Imminent and severe market correction

[sam76]

FTSE and Dow futures like the news.



U.S. Economy Expanded at 0.6% Pace in First Quarter (Update1)

By Shobhana Chandra

April 30 (Bloomberg) -- The U.S. economy expanded at a 0.6 percent annual pace in the first quarter as an increase in inventories compensated for weaker consumer spending and a drop in business investment.

The gain in gross domestic product, the sum of all goods and services produced, was more than forecast and matched the rate of growth in the previous three months, the Commerce Department reported today in Washington. The last time the economy grew less was in the fourth quarter of 2002.

``We think we're in recession, but I don't know that the GDP numbers are going to turn negative at all in 2008,'' said Mark Vitner, senior economist at Wachovia Corp. in Charlotte, in a interview with Bloomberg Television. ``If you were to take out the swing in inventories, these numbers would be negative.''

http://www.bloomberg.com/apps/news?pid=20601087&sid=aFZ5qPxNMywA&refer=home

 

[Uncle Festivus]

FTSE and Dow futures like the news.



U.S. Economy Expanded at 0.6% Pace in First Quarter (Update1)

By Shobhana Chandra

April 30 (Bloomberg) -- The U.S. economy expanded at a 0.6 percent annual pace in the first quarter as an increase in inventories compensated for weaker consumer spending and a drop in business investment.

The gain in gross domestic product, the sum of all goods and services produced, was more than forecast and matched the rate of growth in the previous three months, the Commerce Department reported today in Washington. The last time the economy grew less was in the fourth quarter of 2002.

``We think we're in recession, but I don't know that the GDP numbers are going to turn negative at all in 2008,'' said Mark Vitner, senior economist at Wachovia Corp. in Charlotte, in a interview with Bloomberg Television. ``If you were to take out the swing in inventories, these numbers would be negative.''

http://www.bloomberg.com/apps/news?pid=20601087&sid=aFZ5qPxNMywA&refer=home

I like that one - counting inventories that they can't sell as a positive. Wait for the revisions, assume that this is the first qtr negative?

 

[Uncle Festivus]

A few more snippets of reality for those who care?

Citi - the next BS?

NEW YORK (MarketWatch) -- Citigroup's surprise $4.5 billion common-stock issuance Wednesday hammered home the fact that the bank still faces capital issues, and it keeps pressure on the largest U.S. bank to demonstrate that it's equipped to ride out the credit crisis, analysts said.

Wednesday's offering was Citigroup's fifth capital-raising effort in five months, which has seen the bank garner more than $40 billion and put its Tier 1 ratio at 8.6% by the end of March.

But, even with those efforts, Citi is still falling short of the mark, analysts said, and that could be a signal that the bank is struggling more than it would like to admit.

Classic - the loss wasn't as big as predicted by analysts, so slap a buy on it!

A dismal U.S. market for selling pickups and SUVs along with a strike at a top parts supplier led General Motors Corp. to a massive first-quarter loss, but shares still surged 13% Wednesday as Wall Street had expected worse.

...bringing back the 12 month...... the cupboard is desperately bare....please buy our toxic debt?

In addition, to meet growing financing needs, the Treasury announced that it is bringing back the 52-week T-bill. The first of the monthly auctions will take place on June 3. In a report to the government, a panel of experts said that the department must take more steps to meet the projected deficit. "The majority of members believe that the addition of the year bill combined with increases to the size and frequency of existing coupon debt over coming quarters will still not be sufficient to satisfy the increased financing needs of the Treasury over the intermediate and longer term," the panel said.

 

[Whiskers]

Well, the Fed only cut by 25. Gold up a bit and the USD down again... did the market take some profits after the ann or was it a sign of dissapointment it wasn't 50?

They're suggesting the worst isn't over and left the door open for another cut later... keeping a little pea shooter up their sleeve for next month?

Gee, I don't know. From a psychological perspective I'm still wondering whether they are teasing wall street a bit. I guess we'll soon see whether they toss a tantrum again.

 

[ShareIt]

Well, the Fed only cut by 25. Gold up a bit and the USD down again... did the market take some profits after the ann or was it a sign of dissapointment it wasn't 50?

They're suggesting the worst isn't over and left the door open for another cut later... keeping a little pea shooter up their sleeve for next month?

Gee, I don't know. From a psychological perspective I'm still wondering whether they are teasing wall street a bit. I guess we'll soon see whether they toss a tantrum again.

Surprising day on Wall street... but i wouldn't call it a short bet yet, a large number of put options would have been taken at the end of the day... so i wouldn't be surprised to see the rally tonight shaking out the people who went short.... tonight will be the tell all.... as for USD, think it's having a breather for now and might have another leg up soon

 

[Uncle Festivus]

Tis getting all a bit tiresome now. Aparently this chart means something bad, dunno, not an expert, but basically the Fed is insolvent??? Anybody?

FEDERAL RESERVE STATISTICAL RELEASE

H.3 (502)
Table 1 For Release at 4:30 p.m. Eastern Time
April 24, 2008
AGGREGATE RESERVES OF DEPOSITORY INSTITUTIONS AND THE MONETARY BASE

 

[explod]

Tis getting all a bit tiresome now. Aparently this chart means something bad, dunno, not an expert, but basically the Fed is insolvent??? Anybody?

