NIGHTMARE ON WALL STREET

TSX INDICES

A very dramatic week for the TSX Composite. While the TSX gained only 1.1 per cent this past week the dramatic up day on Friday gave us one of the biggest up days in history – a 7 per cent gain. Despite the gain on the week not everyone participated. Still ending up on the downside were Information Technology, Consumer Discretionary, Healthcare, Industrials, Real Estate and Telecommunications. New lows were seen for a host of sub indices including Information Technology, Healthcare, Telecommunications, Utilities and Metals and Mining. The CDNX Venture exchange also gave us new lows but a dramatic reversal at the end of the week left us with only a tiny loss and virtually got us back to where we started the beginning of the week. No one gave us any buy signals. Financials, while posting an up week are at resistance.

The ones that enjoyed an up week included Energy, Financials, Gold, Materials, Consumer Staples and Utilities. Energy and Gold both bounced of a major long term support levels. It is important they follow through to the upside this week. Indeed if this rally is real then all of them must follow through or it will be a false start and we could in essence head back to new lows. The TSX Composite also hit new lows for his move. [read more…]

NIGHTMARE ON WALL STREET

The events of the past couple of weeks or so are piling up so quickly, our head is spinning. The daily gyrations of the market has everyone running for the Maalox, we are sure. Occasionally we have had to grip our desk. Maybe it is a good thing that unlike 1929, windows in office towers do not open. So is this it – financial Armageddon, a true nightmare on Wall Street?

The temptation is to say that we told you so, but gloating is not a very good trait. A new wave of financial instruments and complex financial derivatives that no one understood except the “masters of the universe” were of course at the root of the collapse. But it was more than just that. It was as if everything conspired at once to give us the perfect storm. Deregulation, highlighted by the repeal of the Glass-Steagall Act (which kept retail and investment banks separate); a long period of low interest rates; seemingly unlimited injections of liquidity into the financial system highlighted by some of most rapid and persistent monetary growth ever seen; and the aforementioned “financial weapons of mass destruction” as Warren Buffet called them that were used to help create an extraordinary array of products, many of which were peddled to Main Street from Wall Street. [read more…]