Pat Dorsey
Wednesday, November 26, 2008
This article is part of a series related to Beginning Investing.
Or better yet - what is the Oracle up to in this market, and can you do the same?
Warren Buffett has already told the world what he's doing in this frightful market. The Oracle of Omaha proudly proclaimed that he's "been buying American stocks" with his personal funds.
But it should also be noted that Buffett has been putting his investors' money on the line as well. After sitting on piles of cash for several years and lamenting the lack of attractive opportunities, Buffett has made several key acquisitions through his investment conglomerate, Berkshire Hathaway, culminating in a flurry of late- September and early-October deals.
In just a two-week span, Buffett picked up Constellation Energy for the relative bargain price of $4.7 billion. He bought $5 billion in preferred stock from Goldman Sachs, receiving a fat 10% yield. And he purchased $3 billion in preferred shares of GE, also yielding 10%.
This doesn't mean Buffett is saying go out and buy Goldman or GE (GE) stock. In fact, there are plenty of reasons why you shouldn't try to follow his lead, not the least of which is the fact that Berkshire gets deals that individuals simply can't.
But that's not the point. The opportunity here is to pick up some valuable investing wisdom from the greatest practitioner alive. In this spirit, here's what I think you can learn from Buffett's moves:
Be Greedy When Others Are Fearful
It's the most famous of all Buffett-isms: "Be fearful when others are greedy and greedy when others are fearful." Today there's ample evidence that people are scared, as fund investors have been redeeming record amounts of money from their stock portfolios.
By contrast, Buffett is putting his money to work. Berkshire's cash balance, by my estimate, is at its lowest level in recent memory.
Now, this doesn't mean the market will turn around tomorrow. But Buffett's point is that this is not the time to flee U.S. stocks. In fact, now is a great time to be looking for shares of high-quality firms that have been beaten down to affordable levels.
For examples of attractively priced industry leaders, see the suggestions to the right.
Don't Be Hobbled by Past Mistakes
Buffett's investment in Goldman Sachs (GS) was surprising to many, given his frequent digs at Wall Street's casino culture and a problematic investment he made in Salomon Brothers.
In 1987, Buffett bought a stake in Salomon to ward off a hostile takeover, but the firm nearly collapsed amid a bond bid-rigging scandal a few years later, and Buffett had to step in as interim chairman.
Although the investment eventually worked out - Salomon was bought by Travelers, which merged with Citicorp to form Citigroup (C) - it's safe to say that it was a longer and harder road than he had anticipated.
Still, Buffett understood that investment banking, for all its recent woes, is an attractive business if managed properly. The group of top-tier firms is fairly small, and it would be hard for a new competitor to break into the business, which gives Goldman Sachs tremendous bargaining power over its customers.
There's an important lesson in this for individual investors. Just because many financial stocks in your portfolio have imploded recently, it doesn't mean you should sell out of this sector entirely - or turn your back on these stocks for good.
Don't Fall in Love With Your Stocks
Buffett is famous for having said that his favorite holding period is "forever." But he will sell a stock he loves if conditions warrant. For example, late last year, as crude-oil prices were approaching $100 a barrel, Buffett jettisoned his stake in PetroChina (PTR).
Why? After multiplying more than fivefold since he bought it a few years earlier, PetroChina shares had reached fair value, so he sold. Since he cashed out, PetroChina shares have been cut in half.
Chalk this up to a lesson the Oracle learned in the late '90s. As he admitted in 2003, "...I made a big mistake in not selling several of our larger holdings during the Great Bubble."
Buffett similarly made what may be one of his best decisions when he sold Berkshire Hathaway's long-held stake in Freddie Mac (FRE) in 2000. He's never written about exactly why, but he noted presciently at his 2001 annual shareholder meeting that Freddie Mac's "risk profile had changed."
Keep Your Powder Dry
While the rest of the world gorged on cheap credit, Buffett maintained Berkshire's conservative profile. This hindered his returns when times were good, but having lots of cash on hand enabled Buffett to snap up once-in-a-lifetime deals, like Constellation Energy (CEG).
Buffett, who owns several utilities, jumped on Constellation in September after its shares tumbled from around $60 to his purchase price of $26.50 in a mere matter of days. The result: He nabbed a company that produces nearly $1 billion in earnings a year for less than $5 billion.
Now, you may not be in a position to keep $40 billion in the bank. But as Buffett showed, it's smart to have some cash on hand for opportunistic purchases. What's more, there's nothing wrong with being disciplined enough to turn your back on stocks that you're not 100% confident in. That's sage advice.
Why He's Warren Buffett — and You're Not
If investing were as simple as mimicking Warren Buffett, then all you'd have to do to retire rich would be to download a free copy of the Berkshire Hathaway annual shareholder letter and shadow the Oracle's moves.
Given that you're reading this article instead of relaxing at your seaside villa, it's clear copying Buffett is no easy task. So as you marvel at the Sage, keep the following in mind:
Warren Can Strike Deals You Can't
Buffett's reputation and Berkshire's financial heft are enormous advantages that regular investors simply don't share. Take his recent investment in Goldman Sachs (GS). It was made in preferred stock that was offered only to Berkshire and pays a 10% fixed yield.
That's twice what Uncle Sam is initially earning on the preferred shares it got from Goldman in exchange for injecting capital into the bank. But chalk that up to the Buffett premium. Firms want the Oracle to invest in them for his seal of approval.
Berkshire's purchase of Constellation Energy offers a great example. Constellation's shares had fallen 75% from their highs because the market was worried about the financial health of the company's energy-trading operations.
If you or I bought the stock at that level, we would have been making a bet that Constellation would pull through. But we would not have been able to affect the odds. However, Berkshire's financial strength and Buffett's name assured Constellation's survival, making the investment more valuable as soon as Warren bought the company.
Warren Is Smarter Than You Are
Many casual observers assume that Buffett simply buys great companies and hangs on to them. Simple, right? But the real key to Buffett's success is far more complicated.
Buffett has created enormous value for Berkshire by buying all kinds of securities, from common stock and preferred shares to currencies, distressed debt and options.
He has also made money through merger arbitrage and fixed-income arbitrage. These are all areas that only the most sophisticated investor should dabble in.
Why Mimic Warren When You Can Hire Him?
Your best bet for benefiting from Buffett's wisdom is the most obvious: Buy Berkshire Hathaway (BRK.B) stock.
It's really an investment company. But unlike a fund, it doesn't charge annual management fees. Buffett has deployed a lot of cash into attractive deals lately, which should add value for years to come.
Wednesday, November 26, 2008
Tuesday, November 25, 2008
Why Government Spending Does Not Stimulate Economic Growth
Heritage Foundation ^ | November 12, 2008 | Brian M. Riedl
Posted on 25 November 2008 9:27:01 PM by Conservative Coulter Fan
In a throwback to the 1930s and 1970s, Democratic lawmakers are betting that America's economic ills can be cured by an extraordinary expansion of government. This tired approach has already failed repeatedly in the past year, in which Congress and the President:
Increased total federal spending by 11 percent to nearly $3 trillion;
Enacted $333 billion in "emergency" spending;
Enacted $105 billion in tax rebates; and
Pushed the budget deficit to $455 billion in the name of "stimulus."
Every one of these policies failed to increase economic growth. Now, in addition to passing a $700 billion financial sector rescue package, lawmakers have decided to double down on these failed spending policies by proposing a $300 billion economic stimulus bill. Even though the last $455 billion in Keynesian deficit spending failed to help the economy, lawmakers seem to have convinced themselves that the next $300 billion will succeed.
This is not the first time government expansions have failed to produce economic growth. Massive spending hikes in the 1930s, 1960s, and 1970s all failed to increase economic growth rates. Yet in the 1980s and 1990s—when the federal government shrank by one-fifth as a percentage of gross domestic product (GDP)—the U.S. economy enjoyed its greatest expansion to date.
Cross-national comparisons yield the same result. The U.S. government spends significantly less than the 15 pre-2004 European Union nations, and yet enjoys 40 percent larger per capita GDP, 50 percent faster economic growth rates, and a substantially lower unemployment rate.[1]
When conventional economic wisdom repeatedly fails, it becomes necessary to revisit that conventional wisdom. Government spending fails to stimulate economic growth because every dollar Congress "injects" into the economy must first be taxed or borrowed out of the economy. Thus, government spending "stimulus" merely redistributes existing income, doing nothing to increase productivity or employment, and therefore nothing to create additional income. Even worse, many federal expenditures weaken the private sector by directing resources toward less productive uses and thus impede income growth.
The Myth of Spending as "Stimulus"
Spending-stimulus advocates claim that government can "inject" new money into the economy, increasing demand and therefore production. This raises the obvious question: Where does the government acquire the money it pumps into the economy? Congress does not have a vault of money waiting to be distributed: Therefore, every dollar Congress "injects" into the economy must first be taxed or borrowed out of the economy. No new spending power is created. It is merely redistributed from one group of people to another.[2]
Spending-stimulus advocates typically respond that redistributing money from "savers" to "spenders" will lead to additional spending. That assumes that savers store their savings in their mattresses or elsewhere outside the economy. In reality, nearly all Americans either invest their savings by purchasing financial assets such as stocks and bonds (which finances business investment), or by purchasing non-financial assets such as real estate and collectibles, or they deposit it in banks (which quickly lend it to others to spend). The money is used regardless of whether people spend or save.
Government cannot create new purchasing power out of thin air. If Congress funds new spending with taxes, it is simply redistributing existing income. If Congress instead borrows the money from domestic investors, those investors will have that much less to invest or to spend in the private economy. If Congress borrows the money from foreigners, the balance of payments will adjust by equally reducing net exports, leaving GDP unchanged. Every dollar Congress spends must first come from somewhere else.
This does not mean that government spending has no economic impact at all. Government spending often alters the composition of total demand, such as increasing consumption at the expense of investment.
More importantly, government spending can alter future economic growth. Economic growth results from producing more goods and services (not from redistributing existing income), and that requires productivity growth and growth in the labor supply. A government's impact on economic growth is, therefore, determined by its policies' effect on labor productivity and labor supply.
Productivity growth requires increasing the amount of capital, either material or human, relative to the amount of labor employed. Productivity growth is facilitated by smoothly functioning markets indicating accurate price signals to which buyers and sellers, firms and workers can respond in flexible markets. Only in the rare instances where the private sector fails to provide these inputs in adequate amounts is government spending necessary. For instance, government spending on education, job training, physical infrastructure, and research and development can increase long-term productivity rates—but only if government spending does not crowd out similar private spending, and only if government spends the money more competently than businesses, nonprofit organizations, and private citizens. More specifically, government must secure a higher long-term return on its investment than taxpayers' (or investors lending the government) requirements with the same funds. Historically, governments have rarely outperformed the private sector in generating productivity growth.
Even when government spending improves economic growth rates on balance, it is necessary to differentiate between immediate versus future effects. There is no immediate stimulus from government spending, since that money had to be removed from another part of the economy. However, a productivity investment may aid future economic growth, once it has been fully completed and is being used by the American workforce. For example, spending on energy itself does not improve economic growth, yet the eventual existence of a completed, well-functioning energy system can. Those economic impacts can take years, or even decades, to occur.
Most government spending has historically reduced productivity and long-term economic growth due to: [3]
Taxes. Most government spending is financed by taxes, and high tax rates reduce incentives to work, save, and invest—resulting in a less motivated workforce as well as less business investment in new capital and technology. Few government expenditures raise productivity enough to offset the productivity lost due to taxes;
Incentives. Social spending often reduces incentives for productivity by subsidizing leisure and unemployment. Combined with taxes, it is clear that taxing Peter to subsidize Paul reduces both of their incentives to be productive, since productivity no longer determines one's income;
Displacement. Every dollar spent by politicians means one dollar less to be allocated based on market forces within the more productive private sector. For example, rather than allowing the market to allocate investments, politicians seize that money and earmark it for favored organizations with little regard for improvements to economic efficiency; and
Inefficiencies. Government provision of housing, education, and postal operations are often much less efficient than the private sector. Government also distorts existing health care and education markets by promoting third-party payers, resulting in over-consumption and insensitivity to prices and outcomes. Another example of inefficiency is when politicians earmark highway money for wasteful pork projects rather than expanding highway capacity where it is most needed.
Mountains of academic studies show how government expansions reduce economic growth:[4]
Public Finance Review reported that "higher total government expenditure, no matter how financed, is associated with a lower growth rate of real per capita gross state product."[5]
The Quarterly Journal of Economics reported that "the ratio of real government consumption expenditure to real GDP had a negative association with growth and investment," and "growth is inversely related to the share of government consumption in GDP, but insignificantly related to the share of public investment."[6]
A Journal of Macroeconomics study discovered that "the coefficient of the additive terms of the government-size variable indicates that a 1% increase in government size decreases the rate of economic growth by 0.143%."[7]
Public Choice reported that "a one percent increase in government spending as a percent of GDP (from, say, 30 to 31%) would raise the unemployment rate by approximately .36 of one percent (from, say, 8 to 8.36 percent)."[8]
Economic growth is driven by individuals and entrepreneurs operating in free markets, not by Washington spending and regulations. The outdated idea that transferring spending power from the private sector to Washington will expand the economy has been thoroughly discredited, yet lawmakers continue to return to this strategy. The U.S. economy has soared highest when the federal government was shrinking, and it has stagnated at times of government expansion. This experience has been paralleled in Europe, where government expansions have been followed by economic decline. A strong private sector provides the nation with strong economic growth and benefits for all Americans.
Three Applications of the Spending Fallacy
The myth of government spending stimulus is often found in debates over tax rebates (which function similar to government spending), highway spending, and federal bailouts of states.
1) Why Tax Rebates Do Not Stimulate
The debate on taxes and economic growth is also clouded with confusion. By asserting that tax cuts spur economic growth by "putting spending money in people's pockets," many tax cutters commit the same fallacy as do government spenders. Similar to government spending, the money for tax cuts does not fall from the sky. It comes out of investment and net exports if financed by budget deficits or government spending if offset by spending cuts.
