One Flew Over the Cuckoo's Nest?

Jill Treanor and Nick Fletcher of the Guardian report, World stock markets in turmoil:

Almost £50bn was wiped off the value of Britain's 100 biggest companies on a day of global stock market mayhem triggered by a deepening of the eurozone crisis and fears for the US economy.

After a day of massive stock market falls in Europe and the US of a kind not seen since the depths of the last economic downturn, traders said the atmosphere was reminiscent of the banking crisis of October 2008. Wall Street endured one of its worst days since the height of that crisis, with the Dow Jones Industrial Index closing more than 500 points or 4.3% lower at 11,383 in heavy volume, as it resumed a two-week streak interrupted only briefly on Wednesday. It was the biggest single-day loss since 2008.

"For many traders this week has felt like the start of the banking crisis in 2008, which would go some way to explaining the panic selling we have seen today," said Will Hedden, sales trader at IG Index.

The fall on Wall Street is expected to cause further falls in the FTSE 100 index of leading shares today, after the index fell to its lowest close, 5393.14, since September 2010 yesterday. The futures market was predicting a further 100 point fall.

Rumours were swirling around the City that hedge funds were being forced to sell assets such as gold in order to cover deepening losses on other investments. This led to a surprise 1% drop in gold, which in recent weeks had hit record highs of more than £1,000 an ounce as a safe haven bet in the eurozone and US debt crisis. Brent crude fell 5% to $107 a barrel amid signs of slowdown in the west's economies.

Anxiety over the debt crisis in the eurozone, and increasingly in Italy, set the tone for nervous trading during the London morning, but the pace of the decline accelerated as Wall Street opened sharply lower. By early afternoon in New York the Dow Jones had declined by 400 points, resuming the two-week losing streak only briefly interrupted on Wednesday. Despite this week's 11th-hour agreement to raise the US debt ceiling, Wall Street is increasingly anxious over the health of the world's biggest economy. A major test comes today with the release of US employment data giving the latest health check of an economy which barely grew in the first half of the year.

The 191.27 point drop in FTSE 100 index represented a 3.43% slump — the index's biggest daily fall in percentage terms, and the biggest points fall, since March 2009.

Banks were particularly hard hit, with falls in the bailed-out Lloyds Banking Group and Royal Bank of Scotland leaving taxpayers nursing £28bn of losses. There were big falls by other FTSE 100 firms.

The index of leading shares has now shed 422 points this week, wiping £110bn off its value. It is down 11% since April's peak. The continued weakness in the UK economy ensured the Bank of England kept interest rates at their record low of 0.5% for the 29th successive month.

The president of the European commission, José Manuel Barroso, fuelled anxiety about the eurozone debt crisis by berating European leaders about the speed at which they were responding to the debt crisis, barely a fortnight after congratulating them about their latest deal to rescue Greece.

"We are no longer managing a crisis just in the euro area periphery," he said. "Euro area financial stability must be safeguarded." He urged European leaders to review "all elements" of the €440bn (£382bn) European financial stability facility and its €500bn replacement, the European stability mechanism.

The European Central Bank gave signals it was ready to resume buying bonds of troubled eurozone countries. Dealers said the central bank had been buying Portuguese and Irish bonds – but not those of Italy and Spain, where borrowing costs have shot to euro era highs and are now the new focus of the markets.

Jamie Dannhauser, economist at Lombard Street Research, said the ECB was "still in cloud cuckoo land".

"The overriding impression one gets of the ECB is of an organisation unwilling to accept the reality that faces the eurozone. In contrast to other major central banks, the ECB has recently been making hawkish noises – at least, that is, until now."

Despite the ECB intervention, continental European markets suffered heavy losses.Germany's Dax closed 3.5% lower and the French CAC dropped 4%, while the euro fell sharply against other currencies, losing nearly 1.5 cents against the US dollar to $1.4170. The Bank of Japan had sparked frenzied action on the foreign exchanges after intervening to drive down the yen against the dollar.

Bond yields – interest rates – in Italy remained stuck above the critical level of 6% while Italian shares plunged amid confusion about the moves in the main stock market index which was experiencing pricing difficulties.

Amid the rout, it emerged that police acting on orders from the prosecutors of Trani, a port on Italy's Adriatic coast, had raided the Milan offices of the rating agencies, Moody's and Standard & Poor's, as part of continuing investigations into their role in recent financial turmoil. The chief prosecutor in Trani told Reuters his office was checking to see whether the ratings agencies "respect regulations".

So what is going on? Is Italy about to cave and Europe about to collapse? Will the US jobs report be another disaster on Friday morning and stocks will tank yet again? Is the world coming to an end and more importantly, are we about to experience the Great Crash of 2011?

Listen, if all you see is doom & gloom all over the world and are seriously contemplating on slicing your wrists because you've been reading the bullshit over at Zero Hedge, then stop reading my comment right away. I parted ways with Zero Hedge and Tyler Durden today after I gave it to him for censoring me and allowing the clowns over there to constantly ridicule and insult me. That blog is becoming a total joke and I am not surprised he banned me because he is the same as all the rest of the zealots who silence any dissenting voices. If you don't toe the line at Zero Hedge and paint everything dark, they will ban you.

I am tired of arrogant, narcissistic fools and wish Tyler Durden and the clowns at Zero Hedge all the best. I have no agenda, nothing to peddle, and will speak the truth. If Tyler Durden wants to silence me, then that speaks volumes about his credibility. So let me share with you what I really think is going on in this latest panic selling:

• First, I do not believe Italy or Spain are on the verge of default or that their economies are just as bad as the Greek economy. This is pure nonsense. There are serious structural issues but to say that Italy or Spain are the next Greece and that the eurozone will collapse is just irresponsible fear mongering.
• Second, while hedge funds are liquidating, adding to the forced selling we're witnessing around the world, it's pure speculation to conclude that there are mass redemptions going on right now. Sure, some hedge funds will fold, maybe even a large, well known one, but who cares? This market is much bigger than any large hedge fund.
• Third, and more importantly, what I really think is going on is the financial oligarchs are looking for more goodies from the Fed. Bring on QE3 which is what they want to trade away in risk assets and buy more time as they try to shore up their balance sheets. If the employment figures come in way below expectations on Friday morning, get ready for QE3 and another liquidity rally on Wall Street (albeit, a more muted one).
  
• Fourth, this isn't 2008 all over again, not even close. Corporations are flush with cash, earning record profits. Also, I lived 2008, traded in 2008, it was one of the scariest things I ever seen, far more scary than the tech crash. Only October 1987 was scarier but I doubt we'll ever see that again in our lifetime.
  
• Finally, the most important point I want you all to keep in mind is that the financial oligarchs do not want to starve the beast that feeds them. They will stop at nothing to extend and pretend that all is well. If you buy this nonsense that the world is coming to an end and sell everything because you are following the herd in global panic mode, you will regret it. Remember, this wolf market is not for the feint of heart. The Big Boys (more like certified sociopaths) want to screw you over every chance they get, scaring you into selling your shares at the bottom so they can scoop them up for a song.

That's why today I closed my computer after lunch and headed to my pool to swim, tan and enjoy the beautiful weather. My personal portfolio is 90% in one stock right now -- Level 3 Communications (LVLT) which fell 1.8% today, hardly anything to get anxious about for me. I am betting alongside some of the best funds in the world that this stock will keep grinding much higher from these levels. Apart from Level 3, I have small positions in Satcon Technologies (SATC), EMCORE Corporation (EMKR) and D'Arianne Resources (DAN.V). EMCORE took a 31% haircut today but I didn't panic and sell. Here are some of the stocks I was tracking today (click on image to enlarge):

There are many, many, many good deals out there. If I was the CIO of a major pension fund, I would take note of what Neil Petroff, the CIO at Ontario Teachers', told me on active management, and go into selective buy mode. What about risk management and cutting your losses? FUCK RISK MANAGEMENT, NOW IS THE TIME TO GET GREEDY AND SNAP UP RISK ASSETS!!!

What are some of the stocks I'd be picking up right now if I were the Senior VP Global Equities at a large pension fund? I am going to go over a few of them this Sunday during my Sunday Stock Scoop, but I would be looking at stocks like Juniper Networks (JNPR) which is extremely oversold as hedge funds liquidated positions (click on image to enlarge):


Sure, it can fall further, the stock market could crash next week, but I honestly think investors are panicking and losing their minds in this wolf market dominated by computer-driven algorithmic trading. It might seem rational to sell everything now and forget the stock market but this really is the time to ignore the noise, buy the dips selectively, and focus on stocks with excellent long-term potential price appreciation.

I leave you with a Daily Ticker interview with Lance Roberts, CEO and chief strategist of Streettalk Advisors, who says there is nothing more certain than QE3 and the potential for another recession. "The trend of the data is all negative, so barring any quantitative easing program from the Fed, we will probably be in a recession by the end of the year." I agree, get ready for a weaker economy, more quantitative easing, and more volatility in the stock market.