Friday, March 13, 2009

DOW tech update - market update

The Dow chart shows how well the channel support has stopped the wave and the test of the resistance is due within a few weeks. Mandatory is the test of the 50 day MA at 7750 but I rather think that 8250 is a target within 4 weeks. No one is in this market so far as mostly we have seen short covering so far. To turn into a real sucker rally the market needs to suck in longs and that happens rather close to the highs. The DOW has not taken out the Nov low so far but crucial is that the SPX did so and the NDX turned even above creating a positive intermarket divergence. Keep buying weakness early next week.

Thursday, March 12, 2009

CRB tech update - general market update

The whole process is in sink OIL and CRB have made their lows and will start rising substantially soon. Target for the CRB in the first wave is 250 but we actually should even trade up to 300 finally within 2-3 months. A long term analysis might turn out much more aggressive in terms of target levels. Stock markets confirmed the bottom as the SPX close above 740 and we are now in a multiweek upside move. The way things look will be confirmed with tomorrows close as the first impulse wave up should soon come to an end and a pullback is mandatory. I rather expect for next week to happen (first half) as we have plenty important meetings over the WE and Monday is day 5 of the upmove which tends to be corrective. 6th March the day Venus went stationary turned out to the exact impulse to turn the markets which will last til mid April. Even the Investor Intel. reached the extreme levels as well with 26.4 bulls and 47.2 bears - not as extreme as the November readings but even that is a bullish divergence.

Wednesday, March 11, 2009

FTSE tech update - general market update

Left hand the FTSE weekly chart looks like the DOW and SPX we have reached the weekly 13's and turned. The other day markets were manipulated up the last 2 days and its hard to see a low point with an ISEE of 220 it rather should be 60 as much more calls were bought that day than puts. That's a typical evidence of an insider deal but anyway we came close to the SPX target of roughly 650 and tested exactly the 6500 support of the DOW. We can start buying any weakness as shorts should be covered as I wrote last week. Very soon we will have a bull campaign especially when we close above 740 SPX short covering will be increasing. Except the insider players no one went really long so far. We only made the snap back to the weekly Boll . bands but the price action is promising. Get ready to rock and for long term investors who did not sell now an opportunity will show soon (last exit) to get rid of stocks as we finally will have to drop to half of today's values in 1-2 years time.

Tuesday, March 10, 2009

Trouble is starting to rise again on many issues

Banks are cutting credit card limits and raising rates which does hurt consumers, especially those receiving big bailout taxpayermoney should be urged to beahve prudent and responsible. Todays short covering rally was obviously a manipulation attempt but I doubt it will be investigated. That taxpayers have to settle losses of AIG and cover the counterpart risk of Goldman and other banks is basically not tolerable as those same banks keep screwing Mainstreet. Politics is on a path of complete disaster as they make things even worse and the new admin is not doing any better on that front. Against the phony statements of Mr Pandit that he is running a sound bank which is complete bogus as they have probably the worst balance sheet of all remaining banks Ms Whitney claimed rightfully that they if ever survive will do that on a fraction of their current status.

Excerpt 1

Citigroup will have to sell more of its assets to stay in business, well-known banking analyst Meredith Whitney told CNBC Tuesday.

Whitney made her comment after being asked about Citi's Chief Executive Vikram Pandit saying he was confident about the troubled bank's survival prospects.

Meredith Whitney

"Citi's capital position is stronger relative to how it was," said Whitney. "But I wouldn’t call it strong."

Whitney, who is founder of Meredith Whitney Advisors, said that the bank has exposures across the board and said that "I'm not optimistic about them."

"Trillions of dollars of loans have been mispriced by Citi", said Whitney. "By my math, they don’t make money in any of their businesses."

Whitney says Citigroup [C 1.45 0.40 (+38.1%) ] will be forced to sell their "crown jewels" if they are going to get any more bailout money from the government. "They're going to have a 'yard sale.' They will be a smaller and less of an international business going forward," says Whitney.

Citi split off its prized Smith Barney brokerage on Janury 13th.

