June 16, 2012 at 12:26 PM EDT
So much at stake–so many unknowns!
Saturday, June 16, 12:30 p.m. There were numerous weekends like this in 2008 and early 2009 that were also fraught with danger and uncertainty. The U.S. financial system and economy were continually on the brink of collapse in 2008, and threatening to drag the rest of the world into the abyss of the next Great [...]

Saturday, June 16, 12:30 p.m.

There were numerous weekends like this in 2008 and early 2009 that were also fraught with danger and uncertainty. The U.S. financial system and economy were continually on the brink of collapse in 2008, and threatening to drag the rest of the world into the abyss of the next Great Depression. Many emergency meetings were held that would hopefully finally provide the rescue operation that would work.

Sometimes the expected rescue efforts were forthcoming, sometimes not. Sometimes their announcement sparked market rallies, most times not and the market plunged further, as can be seen in this chart. And none of them worked to end the crisis.

61612e

Here is a list of most of those rescue efforts:

Under Bush Administration:

March 8, 2008: $29 billion (Wall Street bailout, Bear Stearns,etc.)

May, 2008: $178 stimulus checks to consumers.

July, 2008: $300 billion, stimulus and rescue package for at-risk homeowners.

September, 2008: $25 billion automaker bailout.

September, 2008: $200 billion Fannie Mae bailout.

October, 2008: $700 billion bank bailout.

Under Obama Administration:

Feb., 2009: $787 billion ‘average American’ stimulus.

Feb., 2009: $275 homeowner bailout.

March, 2009: $1 trillion bank bailout.

March, 2009: $22 billion, automaker bailout.

And as the rescue packages became ever larger, the stock market finally bottomed in March, 2009, and the ‘Great Recession’ ended three months later in June, 2009.

The recovery from the great recession has been anemic and tedious. It has twice required additional stimulus to rescue it when it stumbled in each of the last two summers.

And both times the Fed had an easy time of rescuing it by itself, with QE2 in 2010, and ‘Operation Twist’ last summer.

Investors have short memories, and have forgotten the many failed rescue efforts in 2008 and 2009, mostly only remembering those easy rescues of the last two summers, making them confident of a Bernanke ‘Put’. That is, that the economy and market cannot slow more than the Fed is willing to let them, and once it decides to act the economy is sure to recover and the market can only surge up from its lows, as in 2010 and 2011.

Probably true, but . . .

This time around, the threat is from Europe, where, like the U.S. in 2008, the eurozone economy is in a recession, and the eurozone debt crisis threatens a collapse of its financial system that will drag the rest of the world down with it.

And as in the U.S. in 2008, there have been numerous bailouts of individual areas, Ireland, Greece (twice), and Portugal. But each has failed to halt the spread of the financial collapse.

Global markets, outside of the U.S. have been reacting negatively to the situation for more than a year now, their rallies off the October lows to a lower high looking like only a bear market rally within an ongoing bear market.

61612f  

And as shown in the top chart, the U.S. market finally rolled over on the worries in March, (but unlike most global markets, so far have found support at their long-term 200-day moving  averages).

And over the last two weeks, global markets, including the U.S. market have rebounded. Not because the eurozone crisis has diminished. It has not, instead it has become much worse.

And not because the U.S. economy, where the economic recovery from the great recession had stumbled again, has begun to recover. It has not. Instead the string of increasingly dismal economic reports have continued to worsen through April, May and into June. First quarter GDP growth was recently revised down from the previously reported 2.2% to just 1.9%. And now the 2nd quarter has almost ended, with even worse individual economic reports through two and a half months of it.

The markets have rallied for two weeks because they are confident that the situations have become so dire that massive rescue and stimulus efforts will be forthcoming next week, from the European Central Bank, from the European Union, from the G-20 meeting, and from the U.S. Federal Reserve.

And not only that programs will be forthcoming, but that markets will spike up further in confidence that the programs will work.

Probably, but . . . . so many disagreements must be overcome to arrive at the expected coordinated effort, so many pieces have to fall into place, so many traders who bought on the rumors have to decide not to sell on the fact. 

It is a weekend that certainly competes for uncertainties and unknowns with some of those weekends in 2008 and early 2009.

But no shortage of confident opinions of how it will play out.

To read my weekend newspaper column ‘Markets and Governments Are Rolling the Dice!’ click here.

Subscribers to Street Smart Report: There is an important hotline from Thursday evening in the subscribers’ area of the Street Smart Report website. And please stay tuned to the hotline going forward!

Yesterday in the U.S. Market.

Another positive day in spite of more negative economic reports (Consumer Sentiment down again in June, Empire State (NY) Fed Mfg Index plunging in June).

Volume was high at 1.4 billion shares traded on NYSE, but that was the normal high volume associated with the quarter’s option expirations yesterday.

