MarketRant: USRant: It Begins...

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The 'Magic Negro' (as Fox News permitted a moderated SMS message to refer to Obama) has wasted no time in announcing plans to expand the rate of theft from future generations. Next year will see that theft reach historic proportions. I have seen mooted - and what's more, the mooting was done with no hint of disapprobation - a forecast 2009 government deficit of 1.2 trillion (that's 1.2 million million dollars, for those suffering from 'illion' brainfade).

Such a deficit is not going to help, except if you're a defence contractor or have some other means of getting tax funds transferred into your bank account (i.e., unless you're a crony).

In fact such a deficit will do great long-term damage, since government deficits are never put to work in ways that yield more than the nominal interest rate.

For a start, it takes $1.30 of tax collections for the government to be able to do $1 worth of anything - that puts any "government spending is investment" theory out the window right there. If you have an investment that goes backwards 23% (that's {$1/$1.30 - 1} for those playing at home), then you need returns 2% above the cash rate for the investment to break even.

If bureaucrats were ever able to earn 2% above cash, then the world would be almost infinitely richer than it actually is.

Want proof of that assertion? Simply do the sums: start with a really low cash rate (say. 1%, making the required rate of return 3%).

If someone was able to earn 3% a year consistently on one single dollar, over a thousand years, the investment of a single dollar would now be worth $6.3 trillion.

It is utter nonsense to say that there was less than, say, $100 million (in 2008 equivalents) at the disposal of States in the year 1008 - so if states were able to hit "time preference plus 2%" with a really really low assumption on time preference, you might reasonably expect global financial wealth to be around 630 quintillion dollars: not a chance. It's not even close.

And when you consider that time preference is more of the order of 5% (i.e., that the equilibrium rate demanded by people to forego consumption for a year is about 5%), the required rate of return becomes something more like 7% - and the end-point wealth from one single dollar invested a thousand years ago becomes...

241,979,004,221,013,725,881,088,234,997.97

that is, 241 octillion dollars, and some-odd cents.

You might think I'm being a bit unfair requiring unbroken investment control by a single state over the proceeds of that single dollar, but I'm not: there is no requirement for the custodianship of the investment to be continuously in the hands of one organisation - all that is required is that each change of ownership results in the same investment performance.

This should be the point at which a light bulb appears over your head, dearest Reader: states - be they kings and princes, potentates and satraps, or Ministers and Senators - are composed of nothing more than a seething mass of parasites. The rate of return from parasites (for the host) is negative in almost all situations. There are some parasites which furnish symbiotic 'benefits' to the host as a side effect: some worms that infest the human gut can reduce asthma and related allergy symptoms and severity, through their suppression of histamine reactions.

I think we can put unintended symbiotic benefits aside - the political class does not furnish a single iota of symbiotic benefit. It furnishes war with undying regularity, and also - for good measure - mismanages resources badly enough to provide the occasional famine as well.

The one thing that was quite interesting: bonds did not rise as equities fell today, despite the magnitude of the fall in stocks. The 30-year bond has given up just on 10 full points since New Year's Day.

Economic News

Crude Oil inventories rose by over 6 million barrels, which was much more than expected. I find it odd that expectations were so low-balled, given the US government's explicit promise last week to buy up more oil for the SPR. I'm not saying that SPR holdings are counted in crude inventories (they're not) but if government is putting oil into th SPR, then refiners are also likely to undertake inventory build.

Headline Indices

The Dow Jones Industrial Average shed 245.4 points (2.72%) to 8769.70 points. The index high for the day was 8996.94 (at the open) although the intraday 'traded' high was a little over 8900. The low was 8719.92, set at about 3:05 p.m. NY time... so yet again the thing could not resist a bounce into the close (albeit a weak bounce).

Total volume traded in the 30 components of the Dow was 930.89m shares. Decliners outpaced gainers by 9 to one, with 27 decliners to 3 advancers. Declining volume was greater than advancing volume by 873.1m to 57.78m shares. The main decliners (in percentage terms) were -

Alcoa (AA) -1.23 (10.1%) to $10.89 on volume of 34.93m shares;
Du Pont (DD) -1.99 (7.2%) to $25.66 on volume of 11.18m shares;
Intel (INTC) -0.93 (6.1%) to $14.44 on volume of 128.52m shares;
Microsoft (MSFT) -1.25 (6%) to $19.51 on volume of 71.05m shares; and
JPMorganChase (JPM) -1.79 (6%) to $28.09 on volume of 40.18m shares.

