Posts Tagged Stock Market
July 23, 2012
Where have we seen this before? Bond yields soar above the 7 percent danger level. Check. The stock market crashes to new lows. Check. Industrial activity plummets like a rock and the economy contracts. Check. The unemployment rate skyrockets to more than 20 percent. Check. The bursting of a massive real estate bubble pushes the banking system to the brink of implosion. Check. Broke local governments beg the broke national government for bailouts. Check. The international community pressures the national government to implement deep austerity measures which will slow down the economy even more and hordes of violent protesters take to the streets. Check. All of this happened in Greece, it is happening right now in Spain, and mark my words it will eventually happen in the United States. Every debt bubble eventually bursts, and right now Spain is experiencing a level of economic pain that very, very few people saw coming. The recession in Spain is rapidly becoming a full-blown economic depression, and at this point there is no hope and no light at the end of the tunnel.
The bad news for the global economy is that Spain is much larger than Greece. According to the United Nations, the Greek economy is the 32nd largest economy in the world. The Spanish economy, on the other hand, is the 4th largest economy in the eurozone and the 12th largest economy on the entire planet. It is nearly five times the size of the Greek economy.
Financial markets all over the globe are very nervous right now because if the Spanish government ends up asking for a full-blown bailout it could spell the end for the eurozone. There simply is not enough money to do the same kind of thing for Spain that is being done for Greece.
Of course European officials are going to do their best to keep the eurozone from collapsing, but what they have completely failed to do is to keep these countries from falling into depression.
As I have written about previously, Greece has already been in an economic depression for some time.
I warned that Spain, Italy, Portugal and a bunch of other European nations were going down the exact same path.
Now we are watching a virtual replay of what happened in Greece take place in Spain.
Unfortunately, the global financial system may not be able to handle a complete implosion of the Spanish economy.
The following are 12 signs that Spain is shifting gears from recession to depression….
#1 At one point on Monday, the IBEX stock market index fell to 5,905, which was the lowest level in nearly ten years. When it hit 5,905 that represented a drop of about 12 percent over just two trading days. If that happened in the United States, it would be the equivalent of the Dow falling by about 1500 points in 48 hours.
#2 So far this year, the Spanish stock market is down more than 25 percent. Back in 2008, the IBEX 35 was well over 15,000. Today it is sitting just above 6,000.
#3 Spain has banned many forms of short selling for 3 months.
#4 The yield on 10 year Spanish bonds is now well above the 7 percent “danger level”.
#5 Thanks to the problems in Spain, the euro continues to fall like a rock. On Monday it hit a new two year low against the U.S. dollar, and it is near a twelve year low against the Japanese yen.
July 17, 2012
by: Charles Hugh Smith
July 11, 2012
M2 money supply rose sharply, driving the stock market higher. Now it has peaked and rolled over. That does not bode well for the Bull market.
Our Chartist Friend from Pittsburgh kindly shared a chart of M2 money supply and the S&P 500 stock market index (SPX). The correlation between expansion of the money supply and the stock market is worth studying.
The primary point is that “real growth,” i.e. rising wages and profits powered by increases in productivity, does not require massive growth of M2.
by: Tyler Durden
July 10, 2012
Courtesy of the author, we present to our readers the following excerpt from Dark Pools: High-Speed Traders, AI Bandits, and the Threat to the Global Financial System, by Scott Patterson, author of The Quants.
In the dark dawn hours of yet another frigid New York morning, Josh Levine dressed quickly and left his apartment in the shadow of the Twin Towers at Battery Park. He trudged through city blocks clogged with treacherous mounds of packed dirt-pocked snow and ice from the year’s record-breaking string of storms. It was February 16, 1996. A Friday. Earlier that week, IBM’s AI supercomputer Deep Blue defeated world chess champion Garry Kasparov for the first time. Bill Clinton was entering his second term in office. The country was in the midst of a powerful economic boom that would culminate in a massive tech-stock bubble, and Levine and Datek’s army of traders would be at the center of it.
The programmer walked east on Wall Street, then turned south on Broad, passing by the marble façade of the NYSE. At 50 Broad, he took the elevator to the sixth floor and walked past a few early risers, the wired, sunken-eyed day traders for Datek. Staring at their computer terminals, hugging their steaming coffees, waiting impatiently for the action to start at the opening bell, they nodded to Levine quietly as he passed.
