Just don't believe

Well we are off 200 points from the opening frenzy. I will saw this again and it was just spoken about on Rush Limbaugh show that the markets are being propped up by the FED. The volume is low all that saved the markets two days ago was the FED coming in and buying if it was not for that we would have been down huge. YES HUGE. So the powers that be still are just playing around with the regular guy and that's all, don't get caught chasing a shadow!!

Initial Claims

The Department of Lies has released its latest initial claims report: last week we saw 453,000 initial claims, meaning the economy continues to lose about 50-100 jobs a month. This was slightly better than expectations of 460,000. Yet what the market once again misses is that for the nth week in a row the previous week's claim number is revised, as always, higher, but who cares.

R.I.P

R.I.P to my friend- Sad when someone leaves this world without any notice

Don't believe the hype-

Goldman's Investment Strategy Group has just circulated the most bearish 2011 outlook presentation, detailing why the US economy in 2011 will likely stall and post negative growth. As the chart below demonstrates, the current case, where ongoing QE will likely persist through 2011 and even into 2012, and thus make any discussion of raising rates irrelevant (likely forever, as the Fed will not be able to absorb all the excess slack before it is forcefully removed after 2-3 sequential dollar devaluations) lead Goldman to a GDP expectation of well under half of the Fed's greenshooty outlook of 3%.

Here is how Goldman describes the its across the board outlook revision:

* Lower growth: We expect GDP to grow 1.5-2.5% in 2011 (down from 2.5-3.0%). Our view is that the growth baton will be passed successfully from inventories and government spending to consumption and investment so growth should remain positive over the next 12-18 months.
* Higher uncertainty: Our forecast range for GDP is wider (1% instead of 0.5%) at 1.5-2.5%
* Lower rates: We are lowering our long-term rates forecast to 3.0-3.75% by end 2011 (from 3.75-4.25%).

And according to the "Bad Case" which the Fed is about to enact, Goldman sees a fundamental S&P valuation range of 725-800 based on 10-11x multiples

GS is now obviously setting up for a 750 S&P FOR 2011. I have spoken about this before that 2011 is the next real test for the market.

Why having broken systems lead to loss of #1

We won't be the alpha dog in the western hemisphere forever.

Even if the U.S. hadn't crashed into a financial crisis, there are demographic, material, and political forces that have been spreading power around the Americas for decades.

Brazil is first among the BRICs -- four economies that are supposed to overtake the six largest Western economies by 2032.

Mexico is first among the MAVINS (Mexico, Australia, Vietnam, Indonesia, Nigeria, and South Africa) -- six economies we expect to blow away expectations and become leading powers in their regions relatively soon.

Canada and Venezuela are oil powers of the distant future.

Peru and Chile are sitting on a fortune of metals and minerals.

All these countries are cranking up, while America faces plenty of fiscal and demographic problems at home.

Here are Signs the US Is Losing Its Influence In Its Own Backyard:

Our most powerful regional ally--Brazil--refuses to follow our orders on Iran

Hillary Clinton went to Brazil to beg support for sanctions against Iran and came away empty handed. Now the UN is counting on Brazil, which is friendly with America and Iran, to lead nuclear diplomacy.

The World's Richest Man is now a Mexican, not an American.

For the first time in 16 years, the World's Richest Man is not an American. Carlos Slim, worth $54 billion, is the first Latin American to hold that title and one of many emerging market billionaires to eclipse the U.S.

Three years after a US financial crisis, Latin America is again growing rapidly. The U.S.? Not so much...

Compare this to what happened during the Great Depression. Latin America was devastated when US investment dried up and the export market soured in the 30s. A League of Nations report said Chile, Peru, and Bolivia suffered the world's worst depression.

Today is quite different. Brazil, Argentina, and Mexico have led a buoyant recovery from the global recession, according to Reuters. The regional economy is expected by the UN to grow 4.3 percent in 2010. If the American consumer remains weak, Latin American exports will move elsewhere.

Chile produces 300% more copper than America--the former world leader in copper production

America used to lead the world in copper production. We produced 49% of the world's copper in 1929, according to this article from the archives. Today we produced 1.2 million tonnes yearly, compared to 5.4 million tonnes in Chile.

