Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Will Fed‘s Cap On Interest Rates Trigger Gold’s Rally? - 30th May
Is Stock Market Setting Up for a Blow-Off Top? - 29th May 20
Strong Signs In The Mobile Gaming Market - 29th May 20
Last Clap for NHS and Carers, Sheffield UK - 29th May 20
The AI Mega-trend Stocks Investing - When to Sell? - 28th May 20
Trump vs. Biden: What’s at Stake for Precious Metals Investors? - 28th May 20
Stocks: What to Make of the Day-Trading Frenzy - 28th May 20
Why You’ll Never Get Another Stimulus Check - 28th May 20
Implications for Gold – 2007-9 Great Recession vs. 2020 Coronavirus Crisis - 28th May 20
Ray Dalio Suggests USA Is Entering A Period Of Economic Decline And New World Order - 28th May 20
Europe’s Coronavirus Pandemic Dilemma - 28th May 20
I Can't Pay My Payday Loans What Will Happen - 28th May 20
Predictive Modeling Suggests US Stock Markets 12% Over Valued - 27th May 20
Why Stocks Bear Market Rallies Are So Tricky - 27th May 20
Precious Metals Hit Resistance - 27th May 20
Crude Oil Cuts Get Another Saudi Boost as Oil Demand Begins to Show Signs of Life - 27th May 20
Where the Markets are heading after COVID-19? - 27th May 20
Silver Springboards Higher – What’s Next? - 26th May 20
Stock Market Key Resistance Breakout Is Where the Rubber Meets the Road - 26th May 20
5 Ways To Amp Up Your CFD Trading Today - 26th May 20
The Anatomy of a Gold Stock Bull Market - 26th May 20
Stock Market Critical Price Level Could Soon Prompt A Big Move - 25th May 20
Will Powell Decouple Gold from the Stock Market? - 25th May 20
How Muslims Celebrated EID in Lockdown Britain 2020 - UK - 25th May 20
Stock Market Topping Behavior - 24th May 20
Fed Action Accelerates Boom-Bust Cycle; Not A Virus Crisis - 23rd May 20
Gold Silver Miners and Stocks (after a quick drop) Ready to Explode - 23rd May 20
3 Ways to Prepare Financially for Retirement - 23rd May 20
4 Essential Car Trade-In Tips To Get The Best Value - 23rd May 20
Budgie Heaven at Bird Land - 23rd May 20
China’s ‘Two Sessions’ herald Rebound of Economy - 22nd May 20
Signs Of Long Term Devaluation US Real Estate - 22nd May 20
Reading the Tea Leaves of Gold’s Upcoming Move - 22nd May 20
Gold, Silver, Mining Stocks Teeter On The Brink Of A Breakout - 21st May 20
Another Bank Bailout Under Cover of a Virus - 21st May 20
Do No Credit Check Loans Online Instant Approval Options Actually Exist? - 21st May 20
An Eye-Opening Perspective: Emerging Markets and Epidemics - 21st May 20
US Housing Market Covid-19 Crisis - 21st May 20
The Coronavirus Just Hit the “Fast-Forward” Button on These Three Industries - 21st May 20
AMD Zen 3 Ryzen 9 4950x Intel Destroying 24 core 48 thread Processor? - 21st May 20
Dow Stock Market Trend Analysis and Forecast - 20th May 20
The Credit Markets Gave Their Nod to the S&P 500 Upswing - 20th May 20
Where to get proper HGH treatment in USA - 20th May 20
Silver Is Ensured A Prosperous 2020 Thanks To The Fed - 20th May 20
It’s Not Only Palladium That You Better Listen To - 20th May 20
DJIA Stock Market Technical Trend Analysis - 19th May 20
US Real Estate Showing Signs Of Covid19 Collateral Damage - 19th May 20
Gold Stocks Fundamental Indicators - 19th May 20
Why This Wave is Usually a Market Downturn's Most Wicked - 19th May 20
Gold Mining Stocks Flip from Losses to 5x Leveraged Gains! - 19th May 20
Silver Price Begins To Accelerate Higher Faster Than Gold - 19th May 20
Gold Will Soar Soon; World Now Faces 'Monetary Armageddon' - 19th May 20

Market Oracle FREE Newsletter

Coronavirus-stocks-bear-market-2020-analysis

Stock Market Toppy Tuesday, LA City Runs Out of Money on June 30th?

Stock-Markets / Financial Markets 2010 Apr 06, 2010 - 09:22 AM GMT

By: PhilStockWorld

Stock-Markets

Best Financial Markets Analysis ArticleIs Los Angeles unique or just the first?

City Controller Wendy Greuel declared an "urgent financial crisis" and said the only way to continue paying bills in the short term was to begin to drain the city’s already limited emergency reserve.  Greuel said the city would need to pull money from its $191 million in reserve funds immediately to pay its bills next month. She expects the city to be out of money, and probably in the red, by June 30.  Some officials fear that using that money would not only leave the city without reserves in case of emergencies, it would also probably trigger another downgrade in its Wall Street credit ratings.


Cities all over the nation are scrambling to pay their bills and that’s nothing compared to the disasters state budgets face.  A study released Monday by Stanford University estimates that California’s three largest state-operated, public-employee pension funds—the California Public Employees’ Retirement System, California State Teachers’ Retirement System and University of California Retirement System—currently face a total shortfall of more than $500 billion.  Gov. Schwarzenegger warned Monday that pension-fund shortfalls could lead California, which faces a $20 billion budget gap in the coming fiscal year, to divert more funds from other state programs to cover pension costs.

