STOCK MARKET WATCH, Monday 10 May

All the good economic news is causing investors to panic.

and markets are doing SO well the Dow will probably break 10,000 the wrong way again this week. Wonder how the whores are going to spin that one.

How about "ths morning"??

has just been broken...

Commenting on the mass psychology behaviors that seem to bound the swings for periods of time... where the market doesn't tend to go above x nor below y and appears for that period of time to bounce back and forth between the boundaries. For awhile the boundaries seemed to be around 10,200 and 10,700... slightly lowering several weeks ago to around 10,000 (or 10,000) to 10,500.... Wonder where the next equilibrium spot will lie.

Markets all over the world are taking a big hit today. If I had money to invest - it would not stay in the US.

THE DOW REPORT
A Brief Overview of Cycles

In recent weeks I have shown you how I use cycle high and low points to identify trend changes. I have recently received questions asking for more of an explanation about these methods. So, in today’s WrapUp I will attempt to present a brief simplified explanation of just how cycles can be used as a very powerful technical tool once they are understood.

From a cyclical perspective, the trend is defined by the direction of the cycle of the next larger degree. This means that from a cyclical perspective we work in many different dimensions. The key is to isolate and study each cycle of each dimension so that the direction and expectation of these cycles can be known. The identification of these cycle lows is definitely outside of the scope of this brief overview, as it would take volumes of material to do this subject justice. All I want to do here is simply present the concept of using cycle highs and lows of various degrees to show you the concept of how we can work in the various dimensions to identify important turn points.

-cut-

In my work with cycles I also use statistical analysis of the long and intermediate-term cycles to develop expectations that can be applied to future cycles. For example, history may show me that 89% of all long-term cycles, that advance for 6 months or more, hold above their previous long-term low as the correction into the next long-term low occurs. Further analysis of these long-term cycles with advances of 6 months or more is then done in order to find the average advance of this group of cycles. The same is done for the declines into the lows. Analysis of the long-term cycle may also reveal that when this cycle advances for 5 months or less, the previous cycle low has an 83% probability of declining below its previous low and that the average decline may be 39%. These numbers above are all arbitrary, but I present them to you as an example of just how the quantification of cyclical behavior can be used as a guide for future cycles. The key is to identify the cycle of each degree or dimension and then apply the historical norms to the cycle. Basically, this is nothing more than cycle profiling.

http://www.financialsense.com/Market/wrapup.htm

The U.S. economy is growing at its fastest rate since the mid-90’s. Yet these growth rates have failed to ignite the financial markets or create real jobs this year. Since January all of the major indexes have given up their gains and have now turned negative.

Bond Market is at The Wheel

Given all of the structural imbalances in our economy and in our financial markets, aggressive rate hikes by the Fed are an illusion. In fact, the Fed is impotent and in want of a policy Viagra. What is more relevant are the actions of the bond market. As shown in the charts above, interest rates have climbed close to 100 basis points. Since touching a low on March 16th at 3.681%, the rate on the 10-year note has risen to today’s 4.8%. The 30-year bond has gone from a low of 4.643% to 5.5%. Mortgage rates keep climbing with 30-year fixed rates now averaging 6.12%. The bond market is controlling interest rates—not the Fed. Financial institutions are leveraged by 20:1 in the bond carry trade. A rise in bond yields could completely wipe out the equity of major financial institutions locked in the bond carry trade, interest rate swaps or derivatives.

-cut-

Low cost affordable housing from the low $500,000.

These theoretical costs are a lot like the job numbers we get each month from the U.S. Department of Labor, which are another statistical work of fiction. Last month’s great jump in the job numbers was a real statistical miracle. The Department bases those numbers on two surveys. The first survey is known as the household survey and consists of a sample survey of 60,000 homes. The other survey is conducted by the U.S. Census Bureau and includes 160,000 businesses and government agencies. Last month nonfarm payrolls increased by a measly 7,000. After seasonal adjustments and statistical massaging, that number was magically transformed from a mere 7,000 to a magical market-busting 308,000.

Job growth, economic growth and inflation are real works of fiction. That is why on Main Street there is real worry. It explains in part why consumer confidence is trending downward. You see on Main Street there are no job heavens and monthly budgets can’t be statically massaged. On Main Street, the Average Joe is facing daily in-your-face price increases from gas at the pump to the price of Spam or a carton of milk. This is reality. On Wall Street and in Washington, they deal with illusions. There are no illusions for the average family of four with kids in school or a home in the suburbs.

http://www.financialsense.com/stormwatch/oldupdates/2004/0507.html

But by the look at the futures markets, this thread stands a good chance of being swamped with company. Can those futures storm clouds looking any more menacing? Is that a wall cloud I see on the horizon?

Please try to have a good day at the casino Marketeers!

:donut: :donut: :donut: :donut: :donut: :donut: :donut:

Ozy :hi:

Howdy Marketeers!

Holy Cannolli! Things look mighty, mighty grim! I am heading out shortly, a very busy day for us overthrow-worker bees but I am pleased to announce it's going swimmingly. More on that another time.

Yes, the occassional peeks this mornin' at futures told me the SWT was a MUST SEE before heading out. Brilliant articles posted as usual. I noticed the same spin as you all. Things are just so damn great people are wetting themselves with fear. *snicker* Last time Asian got hammered so hard they were lucky enough to overhear some trader mutter the term "manly profit taking" so they were able to alugh it off most of the day by simply employing that clever phrase. Ugh.

I expect to be checking back in mid-day but will be unable to resist at least an occasional peek now and then via my cell phone.

Strap in and take your safest positions. Gold is looking "bargain bin"-ish lately. ;-)

Julie

http://quotes.ino.com/chart/?s=NYBOT_DXY0

Last trade 91.66 Change +0.53 (+0.58%)

http://www.fxstreet.com/nou/content/2115/content.asp?menu=market&dia=1052004

Dollar Adds to Gains, Retests 2-Year Downtrend

At 10:30:00 AM US Chicago Fed Moscow Speaks

The dollar added to Friday’s gains in London, rallying to its 2-year resistance line at 1.18 against the euro while vaulting to a new 7-month high of 113.78 yen. Last Friday’s surge in US payrolls was clearly the catalyst as the 288k figure for April beat consensus expectations by 100k and led to a sharp move in the 10-year yield, through last year’s high of 4.7%. The move above 4.7% in the 10-year yield is technically bullish for yields and has led to follow through buying in the dollar, putting the greenback at a critical juncture for today’s session as traders will assess whether or not back to back payroll surprises warrants a breakout in the dollar from its two-year old downtrend. Gold dropped to a new 6 month low of $372 as it targets $365, the 61.8% retracement of last year’s move from $325 to $430.

Surging Yields May Give Dollar a Hand
Friday’s move in yields was quite significant from a technical standpoint and could lead to further gains in the dollar. The 10-year yield broke above its 4-year downtrend from the January 2000 high of 6.79% to test the 2003 peak at 4.7% last week. Back to back surprises in US payroll reports were the catalyst, and the rally through 4.7% on Friday was even more significant because this also marks downtrend resistance from the August 1981 high of 15.84%. The 10-year yield should now target 5.4%, the 61.8% retracement of the decline from 6.79% to the June 2003 low of 3.13%. A rise in yields to 5.4% should then help the dollar break though its two-year downtrend line. Against the euro that downtrend line now crosses at 1.18.

Nikkei Tumbles 4.84% Dragging Yen Lower In Its Wake
The Nikkei plunged 4.84% on Monday as traders returned from a week of holidays to react to Friday surging dollar and falling global equities. Recent inflows into Japan were supporting a rising equity market and yen, leading to a virtuous circle for foreign investors, but this trade appears to be coming unwound as the dollar index threatens a breakout of its 2-year downtrend crossing at 0.9150. Today’s high in the dollar index is 0.9180.

