Thursday, February 28, 2013

Dow Comes Close to All-Time High, Turns Back

Stocks keep grinding higher, but the all-time high on the Dow Industrials - 14,164.53, set October 7, 2007 - continues to be an elusive target, maybe attainable, but hardly one which anybody believes will hold for long.

The general consensus over the past four weeks or so has been that the market was in need of a pullback, to re-test support, before moving to higher levels.

Today's midday action seemed promising, especially when the Dow shot up more than thirty points in a matter of minutes, breaking out of a dull, smallish range and eventually getting to within just 16 points of the record.

Headwinds were blowing from Washington and elsewhere, however, and the Dow, S&P, NYSE Composite and NASDAQ all lost steam in the final ninety minutes, leaving all in the red on the day, the fade from record territory a disheartening sign to traders.

In the nation's capitol, the Senate failed to approve a measure that would have staved off the sequestration cuts scheduled to kick in at midnight tonight which might have been just enough negativity to keep the markets honest - for a change. Prior to the open, there was disappointment in the second estimate of 4th quarter 2012 GDP, which improved from -0.1 to +0.1, though the restatement was hardly enough to inspire any kind of confidence. Stocks limped through the morning session without much in the way of direction.

A number of stocks also kept the market in check. Following Wednesday's close, JC Penny (JCP) posted another in a series of horrifying quarterly reports, falling nearly 17% on Thursday. The much-ballyhooed turnaround by Apple wunderkind Ron Johnson has failed to materialize, the CEO admitting that he had made mistakes along the way, surely the understatement of the day, though he should be lauded for his honesty, albeit a bit late.

Wal-Mart (WMT), the nation and the world's largest retailer, continues to show signs of struggling, hovering around 70/share as Bloomberg released a story based on minutes from an officers' meeting that said the giant is having trouble keeping stores' shelves stocked with merchandise.

Somehow, there just seems a certain disconnect between the US economy and the US stock markets. Obviously one does not equate directly to the other, but with unemployment around eight percent, an enormous federal deficit, gridlock in Washington and an all-time high in food stamp recipients there seems to be no good reason for stocks to be at all-time highs except for no other reason than the liquidity-driven rally fomented by the Federal Reserve since 2009.

Stocks may or may not reach new highs in short order, though from the looks of things on the ground, it's certainly not cause for celebration by the masses and surely does not seem a sustainable condition.

Any trader worth his or her chops should probably be shoveling in physical silver and gold by the bucketfuls, as both are hovering near five-month lows.

Dow 14,054.49, -20.88 (0.15%)
NASDAQ 3,160.19, -2.07 (0.07%)
S&P 500 1,514.68, -1.31 (0.09%)
NYSE Composite 8,868.72, -6.61 (0.07%)
NASDAQ Volume 1,909,055,500
NYSE Volume 3,801,066,000
Combined NYSE & NASDAQ Advance - Decline: 3204-3212
Combined NYSE & NASDAQ New highs - New lows: 308-46
WTI crude oil: 92.05, -0.71
Gold: 1,578.10, -17.60
Silver: 28.40, -0.548

Wednesday, February 27, 2013

Forget the Sequester; Bernanke Has All the Cards (and all the money)

Nothing like a couple of days in the woods - away from the Sturm und Drang of the neo-rational markets and shrieking media pundits - to offer a bit of perspective on not only the economic realities of the day, but the human condition in general.

What appeared to be the inevitable swoon the naysayers have been long-hoping-for on Monday, with markets taking their most violent downturn of the year, was quickly overruled on Tuesday and absolutely trumped and superseded with the third-best gain (on the Dow, at least) of the year on Wednesday.

Not that there wasn't a good share of associated nonsense and rationale for each of the directional market moves, but, in the end, it was a wash and a win for the erudite chairman of the Federal Reserve, Mr. Ben Bernanke, who availed himself of the opportunity to alternately receive and give both praise and chiseled criticism to both chambers of Congress in his annual Henry Hawkins testimony and the adjoining question and answer periods. We rest assured that the Chairman is content that not only are his policies of ZIRP and QEternity the correct ones for the US and global economies (because as goes the US, so goes the world at this juncture), but also that he has convinced most members of congress that they are working. Besides, there's nothing the congress nor the president nor any other person or assemblages can do about said policies, right, wrong or otherwise.

He is, for all intents and purposes, master of the financial universe. So be it.

Noting the chairman's unadulterated power to influence and control the economics of the world, skeptics still advertise their discontent, brining up the untidy details of the unwinding of his easy money regime, but this argument is a chimera, a cloak for ineptitude, a misunderstanding, a falsity, an impotent attempt to fleece power from the unbridled king of money, because the chairman and his cronies at the Fed are not at all concerned with unwinding anything. Their policies will remain in effect until the next chairman and governors are appointed/elected, and then such unwinding - if there ever is one at all - will be their problem.

For the rest of us, who do not enjoy the luxuries of appointments or elections, but rather suffer the daily slings, swings and arrows of outrageous fortune (or misfortune), a plan is a necessity, though those offered by the shysters and criminals populating the financial services industry might not always be in our own self-interest, if only because they contain the notion of conceit that markets are always optimized and correct, risk is always contained and humans always make rational decisions.

History will prove all three of those basic financial tenets absolute falsehoods. That is why we have booms and busts, successes and failures, joy and tears. Existence is not guaranteed and a fruitful existence is only attainable at some others' expense, such is the basis of capitalism.

