Our Crowded Hour
Research for Online Investors

by John Dalt

8/18/11

Initial jobless claims came out this morning higher than expected, continuing claims were also higher.  Existing home sales were less than expected, but the economic report that grabbed everyone’s attention was the CPI.  Consumer Prices jumped 0.5% last month.  Economists expected a 0.2% increase.  The Philadelphia Manufacturing Index dropped like a hot rock to minus 30.7  Economists expected an anemic but positive 3.9 number.

The market is back in the rocking chair we were in last week.  We are down today on bad economic reports and fear out of Europe.  Futures were down triple digits before our bad economic reports came out, they only piled on the rumors out of Europe.

There were reports that an unnamed bank in Europe had to borrow $500,000 dollars for one week from the ECB and that a large investor had bought puts against the European financial sector.

The Stoxx Europe 600 index lost 4.8%, with financials leading the market down.  Barclays PLC bank in London lost 12% as did Societe Generale in Paris.  Dexia SA of Brussels lost 14% along with Germany’s Commerzbank losing 10%.  Will Hedden of IG Markets said the “Banking stocks have been decimated across Europe, with indiscriminate selling even in banks that maintain their exposure to the crisis is slim.  No sector is surviving this tidal wave of selling…”

Morgan Stanley downgraded global growth forecasts with the statement that the U.S. and eurozone are “hovering dangerously close to recession.”  Edward Nowotny of the ECB’s governing council, said he fears Europe could enter a period of limited growth like Japan.

We need news of aggressive action in the eurozone to contain the problem.  Perhaps it takes some pain in the markets for eurozone politicians to take action.  We have written about the problems Angela Merkel faces in Germany.  Finland’s new government ran on opposing bailouts for eurozone member states.

The Finland government demanded collateral on their loans to Greece.  Austria thought that was a good idea and has asked for collateral along with the Netherlands.  A Dutch Finance Minister said, “If Finland gets such a deal, we want it too.”  Can you blame him?

The data and inputs today have made this any trader’s “crowded hour.”  Investors would be best to take the day off, but it is impossible to ignore the negative energy in the air.  I thought the drop last week might have set the low for the year.  Now I am not so sure.  Here is a Point and Finger chart of the S&P 500.

Will the market low hold?

Mailbag:
Great MarketToday on populism, keep it up.  No, you weren’t too hard on Obama!---subscriber T.M.

"Grassroots" movement my foot! Arab Spring is right. We are going downhill so fast with that man leading our country. His agenda is obvious to me. I guess his supporters are the ones who want "gimme's" from the federal government and don't care about their country. They don't have enough sense to realize they are bringing their own selves down as well! Every time I think it can't get worse, it does.---Long-Term and Buy, Sell, Hold subscriber G.C.

John’s reply:  I heard today the President is not scheduled to campaign in any inner city poor areas.  They have been hurt the worst by his policies.  Unemployment is highest for minorities and young people.

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

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