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Our focus today is on the never-ending EU debt crisis, China’s slowdown & the declining corporate earnings we see queuing up in Q2.
Asian markets (ex-China) have been on quite the downtick, falling for a 6th consecutive day.
The Euro dropped below 122 versus the dollar, showing that in the land of the blind, the one-eyed man is king.
There was no magic bullet in the FOMC minutes, and without that shot of Redbull coming markets in the US look tired and pressured.
European markets also fell, as half hearted central banks stimulus measures failed to arouse traders animal spirits.
We continue to monitor the global economy for further signs of deterioration.
What makes this environment so challenging is that without the certainty of another round of QE investors are more likely to be risk off. Whats preventing this from becoming a rout — see our discussion on the final hour of trading rally each day — is the fear of getting caught under-invested or (heaven forbid short) when the next Ben Bernanke helicopter drop flies into town . . .
Category: Markets
Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.
Riddle me this …
Not too many months ago, there was a cadre of nuts who appeared to truly believe in their heart of hearts that Debt Is Wealth. I had numerous debates in this space with several crazies of that persuasion. So tell me, Bunky … is Greece the place to be??
re the last hour of the day – so many things on so many timelines – large institutional players that need to rebalance daily and have their MOC orders start to hit the trade desks around 3:45, day traders closing out short positions, HFT and other micro-time frame traders trying to catch the train between short covering and institutional rebalances. Then you have traders placing bets on the ever occurring gap up, gap down and want to get their chips on the table before the close as well. Lastly, don’t forget that 1 or 2 really large players who see that the smaller time frame crowd is leaning too far in one direction just taps the gas pedal a bit to relieve them of their funds.
I think we may be attaching too much importance to such things.
Look at leading stocks and garbage off the bottom names – they both equally look like uninspiring.
PS – I guess now that this site is such a big deal, you don’t have the section on LIRR nightmares anymore or am I misremembering?
~~~
BR: Ha! I have been rereading some of these old LIRR Commuters from Hell — and they are hilarious!
Barry, Did you forget to report you’re traveling today?
Good point ‘dead hobo’… but “Riddle Me This”:
I agree that debt is not wealth! But… and here’s the catch… neither is money!
For some reason it seems to be a difficult point to get… but an economy is not money… and if we want to get even more fundamental about it…
the goods and services, trade, etc that make up an economy aren’t quite the root either!
An economy is the cumulative result of the interplay of countless DECISIONS!
(a decision is an idea + an action; it can be as simple as “I think I’ll climb that ladder”… and then doing it… or as complex as the co-ordinaton of ideas and actions that go into building a stealth bomber)
Money is a tool for the transfer of DECISION from one to another. When excessively concentrated… the capability for decision becomes narrowly concentrated as well (including, but not only political decision).
This process can be self-re-enforcing and WILL kill the Middle Class unless addressed.
Keynes understood that money is a tool… its not wealth.
The tragedy is how central banking and bias in credit creation and the mechanisms for introduction of that created credit have corrupted the Keynesian vision… and may well end up destroying the Keynesian potential.
The Pooled-User-Dedicated Account (implemented via a sort of virtual cash card with Trusts funds held in local banks) may be able to play a role in remedying this as a sort of ‘emergent localization potential’ of the network thereby arising. But that’s a longer story.
“The way out is always through.” -Robert Frost
@rktbrkr
I was thinking the same thing.
What amazes me the most is how confident so many market participants have become that the Fed will be there to essentially keep markets from falling. Art Cashin got it right when he showed that the level at which the Fed has acted over the past 3 years has generally required around a 20% drop in the S&P. This is quite a bit lower than the levels at which most market participants seem to think further action will come. The one thing I know is that as of right now, we do not truly know that the Fed will save the day. As such, I will continue to invest based on fundamentals, not based on the hope that Benny and the Inkjets are coming to town.
Futures all in the red…BR must be traveling for sure…
shakey out there
its hard to define near term real good news
vix not so high tho
once again market feels like summer 2008
with pops on mostly bogus rescue news
The trend (since Oct., of last year), seems to be USD up, pretty much everything else, down.
In light of QE, this is a bad development, IMO.
We will eventually be confronted with a dilemma on the monetary policy front: Even more massive QE, or paying back our crushing debt in strong dollars.
If it’s the former, hopefully that new csh will be allowed to reach the indebted.
If it’s the latter, or if QE happens, but the new money becomes even more concentrated at the top, say goodbye to the middle class.
The URL is : LIRRcommuterfromhell.com
CulturalEngineer Says:
July 12th, 2012 at 7:53 am
Good point ‘dead hobo’… but “Riddle Me This”:
reply:
————-
Cliches are cool.
Debt is wealth only if you never intend to pay it back. That decision allows you to accumulate without substantial cost to you, only to your creditors.
Your philosophy is impressive, but won’t buy much from a vending machine. Unless it is accompanied by cash from either your pocket or from a loan.
“The Pooled-User-Dedicated Account” sounds like a good way to confuse the gullible into transferring wealth via loans that will never paid back by using a complicated distribution system as a means to confuse. You should work for the EU. A gobbledygooked plan like that should pump the markets for at least one more EU summit. Call it a successor to the EFSF. Add Central Bank leverage and to the moon, Alice. Oops, sorry, its’ already a work in process and they call it the ESM, exceptfor the ECB leverage.
So, what’s the knock on the first hour of trading?
I agree “seeker.” fwiw
Woo-hoo! We got one eye!!! Means no depth perception though…
What is this nonsense in using the term “risk off”? It emphasizes the nonsense that CNBC and Bloomberg push that you should always own something that is going up. In a bear market, cyclical or secular, the correct “risk on” position is to be short and you will never hear that on those channels.
Chief Tomahawk:
Funny!
@thetruthseeker:
You say :”As such, I will continue to invest based on fundamentals, not based on the hope that Benny and the Inkjets are coming to town”
How is that working out for you? I’m in the same boat, and it isn’t pretty. I’m not exactly seeing many bargains in this anemic growth, peak corporate profits, growth-impeding debt levels, Bernanke-inflated market environment.
Then again, with interest rates negative, maybe it’s time I get on the infinite P/E bandwagon. With that perspective, market levels not only look reasonable, they’re downright cheap!
It is much simpler than you think Barry — QE works as a placebo (market participants believe QE helps the market, as a patient believes a sugar pill cures a headache) — Bernanke needs much lower stock market before he can announce QE3.
Bernanke cannot risk announcing QE3 and the stocks still plunge (he cannot afford to lose Pavlov’s dogs conditioning where the stock market participants believe QE means automatic higher stock prices).
Therefore, Bernanke will wait for the stock market to sell off by ~15-20%, so when he announces QE3 the stocks ready to move higher (it is hard to push stocks much higher from current high levels, QE or no QE).
BR writes:
If and when that happens, we should see stock prices rise about 10-15%above where they would otherwise be as a result of new quantitative easing. That’s a huge difference compared to the Fed’s Operation Twist activities (1.0 and 2.0), which has had little, if any, impact on stock prices.
@deadhobo and culturalengineer
Actually. . . Money (as you are refering to it) is debt!
Don’t believe me? Take a dollar bill out of your pocket and read what it says at the top. . .”Federal Reserve Note”
What does this mean? It means that this “money” is a form of debt as a liability of the United States Federal Reserve Bank, and an obligation of the United States Government and collective citizens (i.e., US!)
In the real world, this debt is utilized as a medium of universal exchange, because it’s a hel of alot easier than the barter system in a highly advanced society such as the one in which we live.
True wealth is the labor, skills, knowledge, and real capital assets that exist to provide a benefit for oneself and society as a whole.