Months earlier, Levine had decamped from the tiny cluttered room on the tenth floor of 50 Broad to a larger room on the sixth.
The room quickly slouched toward the en- tropic chaos Levine seemed to thrive in. He brought in an inflatable kiddie pool and populated it with turtles. He grew sea monkeys in a glass jar. An Israeli army bazooka leaned in a corner. The ubiquitous garbage piles, the tech ’zines such as PC World, stacks of computer books, pizza boxes, magazines, crunched Coke cans, crumpled computer printout paper, and candy wrappers rose to the ceiling like tropical plants, competing for space with the baker’s racks of computers, rows of computer terminals lined up on card tables, electric cords and creeping cables shooting out of the floor and through holes in the ceiling.
Levine shed his jacket, sat down before his monitor, and hit a but- ton. His computer hummed awake. It was time. The pieces were in place. Now he was about to bring to life the heretical idea that he’d been nurturing ever since he was a teenage runner in the 1980s.
Typing rapidly, he called up the program. Inputting a few instructions and taking a deep breath, he turned it on. Island was alive.
“Island is here!” Levine wrote on Watcher News. “You now have the ability to execute Island orders from the safety and comfort of your own Watcher.”
March 18th, 2012
No matter how often the pretty people on television tell us that the U.S. economy is getting better, it isn’t going to change the soul crushing agony that millions of American families are going through right now. The stock market may have gotten back to where it was in 2008, but the job market sure hasn’t. As I wrote about a few days ago, the percentage of working age Americans that are actually employed has stayed very flat since late 2009, and the average duration of unemployment is hovering near an all-time high. Sadly, this is not just a temporary downturn. The U.S. economy has been slowly declining for several decades and is nearing total system failure. Right now, manypoverty statistics are higher than they have ever been since the Great Depression. Many measurements of government dependence are the highest that we have ever seen in all of U.S. history. The emerging one world economic system (otherwise known as “free trade”) has cost the U.S. economy tens of thousands of businesses, millions of jobs and hundreds of billions of dollars of our national wealth. The federal government is going into unprecedented amounts of debt in order to try to maintain our current standard of living, but there is no way that they will be able to sustain this kind of borrowing for too much longer. So enjoy this bubble of false prosperity while you can, because things will soon get significantly worse.
As the U.S. economy experiences total system failure, it will be imperative for all of us not to wait around waiting for someone to rescue us.
And I am not just talking about the government.
Today, millions upon millions of Americans are waiting around hoping that someone out there will hire them.
Well, the truth is that our politicians have made it so complicated and so expensive to hire someone that many small businesses try to avoid hiring as much as possible.
Businesses generally only want to hire people if they can make a profit by doing so. When our politicians keep piling on the taxes and the regulations and the paperwork, that creates a tremendous incentive not to hire workers.
Michael Fleischer, the President of Bogen Communications, once wrote an op-ed in the Wall Street Journal entitled “Why I’m Not Hiring”. The following is howPaul Hollrah of Family Security Matters summarized the nightmarish taxes that are imposed on his company when Fleischer hires a new worker….
According to Fleischer, Sally grosses $59,000 a year, which shrinks to less than $44,000 after taxes and other payroll deductions. The $15,311 deducted from Sally’s gross pay is comprised of New Jersey state income tax: $1,893; Social Security taxes: $3,661; state unemployment insurance: $126; disability insurance: $149; Medicare insurance: $856; federal withholding tax: $6,250; and her share of medical and dental insurance: $2,376. Roughly 25.9 percent of Sally’s income is siphoned off by Washington and Trenton before she receives her paychecks.
But then there are the additional costs of employing Sally. In addition to her gross salary, her employer must pay the lion’s share of her healthcare insurance premiums: $9,561; life and other insurance premiums: $153; federal unemployment insurance: $56; disability insurance: $149; worker’s comp insurance: $300; New Jersey state unemployment insurance: $505; Medicare insurance: $856; and the employer’s share of Social Security taxes: $3,661.
Over and above her gross salary, Bogen Communications must pay an additional $15,241 in benefits and state and federal taxes, bringing the total cost of employing Sally to approximately $74,241 per year. Sally gets to keep $43,689, or just 58.8% of that total.
Are you starting to understand why so many businesses are hesitant to hire new workers?
