Get to the nitty gritty: what should we do with our TIAA-CREF or other retirement pension investments? Mark Jones wrote: > In the first such move since the panic days of the 1998 financial crisis, the > Federal Reserve today lowered interest rates between meetings. It was a dramatic 50 > basis point move, sending a strong signal to the begging marketplace that the Fed is > ready and willing to take strong action to sustain the faltering boom. > Interestingly, this aggressive rate cut comes just one day after financial markets > traded in an extraordinary manner uncomfortably reminiscent of 1998. Throughout the > Treasury, agency and mortgage-backed marketplace, yesterday was a virtual buyers > panic. Two-year Treasury yields sank an eye-opening 23 basis points to 4.93%, while > 10-year Treasury yields dropped 19 basis points. The implied yield on the agency > futures contract also collapsed 23 basis points, with mortgage-back yields generally > dropping about 22 basis points. It looked like derivative trades run-amok. > Ominously, NASDAQ was in severe decline and many key financial stocks were coming > under heavy selling pressure as well. In both the stock and credit markets, it > certainly had the appearance of an unfolding market dislocation - a 1998-style > seizing of the markets caused by deleveraging and derivative problems. > > Todays Fed announcement created an abrupt market response, inciting panic buying > throughout the stock market. The NASDAQ100 ended the day with a stunning 19% > advance, while the NASDAQ Telecommunications index surged 18% and the AMEX > Broker/Dealer index rose 13%. The Street.com Internet index gained 20% today, while > the Semiconductors added 18%, and the Morgan Stanley High Tech index jumped 17%. > The NASDAQ Composite gained a record 325 points, besting the previous 274 point > record established on the 5th of last month. The 14.17% gain surpasses the 10.48% > record gain set on December 5th as well. It was a record day of volume on NASDAQ > with more than 3.1 billion shares traded. This surpassed the previous record > established on April 4th, 2000, by 240 million shares. All of the top ten volume > days have been within that past nine months. > > For the week, the Dow, S&P500, Transports, and the Morgan Stanley Cyclical index, > have all gained 2%. The Morgan Stanley Consumer index has declined 3% and the > Utilities 8%. The NASDAQ100 has gained 8%, the Morgan Stanley High Tech index 10%, > and the Semiconductors 16%. The Street.com Internet Index and the NASDAQ > Telecommunications index have gained 9%. The Biotechs, small cap Russell 2000, and > S&P400 Mid-Cap indices are largely unchanged. The AMEX Securities Broker/Dealer > index has gained 9% and the S&P Bank index 3%. The dollar rallied strongly on the > Fed announcement, gaining better than 2% against the euro. > > Panic buying in the stock market was the mirror image of the heated selling in key > sectors of the credit market. For the day, benchmark 10-year Treasury yields jumped > 25 basis points and 5-year yields surged 22 basis points. Agency yields jumped 17 > basis points and mortgage-backs 15 basis points. In short, dislocated conditions > prevail throughout the credit market, with such an environment quite a challenge for > the leveraged speculators and derivative players. We are left to ponder if some > type of derivative problem and/or hedge fund troubles was a factor in the Feds > surprise decision. Clearly, all is not well in the U.S. financial system. > > Things are not well in Corporate America either. The Bloomberg headline read GM, > Ford Dec. Auto Sales Fall 15% on Weather, Economy. For U.S. manufacturers, > December auto sales reports make for some bleak reading. Fords American-built > sales dropped 15%, with auto sales declining 24% and truck sales 7%. It was, > however, a record year with sales increasing 1%. At General Motors, December total > vehicle sales dropped 18%, with car sales down 15% and truck sales declining 20%. > For the year, total vehicle sales at GM declined 1%, with car sales declining 1% and > truck sales flat. Chrysler division December sales dropped 15%, with year-2000 > sales down 4%. DaimlerChrysler announced that it would idle five plants next week > in an effort to trim oversized inventories. > > Interestingly, industry sales for December are being called down about 8%, as > foreign manufacturers continue to benefit from strong sales. At Toyota, December > sales were up 14% from last year. For the year, Toyota sales jumped almost 10%, to > a record 1.62 million units. The Camry was the best-selling car in the U.S. for the > fourth year in a row. December Camry sales were 23% above year ago levels, and the > luxury Lexus unit saw sales jump 31%. We found a quote from a Toyota executive > quite interesting: The economy is down-shifting from delirious to deliberate and we > have just passed a sign saying Proceed with Caution. Last year was great, this > year will be merely good. At Honda, December sales were 3% above last year, with > year-2000 sales up 8%. Volkswagen December sales were 12% above 1999, and full > year sales increased almost 13%. BMW enjoyed a record December, with sales jumping > 40%. It was also a record year at BMW with sales surging 22%. SAAB also had a > record December, with sales 29% above year ago levels. Audi December sales were 15% > above last year and up 22% for the full year. Nissans year-2000 sales increased > 11% from last year, with truck sales jumping 21%. Mazda sales jumped 16% for the > year. Sales at Fords Jaguar and Volvo divisions both set new records, with Jaguar > sales jumping 25% during 2000. Mercedes-Benzs established a new U.S. sales record, > up 9% from last year. December sales, 6% above 1999, were also a new record. Kia > also enjoyed a record year-2000, with sales increasing 19%. It was a record year > as well for Mitsubishi, with sales jumping 20%. > > We have over the past months highlighted auto sales on an almost monthly basis for > the reason that we see them basically as a microcosm of the unfolding problems for > the entire U.S. economy. Importantly, foreign manufacturers are kicking our > butts. Wall Street and the media can present the weak showing of the U.S. > manufactures, as indicative of a very weak consumer sector, but this is a distortion > of reality. If consumer spending was so weak and the negative NASDAQ wealth effect > so powerful, would BMW and Lexus sales be at record levels? > > Much was made of yesterdays sharp decline in the National Association of Purchasing > Managers Index. And while the media focus was on the NAPM Drops to Lowest in 9 > Years, there was little mention that the prices paid component jumped to 61 from > 56.6. The prices paid component was 32.2 in December 1998 and has remained very > stubborn despite the sharp downturn in new orders and production. We believe this > is indicative of strong underlying inflationary pressures that will only gain > additional momentum from lower interest rates. > > Interestingly, November construction spending data was released today. > Year-over-year, total construction spending was 5% above a very strong November of > 1999 and 11% above November of 1998. Nonresidential spending ran 11% above last > year, with spending on industrial structures rising 44%, office buildings 15%, and > hospitals 11%. Residential spending was 3% below very strong levels from last year. > There are currently few indications of any significant downturn in construction, > with lower interest rates certainly only to provide a continuing benefit for this > key sector. > > And while the focus will be on the Fed and how their rate cuts will ensure the > continuation of solid economic growth, - permanent prosperity - the real story > remains an acutely maladjusted economy and unstable financial system. We strongly > argue these structural problems will only be exacerbated by aggressive Federal > Reserve accommodation. Indeed, todays wild stock market reaction is just > confirmation of how dysfunctional and distorted market dynamics have become. Such > unusual moves in both equity and credit market prices are indicative of serious > financial imbalances, with the U.S. financial system clearly an accident waiting to > happen. > > www.prudentbear.com > > _______________________________________________ > Crashlist resources: http://website.lineone.net/~resource_base > To change your options or unsubscribe go to: > http://lists.wwpublish.com/mailman/listinfo/crashlist _______________________________________________ Crashlist website: http://website.lineone.net/~resource_base
