STOCK MARKET WATCH, Wednesday 26 May

[ozymandius]

Wednesday May 26, 2004

COUNTING THE DAYS
DAYS REMAINING IN THE * REGIME 243
DAYS SINCE DEMOCRACY DIED (12/12/00) 3 YEARS, 166 DAYS
WHERE'S OSAMA BIN-LADEN? 2 YEARS, 219 DAYS
WHERE ARE SADDAM'S WMD? - DAY 433
DAYS SINCE ENRON COLLAPSE = 916
Number of Enron Execs in handcuffs = 18
Recent Acquisitions: Jeff Skilling
ENRON EXECS CONVICTED = 2
Other Arrests of Execs = 54

U.S. FUTURES & MARKETS INDICATORS
NASDAQ FUTURES-----------------------------S&P FUTURES




AT THE CLOSING BELL ON May 25, 2004

Dow... 10,117.62 +159.19 (+1.60%)
Nasdaq... 1,964.65 +41.67 (+2.17%)
S&P 500... 1,113.05 +17.64 (+1.61%)
10-Yr Bond... 4.72% -0.02 (-0.34%)
Gold future... 388.40 +2.80 (+0.73%)


|||


GOLD, EURO, YEN and Dollars


~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
PIEHOLE ALERT

Heads Up!
Preliminary info on appearances by Bush & Co. throughout the country. Details & links are added as they become available so check back. And if you know more, are organizing something, or would like to, contact [email protected]

For information on protests and other actions Citizens For Legitimate Government

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

[ozymandius]

1. WrapUp by Jim Puplava

Wishing Upon a Star

Today the markets rallied strongly. No one knows why. The financial press attributed today’s gains to optimism that rising interest rates and record oil prices won’t have a major impact on the economy. Housing is weakening, but home sales are still at high enough levels to keep the markets going. Existing home sales were up 2.5% last month. When it comes to housing, investors remain optimistic as if it is a “can’t lose“ proposition. Rising interest rates--no problem. Simply switch to an adjustable rate mortgage. Your payments will be much lower than a fixed rate mortgage. You can now buy an even bigger home. At the very least, it’ll be years before your adjustable rate mortgage will catch up to today’s higher fixed rates. Homeowners are taking their cue from the maestro, Mr. Greenspan. The Fed chairman more than a month ago urged homeowners to switch to variable rate loans at the peak of the bond market. Great timing, Mr. G!

If investors were optimistic that higher energy prices and higher interest rates wouldn’t affect the economy or mute investors' appetite from bidding up bubbles, as consumers, the attitude was just the opposite. Consumer confidence remains muted or is in fact falling. Personal bankruptcies rose 2.8% in the year ending in March. The rise in bankruptcies continues the present trend of recent years of higher and higher bankruptcy rates. New personal bankruptcy filings rose to 1,618,062 from 1,573,720 the year before. The trend continues to accelerate despite improving economic conditions. In order to live these days, consumers must take on ever-increasing amounts of debt. Their cost of living continues to rise due to inflationary trends. With the rise in the cost of everything they need going up from gas, utilities, food, services and taxes to entertainment, increases in personal income have remained stagnant. The result is that the two wage-earner couple, heads of households and singles must supplement wages with debt.

-cut-

That is one of the main reasons why confidence is down and why it doesn’t feel like a recovery. Yes, the stock market came back last year and housing prices have soared. However, so has the cost of living. The average grocery bill has more than doubled over the last three years. The cost to fill up the tank has gone up over 70% in the last two years. Federal taxes are down, but rising state income, sales, and property taxes have more than made up for the difference. Healthcare premiums are up double digits and more and more employers are asking working and retired employees to pay a portion of the escalating costs. We just went through a disruptive grocery store strike that centered on employee contributions to healthcare premiums. Asset bubbles have reinflated, but unless you have assets, you feel left out. Even then rising asset prices need to be monetized through cash out financings or margin debt, or when necessary, liquidated.

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

[54anickel]

2. Dollar pressured by high oil prices

http://story.news.yahoo.com/news?tmpl=story&cid=1519&ncid=749&e=6&u=/afp/20040525/bs_afp/forex_us

snip>
Even though crude oil futures dipped following Monday's record high, traders remained concerned about the impact of soaring energy costs along with ongoing troubles in Iraq (news - web sites).

Because Japan's economy is also vulnerable to energy's effects, the crude price relief allowed the yen to trounce its US rival during trading on Tuesday.

The dollar meanwhile was unable to draw strength from a big rally on the stock market that sent the Dow Jones industrials back above 10,000.

The "surge in oil prices seems to have caused a mild sense of panic in the currency markets, as traders now realize that even if Saudi Arabia does increase output after next week's OPEC (news - web sites) meeting, it still looks as if the US faces an energy crisis this summer," said Wayne Roworth, senior foreign-exchange dealer with CMC Group.

"This will have a clear impact on the American economy and the dollar has been sold off as a result."

more...

Sterling, Euro, Yen - anything but the dollar

[ozymandius]

4. Good morning 54anickel and everyone.

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

It looks like inflation just got an espresso i.v.

[54anickel]

6. Good morning Ozy and all. Seems I missed the big party yesterday!

Today's wrap-up is another great one, along with the toon of course!

The increase in M3 again should prove to make the next quarter interesting. Lots-o-moola being pumped in! Gotta wonder where it's going to go. What happens when foreign investors go to dump their greenbacks and they get added to all this fresh new green stuff? And they haven't even started with the helicopter drops yet, have they?

When do we start using the reference dandelion instead of greenback for the US$ - more than plentiful but nobody wants them.

[ozymandius]

9. The dandelion analogy is lost on my son.

He cannot get enough of them.

But I see your point. What would happen, do you suppose, if these trillions of overseas dollars started washing up on our shores? Hyperinflation? Bond market collapse?

[54anickel]

14. Isn't that where Bernanke's idea of helicopter drops comes in? I thought

that was when they really get the old presses running round the clock to buy back (monetize) the debts. After all, we only owe it to ourselves!

