Thursday, January 31, 2013

Red Alert: Markets Leak Lower Second Straight Session

The 0.1% decline in fourth quarter 2012 GDP appears to have been taken a bit more seriously than first expected, as stocks fell for the second consecutive session on Thursday. Adding to the dour sentiment on the US economy, initial unemployment claims spiked to 368,000 after last week's multi-year low of 330,000 was seen as initially buoyant but now looks to be more of an aberration than a harbinger of things to come.

Stocks were higher in the morning, but drifted through the day, eventually ending lower despite a furious, failed attempt to paint the tape in the final ten minutes of trading. Of the major indices, only the NASDAQ was close to the break even mark, closing down fractionally.

Chicago PMI for January was a major surprise, coming in at 55.6 on expectations of 50.0%, but even this was not enough to bolster the markets.

The real story came in terms of personal income, which sported a gain of 2.6% in December, a boon for the average consumer, a bane for business, but overall, likely a wash, as the reading was prior to government's decision to roll back the temporary cut in Social Security deductions. Wage earners are seeing less in their paychecks while oil, fuel and food are beginning to show signs of ramping up in price, a formula not apparently anticipated by by the Fed/government/business brian trust which wants to control everything from guns, to stock prices to health insurance premiums.

There's an eventuality about all of this control-orientation that reeks of collapse, anarchy and non-compliance from the general populace. If not for food stamps, rent subsidies and other socialist mechanisms polluting the formerly-free markets, the economy would have been dead and buried long ago.

As for the skimmers on Wall Street, their attempts to manage the markets lower amid weakening expectations are, for now, succeeding, though on this final day of trading in January - one of the best months ever for stocks - there was little in the way of window dressing, the usual ritual of fund managers seeking to impress clients.

With non-farm payroll data due out prior to Friday's opening bell, everything is on hold, though sentiment seems to be turning a bit more negative than usual. Estimates are for a net increase of 200,000 jobs created in December, after ADP reported a gain of 192,000 on Wednesday, counting only the private sector.

Washington's been eerily silent of late, supposedly getting down to work on immigration and possibly other pressing issues, but debate will soon liven over a budget, something congress and the president has failed to address for four years.

A big discrepancy in the Advance-Decline line - 3546-2897 - the opposite of what one would expected on a negative trading day, indicates that investors were busily unloading losers and scrambling for safety. Consumer stocks, in addition to energy, healthcare and transportation were the largest sector losers, with utilities and services the only sectors slightly positive.

Wall Street's tea leaves will tell more tomorrow, and if hiring was less than expected in December, downward pressure will remain in charge and perhaps be amplified.

Dow 13,860.58, -49.84 (0.36%)
NASDAQ 3,142.13, -0.18 (0.01%)
S&P 500 1,498.11, -3.85 (0.26%)
NYSE Composite 8,892.59, -11.73 (0.13%)
NASDAQ Volume 2,134,474,750
NYSE Volume 4,027,212,000
Combined NYSE & NASDAQ Advance - Decline: 3546-2897
Combined NYSE & NASDAQ New highs - New lows: 316-39
WTI crude oil: 97.10, -0.84
Gold: 1,663.80, -16.10
Silver: 31.42, -0.60

UPDATE: Stocks Near Record Highs as GDP Goes Negative

Editor's Note: We're back up and running with a new computer, after ten days of muddling through with three old Macs.

Wednesday was a pivotal day for US stocks as the government reluctantly reported that GDP shrank in the fourth quarter (remember, hurricane Sandy will be blamed for disappointing holiday retail sales) as defense spending fell by the largest amount in 40 years and inventory growth lagged.

The talking heads across the CNBC and Bloomberg networks blamed the "unexpected" decline of 0.1% mostly on the defense spending, a result of congress' inaction on the budget process and potential for sequester cuts to kick in shortly.

Federal Reserve officials, completing a two-day meeting, noted the economy had "paused" due to weather-related disruptions and other "transitory factors." Nothing like a Fed Open Market Committee that continues to furiously pump dollars into the coffers of the banks and keep interest rates artificially low calling climate change "disruptions" and employing the "transitory" verbiage to mask an incredibly weak nominal economy.

What is not so well hidden in the report is the lack of replenishment of inventories. Through the holiday season, retailers were adamant about reducing overhead, slashing prices and keeping costs to bare-bones levels, opting to wait until later to order new goods. The lack of confidence going forward exacerbates the slow "recovery" further, putting pressure on manufacturers (those few remaining on US shores) to cut prices and make concessions on delivery and payment dates and rates.

The setup is deflationary at worst, erratic at best, but continues to point up issues developing from the federal government's plan to kick the fiscal can down the road a bit further instead of tackling the nation's debt and deficit problems head-on.

As for stocks, they did an about-face after the Fed's afternoon announcement that they would change absolutely nothing, reiterating their intent to purchase $85 billion a month in MBS and Treasury issuance, the inflationary frontage against the winds of stagnation. The Fed also will keep rates artificially low, boosting home sales, but doing little for bank profits. Their attack on the monetary system continues to hamper business investment while inflating real estate through low interest rates. With no exit strategy in place, the only place the Federal Reserve and the government are kicking that can of deflation is directly into a brick wall of deflation and recession. The negative GDP print for the fourth quarter of 2012 is exactly what their policies will produce down the road, though the decline will be vastly greater.

It's important to note that with one quarter of negative GDP already on the books (though revisions will likely change that to a positive integer), another consecutive quarter in the red is the textbook definition of a recession. Regardless of whether the downturn is isolated in one or two areas, the overall picture remains clouded, manipulated and quietly desperate.

There's no good way out of a financial crisis, such as that which occurred in 2008, but the Keynesians in Washington have kept the plates spinning, frantically turning the sticks of quantitative easing and heavy-handed deficit spending. These policies have an end at some point, the question being whether the end will come by their own hands or be forced by the merciless invisible one of Mr. Market.

Optimists will point out - correctly so - that even though the economy is staggering along, it is still vibrant and productive. However, to think that corporate profits are a one-way street to the heavens is a folly on par with thinking the sub-prime housing bubble would never burst.

There's going to be a short-term pullback in both housing and stocks, both having been bid up too high, too fast, on artificial stimulus, a condition approaching that of 2005-07. While the near term cannot be characterized as horrifying, it is most certainly unstable and unsure, and profits will be taken at nose-bleed levels. The chances of a short duration correction are high, those of a cyclical turn to a bear market less likely, though the current bull is now entering its 48th month, worth noting that the turn in 2007, which led directly to a crash in the fall of 2008, was on the heels of a 53-week-long bull run.

Out in the fantasy land known as economic and stock market predictions, the sounds are of quiet groaning accompanied by squeamish forecasts of 2% growth in GDP for 2013 and an S&P ramping toward 1550. While the general public and regional economies twist in the wind under the thumb of higher taxes and tighter regulations, making business development a non-starter, Wall Street will continue to binge on the Fed's free money, the punch bowl that Chairman Bernanke will not take away, and the government debt will continue to be monetized by that same Fed.