Speculative Dollar Shorts Mixed
For the week ending May 5, speculative positions in the dollar index showed a 1.2k decline in net shorts to 1543, but the overall positioning was mixed. EUR longs rose 1.5k to 6999 GBP longs rose 1k to 4730 CHF shorts fell 4k to 7089 JPY longs rose 2.7k to 2973 AUD longs fell 1k to 2186. The biggest move came in CAD shorts which doubled to 19391.

...more...

http://www.forbes.com/markets/newswire/2004/05/10/rtr1365120.html

Dollar set for 115 yen, going higher seen difficult

TOKYO, May 10 (Reuters) - The latest signs of recovery in the U.S. job market are likely to push the dollar up to 115 yen but most analysts said it would face an uphill battle to extend its rally beyond that level.

Surprisingly strong U.S. payroll data on Friday have increased speculation about an early rise in official U.S. interest rates, which boosted the dollar to an eight-month high of just above 113 yen on Monday.

That brought the dollar to an important gap on the dollar/yen chart, which was created when a Group of Seven financial ministers' meeting in Dubai last September called for more flexibility in the currency market.

That G7 statement was viewed as criticism of Japan's intervention to hold the yen down and the effect was to push the dollar down to 112.70 yen on the Monday after the G7 meeting from 113.55 on the Friday before.

<snip>

Other analysts said the end of the dollar's long fall did not necessarily signal the start of any major new ascent, given structural problems such as the huge U.S. trade gap.

"I don't think the dollar is going to stay above 115 yen for any length of time," said Koichi Ono, a currency analyst at Daiwa Research Institute.

"The dollar could perhaps keep rising for a few months. But the huge U.S. current account deficit is not consistent with a long rising trend in the dollar," he said.

Ono also argued that a rise in U.S. interest rates -- the main factor behind the dollar's latest rally -- had not historically helped the dollar versus the yen.

...more...

Ozy, I really want you to know how much I appreciate all that you do each day - from starting the thread and keeping the discussions relevant! You are terrific (and so are all the rest of the Marketeers!)

It's going to be an interesting day at the Casino :)

We are 'the greatest'

Wait about two weeks. If gold is down just slighltly (less than it's fallen each of the last couple days) and if the dollar (trade-weighted index) is up just about half a cent. Where will we be?

We'll be sitting on a dollar that has risen over the prior 12 month period.

AND gold trading below where it was a year before.


Sound like "medium-term" rising trends at least.

It isn't just "possible" I think it's likely to happen. The dollar is now trading above it's 200 day moving average for (I think) the first time since it was close to 120. The only other time it touched the line it bounced right off and headed down last fall. This appears to have the makings of a clean break.

the quote (in its entirety) is:

"The dollar could perhaps keep rising for a few months. But the huge U.S. current account deficit is not consistent with a long rising trend in the dollar," he said.

What is consistent is the deficit numbers are on the rise - there is no real objective to decrease the size of the trade imbalance or the federal deficit.

I have been watching the dollar for a long time (longer than 2 years) and the trend is definitely not "up".

This mal-administration has been pushing for a weaker dollar in every way and whether gold is tied to the dollar (in an intangible manner or not), is really not the issue.

I was shamelessly looking for something regarding either the dollar or gold to tack my recent discovery on. :shrug:

Though I DO contend (as you know) that the dollar has seen the bottom and gold has seem it's top.

GDP growth is not irrelevant in currency exchange rates, deficit measurements are only valid in relation to the size of the economy in question. And since it appears that the deficit (while not getting smaller) is "projected" smaller (or smaller increase than projected) while the GDP is growing strongly... I suspect that WILL improve the dollar vs countries with similar deficits, HIGHER unemployment (by a long shot) and LOWER (by a comfortable margin) GDP growth.

We can't look at the US in isolation and say "things are bad and aren't getting much better". We have to admit that the dollar has already fallen A LOT and the economy is getting somewhat stronger while the economies it competes with are not.

nah, there are so many loan-sharks out there that want us destitute, why would we try to "isolate" ourselves?

http://www.denverpost.com/Stories/0,1413,36~75~2132231,00.html

excerpt:

Who is lending? Not you or me. Has anyone bought $1,800 in savings bonds this year? The rate of private savings in the U.S. has been below 3 percent for virtually all of Bush's tenure and now is under 2 percent.

Lots of the lending is coming from foreign governments: Japan, Britain, China, Caribbean banking centers, Hong Kong, Canada, Taiwan and many others. Between January 2003 and January 2004, foreign governments increased their holdings of U.S. Treasury securities by $336.3 billion. Coincidentally, the 2003 federal budget deficit was $375.3 billion.

Why are these countries so eager to invest in Treasury bonds? It's not because they're great investments. The interest is only about 4 percent a year, paid in depreciating money.

These countries are not so wealthy that they can't find a better place for their money. While the Japanese government was lending the U.S. government nearly $200 billion dollars, or $1,500 on behalf of each Japanese citizen, it was borrowing the equivalent of 7.4 percent of Japanese GDP for itself. China lent our government about $21 for each of its citizens, even though per capita income there is less than $1,000. India lent us about $5 for each member of its population.

It means that the opinion that the dolar "just HAS to fall" because we have big deficits ignores all the other countries out there. The dollar has to fall inrelation to something. And the economies of the currencies it competes with are now doing worse than the US. "Why" should the dollar fall agains a German economy with comparable deficits, far worse unemployment, and anemic growth? Because Japan lends us money?

I suspect the contries in question have a very good reason for putting money in US treasuries. They are the soundest investment (credit wise) in the world. The "full faith and credit" of China just isn't comparable.

many pre-conditioned notions and beliefs, but suspension of those are necessary to see the picture that is emerging - that the monetary system in this country has been stretched past its elastic and that other monetary systems are capable of surpassing what we currently have.

I'll stick what was, what is, and what is likely to still be decades from now. I haven't seen anything in that last several years that is remarkably different from how things have been in the past.

I wouldn't call that "pre-conditioned notions" so much as "historical facts".

What other "moenetary systems" will surpass what we currently have?

As long as the definition of "historical facts" are limited to, oh say, 60 years. :evilgrin:

Nothing before I was born can really be "proven" to have happened anyway. And certainly nothing before the world was in color.

:-)

http://www.gold-eagle.com/editorials_04/ackerman050904.html

snip>
'Worthless Dollar' Could Surge

But Buffett - and millions of other investors, most particularly precious-metals bulls -- could be very much mistaken in assuming that a weak or even worthless dollar cannot soar, at least for a while, for reasons wholly unrelated to its fundamental value. As a floor trader, I saw this happen time and again when the shares of poorly run or even criminally mismanaged company went ballistic. Many of them. after initially falling for fundamental reasons that were widely recognized, soared 30% or 40% in mere days. The cause almost invariably was unrelated to the company's fortunes; rather, it was the result of egregious, fleeting imbalances between supply and demand. The demand came from shorts who, having bet the stock would fall, were stampeded into covering their positions when the stock started moving against them. As for supply, it dried up almost completely when shareholders realized they had the bears on the ropes.

I have seen this occur on the trading floor too many times to ignore the possibility it could happen to the dollar. As I explained here recently, most of the world's hundreds of trillions of dollars of debt is denominated in dollars, and this debt represents, implicitly, a massive short-position against the dollar. As such, all borrowers of dollars should be praying for inflation, since it would allow them to pay back what they owe in cheapened money. They could also pray for the one other thing that might do the trick - a dramatic rise in incomes over and above the rate of inflation. Miracles do happen.