Fortunately, for the dollar, we are by no means the most screwed-up economy on the planet.  The Euro is dropping to new lows this morning amid speculation that a plan for Greece to obtain European Union and International Monetary Fund help in cutting its budget deficit may falter (again).  The report that Greece “isn’t keen on the IMF being involved in any bailout would seem to throw the whole plan into question,” said Simon Derrick, chief currency strategist at Bank of New York Mellon Corp. in London. “As an investor, do you really want to hang around and see what’s happening next? The Greece story is definitely a negative for the Euro.”  

The Dollar is not doing so well against the Aussie Dollar, which rose to 92.14 this morning as the ACB raised their main interest rates to 4.25%, it’s fifth rate increase in six meetings.  Even more shocking to most Americans is the Canadian "Loonie," which is now trading at $1.0008 to the dollar - almost on par to the dollar and down from 1.26 Loonies to the Dollar last March!  So let’s not get too full of ourselves, America - Canada is quietly taking over North American economic leadership

With our own Fed Funds rate lower than Japan’s (0.3%) at the moment, we’ll be getting a read of the Fed’s Minutes this afternoon and looking for signs that the US will be as brave as the Band of England (0.5%) or the ECB (1%) in raising rates to within 1/10th of Australia’s levels.  Our last rate change was an "emergency" 0.75% drop on Dec 16th, 2008, when the Fed slipped in what is now adding up to a $1.5Tn gift to their banking buddies who are able to borrow at 0.25% (subsidized by we, the people) and play the markets, buy commodities or simply put their money into countries that pay much higher rates like Brazil (8.75%), Egypt (8.25%), South Africa (6.5%), China (5.31%), India (5%) or Australia (4.25%).  China is pegged to our currency, for goodness sakes - that’s a pretty good way to play the carry trade! 

Speaking of things that get carried - Despite the huge run-up in commodities this month, the Baltic Dry Index has fallen almost 20% as there is less and less actual demand for them.  This is especially true in the oil segment, where the number of tankers storing oil in order to create the false impression of demand and inflate prices has fallen from 168 in November to "just" 104 at the end of February and you can see the rapid decline in rates on the BDI as oil shot up over $80 and investors like JPM, MS and C cashed in their winnings in another excellent use of taxpayer bailout dollars.  Now we face a serious tanker glut as there hasn’t been any actual, non-speculative demand for anything in two years. 

Commodity pushers led the Asia/Pacific Index to new highs this morning as oil was jammed back over $86.50 in overnight trading and copper broke the magical $8,000/ton mark, which is about $3.63 on our futures.   The Nikkei was unable to hold their highs as the Yen bounced back slightly, finishing the day at just under 94 Yen to the dollar and that cost the Nikkei another 56 points this morning but fortunately, they gained 60 points in the last 45 minutes of trading or things might have looked ugly!  The Hang Seng is still closed and India was dead flat so we have a continuing rally in the MSCI that is based mainly on trading closed markets, forming a massive, speculative bubble that makes EDZ a really great hedge today after closing right at $39 yesterday.  We’ll be looking at some option plays in the morning Alert. 

Europe is well off a strong open and now (9am) flatlining ahead of the US open.  British PM Brown called for a general election on May 6th, which is hurting the Pound ($1.515) on concerns that it may result in a hung Parliament, with no party holding a clear majority and, unlike the US, EU investors are not big fans of gridlock.  Here’s a great video of Brown and Cameron going at it over the last election.  The Euro also went down sharply driving oil up a whopping 28% in two months against that currency and bond yields in Greece climbed back to Jan 29th highs (when the markets were tanking).  As in Asia, the commodity pushers were having a good old time with BP and RDS.A gaining 1.5% on the day and miners once again leading the indexes.  “The market is clearly betting on the improvement in the economy,” said Kilian de Kertanguy, who helps oversee about $3.1 billion at Cholet-Dupont Gestion SA in Paris. “Each time economic data support an amelioration, stocks are rising.”   

This morning’s amelioration in the US is coming from our Retail Sales, with the ICSC Report showing a 4.7% year/year improvement.  As I pointed out last week, this is a fantastic number if we ignore the fact that last year was down over 10% from the year before AND it wasn’t Easter last year (a week later) AND the sales report doesn’t take into account that 10% of the competition went out of business so all we are really measuring is a redistribution of what’s left of consumer spending to the surviving stores.  Look for the MSM to sum this all up as "great sales numbers."

We’ll see if this "great" news is going to be enough to finally get us to that magic 11,000 mark on the Dow.  Our other resistance points have not been holding up and we continue to watch the NYSE, who hit the roof at 7,600 yesterday, as our strongest directional indicator while we wait for the Russell to catch up (700) and give us the all-clear to get a little more bullish.  Until then - we remain cautious and in cash.

By Phil

www.philstockworld.com

Philip R. Davis is a founder of Phil's Stock World (www.philstockworld.com), a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders. Mr. Davis is a serial entrepreneur, having founded software company Accu-Title, a real estate title insurance software solution, and is also the President of the Delphi Consulting Corp., an M&A consulting firm that helps large and small companies obtain funding and close deals. He was also the founder of Accu-Search, a property data corporation that was sold to DataTrace in 2004 and Personality Plus, a precursor to eHarmony.com. Phil was a former editor of a UMass/Amherst humor magazine and it shows in his writing -- which is filled with colorful commentary along with very specific ideas on stock option purchases (Phil rarely holds actual stocks). Visit: Phil's Stock World (www.philstockworld.com)

© 2010 Copyright  PhilStockWorld - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules