Recap of Financial Week: September 9, 2016

Well, I guess it’s time for a “recap” of the “week that was.” I have previously recapped the following financial “points in time” for my and my readers’ edification. Enjoy the “looking glass” view if you wish:
Recap of September, 2015 U.S. stock market
Market recap for week of January 8, 2016

Or, continue to the next paragraph for this week’s catalytic effects on the financial markets. Here’s my candidates “naughty actors” that contributed to the downward drop or behavior of the “DOW” (Dow Jones Industrial Average)

• The Hanjin container ships marooned at sea drama Hanjin. Also see my blog item: Ghost Ship
• Fear of a Fed interest rate increase Federal Reserve Rate Increase?
• “Bad” behavior of Wells Fargo Bank Banks behaving Badly
• North Korea “flexing” their military muscles North Korea
• End of the U.S. Federal Reserve Bank of Kansas City’s financial conference at Jackson Hole Federal Reserve at Jackson Hole. Here’s another blog item I wrote regarding the conference Woodstock for Economists.

and, just for a “light” bit of humor:
• It was only a 4-day work week in the U.S.

I have read and heard on the news recently that the months of September and October are “tricky” or perhaps a better word is “dangerous” months for the “markets.” Well, who am I to argue with that, the 1929 stock market crash happened in October of 1929, the 1987 crash happened in August, 1987 (close enough to September for me). (Incidentally, I was watching a financial TV program the day of the “’87” crash, and yes, I can remember where I was and who was with me at that time.) I lost a couple of “bucks” in the Dot Com crash in 2001. Next came the housing bubble in 2009, seems to me that I starting hearing about “housing” credit problems in the summer of 2008 but anyway, I do know that there was no snow on the ground when the dominoes started to fall.

So, that’s my list of reasons for the U.S. stock market “readjusting” itself today and closing down around 2% or so.

It doesn’t really matter! (I guess)

What I’m referring to is the U.S. Presidential election and the U.S. stock market.

There is a saying “on Wall Street” that the stock market projects six (6) months “down the road.” This means that “the markets” are already anticipating the future or have “a forward looking view.” In other words, “the market” is probably not responding to the news which is happening now (e.g. July 20, 2016), or this week or perhaps even this last month, but rather “the markets” are acting positively or negatively towards “the future”.

The U.S. Dow Jones Industrial Average (DJIA) is bumping it’s head up against ANOTHER “all-time high.” To quote the New York Times, “The Dow Jones industrial average inched 25.96 points, or 0.1 percent, higher for its eighth consecutive gain to set another record at 18,559.01.”

Here’s how the Canadian newspaper, the Globe and Mail relates the U.S. stock market in relation to the U.S. presidential election.

CNBC has an interesting “take” on the stock market vs. presidential election phenomenon: History shows stocks rally

If you are interested in “market indicators”, here are two (2) blog posts which focus on this subject:

What are Economic Indicators?

U.S. Economic Indicators

Numbers #8: Measuring the Markets

There are many “models” used to measure the pulse of the United States stock market. Below are some of them. There are over 6,000 stocks traded over the New York stock exchange (NYSE). Here’s a laundry list of some of the U.S. stock markets indices. Each index contains a different “sampling” of stocks, however, any one stock can be listed in more than one index “basket”, e.g. Apple is traded on the NASDAQ market and is also included on the Dow Jones Industrial Index of 30 stocks. To be clear, the NASDAQ is a stock trading market place and the Dow Jones Industrial Average is a listing of 30 stocks.

New York Stock Exchange (NYSE)
“A stock exchange based in New York City, which is considered the largest equities-based exchange in the world based on total market capitalization of its listed securities. Formerly run as a private organization, the NYSE became a public entity in 2005 following the acquisition of electronic trading exchange Archipelago. The parent company of the New York Stock Exchange is now called NYSE Euronext, following a merger with the European exchange in 2007.”
Read more: New York Stock Exchange (NYSE) Definition | Investopedia

“A global electronic marketplace for buying and selling securities, as well as the benchmark index for U.S. technology stocks. Nasdaq was created by the National Association of Securities Dealers (NASD) to enable investors to trade securities on a computerized, speedy and transparent system, and commenced operations on February 8, 1971. The term “Nasdaq” is also used to refer to the Nasdaq Composite, an index of more than 3,000 stocks listed on the Nasdaq exchange that includes the world’s foremost technology and biotech giants such as Apple, Google, Microsoft, Oracle, Amazon, Intel and Amgen.” Read more: Nasdaq Definition | Investopedia

Dow Jones Industrial Average (DJIA)
“The DJIA is a price-weighted index, which means that the sum of the component stock prices is divided by a divisor. Instead of dividing by the number of stocks in the average, as is done in an arithmetic average, the Dow divisor is used. The purpose of this divisor, which is continually adjusted, is to smooth out the effects of stock splits and dividends. The result is that the DJIA is affected only by changes in the stock prices, so stocks with a higher share price have a larger impact on the Dow’s movements.

For example, if the DJIA rose by 50 points, it means that the cost of purchasing the 30 stocks in the index was $50 higher than the cost of purchasing those same 30 stocks yesterday, taking into account stock splits and dividends. In other words, those stocks are more valuable today than they were the previous day. Over time, the DJIA can be used as a benchmark for the economy.” Read more: What does the Dow Jones Industrial Average measure? | Investopedia

Dow Jones Utilities Index
“The Dow Jones Utility Average is a price-weighted average of 15 utility stocks traded in the United States. The DJUA was started back in 1929.” Read more: Dow Jones Utility Average (DJUA) Definition | Investopedia

Value Line Index
“A stock index containing approximately 1,675 companies from the NYSE, American Stock Exchange, Nasdaq and over-the-counter market. The Value Line Index has two forms: The Value Line Geometric Composite Index (the original equally-weighted index) and the Value Line Arithmetic Composite Index (an index which mirrors changes if a portfolio held equal amounts of stock.) These indexes are typically published in the Value Line Investment Survey, created by Arnold Bernhard, the founder and CEO of Value Line Inc.” Read more: Value Line Index Definition | Investopedia

S&P Small Cap Index
“An index of small-cap stocks managed by Standard and Poor’s. The S&P 600 SmallCap Index covers a broad range of small cap stocks in the United States. The index is weighted according to market capitalization and covers about 3-4% of the total market for equities in the United States.” Read more: S&P 600 Definition | Investopedia

S&P MidCap Index
“This Standard & Poor’s index serves as a barometer for the U.S. mid-cap equities sector and is the most widely followed mid-cap index in existence. To be included in the index, a stock must have a total market capitalization that ranges from roughly $750 million to $3 billion dollars. Stocks in this index represent household names from all major industries including energy, technology, healthcare, financial and manufacturing.” Read more: S&P MidCap 400 Index Definition | Investopedia

Russell 2000 Index
“An index measuring the performance approximately 2,000 small-cap companies in the Russell 3000 Index, which is made up of 3,000 of the biggest U.S. stocks. The Russell 2000 serves as a benchmark for small-cap stocks in the United States.” Read more: Russell 2000 Index Definition | Investopedia

Dow Jones Transportation Index (DJTA)
“A price-weighted average of 20 transportation stocks traded in the United States. The Dow Jones Transportation Average (DJTA) is the oldest U.S. stock index, compiled in 1884 by Charles Dow, co-founder of Dow Jones & Company. The index initially consisted of nine railroad companies – a testament to their dominance of the U.S. transportation sector in the late 19th and early 20th centuries – and two non-railroad companies. In addition to railroads, the index now includes airlines, trucking, marine transportation, delivery services and logistics companies.”
Read more: Dow Jones Transportation Average (DJTA) Definition | Investopedia

Of further interest: By the Numbers #3: Those Naughty Market Indices, They Move Up and Down!

Great Recession Retrospective Redux

I started my blogging adventure on WordPress with a series of articles about the Great Recession (in my opinion another depression). I have decided to bring them all together in one posting. Why? Partly because many of the issues have never been addressed by the “powers to be”, partly because it’s nice not to have to rummage to find them, partly because it looks like deja vu all over again, and, as history repeats itself, reflection is not a bad thing. It may be “food for thought” as the year 2016 unwinds precariously before us. Besides, the documentary producers at Frontline did a great job of capturing the essence of the demise of the U.S. economy through Wall Street’s greed and the U.S. government’s political blunders (to put it kindly). I placed links to these Frontline documentaries in several of the following blog articles below.

So, without further ado, here are some stories of the Great Recession in all its Greek tradegy splendor:

A Taste of Events in the Great Recession crisis
Timeline and Overview of the Great Recession Crisis
Regulate Derivatives? No Way!!!!
Humpty Dumpty had a great fall even though there wasn’t a Wall!
The Nationalization of Wall Street
The U.S. Taxpayer as Lender of Last Resort–The TARP Program
Deja Vu all over again, a little bit about Greece, the crisis goes global!
Some details that help explain the Great Recession and Global Ecomony Crisis
Laboring over the LIBOR scandal
The “Flash Crash” and the “London Whale”
It’s a Credit Crisis! It’s a Liquidity Crisis! It’s a Solvency Crisis!
And now in the center ring: An Asset Bubble!!!

It’s a New Year, let’s hope for some sanity but… don’t hold your breathe too long.

Market Recap for week of January 8, 2016

Happy New Year! Or is it?

Is the U.S. stock market like the movie King Kong (circa 1933) or perhaps more like the movie Wall Street ? Is the gorilla the International marketplace and “the girl” Fay Wray the U.S. marketplace or maybe King Kong is Wall Street and Fay Wray is the American consumer; or how about “party time” as depicted in the movie The Wolf of Wall Street?

Any way you look at it, it has turned out to be a very scary week on Wall Street in the U.S. I guess the slowdown of China’s economy, being the second largest economy in the world after the United States, has caused much more chaos than anyone bargained for in our global economic universe.

Here are some links to help you “wrap your head” around just what’s happening “this time”!

Graph of 10 largest economies: World’s Largest Economies

Reuters: Wall Street has worst start to year ever

Wall Street JournalBad Week for U.S. stocks dims outlook

 New York TimesStock Market Ends Its Worst Week Since 2011

NBC News:  China Shares Turn Higher After Wild Start to 2016

Did the teeter totter flip both “riders” into the air at the same time? It would seem so. Here’s my reference to the U.S. market as a teeter totter:

The Stock Market as a Teeter Totter

P.S. Let’s be optimistic and say “Yes, it’s a Happy New Year.”

And now in the center ring: An Asset Bubble!!!

The Great Recession period is spoken of as a “liquidity” bubble.  See my blog posting It’s a credit crisis, It’s a liquidity crisis! It’s a solvency crisis!.  Are we now in an asset bubble that is bursting?   This craziness in the world economies and the financial markets made me think of the Lawrence Welk  TV (television) show. What a great entertainer he was and what a great family entertainment TV show he literally orchestrated. Lawrence Welk was a “big band” leader. Welk used a “bubble machine” while playing some of his orchestration pieces. Here’s a YouTube clip example of the opening of  a Welk TV program.

But I stray from my subject…

The asset bubble that we are now experiencing is seen, by some,  as a result of all the easy, cheap money provided by the governments and large financial institutions to solve the liquidity/solvency crises that emerged during the 2008-2009 financial crisis. In other words, all the quantitative easing (QE) programs implemented to stave off another Depression like that experienced during the 1930s.

