Smoot-Hawley Tariff Act - Wikipedia, the free encyclopedia

Potentially one of the worst laws to pass in the US, extending the Great Depression, ticking off their trade partners (including Canada) and causing a general feeling of disgust at the protectionist measures being enacted.

This would be equivalent to a Great Leap Forward in terms of its effect on the population and the economy, or perhaps an injection of subprime and fraud into otherwise marketable securities.

The Hawley-Smoot Tariff (or Smoot-Hawley Tariff Act)^[1] was signed into law on June 17, 1930, and raised U.S. tariffs on over 20,000 imported goods to record levels, and, in the opinion of most economists, worsened the Great Depression. Economists have now generally regarded this Tariff Act (i.e., tax increase on imported goods) as the greatest policy blunder in American economic history, coming as it did after the 1929-30 recession and preventing the economy from a full, natural recovery which had already started by the Spring, 1930. Many countries retaliated with their own increased tariffs on U.S. goods, and American exports and imports plunged by more than half.

Source: Smoot-Hawley Tariff Act - Wikipedia, the free encyclopedia

Plus Ben Stein's performance made Ferris Bueller's Day off...

... Bueller?  ... Bueller?

The Bermuda Copper of 1793 - Introduction

 

Just like prison, you used to be able to barter with tobacco in Bermuda, due to the lack of currency.  

Following the brief episode with "Hogge money" in 1615-1616 (see the Sommer Island section), Bermuda returned to the barter system with tobacco serving as the standard currency. During the 18th century, the tobacco standard was supplemented with Spanish silver and gold, and after 1761 some paper certificates were issued.

The Bermuda Copper of 1793 - Introduction

Hogge money were coins with a hog on the front and a sailboat on the back.  Later,  a low-grade, brassy copper coin was introduced, with a wash of silver that didn't mix with the salty climate and wore off.  This reminds me of the red wash on some of the new quarters here in Canada.

What's so important about the first coins made in Bermuda?  They were destined to go to the Americas, to be used as the first British coins for the New World.

Bespoke Investment Group: Correlation Ticking Higher in Current Market Environment

I threw up my hands a couple of weeks ago.  Looks like others are doing the same.

So what's there to buy in markets like these besides the ultra short ETFs? 

These figures confirm the basic idea that in bear markets everything becomes correlated because market participants end up selling all of it. Traders facing margin calls are end up forced to sell-off "quality" things, and others just throw up their hands and dump everything.

Source: Bespoke Investment Group: Correlation Ticking Higher in Current Market Environment

Stock screeners

No surprises here, but a good overview of some free stock screening tools. 

Caveats
No free screener does the best job for every conceivable search. MSN Deluxe might offer the best chance over all but some of the others may do a better job depending on the search parameters specified. And it is quite possible for the same search criteria inputted into different screeners to return dissimilar lists of companies.
“Screeners seem like great tools for finding errors in databases,” quips Michael James Weiner, who writes the Michael James on Investing blog. While this may be a lesser problem for subscription-based screeners and the better free screeners, Mr. Weiner’s reservations do highlight the issue of data quality and timeliness. Another caveat, as Investopedia.com notes, is the inability of screeners to sort on the basis of intangible variables (e.g. the value of a brand name).

Source: globeandmail.com: Globe Investor Magazine

stocktickr blog » Blog Archive » Replay the Trading Day Using Automatic Screenshots

Here's how to monitor your trading day using IrfanView and some automated screen shots. 

Compile these with Windows Movie Maker and you have a run through of your daily activities.

It's not just for trading....  

IrfanView Software
You might be surprised to learn that there is a free software package that can do almost everything you need from automatically taking the screenshots of your desktop to replaying them. It is called IrfanView and it’s available as a free download for Windows. Once you’ve installed it, just start IrfanView from the windows start menu. From the Options menu, choose Capture/Screenshot. Here’s the screen that appears.

Source: stocktickr blog » Blog Archive » Replay the Trading Day Using Automatic Screenshots

Panic strikes the wheat market

Liquidity is a two-way street.  Lack of sellers is just as bad as a lack of buyers... especially when you're selling short and need to close out a position.

This should have an interesting effect on food prices in the next few months.

Matt Pierce, Futures International Inc. says there is an absolute run on spreads right now. "It's the scariest thing I've ever seen on this floor," Pierce says.

Source: Panic strikes the wheat market

As inflation grows, product packaging shrinks, and gas mileage goes down

 This sounds like a recipe for disaster... a machine that you need to feed with land, seeds, fertilizer, hay, water, electricity, steel, building materials, food, food-byproducts, natural gas, oil, gasoline, trucks, electricity, and pumps, not to mention the printing costs for all the currency required to sustain this endless cycle of consumption.  All this will drive a steady influx of jobs back into the farming industries, while driving existing farmers to increase yields and burn out their lands.  It will increase drivers to adopt "eco-friendly" cars due to tax breaks and marketing, while causing many to adopt more frugal lifestyles or face financial ruin due to skyrocketing food costs. 

Will it create the next dustbowl effect, as Australia is currently experiencing?

"This energy loss leads to a 2% - 3% decrease in miles-per-gallon vehicle fuel economy with 10% [ethanol]."[7] Essentially, drivers will not be able to go as far on each gallon of ethanol as they currently do on gasoline.

Source: Ethanol: Bumper Crop for Agribusiness, Bitter Harvest for Taxpayers

This sounds like a problem invented by governments and the so-called "renewable energy" associations, or lobbyists.  Will it be solved by them too?

What could go up in price?

• Cereal
• Wine
• Ethanol and Washer fluid
• Gas
• Alcohol
• Tobacco
• Corn
• Water
• Fertilizer
• Anything made with wheat
• Anything requiring animal feed (cows, pigs, sheep)
• Sugar and anything made with it
• Milk and anything made with it

This really starts at the bottom of the food chain and works its way up into the global economy very quickly.  Farmers will sit on their harvests as long as possible, in order to capture the skyrocketing costs of their commodities.  The real estate (shelter) bubble burst - Is the food and water bubble upon us?

EU Economic Forecasts in a couple weeks

Watch for these to affect world markets.   The last forecast?

"Autumn economic forecast 2007-2009: growth moderating" 

Thursday 21 February: Interim Economic Forecasts

The news:

The Commission will publish its interim economic forecasts updating the outlook for GDP growth and inflation in 2008 for Germany, United Kingdom, France, Italy, Spain, the Netherlands and Poland as well as the EU and Euro area aggregates.

The background:

Interim forecasts are published in February and September between the major spring and autumn forecasts for all Member States and all variables, including national debts and budget deficits.

The next fully-fledged forecast comes out on 28 April 2008.

Source: EUROPA - Rapid - Press Releases

More ways of holding energy - Aluminum foil?

 My wife thought I was a bit crazy to be grabbing a couple Costco-sized boxes of aluminum foil last time we went.  I figured the price of food is going up more over the next few months, so starting with something that preserves food would work out well.  Looks like following and trading stock charts can apply to the real world.

``Aluminum is the one to watch at the moment,'' said David Thurtell, an analyst at BNP Paribas SA in London. ``Aluminum is often referred to as solid electricity'' because it requires so much power for production, he said.

Aluminum production consumes 15.5 megawatt hours of power per ton compared with about 4 megawatt hours for a ton of copper, said Goldman Sachs analyst James Gutman in London.

Source: Bloomberg.com: Commodities

I noticed AA when reviewing P/E for the large DOW stocks... theirs has steadily declined up until the Jan '08 crash.

Realistically it is probably 40% of costs that are electricity, less tax benefits and such.  That's still not bad if you want some solid electricity... and it's a conductor if you want to give it a charge.

But watch out for recycled Aluminum foil... it only takes 5% of the energy from it's parent.

"Aluminum for delivery in three months fell $15 to $2,695 a metric ton as of 3:17 p.m. on the London Metal Exchange. The 6.7 percent gain this week would be the biggest since November 2001.

Copper declined $85 to $7,265 a ton. "

Forget Gold, I'm going to go find a ton of copper someplace...

Safe Haven | The Double Whammy of Geopolitical Gold Games

One way to earn income with a fluctuating gold and silver.  Hold and short. 

Lending money necessarily involves risks: the borrower may default. But if you don't give up physical control, then you will escape the monetary debacle unscathed. Because of the imbecility of the managers of the paper dollar standard there exist durable risk-free profit opportunities in holding monetary metals in the balance sheet. The trick is: covered selling. That's possible because the price of monetary metals has been allowed to fluctuate. The price fluctuation of a monetary metal, like the flow-and-ebb of the oceans, represents energy. Energy that can be harnessed. Energy that can be harnessed only by those who understand monetary economics.

Source: Safe Haven | The Double Whammy of Geopolitical Gold Games

Shocked Investor: The Illusion of the DJIA - Updated

Interesting stats on how the skyrocketing price of Gold could really be just an illusion for people in Canada.  Any gains realized in USD translated to CAD could be quickly lost.

