STOCK MARKET WATCH, Wednesday 7 July

[ozymandius]

Wednesday July 7, 2004

COUNTING THE DAYS
DAYS REMAINING IN THE * REGIME 201
DAYS SINCE DEMOCRACY DIED (12/12/00) 3 YEARS, 208 DAYS
WHERE'S OSAMA BIN-LADEN? 2 YEARS, 262 DAYS
WHERE ARE SADDAM'S WMD? - DAY 475
DAYS SINCE ENRON COLLAPSE = 958
Number of Enron Execs in handcuffs = 18
Recent Acquisitions: Jeff Skilling
ENRON EXECS CONVICTED = 2
Other Arrests of Execs = 54

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

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AT THE CLOSING BELL ON July 6, 2004

Dow... 10,219.34 -63.49 (-0.62%)
Nasdaq... 1,963.43 -43.23 (-2.15%)
S&P 500... 1,116.21 -9.17 (-0.81%)
10-Yr Bond... 4.48% +0.02 (+0.49%)
Gold future... 393.00 -5.70 (-1.43%)


|||


GOLD, EURO, YEN and Dollars

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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 [e-mail]

For information on protests and other actions Citizens For Legitimate Government

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[UpInArms]

1. daily dollar watch

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

Last trade 87.66 Change -0.46 (-0.52%)

http://www.fxstreet.com/nou/noticies/afx/noticia.asp?font=Reuters&pv_noticia=MTFH45351_2004-07-07_09-48-49_L0711212

GLOBAL MARKETS-Dollar weak, shares lack lustre on U.S. concerns

LONDON, July 7 (Reuters) - The dollar weakened against other major currencies and global stock markets lacked lustre on Wednesday as traders reacted to the latest signs that the U.S. economic recovery is going off the boil.

Yields on euro zone government debt were little changed after a successful auction of 10-year German Bunds and oil prices edged lower after their recent sharp rise on supply disruptions.

A steep fall in the growth rate of the U.S. service sector, reported on Tuesday, was the main factor influencing the markets.

The U.S. June non-manufacturing index from the Institute of Supply Management (ISM) fell to 59.9 from 65.2 in May, a far bigger drop than expected, adding to concerns about the robustness of the U.S. recovery sparked last week by weak payrolls data.

"Mixed signs from the U.S. economy reinforce the view that the Fed will take a gradual approach to raising rates and this is weighing on the dollar," said Lena Komileva, global economist at Prebon Marshall Lemane.

The dollar slid to its lowest level in over three months against the euro <EUR=>, with high oil prices and a fall overnight in U.S. share prices seen as additional factors.

At 0925 GMT, the euro was up over half a percent at $1.264.

The dollar was also weak against the yen <JPY=> despite market nervousness that the outcome of elections this weekend to Japan's upper house of parliament may weaken Prime Minister Junichiro Koizumi's government.

It fell to 108.36 yen from 109.48 in late New York trade.

"There are two big themes in the market today, and it's a matter of whether you focus on the risk of a weaker U.S. economy or the risk of a loss for Koizumi in the upcoming election," said Tomokazu Ohno, forex strategist at Shinko Securities.

...more...

http://www.reuters.com/newsArticle.jhtml?type=businessNews&storyID=5607355

Dollar Hits Three-Month Low vs. the Euro

LONDON (Reuters) - The dollar hit a three-month low against the euro and lost one percent on the day versus the yen on Wednesday, as economic data added to expectations that future hikes in U.S. interest rates might not be aggressive.

A key survey of the U.S. service sector came out weaker than expected on Tuesday, intensifying worries sparked last week by disappointing U.S. payrolls data and the Federal Reserve's insistence on a "measured" pace of future tightening.

Slower rises in U.S. interest rates, which the Fed increased last week for the first time in four years, diminish the allure of dollar-based assets for global investors.

"It is really continued momentum from last week when the dollar looked pretty vulnerable," said Mitul Kotecha, head of global foreign exchange research at Calyon in London.

"Markets had become so bullish on the U.S. economy that it is becoming difficult to live up to expectations."

...more...

http://www.reuters.com/newsArticle.jhtml?type=businessNews&storyID=5607332

Dollar Slides Against Other Currencies

By Gerrard Raven

LONDON (Reuters) - The dollar slid against other major currencies and global stock markets lacked luster on Wednesday as traders reacted to the latest signs that the U.S. economic recovery is going off the boil.

Yields on euro zone government debt were little changed after a successful auction of 10-year German Bunds and oil prices eased from recent highs after the Saudi oil minister said an increase of OPEC's supply ceiling would go ahead next month.

Stock futures indicated Wall Street was set to open slightly firmer after falling for a third straight day on Tuesday.

A steep fall in the growth rate of the U.S. service sector, reported on Tuesday, and a barrage of profits warnings by U.S. companies and negative comments by Wall Street analysts, were the main factors influencing markets.

...more...

Have a Great Day Marketeers!

[54anickel]

2. Heh-heh, "recovery is going off the boil". Funny how we've seen that

"boil" reference in quite a few articles lately. Who are they trying to kid - we never got above luke-warm! The Krugman article that Maeve posted yesterday did a good job of pointing that out. The reports haven't exactly been trend setters by any means.

[Frodo]

10. I'd say 8.2% is pretty far above "luke warm"... but then again...

as just one quarter - it could be called a "flash in the pan" rather than a "boil". ;-)


But it still looks like an annual 4% growth rate (and it was over 4% for last year as well)- which, while not "spectacular" is well above "luke warm". The problem I see is people arguing whether the porridge is "ice cold" or "boiling hot". There really are a great range of values in between. It may not be "just right", but there are more than three bears in this story.

[54anickel]

3. The United States of Speculation (missed this one last week)

The United States has become a nation defined by speculation and gain from asset price inflation. Returns to asset ownership march onward and upward, despite and alongside consumer debt, deficits, falling dollars and trade deficits. Among those still happily dwelling in the sunny delusion that this is normal and sustainable are economists, esteemed employees of the Departments of the Treasury, The Federal Reserve Banking System and most employed in financial services. Recent reporting from the OECD and the 2004 Cap Gemini Merrill Lynch World Wealth Report provide the basis for my not so sanguine view below.

Across 2003 foreign direct investment in the US declined 44%, falling to $40 billion in 2003 from $72 billion in 2002 and $167 billion in 2001. OECD data confirm that this two year loss of $127 billion in foreign direct investment distinguished us as the worst 2003 performer of the 30 advanced economy member states. While other nations suffered declines, ours was simply peerless. China, overtaking the US as a destination for foreign direct investment, suffered a 4% decline to $53 billion in 2003. I am sure you are well aware of the sorry state of our external balances. I won't bother mentioning our huge and widening trade gap. Not to worry, housing market surge, deficit spending and massive consumer borrowing bridged the gaps and facilitated a stellar 2003 for equity investors and the United States of Speculation generally.

There is no doubting that 2003 was a historically strong year for Fortune 500 profitability-if not for revenue-and for equity investors. The recently released and ever prescient 2004 World Wealth Report sheds some light on returns and the changing dynamics and desires of the world's most savvy and sophisticated individual investors, High Net Worth Individuals (HNWI). The Report examines the returns, needs and demands of 7.7 million HNWI commanding $28.8 trillions across 68 nations.

The good news-if highly predictable-is that North American HNWI ranks grew and returns were globally distinguished here at home. This is unsurprising as American HNWI are and grew increasingly, overweight US equities. Domestic speculation proved sage and returns were strong, 13.6%. Global Average 7.7% growth has easily edged by the US cohort as our major indexes outperformed alongside increasingly popular real estate and alternative investments. Thus, we did well this year by intensifying our domestic equityphyllia- which had cost dearly over the past few years. However, there is mounting evidence of growing US investor sophistication and globalization of asset interest. The Report notes, for the second consecutive year, that American HNWI are demanding global advice and opportunity. Cash and fixed income positions were drawn down along growing interest in offshore exposure.

more...

[54anickel]

63. Link....DOH!

http://www.prudentbear.com/archive_comm_article.asp?category=Guest+Commentary&content_idx=33814

[54anickel]

4. Oil Drops as Saudi Pledges More OPEC Oil

Haven't these folks been a bit fickle lately - one day it's yes to more, the next day it's no, then back to yes. What's up with that? I still have that rumor in my head about how the Sauds promised to help Shrubby get re-selected. Seems there's some confusion or disagreement in the ranks over there. :shrug:

http://biz.yahoo.com/rb/040707/markets_oil_3.html

LONDON (Reuters) - World oil prices fell on Wednesday after leading exporter Saudi Arabia said the OPEC oil cartel would go ahead with plans to increase output.

Saudi Arabian Oil Minister Ali al-Naimi said the Organization of the Petroleum Exporting Countries would proceed with a 500,000 barrels per day (bpd) output hike in August, according to an industry newsletter.