So, a note, as the congress and the president sit upon their fattened hands awaiting the monster of their own creation - sequestration - which commences on March 1st, but in reality is more a boogie-man-in-the-closet apparition than an actual threat to the economy, especially on a local, individual, human level. It's something on the order of a two percent cut in the discretionary budget - domestic programs (not welfare, Social Security Medicare or Medicaid) and defense spending - thrown against the background of a baseline budgeting process which automatically increases the spending on these programs by three to ten percent in the upcoming continuing resolution process (which has displaced the budget process for five years now) due to commence by mid-March. In effect, the sequester is a non-sequitur - it is utterly meaningless.

Still, a plan one must have for the Ben Bernanke era, so make one, and make sure it includes not buying a new car unless you are willing and able to pay for it in cash or can get 0% interest for the life of the loan (hey, the banks get that rate, why not you?) which should be no longer than five years. Your plan should also include the paying down or clipping up (or maybe both) of all your credit cards except one for dire emergencies, unless you have $10,000 or more in cash safely hidden away in your back yard or sock drawer (though a safe would seem a more prudent place).

Those are the starting points, but check to see if you are playing more than 1/3 of your net income (after taxes) on housing. If you are, move. Downsize. There are plenty of deals available at excellent prices, even though the housing market in many places has yet to bottom.

And here's something that bugs the heck out of some people: It doesn't matter if you make $20,000, $200,000 or $2,000,000 a year. Spending four to five dollars on a cup of coffee is stupid. Stop it. Put Starbucks out of business. And stop all the other dumb, extravagant, ludicrous things like lottery tickets, day spas, dining out and "entertainment." Well, you don't have to stop them altogether, just be sensible about your spending. A very wise man (my father, RIP) once said, "it's not how much you make, but how much you spend." That kind of depression-era advice can go a long way these days (since we're in another depression but don't really know it. Shhh... the banks are faking it).

Remember at all times that financial news - even news on specific stocks - is marco-news, and, thus, will have little effect on your own personal condition.

Save. Don't invest. Save 5-10% of your gross income and put it into cash or physical gold or silver or tangible assets which will hold their value no matter what (a tough find).

Grow yourself some herbs, fruits or vegetables. Seriously. There's nothing like the taste of something you've nurtured from seed or seedling or sapling to a ripened delicacy. And, it's relatively easy. Nature does most of the work. Wall Street has nothing that compares to the return you get from a handful of seeds, sunshine and rain. Beyond that, you will be the envy of your neighbors, who aren't nearly as smart or thrifty or nature-loving as you. There's something to be said for that.

All hail the great Bernanke! Amen.

Dow 14,075.37, +175.24 (1.26%)
NASDAQ 3,162.26, +32.61 (1.04%)
S&P 500 1,515.99, +19.05 (1.27%)
NYSE Composite 8,875.33, +109.15 (1.25%)
NASDAQ Volume 1,726,024,500
NYSE Volume 3,911,747,250
Combined NYSE & NASDAQ Advance - Decline: 4528-1799
Combined NYSE & NASDAQ New highs - New lows: 252-38
WTI crude oil: 92.76, +0.13
Gold: 1,595.70, -19.80
Silver: 28.94, -0.317

Friday, February 22, 2013

Market Message: Buy the Dip

Lemmings that they are, the traders and their algo-infested computer programs did what all good followers do, they followed the lead set down by the futures market prior to the open and bought stocks all day long, erasing a good portion - more than half - of the losses incurred over the past two sessions.

It being Friday and options expiration, all the boys and girls will be out having champagne and lobster in lower Manhattan tonight.

Today's results do not imply that all's right with the market, though an amazing disparity can be seen on days in which program trading is the norm as opposed to humans actually taking a hand in making bets, as was the case on Wednesday.

The fears inspired by the release of January's minutes were quickly dispelled this morning on CNBC's Squawk Box, as Fed governor James Bullard plainly stated that the Fed was not going to change policy any time soon, as though anyone in their right mind would have believed otherwise.

So, Wall Street is saved and Main Street will continue to muddle through, making the best of customers with SNAP cards and the proceeds from trips to the Coinstar machines.

Silver and gold closed out the week still at bargain-basement prices.

Dow 14,000.57, +119.95 (0.86%)
NASDAQ 3,161.82, +30.33 (0.97%)
S&P 500 1,515.60, +13.18 (0.88%)
NYSE Composite 8,887.40, +77.11 (0.88%)
NASDAQ Volume 1,540,804,625
NYSE Volume 3,463,590,000
Combined NYSE & NASDAQ Advance - Decline: 4713-1718
Combined NYSE & NASDAQ New highs - New lows: 191-42
WTI crude oil: 93.00, +0.16
Gold: 1,572.80, -5.80
Silver: 28.46, -0.239

Thursday, February 21, 2013

Stocks Trashed Again on Brace of Poor Economic Data

Possibly more than anything else, the horrific -12.5 print by the Philadelphia Fed was responsible for the added declines on Thursday, following Wednesday's setback after the FOMC minutes from january were announced.

The market was expecting a reading of 1.5 from the Philly Fed in its survey of business conditions, which, in and of itself, is a bit of an embarrassment, but were greeted with an even lower number for February after january came in at a disappointing -5.8. Obviously, there's little to no catalyst for improvement in the region, and the same is pretty much true in other Fed outposts, though the Philadelphia survey gets more attention, it representing a solid hub of business activity.

Beyond the sorry report, other economic data was less-than-encouraging. First-time unemployment claims ticked up 20,000, from a revised 342K last week, to 362K in the latest reporting period, dashing - for the time being - any hope of a rebound in employment.

This is a fickle, almost psychotic market. On the one hand, traders get worried that the Fed will take away the punch bowl of unlimited QE and low interest rates, but, on the other, they are equally concerned that the general economy is again approaching stall speed, as it did last year and in 2011 in the early months.