Both of these conditions cannot continue indefinitely, but those in control continue to deny the possibility that anyone will feel any economic pain, no matter how slight.

Thus, it would not be at all surprising to see stocks continue to rise in the face of stagnant or deteriorating conditions in the real economy. Either the stock market wakes up to reality or the current bull trend will wind up being the longest in recorded history, all built on an inflationary bubble of the Fed's creation.

It is false to believe that these conditions can continue indefinitely. There is a price to be paid for every manipulation and falsehood presented to the markets and the fallacy of current policies suggests that the price will be enormous.

Wednesday, January 30, 2013

Money Daily Recovers from Computer Crash, Back to Normal on Thursday

Editor's Note: Money Daily is still recovering from its computer issue, but the new machine is in place and a complete report on what turned out to be an important day in the public markets will be posted tomorrow (Thursday) morning. We regret any inconvenience.

Dow 13,910.42, -44.00 (0.32%)
NASDAQ 3,142.31, -11.35 (0.36%)
S&P 500 1,501.96, -5.88 (0.39%)
NYSE Composite 8,904.32, -31.32 (0.35%)
NASDAQ Volume 2,031,129,750
NYSE Volume 4,042,243,000
Combined NYSE & NASDAQ Advance - Decline: 2182-4279
Combined NYSE & NASDAQ New highs - New lows: 494-27
WTI crude oil: 97.94, +0.37
Gold: 1,679.90, +19.10
Silver: 32.18, +0.993

Tuesday, January 29, 2013

Stocks Nearing All-Time Highs: Time to Jump In?

Yesterday, we posed the question whether this dull market could actually be a good thing, and answered with a qualified maybe.

It's maybe on a number of levels, ranging from time horizons to what kind of investor one is to what levels of risk one would be willing to accept to the high-end macro-view in a world with low bond yields, scary geopolitical events and the usual economic crises popping up every few years.

Today's action was anything but dull, especially for the bulls, who are enjoying one of the greatest months of January in market history.

Stocks have been up roughly 75% of the time, and, with only two trading days left, the smiles are wide from Wall Street nearly to Main Street.

The Dow is rapidly approaching 14,000, closing in on all-time highs, so just about anyone - from the casual investor in mutual funds to the heaviest of heavy hitters in the hedge fund world - who has taken the wild ride from the depths of 2008-09 to the present is flush with profits.

Those who have derided the sub-prime crisis and all subsequent crises as near end-of-the-world experiences (a view widely held on this blog), have been left with little to show other than a pocketful of gold or silver, maybe some real estate and other hard goods.

Not that there's nothing wrong with hard assets, but then stock are putting in 16% gains, like last year, one has to wonder just how long the Fed and the government can keep kicking the can down the road before everything blows up.

The best answer is that they can kick it as far as public perception will allow it. Owing a great deal to normalcy bias - in which one is comfortable with the status quo - the politicians and bankers have a huge advantage. The general public largely wants things to remain somewhat the same and they have and will put up with overly-generous swaths of greed, corruption and avarice, so the rich get richer while the politicians pay no price for their follies.

The point is that over the past four years, stocks have done quite well, and, if you've missed the move, well, hope is that you've done well elsewhere.

As long as the Fed is fixing policy at ridiculous levels, it might be prudent to wade into the waters of Wall Street, buy selectively, and hang on for the ride.

This is, however, the top of the run, though there's no guarantee that it couldn't run even higher, and, in fact, it probably will. That thinking runs contrary to the first tenet of wise investing: buy low, sell high.

The market is highly manipulated and leveraged, the politicians are tools of the bankers, but, they like stocks the most, so, it's a difficult call if going against the tide.

Bottom line is to stick with whatever strategy is working. If you're into gold or land or art or private placements, and it's working, stay there. But, if you have some play money, the returns on stocks over just about any six-month to one-year period in the past four have be easy money.

Dow 13,954.42 Up 72.49 (0.52%)
NASDAQ 3,153.66 Down 0.64 (0.02%)
S&P 500 1,507.84 Up 7.66 (0.51%)
NYSE Composite 8,935.64 Up 55.62 (0.63%)
NASDAQ Volume 2,052,649,125
NYSE Volume 4,198,815,500
Combined NYSE & NASDAQ Advance - Decline: 3759-2669
Combined NYSE & NASDAQ New highs - New lows: 459-17
WTI crude oil: 97.57, +1.13
Gold: 1,660.80, +7.90
Silver: 31.18, +0.404

Monday, January 28, 2013

Is This Dull Market Healthy?

Probably not, but maybe.

Money Daily is still experiencing computer issues, but a new computer is due to arrive by January 31.

Our apologies.

Dow 13,881.93, -14.05 (0.10%)
NASDAQ 3,154.30, +4.59(0.15%)
S&P 500 1,500.18, -2.78 (0.18%)
NYSE Composite 8,880.01, -24.51 (0.28%)
NASDAQ Volume 1,868,661,625
NYSE Volume 3,562,544,250
Combined NYSE & NASDAQ Advance - Decline: 3084-3392
Combined NYSE & NASDAQ New highs - New lows: 535-28
WTI crude oil: 96.44, +0.56
Gold: 1,652.90, -3.70
Silver: 30.78, -0.426

Friday, January 25, 2013

Stocks at Multi-Year Highs: Tide Detergent as Currency

The S&P closed today at it's highest level since the fall of 2007, a more than five-year-high, breaching the psychological 1500 level at the close of trading. That left the S&P with an eight-day winning streak, the longest since 2004, prompting claims by pundits and analysts that the market was just beginning a new supercycle bull market.

All snickering aside, a massive bull run on top of what has been one of the longest straight-up bull markets without a significant, sustained correction (46 months and counting), is a call that only the masters of the money universe on Wall Street could make with a straight face.

Whatever side of the trade you're on - and if you're short, you're dead - there's little doubt that four years of ZIRP and constant money printing by the Federal Reserve has finally yielded the desired results" a runaway risk asset market in stocks forcing forgetfulness about risk and the all-time high in consumer credit. The new bubble has been blown and American consumers are seemingly content to blow it until it bursts.

Coupled with the nascent recovery in housing, stocks as an asset class have proven the darlings of hedge funds, pension funds and evryone except the individual investor, whose memory still appears to be focused on the crash of 2008 and continuing uncertainty in the general economy.

Like it or not, however, Wall Street is enjoying one of the best runs of increases ever - not just this January, but throughout the four-plus years since the painful crash.

It's enough to prompt the fearful to get back in the game, though, with indices approaching all-time highs, it just doesn't seem a prudent entry point.

And, just in case you're not up on ghetto culture, laundry detergent - specifically Tide, made by Proctor & Gamble - has become the new currency of choice, a 150-ounce bottle redeemable on the street for $5 cash or $10 worth of weed or crack cocaine.

In the right circles, America's most popular detergent goes by the moniker, "liquid gold," and a crime spree of national magnitude has retailers locking down bottles of the stuff and putting additional security guards on patrol in the aisles.

