Asian News

[Ichiro]

13jun-U.S. Stock-Index Futures Gain as Treasury Bonds Erase Losses

By Lynn Thomasson

June 13 (Bloomberg) -- U.S. stock-index futures gained after the yield on the 10-year Treasury bond retreated from a five-year high.

Merrill Lynch & Co., the world's biggest brokerage, and Wachovia Corp., the fourth-biggest U.S. bank, advanced in trading in Europe. Bond yields fell even after retail sales and import prices rose more than forecast in May.

Stocks plummeted yesterday after the 10-year note's yield surged to its highest since 2002, heightening concern that the pace of takeovers may have peaked along with corporate profits.

``In a liquidity-driven market such as we're in, bond yields play a critical role,'' said Michael Malone, a trading analyst at Cowen & Co. in New York.

http://www.bloomberg.com/apps/news?pid=20602003&sid=axzfQQzlpnYk&refer=world_indices

 

[Ichiro]

13jun-Asian Currencies: Rupiah, Ringgit and Peso Fall After Greenspan

By Ron Harui

June 13 (Bloomberg) -- Asian currencies slid, paced by the Indonesian rupiah, the Malaysian ringgit and the Philippine peso, after former Federal Reserve Chairman Alan Greenspan predicted a slump in emerging-market debt.

The rupiah snapped a two-day rally, the ringgit fell to near a three-month low and the peso dropped to the weakest since May 18 as declining global equities and rising U.S. Treasury yields prompted investors to reduce holdings of assets in the region.

``The move higher in U.S. yields creates a higher hurdle for investment in emerging markets,'' said Adrian Foster, director of capital markets at Dresdner Kleinwort in Beijing. ``Asian currencies are likely to remain under modest downward pressure.''

The rupiah fell as much as 1.4 percent to 9,115 against the dollar before trading at 9,082 at 3:20 p.m. in Jakarta. The ringgit dropped 0.8 percent to 3.4725 and the peso declined 1.1 percent to 46.715.

The Morgan Stanley Capital Asia-Pacific index of leading regional stocks slid 0.6 percent as investors pared back holdings in smaller markets. Speculation the Fed may raise rates this year helped push U.S. bond yields to the highest in five years, increasing returns from holding less risky securities.
http://www.bloomberg.com/apps/news?pid=20601083&sid=aG7pfs6qbbb0&refer=currency

 

[Ichiro]

13jun-China's Retail Sales Accelerate on Rising Incomes (Update6)

By Nipa Piboontanasawat

June 13 (Bloomberg) -- China's retail sales unexpectedly accelerated at the fastest pace in three years, buoyed by rising incomes and a stock market that's doubled this year.

Sales rose 15.9 percent from a year earlier to 715.8 billion yuan ($94 billion) after gaining 15.5 percent in April, the statistics bureau said today. That beat the 15.3 percent median estimate of 19 economists surveyed by Bloomberg News.

A $1 trillion increase in the value of the stock market this year has helped spur sales for retailers from low-cost clothing chain Giordano International Ltd. to luxury Mercedes- Benz and Audi car dealers. China is the world's fastest-growing retail sales market, according to McKinsey & Co.

http://www.bloomberg.com/apps/news?pid=20601013&sid=amNwvjVxzh48&refer=emergingmarkets

 

[Ichiro]

1 aug- AP
Dollar Drops Sharply Vs Yen in Asia
Wednesday August 1, 4:35 am ET
Dollar Drops Sharply Vs Yen in Asia on Worries Over U.S. Housing Loans

TOKYO (AP) -- The dollar fell sharply against the yen in Asian trading Wednesday as non-Japanese investors sold the U.S. currency to lock in profits amid expectations that subprime mortgage woes will continue to weigh on U.S. shares.


The U.S. dollar was trading at 117.94 yen Wednesday afternoon, down from 119.30 yen late Tuesday in New York.