Since October of last year, Citigroup has received two federal bailouts, $45 billion of capital from the Treasury Department's Troubled Asset Relief Program, and a government agreement to cap losses on $300.8 billion of troubled assets.

On the topic of keeping mark-to-market rules, Whitney said that it's basically a non-factor and that the damage has already been done. Whitney says that the banks don't want to have it suspended because if for some reason, the market comes back "they don’t get the benefit of the newer market."

Whitney also said that the government is trying to sweeten deals for the private sector in order to get more cash infusions into U.S. banks. "The government cannot do it alone," said Whitney. "They need the private sector to come back."

Whitney also commented on the credit card crisis she's been predicting. She said that credit cards are the next credit crunch and said that banks' portfolios continue to shrink and when you shrink the portfolios for the banks, "credit losses eat into earnings and they have to peddle faster to collect on loans and they make less money and lose money."

The following article is a very good read and describes part of the huge problems but what it does not tell is that parts (if not big parts of this problems were made deliberately by evil thinking people). For now we concentrate on the facts as that would take to much time and we are anyway thrown into a defence scenario where tightening all loose ends is the first priority. Yesterday I heard a very good valuation model as real estate is not my expertise it was confirming my assumptions. The average affordability index of homes is at 2.75 times income and just to reach that point prices need to fall another 20% in the USA and as we all now it never stops at that point and rather goes to the other extreme which I pointed out in earlier blogs. Within the normal extreme that would call for 35% decline of prices and even 50% is possible. That describes pretty much the scenario for stocks values as well and do not listen to guru's like Buffett who described the current situation like being a 'mosquito in a nudist camp' - although its shows only one part of the story as many mosquito's will be killed anyway while trying to suck up some blood.

Seeds of its own destruction

By Martin Wolf

Published: March 8 2009 19:13 | Last updated: March 8 2009 19:13

Another ideological god has failed. The assumptions that ruled policy and politics over three decades suddenly look as outdated as revolutionary socialism.

“The nine most terrifying words in the English language are: ‘I’m from the government and I’m here to help.’” Thus quipped Ronald Reagan, hero of US conservatism. The remark seems ancient history now that governments are pouring trillions of dollars, euros and pounds into financial systems.

“Governments bad; deregulated markets good”: how can this faith escape unscathed after Alan Greenspan, pupil of Ayn Rand and predominant central banker of the era, described himself, in congressional testimony last October, as being “in a state of shocked disbelief” over the failure of the “self-interest of lending institutions to protect shareholders’ equity”?

In the west, the pro-market ideology of the past three decades was a reaction to the perceived failure of the mixed-economy, Keynesian model of the 1950s, 1960s and 1970s. The move to the market was associated with the election of Reagan as US president in 1980 and the ascent to the British prime ministership of Margaret Thatcher the year before. Little less important was the role of Paul Volcker, then chairman of the Federal Reserve, in crushing inflation.

Yet bigger events shaped this epoch: the shift of China from the plan to the market under Deng Xiaoping, the collapse of Soviet communism between 1989 and 1991 and the end of India’s inward-looking economic policies after 1991. The death of central planning, the end of the cold war and, above all, the entry of billions of new participants into the rapidly globalising world economy were the high points of this era.

Today, with a huge global financial crisis and a synchronised slump in economic activity, the world is changing again. The financial system is the brain of the market economy. If it needs so expensive a rescue, what is left of Reagan’s dismissal of governments? If the financial system has failed, what remains of confidence in markets?

It is impossible at such a turning point to know where we are going. In the chaotic 1970s, few guessed that the next epoch would see the taming of inflation, the unleashing of capitalism and the death of communism. What will happen now depends on choices unmade and shocks unknown. Yet the combination of a financial collapse with a huge recession, if not something worse, will surely change the world. The legitimacy of the market will weaken. The credibility of the US will be damaged. The authority of China will rise. Globalisation itself may founder. This is a time of upheaval.

How did the world arrive here? A big part of the answer is that the era of liberalisation contained seeds of its own downfall: this was also a period of massive growth in the scale and profitability of the financial sector, of frenetic financial innovation, of growing global macroeconomic imbalances, of huge household borrowing and of bubbles in asset prices.