Dow 13,895.98, +70.65(0.51%)
NASDAQ 3,149.71, +19.33(0.62%)
S&P 500 1,502.96, +8.14(0.54%)
NYSE Composite 8,904.53, +47.95(0.54%)
NASDAQ Volume 1,932,190,500
NYSE Volume 3,653,707,000
Combined NYSE & NASDAQ Advance - Decline: 3788-2649
Combined NYSE & NASDAQ New highs - New lows: 540-21
WTI crude oil: 95.88, -0.07
Gold: 1,656.60, -13.30
Silver: 31.21, -0.516

Thursday, January 24, 2013

Dow Pushes Higher Again; S&P on 7-Day Win Streak

Dow up again, sixth day in a row. S&P eked out the narrowest of possible gains to extend its winning streak to seven straight, the most since 2006. NASDAQ down due to Apple being hammered.

That's it. Play nice.

Dow 13,825.33, +46.00 (0.33%)
NASDAQ 3,130.38, -23.29 (0.74%)
S&P 500 1,494.82, +0.01 (0.00%)
NYSE Composite 8,856.59, +27.93 (0.32%)
NASDAQ Volume 2,049,702,125
NYSE Volume 3,998,358,000
Combined NYSE & NASDAQ Advance - Decline: 3592-2854
Combined NYSE & NASDAQ New highs - New lows: 667-18
WTI crude oil: 95.95, +0.72
Gold: 1,669.90, -16.80
Silver: 31.72, -0.717

Wednesday, January 23, 2013

Dow Continues to Power Higher; Apple Cored After Hours

Editor's Note: Apologies for not posting yesterday. We had a major crash of our main computer on Sunday and have been working off a partially-impaired computer since, making life difficult and blogging an excursion into 1990s computing. A bew computer (due to arrive by Monday) should get everything back to normal within a few days.

Stocks keep climbing on hopes that the congress and the president can resolve their debt ceiling differences by passing a temporary extension (read: kicking can a bit down the road) and promising to get serious long before their May deadline (we will believe that when we see it).

The House passed the bill paving the way for an extension of the debt limit until May 19, when it will be reset to reflect additional borrowing through the interim period, voting overwhelmingly in favor across party lines, 285-144.

On Tuesday, existing haome sales came in below forecast, at 4.94M, on expectations of 5.10M (annualized). Not to worry, stocks put in another day of gains.

The Dow was the big winner today, thanks almost entirely to IBM, even though Big Blue has made the bulk of its profits over the past two years by buying back shares, thus reducing the number of shares available and making the EPS number more palatable.

Only 12 stocks on the Dow were up, compared to 17 closing in the red. Coca-Cola (KO) finished unchanged.

McDonald's reports that profits in the US were highly correlated to sales off its dollar menu, implying that either the American pallet enjoys the cheaper menu items or the American wallet is not very well-filled these days.

Apparently, not everyone is convinced that the only thing that matters is what happens in Washington. The NYSE Composite closed lower on the session.

So far in 2013, Dow Jones Industrials have finished higher on 11 of 16 trading days, including the last four straight. The average is up a whopping 675 points, roughly a five percent gain, which, in more normal times, might be good for a full year.

Caution is advised, though with the Fed pumping liquidity with every last ounce of reserve (no pun intended), the chances are that any pullback will be temporary and short-lived.

After hours, shares of Apple (AAPL) were slashed, as the company reported flat earnings per share on increased revenue (18%) year-over-year. The stock was down nearly five percent, falling below the 500 level once again.

Dow 13,779.17, +66.96(0.49%)
NASDAQ 3,153.67, +10.49(0.33%)
S&P 500 1,494.78, -2.22(0.15%)
NYSE Composite 8,828.35, -4.40 (0.05%)
NASDAQ Volume 1,687,925,130
NYSE Volume 3,764,679,750
Combined NYSE & NASDAQ Advance - Decline: 2909-3504
Combined NYSE & NASDAQ New highs - New lows: 510-10
WTI crude oil: 95.23, -1.45
Gold: 1,686.70, -6.50
Silver: 32.44, +0.262

Friday, January 18, 2013

Stocks Ramp Higher as Fed Keeps Pumping Full On

What we have here is a self-reinforcing mechanism.

As long as the Fed keeps buying treasuries and MBS, don't expect stocks to do anything but continue going straight up. Those who have 401Ks, mutual funds, individual stocks, ETFs, etc., can rest easy. The Fed has your back.

For everyone else, tough cookies (and higher prices for them). Simply amazing.

Monday is Martin Luther King Day. Markets are closed.

Dow 13,649.70, +53.68 (0.39%)
NASDAQ 3,134.71, -1.29 (0.04%)
S&P 500 1,485.98, +5.04 (0.34%)
NYSE Composite 8,792.58, +26.03 (0.30%)
NASDAQ Volume 1,861,060,250
NYSE Volume 4,018,652,250
Combined NYSE & NASDAQ Advance - Decline: 3764-2612
Combined NYSE & NASDAQ New highs - New lows: 453-13
WTI crude oil: 95.56, +0.07
Gold: 1,687.00, -3.80
Silver: 31.93, +0.122

Thursday, January 17, 2013

Dow Hits Five-Year High; Why Isn't Anyone Celebrating?

Money has to go somewhere, and today it went straight into equities, pushing the Dow to a five-year high.

Whether or not this euphoric advance was based on anything more than the Fed's continuing POMO operations remains to be seen.

Housing starts and building permits for December were figuratively "through the roof," though on Main Street America, people are wondering just who it is that is buying all these new homes.

In the real economy - the one that functions on dollars and cents, not swaps, repos, debt financing and accounting fantasies - it still feels like a recession. Stores are largely empty, incomes are still declining overall and the bulk of the US consumer class has just been hit with a 2% tax increase, thanks to the assembled dunces in congress and at the White House.

Unemployment claims today came in at a multi-month low of 335,000, though continuing claims increased from 3127K to 3214K in one week, so, something at the BLS isn't quite adding up, though that's largely been the case since 2006 or before.

The Philadelphia Fed index of economic activity printed a -5.8 for the current month, following a positive 4.6 in December. This reading comes on the heels of Empire Manufacturing (NY state) showing a -7.8 after a -7.3.

If none of this makes any sense to you, consider that Boeing (BA), after having all of their 787 "Dreamliners" (make that "Nightmare Flight") grounded by the FAA (note: this is after years and years of delays and missed deadlines), shares of the nation's top plane builder finished up 92 cents (1.24%).

Beyond that, ZeroHedge notes that if you strip out the gains made by Bank of America - the top performing Dow stock of 2012 - for releasing loan loss reserves (an accounting trick), the bank actually lost something on the order of $2.5 billion last year.

Regular readers (or at least those who check the stats at the bottom of each post) will take note that new highs - new lows has today reached the pinnacle of absurdity.