"Concerns over U.S. stock falls triggered by a credit crunch will likely remain deeply rooted in the financial markets," said Osao Izuka, head of foreign-exchange trading at Sumitomo Trust & Banking. "Under such circumstances, it's difficult (for investors) to buy the dollar."

http://biz.yahoo.com/ap/070801/asia_dollar.html?.v=1

 

[Ichiro]

1 aug- AP-Japanese Stocks Drop to 4 1/2 Month Low
Wednesday August 1, 3:19 am ET
By Kozo Mizoguchi, Associated Press Writer
Japanese Stocks Drop to 4 1/2 Month Low on Concerns Over Banks, Plunging U.S. Market

TOKYO (AP) -- Japanese stocks tumbled to a four-and-a-half month low Wednesday on disappointing earnings from the nation's megabanks and in reaction to another drop on Wall Street caused by woes in U.S. housing loans.

Political concerns also weighed on the market after the country's farm resigned to take responsibilty for the ruling party's crushing defeat in weekend elections.

Agriculture Minister Norihiko Akagi, who was embroiled in a funding scandal, is the fourth minister to leave an increasingly unpopular Cabinet.

"In addition to overnight declines in U.S. shares and banks' pulling down the Nikkei, such domestic factors as the farm minister's resignation may be discouraging foreign investors," said Fumiyuki Nakanishi, strategist at SMBC Friend Securities.

The Nikkei 225 fell 377.91 points, or 2.2 percent, on the Tokyo Stock Exchange, to finish at 16,870.98 points. The index last ended below the 17,000-point mark on March 16.

Investors dumped shares after U.S. stocks sank Tuesday on persistent worries that souring subprime mortgages could take a toll on the U.S. economy, a key export market for Japan. The Dow Jones industrial average fell 1.1 percent, to 13,211.99.

http://biz.yahoo.com/ap/070801/japan_markets.html?.v=2

 

[Ichiro]

1aug-uropean Stocks Decline on Subprime Concern; RBS, ING Slide

By Andreas Hippin
Enlarge Image
Signage at the Royal Bank of Scotland head office

Aug. 1 (Bloomberg) -- European stocks dropped after Macquarie Bank Ltd. of Australia and Bear Stearns Cos. said funds may post losses as concern mounted a sell-off in the U.S. subprime-mortgage market may spread.

Royal Bank of Scotland Group Plc and ING Groep NV led financial stocks lower. Cadbury Schweppes Plc, the world's largest confectionery maker, fell the most in more than four years after earnings were less than analysts estimated.

``No one knows where the ultimate subprime risk resides so investors across the globe are ducking for cover,'' said Simon Carter, head of North American equities at Aegon Asset Management in Edinburgh, where he helps oversee $3 billion. ``Incremental news of hedge funds and subprime issuers experiencing margin calls and shutting their doors will likely continue.''

Macquarie, Australia's largest securities firm, tumbled the most in five years in Sydney after saying investors in some of its high-yield funds may lose as much as 25 percent of their money. Bear Stearns, manager of two hedge funds that collapsed last month, blocked investors from pulling money out of a third fund, sending futures on U.S. share indexes lower.

The Dow Jones Stoxx 600 Index lost 1.9 percent to 372.83 at 9:02 a.m. in London. The Stoxx 50 slid 1.8 percent, while the Euro Stoxx 50, a measure for the euro region, fell 1.9 percent.

http://www.bloomberg.com/apps/news?pid=20601085&sid=ad9pS.aC90jE&refer=europe

 

[Ichiro]

1aug-nvestors Are Big Losers as Japan's Abe Stays On: William Pesek (lets all hope that Abe resigns in the near future... he is bad for the Japanese stock market).

By William Pesek


July 30 (Bloomberg) -- There's no better way to judge a man, the old saying goes, than by the caliber of his critics. Just ask Japan's Prime Minister Shinzo Abe, who's getting grief even from the man who arguably paved his route to the premiership.