Murphy's Law and Debt

But unless Murphy's Law is suspended for the next ten years, we can be reasonably certain that borrowers are not going to get off quite so easily, especially since all it would take to crush them is a rise in lending rates. I'm not talking about 15% mortgages, either, or even 10%. If residential property values and incomes were to fall even slightly, a five- or six-percent mortgage would for most homeowners become a crushing burden.

This is the very crux of the coming deflation as well as the basis for a potentially sensational rise in the dollar that almost no one expects. As a mechanism to cleanse the economic system -- to cleanse capitalism, if you will --- the scenario has the "virtue" of outfoxing not only gold-bugs who trust that the dollar's inevitable decline will make bullion far more precious, but also financial world-beaters like Warren Buffett, who perforce do not come naturally to the notion that cash may be the best asset to hold for the next several years.

more...

The cause almost invariably was unrelated to the company's fortunes

But if the "company" is the US economy. Can we really say the "fudamentals" are on the ropes? Dramatically rising profits, imprving employment, rapid GDP growth, tame inflation, even rising tax receipts.

I've lost money when companies have gone under before. And I've recovered a big chunck of it when selling on the dead-cat bounce. Those were always companies that were quite a bit worse off than what we see here.

Interesting that here we still have someone singing the "deflation" blues. No point in raising interest rates if we're going to hit deflation. Eh?

the point, but I'll state it in no uncertain terms, I take back the statement I made regarding deflation as some sort of red-herring.
We are in the midst of something nasty, don't know what it is.

In those posts, deflation was defined as a spiraling downward of prices, NOT a decrease in the money supply (that was claimed to be disflation).

So, with spiraling downward values of assets as the proper definition of deflation, yes it's real and coming. Isn't that what we saw in the Great Depression? Nevermind, your "historical facts" don't go back that far.

"We are in the midst of something nasty, don't know what it is."

That seems to be the DU consensus. We are in deep doodoo. everyone is certain of it. They just can't decide whether we are slipping WAY into the inflation side of the equation or WAY into the DEflation side of the equation.

They're absolutely certain it can't be somewhere in between - because that would mean Bush would get credit for it. I'm convinced there is a feeling that his evil ways mean his bad karma will force things to end up bad. We just can't figure out which way.

People need to understand that the two are contradictory positions.


I did find it interesting listening a bit to MoneyTalk this weekend. He made the point that "High gasoline prices mean less cash in your pocket to purchase other things. This is NOT a sign of inflation".

what the proper definition of inflation is.

But, as you noted in another post somewhere on this board, real wages have begun to increase - which is one of Greenspan's standard watch stats. That IS inflation in Greenspans mind. I just don't think you can "inflate" your way (helicopter drops of $$$) out of a deflationary trend. May buy some time, but it's not the cure. It just puts off the inevitable cleansing. Question is, does it make the condition worse off in the end to the point where it becomes terminal? :shrug:

But where to put those profits in an economy suffering from deflation is the question.

Nowhere to run to, nowhere to hide.

At the outset, I was inclined to think that a deflation-bound economy - particularly a global one - would create the most challenging investment environment imaginable And so it has. I have always believed that deflation would bring, not money-making opportunities, but rather a prolonged period of economic adversity during which even the savviest investors would be challenged to hold onto 30%-40% of their original net worth.

http://www.netassets.co.za/equities/nabrksreps/brokersDetail.asp?websitecontentitemID=30656

By Justin Brown Gold fell today to a six-and-a-half month low of US$371 a troy ounce due to the stronger US dollar against the euro and the yen, as well as long liquidation. At 1450, gold was quoted at $372.90/oz, down $5.70/oz from Friday's New York close of $378.60/oz. At 1450, the euro was quoted at $1.1833, down $0.0047 from late New York trade on Friday of $1.1880, while the US dollar was last quoted at 113.56 yen, up 1.24 yen from late New York trade on Friday of 112.32 yen. "Gold has moved lower today on the stronger US dollar and some long liquidation. We see the euro going to $1.1750 and that move weaker should keep the gold price under pressure," a London analyst said. The US dollar continues to be spurred on by the better than expected US non-farm payrolls data released on Friday, which indicated that US jobless claims had fallen to the lowest since October 2000. JP Morgan expects that gold could test $360/oz in the short-term and that the metal could even fall towards $345/oz after the $360/oz level is broken. Platinum touched a five-month low on Monday of $763.50/oz due to concerns about a hard landing for the Chinese economy and the possible impact of an increase in US interest rates on platinum demand.

bit more...

Not much of a year if you "bought and held" gold.

In fact... it looks like if you invested in gold at the beginning of last year... you haven't made anything at all.

at the beginning of last year, how much of those big gains are real as opposed being a result of the US$ being worth less?

?s=NYBOT_DXY0&t=l&w=15&a=50&v=dmax

Since the dollar isn't "worth" nearly as much "less" as the S&P/NASDAQ is worth "more", I'd say you made out pretty well. The S&P is up about 20% from last January 1 while the Dollar index is down close to 10%. The difference is more pronounced since last May/June since the dollar is essentially where it was and the DOW is still up double digits.

Not that it matters (and I know we've discussed this before) - How exactly are stock market returns degraded by a weaker dollar? I'm supposed to look at my portfolio and say "I made 30%, but it won't buy me any more in Spain so I didn't "really" make anything"???

"inflation". Do you have a positive or negative return based on the purchasing power of the currency? As more $$$ are created, their value declines (too many $$$ chasing too few goods).

Unfortunately, you can't get a true handle on the rate of inflation these days due to the hedonisitcs now used to calcuate the CPI and PPI. I am certainly not suggesting that you calculate gains/losses in the market on foreign currencies. (I think that's what you're alluding to.)

US Dollar returns (of any type) vs. Foreign Exchange Rate = irrelevant

Irrelevant, that is, unless you are a foreign investor. Foreign exchange rates DO effect spending power slightly (to the extent you buy foreign goods), but it isn't that substantial.

Do you have a positive or negative return based on the purchasing power of the currency?

Absolutely! It's called the "real" return. But only the "purchasing power" in this country.

I don't see a real problem getting "a handle" on inflation. I see people with a dog in this race trying (at EVERY opportunity) to say that things are really worse than they seem (or conversely claiming things are better then they seem). I frankly don't have much of a problem with a measure of inflation that counts a new car with a $500 airbag priced at $20,500 as NOT contributing to inflation over the previous year's car that sold for $20,000 but did not include the airbag. It's either a 2.5% increase or none at all. It looks like none at all to me.

Dow 10,054.03 -63.31 (-0.63%)
Nasdaq 1,903.81 -14.15 (-0.74%)
S&P 500 1,094.37 -4.33 (-0.39%)
10-Yr Bond 4.757% -0.009

(edited for use of wrong time zone :D )

market opened up early today huh :D :D

I'm CST - post should have read 9:32 EST -

my bad

... markets. Am I wrong in thinking that this is a result of lots of big institutions' computer trading. All three are damned near identical....

Dow 10,002.22 -115.12 (-1.14%)
Nasdaq 1,893.42 -24.54 (-1.28%)
S&P 500 1,085.55 -13.15 (-1.20%)
10-yr Bond 4.752% -0.014
30-yr Bond 5.449% -0.015

NYSE Volume 327,852,000
Nasdaq Volume 386,354,000

10:00AM: Although back at its earlier lows, the market had exhibited some resilience since the last update, with the major averages paring a portion of their losses, led forward by the Nasdaq... Much of the market's weakness this morning has been ascribed to continued fears over rising interest rates... Yet, keep in mind that there's little novelty to these fears, which have kept a lid on the proceedings for much of the past month, as the major averages declined 5.5-9.5% and the 10-year note yield rose from under 4.0% to over 4.75%...
Currently, the 10-year note is trading up 5/32, bringing its yield down to 4.75%... Given the recent sell-off in equities and today's rebound in bond yields, there's potential for a rebound in stocks as traders key into the bond market action and develop a sense that the sell-off has been overdone... NYSE Adv/Dec 337/2293, Nasdaq Adv/Dec 634/2035

http://www.gold-eagle.com/editorials_04/chapmand050804.html

snip>
What happens on the geopolitical front is important to investors in the Western world particularly North America even without a key election taking place in November. If things are deteriorating elsewhere, it will eventually wear on consumer and investor confidence. If consumer and investor confidence fails, a turn down in the economy and the stock market is not far behind. The stock market often starts falling before the negative events come completely into play. Recent retail sales in the US were lower than expected; Gas prices at the pump are at their highest levels ever in North America (although compared to Europe they are still a bargain); long term interest rates are rising and threaten the housing boom; and, with an unprecedented level of debt outstanding with consumers and corporations higher interest rates are potentially dangerous if accompanied with an economic slowdown.