Brazil now produces over four times as much iron ore as the U.S.. We used to lead that industry, too.

America once led the world in iron mining. In 1892 we discovered the world's largest mine at the Great Lakes Mesabi Range. It was a wellspring for America's industrial might and the foundation of the rust belt.

Now we claim reserves at 2,100 mt. Seven countries claim higher reserves, including Brazil at 8,900 mt. We produce only 54 mt yearly, while Brazil produces 250 mt.

Canada and Venezuela will pass the US in oil production in the next decade

America produces around 9 million billion barrels of oil a day. Venezuela and Canada each produce around 3 million. But America's reserves are 21 billion barrels and may last less than a decade. Our oil-rich neighbors claim 99 billion bbl and 178 billion bbl, respectively, and will keep producing oil into the distant future.

Now Brazil exports over twice beef as much as we do

America used to lead the world in beef production. Although we still do, America exports only 800,000 mt of beef per year. Brazil exports 2,200,000 mt. Here's some ironic excerpts from a 1911 NYT article: "American-Canadian syndicate to have world's largest beef plant in Brazil... The chilled beef industry has never been tried before in Brazil and has only recently gotten under way in Argentina."

Brazil is now a critical partner for Russia, India, and China

The acronym coined by Goldman Sachs to describe the four key emerging powers has taken on a life of its own. Brazil, Russia, India, and China have held several summits and even discussed making a supranational currency -- that would pull the rug out from the US dollar.

What's important here is that global emerging powers have good relations and are inclined to work together. For instance, China just signed major contracts to build factories and high-speed rail in Brazil.

Brazil, Canada, and Mexico all invest a greater share of GDP in clean energy

A Pew survey found that Brazil invests 0.37% of its economy in clean energy. Canada invests 0.25% and Mexico invests 0.14%. America is eleventh in the world at 0.13%.

Hugo Chavez is still in power

The CIA has a notorious history of interventions in Latin America, supposedly targeting Jacobo Arbenz Guzmán, Fidel Castro, Manuel Noriega, Rios Montt, Che Guevara, and many others. But they haven't stopped Hugo Chavez from railing against the United States for years. Clearly America has adopted a more passive regional strategy.

Predict

10 years from now we will no longer be using desktop computers not even at work. These smartphones plus ipad like devices will be the new norm. Already in Germany many schools are buying ipads instead of macbooks for their students. That is something we should think about too, why is it that the Germany school system gives every student a macbook or ipad and our students get zero, no wonder the Germans are way ahead of the US in engineering and the high schools are leading in math, english and science.
Our education system is broken much like our financial system but hey it is the American way :) just spend BUT not on the right thing. Teachers barely getting paid and we wonder why the education system is on the decline. Oh well what else is new?

Interesting read

Fixed income desks are going to be subject to severe layoffs, according to a highly placed Wall Street insider with information about the plans of his firm and the plans of rivals.

"It's going to be a blood bath. Volume is down for everything except Treasuries and Munis. These guys aren't making money and soon they'll be out of their jobs," he said.

He is sitting in Grand Central's Oyster bar. It's an annual ritual for him: welcoming in September with a frenzy of shell fish and wine.

Typically he invites along a few friends and treats them to a discourse on the state of Wall Street.

"It's a one-two blow for fixed income. The derivatives are being commoditized and put on exchanges. Swoosh. Now you don't need half the people you employ to trade and track those. And volume on corporates and agency paper is way down."

The numbers from SIFMA bear him out. Year to date, the average daily trading volume in US corporate debt is down 2% compared to last year.

Trading in Fannie Mae and Freddie Mac debt is down 7%. Trading in mortgage-backed securities sponsored by Fannie and Freddie is down 13%. And the year to date numbers only tell part of the story. And the part it leaves out is how thin trading became over the summer.

Trading in corporate debt started the year pretty robustly, with $19.7 billion of bonds trading hands in January. But in June, volume dropped down to $14.6 billion and kept dropping right through the summer. The year before, the average daily volume for June was 19.3, so this decline cannot be attributed to merely a summer slowdown.

"We're easily going to cut a quarter to a half of our traders and back office in fixed income. Everyone else is going to do it too," he says.

Gold

Gold February 2011 just traded over $1301

Silver

Wow Silver really busted a move higher- Two years ago I was talking about Silver reaching new highs on the back of Gold mainly because most who invest in precious metals do so through gold and Silver would be the lagging commodity. 30 year highs!

Gold

New highs for the precious metal. Looks like 1300 in the cards.

For the Gold bugs

Bangladesh bought 10 tonnes of the gold on sale from the I.M.F. last week. This leaves 88.3 tonnes to sell now. The 10 tonnes that Bangladesh bought cost them around $1,260 an ounce. This tells us that price was not a determinant in the matter. This may surprise many, but it does highlight something about why central banks in general are buying gold now.

The potential, not just for currency crises, but serious foreign exchange structural problems is huge. The international level of cooperation between nations is poor [as we are seeing in the U.S. China faceoff over the Yuan exchange rate against the Dollar] leaving us uncertain at the prospect of unstable currency markets. This has vastly increased the attraction of gold as a reserve asset. As such the price paid for gold in foreign exchange reserves is hardly relevant. When that dark and rainy day comes its use in settling pressing foreign obligations will heavily outweigh what the gold cost. It's having the gold to pay these obligations or guarantee foreign currency obligations that will matter then.

Why can't anybody buy anyway?

The I.M.F. has chosen to sell their gold in only two ways;

1. They will sell direct to central banks and announce the sale after the sale is complete.
2. It will sell the remaining gold on the open market through the bullion banks over time in a manner that will not influence the price. This can result in just a couple of tonnes sold right up to 15+ tonnes sold in any month.


China not a Buyer but others would like to

You may be surprised that China has not made a direct bid for the gold on sale from the I.M.F., but there are good reasons why they have not bid. The Chinese central bank, the People's Bank of China does not buy gold for its reserves direct from any market or auction. It uses an agency to do the buying. This agency can hold the gold for 5 years and then pass it to the P. of C. Only at that point does the central bank declare it has bought it. This anonymity is very important to China. If it were known that China had a serious long-term commitment to buying gold there is no doubt that it would precipitate such a jump in the gold price that the market could destabilize and China not be able to access open market gold.

Because of these considerations of a direct and then announced approach by China to the I.M.F. we doubt very much if China will now be a buyer. They will continue to buy in the open market anonymously.

If the I.M.F. had been willing to sell direct to large institutions [such as China's buying Agency if they had been a buyer] the gold would have been sold to it and/or to other private funds and sovereign wealth funds very quickly after the initial announcement to sell gold had been made by the I.M.F. In fact, there are many non-central bank institutions that want to approach the I.M.F. to buy the gold, but the two selling routes are inviolate. This means that, with only 88.3 tonnes left to sell it the opportunity to buy gold in a large amount [only by central banks] is slowly disappearing.

A potential buyer could have been India, who made the largest purchase of I.M.F. gold at 200 tonnes. Just after India bought the 200 tonnes of gold from the I.M.F. it stated that it may be a further buyer of this gold. Will they come in again, or will more Asian central banks come in for the first or second time? Well, both time and supply are running out for all central banks buyers.

As the buying has come from Asian countries who know and love gold, the most likely buyers will be from that part of the world, not from the developed world's central banks. For the West to be buyers, may well be seen as undermining the paper currency world.

At the present rate of selling in the 'open' market the I.M.F. will have completed selling in 6 months time. So the clock is ticking. That's why we expect one or more announcements from the I.M.F. on further sales to central banks soon. These will come anytime from now and over the next 6 months. We would not be surprised is the entire remaining amount goes in one fell swoop, soon. No-one can say who for sure will be buyers.

The IM.F.s' announcement that I.M.F. gold sales are complete will be a trumpet signal to the market that supplies have narrowed. Then what?

FOMC

FOMC meeting today. Day off for me then. Very interested in hearing what the are going to say about the unemployment.

Oil

higher as expected. Got to watch if it make a new swing high on this push.

Wall Street revenues down

Inside the great investment houses on Wall Street, business has taken a surprising turn — downward.

