Reminder, don't drink the Kool-Aid. Economy NOT improving.

[redrumloa]

Stocks fall on weak retail sales, foreclosure jump

http://finance.yahoo.com/news/Stocks-fa ... et=&ccode=

During the market's two-month advance, investors grew accustomed to data indicating that the economy, while not growing, was at least bottoming out. This week, unexpectedly worse data has thrown a wrench into the works.

On Wednesday, economists predicted April retail sales would be flat, but instead they fell, and March's sales decline was revised to an even larger drop.

Macy's Inc. offered another sign that consumer spending is not on the rebound. The department store operator said its loss in the first-quarter widened from a year ago to $88 million. Macy's fell 83 cents, or 6.7 percent, to $11.52.

Meanwhile, the main driver of the recession -- the collapsing housing market -- has yet to turn around. RealtyTrac data said April's foreclosures were up 32 percent from a year ago, and up slightly from March. It was the second straight month that more than 340,000 U.S. households received a foreclosure filing.

The stock market is an indicator of the overall economy. I've been saying all along that the recent stock market rally and supposed economic recovery was nothing more than a bear market rally, a sucker's rally. Read up on the great depression and you will see there were many false bottoms and sucker's rallies, each time the drop was worse than the last. As it says above, the driver of the recession was real estate and real estate has NOT bottomed yet. As I've also said, Obama spending like a drunk sailor in a whore house will make things far worse.

Keep those seat belts on.

 

[redrumloa]

As a side note, I tried to "short" BAC (Bank of America) at $13.50 on Friday. Shorting means you make money when the stock price goes down. I was unable to, no shares were available for shorting. Long story short, there was a ton of Wallstreet that agrees with me. BAC is currently trading at $10.81 after hours, I could have made 20% in 4 trading days

Why do I mention this? Despite the talking heads on tv, this is a clear example that most investors don't believe the hype.

 

[redrumloa]

Reminder, I don't like posting doom and gloom but I want to keep my eyes open.

You Can't Drink Yourself Sober": Financial Crisis Far from Over, Ritholtz Says

http://finance.yahoo.com/tech-ticker/ar ... et=&ccode=

The fact bank stocks have rallied and many have been able to raise private capital is a positive, but it's folly to believe the crisis is over, says Barry Ritholtz, CEO of Fusion IQ and author of the forthcoming Bailout Nation. "You can't drink yourself sober and you can't leverage your way out of excess leverage."

Many big banks remain technically insolvent and "are only being held together by spit, bailing wire and tape," says Ritholtz.

Banks like Citigroup and Bank of America are being "propped up by the grace of Uncle Sam," which can't afford to let go because bad loans continue to rise and demand for credit is falling, says the money manager and Big Picture blogger.

The banking system needs more time, at least three to five years, to deleverage before it can be left to its own devices, Ritholtz says, suggesting only time can heal the sector's wounds.

That said, because the government is propping up "zombie" banks, you can't rule out the Japan scenario of a decade (or more) of economic malaise, he says.

 

[redrumloa]

If the consumer isn't petrified, he or she is a damn fool

http://finance.yahoo.com/tech-ticker/ar ... et=&ccode=

But the whole concept of the economy finding its footing was "preposterous" to begin with, says Howard Davidowitz, chairman of Davidowitz & Associates.
"We're in a complete mess and the consumer is smart enough to know it," says Davidowitz, whose firm does consulting for the retail industry. "If the consumer isn't petrified, he or she is a damn fool."

Davidowitz, who is nothing if not opinionated (and colorful), paints a very grim picture: "The worst is yet to come with consumers and banks," he says. "This country is going into a 10-year decline. Living standards will never be the same."

and

As for all the hullabaloo about the stress tests, he says they were a sham and part of a "con game to get private money to finance these institutions because [Treasury] can't get more money from Congress. It's the ‘greater fool' theory."

"We're now in Barack Obama's world where money goes into the most inefficient parts of the economy and we're bailing everyone out," says Daviowitz, who opposes bailouts for financials and automakers alike. "The bailout money is in the sewer and gone."

 

[FluffyMcDeath]

It's pretty damned obvious there's still a world of trouble ahead. Fasten you diapers - it's not over yet.

While a lot of the sub-prime crud is working it's way through the system, look at the schedule for ARM resets:

That's a whole lot of potential pain as people who are struggling with their minimums get bumped up to the reset rate and can't sell their homes to cover.

Fortunately those wresling with ARMs look to be catching a break - but for how long.

Also, people are still losing their jobs. Job loses have to stop and even turn around before people start getting their confidence back and begin spending again. It takes a lot more to rebuild trust in the economy than to break it and meanwhile retail properties are vacating leaving commercial mortgages dangling.

It remains to be seen if enough money was was thrown at the banks to buy them into going easy on strapped borrowers (or if the administration has tied enough strings) and the administration needs to project a convincing optimism to hold back the flood of people running for the exits.