Wake-up signals from Wall Street Paul Craig Roberts

Washington Times ^ | Wednesday, July 3, 2002 | Paul Craig Roberts

[JohnHuang2]

Experienced money managers are puzzled by the stock market's untypical behavior. Normally, stock prices rise in anticipation of recovery and profits from Fed easing. This time it did not happen. Months into the recovery, it still has not happened.

Investors Business Daily, the Los Angeles financial newspaper that studies the market, noted last week that the stock market is usually led by newer issues, "stocks that have come public in the last eight years" and that bring "new products, new services, new technologies and new ways of doing business."

[JohnHuang2]

Wednesday, July 3, 2002

Quote of the Day by facedown

[Pokey78]

I hate to break into thois sob session, but . . .from Bloomberg:

07/03 00:35

Dollar Rises vs Euro; Factory Orders May Highlight U.S. Appeal

By Mari Murayama

Tokyo, July 3 (Bloomberg) -- The dollar rose, putting it on track for its biggest two-day gain against the euro in seven weeks, on expectations reports today and tomorrow will show factory orders are rising in the U.S. while falling in Germany.

The U.S. currency strengthened to 98.35 cents per euro from 98.65 in late New York trading yesterday, when it gained 0.5 percent. The dollar traded at 120.06 yen from 119.85 after rallying as high as 120.21.

U.S. factory orders probably rose for a third month in May, climbing 0.5 percent, a Bloomberg News survey of economists shows. A report Monday showed manufacturing grew in June at the fastest pace in almost 2 1/2 years. In Germany, Europe's largest economy, a report tomorrow will probably show factory orders dropped 0.2 percent in May, a survey showed.

``We're seeing many strong reports for the U.S. and weak ones for Europe,'' said Minoru Shioiri, foreign exchange manager at Kokusai Securities Co. ``More signs of the difference between the two regions may convince us'' to buy dollars, he said.

The dollar pared some of its gains as the decline in U.S. stocks to a 4 1/2-year low yesterday heightened concern more money will flow out of the nation's assets.

************************************************

Plus isn't a falling dollar good for exporting American made goods?

[Orion]

If you kept cash or TBills since '98, you would have outperformed the S&P, and would have crushed the Nasdaq performance.

The Fed is out of ammo, debt is at alltime highs, and confidence is in a freefall. Stocks are still more expensive (in terms of earnings) than they were BEFORE the crash in '87.

Tick-tock...tick-tock...tick-tock...

Anyone care to say where the major indexes bottom out? Naz=600, DJIA = 4500.

[First_Salute]

See: Stock-Market Stinker, New York Post, June 30, 2002, by Jessica Sommar (posted by sarcasm).

[JohnHuang2]

Thanks, Pokey. As they say, economic fundamentals ultimate out-weight most other factors.

[JohnHuang2]

ultimate=ultimately

[First_Salute]

Bump.

[Pokey78]

Good morning King!

Let it be said I am no economic expert or anything, but from what I've seen others say about the economy, the recovery is doing fine. Q1 GDP was 6.1%, which is pretty dang good.

It's that we're about halfway through all the big companies taking a hard look at their accounting methods. Once this ends, confidence should return to the market and the indexes will rebound.

Until then, Wall St. will remain gunshy.

My worthless opinion. hehe

[logician2u]

Plus isn't a falling dollar good for exporting American made goods?

That is the accepted wisdom.

Bear in mind, though, that the dollar began to fall wrt European currencies very soon after Reagan's Treas. Sec. Baker announced (in Germany?) the dollar would not be defended.

That was late September, 1987.

You recall what happened in October.

[SevenDaysInMay]

With the feds spending lust wilder than during LBJ's great Society, IMO, we are in for a long sobering inflationary recession. Wall Street has been incestuous with accountants, committing the mortal Ander sin. There is no reason for investors to believe company financial reports.

[JohnHuang2]

Pokey, your post #8 contains more commonsense than all the "experts" will ever be able to grasp =^)

[snooker]

I agree with your opinion. There is no valid reason the markets are down. The economy is rising, and usually the markets signal this in advance. But now ... stock buyers are driven by fear that the next company to own up to 'clinton accounting practices' will be the one they own stock in.

Can't blame them. Once this 'crisis of confidence' clears up, all will be back to normal.

tarpon

[cinFLA]

The Fed is out of ammo,

A common misconception. As long as they are forcing interest rates low, the $$ are flowing into the finance system. Everyday I get offers of 0% credit cards (good till 7/03).

[Lancey Howard]

A cut in the capital gains tax would save Washington's bacon. But ignorant Democrats prefer to demagogue "the rich," and Republicans fear the charge of "favoring the rich" more than they fear war with the Muslim world. There are enough fools in Washington to destroy the country without any help from Islamic terrorists.

Very well said. Except the Democrats are not "ignorant" - - those scumbags know exactly what they are doing. Republicans who fail to act for fear of the scumbag Democrats and their tactics, however, are indeed cowards. The Republicans need to get dirty - - they need to go down, way down, to the bottom of the sewer and fight the scumbag Democrats where they live.

And Roberts surely knows that a miserable economic slump is exactly what the Democrats strive for. What better way for the Democrat Party to create more parasites to add to their core constituency? Ha! Terrorists don't need bombs when they have the Democrat Party to help them destroy a once-proud nation.

[Orion]

That works until inflation is accepted as a reality. Then you have the specter of the FED making money more expensive at a time where the finance system is crumbling.

This is what happens on the back side of financial bubbles. It is unavoidable.

These past two years have been a bonanza for short-sellers. I almost have my next home paid for. When the housing market tanks, I will have it paid for, and then some.

When interest rates go up, the high-end real estate market is going to get disemboweled. My finance guy noted some venture capitalists are loaning $1M to folks with $4M of equity in Silicon Valley residential real estate. It seems that many are realizing the fallout of the DOT.BOMB days (garden.com - WTF?) and are in need of some cash to try to get back in the game. These loans are going out at 14% and are virtually guaranteed.

This is going to get fugly before it is over. San Jose, CA was the worst performing housing market last year. It will repeat this year. San Francisco was third from the bottom.

[woofie]

I think the market will go down, then go up...or is it the other way around?

[TigerLikesRooster]

Re #16

Ever heard a rolling downhill ?

[brat]

"There are enough fools in Washington to destroy the country without any help from Islamic terrorists."

Ain't it the truth! LOL

[billybudd]

The dollar is still off its highs against the euro (see graph here). Currency markets are notoriously volatile but there does seem to be a downtrend for the dollar. Anyway, it's true that a weaker dollar helps American exports, but since we import much more than we export, a weaker dollar hurts us overall.

[billybudd]

There is no valid reason the markets are down.

Boy, how did you come to that conclusion? I don't think millions of investors are being irrational when they take their money out of the market - they are simply reflecting the economic and political uncertainty. This is a "valid" reason, although I'm not sure what you consider a "valid" reason for a market to be down.
I think your optimism is premature. We have not experienced a panic, an overreaction that can be cleared up once the dust settles. We have had much worse - a steady loss of credibility in the market. There are structural issues to be resolved at the core of our economic system, plus an uncertain political environment because of the war. This is not something that will "clear up" in a couple of months.