However, the right tax cuts can add substantially to productivity. As stated above, economic growth requires that businesses produce increasing amounts of goods and services, and that requires consistent business investment and a growing, productive workforce. Yet high marginal tax rates— defined as the tax on the next dollar earned—create a disincentive to engage in those activities. Reducing marginal tax rates on businesses and workers will increase incentives to work, save, and invest. These incentives encourage more business investment, a more productive workforce by raising the after-tax returns to education, and more work effort, all of which add to the economy's long-term capacity for growth.
Thus, not all tax cuts are created equal. The economic impact of a tax cut is measured by the extent to which it alters behavior to encourage productivity.
Tax rebates fail to increase economic growth because they are not associated with productivity or work effort. No new income is created because no one is required work, save, or invest more to receive a rebate. In that sense, rebates are economically indistinguishable from government spending programs that write each American a check. In fact, the federal government treats rebate checks as a "social benefit payment to persons."[9] They represent another feeble attempt to create new purchasing power out of thin air.
Consider the 2001 tax rebates. Washington borrowed billions from the capital markets, and then mailed it to Americans in the form of $600 checks. Rather than encourage income creation, Congress merely transferred existing income from investors to consumers. Predictably, the following quarter saw consumer spending growth surge from 1.4 percent to 7.0 percent, and gross private domestic investment spending drop correspondingly by 22.7 percent[10] The overall economy grew at a meager 1.6 percent that quarter, and remained stagnant through 2001 and much of 2002.
It was not until the 2003 tax cuts—which cut tax rates for workers and investors— that the economy finally and immediately began a robust recovery. In the previous 18 months, business investment had plummeted, the stock market had dropped 18 percent, and the economy had lost 616,000 jobs. In the 18 months following the 2003 tax rate reductions, business investment surged, the stock market leaped 32 percent, and Americans created 307,000 new jobs (followed by 5 million jobs in the next seven quarters).[11] Overall economic growth rates doubled.[12]
Marginal tax rates were reduced throughout the 1920s, 1960s, and 1980s. In all three decades, investment increased, and higher economic growth followed. Real GDP increased by 59 percent from 1921 to 1929, by 42 percent from 1961 to 1968, and by 31 percent from 1982 to 1989.[13]
Yet in a triumph of hope over experience, lawmakers embraced tax rebates over rate reductions again in early 2008. While the economic data are still coming in, it is clear that once again the rebates failed to support economic growth. There is no reason to expect another round of tax rebates to be any more effective.[14]
2) Highway Spending: The Myth of the 47,576 New Jobs
Nowhere is the government spending stimulus myth more widespread than in highway spending. Congress is already rumbling to push billions in highway spending in the next stimulus package. Over the years, lawmakers have repeatedly supported their errant claim that highway spending is an immediate economic tonic by citing a Department of Transportation (DOT) study. This study supposedly states that every $1 billion spent on highways adds 47,576 new jobs to the economy.[15]
The problem: The DOT study made no such claim. It stated that spending $1 billion on highways would require 47,576 workers (or more precisely, it would require 26,524 workers, who then spend their income elsewhere, supporting an additional 21,052 workers). But before the government can spend $1 billion hiring road builders and purchasing asphalt, it must first tax or borrow $1 billion from other sectors of the economy—which would then lose a similar number of jobs. In other words, highway spending merely transfers jobs and income from one part of the economy to another. As The Heritage Foundation's Ronald Utt has explained, "The only way that $1 billion of new highway spending can create 47,576 new jobs is if the $1 billion appears out of nowhere as if it were manna from heaven."[16] The DOT report implicitly acknowledged this point by referring to the transportation jobs as "employment benefits" within the transportation sector, rather than as new jobs for the total economy.
An April 2008 DOT update to its previous study reduced the employment figure to 34,779 jobs supported by each $1 billion spent on highways, and explicitly stated that the figure "refers to jobs supported by highway investments, not jobs created."[17] Similarly, a Congressional Research Service study calculated similar numbers as the DOT study, but cautioned:
To the extent that financing new highways by reducing expenditures on other programs or by deficit finance and its impact on private consumption and investment, the net impact on the economy of highway construction in terms of both output and employment could be nullified or even negative.[18]
Not surprisingly, highway spending has a poor track record of stimulating the economy. The Emergency Jobs Appropriations Act of 1983 appropriated billions of dollars in highway spending (among other programs) in hopes of pushing the double-digit unemployment rate downward. Years later, an audit by the General Accounting Office (GAO, now the Government Accountability Office) found that highway spending generally failed to create a significant number of new jobs.[19] The bottom line is that there is no reason to expect additional highway spending this year to boost short-term economic growth or create new jobs.
As stated above, resulting improvements in the nation's infrastructure may increase future productivity and growth—once they are completed and in use. This is not the same as suggesting that the act of spending money on additional highway workers and asphalt is itself an immediate stimulant. Even the hope of future productivity increases rest on the assumptions that politicians will allocate money to necessary highway projects (rather then pork), and that those future productivity benefits will outweigh the lost productivity from raising future tax rates to finance the project.[20]
3) State Bailouts Merely Shift Money Around
Congress is reportedly considering using stimulus funding to bail out states dealing with their own budget shortfalls. This makes little sense as a matter of macroeconomic policy. State spending does not suddenly become stimulative because it is funded by Washington instead of state governments. Either way, any spending "injected" into the economy must first be taxed or borrowed from the economy. It does not matter which level of government is doing the taxing, borrowing, or spending.
Furthermore, sending federal aid to states would not save taxpayers a dime because state taxpayers are also federal taxpayers. Increasing federal borrowing to keep state taxes from rising is like running up a Visa card balance to keep the Mastercard balance from rising. The overall costs do not change, only the address receiving the payment.
Governors typically respond that a federal bailout is preferable because it could be funded with deficits rather than new taxes—currently not an option for the 49 states with balanced-budget requirements. But nobody forced these states to enact balanced-budget requirements, which they are free to repeal. It is disingenuous for a state to enact a balanced-budget amendment, and then demand that Washington bail it out of the consequences of its own policy.
Congress already sends $467 billion to state and local government every year—up 29 percent after inflation since 2000.[21] This is well beyond what is needed to reimburse states for federal mandates. In fact, since 1996, Washington has imposed less than $25 million per state in new unfunded mandates. (No Child Left Behind is neither unfunded nor mandated.)[22] State health, education, and transportation programs remain heavily subsidized by Washington.
Because states are so dependent on income tax revenues—which are volatile—common sense says to build rainy-day funds during booms to cushion the inevitable recessions. Instead, states keep responding to temporary revenue surges with new permanent spending programs. Between 1994 and 2001, states flush with new revenues shunned rainy-day funds and instead expanded their general fund budgets by 6.2 percent annually.[23]
All booms eventually end, and these free-spending states left themselves utterly unprepared for the 2002–2003 economic slowdown. Yet instead of sufficiently paring back their bloated budgets, the states demanded and received a $30 billion bailout from Washington in 2003. When government bails out irresponsible behavior, it only encourages more irresponsibility. And that is just what happened: After the 2003 bailout, states went right back to spending—with annual budget hikes averaging 7.2 percent over the next four years.[24] Rainy-day funds were expanded, although not nearly by enough. Thus, another recession has brought another round of state bailout calls.
How will states learn to budget responsibly if they know they can keep returning to the federal ATM?
The biggest losers from a federal bailout are the taxpayers who live in fiscally responsible states. They played by the rules and resisted extravagant new spending programs—and will be "rewarded" with higher taxes to bail out neighboring states that went on a spending spree they could not afford.That is simply unfair. And it encourages responsible states to be less responsible next time—better to be the bailout recipient than the bailout payer.
Congress should resist a bailout and instead instruct state governments to set priorities, make trade-offs, and reduce unnecessary spending. States that insist on deficit spending should reform their own balanced-budget laws rather than demand that Washington borrow for them. Finally, any federal aid to state governments should come in the form of loans to be repaid in full, with interest, within three years.
A Better Way
Government spending has an abysmal track record of stimulating the economy. However, these repeated failures have not stopped lawmakers from proposing and enacting a seemingly endless string of "stimulus" bills. Rather than redistributing money, lawmakers should focus on improving long-term productivity. This means reducing marginal tax rates to encourage working, saving, and investing. It also means promoting free trade, cutting unnecessary red tape, and streamlining wasteful spending that all weaken the private sector's ability to generate income and create wealth. Finally, it means strengthening education—not just throwing money at it. Addressing long-term growth and productivity is more challenging than waving the magic wand of short-term "stimulus" spending—but a more productive economy will be better prepared to handle future economic downturns.
Posted on 25 November 2008 9:27:01 PM by Conservative Coulter Fan
In a throwback to the 1930s and 1970s, Democratic lawmakers are betting that America's economic ills can be cured by an extraordinary expansion of government. This tired approach has already failed repeatedly in the past year, in which Congress and the President:
Increased total federal spending by 11 percent to nearly $3 trillion;
Enacted $333 billion in "emergency" spending;
Enacted $105 billion in tax rebates; and
Pushed the budget deficit to $455 billion in the name of "stimulus."
Every one of these policies failed to increase economic growth. Now, in addition to passing a $700 billion financial sector rescue package, lawmakers have decided to double down on these failed spending policies by proposing a $300 billion economic stimulus bill. Even though the last $455 billion in Keynesian deficit spending failed to help the economy, lawmakers seem to have convinced themselves that the next $300 billion will succeed.
This is not the first time government expansions have failed to produce economic growth. Massive spending hikes in the 1930s, 1960s, and 1970s all failed to increase economic growth rates. Yet in the 1980s and 1990s—when the federal government shrank by one-fifth as a percentage of gross domestic product (GDP)—the U.S. economy enjoyed its greatest expansion to date.
Cross-national comparisons yield the same result. The U.S. government spends significantly less than the 15 pre-2004 European Union nations, and yet enjoys 40 percent larger per capita GDP, 50 percent faster economic growth rates, and a substantially lower unemployment rate.[1]
When conventional economic wisdom repeatedly fails, it becomes necessary to revisit that conventional wisdom. Government spending fails to stimulate economic growth because every dollar Congress "injects" into the economy must first be taxed or borrowed out of the economy. Thus, government spending "stimulus" merely redistributes existing income, doing nothing to increase productivity or employment, and therefore nothing to create additional income. Even worse, many federal expenditures weaken the private sector by directing resources toward less productive uses and thus impede income growth.
The Myth of Spending as "Stimulus"
Spending-stimulus advocates claim that government can "inject" new money into the economy, increasing demand and therefore production. This raises the obvious question: Where does the government acquire the money it pumps into the economy? Congress does not have a vault of money waiting to be distributed: Therefore, every dollar Congress "injects" into the economy must first be taxed or borrowed out of the economy. No new spending power is created. It is merely redistributed from one group of people to another.[2]
Spending-stimulus advocates typically respond that redistributing money from "savers" to "spenders" will lead to additional spending. That assumes that savers store their savings in their mattresses or elsewhere outside the economy. In reality, nearly all Americans either invest their savings by purchasing financial assets such as stocks and bonds (which finances business investment), or by purchasing non-financial assets such as real estate and collectibles, or they deposit it in banks (which quickly lend it to others to spend). The money is used regardless of whether people spend or save.
Government cannot create new purchasing power out of thin air. If Congress funds new spending with taxes, it is simply redistributing existing income. If Congress instead borrows the money from domestic investors, those investors will have that much less to invest or to spend in the private economy. If Congress borrows the money from foreigners, the balance of payments will adjust by equally reducing net exports, leaving GDP unchanged. Every dollar Congress spends must first come from somewhere else.
This does not mean that government spending has no economic impact at all. Government spending often alters the composition of total demand, such as increasing consumption at the expense of investment.
More importantly, government spending can alter future economic growth. Economic growth results from producing more goods and services (not from redistributing existing income), and that requires productivity growth and growth in the labor supply. A government's impact on economic growth is, therefore, determined by its policies' effect on labor productivity and labor supply.
Productivity growth requires increasing the amount of capital, either material or human, relative to the amount of labor employed. Productivity growth is facilitated by smoothly functioning markets indicating accurate price signals to which buyers and sellers, firms and workers can respond in flexible markets. Only in the rare instances where the private sector fails to provide these inputs in adequate amounts is government spending necessary. For instance, government spending on education, job training, physical infrastructure, and research and development can increase long-term productivity rates—but only if government spending does not crowd out similar private spending, and only if government spends the money more competently than businesses, nonprofit organizations, and private citizens. More specifically, government must secure a higher long-term return on its investment than taxpayers' (or investors lending the government) requirements with the same funds. Historically, governments have rarely outperformed the private sector in generating productivity growth.
Even when government spending improves economic growth rates on balance, it is necessary to differentiate between immediate versus future effects. There is no immediate stimulus from government spending, since that money had to be removed from another part of the economy. However, a productivity investment may aid future economic growth, once it has been fully completed and is being used by the American workforce. For example, spending on energy itself does not improve economic growth, yet the eventual existence of a completed, well-functioning energy system can. Those economic impacts can take years, or even decades, to occur.
Most government spending has historically reduced productivity and long-term economic growth due to: [3]
Taxes. Most government spending is financed by taxes, and high tax rates reduce incentives to work, save, and invest—resulting in a less motivated workforce as well as less business investment in new capital and technology. Few government expenditures raise productivity enough to offset the productivity lost due to taxes;
Incentives. Social spending often reduces incentives for productivity by subsidizing leisure and unemployment. Combined with taxes, it is clear that taxing Peter to subsidize Paul reduces both of their incentives to be productive, since productivity no longer determines one's income;
Displacement. Every dollar spent by politicians means one dollar less to be allocated based on market forces within the more productive private sector. For example, rather than allowing the market to allocate investments, politicians seize that money and earmark it for favored organizations with little regard for improvements to economic efficiency; and
Inefficiencies. Government provision of housing, education, and postal operations are often much less efficient than the private sector. Government also distorts existing health care and education markets by promoting third-party payers, resulting in over-consumption and insensitivity to prices and outcomes. Another example of inefficiency is when politicians earmark highway money for wasteful pork projects rather than expanding highway capacity where it is most needed.
