Financial topics

[John]

Steve Lieseman on CNBC called the earthquake in Japan a "major
deflationary event in a major deflationary country."

He said that the earthquake may be "QE3 in disguise." I assume what
he means by that is that the earthquake will be used as justification
for QE3, because of its deflationary effect.

John

[John]

Well, Higgie, yesterday you said, "Markets are behaving normally today
for the first time in a long time." It didn't last long. The
earthquake disaster should be pushing stocks down, but it's not.

Why? My guess is that investors are now expecting QE3, as Lieseman
indicated.

John

[Higgenbotham]

Well, Higgie, yesterday you said, "Markets are behaving normally today
for the first time in a long time." It didn't last long. The
earthquake disaster should be pushing stocks down, but it's not.

Why? My guess is that investors are now expecting QE3, as Lieseman
indicated.

John

I expected a reaction back up today. The quake did provide a bit of hesitation to that; otherwise stocks would probably be stronger. The bond market in particular got a bit stretched yesterday (bonds were up a lot). So with stocks up we see: dollar down, bonds down (interest rates up), silver and gold up, silver up more than gold. All of those relationships are normal.

When a market gets oversold, news like that sometimes provides an excuse to buy stocks. If I recall correctly, the London subway bombing did the same thing. Investors tend to make up anything they want to justify doing what they want to do.

PS I just sent John a time stamped e-mail I wrote while the market was still down this morning calling this reaction back up.

[John]

Date DJIA (Change) (% of trend) (% of 2000 high)
---------------------------------------------------------------------
Mon 2005-06-27 10290.78( -0.07%) (215% of 4776.9) ( 87% of 2000-01-14)
Tue 2005-06-28 10405.63( +1.12%) (217% of 4777.5) ( 88% of 2000-01-14)
Wed 2005-06-29 10374.48( -0.30%) (217% of 4778.1) ( 88% of 2000-01-14)
Thu 2005-06-30 10274.97( -0.96%) (215% of 4778.7) ( 87% of 2000-01-14)
Fri 2005-07-01 10303.44( +0.28%) (215% of 4779.3) ( 87% of 2000-01-14)
---------------------------------------------------------------------
Tue 2005-07-05 10371.80( +0.66%) (216% of 4781.7) ( 88% of 2000-01-14)
Wed 2005-07-06 10270.68( -0.97%) (214% of 4782.3) ( 87% of 2000-01-14)
*** London subway bombing on 7/7/2005
Thu 2005-07-07 10302.29( +0.31%) (215% of 4782.9) ( 87% of 2000-01-14)
Fri 2005-07-08 10449.14( +1.43%) (218% of 4783.5) ( 89% of 2000-01-14)
---------------------------------------------------------------------
Mon 2005-07-11 10519.72( +0.68%) (219% of 4785.3) ( 89% of 2000-01-14)
Tue 2005-07-12 10513.89( -0.06%) (219% of 4785.9) ( 89% of 2000-01-14)
Wed 2005-07-13 10557.39( +0.41%) (220% of 4786.5) ( 90% of 2000-01-14)
Thu 2005-07-14 10628.88( +0.68%) (222% of 4787.1) ( 90% of 2000-01-14)
Fri 2005-07-15 10640.83( +0.11%) (222% of 4787.7) ( 90% of 2000-01-14)
---------------------------------------------------------------------
Mon 2005-07-18 10574.99( -0.62%) (220% of 4789.5) ( 90% of 2000-01-14)
Tue 2005-07-19 10646.56( +0.68%) (222% of 4790.1) ( 90% of 2000-01-14)
Wed 2005-07-20 10689.15( +0.40%) (223% of 4790.7) ( 91% of 2000-01-14)
Thu 2005-07-21 10627.77( -0.57%) (221% of 4791.3) ( 90% of 2000-01-14)
Fri 2005-07-22 10651.18( +0.22%) (222% of 4791.9) ( 90% of 2000-01-14)
---------------------------------------------------------------------
Mon 2005-07-25 10596.48( -0.51%) (221% of 4793.7) ( 90% of 2000-01-14)
Tue 2005-07-26 10579.77( -0.16%) (220% of 4794.3) ( 90% of 2000-01-14)
Wed 2005-07-27 10637.09( +0.54%) (221% of 4794.9) ( 90% of 2000-01-14)
Thu 2005-07-28 10705.55( +0.64%) (223% of 4795.5) ( 91% of 2000-01-14)
Fri 2005-07-29 10640.91( -0.60%) (221% of 4796.1) ( 90% of 2000-01-14)
---------------------------------------------------------------------

** Great Depression and Dow Jones Industrial Average
** http://www.generationaldynamics.com/cgi ... 010.i.djia

[Higgenbotham]

Also, I forgot to mention another aspect of recent events as they relate to the logic or illogic of the stock market. In the leadup to the problems in Europe last year, investors sold European stocks and bought US stocks for a time. The same thing seemed to be happening during the leadup to the problems in the Middle East. With the earthquake in Japan, investors may sell Japanese stocks and buy US stocks. I'm noticing the Japan index funds like EWJ are down this morning. Any effect on the US market may be more temporary than the previous events though.

[John]

> How traders react to crisis like Japan

> "The gravitational effects of the supermoon"

> Jonathan Ratner Mar 11, 2011

> When great tragedy such as Japan’s massive earthquake strikes,
> traders immediately go bi-polar.

> On the one side, they are empathetic: What can I do? How can we
> help?

> Art Cashin, director of NYSE floor operations for UBS, remembers
> the Oklahoma City bombing in 1995. When the news hit the wires,
> “the hat” was immediately passed around the trading floor and more
> than US$150,000 in cash was raised within ten minutes. A broker
> was on the first flight to Oklahoma City with the cash to be used
> “in the most effective way.”

> But as the hat was being passed, minds were busy at work thinking
> about each consequence and its broader impact on the economy and
> financial markets.

> “This morning the thinking continues at lightening speed,”
> Mr. Cashin said in a note to clients on Friday.

> Longer term, Mr. Cashin thinks the quake may strain global
> liquidity.

> “If Japan must borrow for large or extensive repairs, there may be
> fewer buyers for U.S. or European bonds,” he said, providing a
> glimpse of how traders think as they react to crisis and start to
> price-in unforseen events.

> Traders and financial markets have been dealing with numerous
> “Black Swan” events in recent years, with the Japanese earthquake
> and the ouster of Mubarak from Egypt only the latest.

> Popular commentator Dennis Gartman pointed out that the yen firmed
> as the Japanese call money back home to help rebuilding
> efforts. Meanwhile, oil and other commodities faltered as the
> world’s third-biggest economy is set to pause or slow, limiting
> short-term demand. Re-insurers also dipped on fears of extensive
> claims.

> Sherry Cooper, chief economist of BMO Capital Markets, notes the
> BoJ has pledged liquidity to cope with the disaster aftermath and
> central banks all over the world will be on red alert to cope with
> any dislocations.

> Economic activity cannot help but be negatively impacted
> worldwide, which will put downward pressure on interest rates. The
> flight to the safe haven of U.S. Treasuries will assure lower
> yields and cheaper borrowing rates and a stronger U.S. Dollar, she
> said.

> But Carl Weinberg, chief economist at High Frequency Economics,
> says the Japanese themselves could well be scrambling for cash in
> the next days and weeks.

> “Millions of people are going to need a lot of cash, and bank
> branches are not going to be open in a lot of places,” he said in
> a note this morning. “A lot of households and small businesses
> that conduct financial transactions electronically are not going
> to be able to conduct those transactions because their houses or
> businesses are gone. That will impact the people and businesses to
> whom money is owed, regardless of where that may be… in Japan or
> in New York City.”

> Meanwhile, as traders are as unprepared as the rest of us to deal
> with unforseen events, Mr. Gartman may have been on to something
> when he warned two weeks ago of the impending approach of the moon
> to the earth. The so-called “supermoon” will come as close as it
> has to earth in a long time on March 19.

> The gravitational effect of the moon upon earth and the potential
> result of more earthquakes elevated fears after the recent
> earthquake in Christchurch, New Zealand.

> “We shall warn again of that likelihood,” Mr. Gartman said in his
> daily letter.

> http://business.financialpost.com/2011/ ... liquidity/

[OLD1953]

Holy howling Hannah! Talk about fanning the flames of hate for business, this will certainly accomplish THAT goal!

http://www.cbsnews.com/8301-504763_162- ... 91704.html

Probably, but look again:

The drug, a form of progesterone given as a weekly shot, has been made cheaply for years, mixed in special pharmacies that custom-compound treatments that are not federally approved. But KV Pharmaceutical recently won government approval to exclusively sell the drug, known as Makena (Mah-KEE'-Nah). The March of Dimes and many obstetricians supported that because it means quality will be more consistent and it will be easier to get.

It seems no one anticipated the dramatic price hike.

Note that part about government giving exclusive approval, supposedly to get more consistent quality? Bet you someone in government and some big supporters were paid off by people who own shares in that company so they could make a lot more money. This exclusive approval, when they did not have it before, is eliminating competition. Of course they could charge more after the government eliminates their competition. But the hate should be directed towards government corporatism, not capitalism or free markets.

Vince, that's a signal reaction to a stimulus, your associations with government are such that any reference to government in association with any public ripoff means it's the governments fault, no matter the circumstances. While the FDA is in fact a "captured agency", they don't set prices for drugs. Any approval includes an exclusive right to manufacture that drug for a time, and that's been the cause of high US drug prices forever. If you must blame the government, blame our Congress that insists "drug companies need money for research", which is not true, they are just lining their pockets. Between tax breaks and grants both public and private (NPO) drug research is actually cost free or very low cost in most instances IFF you look at the final accounting. Drug companies and motion picture studios claim to almost never have a product that makes a profit. LOL. Change the tax laws and they'll show profit in plenty.

[vincecate]

The US government spent 3 times what they took in during Feb. The taxes from corporations are down 69% and yet the stock market is up. This situation is crazy bad.

"The U.S. government posted a budget deficit of $222.5 billion in February, the largest monthly deficit on record, the Treasury Department reported Thursday. The government spent about $333 billion in the month and took in about $110 billion. Compared to February 2010, corporate tax receipts were 69% lower. On the spending side, the U.S. spent 29% more than a year ago on interest on the U.S. debt."

http://www.foxbusiness.com/2011/03/10/p ... t-deficit/

[vincecate]

Any approval includes an exclusive right to manufacture that drug for a time, [...]

So before when they sold it without exclusive rights you think they did not have approval to sell it?

[OLD1953]

They did not have official FDA approval to sell progestrone for that purpose, correct.

Perhaps I should have underlined "for that purpose". US drug law is funny, once a drug is approved for any purpose, a doctor can write a prescription for that drug for another purpose, and it is legal and the prescription will be honored. However, the drug in question is not being used for its intended purpose.