Even after taxpayer bailouts restored bankers’ profits and pay, the great Wall Street money machine is decelerating. Big financial institutions, including commercial banks, are still making a lot of money. But given unease in the financial markets and the economy, brokerages and investment banks are not making nearly as much as their executives, employees and investors had hoped.

After an unusually sharp slowdown in trading this summer, analysts are rethinking their profit forecasts for 2010.

The activities at the heart of what Wall Street does — selling and trading stocks and bonds, and advising on mergers — are running at levels well below where they were at this point last year, said Meredith Whitney, a bank analyst who was among the first to warn of the subprime mortgage disaster and its impact on big banks.

Worldwide, the number of stock offerings is down 15 percent from this time last year, while bond issuance is off 25 percent, according to Capital IQ, a research firm. Based on these trends, Ms. Whitney predicts that annual revenue from Wall Street’s main businesses will drop 25 percent, to around $42 billion in 2010, from $56 billion last year.

While the numbers will not be known until after the third quarter ends and financial companies begin reporting earnings in October, the pace of trading this summer was slow even by normal summer standards. Trading in shares listed on the New York Stock Exchange was down by 11 percent in July from 2009 levels, and August volume was off nearly 30 percent.

“What’s happened in the third quarter is that after a very slow summer, people expected things to come back,” said Ms. Whitney. “But they haven’t, and the inactivity is really squeezing everyone.”

The downward slide on Wall Street parallels a similar shift in the broader economy, which has slowed considerably since showing signs of a nascent recovery this spring. And if banks come under pressure, all but the safest borrowers may struggle to get loans.

With less than two weeks to go in the third quarter, companies will be hard-pressed to fulfill earlier, more optimistic expectations.

“It’s like the marathon: if you’re five miles behind, you can’t make that up in the last 10 minutes of the race,” said David H. Ellison, president of FBR Fund Advisers, a money management firm that specializes in financial companies. Many banks are barely scraping by in traditional Wall Street business.

As a result, executives, portfolio managers and analysts say that even the mighty Goldman Sachs, which posted a profit every day for the first three months of the year, is unlikely to deliver the kind of profit growth that investors have come to expect.

Keith Horowitz, a bank analyst at Citigroup, said he expected Goldman Sachs to earn $7.8 billion in 2010, a 35 percent decline from the $12.1 billion it made last year.

The drop in trading translates into lower commissions for brokerage firms, as well as a weaker environment for underwriting initial public offerings and other stock issues, traditionally a highly lucrative niche.

Banks are also scaling back on making bets with their own money — known as proprietary trading — another huge profit source in recent years that will soon be forbidden under terms of the financial reform legislation passed by Congress this summer.

Indeed, analysts have finally started to bring their forecasts in line with the new reality. On Sept. 12, Mr. Horowitz reduced his estimates for third-quarter profits at Goldman and Morgan Stanley.

Mr. Horowitz had predicted Goldman would make $1.75 billion in the third quarter, or $3 a share; he now expects Goldman’s profit to total $1.34 billion, or $2.30 a share. For Morgan Stanley, his revision was even steeper, with earnings expectations revised downward to $140 million, or 10 cents a share, from $726 million, or 53 cents a share.

Mr. Horowitz’s estimates are considerably lower than the consensus among analysts who track the two companies. If the other analysts revise their estimates closer to his, they would put pressure on the shares.

One of the rare bright spots for Wall Street recently has been the issuance of junk bonds, as ultra-low interest rates encourage investors to seek out riskier debt that carries a higher yield. But that will not be enough to offset the weakness elsewhere, said one top Wall Street executive who insisted on anonymity because he was not authorized to speak publicly for his company, and because final numbers would not be tallied until the end of the month.

To make matters worse, he said, many Wall Street firms increased their work forces in the first half of the year, before the mood shifted and worries of a double-dip recession arose. If activity remains anemic, firms could soon begin cutting jobs again.

“I think the summer was horrible for everyone, and no one expected it to be as bad as it was,” he said. “It’s coming back a little bit in September but nowhere near enough to make up for what happened in July and August.”

