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Mark's Market Blog

6-22-09: Green Shoots or Desolation?

By Mark Lawrence

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Stocks were down 3% last week, and another 3% today (sorry, I took Father's day off.) We closed today below 900 for the first time in nearly a month. Is this it? Is this the beginning of the next leg down??? Nah, this little drama isn't played out yet, imho. We'll bounce back from this, as soon as we hit about 880, that's another 1% - 2% down. As I read the chart below, we have a "shoulder" around May 10th, a "head" around June 8th, and we're getting set to form another "shoulder" around maybe July 6th or so. More on this in a later blog.

There are still six months left in this decade, but it is not too soon to start drafting its obituary. Howard Silverblatt, senior analyst at S&P (That's the geniuses who called rated the junk mortgage bonds AAA, called a bottom to the market in early November, then again in early January), is already looking at the decade’s stock market legacy. The S&P 500 is down 39.22% from Dec. 31, 1999 through Monday’s close. "We need a 63.79% advance just to break-even for the decade," Silverblatt says."The last negative decade was the 1930s, -41.77%."

Is every stock in the world tanking? Nope. Smith & Wesson is handily beating all profit and revenue estimates, and has about a. eight month production backlog for hand guns. A gun dealer said to me last week, "If I'd known Obama would be this good for sales, I would have voted for the SOB myself." Those of you who own guns already know this but for the rest of you many guns and most ammunition simply aren't available - the ammo shelves in most gun stores look like the meat shelves in Soviet Russia.

The rate of auto loan payments that were 60 days or more late rose 28 percent in the first quarter compared with 2008. The rate at which people fell two months behind on their mortgage payments went up for the ninth straight quarter. It's 62 percent higher than the first quarter of 2008. The delinquency rate for bank-issued credit cards rose 11 percent from last year. BofA, the largest U.S. bank, said its default rate soared to 12.50 percent in May from 10.47 percent in April. AmEx said its default rate rose to 10.4 percent from 9.90. If credit card losses across the industry surpass 10 percent this year, as analysts and bank executives expect, loan losses could top $70 billion.

U.S. homebuilder sentiment slipped in June as higher mortgage rates and an ongoing credit crunch damped expectations for the sector.

The nation's foreclosure crisis is spreading to new areas as the economy teeters. The foreclosure rates in 40 of the nation's counties that have the most households have doubled from last year/ Most were in areas far removed from the avalanche of bad mortgages and lost homes that have hammered the U.S. housing market. Among the new areas: Boise and Green Bay, Wis. Unlike the foreclosure wave that began in 2007 and was driven by risky subprime loans, the latest increases are the result of the recession and unemployment.

And now an editorial rebuttal from some irresponsible members of the bailed-out opposition. JPMorgan Chase Chief U.S. Equity Strategist Thomas Lee said on Wednesday, "The global economy is in the midst of a synchronized recovery. If we end up with a V-shaped recovery, we could go back to our record S&P high of 1,500 in 2011-2012."

While most are debating whether the "green shoots" are real or just weeds, Liz Ann Sonders is declaring the recession over. Charles Schwab's chief investment strategist says the recession has ended, and believes second quarter GDP could be marginally positive.


Green shoots?

or desolation?

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