Thursday, April 24, 2008

Thursday News Deluge

Sorry for the lack of posting. Getting things set up for the vacation next week and getting my work projects transferred has taken a bit of time this week. Only Friday to go and I am officially on vacation! Good stuff.

Yahoo Article Chock Full of Stupid
Some of you may wonder why most of the articles I use here are Yahoo Finance articles. There are a few reasons. First, Yahoo collects feeds from AP, Marketwatch, Bloomberg, and Reuters which comprise the dreaded "mainstream media" arm of finance. I like to read what passes for analysis for the masses. Second, I just like the Yahoo set up and find it easy for me to navigate and find the information I want. Third, the articles are almost always the funniest thing I read all day, so they serve as comic relief for me.

Today's market wrap-up piece was especially tickling today. Let's take a look:
AP
Wall Street rises after drop in jobless claims, Ford results
Thursday April 24, 5:54 pm ET By Tim Paradis, AP Business Writer
NEW YORK (AP) -- Wall Street rallied Thursday after the government's jobless claims data and Ford Motor Co.'s first-quarter results helped reinject some optimism about the economy into the market.
The Dow Jones industrial rose more than 80 points as investors focused on the Labor Department data showing weekly unemployment claims dropped and word that Ford had a $100 million profit in the first quarter. The news allowed investors to look past the Commerce Department's report that new home sales fell in March to the lowest level in more than 16 years, a sign that the housing slump isn't close to an end.

--Reinject? Is that even a word? To RE inject, one assumes a prior injection was done. I thought all we had were capital injections for banks, or cash infusions or some other such medical terminology!

Sellers held sway early in the session, sending the Dow down nearly 57 points, after the home sales report. The data appeared to stir concerns that the hangover from the housing bubble would remain an intractable obstacle for the economy. But as the session wore on, the market righted itself, perhaps because there were no real surprises in the day's negative news.
--So the market righted itself? Markets are supposed to reflect a realistic pricing for stocks, and perhaps that will mean a down market sometimes. AP makes sure you get the idea that ONLY up markets are correct and good. As for no surprises, if the market chooses to not be surprised, that's their business.

John Merrill, chief investment officer at Tanglewood Capital Management in Houston: "The earnings picture is not so bleak as people though it was going to be," he said. "There's been so much talk of the spillover from the credit crunch and homebuilding into the real economy and that just doesn't seem to have happened."
--John Merril makes the list for retarded quote competition 2008. Mr. Merril does not think the housing bust and credit crunch has spilled over into the REAL ECONOMY? Ok, what is the real economy? If the REAL ECONOMY is unaffected, why in the hell is the FED loaning their treasuries out en mass through the alphabet soup of lending facilities? Is the loss of an estimated 40,000 finance jobs the real economy? Has Mr. Merril listened to Starbucks, UPS, FEDEX, Amazon, etc about the prospects for the real economy? I love this quote. Would the REAL ECONOMY please stand up so Mr. Merril can see you?

The dollar rose for the second straight day, regaining ground from its record low against the euro on Tuesday amid rising expectations that the Federal Reserve will pause in its string of interest rate hikes following its meeting next Wednesday. The euro brought $1.5686 in late New York trading, down from $1.5896 Wednesday and $1.6018 on Tuesday.
The greenback's advance sent commodities prices falling; hard assets like oil and gold tend to rise when the dollar is falling, so they reversed course Thursday as the U.S. currency regained some strength.
A drop in oil prices was particularly reassuring for Wall Street. Crude's surge toward $120 a barrel earlier this week compounded already rising concerns about inflation and its impact on consumer spending. Light, sweet crude fell $2.24 to settle at $116.06 on the New York Mercantile Exchange.


My favorite kind of reporting is the kind that is blatant in it's bias. When Oil rises from $80-$116 over the last year, the media says the rise has no effect on the "solid" economy. No get this, when oil drops $2.24 to $116 a barrel this is REASSURING to the market! That's rich! Let's see here, $2-$3 bucks on a $115 barrels is a whopping 2.5% drop! Woo Hoo Oil is headed for $30 a barrel any day now! Same thing with the silly dollar rise. 120 on the index down to 70, and I am supposed to get all excited about a rise to 72? WOO HOO! Thanks for the laughs Yahoo.

Student Loan Debacle Can Only be the Work of Government Intervention
The current crisis in student loans is an important thing to watch. I found this wonderful article that is a great summary:
http://online.wsj.com/article/SB120899430294839827.html?mod=opinion_main_review_and_outlooks

Key summary quote, but you should read the whole thing:
"To summarize: Congress mandated a return on student loans that is too low to attract private capital in the current market. So Congress will now use your money to create artificial investor demand. Taxpayers will bear more risk so that Congress can fashion a new business model to replace the one it just destroyed. The Bush Administration, unwisely but typically, has endorsed this approach."