The profit picture is brighter for diversified companies like JPMorgan Chase and Bank of America, which have larger commercial and retail banking operations in addition to their Wall Street units, but some analysts say earnings expectations for them could come down as well.

“Estimates still seem a little high, and the revenue story for all the banks is not a good one,” said Ed Najarian, who tracks the banking sector for ISI, a New York research firm.

With interest rates plunging, banks are making less off their interest-earning assets like government bonds and other ultra-safe securities. At the same time, demand for new loans remains weak.

One wild card will be the credit card portfolios at major banks like JPMorgan, Bank of America and Citigroup. As delinquencies ease, Mr. Najarian said, credit losses are likely to decline. That trend helped earnings at JPMorgan in the second quarter, and could be crucial again in the third quarter.

Ms. Whitney says the gloomy short-term predictions foreshadow a series of lean years in the broader financial services industry.

Indeed, she said the Street faced a “resizing” not seen since the cutbacks that followed the bursting of the dot-com bubble a decade ago.

“We expect compensation to be down dramatically this year,” she wrote in a recent report. She predicts the American banking industry will lay off 40,000 to 80,000 employees, or as many as 1 in 10 of its workers.

That may be extreme, but Ms. Whitney argues that the boom years are not coming back anytime soon. As both consumers and companies cut back on debt, and financial reform rules put the brakes on profitable niches like derivatives and proprietary trading, the engines of earnings growth for the last decade will continue to sputter.

Oil

Wow oil position fight it hard but I believe it will definitely play out. Right here we have a possibility to get a retracement back up from the quick sell off last week. Still looking for oil to settle below $72 and drift lower. I will see soon enough.

S&P
As said last week 1029/1030 should be heavy resistance I will be watching that area again this week to see if we break through or hit the wall.

CFOs not confident

Optimism about the U.S. economy has fallen back to recession levels among chief financial officers (CFOs), who foresee minimal increases in expected hiring, weak consumer demand and heightened economic uncertainty.

Credit is still tight for small firms and many firms continue to hoard cash. Without improvement in the economy, CFOs say earnings growth and capital spending will falter within six to 12 months.

These are some of the findings of the most recent Duke University/CFO Magazine Global Business Outlook Survey. The survey, which concluded Sept. 10, asked 937 CFOs from a broad range of global public and private companies about their expectations for the economy. (See end of release for survey methodology.) The research has been conducted for 58 consecutive quarters. Presented results are for U.S. firms unless otherwise noted.

Summary of Findings

-- CFO optimism about the U.S. economy has fallen to 49 on a zero-to-100 scale, well below the rating of 58 from the last quarter. Pessimists outnumber optimists four-to-one. European CFOs' optimism rate is 58; Asian CFOs' rate is 70.

-- Half of CFOs say they will cling tightly to cash due to economic uncertainty and as a liquidity buffer. The other half will spend some cash reserves in the next year, primarily for investment, to pay down debt and to make acquisitions.

-- Earnings are expected to rise 12 percent and capital spending almost 7 percent in the next 12 months. However, nearly half of CFOs say unless the overall economy improves, there is only a six-month window during which they can maintain this level of growth.

Optimism Plunges

Optimism about the overall economy fell at 53 percent of U.S. firms and increased at only 14 percent. The optimism rate of 49 is at a level not seen since the first quarter of 2009, when CFOs rated the economy at 40.

"The CFO optimism index has proven to be an accurate predictor of future economic performance," said Julia Homer, executive vice president for content at CFO Publishing LLC. "Therefore, this dramatic drop in optimism bodes poorly for the economic outlook. Half of CFOs say there is only a six-month window -- and another one-fourth believe it's a 12-month window -- during which they can maintain current levels of business activity without improvement in the overall economy."

Employment Stagnant

U.S. companies expect full-time domestic employment to inch up by 0.7 percent over the next year, while temporary employment will increase 0.8 percent. The labor picture is about the same in Europe, but much stronger in Asia (with expected growth of more than 5 percent).

"This rate of U.S. employment growth will increase payrolls, but not put a dent in the unemployment rate due to growth in labor force participation," Homer said. "Another negative employment trend is the recent surge in hiring contract and temporary employees rather than permanent workers."