The S&P500 Index slid 28.05 points (3%) to 906.65 points. Total volume traded in the 500 components of the index was 3.72bn shares. Decliners outpaced gainers by 10.2 to one, with 437 decliners to 43 advancers. Declining volume was greater than advancing volume by 3.21bn to 448.42m shares. The main decliners (in percentage terms) were -

American Capital (ACAS) -1.07 (14.6%) to $6.24 on volume of 12.53m shares;
Lincoln National (LNC) -3.58 (14.4%) to $21.22 on volume of 6.26m shares;
CONSOL Energy Inc. (CNX) -5.22 (14.3%) to $31.37 on volume of 6.3m shares;
Federal Home Loan Mtg. (FRE) -0.11 (12.8%) to $0.75 on volume of 14.05m shares; and
Wyndham Worldwide (WYN) -1.11 (12.7%) to $7.6 on volume of 3.18m shares.

The Nasdaq Composite dropped 53.32 points (3.23%) to 1599.06 points. while the Nasdaq100 dipped 35.89 points (2.82%) to 1238.60 points..

Total volume traded in the 100 components of the Nasdaq100 index was 937.45m shares. Decliners outpaced gainers by 5.9 to one, with 83 decliners to 14 advancers. Declining volume was greater than advancing volume by 729.35m to 201.02m shares. The main decliners (in percentage terms) were -

Wynn Resorts (WYNN) -8.05 (14.6%) to $47.23 on volume of 3.28m shares;
Focus Media Holding (FMCN) -0.95 (9.4%) to $9.15 on volume of 2.41m shares;
Applied Materials (AMAT) -0.98 (8.5%) to $10.6 on volume of 25.27m shares;
Foster Wheeler (FWLT) -2.28 (8.3%) to $25.32 on volume of 4.24m shares; and
Microchip Technology (MCHP) -1.51 (7.5%) to $18.5 on volume of 5.95m shares.

Volatility

The CBOE Volatility Index added +4.83 points (12.53%) to 43.39 points. and the CBOE Nasdaq100 Volatility Index rose +3.81 points (9.59%) to 43.52 points..

Breadth and Internals

A total of 3887 issues traded today on the NYSE; 813 stocks posted gains for the day, and there were 2998 losers. 11 stocks made new 1-year highs on the NYSE, while 59 shares plumbed new 52-week depths.

On the Nasdaq 2935 tickers traded today; total Nasdaq volume was 2.02bn shares. A total of 753 stocks posted gains for the day, with aggregate volume of 450m shares changing hands in the day's winners. The red zone of the Nasdaq exchange comprised 2073 losers, and total declining volume was 1.55bn shares. 7 Nasdaq-listed stocks hit new 52-week highs, while 27 shares dipped to new 1-year lows.

Major Market Statistics
Index	Close	Gain(Loss)	%
Dow Jones Industrial Average	8769.70	-245.40	-2.72%
S&P500 Index	906.65	-28.05	-3%
Nasdaq Composite	1599.06	-53.32	-3.23%
Nasdaq100	1238.60	-35.89	-2.82%
CBOE Volatility Index	43.39	+4.83	12.53%
CBOE Nasdaq100 Volatility Index	43.52	+3.81	9.59%

Dow Darlings

General Motors (GM) +0.19 (4.8%) to $4.13 on volume of 26.7m units
Verizon (VZ) +0.40 (1.3%) to $31.90 on volume of 20.7m units
Coca-Cola (KO) +0.22 (0.5%) to $44.93 on volume of 10.4m units

Dow Duds:

Alcoa (AA) -1.23 (10.1%) to $10.89 on volume of 34.9m units
Du Pont (DD) -1.99 (7.2%) to $25.66 on volume of 11.2m units
Intel (INTC) -0.93 (6.1%) to $14.44 on volume of 128.5m units
Microsoft (MSFT) -1.25 (6%) to $19.51 on volume of 71.1m units
JPMorganChase (JPM) -1.79 (6%) to $28.09 on volume of 40.2m units

Most Traded Dow stocks:

Intel (INTC) --0.93 (6.1%) to $14.44 on volume of 128.5m units
Bank Of America (BAC) --0.57 (4%) to $13.71 on volume of 109.3m units
Citigroup (C) --0.31 (4.2%) to $7.15 on volume of 102m units
Microsoft (MSFT) --1.25 (6%) to $19.51 on volume of 71.1m units
General Electric (GE) --0.75 (4.4%) to $16.11 on volume of 70m units

Precious Metals

The Gold Bugs index (XAU) dipped -10.16 points (8.37%) to 111.29 points. Total volume traded in the 16 components of the index was 137.65m shares. None of the 16 index components rose today: 16 stocks within the index fell, with downside volume of 137.65m shares. The main decliners (in percentage terms) were -

Silver Wheaton (SLW) -0.8 (12.3%) to $5.71 on volume of 11.47m shares;
Newmnt Mining (NEM) -4.44 (11.2%) to $35.11 on volume of 11.47m shares;
Gold Fields Ltd (GFI) -1.11 (11%) to $8.95 on volume of 8.67m shares;
Yamana Gold (AUY) -0.73 (9.7%) to $6.77 on volume of 21.25m shares; and
Freeport McMoran (FCX) -2.82 (9.2%) to $27.99 on volume of 25.07m shares.

