Global Stock Market Crash Warning and Loss of American Financial Privacy
Stock-Markets / Financial Markets Jun 20, 2008 - 05:40 PMBy: Anthony_Cherniawski
Washington, DC - Hidden deep in Senator Christopher Dodd's 630-page Senate housing legislation is a sweeping provision that affects the privacy and operation of nearly all of America 's small businesses. The provision, which was added by the bill's managers without debate this week, would require the nation's payment systems to track, aggregate, and report information on nearly every electronic transaction to the federal government. FreedomWorks Chairman Dick Armey commented: "This is a provision with astonishing reach, and it was slipped into the bill just this week. Not only does it affect nearly every credit card transaction in America , such as Visa, MasterCard, Discover, and American Express, but the bill specifically targets payment systems like eBay's PayPal, Amazon, and Google Checkout that are used by many small online businesses. The privacy implications for America 's small businesses are breathtaking."
What is Senator Dodd up to? The concept of this bill is to create a repository of all financial transactions. For whom? Let's hope this legislation doesn't pass.
The Royal Bank of Scotland issues a warning.
The Royal Bank of Scotland has advised clients to brace for a full-fledged crash in global stock and credit markets over the next three months as inflation paralyses the major central banks.
A report by the bank's research team warns that the S&P 500 index of Wall Street equities is likely to fall by more than 300 points to around 1050 by September as "all the chickens come home to roost" from the excesses of the global boom, with contagion spreading across Europe and emerging markets.
Regulators crack down on shadow banking system.
The shadow banking system grew rapidly during the past decade, accumulating more than $10 trillion in assets by early 2007. That made it roughly the same size as the traditional banking system, according to the Federal Reserve. In their effort to deregulate the brokerage industry, they have kept a “hands off” approach until recently. Now we find the shadow banking system isn't passing the stress test. What's next?
Stocks seeing nothing but red.
That not only refers to the chart, where down days are in red, but also the underlying stocks. Both the NYSE and the NASDAQ are experiencing 80% down days today on rising volume, which does not bode well for the markets.
" Investors have been unwilling to step up and buy stocks because the markets continue to get pressured by the same old story," including worries about higher energy costs, losses linked to financials, inflation concerns, second-quarter earnings and the housing slump, said Robert Pavlik, chief investment officer at Oaktree Asset Management.
Treasury Bonds experiencing scant relief so far.
Last week's call was accurate only to the extent that treasuries stopped their descent. There is some work to be done yet to confirm the end of the downturn. Nonetheless, Treasuries have gained for the week and bond traders are scaling back bets of an interest rate hike.
Treasuries had their biggest two-month loss in April and May since 2004 as oil prices surged and Fed officials intensified indications they've shifted their focus from spurring growth to fighting inflation. Government debt lost a combined 2.9 percent in the two months ended in May, trimming gains so far this year to 0.7 percent.
Today treasuries benefited in Friday's action from a flight-to-quality bid tied to reports of Israel military exercises, traders said. A large-scale exercise conducted by the Israeli air force earlier this month appeared to be a rehearsal for an attack on Iran , according to unnamed Pentagon officials cited by the New York Times.
Gold remains range-bound.
( Bloomberg.com: News ) Gold is headed for its largest weekly rally in four months, but still hasn't broken out of its trading range. Gold often moves with the Euro and Oil, but contrary to the U.S. Dollar. This week the dollar appears to be moving down , but as you will see later in this report, the dollar may not decline much further. That, coupled with the inability of gold to establish a new high, puts the gold rally in doubt.
The Nikkei is being hit doubly hard.
June 20 ( Bloomberg ) -- Japan's stocks fell to a three-week low, capping a second week of losses, after China boosted fuel prices, sending oil to its biggest drop in three months on concern demand for petroleum products there will shrink.
Japan 's economy is getting hit with a double whammy. First, the U.S. economy is slowing down. Now, China 's economy may take a turn due to rising cost of fuel in China .
How low will Shanghai go?
The World Bank sharply raised its forecast for China 's inflation on Thursday, saying that while food price pressures were fading, there was a risk of a spillover into wages and the wider economy.
On Friday, the Chinese government decided to raise retail fuel prices by 16% in an effort to appease the World Bank in advance of the Summer Olympics. The price hike to approximately $3.00 per gallon for gasoline may not elicit sympathy form the west, but it has already brought howls of protest from consumers in China .
