coolhand's Account Talk

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I've been watching the Seven Sentinels the past few days for a sign to move back into the market. Here's the answer to that question after yesterday's move higher:

NO SIGNAL. As we could see at the close, we have 5 of 7 on the buy side with TRIN having been held back by massive downside volume in GE (approaching a billion shares), and by bpcompq. Rather than speculate on what's coming, I'll let the market tell it's own story. Good trading, D

http://www.traders-talk.com/mb2/index.php?showtopic=98276
 
Today may be that "Whoosh" Tom is looking for, but wouldn't count on it. Selling is intense today, but in this economic climate we may need some massive, and I mean massive capitulation before we put in a bottom. This is one dangerous market for us TSPers.

Hope no one tried to fade me when I got out last Friday. I may be aggressive, but I'm not stupid. :cool:

From this morning's Wall Street Sentiment Daily:

AAII reported 18.92% Bulls and 70.27% Bears vs. 24.30% Bulls and 55.10% Bears last week. Amazing readings really.
 
Oh yeah, the seven sentinels are still out of the market. I'm looking for a full buy on those signals at this point before I decide to get back in. :)
 
mojo said:
More news to rally on lol.
Click to expand...

:confused:

This is the kind of news we've been getting for months. In what context are you looking for a rally? Under normal market conditions I would agree, but that's what's been getting me in trouble lately. :notrust:
 
Received this email from Louis Navellier:

The Truth About AIG

Earlier this week, AIG announced that it needed another $30 billion in taxpayer money to offset its massive $62 billion loss in the fourth quarter. All told, that brings AIG’s bailout to a staggering $180 billion!

American International Group (AIG) is a good example of how complicated this current market is. So let me break it down for you:
How AIG Lost a Fortune

I’ll admit that $62 billion is a staggering amount of money to lose in a quarter. But when you look at the root causes, you can see how it happened.

A kinky Wall Street creation called a Credit Default Swap (CDS) is the root cause of catastrophic losses at AIG—and in fact, a part of the larger economic crisis. These swaps are used by insurance financial firms to hedge their risk from “default” on certain forms of “credit.” Since the number of mortgages and business loans in default has skyrocketed, investors who bought CDSs came knocking at AIG’s door for billions of dollars in compensation.

Since the CDS market was worth more than $62 trillion (yes “trillion” with a T) at the end of 2007 and since AIG was the world leader in this type of investment, you can see where the huge quarterly loss comes from.
Why AIG is “Too Big To Fail”

There’s no doubt AIG was foolish to jump into the CDS market so heavily, and the company should pay the price for its mistakes. However, many of the investors who bought swaps were financial firms hedging against their incredibly risky strategies. That’s right—many financial institutions extended mortgages to people who couldn’t repay the loan, and then invested in credit default swaps that would pay out when those homeowners fell into foreclosure.

So if AIG goes bankrupt, what would happen to the already battered global financial industry? The U.S. isn’t willing to find out, and has thrown $180 billion at this insurance giant in an effort to prevent the entire financial sector from unwinding.

AIG’s management is surely to blame, but punishing this individual company by letting it fail would also do grave harm to the many banks and brokerages that are already reeling. Instead of nationalizing AIG, the government could wind up owning a dozen failed banks instead.

And more importantly, the collapse of AIG would create panic and uncertainty on the scale of the Lehman Brothers collapse. Since the main goal of U.S. regulators right now is to restore confidence and solvency to the financial sector, Washington decided it was better to keep AIG propped up despite these huge losses.
Why the Latest Payout Was Bad News

Since AIG’s losses were due to CDSs, and since the government’s latest $30 billion will help guarantee those swaps, you might think the bailout was a GOOD thing. But the problem is that AIG posted staggering losses far beyond Wall Street expectations. Since this octopus of a company has its tentacles connected to just about every financial firm in the world, many investors took this as a sign that the entire industry is in much worse shape than they had thought.

The market’s 300 point decline that pushed the Dow Jones below 7,000 wasn’t due so much to the specific bailout of AIG, but rather to the persistent problems in the financial sector. This helped rekindle all the fear and uncertainty that has battered the market in recent months, and it was downhill from there.

