Thursday, August 27, 2009

Huddle Huddle here come the Goldy Fuddle...Oh my it's getting real close to September 9th 2009

...isn't it?

The best of the best top TEN;

1- "The Obama administration recently announced the U.S. budget deficit will be $9 trillion during the next decade; $2 trillion higher than the original forecast." Folks, please remember that this is the Obama Administration's forecast. Government projections are always going to be understated (for political reasons) well below what the actual deficits will turn out to be. Our unfunded future Federal liabilities now stand somewhere between 60-100 TRILLION dollars. Welcome to Argentina, my friends.

2- Obama appears to me to be determined to push through his plans to satisfy his own ego..he cares nothing about the average citizen, young or old..I am glad I am 82 years old, my fear is for m;y grandchildren and their children saddled with his does not grow on trees and his printing press could break down.

3- And there goes the American dream. Too bad we don't know how to make anything, our AG products are only good enough for heavily processed "food" put in bags or boxes, we depleted our oil reserves for the sake of bloated cars and pickem-up trucks and our government is run by lobbyists. If only we could sell our expertise is buying junk on credit, throwing it away and replacing it with more junk. What is really sad is a relatively small group has made a mess for our children. You know the one's, they either got bailed out or will walk away owing nothing due to the wonders of our legal system.

4- yep, and the sooner they stop trying to patch the broken parts of the old economy, and finally start thinking about getting back to basics, and building the new, the sooner we willl be out of trouble. All this borrowing probably added years to the depression we are in or heading into.

5- We are at the edge of the cliff. You can not borrow your way to prosperity. Government should have had a plan to save America AFTER the depression. The depression cannot be avoided in the current monetary system. If FED inflates credit supply for 50 years without underlying fundamentals, it is bound to deflate, Great Depression style. The debt burden on the tax payer is so high, nobody can spend anything anymore!

6- Obama does have a clue. He's doing exactly what he said he would do and precisely what his socialist mentors have inculcated.

7- Unfortunately Mr. Davidowitz is right on track. The rise in the stock market is due to excess liquidity in both the Chinese and American investment banks (day trading). Individuals are not driving this market.

8-Oh the doom sayers will love this one. TT is all about you today. You asswipes keep listening to this negative spin while I take your money in the market. LOSERS ---------------------------------------------------------------------------------------------------------------- So why do you care what the “losers” do? You’re better than them and wealthier, too, right? So why don’t you just enjoy your superiority and success? It’s because the party you’re at is dead, isn’t it, and you’re trying try bring more people in to liven it up, right? You don’t fool anyone, LOSER.

9- And the politicians say " I love spending someone elses money, I get millions in kick backs through my lobyist friends/family or just award contracts to companies I or my spouse owns. The media regurgitates whatever I tell them so if you or your company want my endorsement you gotta pay me. Who's going to stop me; voters, tea parties. Give me a break, I own the media, academia and acorn, so what if it's not in the media I never hear it, academia keeps cranking out clueless liberals and thanks to acorn I don't need your votes anymore either. And the best part is, unlike in the private sector, results don't matter. Life is Good".

10- Obama have no clue on the economy, his self deity ego and his followers are completely and utterly destroying the american culture and if he is not stop soon America will for ever be a third world country. this guy is the worse of presidents to ever step in the white house, we all knew he was not qualified for the job and you voted him in, now is time to pay the price for it. God save us all!