Prices also came under pressure after Iraq repaired a sabotaged pipeline and restored crude exports to near-normal levels.

snip>

"We're over-bought near term and we're having a pull-back," said Edward Meir of Man Energy. "Plus, the Iraqi situation seems to be on the mend." :eyes:

more...

[54anickel]

5. Great toon Ozy!

[ozymandius]

6. Good morning folks.

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

Lots of things to do today: follow-up on a job lead, take boy to school, finalize terms on new apartment...

So I will not be around much today. I miss you all.

best to you,

Ozy :hi:

[54anickel]

7. Good luck to you Ozy on the lead! And thanks again, as always,

for getting us started every morning! :hi:

[UpInArms]

8. Good luck to you

today and every day Ozy!

:hi:

[54anickel]

9. US economy skids on soft patch, analysts sweat over outlook

But it's all good news!!! :eyes:

http://story.news.yahoo.com/news?tmpl=story&cid=1519&ncid=749&e=6&u=/afp/20040707/bs_afp/us_economy

WASHINGTON (AFP) - Unexpectedly weak US economic reports, in particular a slump in June jobs growth, have prompted an argument over whether the American boom is going bust.

Most analysts say the economy is merely moderating from last year's blistering pace, an encouraging development that will allow the Federal Reserve (news - web sites) to raise interest rates gently.

But some fear the economy is suffering a new structural weakness, caused in part by a vast global supply of cheap, well-educated workers who can be tapped at the click of a computer mouse.

The outcome could be crucial to President George W. Bush (news - web sites)'s chances of being re-elected November 2 in the face of Democratic opponent John Kerry (news - web sites)'s charges of economic mismanagement.

Signs of a slowdown include:

more...

[Frodo]

14. This is as bad as a football season.

Just sixteen games.

I remember lots of years where my team would win the first game or two and the talk woud move quickly from playoffs to a possible Super Bowl appearance. Then they lose one and the next day's paper's are talking about the setback. Lose another and rumors start spreading about how long the coach has to "turn it around" before he gets canned. That's a .500 record folks and we've swung from one extreme to the other instead of saying "they're looking pretty average".

The reporters are mostly idiots who just need something to write. Yesterday Drudge linked an article with several economists predicting a hotter year than any of Clinton's (4.8%) and today we've got Yahoo (an appropriate name sometimes) saying some are worried it's all over. And based largely on one month's employment numbers?

Look again at the chart:


Ignore the current stuff and look at '94-'99. There's hardly three months in a row moving in the same direction. Notice a few times it was essentially zero one month and 400,000 (or even 500,000!) the next month? Anyone want to guess how the press played it?

The TREND is what's important. Just look at the similar point in the curve (the moving average) in what looks like early 1993. The monthly figure had just reached 300k for the first time and suddenly dips to a NEGATIVE 30k (or so). Had the recovery stalled? Did it "restart" the next month? Or could it just be that a fluctuation is a normal thing (there's about a hundred of them on that chart)?

[54anickel]

51. Hmmm, the 12 month moving average line seems much more interesting

to me. Look at when and for how long a duration it was below 0.

[Frodo]

58. Yep

And look at when it turned south and when we started to see more consistent negative numbers.

Was it Clinton's "fault"? Nope, economic cycles don't stay positive forever. But looking at mid-January '01 as some magic date makes no economic sense.

The length of time under water appears (to me) to be a combination of the extraordinary time between recessions over the last 20-25 years with maybe a touch of 9/11 thrown in. Heck, we used to have recessions every three years or so - we'd probably be BACK into another one if things weren't slowed down. Don't get me wrong, I think it's a net "good" thing.

[54anickel]

60. Greenspan effect? His attempts to overcome the normal business

cycle of 3 to 4 years and his desire to defeat price inflation once and for all with his monetarism ideology perhaps? Part of that "new economy" where Greenspan tilts at windmills? :shrug:

[Frodo]

62. If you want to call it that.

Some of the previous Fed chief as well.

I think it's just a more refined understanding of things economic (so we aren't making 5% rate shifts in three months anymore). We have to admit that the last 20 years or so have been pretty good. To the point where "stagflation" to some means "3-4% inflation" and "anemic GDP growth" is 3%. There was a time when such ideas would have been laughed at.

[54anickel]

65. But if something cannot go on forever, it won't. I don't agree that the

last 20 years or so have been pretty good. Constant inflation is a high price to pay for monetarism ideology. Personally I don't consider it a more refined understanding of things economic so much as it's been creative financial engineering that has hit the little guy pretty damned hard. The cleansing effect of ups and downs of the business cycle were healthy, albeit an annoyance for the elite. Greenspan has attempted to re-engineer that cycle - sort of like messing with the changing seasons, sooner or later summer all the time in all places will have devastating effects.

As far as the previous fed chief, you can't mean Volker - can you?

[Frodo]

66. You only know it "can't go on forever" when it doesn't.

How can you look at the Nixon/Ford/Carter years and call the last 24 "constant inflation"? Or are you saying that Carter, Reagan, BushI, Clinton, AND BushII ALL made up the figures???

What measurement are you using to compare the effects on "the little guy"? Home ownership? Inflation adjusted income? Standard of living?

I'm adjusting downward my assumption of how old you are.


Things HAVE to fluctuate to be healthy long term - yes. But by "refined" I mean more precisely understood "cause and effect"-wise. Largely due to computer modeling that was unavailable before the period in question. Think of it as "supply chain maangement". The science is simply better. "Bad" things will still happen, but you can make smaller changes in the process to keep things going.

As for Volker, I'm not giving him credit so much as recognizing that rate policy stabalized a tad before things got handed over to Greenspan. He certainly was too agressive with massive moves in the early 80's

[54anickel]

68. Constant inflation....

as in the stealth tax and the transfer of wealth that has helped to create the huge chasm and descrepency between the tiny top % that holds the most wealth and with it power.

I suppose if your standard of living hasn't declined you wouldn't see inflation as a stealth tax because "you're getting your piece of the pie", you just don't notice the pie has gotten a whole lot bigger and those getting the most of it have even changed it from apple to cherry - you just keep getting the same piece that's just large enough to satisfy your immediate hunger. Others are left without even crumbs as that transfer of wealth does away with more and more of what was once considered a social and moral obligation - health care, education, community, county or state hospitals, entitlements, etc.

Thanks for adjusting downward your assumed age for me. :-)

[Frodo]

70. Most of what you called "social moral obligation"

Don't go all that far back. Almost everything we call an entitlement, certainly health care. Education is a state/county responsibility and never got "dropped" by the Federal govt.

As for the chasm between top and bottom? Again I think you are forgetting history. That's an effect of a capitalist system, not some recent occurrence. I'm not sure where you see the "transfer of wealth" (implying I once had it and now the rich have taken it away), but more importantly, I'm not sure how it's "inflation". If I get a lot more (in real terms) than I got twenty years ago, but some other guy I never met has LOTS more than that - I've lost out how? I have a right to 1/270,000,000 of total wealth in the country? Again, that's capitalism vs. Socialism... not a "new economy" thing. Generally speaking, the rich get richer and the poor get poorer because the rich continue to do the types of things that got them rich and the poor continue to do the types of things that keep them poor. Children of wealthy parents get better educations and are more likely to save and invest. Someone below a "working class" level doesn't learn any of that. If as soon as you get a better job you go out and buy a new car with a tricked out stereo system - you're never going to rise above the guy from a poor neighborhood with the cool car. Who teaches you that this isn't the thing to do? In the upper middle class family it's hardly an issue. You go to college, you save, you get a 401(k)... these are the things you do.

Just compare the size and average living standard of the "middle class" today to what it was fifty years ago. Housing alone proves the point. Look at what a family of six lived in then to what DINKs get today.


BTW - In America, the gap is really between the poor and middle class (or perhaps there are two gaps). The middle class here is far larger and better off than almost anywhere else in the world. Frankly, our "poor" are better off than many/most countries (since "their" poor do everything in their power to come HERE to be poor... and usually end up more successful than the older Americans because they work harder).

[54anickel]

72. Nope, not forgetting history at all.

It's the type of changes and the accelerated pace of the differences found in the classes that have taken place over the past 30 some years as the corporations and their lobbiest with the wealth and power have more and more say on what's best for "us". Look at the expansion of K street alone. But that's getting off the topic of inflation as a stealth tax. That's assuming you still define inflation as an increase in the money supply and all that goes with it.

I think we are just too far apart on this issue, almost speaking different languages regarding the effects of monetary inflation on the well being of those not fortunate enough to be part of that top %. I'm one of those bleeding heart liberals.

Have a great night Frodo. :hi:

[Frodo]

73. I don't define inflation that way. Because it isn't/

It's an increase in the money supply in excess of the increase in production. Double the amount of "x" produced and you can double the amount of "money" (MUST double the amount of money) without ANY "inflation".

