There Must Be Some Way Out Of Here

Stocks Sink To Levels Last Seen In '80s

A never-ending war. Think of the potential

bump.

A Looming Worldwide Depression? - Warning given by chief economist for Deutsche Bank

Theres too much confusion........ (ya beat me to it man)

FINANCIAL SENSE ONLINE
Weekday Commentary from Jim Puplava
Market Wrapup
Wednesday, September 4, 2002
SOURCE

^{Wednesday September 4, 2002 Market WrapUp}

The Daily Spin
It is always interesting to hear the daily spin as to why stocks rose or fell. The days stocks fall are usually accompanied by some piece of news relating to the economy or corporate profits. With weak economic numbers and declining profits it would make sense for stocks to fall. Valuations at today’s level make stocks grossly overpriced, so in order to sell investors stocks, various spin cycles have been resurrected to keep John Q. fully invested in his shares. If there is a good economic report, it is spun way out of proportion. When it is later revised lower, the number is kept quiet. A good example was the government’s revisions of the GDP numbers from 1999-2001. Those revisions not only showed lower productivity, but also the fact that the economy grew at a much lower rate, and that the recession of last year was much more severe than originally reported. This fact alone would warrant much more attention then it received given the rosy scenarios projected for the second half of this year.

When it comes to financial or economic numbers today, there isn’t much you can put faith in anymore. The economic numbers are seasonally adjusted, massaged, manipulated and restated so frequently that you never know the real story. When it comes to earnings, we are still dealing with fictional numbers. The bottom line reported to the SEC, which reflects earnings according to GAAP, is no longer discussed. In its place we now have operating earnings or some other variation of pro forma earnings, which don’t reflect reality. What goes on today in the financial field is a farce, if not fraud. Wall Street knows it, and so does Washington. The problem is that the economy is much more dependent on bubbles today than in the past. If the stock market bubble was to fully deflate, along with the mortgage and housing market, the US economy would be in deep trouble. It is now necessary to maintain the illusion that all is well, when in fact the patient is terminally ill.

The simple fact is that the American economy is requiring more and more doses of cheap credit to finance its day-to-day functioning. Without massive daily infusions of credit, the economy would implode. In order to postpone the day of reckoning it has been necessary to use every means of artificial stimulus available. All this has done is to postpone judgment day, and nothing more. Analysts and commentators can talk all they can about how this market has bottomed, but this talk is meaningless in light of stock market valuations. I hate to keep harping on this fact, but valuations do matter when you are in a bear market. The only time they don’t matter is when you are in the midst of a bubble as we saw in the late 90’s. However, with the S&P 500 trading at 32 times trailing earnings and dividend yield of only 1.73%, the S&P 500 would have to drop in half from here just to get back to normal, much less become cheap. This talk about market bottoms, or for that matter, brokerage analysts and fund managers talking about stocks as cheap, is based on no sense of reality. A stock that has dropped 75% may be cheaper than it was before it fell, but it doesn’t make the stock a value if it still trades at 35 times earnings. A dividend yield of less than 2% only looks cheap if you compare that dividend to t-bills, which are offering yields slightly less than that. One should point out that t-bill yields are considerably safer than a stock dividend.

There are other measures of valuation other than dividends and P/E multiples. Price/book and price/sales ratios also indicate that stocks are grossly overvalued. The price-to-book ratio is an interesting one to look at since book value has been destroyed by the merger and acquisition binge of the last decade. In order to inflate stock prices in an effort to capitalize on stock options, CEO’s went on a buying spree overbuying and overpaying for companies through the issuance of stock. Now those companies have to write off those assets by big writedowns, which are decimating book value. This is one reason, in my opinion, why analysts and anchors don’t talk about earnings according to GAAP, because the GAAP numbers reflect these massive write-offs.

The book value of a company is the shareholder’s bank account. That book value is supposed to reflect assets that were invested in to produce higher returns for shareholders, rather than returned to shareholders in the form of a dividend. When money is retained by management, instead of distributed to shareholders as owners of the enterprise, shareholders have the right to ask of management how well they have done as stewards of that money. The answer is very clear by looking at what has happened to book value over the last two years. It has been destroyed by reckless acquisitions and diluted through the aggressive use of stock options to reward CEO’s and top management. As stewards of shareholder value, most management teams would have received an ‘F’ for failure to do their duty, an ‘F’ for fraud, and an ‘F’ for free-wheeling with shareholder money.

