COULD TRIGGER
http://www.marketwatch.com/story/stocks-risk-harder-drop-if-fed-hints-at-tapering-2013-03-17

SO MUCH FOR PSI AND ONEOFF
http://www.ritholtz.com/blog

COULD THIS SPILLOVER
http://blogs.barrons.com/stockstowatchtoday/2013/03/17/cyprus-thai-baht-97-redux/

ASIAN STOCKS DOWN
http://www.bloomberg.com/news/2013-03-18/asian-stocks-drop-most-in-month-on-cyprus-deposit-tax.html

US STOCKS FALL
http://www.bloomberg.com/news/2013-03-18/u-s-stock-index-futures-drop-on-cyprus-bank-levy.html

Friday, March 15, 2013

MARKET WRAP

The market took a brief respite today, a long overdue one many believe, after 10-straight up days causing just as many others to believe the run is the beginning of the next prolonged bull market.

The DJIA closed down a big 25 points, or 0.2%, on heavier volume, at 14,514.11 while the S&P 500 index declined 2.5 points, 0.2%, leaving it just under 5 points from its all-time high.

The slight decline sets the table for next week to see which way the market goes, onward and upward to new highs or downward to some kind of meaningful correction.

The specter of inflation popped into the equation Friday when February's consumer prices showed a 0.7% increase, most of it coming from higher gasoline prices, according to the US Department of Labor.

Most believe that the trend in February will not impact future inflation and cause the Fed to change monetary policy. The easy-money trend, in other words, according to these watchers, is still intact.

It should be noted that many people don't trust the government's numbers, to beging with, arguing the Fed and other central banks along with some hedge fund folks have been keeping a lid on the price of gold. 

Toss in a compliant MSM and you have all the necessary ingredients to bake the perception cake of your choice. Markets are to peception as perception is to wealth effect. 

Next week investors will be watching the latest FOMC meeting, news about the propsects of growth in EU and budget discussions in the UK.

Thursday, March 14, 2013

OUR TAKE

They say no risk no gain.

Here's our short-term view on this market. Expect a 5-6% pullback. We raised some cash recently for the pull back to buy at better prices. Know ahead of time what you want to buy. Stick with quality.

It's not the first half of this year we're worried about. If the second half gets ugly you may still get slammed, but you'll be glad you own quality.

The truth is no one--and we mean no one--knows for certain the future of this run, flash in the pan, mini-bull or major full speed ahead.

Ask yourself this question. Do you drive around at different hours of the day and night with a flat spare tire in your trunk?





THE RALLY CONTINUES

The rally in the stock market continues, but where's the volume and the leadership?

The DJIA closed today up 83 points, or 0.6%, at 14,539.14, a new closing high on lower than average volume. Since March 1, daily volume has been declining, not particularly a positive sign for the market in general, some analysts believe.

Leaderships begs another question. So far it's been mostly defensive issues leading the parade. Also conspicuously absent, according to many traders, is Joe Retailer. There are few, if any real signs, retail investors are jumping on board.

The S&P P 500 also rallied, closing at 1,563.23, just points from its all-time high set in 2007.  Advance-declines on the NYSE were 2:1.

Tomorrow should prove interesting going into the weekend. 




ANOTHER VIEW


Editor's note: We don't have a greyhound in the race mentioned in Budget story nor do we know anyone connected with the Empire organization. We just bumped into the story in our wide readings as we search for solid, factual information to pass along to our readers, many of whom we're sure travel as we do. You can decide for yourselves.

BUDGET CAR RENTAL SERVICE
http://www.empirepage.com/37-editors-blog

THE RED AND THE BLUE LIVES
http://www.economist.com/blogs/democracyinamerica/2013/03/abortion-laws-south

THE WEALTH EFFECT: IS IT SHRINKING?
http://www.money.cnn.com/2013/03/13/news/economy/stocks-housing-wealth-effect/index.html

ASIAN STOCKS EX-JAPAN DOWN
http://www.marketwatch.com/story/japan-stocks-rise-as-rest-of-asia-lower-2013-03-13?pagenumber=2

PUNDIT SAYS BEWARE CHINA
http://blogs.marketwatch.com/thetell/2013/03/14/marc-faber-says-investors-should-fear-chinas-colossal-credit-bubble/

Exclusive: Chinese firm puts millions into U.S. natural gas stations
http://www.reuters.com/article/2013/03/14/us-enn-lng-usa-idUSBRE92D09Y20130314

Capitalizing on the Dow’s unloved rallyhttp://www.futuresmag.com/2013/03/14/capitalizing-on-the-dows-unloved-rally?ref=hp



Wednesday, March 13, 2013

MARKET WRAP

Well, they did it again.

The DJIA closed up for the ninth consecutive day, the best run since late 1996. Much of the uproar centered on better-than-expected February retail sales. Credit the consumer, but don't leave out the Fed with its bogus "wealth effect."

This is exactly what the Fed wants: Get the natives feeling better about themselves and their future via housing prices and construction or voodoo if necessary. That's what some believe the Fed's current MP is: A little of this, a little of that and a lot of voodoo.

The DJIA eked out a gain, closing at 14,45.28, up 0.04% while the S & P 500 inched closer to it all-time high closing at 1,554.52.

The nine day streak is the best since the 10-day run in November 1996. The thing to keep in mind is the longer the run goes on the more likely the upcoming pullback--and there will be one--might be steeper than most expect.