Saturday, May 26, 2007


"I’ll suggest as well that we’ve entered a dangerous period of Bubble-on-Bubble Excess. Despite several years of significant stock market inflation – three-year gains of 46% for the Russell 2000, 51% for the S&P400 Mid-Cap index, and 40% for the Wilshire 5000 - liquidity abundance has nonetheless nurtured a fanciful view that U.S. equities remain “undervalued.” The S&P500 this week traded back to year-2000 record highs, with the bulls keen to note that earnings have risen markedly since then (corporate profits have doubled since 2000 in total from the National Income and Product Accounts, and similarly for S&P500 companies).

So the bulls today trumpet the case that U.S. stocks are cheap in real terms (S&P500 at “only” 18 P/E) and relative to global equities prices. The reality of the situation, however, is that years of U.S. Bubble excess have significantly inflated “fundamentals” such as corporate earnings and cashflows and personal incomes, along with global asset prices generally. Bubble-on-Bubble excess today inflates the perceived reasonable bounds for valuation to extremes - on top of an earnings base that is acutely vulnerable to a post-Bubble collapse. Yet perceptions hold that market risk is today much lower than during the 2000 Bubble.

As we now witness, financial excess inflicts its most seductive distortions to underlying “fundamentals” during the late phase of Credit Bubble excess. There is an argument that lingers to this day that stocks were not overvalued in the late twenties. And while P/E ratios were modest right up to the ’29 crash, underlying boom-time earnings had become grossly inflated - and vulnerable. Similar dynamics are at play today. I fully expect corporate profits, personal income, and government tax receipts to all prove highly susceptible to the inevitable Credit cycle downside.

Some choose to define Bubbles as a divergence between asset prices and underlying “fundamentals”. I would instead stress how profoundly and surreptitiously late-stage Bubble dynamics distort fundamentals – as both Credit and asset prices lose their moorings to anything of stable value. It’s when the pendulum inevitably swings back and the market places cautious multiples on post-boom earnings (that can be abruptly sliced "in half") that create devastating losses for unsuspecting “investors.” I’m with Fan Gang on this: I find the current direction of things Scary."

**Many believe current housing CRISIS is beig under reported, true data manipulated to seem not as bad, when real economy shows its ugly head and people get cautious (as some banks already have) there will be a MAD RUSH FOR THE EXITS.



Friday, May 25, 2007


CHINESE Pawn Brokers seeing influx so little guys pour anything, savings, borrowed against the house etc....anything to raise cash to PLAY the markets. It is dominated not by big players but all these little guys, and most know NOTHING about markets!!!!!! They buy based on rumors and lucky numbers.

GOV has made some attempts to slow it down, however these have gone ignored as it soars to new records.

The lemming destruction is all but guaranteed and will pull down the world's economies when it implodes. NEW highs again last night.


Thursday, May 24, 2007


Mixed Signals Overshadow Home Sale Surge
Thursday May 24, 2:15 pm ET
By Martin Crutsinger, AP Economics Writer