Sounds like CAD is a hedge against US-based inflation, the common reason for buying gold as a hedge?  So instead of buying gold, you should stock up on cash?  I'm a bit confused... that's not how it's supposed to work.

Consider also the appreciation of gold in 2007. While the price of an ounce of gold has gone up by 18% in USD and by 11% in Euros in 2007, it has not appreciated at all for those investors in Canada and Brazil

Source: Shocked Investor: The Illusion of the DJIA - Updated

When Money Market funds are paying out more than a 1 year GIC you know there are issues with the markets... and it's going to get worse before it gets better.  Today's MM rate - 4.21%... and the spread should go higher when Canada's central bank follows it's US masters and chops rates a bit more.

I was expecting the Fed to disappoint with a .25 cut, but as soon as they chopped .5 off the rate I ditched my short holdings, which have been ticking me off ever since the last emergency cut.  Basically the Fed, now sitting at 3%, seems to be determined to chop until they either hit zero or positive market sentiment returns.  Somehow I think 0 is in the cards...

With China revaluation of the Yuan, (currently at 7.19 per USD according to Yahoo, give or take the bank spreads) it appears that this could be a contributing factor to US inflation.  As China fights inflation with an increasing Yuan, this would deflate the value of their USD holdings and increase the costs of exports.  Wal-Mart is going to have a tough time trying to put smiley faces on increasing import costs, though it could be good for export businesses in the US (think manufacturing?)

It seems as though the middle of the teeter-totter could break at any moment, with 2 - 500 lb gorrilas sitting on each side.  According to some articles, this decrease, if it hits 6, could pose a danger to China's staggering economic growth, though it's a lucky number in Chinese.

"The number six, liù, is considered to be a very auspicious number because it is a homonym of the word for "flowing" or "smooth," liū. This is the reason why the Western ominous number combination 666 does not get the hairs on the back of Chinese people to stand up. The "devil's number" is a particularly lucky one in the Chinese language, as it sounds close to the words meaning "things are going smoothly." People often pay extra to have this string appear in their telephone number. Basically, it seems that the more times a lucky number is repeated one after another, the more potent will its fortune-bringing effect be."

This can't be good for offshore companies...

In other news, or in more of the same news... more downgrades.

Bond insurers' possible downgrade spurs market angst seems to indicate that another wave of writedowns are going to hit the market next month.  However, after reading more about mining stocks and various concerns about South African stakes, plus the skyrocketing price of gold, I see that there could still be some upside to the gold miners in Canada.

Though short term, it doesn't look that anything's got upside, except for some highly-manipulated small caps.

Somebody was on the right side of the trade with Kelly Services.... 200 shares traded, up 31% today.  Damn market orders...

Of course, if you are on the Ultrashort side, you had a 9% gain in FXP today... but the word "ultra" is probably just another way to say "weapon of mass destruction" in your portfolio, unless you're a day trader with a good eye for trends and a good ear to the ground for emergency rate cuts...

Microsoft Massage v1.0

 Microsoft Massage v1.0 is the latest entry to their financial product line. Run against a balance sheet, and it will point out the best way to move the numbers to please investors and analysts, causing stock prices to increase.

With respect to the earnings bump reported on Friday by Microsoft, Honeywell and Caterpillar, traders are not fooled by results that are boosted as a result of huge share buy-backs.

To show how earnings are increased via financial balance sheet restructuring rather than from operations, look to the number of outstanding shares as reported by Value Line:

MSFT
2005: 10700 mil shs
2006: 10062
2007: 9380
2008: 9000e

HON
2005: 829.48 mil shs
2006: 800.59
2007: 745.00
2008: 745.00e

CAT
2005: 670.87 mil shs
2006: 645.81
2007: 635.00
2008: 615.00e

Despite higher internal rate of return from operations, these corporations were buying back treasury stock in the open market at cycle-high prices. As I see it, these companies seek to boost their per share profit in order to derive higher management bonuses and/or to rationalize extreme compensation.

It’s a case of everybody has to get theirs as soon as they can get it.

Source: Bill Cara: Daily Report for Sat, Jan 26, 2008

Note: There is no such thing as Microsoft Massage, though it could be a good idea.  Contracting the money supply (or in this case, the share supply) increases the value of the stock, even though corporate assets are being used to buyback shares at top value.  This is probably not the best way to deploy capital, but when you're a cash cow like Microsoft it probably doesn't matter a whole lot what you do... especially when you now have a profitable gaming system, and a bigger bonus to spend on cheap games from the Microsoft store.