Whatever the market is feeling these past two days, it is mostly confusion and consternation. The major averages took some serious dips into the red today before a wicked, final-hour, short-covering rally brought them close to unchanged on the day, eventually failing in the final half hour of trading.

One can hardly blame the shorts for pulling a quick trigger on their positions this afternoon. Attempting to short this market and counter the Fed's relentless money creation machine has been a losing trade for the better part of four years and its a testament to the resolve of the non-believers to hold true even on a two-day reversal.

US markets were not the only ones being handed their hats on Thursday. European markets were shattered even worse after a key reading on services and manufacturing fell from 48.6 in January to 47.3 in February, well short of expectations, where the consensus was 49. It may be finally dawning on european investors that various bond schemes by the ECB and austerity measures in various countries aren't producing the desired effects and may even be contributing to continued weakness in the Eurozone.

Taken together, the Eurozone and the US are beginning to look like a pair of gussied-up party girls after a long night on the town. The makeup is fading and cracking and the hangover is setting in with a passion.

Even though two days of trading does not constitute a trend of any sort, the past two have been the worst in succession for US stocks this year and there may not be much of a respite with sequestration issues and a budget battle looming between the opposing parties in the nation's capitol, and those are two fights the American public is hardly keen on, as congress and the president have both shown an unwavering reluctance to handle pressing business like adults, preferring to play the blame game and seek short-term, band-aid types of approaches.

How the markets play out over the next few weeks and months will go a long way toward determining the mood on Wall Street and Main Street, and the mood - despite the best intentions by business - is beginning to show signs that patience is growing exceedingly thin.

Elsewhere, gold got a bit of a dead-cat-bounce after a month of steady declines, giving back those gains during the open session, though silver remains mired at multi-month lows. The metal prices may move even lower, in union with stocks, although one would be hard-pressed to find an actual physical holder of either willing to part with any or all of his or her holdings. Suppression by central banks and other operators has been well-documented, and the more they push down, the more dire conditions for a sharp response become.

Crude oil also has been taken a beating as speculators are having their lunch eaten. Overabundant supplies of WTI crude and slack demand is causing a serious disruption in the trading, which has been nothing but straight up since December. Oil and gas at the pump are about to get a whole lot cheaper.

It's getting a little bit interesting out there after the champagne rally of the first seven weeks of the year. The A-D line has been in reversal for two straight days and today's new highs - new lows reading was nearly at parity, a condition foreign to these markets since last November.

Dow 13,880.62, -46.92 (0.34%)
NASDAQ 3,131.49, -32.92 (1.04%)
S&P 500 1,502.42, -9.53 (0.63%)
NYSE Composite 8,816.74, -66.88 (0.75%)
NASDAQ Volume 2,007,395,000
NYSE Volume 4,414,224,500
Combined NYSE & NASDAQ Advance - Decline: 1942-4569
Combined NYSE & NASDAQ New highs - New lows: 104-78
WTI crude oil: 92.84, -2.38
Gold: 1,578.60, +0.60
Silver: 28.70, +0.077

Wednesday, February 20, 2013

Fed Minutes Send Shock Waves, Stocks Plummet

Was today the day that the skeptics and shorts have been waiting for the four months? The day the market turned and rolled over, ending ridiculous speculation that the rally had more legs and major indices - S&P, Dow - would reach all-time highs?

Maybe. And to think that it would be the Fed, the very same Federal Reserve that continues relentlessly pumping money at a rate of $85 billion a month into the market, that would cause the turn is simply delicious in its irony.

Stocks were cruising along aimlessly most of the session, down slightly, until last month's Fed minutes were released at 2:00 pm ET. The initial reaction was muted, as most algos were turned off for the event, not being able to peer into the minutes from the FOMC meeting of January 29-30.

The minutes revealed extensive discussion over the current expansionary Fed policy of QE, focused around the purchase of Treasury and mortgage-backed bonds that has been in effect since September of 2012 and whether or not the Fed should continue the policy along the lines of its current stature - until unemployment targets of 6.5% are met - or modify the existing arrangement as market actions warrant.

The committee discussed its options at the January meeting, but voted in favor of keeping the current polify intact, though today's minutes show that fissures in Fed policy are beginning to appear, with not all members completely in line with Chairman Ben Bernanke's policy of unusually easy money.

Once enough wall Street experts were able to read and comprehend what the Fed was transmitting, the selling ensued and at times became quite raucous, especially in the more speculative issues on, mainly on the NASDAQ, which suffered its worst loss of the year.

The Dow lost over 100 points on the day and the S&P pulled back substantially as well. Whether or not the declines will last for more than one session is still up in the air, but what is certain is that officials at the Fed are now openly questioning policy decisions - some insisting that QE is necessary and that the economy is too fragile to change policy, others suggesting that the extraordinary measures are leading to a bubble in equity markets, a view that is beginning to gain traction.

There's little doubt anywhere that if the Fed were to substantially reduce its asset-buying-binge, the economy - and especially the equity markets - would not respond favorably and the economy could be thrust into another round of recession, a reality that is much closer than anyone wishes to believe, after last quarter's -0.1 GDP print.

At this juncture, it would appear that the Fed has tied its own hands, and that any change in policy would be damaging to markets, if not the greater economy. Mere mention of discussion about change caused a selloff, so actual change would no doubt engender more severe reactions.

Dovetailing into the government's do-nothing policy regarding the upcoming sequestration issue, Fed policy should not materially change for the next three to six months, unless the president and congress find a way toward compromise on spending cuts without raising taxes, an outcome seen as remote by most.