The drubbing Abe took yesterday from the Japanese electorate is getting most of the headlines, of course. As of 6:40 a.m. Japan time, his Liberal Democratic Party and its coalition partner had won 46 seats, well short of the 64 needed to keep their majority, public broadcaster NHK reported.

The thrashing was no surprise. What was unexpected was hearing Abe's political benefactor, Yoshiro Mori, appear to give up on him. In a speech over the weekend, Mori, 70, suggested Abe lacks experience and said future LDP leaders will need to have proven themselves in longer careers.

The comments raised eyebrows around Nagatacho, Japan's equivalent of Washington's Capitol Hill, for two reasons. One, it indicates Abe's support is dwindling within the political faction -- Mori's -- that championed his rise. Two, when even a dud like Mori is criticizing you, it's time to quit and write your memoirs.

http://www.bloomberg.com/apps/news?pid=20601039&sid=a5vvE6qFrob0&refer=columnist_pesek

 

[Ichiro]

Come Back Koizumi -- All Is Forgiven After Abe: William Pesek (lets all hope that Koizumi returns as the prime minister of Japan.. the stock market will go wild again if he returns).

By William Pesek

Enlarge Image
Junichiro Koizumi, former Japanese prime minister

July 12 (Bloomberg) -- Here's something many of us Japan observers never thought we would be saying: Bring back Koizumi.

Japan's prime minister from April 2001 to September 2006, Junichiro Koizumi was always a unique character. With his lively mane of hair, blunt comments and Richard Gere looks, he captivated a nation hungry for the strong, forward-looking leadership Asia's biggest economy hadn't seen in years.

By the time Koizumi left office, he was far less popular. One reason is the way he damaged relations with China and South Korea by visiting Yasukuni shrine, which critics say glorifies Japan's World War II militarism. Many also felt he was more talk than action on boosting living standards.

What voters really should be miffed about was Koizumi's anointing of Shinzo Abe as his successor. His scandal-ridden and erratic leadership is thwarting much of what the Koizumi era promised to fix. Things such as cross shareholdings between companies and poison pills against mergers are more common now than at the end of Koizumi's tenure. Japan Inc. is making a comeback.
http://www.bloomberg.com/apps/news?pid=20601039&sid=aZJT1ovNMgjY&refer=columnist_pesek

 

[Ichiro]

1aug-Euro Trades Little Changed Before Central Bank Decides on Rates

By Aaron Pan and Kosuke Goto
Enlarge Image
A woman arranges Japanese currency.

Aug. 2 (Bloomberg) -- The euro was little changed against the dollar before a European Central Bank rate-setting meeting where policy makers are forecast to leave borrowing costs as a six-year high.

The European single currency pared declines versus the yen on speculation the ECB will signal an increase in borrowing costs. The bank said today President Jean-Claude Trichet will explain its decision on the benchmark rate, which is forecast to stay at 4 percent. The bank typically doesn't hold a briefing in August. Policy makers will lift rates a quarter of a point in September, according to economists surveyed by Bloomberg News.

``The consensus view remains that the bank will raise rates at the September meeting,'' said Stuart Bennett, senior euro- region strategist at Calyon in London. ``With the market virtually pricing in a near-term rate hike, the bank has little to lose by pushing ahead with a further increase next month.''

The euro traded at $1.3664 as of 11:50 a.m. in London. It was at 162.29 against the yen, after earlier touching 161.57.

http://www.bloomberg.com/apps/news?pid=20601101&sid=a8Ja8iERs1js&refer=japan

 

[Ichiro]

1aug-apanese Stocks Rise as Cheap Shares Attract Buyers; Banks Drop

By Patrick Rial and Makiko Suzuki
Enlarge Image
A woman walks past an electronic stocks board in Tokyo.

Aug. 2 (Bloomberg) -- Japanese stocks advanced, led by property developers such as Mitsubishi Estate Co. on speculation recent losses were excessive and after a report land prices rose 8.6 percent in 2006.

