Sunday, October 12, 2008

Higher Volume Indicates Push Toward Turning Point

By Jeff Cox,

Stronger volume in stock trading Friday could raise hopes that the eight-day blowout on Wall Street is pushing toward a capitulation bottom.

Richard Drew / AP

Over the past week the stock market has posted its biggest drop ever, tumbling some 18 percent and triggering angst and despair among both investors and traders on the floor.

The powerful selloff abated Friday, and there also was a bit more intense volume accompanying it: close to 3 billion shares trading hands, nearing what most experts consider enough for capitulation.

"You really just want people to say, 'I can't take it anymore,' and I think we're getting to that position," said Quincy Krosby, chief investment strategist at The Hartford. "Selling begets selling, that's what happens, until it kind of washes out, until the last seller comes in and says, 'That's it.' Then there's kind of an eerie quiet."

Krosby said that despite Thursday's washout, in which stocks across the board lost about 7 percent of their value, volume was too thin. Total market volume was about 1.8 billion shares, and she would expect a number closer to 2.5 billion to 3 billion to see a true capitulation.

"You'd like to see more selling," Krosby said. "That's something that you look for--really, really heavy selling and you didn't have that yesterday and you didn't have that in many of the really strong down days."

While hedge funds and industrial investors have been bailed out of positions, individual retail investors have still not reached the severe panic point.


"We're seeing volatility right now that's really starting to freak out the investor for sure," Ben Lichtenstein, president of Traders Audio, said on CNBC. "Once the investor, the normal, everyday-type investor starts to see his original investment start to decrease, that's where the fear-type selling could kick in."

Some were unsure just where the capitulation point could be found.

"I think no one knows where the bottom is" and the market hasn't yet seen the kind of trading that indicates capitulation, BlackRock Vice Chairman Bob Doll told CNBC. "Often you see double, triple normal volume and we've just not seen that kind of capitulation yet."

But while few if any were using the term "capitulation," there certainly was talk of liquidation.

"I have a hedge fund that's up 40 percent this month but I question whether I have a future or any of my peer group have a future," Hugh Hendry, Partner and Chief Investment Officer at Eclectica, told CNBC. "The only defense to your portfolio is not fundamentals. The only defense left to investors this day is to sell their assets; this is a liquidation."

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U.S. takes North Korea off terror list

WASHINGTON (CNN) -- The United States on Saturday removed North Korea from its list of states that sponsor terrorism, State Department spokesman Sean McCormack said.

U.S. State Department spokesman Sean McCormack announces the agreement Saturday.

U.S. State Department spokesman Sean McCormack announces the agreement Saturday.

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"Based upon the cooperation agreement North Korea has recently provided ... the secretary of state this morning rescinded the designation of the DPRK [Democratic People's Republic of Korea] as a state sponsor of terrorism, and that was effective as of her signature," McCormack said.

McCormack said the United States and North Korea had reached agreement "on an number of important verification measures" of North Korea's nuclear program.

These include participation by all members of the Six Party Talks, the role of the U.N. nuclear watchdog agency, access to all of North Korea's nuclear facilities and what procedures would be used in the verification process.

"Every element of verification that we sought is included in this package," McCormack said at a news conference.

A senior State Department official said earlier that President Bush made the decision Friday night to remove North Korea from the terrorism list. Video Watch how North Korea escaped the terror list »

The official said verification of North Korea's statements about its nuclear program will start right away, and the North Koreans will immediately reverse actions they have taken in recent weeks to restart their reactor and reprocessing facilities that produce plutonium for nuclear weapons.

The North Koreans are expected to make a separate announcement Saturday, McCormack said.

McCormack said Japan had agreed to formalizing the agreement at the Six-Party level, although the issue of North Korea's abduction of Japanese citizens in the 1970s and 1980s has not yet been addressed.

President Bush spoke Saturday morning with Japanese Prime Minister Taro Aso, telling him that the United States "will never forget the abduction of Japanese citizens by the North Koreans," White House spokesman Gordon Johndroe said.

"We will continue to strongly support Japan's position on the abduction issue and will urge North Korea to take immediate steps to implement the commitments it made this summer as part the agreement reached with Japan," he said.

North Korea was added to the list of state sponsors of terrorism in 1988, the fourth country to be added. Cuba, Syria, Sudan and Iran remain on the list.

Countries designated as state sponsors of terrorism are subject to limitations on foreign aid, a ban on defense exports and sales, restrictions on exports of "dual use" items -- those that could be used for defense or non-defense purposes -- and a variety of financial and other restrictions.

In recent weeks, North Korea objected to the way the United States and its allies were proposing to verify that North Korea was revealing all its nuclear secrets.

The question of removing North Korea from the terror list had been under intense deliberations in the Bush administration over the past several days, since the U.S. point man in the negotiations, Assistant Secretary of State Christopher Hill, had returned from talks in North Korea.

Secretary of State Condoleezza Rice had talked by phone to her counterparts in China, Japan and South Korea, and according to a spokesman on Friday, she expected to talk to Russia's foreign minister in coming days.

Speculation had been rising in Washington that the Bush administration would decide to "de-list" North Korea, despite fierce opposition from some of Bush's fellow Republicans.

Rep. Ileana Ros-Lehtinen, R-Florida, the ranking Republican on the House Foreign Affairs Committee, issued a strongly critical statement after Saturday's announcement.