Minyanville - NEWS & VIEWS-Article

 

Five Things You Need to Know: President Bush, Congress Weigh Economic Stimulus Package Targeting Economic Stimulus Package

Minyanville - NEWS & VIEWS-Article

Pam Martens: How Wall Street Blew Itself Up

 

Interesting peek behind how  the current financial crisis may have been started... and by whom.

The private company that would become Wall Street's ticker tape for pricing exotic credit instruments (derivatives on subprime mortgages and credit default swaps) started out as Mark-it Partners in 2001, the brain child of Lance Uggla while he was working for a division of Toronto Dominion Bank, TD Securities.

Pam Martens: How Wall Street Blew Itself Up

A Wile. E. Coyote moment... Super Genius no more?

 Yes, there are problems with the markets.  Yes they are big problems.  Is the media milking this?  Probably.  The media likes big problems.  Is it an opportunity?  Nobody will know for probably 2-3 years at least.

It's the Wile. E. Coyote moment. The ha-ha point at which the cartoon character runs off the edge of the cliff, looks down and realises there's nothing there.

Except it's not so funny when it's your savings in freefall. Since the beginning of the year, equity markets have looked and decided they didn't like what they saw down there. Having run in mid-air for months, convincing themselves that the stock market could shrug off the credit crunch, they've had a rethink.

Source: Not selling in October is no reason to sell shares now - Telegraph

Downgrade will hurt CDO markets

The $450 trillion CDO market seems to include a lot of double-triple-quadruple counted numbers. $27 trillion is still a lot of money. If we're talking about this being the worst recession since the Great Depression, we're looking at defaults of at least 12.7% or $3.43 trillion?
Or will the swaps end up cancelling each other out?

This has grown to be a huge market: The total value of all CDS contracts is something like $450 trillion. Because buyers and sellers of insurance usually create multiple "policies" as they attempt to control risk, that number includes a lot of duplication. Real exposure, says the Bank for International Settlements, may be only 20% of that, or $90 trillion. Some studies have put the real credit risk at just 6% of the total, or about $27 trillion. That puts the CDS market at somewhere between two and six times the size of the U.S. economy.
The CDS market has been a good place to make money in the past few years because default rates in the junk-bond market have been historically low. The default rate for all junk bonds declined to 1.7% in 2006. That's the lowest rate since 1996. With defaults that low, sellers were paid insurance premiums but didn't have to cough up much in return.
But that default rate started to rise in 2007, climbing to 2.6%. And Standard & Poor's projects the rate will climb to 3.4% by October. At that rate, 56 bonds would go into default in 2008, compared with 14 in 2007.
That level of default isn't likely to inflict too much damage on the CDS market. The historical rate for defaults by corporate junk bonds has averaged 5% a year since 1980. But the default rate has run as high as 12.7% in previous recessions.
Source: The next banking crisis on the way - MSN Money

The economy slows down with its ships

As the price of oil goes up, so does the cost of shipping.  Reductions in shipping speeds mean a slower time to market, which should ultimately cause shortages for products and hence increase the cost of goods.  With a 1 1/2 day lag in receiving goods, just-in-time manufacturing companies could have a harder time.

"Slowing down by 10 percent can lead to a 25 percent reduction in fuel use. Just last week a big Japanese container liner gave notice of its intention to slow down," he added.

Source: Slower boats to China as ship owners save fuel - Yahoo! News

Stock Market Trading & Investing Analysis

Are we in a bear market yet?  Naaaa... it's way worse than that.  

We're going to need to start talking in marine terms pretty soon. This one's a whale.

The possibility of an up close this week certainly did not come into being. Weekly price charts of major US Stock Market Indexes show major devastation from last weeks trading and overall breadth for the week was as bad as it’s ever been in any of the last downside week’s over the past few months.  Only 10 of the 273 sectors we tracked had better than 0% breadth, that’s just nasty!  This suggests lower lows to come or at least serious testing of the lows made this week.

Source: Stock Market Trading & Investing Analysis

Ambac downgraded, cities seen at risk

Dominoes are falling... 

Since late last year, when the agencies first raised the prospect, analysts have suggested any move to cut Ambac or MBIA below "AAA" could be disastrous. The concern is that downgrades will lead to a reduction in the value of portfolios at dozens of financial institutions, said Donald Light, a senior analyst at Celent LLC.

"Bond insurers are the lynchpin holding together valuations of portfolios of all kinds of financial institutions," Light said.

Source: Ambac downgraded, cities seen at risk

Could be a time to pick up another few shares of Berkshire Hathaway.

Ugly Chart Sector Charts

Ugly's got some good charts for sector rotation analysis. 

Link to Ugly Chart Sector Charts