April New Home Sales Post Highest Monthly Gain in 14 Years

WASHINGTON (AP) -- Sales of new homes surged in April by the biggest amount in 14 years, but the median price of a new home dropped by the largest amount on record. The mixed signals left no clear picture of whether the worst of the nation's housing slump is over.
The Commerce Department reported that sales of new single-family homes jumped by 16.2 percent in April to a seasonally adjusted annual rate of 981,000 units. That was far better than the tiny 0.2 percent gain that economists had been expecting.
However, the median price of a new home sold last month fell to $229,100, a record 11.1 percent decline from the previous month. The big price decline indicated that builders are slashing prices in an effort to move a huge overhang of unsold homes.
The jump in sales was the biggest increase since a 16.4 percent surge in new home sales that occurred in April 1993.
However, analysts cautioned against reading too much into the big gain, especially in light of other surveys showing that builder confidence has sunk in recent months over worries that troubles in the subprime mortgage market will further crimp demand in coming months.
The strength in sales was led by a 27.8 percent surge in the South. Sales were also up in the West by 8.5 percent and in the Northeast, where they rose 3.8 percent.
Sales fell in the Midwest, dropping by 4 percent.
The drop in median prices in April compared to March was a record one-month decline. If the April sales price was compared to the sales price a year ago, the decline was 10.9 percent, the biggest year-over-year drop since 1970.
In other economic news, the Commerce Department said that orders to U.S. factories for big-ticket manufactured goods posted a moderate 0.6 percent increase in April, helped by a continued rebound in business investment.
In a third report, the Labor Department said that the number of newly laid off workers filing applications for unemployment benefits rose to 311,000 last week, an increase of 15,000. But even with the gain, claims remain at a level indicating a healthy labor market.
While the increase in orders for durable goods was less than had been expected, the government sharply revised the March performance to show a 5 percent surge, much stronger than the 3.7 percent gain previously reported.
Analysts believe that U.S. factories, which have been buffeted by the weakness in housing and slumping demand for autos, are starting to stage a moderate rebound, helped by reviving interest on the part of businesses to spend money to expand and modernize.
The overall economy slowed in the first three months of this year to an annual growth rate of just 1.3 percent, the weakest performance in four years, as a steep slump in housing continued to weigh on the economy's performance.
Analysts are hoping that spending by consumers and businesses will be able to overcome the weakness in housing and keep the country out of a recession.
The report on durable goods offered encouragement in the area of business investment. It showed that demand for capital goods excluding airplanes, considered a good proxy for business investment, rose by 1.2 percent in April following, the second solid monthly increase.
The 0.6 percent rise in total durable goods orders came even though demand for transportation products fell by 1.3 percent. This reflected a drop of 10.7 percent in demand for commercial aircraft and a 1.9 percent fall in orders for motor vehicles.
Excluding transportation, orders would have been up by 1.5 percent, the same performance as in March.
There was strength in orders for primary metals such as steel which rose by 4.3 percent and orders for electronic equipment and appliances, which rose by 3.8 percent.
But demand was weak for computers, which fell by 7.8 percent, and communications equipment, which dropped 5 percent.

Monday, May 21, 2007

HOUSING SECTOR REPORT Is market looking beyond this to housing bottom in 2006, without devestating effects on economy?


Tuesday, May 15, 2007

Sunday, May 13, 2007


I’ll conclude this query into the issue of unchecked finance and the concentration of financial power with a few closing thoughts. In practice, the “Infinite Multiplier Effect” is restrained by the natural limitations in the demand for borrowed funds. In the case of traditional lending, finance will expand at a rate to satisfy the demand for funds for real economic endeavors (i.e. business capital investment). And despite some rather outrageous lending excesses, even the expansion of mortgage finance was limited to a degree by the capacity of households to borrow.

Today is different. The prevailing demand for borrowing emanates from securities markets activities – specifically for M&A and leveraged securities speculation. In both cases, “the sky’s the limit.” As such, we’re in a period of extraordinary capacity for finance to mount a powerful burst of expansion - which it has been doing. The Credit infrastructure has developed incredible capabilities over the past few years; Wall Street and the global leveraged speculating community have become enormously big and powerful; foreign central bank “recycling” of dollar liquidity has evolved into one of history’s most remarkable (and dangerous) Monetary Processes; and Wall Street has begun to position for the next easing cycle with tens of trillions of securities available for such an endeavor.

The monetary backdrop has clearly become extremely unstable – I’ll refer to it as an “Unchecked Liquidity Dislocation.” The question then becomes, can monetary affairs settle down to a less unwieldy posture? Or are we instead now firmly locked in a Minsky Ponzi “deviation amplifying system” - that at some unpredictable time and in some unpredictable fashion comes to a predictably devastating conclusion?

Friday, May 11, 2007


Click to enlarge** I am looking here for stress, divergences in place in my indicators as noted.