"While I am not surprised by today's decision, I am profoundly disappointed," she said.

"Given the regime's decision to restart its plutonium reactor at Yongbyon and actions barring access to the site by inspectors from the International Atomic Energy Agency, it is clear that North Korea has no intention of meeting its commitment to end its nuclear program."

Republican presidential candidate Sen. John McCain put out a statement Friday opposing taking North Korea off the terrorism list.

"I have previously said that I would not support the easing of sanctions [against] North Korea unless the United States is able to fully verify the nuclear declaration Pyongyang submitted on June 26," McCain said. "It is not clear that the latest verification arrangement will enable us to do so."

McCain's Democratic rival, Sen. Barack Obama, had a more positive view, calling North Korea's agreement to the verification measures "a modest step forward." But, he said, any failure on Pyongyang's part to follow through with its side of the agreement must be met with swift action.

"President Bush's decision to remove North Korea from the list of state sponsors of terrorism is an appropriate response, as long as there is a clear understanding that if North Korea fails to follow through there will be immediate consequences," Obama said.

"If North Korea refuses to permit robust verification, we should lead all members of the Six-Party Talks in suspending energy assistance, re-imposing sanctions that have recently been waived, and considering new restrictions."

Participants in the Six-Party Talks, besides the United States and North Korea, are South Korea, China, Japan and Russia.

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Justice Department scandal almost buried by financial crisis

AT ANY other time, what happened in the U.S. Justice Department last week would have been big news. At any other time, when internal reports by Justice Department call for more investigation into a case of unethical, if not criminal, conduct on the part of lawmakers and the White House, the administration would have a lot of explaining to do.

But the Bush Administration got lucky. As its Treasury and Federal Reserve chiefs warned that the sky was falling and the economic crash and continuing tumult on Wall Street made them seem prophetic, the Justice Department released a nearly 400-page scalding indictment of the administration over the controversial firings of several U.S. attorneys in 2006.

It was an overlooked bombshell in breaking news cycles preoccupied with financial crisis, rescue plans, presidential politics, and a vice presidential debate.

But what the Justice Department’s exhaustive investigation and blistering report concluded about the enormous damage done to the department through improper politicization is far more troubling than even Sarah Palin in disjointed attack mode.

Investigators from both the department’s Office of Inspector General and Office of Professional Responsibility found that political pressure did indeed drive the dismissal action against at least three of the nine federal prosecutors abruptly fired. At the time, then-Attorney General Alberto Gonzales insisted the individuals were all dismissed for inadequate performance, or failure to implement the President’s law enforcement agenda.

But it appears the longtime pal and adviser to President Bush was lying through his teeth. Turns out the real reason some of the top federal lawyers were removed from the job, according to the Justice Department report, was that either the U.S. attorneys had the audacity to prosecute Republicans or because they failed to aggressively prosecute Democrats.

Either way, their behavior ticked off well-connected GOP politicians who had come to expect a politically loyal Justice Department. A couple of calls from powerful New Mexico Republican officeholders helped push former U.S. attorney David Iglesias out of a job. Evidently, the top New Mexico prosecutor was remiss in his duty to produce criminal charges against Democrats in the run-up to the 2006 election.
Another U.S. attorney in Missouri lost his post over a petty complaint from Republican Sen. Christopher Bond, and still another was bumped to make room for a protégé of White House political adviser Karl Rove. There was a pervading culture of partisanship/loyalty-above-all-else in the department, recalled one of the fired attorneys.

“Not only were my colleagues and I not insulated from politics — as we should have been in our jobs as prosecutors — but we were fired for the most partisan reasons,” Mr. Iglesias said.

But it mattered not to the Machiavellian Bush Administration that justice was compromised with appalling political interference. It operates under the premise that the ends always justify the means.

Look at the pattern.

The administration used fear about nonexistent WMDs as a means to justify the ends of invading Iraq. It outed a CIA operative to punish critics, eliminated civil rights under the misnamed Patriot Act to expand executive authority, crafted energy policy with energy companies to benefit the energy industry, and allowed the subprime mortgage mess to perpetuate to generate obscene wealth for a few.

And now there are official findings of fact about the politically charged dismissals of U.S. attorneys conducted to satisfy a White House agenda. Scandal-weary Americans may be inclined to dismiss yet another administration disgrace, but what happened at the Justice Department is too big a deal to ignore.

We’re supposed to be a country that requires “equal justice under the law,” not tainted justice under political consideration. But that’s what we had under shameless administration zealots like Mr. Rove and Mr. Gonzalez.

The former administration officials allowed the most invaluable assets of the Justice Department — its integrity and independence — to be jeopardized for political ends. They permitted wholesale politicization of the department, as one commentary put it, “by subjecting new hires and sitting U.S. attorneys to rigid ideological litmus tests.”

Even though new Attorney General Michael Mukasey has appointed a federal prosecutor to investigate whether criminal laws were violated all the way to the Oval Office, the administration may luck out again. As time runs out on its lamentable tenure, the injustice it perpetrated on a once-venerated institution may go unpunished.

But before the next administration takes over, Americans need firm assurance that the rule of law will be applied fairly by the Justice Department. Never again can there be partisan allegiance required of incoming professionals, or political criteria that outweigh the legal and ethical.

The impartial administration of justice in this nation, its very credibility, was nearly destroyed by the tyrannical ambitions of a few.

How’s that for big news almost buried?

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