Thursday, August 25, 2016

Continued Sluggishness In Equity Markets Awaiting Janet Yellen At Jackson Hole

Investors (if that's what they're being called these days) are largely on hold in advance of Fed Chair Janet Yellen's speech at Jackson Hole tomorrow and a return to what passes for normal conditions following the Labor Day holiday.

Essentially, stocks have been treading water for the past month, since setting new all-time highs mid-July and making a double top earlier this month.

For whatever it's worth, the one bid by the Fed and its central bank allies has produced a very dull market, if that's what we're calling it these days.

Of particular note is the current odds for a rate hike in September, currently hovering around 18%. For a December rate hike, it's basically a 50-50 proposition, though neither is actually very likely considering the fragility of the global economy.

Thursday's Closing Prices:
Dow Jones Industrial Average
18,448.41, -33.07 (-0.18%)

NASDAQ Composite
5,212.20, -5.49 (-0.11%)

S&P 500
2,172.47, -2.97 (-0.14%)

NYSE Composite
10,780.23, -10.95 (-0.10%)

Tuesday, August 23, 2016

Stocks Stuck Until Labor Day

Editor's Note: Very rough schedule this and next week, so there may not be the usual market banter. For now, stocks seem stuck until after Labor Day. Of course, any big news will be reported upon. Enjoy the summer weather!

Nothing to write home about today, as stocks ramped early in the session and sold off the rest of the day. Sluggish is an appropriate way to call it.

Tuesday's Travails:
Dow Jones Industrial Average
18,547.30, +17.88 (0.10%)

S&P 500
2,186.90, +4.26 (0.20%)

5,260.08, +15.47 (0.30%)

NYSE Composite
10,847.49, +31.57 (0.29%)

Monday, August 22, 2016

Slow Week For Stocks Ends With Losses

Despite various new highs, stocks traded in a very tight range over the course of the week.

Not surprisingly, August is the most popular time for vacations, not exclusive of stock brokers, traders, managers and all those who participate in making the markets.

Friday's trading was particularly sluggish, with all the major averages finishing in the red, albeit, slightly.

The weekly figures were hardly encouraging to either bears or bulls, with the main indices offering losses or gains of fractions of one percentage point, the S&P the least affected, down 0.18 points.

Leading into the final full week of August trading, with monthly options already having expired (Friday), another week of widespread complacency is expected.

Figures for Friday:
Dow Jones Industrial Average
18,552.57, -45.13 (-0.24%)

5,238.38, -1.77 (-0.03%)

S&P 500
2,183.87, -3.15 (-0.14%)

NYSE Composite
10,829.15, -33.86 (-0.31%)

For the Week:
Dow: -23.90 (-0.13%)
S&P 500: -0.18 (-0.01%)
NASDAQ: +5.48 (0.10%)
NYSE Composite: +6.74 (0.06%)

Wednesday, August 17, 2016

Stocks Flail About As Investors Ponder September Rate Hike False Flag

Pretty ugly. The Dow round-tripped about 120 points, ending the session slightly on the positive side.

Fed minutes were released at 2:00 pm EDT, and offered little insight. The word is that they're going to raise rates in September.

Nonsense. They've already seen what a rate hike did to stocks the last time. They're not going to take that chance, unless they want to see Hillary lose the election come November.

Today was all about flailing about in an overpriced environment.

Wednesday's Wash:
Dow Jones Industrial Average
18,573.94, +21.92 (0.12%)

5,228.66, +1.55 (0.03%)

S&P 500
2,182.22, +4.07 (0.19%)

NYSE Composite
10,824.40, +14.66 (0.14%)

Tuesday, August 16, 2016

Fed's John Williams Strikes The Alarm Bell; Markets, Economists Respond With Aburptness, Gibberish

President and CEO of the San Francisco Federal Reserve Bank, John Williams, released a white paper on Monday that caught the attention of just about everybody even tangentially aligned with economics or finance called Monetary Policy in a Low R-star World.

Williams, who was Janet Yellen's chief researcher when she was head of the San Fran Fed, has, with the release of this paper, struck the alarm bell with an enormous policy mallet. In effect, he's telling the world that the central banks of the world - including our own, all-powerful Fed - that the past seven years of low interest or zero interest rates have not produced the desired results, which would be a robust economic climate coupled with adequate inflation.

What the Fed and other central banks consider adequate inflation is something of a mythical, though essential, concept in Keynesian economics. Central bankers talk of a target inflation rate, figuring that two percent is about the right level to keep GDP and the associated debt burden growing.

