dow theory bullshit

Not that it means anything, but this open followed by this climb pattern is usually followed by a slow rise day, and not by the re-collapse going on right now. The trading floors are full of anger and fear, and in those rare occasions when you get panics, this is the kind of setting for them.

I'm not calling a panic. I'm just saying this is where you get them.

The DJIA and S&P500 just broke south of the first-hour low. I have this nervous fear that we bounce right here, right now, or we don't - but that's pure emotionalism talking, but I'm also reacting to street emotionalism that I'm seeing in the numbers, so. But if we don't, the resulting drop really would take us through November trading lows (only the Dow is through those now - the NASDAQ and S&P500 are still nontrivially above them) and then there's nothing to support the market in trading terms for a long, long way down.

More later.

And this went undetected for how long?

Good morning.

First: no panic right now, which is good. About three minutes after I posted, the markets did bounce, albeit weakly. Most of the up forces seem to be in the NASDAQ, I don't know why.

I haven't talked much about the Madoff ponzi-scheme masquerading as a money-management fund, but this story even made me blink - apparently he bought no securities in 13 years with that US$50B. None. I wonder what this tells us about the potential recovery rate?

This is not going to help confidence, which continues to be a hole in the ground. Are your stock investments really there? Madoff's firm was supposedly under surveillance for 15 years, longer than the period of time in which it failed to buy anything, and nothing happened until just recently.

Also at that link: Karl at Market Ticker thinks he's sniffing out capital flight. I'm considering the case for that; if we are, we're also seeing a lot of flight-to-dollars at the same time, which is an interesting combination, but possibly one that could be triggered by foreign investors settling US positions on the way out the door. It has become almost impossible to sell Fannie Mae/Freddie Mac securities, however. (And since Bloomberg is screwed up right now and not showing story text, try this copy-pasted repost here.) Basically they want the same US government guarantees as granted to Bank of America, Citigroup, and some others. The problem with that is that's another huge liability put onto the taxpayer, through Treasury sales.

hubbit points me to Consumerist thinking that the market this morning was panicking about bank nationalisations. That's fair, it is the talk of the town. But Mish wants to know what kind of bank nationalisation you're talking about here, because that matters quite a lot.

Oh, and also about that earlier comment about anger, check this out - CNBC's Rick Santelli flips out, and the Chicago trading floor cheers him on. They're outraged about Mr. Obama's mortgage/foreclosure stabilisation plan. Note, of course, that these people were generally quite happy when far more money was thrown away at Mr. Bush's attempted bailouts of banks, but, well, goose and gander comparisons aren't for them. Market Ticker pointed out a key element from this plan, as related by Bloomberg:

The average borrower’s home value could be stabilized against a price decline by up to $6,000, the White House fact sheet said.

Who's that going to help, then? I don't really know. Marketwatch likes it, though. (See also here.)

Almost out of time, so have a bunch of links and minipoints:

GM will want another US$16.6B in said as it announces 47,000 layoffs. A layoff-management lawyer whose firm handles layoff legality for large corporations warns that much larger rounds are coming. The New York Manufacturing Index plunged to -34.7, which is a record. Moody's warns about US and UK credit ratings again.

We're seeing the effects of the sales-tax bomb here, with Metro Transit talking about as much as $100M in shortfall.

Brad Setser is asking how much we should be worried about Dubai; Mish worries about jumping protectionism as Asian export economies free-fall (Japan's GDP fell 12.7% annualised in the last quarter) and the European economy freezes up (and faces its own banking system meltdown); Singapore exports fell 35% in January; the Chinese government is engaging in some serious monetary contraction efforts, which is interesting (if this weird article is accurate, anyway); India reports that sales are being propped up domestically by purchases from rural areas less affected by the global meltdown, which certainly won't do them any harm.

Rachel Ziemba at the CFR talks about China's major resource buys in recent weeks. (C.f. the spike in dry bulk shipping.

Markets are breaking down again, hard; the NASDAQ in particular has dropped below the opening lows. Hopefully that's not it for the bounce.

