comMITTed to Romney!

Reading market reports this morning and listening to Barron’s videos discussing Geithner’s testimony before Congress the other day, one word keeps popping up in my mind: incompetence.

It’s not just one person’s opinion, the world wide financial community is spooked by this administration and especially Geithner’s timidity and lack of specificity. The market was looking for details and it got generalities. As an editor at Barron’s put it so ominously, “If there was a way to sell the world short, we would do it.”

~~John Cronin~~

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With today’s sell off in the bank stocks, Mr.Schiff’s warnings are taking on a new urgency.

~~John Cronin~~

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NEW YORK — U.S. stock futures pointed to an opening slump on the first day of December, as gloomy world-wide economic data took the wind out of last week’s rally.

S&P 500 futures dropped 21.7 points to 873.60 and Nasdaq 100 futures fell 27 points to 1,159. Dow industrial futures dropped 178 points. Last week, the S&P 500 climbed 12%, the Dow industrials rose 9.2% and the Nasdaq Composite rose 11%. The direction of futures doesn’t always accurately predict the direction of stocks at the opening bell.

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DJIA up 304 points. Whoo Hoo! Good to have something to cheer about. Don’t throw caution to the winds, this could just be a bear market rally. That being said, the Dow Industrials’ P/E has declined form 45.77 ( year ago), to 16.85 as of 11/21/08 and the 12 mo. forward estimate is 8.95 with a dividend yield of 4.03%.**

These have historically been levels at which bear markets tend to stabilize and where the conditions that set up the next bull market materialize.

~~John Cronin~~

**Sources: Birinyi Associates, WSJ Market Data Group

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http://www.marketwatch.com/news/story/story.aspx?guid={223B0E95-C272-47B7-BCFA-2ECF65583015}&siteid=rss

U.S. stock futures pointed to opening gains on Monday after the last session’s blast higher, with Citigroup set to rise after the government injected $20 billion as part of a rescue package.

A late-hour rally pushed U.S. stocks to huge gains on Friday, with the Dow Jones Industrial Average jumping 494 points, the Nasdaq Composite rising 68 points and the S&P 500 rising 47 points. The gains came after news leaked that Timothy Geithner will be President-elect Barack Obama’s Treasury Secretary, though not all observers were convinced the gains were on the new selection alone.

“Anyone watching the markets Friday will be seriously suspicious of the validity of the huge rally. It was option expiration, and the rally seemed to feed on it itself and in a few select stocks,” said Tom Hougaard, market strategist at City Index in London.

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I don’t agree with many of the conclusions reached by the author of this article and I most assuredly hope he is wrong about another Depression looming on the horizon. I posted this as a FYI about what some market opinion makers are thinking.

~~John Cronin~~

http://www.marketwatch.com/news/story/Well-Great-Depression-2-2011/story.aspx?guid={B28B49B5-EFD1-4941-B57E-A2BA1545BA09}

New-New Deal, bailouts, trillions in debt, antitax mindset spell disaster

ARROYO GRANDE, Calif. (MarketWatch) – By 2011? No recovery? No new bull? “Hey Paul, why do you keep talking about a bigger crash coming by 2011?” Readers ask that often. So here’s a sequel to my predictions of 2000 and 2004, with a look three years ahead:

First. Dot-com crash

We pinpointed the dot-com crash at its peak, in a March 20, 2000 column: “Next crash? Sorry, you won’t see it coming.” Bulls-eye: The dot-com bubble popped. The economy went into a 30-month recession. The stock market lost $8 trillion. And today, over eight years later, the market is still roughly 40% below its 2000 peak. See previous Paul B. Farrell.

Factor in inflation and the average stock has lost well over 50% of its value. Stocks have proven to be a very big loser, a bad investment for Americans, thanks to Wall Street’s selfish greed, plus the complicity and naiveté of politicians, press and public.

Second. Subprime meltdown

We reported on warnings of another crash coming as early as 2004, wrote a sequel, also titled “Next crash? Sorry, you won’t see it coming.” Yes, we were early, but in good company. We wrote many more warning columns. Few listened.