Mountains of academic studies show how government expansions reduce economic growth:[4]
Public Finance Review reported that "higher total government expenditure, no matter how financed, is associated with a lower growth rate of real per capita gross state product."[5]
The Quarterly Journal of Economics reported that "the ratio of real government consumption expenditure to real GDP had a negative association with growth and investment," and "growth is inversely related to the share of government consumption in GDP, but insignificantly related to the share of public investment."[6]
A Journal of Macroeconomics study discovered that "the coefficient of the additive terms of the government-size variable indicates that a 1% increase in government size decreases the rate of economic growth by 0.143%."[7]
Public Choice reported that "a one percent increase in government spending as a percent of GDP (from, say, 30 to 31%) would raise the unemployment rate by approximately .36 of one percent (from, say, 8 to 8.36 percent)."[8]
Economic growth is driven by individuals and entrepreneurs operating in free markets, not by Washington spending and regulations. The outdated idea that transferring spending power from the private sector to Washington will expand the economy has been thoroughly discredited, yet lawmakers continue to return to this strategy. The U.S. economy has soared highest when the federal government was shrinking, and it has stagnated at times of government expansion. This experience has been paralleled in Europe, where government expansions have been followed by economic decline. A strong private sector provides the nation with strong economic growth and benefits for all Americans.
Three Applications of the Spending Fallacy
The myth of government spending stimulus is often found in debates over tax rebates (which function similar to government spending), highway spending, and federal bailouts of states.
1) Why Tax Rebates Do Not Stimulate
The debate on taxes and economic growth is also clouded with confusion. By asserting that tax cuts spur economic growth by "putting spending money in people's pockets," many tax cutters commit the same fallacy as do government spenders. Similar to government spending, the money for tax cuts does not fall from the sky. It comes out of investment and net exports if financed by budget deficits or government spending if offset by spending cuts.
However, the right tax cuts can add substantially to productivity. As stated above, economic growth requires that businesses produce increasing amounts of goods and services, and that requires consistent business investment and a growing, productive workforce. Yet high marginal tax rates— defined as the tax on the next dollar earned—create a disincentive to engage in those activities. Reducing marginal tax rates on businesses and workers will increase incentives to work, save, and invest. These incentives encourage more business investment, a more productive workforce by raising the after-tax returns to education, and more work effort, all of which add to the economy's long-term capacity for growth.
Thus, not all tax cuts are created equal. The economic impact of a tax cut is measured by the extent to which it alters behavior to encourage productivity.
Tax rebates fail to increase economic growth because they are not associated with productivity or work effort. No new income is created because no one is required work, save, or invest more to receive a rebate. In that sense, rebates are economically indistinguishable from government spending programs that write each American a check. In fact, the federal government treats rebate checks as a "social benefit payment to persons."[9] They represent another feeble attempt to create new purchasing power out of thin air.
Consider the 2001 tax rebates. Washington borrowed billions from the capital markets, and then mailed it to Americans in the form of $600 checks. Rather than encourage income creation, Congress merely transferred existing income from investors to consumers. Predictably, the following quarter saw consumer spending growth surge from 1.4 percent to 7.0 percent, and gross private domestic investment spending drop correspondingly by 22.7 percent[10] The overall economy grew at a meager 1.6 percent that quarter, and remained stagnant through 2001 and much of 2002.
It was not until the 2003 tax cuts—which cut tax rates for workers and investors— that the economy finally and immediately began a robust recovery. In the previous 18 months, business investment had plummeted, the stock market had dropped 18 percent, and the economy had lost 616,000 jobs. In the 18 months following the 2003 tax rate reductions, business investment surged, the stock market leaped 32 percent, and Americans created 307,000 new jobs (followed by 5 million jobs in the next seven quarters).[11] Overall economic growth rates doubled.[12]
Marginal tax rates were reduced throughout the 1920s, 1960s, and 1980s. In all three decades, investment increased, and higher economic growth followed. Real GDP increased by 59 percent from 1921 to 1929, by 42 percent from 1961 to 1968, and by 31 percent from 1982 to 1989.[13]
Yet in a triumph of hope over experience, lawmakers embraced tax rebates over rate reductions again in early 2008. While the economic data are still coming in, it is clear that once again the rebates failed to support economic growth. There is no reason to expect another round of tax rebates to be any more effective.[14]
2) Highway Spending: The Myth of the 47,576 New Jobs
Nowhere is the government spending stimulus myth more widespread than in highway spending. Congress is already rumbling to push billions in highway spending in the next stimulus package. Over the years, lawmakers have repeatedly supported their errant claim that highway spending is an immediate economic tonic by citing a Department of Transportation (DOT) study. This study supposedly states that every $1 billion spent on highways adds 47,576 new jobs to the economy.[15]
The problem: The DOT study made no such claim. It stated that spending $1 billion on highways would require 47,576 workers (or more precisely, it would require 26,524 workers, who then spend their income elsewhere, supporting an additional 21,052 workers). But before the government can spend $1 billion hiring road builders and purchasing asphalt, it must first tax or borrow $1 billion from other sectors of the economy—which would then lose a similar number of jobs. In other words, highway spending merely transfers jobs and income from one part of the economy to another. As The Heritage Foundation's Ronald Utt has explained, "The only way that $1 billion of new highway spending can create 47,576 new jobs is if the $1 billion appears out of nowhere as if it were manna from heaven."[16] The DOT report implicitly acknowledged this point by referring to the transportation jobs as "employment benefits" within the transportation sector, rather than as new jobs for the total economy.
An April 2008 DOT update to its previous study reduced the employment figure to 34,779 jobs supported by each $1 billion spent on highways, and explicitly stated that the figure "refers to jobs supported by highway investments, not jobs created."[17] Similarly, a Congressional Research Service study calculated similar numbers as the DOT study, but cautioned:
To the extent that financing new highways by reducing expenditures on other programs or by deficit finance and its impact on private consumption and investment, the net impact on the economy of highway construction in terms of both output and employment could be nullified or even negative.[18]
Not surprisingly, highway spending has a poor track record of stimulating the economy. The Emergency Jobs Appropriations Act of 1983 appropriated billions of dollars in highway spending (among other programs) in hopes of pushing the double-digit unemployment rate downward. Years later, an audit by the General Accounting Office (GAO, now the Government Accountability Office) found that highway spending generally failed to create a significant number of new jobs.[19] The bottom line is that there is no reason to expect additional highway spending this year to boost short-term economic growth or create new jobs.
As stated above, resulting improvements in the nation's infrastructure may increase future productivity and growth—once they are completed and in use. This is not the same as suggesting that the act of spending money on additional highway workers and asphalt is itself an immediate stimulant. Even the hope of future productivity increases rest on the assumptions that politicians will allocate money to necessary highway projects (rather then pork), and that those future productivity benefits will outweigh the lost productivity from raising future tax rates to finance the project.[20]
3) State Bailouts Merely Shift Money Around
Congress is reportedly considering using stimulus funding to bail out states dealing with their own budget shortfalls. This makes little sense as a matter of macroeconomic policy. State spending does not suddenly become stimulative because it is funded by Washington instead of state governments. Either way, any spending "injected" into the economy must first be taxed or borrowed from the economy. It does not matter which level of government is doing the taxing, borrowing, or spending.
Furthermore, sending federal aid to states would not save taxpayers a dime because state taxpayers are also federal taxpayers. Increasing federal borrowing to keep state taxes from rising is like running up a Visa card balance to keep the Mastercard balance from rising. The overall costs do not change, only the address receiving the payment.
Governors typically respond that a federal bailout is preferable because it could be funded with deficits rather than new taxes—currently not an option for the 49 states with balanced-budget requirements. But nobody forced these states to enact balanced-budget requirements, which they are free to repeal. It is disingenuous for a state to enact a balanced-budget amendment, and then demand that Washington bail it out of the consequences of its own policy.
Congress already sends $467 billion to state and local government every year—up 29 percent after inflation since 2000.[21] This is well beyond what is needed to reimburse states for federal mandates. In fact, since 1996, Washington has imposed less than $25 million per state in new unfunded mandates. (No Child Left Behind is neither unfunded nor mandated.)[22] State health, education, and transportation programs remain heavily subsidized by Washington.
Because states are so dependent on income tax revenues—which are volatile—common sense says to build rainy-day funds during booms to cushion the inevitable recessions. Instead, states keep responding to temporary revenue surges with new permanent spending programs. Between 1994 and 2001, states flush with new revenues shunned rainy-day funds and instead expanded their general fund budgets by 6.2 percent annually.[23]
All booms eventually end, and these free-spending states left themselves utterly unprepared for the 2002–2003 economic slowdown. Yet instead of sufficiently paring back their bloated budgets, the states demanded and received a $30 billion bailout from Washington in 2003. When government bails out irresponsible behavior, it only encourages more irresponsibility. And that is just what happened: After the 2003 bailout, states went right back to spending—with annual budget hikes averaging 7.2 percent over the next four years.[24] Rainy-day funds were expanded, although not nearly by enough. Thus, another recession has brought another round of state bailout calls.
How will states learn to budget responsibly if they know they can keep returning to the federal ATM?
The biggest losers from a federal bailout are the taxpayers who live in fiscally responsible states. They played by the rules and resisted extravagant new spending programs—and will be "rewarded" with higher taxes to bail out neighboring states that went on a spending spree they could not afford.That is simply unfair. And it encourages responsible states to be less responsible next time—better to be the bailout recipient than the bailout payer.
Congress should resist a bailout and instead instruct state governments to set priorities, make trade-offs, and reduce unnecessary spending. States that insist on deficit spending should reform their own balanced-budget laws rather than demand that Washington borrow for them. Finally, any federal aid to state governments should come in the form of loans to be repaid in full, with interest, within three years.
A Better Way
Government spending has an abysmal track record of stimulating the economy. However, these repeated failures have not stopped lawmakers from proposing and enacting a seemingly endless string of "stimulus" bills. Rather than redistributing money, lawmakers should focus on improving long-term productivity. This means reducing marginal tax rates to encourage working, saving, and investing. It also means promoting free trade, cutting unnecessary red tape, and streamlining wasteful spending that all weaken the private sector's ability to generate income and create wealth. Finally, it means strengthening education—not just throwing money at it. Addressing long-term growth and productivity is more challenging than waving the magic wand of short-term "stimulus" spending—but a more productive economy will be better prepared to handle future economic downturns.
OBAMA, THE STOCK MARKETS, AND ENERGY
BARACK HUSSEIN OBAMA is an avowed socialist, openly talking about applying marxist dogma and principle to our free market.
He has stated, among other things, that he openly wants all of the following:
Redistribution of Wealth (in his 2001 NPR interview)
That he wants to bankrupt the traditional coal industry (in the closing days of the campaign).
That he wants off shore drilling and ANWR drilling curtailed (before and during the campaign).
That the rest of th world will not put up with Americans driving SUVs, keeping their houses warm, or enjoying their life styles (during the campaign).
That huge bailouts should go tot he very institutions that have caused the financial crisis under democratic party initiatives (during the campaign...and before when he himself was involved in creating, supporting, and pushing forward those very initiatives).
That any talk against his socialistic plans is "greed" and that free market principles that invoke such "greed" should be ended (during the campign and throughout his career as a politician and activist).
Now, despite the complicit and abetting MSM trying to convince everyone to the contrary, or trying to ignore the facts, most savy people in the market recognize Obama's attack on the free market, his plans to derail self sufficiency in energy in the near future, and HIS OWN COMPLICITY IN THE FINANCIAL CRISIS.
So OF COURSE, the free market is running away from investment during an Obama administration, dropping another 22 percent since he was elected.
They expect (and IMHO, rightfully so) for things to get worse financially in the free market instead of better as Obama builds and institutes command market principles (read as complete government control) on these United States.
He is picking people for his cabinet, and already has in place a Congress that will support and push through his agenda in both of these areas, financial markets and energy.
The only hope for blunting it or slowing it down, and that is only if the US Senators would stand up (which is a very iffy thing in and of itself) is if the GOP can maintain 40 seats in the US senate and then use that filibuster capability, abd the bully pulpit to point these things out and derail Obama's agenda.
So, yes, the market is more than nervous and is running away from investment under his administration.
As to oil...prices are down right now. And why? precicely for two reasons:
1) The demand lowered significantly during the high prices earlier this summer.
2) Because Bush and many in the current congress openly talked about offshore drilling, oil shale production, on-shore drilling, and ANWR drilling where all combined, we have mnore oil here in the US than all of the mid east combined.
Bush has put in place (and is still doing so) executive orders to make this possible (which he should have been doing for the last 6 years or more) and OPEC sees it and fears it and will continue to try (along with the demand issues) to get out in front of that and make it as financially unfeasible for us to do as possible.
They would rather get drasticallyy reduced prices from us and still make a decent profit, than to get little or nothing from us at all.
They will do this as long as they think there is a chance that the US will actually move forward with these plans...which we are doing right now.
But as soon as Obama takes office, he is talking about dismantling most, if not all of what is happening now, so there is a real danger that the prices will steadily increase once again as soon as his administration assumes control.
In the mean time, we should all take advantage of the prices of less than $2.00 a gallon we are now enjoying ($1.95 a gallon here in Idaho, as low as the $1.60 a gallon in other places) which the so-called experts, only four months ago were telling us on the MSM that we would likely not see again in our life times.
Thank the GOP for the respite, and please, please, WRITE YOUR SENATORS, all of them and let them know exactly where you stand.
He has stated, among other things, that he openly wants all of the following:
Redistribution of Wealth (in his 2001 NPR interview)
That he wants to bankrupt the traditional coal industry (in the closing days of the campaign).
That he wants off shore drilling and ANWR drilling curtailed (before and during the campaign).
That the rest of th world will not put up with Americans driving SUVs, keeping their houses warm, or enjoying their life styles (during the campaign).
That huge bailouts should go tot he very institutions that have caused the financial crisis under democratic party initiatives (during the campaign...and before when he himself was involved in creating, supporting, and pushing forward those very initiatives).
That any talk against his socialistic plans is "greed" and that free market principles that invoke such "greed" should be ended (during the campign and throughout his career as a politician and activist).
Now, despite the complicit and abetting MSM trying to convince everyone to the contrary, or trying to ignore the facts, most savy people in the market recognize Obama's attack on the free market, his plans to derail self sufficiency in energy in the near future, and HIS OWN COMPLICITY IN THE FINANCIAL CRISIS.
So OF COURSE, the free market is running away from investment during an Obama administration, dropping another 22 percent since he was elected.
They expect (and IMHO, rightfully so) for things to get worse financially in the free market instead of better as Obama builds and institutes command market principles (read as complete government control) on these United States.
He is picking people for his cabinet, and already has in place a Congress that will support and push through his agenda in both of these areas, financial markets and energy.
The only hope for blunting it or slowing it down, and that is only if the US Senators would stand up (which is a very iffy thing in and of itself) is if the GOP can maintain 40 seats in the US senate and then use that filibuster capability, abd the bully pulpit to point these things out and derail Obama's agenda.
So, yes, the market is more than nervous and is running away from investment under his administration.
As to oil...prices are down right now. And why? precicely for two reasons:
1) The demand lowered significantly during the high prices earlier this summer.
2) Because Bush and many in the current congress openly talked about offshore drilling, oil shale production, on-shore drilling, and ANWR drilling where all combined, we have mnore oil here in the US than all of the mid east combined.
Bush has put in place (and is still doing so) executive orders to make this possible (which he should have been doing for the last 6 years or more) and OPEC sees it and fears it and will continue to try (along with the demand issues) to get out in front of that and make it as financially unfeasible for us to do as possible.
They would rather get drasticallyy reduced prices from us and still make a decent profit, than to get little or nothing from us at all.
They will do this as long as they think there is a chance that the US will actually move forward with these plans...which we are doing right now.
But as soon as Obama takes office, he is talking about dismantling most, if not all of what is happening now, so there is a real danger that the prices will steadily increase once again as soon as his administration assumes control.
In the mean time, we should all take advantage of the prices of less than $2.00 a gallon we are now enjoying ($1.95 a gallon here in Idaho, as low as the $1.60 a gallon in other places) which the so-called experts, only four months ago were telling us on the MSM that we would likely not see again in our life times.
Thank the GOP for the respite, and please, please, WRITE YOUR SENATORS, all of them and let them know exactly where you stand.
Sunday, November 23, 2008
21nov08 only 9 stocks with options, here is another one to make it 10, but this no option
Stock: Allegiant Travel Company
Symbol: ALGT
Current Price: $38.97
Exchange: NMS
Industry Group: Transportation-Airline
Overall Rating: (99 = A+)
Stock's Diagnosis
Technical Rating (98 = A+) Group's Technical Rating (94 = A)
Fundamental Rating (79 = B-) Group's Fundamental Rating (46 = D)
Attractiveness Rating (99 = A+)
Allegiant Travel Company's Rank within the Transportation-Airline Group
worst best
Overall Rank: 1st out of 30 stocks
worst best
Technical Rank: 1st out of 30 stocks
worst best
Fundamental Rank: 8th out of 30 stocks
worst best
Attractiveness Rank: 1st out of 30 stocks
Note: There are cases where two or more stocks have the same Rank within an Industry Group. This reflects that the companies had an equal rating after computing and weighting all components in the category.
Top 5 Companies in the Transportation-Airline Group Stocks Above $10 - Sorted By Best Overall Rating
Allegiant Travel Company ALGT
Republic Airways Holdngs RJET
Ryanair Hldgs Plc Adr RYAAY
Alaska Air Group Inc ALK
Copa Holdings Sa CPA
Earnings Per Share (EPS) Rating Relative Price Strength (RS) Rating Industry Group Relative Strength (Grp RS) Rating Sales + Profit Margins + ROE (SMR) Rating Accumulation/ Distribution (Acc/Dis) Rating
47 99 A+ B A+
Vital Statistics
Industry Group Rank (1-197) 2 % Off 52 Week Price High -10%
Daily Graphs Timeliness A 52 Week Price High $43.10
Alpha 0.42 52 Week Price Low $15.89
Beta 0.99 3 Year Earnings Per Share Rate 65%
Up/Down Volume 1.3 3 Year Sales Rate 60%
Performance Industry Group Performance
% Change Year To Date 21% % Change Year To Date -45%
% Change in Last 12 Months 23% % Change in Last 12 Months -52%
% Change in Last 4 Weeks 15% % Change in Last 4 Weeks -8%
Stock Performance vs. Index* Group Performance vs. Index*
% Change vs Index,
Year To Date 67% % Change vs Index,
Year To Date 1%
% Change vs. Index,
in Last 12 Months 69% % Change vs. Index,
in Last 12 Months -6%
% Change vs. Index,
in Last 4 Weeks 21% % Change vs. Index,
in Last 4 Weeks -2%
Stock Checkup Analysis:
Allegiant Travel Company receives an overall rating of A+, which is in the 99th percentile of all stocks in the database. The overall rating is calculated using five proprietary ratings that measure each stock's Technical and Fundamental qualities and the Technical and Fundamental qualities of the industry group that it resides in, as well as a rating on the stock's current price attractiveness.
Allegiant Travel Company receives a Technical Rating of 98, which places it 1st out of 30 stocks in the Transportation-Airline group.
Allegiant Travel Company receives a Fundamental Rating of 79, which places it 8th out of 30 stocks in the Transportation-Airline group.
Allegiant Travel Company receives an Attractiveness Rating of 99, placing it 1st out of 30 stocks in its group.
The Transportation-Airline group's technical rating of A ranks it in the 94th percentile of the 197 different Industry Groups. The Transportation-Airline group's fundamental rating is D, ranking it in the 46th percentile of all groups.
Stocks surged late Friday on reports that President-elect Obama had tapped New York Federal Reserve President Timothy Geithner to be the next Treasury secretary.
The Nasdaq rebounded to gain 5.2%. The S&P 500 soared 6.3%, the NYSE composite 6.6%, the Dow industrials 6.5%.
Geithner, named by several media outlets as the new head of the Treasury, was the Fed's point man on the Bear Stearns and AIG (AIG) rescue deals.
That news, combined with the market being heavily sold in the past few days, opened the door for a big rally. The Dow's 10.4% loss over the previous two sessions was its biggest drop in more than 20 years.
Friday's gains pared some big losses for the week.
Still, the Nasdaq closed with a weekly loss of 8.7%. The Dow dropped 5.3%, the S&P 500 8.4%, the NYSE composite 9%.
Despite Friday's big price gains, investors showed a curious lack of conviction.
Volume ended mixed. It fell 4% on the Nasdaq, albeit compared with Thursday's elevated levels. NYSE volume climbed 4%. Friday was an options-expiration day, which typically boosts trading.
Market breadth was also less than expected, given the big overall price gains. Winners beat losers by about a modest 9-to-5 ratio on the Nasdaq. NYSE gainers outpaced decliners by less than 2-to-1.
Also keep in mind that this was just one up day. Some investors may have been temporarily emboldened here and there over the past few weeks, as the market has mixed in some big gains with its stream of losses.
History tells us not to get too excited about an outlier here or there. Most of the biggest single-day gains in Wall Street history have occurred during bear markets.
Overall, fear continues to hang over the market. The put-call ratio hit 1.14 on Friday, despite the session's big advance.
That was down just slightly from a 1.21 reading Thursday. Any number above 1 suggests elevated levels of investor fear.
Another sign of trepidation has been the action in the bond market. Bond prices have shot up, yanking yields down as a result.
The yield on the three-month Treasury bill, often seen as the safest place to stash money short-term, remained barely above zero.
That's a telltale sign that shell-shocked investors are willing to take literally zero return for their money — so long as they're not losing large amounts in the beleaguered stock market.
Financial stocks continued to feel the pain, despite the broad market's gains. Citigroup (C) plunged 20% in massive volume, as the bank sector and credit markets remained under pressure.
On the tech side, Dell (DELL) fell 51 cents, or 5%, to 9.30 in rapid turnover. After Thursday's close, the PC maker reported weaker sales and earnings results that still beat analysts' views.
Also late Thursday, apparel chain Gap (GPS) reported its quarterly earnings results, topping earnings estimates but missing sales views. The stock vaulted 27%.
Energy stocks also gained ground, thanks to an uptick in energy prices. Crude oil advanced 51 cents to $49.93 a barrel.
That triggered hefty gains for bellwether energy stocks such as Exxon Mobil (XOM) and Chevron (CVX).
Smaller names also perked up. World Fuel Services (INT) bounced 4.38, or 17%, to 30.49 in nearly double its normal trade. The vendor of aviation, marine and land fuel bounced back after a 17% loss on Thursday.
Still, a number of top-rated stocks also turned lower.
ManTech International (MANT) shed 1.79 to 47.27 as volume swelled to more than six times its usual level. The provider of IT services to government agencies tried to rally above its 200-day moving average before turning sharply lower.
Celgene (CELG) dropped 3.54, or 7%, to 47.50 in twice its typical turnover. The biotech slumped for the sixth straight session after recently running into resistance at its 50-day moving average. It closed near a 52-week trough.
Symbol: ALGT
Current Price: $38.97
Exchange: NMS
Industry Group: Transportation-Airline
Overall Rating: (99 = A+)
Stock's Diagnosis
Technical Rating (98 = A+) Group's Technical Rating (94 = A)
Fundamental Rating (79 = B-) Group's Fundamental Rating (46 = D)
Attractiveness Rating (99 = A+)
Allegiant Travel Company's Rank within the Transportation-Airline Group
worst best
Overall Rank: 1st out of 30 stocks
worst best
Technical Rank: 1st out of 30 stocks
worst best
Fundamental Rank: 8th out of 30 stocks
worst best
Attractiveness Rank: 1st out of 30 stocks
Note: There are cases where two or more stocks have the same Rank within an Industry Group. This reflects that the companies had an equal rating after computing and weighting all components in the category.
Top 5 Companies in the Transportation-Airline Group Stocks Above $10 - Sorted By Best Overall Rating
Allegiant Travel Company ALGT
Republic Airways Holdngs RJET
Ryanair Hldgs Plc Adr RYAAY
Alaska Air Group Inc ALK
Copa Holdings Sa CPA
Earnings Per Share (EPS) Rating Relative Price Strength (RS) Rating Industry Group Relative Strength (Grp RS) Rating Sales + Profit Margins + ROE (SMR) Rating Accumulation/ Distribution (Acc/Dis) Rating
47 99 A+ B A+
Vital Statistics
Industry Group Rank (1-197) 2 % Off 52 Week Price High -10%
Daily Graphs Timeliness A 52 Week Price High $43.10
Alpha 0.42 52 Week Price Low $15.89
Beta 0.99 3 Year Earnings Per Share Rate 65%
Up/Down Volume 1.3 3 Year Sales Rate 60%
Performance Industry Group Performance
% Change Year To Date 21% % Change Year To Date -45%
% Change in Last 12 Months 23% % Change in Last 12 Months -52%
% Change in Last 4 Weeks 15% % Change in Last 4 Weeks -8%
Stock Performance vs. Index* Group Performance vs. Index*
% Change vs Index,
Year To Date 67% % Change vs Index,
Year To Date 1%
% Change vs. Index,
in Last 12 Months 69% % Change vs. Index,
in Last 12 Months -6%
% Change vs. Index,
in Last 4 Weeks 21% % Change vs. Index,
in Last 4 Weeks -2%
Stock Checkup Analysis:
Allegiant Travel Company receives an overall rating of A+, which is in the 99th percentile of all stocks in the database. The overall rating is calculated using five proprietary ratings that measure each stock's Technical and Fundamental qualities and the Technical and Fundamental qualities of the industry group that it resides in, as well as a rating on the stock's current price attractiveness.
Allegiant Travel Company receives a Technical Rating of 98, which places it 1st out of 30 stocks in the Transportation-Airline group.
Allegiant Travel Company receives a Fundamental Rating of 79, which places it 8th out of 30 stocks in the Transportation-Airline group.
Allegiant Travel Company receives an Attractiveness Rating of 99, placing it 1st out of 30 stocks in its group.
The Transportation-Airline group's technical rating of A ranks it in the 94th percentile of the 197 different Industry Groups. The Transportation-Airline group's fundamental rating is D, ranking it in the 46th percentile of all groups.
Stocks surged late Friday on reports that President-elect Obama had tapped New York Federal Reserve President Timothy Geithner to be the next Treasury secretary.
The Nasdaq rebounded to gain 5.2%. The S&P 500 soared 6.3%, the NYSE composite 6.6%, the Dow industrials 6.5%.
Geithner, named by several media outlets as the new head of the Treasury, was the Fed's point man on the Bear Stearns and AIG (AIG) rescue deals.
That news, combined with the market being heavily sold in the past few days, opened the door for a big rally. The Dow's 10.4% loss over the previous two sessions was its biggest drop in more than 20 years.
Friday's gains pared some big losses for the week.
Still, the Nasdaq closed with a weekly loss of 8.7%. The Dow dropped 5.3%, the S&P 500 8.4%, the NYSE composite 9%.
Despite Friday's big price gains, investors showed a curious lack of conviction.
Volume ended mixed. It fell 4% on the Nasdaq, albeit compared with Thursday's elevated levels. NYSE volume climbed 4%. Friday was an options-expiration day, which typically boosts trading.
Market breadth was also less than expected, given the big overall price gains. Winners beat losers by about a modest 9-to-5 ratio on the Nasdaq. NYSE gainers outpaced decliners by less than 2-to-1.
Also keep in mind that this was just one up day. Some investors may have been temporarily emboldened here and there over the past few weeks, as the market has mixed in some big gains with its stream of losses.
History tells us not to get too excited about an outlier here or there. Most of the biggest single-day gains in Wall Street history have occurred during bear markets.
Overall, fear continues to hang over the market. The put-call ratio hit 1.14 on Friday, despite the session's big advance.
That was down just slightly from a 1.21 reading Thursday. Any number above 1 suggests elevated levels of investor fear.
Another sign of trepidation has been the action in the bond market. Bond prices have shot up, yanking yields down as a result.
The yield on the three-month Treasury bill, often seen as the safest place to stash money short-term, remained barely above zero.
