Wall Street Up 1% on IMF Buoying Europe

Posted on January 18, 2012 by Alexander

Fears about Europe still hover over traders like a black pall of smog over a funeral proceeding. But the IMF gave traders and investors alike some hope as it looks to financially back debt engorged European countries.

What form that help will take wasn’t outlined. But the IMF is about 80% funded by the US so we’re looking at more wasted taxpayer dollars we don’t have. It comes in the form of further inflation meaning your dollars buy less food, electricity and gasoline.

Some experts predict gasoline will go to $4.25 per gallon this year. But that’s a different story. The positives are IMF chest beating and Goldman Sachs announcing better earnings.

Here’s the story:

“(Reuters) – Stocks jumped to their highest since July on Wednesday as the International Monetary Fund sought to help countries hit by the European debt crisis, while forecast-beating earnings from Goldman Sachs dispelled some worries over bank profits.

The stronger-than-expected earnings from Goldman Sachs Group Inc (GS.N) followed disappointing results from Citigroup (C.N) on Tuesday and JPMorgan Chase & Co (JPM.N) last week.

Goldman shares shot up 6.8 percent to $104.31, while the S&P financial sector .GSPF rose 1.7 percent, leading the S&P 500 higher.

The banking sector has outperformed the broader market so far this year, but the financials sector was the S&P 500′s weakest-performing one last year.

While the Goldman results supported financial shares, the IMF’s willingness to bolster its crisis-fighting resources gave the sector a big push. Financials had suffered throughout 2011 on worries that Europe’s debt crisis would hit banks globally.

“Any time liquidity is added to the financial system, it gives financials a little bit of breathing room, and it will result in higher prices for the banks,” said Kevin Caron, market strategist at Stifel, Nicolaus & Co, in Florham Park, New Jersey.

The IMF is seeking to boost its war chest by $600 billion to help countries reeling from the crisis, even though some nations insist Europe must first do more to support ailing members, according to sources.”

Full story at Reuters.

Who knows where or how this $600 billion is going to come from. More money printing leading to inflation anyone?

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Greek Debt, Italian Debt Loads, and Chinese Growth Oh My

Posted on January 17, 2012 by Alexander

Greek and Italian debt levels have soared to heights not seen in years. The interest rates these 2 government are having to pay are over 7% which is crippling levels.

They’re both looking at over 120% debt to GDP. And their prospects of continuing (and soaring) deficits loom large over the countries and the market as a whole.

China’s growth continues despite many investors and economists’ fears about their slow down and way overheated real estate market. They’re seen massive fraud in accounting and heavy losses on real estate loans.

Inflation is causing much pain to Chinese citizens as well. The government is taking steps to curb inflation and there’s still bright spots.

Here’s the article from the Washington Post:

“LONDON — Markets brushed aside fears that Greece may be heading for a devastating debt default and rallied Tuesday on Chinese growth figures, which eased concerns of an abrupt slowdown in the world’s second-largest economy.

With Europe sliding back toward recession and the U.S. recovery still unconvincing, China’s performance is important to shore up the global economy and market sentiment, especially when investors are fretting about a potential Greek default that could further roil financial markets.

Government figures showed that the slowdown in Chinese growth in the final quarter of 2011 was not as big as had been feared and would still see Chinese monetary authorities loosen policy. Though the drop to 8.9 percent represented the lowest rate in two and a half years, the markets had been expecting a bigger decline to 8.7 percent.

“Chinese activity data for late 2011 was something of a ‘goldilocks’ result for investors,” said Nick Bennenbroek, an analyst at Wells Fargo Bank. “Growth figures surprised to the upside, but were nonetheless consistent with an overall slowing trend, keeping the prospects for further Chinese easing intact.”

Following Asia’s strong performance, European and U.S. markets have traded strongly.

You can read the full article here:

Bottom line is caution is warranted in your investing. The world is in turmoil and volatility is likely to continue for the next year or 2. Trade and plan accordingly.

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Wall Street Bailouts – Big Bank Citigroup Bailout After Effects

Posted on January 17, 2012 by Alexander

The after glow is is off putting and the stench like something out of a sewer on this bailout. Back in 2008 Citigroup shareholders were up in arms getting fleeced on the government bailout terms.

The highlights:

1. Profit/earnings dropped 11% to $1.16 billion

2. Revenue fell 7% to $17.2 billion

3. Shares slid 7% to $28.36

4. One Positive – Loan losses plummeted 40%!

The drop in loan losses seems to signal the economy is improving a bit for consumers or else they’re paring down their debt to level they can afford.

Either way it’s good news for the US economy as a whole.

Here’s the article from the New York Times:

“NYTimes – Despite signs of life on Main Street, Wall Street is still struggling.

That dichotomy was evident on Tuesday, when Citigroup reported fourth-quarter results that fell far short of what analysts were forecasting, despite a pickup in lending and a drop in losses on bad loans. The culprit was the banking giant’s capital markets business, where revenue fell 10 percent last quarter as market players headed for the sidelines and trading volumes dwindled.

