With Goldman shares mired in a cyclical dither, we expected Google to lead the market higher yesterday. And so it did, although the net effect was a merely weakly buoyant Dow Average that crashed in the final hour. With hubris alone driving stocks higher, it would seem there’s no substitute for the un-real thing. Which is to say, Goldman’s flashy, smoke-and-mirrors modus operandi will always look more impressive to traders than Google’s old-fashioned focus on advertising revenues. Google was up nearly $8 at one point, and nearly $32 since Friday, on perceptions that it is among the few companies in America with a hot enough earnings story to persist even if the U.S. economy slip into Depression. That’s great for Google, but is it enough to drag the shares of Wal-Mart and McDonald’s higher? Apparently not.
We already know how the Goldman story will turn out, since it is at the leading edge of a financial sector in its death rattle. What will a share in Goldman Sachs be worth after the term “financial product” has been banned from the English language a few years hence? By then I will have danced the hula in Times Square, but my detractors shouldn’t kid themselves about whether my $29 forecast for the stock is still viable.
Caterpillar Uptick
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Speaking of what’s viable, more green shoots sprouted to the top of the Wall Street Journal’s front page yesterday: “Business Spending Looks Up”. What a crock! Caterpillar and Parker Hannifin, two heavy-duty manufacturers, evidently think the worst of the recession is past. Now let’s see how eager they are to expand. The payoff for America, if they’re serious, would come in the form of higher capital spending. But how much of an offset would that be when measured against asset shrinkage in the financial sector amounting to tens of trillions of dollars?
The headline beneath the Journal’s louche main headline was more cautious in sizing up the nation’s capital spending prospects: “Investment Uptick Seen”. And the story itself broached this “disclaimer” as its fourth paragraph: “Any spending improvement remains tentative and will be coming off depressed levels. Both Caterpillar and Parker, even as they forecast brighter times, reported sharp year-over-year drops in revenue Tuesday. Some companies that foresee higher sales don’t expect to boost capital investment significantly because they can just bring back idled production.” Some recovery!
As you can see, there’s quite a disconnect between headline and story. Is the bullish slant of the headline a staid newspaper’s version of lurid sensationalism? Rupert Murdoch clearly knows who butters his bread – and it’s not readers.
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Huge outside day at resistance. I went short but have been wrong a few times in the last few months already.
I’m hoping your Apple target does not get reached.
Didn’t you think today was techincally signifcant?
Hi Rick
Interested to know if you are still short-term bullish GS. I reckon the whole caboodle topped last night (Weds) and the financials are looking a bit shaky.
DK
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I shun dramatic predictions and those who make them because they are wrong perhaps 97% of the time. That said, I am alert to the possibility that Goldman’s top last week could mark the psychological turning point that will bring about the dropping of the banking system’s other shoe. From a technical standpoint, Goldman will create a bearish impulse leg on the hourly chart — its first in as long as I can recall — if it dips below 173.16 this week. RA
Green Shoots, or Lurid Sensationalism?
Of course we have green shoots. They’re WEEDS! It is amazing that the banking crisis is over after only a few short months. If you believe that, I’ve got a couple of bridges to sell you.
The toxic assets are still on the banks’ books. The commercial real-estate mortgages will continue to reset next year and many businesses can’t afford to pay higher mortgages which means many will have to shut their doors. This is only round 1 of the financial crisis.
There was an excellent program on PBS Frontline “The Warning” which foretold of the financial crisis by Brooksley Born. http://www.pbs.org/wgbh/pages/frontline/warning/
The financial system did not want anyone to hear her warnings to regulate the derivatives that the banks are selling to unsuspecting customers, so they clipped her wings and she resigned. Now the financial system is teetering on collapse because of the derivatives and every banker in front of congress claims they couldn’t see it coming. Greenspan himself didn’t see it coming even though he was warned about it. Now the banks need a taxpayer bailout.
To understand how this crisis festered for so long, the banking system on Wall Street is corrupt. They fought regulation tooth and nail so they could sell complex derivatives that are worthless. How can someone sell derivatives based on derivatives that are based on other derivatives without being charged with fraud? If you or I sold a house to 3 different customers and pocketed the money, we’d be charged with a crime. But the banks can get away with it because they own congress. No one in congress defended Born and many of them chastised her for even suggesting that the banks could be doing something wrong.