Mitsubishi Estate climbed 6.3 percent and Urban Corp. jumped 11 percent, its steepest gain in more than 14 months. A measure of real estate shares rose 4.4 percent, the biggest advance among the 33 Topix industry groups, after falling 20 percent in the last two months.

Companies reporting earnings that exceeded investor expectations rose. Astellas Pharma Inc. said first quarter net income advanced by 52 percent and Benesse Corp. boosted its full- year forecast.

Banks declined for a second day, led by Mizuho Financial Group Inc. after the company said its first-quarter profit fell by half and on speculation lenders may also become embroiled in the U.S. subprime crisis.

``The valuation levels have become so cheap after the correction that people have started bargain hunting for discounted shares,'' said Masaki Iso, who oversees about $7.3 billion as head of Japanese equities at Yasuda Asset Management Co. in Tokyo. ``Banks' first quarter earnings were much, much worse than we had expected.''

The Nikkei 225 Stock Average added 113.13, or 0.7 percent, to 16,984.11 at the close in Tokyo. The average earlier fell as much as 1.3 percent. The Topix index rose 0.48 point to 1,669.33, after gaining as much as 0.6 percent and slumping 1.6 percent.
http://www.bloomberg.com/apps/news?pid=20601101&sid=ajQTgYV7rrRc&refer=japan

 

[Ichiro]

2aug-Bank of England Leaves Interest Rate at Six-Year High (Update1)

By Jennifer Ryan
Enlarge Image
Mervyn King, governor of the Bank of England

Aug. 2 (Bloomberg) -- The Bank of England left its benchmark interest rate at a six-year high today as policy makers assess whether five quarter-point increases in the past year are enough to quell inflation.

The Monetary Policy Committee, led by Governor Mervyn King, left the Bank Rate at 5.75 percent, the highest since April 2001, the central bank said today in London. The decision was predicted by all 60 economists surveyed by Bloomberg News.

The nine policy makers said at July's meeting, when they voted for an increase, that they planned to wait for new inflation and growth forecasts this month before deciding whether further moves are needed. Inflation has held above the bank's 2 percent target for a 14th month, while stock prices have tumbled as the U.S. subprime crisis spread to markets in Europe and Asia.

``The bank is going to want to give previous increases a chance to have an effect,'' said Dominic White, an economist at ABN Amro Holding NV in London who used to work at the U.K. Treasury. ``The likelihood is that the economy will hold up and that inflation may be more of a problem. Rates will probably go to 6 percent.''

The Standard & Poor's 500 Index posted its biggest monthly decline in three years in July, and the risk of owning corporate bonds rose in Europe by the most in at least three years yesterday as the fallout from subprime mortgage losses spread. In the U.K., the benchmark FTSE 100 index has fallen 5.8 percent as of yesterday's close since the bank's last decision July 5.

http://www.bloomberg.com/apps/news?pid=20601085&sid=a9SSgZoCfh4Y&refer=europe

 

[Ichiro]

2aug-European Stocks Rise, Led by Nokia, Societe Generale, Unilever

By Andreas Hippin
Enlarge Image
A Credit Suisse office in New York

Aug. 2 (Bloomberg) -- European stocks advanced after Nokia Oyj, Societe Generale SA and Unilever SA reported earnings that beat analysts' estimates and shares rallied in the U.S. market yesterday.

Nokia, the world's biggest maker of mobile-phones, jumped 7 percent, leading gains on the Dow Jones Stoxx 600 Index. Societe Generale rose the most since April, while Unilever headed for its biggest gain since March 2003.

U.S. stocks climbed yesterday after a surge in computer and consumer shares lifted the Dow Jones Industrial Average 150 points in the last 20 minutes of trading. Asian stocks rose today after higher profits from Astellas Pharma Inc. and Chi Mei Optoelectronics Corp. helped counter concern the rout in U.S. subprime mortgages is spreading.