Thursday, May 10, 2007


Rising Fears of an Ethanol Bust
With some analysts warning of an oversupply of the corn-based fuel later this year, concern is growing among farmers and investors
by Moira Herbst

President George W. Bush's January, 2006, declaration that the U.S. is "addicted to oil" marked the beginning of a gold rush for corn growers: The government policies the comment helped spur have been a boon for the producers of corn-based ethanol, the all-American fuel that now displaces about 4% of U.S. gasoline supply. Over the past 18 months, farmers have rushed to plant more corn—and are set to produce a record crop this year—while small-time entrepreneurs and agricultural giants alike have built plants to expand capacity. A handful of initial public offerings have fed investors' desire to get in on the action.
But while farmers and producers remain bullish on corn ethanol's prospects, a once-enthusiastic Wall Street is growing skeptical. On May 1, the largest U.S. ethanol producer, Archer Daniels Midland (ADM), reported quarterly earnings that fell short of analyst expectations, citing higher corn costs as a problem. ADM shares tumbled 5.4% that day to close at $36.60 as investor disappointment spread throughout the sector. Shares of U.S. Bioenergy (USBE), Pacific Ethanol (PEIX), Andersons (ANDE), Aventine Renewable Energy (AVR), and VeraSun Energy (VSE) dipped 1% to 2%.
Lurking behind ADM's gloomy news are doubts about the future of corn ethanol. A growing number of analysts, once bullish on the product, are warning that an oversupply may be coming as soon as this year. On Apr. 27, a Lehman Brothers (LEH) report projected that production will outstrip demand in the second half of 2007, measuring the domestic thirst for corn ethanol at 420,000 barrels per day but supply at 445,000 barrels a day, mainly because the U.S. lacks the infrastructure to move the product to market.
"Chicken-and-Egg Problem"
"There's tremendous capacity coming online, but the infrastructure isn't there to keep up with it," says Michael Waldron, an oil markets research analyst at Lehman Brothers who co-authored the report. "We need a nationwide system to pipe it, and until that happens, we'll likely have an excess of product."
Waldron says the problem isn't a lack of demand for ethanol, which remains high, especially given that the federal Renewable Fuel Standard mandates at least 4 billion gallons, or about 3% of all U.S. transportation fuels, to come from alternative sources today, and nearly double that amount, or 7.5 billion gallons, by 2012. Lawmakers are expected to give the mandate a significant boost later this year. Rather, the problem is getting ethanol to consumers in various parts of the country. Ethanol requires a separate piping system from gasoline, and since Uncle Sam hasn't appropriated funds to build such infrastructure, ethanol is now primarily transported by rail. But the rail system extends only to major metropolitan areas—not to mention the dual problems of its high cost and carbon dioxide emissions.
"It's a chicken-and-egg problem," says Waldron. "If the infrastructure were there, the demand would be there. In the end the government would have to play a role to help build out a [national] dedicated pipeline."
Caution to Investors
A growing number of analysts agree with Lehman Brothers' conclusions. "We remain cautious on the ethanol stocks over a 12-month period," wrote Bank of America (BAC) analyst Eric Brown in an Apr. 24 research note. "Looking ahead we continue to believe that an oversupply of ethanol in the second half of 2007 will depress ethanol's premium to gasoline."
A glut of ethanol stuck in the Corn Belt would be unwelcome news for corn growers and the agricultural entrepreneurs who had set their hopes on a bright future for what has since become a controversial fuel (see, 3/19/07, "Ethanol's Growing List of Enemies"). Farmers are beginning to voice their concern.
"We've got an enormous amount of product coming online in a short period of time," says Geoff Cooper, director of ethanol programs for the National Corn Growers Assn. "The market is surprised by all this volume and can't absorb it now."
Evolving Infrastructure
He says the problem of transporting ethanol to parts of the country like the Southeast remains a problem, as does a shortage of storage capacity in these areas. Yet Cooper calls those obstacles "bad news but not disastrous" for corn growers, as a more effective ethanol infrastructure will evolve in the next several years. "The oversupply now is more a bump in the road than a catastrophe," he says.
Plus, not everyone agrees with the emerging consensus among analysts. The Renewable Fuels Assn., an industry trade group for ethanol producers, maintains that the problem is a lack of capacity rather than an excess of it. Using Energy Dept. figures, the RFA calculates that demand now stands at 416,000 barrels a day but production is only 386,000 barrels a day. Even the 80 new ethanol plants expected to be operating by 2009 won't be able to meet the growing demand, according to the association.
"Right now we have ethanol making up 4% of transportation fuels, but we can get to 10% with no changes to cars' engines or retail pumps," says Matthew Hartwig, an RFA spokesman. He acknowledges that transportation is an issue but says rail cars are able to transport the product now, and there are studies under way about a national pipeline.
Short-Term Pain, Long-Term Gain?
In any case, Hartwig says, any oversupply domestically could be exported to other counties, as demand for fuel is growing in all parts of the world, and gasoline prices are increasing.
Waldron of Lehman Brothers sees another outcome to a glut. An ethanol oversupply would make ethanol blends cheaper for consumers, potentially eliminating the need for the 51¢-per-gallon subsidy blenders get from the government. In other words, too much ethanol means cheaper ethanol, which could ultimately extend its longevity in the marketplace.
"Too much supply could hurt ethanol producers' margins, but in the end it may be a good thing for prices to come down," Waldron says. "A short-term problem for the industry could be healthier for it in the long run."
Click here to see a slide show on how ethanol is made.
Herbst is a reporter for in New York.


Wal-Mart same-store sales tumble 3.5%8:18am: Shares of the world's biggest retailer fall more than 1 percent as sales drop in April. (holding shares of WMT since 2000 high has you hurting)

Scene is RIPE for nice sell off, will it materialise?

Unemployment claims drop UNDER 300K.



Wednesday, May 09, 2007


"Economic growth slowed in the first part of this year and the adjustment in the housing sector is ongoing. Nevertheless, the economy seems likely to expand at a moderate pace over coming quarters.
Core inflation remains somewhat elevated. Although inflation pressures seem likely to moderate over time, the high level of resource utilization has the potential to sustain those pressures.
In these circumstances, the Committee's predominant policy concern remains the risk that inflation will fail to moderate as expected. Future policy adjustments will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information."

In other words, blah blah blah. The FED is behind continued asset inflation, is lying about inflation pressures and wants status quo, market due for pullback.


Dow: Longest bull run in 80 years

Blue-chip gauge matches 1927 record for longest up streak; Alcoa bid for Alcan, falling oil prices help.
By Alexandra Twin, senior writer
May 7 2007: 5:50 PM EDT
NEW YORK ( -- The Dow industrials ended at another all-time high Monday, closing with gains for the 24th out of 27 sessions - a streak that matched an 80-year-old record on Wall Street.
The Dow Jones industrial average (up 48.35 to 13,312.97, Charts) gained nearly 0.4 percent after briefly hitting an intraday record of 13,317.69. It was the fifth straight record close for the average.
The broader S&P 500 (up 3.86 to 1,509.48, Charts) index rose about 0.3 percent, edging ever closer to its all-time high of 1,527.46. That record was hit in March 2000 at the tail end of the last rally, fueled by the 1990s tech boom.
The tech-heavy Nasdaq composite (down 1.20 to 2,570.95, Charts) fell a few points after ending last week at a six-year high.
Stocks have been on a roll lately, thanks to a mix of strong earnings and buyout news.
"We haven't had many gigantic up days, we're just nickel and diming our way up the ladder," said Ron Kiddoo, chief investment officer at Cozad Asset Management. "People are more tempted to take profits one day after the Dow went up 200 points, than one day after it gained 30 points."
The 30-share Dow has now risen 24 of the last 27 sessions, matching its longest bull run in history, hit during the summer of 1927, according to Dow Jones. Should the Dow end higher on Tuesday, it would set a new record.
Kiddoo said the run was partly in response to the positive earnings and merger news, but also partly since the market's gains have been mostly modest and volatility has been limited.
Blue chips managed gains from the get-go Monday as investors welcomed the day's merger news, including Alcoa's $27 billion hostile bid for Canadian rival Alcan.
Treasury prices slipped, the dollar and oil prices fell while gold rose.
"The market improvement we've seen over the last few months is a result of higher-than-expected corporate profits," said Richard Hoyt, portfolio manager at KDV Wealth Management. "The profits are a result of the still-strong market fundamentals."
Hoyt said investors are looking beyond any short-term questions about the strength of the economy and focusing on longer-term expectations.
With the Dow at an all-time high and the S&P 500 nearing one, the impact on investor sentiment is twofold, said Hoyt. Investors who've been on the sidelines will have a new reason to jump in for fear of missing out. But investors who've been burned when the market was at new highs will have a reason to step back.