The Dow closed up 115 points, or 0.9%. The S&P 500 closed up 1.0%. The NYSE Composite closed up 1.1%. The Nasdaq closed up 1.3%. The Nasdaq 100 closed up 1.2%. The Russell 2000 closed up 1.2%. The DJ Transportation Avg. closed up 0.7%. The DJ Utilities Avg closed up 0.5%.

Gold closed up $2 an ounce to close at $1,624 an ounce, and up $31 for the week.

Oil closed up $.08 a barrel to $83.99 a barrel.

The U.S. dollar etf UUP closed down 0.4%.

The U.S. Treasury bond etf TLT closed up 0.6%.

Yesterday in European Markets.

European markets also liked the prospects for meaningful rescue efforts next week. The London FTSE closed up 0.2%. The German DAX closed up 1.5%. And France’s CAC closed up 1.8%.

Global markets for the week.

Two straight positive weeks in spite of another week of worsening economic reports in the U.S., and the steepening eurozone crisis.


THIS WEEK (June 15)
DJIA12767+ 1.7%
S&P 5001342+ 1.3%
NYSE7663+ 1.5%
NASDAQ2872+ 0.5%
NASD 1002571+ 0.5%
Russ 2000771+ 0.3%
DJTransprts5091+ 0.6%
DJ Utilities483+ 1.0%
XOI Oils1,150+ 2.2%
Gold bull.1,624+ 2.0%
GoldStcks164+ 1.2%
Canada11524+ 0.2%
London5478+ 0.8%
Germany6229+ 1.6%
France3087+ 1.2%
Hong Kong19233+ 3.9%
Japan8569+ 1.3%
Australia4107- 0.1%
S. Korea1858+ 1.2%
India16948+ 1.4%
Indonesia3818- 0.2%
Brazil55844+ 2.9%
Mexico37751+ 1.1%
China2416+ 1.1%
LAST WEEK (June 8)
DJIA12554+ 3.6%
S&P 5001325+ 3.7%
NYSE7553+ 3.6%
NASDAQ2858+ 4.0%
NASD 1002559+ 4.1%
Russ 2000769+ 4.3%
DJTransprts5062+ 3.1%
DJ Utilities478+ 3.1%
XOI Oils1,125+ 4.9%
Gold bull.1,593- 1.9%
GoldStcks162- 0.4%
Canada11500+ 1.2%
London5435+ 3.3%
Germany6130+ 1.3%
France3051+ 3.4%
Hong Kong18502- 0.3%
Japan8459+ 0.2%
Australia4111- 0.1%
S. Korea1835+ 0.1%
India16718+ 4.7%
Indonesia3825+ 0.7%
Brazil54276+ 1.5%
Mexico37320+ 0.3%
China2389- 3.9%
PREVIOUS WEEK (June 1)
DJIA12118- 2.7%
S&P 5001278- 3.0%
NYSE7292- 3.2%
NASDAQ2747- 3.2%
NASD 1002458- 2.7%
Russ 2000737- 3.8%
DJTransprts4911- 3.3%
DJ Utilities464- 0.7%
XOI Oils1,072- 4.2%
Gold bull.1,624+ 3.3%
GoldStcks163+ 3.1%
Canada11361- 1.9%
London5260- 1.7%
Germany6050- 4.6%
France2950- 3.2%
Hong Kong18558- 0.8%
Japan8440- 1.6%
Australia4116+ 0.9%
S. Korea1834+ 0.6%
India15965- 1.6%
Indonesia3799- 2.6%
Brazil53484- 1.9%
Mexico37195- 0.8%
China2486+ 1.7%

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Next week’s Economic Reports:

Next week will be a quite important week for potential market-moving economic reports, including Housing Starts, Existing Home Sales, and the Phila Fed Mfg Index. But the most important is likely to be the Fed’s decisions and statement after its FOMC meeting on Wednesday. To see the full list and times for each release click here, and look at the left side of the page it takes you to.

This past week’s reports were more of the same dismal variety of the last several months, providing no indication that the economic recovery is back on track.

The reports included that Retail Sales fell 0.2% in May, and the previously reported increase of 0.1% in April was revised to down 0.2%. The Producer Price Index fell a significant 1.0% in May, the steepest monthly drop since July, 2009. New weekly unemployment claims rose by 6,000 to 386,000 versus the consensus forecast of a decline to 376,000. The Consumer Price Index fell 0.3% in May, the biggest monthly decline in 42 months. And yesterday it was reported that the Fed’s Empire State (NY) Business Index plunged to 2.3 in June from 17.1 in May. The University of Michigan Consumer Sentiment Index fell to 74.1 in June from 79.3 in May, versus the consensus forecast of a decline only to 77.8. And Industrial Production slipped 0.1% in May versus the forecast for no change. 

To read my weekend newspaper column ‘Markets and Governments Are Rolling the Dice!’ click here.

Subscribers to Street Smart Report: There is an important hotline from Thursday evening in the subscribers’ area of the Street Smart Report website. Please stay tuned to the hotline going forward!

I’ll be back with the next regular blog post on Tuesday morning at 9:25 a.m.

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