The big corporations can handle all of the paperwork and regulations that come with hiring a new worker fairly well, but for small businesses hiring a new worker can be a massive undertaking. That new worker is going to have to almost be a miracle worker in order to justify all of the hassle and expense.
But the federal government just keeps piling more burdens on to the backs of employers. That is one reason why there is such an uproar over Obamacare. It is going to make hiring workers even less attractive.
These days, most small businesses are trying to get by with as few workers as possible, and many big businesses are trying to ship as many jobs as they can overseas.
Sadly, even if you do find a good job it can disappear at any moment.
The following is from a comment that a reader named Jeff recently left on one of my articles….
It’s sad what’s happening here in this country. So many lucky ones defend it. In America it’s not exactly about hard work anymore, it’s about who you know always. The ability to keep people stupid as well as in debt was established here well by corporations also. You cannot start a solid hiring business like you could years ago.
I know many of folks who don’t break a sweat and earn more money than I ever will in a week. The system is getting crazy only creating two extremes. I fought for this country right after 9/11 as a young naive person. Using my grandfather’s old stories to see the dream that this country was always suppose to have.
The company I still unfortunately work for (cause other places are worse), 4 years ago they froze our salaries. No raises yet, this is when the company was bought by an investment group for 500 million.
Now we are getting sold to Japan for 1 billion. A 500 million dollar profit. Sorry if I may be ignorant in this way of business. But it seems the only one who benefited from this is that group of investors. 400+ well skilled jobs lost, no raises or rewards, a whole lot more work and contract obligations to meet, and less contact with management when problems surface.
I just think the United States of America is becoming the world’s poker table.
I want out of this country so bad. I don’t even know what happen to people here. The younger generation scares me how dumb they are and everyone seems so easily bought with eyecandy.
Can you imagine that?
Can you imagine your boss walking in one day and declaring that the business has just been sold to foreigners and that you are about to lose your job?
In America today, it can be absolutely soul crushing to lose a job. It isn’t as if you are going to run out and get another fantastic job in a week or two.
When you are unemployed, people look at your differently. It gets to the point where you don’t even want to interact with other people because you know that your unemployment is probably going to be the number one topic of conversation.
When you are out of work for six months or more, it is easy to feel like a failure – especially when so many other people are looking at you as if you are a failure too.
But in most cases, individual Americans are not to blame for not being able to find work.
Rather it is the entire system that is failing all of us.
The U.S. economy is bleeding good jobs and the middle class in America has become a bizarre game of musical chairs. When the music stops each round you might lose your spot. You just never know.
Looking for work in the United States in this economic environment can be a demoralizing endeavor. For example, a recent Esquire article described what one unemployed man named Scott Annechino found when he attended a job fair in San Francisco….
A glass elevator carries him to the third floor, where the front-desk girl, who knows it’s her job to be cheerful, told him the job fair is supposed to be.
A pasty kid, maybe thirty, in a too-big shirt and a cheap tie, greets him and tells him the companies are set up in rooms along the hall and that he should definitely visit all of them. Annechino, forty-four years old, wearing his best suit and shined black shoes, walks to the first exhibitor: Devcon, a home-security company. The door is closed, no one inside. Annechino looks around for an explanation. “Oh, I just got an e-mail from my contact there saying they wouldn’t be able to make it today,” the pasty kid says, fingering his BlackBerry.
A couple of other potential employers who were supposed to be here didn’t make it, either — Konica Minolta, Santa Clara University. “Yeah …” the kid says. Annechino moves to the next room. State Farm. They’re looking for people who can put up fifty grand to start their own insurance agency. The Art Institute is next, mostly looking for people who might want to go to art school. New York Life. The U. S. Army, where men wearing fatigues and combat boots offer brochures.
If you want to check out the rest of the sad unemployment stories in that article, you can find them right here.
But even if you do have a job, that doesn’t mean that everything is just fine. Average American families are finding that the prices of the basic things that they need are rising much faster than their paychecks are.
According to one recent study, more than half of all Americans feel as though they are really struggling to afford just the basics at this point….
“Every retailer wants to think ‘Everything I sell is worth it! Shoppers will love it’, but the hard reality is 52% Americans feel they barely have enough to afford the basics,” said Candace Corlett, president of WSL/Strategic Retail.
Just buying food and gas is a major financial ordeal for many families these days. On average, a gallon of gasoline in the United States now costs $3.83. Many Americans burn up a huge chunk of their paychecks just going back and forth to work in their cars.
So what is the solution?
Well, according to the Obama administration the answer is even more government dependence. The federal government is now actually running ads encouraging even more people to go on food stamps….
Can you believe that?
Apparently having 46.5 million Americans on food stamps is not enough. The federal government is spending our tax money on advertisements that try to convince even more Americans that they need to be on food stamps.
What the American people really need are good jobs, but those keep getting shipped out of the country.
Meanwhile, people are becoming increasingly desperate.
For example one Colorado man was recently caught stealing parts from toiletsin public restrooms….
Donald Allen Citron, 48, faces 18 charges, including burglary and theft. He’s accused of stealing toilet parts from several locations, including Southwest Plaza Mall, University of Denver, and Craig Hospital.
Most of the crimes happened in just a few minutes, but police Citron is a plumber and all he needed was a wrench and a screw driver to steal pipes and the plumbing in toilets. The items he’s accused of stealing are valued at around $6,400.
They are calling him “the crapper scrapper”.
Other Americans are not willing to stoop to crime and instead suffer quietly and anonymously.
A reader named Katie recently left the following heartbreaking comment on one of my articles….
I’m almost homeless. Through no fault of my own I’d like to point out. I don’t drink, smoke, or do drugs. I don’t even eat fast food unless I have too.
Four years ago I had a house, car, family, stuff, an IRA, and really everything that people in this country aspire to. I had a great job that I enjoyed so did my boyfriend. Even our relationship was great.
We didn’t get hit by the economy right away. We were in Katrina damaged parts of the country and there was still a lot of construction going on and the economic boom that comes with it.
Then I got laid off. Doesn’t seem to matter that I go to interview after interview. I use indeed, monster, craigslist, and newspapers to search for jobs even outside my area.
Now my boyfriend has passed away suddenly, and his family got everything. I personally have only a living father left, who hasn’t the room but I’m camping in his yard. All my friends say they don’t have the room either. Which makes me wonder just how much of friends they are. Considering if the situation was reversed I have in the past and would open my home to anyone that needed help.
If something happens to him I really don’t know what I’m going to do. I need to get on my feet and I know that jobs are hard to come by. I’m sick of the people who have jobs saying ‘get a job you lazy bum’. I’m hardly lazy and I’m trying desperately to be employed; not being homeless would be rather awesome in my opinion. I’m not picky, regardless of my degree I’ll pick up trash or clean toilets. McDonald’s, Taco Bell and the other fast food places don’t even bother with a call back. And when I call to inquire about my application it’s always the same, ‘we will call you when we make a decision’. Such a cop-out.
So no. In my (granted meaningless opinion) the economy is not getting better. To even suggest that when unemployment is so high or the rate of food stamps. Is utter ludicrous at best. I notice that those talking heads on the cable news and radio never seem to mention that the homeless shelters have a higher occupancy level than ever before. Nor would they mention the fact that we have those shelters in abundance now across the country in comparison to the Great Depression.
I’m getting real tired of hearing how great the economy is doing. When obviously it’s not. All you have to do is open your eyes and see. Business are not coming back yet and foreclosed homes sit empty everywhere. The unemployment rate only counts the people who are getting unemployment benefits. So the people who fall off the unemployment benefits don’t get counted. Because the must have gotten a job, right? Hardly. In fact the homeless in this country are almost never counted correctly. It’s too hard to count them all, or at least that’s the excuse.
I know it’s meaningless, especially to those who see homeless and immediately have a bias, but that’s my opinion on the current state of our economy. You can count me in the 80%. Only a fool would see this as a recovery.
Please say a prayer for Katie and the millions of other Americans just like her. It can be absolutely soul crushing to lose everything that you ever worked for and not see any light at the end of the tunnel.
Unfortunately, the U.S. economy is not going to be improving in the long run. What we are experiencing right now is about as good as it is going to get. The truth is that it is pretty much downhill from here.
It is fairly simple to figure out what is happening to us as a nation.
You can’t keep buying far more than you sell.
You can’t keep spending far more than you bring in.
You can’t keep running up debt in larger and larger amounts indefinitely.
The U.S. economy is running on borrowed money and on borrowed time.
At some point, both are going to run out.
Are you ready for that?