Right now we have a most difficult situation going on. Interest rates have been maintained artificially low now for some time. Low interest rates are the major contributor to the debt bubble of consumer debt and mortgages, the revived stock market bubble and the housing bubble. The monetary authorities have maintained an easy money policy for years. The last slow down in money growth (M3) was in the early nineties. Since 1993/94 M3 has grown 114% from $4.2 trillion to over $9.0 trillion or roughly 11.4% per year. Consumer debt (mortgages and consumer credit) has grown even more from $4.2 trillion at the end of 1993 to over $9.4 trillion at the end of 2003 up 123% or 12.3% per year. Business debt is up only 100% growing from $3.7 trillion to $7.4 trillion in the same period.

Money supply growth actually retreated briefly for a few months in late 2003 but since the beginning of the year it has been rising once again at an 8.6% annual pace. But contrast the monetary and debt growth with economic growth that has only increased 69% (before factoring in inflation impact) since the end of 1993 ($6.7 trillion to $11.2 trillion) and you realize that without the massive monetary and debt growth not only would the stock market not have soared economic growth might have actually been negative.

Adding to the massive debt situation is the current account, trade and federal budget deficit that now combined is approaching $1 trillion annually. This deficit represents a massive transfer of wealth out of the US into the hands of foreigners who now own upwards of 50% of government debt. All of this leaves Alan Greenspan between a rock and hard place. Even a small hike in short term interest rates could quickly unravel the market. Yet the bond market falling in price (rising in yield) is doing it for him by pricing in anticipated interest rate hikes. What the bond market is saying is that there is problems here of debt and inflation (commodities, war, and economic growth) that is not being accounted for and as a result higher interest rates are needed.

The job numbers that came out today are adding fuel to the fire (238K versus expectation of 173K plus an upward revision of the previous month and a lowering of the unemployment from 5.7% to 5.6%). The bond market was, in reaction, to put it mildly, "trashed". And the stock market rather than reacting positively to the job numbers was down to mixed rather than experiencing a big up. Rising interest rates take precedence over rising job numbers. Speculation is now going around that while the Fed may not move in June it might be August although some are expecting that it could very well be June. In a highly leveraged economy even a small interest rate hike could tip things over not only cooling the stock market but ending the housing and consumer boom.


more...

... and I suspect it will close there...

http://www.321gold.com/editorials/bond/bond051004_wsj.html

London Homesick Blues

snip>
It gets curiouser.

China, the other big planetary player, actually the third rail of world economics, is turning the screws down on its economy in an effort to cool inflation and protect its massive US dollar currency reserves preparatory to dumping them. Europe wants trade concessions from China, too, which the Chinese will be all too willing to grant should the EU rescind its arms embargo. The new Bank of China advertises every half-hour on both Bloomberg Europe and CNBC Europe. They are open for business. China's throttling-back will be tough on commodities for the next few months but it is temporary. They have stuffed 200 years of Industrial Revolution into a single generation's lifespan and there's no looking back. By 2050 China, urbanizing along a trend experienced by Japan, Europe and the U.S. during their industrial revolutions, will shift their population from the country to the cities, necessitating the construction of the equivalent of a Los Angeles every two years or less.

China, Japan, South Africa, and most European countries cannot afford to see the dollar fall any further, but they also cannot afford to keep propping the USD up, either. There is simply not enough wealth on this planet to keep pace with the United Snakes Federal Reserve Bank's printing presses. And at a fixed 6% interest per year - the rate at which the Fed loans us our dollar bills - why would the Fed wish to stop printing? It is, in the words of Janet Reno and Jim Jones, for the sake of the children, no?

Please hang with us whilst we digress. What whacked us to our senses was a visit in Russia this past week to the world's biggest surviving rail-gun. It is a marvelous device, supported by some 13 pairs of railroad wheel trucks, each capable of hauling 100 tons. The rail gun is proudly displayed near Gorky Park. The Russians own it, but the Germans built it in the early 1940s with the intent of lobbing lead at Moscow from it. Things went south for the Germans in 1944, and the Russians grabbed the rail gun from them somewhere outside St. Petersburg. Short of an aircraft carrier it is the most impressive piece of military machinery we have ever seen.

Memories die hard. It does not occur to us Americans, in our comfortable homes in Florida or Idaho, how hard a half-century of war was on these people. What I see here is an awakening and a rising, from the bar-room floor, of the participants in this half-century-long bar-brawl, the bloodiest in history (the peace of the Treaty of Versailles was, if you look at it rationally, just a time-out in the penalty box whilst everybody regrouped to go another round) and after 50 year' recovery smelling blood in the waters.

The Europeans and the Asians are wiping the crud from their eyes and they are coming-to. For 50 years they have been down, but not out. Their fighting amongst themselves - Europe upon itself and Japan and China at each others' throats - is over.

more...

Dow 9,984.27 -133.07 (-1.32%)
Nasdaq 1,889.19 -28.77 (-1.50%)
S&P 500 1,083.16 -15.54 (-1.41%)
10-yr Bond 4.771% +0.005
30-yr Bond 5.467% +0.003

10:30AM: The major averages continue to decline, setting fresh session lows in their retreat... The negative bias is broad-based, with the majority of the sectors supporting the pullback... Among the numerous laggards of note are the influential hardware, internet, networking, semiconductor, software, telecom, biotech, banking, broker/dealer, REIT, insurance, oil services, transportation, coal, iron & steel sectors - the list goes on... Leadership to the upside is illusive at this point, but includes the gold sector, which is finding appeal in view of its safe-haven characteristics...
In its decline, the Dow had momentarily slipped below the psychologically significant 10,000 mark, although it quickly rebounded... The Nasdaq, for its part, has traded below the 1900 level, but is making its way back...NYSE Adv/Dec 370/2704, Nasdaq Adv/Dec 520/2309

The DOW lost approximately 5% of its value over the last week?

:wtf:

Somebody was talking about the NASDAQ going under 2K and what a significant downturn that would be. I have not been on the DU in about a month, but I must ask this since the 2K mark has been shattered or should I say plunged through: What is the significance and how healthy is the market today? Is this a reflection of the 280K+ jobs that were created? All of those employed people are killing the corporate profits you know.

http://www.eubusiness.com/afp/040510133726.8ee74sq6

France distanced itself Monday from an offer by the EU executive commission to eliminate EU agricultural export subsidies, saying the initiative exceeded the commission's negotiating mandate.

"This seems to exceed the negotiating mandate and also seems to be tactically very dangerous," French Agriculture Mimister Herve Gaymard said here at a meeting of European Union farm ministers.

He was speaking following an announcement by European Agriculture Commissioner Franz Fischler that the EU was prepared to abolish its agricultural export subsidies if other members of the World Trade Organization did the same.

Fischler, appearing at a press conference here, said the European Commission, the EU's executive arm, had sent a letter to its members on Friday informing them of the proposal.

more...


EU offers to cut farm subsidies

http://www.iht.com/articles/519156.html

Effort to unblock talks hinges on partners' aid

KILLARNEY, Ireland The European Union is ready to eliminate subsidies on farm exports in an effort to move sluggish world trade talks forward, provided its main partners do the same, the EU trade commissioner, Pascal Lamy, said Monday.
.
Details of the proposed move, long demanded by critics of Europe's generous farm subsidies, have been sent to members of the World Trade Organization just days before ministers from several of the organization's states hold a potentially crucial meeting in Paris.
.
The EU spends about E43 billion, or $51 billion, a year on its farm policy, nearly half its annual budget. By far the largest proportion of this goes to France. The EU has faced mounting pressure to abolish its export subsidies.
.
Lamy said that the offer depended on whether Europe's WTO partners matched their move, which the United States has indicated it is willing to do.

more...


EU Ready to End Farm Export Aid, Says U.S. Must Match
http://quote.bloomberg.com/apps/news?pid=10000086&sid=aZQbzIjzllc4&refer=news_index

May 10 (Bloomberg) -- The European Union sought to kick- start global trade talks by offering to end subsidies supporting its agricultural commodity exports as long as nations including the U.S. promise to cut farm grants and lower import tariffs.

The EU, which spent 3.4 billion euros ($4 billion) to compensate exporters of beef, wheat or milk powder for lower world prices in 2002, previously said it was only willing to cancel subsidies for products ``of interest'' to developing countries at World Trade Organization talks. Poorer nations refused to compile such a list.

``With today's move, we show we are ready to go the extra mile to ensure we conclude 50 percent of the round by 2004,'' EU Trade Commissioner Pascal Lamy told a news conference in Brussels. ``The purpose of this initiative is to speed up negotiations in the WTO.''

The EU's refusal until now to eliminate farm export subsidies has been a major obstacle to reaching a wider agreement that would boost the international economy by $500 billion a year. Trade negotiators at the WTO are aiming to develop an outline for a future agreement by the end of July.

Such an agreement is seen by many, including U.S. Trade Representative Robert Zoellick, as the key to unlocking the current round of trade liberalization discussions. The round was supposed to have been completed by the end of 2004.

snip>
``The Americans have to put on the table a serious reform of their domestic support and I think they are prepared to move in that direction, if only because of very heavy costs to the U.S. budget,'' Lamy said.

http://www.forbes.com/personalfinance/funds/newswire/2004/05/10/rtr1365474.html

NEW YORK, May 10 (Reuters) - The dollar rolled higher across the board on Monday, hurting high-yielding currencies and pushing the yen to an eight-month low as accelerated expectations for U.S. interest rate hikes gripped the market.

With the currency market's focus firmly on U.S. rates, attention was turning to Chicago Federal Reserve President Michael Moskow slated to speak at 10:30 a.m. EDT (1430 GMT) on Monday and U.S. Treasury Secretary John Snow slated to speak at 12:30 p.m. EDT at (1630 GMT).

snip>

Reversal of "carry trades" in which investors had previously borrowed in low interest rate currencies in order to buy higher yielding bonds in others, sent some high yielding currencies down sharply. The Australian dollar fell about 1.5 percent against the U.S. currency, hitting lows around US$0.6908 <AUD=>.

snip>

The dollar has so far benefited from robust U.S. economic growth reports bringing forward expectations for Fed rate hikes that would burnish the allure of U.S. fixed income securities to foreign investors. But growing inflation pressures could hurt dollar-denominated bonds and diminish the U.S. currency's appeal somewhat, analysts warn.

I'm feeling sick to my stomach. At least it's up from 175.

Spoke too soon.

12:30PM: The S&P 500 successfully tested its 200-day simple moving average at 1079, leading to a stabilization in the broader market... To that effect, while the major averages remain engulfed in the red, they have been able to bounce off their respective session lows, with the current losses totaling 1.2-1.3% for the major averages... On a year-to-date basis, the Dow, S&P 500, and Nasdaq remain in the red, with losses of 4.4%, 5.4%, and 2.3%, respectively...


Have to see what the rest of the day brings.

1:03 EST

Dow 10,020.95 -96.39 (-0.95%)
Nasdaq 1,902.85 -15.11 (-0.79%)
S&P 500 1,089.63 -9.07 (-0.83%)
10-Yr Bond 4.779% +0.013

1:00PM: The dip to session lows is being used as a buying opportunity, as the major averages are continuing to pare their losses... The S&P 500 is leading the recovery effort, with the Nasdaq, which continues to be supported by the influential semiconductor sector, not far behind... The Dow is underperforming the S&P 500 and the Nasdaq on a relative basis...

Note that while the stock market has been declining in today's session, citing continued concerns over rising interest rates, the bond market has stayed within a short reach of the unchanged line, leading to participants noting that the sell-off associated with the rise in interest rates has (arguably) been overdone....NYSE Adv/Dec 387/3002, Nasdaq Adv/Dec 609/ 2517

http://www.gold-eagle.com/gold_digest_04/droke042804.html

Now to show you what a manipulated market looks like, pick out a chart of any actively traded stock or commodity -- it can be IBM, Barrick Gold, corn futures, or whatever. I'm not trying to single out any one stock or commodity because any one of them worth trading is being manipulated at the present time. This is not to cast aspersion on these stocks or commodities; indeed, the presence of organized manipulation is actually desirable up to a point. You see, the whole cycle of bull market followed by bear market is nothing but a continuously repeating pattern of manipulation. Bull markets in stocks and commodities happen because shrewd and well-monied groups of insiders decide that a certain asset (say for instance shares of XYZ Corp.) are depressed and have declined too low. Moreover, this coterie decides that XYZ is worth accumulating at the current low prices because the outlook for this company is promising and the group believes that XYZ shares can sell for much higher prices at some point in the future. So an attempt at absorbing all the excess shares of XYZ begins and the campaign of market manipulation is underway. After a long period of quietly picking up shares of XYZ, a new bull market campaign commences with the insiders advertising XYZ to the general public in various ways, which causes the public to demand shares of XYZ. A bidding war ensues with the public grabbing the bait laid forth by the manipulators and a new uptrend in the price of XYZ gets underway. Eventually, the shares of XYZ reach unsustainable levels and by that time the manipulators have long since sold all their shares to the public. So a bear market cycle follows and XYZ declines in price again. That, in a nutshell, is the cycle of manipulation.

Would the price of XYZ shares ever start a sustained uptrend and make higher highs without the presence of organized market operations (read manipulation)? Likely not. It takes organization from behind the scenes by professional manipulators to build bull markets, which in turn give way to bear markets - these things could never happen if trading in stocks and commodities was left to the unorganized public alone. So manipulation, far from being undesirable, is actually a necessary element to the smooth functioning of the financial markets. Without manipulation, there could be no following of the trends (since there would be no trends). Moving averages wouldn't work since price movement would be extremely erratic (see the above chart example). Chart patterns would be unreadable since by definition there would be no recognizable price patterns. Even fundamentals would be of little use if none of the well-heeled, behind-the-scenes manipulators felt that a given asset wasn't worth operating in.

Liquid markets that are under the influence of organized manipulation (which would include virtually all tradeable commodities and most listed stocks) have what is known as "market makers." Every stock of a well-capitalized company whose shares are heavily traded by the public employs someone to make sure the market for its shares is in relatively good working order. That means that whenever things look shaky this paid professional will step in and support the market at critical price levels to prevent an all-out break in prices. Or, to give another example, when an accumulation campaign is underway near the bottom of a bear market, this professional will make sure that no undue attention will be attracted to the stock of said company (in order to keep the general public away from the stock until the appointed time). This might properly be said to be another form of manipulation, but a very necessary one from the standpoint of the company and of the stock market as a whole. After all, if the public was allowed to madly rush into the market of any given stock at the same time, it would create a huge spike in the share price that would quickly be followed by a completely retracement right back to where the price was before the public entered the fray. (We've all seen this happen time and again with the penny junior mining stocks in years past when there was no professional support for a given stock. A "hot tip" from the Internet would cause thousands of traders to all buy the said stock at the same time, resulting in a massive rally in one or two days, which inevitably failed and left the stock right back where it started. This is what happens when there is no organized manipulation).