How the market responds tomorrow and Friday will set the stage for the final week of February, which is loaded with important economic data releases, not the least of which is the second estimate on fourth quarter GDP on the 28th. Since next Friday is the first of March, the usual non-farm payroll data will be delayed until the 8th, giving the BLS more time to analyze and massage the data.

This may or may not be a significant turn in the markets, but for certain, it's an important development heading into at least three weeks of important data and serious fiscal issues that the government has thus far been reluctant to address.

Collateral damage was done in the precious metals as gold and silver took sizable hits after the Fed minutes release.

Dow 13,927.54, -108.13 (0.77%)
NASDAQ 3,164.41, -49.18 (1.53%)
S&P 500 1,511.95, -18.99 (1.24%)
NYSE Composite 8,883.63, -120.75 (1.34%)
NASDAQ Volume 1,998,613,000
NYSE Volume 4,576,938,000
Combined NYSE & NASDAQ Advance - Decline: 1519-5016
Combined NYSE & NASDAQ New highs - New lows: 470-59
WTI crude oil: 94.46, -2.20
Gold: 1,562.40, -41.80
Silver: 28.51, -0.912

Tuesday, February 19, 2013

Markets Up Following Three-Day Weekend; Congress Still on Vacation

Nothing like a three-day weekend to release pent-up demand.

Stocks took off like rockets into the sky at the open, leveled off and stayed about the same throughout the session. The S&P closed at a five-year high; the NASDAQ at a 12-year peak. Impressive.

Nobody is taking the issue of sequestration - which will cause some cuts in federal spending, but nothing too severe - seriously. Congress, like school-kids, teachers and administrators, has taken the entire week off.

One care hardly blame the hard-working members of congress for taking a nine-day vacation prior to sequestration to take effect on March 1. After all, they've worked tirelessly at getting re-elected and avoiding making hard choices, like putting together a budget or crafting a jobs bill to solve the unemployment situation.

Congress, like most of Washington, is a near-complete waste of effort. If there's any problem with the US economy, congress will surely attempt to make it worse. In fact, many in the business community will state quite plainly that congress and various levels of government - with its myriad rules, regulations and taxes - is the reason the economy only benefits Wall Street corporations and their shareholders. The rest of us will just have to struggle along, hopefully avoiding the taxes and rules government is so good at marking up and so bad at enforcing.

As for stocks, they're rapidly approaching record highs, which, considering the GDP was -0.1 in the 4th quarter last year and unemployment is "officially" 7.9%, is quite a remarkable feat. Truly, the power of low interest rates and unlimited QE by central banks worldwide, is very robust.

Making money in this environment has been a complete no-brainer. A monkey throwing darts at a stock table could have ramped up 10% gains easily. If the S&P 500 ends the week in positive territory, it will be the eighth straight week of gains, never before accomplished in the history of the index.

There is absolutely no fear in the marketplace, which, in and of itself, is reason to be afraid.

Precious metals - particularly gold and silver - have been on sale for some time and got even cheaper today.

Dow 14,035.67, +53.91 (0.39%)
NASDAQ 3,213.59, +21.56 (0.68%)
S&P 500 1,530.94, +11.15 (0.73%)
NYSE Composite 9,004.40, +71.18 (0.80%)
NASDAQ Volume 1,790,308,875
NYSE Volume 4,003,571,000
Combined NYSE & NASDAQ Advance - Decline: 4400-2121
Combined NYSE & NASDAQ New highs - New lows: 640-39
WTI crude oil: 96.66, +0.80
Gold: 1,604.20, -5.30
Silver: 29.42, -0.427

In the video below, Senator Elizabeth Warren asks officials of various "supervisory" agencies the last time they took a big Wall Street bank to trial. The answers are, in a word, predictable.

Friday, February 15, 2013

DEAD MARKET: Stock Indices Finish Week Nearly Unchanged

As has been repeated here and on other financial sites ad nauseum, this is about as dull a market as has ever been seen.

Even though the Dow Industrials finished positive on the day, it spent most of Friday's session in negative territory, down by as many as 61 points just 90 minutes prior to the close. It actually turned positive just two minutes before the closing bell.

The NASDAQ suffered its first losing week of the year, a laughable 1.84 point decline. The Dow fell - on a weekly basis - for the second straight week, a whopping 11-point loss on top of last week's monumental 17 point decline. A cumulative loss of 28 points in two weeks (10 trading days) is nothing more than a rounding error.

As for the darling S&P, it continued its 2013 winning streak, closing up again for the seventh straight week, though only by a mere 1.86 points. They dynamic S&P 500 went the entire week without moving more than three points on a closing basis. That's dull with a capital D.

With all this excitement, thank goodness the exchanges are closed on Monday for President's Day. The traders and all us weary writers really need a break.


Late Breaking: The SEC has filed charges in unusual trading activity in options just prior to Berkshire Hathaway's takeover of H.J. Heinz (HNZ). Geez, Uncle Warren involved in something less than ethical? The horror. The ironic twist is that Business Insider, operated by banned trader/analyst Henry Blodget, was the first on the web with the story, proving that, even on Wall Street, truth is stranger than fiction.

Dow 13,981.76, +8.37 (0.06%)
NASDAQ 3,192.03, -6.63 (0.21%)
S&P 500 1,519.79, -1.59 (0.10%)
NYSE Compos... 8,932.17, -20.91 (0.23%)
NASDAQ Volume 1,831,044,125
NYSE Volume 4,096,131,750
Combined NYSE & NASDAQ Advance - Decline: 2977-3410
Combined NYSE & NASDAQ New highs - New lows: 489-45
WTI crude oil: 95.86, -1.45
Gold: 1,609.50, -26.00
Silver: 29.85, -0.504

Thursday, February 14, 2013

St. Valentine's Day Mascara

No, that's not a misprint in the headline. The word is "mascara" - the stuff women apply to darken, thicken, lengthen, and/or define their eyelashes. It's a cosmetic, as in rouge, or lipstick, as in lipstick on a pig, which is exactly what the algos and buy-siders did to today's undeniably weak, directionless market.