That is how I understood his speech on fighting deflation anyway. I may have misread that. Perhaps UIAs can clue us in on the plethora of possibilities when our shores are awashed with the dang things!

[UpInArms]

21. here's a theory

http://william-king.www.drexel.edu/top/prin/txt/probs/infl7.html

excerpt:

The story behind the German hyperinflation illustrates how all hyperinflations have come about, and is of particular interest in itself. After World War I, Germany had a democratic government, but little stability. A general named Kapp decided to make himself dictator, and marched his troops and militias into Berlin in an attempted coup d'etat known as the "Kapp Putsch." However, the German people resisted this attempt at dictatorship with nonviolent noncooperation. The workers went out in a general strike and the civil servants simply refused to obey the orders of Kapp and his men. Unable to take command of the country, Kapp retreated and ultimately gave up his attempt.

However, the German economy, never very sound, was further disrupted by the conflict surrounding Kapp's putsch and by the strike against it; and production fell and prices rose. The rise in prices destroyed the purchasing power of wages and government revenues, and the government responded to this by printing money to replace the lost revenues. This was the beginning of a vicious circle. Each increase in the quantity of money in circulation brought about a further inflation of prices, reducing the purchasing power of incomes and revenues, and leading to more printing of money. In the extreme, the monetary system simply collapses. In Germany, people would rush out to spend the day's wages as fast as possible, knowing that only a few hours' inflation would deprive today's wages of most of their purchasing power. One source says that people might buy a bottle of wine in the expectation that on the following morning, the empty bottle could be sold for more than it had cost when full. Those with goods to barter resorted to barter to get food; those with nothing to barter suffered.

This is the way that hyperinflations happen: by a self-reinforcing vicious cycle of printing money, leading to inflation, leading to printing money, and so on. This is one reason why inflation is feared. There is always the concern that even a little inflation this year will lead to more next year, and so on. But some countries have experienced very great inflations -- 50 to 100% per year -- without ever falling into the cycle of hyperinflation, and there has never been a hyperinflation that could not have been avoided by a simple government determination to stop the expansion of the money supply.

The key point is this: the monetary system can function reasonably well as long as the value of the monetary unit is reasonably stable and predictable, and the high standards of living of modern societies cannot exist without a functioning monetary system.

http://www.milliondollarbabies.com/

Since the beginning of recorded history humans have resorted to some type of specie as a medium of exchange over tried and true barter systems ( After all, it’s hard to gauge how many chickens you need to carry about for a day’s shopping! ). Inevitably, you need someone to enforce the rules of exchange for, and production of, objects meant to represent the daily exchange of services for goods. Seeing a great opportunity to enrich their coffers, this role is usually usurped by the ruling government. By bringing the issue of national currencies under their purview, since ancient times, governments have succeeded in getting everyone where they want them - in their pocketbooks.

Consider the following formula...

"A monetary expansion of 4.5 percent, combined with a productivity increase of 0.5 percent and a growth rate of 2 percent, will suffice to attain the inflation target of 2 percent."

Sounds like simple arithmetic doesn’t it? But these feeble economic formulas have been proven wrong time and again.

Now translate these numbers into percentages of ...Millions? ...Billions? ...Trillions?

Or continue increasing the percentages at exponential rates to keep your floating debt afloat. Just like Quantum Theory, we find that the effect is a matter of scale. Gravity is a negligible effect on the atomic level, but cram enough atoms into a small space and you have a Black Hole that eats space and time like beer and brats at Oktoberfest. At exponential levels, "monetary expansion" sounds more like pre-meditated murder, and has the same effect on the population at large. Besides the threat of a standing army, the greatest power of government is the printing of money. They create something where there was nothing and then tax you to use it.

http://www.the-privateer.com/usdebt/dow-debt.html

Dow Jones Average - Treasury Debt: A Comparison

On these charts, 1 Dow point equals $US 1 Billion in Treasury Debt.
The charts are updated to the Dow's all time high of 11326 set on August 25, 1999.

The first chart shows the growth of the Dow and of Treasury debt from the beginning of this century. As you can see, there was no particular correlation between the two right up until the early 1980s. In fact, up until the huge surge in debt issued to finance World War II, Treasury debt hardly registers on this chart at all.

The steady and inexorable rise in Treasury debt began with the 1970s. The most important event which made this possible was the removal of the discipline of Gold backing for the Dollar, which took place on August 15, 1971. This chart of Treasury debt was likened to a "hockey stick" in the mid 1990s. You can clearly see that 1970 marks the point where the blade ends and the stick begins.

(see charts)

This second chart is a "blow-up" of the first one, covering the last 20 years. This is where the correlation between the Dow and the level of Treasury debt gets really interesting ...

The explosion in the price of real goods and services ("inflation", by modern definition) peaked at the beginning of this series, in 1979 - 1981. Real inflation - the increase in the total stock of money - is still increasing. All modern money is based on debt. But even though gross Treasury debt is still increasing too, it annual rate of increase is slowing down - fast.

In fact, the acceleration of Treasury debt peaked eight years ago - in 1991. 1991 was the year of the last (comparatively mild) recession in the U.S. To combat this recession, the Fed lowered interest rates from 8% to 3% in 16 steps between July 1990 and September 1992. The Fed Runds rate then stayed at 3% for more than a year, until February 1994.

That huge fall in interest rates led to a sea change in the attitudes of Americans. Slowly but surely, they began to abandon the banks and traditional investments like real estate. More and more, having shaken off the scare of the 1987 crash, they began to put what used to be their "savings" into the markets.

For thirteen years, the increase on Treasury Debt supplying more money to the system dragged the Dow upward. In fact, from 1982 to late 1994, the correlations between $US 1 Billion of Treasury debt and one point on the Dow was uncannily close.

But by 1995, the rate of debt increase could no longer be sustained. The slope of the "debt curve" began to flatten out. This was hailed as a sign of inflationary pressures going out of the system.

But the Dow didn't "flatten out". It took off! The last five bars on the chart show the extraordinary bull market which has taken the Dow from less than 4000 to well over 11000 in less than five years. Inflationary pressures have not gone out of the system. They have all been concentrated in one place - in the stock market.