That's a telltale sign that shell-shocked investors are willing to take literally zero return for their money — so long as they're not losing large amounts in the beleaguered stock market.
Financial stocks continued to feel the pain, despite the broad market's gains. Citigroup (C) plunged 20% in massive volume, as the bank sector and credit markets remained under pressure.
On the tech side, Dell (DELL) fell 51 cents, or 5%, to 9.30 in rapid turnover. After Thursday's close, the PC maker reported weaker sales and earnings results that still beat analysts' views.
Also late Thursday, apparel chain Gap (GPS) reported its quarterly earnings results, topping earnings estimates but missing sales views. The stock vaulted 27%.
Energy stocks also gained ground, thanks to an uptick in energy prices. Crude oil advanced 51 cents to $49.93 a barrel.
That triggered hefty gains for bellwether energy stocks such as Exxon Mobil (XOM) and Chevron (CVX).
Smaller names also perked up. World Fuel Services (INT) bounced 4.38, or 17%, to 30.49 in nearly double its normal trade. The vendor of aviation, marine and land fuel bounced back after a 17% loss on Thursday.
Still, a number of top-rated stocks also turned lower.
ManTech International (MANT) shed 1.79 to 47.27 as volume swelled to more than six times its usual level. The provider of IT services to government agencies tried to rally above its 200-day moving average before turning sharply lower.
Celgene (CELG) dropped 3.54, or 7%, to 47.50 in twice its typical turnover. The biotech slumped for the sixth straight session after recently running into resistance at its 50-day moving average. It closed near a 52-week trough.
21nov08
CALL OPTIONS Expire at close Fri, Feb 20, 2009
Strike Symbol Last Chg Bid Ask Vol Open Int
30.00 CLBF.X 31.90 0.00 32.70 33.40 27 27
45.00 CLBI.X 18.50 0.00 19.00 19.50 18 18
50.00 CLBJ.X 16.00 0.00 14.90 15.30 20 21
55.00 CLBK.X 11.20 0.00 11.10 11.50 300 511
60.00 CLBL.X 6.50 0.60 7.90 8.20 105 771
65.00 CLBM.X 4.20 0.90 5.20 5.50 97 1,611
70.00 CLBN.X 2.50 0.25 3.20 3.50 3 1,107
75.00 CLBO.X 1.40 0.70 1.80 2.00 3 1,345
80.00 CLBP.X 1.00 0.20 0.95 1.10 26 894
85.00 CLBQ.X 0.60 0.00 0.45 0.60 20 943
90.00 CLBR.X 0.20 0.00 0.15 0.30 101 188
PUT OPTIONS Expire at close Fri, Feb 20, 2009
Strike Symbol Last Chg Bid Ask Vol Open Int
30.00 CLNF.X 0.30 0.05 0.25 0.40 1 60
35.00 CLNG.X 0.65 0.15 0.55 0.70 58 288
40.00 CLNH.X 1.10 0.30 1.00 1.15 11 74
45.00 CLNI.X 1.80 0.20 1.65 1.75 37 712
50.00 CLNJ.X 2.95 0.00 2.50 2.65 112 583
55.00 CLNK.X 4.30 0.30 3.70 4.00 10 2,257
60.00 CLNL.X 6.80 0.20 5.50 5.70 94 785
65.00 CLNM.X 9.70 2.20 7.80 8.00 4 2,403
70.00 CLNN.X 10.20 0.00 10.70 11.00 3 1,801
75.00 CLNO.X 13.70 0.00 14.30 14.60 20 1,501
80.00 CLNP.X 18.90 0.00 18.30 18.80 10 397
85.00 CLNQ.X 21.00 0.00 22.80 23.20 10 249
90.00 CLNR.X 31.30 0.00 27.50 27.90 10 10
CALL OPTIONS Expire at close Fri, Apr 17, 2009
Strike Symbol Last Chg Bid Ask Vol Open Int
30.00 KBUDF.X 32.30 0.00 38.10 40.20 10 10
35.00 KBUDG.X 26.70 0.00 33.40 35.50 1 1
40.00 KBUDH.X 22.00 0.00 29.00 31.30 3 25
45.00 KBUDI.X 16.70 0.00 24.80 26.80 0 9
50.00 KBUDJ.X 9.10 0.00 20.90 23.10 0 16
55.00 KBUDK.X 14.92 0.00 17.30 19.50 3 8
60.00 KBUDL.X 15.50 0.00 14.10 15.80 4 41
65.00 KBUDM.X 11.30 0.00 11.10 12.60 5 522
70.00 KBUDN.X 10.10 0.00 8.70 10.00 33 87
75.00 KBUDO.X 7.00 0.40 6.70 8.50 5 313
80.00 KBUDP.X 5.70 0.00 4.90 6.20 11 133
85.00 KBUDQ.X 4.50 0.00 3.40 4.50 10 45
90.00 KBUDR.X 3.00 0.00 2.30 3.40 11 52
95.00 KBUDS.X 1.90 0.00 1.45 2.40 5 43
PUT OPTIONS Expire at close Fri, Apr 17, 2009
Strike Symbol Last Chg Bid Ask Vol Open Int
35.00 KBUPG.X 1.05 0.00 0.30 1.10 10 10
40.00 KBUPH.X 1.30 0.00 0.75 1.75 10 30
45.00 KBUPI.X 1.70 0.00 1.45 2.55 10 83
50.00 KBUPJ.X 2.60 0.00 2.40 3.60 0 10
55.00 KBUPK.X 3.70 0.00 3.70 5.10 30 196
60.00 KBUPL.X 5.10 0.00 5.20 6.80 30 147
65.00 KBUPM.X 7.20 0.00 7.10 8.90 2 276
70.00 KBUPN.X 10.90 0.30 9.50 11.50 1 33
75.00 KBUPO.X 12.00 0.00 12.60 14.40 6 36
80.00 KBUPP.X 16.80 0.00 15.40 17.60 1 12
85.00 KBUPQ.X 20.10 0.00 18.70 21.20 20 30
90.00 KBUPR.X 30.00 0.00 22.10 25.10 10 10
CALL OPTIONS Expire at close Fri, Mar 20, 2009
Strike Symbol Last Chg Bid Ask Vol Open Int
45.00 CQXCI.X 10.10 0.00 10.40 14.10 20 36
50.00 CQXCJ.X 7.20 0.00 7.20 11.10 10 20
55.00 CQXCK.X 4.40 0.00 4.80 8.70 10 27
60.00 CQXCL.X 0.30 0.00 2.80 6.80 0 10
65.00 CQXCM.X 3.40 0.00 1.00 5.30 10 148
PUT OPTIONS Expire at close Fri, Mar 20, 2009
Strike Symbol Last Chg Bid Ask Vol Open Int
35.00 CQXOG.X 2.00 0.00 N/A 5.00 10 20
40.00 CQXOH.X 3.30 0.00 0.50 5.30 1 61
45.00 CQXOI.X 5.10 0.00 2.10 6.80 30 40
50.00 CQXOJ.X 6.00 0.00 3.90 8.60 4 55
55.00 CQXOK.X 10.00 0.00 6.50 11.10 1 12
CALL OPTIONS Expire at close Fri, Apr 17, 2009
Strike Symbol Last Chg Bid Ask Vol Open Int
120.00 SQGDD.X 100.00 0.00 97.10 101.20 0 10
140.00 SDQDH.X 81.90 0.00 80.00 84.20 10 10
160.00 SDQDL.X 45.00 0.00 64.10 68.60 0 20
165.00 SDQDM.X 41.60 0.00 60.60 64.70 0 10
170.00 SDQDN.X 58.40 0.00 56.70 60.80 0 10
175.00 SDQDO.X 51.70 0.00 53.60 57.80 0 10
180.00 SDQDP.X 45.00 0.00 50.20 54.40 1 11
185.00 SDQDQ.X 49.42 0.00 46.40 50.40 0 11
190.00 SDQDR.X 14.10 0.00 43.00 46.80 0 12
195.00 SDQDS.X 36.60 0.00 39.90 43.80 0 10
200.00 SDQDW.X 41.80 0.00 37.40 41.60 1 1
210.00 SDQDX.X 34.10 0.00 31.90 36.00 1 31
220.00 SDQDY.X 29.60 0.00 26.50 29.90 35 46
230.00 SDQDU.X 21.28 0.00 22.40 24.30 1 16
240.00 SDQDZ.X 19.80 0.00 17.90 21.70 3 13
250.00 SDQDV.X 18.20 0.00 14.80 18.90 2 455
290.00 SDQDD.X 8.70 0.00 5.00 9.10 63 63
PUT OPTIONS Expire at close Fri, Apr 17, 2009
Strike Symbol Last Chg Bid Ask Vol Open Int
100.00 SQGPT.X 2.25 0.00 1.25 5.00 1 1
105.00 SQGPA.X 3.31 0.39 1.65 5.30 4 22
110.00 SQGPB.X 3.92 1.12 2.15 5.80 1 17
115.00 SQGPC.X 1.80 0.00 2.65 6.30 0 20
120.00 SQGPD.X 1.30 0.00 2.90 6.80 0 10
125.00 SQGPE.X 4.70 0.00 3.40 7.40 14 24
135.00 SDQPG.X 5.00 0.00 4.70 8.80 53 53
140.00 SDQPH.X 5.40 0.00 6.50 9.90 63 63
145.00 SDQPI.X 5.90 0.00 6.70 10.50 24 24
150.00 SDQPJ.X 6.80 0.00 7.60 11.60 44 44
155.00 SDQPK.X 7.70 0.00 8.60 12.70 24 24
160.00 SDQPL.X 8.00 0.00 9.90 13.80 3 80
165.00 SDQPM.X 12.80 0.00 11.90 15.00 10 61
170.00 SDQPN.X 14.09 0.00 12.70 16.30 1 79
175.00 SDQPO.X 11.10 0.00 14.10 17.80 50 71
180.00 SDQPP.X 14.24 0.00 16.30 19.40 1 180
185.00 SDQPQ.X 10.80 0.00 18.00 20.90 10 24
190.00 SDQPR.X 25.20 13.30 20.40 22.70 25 23
200.00 SDQPW.X 26.50 1.78 23.10 26.50 3 65
210.00 SDQPX.X 25.74 0.00 27.50 30.90 1 20
220.00 SDQPY.X 27.00 0.00 32.40 35.70 10 28
230.00 SDQPU.X 45.40 0.00 37.90 41.20 0 10
240.00 SDQPZ.X 40.00 0.00 44.60 47.10 0 10
250.00 SDQPV.X 56.90 8.70 50.60 53.50 1 30
290.00 SDQPD.X 76.50 0.00 80.60 83.70 10 10
300.00 SDQPE.X 77.70 0.00 89.50 92.10 10 10
CALL OPTIONS Expire at close Fri, Feb 20, 2009
Strike Symbol Last Chg Bid Ask Vol Open Int
25.00 OAQBE.X 45.80 0.00 44.40 45.50 10 31
30.00 OAQBF.X 33.30 0.00 40.40 40.90 0 42
35.00 OAQBG.X 34.83 0.00 35.80 36.30 6 38
40.00 OAQBH.X 21.30 0.00 31.50 31.90 16 38
45.00 OAQBI.X 23.50 0.00 27.20 27.70 10 129
50.00 OAQBJ.X 22.10 0.00 23.30 23.80 30 372
55.00 OAQBK.X 18.50 1.10 19.70 20.10 14 840
60.00 OAQBL.X 16.50 3.00 16.20 16.70 19 1,355
65.00 OAQBM.X 13.20 1.40 13.30 13.60 274 2,537
70.00 OAQBN.X 9.35 0.20 10.50 10.90 136 8,203
75.00 OAQBO.X 7.60 0.43 8.30 8.60 112 1,063
80.00 OAQBP.X 5.00 0.70 6.40 6.70 268 5,188
85.00 OAQBQ.X 3.70 0.40 4.80 5.10 8 42
90.00 OAQBR.X 2.50 0.00 3.50 3.80 20 51
95.00 OAQBS.X 1.75 0.00 2.55 2.80 20 64
100.00 OAQBT.X 1.20 0.00 1.80 2.05 20 170
105.00 OAQBA.X 0.70 0.00 1.25 1.45 10 36
110.00 OAQBB.X 0.85 0.05 0.85 1.00 50 40
PUT OPTIONS Expire at close Fri, Feb 20, 2009
Strike Symbol Last Chg Bid Ask Vol Open Int
25.00 OAQNE.X 0.20 0.00 0.15 0.30 34 160
30.00 OAQNF.X 0.35 0.00 0.45 0.55 30 103
35.00 OAQNG.X 0.95 0.40 0.85 0.95 30 189
40.00 OAQNH.X 1.55 0.45 1.40 1.55 40 231
45.00 OAQNI.X 2.40 0.20 2.15 2.40 10 2,005
50.00 OAQNJ.X 3.40 0.10 3.20 3.50 44 1,116
55.00 OAQNK.X 5.40 0.70 4.50 4.80 589 4,905
60.00 OAQNL.X 7.20 1.50 6.10 6.50 522 5,136
65.00 OAQNM.X 9.50 1.10 8.20 8.40 261 1,750
70.00 OAQNN.X 11.80 0.40 10.30 10.70 30 2,537
75.00 OAQNO.X 15.20 0.10 13.00 13.50 52 664
80.00 OAQNP.X 16.80 1.10 16.10 16.60 31 706
90.00 OAQNR.X 23.00 0.00 23.10 23.60 4 4
CALL OPTIONS Expire at close Fri, Mar 20, 2009
Strike Symbol Last Chg Bid Ask Vol Open Int
20.00 QHTCD.X 4.50 0.00 7.60 8.80 0 2
22.50 QHTCX.X 2.70 0.00 5.90 7.10 2 2
25.00 QHTCE.X 4.40 0.00 4.50 5.40 1 20
PUT OPTIONS Expire at close Fri, Mar 20, 2009
Strike Symbol Last Chg Bid Ask Vol Open Int
17.50 QHTOW.X 1.45 0.00 0.30 0.90 0 10
20.00 QHTOD.X 1.75 0.00 0.85 1.40 10 30
22.50 QHTOX.X 2.25 0.00 1.60 2.10 3 3
25.00 QHTOE.X 3.70 0.00 2.55 3.40 0 10
CALL OPTIONS Expire at close Fri, Mar 20, 2009
Strike Symbol Last Chg Bid Ask Vol Open Int
25.00 PNYCE.X 7.60 1.50 7.70 9.00 10 10
30.00 PNYCF.X 2.65 1.45 4.50 5.50 6 121
35.00 PNYCG.X 2.00 0.05 2.05 3.10 5 355
PUT OPTIONS Expire at close Fri, Mar 20, 2009
Strike Symbol Last Chg Bid Ask Vol Open Int
22.50 PNYOX.X 0.75 0.35 0.40 1.05 10 40
25.00 PNYOE.X 1.55 0.10 1.00 1.65 10 59
30.00 PNYOF.X 2.65 0.00 2.45 3.50 10 50
35.00 PNYOG.X 5.30 0.00 5.00 6.00 1 41
CALL OPTIONS Expire at close Fri, Mar 20, 2009
Strike Symbol Last Chg Bid Ask Vol Open Int
35.00 LGCG.X 18.00 0.00 16.90 18.50 1 21
40.00 LGCH.X 13.60 0.00 12.80 14.40 1 13
45.00 LGCI.X 7.90 0.00 9.20 10.80 2 60
50.00 LGCJ.X 5.10 0.20 6.60 7.60 30 80
55.00 LGCK.X 4.60 0.60 4.50 5.30 20 73
60.00 LGCL.X 2.35 0.60 2.80 3.60 6 60
PUT OPTIONS Expire at close Fri, Mar 20, 2009
Strike Symbol Last Chg Bid Ask Vol Open Int
30.00 LGOF.X 0.65 0.10 0.05 0.55 20 55
35.00 LGOG.X 1.20 0.00 0.50 1.00 10 150
40.00 LGOH.X 2.25 0.00 1.50 2.00 10 192
45.00 LGOI.X 1.75 0.00 2.75 3.60 4 144
50.00 LGOJ.X 6.50 0.90 4.80 5.80 30 67
55.00 LGOK.X 8.50 0.50 7.60 8.60 30 32
CALL OPTIONS Expire at close Fri, Apr 17, 2009
Strike Symbol Last Chg Bid Ask Vol Open Int
25.00 WGLDE.X 2.80 0.00 10.80 11.60 0 1
30.00 WGLDF.X 4.00 0.00 7.10 7.90 3 32
35.00 WGLDG.X 3.00 0.00 4.30 4.90 3 104
40.00 WGLDH.X 1.40 0.00 2.20 2.70 20 80
PUT OPTIONS Expire at close Fri, Apr 17, 2009
Strike Symbol Last Chg Bid Ask Vol Open Int
22.50 WGLPX.X 0.95 0.00 0.60 0.90 0 60
25.00 WGLPE.X 3.30 0.00 0.95 1.25 0 10
30.00 WGLPF.X 3.80 0.00 2.30 2.80 10 160
35.00 WGLPG.X 5.60 0.00 4.40 5.00 10 32
Monday, November 17, 2008
14nov08
CALL OPTIONS Expire at close Fri, Feb 20, 2009
Strike Symbol Last Chg Bid Ask Vol Open Int
20.00 DQOBD.X 19.20 0.00 18.80 20.50 11 11
27.50 DQOBY.X 13.20 0.00 12.30 13.00 1 32
30.00 DQOBF.X 9.50 0.00 10.40 11.00 1 93
32.50 DQOBZ.X 8.60 0.00 8.60 9.10 4 20
35.00 DQOBG.X 7.23 0.57 7.00 7.40 2 205
37.50 DQOBU.X 6.20 0.80 5.60 6.00 27 825
40.00 DQOBH.X 4.50 0.50 4.40 4.70 37 459
42.50 DQOBV.X 3.80 0.80 3.30 3.70 6 870
45.00 DQOBI.X 2.85 0.70 2.55 2.80 6 201
47.50 DQOBW.X 2.15 0.46 1.90 2.15 1 297
50.00 DQOBJ.X 1.40 0.00 1.40 1.60 84 210
55.00 DQOBK.X 0.65 0.00 0.65 0.85 107 154
60.00 DQOBL.X 0.40 0.00 0.25 0.45 0 57
PUT OPTIONS Expire at close Fri, Feb 20, 2009
Strike Symbol Last Chg Bid Ask Vol Open Int
20.00 DQOND.X 0.45 0.00 0.30 0.50 0 40
22.50 DQONX.X 0.60 0.00 0.50 0.70 0 10
25.00 DQONE.X 0.85 0.00 0.80 1.05 120 245
27.50 DQONY.X 1.52 0.00 1.30 1.50 1 119
30.00 DQONF.X 1.55 0.00 1.90 2.05 10 196
32.50 DQONZ.X 2.65 0.00 2.60 2.80 14 345
35.00 DQONG.X 3.60 0.30 3.40 3.70 30 623
37.50 DQONU.X 5.00 0.00 4.50 4.80 55 601
40.00 DQONH.X 5.10 0.00 5.70 6.00 10 302
42.50 DQONV.X 7.50 0.00 7.00 7.50 15 314
45.00 DQONI.X 8.50 0.00 8.60 9.20 11 63
47.50 DQONW.X 11.00 0.00 10.40 11.00 32 44
50.00 DQONJ.X 12.70 0.00 12.10 13.00 10 32
55.00 DQONK.X 16.40 0.00 15.90 17.30 10 10
CALL OPTIONS Expire at close Fri, Apr 17, 2009
Strike Symbol Last Chg Bid Ask Vol Open Int
15.00 FDODC.X 13.00 0.00 12.20 12.70 11 10
20.00 FDODD.X 10.10 0.00 8.40 8.80 2 22
22.50 FDODX.X 7.60 0.00 6.80 7.10 10 31
25.00 FDODE.X 6.20 0.00 5.30 5.80 1 249
27.50 FDODY.X 4.30 0.00 4.10 4.50 10 178
30.00 FDODF.X 3.90 0.00 3.00 3.50 1 143
35.00 FDODG.X 1.95 0.00 1.60 1.90 35 472
40.00 FDODH.X 1.05 0.15 0.75 1.00 6 166
PUT OPTIONS Expire at close Fri, Apr 17, 2009
Strike Symbol Last Chg Bid Ask Vol Open Int
15.00 FDOPC.X 0.90 0.00 0.80 1.00 30 45
17.50 FDOPW.X 1.40 0.00 1.25 1.55 20 20
20.00 FDOPD.X 2.15 0.25 1.90 2.20 18 50
22.50 FDOPX.X 3.00 0.00 2.70 3.10 11 64
25.00 FDOPE.X 3.50 0.40 3.70 4.10 1 114
27.50 FDOPY.X 5.10 0.00 4.90 5.30 3 48
30.00 FDOPF.X 7.00 0.00 6.40 6.80 3 93
35.00 FDOPG.X 11.60 0.00 9.80 10.30 10 30
40.00 FDOPH.X 13.40 0.50 14.00 14.40 10 30
CALL OPTIONS Expire at close Fri, Feb 20, 2009
Strike Symbol Last Chg Bid Ask Vol Open Int
50.00 BAXBJ.X 10.78 0.00 11.70 12.10 3 198
55.00 BAXBK.X 8.00 0.00 8.10 8.40 10 96
57.50 BAXBY.X 7.10 0.00 6.50 6.90 10 161
60.00 BAXBL.X 5.90 0.00 5.10 5.50 19 519
62.50 BAXBZ.X 4.00 0.00 4.00 4.30 1 210
65.00 BAXBM.X 2.90 0.00 3.00 3.30 1 420
67.50 BAXBU.X 2.40 0.00 2.20 2.40 14 341
70.00 BAXBN.X 2.35 0.60 1.60 1.75 17 1,392
72.50 BAXBV.X 1.15 0.00 1.15 1.30 20 1,121
75.00 BAXBO.X 0.80 0.00 0.75 0.90 15 2,507
80.00 BAXBP.X 0.35 0.00 0.35 0.45 15 2,313
85.00 BAXBQ.X 0.50 0.00 0.10 0.25 0 206
PUT OPTIONS Expire at close Fri, Feb 20, 2009
Strike Symbol Last Chg Bid Ask Vol Open Int
50.00 BAXNJ.X 1.90 0.00 1.80 1.95 1 573
55.00 BAXNK.X 3.40 0.00 3.10 3.30 20 418
57.50 BAXNY.X 4.47 0.00 4.00 4.30 40 403
60.00 BAXNL.X 4.80 1.10 5.10 5.40 9 272
62.50 BAXNZ.X 5.80 0.00 6.40 6.70 1 312
65.00 BAXNM.X 7.70 0.20 7.90 8.20 3 631
67.50 BAXNU.X 11.60 0.00 9.70 9.90 25 223
70.00 BAXNN.X 6.00 0.00 11.50 11.80 0 392
72.50 BAXNV.X 11.90 0.00 13.40 13.90 22 284
75.00 BAXNO.X 8.90 0.00 15.60 16.10 0 420
80.00 BAXNP.X 19.90 0.00 20.20 20.60 4 89
CALL OPTIONS Expire at close Fri, May 15, 2009
Strike Symbol Last Chg Bid Ask Vol Open Int
22.50 CPAEX.X 7.60 0.00 6.20 6.80 10 10
30.00 CPAEF.X 5.00 0.00 3.30 3.80 10 10
35.00 CPAEG.X 2.00 0.00 2.15 2.55 3 50
PUT OPTIONS Expire at close Fri, May 15, 2009
Strike Symbol Last Chg Bid Ask Vol Open Int
20.00 CPAQD.X 4.20 0.00 3.20 3.60 10 10
30.00 CPAQF.X 9.80 0.00 8.80 9.40 10 10
CALL OPTIONS Expire at close Fri, Apr 17, 2009
Strike Symbol Last Chg Bid Ask Vol Open Int
30.00 KBUDF.X 32.30 0.00 41.10 43.60 0 10
35.00 KBUDG.X 26.70 0.00 36.40 38.70 0 1
40.00 KBUDH.X 22.00 0.00 31.70 33.60 3 25
45.00 KBUDI.X 16.70 0.00 27.40 28.90 0 9
50.00 KBUDJ.X 9.10 0.00 23.30 25.40 0 16
55.00 KBUDK.X 14.92 0.00 19.30 21.40 3 8
60.00 KBUDL.X 7.10 0.00 15.80 17.40 10 42
65.00 KBUDM.X 11.30 0.00 12.60 14.10 5 522
70.00 KBUDN.X 10.60 2.80 10.10 11.70 1 102
75.00 KBUDO.X 8.70 2.50 8.70 9.20 112 235
80.00 KBUDP.X 4.10 0.00 6.60 7.40 1 133
85.00 KBUDQ.X 2.50 0.00 4.50 5.60 32 40
90.00 KBUDR.X 2.60 0.00 3.60 4.40 10 41
95.00 KBUDS.X 1.55 0.40 2.30 3.40 11 21
PUT OPTIONS Expire at close Fri, Apr 17, 2009
Strike Symbol Last Chg Bid Ask Vol Open Int
35.00 KBUPG.X 1.05 0.00 0.20 0.85 0 10
40.00 KBUPH.X 1.30 0.00 0.55 1.45 10 30
45.00 KBUPI.X 1.95 0.05 1.05 2.00 20 53
50.00 KBUPJ.X 2.60 0.00 1.70 2.70 0 10
55.00 KBUPK.X 4.20 0.40 2.80 3.80 10 166
60.00 KBUPL.X 5.10 0.00 4.10 5.30 30 147
65.00 KBUPM.X 7.70 0.20 6.00 7.20 10 276
70.00 KBUPN.X 10.20 0.00 8.10 9.40 10 33
75.00 KBUPO.X 13.00 0.00 10.90 12.20 20 30
80.00 KBUPP.X 15.30 1.10 13.80 15.30 2 10
85.00 KBUPQ.X 20.10 0.00 17.10 18.70 20 30
90.00 KBUPR.X 30.00 0.00 20.80 22.50 0 10
CALL OPTIONS Expire at close Fri, Feb 20, 2009
Strike Symbol Last Chg Bid Ask Vol Open Int
25.00 OAQBE.X 45.80 0.00 43.10 45.10 10 31
30.00 OAQBF.X 33.30 0.00 38.40 38.90 0 42
35.00 OAQBG.X 26.40 0.00 33.80 34.40 1 40
40.00 OAQBH.X 21.30 0.00 29.30 29.90 16 38
45.00 OAQBI.X 24.30 0.00 25.10 25.60 10 119
50.00 OAQBJ.X 21.60 0.00 21.10 21.60 10 374
55.00 OAQBK.X 16.10 0.00 17.40 17.80 3 834
60.00 OAQBL.X 13.20 0.00 14.10 14.50 77 1,246
65.00 OAQBM.X 10.50 0.00 11.20 11.50 22 2,586
70.00 OAQBN.X 8.50 1.30 8.50 8.90 10 8,212
75.00 OAQBO.X 7.10 0.50 6.40 6.80 4 1,073
80.00 OAQBP.X 5.10 0.00 4.80 5.10 3 5,180
85.00 OAQBQ.X 3.70 0.00 3.40 3.70 10 10
90.00 OAQBR.X 2.45 0.00 2.45 2.65 9 41
95.00 OAQBS.X 1.65 0.00 1.70 1.85 10 58
100.00 OAQBT.X 1.10 0.25 1.15 1.25 62 113
105.00 OAQBA.X 0.70 0.35 0.75 0.85 10 26
PUT OPTIONS Expire at close Fri, Feb 20, 2009
Strike Symbol Last Chg Bid Ask Vol Open Int
25.00 OAQNE.X 0.15 0.00 0.10 0.20 36 128
30.00 OAQNF.X 0.30 1.00 0.25 0.35 10 56
35.00 OAQNG.X 0.60 0.10 0.55 0.65 10 181
40.00 OAQNH.X 2.95 0.00 1.00 1.15 40 237
45.00 OAQNI.X 1.55 0.45 1.70 1.85 71 2,009
50.00 OAQNJ.X 3.10 0.00 2.70 2.80 29 1,117
55.00 OAQNK.X 3.60 0.40 4.00 4.20 110 5,035
60.00 OAQNL.X 5.20 0.40 5.60 5.90 208 5,358
65.00 OAQNM.X 7.74 0.44 7.50 7.90 44 1,903
70.00 OAQNN.X 10.14 0.64 10.00 10.30 81 2,586
75.00 OAQNO.X 11.30 0.00 12.90 13.30 87 663
80.00 OAQNP.X 15.60 0.00 16.10 16.50 10 681
90.00 OAQNR.X 23.00 0.00 23.70 24.20 4 4
CALL OPTIONS Expire at close Fri, Apr 17, 2009
Strike Symbol Last Chg Bid Ask Vol Open Int
120.00 SQGDD.X 100.00 0.00 98.00 100.50 0 10
140.00 SDQDH.X 81.90 0.00 80.40 83.30 0 10
160.00 SDQDL.X 45.00 0.00 64.20 67.30 0 20
165.00 SDQDM.X 41.60 0.00 60.60 63.70 0 10
170.00 SDQDN.X 58.40 0.00 56.90 60.10 0 10
175.00 SDQDO.X 51.70 0.00 53.30 56.60 0 10
180.00 SDQDP.X 45.00 0.00 49.50 52.60 1 11
185.00 SDQDQ.X 49.42 0.00 46.00 49.30 0 11
190.00 SDQDR.X 14.10 0.00 42.90 46.20 0 12
195.00 SDQDS.X 36.60 0.00 39.90 42.90 0 10
200.00 SDQDW.X 41.80 0.00 37.10 39.90 1 1
210.00 SDQDX.X 34.10 0.00 31.60 34.40 1 31
220.00 SDQDY.X 25.90 0.00 26.80 29.50 1 16
230.00 SDQDU.X 21.28 0.00 22.30 25.20 1 16
240.00 SDQDZ.X 4.50 0.00 18.20 21.70 10 10
250.00 SDQDV.X 14.50 0.00 15.20 18.40 425 455
290.00 SDQDD.X 5.00 0.00 5.70 7.70 10 10
PUT OPTIONS Expire at close Fri, Apr 17, 2009
Strike Symbol Last Chg Bid Ask Vol Open Int
105.00 SQGPA.X 1.25 0.00 1.55 2.35 10 20
110.00 SQGPB.X 0.95 0.00 1.80 2.65 0 10
115.00 SQGPC.X 1.80 0.00 2.15 3.10 10 20
120.00 SQGPD.X 1.30 0.00 2.60 3.60 0 10
125.00 SQGPE.X 1.60 0.00 3.00 4.40 0 10
135.00 SDQPG.X 5.00 0.00 4.10 5.40 53 53
140.00 SDQPH.X 5.40 0.00 4.80 6.20 63 63
145.00 SDQPI.X 5.90 0.00 5.50 7.00 24 24
150.00 SDQPJ.X 6.80 0.00 6.30 8.00 44 44
155.00 SDQPK.X 7.70 0.00 7.10 9.00 24 24
