Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
Stock Market Dow Elliott Wave Analysis Forecast - 13th Oct 19
The Most Successful IPOs Have This One Thing in Common - 13th Oct 19
Precious Metals & Stock Market VIX Are Set To Launch Dramatically Higher - 13th Oct 19
Discovery Sport EGR Valve Gasket Problems - Land Rover Dealer Fix - 13th Oct 19
Stock Market US Presidential Cycle - Video - 12th Oct 19
Social Security Is Screwing Millennials - 12th Oct 19
Gold Gifts Traders With Another Rotation Below $1500 - 12th Oct 19
US Dollar Index Trend Analysis - 11th Oct 19
China Golden Week Sales Exceed Expectations - 11th Oct 19
Stock Market Short-term Consolidation Does Not change Secular Bullish Trend - 11th Oct 19
The Allure of Upswings in Silver Mining Stocks - 11th Oct 19
US Housing Market 2018-2019 and 2006-2007: Similarities & Differences - 11th Oct 19
Now Is the Time to Load Up on 5G Stocks - 11th Oct 19
Why the Law Can’t Protect Your Money - 11th Oct 19
Will Miami be the First U.S. Real Estate Bubble to Burst? - 11th Oct 19
How Online Casinos Maximise Profits - 11th Oct 19
3 Tips for Picking Junior Gold Stocks - 10th Oct 19
How Does Inflation Affect Exchange Rates? - 10th Oct 19
This Is the Best Time to Load Up on These 3 Value Stocks - 10th Oct 19
What Makes this Gold Market Rally Different From All Others - 10th Oct 19
Stock Market US Presidential Cycle - 9th Oct 19
The IPO Market Is Nowhere Near a Bubble - 9th Oct 19
US Stock Markets Trade Sideways – Waiting on News/Guidance  - 9th Oct 19
Amazon Selling Fake Hard Drives - 4tb WD Blue - How to Check Your Drive is Genuine  - 9th Oct 19
Whatever Happened to Philippines Debt Slavery?  - 9th Oct 19
Gold in the Negative Real Interest Rates Environment - 9th Oct 19
The Later United States Empire - 9th Oct 19
Gold It’s All About Real Interest Rates Not the US Dollar - 8th Oct 19
A Trump Impeachment Would Cause The Stock Market To Rally - 8th Oct 19
The Benefits of Applying for Online Loans - 8th Oct 19
Is There Life Left In Cannabis - 8th Oct 19
Yield Curve Inversion Current State - 7th Oct 19
Silver Is Cheap – And Getting Cheaper - 7th Oct 19
Stock Market Back to Neutral - 7th Oct 19
Free Market Capitalism: Laughably Predictable - 7th Oct 19
Four Fundamental Reasons to Buy Gold and Silver - 7th Oct 19
Gold and Silver Taking a Breather - 7th Oct 19
Check Engine Warning Light ECU Dealer Diagnostic Cost - Land Rover Discovery Sport - 6th Oct 19
Natural Gas Reloads For Another Price Rally - 6th Oct 19
Understanding and Purchasing different types of Plastic Building Materials Online - 6th Oct 19
Craig Hemke: Ignore the Elliott Wave “Buffoons” Calling for a Gold Crash - 6th Oct 19
Stock Market 6 Month Trend Forecast Conclusion - Video - 6th Oct 19
The True Causes Behind the Yield Curve Inversion and Gold - 5th Oct 19
Strategies on how to be a Successful CFD Trader - 5th Oct 19
Gold Stocks Correction Underway - 5th Oct 19
Climate Change When the Levee Breaks - 5th Oct 19
Federal Reserve Bank ‘Guarantees’ Dow Will Not Sink Below 26k - 5th Oct 19
The Russell and Transportation Tell A Completely Different Stock Market Story - 4th Oct 19
Confidence Drives the Economy and Trump’s Trade War Is Killing It - 4th Oct 19
ADL Predicts Crude Oil Prices Will Fall Below $40 - 4th Oct 19
Investing Money? Why You Need a Reputable Accountant - 4th Oct 19
Stumbling Manufacturing and Rising Gold – Now or Later? - 4th Oct 19
Silver Eyes Fourth Quarter Rebound - 4th Oct 19
Gold Price Forecast to Exceed $10,000/Ounce - 3rd Oct 19

Market Oracle FREE Newsletter

Stock Market Trend Forecast Oct - Dec 2019 by Nadeem Walayat

Stock Market Thanks Citigroup Pandit

Stock-Markets / Financial Markets 2009 Mar 11, 2009 - 03:32 AM GMT

By: PaddyPowerTrader

Stock-Markets Best Financial Markets Analysis ArticleKing for a day, Citigroup CEO Vikram Pandit, a man who had presided over shareholder destruction equal to the GDP of small nations had some soothing words for his long suffering shareholders yesterday, “In addition to our strong capital position, I am most encouraged with the strength of our business so far in 2009. In fact, we are profitable through the first two months of 2009.”