``Markets are finding a bottom,'' said Gunther Westen, who helps oversee $55 billion as head of asset allocation and fund management at WestLB Mellon Asset Management in Dusseldorf, Germany. ``The fundamental situation is still very good in Europe and not too bad in the U.S.''

The Stoxx 600 Index advanced 0.6 percent to 376.49 at 12:01 p.m. in London. All 18 industry groups gained except a measure for oil stocks. The Stoxx 50 added 0.7 percent, while the Euro Stoxx 50, a measure for the euro region, increased 1 percent.

http://www.bloomberg.com/apps/news?pid=20601087&sid=ayF8i5Vy1DIg&refer=worldwide

 

[Ichiro]

3aug- AP-Stocks Slide Amid Credit, Economic Fears
Friday August 3, 3:57 pm ET
By Tim Paradis, AP Business Writer
Stocks Fall Following Concerns About Credit, Weaker-Than-Expected Economic Readings

NEW YORK (AP) -- Stocks fell sharply Friday amid fresh concerns that soured subprime mortgages will ignite a credit crunch and following weaker-than-expected economic readings. The Dow Jones industrials fell more than 230 points.


The final session of a volatile week also saw a notable rise in the bond market, with the yield on benchmark 10-year Treasury note falling to 4.70 percent from 4.77 percent late Thursday. Bond prices move opposite yields.

Stocks pulled back Friday afternoon after comments from Bear Stearns Cos. Chief Financial Officer Sam Molinaro stirred concerns that weakness in the credit market was widespread.

Coming off two straight days of triple-digit gains in the Dow, stocks fell earlier after the government said jobs growth was not as strong as expected last month and a trade group reported that the nation's service sector grew at a slower pace than expected in July.

Credit concerns, which have dogged investors for months and have roiled markets since last week, weighed on investor sentiment again Friday. Standard & Poor's Ratings Services lowered its credit outlook on Bear Stearns Cos. to negative from stable because of the investment bank's exposure to the distressed mortgage and corporate buyout markets. The stock at times fell to levels not seen since November 2005; in the early afternoon it was down $3.06, or 2.7 percent, at $112.57.

http://biz.yahoo.com/ap/070803/wall_street.html?.v=33

 

[Ichiro]

3aug-U.S. Economy: Job Gains Slow, Unemployment Rate Rises (Update5)

By Shobhana Chandra
Enlarge Image
Apprentices at Southern California Carpentry Center

Aug. 3 (Bloomberg) -- Employers in the U.S. added fewer jobs than forecast and the unemployment rate rose as the economy cooled in response to the worst housing recession in 16 years.

Job growth slowed to 92,000 in July, from 126,000 the prior month, the Labor Department said today in Washington. The jobless rate increased to 4.6 percent from 4.5 percent. A separate report from the Institute for Supply Management showed service industries, which include banks and retailers, expanded less than anticipated.

The slackening in hiring reflects a deepening slump in housing, which has pushed home prices lower and restrained economic growth for the past year. Outside of real estate and the government, the labor market continued its four-year expansion and futures suggest the Federal Reserve is unlikely to reduce interest rates in coming months. Treasury notes rose, the dollar weakened and stocks retreated.

http://www.bloomberg.com/apps/news?pid=20601068&sid=awWgd1yti3tg&refer=economy

 

[Ichiro]

3apr- AP-Stocks Fall Sharply Amid Credit Fears (Folks, this is the start of crash of the stock market due to the inability of the FEDS to understand the impact of the subprime problem. In th next few months, we will see a substantial increase in the number of house foreclosures)
Friday August 3, 4:06 pm ET
By Tim Paradis, AP Business Writer
Stocks Fall Following Concerns About Credit, Weaker-Than-Expected Economic Readings

NEW YORK (AP) -- Wall Street plunged anew Friday, hurtling the Dow Jones industrial average down more than 280 points after comments from a Bear Stearns executive reinvigorated the market's fears of a widening credit crunch.