Perhaps the hole in the theory is that the "top 1%" is ALWAYS the top "1%". What if you were to measure the number of people making more than "x" (in inflation adjusted terms). You might find that there were a LOT more people who would have been classified as "rich" in the 40's.


But we can agree to disagree. Have a good evening.

[54anickel]

50. Here's the Roach article quoted in the posted article from YaHoo

http://www.morganstanley.com/GEFdata/digests/20040706-tue.html#anchor0

In a US-centric world, America is obviously the place to start. And the high-frequency (i.e., monthly) data have certainly been on the soft side recently. Weak shipments data point to a loss of momentum on the capital spending front in April and May, and motor vehicle sales were nothing short of terrible in June. But the big story was a “surprising” moderation of labor market activity in June — easily the single most important data release of any month. It’s not just that job growth was weak last month — a puny increase of 112,000 in nonfarm payrolls that came in at half the consensus guesstimate. It’s that the June trend fits in all too well with the character of the “jobless recovery” — one of the most distinguishing features of the current cyclical upturn.

This expansion is now 31 months old. In only two of those months — March and April of 2004, when gains in nonfarm payrolls averaged 338,000 — did job growth surge decidedly above trend as it normally does when recoveries finally get traction. Yes, job growth was strong in May at 235,000, but that’s actually pretty close to a trend increase for a US economy in expansion. By contrast, in past cycles, cyclical overshoots typically last at least 6 to 9 months. It turns out that private nonfarm payrolls are up only 0.3% from levels reached at the trough at the last recession in November 2001. Normally at this stage in a cycle, the increase is closer to 7.5%. If the current hiring cycle had conformed to the average hiring cycle of the past six upturns, private nonfarm payrolls would have been 8.0 million higher than they are at present. The current hiring cycle is even tracking 2.9 million workers below the profile of the so-called jobless recovery of the early 1990s. In recent months, the growth optimists have drawn great comfort from the long-awaited revival on the hiring front. The latest evidence suggests they may have been a bit quick to jump to that conclusion.

But there is a second dimension of US labor market activity that is equally worrisome — a decided shortfall of real wage growth. This is of critical importance for the consumer — mainly because it is the combination of increases in employment levels and the pay rate that drive personal income. For three months in a row — March through May 2003 — the monthly data on average hourly earnings hinted at a long-awaited revival on the wage front — average gains of about 0.3% at a monthly rate, or close to a 3.5% annual rate. The June number — a fractional increase of just 0.1% — draws that optimism into serious question as well. This series is up just 2.0% on a year-over-year basis through June 2004 — well below the 3.1% increase in the headline CPI in the 12 months ending in May and barely above the 1.7% rise in the core CPI over the same period. The basic point is that we are fully 31 months into a so-called economic recovery, and American workers are seeing virtually no improvement in real wages. That development, in conjunction with the hiring shortfall noted above, has left the all-important wage and salary component of personal income fully $263 billion below the path of the typical recovery. I should note that this comparison only goes through May 2004 — the latest month for which personal income data are available; based on the June labor market surveys, it seems reasonable to believe that there has been a further widening of this shortfall. Little wonder that income-short American consumers have morphed into asset-dependent spenders (see my 21 June dispatch, “The Asset Economy”). Or little wonder why the recent “mini oil shock” apparently took such a toll on discretionary consumption in June.

snip>

The global labor arbitrage suggests it is not an accident. A disappointing June labor market survey should not be dismissed as a statistical aberration. As was the case in the first 27 months of this recovery, the June report is probably a much cleaner read on the underlying trend than were the two aberrant observations in March and April.

snip>

I have long argued that an unbalanced world draws the possibility of a sustainable synchronous upturn into serious question. Yes, I was wrong to miss the temporary cyclical vigor of the world over the past year. The lesson: Never under-estimate the political pressures for reflation. Yet with fiscal and monetary policy stimulus both having been taken to the max, such impetus will now be missing in the period ahead. Consequently, in that context and in light of the tough fundamentals that still exist, I still worry that a good deal of this year’s growth could have borrowed from gains that might have otherwise occurred in 2005 — in effect, setting the stage for the boom that begets the bust. Without a meaningful rebalancing of a lopsided global economy, such periodic distortions could be the norm — suggesting that the debate over sustainability will be with us for some time to come. In this climate, the growth risks that are now creeping into the data flow cannot be treated lightly.

more...

[54anickel]

11. Frugal generation has not escaped debt woes

http://www.dallasnews.com/sharedcontent/dws/bus/stories/070704dnbuselderdebt.7cb9a.html

NEW YORK – America's seniors, who weathered the Great Depression or grew up in its shadow, have a reputation for frugality and saving.

Of all generations, this was the one that got it right by pinching pennies, avoiding credit and putting money away for retirement and to pass on to their children.

Yet an increasing number of older Americans find themselves deep in credit card debt or even filing for bankruptcy – troubles more associated with their baby boomer children and their grandchildren.

The reasons vary, but experts say some retirees are overwhelmed by rising medical expenses or find that Social Security and their pensions don't stretch far enough.

Those who lost jobs before they were ready to retire never quite caught up.

more...

[54anickel]

12. ECB, Fed mulling ways to corral hedge funds: Bundesbank chief

http://story.news.yahoo.com/news?tmpl=story&cid=1518&ncid=1518&e=4&u=/afp/20040706/bs_afp/eu_us_bank_finance_funds

FRANKFURT (AFP) - The European Central Bank and the US Federal Reserve (news - web sites) are trying to agree on a framework for controlling speculative hedge funds, the head of the German Bundesbank, Axel Weber, said.

"We are currently in talks in Basel (Switzerland) with the Americans about ways to control hedge funds," said Weber, who is also a member of the ECB's governing council.

"The Americans' position is clear: no regulation. Our conception is different," the central bank chief told a financial forum.

Hedge funds require investors to make substantial payments and often concentrate on speculative, short-term financial instruments with the aim of reaping large profits.

more...

[54anickel]

16. German regulator to relax hedge fund rules

http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullStory&c=StoryFT&cid=1087373507585&p=1012571727310

German insurance companies will be allowed to invest up to 5 per cent of their assets in hedge-fund products, but face strict criteria on the type of funds they can utilise.


BaFin, the country's chief financial regulator, will permit the use of fund-of-funds and single funds, but will seek to prevent the full ownership of hedge-fund products, according to draft rules obtained by FT Deutschland, the FT's sister paper.

Germany is one of the last big markets to authorise the use of hedge funds, which use sophisticated mathematical modelling to generate high returns from a range of asset classes, regardless of whether the market in them rises or falls.

The returns generated over the past two years have seen rapid growth in hedge-fund mandates, with fund-of-funds product growth running at up to 50 per cent.

However, returns have fallen over the last two months, leading some large investors to curtail their allocations.

more...

[UpInArms]

13. pre-opening blather

briefing.com

9:07AM: S&P futures vs fair value: -0.3. Nasdaq futures vs fair value: +4.0. Expectations remain intact for a lackluster open for the equity market... Treasuries are similarly weak right now - ahead of the $15 bln auction of 5-year notes later today.

8:54AM: S&P futures vs fair value: - 0.4. Nasdaq futures vs fair value: +4.5. Futures indications continue to slip, and now suggest a mixed open for the indices... A large number of warnings from software companies has undercut the conviction of buyers, and taken the futures market off its highs... A sense of hesitancy ahead of the June quarter reporting season - which starts tonight - has also worked against the efforts of bulls.

8:27AM: S&P futures vs fair value: +1.7. Nasdaq futures vs fair value: +6.5. Futures trade gives back some of its gains, but continues to point to a higher open for the cash market... Mixed trading in Europe and Asia have had a cooling effect on the efforts of buyers... There are no meaningful economic or earnings reports today, but quarterly releases from AA, DNA, and YHOO are due out after the close.

ino.com

The September NASDAQ 100 was higher overnight due to short covering as it consolidates above the June 22 reaction low at 1452.50, which coincides with the 50% retracement level of the May-June rally. Stochastics and the RSI are bearish signaling that sideways to lower prices are possible near-term. If September extends Tuesday's decline, the 62% retracement level of the May-June rally crossing at 1434.57 is the next downside target. The September NASDAQ 100 was up 3.00 pts. at 1456.50 as of 6:53 AM ET. Overnight action sets the stage for a steady to firmer opening by the NASDAQ composite index later this morning.

The September S&P 500 index was higher overnight due to short covering as it consolidates some of Tuesday's decline. Tuesday's decline led to a close below the 40-day moving average crossing at 1118.30 and led to a test of the 50% retracement level of the May-June rally crossing at 1112.70. If this support level is broken, the 62% retracement level crossing at 1104.86 is the next downside target. Stochastics and the RSI are bearish signaling that sideways to lower prices are possible near- term. The September S&P 500 Index was up 2.00 pts. at 1117 as of 6:55 AM ET. Overnight action sets the stage for a steady to firmer opening when the day session begins later this morning.