What you say is in fact correct, they are well below the line and is why they are issueing these new 12 months bonds, but no takers. I am also unable to interpret the figures. Privateer newsletter will have more to say on it at the weekend and has done so recently and how they have been getting there historically. Will look back over the isue when I have time and (yawn energy) later.

 

[ShareIt]

I had been expecting this rally to come and stated a few posts before.... but this rally smells like a BULL trap....

 

[sassa]

I had been expecting this rally to come and stated a few posts before.... but this rally smells like a BULL trap....

Has the fat lady put her first foot on the stage?Will she pulled back by the stage manager tonight because she went too early?
According to Bonddad-
http://www.bonddad.blogspot.com/
-the SPY and IWM broke through key resistance points today and that means onward and upwards.

 

[nioka]

I had been expecting this rally to come and stated a few posts before.... but this rally smells like a BULL trap....

Rather than smell a bull trap I think we are smelling what has been a bear trap.

 

[sassa]

Rather than smell a bull trap I think we are smelling what has been a bear trap.

And beware of the lagging indicators-
"The third danger results from the interaction between wealth, spending and employment. As U.S. households’ wealth – in the housing market and the stock market – falls, their consumption is beginning to fall and will continue to do so, again with a lag. This decline in consumption is leading to a decline in profits, of which more is on the way, which in turn will lead to a decline in investment. The combined decline in consumption and investment spending will eventually lead to a decline in employment, as firms begin to recognise that their labour is insufficiently utilised. The decline in employment, in turn, means a drop in labour income, which, with a lag, leads to a further drop in consumption."
http://www.nakedcapitalism.com/2008/05/four-mega-dangers-international.html

 

[ShareIt]

Rather than smell a bull trap I think we are smelling what has been a bear trap.

I have been riding this rally all the way up and it has been fun... but the one thing that is most important and that is missing, is volume... and that is why i think we are headed for a correction within a week

 

[Uncle Festivus]

Move along now, nothing to see here, just some overstated mark to market book entires, not really real really....eerily similar to that other famous 'victory'. Mission accomplished - well done financial wizards .

Worst of credit crisis may be over: Bank of England
Total subprime losses appear significantly overstated, U.K. central bank says

LONDON (MarketWatch) -- The Bank of England said Thursday that the correction in credit markets has gone too far and that risk appetite and confidence were likely to gradually return to the financial system, indicating the central bank believes the worst of the credit crunch may be over.

In a statement accompanying its twice-yearly report on financial stability, John Gieve, a Bank of England deputy governor, said the pricing of risk in credit markets appears "to have swung from being unsustainably low last summer to being temporarily too high relative to fundamentals.
"So, while there remain downside risks, the most likely path ahead is that confidence and risk appetite will return gradually in the coming months," Gieve said.

Added to quotable quotes >

"So, while there remain downside risks, the most likely path ahead is that confidence and risk appetite will return gradually in the coming months," Gieve said.

 

[Whiskers]

Move along now, nothing to see here, just some overstated mark to market book entires, not really real really....eerily similar to that other famous 'victory'. Mission accomplished - well done financial wizards .

Added to quotable quotes >

"So, while there remain downside risks, the most likely path ahead is that confidence and risk appetite will return gradually in the coming months," Gieve said.

Yep, remember the residue will carry over for another day, Uncle.

We'll be doing it all again in a year or two or three!

But Uncle, have you turned to supporting the opposition, or have you jumped ship to follow the safety of the crowd for awhile?

 

[Uncle Festivus]

Yep, remember the residue will carry over for another day, Uncle.

We'll be doing it all again in a year or two or three!

But Uncle, have you turned to supporting the opposition, or have you jumped ship to follow the safety of the crowd for awhile?

Never! We will fight them on the beaches, we will fight them....woops, getting a bit carried away there .

Well, until the data changes I will continue with the view that we are in for more market churning, but trade the lemming sentiment anyhows. Interesting night tonight for sure ie if the data is bad (and the NFP usually is consistently bad lately - sticking to trend?) then profit taking is on the cards I reckon

1712 ET 01May2008-U.S. economic indicators for May 2
------------------------------------------------------------------------------
The major economic indicators due on Friday are April non-farm payrolls at
8:30 a.m. EDT and March factory orders at 10 a.m. EDT.

 

[Whiskers]

Well, the night has got off to a flier. Unemployment falls 'unexpectedly' and the Fed joins with European banks to battle credit crisis.

I'm not surprised, BUT... AN OPEN CHEQUE!

Fed joins with European banks to battle credit crisis
Friday May 2, 9:17 am ET
By Martin Crutsinger, AP Economics Writer
Fed announces new moves Friday with European banks to battle ongoing credit crisis


WASHINGTON (AP) -- The Federal Reserve announced Friday that it will expand a series of efforts to deal with the global credit crisis, in coordination with European central banks.

The Fed's decision to boost the amount of loans it makes to banks every two weeks, in a process known as a Term Auction Facility, was aimed at sending a strong signal that the central bank is prepared to supply as much in reserves as U.S. banks need. The latest move was made in coordination with the European central banks' efforts to bolster their financial systems as well.

The Fed said it was also expanding the types of assets that investment banks can use as collateral to receive loans from the central bank.
http://biz.yahoo.com/ap/080502/fed_credit_crisis.html

 

[dhukka]

Well, the night has got off to a flier. Unemployment falls 'unexpectedly' and the Fed joins with European banks to battle credit crisis.

I'm not surprised, BUT... AN OPEN CHEQUE!

The US economy lost 20k jobs and the unemployment rate fell, an unsustainable trend, the unemployment rate will rise in coming months.

Whilst only -20k jobs were lost the controversial birth/death model added 267k jobs for the month of April. To highlight the absurdity of this number, the b/d adjustment estimates 45k new costruction jobs were created in April.

Meanwhile on the liquidity front, things continue to go swimmingly:

Fed Raises Cash-Loan Auctions by 50% to $75 Billion

The Federal Reserve expanded its cash- loan auctions for banks by 50 percent to $75 billion each after higher borrowing costs blunted the impact of the four-month-old program.

The Fed also increased its currency-swap arrangement with the European Central Bank by two-thirds to $50 billion and doubled the amount with the Swiss National Bank to $12 billion, extending their terms through January. In a third move, the Fed will accept other AAA rated asset-backed securities as collateral for Treasury loans through another program.

Fed Chairman Ben S. Bernanke created the Term Auction Facility and two other programs to reverse a decline in liquidity that began last year with the collapse in the market for subprime mortgages. Today's move may reduce loan payments for some companies and homeowners with variable-rate mortgages.

The actions were taken ``in view of the persistent liquidity pressures in some term funding markets,'' the Fed said in a statement.

 

[Uncle Festivus]

The US economy lost 20k jobs and the unemployment rate fell, an unsustainable trend, the unemployment rate will rise in coming months.

Whilst only -20k jobs were lost the controversial birth/death model added 267k jobs for the month of April. To highlight the absurdity of this number, the b/d adjustment estimates 45k new costruction jobs were created in April.

Meanwhile on the liquidity front, things continue to go swimmingly:

Ah yes, the birth death calculation, all very convenient at this juncture. I have to hand it to them, they have succeeded in placating the masses but at what cost for the future? One estimate is that the Fed has 'put out' approx $1trillion so far in priming liquidity, yet they still cut rates by 25 bp.

If the money was getting back to the real economy then all would be fine again but it's not - most is finding it's way back to non productive equity speculaton and bringing bank balance sheets back from the brink to somewhere that they can only remotely start thinking about re-starting lending to the masses again.

We may have to wait for the next qtr figures to expose to the lemmings that the emperor isn't wearing any clothes. A Buffetism - you only know who's been swimming naked when the tide goes out. The tide is out, the people are picking up the floundering fish, but fail to see the tsunami approaching.

There is also a big emphasis on ensuring that important technical levels are broken, to the upside, to cement the illusion that this is the real deal, again! What they have set themselves up for is a re-test of the previous highs over 14k for the DOW. The danger is though if this fails then that would be an important negative signal. By that time also the real economy would have re-asserted itself with negative overtones so there still could be an alignment of negativity which could ultimatly test the resolve of all the permabulls. 12 weeks max?

 

[Whiskers]

Even the old guru isn't immune...

Berkshire net income falls 64 percent because of derivatives
Friday May 2, 7:12 pm ET
By Josh Funk, AP Business Writer
Unrealized derivative losses send Berkshire's 1Q profit 64 percent lower

OMAHA, Neb. (AP) -- Berkshire Hathaway Inc. said Friday its first-quarter profit fell 64 percent because it recorded an unrealized $1.6 billion loss on its derivative contracts, and its insurance businesses generated lower profits.

Berkshire reported net income of $940 million, or $607 per share, in the quarter ended March 31. That's down significantly from the net income of $2.6 billion Berkshire generated a year ago.

Berkshire's chairman and CEO Warren Buffett warned shareholders in his annual letter that the derivatives could make the company's earnings volatile. But he predicted the derivatives will ultimately be profitable.

Including the derivative losses, Berkshire's net investment losses in the quarter totaled $991 million. A year ago, the Omaha-based company recorded a $382 million investment gain.

...and he's still optimistic.

But...

Berkshire said its operating earnings are a better measure of how the company is performing in any given period because those figures exclude derivatives and investment gains or losses. Berkshire reported $1.93 billion in operating earnings during the first quarter, which was down from $2.21 billion in operating earnings a year ago.
http://biz.yahoo.com/ap/080502/earns_berkshire_hathaway.html

 

[juiceman]

Well, the night has got off to a flier. Unemployment falls 'unexpectedly' and the Fed joins with European banks to battle credit crisis.

I'm not surprised, BUT... AN OPEN CHEQUE!

If you cut the gobbley gook sounds like we had/have a serious problem
If this was mum and dad their house would be Gone!!!
The effects of 1929 were not really felt by the public until 1930