The huge drop was a fitting end to two extraordinarily volatile weeks on Wall Street and followed back-to-back triple digit gains in the Dow. This time, the catalyst for a sharp skid was Bear Stearns Cos. Chief Financial Officer Sam Molinaro, who described conditions in the credit market as the worst he'd seen in more than two decades.

According to preliminary calcuations, the Dow fell 283.62, or 2.11 percent, to 13,179.71.

http://biz.yahoo.com/ap/070803/wall_street.html?.v=35

 

[buda]

Will it still bleed or should we be looking at this as a buying oportunity?

 

[Ichiro]

I would still wait but slowly I would add position to the I fund since that is where the major growth will be in the future. Besides, generally the stock market is down during the summer months and usually it picks from October. But, if Mr. Greenspan states anything crazy about the subprime problems or if the China stock market crashes which would both add to the fire, we will see another fast drop of 5% in the market. That is when I will back up my truck and add more money to the I fund.. The movement from the bottom will be very fast and most investors will miss this opportunity. But, if the economy slows even further, I am sure that the FED will lower the rates in September or October. This will cause the yen carry trade to speed up and the yen to appreciate to even below 115. Would you beleive that the Federal Goverment the budget rate for 2007 is 113.3 yen to the dollar...

But, as far as my Roth IRA investment, it is a different story. I am already adding $$$ to my Roth IRA with the Dodge and Cox International funds (DODFX). I willl keep my Roth Investments forever in DODFX and vEU. So, a temporary drop of 5% is a buying opportunity.. Lets say that there is a big sale at Walmart.

 

[Ichiro]

4aug-Dollar Falls on Economic, Credit Worries
Friday August 3, 4:43 pm ET
Dollar Trades Lower Against Major Currencies on Economic, Credit Concerns

NEW YORK (AP) -- The dollar slipped as the euro surged on Friday following a pair of discouraging U.S. economic reports and amid worries about a potential credit crunch.

The 13-nation euro rose to a high of $1.3818 before settling back at $1.3801 in late New York trading. That was up from $1.3693 the night before.


The dollar fell to 118.41 Japanese yen from 119.10 yen late Thursday, while the British pound climbed to $2.0447 from $2.0357.

Comments from Bear Stearns Cos. Chief Financial Officer Sam Molinaro Friday stirred concerns that troubles in the credit market are far-reaching. Worries about the U.S. lending climate have badgered markets since last week, and investors are concerned that weakness in the U.S. subprime mortgage sector will spread to global credit markets.

A pair of weaker-than-expected economic reports also did little to boost the dollar Friday.

The euro soared after a U.S. Labor Department report showed that hiring cooled in July, pushing the nation's unemployment up to 4.6 percent, a six-month high.

The fresh snapshot of employment conditions around the country also showed that new job creation slowed. Employers increased payrolls by 92,000 last month, the fewest add-ons in a single month since February.

Also Friday, a trade group reported that the nation's service sector grew at a slower pace than expected in July. The Tempe, Ariz.-based Institute for Supply Management said its index measuring change in the non-manufacturing sector, which accounts for 80 percent of U.S. economic activity, registered 55.8 in July.

That's the lowest level since March and down from 60.7 in June.

http://biz.yahoo.com/ap/070803/dollar.html?.v=3

 

[Ichiro]

VOLATILITY DELIVERS WAKE-UP CALL TO FINANCIAL SPHERE
by Joseph Russo
ElliottWaveTechnology.com
August 4, 2007

Likely resulting from decades of imprudent financial engineering, the uncertainty-surrounding discovery as to the potential extent of collateral damage from such shenanigans remains immeasurable and unknown.

Similar to those engineers about to embark upon months of intense investigation in attempt to determine cause of the sudden bridge collapse in Minnesota - the omnipotent financial sphere is just beginning to access whether or not the minor structural fractures, (which market volatility has so blatantly revealed) could possibly morph into a sudden and total collapse of similar dimension.

The Week in Review:

Highlighting the NASDAQ 100

General Equity Indices Threaten Notable Breakdowns going forward

Friday’s dismal weekly close did nothing to improve upon the numerous technical underpinnings that were riding on last week’s performance.