[54anickel]

15. Pimco's Gross Sees Risk of Rising Interest Rates

http://quote.bloomberg.com/apps/news?pid=10000103&sid=aDYxRf1OejUM&refer=us

July 7 (Bloomberg) -- Rising interest rates threaten a global economy that is already ``more vulnerable than it has been'' in about 30 years, said Bill Gross, who runs the world's biggest bond fund at Pacific Investment Management Co.

A ``debt-laden'' economy means that short-term interest rates kept too low will create ``asset bubbles,'' while interest rates that are raised too high will ``pop'' existing bubbles and cause a recession, Gross wrote in a monthly commentary published on Newport Beach, California-based Pimco's Web site.

``The Goldilocks yield is the only one that speaks to relative stability, and the margin for error is much narrower than in prior decades,'' Gross wrote. Pimco has almost $400 billion in assets under management and is owned by Allianz AG, Europe's biggest insurer.

snip>

His commentary accompanied a chart showing total credit- market debt exceeding U.S. gross domestic product by three times.

``It's sobering to contemplate that not only has our current cyclical prosperity been due to the `productivity' of lower interest rates in a finance-based, debt-laden economy, but that the reversal of yields must be more than delicately manipulated in order to prevent reciprocal damage and global economic instability,'' he wrote.

[UpInArms]

17. Markets are open at 9:32 EST

Dow 10,209.61 -9.73 (-0.10%)
Nasdaq 1,964.69 +1.26 (+0.06%)
S&P 500 1,115.90 -0.31 (-0.03%)
10-Yr Bond 4.480% +0.000

[54anickel]

18. Taiwan Posts First Trade Deficit in Four Years as Exports Flag

http://quote.bloomberg.com/apps/news?pid=10000080&sid=al6ZnikofvaE&refer=asia

July 7 (Bloomberg) -- Taiwan had its first trade deficit in four years last month as high oil prices pushed imports to a record and demand cooled in China, the biggest buyer of the island's exports.

Taiwan posted a trade deficit, its first since February 2000, of $203 million after recording a $1.2 billion surplus in May, the finance ministry said in a statement in Taipei. Export growth slowed to 25 percent, lagging the median 31 percent gain forecast in a Bloomberg News survey of five economists.

``We are seeing slightly the impact on Taiwan's exports of China's policy to curb lending to cool its economy,'' said Joanne Yang, an economist at Yuanta Core Pacific Securities Co.

Slowing sales to China will make it harder for Taiwan's government to achieve its goal of expanding the economy 5.4 percent this year, after 3.2 percent growth in 2003, and may hurt earnings at companies including Asustek Computer Inc. and Benq Corp. China buys almost two-fifths of Taiwan's exports, which in turn account for about half of the island's $286 billion economy.

more...

[54anickel]

19. S.E.C. Inquiry to Encompass 401(k) Plans

http://www.nytimes.com/2004/07/07/business/07place.html

The Securities and Exchange Commission has widened its investigation into mutual funds to include those held by millions of Americans in retirement accounts.

The S.E.C. said yesterday that it had asked two dozen mutual fund companies to provide details about payments they may make to ensure that their funds are included in corporate 401(k) plans.

By requesting the materials, regulators want to assess the prevalence of so-called pay-to-play arrangements among funds and what effect these deals may have on the performance of retirement plans.

snip>

Since the investigation into mutual funds was disclosed last September, it has centered on relatively arcane practices like late trading, which allows certain investors to buy and sell fund shares after hours, and market timing, which allows some investors to make rapid trades in and out of funds. But by scrutinizing how funds are chosen for 401(k) and other retirement plans overseen by corporations, regulators seem to be acknowledging that conflicts of interest may run much deeper among fund companies than many investors realize.

more...

[UpInArms]

24. here's another article regarding the 401(k) issue

http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2004/07/07/BUGDI7HJ3C1.DTL&type=business

excerpt:

Americans certainly rely more heavily on mutual funds for their retirement plans than ever before. According to the Investment Company Institute, the lobbying organization for the fund industry, $922 billion, or 48 percent of the assets in 401(k) plans, was invested in mutual funds at the end of last year. In 1991, only $46 billion, or 10 percent of the assets in 401(k) plans, consisted of mutual fund shares.

The companies that offer retirement accounts to their employees, known as plan sponsors, have fiduciary duties to plan participants under the Employee Retirement Income Security Act to see that the portfolios are run with prudence and loyalty and without conflicts of interest.

But pension experts say that many companies that offer 401(k) plans, which are often described as defined contribution plans, are unaware of hidden compensation arrangements that influence which funds are included on a 401(k) menu and which are not. The arrangements can increase investors' costs, diminish returns and may result in poorly performing funds being offered on a 401(k) menu while better funds are left off the list.

[54anickel]

26. Rolling over my 401K from the plan offered by my employer was the

one good benefit of getting laid off. Their defined plan sucked with regards to investment choices.

[llmart]

48. As someone who used to work in the benefits department...

of a large, automotive supplier, I can tell you stories about how they arrive at what funds to offer, what company will sponsor the 401K, even what health care providers they offer. The director of benefits is wooed by these providers and the director chooses what will make him look good at the end of the year so that his bonus will be larger. If choosing a new health care provider means saving a couple thousand dollars, he will even though it would disrupt the health care choice of a thousand employees and cause them much grief because they have to change doctors, etc. It's why I left the corporate world for a lot less money but a lot more job satisfaction. I could no longer be a party to what went on at the top.

[54anickel]

20. Credit default swaps given twist

http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullStory&c=StoryFT&cid=1087373531909&p=1012571727204

A new variant of the credit default swap - a derivative that permits hedging or speculation on the credit quality of a bond or loan - has been launched with the aim of offering investors additional returns at a time when interest rates are low.

First-to-default baskets (FTDs), as the new products are known, bring together the default swaps of five underlying names in particular industry sectors.

Because the investor takes on the credit risk of five underlying companies rather than the one in a traditional default swap, the potential returns are also much greater.

"The risk has been scaled up five times, so the return goes up by a similar amount," said Mike Harris, credit derivatives strategist at JP Morgan.

snip>

The banks involved in the initial launch are JP Morgan, BNP Paribas and Morgan Stanley.

[54anickel]

21. VW resorts to interest-free loans in US

http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullStory&c=StoryFT&cid=1087373536698&p=1012571727310

Volkswagen is offering "zero per cent" loans in the US for the first time in a sign that Europe's largest carmaker is being sucked into the incentives battle raging in the industry.

The move marks a departure for the German carmaker, which has long resisted offering interest-free loans and "cashback" discounts across the US for fear of damaging consumer perceptions of its brand.

snip>

Edmunds.com, an automotive industry forecaster, reported on Tuesday that the value of US vehicle incentives reached record levels on June.

In spite of heavy incentives, US vehicle sales fell by 2 per cent in June, compared to June 2003.

more...

[UpInArms]

22. Market Numbers at 9:45 EST

Dow 10,240.07 +20.73 (+0.20%)
Nasdaq 1,975.46 +12.03 (+0.61%)
S&P 500 1,118.24 +2.03 (+0.18%)
10-Yr Bond 4.481% +0.001

[54anickel]

28. Splash of blather with that...

9:45AM: A quiet open for the equity market as the indices deviate little from the unchanged mark... Right now, the tone is slightly positive - which is largely a rebound response to yesterday's 0.6-1.2% fall... However, conviction behind the buying efforts is not especially strong as investors remain put off by a few items... Namely, a number of software companies (JDAS and PSFT being the highlights) followed in the footsteps of Veritas (VRTS 17.14 +0.14) yesterday and cut their quarterly outlooks...
Secondly, investors remain apprehensive ahead of the June quarter reporting season which starts tonight with Alcoa (AA 32.31 +0.33), Genentech (DNA 55.06 +0.40), and Yahoo! (YHOO 32.85 -0.37)...

[54anickel]

23. Microsoft to cut costs by $1bn this year

http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullStory&c=StoryFT&cid=1087373538544&p=1012571727088

Microsoft plans to reduce operating expenses by $1bn this year to help finance investment in new products, according to Steve Ballmer, chief executive.

In a wide-ranging memo to employees, Mr Ballmer noted that expenses had grown faster than revenues in each of the last three years.

"This obviously is not a trend we can continue," he wrote.

snip>

Microsoft this year reduced healthcare benefits for many US employees, a move that caused discontent within the company.

Defending this move, Mr Ballmer wrote: "I believed strongly that we needed to make these changes as part of our comprehensive cost-saving efforts."

more...