[54anickel]

3. Speculators blamed for pushing up oil prices

http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullStory&c=StoryFT&cid=1084907815602&p=1012571727207

Speculative investors have been blamed for pushing US crude futures to their highest level in 21 years, dividing opinion on whether large hedge funds are buying on the basis of solid market fundamentals or creating a bubble.

Oil has become the market of choice for speculators in recent months with a niche group of unknown investors holding a significant portion of the total outstanding crude related energy contracts on the New York Mercantile Exchange. That volume equates to an underlying 1bn barrels of crude oil and petroleum products, or about 4½ months worth of global consumption.

"There is no doubt that there is a speculative bubble that has created a big premium in the price, which should be closer to $30 to $32 a barrel based on the current supply and demand trends," said Mike Rothman, chief energy strategist at Merrill Lynch.

snip>
Kevin Norrish, energy analyst at Barclays Capital, said this net position had fallen from its peak in March, meaning that fewer people now think prices will keep rising. Despite that, crude prices have risen $8 since then. However, the current level is still double that of last year - a net position that was considered a record at the time. Around that time, because of the Iraq war, oil prices also witnessed a strong surge.

"If the net position had continued to grow with the increase in speculative interest in crude oil then that would reflect a bubble, but we are not seeing that. The buying is based on market fundamentals of strong demand and concerns about security of supply," Mr Norrish said.


more....

So who to believe - The Merrill Lynch or Barclays Capital analyst?

[dixielib]

25. Is it unusual for unknown investors....

to hold a significant portion of the crude? Maybe like the puts on airline stocks before 9/11?

"Oil has become the market of choice for speculators in recent months with a niche group of unknown investors holding a significant portion of the total outstanding crude related energy contracts on the New York Mercantile Exchange."

[UpInArms]

27. I think that those would be mutual and hedge funds

http://www.forbes.com/personalfinance/funds/newswire/2004/05/24/rtr1382740.html

For investment managers -- be they hedge or mutual funds -- this may signal more demand for their services too.

"I have had an unprecedented number of inquiries from investors who are already comfortable with investments in futures," said Hilary Till, a principal at hedge fund Premia Capital Management.

With stocks of oil companies like Exxon Mobil, which has gained about 5 percent since the start of the year, also benefiting from the move, even mutual fund investors could find a silver lining amid the higher prices, analysts said.

Natural Resources funds have gained 0.50 percent since the start of the year, far better than the average sector equity fund which has lost an average 2.28 percent, according to data from fund research firm Lipper Inc.

"Stocks of energy related companies have appreciated significantly and while I'm not saying this is a slam dunk investment, people may want to consider exposure to natural resources funds as a long term investments," Morningstar's Healy said.

[54anickel]

52. Silly in a way isn't it?

Yep, I wanna place my bet at the casino that natural resources will go up in price by 50% so I can get me a measly 0.50% increase on that bet.

I may end up paying thru the nose for gas and heating fuel, but hey lookie at my investment in the Natural Resources funds take off 0.50% while the rest of the market is posting losses.

Sheesh! :eyes:

[54anickel]

5. Casino to issue credit spread warrants

Talk about an appropriate name to start off this game!

http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullStory&c=StoryFT&cid=1084907819219&p=1012571727204

French supermarket chain Casino on Tuesday became the first company to issue a credit-spread warrant, a new type of derivative that gives investors the right to buy a bond in the future at a fixed price.

Dresdner Kleinwort Wasserstein, the investment bank, expects credit-spread warrants to be used by other companies in the future. Henry Nevstad, DrKW managing director of structured debt, said: "They have wide implications for bond issuance."

The warrants are European-style call options, which give the right to buy at a fixed point in the future but not before.

snip>

But Mr Nevstad said he believed the innovation would be of interest to "sophisticated" investors such as hedge funds and proprietary trading desks that target volatility as an asset class in itself.

more...

[ozymandius]

7. The futures seem to back up this report.

Stocks Set to Slip; Oil Inventories Eyed

NEW YORK (Reuters) - U.S. stocks were set for a slightly lower open on Wednesday as investors paused after Tuesday's rally and waited for key data on U.S. oil and gas supplies.

-cut-

Oil continues to be a focus in the stock market as a fall in crude prices in the previous session sparked a rally.

"The price of oil is really the day-to-day variable and today there is going to be a big gasoline inventory report and depending on that, the price of gas and oil might fluctuate around," said Larry Wachtel, senior vice president and market analyst Wachovia Securities.

story

[ozymandius]

10. I forgot to mention this: it's profit taking day.

Today's performance was just too damned predictable when I heard yesterday's final numbers. There was no good reason for the numbers to jump so high. Even the etherial consumer sentiment was not stellar. So it could only mean one thing: profits. This is the third sucker rally we've seen inside of a week. And this one stands a chance of becoming a nice grand-moll sucker rally.

Reasons are conveniently invented for a rally, just as they are for a huge selloff. Is it any wonder why the markets bear the moniker of "Casino".

Hang on to something sturdy today folks.

[wildmanj]

20. profits

SHARKS in a feeding frenzy----plenty of SUCKERS in the water waiting to be had :think:

[54anickel]

11. Oh for Petessake! Remember the good old days when the market

priced stocks well into the future based on expectations of fundamentals like P/E, future development and the prospects of a company's ability to earn an "honest" buck?

Now it's more and more day-to-day speculation driven by day-traders, shorts and buys on margin! How on earth can anything be properly priced in this type of atmosphere!

Did you catch yesterday's closing blather? The claim that the huge rally hinged on 58 cents worth of a change in oil prices. Geeze, even the blather authors can't find a decent reason to point to!

[Frodo]

13. I'm telling you.

It's because I took the day off.

I'm back today - so expect a correction.

[54anickel]

15. Can't you just take another sick day? The nation is counting on you now!

[Frodo]

18. The White House called

Asked me to hold off on that till October (some kind of "surprise").

Then these two guys in a black van asked which water service I use for my delivered water and if I would still be using them in October?

Made my a little nervous, but they said not to worry.

[JNelson6563]

30. lol Good one Frodo

Whole thing was funny, my fav:

Asked me to hold off on that till October (some kind of "surprise"). <snarf>

You should display your humor here more often, you're a witty guy.

:toast:

Julie

[Frodo]

35. I'm probably "under the influence"

of too much Nyquil.

[54anickel]

8. China Producer Prices Climb 5% on Rising Investments (Update2)

http://quote.bloomberg.com/apps/news?pid=10000080&sid=a3QsOYfYECGs&refer=asia

May 26 (Bloomberg) -- China's producer-price inflation accelerated to 5 percent in April as surging investment in factories and roads intensified competition for steel and other raw materials.

The gain in prices reported by the Beijing-based National Bureau of Statistics on its Web site outpaced the 3.9 percent increase in March. Raw material prices rose 6.2 percent from a year earlier, with crude oil costs climbing 3.8 percent and steel rod prices gaining 35 percent.

The government is trying to cool an investment boom that stoked economic growth of 9.1 percent in 2003, the fastest pace in seven years. China has tightened lending rules for industries including steel and cement and has increased the proportion of deposits banks must set aside as reserves while leaving its key interest rate unchanged.

``The economy is still pretty hot, and we haven't yet seen fundamental changes as it takes time for government measures to show their effectiveness,'' said Bob Zhang, an economist at Core- Pacific-Yamaichi in Beijing. ``Current economic data is not enough to support an interest-rate increase in the first half.''

more....

Aren't you glad to know Snow and the rest of the US money-gang are advising China on their monetary policies? Don't forget - they'll teach them all about the wonderful world of derivatives once they float that dang yuan!

[UpInArms]

12. daily dollar watch

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

Last trade 89.71 Change -0.13 (-0.14%)

http://www.fxstreet.com/nou/noticies/afx/noticia.asp?pv_noticia=1085573705-9e32d306-24457

Forex - Dollar on backfoot as market reevaluates outlook for US rates

LONDON (AFX) - The dollar remained on the backfoot as investors reevaluated the outlook for US interest rates amid high oil prices and softer US economic data, dealers said

At one stage, the euro climbed to a three-week high of 1.2143 usd, while the dollar slipped to a one-month low of 111.25 yen

"Oil prices are now seen as a negative for consumer spending and business investment, thus limiting the need for aggressive rate hikes," said Commerzbank currency strategist Nick Parsons

"The dollar's glass, in other words, has moved from half-full to half empty," he added

New York's benchmark oil contract, light sweet crude for delivery in July, held up above 41 usd per barrel, within sight of a 21-year record high reached on Monday

Data on the immediate horizon meanwhile promised little respite for the dollar, analysts said

US durable goods orders for April due out later Wednesday are expected to fall 0.8 pct after March's 5.0 pct surge

Economists said next week's US employment report for May would have a bigger bearing on the Fed's thinking at its next interest rate-setting meeting on June 30

They said a third consecutive month of solid jobs growth would cement expectations that the US economic recovery is finally yielding employment improvements and that interest rates will rise in June from their 46-year lows of 1.00 pct

...more...

http://www.fxstreet.com/nou/content/103770/content.asp?menu=technicalanalysis&dia=2652004

The dollar fell sharply on Tuesday

The dollar fell sharply on Tuesday and seems to be on the brink of significant losses. Mixed data on consumer confidence and existing home sales didn’t alleviate the selling pressure. While profit taking should slow down its decline, the dollar is more likely to fall ahead of the long weekend as Saudi Arabia’s promised help with the oil supply is unlikely to be timely.

...more...

Yowie!

http://cbs.marketwatch.com/news/newsfinder/pulseone.asp?dateid=38133.3566666667-814757989&siteID=mktw&scid=0&doctype=806&

Durable goods fall 2.9% in April By Corbett B. Daly

WASHINGTON (CBS.MW) -- New orders for goods that last more than three years fell in April at the fastest pace in a year and half, the Commerce Department said Wednesday. New orders for durable goods fell 2.9 percent in the month after two consecutive monthly gains. Orders for durable goods, excluding transportation, fell 2.1 percent in the month, the first drop in five months. Orders for durable goods, excluding defense, fell 2.4 percent in the month, the first decline in three months. Inventories of durable goods rose 0.5 percent in April, the fifth consecutive monthly increase. Shipments fell 0.8 percent in the month, while unfilled orders rose 0.6 percent.

http://www.reuters.com/financeNewsArticle.jhtml?type=bondsNews&storyID=5260714

US mortgage applications fall for 3rd straight week

NEW YORK, May 26 (Reuters) - New U.S. mortgage applications fell last week for a third straight week, as mortgage rates resumed an upswing after slipping the prior week, an industry trade group said on Wednesday.

The Mortgage Bankers Association said its seasonally adjusted market index, a measure of weekly mortgage activity, fell for the week ending May 21 by 3.3 percent to 632.4 from the previous week's 654.1.

Average 30-year mortgage rates, excluding fees, rose by 5 basis points to 6.26 percent. Last week's average 30-year rates were up 112 basis points from the comparable week a year ago.

The 30-year mortgage rate has averaged at least 6 percent for five weeks in a row, equaling the span set from the last week of July to the last week of August 2003.

Refinancing activity, more sensitive to changes in mortgage rates, has dropped dramatically since the record weekly high nearly a year ago as mortgage rates have risen sharply from their four-decade lows since Mid-March.

...more...

Have a Great Day Marketeers!

[54anickel]

19. YIKES! That takes out the 50 day and touches the 200 day MA!

The buck is gonna need some good news today!

[54anickel]

16. Japan's April Imports Rise to Record as Demand Grows (Update6)

http://quote.bloomberg.com/apps/news?pid=10000080&sid=aKrJUQERyKh0&refer=asia

May 26 (Bloomberg) -- Japanese imports rose to a record in April, suggesting that growing domestic demand is helping the world's second-largest economy extend a recovery.

Imports rose 1.1 percent from March to 3.9 trillion yen ($34.9 billion), seasonally adjusted, the Ministry of Finance said in Tokyo. Exports rose 0.5 percent to 4.88 trillion yen, also a record. The trade surplus shrank to 985.5 billion yen from 1 trillion yen in March.

Sharp Corp. and other manufacturers imported machinery and equipment as they added capacity to meet rising overseas and local demand. Japanese consumers are also buying more imported goods as a recovery from a third recession since 1991 drove unemployment to a three-year low, boosting confidence.

``Import growth is high, which signals a recovery in domestic demand,'' said Takuji Aida, a senior economist at Merrill Lynch Japan Securities, after the report was released. ``Domestic demand is going to determine whether Japan's economic expansion is going to be sustainable.''

more...

[54anickel]

17. S.E.C. Mutual Fund Inquiry Widens to Include Wellington

http://www.nytimes.com/2004/05/26/business/26fund.html

The Wellington Management Company, one of the nation's oldest and most respected money management firms and an adviser to more than a dozen funds offered by the Vanguard Group, is under investigation by officials at the Securities and Exchange Commission.

The investigation suggests that the mutual fund scandal may not only be expanding, but may also be threatening to touch Vanguard, the nation's second-largest fund company and one of the most trusted names in mutual funds.

"We were informed by the S.E.C. that it had initiated an investigation relating to our trading practices and procedures," said Lisa D. Finkel, a spokeswoman for Wellington. "We do not believe it has to do with market timing and late trading."

Ms. Finkel declined to provide additional information, like which of the firm's practices were under scrutiny or whether trading in Vanguard funds was an issue.

A broad examination of Wellington's trading practices would appear to encompass all the firm's clients, including banks, insurance companies, endowments and 95 mutual fund companies. As of March 2004, Wellington managed $416 billion in stock and bond portfolios for approximately 1,000 clients.

more...

[54anickel]

22. Inflation Remains The Least Bad Option For The US (speaking of Ben)

http://www.prudentbear.com/internationalperspective.asp

Benjamin Bernanke has clearly learned a thing or two since his now notorious celebration of the Fed’s electronic printing press: never frighten the foreigners who hold much of your debt by abandoning the guise of being vigilant about inflation. A crashing dollar means significantly higher rates, which are something the US economy can ill-afford at this juncture. According to Bernanke, the Federal Reserve should be able to push short-term interest rates up at a gradual pace, the speed of which to be dictated by economic events not, one presumes, market speculators. This is a polite way of trying to tell those baying for a sharp increase in rates in order to get the central bank “ahead of the curve” to get stuffed. To us, it confirms the suspicion that the Fed has no intention of embracing anything but the most cosmetic forms of tightening, given that the real goal is to deliberately engineer as much inflation as possible on the quiet. On the quiet it must indeed be, because any explicit promise to the contrary could turn today’s gentle dollar decline into a rout, thereby fuelling precisely the kinds of anxiety in the bond market that would drive yields much higher.



For all of the talk of “rising inflationary pressures”, the real story of the 21st century thus far has been the vast explosion of debt on the heels of a historically unprecedented credit bubble. The household sector never quite made it back to a net nominal saving or financial surplus (or free cash flow, if you prefer) position either during the official recession of 2002 or during the more recent double dip of 2003. There is no precedent for such profligate behavior by U.S. households. In all prior recessions households paid down debt and home price inflation abated. It is hard to think of any other economy where highly indebted households have responded to the threat of severe asset deflation by going on an even greater debt financed spending spree. But somehow, now that it has happened, financial market participants have come to regard it as normal and sustainable behavior.

Part of this complacency has undoubtedly been fostered by members of the Federal Reserve itself. To quote Mr. Bernanke again: “2003 seems to have marked the turning point for the US economy, and we have reason to believe that 2004 will see even more growth and continued progress in reducing unemployment.” The March Payroll Employment report seemed to support Bernanke’s optimism, both statistically and in terms of the outlook for the economy and markets. It strongly suggested that firms have shifted toward hiring more workers as opposed to relying on longer hours and further investment as the low-cost way to increase output. If employment increases remain at about 175,000 per month (the three-month average through March was 171,000), the economy will approach a more normal picture with about 1 percentage point of growth coming from higher employment and 2.5 to 3 percentage points of growth coming from higher productivity.

Add to the pickup in employment growth a surge in U.S. retail sales signaling stronger consumption, and you have a rapid shift from a U.S. supply-driven growth pattern to a more typical demand-driven growth picture. Those of us who have questioned the sustainability of US consumption appear to have been wrong-footed again.

more...

[ozymandius]

23. Marketeers, my time here is short.

My son is off to daycare and I have a mountain of work to do. I'll try to check back after lunch.

Have a fun ride at the Casino.

Ozy :hi:

[UpInArms]

24. Markets Open - Numbers at 9:33 EST

Dow 10,094.91 -22.71 (-0.22%)
Nasdaq 1,961.57 -3.08 (-0.16%)
S&P 500 1,111.28 -1.77 (-0.16%)
10-Yr Bond 4.693% -0.031

Dollar at 9:00

Last trade 89.57 Change -0.27 (-0.30%)

(edited for html)

[UpInArms]

26. Hedge funds smell trouble and dump stocks

http://www.reuters.co.uk/newsPackageArticle.jhtml?type=businessNews&storyID=517270§ion=finance

LONDON (Reuters) - Hedge funds are preparing for a crash landing on financial markets, paring down their equity exposure, cutting debt and getting ready to short stocks in a sign of growing risk aversion, industry players say.

With U.S. interest rate hikes looming after the heady days of cheap money, hedge funds have gone back on the defensive with long biases cut and equity holdings underweighted.

"Hedge funds are trimming back their balance sheets. There is a lot of deleveraging going on at the moment," said John Capaldi, managing director of London fund of hedge fund Financial Risk Management running $10 billion of assets.

"People are trying to get risk off the table. Things are going to get choppy and volatile," he told Reuters.

Leverage is the widely-used hedge fund practice of borrowing money to make big bets to try to boost returns. Deleveraging is a sign of growing cautiousness and risk aversion.

<snip>

For months, investors have worried that U.S. interest rates will soon rise from their current 46-year lows. Iraq instability and oil prices nearing 21-year highs have added to the jitters.