What is an asset bubble? The Wall Street Journal article dated May 11, 2015, discusses The Federal Reserve Asset Bubble Machine:

Faith in the Fed’s easy-money policies has encouraged a dangerous complacency. The mantra on Wall Street is that good economic news is good news for the markets, but that bad news is also good news, because it will encourage the Fed to keep rates lower for longer. This has led to one of the longest rallies the U.S. stock market has ever experienced, without even a 10% correction.

The latest “bad news” of course has been the decline in China’s economic growth.  How does China’s economy affect us in the U.S.? Here’s an article from
U.S. Stock-Index Futures Decline After Steepest Slump Since 2011

For a little historical perspective on economic bubble machinesFrontline, that great documentary film company, has listed five famous bubbles at their site:

  • Tulip mania (1630’s)
  • The Mississippi bubble (1719)
  • The South Sea bubble (1720)
  • The Roarin’ 20’s in the U.S. (before the 1929 crash)
  • The Japanese bubble (1980’s)

As always, where are we, the individual investor, when these bubbles burst? As much as we may or may not consider ourselves speculators vs. investors, I’m afraid everyone is morphing into a little of both. After all what can one do when his/her savings are earning zero interest!


Recap of September 2015 U.S. stock market

So… what happened to the U.S. stock market? Was it:

  • the sermon to the U.S. Congress by Pope Francis,
  • the resignation of John Boehner as Speaker of the House of Representatives,
  • the on-going immigration crisis in the Euro zone countries,
  • the visit to President Obama by China’s President Xi,
  • the drug company who bought a decades-old generic drug with the intention of inflating its price 5,000%,
  • the FOMC (Federal Open Markets Committee) not raising interest rates (federal funds rate),
  •  more companies laying off hundreds of workers?
  • the crude oil market bubble bursting
  • Perhaps it’s the “guillotine” aura of the U.S. Government shutting down AGAIN on September 30, 2015, because of elected officials’ dysfunction and mismanagement.

I won’t comment or opine on any of the above events (well I did a little at the end), there are plenty of others doing it much better than I. Coverage of Pope Francis and China’s president have been all over the news networks and the ‘net. But I will include a link to the drug price “shocker” because it has raised the issue of “outrageous drug prices” in general to the “front page” at least for a little while. Here’s the skinny*:

*definition of “skinny”

The outrageous price increase:  Turing Pharmaceuticals

And the rollback:

However, I’m calling attention to a stock market (which incidentally supposedly looks six months forward in its activity) which reacts quite violently these days to daily news and events, thanks to program trading and algorithms. Below are various articles and/or opinions that are discussing this “increased” volatility, and perhaps some reasons for it, as well as the increasingly “fragile-appearing” economy the U.S. is experiencing. Heck, who needs to go to Vegas!


New York Times

Barron’s  8/21/2015

Author’s Addeneum 10/1/2015:   Here’s a Wall Street Journal article featuring the New York Federal Reserve president, William Dudley. Article is updated as of September 28, 2015. Article discusses possibility of the Federal Reserve Bank finally raising its short-term interest rates.

Definitions: Financial and Economic

Here are some terms and concepts that are used every day in the financial and news media. I will add additional definitions to this list in the future. The definitions are from Investopedia and/or CNBC Explains.


As usual, I go to for a definition, here it is:
“Throughout even the longest uptrends, investors experience declines against the main trend. These are referred to as corrections. At other times, markets correct more than expected in a short period of time. Such occurrences are called crashes. Both of these can lead to a misunderstood situation called capitulation.”

Read more:

Carry trade

Carried interest

Euro-dollar parity

Fractional Reserve Banking

A banking system in which only a fraction of bank deposits are backed by actual cash-on-hand and are available for withdrawal. This is done to expand the economy by freeing up capital that can be loaned out to other parties. Most countries operate under this type of system.