In today’s markets, the reason given for stock prices rising was that investors now believe the July lows were the final bottom of this bear market. The markets veered between losses and gains early in the day. Stocks supposedly rose after a report that zero-percent loans helped to lift sales at Ford, which is hemorrhaging from red ink, and GM. Between discounts and zero-percent loans, the auto companies are giving cars away. This concept has spread to other industries that have seen sales dwindle. Recently we went to upgrade our copier machine. Instead of paying cash I was offered a zero-percent loan. We took the zero-percent option. If they are giving away free money, why not? Maybe next we will get zero-percent mortgages. Here in San Diego my friend, the mortgage broker, tells me they are bumping housing prices so that zero down payment homeowners can have their closing costs rebated to them by the seller.

If you follow this through to conclusion you can see that a very frightening situation is developing in our credit markets. The Fed is inflating the banking system along with quasi government entities such as Fannie and Freddie through the securities market. The Fed lowers interest rates by injecting reserves in the banking system through its purchases of Treasuries from the banks. This increases their lending base, which can be multiplied through our system of fractional reserve banking. The GSE’s are also fueling the credit cycle through the securitization of mortgages. Financial intermediaries are also inflating credit by securitizing everything from auto loans to credit cards. Today most kinds of loans can be turned into asset backed mortgages. This is creating another bubble in the bond market. The money that has been fleeing stocks is going into bonds, mortgages and real estate. All three are becoming bubbles and are dependent on a Ponzi scheme structure that is going to implode in the same way as the Nasdaq and Internet mania of only a few years ago. Today bond fund managers are buying asset backed securities along with Treasuries for their bond portfolios. The credit created is simply offloaded to the securities market.

So instead of one bubble, we have multiple bubbles. We also have multiple new bubbles in the real estate, mortgages, and a new bond market bubble. These bubbles must be added to the already existing bubbles in the stock market and the US dollar. The stock market, although lower today, has yet to fully deflate itself. It is being held up by spin and intervention. If you look at the larger picture, the US economy is built on the shaky ground of debt, which sooner rather than later will come crashing down from its own weight. The US is now in a debt trap of its own making that is going to take more than spin an illusion to solve. As I see it, there is no way out other than to hyper inflate. As far as deflation and inflation are concerned, it is a moot point. We are going to see both. The coming implosion of credit will see deflation in those areas where credit had its greatest impact, which is in the stock and bond market, the housing market and in luxury goods. We will see inflation in basic necessities, such as raw materials, energy, and imported manufactured goods that we need to live. Forget pure deflation; it isn’t in the cards. The US is too dependent on foreign goods and raw materials as well as energy for all the things we need. At some point, the rest of the world is going to get tired of taking our paper money in exchange for the goods and raw materials they ship us. When that point arrives, you will be paying more for the things you need from the food you eat, the fertilizer that is used to grow food and make your garden grow, to your utility bill and the gasoline you put in your car. That is what today’s graph of the CRB is showing. If reflects the future price of goods we consume from coffee, cocoa, soybeans, sugar, oil, natural gas, cotton, to wheat and orange juice.

Forget the CPI, which is a worthless gauge of inflation that is a contrived and manipulated index for the benefit of public consumption. Look at your checkbook and do your own survey. Look at what your food and energy bill was a year ago. Look at what it now costs you to send your kids to school, or even worse, to college. Look at your insurance premiums; examine your medical bills. Look at the size of your mortgage, your credit card bills and what you will pay in social security taxes this year. Then ask yourself if this jives with the CPI.

Stocks rebounded today on what has been a persistent pattern of weakening volume. Traders bought technology stocks, biotech, and airlines. Analysts and economists have almost begged investors to ignore the economic news, which keeps getting worse. Forget the double-dip. What is coming is a consumer led recession that will be added to the profit recession giving us a full-blown recession. The double-dip is a mild palliative suggesting that things will eventually get better.

Volume came in at 1.34 billion shares in the NYSE and 1.48 billion on the Nasdaq. Market breadth was positive by 22-9 on the big board and by 21-12 on the Nasdaq. Be wary of today’s rebound. What happened yesterday was the first instance of a 90% downside day since April of last year. It indicates that more days like it are ahead of us.

