Friday, September 3, 2010

EU May Limit Naked Shorts of Stocks, Government Debt

The European Union may limit so- called naked short sales of shares and government debt, which it says can cause a “disorderly market and possible systemic risks.”

Traders would be required to submit proof that they have access to the underlying security to settle a trade designed to profit from a decline in prices, according to a European Commission document obtained by Bloomberg News.

The proposals, which must be approved by the full commission before being submitted to the Parliament and national governments, require short sellers to show they “can ensure that the security can be borrowed so that settlement can be effected,” the document said.

German Chancellor Angela Merkel, who banned some naked short selling in Germany in May, called on the commission earlier this year to speed up curbs on financial speculation. Merkel and French President Nicolas Sarkozy argued that some bets against stocks and government bonds should be banned as the Greek debt crisis made markets more volatile. (more)

Painting the Real Estate Tape: Bogus Housing Sales Prices

A report is circulating that some housing sales are being recorded at much higher prices than the true sales prices. The report has the smell of truth.

Zero Hedge reports:
A reader writes in with some troubling observations on what could potentially be a pretty substantial scheme to artificially "boost" existing home prices by up to 40%, putting all the NAR data, and all other relevant public housing data materially into question. Since trick is painfully simplistic, and all too easy to spot, we wish to open it up to our readers for verification, as this could be a huge hit to the credibility of all existing home price metrics, and put into question all transitory upticks in home prices, such as the backward looking Case-Shiller index indicated yesterday.

From the email:

Realtors are not reporting the true sold prices on homes. Here are 2 examples. If a home is listed on the MLS and then sells at a auction like Hudson & Marshal or RealtyBid, you can see the sold price online or if you attend the live auctions, see the house sell at open outcry auction. The next day the houses are reported sold on the MLS but always at full price.

The example below sold for $115,000 at Realtybid but is listed as sold for $159,500 on the MLS. (more)

20 Most Undervalued Stocks Being Chased by the Smart Money

The following is a list of undervalued stocks, when comparing Monday's close to the average analyst target price (i.e. discount to analyst fair value). All of these stocks have market caps north of $1.0B, and have seen significant institutional inflows over the last 3 months.

The smart money seems to think these stocks are undervalued. What do you think? Institutional data sourced from, and analyst target prices sourced from Zacks Investment Research.

The list has been sorted by the increase in institutional ownership.

1. Popular Inc. (BPOP): Market cap of $1.6B. Last close at $2.53, vs. avg. target price of $4.57 (implies a discount of -44.64% to analyst fair value, based on a survey of 7 analysts). Institutional investors currently own 739,861,848 shares vs. 308,786,491 shares held 3 months ago (+139.6% change).

2. Fortress Investment Group LLC (FIG): Market cap of $1.5B. Last close at $3.17, vs. avg. target price of $6.50 (implies a discount of -51.23% to analyst fair value, based on a survey of 6 analysts). Institutional investors currently own 42,899,849 shares vs. 33,894,291 shares held 3 months ago (+26.57% change). (more)

SP500 & Gold At Crucial Pivot Points

Wednesday was a big session with better than expected manufacturing surging the market 3%. In this article I will do a quick technical take on the current situation for the SP500 and gold as they are both trading at a key resistance level. also its important to know what type of price action we will get in the next 1-2 days so you can have your profit targets or protective stops in place depending on which side of the market you are currently playing.

SPY – SP500 Exchange Traded Fund – 60 Minute Chart

The market is currently in a down trend which means bounces get sold. But if you take a look at the buying volume ratio at the bottom of the chart you will notice that in an uptrend buying surges are the beginning of a rally, and during a downtrend buying surges are the end of a rally. I also want to mention that a lot of volume traded at this current level which you can see on the volume by price bars on the chart. This means there will be a lot of sellers to overcome before breaking to the upside.

The situation the market is at now makes things difficult to tell if this bounce will get sold, or if its just the starting of a rally. There are several arguments for each side but the one which I think has the most influence is the buying volume. It was very strong on this current bounce. It feels more like a rally but we will not know for sure for a couple days… (more)

The Weekly Gold Digger!

