Posted by Ray on June 2, 2010 under Main | 
Oh, wait, criminal charges may be filed against BP, but the crooks and liars from Wall Street are just fine. Is it me or do you see the supreme hypocrisy around this whole situation? BP is doing everything under the sun to correct its wrong, I know, it is not enough, but nevertheless they are paying people who lost their livelihood, paying for the cleanup and doing everything in their power to stop the flow of crude from the well and they may face civil and criminal charges. However, the banks, ratings agencies and other related crooks who bilked trillions in bailouts from governments, i.e. the taxpayer, that is you and I, on fraudulent loans and bonds are getting bonuses.
What is going on? What is the difference between BP and Goldman Sachs? Well, for one thing it is the money. Wall Street, collectively, gave Obama $23M in campaign contributions in 2008, the most out of any candidate running in the series that year. Compare that towards the oil and gas industry and it really just does not compare at all, Wall Street has the cash and if you think that has nothing to do with it you are naïve or blind to the hard facts of life. I am not saying BP, which as of yesterday I am a shareholder of, did nothing wrong, but they hardly blew up the financial system and drove millions out of jobs, their homes, blew up retirement plans and the list goes on, but Wall Street did all of that.
Where are the kangaroo trials for Wall Street? Where is that change I can believe in? I do not see it. I see the green lobby getting their kangaroo trials, but not the American people who lost trillions. We got Bernie Madoff which is not exactly a shining example of government efficiency as a whistle blower tried to turn him in 10 years ago, but other than that we got nothing other than an exploding deficit. The bankers got their bonuses last year, actually, if you think about it, they got their bonuses in 2008 as well and were really not impacted at all by the financial crisis in the least. Sure, some lost their jobs, lower level people, but not the main players who made it happen and they are still making millions a year.
The ratings agencies are still doing what they always do, rating paper on fantasyland assumptions which are far from reality and there is zero reform going on there. Goldman is going whatever Goldman does, perfect trading days for all of 2010, how does that happen? Citi is getting right back into the game of packaging and selling CLO’s again, more garbage to go into your mutual fund, how exciting! Yet, Chuck Prince still has his millions, John Mack still has his millions, all the executives at Lehman are still wealthy, same at Bear Sterns, but what about their bond holders and shareholders? What about Repo 105?
Give us 1 freaking show trial! Instead we are getting BP under investigation, great. I am sure the granola kids will love that show trial, but for those of us who actually pay taxes, work and actually show up to vote, well, we are mad and want some Wall Street heads on a platter still. Preferably Lloyd’s, but I will take John Mack’s just the same, I am not picky.
Subscribe to Annuity IQ's Feed
LS Blogs
Sphere: Related Content
Tags: bernie madoff, bp, campaign contributions, cleanup, corruption, criminal charges, crooks and liars, financial crisis, Goldman Sachs, government efficiency, hypocrisy, oil and gas industry
Posted by Ray on June 1, 2010 under Main |
The media is blaming BP for just about everything nowadays including today’s selloff which is absurd to say the least. There is little doubt that BP has had an impact on the oil service sector and sent those shares lower as the government is about to unleash the proverbial Hell on the sector for what amounts to a horrible accident. A word on the spill, it is terrible, awful and I hope it gets taken care of as soon as possible, but BP is doing everything it is supposed to be doing. Even the President admitted that the company cannot make a move without his direct approval, so let’s make sure we spread blame to all who deserve it. However, the leak is not the cause of the market selloff, but only part of the problem.
What I found extremely interesting in Tuesday’s trading was that the Euro made a fresh 4 year low and someone decided to step in and buy the Euro like no tomorrow. It had to have been a central bank because I know of no investor that would be anxious to buy anything that just made a fresh 4 year low on speculation of a rebound, but that is rumor and my own speculation and it does not matter who did it because it happened. The Euro is leading the trading and that is what is important to realize and that in itself is what is interesting because that trend is on again and off again day by day so do not depend on the Euro to always be the guide. To be sure if the Euro is leading the way check the EURO/USD and EURO/JPY pairs and id they are both heading in the same direction with the market the trend is valid, if they are mixed take your own chances trusting the Euro to lead.
