Financial Entertainment TV is a sham and it showed this week as they tried to package a Procter & Gamble (NYSE:PG) mis-trade as being the cause of the sell-off. The talking heads never want to dig at the truth, which is that markets are driven largely by emotion and the media is used by vested interests to stir it up.

Yes, the media – much of it anyway — has fallen into the role as pimp for a bevy of prostitutes, being Humungous Bank & Broker (HB&B), private equity, hedge funds, mutual funds, and others who sell their so-called financial ‘services’.

The media is aware that mis-trades happen all the time, every month in fact, usually when people are distracted or agitated. In other words, mis-trades are a result, not a cause.

What upsets me most is the cover-up — that the media is paid to divert people’s attention to the real drivers of market prices, only giving the johns enough of a look to keep their attention on the marketing.

Yes, markets have become marketing – I say that all the time. It’s a disgrace because the capital market should be the workplace of the owners of capital, not the financial services industry and their shills. Legislators and regulators don’t see the problem here because they have been coerced or bought off by the financial services industry. Plain and simple.

Did you not feel this event developing in the past two weeks? I did, and moreover I told you all, not once but several times.

In the April 25 WIR, I concluded: “I don’t know the biggest problem that faces the equity market today, but I can see that something big is looming… I say something is about to break here, taking the S&P down faster than the IOO, both of them probably tumbling together as happened for several months after the Lehman collapse. Something to think about this weekend.”

Well, this week(May 2 WIR), the S&P 500 dropped -2.5%, NASDAQ -2.7%, the UK FTSE -3.0%, the French CAC -3.4%, and Shanghai -3.8%. Many of the others got off lightly, at least for now.

I started the April 25 WIR last weekend by listing three concerns: (i) the Goldman Sachs (NYSE:GS) Congressional hearing, (ii) the FOMC decision, and (iii) problems in Euroland.

Taking the last one first, I remarked: “The Greece situation is more about the future of Euroland than about Greece. Greece today will be Spain tomorrow, in all likelihood, and probably Portugal and maybe Italy the days after that.” …” Well, you knew what I meant about “tomorrow”, so I know you won’t hold it against me when the S&P downgraded Portugal on Tuesday and Spain on Thursday, with everybody now looking to Italy in the next row of dominoes to fall.

This cannot be good for the Euro, and it wasn’t. The Euro ($XEU) put in a cycle low of 131.17 on Wednesday and closed the week down -0.64% at 132.97, a 52-week low. The Euro contracts by the way traded as high as 151.44 in November, so that’s a slide of almost -20% in 5½ months. Greece started this; when will it end?

Normally when the Euro falls, so too does $GOLD, but that’s only when gold is trading like money. So, this week, based on anxiety and even fear, gold traders pushed up $GOLD by +1.87%, mostly on Friday, thinking perhaps that Italy hits the fan next.

…But then we have the other problem I wrote about in the last WIR: the FOMC issue. After the Fed meeting this week, the announcement said “No change”. But, the Fed balance sheet has bubbled to $2.34 trillion [4/19/2010 report] from $928 billion the week before the Lehman Brothers collapse September 15, 2008. The Fed website illustrates the situation, and their chart clearly shows the situation has gotten worse in the past nineteen months.
http://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm

The fact that the Fed’s trillions in dubious securities is managed by over 400 Wall Street traders, is to me, just like Goldman Sachs (NYSE:GS) double-dealing, a very serious matter.
http://www.wingsoflightning.com/blogs/viewEntry?entry=166

As I stated a week ago, and on several occasions, “Until this Interventionist problem is resolved, and the Fed balance sheet reverts to holding only short-term liquid securities as was always the intention, the fate of the US Dollar hangs in the balance.”

The Fed doesn’t seem worried. Maybe they think Americans will not be like Europeans and riot. Maybe they think America has forgotten those Kent State riots forty years ago this week, or maybe they think Americans learned a lesson that if you want to riot you will get shot-four dead and nine wounded in 13 seconds, one college student per second, a real lesson in life in America.
http://en.wikipedia.org/wiki/Kent_State_shootings

Yes, as long as the problems of Euroland are front and center, the pressure is on the Euro, which helps the Dollar, but, as I say, that delay only puts more pressure on the Fed to make decisions that balance the destructive powers of taking action too early (i.e., where the bond and equity market stumble) or too late (i.e., where, down the road, the American people are subjected to horrible inflation and very high interest rates).

…The US macro-economic data appears to be getting stronger – although some people disagree – but the point I’d like to make is to remind you once again that equity prices move in cycles higher and lower based on perception of what’s likely to happen in the future within the big picture. So China’s Shanghai Composite, for instance, is down -12.4% YTD and it was absolutely smashed from early 4Q2007 through early 4Q2008, and yet at both times, the economy (GDP) of China is and was in a +10% Y/Y growth phase.

The quantitative easing programs of governments around the world have pumped share prices very much. Interestingly, there has not been much growth in most markets in the past six or seven months. So far this year, in addition to China being down -12.4%, Hong Kong and Taiwan are down -3.5% and -2.2% respectively and France is down -3.0%. This past month, in fact, all of France, Germany and the UK took losses, as did Mexico, Thailand, Japan and Australia as well as Shanghai and Hong Kong… Asia-Pacific has issues with China’s tightening. Europe has issues with Greece, Portugal and Spain. It’s not all blue sky out there. …The iShares Global 100 has gone nowhere in almost seven months.

Let’s look deeper at what’s happening in the equity market. As you know, earnings season is rapidly coming to an end. After almost 90% of S&P 500 companies have reported “surprises” with higher than expected earnings, the market Bulls are trying to pump you for all you are worth.

I’m pleased to report that while the S&P 500 dropped -6.4% this week, our Concept accounts (the main accounts we manage) had a gain of about +2.0% W/W. We made gains by closing some shorts, but also by selling longs. An example of the latter is that on April 27th and 28th we acquired a position in Walmart (NYSE:WMT) at $52.82 and sold it at ~$54.79 on May 5. WMT traded down to $51.53 the following day, and closed the week at $52.40.

As Value Line analyzed WMT this week, I will have a few comments later in this WIR.

This week I also started trading the position-based small accounts that we call Select accounts because the portfolios are sector or country-specific. A few stocks in my candidate lists have fallen so deep into my Accumulation Zone or to prices that I believe hold long-term value that I started to make some Buys. I did that on Thursday afternoon at the height of the panic and then a bit more during Friday, in India, which is the country I hold out most hope and highest expectations for coming of (modern) age in the next ten years. All told, across the board for my Select accounts, the average weighting is only about 5%. I’ll probably double that next week. Longer-term, I expect lower prices, and through the market’s Bear period I will be rifle-shooting on behalf of these Select accounts.

Just like you all have different financial and time resources and interests, so too do my clients. With clients, I can meet well-defined needs, but in a blog all I can do is talk in very general terms, using specific cases for learning and informational purposes, trying to make the subject interesting.

Summary: “Equities swooned world wide as the Greek aid package and the People’s Bank of China’s third margin requirement increase this year sent investors fleeing for safe havens. And the global market sell-off continued to escalate throughout the week. This time worries centered on the increasing fears that the debt crisis would spread to other European countries. All equity indexes followed here with the exception of the SET were down last week. The CAC plunged 11.1% while the NASDAQ sank 7.9%, the Jakarta Composite dropped 7.8% and the FTSE swooned by 7.7%… Markets were rocked as the danger to the global economy of unsustainable budget deficits has hit investors hard. Riots in Athens have illustrated how the severe austerity measures designed to tackle such deficits have implications not just for economic growth but on the fabric of society as well. The dollar and highly-rated government bonds have been pushed sharply higher on safe haven flows while commodities corrected to year lows… And on Thursday, worries about European sovereign debt turned into a route. A 4% drop in Chinese stocks started the downbeat mood. But later in the afternoon U.S. stocks plunged while the VIX index of market volatility spiked nearly 40% to 40.71, to the highest level in a year. Traders were disappointed that ECB President Jean Claude Trichet did not announce further measures to support the region’s debt markets. Adding to stress in markets were signs that European banks were becoming less willing to lend to each other as fears about counterparty risk relating to Greek debt exposure takes hold.”

US Personal Income and Outlays for April. Following release of the data on 5/3/2010 8:30:00 AM ET, Econoday reported, “Personal income strengthened in March, gaining 0.3 percent, following a 0.1 percent rise the prior month. The heavily-weighted wages & salaries component increased 0.2 percent in March after edging up 0.1 percent in February… Consumer spending rose at a faster pace due to a jump in motor vehicle sales. Overall, personal consumption posted a 0.6 percent boost in March, following a 0.5 percent jump the month before. The March figure equaled expectations but February spending was revised up from a 0.3 percent initial estimate. By components, durables spiked 3.6 percent in March, nondurables advanced 0.3 percent, and services rose 0.2 percent.
”

US ISM Manufacturing Index for April. Following the release of the data on 5/3/2010 10:00:00 AM, Econoday reported, “The ISM’s composite index, at 60.4, posted its strongest reading in six years. The pace of new orders is very strong, at 65.7 to extend a run of 10 straight months of strength. Production is following new orders, at 66.9 for a nearly 7 point gain from March for its strongest reading in six years… Manufacturers are adding workers to meet the ramped up production schedule as the employment index rose nearly 3-1/2 points to 58.5 for its strongest reading, again, in six years… Both exports and imports are strong. The stock market is rising in reaction to this report.”

US Construction Spending for March. Following the announcement on 5/3/2010 10:00:00 AM ET, Econoday reported, “Construction outlays made a partial comeback in March but February’s decline was worse than earlier believed. Construction spending in March rebounded 0.2 percent, following a 2.1 percent drop the month before. March topped analysts’ forecast for a 0.3 percent decrease for the latest month. However, the February figure originally had been at a 1.3 percent dip… The March gain was led by a jump in public outlays which increased 2.3 percent after a 1.6 percent decline in February. The private sector was weak. Residential spending fell 1.1 percent, following a 3.4 percent decrease in February. Meanwhile, private nonresidential outlays slipped 0.7 percent, following a 1.5 percent fall the month before… On a year-ago basis, overall construction outlays improved to minus 12.3 percent in March from minus 12.9 percent in February… Today’s report is about neutral for the markets given that the March figure beating expectations was offset by a downward revision to February. ”

US Motor Vehicle Sales for April. Following release of the data on 4/29/2010 4:30:00 AM ET. Econoday says, “Despite a significant easing in incentives, vehicle sales proved resilient in April and compare well with a very strong March that was boosted by unusually aggressive incentives. April total sales came in at an annualized rate of 11.2 million units, down 5 percent from March. Sales of domestic-made units totaled 8.5 million vs. March’s 8.8 million with sales of imported light vehicles at 2.7 million vs. 3.0 million in March. Month-to-month weakness is centered in the lower cost car component not light trucks which show a smaller dip, this along with less aggressive incentives will limit the dollar decline in retail sales data. Though the results do point to weakness for the motor vehicle component of the April retail sales report, they nevertheless offer a further indication that consumers are out shopping.”

US Factory Orders for March. Following release of the data on 5/4/2010 10:00:00 AM ET, Econoday reported, “Today’s report also includes an upward revision to March orders for durables goods, now at minus 0.6 percent vs. an advanced reading of minus 1.3 percent. The headline decline reflects a month-to-month downswing in aircraft orders and masks general strength. Excluding transportation, orders rose 3.1 percent for the best reading in nearly five years. In yet another plus for this report, durable goods orders for February were revised 5 tenths higher to plus 1.6 percent… Total factory orders, that is with non-durables and durables combined, rose 1.3 percent and offer the latest confirmation of accelerating strength in the nation’s manufacturing sector. Factory orders for February were revised 7 tenths higher to also plus 1.3 percent.”

US Non-Mfg Index for April. Following release of the data on 5/5/2010 10:00:00 AM ET, Econoday reported, “A slowing in supplier deliveries held up the ISM’s composite index in April at March’s level of 55.4. But month-to-month acceleration in new orders eased a little more than 4 points, to 58.2 vs. March’s very strong 62.3. But this is offset by a 4 point rise in supplier deliveries to 53.5. The composites remaining components, employment and business activity, were little changed, at respective readings of 49.5 and 60.3… This report, though showing little change, is positive for the economic outlook, indicating steady growth for the bulk of the nation’s economy.”

US Jobless Claims data for week ending 5/1. Following release of the data on 5/6/2010 8:30:00 AM ET, Econoday reported, “Unemployment claims improved for a third straight week but far from dramatically. Initial claims for the May 1 week fell 7,000 to 444,000, pulling the four-week average down 4,750 to 458,500. The prior week was revised 3,000 higher to 451,000. Continuing claims for the April 24 week fell 59,000 to 4.594 million, though the four-week average for this reading rose slightly to 4.649 million. The unemployment rate for insured workers is unchanged at 3.6 percent… Month-to-month comparisons show very little change and are not strongly supportive for expectations of incremental improvement in tomorrow’s employment report. ”

US Productivity and Costs data for 1Q2010. Following release of the data on 5/6/2010 8:30:00 AM ET, Econoday reported, “Productivity growth slowed in the first quarter while the recent decline in labor costs came to a near halt. Nonfarm business productivity rose an annualized 3.6 percent in the first quarter after a 6.3 percent surge in the final quarter of 2009. Analysts had forecast a 2.6 percent gain in productivity. Unit labor costs slipped an annualized 1.9 percent in the first quarter, following a fourth quarter drop of 5.6 percent. The market projection was for a 1.0 percent dip in costs… The easing in productivity growth was largely due to less robust output growth and was largely expected, given the slowing in GDP growth. Output in the nonfarm business sector advanced 4.4 percent, following a 7.0 percent spike the prior quarter. The good news in the report is that hours worked has risen modestly for two quarters, indicating some improvement in demand for labor. Hours worked increased 0.8 percent in the latest period after edging up 0.7 percent in the fourth quarter. While modest, these gains are in sharp contrast to large declines in prior quarters… Year-on-year, productivity rose 6.3 percent in the first quarter-an improvement 5.6 percent in the prior quarter. Year-ago unit labor costs slipped to minus 3.7 percent from minus 4.6 percent the previous quarter… Both productivity and costs were a little better than expected. This is good news for the Fed, which needs to see a continuation of subdued inflation pressures. Equities were up slightly on the news.”

US National Employment Report for April. Following release of the data on 5/7/2010 8:30:00 AM ET, Econoday reported, “Today’s jobs report was unexpectedly strong-including after discounting Census jobs. And a rise in the unemployment rate actually points to optimism on the part of workers. Payroll jobs in April grew a healthy 290,000, following a revised 230,000 advance in March, and 39,000 rise in February. April’s boost topped the market estimate for a 200,000 gain. Net combined revisions for March and February were up a 121,000-including turning February from negative to positive. But the key number is private payrolls as Census hiring added 66,000 to April’s jobs, compared to adding 48,000 the prior month. Private nonfarm employment increased 231,000, following a 174,000 rise in March… Payroll gains were widespread, including increases in goods-producing and service-providing sectors… Goods-producing jobs increased 65,000 after a 55,000 rebound in March. Manufacturing employment surged 44,000, following a 19,000 advance in March. Construction jobs even continued a comeback with a 14,000 rise, after rebounding 26,000 in March. Mining jobs rose 7,000 in April… Private service-providing employment gained 166,000 in April, following a 119,000 boost the month before. Latest strength was in professional & business services, up 80,000; leisure & hospitality, up 45,000; and education & health services, up 35,000… On a year-ago basis, payroll jobs improved to minus 1.0 percent in April from minus 1.7 percent the month before… Wage inflation is nonexistent currently but it is hard to tell initially if weakness is related to shifts in the composition of hiring or not but that likely partially explains the weakness. Average hourly earnings were flat in April, following a 0.1 percent dip in March. Analysts had expected a 0.2 percent boost… Not only is hiring improving but the workweek. The average workweek for all workers firmed to 34.1 hours from 34.0 hours in March. The consensus had projected 34.0 hours. The traditional series for production and nonsupervisory workers improved to 33.4 hours in April from 33.3 the prior month… From the household survey, the unemployment rate rose to 9.9 percent from 9.7 percent in February, coming in above the consensus estimate for 9.6 percent. But the jump was due to an 805,000 surge in the labor force. April household employment actually jumped 550,000. Basically, discouraged workers see hope of employment and have jumped back into the labor force… The bottom line is that the U.S. labor market is showing notable improvement. This could help the consumer sector regain optimism and strengthen the overall recovery. Equity futures rose on the news.”

US Consumer Credit for March. Following release of the data on 5/7/2010 3:00:00 PM ET, Econoday reported, “The incentive-driven surge of car sales in March made for what is actually a welcome increase in outstanding consumer credit, up $2.0 billion in March vs. a $6.2 billion contraction in February. Even the news on February is a little better as the contraction was revised upward to minus $6.2 billion from an initial reading of minus $11.5 billion. Back to the March data, non-revolving credit, reflecting car sales, jumped $5.2 billion to offset another contraction in revolving credit, this time minus $3.2 billion. The contraction in non-revolving credit is a reminder that consumer confidence, despite an improving jobs market, is less than spirited. The early April outlook for this report is in fact poor given the slowdown in both unit vehicle sales and chain-store reports.”

The US National Jobs Report totally confounds me. Payroll jobs grew by +290,000, but the labor force surged +805,000, so unemployment rose from 9.7% to 9.9%… pardon me; I don’t get it.

Here I am with undergrad and grad degrees in business with a major in econ, and two professional accounting designations earned as well as 40 years working experience in business and finance and I have to conclude the US Dept of Labor’s left hand doesn’t know what the right hand is doing. They counted people as unemployable previously because it suited their purpose in keeping the unemployment rate to a politically acceptable low number rather than the likely actual number somewhere close to 20%. It also helped them cut off unemployment benefits.

Government should not be producing this statistical data because it is purposefully biased and inaccurate. This is like the Fed saying ‘We really do have gold in the vault. Trust us. No audit necessary.’ What is needed is a few independent private sector organizations, preferably the Big Four independent auditors, to produce this data based on independent surveys plus corporate filings with the SEC submitted in XBRL.
http://en.wikipedia.org/wiki/XBRL

If done my way, at the end of the day, the data would be less costly, believable and more timely.

The left hand doesn’t know what the right hand knows etc as a matter of convenience. The econ data collection and reporting system is set up in the US for the purposes of gaming us. It is no different than the spectacle of the Fed meetings and policy statements. These meetings should be open to the public and the Fed balance sheet and statement of operations should be audited.

Maybe I’m really ticked today because the SEC has made a statement that they may institute a rule to slow down trading during times they conduct investigations. How bloody preposterous. These people should be ashamed of themselves for going down that slippery slope. If it comes to be, how soon will it be before individuals like Warren Buffett game that system too? It won’t be John and Mary Smith from Canton Ohio or the Jones family from Jacksonville FL who get through to the SEC commissioners to say, ‘Pardon me, but I think something might be going on in the trading of ABC’. But you can bet your last dollar they’ll be taking the calls of the S&P 500 CEO’s, the big hedge fund and mutual fund managers and the private equity managers. Don’t give discretion to anybody connected to the market who has an axe to grind or who could be influenced by or be helpful to the elite. Just criminally charge the reprobates and send them to prison for a very long time. Why add another Interventionist to the mix? Don’t we have enough already?

Complexity that is built into a system is done to cover up a conflict of interest and make it appear not to exist or not to be a problem.

I’m convinced that America is its own worst enemy.

The report on consumer credit and also the one on personal income vs expenditures ought to be a concern for market Bulls. Inter-bank lending issues are back to the pre-Bear Stearns melt-down period. The economic recovery has been aided by the rising stock market and hence people’s feeling ‘better’ about things. But the extra spending has come from savings and not because of consumer credit. Bank lending is tight. I think that if, as, and when the equity market contracts in a primary Bear, as it always does, with people already being nervous and holding 35% in cash with their broker today, they will start to pull back in their spending. That is not going to help economic recovery, including jobs.

US International Trade data for March. Prior to release of the data on 5/12/2010 8:30:00 AM ET, Econoday reported, “The U.S. international trade gap widened in February on both oil and non-oil imports. The trade deficit for February grew to $39.7 billion from a revised $37.0 billion the month before. The worsening in the trade deficit was led by the nonpetroleum balance which widened to $27.2 billion from $25.6 billion in January. The petroleum deficit came in at $22.9 billion, compared to $22.5 billion in January. Look for a further widening in the gap in March based on higher oil prices.”

US Treasury Budget for April. Prior to the release of the data on 5/12/2010 2:00:00 PM, Econoday reported, “The U.S. Treasury monthly budget report showed a deficit of $65.4 billion in March-a sizable sum but well under the year-ago March deficit of $191.6 billion. The improvement was reflected in the fiscal year-to-date deficit, which six months into the fiscal year has turned lower, down 8.2 percent from a year ago but at a still enormous total of $717.0 billion. Outlays, benefiting from TARP repayments, were down a fiscal year-to-date 5.7 percent versus a year ago. Year-to-date receipts were down 3.6 percent from a year ago. Looking ahead, the month of April typically shows a large surplus. Over the past 10 years, the average surplus for the month of April has been $97.8 billion and $98.5 billion over the past five years. The April 2009 number was actually a deficit of $20.9 billion.”

US Jobless Claims for Week ending May 8. Prior to the announcement on 5/13/2010 8:30:00 AM ET, Econoday reported, “Initial jobless claims improved for a third straight week for the May 1 week, falling 7,000 to 444,000 and pulling the four-week average down 4,750 to 458,500. Continuing claims for the April 24 week fell 59,000 to 4.594 million.”

US Retail Sales for April. The data will be released on 5/14/2010 8:30:00 AM ET. Econoday says, “Retail sales in March jumped 1.6 percent after gaining 0.5 percent in February. Sales posted healthy increases three months in a row and in five of the last six months. Motor vehicles provided a huge contribution in March, spiking 6.7 percent after dipping 1.9 percent in February. But even excluding autos, sales in March posted another healthy boost, rising 0.6 percent which came after a 1.0 percent surge in February. The increase was not related to changes in gasoline prices as sales excluding autos and gasoline improved by 0.7 percent, following a 1.1 percent increase in February. Looking ahead, a moderate easing in motor vehicle sales from the March surge will weigh on overall retail sales for April. Higher gasoline prices should support ex-autos sales.”

US Industrial Production for April. Prior to release of the data on 5/14/2010 9:15:00 AM ET, Econoday reported, “Industrial production in March edged up only 0.1 percent after gaining 0.3 percent the month before. But the manufacturing component was notably strong with a 0.9 percent jump, after advancing 0.2 percent in February. For the other major components, utilities output plunged 6.4 percent after no change the prior month while mining production increased 2.3 percent after rising 1.7 percent in February. Capacity utilization expanded to 73.2 percent in March from 73.0 percent the month before. Looking ahead, we should get a robust gain in April for at least the manufacturing component as aggregate production worker hours were up 0.8 percent for the month.”

US Consumer Sentiment for April. Prior to release of the data on 5/14/2010 9:55:00 AM ET, Econoday reported, “The Reuter’s/University of Michigan’s Consumer sentiment index for the final April reading bounced back by more than 2-1/2 points from the preliminary mid-April estimate to 72.2. The improvement was centered in the leading component which is expectations. Expectations rose more than 4 points from mid-month to 66.5. Current conditions, the second component, edged slightly higher from mid-month to 81.0. April’s full-month reading was weighed down by the first half of the month portion of the survey. Final April is still softer than final March which came in at 73.6. We may see further improvement in the initial May reading as the implied figure for just the second half of April is 75 (assuming that 50 percent of the full sample occurs for the initial estimate).”