Although the NDX broke down below last week’s trendline, we graciously offer it a second such boundary to prove itself in the week ahead.

The low close beneath levels of the past seven weekly bars, has evoked a “sell-signal” basis the good old-fashioned 4-week rule. (John Murphy’s Technical Analysis of Financial Markets)

Breadth stinks quite frankly - as all of the major Bullish Percent Indices (including the Dow’s) have flagged sector-wide sell signals upon significant reversal breaches below their overbought 70-levels.

Despite capitulation-optimism surrounding high VIX/VXN readings relative to recent years, historically, the VIX becomes contrarian-bullish at levels above 30. Still a ways to go…

Apart from all of the plausible doom and gloom, longer-term uptrends remain firmly in tact, and at some point, a major reaction rally will prepare for take-off.

Although one should maintain general levels of optimism (after all, the bull is NOT dead yet) one should also be prepared for the absolute worst.

At the pilot’s request, please keep your safety belts securely fastened, and your seat backs in their standard upright positions.

post 2002 - Is Volatility attempting to return to historical NORMS – AGAIN!

Such question will be answered in due time, and will be contingent upon success of the financial spheres fresh layers of adopted rescue attempts.

http://www.[[financialsense.com/fsu/editorials/russo/2007/0804.html

 

[Ichiro]

PANIC IN THE STREETS,
FEAR IN THE AIR!
by Clif Droke
August 3, 2007


Did you hear that sound last week? That was the collective sound of millions of retail traders and investors screaming in fear and running, not walking, to the nearest bomb shelter as the stock market put in its internal low. Once again the ever-growing fear of the Main Street masses has led to capitulation at what looks to be another important stock market bottom in the making.



The June 29 edition of the Financial Times showed a picture on the front page of an exasperated Wall Street floor trader with his hands covering his face following a hard week of losses for equities. The S&P 500 was down over 5% in what was the biggest decline since the late February selling panic. The headline for June 29 read “’Wake up call’ for investors” in reference to the statement by Treasury Secretary Henry Paulson who said, “I think [investors] could use some more discipline. We are seeing a reassessment of risk and that is leading to a market adjustment.” When a high ranking member of the government pontificates on the dangers and excesses of the financial markets it means the worst has been seen in this latest correction and it’s time to look past the rhetoric and do some nibbling.



To illustrate the heavy fear hanging in the air over the latest “crisis of the hour,” here are a collection of headlines from that same newspaper over the past few days: “Subprime fears hit financial offerings,” “Subprime and credit fears give rise to volatility,” “Flight to quality over credit concerns,” “Shares battered as mortgage fears rise,” “Dollar rallies on US subprime fears,” “Bank debt fears spark big share price falls,” “Credit crisis puts heat on liquidity,” “S&P paints a gloomy picture for big banks,” “Credit gloom intensifies after double whammy,” “S&P plunges 2.3% amid earnings and housing gloom,” “Equity investors join exodus as mood darkens.”



I’m sorry, what was it again the press wants us to be afraid of? Oh yes, a credit crisis! (And if we believe the reports it’s going to get us all!) In reality, of course, this graphic display of fear and gloom show us that as investors we should be feeling the exact opposite of what the press is preaching, namely optimism over the U.S. stock market outlook.



The internal low of last week’s decline occurred on July 26, a day that saw the 52-week new highs/new lows on the NYSE fall to -620 in what was probably the lowest 1-day reading of net new lows in the last three years. This typically means investors have just about thrown in the towel on stocks, marking the worst part of the correction. Since then the number of stocks making new 52-week lows has gradually shrunk until today (August 2) when the hi-lo differential was -171, a vast improvement over the past two weeks when the average hi-lo disparity has averaged well over -300. Clearly the broad market is showing signs of gradual internal improvement.

http://www.financialsense.com/editorials/droke/2007/0803.html