160.00 SDQPL.X 8.80 0.00 8.20 10.10 66 83
165.00 SDQPM.X 12.80 0.00 9.20 12.60 10 61
170.00 SDQPN.X 11.50 0.00 10.40 13.90 50 78
175.00 SDQPO.X 11.10 0.00 11.80 15.30 50 71
180.00 SDQPP.X 13.70 0.00 13.20 15.60 3 83
185.00 SDQPQ.X 10.80 0.00 14.70 17.10 10 24
190.00 SDQPR.X 11.90 0.00 16.40 18.90 10 23
200.00 SDQPW.X 20.50 0.10 20.50 22.80 10 55
210.00 SDQPX.X 24.60 2.90 24.90 27.30 20 1
220.00 SDQPY.X 27.00 0.00 29.80 32.30 10 28
230.00 SDQPU.X 45.40 0.00 35.20 38.00 0 10
240.00 SDQPZ.X 40.00 0.00 41.20 44.10 0 10
250.00 SDQPV.X 48.20 2.90 47.70 51.10 10 20
290.00 SDQPD.X 76.50 0.00 77.90 80.90 10 10
300.00 SDQPE.X 77.70 0.00 86.50 89.50 0 10
CALL OPTIONS Expire at close Fri, Apr 17, 2009
Strike Symbol Last Chg Bid Ask Vol Open Int
35.00 TAPDG.X 10.20 1.88 9.90 10.30 10 40
40.00 TAPDH.X 7.20 0.80 6.70 7.00 1 185
45.00 TAPDI.X 4.20 0.00 4.20 4.40 4 285
50.00 TAPDJ.X 2.25 0.25 2.40 2.65 30 842
55.00 TAPDK.X 1.00 0.00 1.20 1.40 2 90
60.00 TAPDL.X 0.50 0.00 0.55 0.70 2 192
PUT OPTIONS Expire at close Fri, Apr 17, 2009
Strike Symbol Last Chg Bid Ask Vol Open Int
17.50 TAPPW.X 0.20 0.00 0.10 0.25 15 40
20.00 TAPPD.X 0.30 0.00 0.25 0.35 15 45
22.50 TAPPX.X 0.50 0.00 0.40 0.55 0 40
25.00 TAPPE.X 0.75 0.00 0.65 0.75 10 50
30.00 TAPPF.X 1.50 0.00 1.30 1.45 33 200
35.00 TAPPG.X 3.20 0.00 2.50 2.75 20 1,518
40.00 TAPPH.X 4.50 0.00 4.20 4.50 20 153
45.00 TAPPI.X 6.76 0.00 6.60 6.90 100 856
50.00 TAPPJ.X 10.30 0.00 9.70 10.20 29 174
55.00 TAPPK.X 9.20 0.00 13.50 13.90 0 10
CALL OPTIONS Expire at close Fri, Apr 17, 2009
Strike Symbol Last Chg Bid Ask Vol Open Int
40.00 ABVDH.X 11.30 0.00 11.00 13.30 14 14
45.00 ABVDI.X 8.50 0.00 8.80 10.20 10 10
50.00 ABVDJ.X 8.20 2.10 6.70 8.10 10 107
55.00 ABVDK.X 7.00 0.00 4.80 6.00 0 10
60.00 ABVDL.X 4.10 0.00 3.10 4.30 1 3
65.00 ABVDM.X 2.25 0.00 2.05 3.20 4 5
70.00 ABVDN.X 1.60 0.00 1.25 1.95 1 1
75.00 ABVDO.X 2.25 0.00 0.65 1.35 0 20
PUT OPTIONS Expire at close Fri, Apr 17, 2009
Strike Symbol Last Chg Bid Ask Vol Open Int
35.00 ABVPG.X 6.60 0.00 3.60 4.80 27 57
45.00 ABVPI.X 8.00 0.00 7.70 9.10 4 25
50.00 ABVPJ.X 11.00 0.00 10.20 12.50 10 45
60.00 ABVPL.X 18.00 0.00 16.50 18.80 0 22
65.00 ABVPM.X 20.50 0.00 20.10 22.90 5 5
70.00 ABVPN.X 19.50 0.00 23.50 27.50 0 10
75.00 ABVPO.X 19.70 0.00 27.70 31.80 0 20
CALL OPTIONS Expire at close Fri, Mar 20, 2009
Strike Symbol Last Chg Bid Ask Vol Open Int
50.00 BUDCJ.X 13.50 0.00 17.70 21.10 10 32
55.00 BUDCK.X 12.80 0.00 14.00 15.00 10 94
60.00 BUDCL.X 9.60 0.20 9.50 9.80 105 1,370
65.00 BUDCM.X 4.70 0.30 4.60 4.80 373 4,735
70.00 BUDCN.X 0.10 0.05 0.05 0.10 212 3,326
75.00 BUDCO.X 0.05 0.00 N/A 0.10 10 98
80.00 BUDCP.X 0.05 0.00 N/A 2.25 6 7
PUT OPTIONS Expire at close Fri, Mar 20, 2009
Strike Symbol Last Chg Bid Ask Vol Open Int
30.00 BUDOF.X 0.35 0.00 0.05 0.15 10 159
35.00 BUDOG.X 0.29 0.31 0.10 0.50 34 270
40.00 BUDOH.X 0.80 0.05 N/A 0.75 11 95
45.00 BUDOI.X 1.00 0.20 N/A 1.25 11 52
50.00 BUDOJ.X 0.50 0.95 0.05 0.75 3,238 1,030
55.00 BUDOK.X 0.90 1.10 N/A 1.00 20 365
60.00 BUDOL.X 0.75 0.90 0.70 1.00 78 4,438
65.00 BUDOM.X 1.00 1.99 0.95 1.80 353 3,705
70.00 BUDON.X 1.00 1.00 1.10 3.10 21 270
80.00 BUDOP.X 12.50 0.00 9.60 13.00 10 10
Friday, November 14, 2008
indexes undercut lows, technical analysis traders' signal set-off, wonder what will happen in the next few weeks? is it a trap? smells like one though
ibd states :
Posted 11/13/2008
Stocks rebounded sharply higher Thursday, after most of the major indexes undercut their recent lows.
The Nasdaq plunged as much as 4.7% early in the session. But the technology-laden index snapped back for a 6.5% gain.
The benchmark S&P 500 also erased a big early loss, rocketing 6.9%. The Dow industrials vaulted 6.7%, the NYSE composite 7.4%
Volume spiked across the board. It jumped 37% on the NYSE side, hitting its highest total since Oct. 16. Nasdaq trading bounced 43% compared to Wednesday's level, marking its fastest pace since Oct. 23.
Stocks found their second wind after the Nasdaq, S&P 500 and NYSE composite all undercut their lows from last month.
In fact, the market likely set off a number of trade triggers, given the milestones that it hit.
The Nasdaq briefly ducked below 1500 for the first time since May 2003. The Dow again sliced through the 8000 level, just the second time it's done so since April 2003.
That 2003 marker also has significance. The broad indexes followed through on a rally in March of that year, launching a four-year bull run.
Indeed, the past few weeks have shown some signs of support just above those early 2003 levels.
Still, one big up day in higher volume, even with such a dramatic price swing, doesn't change the fact that the market remains in a correction.
On Oct. 10, the Nasdaq swung from a big loss all the way into the black. A follow-through ensued just four sessions later, as the market staged yet another big, upside reversal on Oct. 16. But that rally quickly petered out.
On Oct. 28, stocks showed more resilience, with the S&P 500 rolling up a 10.8% surge — one of the biggest in its history.
After a few more up days, that brief rally attempt also turned sour.
For growth investors, the one saving grace is the action of a handful of top-rated stocks. After some heavy losses Wednesday, a number of leaders bounced back Thursday.
Almost Family (AFAM) staged a huge reversal, rebounding from support at its 50-day moving average and powering up 5.30 to 49.65 in 2 1/2 times its normal trade. The provider of in-home nursing services briefly undercut its 42.90 buy point before bouncing back.
Ralcorp (RAH) soared 6.12, or 9%, to 71.43 in active trading.
The maker of cereals, cookies and crackers added a second day of gains following Wednesday's earnings report. That propelled Ralcorp above a 71.10 buy point in a short consolidation.
Energy stocks had a big day, as oil prices halted their recent plunge.
December crude rose $2.08 to $58.24 a barrel. Oil prices pared early gains after a government report showed crude inventories stayed flat last week, while gasoline stockpiles climbed more than expected.
Dow component Exxon Mobil (XOM) vaulted 6.48 to 75.41 in above-average turnover, as the stock reclaimed its 50-day line.
World Fuel Services (INT) surged 5.89, or 20%, to 34.66 in more than 2 1/2 times its regular volume. The vendor of marine, aviation and land fuel hit a 52-week high.
The IBD 100, which tracks the action of highly rated stocks, stormed ahead 5.4%.
A gain in weekly jobless claims helped push the market lower early on. New unemployment claims rose to the highest level since right after 9/11. The number of people continuing to file claims hit a 25-year high.
Elsewhere, the Senate Banking Committee pressed bank executives to start using the proceeds of the government's $700 billion rescue plan to initiate more loans.
A few tech stocks fell early on, before rebounding in step with the market. Chipmaker Intel's (INTC) fourth-quarter sales warning after Wednesday's close caused a big drop for the stock early on. But Intel rebounded to gain 7%.
Meanwhile, Citigroup cut its profit forecasts on Hewlett-Packard (HPQ) and Dell, (DELL) triggering early losses. But HP rallied to gain 2%, while Dell shaved its loss to 2%.
Thursday, November 13, 2008
got this news from reuters, could it be a reason on why the market is doing, what it is doing?! if it is, great!! expect more of it from the new prez
Obama's Bailout Bunch Brings Us More of the Same: Jonathan Weil
Commentary by Jonathan Weil
Nov. 11 (Bloomberg) -- It's hard to believe Barack Obama would even think of calling this change.
Take a good look at some of the 17 people our nation's president-elect chose last week for his Transition Economic Advisory Board. And then try saying with a straight face that these are the leaders who should be advising him on how to navigate through the worst financial crisis in modern history.
First, there's former Treasury Secretary Robert Rubin. Not only was he chairman of Citigroup Inc.'s executive committee when the bank pushed bogus analyst research, helped Enron Corp. cook its books, and got caught baking its own. He was a director from 2000 to 2006 at Ford Motor Co., which also committed accounting fouls and now is begging Uncle Sam for Citigroup- style bailout cash.
Two other Citigroup directors received spots on the Obama board: Xerox Corp. Chief Executive Officer Anne Mulcahy and Time Warner Inc. Chairman Richard Parsons. Xerox and Time Warner got pinched years ago by the Securities and Exchange Commission for accounting frauds that occurred while Mulcahy and Parsons held lesser executive posts at their respective companies.
Mulcahy and Parsons also once were directors at Fannie Mae when that company was breaking accounting rules. So was another member of Obama's new economic board, former Commerce Secretary William Daley. He's now a member of the executive committee at JPMorgan Chase & Co., which, like Citigroup, is among the nine large banks that just got $125 billion of Treasury's bailout budget.