Investors wasted little time in showing their disappointment — even as the market rallied Tuesday, Citigroup’s shares were off more than 7 percent at $28.36 in afternoon trading.

More than anything else, Citigroup executive said fears about the European debt crisis made clients increasingly risk-averse during the quarter, which concluded with a “very, very weak December,” according to John Gerspach, the bank’s chief financial officer.

“Europe remains the largest overhang on the market at this time,” he added. “There are a lot of dark clouds.”

Overall, earnings dropped 11 percent to $1.16 billion, or 38 cents per share, well below the 50 cents per share Wall Street was looking for, according to Zacks Investment Research. Revenues were also weak, falling 7 percent to $17.2 billion.

Results in the year-ago period, when Citigroup posted profit of $1.3 billion, or 43 cents a share, had been helped by sizable accounting gains on the value of Citigroup debt, which were mostly absent from the fourth-quarter results for 2011.

Like other battered financial names, including Bank of America, Citigroup’s shares have been surging recently on hopes that the financial crisis in Europe might be easing and the economic recovery in the United States is gaining steam. Since the end of November, Citigroup shares have rallied 20 percent.

For the full year, Citigroup reported net income of $11.3 billion, up 6 percent from 2010, one measure of progress in the company’s slow but steady recovery under its chief executive, Vikram S. Pandit, who has been trying to transform Citi from a sprawling but shaky global banking giant into a stronger, more nimble corporate lender.

In the wake of the financial crisis, Citigroup required a $45 billion bailout from Washington, and while that has been paid back, Mr. Pandit is still in the process of shedding assets and lightening the bank’s balance sheet….

One bright spot was a drop in loan losses, which declined 40 percent to $4.1 billion, suggesting that for consumers at least, the economy was becoming more solid. In addition, the bank said that total loans outstanding rose 14 percent to $465.4 billion for the year.”

See the full article here.

Bottom line, the bailouts of “too big to fail” financial institutions, Wall Street Investment banks, and other big conglomerates is looking like a bigger waste of taxpayer money.

Even after bailouts the companies aren’t doing what it takes and responding to the realities of the current market to get back into profitability. Private money and responsibility is the only thing to count on.

See a software here which makes investing simpler.

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European Problems Both Financial and Political

Posted on January 17, 2012 by Alexander

You’re probably well aware of the problems the Euro faces. It’s been absolutely torched by bloated debt in all the European Union countries (except financially responsible Germany).

France was even downgraded last week from AAA to AA+ credit worthiness credit rating. This is ominous news.

Italy’s collapsing if not already collapsed with its biggest bank Unicredit unable to raise capital and going bust. It couldn’t even sell equity shares successfully at 70% to 90% below market value to current shareholders.

This is very ominous news for the Euro’s viability.

The European Central Bank is propping up the Euro by buying bonds of many different countries. Basically they’re printing money just like the US Federal Reserve is.

Here’s an interesting political story from Hungary:

“BRUSSELS—The European Commission opened three legal cases Tuesday against the Hungarian government, aiming to undo laws passed by the government of Prime Minister Viktor Orban that the commission says threaten the independence of key government institutions.

But the cases from the European Union executive body, which is charged with enforcing EU rules, don’t touch several other changes pushed by Mr. Orban that human-rights groups say risk entrenching the power of his Fidesz party in the Hungarian political system.

“The commission is determined to take any legal steps necessary to ensure that the compatibility with European Union law is maintained,”

See the story at Wall Street Journal Online

Bottom line, the Euro like the US Dollar is in a slow grinding downward spiral with politicians and human nature making it all but certain these currencies will be destroyed.

Protect the buying power of your currency through forex trading and gold and silver. Software like FAP Turbo can help with your currency trades.

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China Headed For Meltdown

Posted on October 5, 2011 by Alexander

It’s become increasingly clear the Chinese real estate market is massively overheated. They’ve been building skyscrapers and cities like they’re going out of style.

I seem to remember one statistic which said China has built something like 10 ft.² of office space for every citizen in their country. And you’ll remember they have over 1.2 billion people in the country now so that’s a helluva lot office space.

Obviously, lots of financing and human resources were required to build all these buildings.

Unfortunately though, many of these buildings sit empty with very little hope of being occupied anytime soon.

This is having a cascading effect drawing down their overall economy as well as likely dooming the lenders who made bad loans, and even commodity producers.

This means a lot less demand for copper, concrete, steel and many of the other building materials. And as construction slows down the construction sector of workers will also be hit hard with unemployment.

This means the Chinese yuan may show some weakness. The US dollar has already been showing strength recently.

This is why a tool like FAP turbo helps you trade these forex changes. It’ll help you keep your emotions at bay trading only on the numbers.

This is impossible to do without a software tool like FAP turbo because emotions are as much a part of humanity as breathing. But when it comes to trading, emotions can be devastating to your trading account balance.

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