(Note: For further reading on the subject of the presence and desirability of manipulation in the stock market I suggest reading the classic 1933 work "The Business of Trading in Stocks" by John Durand and A.T. Miller (Fraser Publishing, Burlington, VT). The authors devote two in-depth chapters to the discussion of manipulation and describe in detail a complete manipulation campaign from start to finish).

Now I realize there is another form of manipulation which is particularly odious to even well-meaning market observers, which is mistakenly called "manipulation" by many. Actually, the correct term to use for this form of market operation would be "intervention." This is typically carried out by large entities such as the government. For instance, many traders speak of "manipulation of interest rates" or the manipulation of the dollar by the U.S. government. What they really mean is that at certain times (or perhaps at all times) there is an ongoing effort by the feds at keeping the value of the dollar low or high relative to other currencies. Or in the case of interest rates, that there is an active attempt by the Fed at keeping rates extremely low in order to keep the economy stable. Be this as it may, does the presence of the Federal Reserve or the Treasury Department mean that we have no way of trading the markets without always coming out on the losing end? Does government manipulation of the markets render price patterns meaningless and technical analysis of no value?

snip>

There are limits to human intervention in the natural realm and this applies especially to the commodities market. That's the lesson of history with regard to manipulation. True, manipulation will always exist as long as there are stocks and commodities to trade. To a degree, manipulation is even desirable. But even when taken to undesirable extremes, the natural forces of supply and demand ultimately keep the manipulators in check.

edit to add link

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=102x544574

http://biz.yahoo.com/cbsm-top/040510/e01558429e478bcf4caad68af4cff4f1_1.html

NEW YORK (CBS.MW) -- U.S. stocks tumbled Monday to their lowest levels for the year, with the Dow Jones Industrial Average sliding below the key 10,000 mark, on rate hike concerns and the worsening political climate over Iraq.

snip>
Paul Nolte, director of investments at Hinsdale Associates said the Dow falling below 10,000 was something of a "foregone conclusion."

"The broader have been performing poorly. You've had the Nasdaq below 2,000, the S&P slowly moving below 1,100 and the Russell also breaking down. It was just an eventuality that the Dow would break below that magic number."

Nolte said weakness was due to the heavy sell-off on global markets over interest rate concerns and concerning over the worsening political situation, both abroad and on the domestic political scene.

snip>
Meanwhile, there was concern that new photos of U.S soldiers abusing Iraqi prisoners could further destabilize the Bush administration.

Brian Westbury, chief economist at GKST Economics said it was this and not rate fears driving equities lower.

"The negative reaction in stocks, to the extent it is driven by fears of rising rates, is also overdone," said Westbury.

"The Fed could triple rates tomorrow (to 3%) and Fed policy would still be accommodative. It is terrorism and Iraq that are driving stock prices lower, not the Fed."

more...

What a BOOMING economy! My 401k is a 101k!

buying to keep the DJIA above 10K today ?

Just wondering?

Dow 9,990.58 -126.76 (-1.25%)
Nasdaq 1,899.48 -18.48 (-0.96%)
S&P 500 1,087.01 -11.69 (-1.06%)
10-yr Bond 4.784% +0.018
30-yr Bond 5.477% +0.013

NYSE Volume 1,233,304,000
Nasdaq Volume 1,246,005,000

1:30PM: Although still in the red, the major averages are well off their respective session lows... The Nasdaq has assumed a leadership position and is now spearheading the advance and outperforming its blue-chip counterparts on a relative basis... The tech-composite's advance continues to be supported by the semiconductor sector, which is higher by 1.1%, as indicated by the SOX index... Remember that going into Friday's session, the SOX index was down close to 20% from its high set in early January... On Friday, the SOX index closed higher, despite losses in the broader market...
The same had proven true in today's session, as the semiconductor sector has been showing relative strength despite the broader losses... Such resilience from a widely-followed and heavily-traded group could be another factor contributing to the idea that the market is oversold...NYSE Adv/Dec 506/2886, Nasdaq Adv/Dec 892/2265

http://finance.yahoo.com/m0

NYSE Nasdaq
Advances 594 (17%) 913 (27%)
Declines 2804 (80%) 2241 (68%)
Unchanged 82 (2%) 110 (3%)

--------------------------------------------------------------------------------

Up Vol* 246 (20%) 378 (31%)
Down Vol* 929 (78%) 824 (68%)
Unch. Vol* 4 (0%) 8 (0%)

Make your bets now :D

Stock market betting can be done at the best interactive stock market betting exchange on the web: Tradesports

http://www.gurutracker.com/stock-market-betting.shtml

Just kidding, I don't even play penny ante poker with the relatives (most of the time)

everybody knows its the Clenis fault

http://www.forbes.com/newswire/2004/05/10/rtr1365864.html

NEW YORK (Reuters) - Shares of North American oil companies fell Monday after a call by Saudi Arabia's top energy official for increased production by OPEC members sent oil prices lower.

Oil futures slipped more than a dollar a barrel in early trade as Saudi Oil Minister Ali al-Naimi said OPEC should boost output by 1.5 million barrels a day, or about 6 percent, to prevent high oil prices from derailing global economic growth.

The comments reinforced worries that oil prices, which rose above $40 Friday, cannot stay at these levels. Oil was down 53 cents at $39.40 early Monday afternoon.

"With oil prices approaching $40 bucks, it's difficult to see that as sustainable," said Brad Beago, an analyst for Calyon Securities USA. "If Saudi Arabia is trying to talk down oil prices. I think they'll be successful."

snip>
But analysts say 10 OPEC members already exceed their official quotas by a total of 2 million barrels per day. As a result, Naimi's comments would have a greater impact on the market's "psychology" than on actual supplies.

snip>
Today's retreat in oil stocks comes as shares of many energy producers soared to their highest in more than two years in recent weeks. Investors bet that OPEC output cuts, growing global demand and turbulence in the Middle East would keep oil prices in the high $30s for the foreseeable future.

more...

So, how long before we come full circle on this issue? OPEC first called for the cutback since the purchasing value of the petro dollar was declining based on the US$. No one wanted them to begin pricing in Euros or a currency basket basis. Now they will supposedly increase output because prices have gotten too high - based totally on speculation in the markets. No supply/demand fundamentals playing out in this scenario. :shrug:

edit to add: Looks like support efforts are being concentrated on the S&P technical of 1079 now.

Dow 9,967.66 -149.68 (-1.48%)
Nasdaq 1,893.89 -24.07 (-1.25%)
S&P 500 1,084.07 -14.63 (-1.33%)
10-yr Bond 4.782% +0.016
30-yr Bond 5.479% +0.015

NYSE Volume 1,422,009,000
Nasdaq Volume 1,419,135,000

2:30PM: Little change since the last update, as the major averages remain engulfed underwater... Volume is running at a healthy pace today, particularly on the NYSE, where volume totals are looking to come in near their highest levels of the year... Breadth figures remain rather uninspiring, with decliners leading advancers by an 8-to-1 margin on the NYSE and a 3-to-1 margin on the Nasdaq... Down volume, in the meantime, is leading up volume by a 6-to-1 margin on the NYSE and by roughly 7-to-2 margin on the Nasdaq...
The ratio of new 52-week highs to new lows is rather dismal, with 805 and 178 new lows on the NYSE and Nasdaq, respectively, juxtaposed with only 6 and 12 new highs...NYSE Adv/Dec 365/3056, Nasdaq Adv/Dec 745/2441

lead to the same price, give or take a dime.