Also known as “fractional deposit lending”. Definition courtesy of

Read more: Fractional Reserve Banking Definition | Investopedia


Mark to market

Market maker

Negative Interest Rate Policy (NIRP)

During deflationary periods, people and businesses hoard money instead of spending and investing. The result is a collapse in aggregate demand which leads to prices falling even farther, a slowdown or halt in real production and output, and an increase in unemployment. A loose or expansionary monetary policy is usually employed to deal with such economic stagnation. However, if deflationary forces are strong enough, simply cutting the central bank’s interest rate to zero may not be sufficient to stimulate borrowing and lending. A negative interest rate means the central bank and perhaps private banks will charge negative interest: instead of receiving money on deposits, depositors must pay regularly to keep their money with the bank. This is intended to incentivize banks to lend money more freely and businesses and individuals to invest, lend, and spend money rather than pay a fee to keep it safe.

Read more: Bank of Japan Announces Negative Interest Rates | Investopedia

Real return vs. nominal return

Relative Strength

“Relative strength is a momentum investing technique that compares the performance of a stock, exchange-traded fund or mutual fund to that of the overall market. Relative strength calculates which investments are the strongest performers, compared to the overall market, and recommends those investments for purchase. Relative strength is a “buy high, sell higher” strategy that assumes a stock whose price has been rising will continue its upward trajectory.”

Sovereign debt

Transfer Payment
What is a ‘Transfer Payment’

A transfer payment, in the United States, is a one-way payment to a person for which no money, good, or service is given or exchanged. Transfer payments are made to individuals by the federal government through various social benefit programs. These types of payments are executed by the United States to individuals through programs such as Social Security.

Read more: Transfer Payment Definition | Investopedia

Numbers #3: Those Naughty Market Indices, They Move Up and Down!

heart monitor

The three (3) most widely watched U.S. market indices are the Standard and Poor’s (S&P) 500, the DOW Jones Industrial Average and the NASDAQ.

Since analogies are a great way to explain concepts, I think that picturing the ten (10) Standard & Poor’s  (S&P) market sectors as a vital signs monitor would be a graphic visualization. Not that I’m insinuating that the U.S. economy is a “patient”…. at least not right now.

The S&P 500® is widely regarded as the best single gauge of large-cap U.S. equities. There is over USD 7.8 trillion benchmarked to the index, with index assets comprising approximately USD 2.2 trillion of this total. The index includes 500 leading companies and captures approximately 80% coverage of available market capitalization.

Quote Source:  Standard & Poor’s Index

Anyway, the S&P 500 index consists of ten (10)  industrial/commercial sectors of publicly traded common stock.  The ten sectors of the S&P 500 are:

  • Consumer Discretionary
  • Consumer Staples
  • Energy
  • Financials
  • Healthcare
  • Information Technology
  • Industrials
  • Materials
  • Telecommunication Servies
  • Utilities

On the other hand, the DOW Jones Industrial Average (the DOW) consists of only thirty (30) publicly traded stocks and they are not all industrial companies as the index name implies. The thirty (30) stock components (companies) do change, although not very often.  A look at the history of  Dow listings since inception in 1884  is an interesting “portal” into how the industrial age and new technologies changed the landscape of the United States over the last one hundred years. Just this year 2015, Apple Inc. was added to the DOW. The DOW Industrial Average is indexed by the price of each stock. Thus the Dow Jones Industrial Average (DJIA) changes daily and may move abruptly up or down based upon the price of each DOW “component.” Apple Inc. is such a highly priced stock at this point in time it can “move” the DJIA value up or down quite a bit just based on Apple’s pricing activity for the day! So even though there are 29 other corporate stocks on the DJIA index, Apple because of it’s high capitalization* can greatly affect the DJIA on any one day.