In the US, core of the global market economy and centre of the current storm, the aggregate debt of the financial sector jumped from 22 per cent of gross domestic product in 1981 to 117 per cent by the third quarter of 2008. In the UK, with its heavy reliance on financial activity, gross debt of the financial sector reached almost 250 per cent of GDP (see charts).

Proportion of countries with banking crises

Carmen Reinhart of the University of Maryland and Kenneth Rogoff of Harvard argue that the era of liberalisation was also a time of exceptionally frequent financial crises, surpassed, since 1900, only by the 1930s. It was also an era of massive asset price bubbles. By intervening to keep their exchange rates down and accumulating foreign currency reserves, governments of emerging economies generated huge current account surpluses, which they recycled, together with inflows of private capital, into official capital outflows: between the end of the 1990s and the peak in July 2008, their currency reserves alone rose by $5,300bn.

These huge flows of capital, on top of the traditional surpluses of a number of high-income countries and the burgeoning surpluses of oil exporters, largely ended up in a small number of high-income countries and particularly in the US. At the peak, America absorbed about 70 per cent of the rest of the world’s surplus savings.

Meanwhile, inside the US the ratio of household debt to GDP rose from 66 per cent in 1997 to 100 per cent a decade later. Even bigger jumps in household indebtedness occurred in the UK. These surges in household debt were supported, in turn, by highly elastic and innovative financial systems and, in the US, by government programmes.

Throughout, the financial sector innovated ceaselessly. Warren Buffett, the legendary investor, described derivatives as “financial weapons of mass destruction”. He was proved at least partly right. In the 2000s, the “shadow banking system” emerged and traditional banking was largely replaced by the originate-and-distribute model of securitisation via constructions such as collateralised debt obligations. This model blew up in 2007.

We are witnessing the deepest, broadest and most dangerous financial crisis since the 1930s. As Profs Reinhart and Rogoff argue in another paper, “banking crises are associated with profound declines in output and employment”. This is partly because of overstretched balance sheets: in the US, overall debt reached an all-time peak of just under 350 per cent of GDP – 85 per cent of it private. This was up from just over 160 per cent in 1980.

Among the possible outcomes of this shock are: massive and prolonged fiscal deficits in countries with large external deficits, as they try to sustain demand; a prolonged world recession; a brutal adjustment of the global balance of payments; a collapse of the dollar; soaring inflation; and a resort to protectionism. The transformation will surely go deepest in the financial sector itself. The proposition that sophisticated modern finance was able to transfer risk to those best able to manage it has failed. The paradigm is, instead, that risk has been transferred to those least able to understand it. As Mr Volcker remarked during a speech last April: “Simply stated, the bright new financial system – for all its talented participants, for all its rich rewards – has failed the test of the marketplace.”

In a recent paper Andrew Haldane, the Bank of England’s executive director for financial stability, shows how little banks understood of the risks they were supposed to manage. He ascribes these failures to “disaster myopia” (the tendency to underestimate risks), a lack of awareness of “network externalities” (spill overs from one institution to the others) and “misaligned incentives” (the upside to employees and the downside to shareholders and taxpayers).

. . .

After the crisis, we will surely “see finance less proud”, as Winston Churchill desired back in 1925. Markets will impose a brutal, if temporary, discipline. Regulation will also tighten.

Less clear is whether policymakers will contemplate structural remedies: a separation of utility commercial banking from investment banking; or the forced reduction in the size and complexity of institutions deemed too big or interconnected to fail. One could also imagine a return of much banking activity to the home market, as governments increasingly call the tune. If so, this would be “de-globalisation”.

US & UK house prices

Churchill called also for industry to be “more content”. In the short run, however, the collapse of the financial system is achieving the opposite: a worldwide industrial slump. It is also spreading to every significant sector of the real economy, much of which is clamouring for assistance.

