Tuesday: US Stock Market Summary

Wild swings, just wild. FRE went from 6% down, to 8% up. Go figure. Mania rarely makes sense. Aren’t you glad you have a working brain? Me, too. Here’s a link to Hank Paulson’s speech today. Nice little bit of fictional reading, but don’t use it for the kids’ bedtime story or they will be afraid to sleep.

The Dow rallies to close over 11600. I almost missed it, as I was watching some short positions performing very well. Hm, a little disconnect between the indices and broader market.

Loved this tidbit from FDIC’s Sheila Bair. I cannot even comment on this and be nice about it:

FDIC’S BAIR NOTES NO EXPECTATION OF FURTHER FAILURES OF BANKS OF INDYMAC OR LARGER

Here are the earnings I have so far:

ETFC (E Trade) REPORTS Q2 -$0.19 V -$0.14E, R $342.8 V $332.5ME; HALTED
- Q2 Net customer adds 22K v 90K y/y
- Q2 DARTS 5% q/q and 7% y/y

ISRG REPORTS Q2 $1.28 V $1.18E, R $219.2M V $208.6ME

WAMU REPORTS SIGNIFICANT BUILD-UP OF RESERVES

WAMU REPORTS Q2 -$3.34 V -$1.05E, R $2.85B V $3.59BE
- Q2 provision for loan losses $5.9B v $372M y/y.
- The company’s tangible equity to total tangible assets capital ratio increased during the second quarter to 7.79% from 6.40% in the first quarter, resulting in approximately $7B of capital in excess of its targeted 5.50 percent level

The economy of United States is terrible. The fallout from the housing, credit, and banking markets could be akin to a nuclear winter for years to come. Most people don’t know how the stock markets work, they don’t understand what mortgage backed assets are, and they don’t follow or study trends in the economy. All they know is they open their financial statements every three months and see their retirement savings being depleted. These same people watch the evening news and hear Government officials say “the fundamentals of the economy are strong“, “the housing market is improving“, “speculators are responsible for the rise in oil“, and many many more. You may have even received a letter from the people managing your savings telling you that market corrections are normal and to “don’t worry”. (see my commentary on December 12th 2007)

The truth is that the financial backbone of the United States is hanging by a very delicate thread. Why do you think the Federal Reserve has had to resort to so many money lending programs for banks and financial institutions? It is a constant blood transfusion from the veins of you and me right into the arms of the banks and financial institutions. The very same financial institutions that have contributed greatly to the mess the economy is in now! Poor oversight (or ignorance) by the Government in the first place created the credit market disaster with the financial institutions taking yours and my mortgages and creating bizarre and nearly incomprehensible trading vehicles. Numerous types of mortgage backed securities and variations thereof have imploded in the hands of the financial institutions that created them in the first place. And now with the banks and financial institutions in intensive care it is you and me that are being forced to roll up our sleeves and get the needle jammed in our arms to keep them alive.

The housing bailout bill (H.R. 3221) will be coming up for a vote soon. The bill, should it become law, provides more bailouts for financial institutions and would open the spigot even wider on the IV line carrying blood to the banks and financial institutions. By the way, did you know what is tucked away in this bill that nobody seems to be talking about?

Payment Card and Third Party Network Information Reporting.

The proposal requires information reporting on payment card and third party network transactions. Payment settlement entities, including merchant acquiring banks and third party settlement organizations, or third party payment facilitators acting on their behalf, will be required to report the annual gross amount of reportable transactions to the IRS and to the participating payee. Reportable transactions include any payment card transaction and any third party network transaction. Participating payees include persons who accept a payment card as payment and third party networks who accept payment from a third party settlement organization in settlement of transactions. A payment card means any card issued pursuant to an agreement or arrangement which provides for standards and mechanisms for settling the transactions. Use of an account number or other indicia associated with a payment card will be treated in the same manner as a payment card. A de minimis exception for transactions of $10,000 or less and 200 transactions or less applies to payments by third party settlement organizations. The proposal applies to returns for calendar years beginning after December 31, 2010. Back-up withholding provisions apply to amounts paid after December 31, 2011. This proposal is estimated to raise $9.802 billion over ten years.
(Source: FreedomWorks Org

The stock markets may be on the way to having it’s second major ‘bear market rally’. I say “may” because the media is jumping all over this again as the “bottom is in”. Are we in the next bear market rally? Too many obstacles remain for even a bear market rally to be claimed, let alone a bull market

Below are various charts. Some are of the same index or sector but with different time perspectives.