Citigroup finished up 36% yesterday. As Warren Buffet pointed out, if the government gives you free money courtesy of the hapless taxpayer, you will have a competitive advantage over your competitor and your non legacy business will be hugely profitable. The trouble is, of course, that the pesky sins of the past and the huge leverage that will continue to force write down on existing “assets” until deleveraging is completed. Adding to the good news for stocks was the proposal to bring back the old fashioned “uptick” rule and was the unicorn like dividend hike by Microsoft to 3.4% which led the overall NASDAQ to a 7% gain. But selling rallies will remian the clarion call of many investors as yesterday will be dismissed as a short covering. One wonders whether CNBC will call another bottom!

Today's Market Moving Stories

  • Trader ReportIn overnight news Japanese machinery orders dropped 3.2% in January, marking the fourth consecutive monthly decline (the seventh in eight months). This confirms a miserable outlook, mostly driven by collapsing exports and corporate profits.
  • Chinese trade stats for February showed exports declined a huge -25.7% YoY versus -17.5% YoY the previous month. The timing of the Lunar New Year meant that the numbers should have been worse in January, but better in February, so today's figure implies a significant deterioration in the outlook. Imports are also falling at an accelerated rate to imply that export growth will remain weak in the coming months. This data merely underlines the slump in the global economy.
  • In early trading European equities are soft and seemingly not buying into the rally Stateside. They are not being helped by another jaw dropping loss from a bank. This time it's the turn of UBS who have just reported a wider than expected loss of $18bn for 2008. HSBC are also back down ahead of their jumbo rights issue and oil stocks (Cairn, Premier and Repsol in particular) are under pressure. In advertising space, JCDecaux is down 16% after scrapping their dividend and issuing fairly horrible guidance. One on the up are tyre maker Pirelli (10%) who have been rated a buy at Deutsche Bank.
  • Quantitative easing (QE) day has arrived in the UK. After months of debating its effectiveness, the Bank of England will begin its QE mission through this morning's first reverse gilt auctions. The bonds targeted range from 2014 to 2018 in a total size of £2bn. The level of market participation in the first few reverse auctions will be crucial in determining how aggressive the BoE will be over the 3-month period, especially as it is likely to be targeting at least £50bn in total gilts during this time.
  • Note Bernanke killed hopes of a suspension of mark to market accounting yesterday.
  • On the Irish Economy blog Philip Lane argues that falling CPI inflation provides an opportunity for the Irish government to raise VAT taxes , substantial revenues that would come in handy in the current fiscal situation. It is the mirror image of a situation several years ago when high inflation rates prompted calls for a cut in VAT.
  • In Irish equity related news, Irish banks enjoyed a respite yesterday. As well as being lifted by the improved general sentiment, they were buoyed by comments from governor of the central bank Hurley, who said that the government is considering adapting the €440bn state guarantee to facilitate longer term bond issuance by the banks well beyond the initial two year timeframe. Aer Lingus is off 11% odd this AM after recording a €107.8m annual loss and saying that if is unlikely to record a profit this year. And Ryanair have announced that they are to become the first airline to move 100% to web based check in as of Oct 1st this year in another innovative first mover effort to reduce costs.
  • With Cairn announcing a highly surprising share issue representing 5% of the outstanding, Davy's are recommending Dragon Oil as a less risky play, while Tullow Oil remain very focused and more financially sound.

A Suckers Rally?
So, US equities enjoyed a rally yesterday, racking up gains of around 5% by late London afternoon. Now that the S&P 500 is trading on a 10-year cyclically-adjusted P/E ratio of a little over 12, there is no major valuation constraint standing in the way of a stock market rally. At 10.8, the average cyclically-adjusted P/E ratio at the nadir of each of the past 15 bear US recessions has not been much lower. Stocks typically turn the corner six months before the trough in economic activity.

The UptickBut earnings have typically only reached a floor three months after a recession has ended. My reticence to turn more optimistic on equities is that I just can't see earnings turning up any time soon. On the contrary, I think profits will remain under pressure well into next year, keeping any lasting rally at bay for now.

What Is The Uptick Rule?
Congressman Barney Frank has had enough of the SEC and its no-regulatin' past, and he has vowed that the uptick rule will be reinstated within a month . The uptick rule is a handy bit of regulation that governs short selling. Its intent is to prevent short sellers from continually driving the price of stock down with their wacky selling. The uptick rule mandates that the initial sale is at a price higher than the last trading price, which both slows down short selling and helps to prevent massive volumes of short sales from causing a stocks price to plummet very rapidly. This is more the case with hedge funds, as individual investors rarely short at a sufficient volume to drastically affect a stock's price. The rule was binned in July of 2007 after the last SEC decided it was outdated. Then rather than reinstate it last Autumn they banned short selling which spawned the monster of the massive growth in the completely unregulated CDS ( credit default swaps ) market. A far more deadly hybrid beast. On the downside, traders say it will take six months to get the old technology tweaked to handle such the change.

Disclosures = None

By The Mole

The Mole is a man in the know. I don’t trade for a living, but instead work for a well-known Irish institution, heading a desk that regularly trades over €100 million a day. I aim to provide top quality, up-to-date and relevant market news and data, so that traders can make more informed decisions”.

© 2009 Copyright PaddyPowerTrader - 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.

PaddyPowerTrader Archive

© 2005-2019 - 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