The Economist Canada - 13th August-19th August 2011
Saturday, August 13, 2011
Both Consumer Confidence And The Labor Participation Rate Are At A 30 Year Low ... That's Not A Coincidence
A new poll from Thomson Reuters and University of Michigan shows that consumer confidence is the lowest its been for 30 years.
A new report from Wells Fargo Securities shows that the labor participation rate is also "at a 30-year low".
That's not a coincidence.
If people can't find work, they'll have no confidence in their ability to pay for the things they want or need, or in the economy as a whole.
The administration - despite its rhetoric - is doing nothing to decrease unemployment (and see this), and is solely helping the super-rich at the expense of everyone else.
Given this situation, it shouldn't be a huge surprise that:
Insiders Buying Stock at Highest Rate Since March ’09 as S&P 500 Drops 18%
More executives at Standard & Poor’s 500 Index companies are buying their stock than any time since the depths of the credit crisis after valuations plunged 25 percent below their five-decade average.
Sixty-six insiders at 50 companies bought shares between Aug. 3 and Aug. 9, the most since the five days ended March 9, 2009, when the benchmark index for U.S. equities reached a 12- year low, according to data compiled by Bloomberg. Morgan Stanley (MS) Chief Executive Officer James Gorman and two other managers purchased 175,000 shares of the New York-based bank as the shares fell to the lowest level since March 2009, according to filings with the U.S. Securities and Exchange Commission.
Almost $3 trillion has been erased from U.S. equity values in the last three weeks as signs the economy is slowing and S&P’s downgrade of the government’s AAA credit rating left the benchmark gauge for U.S. shares within 30 points of a bear market. Some analysts say insider buying is bullish because executives have the best information about their prospects.
“Nobody knows a company better than the people running it,” Shawn Price, who manages $2.4 billion at Navellier & Associates Inc. in Reno, Nevada, said in a telephone interview. “It’s a positive sign that they are committing their personal capital.” (more)
Friday, August 12, 2011
God Bless the U.S. Financial Sector (UYG, XLF, SKF), UYG, FAS
U.S. financial stocks have been taken to the cleaners lately, its why the Masters have had eyes on three of the most popular financial ETFs trading. The weapon of choice this past week has been the bearish ProShares UltraShort Financials (ETF) (NYSE:SKF) made famous during the last market meltdown. However now that everything has been to hell and back the bullish ProShares Ultra Financials (ETF) (NYSE:UYG) and Financial Select Sector SPDR (ETF) (NYSE:XLF) are ticking higher. Betting on these ETFs is about as stable as the once famous relationship of Bobby Brown and Whitney Houston. However at some point the Powers-that-be are going to say the U.S. financials have hit bottom.
Despite today's 14.5% rally in the ProShares Ultra Financials (ETF) (NYSE:UYG), the fund has lost 29% since July 27th. The UYG has gone from over $60 a share just a few weeks ago to $45 today. The XLF has lost 16% since July 27th, its not as risky as the UYG. The ProShares Ultra Financials (UYG) seeks daily investment results that correspond to twice the daily performance of the Dow Jones U.S. Financials Index. The XLF is less risky as its results that correspond to the price and yield performance of the Financial Select Sector of the S&P 500 Index.
The Masters do not play around with the 3X bullish and bearish financial ETFs such as the Direxion Daily Financials Bull 3X Shs(ETF) (NYSE:FAS). Its crazy to consider you would pour your IRA money into a risky 3X ETF, the swings can wipe out your savings in a matter of days.
Belgium, France, Italy, Spain Overrule European Regulator, To Impose Standalone Short-Selling Bans
Stop the presses. Barely did we have time to report that European regulators failed to impose a coordinated short selling ban, that Bloomberg reports that the countries most impact by the market plunge are about to impose standalone short-selling bans. These are Belgium, Italy, Spain and France. In other words, it really is on and the 2008 Lehman PTSD flashbacks may now resume. Until we get a headline that says it isn't. The rescue of the Borsa Italian is now more schizophrenic than that of Greece. As a reminder, in the previous post the FT quoted Abraham Lioui, a professor at the Edhec business school in France, who said “It is the worst thing to do right now. This would signal to the market there may be something fundamentally bad that is happening." He is correct. Something is fundamentally very wrong and about to break.
From the AP, google translated:
Short selling of financial stocks banned for 15 days in France
(AFP) - There are 13 minutes
PARIS - The Financial Markets Authority (AMF), Constable French stock exchange has banned short selling of financial stocks listed in France for a period of 15 days, told AFP, its president Jean-Pierre Jouyet.
"We have decided to ban short selling (...) on the actions of eleven banks and insurance companies listed on the French market, that for a period of 15 days," said Mr Jouyet.
Study: Majority of Americans Don't Have Funds on Hand for $1000 Emergency
While this is just a sampling size of 2700 for this particular study, an interesting blurb on CNNMoney about the dire straights many Americans are in, in terms of savings. While this is one random study and the actual figure of people who could not come up with $1000 could be 68% or 52%, as easily at 64%, the broader idea is the same. There is very little margin for error for the majority in country - the same as we've seen in previous pieces as the bifurcation of wealth and incomes continues.
- A majority, or 64%, of Americans don't have enough cash on hand to handle a $1,000 emergency expense, according to a survey by the National Foundation for Credit Counseling, or NFCC, released on Wednesday.
- Only 36% said they would tap their rainy day funds for an emergency. The rest of the 2,700 people polled said that they would have to go to other extremes to cover an unexpected expense, such as borrowing
money or taking out a cash advance on a credit card. - "It's alarming," said Gail Cunningham, a spokeswoman for the Washington, DC-based non-profit. "For consumers who live paycheck to paycheck -- having spent tomorrow's money -- an unplanned expense can truly put them in financial distress," she noted.
- Many respondents, 17%, said they would borrow money from friends or family. Another 17% said they would neglect other financial obligations -- like a credit card bill or mortgage payment -- in order to free up some funds.
- Alternatively, 12% of the respondents said they would have to sell or pawn some assets to come up with $1,000 and 9% said they would need to take out a loan. Another 9% said they would get a cash advance from a credit card, according to the NFCC.
- Cunningham finds that particularly troubling. Neglecting other debt obligations -- or worse piling on more debt -- "really exacerbates the problem," she said.
- An earlier study by the same organization found that 30% of Americans have zero dollars in non-retirement savings. A separate study by the National Bureau of Economic Research found that 50% of Americans would struggle to come up with $2,000 in a pinch
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