Obama's Spending Spree, Budget Numbers "Have All Gone Mad," Analyst SaysPosted Aug 27, 2009 09:00am EDT by Heesun Wee in Investing, Products and Trends, Recession, Autos, Housing
Related: ^dji, ^gspc, wmt, tgt, rost
When retail expert and all-around economy watcher Howard Davidowitz appeared on Tech Ticker in February declaring the worst was yet to come for the U.S. economy and that Americans' standard of living has changed permanently, our comment boards lit up.
But surely with the latest rally off the March lows, bearish Davidowitz is more bullish, right? Not a chance. Look at your financial history books.
Two of the biggest rallies of more than 40 percent occurred during the Great Depression, says Davidowitz of Davidowitz & Associates,a retail consulting and investment banking firm. "People were sucked in and ultimately were destroyed," he says. It's a warning to today's investors, who are hoping to extend the rally.
Don't get Davidowitz started on the economy or fundamentals. "Barack Obama's numbers have all gone mad," Davidowitz says. The Obama administration recently announced the U.S. budget deficit will be $9 trillion during the next decade; $2 trillion higher than the original forecast.
And, the proposed price tag for health-care reform? "Minimum $3 trillion," Davidowitz says. "One trillion? Are you kidding?"
Stimulus binges? Roller coaster equity performance over years? Stubborn consumers holding out for sales as deflationary pressures loom over the recovery? Sounds like the U.S. economy is turning Japanese, Davidowitz says.

AND MORE ABOUT GOLDY, see September 9th 2009, 18th and 29th 2009.

Goldman Subpoenaed on Huddles

Massachusetts Official Worries Tips Leave Some Clients at a Disadvantage
William Galvin, Massachusetts's chief financial regulator, has subpoenaed Wall Street firm Goldman Sachs Group Inc., demanding information on the firm's weekly trading huddles between its research analysts and traders.
Mr. Galvin, the Massachusetts secretary of the commonwealth, said he is concerned that the huddles, in which Goldman's research staff give verbal short-term stock tips to the firm's traders and then its clients, disadvantage some Goldman customers.
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"We have concerns about the research analysts and the efforts under way to use them to secure additional business," Mr. Galvin said on Wednesday.
The huddles, which were the subject of a page-one article on Monday in The Wall Street Journal, also are being examined by both the Financial Industry Regulatory Authority -- the industry self-regulatory body known as Finra -- and the Securities and Exchange Commission, according to people familiar with the matter.
Internal documents reviewed by the Journal show that at times, these short-term trading tips differed from Goldman's long-term research. Critics complain that Goldman's distribution of the trading ideas to its traders and major clients hurts other Goldman customers who aren't given the opportunity to trade on the information and may be relying on the firm's longer-term research to make investment decisions.
The huddles, and what is discussed during or after them, currently aren't disclosed in Goldman's long-term research. On Monday, the firm internally discussed adding information about the service on its client Web site.
Some firms also give stock ideas to clients but disclose the service in their longer-term research and on their Web sites.
Mr. Galvin's subpoena, also reviewed by the Journal, asks for a host of internal Goldman documents related to the huddles.
A Goldman spokesman declined to comment. In the Monday Journal article, a Goldman spokesman said ideas that arise from the huddles are simply "market color" and "always consistent with the fundamental analysis" in published research reports.
In 2003, Mr. Galvin was one of several regulators involved in negotiating a $1.4 billion settlement with 10 big Wall Street firms, including Goldman. The firms were accused of issuing overly optimistic research in a bid to win more lucrative investment-banking business.
Mr. Galvin on Wednesday said he is concerned that now the trading arms on Wall Street are putting undue influence on research analysts to win business. "Even the term 'huddles' sounds suspicious," he said. He said his investigation may expand to look at practices at other firms.
Write to Susanne Craig at

Satan SAYS: "Combinations of low trading volume and rising interest in a small group of stocks by short-term investors, most of them using high-frequency trading strategies , creating a market where what you see is not what you get. Currently, the market value of stocks has little to do with the performance you are currently watching...THE COMPUTER PROGRAM IS QUICKER THAN THE EYE "

Tuesday, August 25, 2009

All is Golden... do you really expect...

...regulators to be hard on them?

Firm Will Consider Disclosing to All Clients Information It Shared Only With Top Customers
Securities regulators are examining weekly meetings at Goldman Sachs Group Inc. in which research analysts give tips to traders and then to big clients, as the Wall Street giant considers disclosing these so-called trading huddles to all its clients.

The Wall Street Journal reported Monday that analysts at Goldman sometimes shared with traders and key clients short-term trading tips that sometimes differed from the firm's long-term research.
Examiners at the Financial Industry Regulatory Authority, the industry self-regulatory body known as Finra, and the Securities and Exchange Commission intend to ask Goldman for more information on these weekly get-togethers, people familiar with the matter said.
Internal documents show that at times, these short-term trading tips differed from Goldman's long-term research. Critics complain that Goldman's distribution of the trading ideas to Goldman traders and major clients hurts other Goldman customers who aren't given the opportunity to trade on the information, and may be relying on the firm's longer-term research to make investment decisions.
The huddles, and what is discussed during or after them, currently aren't disclosed in Goldman's long-term research. On Monday the firm internally discussed adding information about the service on its client Web site. Some firms, such as Morgan Stanley, also give stock ideas to clients, but disclose the service in their longer-term research and on its Web site.
The huddles highlight the new demands on research analysts as trading desks have become central drivers of profit in recent years. In a 2003 case, U.S. regulators accused firms of issuing overly optimistic research in order to win lucrative investment banking business. In a settlement of that case, Wall Street agreed to strict limitations on the dealings between bankers and stock analysts.
"I think it is unrealistic to expect firms to treat all clients equally," said Robert Glauber, former head of the National Association of Securities Dealers, the precursor agency to Finra, and a lecturer at Harvard's John F. Kennedy School of Government. "The speed, depth and detail of the advice given may be different, but there has to be limits. And the basic stock recommendation must be the same and any differences should be disclosed."

Goldman hasn't been accused of violating any securities laws in its distribution of the trading tips.

Satan says; " NO of course not... not yet!?"

Monday, August 24, 2009

Toxic toxic

Wall Street may have discovered a way out from under the bad debt and risky mortgages that have clogged the financial markets. The would-be solution probably sounds familiar: It's a lot like what got banks in trouble in the first place.
In recent months investment banks have been repackaging old mortgage securities and offering to sell them as new products, a plan that's nearly identical to the complicated investment packages at the heart of the market's collapse.
"There is a little bit of deja vu in this," said Arizona State University economics professor Herbert Kaufman.
But Kaufman said the strategy could help solve one of the lingering problems of the financial meltdown: What to do about hundreds of billions of dollars in mortgages that are still choking the system and making bankers reluctant to make new loans.
These are holdovers from the housing bubble, when home prices soared, banks bought risky mortgages, bundled them with solid mortgages and sold them all as top-rated bonds. With investors eager to buy these bonds, lenders came up with increasingly risky mortgages, sometimes for people who could not afford them. It didn't matter because, in the end, the bonds would all get AAA ratings.
When the housing market tanked, figuring out how much those bonds were worth became nearly impossible. The banks and insurance companies that owned them knew there were still some good mortgages, so they didn't want to sell everything at fire-sale prices. But buyers knew there were many worthless loans, too, so they didn't want to pay full price for the remnants of a real estate bubble.
In recent months, banks have tiptoed toward a possible solution, one in which the really good bonds get bundled with some not-quite-so-good bonds. Banks sweeten the deal for investors and, voila, the newly repackaged bonds receive AAA ratings, a stamp of approval that means they're the safest investment you can buy.
"You've now taken what was an A-rated security and made it eligible for AAA treatment," said Richard Reilly, a partner with White & Case in New York.
As for the bottom-of-the-barrel bonds that are left over, those are getting sold off for pennies on the dollar to investors and hedge funds willing to take big risk for the chance of a big reward.
Kaufman said he's optimistic about the recent string of deals because, unlike during the real estate boom, investors in these new bonds know what they're buying.
"We're back to financial engineering, absolutely," he said. "But I think it's being done at least differently than it was before the meltdown."
The sweetener at the heart of the deal is a guarantee: Investors who buy into the really risky pool agree to also take some of the risk away from those who buy into the safer pool. The safe investors get paid first. The risk-taking investors lose money first.
That's how the safe stack of bonds gets it AAA rating, which is crucial to the deal. That rating lets banks sell to pension funds, insurance companies and other investors that are required to hold only top-rated investments.
"There's no voodoo going on here. It's just math," said Sue Allon, chief executive of Allonhill, which helps investors analyze such hard-to-price investments.
Financial gurus call it a "resecuritization of real estate mortgage investment conduits." On Wall Street, it goes by the acronym Re-Remic (it rhymes with epidemic).
"It actually makes a lot of fundamental sense," said Brian Bowes, the head of mortgage trading at Hexagon Securities in New York. "It's taking a bond that doesn't necessarily have a natural buyer and creating two bonds that might have a natural buyer for each."
The risk is, if the housing market slips even more, even the AAA-rated investments may not prove safe. The deal also relies on the rating agencies, which misread the risk at the heart of the subprime mortgage crisis, to get it right.
And then there's the uncertainty about the value of the underlying investments, which FBR Capital Markets analyst Gabe Poggi called "totally combustible." Poggi likes the deals because they appear to have breathed some life into the market, but he said it only works if everyone knows exactly what they're buying.
The Obama administration is also working on a plan to get banks buying and selling risky bonds. But the public-private partnership announced this spring is still in the works and has yet to help investors figure out what those bonds are worth. By creating Re-Remics, banks can help start the process themselves.
The concept has been around for years, but it has become increasingly popular lately as a way for banks to sell off bonds backed by commercial properties such as malls and office buildings. Analysts say they've seen a few dozen deals aimed at repackaging debt held over from the mortgage boom. Investment banks have also dabbled in turning collateralized debt obligations, or CDOs, into Re-Remics.
That's where Allon gets nervous.
"I think that's trouble," she said.
CDOs are already complicated. Repackaging them makes it harder to figure out what the investment is worth. The more obscure the concept, she said, the more likely the deal has gotten too creative.
Wall Street has a tendency to push the boundaries of good ideas, Bowes said. But he said banks are still smarting from the market implosion and are unlikely to rush into new, risky ventures.
"A lot of the market innovations, they all started out with this fundamentally good concept and they often tend to deteriorate over time, or just evolve into more and more risky versions of the same concept," Bowes said. "This time around, the likelihood is, it will take a lot longer for that to happen."

Satansays; "...kinda like refried beans I guess, with a good shot of HELL's Kitchen HOT sauce!"

Bank this from the NY Times

Full story here;

New York Times

Financial stocks have more than doubled from their March 2009 lows. And with autumn — generally a rocky season for the markets — fast approaching, it's a good time for a reality check on the banking sector. The goal: to determine whether fundamentals in the industry support the rocket-fueled surge in bank shares.
To be sure, the stock market and smart money often try to anticipate recoveries long before they are evident in the numbers. But a "relief rally" — that is, the exuberance that accompanied the fact that our economy appears to have avoided another Great Depression — won't have the same staying power as a move based on solidly improving operations. So understanding what's going on in banks' financial statements is worthwhile.

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With that in mind, Christopher Whalen, managing director at Institutional Risk Analytics, a research firm, has analyzed financial data from the second quarter of this year that almost 7,000 banks submitted to the Federal Deposit Insurance Corporation. The data includes 90 percent of institutions with federally insured deposits but excludes reports from the 19 money-center banks like Citigroup, Bank of America and Wells Fargo. Those reports are filed later to the F.D.I.C.
Even with the big guys missing from the analysis, it is an illuminating look at the health of regional and community banks and a fairly comprehensive assessment of the industry's well-being.
Unfortunately, that assessment shows that the number of financially sound banks is declining and that the ranks of troubled institutions are growing. Indeed, Mr. Whalen said his figures show more stress in the banking industry in the second quarter of 2009 than in the immediately previous periods.

For example, Institutional Risk Analytics gave 4,234 banks a rating of A+ or A (as a measure of their financial soundness) as of June 30. That total was down 21 percent from the end of March and 25 percent from the end of 2008. Meanwhile, it slapped a failing grade on 1,882 banks as of June 30, up 16.5 percent from the end of March; the number with failing grades had dropped a bit in the first quarter.
This downward migration is a sign that more banks are now feeling the effects of economic conditions regardless of their business models, Mr. Whalen said. In other words, even the best-run banks are having trouble escaping the impact of a sluggish economy and high unemployment.
Based on his preliminary review of individual bank reports, Mr. Whalen said the greater stress across the industry results from the large number of banks getting dinged by losses or charge-offs. The figures, Mr. Whalen said, call into question assumptions made by the government earlier this year, when it put major banks through "stress tests."
In short, the tests may not have been tough enough.
"The stress tests said that through the two-year cycle, big banks had to have enough capital plus earnings to withstand a 9 percent loss rate," Mr. Whalen said. "But what we're seeing with the levels of stress in the industry is that we are there now and we are not at peak of cycle yet."
The government's stress tests also assumed that the third quarter would show a bit of an improvement, and Mr. Whalen does not necessarily disagree. But any reduction in losses in that quarter may also be short-lived. "The third quarter may be a little rah-rah in terms of loss rates," Mr. Whalen said, "but if the economy isn't dramatically improving, then the fourth quarter of this year and the first quarter of 2010 will be another leg down."
The good news is that some banks have raised capital during these past few months of investor optimism. But a host of operational problems remains at many institutions. In addition to loan losses and rock-bottom recovery rates on assets they're trying to unload, for example, banks also face rising expenses (because they're paying to carry properties that generate scant — or zero — revenue). All of this cuts significantly into earnings, which banks desperately need to bolster their battered financial positions.
With banks short on revenue, they cannot apportion enough for reserves against future loan losses. "In bad periods," Mr. Whalen said, "banks typically set aside twice as much as they charge off, but now a lot of them are at one-to-one."
Later this year, Mr. Whalen said, banks that stayed on the straight and narrow and dealt swiftly with their problems will start to emerge from the morass.
"But we will still have a very large percentage of the population experiencing problems going into the end of the year," he said.
Surely, investors in financial companies have earned a respite from their long slog of losses, and the recent rally has been a tonic for damaged stock portfolios. But it's simply not clear that the banking industry is out of the woods. It took many years to inflate the enormous debt bubble that popped in 2007. The deleveraging process, which is nobody's idea of fun, will take a long time, too.

Satan says; "Got your hole dug yet to put all your moola in?, or better still follow the advice of all the gold pimps on TV and Radio, and get your investment all shiney!"

Friday, August 21, 2009

IPO's still LOW ... yoe yoe yoe

Watch the IPO's NOT the Stock market

As they continue to slide, and they will, EMployment will slide and the great sucking sound shall continue...

Satan says oooohhhhhh mmmyyyyyy WHAT recovery?

Monday, August 17, 2009

Top trend statements for economy

Satan says listen to this;

1- You ain't seen nothing yet. It's not just a matter of running for the exits, its a matter of preparing for survival. Finance and economics has split. Economics will win in the end, if you play the game of finance instead, you are toast. For heavens sake America, produce something!

2-The only suckers are those that listen to Henry Blodget (see link):

3-When you present PE ratios you must always state clearly what earnings are being used: trailing, current, or projected ... and from what time span they are actually taken ... and most especially in times like these.

4- Know your gurus. This second collapse has been predicted by those such as Felix Zaulauf and Robert Prechter.

5-You need to wait for the earnings reports to reflect actual productivity results, not cut-to-the-bone-and-reduce-headcount results. 1Q2010 would be a good time to evaluate the true picture, not the manufactured one we see here. We will be able to see how the one-time govt deals in first time mortgages and clunkers have played out and measure the effect the stimulus package has had on the economy. Now is just analyst hype, pundit Informercials and political posturing.