Subsequent events, notably former Fed Chairman Alan Greenspan’s admission of his failures in congressional testimony, prove that if he and other Reaganomic ideologues weren’t so myopic and intransigent about proving their free-market deregulation theories, they could have acted earlier and prevented today’s colossal mess. Instead, their ideology kept the bubble blowing, delayed the pop, making matters worse.

So once again, as history proves over and over, ideology trumps common sense, reality and the facts. Greed drives ideologues to blow bubbles. They pop. Crashes happen. The public is collateral damage.

Third. Megabubble cycles

We also detailed the broader, accelerating macroeconomic sweep of cycles last summer in columns like “20 reasons new megabubble pops in 2011.” We summarized a long list of major warnings from financial periodicals — Forbes, Fortune, the Wall Street Journal, Economist — and from the voices of Warren Buffett, Bill Gross, a sitting Fed governor and a former Commerce secretary. Multiple warnings “hiding in plain sight,” beginning with a Fed governor warning Greenspan in 2000 about subprime risk.

But the big shocker came from the new Treasury secretary two years before the meltdown: Bloomberg News reports that shortly after leaving Wall Street as Goldman Sachs’ CEO, Henry Paulson was at Camp David warning the president and his staff of “over-the-counter derivatives as an example of financial innovation that could, under certain circumstances, blow up in Wall Street’s face and affect the whole economy.”

Yes, they knew. And still both Paulson, a Wall Street insider, and Greenspan’s successor, Ben Bernanke, a Princeton scholar of the Great Depression, stayed trapped in denial and kept happy-talking the public for months after the meltdown began in mid-2007. Get it? While they could have put the brakes on this meltdown years ago, our leaders were prisoners of their distorted, inflexible views of conservative Reaganomics ideology.

As a result, once again the “best and the brightest” failed America and now they and their buddies in Washington and Corporate America are setting up the Crash of 2011.

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Woo Hoo!! At last, some common sense. Now if we poor, exploited taxpayers could get back the $440,000 blown by the big-spending party boys over at AIG, I’d be feeling better about the bailout, but not by much.

~~John Cronin~~

http://online.wsj.com/article/SB122687023712831667.html

By SUSANNE CRAIG

The seven top executives at Wall Street firm Goldman Sachs Group Inc. will not receive bonuses for 2008, according to a Goldman spokesman.

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http://www.marketwatch.com/news/story/ratings-agencies-put-system-risk/story.aspx?guid={6A0F18B2-1DB3-4D77-89C7-B5EE7C1829D2}

By Rex Nutting, MarketWatch

WASHINGTON (MarketWatch) –

Credit rating agencies put the global financial system at risk because they had to be lapdogs, not watchdogs, to survive, a top CEO testified Wednesday.

The three major agencies – Moody’s, Standard & Poor’s and Fitch — were caught in a race to bottom, forced to lower their standards in an attempt to maintain their market share, said Raymond McDaniel, chief executive officer of Moody’s, who testified on Capitol Hill on Wednesday.

“We drank the ‘Kool-Aid,’” McDaniel wrote in an internal memo released Wednesday.

That race to the bottom was very lucrative in the short-run for the companies, but disastrous for the global economy in the long haul, said Rep. Henry Waxman, D-Calif., chairman of the House Oversight and Government Reform Committee. Waxman said revenues at the three ratings agencies doubled between 2002 and 2007 to $6 billion, while Moody’s had the highest profit margin of any company in the S&P 500 for five years running.

The three agencies rate financial securities on the risk that they won’t be paid off.

Between 2002 and 2007, the agencies rated a flood of mortgage-related securities issued by Wall Street firms, giving many of the securities a coveted AAA rating at the time, only to downgrade most of them as house prices tanked and defaults spiked. The subsequent collapse in the value of those securities has taken the global financial system to the “brink of the abyss,” in the words of the head of the IMF.

“The story of the credit rating agencies is a story of colossal failure,” Waxman said. “Millions of investors rely on them for independent, objective assessments.”

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Here’s some interesting information from our friends over at MarketWatch on signs to look for when the market is poised for a recovery.