There's More
Obama's economic crew might as well be called the Bailout Bunch. Another slot went to former White House economic adviser Laura Tyson. She's been a director for about a decade at Morgan Stanley, which in 2004 got slapped for accounting violations by the SEC and a month ago got $10 billion from Treasury.
That's not all. There's Penny Pritzker, the Obama campaign's national finance chairwoman. She was on the board of the holding company for subprime lender Superior Bank FSB. The Chicago-area thrift, in which her family held a 50 percent stake, was seized by the Federal Deposit Insurance Corp. in 2001. The thrift's owners agreed to pay the government $460 million over 15 years to help cover the FDIC's losses.
Even some of the brighter lights on Obama's board, like Warren Buffett and former SEC Chairman William Donaldson, come with asterisks. Buffett was on the audit committee of Coca-Cola Co.'s board when the SEC found the soft-drink maker had misled investors about its earnings. Donaldson was on the audit committee from 1998 to 2001 at a provider of free e-mail services called Mail.com Inc. Just before he left the SEC, in 2005, the agency disciplined the company over accounting violations that had occurred on his watch.
Telling Stories
So, by my tally, almost half the people on Obama's economic advisory board have held fiduciary positions at companies that, to one degree or another, either fried their financial statements, helped send the world into an economic tailspin, or both. Do you think any of that came up in the vetting?
Let's say we give Buffett a pass -- smart move he made, skipping the group photo-op last week in Chicago. What about the rest of them? Donaldson, for one, was chairman when the SEC voted in 2004 to let the big Wall Street banks, including Lehman Brothers Holdings Inc. and Bear Stearns Cos., lever up their balance sheets like drunks. Talk about blowing it.
And whom did Obama tap for White House chief of staff? Rahm Emanuel, the Illinois congressman who was a director at Freddie Mac in 2000 and 2001 while it was committing accounting fraud.
Ideally, this job would go to someone who can't be easily fooled. Think about it: Of all the people Obama could have chosen as his chief of staff, couldn't he have found someone who wasn't once on the board of Freddie Mac?
Renewed Confidence
The president-elect needs some new advisers -- fast. We are in a crisis of confidence in American capitalism. These aren't the right people to re-instill its sense of honor.
Many of them should be getting subpoenas as material witnesses right about now, not places in Obama's inner circle. Did Obama learn nothing from the ill-fated choice of James Johnson, the former Fannie Mae boss, to lead his vice- presidential search committee?
Does he think people like Robert Rubin or Richard Parsons will offer any helpful advice on how to stop crooked bankers or sleep-walking directors from sinking our economy? Or that they won't mistake the nation's needs for their own corporate interests? Or that the people who helped get us into our long financial nightmare have any clue how to get us out?
Obama has created hope that our nation can stand for all that is good in the world again. It's not too late to change course.
Start by scrapping this board.
(Jonathan Weil is a Bloomberg News columnist. The opinions expressed are his own.)
To contact the writer of this column: Jonathan Weil in New York at jweil6@bloomberg.net
Last Updated: November 11, 2008 00:01 EST
FURTHERMORE, ibd states
Posted 11/12/2008
Stocks plunged in higher volume Wednesday, dealing a knockout blow to the market's short-lived uptrend.
The Nasdaq and S&P 500 dived 5.2%. The NYSE composite swooned 5.6%, and the Dow industrials 4.7%.
Volume grew 9% on both the Nasdaq and the NYSE, compared to Tuesday's totals.
Wednesday's drop in higher volume made it three bouts of distribution for the major market indexes in the past five sessions, and four distribution days for the benchmark S&P 500 and the Dow in just over two weeks. That kind of rapid-fire selling in a relatively short time usually scuttles a market rally.
Granted, the broad indexes didn't quite undercut their Oct. 10 and Oct. 24 lows. But the accelerating sell-offs still made it clear that the rally has ended.
Today's Market Pulse now shows the market in a correction. The distribution day count has been removed, since they're much less relevant when a correction's in place.
Growth investors' best course of action is now clear. If you bought a stock in the past couple weeks and it's fallen 7% or 8% from the price at which you bought it, sell it immediately. Avoid new buys in such weak market conditions.
Beyond that, scrutinize your remaining holdings. If you bought a few stocks during the rally and you're still sitting on minor to moderate gains, consider your own risk tolerance, profit goals and the chart health of those stocks.
If you want to hold on and try to ride out the market's storm, do so with only your best stocks. Make sure you have a price cushion in place, so that your gains don't quickly turn into losses.
After several days in which leading stocks were holding up well as the broad market fizzled, Wednesday brought heavy losses for several leaders. The IBD 100 dropped 4.2%.
IBD 100 component American Public Education (APEI) gave up 4.70 to 43.04 ahead of its earnings report after the close.
The online education provider then fell another 9% after hours after issuing fourth-quarter sales and earnings estimates that were merely in line with analysts' estimates. Even with the regular-session loss, American Public Education's stock slashed through its 50-day moving average, in brisk volume.
Almost Family (AFAM) skidded 5.37, or 11%, to 44.35 in nearly twice its normal trade. The provider of in-home nursing services has now squandered most of the gains it racked up following its Oct. 30 breakout past a 42.90 buy point.
An already bad day turned worse Wednesday after Treasury Secretary Henry Paulson said the government is shifting plans for the Troubled Asset Relief Program, a plan originally designed to buy bad loans directly from banks.
Paulson said the program would have taken too much time, and that the Treasury would instead buy equity stakes in banks and encourage them to boost their lending efforts.
He added that the government would offer support for nonbank financial institutions that focus on credit card debt, and student and car loans. The government hopes to avert a collapse in consumer spending, which would deal a heavy blow to the already struggling economy.
Financial stocks tanked on Paulson's comments, and many other sectors followed suit.
Elsewhere, retail stocks struggled.
Electronics chain Best Buy (BBY) slashed its full-year profit forecast, citing weak consumer spending. The company also said it expected a slowdown in upcoming same-store sales numbers.
The news followed rival Circuit City's (CC) announcement Monday that it's filing for Chapter 11 bankruptcy protection.
Department store chain Macy's (M) reported a big quarterly loss. The company cut its fiscal 2009 guidance, with a downturn in consumer spending again the culprit.
On Friday, the Commerce Department will release October retail sales figures. Economists are expecting a drop of 2.1% compared to September's results.
The market got no favors after the close, as bellwether chipmaker Intel (INTC) slashed its Q4 revenue outlook. Its shares fell 7% in after-hours trading, putting the market on bad footing for Thursday's open.
Commentary by Jonathan Weil
Nov. 11 (Bloomberg) -- It's hard to believe Barack Obama would even think of calling this change.
Take a good look at some of the 17 people our nation's president-elect chose last week for his Transition Economic Advisory Board. And then try saying with a straight face that these are the leaders who should be advising him on how to navigate through the worst financial crisis in modern history.
First, there's former Treasury Secretary Robert Rubin. Not only was he chairman of Citigroup Inc.'s executive committee when the bank pushed bogus analyst research, helped Enron Corp. cook its books, and got caught baking its own. He was a director from 2000 to 2006 at Ford Motor Co., which also committed accounting fouls and now is begging Uncle Sam for Citigroup- style bailout cash.
Two other Citigroup directors received spots on the Obama board: Xerox Corp. Chief Executive Officer Anne Mulcahy and Time Warner Inc. Chairman Richard Parsons. Xerox and Time Warner got pinched years ago by the Securities and Exchange Commission for accounting frauds that occurred while Mulcahy and Parsons held lesser executive posts at their respective companies.
Mulcahy and Parsons also once were directors at Fannie Mae when that company was breaking accounting rules. So was another member of Obama's new economic board, former Commerce Secretary William Daley. He's now a member of the executive committee at JPMorgan Chase & Co., which, like Citigroup, is among the nine large banks that just got $125 billion of Treasury's bailout budget.
There's More
Obama's economic crew might as well be called the Bailout Bunch. Another slot went to former White House economic adviser Laura Tyson. She's been a director for about a decade at Morgan Stanley, which in 2004 got slapped for accounting violations by the SEC and a month ago got $10 billion from Treasury.
That's not all. There's Penny Pritzker, the Obama campaign's national finance chairwoman. She was on the board of the holding company for subprime lender Superior Bank FSB. The Chicago-area thrift, in which her family held a 50 percent stake, was seized by the Federal Deposit Insurance Corp. in 2001. The thrift's owners agreed to pay the government $460 million over 15 years to help cover the FDIC's losses.
Even some of the brighter lights on Obama's board, like Warren Buffett and former SEC Chairman William Donaldson, come with asterisks. Buffett was on the audit committee of Coca-Cola Co.'s board when the SEC found the soft-drink maker had misled investors about its earnings. Donaldson was on the audit committee from 1998 to 2001 at a provider of free e-mail services called Mail.com Inc. Just before he left the SEC, in 2005, the agency disciplined the company over accounting violations that had occurred on his watch.
Telling Stories
So, by my tally, almost half the people on Obama's economic advisory board have held fiduciary positions at companies that, to one degree or another, either fried their financial statements, helped send the world into an economic tailspin, or both. Do you think any of that came up in the vetting?
Let's say we give Buffett a pass -- smart move he made, skipping the group photo-op last week in Chicago. What about the rest of them? Donaldson, for one, was chairman when the SEC voted in 2004 to let the big Wall Street banks, including Lehman Brothers Holdings Inc. and Bear Stearns Cos., lever up their balance sheets like drunks. Talk about blowing it.
And whom did Obama tap for White House chief of staff? Rahm Emanuel, the Illinois congressman who was a director at Freddie Mac in 2000 and 2001 while it was committing accounting fraud.
Ideally, this job would go to someone who can't be easily fooled. Think about it: Of all the people Obama could have chosen as his chief of staff, couldn't he have found someone who wasn't once on the board of Freddie Mac?
Renewed Confidence
The president-elect needs some new advisers -- fast. We are in a crisis of confidence in American capitalism. These aren't the right people to re-instill its sense of honor.
Many of them should be getting subpoenas as material witnesses right about now, not places in Obama's inner circle. Did Obama learn nothing from the ill-fated choice of James Johnson, the former Fannie Mae boss, to lead his vice- presidential search committee?
Does he think people like Robert Rubin or Richard Parsons will offer any helpful advice on how to stop crooked bankers or sleep-walking directors from sinking our economy? Or that they won't mistake the nation's needs for their own corporate interests? Or that the people who helped get us into our long financial nightmare have any clue how to get us out?
Obama has created hope that our nation can stand for all that is good in the world again. It's not too late to change course.
Start by scrapping this board.
(Jonathan Weil is a Bloomberg News columnist. The opinions expressed are his own.)
To contact the writer of this column: Jonathan Weil in New York at jweil6@bloomberg.net
Last Updated: November 11, 2008 00:01 EST
FURTHERMORE, ibd states
Posted 11/12/2008
Stocks plunged in higher volume Wednesday, dealing a knockout blow to the market's short-lived uptrend.
The Nasdaq and S&P 500 dived 5.2%. The NYSE composite swooned 5.6%, and the Dow industrials 4.7%.
Volume grew 9% on both the Nasdaq and the NYSE, compared to Tuesday's totals.
Wednesday's drop in higher volume made it three bouts of distribution for the major market indexes in the past five sessions, and four distribution days for the benchmark S&P 500 and the Dow in just over two weeks. That kind of rapid-fire selling in a relatively short time usually scuttles a market rally.
Granted, the broad indexes didn't quite undercut their Oct. 10 and Oct. 24 lows. But the accelerating sell-offs still made it clear that the rally has ended.
Today's Market Pulse now shows the market in a correction. The distribution day count has been removed, since they're much less relevant when a correction's in place.
Growth investors' best course of action is now clear. If you bought a stock in the past couple weeks and it's fallen 7% or 8% from the price at which you bought it, sell it immediately. Avoid new buys in such weak market conditions.
Beyond that, scrutinize your remaining holdings. If you bought a few stocks during the rally and you're still sitting on minor to moderate gains, consider your own risk tolerance, profit goals and the chart health of those stocks.
If you want to hold on and try to ride out the market's storm, do so with only your best stocks. Make sure you have a price cushion in place, so that your gains don't quickly turn into losses.
After several days in which leading stocks were holding up well as the broad market fizzled, Wednesday brought heavy losses for several leaders. The IBD 100 dropped 4.2%.
IBD 100 component American Public Education (APEI) gave up 4.70 to 43.04 ahead of its earnings report after the close.
The online education provider then fell another 9% after hours after issuing fourth-quarter sales and earnings estimates that were merely in line with analysts' estimates. Even with the regular-session loss, American Public Education's stock slashed through its 50-day moving average, in brisk volume.
Almost Family (AFAM) skidded 5.37, or 11%, to 44.35 in nearly twice its normal trade. The provider of in-home nursing services has now squandered most of the gains it racked up following its Oct. 30 breakout past a 42.90 buy point.
An already bad day turned worse Wednesday after Treasury Secretary Henry Paulson said the government is shifting plans for the Troubled Asset Relief Program, a plan originally designed to buy bad loans directly from banks.
Paulson said the program would have taken too much time, and that the Treasury would instead buy equity stakes in banks and encourage them to boost their lending efforts.
He added that the government would offer support for nonbank financial institutions that focus on credit card debt, and student and car loans. The government hopes to avert a collapse in consumer spending, which would deal a heavy blow to the already struggling economy.
Financial stocks tanked on Paulson's comments, and many other sectors followed suit.
Elsewhere, retail stocks struggled.
Electronics chain Best Buy (BBY) slashed its full-year profit forecast, citing weak consumer spending. The company also said it expected a slowdown in upcoming same-store sales numbers.
The news followed rival Circuit City's (CC) announcement Monday that it's filing for Chapter 11 bankruptcy protection.
Department store chain Macy's (M) reported a big quarterly loss. The company cut its fiscal 2009 guidance, with a downturn in consumer spending again the culprit.
On Friday, the Commerce Department will release October retail sales figures. Economists are expecting a drop of 2.1% compared to September's results.
The market got no favors after the close, as bellwether chipmaker Intel (INTC) slashed its Q4 revenue outlook. Its shares fell 7% in after-hours trading, putting the market on bad footing for Thursday's open.
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