[54anickel]

25. China, which spurred world economy, now may slow it down

snip>

"As the Chinese leadership now moves to bring its overheated economy under control, it's important to understand the global implications," Roach said in a recent interview. "When today's Chinese economy sneezes, Asia - and possibly even the rest of the world - could catch a cold."
.
China's slowdown already is evident in commodity markets, said John Mothersole, an economist for Global Insight. Commodity prices soared by 40 percent during 2003 and the first four months of 2004, the biggest jump in nine years, largely because of Chinese purchases of materials such as steel, copper, nickel and oil, Mothersole said.
.
Commodity prices this year, as measured by Global Insight's Industrial Materials index, already have declined 12 percent from their April peaks, "and the slowing in China was a major part of that," Mothersole said. Shipping rates that more than tripled from the end of 2002 through the first six weeks of 2004, partly because of Chinese purchases, have fallen about 45 percent since April, based on the Baltic Dry index, which measures dry bulk freight rates.

snip>

The Chinese economy now is big enough to matter both to Asia and to the world. China's share of world trade mushroomed last year to between 6 percent and 7 percent - almost three times its level a decade ago - making it the world's No. 3 importer, behind the United States and Germany.
.
"It's arguably the second-largest economic power in the world right now, on the way to challenge America," Straszheim said.

more...

[54anickel]

27. U.S. stocks bounce back from one-month lows

http://biz.yahoo.com/cbsm-top/040707/8e30ff685600f09db66918d9a984e1b0_1.html

NEW YORK (CBS.MW) - U.S. stocks moved higher Wednesday in a modest rebound from the prior session's pullback amid continuing concern over the pace of corporate earnings growth after a fresh round of profit warnings in the technology sector.

"We're oversold so I wouldn't be surprised if we bounce back ahead of tonight's results," said Peter Boockvar, equity strategist at Miller Tabak.

snip>

"The market is nervous about second half earnings growth in light of the moderating economic numbers we've been seeing."

snip>

Yet oil watchers cautioned against any excessive enthusiasm.

"The problems for the oil patch keep mounting form Iraq to Nigeria to threats against terminals, to demand, "said Kevin Kerr, editor of newsletter Kwest Market Edge

"Clearly this is a market that wants to go to $45 quickly. Last time we were up here at $40, OPEC came in with extra supply to "save the day. This time they've got no more goodies in the bag of tricks."

more...

[54anickel]

29. Reciprocal Folly

http://www.gold-eagle.com/editorials_04/jmackenzie070604.html

snip>

Markets here the U.S. remain remarkably quiet with what appears to be a lack of buying enthusiasm and liquidity. The Federal Reserve is certainly holding up its end of the bargain as today's Temporary Open Market Operations came in at $10 Billion in U.S. Dollars.

snip>

Reflation, after all, has been systematically ramped to new heights of excess, yet is failing to succeed as the metric of choice, "Stock Prices" have stalled since January of 2004 suggesting a bout of buyers remorse may be dead ahead. Sustaining the unsustainable appears to be in question. Can "They" or will Market forces assert themselves and manifest a rebalancing of large proportions in the form of more sellers than buyers.

Binging on Debt has managed to shift the economic focus to maintenance of America's Financial Economy, bringing an as sundry of nosebleed levels in Housing, Bonds and Stocks to the very Zenith of absurdity.

The Fed's rampant Money and Credit creation implied a loss of control, a lack of systemic liquidity and palatable "Fear" on the part of the Federal Reserve. Alan Greenspan knows he's badly screwed the pooch., Debt for consumption, cannibalizing our Capital Stock was one of, if not, the worst bets in Financial History.

In turn, recognizing the looming disaster, Chairman Greenspan has resorted to "Unconventional Measures" in order to "Manage" the U.S. Economy. The "Command Economy" now represents something Mother Russia would embrace.

more...

[54anickel]

30. The ‘Special Relationship’ Doesn’t Extend To Central Banking

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

snip>

Any “special relationship” that exists between the UK and USA does not extend to central banking practices, if one is to judge from the recent statements of the governor of the Bank of England, Mervyn King. In an interview with the Financial Times, Mr King noted in particular that house prices were “very important” in the decisions to raise interest rates in the past couple of months, whereas Mr Greenspan continues to be in absolute denial about the existence of a US housing bubble (indeed, of asset bubbles of any kind). Equally significant, the governor was not prepared to retreat by so much as an inch from the views on house prices, government borrowing, and the inexorable rise in personal debt that has characterised the British economy over the past decade. There is no trace of a Greenspan-like “Dr Feelgood” pandering to the lowest common economic denominator as and when some unpleasant economic truths need to be spelled out.

Finally, there was this particular gem:

“We don’t have people who interpret to the newspapers what the words are supposed to mean. So instead of just using bland language which then requires someone else to interpret them to create a new profession of spin doctors, I think it’s incumbent on us to say what we mean. Not to exaggerate but equally to say precisely what we want to say - no more no less. And I think that’s one of the strengths of the monetary policy committee, ever since it’s conception, we’ve managed to create a debate of that kind.

snip>

So for Mr Greenspan, there was clearly no need to worry about a mounting high tech bubble featuring unprecedented valuations. Indeed, the Chairman questioned whether it was ever possible to envisage a bubble in advance of its bursting and extended a hand towards the bubble’s greatest apologists:

“Some analysts have offered an entirely different interpretation of the drop in equity premiums. They assert that a long history of a rate of return on equity persistently exceeding the riskless rate of interest is bound to induce a learning-curve response that will eventually close the gap. According to this argument, much, possibly all, of the decline in equity premiums over the past five years reflects this learning response. It would be a mistake to dismiss such notions out of hand. We have learned to no longer cower at an eclipse of the sun or to run for cover at the sight of a newfangled automobile.”

It was not the Fed which was acting precipitously, but we “dinosaur” bears, who stupidly reacted like our benighted ancestors, who ran for cover at the sight of a newfangled automobile or cowered at the eclipse of the sun.

One might have expected a touch more caution and humility on the part of the Fed in light of the disastrous results which flowed from such economic hubris, but no such luck. After an orgy of self-congratulation last year, the Fed has finally relented to market pressures, with a paltry .25 per cent increase in the discount rate. In spite of headlines trumpeting “the end of easy money”, one had the sense of a central bank being reluctantly dragged kicking and screaming into a “measured” form of tightening (the Fed’s words, not ours). By emphasising that “a portion of the increase (in inflation data) in recent months appears to be due to transitory data” and stating that the Committee “will respond to changes in economic prospects as needed” in its attempts to maintain price stability, the Fed confirmed that it was of no mind to tighten aggressively right now because of the enormous leverage in the system, leverage which is a direct consequence of the Fed’s persistent accommodation of an earlier created credit bubble.

much more...

[54anickel]

31. Russell On Dow, Gold & US Dollar

http://www.gold-eagle.com/gold_digest_04/russell070304.html

Economists were expecting a 250 to 350 thousand rise in unemployment. The figures announced this morning was 112,000, which was less than half the median expectation. On the news the long T-bond surged 1 and 20/32nds and the Sept. Dollar Index dropped .70, breaking below the support in what looks suspiciously like a "head-and-shoulders" top."

The two paragraphs below are from the always excellent King Report (July 1 report) --

"A stunningly disturbing Chicago PMI trumped the Fed rate hike. The action in the markets yesterday suggested a change in economic perceptions. It could be the beginning of the end. The ugly ChicagoPMI details: 56.4 expected; employment fell to 53.6 from 54.8; production collapsed to 53.9 from 71.1; new orders collapsed to 56.8 from 74.4; prices paid jumped to 84.5 from 80.

"You can forget all the post mortems on the Fed decision and communiqué; the real talk in the money world yesterday was the astonishing collapse in the Chicago PMI."

snip>

Thus, the whole stock market-US economy picture now seems to be in limbo, with the possibility that the stock market and the US economy could tip either way.

On this basis, the stock market remains both confusing and unattractive for retail investors. This is reflected in the current low volume on the exchanges. Nobody really know what to do, and this leaves the day-to-day trading to the hedge fund managers, program traders and the speculators.

[UpInArms]

32. Market Numbers at 11:03 and blather

Dow 10,224.08 +4.74 (+0.05%)
Nasdaq 1,968.14 +4.71 (+0.24%)
S&P 500 1,117.06 +0.85 (+0.08%)
10-Yr Bond 4.470% -0.010

11:00AM: The market drops off its earlier levels as buying interest wanes... The broker/ dealer index has declined significantly over the past half hour, falling below its June lows... The group has been prone to weakness since the start of the year - as investors reduce exposure to interest rate sensitive stocks , although it had demonstrated some relative strength in past sessions as the yield on the 10-year note decreased... Homebuilding is one area that is still catching a bid from the improvement in the bond market, several issues breaking out of their past trading ranges...

Despite the move, the group is still well below its late 2003 highs...NYSE Adv/ Dec 1814/1074, Nasdaq Adv/Dec 1504/1198

10:30AM: Equities continue to tread water just above the flat line, supported by positive market internals... Advancers are leading decliners by a roughly 2-to-1 margin , and up volume is ahead of down volume by a similar ratio at the NYSE and Nasdaq... From a technical perspective, the Nasdaq has held above a key support level above its 50-day simple moving average, at 1970, but has encountered overhead resistance at the 1975/1979 area - a zone highlighted in today's Technical Take (a Briefing.com Platinum product)... The 1979 point marks the Composite's 200-day moving average...