~~John Cronin~~

By Michael Ashbaugh, MarketWatch

But when measuring the current upturn’s credibility, the following is a checklist for signaling a major market low.

Several, if not all, of the events below need to occur:
• An off-the-charts strong-volume rally that’s not driven by government intervention. Monday’s 400-point Dow spike came on the lightest volume in 18 sessions.
• The emergence of sector leadership. Along with the financials, the airlines have acted well, but these groups won’t do it. Ultimately, the financials will be dead money for some time — several years — and they’ve been propped up through almost daily government intervention.
• At least one, and preferably two, 20-to-1 up days to neutralize the October breakdown. Over the past 11 sessions, the U.S. markets have suffered three 20-to-1 down days, the most recent occurring last Thursday.
• A volatility drop to digest the market crash. For instance, a series of 100-point Dow moves — in either direction — uninterrupted by these 800-point intraday whipsaws.
• From a sentiment standpoint, analysts need to stop declaring how great this buying opportunity is.
• A decisive break atop resistance.

So that’s the technical wish list.

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Note to government officials, especially to Barack Obama/John McCain: I know you are pumping liquidity into the financial system, and that is certainly necessary, but in addition to that, one of the most effective way to stimulate the economy and stop the stock market free-fall is to CUT INDIVIDUAL AND CORPORATE TAX RATES!!!

IMHO, if either candidate fails to promise to cut taxes upon assuming office, you can write the economy and the market off for at least the next four years.

~~John Cronin~~

http://online.wsj.com/article/SB122406877778235991.html

Dire economic data knocked stocks sharply lower Wednesday, with the S&P 500 posting its worst single-day percentage decline since Black Monday 1987, as investors braced themselves for an ugly recession.

The session’s drop rekindled debate on Wall Street about whether last week’s lows will hold up. Increasingly, it seems the record 936-point gain registered by the Dow Jones Industrial Average Monday wasn’t enough to put the market on sure footing

“I don’t just think we’re going to test the lows. I think we’re going to violate them and break lower in a big way,” said Kent Engelke, managing director at the brokerage Capitol Securities Management, in Richmond, Va. Referring to the possible fallout in the broader economy from the credit crisis, he added: “We don’t yet know what that is, because this situation is so unprecedented. Every road sign has been obliterated.”

The Dow’s losses accelerated as the closing bell approached, leaving the blue-chip measure down 733.08 points for the day, off 7.9%, at 8577.91, hurt by losses in twenty-nine of its 30 components. The only exception was Coca-Cola, which climbed 1.1% after posting a strong profit report. The Dow has retraced more than half of its point gain between Friday’s low and Monday’s close. The decline Wednesday was the worst on a percentage basis since Oct. 26, 1987.

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http://online.wsj.com/article/SB122394318763531045.html

By SUSAN PULLIAM

Some hedge-fund titans have yanked most of their money out of the stock market, a bearish sign amid Monday’s euphoria and an indication of how the hedge-fund business is changing amid chaos.
In recent days, Steven Cohen, the hedge-fund manager who runs the $14 billion SAC Capital Advisors, moved about half his funds, or about $7 billion, into money-market and other short-term securities, eliminating much of his fund’s exposure to the stock market, says a person close to the fund. Mr. Cohen plans on sitting on the sidelines for the rest of the year — trading a small portfolio himself …

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Logging on to MARKETWATCH early this morning to get up to speed on the latest market news, I saw news releases from three law firms advising potential clients to “consider their legal options” if they suffered losses because of “large, concentrated positions in stocks.” They were also talking about class action suits regarding an insurance company and a stock brokerage.

What an amazing period of financial history we are witnessing. One year to the day from it’s historic high of 14,000, the Dow had booked losses of $8.4 trillion. Today’s headlines herald a new series of woes for what’s left of Wall Street as the legal vultures are now circling. Don’t misunderstand me. If the brokerages violated the law, they must be held accountable. Just like the pirates over at Fannie and Freddie must be held accountable if they broke the law. Hopefully, some political leader will step up to the plate and hold those responsible for wrecking the financial system to be placed in the same position as any other private citizen if we were guilty on a small scale of what they may be guilty of on a massive scale.