Even in the very, very, very best of times there were always more than eight stocks hitting new 52-week lows, it's only natural in a normal, competitive environment. The number of new lows since the first of the year has been hovering in the teems for the most part. The money gushing from the Federal Reserve to the primary dealers to the stock market is causing the most unbalanced market ever witnessed.

And the debt ceiling increase that needs to be approved, but just seems to sit there, like a 300000000-ton weight over the US economy, ah, don't worry about that. Our "leaders" will find a way to ix that, certainly, positively, without a doubt.

We live in Wonderland. Sadly, only those who pad their wallets on Wall Street get to be either the Cheshire Cat, Mad Hatter or Alice.

Dow 13,596.02, +84.79 (0.63%)
NASDAQ 3,136.00, +18.46 (0.59%)
S&P 500 1,480.98, +8.31 (0.56%)
NYSE Composite 8,766.54, +55.98 (0.64%)
NASDAQ Volume 1,734,349,250
NYSE Volume 3,966,953,250
Combined NYSE & NASDAQ Advance - Decline: 4628-1787
Combined NYSE & NASDAQ New highs - New lows: 525-8
WTI crude oil: 95.49, +1.25
Gold: 1,690.80, +7.60
Silver: 31.81, +0.268

Wednesday, January 16, 2013

Markets Continue Dull Streak; Germany Slow Go on Gold Move

How dull is this market?

The Dow Jones Industrials hit their lows of the day just minutes into trading, losing 66 points, then rallied off that until stabilizing - though still in the red - around 11:00 am ET.

From that point until the close, the index traded in a range of just 25 points.

This is what happens when headline-scanning algos do 80% of the trading. When there's no news, nothing happens. So, if you're trading on fundamentals - things like price-earnings ratios, comparative advantage, free cash flow, etc. - you can just sit and wait until your particular stock of choice latches itself to a broad rally or makes some headline-grabbing news.

And, if that's what's become of our "free" markets, good luck, because the computers will beat you every time. They can find and scan a headline, react and trade in a matter of seconds, or, in much less the time an average web page takes to load.

Now, is there any reason at all for individual investors to trade stocks? One would believe no.

About all that was not moving the market today were a series of equally dull economic reports, like the CPI, at 0.0%. There's no inflation (really?) and no deflation, which, unless one knew better, would be defined as stagflation (or maybe lackflation).

The NAHB Housing Market Index remained steady at 47, whatever that means; industrial production bumped up 0.3%, which was down from last month's reading of an increase of 1.0%, and capacity utilization improved from 78.7% to 78.8%.

Outside of Goldman Sachs' (GS) huge earnings and revenue beat and JP Morgan's (JPM) narrow beat ex-one-time-charges (but of course), what may have put a pall over the session was the World Bank lowering its global growth (that's a joke, son) projection from 3.0% to 2.4%.

Seriously, the sloped-browed, slack-jawed dunces at the World Bank don't have a crystal ball, but, for some unholy reason, people believe they know what they're doing. Some of us are dubious. But, then again, some of us don't trust anything that comes out of the mouth of politicians or bankers or even stock analysts.

Ho-hum. It seems even the bright-minded Germans, who shook things up a little yesterday by wanting some of their gold back, really don't want it all that badly, after all. GATA reports that Germany will take all of seven years to repatriate some 300 tons of its gold from the Federal Reserve in New York. It will likely take a shorter period of time to remove all of its gold - 374 tons - from the vaults in Paris, but it plans on keeping whatever is in the London vaults there indefinitely, amounting of 13% of all its gold.

The plan is to hold 50% of its gold at home, the rest in London and New York. La-de-dah.

Dow 13,511.08, -23.81 (0.18%)
NASDAQ 3,117.54, +6.76 (0.22%)
S&P 500 1,472.57, +0.23 (0.02%)
NYSE Composite 8,710.22, -22.88 (0.26%)
NASDAQ Volume 1,648,059,375
NYSE Volume 3,198,232,750
Combined NYSE & NASDAQ Advance - Decline: 2775-3605
Combined NYSE & NASDAQ New highs - New lows: 263-10
WTI crude oil: 94.24, +0.96
Gold: 1,683.20, -0.70
Silver: 31.54, +0.013

Tuesday, January 15, 2013

Germany Wants It's Gold Back; NASDAQ Negative Since Jan. 2; America: A Nation of Sleeple

The biggest financial news of the day was not carried by the Wall Street Journal, CNBC or Bloomberg (over the air, at least), but by German newspaper Handelsblatt (in German) and initially picked up by GATA and, naturally, ZeroHedge.

After months of pressuring from the public, the report tells of how the German Bundesbank is planning to repatriate much of its gold reserves, of which only 31% is held in Germany.

The New York Federal Reserve holds 45% of Germany’s gold reserves. The Bank of England and the Bank of France hold 13% and 11% each, respectively.

These arrangements date back to the 1950s, when Germany was split into East and West countries, as a precaution, but, since Germany has been whole for some time now, the government believes it is prudent to bring most of the reserves home.

Though details have yet to emerge, the plan calls for repatriation of all gold from France, since there would be no forex advantage, both countries under the regime of the same currency, the Euro. Estimates are that the Germans will kindly ask the Federal Reserve and the Bank of England for most of their reserves, especially after President Obama intoned yesterday that America is not a "deadbeat nation" (we are).

Nitwit traders on Wall Street scarcely understand the importance of this gesture by the Germans. They have (or think they have) the second largest hoard of gold in the world; only the USA has more in actual, physical reserves.

Germany may also be concerned that all of their gold is not where it is supposed to be or has claims against it, as central banks have played fast and loose with gold over the years, often leasing it out on speculation. There's also a fear that some of the gold bars may actually be counterfeit. A number of tungsten-filled bars have been showing up in odd places of late.

One cannot reasonably blame the Germans for wanting a full, accurate accounting of their owned wealth and to have it in their possession. This is a huge development, signaling that Germany, the strongest country in the EU, may be planning to disengage from the Euro and reinstitute and re-establish the Deutschemark as their official currency.

In such a case, nations like Spain, Greece, Italy, Portugal and pretty much the entire Eurozone nations would be toast and the game of international currency debasement would enter a new, dizzying phase with unknown consequences.

Stay tuned on this one.

As reported here yesterday, the NASDAQ index was holding onto a five-point gain since the huge 92-point ramp-up January 2nd, and today finished below that threshold. As of the close today, the NASDAQ is down one point and change. So, if you missed the move on the NAZ on January 2nd, you're down for the year so far. Too bad.

Amazing. With the Fed pumping in $85 billion a month with daily POMOs and all the MBS available, they still can't put together a decent gain? Curious. All this money seems to be going into a black hole.

Reporter and editor of this blog, Fearless Rick (yeah, that guy over there on the duvet having a beer) has coined a new term which he believes covers about 75% for the American population: SLEEPLE, defined as people who look and act like they're awake, but are actually sleeping.

Credit due. Per aspera ad astra. Caveat Emptor. ©

BYW: This looks like a good spot to go short just about anything, but especially tech and, among that group, just about anything related to social media.