Face it, Europe is a bona-fide basket case, Japan is devaluing its currency so fast that George Soros made nearly a billion dollars on the trade in just over three months.

The news coming out of Euro-fantasy-land was less than encouraging. Eurozone fourth quarter 2012 GDP fell by 0.6%.

Making matters a little more interesting - and more frightening - were the figures for the zone's three largest economies - Germany, France and Italy - whose own GDP fell by 0.6%, 0.3% and 0.9%, respectively.

The Eurozone, even after all the bank and sovereign bailouts, pledges of doing everything possible to promote growth by the likes of Germany's Angela Merkel and EU President Mario Draghi, has resulted in three consecutive quarters of negative GDP. Europe is already in the throes of an economic collapse, thanks largely to protectionism for banks and excessive liquidity from European central bankers (most of whom are Goldman Sachs alum, BTW).

While the GDP numbers may be bad enough, consider youth unemployment (ages 15-25) in the Eurozone to be spreading like the bubonic plague. Greece reported youth unemployment over 60%; Spain over 50% and Portugal just topped 40%. Thirteen of the 27 EU member states are reporting youth unemployment over 25%. Austerity: it's what's for dinner.

Europe is solid proof that the elite class is making up the rules as they go along, and the general public is viewed as collateral damage only. Here in the good old USA, we have our own concerns with the sequestration schedule to commence March 1, which will result in massive federal budget cuts. The president and congress haven't even begun to discuss how they'll handle that, though they uniformly say that sequestration (it doesn't rhyme with castration for no reason) is something they'd prefer to avoid.

Have they acted? No. Will they? Probably, but, like the fiscal cliff deal this past December, it will be a stop-gap measure and cost taxpayers more. Nobody ever cuts anything in Washington, only the rate of growth of programs, because what's important to them is keeping lobbyists and voters (government employees and beneficiaries of government largesse) dumb and happy.

So, on what does this algo-concocted market focus? Berkshire Hathaway's buyout of Heinz. Poor suckers that Americans are, they put ketchup on their chicken and pork hot dogs on day old buns while Uncle Warren reaps the profits. If ever there was a crony capitalist, Warren Buffet's picture belongs next to the definition.

Sure, unemployment claims were down - from 368K to 341K - but aren't those figures still too high? The new normal means just doing better than expectations, even if those expectations are sub-par. It's akin to taking your kid out for ice cream because he got a C in math instead of a D. As a nation, we've lowered our standards in everything from our political leaders to what passes for entertainment.

Along with everything else, we've lowered our standards for rational markets. Today's split decision is just another shining example of the truth hiding in plain sight. Sooner or later, even the talking heads on CNBC are going to come to the realization that making new all-time highs with a -0.1% GDP and unemployment at eight percent doesn't really pass the smell test. Someday. Maybe. Note the video below with Rick Santelli, everyone's favorite financial ranter, extrapolating out on what we've been saying nearly every day on this blog: that being a trader is nearly impossible under current conditions.

And, just as a side note, New York Mayor Bloomberg, who first banned drink containers larger than 16 ounces, has proposed a ban on styrofoam containers, and... it's likely to pass his rubber stamp city council.

Let's see, smokes are $10-12 a pack in NY, you can't smoke in any of the bars, night clubs or public buildings; you must drink from small containers and those soon cannot be made of styrofoam. All this makes one pine for the good old days of the seventies. Ed Koch was mayor. Son of Sam was shooting kids in parking lots. Reggie Jackson was blasting balls out of the original Yankee Stadium and you could buy just about any kind of drug - from weed to cocaine - on just about any street corner. Bloomberg. He's just not a fun guy.

Dow 13,973.39, -9.52 (0.07%)
NASDAQ 3,198.66, +1.78 (0.06%)
S&P 500 1,521.38, +1.05 (0.07%)
NYSE Composite 8,951.33, -4.27 (0.05%)
NASDAQ Volume 1,884,832,750
NYSE Volume 3,867,864,500
Combined NYSE & NASDAQ Advance - Decline: 3259-3130
Combined NYSE & NASDAQ New highs - New lows: 505-39
WTI crude oil: 97.31, +0.30
Gold: 1,635.50, -9.60
Silver: 30.35, -0.516

Wednesday, February 13, 2013

Dow Fails to Hold 14,000; Markets in Blah State

Market has a serious case of the blahs; Dow fails to hold 14,000. Expect it to hover below that level for another few weeks.

Sequestration is coming, but, until the politicians get serious about budget negotiations, the markets will reflect a similar attitude, as nothing special is expected.

Negotiations should have begun already, as the deadline is March 1, but, being as this congress is apt to procrastinate at every opportunity, don't expect anything substantive until the very end.

Meanwhile, it's tough to get excited about anything in this environment. Shorting or buying puts - other than for cheap protection - is out of the question, and the upside seems severely crimped.

Dow 13,982.91, -35.79 (0.26%)
Nasdaq 3,196.88, +10.39 (0.33%)
S&P 500 1,520.33, +0.90 (0.06%)
NYSE Composite 8,955.60, -2.00 (0.02%)
NYSE Volume 3,606,101,750
Nasdaq Volume 1,819,338,250
Combined NYSE & NASDAQ Advance - Decline: 3714-2716
Combined NYSE & NASDAQ New highs - New lows: 538-29
WTI crude oil: 97.01, -0.50
Gold: 1,645.10, -4.50
Silver: 30.87, -0.15

Tuesday, February 12, 2013

Print, Baby, Print; Dow Over 14,000 Again

The Dow topped the 14,000 mark for the first time since February 1, setting a closing high that was the best in more than five years.