Yet if the financial system has proved dysfunctional, how far can we rely on the maximisation of shareholder value as the way to guide business? The bulk of shareholdings is, after all, controlled by financial institutions. Events of the past 18 months must confirm the folly of this idea. It is better, many will conclude, to let managers determine the direction of their companies than let financial players or markets override them.

A likely result will be an increased willingness by governments to protect companies from active shareholders – hedge funds, private equity and other investors. As a defective financial sector loses its credibility, the legitimacy of the market process itself is damaged. This is particularly true of the free-wheeling “Anglo-Saxon” approach.

No less likely are big changes in monetary policy. The macro economic consensus had been in favour of a separation of responsibility for monetary and fiscal policy, the placing of fiscal policy on autopilot, independence of central banks and the orientation of monetary decisions towards targeting inflation. But with interest rates close to zero, the distinction between monetary and fiscal policy vanishes. More fundamental is the challenge to the decision to ignore asset prices in the setting of monetary policy.

Many argue that Mr Greenspan, who succeeded Mr Volcker, created the conditions for both bubbles and subsequent collapse. He used to argue that it would be easier to clean up after the bursting of a bubble than identify such a bubble in real time and then prick it. In a reassessment of the doctrine last November, Donald Kohn, Fed vice-chairman, restated the orthodox position, but with a degree of discomfort.

Mr Kohn now states that “in light of the demonstrated importance to the real economy of speculative booms and busts (which can take years to play out), central banks probably should always try to look out over a long horizon when evaluating the economic outlook and deliberating about the appropriate accompanying path of the policy rate”. Central banks will have to go further, via either monetary policy or regulatory instruments.

. . .

Yet a huge financial crisis, together with a deep global recession, if not something far worse, is going to have much wider effects than just these.

Remember what happened in the Great Depression of the 1930s. Unemployment rose to one-quarter of the labour force in important countries, including the US. This transformed capitalism and the role of government for half a century, even in the liberal democracies. It led to the collapse of liberal trade, fortified the credibility of socialism and communism and shifted many policymakers towards import substitution as a development strategy.

The Depression led also to xenophobia and authoritarianism. Frightened people become tribal: dividing lines open within and between societies. In 1930, the Nazis won 18 per cent of the German vote; in 1932, at the height of the Depression, their share had risen to 37 per cent.

One transformation that can already be seen is in attitudes to pay. Even the US and UK are exerting direct control over pay levels and structures in assisted institutions. From the inconceivable to the habitual has taken a year. Equally obvious is a wider shift in attitudes towards inequality: vast rewards were acceptable in return for exceptional competence; as compensation for costly incompetence, they are intolerable. Marginal tax rates on the wealthier are on the way back up.

Yet another impact will be on the sense of insecurity. The credibility of moving pension savings from government-run pay-as-you-go systems to market-based systems will be far smaller than before, even though, ironically, the opportunity for profitable long-term investment has risen. Politics, like markets, overshoot.

The search for security will strengthen political control over markets. A shift towards politics entails a shift towards the national, away from the global. This is already evident in finance. It is shown too in the determination to rescue national producers. But protectionist intervention is likely to extend well beyond the cases seen so far: these are still early days.

The impact of the crisis will be particularly hard on emerging countries: the number of people in extreme poverty will rise, the size of the new middle class will fall and governments of some indebted emerging countries will surely default. Confidence in local and global elites, in the market and even in the possibility of material progress will weaken, with potentially devastating social and political consequences. Helping emerging economies through a crisis for which most have no responsibility whatsoever is a necessity.

The ability of the west in general and the US in particular to influence the course of events will also be damaged. The collapse of the western financial system, while China’s flourishes, marks a humiliating end to the “uni-polar moment”. As western policymakers struggle, their credibility lies broken. Who still trusts the teachers?

These changes will endanger the ability of the world not just to manage the global economy but also to cope with strategic challenges: fragile states, terrorism, climate change and the rise of new great powers. At the extreme, the integration of the global economy on which almost everybody now depends might be reversed. Globalisation is a choice. The integrated economy of the decades before the first world war collapsed. It could do so again.

