The markets were slammed again today on this options expiration week. The SPDR S&P 500 ETF (NYSE:SPY) are trading at $118.05, -1.98 (-1.65%). The markets are seeing the ugly side of Europe again which is causing the Dollar to spike higher. With Ireland on the verge of collapse, the Euro has fallen, inversely, the Dollar has moved higher. This is going directly against what the Federal Reserve has been hoping for in terms of keeping the asset bubble intact with a weak Dollar thus making the average American feel they are richer. Commodity stocks are the hardest hit today with major players in the Dow Jones Industrial Average like Exxon Mobil Corporation (NYSE:XOM) and Chevron Corporation (NYSE:CVX) both dropping two percent or more.
The key to this week is two fold. First, last week a major cycle turn date hit which coincided with the top on the market. Since that cycle date hit, the markets have dropped sharply. Second, this is options expiration week and institutions will push the market in whatever direction they need to maximize their profits on the options they sold. Most likely, they are looking to wipe out the call option holders early thus the sharp sell. While the Federal Reserve is conducting the second quantitative easing, the markets are not being propped up like normal. This is most likely due to the fact the institutions receiving money for treasuries are not putting it into the markets because of options expiration and wanting the markets to fall. Understand it is a rigged game folks. Learn the game and profit.
Gareth Soloway
Chief Market Strategist
www.InTheMoneyStocks.com
#1 Rated
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Below is an excerpt that I took from Wikipedia regarding the 'Savings & Loan Crisis' in the late 1980's. Please look at all the similarities of today as the U.S. citizen is once again on the hook to bailout all these crooks.
Major causes according to United States League of Savings Institutions
The following is a detailed summary of the major causes for losses that hurt the savings and loan business in the 1980s:
1. Lack of net worth for many institutions as they entered the '80s, and a wholly inadequate net worth regulation.
2. Decline in the effectiveness of Regulation Q in preserving the spread between the cost of money and the rate of return on assets, basically stemming from inflation and the accompanying increase in market interest rates.
3. Absence of an ability to vary the return on assets with increases in the rate of interest required to be paid for deposits.
4. Increased competition on the deposit gathering and mortgage origination sides of the business, with a sudden burst of new technology making possible a whole new way of conducting financial institutions generally and the mortgage business specifically.
5. Savings and Loans gained a wide range of new investment powers with the passage of the Depository Institutions Deregulation and Monetary Control Act and the Garn–St. Germain Depository Institutions Act. A number of states also passed legislation that similarly increased investment options. These introduced new risks and speculative opportunities which were difficult to administer. In many instances management lacked the ability or experience to evaluate them, or to administer large volumes of nonresidential construction loans.
6. Elimination of regulations initially designed to prevent lending excesses and minimize failures. Regulatory relaxation permitted lending, directly and through participations, in distant loan markets on the promise of high returns. Lenders, however, were not familiar with these distant markets. It also permitted associations to participate extensively in speculative construction activities with builders and developers who had little or no financial stake in the projects.
7. Fraud and insider transaction abuses were the principal cause for some 20% of savings and loan failures the past three years[clarification needed] and a greater percentage of the dollar losses borne by the Federal Savings and Loan Insurance Corporation (FSLIC).
8. A new type and generation of opportunistic savings and loan executives and owners—some of whom operated in a fraudulent manner — whose takeover of many institutions was facilitated by a change in FSLIC rules reducing the minimum number of stockholders of an insured association from 400 to one.
9. Dereliction of duty on the part of the board of directors of some savings associations. This permitted management to make uncontrolled use of some new operating authority, while directors failed to control expenses and prohibit obvious conflict of interest situations.
10. A virtual end of inflation in the American economy, together with overbuilding in multifamily, condominium type residences and in commercial real estate in many cities. In addition, real estate values collapsed in the energy states — Texas, Louisiana, and Oklahoma — particularly due to falling oil prices — and weakness occurred in the mining and agricultural sectors of the economy.
11. Pressures felt by the management of many associations to restore net worth ratios. Anxious to improve earnings, they departed from their traditional lending practices into credits and markets involving higher risks, but with which they had little experience.
12. The lack of appropriate, accurate, and effective evaluations of the savings and loan business by public accounting firms, security analysts, and the financial community.
13. Organizational structure and supervisory laws, adequate for policing and controlling the business in the protected environment of the 1960s and 1970s, resulted in fatal delays and indecision in the examination/supervision process in the 1980s.
14. Federal and state examination and supervisory staffs insufficient in number, experience, or ability to deal with the new world of savings and loan operations.
15. The inability or unwillingness of the Bank Board and its legal and supervisory staff to deal with problem institutions in a timely manner. Many institutions, which ultimately closed with big losses, were known problem cases for a year or more. Often, it appeared, political considerations delayed necessary supervisory action.
Failures
The United States Congress granted all thrifts in 1980, including savings and loan associations, the power to make consumer and commercial loans and to issue transaction accounts. Designed to help the thrift industry retain its deposit base and to improve its profitability, the Depository Institutions Deregulation and Monetary Control Act (DIDMCA) of 1980 allowed thrifts to make consumer loans up to 20 percent of their assets, issue credit cards, accept negotiable order of withdrawal (NOW) accounts from individuals and nonprofit organizations, and invest up to 20 percent of their assets in commercial real estate loans.
The damage to S&L operations led Congress to act, passing the Economic Recovery Tax Act of 1981 (ERTA) in August 1981 and initiating the regulatory changes by the Federal Home Loan Bank Board allowing S&Ls to sell their mortgage loans and use the cash generated to seek better returns soon after enactment;[7] the losses created by the sales were to be amortized over the life of the loan, and any losses could also be offset against taxes paid over the preceding 10 years.[8] This all made S&Ls eager to sell their loans. The buyers—major Wall Street firms—were quick to take advantage of the S&Ls' lack of expertise, buying at 60%-90% of value and then transforming the loans by bundling them as, effectively, government-backed bonds (by virtue of Ginnie Mae, Freddie Mac, or Fannie Mae guarantees). S&Ls were one group buying these bonds, holding $150 billion by 1986, and being charged substantial fees for the transactions.
In 1982, the Garn-St Germain Depository Institutions Act was passed and increased the proportion of assets that thrifts could hold in consumer and commercial real estate loans and allowed thrifts to invest 5 percent of their assets in commercial loans until January 1, 1984, when this percentage increased to 10 percent.
A large number of S&L customers' defaults and bankruptcies ensued, and the S&Ls that had overextended themselves were forced into insolvency proceedings themselves.
The federal government agency FSLIC, which at the time insured S&L accounts in the same way the Federal Deposit Insurance Corporation insures commercial bank accounts, then had to repay all the depositors whose money was lost. From 1986 to 1989, FSLIC closed or otherwise resolved 296 institutions with total assets of $125 billion. An even more traumatic period followed, with the creation of the Resolution Trust Corporation in 1989 and that agency’s resolution by mid-1995 of an additional 747 thrifts.
A Federal Reserve Bank panel stated the resulting taxpayer bailout ended up being even larger than it would have been because moral hazard and adverse selection incentives that compounded the system’s losses.
There also were state-chartered S&Ls that failed. Some state insurance funds failed, requiring state taxpayer bailouts.
Talk about repeating past mistakes. This was just twenty years ago.
http://en.wikipedia.org/wiki/Savings_and_loan_crisisRead more…