Overseas Markets
European stocks rose on expectations profits will improve at companies ranging from Carrefour to Gallaher Group, Volkswagen and Axa. The Dow Jones Stoxx 50 Index gained for the first day in three, adding 0.8% to 2547.81. Six of the eight major European markets were up during today’s trading.

Asian stocks fell, with Japan's Topix index closing below 900 for the first time in 18 years, after a U.S. manufacturing report indicated a recovery in the region's largest overseas market is faltering. Exporters, such as Sony Corp. and Hyundai Motor Co., led declines in the region. The Topix lost 2% to 886.39, and South Korea's Kospi index had its biggest drop in a month. Taiwan's TWSE Index slid 1.2% to a nine- month low.

Treasury Markets
At last check, the price of the benchmark 10-year Treasury note rose 5/32 to yield 3.94% and the 30-year bond was up 5/32 to yield 4.80%.

Money Man - THE FED - To prevent financial gridlock, the understated banker made the boldest of moves — he flooded the system with cash.
"On a normal day, the Federal Reserve lends U.S. banks about $100 million to keep the system running smoothly. On Sept. 12, those loans totaled $45 billion. On a normal day, the Fed exchanges no foreign currency into dollars. On Sept. 12 and 13, it exchanged $90 billion worth.

It was extraordinary to the point of never having occurred before."

Will Alan Greenspan Be Stripped of His Crown?

A VIEW ON THE GREATER DEPRESSION - "What happened in the '30s was only a supercyclical bottom – what we're now looking at is much, much worse. This resonates with me – I believe what's coming up is going to be so bad, it's going to be worse than even I think it will be. There's a catastrophe of historic proportions in store."

Stocks fall on economic, technology concerns

Soup lines suck

Depression Will Deflate Most Markets

COMPANIES & FINANCE INTERNATIONAL: SAP chief paints gloomy global picture

Americans are losing confidence in the economy.

A lazy (or manipulative) writers signature. They state this like it is some kind of fact or something. Each of us is an individual with their own mind. The only way this statement can be true is if ALL Americans are losing confidence in the economy, which is absurd. It is an attempt to manipulate us with groupthink. Be aware of this and you will notice how frequently it occurs.

HEDGE UP - US Banks' Derivatives Top $50 Trillion

CBS MarketWatch.com
By Greg Morcroft
September 6, 2002
Source

NEW YORK (CBS.MW) -- U.S. banks and their customers continued to pour money into derivatives in the second quarter, as the total value of the specialized contracts passed $50 trillion.

Derivative investments generally rise during times of economic uncertainty, and the recent scandals, concerns about a possible war with Iraq and volatile share prices all inspired investors to hedge risk through derivatives.

In a report issued by the U.S. comptroller of the currency, the total amount of derivatives in U.S. insured commercial bank portfolios rose by $3.8 trillion in the second quarter, to $50.1 trillion. See the OCC report(PDF File).

Bank earnings from derivatives rose to $3.4 billion in the second quarter, a 7.1 percent jump from the first quarter, and a highly unusual move according to the OCC's Michael Brosnan.

"This is the first time we've been looking at the data that second-quarter revenues increased from the first quarter," Brosnan said, adding that the large rise in total value of derivative positions caused the jump.

The top seven banks accounted for 85 percent of total trading revenue, compared to 84 percent in the first quarter.

During the second quarter of 2002, banks charged off $25 million from derivatives, or 0.005 percent of the total credit exposure from derivative contracts, the report said. That compares to banks' second-quarter charge-offs totaling 0.82 percent of loans.

Seven commercial banks account for about 96 percent of the total amount of derivatives, with more than 99 percent held by the top 25 banks, the report said.

The banks with the largest derivative positions were J.P. Morgan For all banks, the fair value of contracts past due 30 days or more totaled $31 million, or .006 percent of total credit exposure from derivatives contracts, the report said.

Interest rate contracts increased by $3.4 trillion, to $42.7 trillion during the second quarter. Foreign exchange contracts rose by $183 billion to $5.8 trillion, excluding spot foreign exchange contracts, which increased by $332 billion to $504 billion, the report said.

Equity, commodity and other contracts jumped $85 billion, to $1.1 trillion, and credit derivatives increased by $54 billion, to $492 billion.