Here’s some unsolicited advise for the major political parties. Whoever goes after the looters who have come within a hair’s breath of wrecking the global economy, will be in power for a long time. The voters are furious and they are waiting for someone in the Oval Office, the Attorney General’s office and the District Attorneys around the country to step forward and, at long last, protect the interests of the people that they have taken an oath to serve.

~~John Cronin~~

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http://www.marketwatch.com/news/story/shares-europe-plunge-again-tumultuous/story.aspx?guid={B5882B27-F163-4F02-B597-A19AB3B5E8A8}

German DAX down 8.2%, French CAC-40 down 6.8%, FTSE 100 down 6%

By Sarah Turner, MarketWatch

LONDON (MarketWatch) – The main national European shares indexes all plunged on Friday, capping a week of carnage in equity markets when policymakers and central banks desperately battled to shore up financials and limit damage to the global economy.

The pan-European Dow Jones Stoxx 600 index fell 6.2% to 208.11, a drop that ranks among the worst one-day falls for the index.

The Stoxx 600 has fallen more than 20% in the last week, leading some strategists to call it a bear market within a bear market. For the year, the Stoxx 600 is down close to 44%.

The European drops followed similar declines in Asia. Japanese shares plunged Friday, with the benchmark Nikkei 225 Average seeing the biggest one-day drop in more than two decades, as panic-stricken investors rushed to dump stocks to raise cash.

U.S. stocks on Thursday collapsed to fresh five-year lows, with the major indexes slammed for a seventh straight session as financial shares and General Motors Corp. tanked and global credit woes spurred panic-stricken investors to flee equities.

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http://www.marketwatch.com/news/story/us-stocks-tank-close-dow/story.aspx?guid={2067E099-1A1C-4B3B-B193-D2B70F65B7D4}

Dow industrials down over 5,500 points, or 39%, from year-ago peak

By Kate Gibson, MarketWatch

“There are only two things that will turn this market around: One is any sign that the credit markets are thawing out, and the second is we finally find a level at which stocks have finally become too cheap, sank 678.91 points, its third-largest point loss on record, to finish at 8,579.19, pushing the blue-chip index under the 9,000 level for the first time since August 2003.

One year to the day after climbing to its peak of 14,164.53, the Dow Jones Industrial Average sank 678.91 points, its third-largest point loss on record, to finish at 8,579.19, pushing the blue-chip index under the 9,000 level for the first time since August 2003.

The Dow’s close leaves it 5,585.34 points, or 39.4%, under its year-ago high.

All of the Dow’s 30 components closed under water.

“Indicators on the state of the credit markets have improved over the past two days but the improvement has not been enough to turn the tide on the equity market’s slide,” said Tony Crescenzi, chief bond market strategist at Miller Tabak & Co.

Volume on the New York Stock Exchange topped 2 billion, and declining stocks outran those advancing 10 to 1. On the Nasdaq, nearly 1.4 billion shares traded, with decliners surpassing advancers nearly 5 to 1.

In commodities trade, gold fell, with the contract for December delivery dropping $20 to end at $886.50 an ounce on the New York Mercantile Exchange.

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http://www.marketwatch.com/news/story/dow-sp-500-approach-important/story.aspx?guid={2D3E860B-AD90-4E08-8FB1-C2AC2178560A}&dist=news

Dow, S&P reach important downside targets

Before detailing the U.S. markets’ wider view, the S&P 500’s hourly chart highlights the past three weeks.

From the Sept. 19 peak to Monday’s close, the S&P has plunged 257 points.

That’s a brutal, 20% bear market across just 12 market sessions.

In Monday’s action, the index bottomed just above the 1,000 mark before rising to close at 1,056.

Meanwhile, the Dow industrials have also been crushed.

In its case, the index has plunged 1,946 points from the Sept. 19 peak to Monday’s close, marking an ugly 17% drop across just 12 market days.

Monday’s close came in at 9,955 marking its first finish under the 10,000 level since Oct. 26, 2004.

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