Thank you, Mr. Bernanke.

There's no substitute for rampant liquidity in a market climate such as this one. Uncertainty continues to abound, the economies of the developed nations are in the proverbial toilet, circling the bowl either in recession (Europe), complete deflationary stagnation (Japan), or barely chugging along at under 2% GDP (USA).

Of late, the Japanese have embarked on "unlimited" quantitative easing (printing money with nothing at all backing it), though the US continues as king of the hill, with the world's largest sovereign economy, the Fed buying up all the rancid mortgage paper and monetizing the federal debt to the tune of $85 billion a month (a touch over $1 trillion per year, annualized).

Europe seems to be getting the message that it's finally time to play no-holds-barred currency war, though the socialists on the continent seem fairly sanguine about continuing their efforts to bail out banks and sovereigns one-by-one, a little at a time, rather than using the bazooka approach favored by Mr. Bernanke.

Sooner or later, the Europeans will devalue by printing, mostly because the high level of the Euro is crimping Germany's exports, and, if Germany's economy suffers, one can probably bet on the good people of Deutschland not being very supportive of the Euro and/or wanting more in return from their Euro-brethren to the south, who, like the American welfare caste, produce nothing, but get much in return.

So the US and other major countries will continue to print, print, print their feckless paper fiat, a time-honored practice that has never ended well, ever. In the meantime, however (and that meantime could stretch out to 2016, 2017, or beyond), one cannot fault stock investors in their search for yield. The past four years in stocks has been nothing but Fat City Easy Street to the xxxxxth degree. During the period from March 9, 2009 until the present, it's been nothing but straight up for stocks, to a point at which the general market is now sporting a 14 multiple, even though many companies are not growing earnings one whit, others making their numbers through cost-cutting and downsizing.

Global finance is in an unsustainable state, but, as long as the printing presses continue to churn out crisp currency, nobody seems to care.

There are signs that it's getting a bit wearisome. Oil is heading over $100 a barrel for WTI crude, despite a glut on the market, especially in the US. Food prices have moderated lately, but they're higher overall than a year, two, three years ago and will only rise from here.

It's a great market for speculators, especially those wearing blinders. Giddy-up!

Dow 14,018.70, +47.46 (0.34%)
NASDAQ 3,186.49, -5.51 (0.17%)
S&P 500 1,519.43, +2.42 (0.16%)
NYSE Composite 8,955.92, +36.90 (0.41%)
NASDAQ Volume 1,719,904,375
NYSE Volume 3,424,131,000
Combined NYSE & NASDAQ Advance - Decline: 4076-2361
Combined NYSE & NASDAQ New highs - New lows: 450-31
WTI crude oil: 97.51, +0.48
Gold: 1,649.60, +0.50
Silver: 31.02, +0.109

Monday, February 11, 2013

No Algo Meat Means No Volume

Since roughly 85% of all market activity is handled via computer algorithm-based trading, there's good reason to suspect that market volume, such as today's - fast on the heels of Friday, which was the lowest volume day of the year (until today) - is going to become the norm, especially if much of the market news is either mundane or bad.

That's because the algos heartily chomp on good market news, profit being (in the words of perma-bull Larry Kudlow) the "mother's milk of the economy," and aren't programmed effectively (some surely are) to quantify downside momentum.

Nobody really wants to see stocks go down, so the quants (programmers) are all really in the bull camp when it comes to writing algos that work.

Did any of these Wall Street whiz kids ever think that skimming the market for pennies with their HFT algos was a bad idea? That it might scare people away from the market and that it might result in a market - in a time when media is controlled and highly contrived - with no liquidity that could go bidless?

Somebody should have looked at the downside of HFT and algo-based trading, because we're getting dangerously close to a market in which nobody wants to participate.

Other than today being the lowest volume session of 2013 (don't worry, there's another 10 1/2 months left to get it even lower), there was nothing of particular interest, except that European finance ministers opened a two-day session in which they will concoct new, more efficient methods of kicking the debt can down their particular road to perdition.

Editor's Note: On Sunday, CBS 60 Minutes aired a piece on the trust, cartel, or monopoly otherwise known as the credit reporting agencies - Equifax, TransUnion and Experian.

Anybody who's ever dealt with these firms - and who hasn't - will find the information in this report somewhat on the tame side, though still worth viewing.

The entire credit reporting scheme operated by these three firms, at the behest of the banks, credit card and finance companies, is a violation of every American's fifth amendment right to due process. A class action should be filed through the ACLU and the Justice Department (good luck with that) to shut this system down. It is horribly flawed, turning everybody into a number. Shades of biblical Apocalypse, indeed.

Watch CBS News Videos Online

Dow 13,971.24, -21.73 (0.16%)
NASDAQ 3,192.00, -1.87 (0.06%)
S&P 500 1,517.01, -0.92 (0.06%)
NYSE Composite 8,919.02, -16.22 (0.18%)
NASDAQ Volume 1,551,395,750
NYSE Volume 2,830,052,000
Combined NYSE & NASDAQ Advance - Decline: 2925-3479
Combined NYSE & NASDAQ New highs - New lows: 332-31
WTI crude oil: 97.03, +1.31
Gold: 1,649.10, -17.80
Silver: 30.91, -0.531

Friday, February 8, 2013

Dow Posts First Losing Week of Year

Despite opening and remaining on the upside for the entire session, the Dow Jones Industrial Average still posted its first losing week of 2013, though the losses are quite insignificant.