The US Dollar has been in sell mode for two days awaited the Unemployment report due Friday at 7:30 AM CST. The US Dollar Index has been under pressure with this week's more positive US Data on Housing and a falling Initial Jobless Claims. The Unemployment Report due out tomorrow can be potentially negative based on our previous 2 reports. Tomorrow, pre-holiday, there are fewer traders typically that can create erratic movements in the markets. Often, we see pre and post holiday exhilaration taking the Stock Market up regardless of the news. Tomorrow, this report is extremely vital to the economic recovery as a whole. President Obama's Team has stated that a second stimulus is not currently in their agenda. With the recovery still the centerpoint of our concerns, the US Dollar has dropped with investors taking positions in other currencies such as the Swiss Franc. The US Dollar is backed by Federal Reserve Bank. Other reports this last week that impacted the marketplace: Consumer Confidence rose to 53.5 in August. Consumer Spending rose. Personal Income rose .2 percent. More importantly, China, Russia and the US reported increased manufacturing. Initial Jobless Claims had fallen. Pending Home Sales of previously owned homes were up. The US Dollar ended today lower at $82.55! While technically bearish now, anticipate a lower trade next week. Should the US Dollar Index cross $83.60, the trend will have turned bullish again. The high this week was $83.405 and the low $82.55. While I speak of the paper assets, one may notice the trend change today in the US T-Bonds. We are pulling back from a top of $136^31. I feel that both of these markets will have tremendous opportunities in potential trades. I also see the inverse relationship between the Gold Market and US Dollar potentially returning. The safe-haven products may at times move together in economic times that breed fear in the marketplace. The ICE Futures U.S. Dollar Index (USDX®), is the international value of the US dollar and the world's most widely-recognized, publicly-traded currency index. By using the Dollar Index, traders can take advantage of moves in the value of the US dollar relative to a basket of world currencies or can hedge their portfolio of assets against the risk of a move in the US dollar in a single transaction. US Dollar Index futures are traded for 22 hours a day on the electronic trading platform of the Intercontinental Exchange (ICE). (more)

Bob Chapman: The Fed's Liquidity Trap: The American and world economies are in a deliberate state of slow collapse

Almost two years ago the US Treasury was selling large amounts of short-term Treasury bills to fund bailouts and stimulus. That caused a major increase in debt. Most of that paper was 2-year bills and it is coming due for rollover shortly. While that transpires, October will report the annual fiscal deficit of 9/30/10 of about $1.5 trillion, a figure thought impossible just 1-1/2 to 2 years ago.

This time around the Treasury will have to depend on the Fed and US banks and institutions to fund this mountain of paper. China has reduced its holdings of Treasury debt by about 6%, or by about $6 billion over ten months, or by about 10% or almost $100 billion over the past year or so. We know these figures are estimates because the Chinese government has the same trouble the US government has, it cannot discern truth from fiction.

Now that the effect of the first quantitative easing is behind us the economy is facing a hangover even with zero interest rates and a 2.42% ten-year T-note. It was just months ago that those rates were close to 4%. The sale of Treasuries for the past six months was easy with a strong US dollar caused by a manufactured crisis in Greece and in the euro. As we look back we can see almost the whole picture. We saw major NYC banks going very long the dollar and short the euro beginning in late October of last year. At the time we couldn’t figure out what they were up too, but it became apparent this past March. The contrived attack on Greece and the euro was to allow the Treasury to fund its debt and to make the banks, which own the Fed, a fortune. 100 to 1 leverage is a lock when you have inside information and are creating the crisis. Except for Greece, Euro Zone members numbers welcomed the 17% fall in the euro vs. the dollar, because their exports were cheaper and more price competitive. What is there not to like about that? As a result the bond vigilantes went into hiding, because they were afraid to go head to head with the Treasury and the Fed. This wasn’t the old days when these entities did not rig the markets. This was today, when they rig every market 24/7, under the Executive Order that created “The President’s Working Group on Financial Markets.” This is a page out of the national Socialist handbook of Germany in the 1930s. Government and markets by regulation known as corporatist fascism aided by collectivist Keynesian economics. The result has been 17 months of net financial inflows, part of which was aided by the Fed in their secret offshore operations. It is no wonder they do not want to be audited and investigated. Now we are back to square one again. We announced two months ago that QE2 was on the way, but as usual few were listening. Monetization is the name of the game. (more)

CHART OF THE DAY: Europe's Crisis Coming Back In 3... 2... 1...

While the financial problems of Europe's periphery 'PIIGS' economies (Portugal, Italy, Ireland, Greece, and Spain), has receded substantially from business headlines, this doesn't mean that their crisis is over, or even getting better.

In fact, the creditworthiness of nations such as Greece, Portugal, and Spain is looking worse than ever, as represented by % spread between the yield demanded by bondholder for ten-year PIIGS government bonds and the ten-year bonds of Germany (Germany is Europe's version of a 'risk-free' yield to compare things against). For all of the PIIGS, it is worse off than before the European Unions's one-trillion-dollar affirmations of support for the PIIGS, or before the much bally-hooed bank stress tests.

The frenzy surrounding the Eurozone crisis may have ebbed, but it'll be back...

The U.S. Path to Collapse

The Financial Crisis Inquiry Commission today held hearings with former Lehman Brothers Chairman Dick Fuld. They are trying to figure out why Lehman Brothers was allowed to collapse, with the belief that the failure of Lehman Brothers caused the financial crisis of 2008. The truth is, the failure of Lehman Brothers was a result of the crisis and allowing them to fail was the only correct decision the government made during the crisis.

The pain that was felt after the collapse of Lehman Brothers is nothing compared to the pain that will come when we begin to feel the effects of bailing out the rest of Wall Street. U.S. second quarter GDP growth was revised down on Friday from 2.4% to 1.6%. In order to get this 1.6% GDP growth, the U.S. government had to spend $3.7 trillion on bailouts, stimulus bills, the buying of mortgage backed securities, and other commitments.

General Motors reported today that their August deliveries fell 25% from one year ago to 185,176 vehicles. The U.S. government used "cash for clunkers" to buy GDP growth in 2009, but that growth stole from future automobile sales. NIA believes that GM's sales decline is a sign that the U.S. will likely see a sharp contraction in GDP beginning in the third-quarter, which will lead to the Federal Reserve implementing the mother of all quantitative easing and cause a massive sell off in the U.S. dollar. (more)

Gold and Silver Market Suppression Failures Flash Buy Signal, Part 2

In Part 1 of this 5-part series, we discussed two agreements that Central Banks used to suppress the price of gold in the marketplace. Please read Part I before proceeding with this article.

So do the Central Banks still have gold?

A nice quote from the GATA article regarding availability of Canadian central bank gold:

When I published my essay "When Irish Eyes are Smiling: the story of Brian Mulroney and Canada's gold," the good folks at the Bank of Canada told me that there had been no physical gold in the bank vaults for years. To quote my essay directly:

"They advised me (early in 2002) that Canada does not really own this gold at all (at the time we were supposed to have about 40 tonnes). What was left of it had been leased out to various bullion banks years ago ...and yes, it (was) being accounted for as requested by International Monetary Fund accounting rules regarding leased gold. Canada's gold cupboard is bare ... not a 400-oz. good-delivery bar in sight."

What about the US gold stocks?

In a book written by Chris Weber and summarized on Lew Rockwell’s site, we noted that in the one audit of Fort Knox: (more)

This Time It's Different, as Emerging Stocks Top World

Emerging-market stocks are trading at the highest valuations relative to advanced-country shares in more than two years as faster economic growth persuades the biggest investors to look past historical sell signals.

The MSCI Emerging Markets Index is valued at 14.1 times reported profits and 1.9 times net assets, compared with ratios of 14.9 and 1.7 for the MSCI World Index, according to data compiled by Bloomberg. When developing-nation equities traded at these levels versus advanced-country stocks in June 2008, the emerging gauge sank 48 percent in four months and trailed the MSCI World index by 16 percentage points.

HSBC Global Asset Management, Morgan Stanley and Deutsche Bank AG say this time is different because developing nations have less debt, more profitable companies and are growing twice as fast as advanced economies. Global money managers are more bullish on emerging markets than any region, while mutual fund investors poured $35 billion into the countries this year, even as they pulled $28 billion from the U.S., Europe and Japan, data from Bank of America Corp. and JPMorgan Chase & Co. show.(more)

Stocks log gains ahead of Friday jobs report

(MarketWatch) -- Stocks mounted a modest afternoon rally to close near the day's highs as investors awaited monthly jobs data on Friday that will shed more light on the economic recovery.

The Dow Jones Industrial Average /quotes/comstock/10w!i:dji/delayed (DJIA 10,320, +50.63, +0.49%) finished up 50.33 points, or 0.49%, at 10319.80. The Nasdaq Composite /quotes/comstock/10y!i:comp (COMP 2,200, +23.17, +1.06%) rose 1.06% to finish at 2200.01 while the Standard & Poor's 500-stock index /quotes/comstock/21z!i1:in\x (SPX 1,090, +9.81, +0.91%) gained 0.91% to 1090.08.

Better-than-expected housing and retail data provided some encouragement to investors, but caution prevailed following Wednesday's big run-up.

If the government's jobs report falls short of already guarded expectations, "that's going to reverse what happened" on Wednesday, when stocks jumped 255 points, said John Canally, economist and investment strategist at LPL Financial.

Canally said that while economic data has come in mixed recently, "the preconditions for a double dip are not here." Strong manufacturing data on Wednesday "puts the burden of proof back on the double dippers," he said. (more)

Buying the Lie: Cash is Dead

Get used to the idea: Cash is dead.

And if you don't believe it, just ask such cashless giants as PayPal, MasterCard and Visa. At the very least, they are working overtime with slick propaganda to make us think so.

Currently on Maestro's website ("Maestro" is the name of MasterCard's UK-based debit card) is a slide show where you can see the following pithy slogans flash past:


Billing their card as "The New Cash," Maestro's FAQ page explains that: "Your Maestro card is linked to your bank account, and the amount of your purchases is deducted directly from that account." (more)