6-Until the Fed allows interest rates to normalize, consumer sentiment will continue to sag. Spenders using low to no interest for their purchasing power represent the current consumer. That's pretty much how we got into this mess in the first place, and certainly is not the way to get out! When the consumer with actual disposable income starts to buy, then we start to recover. That won't happen until interest on consumer savings rises to free market levels. Consumer interest on savings is a big part of discretionary disposable income.

SATAN SAYS..."The Great Sucking Sound Continues !!!!!!!!!!!!!!!!!!!!!"

Sunday, August 16, 2009

How Democrats treat Doctors...

First the real ones;

"...fu_k you Jack, says the House Demon

and now, the fake ones;

Hug hug kiss kiss

Thursday, August 13, 2009

The Real UI picture


11/08/2008 539,787 with total of 3,521,971, just after Election !


current 8/01/09 of ~560,000 new claims and running total of ~5,600,000 NOT including expired benefits of ~ 1,500,000 for grand unofficial total of 7,100,000 unemployed out of a
total INSURED force of 153,000,000

an increase of ~30% in INSURED labour force ! in less than 10 months


Among the marginally attached, there were 796,000 discouraged workers in July, up by 335,000 over the past 12 months. (The data are not seasonally adjusted.) Discouraged workers are persons not currentlylooking for work because they believe no jobs are available for them.

Satan Says increase of ~50% !!in less than 10 months!

About 2.3 million persons were marginally attached to the labor force in July, 709,000 more than a year earlier. (The data are not seasonally adjusted.)
Satan Says increase of ~30% !!in less than 10 months!
These individuals, who were not in the labor force, wanted and were available for work and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey.

Satan Says the great sucking sound continues!!
9-9-9, 9-18-09, 9-29-2009!

Wednesday, August 12, 2009

Monday, August 10, 2009

Krugman: U.S. government averted depression- NYT

Krugman is a Clown! A total Clown!

""The U.S. government saved the country from a "full replay" of the Great Depression, Nobel Prize-winning economist Paul Krugman wrote in an opinion column in the New York Times on Monday.
"Probably the most important aspect of the government's role in this crisis isn't what it has done, but what it hasn't done: unlike the private sector, the federal government hasn't slashed spending as its income has fallen," Krugman wrote.""

The Recession is over and THEY averted a Depression?

I wonder what this Doctor of Voodo Economics will have to say within about 100 more days?

Saturday, August 8, 2009

Which is Fake or Real?

Satan SAYS, have the authorities examine each and whom ever submitted the fake gets a big fine and maybe a jail sentence as well.

other birther links;

Satan's Lucky Lottery Numbers 999

Sorry Lovers but God had nothing to do with this! the big numbers are 9 9 9 through to 9-29-2009

Satan Says, the numbers in the clip below were generated with extreme prejudice by flesh and blood Chicago mortals...or you can believe the incredible odds, take your pick. As a side note there has been other lottery scandles around the world, in fact a f_ck of a lot enter lottery and scandal in google and over 4 million hits

and over 4 million more, so just how/where did those numbers come from...Satan you?

Tuesday, August 4, 2009

Stock market to Fall this Fall?

FIVE reasons the Market could CRASH !

From the above article;

"With all this blather about “green shoots” and economic “recovery” and new “bull market,” I thought I’d inject a little reality into the collective financial dialogue. The following are ALL true, all valid, and all horrifying…


1) High Frequency Trading Programs account for 70% of market volume

High Frequency Trading Programs (HFTP) collect a ¼ of a penny rebate for every transaction they make. They’re not interested in making a gains from a trade, just collecting the rebate.

Let’s say an institutional investor has put in an order to buy 15,000 shares of XYZ company between $10.00 and $10.07. The institution’s buy program is designed to make this order without pushing up the stock price, so it buys the shares in chunks of 100 or so (often it also advertises to the index how many shares are left in the order).

First it buys 100 shares at $10.00. That order clears, so the program buys another 200 shares at $10.01. That clears, so the program buys another 500 shares at $10.03. At this point an HFTP will have recognized that an institutional investor is putting in a large staggered order.