The sad part of this story is the same congressmen are still in power and so are the bankers. Why aren’t they all sharing the same jail cell? Oh yes, I forgot to mention that Congress is just as corrupt as the bankers. When they leave Congress they get a nice cushy job lobbying for the banks. It’s a darn good thing that Congress doesn’t have any ethics because it will just get in the way.
Dusty
P.S. Round 2 will start next year with more major banks failures and they will need more bailouts. You can’t fix things if the system remains corrupt.
I think the biggest disconnect of all is not in perceptions of a return to system stability. I believe it is in the vast gulf between the ethical sentiments expressed by average citizens in the many blogs I read each week and what government and finance industry leaders–cough cough–have been foisting on us. The average person is bewildered by the fact there is no apparent punishment for the ringleaders of this mayhem, not even opprobrium. There’s only federal prosecution when one of their own robs the others on the gravy train. This is deeply corrosive of our system of laws and is shaping up to be, longer term, one of the most dangerous perceptions to contain.
” Now let’s see how eager they are to expand. The payoff for America, if they’re serious, would come in the form of higher capital spending.”
Of course, if they did expand, it would be overseas.
Rick,
with regards to your comments about the Fekete article: ” “bad” gold supposedly on offer by the Bank of England, paper-shuffling to obscure the crime,…”
At an investor conference last night, where gold also was a topic, I heard for the first time in years the resurfacing of the tungsten-inside-gold bars rumor. No one there would have read Fekete’s writings, it wasn’t that type of crowd.
While it is def. possible to attempt this “fake”, given that the two metal’s densities are virtually identical (+/- 0.07), I have been told by some smelters that only supposedly in a few 100gr bars around 1980 has this ever been observed.
Whether or not true or made up, its interesting to ponder who would benefit most by such a rumor.
Technically speaking, I would imagine that a radio-assay, as is possible to determine gold-alloy content instantly should be able to discover this without the need to saw open a bar, but I do not know this for sure.
Just something to add to these new bits of info.
Aloha All
For graphic illustration of your points, read
http://www.cnbc.com/id/33418641/print/1/displaymode/1098/
SOTH NP almost makes the Bush family seem positively economic and eloquent in comparison. Of course HW was a Yale 3 year Phi Beta Kappa in Economics, while GW had his Harvard MBA, which made them neoCon neoKeynesians who destroyed the real economy with virtual printing of usury debt and government spending money, allowing inflation to raise taxes.
Fekete’s fundamental points on Gold backwardization may be accurate, if not timely.
In contrast to most headlines, Big4 still net short bonds, commodities, gold, lumber, natgas, stocks and most currencies, except Peso, Pound and USD, while long oil.
Anglo American forces may be gaining traction against the Chinese Iranian Russian axis in Eurasia: Afghanistan, Iraq and Pakistan. As we suggested recently on JubileeProsperity.com, AA may be about to grab Pakistan’s nuclears with covert special ops and hired guerillas.
If history is any guide, Big4, despite rampant rumours to the contrary, may profit to live another day.
Deflation may be a more powerful phenomenon than many appreciate just yet…
Regards*Rich
The market looks like it’s had enough of the green shoots, and maybe it’s even viewing them now as a reason for the Fed to tighten monetary policy, which would be negative for the economy. And I feel that until the govt addresses the basic structural problems in our financial system of too much debt, we will not have a sustainable recovery. So while the stock market can stay irrational in the shorter term, in the long run I believe it will go back to reflecting the fundamentals of our boom and bust economy. And I therefore still feel that for long term investors a better portfolio allocation is in cash and gold. I think the gold price will continue to rise due to a lack of faith in central banks’ policies and in fiat currencies. I recently read some very interesting articles on these topics at http://www.goldalert.com/gold_news.php, which discuss the relationship between the dollar, the gold price, and gold mining companies given the Federal Reserve’s monetary policies. I thought the article titled “Gold Price Up, Dollar Down – Does it Really Matter?” was particularly useful for investors to read to get a better sense of the relationship between these asset classes given the volatility and uncertainty in our entire global financial system.
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