Dow 13,534.89, +27.57(0.20%)
NASDAQ 3,110.78, -6.72 (0.22%)
S&P 500 1,472.34, +1.66(0.11%)
NYSE Composite 8,733.10, +15.65(0.18%)
NASDAQ Volume 1,852,201,125
NYSE Volume 3,331,416,250
Combined NYSE & NASDAQ Advance - Decline: 3578-2829
Combined NYSE & NASDAQ New highs - New lows: 300-18
WTI crude oil: 93.28, -0.86
Gold: 1,683.90, +14.50
Silver: 31.53, +0.419

Monday, January 14, 2013

Split Indices, Tight Ranges, Soft January

"As January goes, so goes the year."

This tired line of non-logical thinking gets bantered about every year around this time, but is especially in vogue this year after the huge ramp-up in equities on January 2nd, when fresh bank capital (courtesy of the Fed) flowed into the markets in an effort to lure in retail investors.

It's not working.

Since the biggest gain on the Dow Industrials to start a new year (January 2nd, 2013... this year) stocks have gone, well, not very far. The total gain on the Dow over the past eight sessions, including today, is less than 100 points. Big Hooray!

On the S&P 500, the gain has been a whopping eight points. The NASDAQ? 5.24 points since the massive, 92-point gain of January 2nd.

So, the point is that while CNBC and Bloomberg have been crowing about the huge "inflows" to equity funds, the truth is that there has been a net outflow from equity funds )as it has been for the past two years), and the money-creation-machine known as the Fed and its primary dealers have rigged the market higher (as usual).

Today's bid-less action, including the absurd 60-point top-to-bottom range on the Dow, was driven primarily by a rumor that two private equity firms were interested in doing an LBO on Dell. The story, broken by Bloomberg and without any supporting evidence or data, shot Dell shares through the roof and triggered a circuit-breaking halting trading.

The story was likely pure fabrication, because the markets are so dead right now the algos needed a boost to get the indices off UNCH and got it from the Dell "rumor."

Nothing is moving. Volume on the NASDAQ - despite the Dell joke and Apple (AAPL) being sold down the river - was less than 3 billion shares, an oddity even in this low-volume regime. Nobody is trading - not retail investors, at least - because the fraud and rigging has finally reached a point at which the markets cannot be trusted at all. They are controlled by the same people and companies that brought us the sub-prime mess, resultant crash and the current, fudged "recovery."

Perception being more powerful than reality, there's a very good chance that the major indices could stagnate for the rest of the month and the same talking heads on the financial networks will tell us it's going to be a great year because January was positive.

It's. Not. Working.

Dow 13,507.32, +18.89 (0.14%)
NASDAQ 3,117.50, -8.13 (0.26%)
S&P 500 1,470.68, -1.37 (0.09%)
NYSE Composite 8,717.45, +5.05 (0.06%)
NASDAQ Volume 1,879,408,375
NYSE Volume 2,956,360,000
Combined NYSE & NASDAQ Advance - Decline: 3118-3099
Combined NYSE & NASDAQ New highs - New lows: 370-10 (ridiculous)
WTI crude oil: 94.14, +0.58
Gold: 1,669.40, +8.80
Silver: 31.11, +0.702

Friday, January 11, 2013

Markets Flat


Low Volume.

Move on.

Dow 13,488.43, +17.21(0.13%)
NASDAQ 3,125.63, +3.87(0.12%)
S&P 500 1,472.05, -0.07 (0.00%)
NYSE Composite 8,712.37, +1.39 (0.02%)
NASDAQ Volume 1,746,010,000
NYSE Volume 3,550,726,500
Combined NYSE & NASDAQ Advance - Decline: 3221-3162
Combined NYSE & NASDAQ New highs - New lows: 382-15
WTI crude oil: 93.56, -0.26
Gold: 1,660.60, -17.40
Silver: 30.41, -0.51

Thursday, January 10, 2013

According to Wall Street, Humans are Fodder

As I was watching CNBC just minutes ago, as reporter Mary Thompson ticked off details of American Express' (AXP) 4th quarter earnings report, a chart beside her showed the sock gaining in after hour trading just as she announced that the firm would initiate a restructuring involving 5400 job cuts.

The image of the stock going up while people were about to lose their jobs brought home (once again, because this is not the first time) the tragic nature of Wall Street and their glorified love of profits at any cost, even human cost.

Living through the past four years of abject financial repression, first, by banks, then by government, now, by multi-national corporations, the level of moral bankruptcy by the very people who should be exemplars of good behavior is appalling and completely unacceptable.

When people lose jobs and stocks increase in value, it displays not only a shallow disregard for humanity, but almost a depraved indifference to human suffering. Handing out pink slips at corporations has become a routine carried out by more underlings, those "investor types" never having to face a wife or husband who has lost a job when prospects for finding another are so slim.

Of course, from a purely financial perspective, cutting labor costs is wise, but, in the end, elimination of productive labor is wanton, greedy, selfish and eventually self-defeating.

To the corporations and to government, people (mostly working people) are expendable, fodder, chattel, just random numbers to add or eliminate from spreadsheets, profit and loss statements and earnings reports. Rewarding corporations for shedding employees is so distasteful on the surface that one wonders just what parallel universe it is in which those of the rentier class reside.

For every dollar they make in profits, another human being is degraded, shunned, discarded, and, what the investors fail to realize is that without the fruits of human labor - and their spending - the corporations would have no customers. None. Zero. They would be bankrupt and cease to exist and this is exactly the path we have embarked upon though the insanity of centrally-planned money and interest rate policy, banking without rules, corporations with enormous advantages over all competitors and a world reduced to ones and zeroes in a computational fantasy land.

And what a fantasy world it is. Money is created out of thin air, shoveled directly to 10 or 12 money center banks and put to work hiking up prices of stocks. Yes, Virginia, the rich do get richer and the poor poorer, but it is the middle class, like those 5400 American Express employees who are about to lose their jobs who suffer the worst.

Loss of income, self-esteem and personal worth are immeasurable and difficult to replace. The unemployment statistics cited by the government, and ignored by Wall Street, paint a very bleak picture of America in the 21st century. While we are the most technologically-advanced nation in the history of the world, nearly half the population is either collecting some form of government assistance or is about to.

Our business and political leaders have led us down a primrose path to destruction, one upon which they profit every step of the way, but, if there is any justice in the world left, it is the hope that when all the employees are laid off, when all the factories and store fronts and job sites are empty, idle and wasted, that the market will crash, taking down the entire apparatus of Wall Street, the oligarchs and politicians and bankers with it.

Maybe then, finally, people will understand human beings are not fodder, that labor, as defined by none other than Adam Smith, the great economist upon which all of economics is based, is the basis of all wealth, of all money, of all that can be achieved.

Maybe. But it will take a catastrophe - or maybe a hundred thousand catastrophes - for the knowledge to find a home.

Dow 13,471.22, +80.71(0.60%)
NASDAQ 3,121.76, +15.95(0.51%)
S&P 500 1,472.12, +11.10(0.76%)
NYSE Composite 8,713.75, +77.66(0.90%)
NASDAQ Volume 1,753,614,375
NYSE Volume 4,318,613,000
Combined NYSE & NASDAQ Advance - Decline: 4102-2323
Combined NYSE & NASDAQ New highs - New lows: 458-15
WTI crude oil: 94.00, +0.90
Gold: 1,678.00, +22.50
Silver: 30.92, +0.669

Wednesday, January 9, 2013

POMO Is Back; Obama Considering Executive Order on Gun Control

There wasn't much happening on stock markets today other than the constancy of computers trading with other computers, but there was excitement on the political front, including a rabble-rousing utterance (intentional or otherwise) from the foot-in-mouth VP, Joe Biden, who dropped a hint that the president was considering using an executive order to somehow effect more rigid gun control.

This got gun-holders and freedom-lovers of all stripes worked up into a hot lather, as just the mere perception that the second amendment might be somehow circumvented by the totalitarian-in-chief was cause for calls of rebellion, secession and other assorted ranting and raving.

In America, the Founders designed the second amendment, which reads,
A well regulated militia being necessary to the security of a free state, the right of the people to keep and bear arms shall not be infringed.
was designed specifically to keep potential tyrants from having thoughts of subjugating the masses and to protect the nation as a whole. The supposed threat of being shot at from all sides by a well-armed citizenry is the final protection of our liberties, and, since the Constitution has been trampled upon pretty severely over the past 236 years (but mostly in the last 12), people have every right to be alarmed and angry.

The current debate over gun ownership, caused in large part by the mass murder in Sandy Hook, Connecticut, and now widely propagated by the left-leaning media, is just another attempt by a government that has outgrown its usefulness to further infringe upon the rights of the citizenry. The thought that President Obama might go the executive order route is almost ludicrous, considering the potential downside and difficulties (I'm being kind here) in implementing any kind of weapons ban would entail.

It's time the American public knew the truth. The kid at Sandy Hook and the moron who shot up the theater in Colorado were both on psychotropic drugs of some kind - Prozac, Ritalin, or any of a dozen others - that cause a few individuals to do insane things. If there's any sense at all left in Washington (there isn't), there should be a law that anyone who has ever taken any of these medications or been under the care of a psychiatrist (obviously, the author has done neither) should ever be able to own a firearm.

Now, not to sound cynical, but such a ban would never even get a hearing in DC, simply because the drugs in question are manufactured by one of the big pharmaceutical companies, and they pay plenty in graft and hush money (AKA: campaign contributions) that any senator or house member proposing such a deal would be laughed out of town.

Meanwhile, the Federal Reserve is back doing POMO (Permanent Open Market Operations) in earnest, today actually buying up $300 million worth of 30-year bonds that hadn't even been issued!!!! (Note, four exclamation points means this is really exciting.)

The Fed has POMOs set up for every day the markets are open this month except January 30.

While $300 million is a piddling amount, let's not forget that the Fed Chairman, Mr. Bernanke, has explicitly said he would not monetize the debt, which is exactly what he's been doing for the past four years, but this move, grabbing up the auction before it's even available, can only mean one thing: somebody (read: the federal government) needed money in a hurry and couldn't wait until tomorrow.

Yes, our slick Treasury Secretary, Tim Geithner, who has not received nearly the amount of press he deserves, has been employing extraordinary measures to keep the country from defaulting on its obligations since January 1, and maybe he ran into a little snag. In any case, even with the soon-to-be-departed Mr. Geithner pulling all the strings he can, the government will run out of money and options on February 15, if not sooner. So why are people all lathered up about gun control when the entire government is about to implode in about a month?

Yeah, really.

As for the stock markets, the Dow was up 61 points today, after losing 55 yesterday and 50 the day before. Is there a pattern emerging? Yes, and it's called the sideways two-step. Its a delicate dance that encourages partners to go nowhere, slowly.

Dow 13,390.51, +61.66 (0.46%)
NASDAQ 3,105.81, +14.00 (0.45%)
S&P 500 1,461.02, +3.87 (0.27%)
NYSE Composite 8,636.10, +31.71 (0.37%)
NASDAQ Volume 1,731,655,000
NYSE Volume 3,857,859,500
Combined NYSE & NASDAQ Advance - Decline: 3337-2113
Combined NYSE & NASDAQ New highs - New lows: 426-9 (amazing!)
WTI crude oil: 93.10, -0.05
Gold: 1,655.50, -6.70
Silver: 30.25, -0.216

Tuesday, January 8, 2013

Why Stocks Were Down Today and Other Ramblings... and Links

Getting right to the point, stocks slipped a little bit more today, oddly enough, right around another 50 points were knocked off the Dow. why is that odd, you ask?

Well, if you were going to dismantle something and didn't want anyone to take notice, you'd do it a little bit at a time, right? So, after a 50-point drop yesterday, another 55 points today receives little fanfare. Anything over 100 on the Dow, in either direction, gets the attention of Bob Pisani and the other market-watching noobs on CNBC and Bloomberg, and you don't want them going around shouting, "hey, look at this!" but 50 points, not so much.

The point is that stocks went down today (and yesterday) because that's the way the Goldman Sachs and Merrill Lynch's roll. If there were any good reason to bid stocks up, they certainly would have, but, that all got taken care of on January 2nd, to the tune of a 300-point rally. Now it's profit-taking harvest time for the quick-traders out there making all the loot, but, you know, they don't want anyone thinking it's time to head for the hills because there's a flood of bad stuff coming our way.

Uh-uh. Can't have that. The muppets must not be allowed to understand anything that is really happening. Only the global elitists are privy to the inside baseball stuff.

So, what's that bad stuff heading our way? How about a nasty, well-orchestrated fight over the debt ceiling that leads directly to a government shutdown? It has been mentioned only a few dozen times just this week, though every political empty hat says they want to avoid that at all costs. (Rubbish: we all know how loathe the pols in Washington are to actually do any work and how much they relish leisure time.)

So, yes, get ready for that, and that would precipitate some selling of stocks. Once the big guys get their profits, then the little people can take losses, all the while the talking head analysts saying things like, "this is just a little correction," or "stocks will rebound in the second half" (like Notre Dame did last night? Let's hope not).

It's been almost two weeks since the latest market moving event - the fiscal cliff miasma - so, a new crisis can't really be far off. Things should start getting heated up in a few more days or maybe around the end of January, once the new members of congress are all schooled up on their new roles and understand the rules of the game.

Yep, the debt ceiling showdown should prove to be some of the best political theatre of the year, and maybe the most disruptive. The Republicans keep threatening it, and they don't want to look like the boy who cried wolf, so, this time, they'll probably do it, and it will last maybe two or three weeks before a compromise is reached. Naturally, such a compromise will solve nothing except to get most of the furloughed federal employees back on the job, slow down the "recovery" a little and provice cover for Wall Street's anticipated lousy earnings.