:-)

Dow 9,935.87 -181.47 (-1.79%)
Nasdaq 1,888.69 -29.27 (-1.53%)
S&P 500 1,081.77 -16.93 (-1.54%)
10-yr Bond 4.781% +0.015
30-yr Bond 5.476% +0.012

NYSE Volume 1,669,015,000
Nasdaq Volume 1,645,463,000

3:30PM: With half an hour of trade remaining, the major averages continue to chop around in the red... Although volume levels remain far from light, participation has leveled off in the afternoon trade, which has seen the major averages trade in an indecisive, back-and-forth fashion... The bulk of the sectors continue to trade in negative territory, just like they have for the bulk of the session, while leadership to the upside remains difficult to come by... Accordingly, today's weakness is broad-based... On a year-to-date basis, all of the major averages are showing losses...
After being in the green on a year-to-date basis for much of 2004, the small-cap Russell 200 and mid-cap S&P 400 are currently showing losses of 2.0% and 3.1% for 2004...NYSE Adv/Dec 431/2999, Nasdaq Adv/Dec 728/2488

http://www.theaustralian.news.com.au/common/story_page/0,5744,9529063%255E1702,00.html

EUROPEAN stockmarkets fell sharply today, hit by more losses on Wall Street as concerns over high oil prices and an overheating US economy deterred buyers, dealers said.

snip>
"There's nervousness among investors about rising oil prices, inflationary pressure and about a higher-than-expected rate hike in the US in the near term," one Paris dealer said.

snip>
They fell back today, with the benchmark Brent North Sea contract shedding $US1.20 to $US35.80 after Saudi Arabia, the world's biggest oil exporter, called for an increase in the Organisation of Petroleum Exporting Countries' production quota of not less than 1.5 million barrels per day.

But many analysts considered the announcement cosmetic because OPEC members have been exceeding output quotes since a production cut on April 1 and an official increase would therefore do no more than bring the figures into line with reality.

Furthermore, underlying reasons for higher prices - geopolitical instability, increased demand and saturated refining capacity in the United States - remained in place, others noted.

http://www.quicken.com/investments/news_center/story/?story=NewsStory/dowJones/20040510/ON200405101515000898.var&column=P0DST

snip>

"I fell off my chair this weekend," he said, alluding to the widespread belief that the stock market's selloff is tied to higher interest rates and oil prices. "Everyone expects higher rates at this point. The market is a future-discounting mechanism -- it doesn't look backwards."

There are four factors he cited for the widespread havoc in financial markets -- the situation in Iraq is going from bad to worse, President Bush is being perceived as vulnerable in the coming election, a backlash against U.S. companies overseas because of the prisoner-abuse scandal and Fed Chairman Alan Greenspan's warning about the deficit being an obstacle to growth.

The abuse scandal is damaging, said Mr. Ritholtz, as European businesses think the U.S. "has gone off the rails. They are going to ask themselves 'do I buy Boeing or Airbus?' And now along comes Mr. Greenspan. He was very sanguine on tax cuts and deficits last year, but now he is warning the market there is a realistic possibility that taxes are going up. The market is throwing a tantrum because of the number of unpleasant things in the next six months."

snip>
Wall Street has been rife with prattle about how higher rates will impact stocks and other financial instruments. And another worry is popping up more frequently -- some investors fear Fed policy makers may be too late in raising interest rates, which can take months to factor in, to head off inflation.

Alfred Goldman, chief market strategist at A.G. Edwards & Sons in St. Louis, called the market's concerns about what he sees as a natural increase in interest rates "misplaced," saying no one should be surprised to see the Fed raising rates. "We've got very strong fundamentals," he added. "Corporate earnings are going up, up and away."

"Up, up and away."

Would you like to ride in my beautiful balloon
Would you like to ride in my beautiful balloon
We could float among the stars together, you and I
For we can fly we can fly
Up, up and away
My beautiful, my beautiful balloon
The world's a nicer place in my beautiful balloon
It wears a nicer face in my beautiful balloon
We can sing a song and sail along the silver sky
For we can fly we can fly
Up, up and away
My beautiful, my beautiful balloon
Suspended under a twilight canopy
We'll search the clouds for a star to guide us
If by some chance you find yourself loving me
We'll find a cloud to hide us
We'll keep the moon beside us
Love is waiting there in my beautiful balloon
Way up in the air in my beautiful balloon
If you'll hold my hand we'll chase your dream across the sky
For we can fly we can fly
Up, up and away
My beautiful, my beautiful balloon
Balloon...
Up, up, and away.....

Round and round the mulberry bush,
The MONKEY chased the weasel.
The MONKEY thought it all was a joke.
POP goes the weasel.

http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullStory&c=StoryFT&cid=1083180398658

A jump in US interest rate expectations has dealt the heaviest blow to emerging market (EM) debt but this could be the precursor to a similar flight from other risky assets, such as high-yield corporate bonds.

snip>
The Federal Reserve's 13 interest rate cuts from 6.5 per cent in January 2001 have helped inject a huge amount of liquidity into the global financial system, especially as they have coincided with the biggest US tax cuts in decades and sharp increases in Asian money supply.

The cheap money fuelled a dramatic fall in investor risk-aversion, driving emerging market and high-yield corporate bond yields to new lows. But the prospect of higher borrowing costs has knocked the stuffing out of speculative investors, and the fear is spreading to longer-term investors, such as pension funds.

snip>
Mr Audin said the rout in emerging market debt is likely to fuel more selling in high-risk corporate bonds, given the similarities between the markets. Both are volatile, cyclical markets, although some important differences suggest the damage to emerging markets may remain greater.

Liquidity is one factor drawing sellers into emerging market bonds when times get tough.

"Emerging market debt consists of fewer, very large issues, while the high-yield corporate market is more diffuse," Mr Audin said.

Now, investors are setting their sights on Friday's US inflation figures, which are expected offer more clues about the timing of the first interest rate rise. Ian Douglas, analyst at UBS, said: "The Fed can tolerate high growth but not inflation."

didn't you post something (friday, I think) about the unprecedented amount of cash being held by corps....maybe not cash but liquidity?

How does this play into the interest rate increase/inflation argument.

Opinions?

from senior moments. There has been so much written about liquidity and liquidity traps lately. As to how it will play out, I am not sure. MacFarlane from Australia seemed to state that the inflation we exported over the years will come back to haunt us in much higher interest and inflation than currently anticipated by the markets. Then again, he certainly is no fan of Greenspin.

http://www.smh.com.au/articles/2004/04/25/1082831434429.html

All those bucks will have to find somewhere to roost where they can get a return. If they are being chased out of emerging markets, where will they go next?

Sort of makes me think of the old days of trying to burp the air out of a waterbed matress. You chase those bubbles of air around and sometimes they simply merge themselves together into bigger bubbles, but sooner or later they have nowhere to collect and head for the fill hole simply to vanish.

http://www.reuters.com/financeNewsArticle.jhtml?type=bondsNews&storyID=5094474

WASHINGTON, May 10 (Reuters) - U.S. Treasury Secretary John Snow said on Monday he was not concerned about the potential for rising prices and interest rates, saying the economy had lots of room to grow without inflation.

"The economy seems to be on a good course ... and we have a lot headroom in front of us for noninflationary growth," Snow told a luncheon sponsored by the Independent Community Bankers of America.

In his speech, Snow welcomed a rash of upbeat economic news, including a report on Friday that showed U.S. employers added 288,000 workers to their payrolls last month.