The Truth About GM

As if the AIG news wasn’t bad enough, General Motors (GM) auditors said today there is "substantial doubt" whether the iconic automaker can survive this downturn. The market spiraled downward today as investors wondered whether the Detroit company will get another government handout or be forced to fold.
Doubts over GM Aren’t New

While this is grim news, it certainly isn’t a surprise. For years, auto industry experts have noted that General Motors has been behind the curve on innovation and has been crippled by tremendous labor and legacy costs, and the numbers have been trending steadily downward.

Consider that in the second quarter of 2008, the company posted a staggering loss of $11.21 a share compared with an estimated loss of $2.62 a share—for a negative earnings surprise of nearly 330%! In its most recent quarterly results, the company posted its sixth straight quarterly loss, and there is clearly no end to this in sight. In February, GM’s sales were down by a whopping 53% over last year.
The Deck is Stacked Against GM

GM has sustained large and continuing losses, saying it needs additional federal loans to remain in business. That’s an incredible understatement because money alone can’t guarantee this company will survive.

General Motors has only survived this long on $13.4 billion in U.S. aid and says it may need as much as $23 billion in additional funding or else it will run out of cash as early as April. With all the other government obligations in the form of the bank bailout and the stimulus package, not to mention healthcare reform and other budget initiatives, President Obama is going to have a tough time scrounging up tens of billions for GM now—with no guarantee the ailing automaker won’t be back for more in a few months.

The bottom line is that money won’t fix the horrible decline in consumer spending and auto sales. On top of that, Obama's “cap & trade” proposals for carbon emissions are another nail in the coffin. These standards would cause utilities to substantially raise their rates to offset the cost of environmental upgrades. This isn’t just bad news for GM—all manufacturers require cheap electricity in the Midwest from coal to run all the manufacturing plants, and an increase in power costs will severely eat into these companies’ bottom lines.

What Will Obama Do?

Unfortunately, the future of GM is a very political issue. Barack Obama is a very smart man and I’m sure he’ll weigh the costs and benefits of his actions carefully—but if you think he won’t be accounting for the massive union support he rode to the White House, think again. Even if the numbers add up, explaining this to all the union workers that will be losing their jobs is a tall order.

Whatever he decides, Obama is going to anger part of the electorate. One final note: When bad things finally happen to big companies like Citigroup, General Electric or General Motors, the stock market on the whole tends to react adversely. An outright failure of GM would probably shock the market again.
 
Trader's Talk got a T-4 signal today, which indicates a major move up or down, but cannot distinguish which way. It's a warning that is sometimes early, but given the Short, Intermediate, and Long term trend I'd not assume anything. It can give successive buys and sells too. I will say that the Seven Sentinels got further away from a buy signal today, so take that for what's it worth.

My point is simple. Be careful right now!
 
Seems like we are on a direct glide slope to SP 600, or lower. I just don't see any reason that things would turn around any time soon. I do have the feeling that Birchy and others are right that the bull will come out of hiding but not just yet.
 
AIG & State/Municipal Bonds

First of all - My question below is OUT OF IGNORANCE. I just cannot find the answer - and the answer would be extremely interesting...

Was AIG a major insurer of State and Local municipal bonds? I know my city (Enron by the Bay - San Diego) and California bought insurance to beef up individual bond rating and thus reduce the interest rate.

What happens if the insurers of state and municipal bonds default?

Is that why the Feds are propping up this zombie?

Not a good or pretty thought.
 
Read Karl Denninger's market-ticker post of yesterday for the answer. If he was right, toast. If Dennis is right, we live.:worried:
 
Obama's Radicalism Is Killing the Dow

A financial crisis is the worst time to change the foundations of American capitalism.

By MICHAEL J. BOSKIN

http://online.wsj.com/article/SB123629969453946717.html

It's hard not to see the continued sell-off on Wall Street and the growing fear on Main Street as a product, at least in part, of the realization that our new president's policies are designed to radically re-engineer the market-based U.S. economy, not just mitigate the recession and financial crisis.

The illusion that Barack Obama will lead from the economic center has quickly come to an end. Instead of combining the best policies of past Democratic presidents -- John Kennedy on taxes, Bill Clinton on welfare reform and a balanced budget, for instance -- President Obama is returning to Jimmy Carter's higher taxes and Mr. Clinton's draconian defense drawdown.

