Shadowtraders

This week we saw the Market tumble, rebound, and then end the week in a tumble. Used to be that the DOW would go up or down 50-79 points a day. Now a normal day is 180 points, up or down. This makes trading very scary for investors. Buy shares in a stock today, tomorrow those shares may be down 4-5 points.
Along with this volatile price activity, the exchanges are experiencing significant reduction in trade volume. Who wants to buy shares when those shares may not be worth anything tomorrow.
This week we saw GDP advance to 3.3. However, when the economists looked deeply into the numbers, they saw that much of the growth was from the stimulus package that all but ended in July. For the second half of this year, the GDP is expected to be reduced. This was shown clearly when the Department of Commerce reported that personal incomes fell 0.7% in July, when 0.1% was expected. And disposable incomes fell 1.7%. That is a huge number, given that the stimulus package was just released. This week Dell reported a 17% drop in earnings.
For the week, the DOW fell 1%, the S&P fell 1.18% and the Nasdaq fell 3.47% For the month of August, the Dow gained 1.45% and the S&P 500 gained 1.22%. Here’s the scary part, September is generally a weak trading month for stocks. Peter Cardillo, chief market economist at Avalon Partners Inc. said “Traditionally September is a weak month for stocks and I don’t think we’re going to escape that. I do think we are going to stay in a trading range. I don’t see this market falling out of bed and going below the July lows.”
This week we saw another bank failure. That makes 10. The FDIC said that it was looking to borrow money from the Feds to shore up the reserves. Unofficially, it seems there are 300 banks on the list.
Next week should be even more rocky. Hurricane Gustov is coming to town, bringing with it miles of devastation. Gustov comes on the third anniversary of Katrina. Evacuations are already underway in Louisianna. Already Gustov is responsible for 80+ deaths.
Next week the news will come with a shortened 4 days. We’ll see truck and auto sales that have been down for the year. Tuesday will show construction spending, that has also been down (both in commercial and residential). Thursday we’ll have the precursor to the Unemployment report due out Friday…the ADP report. But watch for the 10:00 ISM Services report. We saw the Michigan sentiment report that came out much higher than anticipated. So look for the ISM Services report to be positive.

Full story here.

“Michael Hudson is a former Wall Street economist specializing in the balance of payments and real estate at the Chase Manhattan Bank (now JP Morgan Chase & Co.), Arthur Anderson, and later at the Hudson Institute (no relation). In 1990 he helped established the worldâ??s first sovereign debt fund for Scudder Stevens & Clark. Dr. Hudson was Dennis Kucinichâ??s Chief Economic Advisor in the recent Democratic primary presidential campaign, and has advised the U.S., Canadian, Mexican and Latvian governments, as well as the United Nations Institute for Training and Research (UNITAR). A Distinguished Research Professor at University of Missouri, Kansas City (UMKC), he is the author of many books, including Super Imperialism: The Economic Strategy of American Empire (new ed., Pluto Press, 2002 (more…)

Full story here.

 ”THE UNITED STATES OF AMERICA THE NEXT ARGENTINA

This Time is Different: A Panoramic View of Eight Centuries of Financial Crises by University of Marylandâ??s Carmen Reinhart and Harvardâ??s Kenneth Rogoff makes for perfect reading when flying between the US and Argentina.

There is perhaps no better analysis than Reinhart and Rogoffâ??s on the history of sovereign defaults; and, as such, Reinhart and Rogoffâ??s paper was ideal reading material when traveling between the US and Argentina, for the sovereign defaults that happened in the past to Argentina will soon be happening to the US.

But a US default will make Argentinaâ??s debt defaults pale both by comparison and consequence. The US, unlike Argentina, is the worldâ??s largest economy, the issuer of the worldâ??s reserve currency and the worldâ??s largest debtorâ??and a default by the US on its debt will shake the very foundations of our increasingly fragile global economy. (more…)

Can consumers really believe that the price of oil is based upon supply and demand? This week, Thursday, we saw the price of oil jump from $111/barrel up to $121/barrel. Then Friday came and the price dove back down to $114. Surely supply and demand had no bearing on the price. (more…)

Full story here. Still wanna “dollar cost average” with your broker? I’m waiting for the “down by half and you’re done” party (if your stock plunges more than 50% in one day, it’s over, regardless of assets, PR or voodoo). Use ShadowTraders to make money and keep it.

“Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) fell 22.2% and 24.4% yesterday, respectively, unveiling some of the lowest share prices seen since the late ’80s, when the average home cost around $90,000. In perhaps the saddest indication of just how pitiful these stocks are, Annaly Capital (NYSE: NLY) — a small, scarcely followed REIT that purchases Fannie and Freddie securities — now eclipses the market cap of both Freddie and Fannie. The customer, as they say, is always right.

Fueling the decline was a Barrons article highlighting the truth: There’s literally nothing left for common shareholders, particularly for Freddie. (more…)

Full article here. Oooh, what a bummer for a Tuesday. The nuclear winter we may face is financial and not martial.

“The U.S. financial crisis has cut so deep â?? and the government has taken on so much debt in misguided attempts to bail out such companies as Fannie Mae ( FNM ) and Freddie Mac ( FRE ) â?? that even larger financial shocks are still to come, global investing guru Jim Rogers said in an exclusive interview with Money Morning .

Indeed, the U.S. financial debacle is now so ingrained â?? and a so-called â??Super Crashâ? so likely â?? that most Americans alive today won’t be around by the time the last of this credit-market mess is finally cleared away â?? if it ever is, Rogers said.

The end of this crisis â??is a long way away,â? Rogers said. â??In fact, it may not be in our lifetimes.â? (more…)

If you don’t ShadowTrade, this is what you end up with:

Link here. I suspect that a lot of letters will be going out that look like this one (but sadly, not as honest). Use ShadowTraders and avoid getting a ‘Dear John Investor’ letter.

ACME Systematic Leveraged Macro Momentum Fund LP

 321 Overprice Street

Greenwich, CT 00573

Dear Investor,

This letter is to inform you that the wheels have come off of the proverbial wagon at ACME Systematic Leveraged Macro Momentum Fund LP, and that the same awesome thematic portfolio that made you feel (in the first half-year) as if you’d become very rich in comparison to those sucking wind on their leveraged MBS portfolios or Japanese Small-Cap Value Funds, has, quite literally, spontaneously combusted in our faces. (more…)

Full story here. The short synopsis is that Notice of Defaults (NODs) are down in California, but 91% of that downturn can be attributed to Countrywide not posting them. Is it not a bad statistic if I fail to report it? One paragraph was of particular concern:

“Despite lenderâ??s best efforts to discount, third-party buyers largely yet remain on the sidelines. Foreclosures hit a total of 28,795 properties during July; of those, 27,817 received no bid higher than the lenderâ??s opening bid, meaning REO inventories are mushrooming throughout key areas in the state.” (more…)