Interest rate contracts accounted for 85 percent of the total amount of derivative positions, foreign exchange made up another 12 percent and the balance comprised equity, commodity and credit derivatives.

The number of commercial banks holding derivatives increased by 12, to 391, the OCC said.

Greg Morcroft is New York news editor of CBS.MarketWatch.com.

Corporate debt saps nation: Credit stress hits Depression level

You can no longer safely shrug off Japan's economic crisis. It just might drag the world into a depression

THE GREAT DEPRESSION

Deepening pessimism actually may do the stock market some good
"Analysts say the mood of the market must plummet to truly miserable levels to hit bottom and then head higher again.

''Historically, that has been the turning point. Whenever we have had a really bad run as we have been having this year, you don't have the bottom until everyone throws in the towel,'' said Arthur Hogan, chief market analysts at Jefferies & Co. ''You need to have everyone be bearish.''

Get pessimistic, the analysts need you. Hurry, hurry, hurry, get as miserable as you possibly can in the shortest time possible...

DOW 5000

Gross predicts Dow 5,000

Fears of double-dip, Iraq invasion hurt Dax - "Never before has Germany's stock market performed so badly"

GLOBAL MARKETS-War jitters spur oil price, markets await US data

Buybacks vs. insiders (Stocks with biggest buybacks are being sold by insiders!)

The government's War on Business - "Democrats are demanding something just short of summary executions, while Republicans and President George W. Bush are trying to outdo the Democrats in their anti-business rhetoric"

Dow Closes Down 202; Nasdaq Sheds 36

Wall Street Falls After War and Fed Talk

Jobless Claims Raise Economy Worries

Shares of McDonald's Corp. fall to Seven-year Low

Dollar Mostly Lower

Greenspan Urges Congress to Look at "Spending"

Greenspan Sees 'Depressing Effects'

The Associated Press
By Martin Crutsinger
September 12, 2002
Source

WASHINGTON (AP) - Federal Reserve Chairman Alan Greenspan told Congress on Thursday that a year after the terrorist attacks, the U.S. economy appears to have done a good job of withstanding a series of severe blows, "although the depressing effects still linger."

Greenspan cautioned that such problems as the terrorist attacks and the huge drop in stock prices were still having a lingering impact on growth as the country tries to mount a sustained recovery from last year's recession.

"The U.S. economy has confronted very significant challenges over the past year - major declines in equity markets, a sharp retrenchment in investment spending and the tragic terrorist attacks of last September," Greenspan told the House Budget Committee.

"To date, the economy appears to have withstood this set of blows well, although the depressing effects still linger," Greenspan said.

The Fed chairman said one area of major impact was on the federal budget, which has seen projections of a decade of surpluses of more than $5 trillion replaced with the return of huge deficits.

The Congress Budget Office is now predicting that the deficit for this budget year, which ends on Sept. 30, will hit $157 billion after four straight years of surpluses, the longest such stretch that the budget has been in the black in seven decades.

Greenspan said the sharp fall in stock prices, which have been tumbling since the spring of 2000, was a major reason that government revenues have declined and he said this impact "will likely damp tax revenues relatives to earlier expectations for some time."

Greenspan said the success Congress had been able to achieve in attacking an entrenched deficit problem was in danger of being lost unless lawmakers retained tough rules that require increases in permanent benefit programs or reductions in taxes to be offset by spending cuts or tax increases in other areas.

"If we don't preserve the budget rules and reaffirm our commitment to fiscal responsibility, years of hard work could be squandered," Greenspan told the budget panel. "Failure to preserve them would be a grave mistake."

Those pay-as-you-go rules, which were implemented in 1990, are set to expire at the end of this month.

"The budget rules worked far better than many skeptics, myself included, had expected," Greenspan said. "The pay-go rules changed the way policy-makers analyzed fiscal policy proposals. Rather than focusing solely on the benefits of a proposal, policy-makers were required to recognize the costs as well."

Greenspan made no specific mention in his testimony about what the Fed would do next with interest rates. So far this year, to deal with all the shocks that have hit the economy, the Fed has kept interest rates at a 40-year low of 1.75 percent for the overnight bank lending rate.

The Fed's next meeting is Sept. 24 and many analysts believe that the central bank will continue to leave rates unchanged even though Wall Street got excited last month about the possibility of additional rate cuts.