Mr. Obama's $3.6 trillion budget blueprint, by his own admission, redefines the role of government in our economy and society. The budget more than doubles the national debt held by the public, adding more to the debt than all previous presidents -- from George Washington to George W. Bush -- combined. It reduces defense spending to a level not sustained since the dangerous days before World War II, while increasing nondefense spending (relative to GDP) to the highest level in U.S. history. And it would raise taxes to historically high levels (again, relative to GDP). And all of this before addressing the impending explosion in Social Security and Medicare costs.

To be fair, specific parts of the president's budget are admirable and deserve support: increased means-testing in agriculture and medical payments; permanent indexing of the alternative minimum tax and other tax reductions; recognizing the need for further financial rescue and likely losses thereon; and bringing spending into the budget that was previously in supplemental appropriations, such as funding for the wars in Iraq and Afghanistan.

The specific problems, however, far outweigh the positives. First are the quite optimistic forecasts, despite the higher taxes and government micromanagement that will harm the economy. The budget projects a much shallower recession and stronger recovery than private forecasters or the nonpartisan Congressional Budget Office are projecting. It implies a vast amount of additional spending and higher taxes, above and beyond even these record levels. For example, it calls for a down payment on universal health care, with the additional "resources" needed "TBD" (to be determined).

Mr. Obama has bravely said he will deal with the projected deficits in Medicare and Social Security. While reform of these programs is vital, the president has shown little interest in reining in the growth of real spending per beneficiary, and he has rejected increasing the retirement age. Instead, he's proposed additional taxes on earnings above the current payroll tax cap of $106,800 -- a bad policy that would raise marginal tax rates still further and barely dent the long-run deficit.

Increasing the top tax rates on earnings to 39.6% and on capital gains and dividends to 20% will reduce incentives for our most productive citizens and small businesses to work, save and invest -- with effective rates higher still because of restrictions on itemized deductions and raising the Social Security cap. As every economics student learns, high marginal rates distort economic decisions, the damage from which rises with the square of the rates (doubling the rates quadruples the harm). The president claims he is only hitting 2% of the population, but many more will at some point be in these brackets.

As for energy policy, the president's cap-and-trade plan for CO2 would ensnare a vast network of covered sources, opening up countless opportunities for political manipulation, bureaucracy, or worse. It would likely exacerbate volatility in energy prices, as permit prices soar in booms and collapse in busts. The European emissions trading system has been a dismal failure. A direct, transparent carbon tax would be far better.

Moreover, the president's energy proposals radically underestimate the time frame for bringing alternatives plausibly to scale. His own Energy Department estimates we will need a lot more oil and gas in the meantime, necessitating $11 trillion in capital investment to avoid permanently higher prices.

The president proposes a large defense drawdown to pay for exploding nondefense outlays -- similar to those of Presidents Carter and Clinton -- which were widely perceived by both Republicans and Democrats as having gone too far, leaving large holes in our military. We paid a high price for those mistakes and should not repeat them.

The president's proposed limitations on the value of itemized deductions for those in the top tax brackets would clobber itemized charitable contributions, half of which are by those at the top. This change effectively increases the cost to the donor by roughly 20% (to just over 72 cents from 60 cents per dollar donated). Estimates of the responsiveness of giving to after-tax prices range from a bit above to a little below proportionate, so reductions in giving will be large and permanent, even after the recession ends and the financial markets rebound.

A similar effect will exacerbate tax flight from states like California and New York, which rely on steeply progressive income taxes collecting a large fraction of revenue from a small fraction of their residents. This attack on decentralization permeates the budget -- e.g., killing the private fee-for-service Medicare option -- and will curtail the experimentation, innovation and competition that provide a road map to greater effectiveness.

The pervasive government subsidies and mandates -- in health, pharmaceuticals, energy and the like -- will do a poor job of picking winners and losers (ask the Japanese or Europeans) and will be difficult to unwind as recipients lobby for continuation and expansion. Expanding the scale and scope of government largess means that more and more of our best entrepreneurs, managers and workers will spend their time and talent chasing handouts subject to bureaucratic diktats, not the marketplace needs and wants of consumers.