So, that's why stocks were down today, but they'll be up sooner or later, and trade sideways a bit before the real deal comes down. Then, they'll drop like rocks from a tower, and it will be YOUR MONEY losing value, not THEIRS.

BTW: Alcoa (AA) kicked off earnings season after the bell, posting in-line earnings per share of six cents, which says plenty about the health of this global giant and the world economy in general. Their outlook is for aluminum demand to increase seven percent this year, due to, get this, increased demand from the aerospace industry (read: defense contractors). Whether or not that hike in demand ever materializes, well, we will just have to stay tuned. In the meantime, Alcoa is still a sub-$10 stock, which it's been for close to a year now. There's a reason for that.

Yesterday, I (that being me, Fearless Rick) opined on these pages that something was broken, though I could not quite put my finger on exactly what "it" was that had gone amiss, ending with the gloomy prospect that maybe everything was broken.

Of course, there are innumerable things broken in America and around the world, but there are many more that work, like the Internet, for instance. You're reading this, after all, on the internet. That works.

What's not working, and hasn't been for a long time is the media, but the internet is beginning to take care of that. Most people under the age of 30 get the majority of their news and opinion-making articles from the internet, not mainstream TV, newspapers or (heaven forbid!) the radio, so there's hope on that front.

So, thinking that I must find out just what it is that's broken, research ensued, which consisted of a couple of adult beverages and some internet surfing.

Well, I was right. The entire global economic system is broken, and has been broken for a long time, but I already knew that. I just didn't know exactly how badly broken it was until I came across this exceptional piece of video (8 parts) by one Ann Barnhardt, and her aptly-titled dissertation, The Economy Is Going To Implode...And You Deserve to now Why.

Ms. Barnhardt breaks the complexities of the modern global economy down to a very understandable, though frighteningly-real level that just about everyone (including politicians and tin-horn local office-holders) can understand. One may or may not agree with her approach or her views, but nobody can argue with the math, which presents an unshakable case for economic calamity. This is must viewing for anyone who wishes to understand why everything seems to be heading downhill in America or to relieve - at least for a short time - that nagging feeling that something is broken. Here's part one of the video series.

Just in case you were busy watching the disgrace of Notre Dame at the hands of Alabama last night, and missed this, here's Alex Jones going ballistic over gun control on the Piers Morgan Show. And, in case you don't know who Alex Jones is, well, you're probably just another sheeple, or maybe a sleeple (that's people who appear awake but are actually sleeping). So, here's a link to Enjoy the video rant.

Dow 13,328.85, -55.44 (0.41%)
NASDAQ 3,091.81, -7.00 (0.23%)
S&P 500 1,457.15, -4.74 (0.32%)
NYSE Composite 8,604.38, -32.53 (0.38%)
NASDAQ Volume 1,743,272,375
NYSE Volume 3,757,457,750
Combined NYSE & NASDAQ Advance - Decline: 3003-3411
Combined NYSE & NASDAQ New highs - New lows: 302-13
WTI crude oil: 93.15, -0.04
Gold: 1,662.20, +15.90
Silver: 30.46, +0.383

Monday, January 7, 2013

Something is Broken

Ever get that nagging feeling that something isn't quite right, you don't know what it is, but you're sure something important is broken, and it's going to cause problems?

That seemed to be the sense of things today. This marking the first day of the first full week of trading, and, after that spectacular, fiscal-cliff-solution-induced-rally last Wednesday, stocks have been just spinning their wheels.

Maybe it's the end of the holidays and getting back to reality, or, for those of us up in the North country, the dreary, dank, dark and depressing days of winter (only 73 mare days until Spring!), but there's a problem out there lurking that's bigger than the upcoming debt ceiling fight, the next unemployment report or whether we dip back into a recession.

It's the kind of feeling that pervaded Germany during the rise of Naziism, in which people didn't trust each other any more, everybody was on guard against some unseen, invisible, but just under the surface threat.

To put one's finger on it exactly would be a stroke of luck - or genius - but let's take a stab at it.

The house of cards the US has built up after the fall of the TBTF banks back in 2008 seems to be crumbling, and, like a house of cards, it starts at the top, where those on the bottom or even in the middle, can't see the collapse coming.

After the nonsensical debate and drawn-out rhetoric over the so-called "fiscal cliff," congress delivered a solution that was only half a solution, that being the taxation part. The hard part, cutting spending, is still ahead, and anybody who knows anything about how Washington has worked for the past thirty years knows that the congress and the president aren't willing or able to cut programs in any meaningful way.

So, the political structure at the top of the pyramidical structure called our society isn't working, and that's going to cause problems down below. The bankers, politicians and corporations currently at the top of the food chain don't seem to have adequate answers, only mildly appeasing artical solutions and glad=handing all around while the suppress and repress the rest of society. Eventually, one little slip up, one mistake, one good blow of wind from out of the blue takes the top cards off the structure and down tumbles everything into a massive, wrecked heap.

How long can the nation survive with clowns twirling dishes on stoks and juggling balls in the air at the top of the structure? So far, about four years, but it hasn't been pretty. There's just this feeling that it's all going to get worse.

Maybe if we turned Dow theory on its head, and noticed that the transportation average had moved to a technical, secular bear market back in July and August of 2011, and hasn't recovered to exceed the previous highs, and the Industrials since then have made a concerted, upside move based on nothing but short-covering rallies, asset inflation thanks to continual pumping by the Federal Reserve, that would give us all a clue to where things are going.

Or, maybe the Federal Reserve, the OCC and Fannie Mae all settling up with the banks on the first Monday of the New Year is a what? Coincidence? And nobody is concerned?

Maybe it's the breakdown of the relationship between the A-D line and the new highs vs. new lows. Maybe it's the flu. Maybe it's gold being constantly hammered down, or silver stuck in perpetuity at $30/ounce. And, maybe those are just symptoms.

Something is broken, for sure. Nobody is sure exactly what it is, but it could be everything.

Dow 13,384.29, -50.92 (0.38%)
NASDAQ 3,098.81, -2.85 (0.09%)
S&P 500 1,461.89, -4.58 (0.31%)
NYSE Composite 8,636.91, -30.77 (0.35%)
NASDAQ Volume 1,702,506,875
NYSE Volume 3,513,878,500
Combined NYSE & NASDAQ Advance - Decline: 2852-3657
Combined NYSE & NASDAQ New highs - New lows: 286-15
WTI crude oil: 93.19, +0.10
Gold: 1,646.30, -2.60
Silver: 30.08, +0.136

Friday, January 4, 2013

Jobs Number OK, Stocks Post Mild Gain

It was a pretty nice week for stocks all in all. Good kick-off to the new year, though there are still issues to be resolved. Once the euphoria over the horrid fiscal cliff deal wears off, it will be business as usual, more pimping and pumping of stocks to the sky.

Non-farm payrolls for December came in at a ho-hum 155,000 and the unemployment rate remained at 7.8%, due to a revision from last month, which was originally reported at 7.7%.