Trading should remain range-bound as long as the Nasdaq is unable to breach that point...NYSE Adv/Dec 1895/865, Nasdaq Adv/Dec 1588/968

[UpInArms]

33. GM, Ford: Take our cars, please

http://www.usatoday.com/money/autos/2004-07-07-auto-incentives_x.htm

DETROIT — General Motors (GM) and Ford Motor (F) are boosting incentives to spark demand and clear out excess inventories after U.S. car and truck sales tanked in June.

GM, whose sales declined 12% last month, is dangling cash rebates of up to $5,000 on most remaining 2004 models and as much as $2,000 on some 2005 models.

Ford is also enhancing deals — including interest-free loans for 60 months — after reporting an 8% drop in sales last month. "Reports of the demise of zero-percent financing are greatly exaggerated," Ford spokesman Jim Cain said.

Raising incentives is hugely expensive and carves into automakers' already thin profit margins, but could help GM and Ford stem troubling market share declines. (Related: June auto sales hit brakes, drop 2% from last year)

Beginning today, the highest rebates are being offered on midsize and full-size sport-utility vehicles, with $5,000 available on 2004 Buick Rendezvous and Rainier and Chevrolet Tahoe, Trailblazer and Suburban models. GM and its dealers ended June with 222,000 excess trucks on hand.

...more...

[UpInArms]

34. Dump the U.S. Dollar for Bigger Bucks

http://www.reuters.com/newsArticle.jhtml?type=reutersEdge&storyID=5608940

LONDON (Reuters) - Investors are racing to buy high-yielding currencies like the Australian dollar and sterling on the prospect of widening interest rate differentials compared with the U.S. dollar.

The U.S. Federal Reserve raised interest rates for the first time in four years last week, but stuck to its pledge of making interest rate rises at a "measured" pace, dispelling speculation of more aggressive monetary tightening.

Analysts say expectations of higher interest rates in Australia, Canada, New Zealand and the United Kingdom have rapidly increased the appeal of these countries' currencies, particularly in carry trades.

Carry trades involve borrowing a low-yielding currency to invest in assets in a higher- yielding market.

High-yielding currencies have also gained against other low-yielding ones such as the Swiss franc and the yen, analysts said.

"The high yielders have been outperforming the low yielders over the past week and this is likely to continue for the next couple of weeks," Bilal Hafeez, foreign exchange strategist at Deutsche Bank, said on Wednesday.

"The Fed's statement was more dovish than people had expected, and they are putting carry trades back on."

U.S. interest rates at 1.25 percent remain extremely low compared with Australia at 5.25 percent, New Zealand at 5.75 percent, Canada at 2.0 percent and the UK at 4.5 percent.

...more...

[54anickel]

35. Preparing for a "micro-mini" recession

http://www.gold-eagle.com/gold_digest_04/droke070604.html

snip>

There will undoubtedly come a time for selling short the broad market this summer. But those who choose to "mortgage the farm" to go short for the longer-term are making a mistake, in my opinion. The coming 10-year cycle low is not likely to be the resumption of a secular bear market, but rather a brief pause/correction in the recovery bull market that technically began with the October 2002 stock market lows.

On a related note, I believe it's now time to start focusing on what could turn out to be a "micro-mini" recession this summer. As discussed in previous commentaries, the Fed's huge downturn in M3 money supply last year (on a rate of change basis) is now being felt and is the main cause of the erosion seen in recent economic numbers. If you think about it, the 10-year cycle is created in part by the Fed's money supply machinations, and the very fact they chose to reduce M3 growth last year almost guaranteed that there would be at least one major bump on the road later in 2004 coinciding with the 10-year cycle bottom. Coincidence? I think not and I rather suspect the Fed is behind the 10-year cycle, more or less.

Back to the micro-mini recession. This extremely minor recession, which could only last from now until the fourth quarter, has already begun in my opinion and is already being reflected in certain economic numbers, e.g., the PPI, factory orders, initial jobless claims, and durable goods orders. Now remember, the backdrop for the 3-5 years ahead is still overall bullish, so this is nothing to get overly excited about. I seriously doubt it will derail the longer-term recovery underway since late 2002. But the period of slow growth we're now in is probably going to worsen just enough to get George Bush Jr. kicked out of the White House come November. Just my opinion.

This relative weakness in economic strength in recent months is reflected in the Economic Cycle Research Institute's (ECRI) Weekly Leading Index (WLI), which shows the U.S. economic growth rate and predicts recessions. The latest WLI reading continues to show erosion and before long we'll have that predicted micro-mini recession on our hands just as the U.S. presidential election heats up and the mainstream press starts to turn everyone's attention to the weakening economy. This will undoubtedly cause a huge increase in bearish sentiment, which will provide a nice psychological backdrop for the 10-year cycle bottom and part 2 of the recovery rally into 2005. :eyes:

more...

[Frodo]

36. Something on Gold Eagle I almost completely agree with?

Amazing!

:-)

[54anickel]

38. Sort of figured you would. Posted that one just for you!

B-)

[54anickel]

44. More Droke and his 10 year cycle theory

http://www.gold-eagle.com/gold_digest_04/droke070504.html

The Presidential Cycle and 2005

snip>

The 4-year cycle is peaking this year, and this cycle peak will coincide with the bottom of the 10-year cycle this fall. In those years where the first year of a presidential term was net bearish, one thing was usually true, namely, a 10-year cycle was still coming down. With the pressure of the 10-year cycle lifted, what's to keep 2005 from being bullish?

Another reader asks, "What would make you change your mind about the markets? In other words, what index levels need to hold? What about PMI divergence (prices up to records, production and orders declining significantly)? What if the economic numbers slow for another month? Does that not change the outlook for earnings? What about stagflation?"

snip>

As for the economic numbers slowing for another month, I really don't think this would matter at all. There is already enough divergences among economic statistics (some bullish, some bearish) that we can probably chalk this up to the effects of the 10-year cycle, which tends to make everything seem confusing. This is because the 10-year cycle is part of the larger 20-year cycle, which means that while the 10-year cycle is bottoming, the 20-year cycle is actually peaking. This accounts for the whipsaw, back-and-forth action of the markets and economy typical in a 10-year cycle bottom year.

And so what if certain economic numbers show a bit more erosion in the next couple of months? Fundamentally, a lot of this can be attributed to the Fed's engineered slowdown of the M3 money supply last year, the impact of which is now hitting the economy. But don't forget the Fed in recent months has opened wide the M3 spigot, which means that by next year the economy will reap the benefit of this huge increase in liquidity. This will make up for any temporary downturn in certain economic numbers between now and year-end.

[Frodo]

52. I think it's all smoke and mirrors.

"4 year cycle peak" "10 year cycle trough" "20 year cycle peak".


Blah blah blah... I think it's so that WHICHEVER way the amrket moves he can say "See? I told you so."

[54anickel]

54. Yep. His are the most bizarre analysis methods I have seen. Then again,

so are his conclusions - IMHO that is.

[54anickel]

37. Forget About a “Neutral” Federal Funds Rate

http://www.gold-eagle.com/editorials_04/temple070404.html

snip>

Eventually, the Fed will move the federal funds rate up to one the markets deem "neutral." Based on the most recent readings on core inflation (and I'll pretend for the purpose of this commentary that the government's misleading numbers are correct) this means the federal funds rate will ultimately reach a level of 4% or thereabouts. At that point, the pundits say, all will be well with the world, and the Fed will no longer be regarded as "behind the curve." Whether we get to such a level on the funds rate is not being seriously debated; only how quickly.

Well, don't hold your breath.

That rates will be hiked modestly has not been in doubt; after all, the Fed would blow what little credibility it has left if it didn't do something to acknowledge that prices are rising at least a little, and that there might be some sustainability to the stimulus-induced bounce of the last year or so. But make no mistake: Greenspan and Company aren't quite as stupid as they often sound. They do know that the economy is not on strong footing of its own accord. They do know that the various bubbles they've blown must not be allowed to lose their air quickly.

In short, their dovish stance on inflation is not unwarranted. This is not because prices are not rising; it is because consumption, wage growth, jobs and all the rest still suggest an economy that would have done little had it not been for the Fed's emergency rate. The Fed will remain loathe to hike rates any more than it absolutely has to.

more...

[54anickel]

39. Kukla, Fran, and Alan (more on Fed rate)

http://www.gold-eagle.com/editorials_04/north070404.html

snip>

FINE TUNING THE ECONOMY

How can the Federal Open Market Committee (FOMC), which decides how many dollars’ worth of securities to buy or sell, decide the precise quantity of T-bills to buy in order to attain exactly a .25 percentage point increase in the federal funds rate? Unless the FOMC has developed forecasting tools that would make its members rich by means of insider trading, it is all guesswork.