Our competitors have lower corporate tax rates and tax only domestic earnings, yet the budget seeks to restrict deferral of taxes on overseas earnings, arguing it drives jobs overseas. But the academic research (most notably by Mihir Desai, C. Fritz Foley and James Hines Jr.) reveals the opposite: American firms' overseas investments strengthen their domestic operations and employee compensation.

New and expanded refundable tax credits would raise the fraction of taxpayers paying no income taxes to almost 50% from 38%. This is potentially the most pernicious feature of the president's budget, because it would cement a permanent voting majority with no stake in controlling the cost of general government.

From the poorly designed stimulus bill and vague new financial rescue plan, to the enormous expansion of government spending, taxes and debt somehow permanently strengthening economic growth, the assumptions underlying the president's economic program seem bereft of rigorous analysis and a careful reading of history.

Unfortunately, our history suggests new government programs, however noble the intent, more often wind up delivering less, more slowly, at far higher cost than projected, with potentially damaging unintended consequences. The most recent case, of course, was the government's meddling in the housing market to bring home ownership to low-income families, which became a prime cause of the current economic and financial disaster.

On the growth effects of a large expansion of government, the European social welfare states present a window on our potential future: standards of living permanently 30% lower than ours. Rounding off perceived rough edges of our economic system may well be called for, but a major, perhaps irreversible, step toward a European-style social welfare state with its concomitant long-run economic stagnation is not.

Mr. Boskin is a professor of economics at Stanford University and a senior fellow at the Hoover Institution. He chaired the Council of Economic Advisers under President George H.W. Bush.
 
This didn't take long...

MARCH 6, 2009
Bill Seeks to Let FDIC Borrow up to $500 Billion

By DAMIAN PALETTA

http://online.wsj.com/article/SB123630125365247061.html

WASHINGTON -- Senate Banking Committee Chairman Christopher Dodd is moving to allow the Federal Deposit Insurance Corp. to temporarily borrow as much as $500 billion from the Treasury Department.

The Connecticut Democrat's effort -- which comes in response to urging from FDIC Chairman Sheila Bair, Federal Reserve Chairman Ben Bernanke and Treasury Secretary Timothy Geithner -- would give the FDIC access to more money to rebuild its fund that insures consumers' deposits, which have been hard hit by a string of bank failures.

Last week, the FDIC proposed raising fees on banks in order to build up its deposit insurance fund, which had just $19 billion at the end of 2008. That idea provoked protests from banks, which said such a burden would worsen their already shaken condition. The Dodd bill, if it becomes law, would represent an alternative source of funding.

Mr. Dodd's bill could also give the FDIC more firepower to help address "systemic risks" in the economy, potentially creating another source of bailout funds in addition to the $700 billion already appropriated by Congress.

Mr. Bernanke said in a Feb. 2 letter to Mr. Dodd that such a "mechanism would allow the FDIC to respond expeditiously to emergency situations that may involve substantial risk to the financial system."

The FDIC would be able to borrow as much as $500 billion until the end of 2010 if the FDIC, Fed, Treasury secretary and White House agree such money is warranted. The bill would allow it to borrow $100 billion absent that approval. Currently, its line of credit with the Treasury is $30 billion.

The FDIC's deposit-insurance fund has fallen precipitously with 25 bank failures in 2008 and 16 so far in 2009. Some bank failures have a bigger impact on the fund than others, as IndyMac's failure cost the fund more than $10 billion, while many others cost the fund less than $100 million.

A 1991 law generally caps the amount of money the FDIC can borrow from the Treasury at $30 billion, and the FDIC hasn't borrowed money from the Treasury in more than a decade.

Ms. Bair said a change in the law would give the FDIC more options to determine the best way to rebuild its depleted fund. In an interview, she stressed that all insured deposits were already backed by the "full faith and credit of the United States government."

A change in the law would ease "the mechanics of how seamlessly we can access our lines of" funding. "I'm the kind of person that likes to be prepared for all contingencies," she said.
 
And where is the freak'n Treasury going to get the money?:rolleyes: Get ready for inflation folks.
 
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