Good luck.

eta: Huge (by currency standards) spike down of the US dollar against, hum, everything, about an hour ago. Credit-default swaps on major banks are soaring - that's actually from yesterday but I'm told it's still going.

eta2: White House Press Secretary Robert Gibbs says the Obama administration favours a "privately held" banking system.

Lost in all the excitement over banks and nationalisation...

Somebody sold off a lot of US dollars all at once between 16:30 and 17:00 GMT - around 11:30-Noon Eastern, 8:30-9am Pacific - then followed up with a second round a little bit later. I don't know who, but I know it showed up across every currency I've checked, and, of course, the dollar index:



The Euro path matches the dollar index path the most closely to my eye:



...tho' the Swedish Kronar also matches pretty well. But the only currency I'm seeing consistently showing a big shift at the same time across lots of currencies is the Euro, so someone moved big there. It's reasonably close to closing time for London, so.

The markets were down today, with the S&P500 and DJIA down significantly; the NASDAQ flirted with flat, and, in fact, that index kept the other markets afloat a bit, I think. Yahoo finished up 16¢, or 1.34%. Go fig. Gold jumped over US$1000 today. GM spent some time with a market capitalisation under $1 billion, which hasn't happened since I don't know when, but finished the day just over that number and has regained additional ground in light after-hours trading.

Standard and Poors finally admits that this ain't over, or close to it.

I'm waiting for today's FDIC Friday announcements, if any. I'm not expecting any big banks to get shut down today, but it's one of those items to watch now. They'll wait until closing time of all branches before moving; they always do.

eta: Looks like only one this week; Silver Falls Bank, Silverton, Oregon. Branches and insured accounts handed to Citizens Bank, Corvallis, Oregon; the Silver Falls Bank branches will open as Citizens Bank branches on Monday. ATMs, debit cards, and cheques will operate as normal over the weekend. Small-bank takeovers are so easy.

open tabs of crazy

The Pope is ratcheting up the rhetoric on following the church line in politics, telling US House Speaker Nancy Pelosi outright that Catholic politicians and legislators cannot back abortion rights. You also have Archbishop Raymond Burke picking up fundamentalist rhetoric, talking about the Democratic party as the "party of death."

The theoconservatives keep coming up with new ways to be more absolutist, really. elfs has a very good collection of articles about the increase in "eliminationist" rhetoric on the social right; you should read that, here. Andrew Sullivan notes it here and here, as well. Personally, I don't think you can go around for a decade declaring everyone not on your side of all issues a "traitor" (which was done, consistently and routinely, by the GOP and its talking heads) without starting to mean it. As I've said before, I personally think this an artefact of the fundamentalist capture of the GOP; it's essentially identical to fundamentalist culture's treatment of all opposition as being a manifestation of Satan.

Relatedly, former Concerned Women for America wonk Peter LaBarbara's organisation "Americans for Truth about Homosexuality" - a particularly vicious anti-GBLT hate group - has started targeting groups for harassment, with a new system of joining alt-sex mailing lists to learn about event dates and demanding police and boycott action against them. And, really, why not; they're proud of the effects harassment has had against doctors and clinics providing abortion services, so it's only natural they'd unleash these efforts at new targets.

Andrew Sullivan discusses the spin-about in Utah - watching how everyone on the right supposedly in favour of civil union-type benefits suddenly says 'oh fuck no, you perverts deserve nothing' if marriage is off the table. (In that case, they were ignoring testimony in favour of a bill that would've granted hospital visitation rights, before voting it down unanimously.) He occasionally seems surprised, but we've had this same spin-on-a-dime since Hawai'i in 1996. If marriage is on the table, the right says they're just protecting the word and institution "marriage" but support at least some equal treatment. The second marriage is off the table, it goes right back to 'nothing for you, filthy faggots.' I'd hope that a solid decade of this being demonstrated over and over again will let it sink in, but I doubt it will.

