April 17th, 2012
in Gary's blogging
I mentioned yesterday that the cab drivers are full of market tips and the amateur traders have been jumping on the market's train in hopes Mr. Market to fill their greedy pockets. Only it doesn't work that way. Mr. Market does his best to deprive you of all gains in the most painful way possible.
Many investors have awakened and now see dark clouds on the horizon such as the reality of a war with Iran, a distribution phase among the financial investment managers, insolvency with Spain and Portugal, increased selling volatility and bullish sentiment that smacks of complacency.
Only the informed will see the end of the day and these folks appear not to be very well informed by my standards. And by the looks of it it is time to run the other way because this train isn't going anywhere, except down and here is why.
The markets have been for the last 6 months been driven by new events of various natures, like the 'Hopium” from the Merkozy duo and hints of QE3 from the Fed's.
The coming political elections in the Eurozone have also raised an eyebrow or two realizing that the socialist's are becoming the favorites and they hate austerity. Just remember the market can fall a lot faster than it can rise. Catching a falling knife is not considered a wise thing to do.
The political elections in the Eurozone have also raised an eyebrow or two realizing that the socialist's are becoming the favorites and they hate austerity.
Market Forecast: Words Are No Longer Enough Edition by Graham Summers
“The markets have entered a very dangerous environment in which even the usual market props (Fed Presidents calling for more easing) are being overridden by market concerns for Europe.
So, for the market to tank despite two Fed Presidents hinting at more QE (as well as the ECB engaging in similar comments) should be a major warning sign that selling pressure is creeping back into the markets in a big way.
With that in mind, this week is a bit of a toss-up. It is options expiration week, so we should see the usual upwards manipulation by Wall Street.
However, at the same time, the markets are waking up to the reality that Europe is about to enter its real Crisis (Spain) at the very time that European elections, particularly that of France, are favoring leftist socialist politicians who are completely opposed to fiscal austerity.
Indeed, the situation in Europe is fast approaching a confluence of factors (political, technical, fundamental, and economic) that has the potential for an absolute disaster to unfold in the next six to eight weeks.
Indeed, the mere fact that verbal interventions from the Fed are no longer working should tell investors point blank that things are about to get very ugly in the markets.”
The Pavlov dip buying of late worked well 3 years ago when the market was a raging bull but now the 'Dippers' haven't been paying attention and are likely going to get burned.
I do expect the market to melt higher only because of some gaps left in the disorderly fall early April that need to be filled. I am not ruling out a possible trip to the highs made early April if only to test them. The market is in a mixed state of affairs and could do a lot of things that are not generally expected, but the trend is down.
Expect next week to be full of Spanish news as the numbers are not looking very good. Portugal will also have it day in the Mediterranean sun soon and it won't be a beautiful sunset. Just remember the market can fall a lot faster than it can rise. Catching a falling knife is not considered a wise thing to do.
'Miserere Nobis': More Pain In Spain by Pater Tenebrarum
“Spain's banking system continues to make waves and unwelcome headlines. On Friday [04-13-2012], it became known that the banks have borrowed a record €316.3 billion from the ECB as of March, up from €169.8 billion in February - 28% of the gross borrowings of all banks in the euro area (in terms of borrowings from the ECB, it represent an even bigger percentage). This means Spain's banks have little to no access to the interbank market or other private funding and have evidently made maximum use of the second LTRO."Economist Martin van Vliet at ING Bank said: "The ECB's three-year LTROs have done little to fundamentally improve the solvency situation of either the banking sector or the sovereign, which is where recent investor concern has centered on."He added: "For this to happen, we would likely need to see a sustained return to economic growth and an imminent end to the real estate slump, both of which currently seem a long way off."
That, in a nutshell, is the problem. Spain is in no position to 'grow its way out' of the situation. Au contraire, the country's economic data keep worsening.“
Finally, more reasons to view the markets rise with skepticism and not to buy into the hype. Like Larry Doyle I agree this market is rigged and it should be headline news.
Do readers recall Dick Fuld, then CEO of Lehman Brothers, railing against hedge funds which were attacking the once venerable firm by aggressively shorting its stock? Fuld maintained that these aggressors were engaged in a practice known as ‘naked short selling’ and that they brought Lehman to its knees in the process.
The last four years have brought us plenty of intrigue and innuendo about a host of illegal and illicit practices on and off Wall Street but we have heard and seen little about this practice. Why? What questions need to be addressed on this topic?
1. How widespread was this practice?
2. Was the SEC totally ill-equipped or merely unwilling to address ‘naked short selling’?
3. Can the SEC go back and reconnect the dots and expose the practice and the practitioners? Will they?
4. Can the American public stomach the blatant assault on basic rules of capitalism?
5. Will naked short selling be another nail in the coffin of those who view Wall Street as a rigged game?
6. Might this all be about to change?
And so we watch the 'cab drivers' drive into the sunset, oblivious and not seeing the cliff just ahead.
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Written by Gary