*DEFINITION of ‘Market Capitalization’
“The total dollar market value of all of a company’s outstanding shares. Market capitalization is calculated by multiplying a company’s shares outstanding by the current market price of one share. The investment community uses this figure to determine a company’s size, as opposed to sales or total asset figures.”  Source: Market Capitalization Definition | Investopedia

The third market index I mentioned above is the NASDAQ. The NASDAQ is a very “technology heavy” index meaning many of the hardware/software and high tech publicly traded companies are listed here. The NASDAQ is actually an electronic stock exchange  just like the New York Stock Exchange (NYSE), but the NASDAQ does not have a traditional physical trading floor like the NYSE does. To be listed on the NYSE, a company must meet certain capitalization criteria. Thus, new companies that become public many times list on the NASDAQ exchange first and then move to the NYSE after meeting its listing criteria. Some companies such as Apple and Microsoft still list on the NASDAQ even though they would qualify to be listed on the NYSE exchange.  However, both Apple and Microsoft qualify to be listed on the Dow 30!

Stock Market as a Teeter Totter


I guess it’s a “no-brainer” to view the U.S. stock market or any country’s financial market as a child’s teeter totter. I use the web site to watch the stock market during the day. At the top of the webpage, just above the market charts, there is a linear graphic that displays the total  NYSE  (New York Stock Exchange) universe of 6,000 plus stocks.

Today (8/31/2015) is one of those days that the stock market looks like the drawing. Three thousand (3000 or so) stocks are on the “downside” or declining, and three thousand 3,000 or so) stocks are on the “upside” or advancing in the marketplace.  If there seems to be very little action in the market, the teeter totter is horizontal meaning level, I think of it as “biding time” or “waiting” for something to happen. Ha! as if enough has not happened recently, many stocks have had a 10% correct which is considered “bearish” meaning the “market” is moving toward a “bear market” vs. being in a “bull market”. For those who have not followed the U.S. stock market, it has been in a very bullish phase for about six (6) years now. A very long time in the opinion of many financial professionals.

The NYSE (New York Stock Exchange) by itself  had been around since 1792! Folklore tells the story of  “traders gathering under a tree at Wall Street and Broad Street to trade  in New York City .  The NYSE consists of over 6,000 corporations’ stock listings. You might still visit the NYSE in New York City to witness the “open outcry” system of trading stocks, however, thanks to high-speed computers much of contemporary stock, option, futures, and commodity trading takes place “over the wires” with ultra high-speed computers. There is talk of eliminating the trading pits and thus all trading will transpire strictly electronically. NO MORE HUMANS! Well, no humans on a trading floor. Everyone will be sitting at a desk and using several computer screens to track and trade financial instruments. Here’s an article from Reuter’s about the shut down of the Chicago Board of Trade’s trading pits.

The NYSE is now part of a group of exchanges. The group is called  the ICE Intercontinental Exchange.

In order for there to be a “trade”, there must be a buyer and a seller. So, one might say that when the teeter totter is level, the buyers (buy orders) and sellers (sell orders) match, i.e. buyer A wants to buy 500 shares of GE and seller B wants to sell 500 shares of GE. We’ve got a “match”, so there’s a completed transaction performed. What gets “sticky” is when there are more sellers than buyers. In other words, seller B wants to sell (or in a downward market, a better word might be “unload”) 5,000 shares of GE. Humm let’s make it 5,000,000 (yes that’s million) shares of GE and can’t find a buyer or buyers  for that amount of shares. That type of volume and dilemma may cause market volatility. The teeter totter loses equilibrium and “corrections” may develop in the general stock market. There are brokerage firms called “market makers”.  Investopedia has a very short video explaining the role of a market maker. It’s the “job” of a market maker to help alleviate the trading dilemma or “imbalance” that develops when there are too many buyers or sellers of a stock.

Author’s Note:  As of May 2016, unfortunately, the MarketWatch site no longer displays its information as I previously mention above. I miss the webpage design that was used. The “teeter totter” is no longer available to me as a visual indicator of the New York Stock Exchange’s activity. Such is life! Sometimes it changes for the better, sometimes for the worse.