Just a reminder. Economist Professor Irving Fischer explains that the stock market crashed due to high expectations- not high stock prices. Too many speculators were playing the stocks with borrowed money, resulting in a run on the banks. 80 years later, the banks are speculating with borrowed money and investors are running away from them.
Historic video below.
The N01 stock in the world did it again. Apple beating earnings is nothing new, but the extreme volatility we have seen in the stock should make investors somewhat more alert. Let’s see how Apple trades in the coming weeks, but the volatility must decrease, or those hedge funds all long Apple better start exiting some of their positions. More from Bloomberg below.
Know your bull and bear markets. Further insight on the secular bull and bear markets by Hussman Funds.
“The world economy has stepped back from the brink and we have causes to be a little bit more optimistic. But optimism should not give us a sense of comfort and certainly should not lull us into a false sense of security.”
IMF Managing Director Christine Lagarde, March 17, 2012
As we examine the present evidence relating to both the financial markets and the global economy, the aspect that strikes us most is the extent to which Wall Street continues to emphasize superficially positive data in preference for deeper analysis, to extrapolate short-term distortions as if they were long-term trends, and to misconstrue freshly printed wallpaper and thin supporting ice as if they were solid walls and floors.
Earlier during the weekend, there was some confusion regarding the interpretation of the CME late Friday press release. This is now cleared, and ICE is joining the CME’s lowering of margin with regards to MF Global event. The World is back to normal…..
ICE lowers margin due to the MF Global situation.
Effective immediately, ICE Futures U.S. is temporarily
lowering the Initial Margin rate for all Speculative accounts to a
level equal to the Maintenance Margin rate for all contracts. The
Initial Margin rate for hedgers already is the same as the
Maintenance Margin rate.
This action is being taken to mute the impact of the transfer of
accounts from MF Global Inc. to other clearing members that
was effected overnight, and thereby support the integrity of
CME full clarification below.
Guest Post by DShort.
A major risk factor for margin squeeze is the increase in commodity prices over the past several months with the price of oil and gasoline as the dominant factor. Commodity prices have moderated, but the squeeze remains in evidence.
So let’s take a broader view of these two indicators by viewing them within the context of inflation as measured by the Consumer Price Index. As the first chart clearly shows, the all-time high in the PPI crude-to-finished-goods ratio was in July 2008, the same month that crude oil and gasoline prices in the U.S. hit their all-time highs. The previous ratio high was in the summer of 1973, a few months before the outbreak of the October Arab-Israeli War and the Oil Embargo. Inflation had already been rising in a series of waves since the mid-1960s. But Middle-East events of 1973 were the primary trigger for the nearly ten years of stagflation that followed.
The September 2011 ratio is at the 98th percentile of the 775 data points in this series, up from 97 in August and 96 in July. The interim high since the 2008 peak was the 99th percentile in April.
Full reading here.