What else was extremely interesting today is the fact that the Russell 2000 and the transports had diverged from the Dow 30, S&P 500 and the NASDAQ all day today. It is also important to note that I have mostly thrown my charts away as I feel they are more or less useless at this point, but I do look at them from time to time. Regardless, I always use the RUT, Russell 2000, to gauge the overall movement of the market and where we are ultimately heading for the day, it is fairly accurate as it is a broad based index, and if you are a Dow Theorist you watch the transports anyhow to see where the Dow will go for the day. I guess I am a bit of everything because I watch a lot of things all throughout the day. Of interest was the RUT was down a good 1.7% most of the day as the Dow was positive and the S&P crossed throughout the day and the transports were also down about 1% throughout the day as well.
Having a divergence in itself is not a big deal, it kind of happens all the time and the markets tend to even out at the end of the day, but not today. The RUT and the transports ended down pretty hard, almost 3% and over 2%, respectively, while the Dow ended down 112 and the S&P ended down 18. Typically, when the RUT and transports are down that much the Dow is down about 200+ and the S&P is down about 30 so it was strange trading all day long. It is safe to assume that I merely held my shorts today as I think there is something to this divergence and there is more downside to this market. However, the real catalyst for the selloff was not BP, oh no, it was the EU.
About 10 PM EST last night the ECB released a statement saying that EU banks may write down about $290B in debt, that is a problem. When that news hit it drove futures down 50 ticks and they just stayed there all night long. Considering that it was a holiday that is a pretty big move so I was not surprised this morning when I saw the open, but I was surprised on the turn at 10 AM when the markets went positive and I saw the divergence in the different indices. I kept waiting for the reversal to happen again, but it did not come through until 3:30 which is a bit odd, kind of, but it also shows that this market is not a bull market at all anymore, it is a bear market. A bull market would not be trading like this and we would not get such bearish signals at 3:30 PM, sorry to be the bearer of bad news.
I do expect a rally in the short-term, but nothing to write home about, previously I thought a run to 1,200 on the S&P was possible, but not any longer. I believe we may see 1,120 or so, but that is about it unless the news really turns, which I do not see happening. I believe the ISM data we saw today is the beginning of the official rollover in the data series, leading indicators already rolled, and I am not expecting much more strong economic data as the stimulus money is gone, that was a quick trillion, eh.
Everyone is watching for the employment report on Friday, but no one looks beyond the headline number so why bother? With initial claims in at 460K, 2.5 years into this thing(!), we are in negative job growth territory. I expect to see the unemployment rate climb to 10%+ as people get back into the workforce as extended unemployment benefits are running out and people reenter the workforce. I expect a high number of government employment which needs to be discounted and one needs to remove the Birth/Death model tinkering that occurs because those jobs are simply made up, that is why 880K jobs had to be added to the unemployment roles in February as this model underestimates the unemployment rate. If the private sector is adding only temporary workers at this stage we are in big, big trouble and that is NOT a bullish item, it is very bearish. Overall, I expect a number that is going to be in the 300 – 350K area, I hear of some shenanigans in the numbers, more on that is I can confirm, but until then it is rumor only.
I do not believe there is much upside to this market and the risks run very high with the exception of cash and gold. At this point even high paying income stocks are getting hit hard and bonds are, in my opinion, overvalued at this point and I got very lucky with my exit on high yield. I like short treasuries, 2 year durations, but cash is better at this point. I believe deflation is here and it is going to get very tough going forward which means stocks are way overvalued by 20 – 30%, think 10-12 P/E on $75 earnings on the S&P plus much lower growth. Be very nimble or start looking for entry points for a short position, but you should have been doing that 3 weeks ago so don’t go jumping on the bandwagon now without doing your research.
At this point I am holding high yielding stocks, short duration treasuries, country specific ETF’s, equity income ETF’s, 3x bear ETF’s, put options, gold, silver and platinum group metals. Clearly I am thinking much lower equity prices, deflation followed by inflation at some point. Everyone is a genius when the market is going up, but we are about to hit a very rough market and I expect volatility to remain elevated for some time and the VIX might offer some excitement for you, but you must understand it before you do anything with it. In the meantime my price target is 900 on the S&P 500 which has been my target since the beginning of the year, I think it could go much lower if conditions worsen. Good luck.
Subscribe to Annuity IQ's Feed
LS Blogs
Sphere: Related Content
Tags: bp, credit crisis, dow 30, economic recovery, employment report, gold, inflation, market correction, nasdaq, oil service sector, oil spill, recession, russell 2000, selloff, speculation, spill, stimulus, transports