"It's interesting how quickly things turn," he said, adding that until recently he repeatedly faced questions over the durability of the recovery and a lack of job creation.

"Now the question is, 'Mr. Secretary are you worried about inflation?' ... and, 'Mr. Secretary are you worried about interest rates?'" Snow continued. "No. We're not concerned about inflation and interest rates," he said.

more...

http://www.quicken.com/investments/news_center/story/?story=NewsStory/dowJones/20040510/ON200405101342000826.var&column=P0DEC

snip>
"We have very high productivity," Snow said. "That will hold down price increases."

snip>
Congress needs to make permanent recent tax cuts, and lawmakers should pass the administration's energy plan, Snow said. He repeated his view that high oil prices "act as a tax on the economy" and reinforce the need to reduce U.S. dependence on uncertain foreign oil sources.

snip>
"There's no reason we can get the unemployment rate down to the low 5 percent (range)," Snow said. According to recent Labor Department data, the unemployment rate fell to 5.6% in April.

Answering questions from the trade group, Snow said he was sympathetic to bankers' desire to reduce regulatory burdens. Snow said the administration would work with the industry to identify problems and possible solutions.

"A lot of it requires Congress to play their part," Snow said.

Ahhhhhhhhhhhhhh!


ahhhhhhhhhhhhhhhhhhhhhhhhhhhhh!






ahhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhh!

http://www.321gold.com/editorials/hultberg/hultberg051104.html

In response to a question about an upcoming pennant race back in the 1950's, Leo Durocher of the New York Giants once replied, "Whom knows?" This charmingly crude retort pretty much sums up our best answer today to how the great economic upheaval looming ahead of us will unfold. The thousands of convoluted variables shifting in and out of importance daily, that comprise the global economy, make human efforts at forecasting about as reliable as our predictions on the weather. Still, despite the exasperating uncertainty over it all, there are several strong probabilities that we can glean from the political-economic tea leaves if we are good enough students of history and human nature.

I engaged in debate the other evening about these probabilities with some acquaintances who held the view that I was an unreasonable Cassandra spreading undue alarmism. As they saw it, deflation was impossible, the economy was robust, America had endured far worse before, and she would do so again. What follows are some answers to their optimistic scenario.


Deflation Not Possible

Their first objection to my "alarmism" was that deflation is not possible with a paper currency.

This is probably true, I replied. It would be difficult for the money supply to deflate as long as the boys at the Fed have access to a printing press and the willingness to use it. But bubbles can, and will deflate. For example, Basic Investment 101 says that the bond and Dow bubbles must burst and deflate in the face of intense dollar inflation on the part of the Fed. (The real estate bubble is a wild card in this scenario and could go either way). The problem that many people have with this issue is that they see the clash of inflation and deflation as an either-or kind of thing. This is a false picture brought on by viewing deflation in only its narrow monetary definition and ignoring its relation to prices (more on this later). In my last article I said we would see both Scylla (inflation) and Charybdis (deflation) in tandem, which is a more accurate picture of what must unfold.

more...

No winners here today. Perhaps tomorrow will be a brighter day. Meantime, put another quarter in and try again.

Dow 9,990.02 -127.32 (-1.26%)
Nasdaq 1,896.07 -21.89 (-1.14%)
S&P 500 1,087.12 -11.58 (-1.05%)
10-yr Bond 4.781% +0.015
30-yr Bond 5.476% +0.012

NYSE Volume 1,912,316,000
Nasdaq Volume 1,907,036,000

Close Dow -127.32 at 9,990.02, S&P -11.59 at 1,087.11, Nasdaq -21.89 at 1,896.07: Concerns over rising interest rates led to yet another disappointing session, which saw the major averages close with sizeable losses after failing at a barrage of technical levels... Specifically, the Dow and the S&P 500 traded below their respective ranges for the year, the Dow traded below its 200-day simple moving average and the psychologically-significant 10,000 mark, while the Nasdaq closed below the 1900 level for the first time since November of 2003...
While fears of rising interest rates are not new at this juncture and the major averages have slipped roughly 5.5-9.5% over the last month as these concerns became more prevalent, the market used today's session as yet another opportunity to widen its year-to-date declines... While Briefing.com thinks such fears are justified, we think that from a longer-term view, the market is over-anticipating the probable increase in rates, as discussed in today's The Big Picture column... To that effect, while rates need to rise over the year ahead to about 2 1/2% in the short end, with the 10-year yield of roughly 5-5.5%, this increase is not dramatic enough to curtail the very strong momentum in the economy...

Accordingly, long-term investors should maintain their conservative/defensive stock positions, despite the fact that the near-term may bring more downside... Today's decline, in the meantime, was broad-based and sponsored by the majority of sectors, including the influential internet, networking, telecom, biotech, drug, banking, REIT, oil services, transportation, iron & steel, coal, and utility groups... Leadership to the upside was limited to the gold group, while the semiconductor sector showed relative strength, like it did on Friday...

The bond market was little changed, with the 10-year note closing down 5/32, bringing its yield up to 4.79%...NYSE Adv/Dec 354/3098, Nasdaq Adv/Dec 716/2512

My guess is, we haven't seen the last of some big selling going on. I think this may partially be based on political fallout from the torture pics coming out of Iraq, and bush and rumsfeld's reactions to it all.

Hold your nose! We're going under!!

:kick:

I would never trust them though, this could be part of the break down of chimpy to make him look like a underdog, heavens knows he couldn't do that himself (hehe).

After all the tricks with 9/11 and before, who knows what goes on or games are to be played. Some of these wing nuts may be apoplectic but the folks with big cash know how to game the market. They get guys like * to ante up and play double or nothing with other peoples money.

Lets just put this way, very suspicious but nothing should suprise anybody at this point.

But there is still a pulse. Furutures already a bit down for tomorrow. I got only the very quickest of peeks. Got a new/different candidate for my house-seat race, I'm managing the campaign, filing deadline tomorrow, Dem board wednesday and formal annoucement Thursday. Thank bob for this thread where I can read through and see how things played out.

Thank you all--54 you are wonderful!! All of you are but 54 really keeps us up to the minute and provides such cool articles and is just so there for us. I think Frodo is sweet on her even. ;-)

Thanks for all you do marketeers. I'll keep up my part of the overthrow and enjoy our brief exchanges.

To our collective success! :toast:

Julie

at this time of posting. See what tomorrow brings.

It's always so good to hear what you are up to in the overthrow of the usurper. Thanks agan for all you're doing out there on the frontlines.

I won't be around tomorrow at all. Hope everyone keeps the thread up to date so I can catch up on all the juicy details in the evening.

I'm counting on Frodo to give lots of good news reports for the day. The futures are pointing to a day that would be right up his alley.

:hi: :toast:

one go by for the day.

http://www.forexnews.com/NA/default.asp

S&P-500 nears 200-day moving average
Accompanying the falling US bond market is the increased selling in US stocks. Last week, the US 10-year note fell for the 8th consecutive week with the yield touching as high as 4.84%. Today, US stocks are entering an ominous territory as they hit 8-month lows at a time when the Fed is set to increase the cost of borrowing. Thus, unlike at the beginning of previous tightening cycles when US equities hovered near multi month and multi-year highs, US indices are at multi-month lows before the Fed has even started tightening. This portends for a dangerous slide in US equities when the Fed begins its rate hikes. And with the S&P500-standing 4 points above its 200-day moving average--the closest it stood near it since last year’s war with Iraq--the technical outlook for US equity indices seems increasingly shaky. As the reflation trade continues to unwind, this year’s tightening cycle may hurt a more fragile recovery.


Any bets Greenspin puts off those hikes way beyond what the markets been speculating on? The markets keep moving the rate hike date up, it's looking like even August will be way too soon.