But if it is all guesswork, why does the press spend so much time writing about FED policy, a .25 percentage point increase, and the effect on the economy?

Commercial banks announced a .25% increase. Well, not quite. The banks announced a .25 percentage point increase. When the rate is 1%, a .25 percentage point increase is a 25% increase. But when a commercial lending rate is 4%, then a .25 percentage point increase is a 6.25% increase.

Now this is fine tuning, indeed. The FED announces an increase, but does nothing to establish this by means of a perceptible change in monetary policy. Then commercial banks announce a far lower percentage increase as a direct response to the FED’s imperceptible change in monetary policy.

"Bunga, bunga, bunga – rise, rise, rise!"

What is going on here?

more...

[UpInArms]

40. Market Numbers and blather at 12:08 EST

Dow 10,219.12 -0.22 (0.00%)
Nasdaq 1,966.60 +3.17 (+0.16%)
S&P 500 1,117.24 +1.03 (+0.09%)
10-Yr Bond 4.463% -0.017

12:00PM: Stocks have spent most of the morning trading mildly higher, with any attempts to break out of the trading range crushed by technical reasons and/or fundamental concerns... A handful of software companies (PeopleSoft, JDA Software) have issued warnings, which has brought to mind worries about the June quarter reporting season that starts tonight... As expectations are fairly high (Briefing.com believes profit growth could be 20%+), investors are a bit hesitant to commit new money to stocks ahead of the reports...

As for technical barriers, the Nasdaq has run into resistance at its 200-day (and now 50-day) simple moving averages, and a number of sectors have broken down and fallen below monthly lows... Brokerage has been notably weak (broker/dealer is down 1.8%), along with airline, telecom, and software... Other pockets of technology, however, have been much stronger, with networking, disk drive, computer hardware, storage, and semiconductor all performing well - most of those due to a rebound effort off their drubbing in past sessions...NYSE Adv/Dec 1824/1212, Nasdaq Adv/Dec 1419/1430

11:30AM: Stock market continues to drift from its morning highs, the major indices now entering negative territory... The software group has been one of the worst hit areas this morning, resulting from weaker than expected guidance from players like JDA Software (JDAS 10.84 -1.01) and PeopleSoft (PSFT 16.34 -0.48)... The latter has said its softness was due to large legal fees stemming from Oracle's (ORCL 11.18 -0.02) hostile takeover attempt for PeopleSoft...

In a JP Morgan note this morning, though, the firm said its checks revealed weak manufacturing and retail verticals and challenges in Europe, among other things...

[54anickel]

41. 12:07 lunchtime update

Dow 10,217.06 -2.28 (-0.02%)
Nasdaq 1,966.93 +3.50 (+0.18%)
S&P 500 1,117.26 +1.05 (+0.09%)
10-yr Bond 4.463% -0.017
30-yr Bond 5.213% -0.012

NYSE Volume 548,272,000
Nasdaq Volume 841,208,000

12:00PM: Stocks have spent most of the morning trading mildly higher, with any attempts to break out of the trading range crushed by technical reasons and/or fundamental concerns... A handful of software companies (PeopleSoft, JDA Software) have issued warnings, which has brought to mind worries about the June quarter reporting season that starts tonight... As expectations are fairly high (Briefing.com believes profit growth could be 20%+), investors are a bit hesitant to commit new money to stocks ahead of the reports...
As for technical barriers, the Nasdaq has run into resistance at its 200-day (and now 50-day) simple moving averages, and a number of sectors have broken down and fallen below monthly lows... Brokerage has been notably weak (broker/dealer is down 1.8%), along with airline, telecom, and software... Other pockets of technology, however, have been much stronger, with networking, disk drive, computer hardware, storage, and semiconductor all performing well - most of those due to a rebound effort off their drubbing in past sessions...NYSE Adv/Dec 1824/1212, Nasdaq Adv/Dec 1419/1430

11:30AM: Stock market continues to drift from its morning highs, the major indices now entering negative territory... The software group has been one of the worst hit areas this morning, resulting from weaker than expected guidance from players like JDA Software (JDAS 10.84 -1.01) and PeopleSoft (PSFT 16.34 -0.48)... The latter has said its softness was due to large legal fees stemming from Oracle's (ORCL 11.18 -0.02) hostile takeover attempt for PeopleSoft...

In a JP Morgan note this morning, though, the firm said its checks revealed weak manufacturing and retail verticals and challenges in Europe, among other things...NYSE Adv/Dec 1856/1111, Nasdaq Adv/Dec 1498/1307

[Maeve]

42. Noontime numbers

Dow 10,220.16 +0.82 (+0.01%)
Nasdaq 1,967.78 +4.35 (+0.22%)
S&P 500 1,117.47 +1.26 (+0.11%)
10-Yr Bond 4.465% -0.015

12:00PM: Stocks have spent most of the morning trading mildly higher, with any attempts to break out of the trading range crushed by technical reasons and/or fundamental concerns... A handful of software companies (PeopleSoft, JDA Software) have issued warnings, which has brought to mind worries about the June quarter reporting season that starts tonight... As expectations are fairly high (Briefing.com believes profit growth could be 20%+), investors are a bit hesitant to commit new money to stocks ahead of the reports...
As for technical barriers, the Nasdaq has run into resistance at its 200-day (and now 50-day) simple moving averages, and a number of sectors have broken down and fallen below monthly lows... Brokerage has been notably weak (broker/dealer is down 1.8%), along with airline, telecom, and software... Other pockets of technology, however, have been much stronger, with networking, disk drive, computer hardware, storage, and semiconductor all performing well - most of those due to a rebound effort off their drubbing in past sessions...

[Maeve]

43. Triple threat triplets post again!

[54anickel]

46. Sort of scary, ain't it?

[UpInArms]

45. a salute to the posting triplets

:D

[54anickel]

47. Freddie Mac's Impending Fiasco

http://www.forbes.com/2004/07/06/cz_rl_0706soapbox_print.html

snip>

The revised numbers show that Freddie (nyse: FRE - news - people ) broke even for the second half of 2003, after a profitable first half. Losses from its derivatives trading--the source of the accounting problems and of some $4.3 billion in losses in the second half of 2003--were the cause of the poor second-half showing. To refresh your memory, interest rates fell in the first half of 2003, and they rose in the second half. Perhaps you need not be reminded where they've gone since April of this year.

What's especially disturbing is that little guidance was given for any quarter of 2004 and, despite promises of greater transparency, management stated there would be no reporting of 2004 results until March 2005! The reason given is that the accounting is still not up to snuff. In fact, detailed financials for 2003 won't be published until September, so analysts will have to wait another three months to find out what wasn't said on June 30.

Given the declining results in the second half of 2003, it was not inappropriate for one analyst to quiz Freddie's chief financial officer on the company's conference call what the effect of rising interest rates would have on its trillion-dollar-plus portfolio of derivatives. His astounding reply: "I don't know." So much for transparency.

Reporting bad news still does not come easily at Freddie, so we need to look to other sources of information. First, we hear that banks are reporting they expect to benefit from interest rate rises, contrary to past experience in rising rate environments. Since they are big in the derivatives markets, where Freddie is one of the biggest players, it may well be that their optimism is because they are the counterparties to Freddie's derivatives contracts. Also, look to Fannie Mae's (nyse: FNM - news - people ) reporting for the first quarter of 2004. It reported losses of $1 billion on derivates, and this was before rates started rising in April. Since both companies have about $1.3 trillion in such contracts, Fannie's loss may be a fair estimate of Freddie's loss, if only it were as smart. As I have said in previous columns, the concern has always been that rising rates could cause Freddie to implode, much like the Long Term Capital Management hedge fund or the Orange County investment fund. Only, this time, the fallout could cause a systemwide financial panic.

more...

[Maeve]

49. 1:03 update

Dow 10,216.03 -3.31 (-0.03%)
Nasdaq 1,964.25 +0.82 (+0.04%)
S&P 500 1,116.64 +0.43 (+0.04%)
10-Yr Bond 4.467% -0.013

12:55PM: Stocks continue to hold tight to their neutral trading range today... Most of the summer's activity has been equally lackluster, as major players have been on vacation and potential terrorist targets like the Summer Olympics, or the major parties' National Conventions, have kept buyers reluctant... Briefing.com continues to anticipate a slight rally near the end of the year as more clarity emerges as to the winner of the national election...