Various indicators watched by hedge fund managers suggest the degree of bearishness in the markets is on the increase -- which of course, to a contrarian, may be a sign to buy.

The put/call ratio has gone up in recent weeks, a sign of bearishness, with more players buying put options enabling them to sell than those buying call options enabling them to buy.

That could be a sign more people are selling. It also means a higher level of insurance being taken out against likely falls.

Volatility indices, a gauge of market fear, are also up, indicating that it is time for the market to start cutting risk.

Nobody is taking out big shorts yet but wary hedge fund managers say it may be time to sell the equity markets.

"Cracks are beginning to appear in the main American and European equity indices, and if support erodes further a significant pullback may occur," said Ed Buckley, fund manager at London global macro hedge fund Vizor investment management.

<snip>

Many in the hedge fund world are also taking shelter in oil.

Drago Indjic, head of research at London fund of hedge fund firm Fauchier Partners which manages $ 1.2 billion in assets, said hedge funds playing the oil market had seen a big pay-off.

Milroy said oil prices per barrel would go higher "to the high $40s by September" while Buckley saw it topping $50.

...more...

[Maeve]

28. Who pulled the plug? 10:09

Dow 10,090.16 -27.46 (-0.27%)
Nasdaq 1,961.40 -3.25 (-0.17%)
S&P 500 1,111.20 -1.85 (-0.17%)
10-Yr Bond 4.698% -0.026

And this was the blather just minutes ago...
10:00AM: The market is looking to extend yesterday's gains, with the major averages lifting well above their opening lows and the S&P 500 and Nasdaq reaching into positive territory... Overall, the gains and the losses are only mild at this point, as the market looks for direction...

[Maeve]

29. New home sales tumble

http://money.cnn.com/2004/05/26/news/economy/newhomes/index.htm

Biggest monthly drop in 10 years seen in April as sales fall 11.8% from record.
May 26, 2004: 10:05 AM EDT

NEW YORK (CNN/Money) - New home sales posted the biggest monthly drop in 10 years in April, coming in much weaker than Wall Street expectations.
The Commerce Department reported new home sales at an annual rate of 1,093,000 in the month, down 11.8 percent from the revised record high 1,239,000 rate in March, when mortgage rates were near a 40-year low.

[JNelson6563]

31. Ouch, that's going to leave a mark

Might even require stitches.

Good to see you posting more regularly Maeve. We're all richer for it.

Hope it's all good with my fellow Marketeers! :hi:

Julie

[Frodo]

33. Interesting.

New home sales fall 100,000+ while resales climb 200,000+ to a near-record

Must be the difference in the time it takes to settle on a new home vs. a resale - plus WHEN rates changed.

Should see a dip in resales in the nest couple months then?


I would have expected a bump up over the next quarter from "fence jumpers" who need to get in before rates go up too high.

[54anickel]

32. Oh, so many good posts here and so little time. UIA and all, I hope

to return to read all your great links before the market closes today. I am on "Dad Duty" again so I must be going.

You all have a great day at the Casino! :hi:

[Sven77]

34. Why $2 Gas Is Amazing

Why $2 Gas Is Amazing
Three reasons it should be cheaper.

Gasoline is now selling at more than $2 a gallon, which, after inflation, is higher than it's been since 1981. But that's not the amazing part. Actually, there are three amazing parts.

Amazing Part No. 1 is that this is happening during the first time in history when the United States belongs to the international cartel that controls gas prices.

Amazing Part No. 2 is that this temporary colony of ours sits atop an estimated 115 billion barrels of oil, which, depending on who you ask, constitute the world's second- or third-largest oil reserves.

Amazing Part No. 3 is that, before the war began, Prince Bandar bin Sultan, the debonair Saudi ambassador, assured President Bush that "the Saudis hoped to fine-tune oil prices over 10 months to prime the economy for 2004," according to Bob Woodward's Plan of Attack.

read the rest here

http://slate.msn.com/id/2100772

[nolabels]

36. Where I live stations selling $2.00 a gallon gas would be swamped

&imgrefurl=http://www.news-star.com/terror/911to916.shtml&h=207&w=500&sz=30&tbnid=Mzew9v_x8lUJ:&tbnh=52&tbnw=125&start=39&prev=/images%3Fq%3Dlong%2Bgas%2Blines%26start%3D20%26hl%3Den%26lr%3D%26ie%3DUTF-8%26sa%3DN

They might even run into the next county at them prices

Anybody remember when a gallon of gas was about 35 cents?

[UpInArms]

37. this is gonna date me badly, but

it was 22 cents a gallon when I started (legally) driving.

Oops!

[UpInArms]

38. Abu Ghraib and the Dow

http://www.lewrockwell.com/north/north277.html

As an investor, I look at politics as a major factor in altering the value of capital. Taxation, deficit spending, the rate of monetary inflation, and regulation all affect people’s assessment of the future value of capital. That assessment affects the present value of capital.

If your money is in the stock market, you would be wise to ask yourself this question: "What if Kerry is elected, and both houses of Congress return to the Democrats?" I think this scenario is increasingly likely.

The Republican majority in the Senate is nip and tuck already. The Republicans’ margin is too thin when one-third of the Senators are up for re-election.

Because Republicans have controlled a majority of state legislatures since 2000, when the new census figures came out, they have designed Congressional districts to favor Republicans. The procedure is called Gerrymandering. The legislatures draw the lines for Congressional districts so that lots of Democrats wind up in a few districts. This siphons off Democrats from districts in which there are small Republican majorities. Those Democrats in the House whose districts have been protected are happy with the outcome. Those who are unhappy don’t have anything to say about it. So, it is much more difficult to change the majority party in the House than in the Senate. One estimate of swing districts is that there are as few as 30 out of 435. The Republicans enjoy a 229- 205-1 advantage. It would take a major political event to lose this majority.

The Democrats may now have such an event. By its very nature, the Republicans are not in a position to challenge the Democrats.

...more...

[Frodo]

42. What does that last line mean?

"The Democrats may now have such an event. By its very nature, the Republicans are not in a position to challenge the Democrats."