At the close today, the Dow was down 17 points from the previous Friday, the NASDAQ gained 14 points and the S&P picked up four-and-a-half points, both of the latter on Friday having made up for marginal losses earlier in the week.

Generally speaking, Friday was a fairly dull session in what turned out to be an overall dull week. The one piece of economic data that was positive was the US trade deficit falling to -$38.5B, the lowest in nearly three years.

The fact that stocks have held up so well through the first month of the new year and beyond is rather remarkable, considering the winds of trouble still swirling about. However, there may be reason to take a pause - or profits - as markets seem to have stalled at multi-year highs.

With the Dow and, especially, the S&P nearing all-time highs, a triple-top breakdown could be imminent. Additionally, Sunday marks Chinese New Year with the Year of the Snake designated according to the Chinese astrological calendar. Snake years are usually turbulent. 1941 (Pearl Harbor) and 2001 (September 11) were both Years of the Snake.

Finally, in the video below, Peter Eliades explains how we are on the cusp of a major turning point according to his 9244-day cycle, from his work at Stockmarket Cycles.

Dow 13,992.97, +48.92(0.35%)
NASDAQ 3,193.87, +28.74(0.91%)
S&P 500 1,517.93, +8.54(0.57%)
NYSE Composite 8,930.49, +36.74(0.41%)
NASDAQ Volume 1,776,898,880
NYSE Volume 3,008,696,500
Combined NYSE & NASDAQ Advance - Decline: 4251-2137
Combined NYSE & NASDAQ New highs - New lows: 474-20
WTI crude oil: 95.72, -0.11
Gold: 1,666.90, -4.40
Silver: 31.44, +0.038

Thursday, February 7, 2013

Stocks Drift Lower on Unemployment, Productivity Figures

It appears that the stock market may well be topped out for the short term, though the background of $85 billion in additional monthly stimulus will almost certainly help contain any declines to mere "noise" other than a true correction or change in market sentiment.

About the only thing that could alter the relentless, upward direction of stocks would be war, a series of natural disasters or an alien space invasion, and of those three, war would be the most likely. The suspected antagonists would be China vs. Japan, Israel vs. Iran or an expansion of US efforts in Northern Africa. Even in such a scenario, so intent is the Federal Reserve on its path to devaluing the currency in the name of progress or some nebulous, idealized vision of "growth at all costs," one would tend to believe their efforts at keeping stocks high and interest rates low would only redouble.

So it is that the major indices have come nearly all the way back to previous highs in the nearly five years since the epic crash of 2008-09 without the participation of many individual investors. The reasons contributing to such widespread investor shyness are manifold, highlighted by fear of high frequency trading, flash crashes, suspected manipulation, or the plain and simple conclusion that the stock market is riding on a bubble of Fed largesse which is eventually unsustainable.

It's unfortunate that so many have fled from the market in the midst of one of its most stridently bullish eras, but doubts and fears can linger for generations, and, beyond the market there is widespread distrust of other institutions which place themselves above the common man and often, the law.

While the United States, and, to a large part, Europe, struggles through this long winter of discontent, millions have made adjustments to their lifestyles, opting for more sustainable personal economies as opposed to the heavy-handed debt-as-money regime that seemed to have creaked and cracked in the '08-09 economic downturn. Many such individuals will never return to the market and among those that do, they will be cautious to a fault and ready to flee at the first signs of trouble.

Even though economists and stock-pushers continue the mantra of "recovery,' for most, the results of five years of heavy stimulus has produced perceptibly limited results, keeping the skeptics unconvinced.

Today's action was possibly (who knows for sure?) a reaction to economic data released this morning that say initial unemployment claims nearly steady at 366,000 and a dip in productivity for the fourth quarter of 2012 of two percent, pushing unit labor costs to an inflation-inducing 4.5% gain over the same period.

It is just those kinds of choppy data sets and unintended consequences that serve to amplify fears from main Street to Wall Street. the level of uncertainty about everything from price discovery to government machinations over the budgetary process continuing to put a ceiling on true progress toward a resoration of normalcy.

Dow 13,944.05, -42.47 (0.30%)
NASDAQ 3,165.13, -3.35 (0.11%)
S&P 500 1,509.39, -2.73 (0.18%)
NYSE Composite 8,892.85, 41.38 (0.46%)
NASDAQ Volume 1,916,361,875
NYSE Volume 3,865,233,750
Combined NYSE & NASDAQ Advance - Decline: 2441-3979
Combined NYSE & NASDAQ New highs - New lows: 357-26
WTI crude oil: 95.83, -0.79
Gold: 1,671.30, -7.50
Silver: 31.40, -0.474

Wednesday, February 6, 2013

Meandering Midweek Market

Mostly, investors were mulling over issues that developed over Monday and Tuesday, as nothing new really sufaced on Wednesday. Europe is still in an uncertain state, as is the US, but there was nothing really developing to move markets and the indices dropped popped, dropped and popped back to positive at the end of the session.

Focus will soon turn to the budget and sequester debates in the congress, though that exercise has already been well telegraphed by the players involved. More can-kicking will likely be the order of the day on both fronts, but it is likely to cause a temporary drag on markets.

Tomorrow's initial unemployment claims may cause some excitement, after ripping back up to 368,000 last week, but the biggest factor overall is still the relentless MBS buying and treasury monetizing by the Fed, at a pace of $85 billion per month, underpinning the market.

Until some change in policy occurs, the bets are all on black, the market continuing to climb, obviously a position tough to stand against.

Dow 13,986.52, +7.22(0.05%)
NASDAQ 3,168.48, -3.10 (0.10%)
S&P 500 1,512.12, +0.83(0.05%)
NYSE Composite 8,934.26, +14.12 (0.16%)
NASDAQ Volume 1,961,700,250
NYSE Volume 3,775,844,750
Combined NYSE & NASDAQ Advance - Decline: 3577-2796
Combined NYSE & NASDAQ New highs - New lows: 324-19
WTI crude oil: 96.62, -0.02
Gold: 1,678.80, +5.30
Silver: 31.88, +0.002

Tuesday, February 5, 2013

Europe, Ratings Agencies In Focus as Markets Zig-Zag

Editor's Note: Our regrets and apologies to readers for missing our regularly-scheduled post after the close on Monday. There were negotiations from which we could not extricate ourselves in a timely manner.

Stocks took a dive on Monday, but rebounded sharply on Turnaround Tuesday, raising the indices nicely, but not back to levels seen before Monday's decline.

In the news on Monday was Europe (remember them?), once again rearing its ugly, socialist head over stories emanating from Spain over alleged corruption in the government of Prime Minister Mariano Rajoy (no, really?), which the Spanish PM has denied. While there's little doubt that corruption exists in all levels of government worldwide, especially at the sovereign or federal level, proving such becomes a task not for the feint of heart, as there are vested interests which will defend their salaries, positions and perks like maddened pit bulls.

Italy was also in the news Monday, as fraud and conspiracy charges are being levied against the world's oldest bank, Banca Monte dei Paschi di Siena, and are slowly but surely finding their way to the top of government, eventually to land in the lap of Prime Minister Mario Monti.

National elections are slated for February 24-25, with former Premier Silvio Berlusconi, 76, gaining on front-runner Pier Luigi Bersani. Unemployment and rampant waves of criminality are among major issues in Italy.

On the US home front, the Justice Department finally found some level of damming evidence over which to bring charges against Standard & Poor's. The rating agency is alleged with fraud over their ratings of sub-prime loans in the 2004-06 period, helping bring about the 2008-09 market crash and financial panic. The government is seeking $5 billion in damages.

While the DoJ has reportedly combed through two million pages of emails and internal documents, the real reason for the agency to now bring charges is that - after four months of negotiations with the firm - it wants and needs the money that fines will bring to the federal coffers. Besides that, statues of limitations on fraud are expiring quickly, prompting action. It's a shame this is happening so late in the game and also that the banks which originated and packaged the faulty loans aren't being prosecuted as well.

There was a rush of earnings news, mostly positive, though YUM Brands (YUM) was hard hit on Tuesday even though the company beat on both the top and bottom lines. At the heart of the company's issues is KFC, and tainted chicken sold though their Chinese outlets. The government is continuing its probe of the company which guided forward flat earnings due to the issues arising from the problematic cluckers. KFC is highly profitable in China. More than 40% of YUM's profits come from China.

Dow 13,979.30, +99.22(0.71%)
NASDAQ 3,171.58, +40.41(1.29%)
S&P 500 1,511.29, +15.58(1.04%)
NYSE Composite 8,920.13, +67.31(0.76%)
NASDAQ Volume 2,150,602,500
NYSE Volume 3,859,714,750
Combined NYSE & NASDAQ Advance - Decline: 4674-1828
Combined NYSE & NASDAQ New highs - New lows: 386-22
WTI crude oil: 96.64, +0.47
Gold: 1,673.50, -2.90
Silver: 31.88, +0.159

Friday, February 1, 2013

Dow Clears 14,000; Money is Cheap, Markets on Fire

In the immortal words of The Great One, Jackie Gleason, "...and away we go!"

Stocks leapt out of the gate on a modest January non-farm payroll report, which showed the US economy created 167,000 new jobs in the month, but it was the revisions which really inspired a great deal of confidence going forward and propelled the Dow Jones Industrial Average above 14,000 for the first time since October of 2007.

While the headline number was nothing special, but hardly a disappointment, the revision to November - from from 161,000 to 247,000, and December - from 155,000 to 196,000 - were massive, the November revision of 86,000 alone worth roughly a half-month's worth of payroll gush.

The Dow flirted with the 14,000 mark repeatedly throughout the session, but finally pushed higher in the final thirty minutes of trading, leaving the benchmark average less than 150 points from its all-time high.

Other major indices responded in like manner, most up roughly in the range of one percent on the day.

Skeptics abound, many calling for a correction soon, others deriding the rally as nothing more than the natural outcome of relentless stimulation via zero interest rates and massive bond buying by the Federal Reserve. Still others point to the sluggish real economy, barely doddering along at two percent per annum.

Like it or not, the stock market is not the general economy, which, incidentally, is not faring all that badly. Bankruptcies are not at alarming levels, small business creation is beginning to find legs and consumer spending (much of it on credit and through government transfers) has been remarkably solid.

Though headwinds abound, Wall Street continues to sail forward. January was absolutely boffo - the best since 1997 - and February got off with a bang.

One final note heading into Super Bowl weekend: Fearless Rick says lay the points and go with the 49ers, a win will produce great delight to younger brothers worldwide.

Dow 14,009.79, +149.21(1.08%)
NASDAQ 3,179.10, +36.97(1.18%)
S&P 500 1,513.17, +15.06(1.01%)
NYSE Composite 8,966.79, +83.00(0.93%)
NASDAQ Volume 1,968,694,250
NYSE Volume 4,053,908,500
Combined NYSE & NASDAQ Advance - Decline: 4846-1644
Combined NYSE & NASDAQ New highs - New lows: 668-33 (remarkable!)
WTI crude oil: 97.77, +0.28
Gold: 1,670.60, +8.60
Silver: 31.96, +0.607