On June 19 2007, I concluded an article on the “new capitalism” with the observation that it remained “untested”. The test has come: it failed. The era of financial liberalisation has ended. Yet, unlike in the 1930s, no credible alternative to the market economy exists and the habits of international co-operation are deep.

“I’ve a feeling we’re not in Kansas any more,” said Dorothy after a tornado dropped her, her house and dog in the land of Oz. The world of the past three decades has gone. Where we end up, after this financial tornado, is for us to seek to determine.

This is the first part of an FT series entitled the Future of Capitalism

Monday, March 9, 2009

DOW tech update - market update

The DOW does test the lower support line repeatedly and within a few days has formed the bottom of this current wave. 6500 is pretty much the point which will be pivotal going forward. The crucial support comes from commodities as Oil has made the low as described earlier and the CRb as well will be one of the leading drivers.
The strange thing is some people are anticipating that today and buying tons of calls which is a bit unusual as we have a ISEE of over 200 on a downday.

The final battle starts of government bailout - although they can not win

Now we are coming up with the news which will turn around the markets soon for a little while as they need to put more beef on the table altogether. It will not heal the overall structural crises as the looming losses of the banks are so big that no one can actually pay for it. I just say that as an observer I wish they could but as a matter of fact they can't.
Anyway the upcoming G-20 meeting on the 13th will come out with some announcements which might help to mark the low of this bigger wave. The world bank has no officially claimed the first negative global growth year in over 60 years. Eventually as I stated in an earlier blog we are already in worse shape than the 1929 depression. Throwing the combines forces into the mix sounds nice but in real terms it never can work as all countries do also compete for markets and profit share so we have a to severe conflict of interest to have it work in reality.
Short term though it may look as they have a grip on the situation but they do not as banks are bankrupt and the government has lost a lot of firepower saving those bankers butts and after all its a black whole anyway as losses are double digit trillions.

Excerpt

World Coordinated Stimulus Needed: White House

World leaders need to pump more money into the economy in a coordinated effort to boost demand and pull the world out of recession, the White House's chief economic adviser said on Monday.
In an interview with the Financial Times, National Economic Council Director Larry Summers said kickstarting growth should take precedence over ironing out global imbalances.

"The old global imbalances agenda was more demand in China, less demand in America. Nobody thinks that is the right agenda now," Summers said. "There's no place that should be reducing its contribution to global demand right now. It is really the universal demand agenda."

Summer's comments, ahead of next month's G20 summit in London, suggest the U.S. administration wants all industrialised nations to pull together to engineer a demand-led recovery.

That will be music to the ears of British Prime Minister Gordon Brown who has trumpeted internationally-coordinated stimulus measures as the best way to tackle the downturn.

"The right macro-economic focus for the G20 is on global demand and the world needs more global demand," said Summers.

Saturday, March 7, 2009

Actually the 50 bil went to Goldman-,Deutsche etc. to settle losses-The truth about AIG comes to the open

The point is it runs under AIG and they are responsible for selling those Hedges but at the end who gets bailed out are different institutions. The ugly part of this 50 bil. is they never come back as that are losses AIG made with this counterparts and the taxpayer pays for the settlement of the losses - that is outrages since it is money thrown out of the window. In the financial industry you have a so called counterpart risk so making the right bet is one thing but to choose a counterpart which can pay its obligations is another. The government was never obliged to stand up for the losses and paying them that money is nothing but an aid to that firm hence Goldman received a 6 bil each aid as did Deutsche amongst many others and the taxpayer has no benefit from that at all. In context of bonus payments that's even more disgusting. Its despicable how wallstreet gets bailed out and the taxpayer gets double screwed. This practice is now part of Obama's admin. as well and shows where we stand when it comes to prudence and change.

Its about time for a real 'Boston tea party' as taxpayers good money is thrown still at the wrong places.

Top U.S., European Banks Got $50 Billion in AIG Aid

By SERENA NG and CARRICK MOLLENKAMP

The beneficiaries of the government's bailout of American International Group Inc. include at least two dozen U.S. and foreign financial institutions that have been paid roughly $50 billion since the Federal Reserve first extended aid to the insurance giant.