No major economic reports were released Monday, but investors will be keeping an eye on the Federal Reserve's next policy meeting Wednesday.
Central bank policymakers are widely expected to keep a key short-term interest rate steady at 5.25 percent for the seventh meeting in a row, with a statement expected in the afternoon. As always, investors will be focused on what the statement means for the economy and Fed rate policy.
Ahead of that, investors take a look at the March wholesale inventories report Tuesday and the weekly crude oil inventories report Wednesday morning.

Saturday, May 05, 2007


I have seen a lot in my investing years, I have not seen anything like I have seen during this bull phase. Let us take a closer look.

From 2002 lows market is up around 5,000 points! New highs in MOST of the indexes except the NAZ which lags badly. New highs in Dow , Transports, Utilities and others, new highs appear a forgone conclusion for the SPX.

A recent poll by AAII had respondants rather Bearish??!!!! around 54% compared to 24% Bulls!!??? does this make any sense with market making new highs every day? Is this the contrarian stuff which allows this market to reach higher ground than almost anyone thought possible? The occurance of such a reading while the market plows ahead is quite extroadinary.

FED has blown one bubble into another, while holding interest rates down to historic low of 1% for a year it finally took hold and the animal juices took off, yes after 2 years of rate cuts "don't fight the FED" came true. BOOMING housing led to across the board spending and the economy took off, corporate profits began to set records.

Home owner used thier homes as ATM machines and took out BILLIONS and consumed which fed the economy even more. Rising home values led to record HELOC'S and refi's never seen before. Some cashed out and sold their homes and then plowed that into market.

This led to RAMPANT CONDO etc real estate specualtion which drove prices artifically through the roof. Which led finally to lending money to anyone who could stand, we got the sub prime debacle which has and will lead to much pain.

Many are now CAUGHT upside down on their mortgages, having wither paid too much or extracted more than house is now presently worth, hard to tell as lenders STIFFEN lending criteria and make it harder to get a loan, harder to sell. Near record home inventory still gluts market, it is a buyers market. I think this is still in early stages as many feel worst is over.

ALL you see around you is ASSET inflation, nothing more, our manufacturing base destroyed by cheap Asian labor, mostly low paying jobs being added the US is not in a good position to compete globally. Watch OIL and GOLD if commodities begin to FALL would be warning sign that global liquidity could be drying up.

In last 5 years the hedge funds have become strongest force in markets, they are now borrowing 2.5X their assets to invest in markets, this is unprecedented.

Yields on the UTES and SPX dividends are near record LOWS, this is what you usually see at a MAJOR MARKET TOP not a BOTTOM!!! The SPX low yields near 2.2% (tops under 3% !!!) have existed for a few years running, so yes it is not easy to call a top, not all components are in place.

Are we at another 1998? or closer to another 2000? No one can know, but when one considers how we got HERE, it gives some indication of what will get unwound and IMHO will become a global meltdown at some point.