In some cases, they've gone back to campaigning against bills which don't exist, which got Time Magazine's attention. At least, on the Catholic side. Quoting James Salt, of Catholics United, "These right-wing organizations are deliberatively misleading people in order to stoke the culture war. They're using this as a fundraising tool, as a way to gin up their relevancy. And unfortunately, some of these groups have the ear of certain bishops," as part of an attempt to paint Mr. Obama as "the most pro-abortion president ever."

I had more economic-rage stuff in here - I want to talk about some of the things I'm seeing out there - but I'm moving it to a separate post.

pivoting on an axis

I'm watching this second video of Rick Santelli launching into Steve Liesman about the foreclosure programme I mentioned earlier. They're complaining about $75B, which is now a HUGE PROBLEM MORAL HAZARD BAILING OUT SCUMBAGS, vs. $2T thrown at the banking system, which was Good and Necessary. It's neat, listening him talk about "appropriate people." He calls himself a Ayn Randian, but in the same sentence, talks about giving taxpayer money to people who are more deserving. Both are entirely incompatible with actual Objectivism, of course, but one meets his moral approval - by being people he knows and thinks are like him - the other doesn't.

Mr. Santelli has launched a Chicago Tea Party website, by the way. And CNBC viewers answering this non-scientific poll are overwhelmingly on his side (218K respondents, 94% Yes, 4.8% No). It's big enough that White House Press Secretary Gibbs has responded to Mr. Santelli, who has in turn called the response "bullying" and "the worst administration attack on the media in our lifetime," which I find laughable.

By the way, MSN is playing this angle as well, talking about the outrage triggered by the housing plan. Note the same sorts of commentary from the people they quote. Rush Limbaugh - who I urge you to keep in mind has directly stated he wants Mr. Obama's presidency to fail, what happens to the country be damned - is also running with it, full bore. Please do tie this in to various memes pinning the entire problem on ACORN and poor people from last fall. This is connected.

Meanwhile, check this out: US$25B bailout recipient Chase's CEO refuses to tell CNBC how his bank is performing, and slams the mortgage/foreclosure bailout as moral hazard. Ah, the irony:

I don't think just because someone's underwater they say I don't have to stay there. But they're supposed to pay the mortgage, and we should teach the American people, you're supposed to meet your obligations, not run from them. Because you have a mortgage doesn't mean you should run away as it goes down.

For this guy, it really is all about punishing Those Bad People. Fiduciary responsibility doesn't even enter this guy's mind - and while I'm sure the systemic fraud that created this situation does, they'll be doing everything they can to keep that part of the story buried.

I don't usually have Sullivan links in economics posts, but I want to point to his discussion of the attempts to pin all of the Bush economic damage on Mr. Obama, here. Senators DeMint and Graham (both R-SC) were both on the floor of the Senate denouncing the stimulus plan as a bill that will destroy America. There's a lot of generalised anger and lots and lots of fear, as well. The mood is significantly unstable; people who haven't been talking about guns, canned food, and "taking back our country" are starting to talk about exactly that, in terms I don't like. This is exploitable, and is being exploited.

Accordingly, I'm seeing an attempted capture of this outrage by the Republican party. An outrage that was aimed generally at the banking system, systemic fraud, and massive looting - an operation supported essentially by both wings of the political class - is now being reoriented specifically by the GOP machinery, on the axis of the foreclosure plan, at anyone-in-the-so-called-left, and Mr. Obama in particular. (That the left is onboard with where the economic right has been for the last several months is, of course, irrelevant.) This wouldn't be so bad if the GOP hadn't spent the last decade or so describing everyone not on their side as traitors, publishing books declaring the not-GOP to be socialist-fascists-in-waiting, and so on. But they have, and I don't like where the rumblings are going. And they're seeing a shot here, and they're taking it, using all the same old tools, re-energised by the economic collapse they helped establish. I imagine they see it as both a lever back towards power, and as an opportunity to distract from all that aforementioned systemic fraud and looting by their friends.

I'll be over here hoping it doesn't work. For the moment, though, it seems to be. We'll see whether it sustains itself.