Among those institutions are Goldman Sachs Group Inc. and Germany's Deutsche Bank AG, each of which received roughly $6 billion in payments between mid-September and December 2008, according to a confidential document and people familiar with the matter.

Covered Counterparties

Some banks that were paid by AIG after it was bailed out by the government

Goldman Sachs
Deutsche Bank
Merrill Lynch
Société Générale
Calyon
Barclays
Rabobank
Danske
HSBC
Royal Bank of Scotland
Banco Santander
Morgan Stanley
Wachovia
Bank of America
Lloyds Banking Group

Source: WSJ research

Other banks that received large payouts from AIG late last year include Merrill Lynch, now part of Bank of America Corp., and French bank Société Générale SA.

More than a dozen firms with smaller exposures to AIG also received payouts, including Morgan Stanley, Royal Bank of Scotland Group PLC and HSBC Holdings PLC, according to the confidential document.

The names of all of AIG's derivative counterparties and the money they have received from taxpayers still isn't known, but The Wall Street Journal has identified some of them and is publishing others here for the first time.

Lawmakers Want Names

The AIG bailout has become a political hot potato as the risk of losses to U.S. taxpayers rises. This past week, legislators demanded that the Federal Reserve disclose names of financial firms that have received money from AIG, which Fed officials have described as too systemically important in the financial system to be allowed to fail.

In a Senate Banking Committee hearing in Washington on Thursday, Fed Vice Chairman Donald Kohn declined to identify AIG's trading partners. He said doing so would make people wary of doing business with AIG.

Indicatos hinting for a bottom in sight

The sentiment readings move clearly into the right direction signaling capitulation mode but one of the best is the ISEE MA'S which are not where they are supposed to be yet. Also the VIX is a bit to reluctant should be rather close to 60.

Other Parameters to be watched from the astro side is the upcoming Full Moon on the Uranus /Saturn opposition 10th which should trigger a climax of the selling and we have the 19th March Armstrong date.

Between 10th and 19th (later more likely) we should have the overall turn but some area's will be earlier as at bottoms you tend to have intermarket divergence.

Excerpt

INVESTOR SENTIMENT READINGS

High bullish readings in the Consensus stock index or in the Market Vane stock index usually are signs of Market tops; low ones, market bottoms.

Last Week

2 Weeks Ago

3 Weeks Ago

Consensus Index
	Consensus Bullish Sentiment	19%	21%	23%
Source: Consensus Inc., P.O. Box 520526,Independence, Mo.
Historical data available at (800) 383-1441. editor@consensus-inc.com
AAII Index
	Bullish	18.9%	24.3%	21.6%
	Bearish	70.3	55.1	56.7
	Neutral	10.8	20.6	21.6
Source: American Association of Individual Investors,
625 N. Michigan Ave., Chicago, Ill. 60611 (312) 280-0170.
Market Vane
	Bullish Consensus	32%	36%	37%
Source: Market Vane, P.O. Box 90490,
Pasadena, CA 91109 (626) 395-7436.

Citigroup Panic/Euphoria Model

behind-the-matrix

THE DOT - if this turns orange or red be alert

Friday, March 13, 2009

DOW tech update - market update

Thursday, March 12, 2009

CRB tech update - general market update

Wednesday, March 11, 2009

FTSE tech update - general market update

Tuesday, March 10, 2009

Trouble is starting to rise again on many issues

RELATED LINKS

RELATED LINKS

DOW tech update- some insider game is going on with ISEE well above 200 yesterday

The globalisation capitalism is imploding in front of our eyes and there is no quick fix actually no fix as it was designed to make a few much richer

Seeds of its own destruction

Monday, March 9, 2009

DOW tech update - market update

The final battle starts of government bailout - although they can not win

Saturday, March 7, 2009

Actually the 50 bil went to Goldman-,Deutsche etc. to settle losses-The truth about AIG comes to the open

Top U.S., European Banks Got $50 Billion in AIG Aid

By SERENA NG and CARRICK MOLLENKAMP

Covered Counterparties

Lawmakers Want Names

Indicatos hinting for a bottom in sight

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