Fri, 27 Nov 2009 05:03:30 GMT - Bill Cara's Blog

Bill Cara’s Morning Call

[6:00am ET] While America was enjoying their Thanksgiving Day holiday, the rest of the world was at work selling stock. The headlines today will put the blame on (i) Dubai’s financial troubles, (ii) Japan’s economic predicament, (iii) the tumbling oil price, (iv) U.S. Dollar struggles and soaring gold, and/or (v) whatever words are felt needed to gain readership.

http://finance.yahoo.com/news/Oil-slides-to-near-74-as-apf-380368324.htm...

What Americans will not be told is that the special loans departments at Humungous Bank & Broker (HB&B) are working around the clock to “protect the assets of the bank”.

In other words, while Americans yesterday were enjoying their game of football and planning their Black Friday shopping day, they should have been focused on a different game, the biggest game, the one where fantasy is being matched against reality, the one that resulted in Black Monday 1987.

Yesterday, I opined that HB&B’s collapsing share prices was “serious”. That word had meaning. To follow up, I can now report that the shares of HSBC, the western world’s biggest bank, plunged -7.59% in Hong Kong (see ticker 5 on the Hang Seng Exchange). The shares of the biggest bank, Industrial and Commercial Bank of China (referred to as ICBC or ticker 1398 on the Hang Seng) dropped -5.3%.

Yesterday, I wrote, “Banks from all over the world, everywhere I look early this morning, from Australia, China and Hong Kong, India, Greece, Italy, Portugal, Spain, France, Germany, UK, Ireland, and Russia, are watching their share prices pull down equity market indexes. This is serious.” I went on to tell you that “over the past four weeks on the NYSE, the Financials (XLF) and the worst performing sector” and that in the past ten trading days, the shares of JP Morgan (JPM), UBS (UBS), Morgan Stanley (MS) and Goldman Sachs (GS) “have fallen between -5% and -7% each”.

I didn’t pull any punches when I told you what I really think: “So the big question is why are traders dumping their bank stocks? I suspect it’s because Pinocchio’s nose can only grow so long. You asked: “Where’s the Bull in these banks?” There’s your answer. The bank hype in the run-up has been mind-boggling. The reality is quite different… No one it seems who ventures onto the stage at Tout TV will talk about the negative yield of U.S. T-Bills, but the credit system is a mess. Credit is not being extended and now, in letters to prime customers in many countries, borrowing rates are starting to be lifted. The banks say their costs are rising. Isn’t that interesting!... From a wider view, traders suspect there will soon be more banks like Lehman unless governments continue to save them, and with gold now almost $1200 per ounce, how much more money printing can go on?... You know; even Pinocchio dreamt of becoming a real boy. Alas, in our world it is time everyone face the truth.”

With one day added to the clock, I will repeat yesterday's closing remarks: “Many of you were indulging yesterday, hoping to trim back today. Remember; the market is us.”

Is there hope your portfolio will make it intact through the year-end holidays? Judging from the post-opening reaction in Europe today, that may be a possibility. After a razor sharp lower opening gap and knee-jerk response from the Interventionists, the UK and western European equity markets are holding flat at 5:45am ET. My monitor is presently showing Royal Bank of Scotland and HSBC have been goosed +4.47% and +2.44%.

So you can hope. Isn’t that all you have at this point?

What you need to pray for is more international central bank money printing to: (i) buy up a large portion of Dubai’s $60 billion defaulting debt, (ii) give support to Japan’s crisis-ridden exporters, (iii) allow HB&B friends & family to lift the oil price by 8 to 10% despite the fact there is a glut of supply, (iv) purchase the record offering of Treasury debt being issued this week so that the Fed (i.e., the U.S. taxpayer) doesn’t have to do it, and (v) provide funding for miscellaneous purposes like the U.S. state government defaults, $900 billion for U.S. healthcare “reform”, benefits and emergency bail-outs to 9 million desperate Americans, and on and on. That would patch up the cracks in your Super Bowl.

Isn’t it interesting that just ten months into the White House, America’s most popular ever president is standing today in the polls at 48%, and plunging, while his “Tim will be terrific” Treasury Secretary Geithner is now openly exchanging personal attacks with his critics during Congressional testimony, and pundits are demanding his resignation, replaced by another Teflon Bankster from Wall Street.

Is Wall Street a Yellow Brick Road? Gold this morning is down -$24. Were the goldbugs the last ones to leave the dance floor or will the music continue?

My, this can get ugly. I have never seen anything like this.

For the past couple weeks, I have posted S&P 500 support and resistance levels. You have to respect those levels. Almost three weeks ago I opined, “Same parameters [as a week earlier] hold for next week; S&P over 1080, say, is a caution signal for shorts, while, on the other hand, breaking below the early October intra-day low of 1019 means the Bulls should pull in their horns.” The 52-week high is 1113.69 and the index is now at 1110.63, which is just one-third of one percent from the Bull market cycle high. Was that the peak? If the S&P drops -10% from here, will the support hold, or is this market set up now for a repeat of October 19, 1987? If the level drops below 1080, will the Bulls still cling to positions, hoping for more Intervention?

Today will be interesting. I suspect the Monday return of so many traders will be even more so.

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