By: Daryl Montgomery
U.S. stock market action on Monday was highly unusual with the Dow Jones Industrials rallying strongly while the Nasdaq experienced major selling. This behavior is bearish and indicates lower stock prices in the future.
The open set the tone for the day with the Dow up over 100 points shortly thereafter and the Nasdaq down more than 20 points. The Dow rallied even further and the Nasdaq sold down to even lower levels. By the close however, not ...
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By: Daryl Montgomery
Minutes from the last Fed’s Open Market Committee meeting indicate the central bank is less likely to introduce more stimulus. While this should not have been surprising, stocks sold off on the news adding more evidence that the top has been put in.
The current market rally, indeed the entire market rally since mid-2009 has been produced primarily on liquidity provided by the Fed and other central banks. This liquidity not only allows the ...
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By: Daryl Montgomery
While stocks weakened in the U.S. on Thursday because of disappointing economic data, they were down in Europe on the resurfacing of the debt crisis issues.
The head of sovereign ratings at S&P, Moritz Kraemer, speaking at an event at the London School of Economics said that another restructuring of Greek debt is likely, with the bailout partners such as the IMF having to take a hit the next time around. Speaking at the ...
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By: Daryl Montgomery
As average U.S. gas prices head toward $4.00 a gallon, billionaire hedge fund operator John Paulson recently told a standing room only crowd at New York’s University Club that double-digit inflation is about to rear its ugly head. Paulson assumes that the Fed will continue to engage in its inflation-creating behavior.
John Paulson is famous for making a killing on shorting subprime bonds before their collapse. Most of Wall Street was bullish at the time ...
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By: Daryl Montgomery
While the big Tuesday rally in stocks got all the media attention, the big selloff in U.S. Treasuries that accompanied it went largely unnoticed. Good news for banks apparently means much higher interest rates and bad news for consumers.
Yields on U.S. treasuries were not that far above historical lows before the boondoggle accompanying the Federal Reserve’s stress test announcements. When JP Morgan jumped the gun and other banks followed on March 13th, ...
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By: Daryl Montgomery
The Federal Reserve released its stress test results of 19 banks two days early yesterday. JP Morgan Chase forced its hand by making a public announcement that it had passed the test. Although the news was not particularly good, nor the results completely believable, U.S. stocks had their best day all year.
The Fed said on Tuesday that 15 of the 19 banks tested would have enough capital, even if they suffered a financial shock. ...
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By: Daryl Montgomery
Unadjusted for inflation, U.S. retail sales rose 1.1% in February. There may have been little or no gain if price increases are accurately taken into account.
Retail sales going up in the beginning months of the year should surprise no one because this is when companies typically raise prices. Anyone who goes to Starbucks is aware of this practice. It pervades a number of industries across the spectrum. Clothing prices are being hit particularly ...
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By: Daryl Montgomery
Greece is set to swap its privately-held government bonds today for new ones that will represent a three-quarters loss of the original investment. The deal will allow the country to receive 130 billion euros in funds from its second bailout. Like the money from the first bailout, those funds will eventually run out however.
The Greek bond swap is the biggest debt writedown in history. Over 85% of private investors (essentially banks, the deal does not ...
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By: Daryl Montgomery
After a sharp rise since last October, the market looks like it is set up for one of its usual spring downturns. Without continued liquidity injections from the major central banks, it won’t be able to break through the wall of resistance it’s currently facing, nor will there be much support to hold it up.
As has been the case for months, trouble in Greece is currently roiling international markets. The bond swap deal reached as part of the latest ...
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By: Daryl Montgomery
Once again Greece has avoided a messy default and once again its creditors have had to take a greater loss on their loans and once again standards had to be abandoned to make the deal go through. And once again, we’re not done yet.
Realistically, Greece is actually undergoing a messy default; it’s just doing it in slow motion. When creditors are not fully paid, there is a default. The original default terms ...
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