Five Things You Need to Know: Why Nothing Matters Anymore
We're staring at the teeth of the buzzsaw this morning, and God help anyone still short the stock market and hoarding doomsday supplies.
Kevin Depew's Five Things You Need to Know to stay ahead of the pack on Wall Street:
1. Why Nothing Matters Anymore
At some point in the past 72 hours the news has become pure gibberish. Nothing matters anymore... if it ever did... but The Story, the gritty reality, is that the facade of "newsworthiness," of "market impact," has crumbled around us in a heap of splintered chaos.
We are staring at the teeth of the buzzsaw this morning, and God help anyone still short the stock market and hoarding doomsday supplies. I have a pair of pliers and a roll of duct tape in my briefcase... always... but those are leisure items in my hands, not implements of despair.
Yes, I see Freddie Mac (FRE) and sister Fannie Mae (FNM) crashing today, but that just proves the point; the worm has turned. Even now, angry stock market rubbernecks are demanding answers: Why has the market not crashed? What is wrong? Was it canceled? These are legitimate questions, of course, but the answers are elusive. Might as well ask a tick farmer to count his herd.
But enough of that. Here is what we do know: The following technical measures of stock market participation and extremes are nearing levels last seen in March (courtesy of Investor's Intelligence):
- NYSE Bullish Percent: Os (Negative) 27.5%
- S&P 500 Bullish Percent: Os (Negative) 26.4%
- Nasdaq Composite Bullish Percent:Os (Negative) 26%
- Nasdaq-100 Bullish Percent: Os (Negative) 34%
- Russell 2000 Bullish Percent: Os (Negative) 32.6%
- NYSE High-Low Index: Os (Negative) 11.5%
- Nasdaq High-Low: Os (Negative) 6.8%
The two most important indicators of that lot, for now, are the High-Low Indexes. These simply measure the ratio of new 52-week highs to the sum total of new highs and new lows, smoothed, the 10-day moving average plotted on a point and figure chart. They reversed up in late March and had a nice run until around the middle of May when they reversed down, leaving the bullish percent indicators hanging there, twisting in the wind.
Essentially, the High-Low Indexes are the early warning devices of mean reverting rallies. They haven't reversed up yet, but they will...
2. Stop the IMF!!! Wait, What's the IMF?
Speaking of gibberish, there's a groundswell of concern over an apparent plan by the International Monetary Fund (IMF) to carry out a so-called Financial Sector Assessment Program (FSAP), basically a general audit, of the U.S. financial system. This is being characterized by some as an "embarrassment," a "violation," a "conspiracy" and, in some circles, the beginning of the end of a decades-long game of fiscal chicanery and systematic looting.
Far be it from me to interrupt a storm of outrage; occasionally even the most misguided outrage is a welcome diversion from the blind acceptance of the cattle prod guiding us into the butcher's stall. But look, before we form the posse and light the torches, let's get a few things straight:
1) The International Monetary Fund is the global equivalent of a group of special prosecutors appointed by, and accountable to, an organized crime family operating a fleet of garbage trucks.
2) The IMF is accountable to the governments of its member countries.
3) The IMF's resources are provided by its member countries.
4) The FSAP program wasn't even founded until 1999.
5) Countries that have had FSAP "audits" include: Australia, Canada, Denmark, France, Germany, Spain, Ireland, Israel, Japan, Switzerland, New Zealand and the UK.
3. The Long, Slow Descent of GM
The one thing you learn early on at the racetrack is that when the desperation sets in you can't run around like a lunatic feeling under seats for change and scraping together discarded mutuel tickets looking for a live one somebody accidentally tossed. Hell, at decent tracks they will immediately escort OFF THE PREMISES anyone caught collecting discarded mutuel tickets.
If this seems harsh, put yourself in track management's shoes. From a business standpoint, this makes good sense. They are trying to run a business that turns people into broken, desperate beggars; not host some kind of weird halfway house for people who got that way prematurely.
Unfortunately for General Motors (GM), and all the more horrific for us, there's no such entity, no governing body with an enforcement arm possessing an all-powerful eye-in-the-sky surveillance system capable of identifying this kind of ugly, shameless degenerate behavior and then quickly shooing them out of our eyesight. No, we're forced to witness the entire grisly descent, the whole god-awful collapse into desperation.
Where will it end? This morning, responding to reports the company is probably going to axe thousands more salaried jobs and is hoping to sell off some of its brands, GM said No... they're only looking to sell the Hummer. This is shockingly bad timing, if for no other reason than the memory of GM giving everyone the finger and rubbing our noses in the oil splattered tracks left by these military transport vehicles remains so fresh, so vivid.
If our post-90s version of socio-capitalism were not so primitive, we'd be shielded from embarrassing sights like GM hawking off its Hummer line. That the abandoned carcasses of these vehicles will soon be recycled into low-cost housing for the homeless is cold comfort.
4. Hey Mister, Can You Help a Freddie Out?
If General Motors is indicative of what happens when the government has bigger fish to fry than your failing business, Fannie Mae and Freddie Mac represent those "bigger fish." The pair is down 20% each as I write. The Story... again... is not the news. There were rumblings this morning about analysts reporting additional capital raising measures and writedowns, but that's like the idle chatter moments before a crack bust everyone knows is coming; the bust is self-evident, the details something for attorneys to work out later.
In the case of Fannie and Freddie, The Story is the capitulation by the last of the true believers in the equity. That's what's happening today. Look, they had a 40-year run, but it's back to the womb, back to the warm, safe canal of the mothership that spawned them in the first place, the U.S. government. This return is not truly today's business - recognition is only the first stage - but it's the beginning of the end.
5. Preliminary Mr. T Sell Signal
Just a warning, we saw where Snickers is revising its Mr. T "Get Some Nuts" campaign. The new online-based ads will feature Mr. T in a workshop building a huge cannon loaded with chocolate bars. We'll update the Mr. T Gold Indicator later this week.
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