Energy Complex

The Oil Services index (OSX) lost -7.06 points (4.97%) to 135.12 points. Total volume traded in the 15 components of the index was 113.38m shares. None of the 15 index components rose today: 15 stocks within the index fell, with downside volume of 113.38m shares. The main decliners (in percentage terms) were -

Weatherford International (WFT) -1.36 (9.5%) to $12.95 on volume of 17.43m shares;
Rowan Co (RDC) -1.37 (7.7%) to $16.35 on volume of 4.75m shares;
Smith International (SII) -2.09 (7.2%) to $26.75 on volume of 3.72m shares;
Oceaneering International (OII) -2.26 (6.7%) to $31.52 on volume of 0.7m shares; and
Noble Corp (NE) -1.5 (5.9%) to $23.97 on volume of 8.09m shares.

Bellwethers

The nine-stock group that makes up the Rant bellwethers declined on average by 5.3%. The fallout occurred as follows:

General Electric (GE) -0.75 (4.45%) to $16.11 on volume of 69.97m units.
Citigroup (C) -0.31 (4.16%) to $7.15 on volume of 101.96m units.
Wal-Mart (WMT) -0.48 (0.86%) to $55.54 on volume of 15.97m units.
IBM (IBM) -1.44 (1.61%) to $87.79 on volume of 8.08m units.
Intel (INTC) -0.93 (6.05%) to $14.44 on volume of 128.52m units.
Cisco Systems (CSCO) -0.47 (2.64%) to $17.32 on volume of 48.1m units.
Google (GOOG) -12.05 (3.61%) to $322.01 on volume of 4.45m units.
Fannie Mae (FNM) -0.1 (11.76%) to $0.75 on volume of 32.1m units.
Freddie Mac (FRE) -0.11 (12.79%) to $0.75 on volume of 14.05m units.

Other Indices of Interest...

The Banks index (BKX) dipped -2.35 points (5.33%) to 41.76 points. Total volume traded in the 24 components of the index was 403.59m shares. None of the 24 index components rose today: 21 stocks within the index fell, with downside volume of 403.59m shares. The main decliners (in percentage terms) were -

Regions Financial (RF) -0.92 (10.4%) to $7.91 on volume of 10.92m shares;
Zions Bancorp (ZION) -2.57 (10.2%) to $22.58 on volume of 2.74m shares;
Keycorp (KEY) -0.74 (8.5%) to $7.95 on volume of 7.62m shares;
New M&I Corporation (MI) -1.11 (8.3%) to $12.28 on volume of 2.66m shares; and
BB&T Corp (BBT) -1.92 (7.6%) to $23.29 on volume of 9.74m shares.

The Semiconductor index (SOX) fell -11.44 points (4.88%) to 223.12 points. Total volume traded in the 18 components of the index was 307.15m shares. None of the 18 index components rose today: 18 stocks within the index fell, with downside volume of 307.15m shares. The main decliners (in percentage terms) were -

Applied Materials (AMAT) -0.98 (8.5%) to $10.6 on volume of 25.27m shares;
Taiwan Semiconductor (TSM) -0.69 (8.2%) to $7.71 on volume of 21.59m shares;
National Semiconductor (NSM) -0.89 (7.9%) to $10.44 on volume of 7.68m shares;
KLA-Tencor Cp (KLAC) -1.62 (6.7%) to $22.49 on volume of 4.56m shares; and
Intel (INTC) -0.93 (6.1%) to $14.44 on volume of 128.5m shares.

The ChildKiller ("Defence") index (DFX) dipped -9.19 points (3.26%) to 273.04 points. Total volume traded in the 17 components of the index was 98.64m shares. Decliners outpaced gainers by 15 to one, with 15 decliners to 1 advancers. Declining volume was greater than advancing volume by 96.67m to 1.96m shares. The main decliners (in percentage terms) were -

Teledyne Tech (TDY) -2.97 (6.4%) to $43.25 on volume of 0.41m shares;
Embraer Empresa (ERJ) -0.93 (4.9%) to $18.16 on volume of 0.83m shares;
General Electric (GE) -0.75 (4.4%) to $16.11 on volume of 69.95m shares;
Gencorp (GY) -0.17 (4.4%) to $3.66 on volume of 0.38m shares; and
Rockwell Collins (COL) -1.65 (3.9%) to $40.3 on volume of 1.34m shares.

Wednesday, January 07, 2009

USRant: It Begins...