The HFTP then begins front-running the institutional investor. So the HFTP puts in an order for 100 shares at $10.04. The broker who was selling shares to the institutional investor would obviously rather sell at a higher price (even if it’s just a penny). So the broker sells his shares to the HFTP at $10.04. The HFTP then turns around and sells its shares to the institutional investor for $10.04 (which was the institution’s next price anyway).

In this way, the trading program makes ½ a penny (one ¼ for buying from the broker and another ¼ for selling to the institution) AND makes the institutional trader pay a penny more on the shares.

And this kind of nonsense now comprises 70% OF ALL MARKET TRANSACTIONS. Put another way, the market is now no longer moving based on REAL orders, it’s moving based on a bunch of HFTPs gaming each other and REAL orders to earn fractions of a penny.

Currently, roughly five billion shares trade per day. Take away HFTP’s transactions (70%) and you’ve got daily volume of 1.5 billion. That’s roughly the same amount of transactions that occur during Christmas (see the HUGE drop in late December), a time when almost every institution and investor is on vacation.

HFTPs were introduced under the auspices of providing liquidity. But the liquidity they provide isn’t REAL. It’s largely microsecond trades between computer programs, not REAL buy/sell orders from someone who has any interest in owning stocks.

In fact, HFTPs are not REQUIRED to trade. They’re entirely “for profit” enterprises. And the profits are obscene: $21 billion spread out amongst the 100 or so firms who engage in this (Goldman Sachs (GS) is the undisputed king controlling an estimated 21% of all High Frequency Trading).

{SatanSays "Hey Kids, remember that Goldy Computer program?"}

So IF the market collapses (as it well could when the summer ends and institutional participation returns to the market in full force). HFTPs can simply stop trading, evaporating 70% of the market’s trading volume overnight. Indeed, one could very easily consider HFTPs to be the ULTIMATE market prop as you will soon see.


2) Even counting HFTP volume, market volume has contracted the most since 1989

Indeed, volume hasn’t contracted like this since the summer of 1989. For those of you who aren’t history buffs, the S&P 500’s performance in 1989 offers some clues as what to expect this coming fall. In 1989, the S&P 500 staged a huge rally in March, followed by an even stronger rally in July. Throughout this time, volume dried up to a small trickle.

What followed wasn’t pretty.


"Anytime stocks explode higher on next to no volume and crap fundamentals you run the risk of a real collapse. I am officially going on record now and stating that IF the S&P 500 hits 1,000, we will see a full-blown Crash like last year.

3) This Latest Market Rally is a Short-Squeeze and Nothing More

To date, the stock market is up 48% since its March lows. This is truly incredible when you consider the underlying economic picture: normally when the market rallies 40%+ from a bear market low, the economy is already nine months into recovery mode. Indeed, assuming the market is trading based on earnings, the S&P 500 is currently discounting earnings growth of 40-50% for 2010. The odds of that happening are about one in one million.

A closer examination of this rally reveals the degree to which “junk” has triumphed over value. Since July 10th:

The 50 smallest stocks have outperformed the largest 50 stocks by 7.5%.
The 50 most shorted stocks have beaten the 50 least shorted stocks by 8.8%.
Why is this?

Because this rally has largely been a short squeeze.

Consider that the short interest has plunged 72% in the last two months. Those industries that should be falling the most right now due to the world’s economic contraction (energy, materials, etc.) have seen the largest drop in short interest: Energy -90%, Materials -94%, Financials -86%.

In simple terms, this rally was the MOTHER of all short squeezes. The fact that it occurred on next to no volume and crummy fundamentals sets the stage for a VERY ugly correction.

