A Stiff Upper Lip 

You’ve got to admire the Brit’s for their stiff upper lip. Across the pond they’re in a lot more trouble than we are from England to the Ukraine. Most of the emerging democracies of Eastern Europe bought into what they thought was the American dream. It turned into an over leveraged toxic asset bubble with banks/countries wobbling on the cliff of insolvency nightmare.  

But at least the Brits  have some degree of transparency. Here almost everything  except the amount of bailout and stimulus funds is a deep dark secret. Take the deeply troubled Bank of Scotland now all but completely nationalized by the Bank of England.

_________

Transparency

The Royal Bank of Scotland has put admitted to  $722 billion of “troubled assets” of over leveraged toxic debt and are trying to wind down those liabilities. This loss is staggering England with about 1/5th the gross GDP of the USA.  But, they are dealing with the problem in the open.  We don’t even know the staggering amount of over leveraged debt of AIG, GE, GM or any of our major/minor banks.  The only thing we do know is the near meltdown of the financial system when Lehman Brothers went belly up and its toxic debt brought the entire worldwide banking system to its knees.

Unfortunately we also know this problem is going to get worse. Because more defaults are on the way,  unemployment is growing, home prices declining, and esoteric mortgages will soon start charging higher rates of reurn.

__________

Obama Pass/Fail

Let’s give the guy credit for a transparent budget. He’s getting some excellent reviews because he stopped hiding many items like the Iraq war as part of the overall budget. 

But on the other hand he’s getting clobbered with his rosy economic assessment of the future. Whose he kidding? The US GDP will be -1.2% this year and +3.2% next year. A consensus of Economists believes otherwise as Peter Goodman in NYT point out. (Many thanks to one of you who emailed me this article)

__________

“Geithner’s Folly”

Our new Sec. of Treasury has come up with something called a “stress test” for big banks.  Let’s get real. The vast majority of these toxic institutions invented the stuff that the Bank of Scotland has already admitted to. Big banks are broken. Wake up and smell the coffee – Geithner “is asking the wrong question. The question he is posing is: how can the government save Citigroup? The right question is: how can the government rebuild the banking system?”  Bob Kuttner, columnist for BusinessWeek, Boston Globe and co founder of the American Prospect on no matter how good the rescue plan is it doesn’t matter a lick if you don’t fix the banks.

__________

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

Stocks

-

-

Technicals & Fundamentals

Just about every front page is covering the biggest ever quarterly loss - $62 billion by AIG. 

From Friday – “The Ugly news” would be - “The SPX ends closing  a bit below 741.  This would just establish a lower low (see chart on right side of blog) and further entrench the bears rule chart pattern.”  

The SPX ended up at 735 (A bit below its mother of all support barriers) and technically this along with no climax selloff  shows there’s more down side to come. Perhaps today we may see a climax selling panic today and a chance to nibble. To have a “climax” sell off you need both a big fall and big volume.

Big news of the week is the employment numbers for February come out Friday. 

Reading the Tea Leaves – How many Danger Will Robinson Danger Danger signals can there be?   – Hope you protected any long investments.

Long Term Outlook = BEARS RULE

See STRATEGY, POSITIONS, OVERVIEW  & ARCHIVES sections of blog for more

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

-

News

-

Deer in the Headlight

Stop staring at the headlights and Get out of the road

The reason Investors411 brings you news like “the worlds financial system has effectively disintegrated” (see last post on blog – Roubini, Volker Soros) is so YOU can stop standing like a deer in the headlights and do something to protect your economic well being. - 

Obviously, the Laissez-Faire capitalism under the previous four Presidents has spectacularly failed. The tech, housing, and credit bubbles have all burst under the absolutism of “free market capitalism” and something better has to arise from the ashes. 

Over the last eight years we have so decimated/cut and tainted the staffs of regulatory agencies from the SEC to the FDIC that any short term solution from Madoff to Nationalization becomes,at best very very difficult. 

The Real Structural Problem

What we watched over the last 8 years is an orgy of economic bubbles bursting because of unregulated greed of our capitalist system. Yes its time to restore balance, but first you have to recognize the long term structural problems. Researchers Picketty and Saez on where the money’s gone in our country over the last 40 years. Quote from economist Robert Reich& graph from Picketty and Saez -

“since the late 1970s, a greater and greater share of national income has gone to people at the top of the earnings ladder. As late as 1976, the richest 1 percent of the country took home about 9 percent of the total national income. By 2006, they were pocketing more than 20 percent. But the rich don’t spend as much of their income as the middle class and the poor do — after all, being rich means that you already have most of what you need. That’s why the concentration of income at the top can lead to a big shortfall in overall demand and send the economy into a tailspin. (It’s not coincidental that 1928 was the last time that the top 1 percent took home more than 20 percent of the nation’s income.)

This is the beginning of a “Great Recession.” and the real long term structural problems of income inequality have to be addressed. (see Overview section of blog) Only then will we find a long term solution.

Stocks

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

Short Term Outlook

Both Citi Group and Bank of America were again had massive losses on Friday based on fears of nationalization.  The ETF that mirrors financials is XLF

The major indexes recovered from -3% losses in huge volume on Friday.  After 5 straight days of financial meltdown technically it looks like we may see a short covering rally continue.  The huge volume in financial stocks, the Dow and the S&P indicates a short term climax selloff. This is where all the weak or frightened investors panic and sell. The more solid long term holders remain. The rally from the 3+% fall is all the short term traders caught in short positions selling. Technically, Friday’s trading and the oversold conditions indicate a short term rally in stocks should continue.

You shouldn’t get too excited  - this is a technical bounce. Sometimes these bounces can be the start of something bigger. What we need is some major change in fundamentals like slowing unemployment or decline in the default rate of mortgages to give any rally substance.

. 

Long Term Outlook = BEARS RULE

-

See STRATEGY, POSITIONS, OVERVIEW (new) & ARCHIVES sections of blog for more

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!