[UpInArms]

43. Intent is always difficult to decipher

but I think that he is referring to the redistricing issue - where the Republicans have set up the new lines, yet in the process they have also installed (?) some type of system whereby they face a difficult time unseating some of the Dems.

Simultaneous to this - with the perception (true or not) that the Republicans "own" this war, there could be a significant fallout away from their election or re-election to their districts.

[Frodo]

44. Hmmm. AS I read redistrcting -

Yes, it will be tougher for EITHER party to make large gains because of redistricting.

BUT there are already 5-6 seats currently held by Democrats that are drawn for Republicans (most won't even be competitive).

And the House is not like the Senate. They only need a small majority for total rule. I don't see much chance of that going away absent a massive sea change.

[UpInArms]

46. maybe Dobbs see something

that I don't and you don't. :shrug:

[salin]

39. Yea - the dynamic charts are back!

I am so lazy - I like clicking on the thread and tracking the movement - and then following the conversation. Thanks for getting these back! :hi:

[UpInArms]

40. Market Numbers at 2:14 EST and blather

Dow 10,099.87 -17.75 (-0.18%)
Nasdaq 1,968.75 +4.10 (+0.21%)
S&P 500 1,113.65 +0.60 (+0.05%)
10-Yr Bond 4.681% -0.043

2:00PM: Little change since the last update as the major averages are continuing to vacillate around their respective best levels of the day, although the S&P 500 and the Nasdaq have set fresh session highs over the past half an hour... As in yesterday's session, the price of crude oil is again slightly lower in today's session - down $0.14 at $41.00/ bbl... The price of crude oil fell on the heels of a weekly Department of Energy report indicating that supplies remained unchanged at 298.9 mln barrels...

Separately, Attorney General Ashcroft and FBI Director Mueller are starting their press conference to discuss terror threats, which could prove market-moving...NYSE Adv/ Dec 2018/1214, Nasdaq Adv/Dec 1700/1333

1:30PM: Off their respective session highs, the major averages are continuing to trade in the same relatively tight trading ranges in which they have been for most of the session... Today's action has not provided much follow-through on the heels of yesterday's rally, which took the major averages higher by 1.6-2.2%... Yet, it's encouraging to have seen the major averages stay above their respective 200-day simple moving averages, which the Dow and the Nasdaq cleared in yesterday's session...

With respect to technical levels, the Nasdaq has stalled at its 50-day simple moving average at 1971 in today's session... The tech composite's ability to lift above this technically-significant level on decent volume would likely incite buying efforts in the broader market...

[ozymandius]

41. Blather: US Stocks Mostly Higher on Pedicure Futures*

2:16
Dow 10,100.16 -17.46 (-0.17%)
Nasdaq 1,968.90 +4.25 (+0.22%)
S&P 500 1,113.32 +0.27 (+0.02%)
10-Yr Bond 4.677% -0.047


U.S. stocks mostly higher on tech strength

NEW YORK (CBS.MW) - U.S. stocks were mostly higher Wednesday on strength in technology shares, amid a volatile session for oil prices, conflicting signals from a mixed batch of a data and concern over possible terrorist action on the U.S mainland.

-cut-

The July crude contract jumped as much as 35 cents after the Energy Dept reported a drop in gasoline supplies, and crude oil stocks unchanged for the last week. The contract then slipped back after the American Petroleum Institute reported a climb in gasoline and crude inventories. It was last trading down 19 cents at $40.95.

-cut-

"Whenever we have three-day weekends, there's always talk of terrorist threats so you typically see the markets sell-off into the weekend and then we rally back on a Tuesday when nothing happens," said Leone.

more...

*Satire. But then would it really surprise you if they scraped for such an excuse for market performance?

[Chicago Democrat]

50. Its because of septic tank futures..

cause everyone is scared shitless.

[UpInArms]

45. Vanguard adviser in SEC probe of trading practices

http://www.forbes.com/markets/newswire/2004/05/26/rtr1385684.html

BOSTON, May 26 (Reuters) - Wellington Management Co., one of the most respected U.S. money managers, said on Wednesday federal regulators are investigating it, but not for the type of improper trading that has rocked the mutual fund industry.

The U.S. Securities and Exchange Commission, along with state regulators, have been investigating the $7.6 trillion industry since September. They found that some of America's best-known mutual fund firms cheated their clients by turning a blind eye to managers or clients who engaged in prohibited fast-paced buying and selling of shares or even illegal late trading.

"We were informed by the SEC several months ago that it had initiated an investigation related to our trading practices and procedures. We do not believe this inquiry has anything to do with market timing or late trading," Wellington spokeswoman Lisa Finkel said in a statement.

The New York Times on Wednesday reported the SEC is investigating Boston-based Wellington, which advises more than a dozen funds for the Vanguard Group, the second- biggest U.S. mutual fund company.

People familiar with the matter said the investigation grew out of a routine examination conducted by SEC officials in Boston and focuses on Wellington's trading policies and procedures. Wellington began to tell clients and potential clients about the matter earlier in the year, the people said.

...more...

uh, yeah, not related ... like Sanchez leaving was "unrelated" to the torture at Abu Ghraib after the report that he was "present" and signed off on it. sheesh...

[UpInArms]

47. Market Numbers at 3:32 EST

Dow 10,098.60 -19.02 (-0.19%)
Nasdaq 1,968.04 +3.39 (+0.17%)
S&P 500 1,112.67 -0.38 (-0.03%)
10-Yr Bond 4.671% -0.053

3:00PM: Major indices continue to build off their afternoon gains as the semiconductor group accelerates... Strength in the latter along with gains in biotech has set the Nasdaq up for a gain of 0.5%, versus 0.2% for the broader market... Attorney General Ashcroft's press conference - while far from comforting in its admission that al Qaeda could be planning an US attack - has had no discernible impact on trading... In fact, the breadth figures at the NYSE and Nasdaq have only improved...