4) 13 Million Americans Exhaust Unemployment by 12/09

A lot of the bull-tards in the media have been going wild that unemployment claims are falling. It strikes me as surprising that this would be true given the fact that virtually every company that posted the alleged “awesome” earnings in 2Q09 did so by laying off thousands of employees:

Yahoo! (YHOO) will cut 675 jobs.
Verizon (VZ) just laid off 9,000 employees.
Motorola (MOT) plans to lay off 7,000 folks this year.
Shell (RDS.A) has laid off 150 management positions (20% of management).
Microsoft (MSFT) plans to lay off 5,000 people this year.
So unemployment claims are falling, that means people are finding jobs right? Wrong. It means that people are exhausting their unemployment benefits. When you consider that there are 30 million people on food stamps in the US (out of the 200 million that are of working age: 15-64) it’s clear REAL unemployment must be closer to 16%.

And they’re slowly running out of their government lifelines.

The three million people who lost their jobs in the second half of 2008 will exhaust their benefits by October 2009. When you add in dependents, this means that around 10 million folks will have no income and virtually no savings come Halloween.

Throw in the other four million who lost their jobs in the first half of 2009 and you’ve got 13 million people (counting families) who will be essentially destitute by year-end.

How does this affect the stock market?

The US consumer is 70% of our GDP. People without jobs don’t spend money. People who are having to work part-time instead of full-time (another nine million) spend less money than full time employees. And people who are forced to work shorter work weeks (current average is 33, an ALL TIME LOW), have less money to spend.

Wall Street makes a big deal about earnings (earnings estimates, earnings forecast, etc), but when it comes to economic growth, sales are the more critical metric. Companies can increase profits by reducing costs temporarily, but unless actual top lines increase, there is NO growth to be seen. No revenue growth means no hiring, which means no uptick in employment, which means greater housing and credit card defaults, greater Federal welfare (unemployment, food stamps, etc), etc.

So how will corporate profits perform as more and more consumers become part-time, unemployed, or destitute? Well, so far profits have been awful. And that’s BEFORE we start seeing millions of Americans losing their unemployment benefits.

"With the S&P rallying on these already crap results… what do you think will happen when reality sets in during 3Q09?

5) The $1 QUADRILLION Derivatives Time Bomb

Few commentators care to mention that the total notional value of derivatives in the financial system is over $1.0 QUADRILLION (that’s 1,000 TRILLIONS).

US Commercial banks alone own an unbelievable $202 trillion in derivatives. The top five of them hold 96% of this.

By the way, the chart is in TRILLIONS of dollars:

"As you can see, Goldman Sachs alone has $39 trillion in derivatives outstanding. That’s an amount equal to more than three times total US GDP. Amazing, but nothing compared to JP Morgan (JPM), which has a whopping $80 TRILLION in derivatives on its balance sheet.

Bear in mind, these are “notional” values of derivatives, not the amount of money “at risk” here. However, if even 1% of the $1 Quadrillion is actually at risk, you’re talking about $10 trillion in “at risk.”

What are the odds that Wall Street, when allowed to trade without any regulation, oversight, or audits, put a lot of money at risk? I mean… Wall Street’s track record regarding financial instruments that were ACTUALLY analyzed and rated by credit ratings agencies has so far been stellar.

After all, mortgage backed securities, credit default swaps, collateralized debt obligations… those vehicles all turned out great what with the ratings agencies, banks risk management systems, and various other oversight committees reviewing them.

I’m sure that derivatives which have absolutely NO oversight, no auditing, no regulation, will ALL be fine. There’s NO WAY that the very same financial institutions that used 30-to-1 leverage or more on regulated balance sheet investments would put $50+ trillion “at risk” (only 5% of the $1 quadrillion notional) when they were trading derivatives.

If Wall Street did put $50 trillion at risk… and 10% of that money goes bad (quite a low estimate given defaults on regulated securities) that means $5 trillion in losses: an amount equal to HALF of the total US stock market.

This of course assumes that Wall Street only put 5% of its notional value of derivatives at risk… and only 10% of the derivatives “at risk” go bad.

Do you think those assumptions are a bit… low?
FIVE reasons the Market could CRASH !