In essence, the concept that any level of inflation is good for anybody other than central bankers is complete and absolute buffoonery, designed only to perpetuate the counterfeit of fractional reserve banking and fiat money. It should be pointed out that true inflation is always and everywhere a monetary phenomenon, strictly defined as an increase in the money supply, that being debt in every case involving fiat money. What Williams is talking about is price inflation, an entirely different animal. A price inflation rate of two percent, over any expanse of time, be it 10, 20 or 50 years, does nothing but erode the value of the currency, increasing the price of everything and impoverishing the citizenry coerced into using said currency.

It's horribly bad policy for the bulk of the population, enriching the banks, distorting the natural business cycle and inducing government spending beyond its means, causing deficits and eventually, unpayable, unservicable debt burdens, the exact condition the entire global economy finds itself in today.

Williams chooses to blame all of the central bank policy errors on an amorphous concept known as the natural rate of interest, or R*, or R-star. The conceit of his missive is where he states, "While a central bank sets its short-term interest rate, r-star is a function of the economy that is beyond its influence."

In other words, Williams is conceding that the natural flow of economics is something a central bank cannot control, manipulate, massage, or otherwise rig. It's utter nonsense. The reason the mythical R-star is so low is because central banks worldwide have been dropping key interest rates to previously-unforeseen levels, in many cases (notably the BOJ and SNB) instituting negative interest rates. Central banks have caused the massive global economic problems and Williams' propose solutions indicate that the central bank models are broken beyond repair and that their only tools remaining are empty rhetoric and finger-pointing, obviously ill-suited to stave off recessions or induce growth and prosperity.

Williams wags his finger at governments, proposing that fiscal measures be taken to combat low inflation (eventually outright deflation) with more insanity such as targeting GDP or using some kind of sliding scale of taxation based on centrally-planned, goal-sought data points such as inflation and/or unemployment.

It this were a football game, Williams could be accused of punting on second down from his own goal line. He's given up, as he - and his central bank brethren - should have eight years ago at the height of the Great Financial Crisis (GFC), allowing the market to clear out the malinvestments, cripple the broken, over-leveraged banks and allow the economy to recover on its own terms, without the aid of central bank intervention. The associated pain might have been immense, but it would have been contained and recovery would have been swift.

Instead, Williams and the central bankers of the world have brought the global economy to the brink of a mammoth financial crisis, one in which entire nations' economies will be completely torn asunder. Williams and his friends have given us the most extreme policy initiatives the world has ever seen (ZIRP, NIRP, QE) and saddled governments, businesses and individuals with outrageous debt loads.

If ever the world has been at the cusp of a debt jubilee, this is it. The central banks have failed even themselves and their clandestine shareholders and its time they be relegated to the dustbin of history, along with other failed ideologies.

A return to gold and silver as base capital in a demand economy, various barter exchanges and fixed exchange rates in foreign currencies would be far better solutions than what Williams has proposed and eminently superior to the devilish constructs of the IMF, World Bank, the European Union, futures, derivatives, federal mandates, and other complexities of modern economics.

At the end of error-prone regimes, be they in finance or governance, wild, weird, unwieldy ideas will be promulgated by supposed "experts." Williams' institutional heresy is only the beginning of the coming madness. Expect even more desperate distortions and departures from reality from the very people who created the economic mess. They're uniquely positioned to cause nothing less than global economic, political and societal calamity.

Good luck.


The market response to San Fran Fed's Williams' policy punt has been swift and poignant. In Japan, the Nikkei fell 273 points. European markets were lower across the board, with the Dax, FTSE and France's CAC-40 each losing ground. US stocks opened lower and remained in the red through the session.

It worth noting that this is still August and most of Wall Street's heaviest hitters are still stupefied by drugs and booze out at their Hampton retreats. US markets hit all-time highs in recent days, akin to ringing a bell at the tippy-top of the market. Values are extreme and detached from fundamentals. The dollar was whacked and will likely continue to decline, and, as just about the only barely viable economy and bond market, US treasuries are about to head further toward zero and negative rates. The world is upside down, ripe for complete overhaul. What many have been predicting and anxiously awaiting for the past seven or eight years may finally be upon us.

Of course, to offset the negative effects of Williams' paper, NY Fed head, Bill Dudley trotted out a statement just prior to US markets opening, saying, in effect, that a September rate hike by the Fed is under consideration. There you have it: more jaw-boning and utter nonsense designed to alter perception. To say that the Fed is close to another rate hike is tantamount to thinking that the moon is about to tumble into the earth.

Gold and silver were each up sharply overnight and in early morning trading on the COMEX. Precisely at 8:00 am EDT, both were hammered lower, yet another signal that central bankers are desperate and nearly delusional.

Be prepared.

US Markets at 3:00 pm EDT (prior to close due to scheduling conflict)
Dow Jones Industrial Average
18,583.22, -52.83 (-0.28%)

5,237.45, -24.56 (-0.47%)

S&P 500
2,182.27, -7.88 (-0.36%)

NYSE Composite
10,825.95, -32.54 (-0.30%)