That being said, the market has yet to stage a broad-based rally, with the financial group standing out as a weak link...SOX +1.0, NYSE Adv/ Dec 2085/1192, Nasdaq Adv/Dec 1743/1328

2:30PM: Terrorist concerns resurfaced in today's session on the heels of an Associated Press report that U.S. officials have obtained new intelligence deemed highly credible indicating that Al-Qaeda or other terrorists are in the United States and preparing to launch a major attack this summer... In a press conference held over the past half an hour, Attorney General Ashcroft and FBI Director Mueller provided more details regarding the terror threat...

According to the officials, after the Madrid railway bombings Al-Qaeda reportedly indicated that its planning of an attack on the U.S. is 90% complete, with the likely targets including the Democratic and Republican conventions... The press conference has had little effect on the market, but the terror alerts have played their part in limiting the market's gains in today's session...

[UpInArms]

48. Large-scale layoffs up in April

http://columbus.bizjournals.com/columbus/stories/2004/05/24/daily17.ht...

Mass layoffs increased in April in Ohio, although they remained below their levels of a year ago.

Ohio employers initiated 51 mass layoffs in April, resulting in 5,811 initial claims for unemployment, the U.S. Bureau of Labor Statistics said Wednesday. In March, Ohio lost 4,167 jobs in 31 mass layoff events. A mass layoff is defined as 50 or more jobs cut from a single location within 30 days.

The state saw 10,704 initial claims for unemployment in April of 2003 from 62 mass layoff events. Ohio had the largest year-over-year drop in initial claims, the bureau reported.

Nationwide, U.S. employers cut 157,314 jobs in 1,458 mass layoffs in April, compared with 92,554 jobs cut in 920 mass layoffs in March. Last April, 1,581 mass layoff events resulted in 161,412 initial claims for unemployment.

...more...

[UpInArms]

49. looks like foreclosures are going to be a problem soon

Valley foreclosure rate up 38 percent

http://phoenix.bizjournals.com/phoenix/stories/2004/05/24/daily9.html?jst=b_ln_hl

Foreclosures.com, a Sacramento, Calif.-based distressed property investment advisory firm, Monday reported that April filings of Notices of Trustee Sale Auctions in the Phoenix metro area were running 38 percent ahead of the foreclosure rate in May 2003.

"We saw 1,170 new filings of trustee sales in Phoenix this April," said Alexis McGee, Foreclosures.com president. "That's much higher than the 731 reported in May of 2003, when Phoenix was still in recession."

She added that, while foreclosures were down from a seasonal peak in January 2004, "foreclosure activity is remaining stubbornly high."

McGee speculated that rising interest rates would probably push foreclosures higher by the end of the year.

"Many home buyers stretched themselves thin to buy bigger homes during the recent boom in the Phoenix housing market. As rates stayed low, adjustable rate loans became very popular," McGee said. "Now payments on those loans will start going up, and lots of new homeowners will feel the squeeze."

...more...

Report: Default threat haunts California home sales

http://sacramento.bizjournals.com/sacramento/stories/2004/05/24/daily5.html?jst=b_ln_hl

Widespread use of adjustable rate mortgages by California homebuyers in 2003 could lead to a rise in defaults in coming months as interest rates rise, says a local distressed-property investment advisory firm.


By late 2003, use of adjustable rate mortgages -- which leave borrowers more exposed to interest rate fluctuations than fixed-rate loans, but offer a lower rate -- soared to more than 52 perecent of all California mortgages, the highest level since early 1995.

That, one local firm says, puts more buyers at risk. "A little over 15,000 homes in California entered the foreclosure process in both quarter four of 2003 and quarter one of 2004," says Alexis McGee, president of Fair Oaks-based Foreclosures.com. "With two consecutive quarters of flat foreclosure activity, we can say that defaults returned to their baseline after victims of the 2001 recession were washed out of the system. Now, we expect defaults to start rising again as steady rate increases put adjustable rate mortgage borrowers at risk."

Like other housing industry experts, McGee attributes the record home sales volume and price acceleration seen in March to a rush to buy before interest rates put buying a home out of reach. "A buying surge usually happens whenever rates pass the low end of a cycle and start back up," she says. "Soon thereafter, you'll begin to see the impact of rate increases on homeowners with adjustable rate loans."

McGee said that the San Francisco Bay Area and Orange County were most vulnerable, with 65 percent of buyers in the San Francisco Area and 67 percent in Orange County using adjustables in 2003 to qualify for more expensive homes.

"Many of those buyers stretched themselves to the limit to qualify for homes in a market with rapid price appreciation," she says. "With lenders allowing payment to income ratios of over 40 percent it won't take much of a payment increase to put those people in distress. The next 18 months will be a critical period."

...more...

(edited cuz ah kant spull)

[UpInArms]

51. Closing Numbers and Blather

Dow 10,109.89 -7.73 (-0.08%)
Nasdaq 1,976.15 +11.50 (+0.59%)
S&P 500 1,114.95 +1.90 (+0.17%)
10-Yr Bond 4.671% -0.053

Close: The closing values don't denote much in the way of trading activity, but the indices' ability to hold near the unchanged mark - handily surpassing it in the case of the Nasdaq - was an encouraging sign for a market that posted a 1.6-2.2% gain yesterday... The Dow and Nasdaq finished above their 200-day simple moving averages for a second day in a row, despite a press conference by Attorney General Ashcroft that announced 'credible intelligence from multiple sources' that al Qaeda is planning to launch an attack, as well as a slew of less than encouraging economic data...

April Durable Goods dropped 2.9% (consensus of -0.8%) - although it is important to note that the March gain was revised to a stronger +5.7% - and April New Home sales declined 12% for their largest drop in 10 years, to 1.093 mln (consensus of 1.20 mln)... The weak housing data point weighed heavily on the homebuilders, which were among the weakest groups of the day despite a better than expected Q2 (Apr) report from Toll Brothers (TOL 40.45 - 0.95)... The energy group also suffered large losses following a $0.34 drop in the price of crude oil to $40.80/bbl...

An Energy Department report showed US oil inventories unchanged last week... Other than that, most groups possessed a positive bias, with notable standouts being semiconductor, biotech, and auto... As for the bond market, the 10-year note closed at 3- week highs (yields of 4.67%) in response to Ashcroft's press conference...