More Bad News

Though we might see a relief rally should a debt ceiling resolution take shape, the bad news continues to pile up for market and economic bulls. Here are some of the latest (confirmation bias openly admitted to!):

Advance GDP estimates for 2011Q2 were pretty lousy, with some nasty downward revisions to prior quarters.

And from Mark Hulbert, we learn that insider selling has accelerated to its highest level since 1974:

…consider last week’s sell-to-buy ratio for just those issues listed on the NYSE or AMEX. That came in at 13.10 to 1, which is the highest reading for this ratio since when Vickers began collecting the data, which was October 1974.

…the other occasions in recent years in which the sell-to-buy ratio rose to close to the same level it is today were on the heels of more or less uninterrupted rallies over the previous two or three months. That’s not the case now, of course, suggesting that insider selling this time around may not be so benign.

…the extensive Vickers database encompasses many other earnings seasons besides the current one. Also, the latest insider sell-to-buy ratio is higher than almost all comparable readings from those prior seasons.

And lest we let a dysfunctional U.S. Congress take our eye of another looming systemic risk, Moody’s has announced that Spain’s government debt rating is under threat of a downgrade. Yields on both Spain’s and Italy’s debt  have spike back to pre-European Union (EU)/Greece agreement levels and are threatening to climb higher (falling prices cause yield to rise). Being funded by users of the euro (EU member states) rather than by the actual issuer of euros (the ECB), the developing fiscal facilities in the EU lack a vertical money component, and are thus very limited in their ability to absorb a cascade of sovereign debt crises. If markets retreat from Spain and/or Italy’s debt, then the EU’s rescue facilities could be tapped out in short order. This cycle of panic and relief will continue until something drastic enough to shake the ECB out of its late-1920s ideological straitjacket occurs.

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