Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
How Stagflation Effects Stocks - 5th Dec 21
Bitcoin FLASH CRASH! Cryptos Blood Bath as Exchanges Run Stops, An Early Christmas Present for Some? - 5th Dec 21
TESCO Pre Omicron Panic Christmas Decorations Festive Shop 2021 - 5th Dec 21
Dow Stock Market Trend Forecast Into Mid 2022 - 4th Dec 21
INVESTING LESSON - Give your Portfolio Some Breathing Space - 4th Dec 21
Don’t Get Yourself Into a Bull Trap With Gold - 4th Dec 21
4 Tips To Help You Take Better Care Of Your Personal Finances- 4th Dec 21
What Is A Golden Cross Pattern In Trading? - 4th Dec 21
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - Part 2 - 3rd Dec 21
Stock Market Major Turning Point Taking Place - 3rd Dec 21
The Masters of the Universe and Gold - 3rd Dec 21
This simple Stock Market mindset shift could help you make millions - 3rd Dec 21
Will the Glasgow Summit (COP26) Affect Energy Prices? - 3rd Dec 21
Peloton 35% CRASH a Lesson of What Happens When One Over Pays for a Loss Making Growth Stock - 1st Dec 21
Stock Market Sentiment Speaks: I Fear For Retirees For The Next 20 Years - 1st Dec 21 t
Will the Anointed Finanical Experts Get It Wrong Again? - 1st Dec 21
Main Differences Between the UK and Canadian Gaming Markets - 1st Dec 21
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - 30th Nov 21
Omicron Covid Wave 4 Impact on Financial Markets - 30th Nov 21
Can You Hear It? That’s the Crowd Booing Gold’s Downturn - 30th Nov 21
Economic and Market Impacts of Omicron Strain Covid 4th Wave - 30th Nov 21
Stock Market Historical Trends Suggest A Strengthening Bullish Trend In December - 30th Nov 21
Crypto Market Analysis: What Trading Will Look Like in 2022 for Novice and Veteran Traders? - 30th Nov 21
Best Stocks for Investing to Profit form the Metaverse and Get Rich - 29th Nov 21
Should You Invest In Real Estate In 2021? - 29th Nov 21
Silver Long-term Trend Analysis - 28th Nov 21
Silver Mining Stocks Fundamentals - 28th Nov 21
Crude Oil Didn’t Like Thanksgiving Turkey This Year - 28th Nov 21
Sheffield First Snow Winter 2021 - Snowballs and Snowmen Fun - 28th Nov 21
Stock Market Investing LESSON - Buying Value - 27th Nov 21
Corsair MP600 NVME M.2 SSD 66% Performance Loss After 6 Months of Use - Benchmark Tests - 27th Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Ganging Up on the Stock Market!

Stock-Markets / Stock Markets 2010 Jan 22, 2010 - 01:47 PM GMT

By: Sy_Harding


Best Financial Markets Analysis ArticleI wrote in last week’s column that “the next few weeks could be a testing time for both bulls and bears”.

To my way of thinking too many influential participants decided to take part in that testing this week for comfort.

Early in the week the National Association of Home Builders (NAHB) reported that its Housing Market Index, which measures the confidence of home builders, declined to 15 in January, its lowest level since June, indicating that only 15% of builders have confidence in the housing industry going forward. The NAHB’s chief economist said the housing market recovery is tenuous as foreclosures continue to rise, the jobs recovery is slow, and builders are having trouble getting construction loans.

That was followed the next day by the report that new home starts unexpectedly fell 4% in December.

Banks got into the testing of the market by reporting fourth quarter earnings that were again produced mostly from their investment trading departments and investment-related fees from customers, while their credit-card and loan losses continued to pile up.

The World Bank then got into the act, releasing a report on Thursday saying that global economic recoveries will be tepid at best in 2010, and may even stall if consumer and commercial demand doesn’t pick up sufficiently to replace government stimulus efforts as they are withdrawn.

The report and remarks by the World Bank’s Arthur Burns also added weight to recent monetary policy announcements in China, one of the world’s most important and most stimulated economies, that it has begun preliminary moves to reverse its stimulus efforts. Burns said, “We can already see signs of bubbles and tension in the Chinese economy.”

As if there was not already enough pressure in China to cool off its blistering economy or face potential runaway inflation, China reported on Thursday that its economy (GDP) spiked up 10.7% in the 4th quarter.

To add to the confusion and uncertainty, Warren Buffett chimed in with well-publicized remarks that he still doesn’t know when the economy will recover, and seemed to express the need for more stimulus efforts from the government, saying, “The government came through, and overall I give them high marks for what they did  . . . . . . But we need to get money in people’s pockets, and the first stimulus plan did not do that very well.”

So we had the World Bank saying the global economic recovery will be tepid and may even stall, but that China, so important to global economic recovery, may be in a bubble and needs to take more steps to cool off its economy, with China agreeing, while Buffett is saying the economic recovery in the U.S. is still questionable and needs more government stimulus.

Meanwhile, one of the bright spots in the U.S. economy has been the fast recovery of the major banks, their return to significant profitability, and repayment of the TARP bailout money earlier than was expected.

However, as I noted above, their earnings are coming from their investment activities, while their losses from credit-card and commercial loan losses continue to pile up.

But what the heck, earnings are earnings, and their investment and trading activities have certainly been a prime support for the stock market. As I noted in last week’s column “The absence of public investors has not prevented a strong new bull market, rising on very low volume, the participants primarily being professional traders, and professional investors at hedge funds, banks and other institutions. In fact, banks have been reporting large profits due primarily to their trading and investments, even as their loan losses pile up.”

With those factors already testing the market mightily, President Obama then piled it on, giving a very tough televised speech spelling out proposed measures to reign in the power of banks, including banning them from numerous forms of investment trading, from having hedge funds of their own or providing financing to or investing in hedge funds of others, and so on. Probably good intentions, aimed at preventing the kind of risk-taking and greed that caused the recent problems in the banking system.

A good idea for later. But for now, investment activity by the banks has been a major support of the stock market, and the new bull market has been a major support for the economic recovery.

I didn’t have quite this degree of piling on in mind when I said last weekend that the market would likely be in for testing of its staying power.

Sy Harding is president of Asset Management Research Corp, publishers of the financial website, and the free daily market blog,

© 2010 Copyright Sy Harding- All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in