So first they screw it up, then they subsidize fixing it. Sounds like perfect government logic indeed. When will ANYONE ever learn the basic rule of making things more "affordable" through government subsidy? I will clue any that do not know in;
WHEN THE GOVERNMENT PASSES OUT FREE MONEY TO PROMOTE "SOMETHING" THE "SOMETHING PROVIDERS" INSTANTLY CHARGE THE EXACT SAME AMOUNT MORE AND HENCE ALL THAT HAPPENS IS A PRICE INCREASE. You are welcome. This time it is student loans, but see also mortgage tax deduction=instant home price increase.

Ambac All of a Sudden Very Honest
Again, I am scooped by Mish, Calculated Risk and Market Ticker regarding the sudden honesty from Ambac. Try Mish's take here:
http://globaleconomicanalysis.blogspot.com/2008/04/ambac-expects-losses-of-818-of.html

Basically, ABK is now (now they want to look under the hood?) looking more closely at some deals they were involved in that have silly high default rates. How high? How about a 82% loss projection! That's Triple A all the way baby!

Seems good old Bear Stearns was slipping some funny stuff their way, and now ABK wants the lawyers to check it out. That's bad. Real bad. Lawyers, fraud, and large sums of money tend to get very ugly. Get your popcorn ready!

I hope JP Morgan is ready for this event. I said a while ago that people thinking JPM head Mr. Dimon is Yoda because the FED handed him BSC may come to rethink their lofty praise. Likewise, the FED may rue the day they took Triple A paper like this in swaps for Treasuries. Karl Denninger does the best job at explaining why "contaminated treasuries" will mean higher prices for, well, basically everything credit related going further.

Word of the Year 2008 Nominees
Calculated Risk has a thread up looking for the year 2008 "word of the year" candidates to replace 2007's awesome "subprime" and "contained" wonders. I favor "kitchen sink" as it relates to writeoffs, or "Triple A" which I think will become a dirty word by years end. Vote in the new poll here, or make suggestions in the comments section. I will make updates to the vote list over time. I am also taking Friday night rock blogging requests.

Have a good night.

7 comments:

Anonymous said...

BEEEEP BEEEEEEP BEEEEEEP.....

Hear that?

That's the sound of G backing up the truck for another silver purchase.


G

Yeah... I am crazy but I like it that way..

STOP ROSEVILLE CRIME said...

I have to remind people about the other scams going on with this subprime mess. Jthink of the possibilities. People were taking their equity down to nothing, and probably overdrawing, then going out on expensive dinners, vacations, cruises, buying SUVs, boats, jet skies etc. Do you think any of that went back to the bank? I'm sure there were repos on the stuff the banks could track down and find but you can't repo a vacation, a cruise or phat dinner in the city. What about others who blew it on crazy stuff, or went and bought stocks and bonds?? What about having cash somewhere in a bank account? There's no rule or law that you actually have to pay it back to anyone. There's no debtors prisons. Many people just left their homes and walked away, or mailed their keys to the bank and said I'm not paying anymore. One of my friend's neighbors saw that the building next door was renting her same condo for cheaper than her mortgage so just rented that place and moved out of the other, no one was notified. Now there is an eviction notice on the door but she already left! And thanks to the govt, we're paying for it. Normally, if you left a debt unpaid and it was forgiven, you would be obligated to pay the taxes on the balance (1099), but NO, Bush signed a bill that forgave that tax liability. That's wrong.

Anonymous said...

SNOW, GOD DA*N SNOW, 3" already and it's still snowing. Think I need crop insurance for my garden.

Think gold is going to about 800 and silver is still on track to 14.5. Lower low and lower high. I think some of the market advance may be the YEN carry trade being put back on but we'll see. Those rising bond yields are going to put a dagger in the heart of any recovery in housing.

Kevin

Anonymous said...

Yup I am down for some lower metal prices. Will give me more time to add to my stash.

G

PS: Dear GWB - Thanks for the nice tax refund. I will put it to good use. Your patriot. G.

watchtower said...

It's good to see you doing your patriotic duty G, although I don't think buying PM's is what "W" had in mind.

Snow at this time of the year where I live would be a little depressing, I feel for you Kevin.

I'm going down to Dad's house to borrow his rototiller, best that I can remember this will be a lot like work. Hope the deer appreciate it.

GYSC
Hope you have a good vacation.

Anonymous said...

Watchtower

My problems are minor compared to the farmers who do that for a living out here, they just got some of the fields ready to plant corn and now this, Iowa is also flooding. Looks like corn prices are going higher and we haven't even got threw hale storms and all the other crap that will come toward harvest time. And yup it's a lot of work. Get some blood and pour around that garden it'll keep them deer out.
Kevin

Anonymous said...

G

They don't care what you spend that check on as long as you spend it. That is they only way it can get shoved threw our fractional reserve banking system and create more inflation. The last thing they want is for people to save it.

Kevin