Is this the end of the dollar's decline?
( Thomson Financial ) - The U.S. dollar was trading slightly firmer mid-morning in Sydney on Friday, consolidating overnight gains sparked by the oil price sinking 3.5 percent following moves by China to curb fuel demand.
As long as the dollar index stays above 73, the downtrend is broken. This could act as a base to rally the dollar to much higher levels. The trendline pictured here in the chart is a year old. Breaking the downtrend is very significant in relation to commodities and inflation.
Looking for “Whodonit.”
Apartment vacancies are edging up in many areas of the country, according to the LA Times, as frustrated sellers instead try to rent out their homes and condos. And that is making it harder for landlords to raise rents.
The FBI says it has arrested 406 mortgage brokers, developers and realestate agents in a sweep code named Malicious Mortgage.
But only 2 were charged on Wall Street. A little window dressing?
No shortages, but prices are still high.
The Energy Information Administration's This Week In Petroleum tells us that; “Refinery utilization for the production of gasoline has remained low.” The primary reason seems to be that the spread between the price of oil and the price of gasoline is very low. On the other hand, the production of distillates, such as diesel fuel is higher, because that's where the higher spreads bring a higher profit.
Low stockpiles and speculators keep prices high.
The Energy Information Agency's Natural Gas Weekly Update suggests that it cannot find any weather related demand that would explain higher prices in natural gas. Not only did this weeks trading boost the July futures contract, but contracts for the next heating season are also increasing similarly. The blame for this seems to be traced to several factors. The first is that natural gas imports have gone down. Second, the amount of gas in storage is lower than the 5-year average. Third, hurricane season is approaching and has made traders nervous, since a large percentage of our supply comes through the Gulf of Mexico .
Don't fall for the blame game.
Now that we have been warned by none other than the Royal Bank of Scotland that economic trouble lies ahead, don't be conned by politicians and political movements that want to play the blame game. Our economic expansion and the trouble that now follows was entirely predictable. When inflation first arrives, it looks good. The stock market goes up. Real estate values rise. Then commodities soar. Those that got on the train early profited immensely. Those that got on late were handed losses. The trouble is, our human nature prompts us to do the wrong thing at the wrong time. People who watched their assets soar in value started spending beyond their means. Now we see the cost of living soar and our assets plummeting. Whose fault is it? Our very own. We enjoyed the good times without thought that they would end. Now they have ended and many are not prepared.
J.R. Nyquist has an insightful column warning us not to accept blame shifting and easy answers from anyone, whether from Washington or not. It will only make things worse.
Consider this challenge to the system in the context of what is happening economically, and what must happen politically. The name of the game is to blame. There is an attack underway against traditional religious authority, existing political authority and the economic system as represented by “central bankers.” The attack is taking place on many levels simultaneously. It has been underway for decades and may soon accelerate.
We're on the air every Friday.
Tim Wood of www.cyclesman.com , John Grant and I are back in our weekly session on the markets. This week we debate what the market is telling us, near-term. It should be fascinating. You will be able to access the interview by clicking here .
New IPTV program going strong.
This week's show on www.yorba.tv is packed with information about the direction of the markets. I'm on every Thursday at 4:00 pm EDT . You can find the archives of my latest programs by clicking here .
Please make an appointment to discuss our investment strategies by calling Claire or Tony at (517) 699-1554, ext 10 or 11. Or e-mail us at tpi@thepracticalinvestor.com .
Anthony M. Cherniawski,
President and CIO
http://www.thepracticalinvestor.com
As a State Registered Investment Advisor, The Practical Investor (TPI) manages private client investment portfolios using a proprietary investment strategy created by Chief Investment Officer Tony Cherniawski. Throughout 2000-01, when many investors felt the pain of double digit market losses, TPI successfully navigated the choppy investment waters, creating a profit for our private investment clients. With a focus on preserving assets and capitalizing on opportunities, TPI clients benefited greatly from the TPI strategies, allowing them to stay on track with their life goals
Disclaimer: The content in this article is written for educational and informational purposes only. There is no offer or recommendation to buy or sell any security and no information contained here should be interpreted or construed as investment advice. Do you own due diligence as the information in this article is the opinion of Anthony M. Cherniawski and subject to change without notice.
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