US Business Inventories for March. Prior to release of the data on 5/14/2010 10:00:00 AM ET, Econoday reported, “Business inventories rose 0.5 percent in February with all three components pitching in: retailers up 0.3 percent, manufacturers up 0.5 percent, wholesalers up 0.6 percent. Overall inventories have now risen in four of the last five months. Business should want to rebuild given recent strength in retail sales. But based on the latest factory inventories number, we will likely see another gain in overall March inventories. Manufacturers’ inventories rose a moderate 0.3 percent in March.”

Clearly this week the Bulls took notice that despite a further spate of positive earnings reports from international corporations, there is pressure on stock prices. Of all the market indexes we follow, only Thailand happened to be up on the week, likely due in that case to hope that calm will be restored by the army.

How much pressure? France was worst hit, down -11.1% W/W and now down -13.8% YTD. China is now down -18.0% YTD, though, as the worst equity market, losing -6.3% this week, which was about average for international equity markets. Yes, even the US S&P 500 plunged -6.4%, which was right in line with Japan’s -6.3%, UK’s -7.7%, Germany’s -6.9%, Canada’s -4.2%, Australia’s -6.8%, and India’s -4.5%.

Here we are in Week #19 for the year and YTD only four small exchange indexes are showing a gain: Indonesia, Malaysia, Thailand and Philippines.

Having reported the -18.0% and -13.8% losses in China and France, how bad are the others? YTD, Australia is down -7.7%, Hong Kong -8.9%, India -4.0%, Germany -4.1% and UK -5.4%. All the US markets plus Canada are down less than -1.0% YTD.

We’re headed into the 20th week of the year, so what happened to the Bull all of us have been reading about ad nauseum?

Some of you may even think this market pull-back is all about a trading error in Procter & Gamble (PG) on Thursday and that the SEC will investigate and correct the situation. The mind boggles at the influence of financial Entertainment TV.

If such a thought, ie, PG and the SEC, even crossed your mind as a plausible explanation for plunging market prices, then you ought to be arrested for TUI, to save yourself from lethal actions to your capital wealth.

TUI = Trading Under the Influence.

The Global 100 (international mixture of the world’s largest market capitalized companies) peaked at the start of the year, then had its first pull-back in January. This is the second, a bit worse (but not by much) than the first. This one, in fact, may not be over. Then there is a likely third one to come, possibly in Sept-Oct as the US mid-term election campaigns hit their sleazy low point.

The problem in the world today is credit contraction based on those same old inter-bank lending issues. Many banks are using garbage to back their loans; just like Bear Stearns did until the banking community stopped it. As long as capital was pulling out of the US and going into emerging markets (knocking the $USD index along the way), there was plenty of credit available in those countries, and stock markets were flying. But as soon as the plug was pulled, money flowed back to the US, which raised the $USD, and smacked the prices of the foreign stocks. That started happening in mid-November, almost six months ago. Since then, the non-S&P 500 component of the IOO has soared relative to what Americans call foreign stocks.

But even the S&P 500 has taken a loss going back into last year: on Dec 24, the S&P closed at 1126.48, and the Friday May 7 close was 1110.88, which is a loss of -1.385%. Some Christmas present! You would have been happier to receive a lump of coal in your stocking rather than a share of Alcoa (NYSE:AA), which was priced that Christmas Eve at $16.34, and is now down to $12.00.

Anyway, the problem was not PG; it’s all about the stability of banks. Judging from the share price plunge in France, the big banks in France (BNP and Credit Agricole are ones I noted) must be holding a lot of dubious assets, including a lot from Greece.

Recent Articles By Bill Cara:

• Stocks Sold Off On Heavy Volume In The US Stock Market
• Deutsche Bank Refunding Speculation: How Many Banks To Follow Suit?
• Intel Reports Blow-Out Earnings: Should You Chase This Tech Stock?
• Did Central Banks Have A Hand In Euro Manipulation?
• Traders Selling Risk, Including Most Stocks And Commodities, Ahead Of U.S. Jobs Report
• All Articles By Bill Cara »

Leave A Comment :