U.S. CFOs say nearly one-fourth of recent hiring has been targeted at contract and part-time employees, up from 17 percent prior to the recession.

Credit Conditions

"There has been no progress in fixing the credit problem over the last year," said Campbell R. Harvey, a professor of finance at Duke's Fuqua School of Business and founding director of the survey. "Indeed, half of the small businesses say credit conditions are worse than in 2009.

"The math is simple. A) Banks are sitting on cash because of their poor health and general uncertainty. B) Small and medium-sized firms have employment-generating projects that they cannot get financed because banks will not extend credit. C) In usual circumstances, small and medium-sized businesses account for the majority of employment growth. A+B+C implies we are stuck at 9 or 10 percent unemployment," Harvey said.

When Will Cash Be Unleashed?

"Cash exists in two locations: bank reserves and balance sheets of healthy companies," Harvey said. "Banks show no sign of unfreezing credit. They are lending to the government, not to businesses. However, U.S. firms are sitting on over $1.8 trillion in cash. When will it be unleashed?"

The survey results show 50 percent of respondents have no intention of deploying their cash over the next 12 months. More than half of responders say they will continue to sit on cash for liquidity to protect against another round of credit tightening and general economic uncertainty. Of the 50 percent that will deploy cash, only 56 percent will allocate to capital spending and investment.

"We were especially interested in the type of capital spending that creates jobs," Harvey said. "The survey shows only 22 percent of firms say their new capital spending will lead to hiring. This bodes very poorly for employment in 2011."

If this guy can't get a business how can I

It is amazing how these banks cried for a bail out but they are not doing what is required of them to free up credit for the economy to get on a roll. I hear politicians talk this and that but the basic fact of the matter is banks are the economic cog wheel that turns on hiring. Something needs to happen but all these politicians are just talk and they banks are just trading and keeping their fat check to themselves. What's New??


http://finance.yahoo.com/news/Small-Business-Cant-Get-Loans-bloomberg-1767086225.html?x=0&sec=topStories&pos=6&asset=&ccode=

Gold

Look on Gold rise- Told you move into the commodities here and I don't see equities following the same path for too long. Now it is very important to notice why Gold is on the rise, the treasuries are at a stand still, currencies are stalled and the equity markets are lackluster. Gold is taking the leadership with Oil.

Probability

Probability we get a shake out here. I wont get into all the technicals but 1129 is a good probability short here or at least to start a position. We will see soon enough but with the commodities looking strong I would be careful being long the equities here.

More up

So nice up move today as said would happen. There is a small gap resistance at the 1129 area and I would look for that number to be in play tomorrow if we gap up. Again the market seem to be trading on this air and participation is relatively weak but the tape says higher right now.

Higher

I think the path of least resistance right now is up. Oil is showing a strong anti seasonal move but I will stick to my game plan for now. I will be watching the close of the quarter very closely as I feel we are in some kind of rotation again into commodities especially the metals.

Next week

More than likely I will be posting back everyday starting next week. In the meantime the markets are doing absolutely nothing. The DOW started the year at 10580 and today we are basically flat @ 10410. Tough tough tough to trade without much volatility but we will see how long this tight range remains.
Last year I warned this would happen and here it is, so it is not a surprise to me. Indeed I think the markets are on a dead shot to hit some larger cycle lows in 2011, I can't wait to see if I am correct.

Oil

Still thinking it will fall hard but we will see. Market looks like it wants a bit higher and actually we seem to be in a little uptrend till the cycle high in October. You never know as the last time it totally didn't trade through the previous highs and in turned it reversed. I will be watching carefully today for sure especially the volume which has been light.
All systems up and running as I type.

Fixed

Network is cleared and protected now finally, so I will be installing everything back on the weekend and ready for next week. Hope to get back to regular posting then.
Oil is trying to give a fight but I would double up on shorts up here.

Network problem

So this is the third day of fixing my network. I hope to finish tonight- My emails hacked, network hacked and what else I don't know, just a bummer but these things always seem to happen to me and at the worse times.
Market looks like 1087 resistance but when I have everything up and running perfectly hopefully tuesday I am post my thoughts.

Have a safe holiday weekend