In recent weeks, many economists have revised upward their growth forecasts for the current quarter, some by a full percentage point to 3.5 percent, which would be far above the 1.1 percent growth rate of the April-June quarter.

"August was a strange month. We started off thinking the wheels had come off the economy ... and then the data seemingly changed," said economist Joel Naroff of Holland, Pa., who predicted "volatile, contrasting indicators" would continue for some time as the economy regained its footing.

Sung Won Sohn, chief economist at Wells Fargo in Minneapolis, said he believed that Fed would leave rates alone for the rest of the year despite the weakness discussed in the latest Fed survey of economic conditions in its 12 regions released on Wednesday.

"We had a fairly soft economy in the summer as a result of the stock market crash and ensuing uncertainties facing consumers and businesses," he said. "But the stock market has been doing better of late and manufacturing orders are starting to show improvement."

It is now necessary to maintain the illusion that all is well, when in fact the patient is terminally ill.
And what a "grand illusion" it is too...

Happy New Year.

STOCKS: WORST DECEMBER SINCE '31

US consumers lose faith

US stocks stumble on low consumer confidence

Consumer confidence crumbles

Consumer confidence plunges

There's nothing wrong with this economy, and I'll donate a dollar to prove it

"This economy is strong"
George W. Bush - December 28, 2002 - SOURCE

Bias takes many forms, using an unflattering photograph of someone is one such form. Of all the photos available of President Bush, they selected this one?

Let's see, our economy is stalling over deep water and most people would rather juggle chain saws than deal with the stock market, and you are worried about a unflattering photo of President Bush?

In his Alabama speech, Mr Bush promised an “agenda for long-term growth”. This encompassed: fiscal policy (he wants to make his tax cut permanent, whilst forcing Congress to hold the line on spending); trade policy (he urged Congress to grant him “fast-track” authority to negotiate trade agreements)

Oh Great. Just what we need in a recession, more Job Exporting One-Way trade deals. The only "Free" Aspect of these trade deals is the wealth we transfer to our "Export" Partners. This Guy is LOST.

Hey Joe, others are dealing with the question about the economy, I was just pointing out (once again) the bias of the media. You got a problem with that?

The media sucks, agree.... I just get ticked off when our economy is this bad, yet our government continues to spend like a drunken sailor, the same politicians have driven half the states in this country into the red. And we continue to throw billions of dollars in foreign aid at other nations all over the freaking earth.

We're with you. As to being President "BushBots" count us in!!

Some people can't do "simple" math. If the stock market has suffered a "THREE YEAR" losing streak, when do the people who are blaming President Bush think this started?

It took 8 long years, a lot of deceit and lying to get us where we are today both in matters of security, and regarding the economy. This is not President Reagan nor President Bush 41's economy,.. but the Democratic economy of Clinton and his party. Yet some people continue to blame President Bush for this mess!!

From what I can see.. Americans seem to understand this tactic by the Dems and aren't fooled. Those silly "POLLING" thingies that the Dems seem to love (but ONLY when they favor Dems) seem to indicate that President Bush is remaining popular with Americans. OH MY!!!

Seems the Dems are still beating on the same old tired drums that they beat on when they lost the recent elections. I say keep on beating them!!

BTW,.. anyone can go look back at financial threads here on FR for the past 4 years and see many here at FR have stated that this economy BUBBLE would burst. That things the Clinton administration and the Dems were doing, were going to backfire. They were right on, it happened. I'm with those who say the bottom hasn't "hit" yet.

We are at 8,341.63. The opinion of many people who have posted here, whose opinions seem to have been correct,... is that the bottom hasn't happened and won't until it hits at least 7 thousand. (Some predict 6 thousand!!)

Considering the mess the President inherited, it won't be fixed in 2 years, and maybe not even in 4 years. But its kind of like putting on weight.. it comes on so quick.. but takes twice as long to take off.

One has to hope that Americans FINALLY realize what happened and WHEN.. and will do the right thing by "KEEPING PRESIDENT BUSH IN OFFICE FOR 8 YEARS" so we can see it get fixed!! Then lets hope they are cognitive enough to KEEP it that way!!

It just amazes me that after 8 LOOOOOOONG years of Clinton destroying so many things, some think it can be fixed overnight. Amazing.. huh?

FRegards, Vets