[54anickel]

55. 30 minutes later and the bargain hunters have turned up

Dow 10,245.15 +25.81 (+0.25%)
Nasdaq 1,970.85 +7.42 (+0.38%)
S&P 500 1,119.69 +3.48 (+0.31%)
10-yr Bond 4.479% -0.001
30-yr Bond 5.221% -0.004


1:25PM: The market lifts a bit as trading remains choppy in the afternooon... The price of crude oil has dropped over 1% today, to $39.10/bbl, after yesterday's run-up to one-month highs - the net effect having a positive effect on the market... Saudi Arabia's oil minister said the country was committed to boosting OPEC quotas August 1, which will help to alleviate some supply concerns... Saudi Arabia also reiterated that OPEC will raise its targets by 500K/bbl a day on July 21...NYSE Adv/Dec 1828/1280, Nasdaq Adv/Dec 1425/1514

[54anickel]

53. Europe Gold Gains More Than $10

http://biz.yahoo.com/rb/040707/markets_precious_europe_1.html

LONDON (Reuters) - Gold prices jumped by more than 2.5 percent, or $10 an ounce, in Europe on Wednesday after the euro surged amid waning expectations of aggressive rises in U.S. interest rates that might revive the dollar.

snip>

The gains in Europe contrasted with Tuesday's drop of around two percent when funds liquidated positions. Dealers said a sizeable amount of that selling seemed to have gone through during the afternoon gold fix.

"Gold broke through several resistance levels and stops were triggered. We had some buying on the back of the weaker dollar -- part of it comes from short covering, another part is due to the exaggerated correction we witnessed on Tuesday," one dealer said.

snip>

Reade saw no sign of major speculative or investment buying returning to the gold market, leaving the metal locked in a range and a prisoner of foreign exchange and technical trading flows.

[54anickel]

56. We are all doomed, doomed, doomed (Mogambo warning - he rips a bit on

Krugman this time)

http://www.321gold.com/editorials/daughty/daughty070704.html

snip>

...I absent-mindedly clicked the button that took me to the official National Debt figures provided by the government, and was astonished to see that the debt had ballooned to $7.274 trillion, up from $7.206 trillion, in one day. One day! $68 billion dollars in new debt in one freaking day!

snip>

But, then again, we are talking about the Federal Reserve, and the Federal Reserve itself is seemingly always happy to commit any kind of monetary fraud you can name. And to prove it they bought up another $2 billion in government debt last week. Thus, with this one stroke of a computer button-- beep! --they extinguished $2 billion in government debt and instantly created the same amount of money in the coffers of member banks. Money out of thin air. This is, of course, the ultimate central bank fraud. In a related vein, we turn to Rob Peebles, in his Random Walk column on the Prudent Bear site, and read his new essay entitled "Don't Stop The Stimulus." He seems to agree with me when he says that not only have we had massive stimulative fiscal and monetary policy, but he concludes that, like me, "They have been so stimulative it's hard to imagine taxes getting cut any more, the government spending any faster, or Alan Greenspan's Fed getting any looser."

snip>

Bill Buckler of The Privateer newsletter says that he has taken a look at the first quarter 2004 "Z-1 flow of funds," the report on US credit and financial flows, and his nerves are shot as a result. He notes "The total US credit market debt expanded at a seasonally adjusted $US 2.733 TRILLION (in ONE year) to $US 34.625 TRILLION."

snip>

The folks at the Daily Reckoning have not forgotten bond owners, and they bring the news that bonds have had the worst showing in 24 years. Addison Wiggin does the heavy lifting and adds the details "Treasurys are heading for their worst quarterly loss since 1980. The 10-year note started April at 3.84%. Yields had risen as high as 4.90% on the 14th June." And since bond prices move inversely to rates, you can see how bond owners got whacked. If you stand real still and listen as hard as you can, you can hear the hearts of creditors breaking. I am sure that these boneheads, who bought bonds at the highest prices in a quarter of a century, will not learn anything from this fiasco, because they are obviously the dimmest stars in the investment firmament.

And who are these morons that bought the worst thing at the worst time at the worst prices? Well, if you have any mutual funds that own any bonds, even in the most roundabout way, then that chump is, and I hate to be the one to break it to you like this, you.

more...

[54anickel]

57. Russian Government Begins Seizing Yukos Assets

http://www.washingtonpost.com/wp-dyn/articles/A33869-2004Jul7.html

MOSCOW, July 7 -- The Russian government moved Wednesday to begin seizing assets of Yukos Oil Co. in the culmination of a politically charged tax battle that could either bankrupt or break up the country's largest oil producer.

Court marshals accompanied by special police forces raided the company's registry office in Moscow at the end of the business day to search for ownership documents for various Yukos properties. The marshals were enforcing last week's court judgment giving Yukos a Wednesday deadline to pay a $3.4 billion back tax bill.

Yukos said this week that it had no more than $1.4 billion in cash and could not pay the full charge in time without an installment plan. Yukos reportedly offered to turn over some or all of the controlling stake owned by the company's imprisoned chief shareholder, Mikhail Khodorkovsky, and his partners, but all attempts at negotiations appeared to have failed so far.

snip>

Authorities can seize the company's assets and either keep them to satisfy the tax debt or sell them off. But it is possible they were not able to find the right documents at the office of the registry, a firm called Reyester-M. Yukos said registry documents of its subsidiaries in Siberia and along the Volga River were transferred last week after the court ruling, apparently to those regions.

more...

[Maeve]

59. Almost 3 and things are looking up

Dow 10,263.29 +43.95 (+0.43%)
Nasdaq 1,973.96 +10.53 (+0.54%)
S&P 500 1,121.88 +5.67 (+0.51%)
10-Yr Bond 4.480% +0.000

2:35PM: Buyers continue to exert more influence over the proceedings, and push the indices to new highs... The indices' resilience in the morning trade - in which they did not drift meaningfully lower despite the weak conviction of buyers - has led investors to shift more money towards stocks... As it so happens, the bond market has actually faltered in response to the advance - the 10-year note has surrendered all of its gains, and is now down 1 tick... Stock market breadth figures reflect the improved stance - with advancers outpacing decliners at both the NYSE and Nasdaq...

[54anickel]

61. Woo-hoo! We're in the money! Wonder how big of an end of the day

rally they'll be able to muster up.

[Maeve]

64. Aren't rallies supposed to go UP??

Dow 10,237.04 +17.70 (+0.17%)
Nasdaq 1,965.92 +2.49 (+0.13%)
S&P 500 1,118.20 +1.99 (+0.18%)
10-Yr Bond 4.472% -0.008

:shrug:

[54anickel]

67. DOH!!!! What's that old Bowie song....Ch-ch-ch-changes

I guess I didn't really expect a rally anyway. Why would today be different than any of the past, what 4 or 5 days now?

I wanted to be a cheerleader. Being a bear, I should have known I'd suck at it. Oh well, there's always tomorrow - that's the ticket!!! A rally along with strong growth and a booming recovery will come tomorrow, or the next day, or the next, or the next....we're on the cusp of something big!

[Maeve]

71. Nah...it's not your cheerleading..

It's the rally that sort of sucked.

And I think you switched songs in the middle of posting...I hear distinct overtures of "Annie" playing.

"Tomorrow, tomorrow! I love ya, tomorrow! You're only a day away!"

:loveya:

[54anickel]

69. Closing "stuff"

Dow 10,240.29 +20.95 (+0.21%)
Nasdaq 1,966.08 +2.65 (+0.13%)
S&P 500 1,118.33 +2.12 (+0.19%)
10-yr Bond 4.472% -0.008
30-yr Bond 5.222% -0.003

NYSE Volume 1,328,943,000
Nasdaq Volume 1,754,211,000

Close: The market held its head above water for most of the session, finishing with modest 0.1-0.2% gains... Today's move higher was largely a response to the last three sessions of straight losses - buyers re-emerged and targeted some of the hardest hit areas like technology... However, the conviction behind such efforts was weak - as evidenced by the split market internals at the NYSE and Nasdaq... As a result, the major indices were unable to put together a sustainable rally and the Nasdaq and S&P 500 alike finished below their 50-day simple moving averages...
Selling in one notable area of tech - software - held the Composite back as the space suffered from warnings from JDA Software (JDAS 10.99 +0.86) and PeopleSoft (PSFT 17.10 +0.28)... Blue chip areas were largely mixed for the day - financials falling behind due to concentrated selling in brokerage, but materials, energy, and health care climbing higher...Tonight, after the close, Alcoa (AA 32.70 +0.72), Genentech (DNA 53.78 -0.88), and Yahoo! (YHOO 32.63 -0.59) will report their Q2 (June) numbers... SOX +1.1, NYSE Adv/Dec 2028/1248, Nasdaq Adv/Dec 1428/1632


Advances & Declines
NYSE Nasdaq
Advances 2056 (59%) 1428 (44%)
Declines 1213 (35%) 1632 (50%)
Unchanged 161 (4%) 172 (5%)

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

Up Vol* 780 (58%) 837 (47%)
Down Vol* 512 (38%) 847 (48%)
Unch. Vol* 37 (2%) 62 (3%)

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

New Hi's 180 60
New Lo's 116 102


Have a great night everyone :hi: