The next five per cent move in the market is as clear as the smoke-filled skies above Los Angeles. The deadly and massive Station fire, which doubled in a day to 105,000 acres, from 52,000, mirrored the brutally singled-minded cyclical bull market beginning in March. Both U.S. Fire Service and the Los Angeles County Fire Department concur that the fire’s growth had slowed and that its ferocity is declining. The same might be true for the magical, mystical Wall Street rally we witnessed over the last six months.
Pre-market jitters point to another down opening as disappointing economic manufacturing data of contraction from Europe, and unexpectedly, likewise from England, reminded investors that the all clear from last year’s global meltdown is not entirely clear. The overly rich valuations built into current share prices could be premature.
Bloomberg is reporting Paul Tudor Jones’s Tudor Investment Corp., Clarium Capital Management LLC and Horseman Capital Management Ltd. are among funds betting the green shoot economic recovery announced weeks ago by Goldman Sachs (GS) and Morgan Stanley (MS) are off base this time as economic growth will be overtaken by a continuation of fundamental deleveraging.
On Monday, the DJIA closed down 47.92 or .50 per cent at 9,496.28. The S & P 500 Index also fell 8.31 or .81 per cent to 1,020.62. NASDAQ fell, down 19.17 or .91 per cent to 2,009.06.
Total volume today on the NYSE was 1,377,655,473; advancing shares were 273,143,033 and declining shares were 1,094,260,290 with 10,252,150 unchanged. NASDAQ volume was 2,256,216,789; 847,105,496 shares were up, 1,385,908,101 were down, and 13,912,894 were unchanged.
The Five-Year Note closing yield was 2.387 percent; the Ten Year Note also was lower to 3.402 per cent; and the Thirty Year Bond fell to 4.18 per cent.
Today, economic data hitting the market includes Motor Vehicle Sales, Redbook, ISM Mfg Index, Construction Spending, and Pending Homes Sales Index. The inflated Motor Vehicle Sales figure with embedded Cash-for-Clunkers one-off buying borrowed from future purchases. That program ended August 24th.
This year’s menace to society, unemployment residential foreclosures will pick up again in the fall, as explained by bankers yesterday. Because the government’s mortgage modification program is fully up and running, the foreclosure process ending in eviction can resume running in real time. This could add up to five million additional homes on the market by next spring.
Personal bankruptcies are rising again. Calculated Risk reported non-business filings are up 34.3 per cent from July 2008. Additionally, personal bankruptcies filed in July, are at their highest levels, 126, 434, since the 2005 reform of bankruptcy laws.
Mike Shedlock at Minyanville wrote about a recent Gallop Poll showing that the recent slowdown in consumer spans the entire spectrum of shoppers; from the Greatest Generation, Silent generation, Baby Boomers, Generation X, to Millennials. The study reports that all generations’ daily spending is down about $30. Truncated spending habits are a further macroeconomic drag on the economy.
However, the big enchilada this fall, for blowing a hole in any economic recovery or continued bull market, is commercial real estate. Disappearing prospective tenets, grossly over-valued properties, absent refinancing, and upside-down mortgages, should do to CRE what occurred to residential single-family homes in 2008.
If this does not bother you, then, neither will the fact that the FDIC is running low on cash. It should be pointed out that the FDIC is handing out 80 percent loss guarantees to supposedly intrepid private equity guys willing to save capitalism, if the deal is not too risky for them; but for taxpayers...