That's all. It's Friday. Go spend.

Dow 13,435.21, +43.85 (0.33%)
NASDAQ 3,101.66, +1.09 (0.04%)
S&P 500 1,466.47, +7.10 (0.49%)
NYSE Composite 8,667.68, +59.89 (0.70%)
NASDAQ Volume 1,743,607,375
NYSE Volume 3,662,983,000
Combined NYSE & NASDAQ Advance - Decline: 4529-1933
Combined NYSE & NASDAQ New highs - New lows: 400-8
WTI crude oil: 93.09, +0.17
Gold: 1,648.90, -25.70
Silver: 29.95, -0.774

Thursday, January 3, 2013

Was That It? New Year's Rally a One-Day Wonder

Actually, the New Year's rally on Wednesday - the first day of trading in 2013 - wasn't even a one-day wonder. One might actually consider it a 30-minute - or even 30-second - wonder, in that most of the advances were right at the open with some follow-on in the first half hour of trading.

Naturally, this is how the market rolls these days. If you're not one of the connected special few that can trade pre-market, in futures or make huge buys via HFT computers, like 99% of individual investors, you're SOL, missing out on most of the biggest moves in the market.

Is there any wonder the individual investor has pulled most, if not all, of their money out of equities? The odds are severely stacked against the little and middle guys, yet another reason to despise the one-percenters who glom up the vast majority of Wall Street profits.

As for today's action, not much was happening. Stocks drifted lower in the morning, recovered to around break even or positive, but then slumped when the Fed minutes from the December FOMC meeting were released.

Horror of horrors, some members of the committee were actually openly suggesting an end to their long-standing asset purchase program "well before the end of" 2013.

It's obvious that the Fed can and will do whatever it feels necessary in order to achieve their goals of making every American a debt slave while keeping the US economy from falling into an abyss. In fact, the abyss might just be on the agenda, the Fed owing allegiance to nobody but themselves and their member banks.

So, when traders got a whiff of the odor of no more free money courtesy Helicopter Ben, some went scurrying for the exits, albeit, a bit prematurely. The Fed isn't about to end ZIRP or stop its insane money printing exercise (currenty at a cool $80 billion a month and counting), but there's also the fear that the political clowns in Washington may not exactly get around to cutting spending for a while, and they also may stage a huge fight over extending the debt limit, a la 2011.

So, life in La-La Land (AKA Wall Street) goes on. Stocks got a big boost by acersion of the fiscal cliff, though the job is only half done. There's a sense that whatever conditions arise to offend the investor class, the Fed and the government will be completely accommodative, so that corporate America and the financial sector participants can continue grinding the middle class into dust.

Today's small setback notwithstanding, there's very little fear to keep stocks contained in January, traditionally one of the best months for gains.

A couple of data releases on employment were mixed, with the ADP private jobs report for December showing a net gain of 215,000 jobs, while unemployment claims spiked higher, to 372.000, after last week's 350,000, which was revised (as it always is) higher, to 362,000. The dual releases sent a mixed message in front of tomorrow's December Non-farm Payroll data, due out at 8:30 am.

Dow 13,391.36, -21.19 (0.16%)
NASDAQ 3,100.57, -11.69 (0.38%)
S&P 500 1,459.37, -3.05 (0.21%)
NYSE Composite 8,597.61, -34.40 (0.40%)
NASDAQ Volume 1,724,966,250
NYSE Volume 4,005,988,250
Combined NYSE & NASDAQ Advance - Decline: 3305-3199
Combined NYSE & NASDAQ New highs - New lows: 427-17
WTI crude oil: 92.92, -0.20
Gold: 1,674.60, -14.20
Silver: 30.72, -0.287

Wednesday, January 2, 2013

Washington Comes Alive Past Last Minute; Fiscal Cliff Averted... for Now; Wall Street Rejoices

Well, Money Daily was right. There was no fiscal cliff deal by midnight, December 31, 2012, but, those wily congress-critters once again outfoxed everyone by playing past the deadline and passing a bill that was, by and large, a deal, though it certainly didn't address any long-term issues, nor did it include any meaningful spending cuts.

Congress and the president - now back in Hawaii, playing golf, presumably - made sure that all the handouts would continue being handed out, extending unemployment benefits and keeping the Bush tax cuts in place for individuals earning less than $400,000 per year ($450,000 for couples), while raising the tax on those making more than that from 35% to 39.6%, which is a pretty big bite.

The "deal" also raised capital gains taxes from 15% to 20%, but only on those earning more than $400,000, a bit of relief for the 99% gang.

Scoring by the Congressional Budget Office and others put the cost of this deal at an increase of some $4 trillion to be added to the national debt over the next ten years. Nice job, boys.

Everybody's taxes will go up, however, because the deal did not extend the 2% tax holiday on Social Security payroll deductions, which was cut from 6.2% to 4.2% last year and will go back up to 6.2% this year. So, if you make $1000 a week, the feds will be taking an extra $20 out of every paycheck.

Foreclosures and short sales will continue to prosper in 2013, as the deal extended the 2007 Mortgage Forgiveness Debt Relief Act, which allows homeowners who experience a debt reduction through mortgage principal forgiveness or a short sale are exempt from being taxed on the forgiven amount.

Yippie! Our "Free houses for everyone!" motto lives on.

Wall Street was enthralled by the deal, sending stocks rocketing to their biggest gains of the year (Money Daily expects this will be the largest one-day gain for stocks in 2013, so bookmark this page now!).

The major indices made back all of the losses they took in the final ten trading days of 2012, and then some in just the first trading day of the new year.

At issue is how long the rally will last, whether this is just a one-day wonder or whether stocks can still remain the darlings of investors with 4th quarter earnings season on the horizon and the new congress (and same old president) having to deal with sequestration, deficit reduction and a debt limit increase within 60 days.

Since, according to Treasury Secretary Tim Geithner, we've already exceeded the debt limit, the feds will be borrowing from government pension funds to fund the government in the interim. A huge fight is ensured in February, as congress, if the latest fiasco offers any clue, won't want to deal with these issues until late in the game.

For now, though, roll with it. The Federal Reserve has the government's back, standing at the ready to print billions more in greenbacks at the hint of any troublesome developments.

Along with equities, expect everything else to keep getting pricier because there's really no easy way out of the monetary fix we're in. Next week, when life returns somewhat to normal, the angst will reemerge.

BTW: Money Daily was actually correct in predicting that everybody's taxes would go up under any kind of deal. They did. Check your paycheck in coming weeks for proof.

Dow 13,412.55, +308.41 (2.35%)
NASDAQ 3,112.26, +92.75 (3.07%)
S&P 500 1,462.42, +36.23 (2.54%)
NYSE Composite 8,631.18, +187.67 (2.22%)
NASDAQ Volume 2,071,100,625
NYSE Volume 4,634,567,000
Combined NYSE & NASDAQ Advance - Decline: 5798-863 (wOW!)
Combined NYSE & NASDAQ New highs - New lows: 679-21 (WOW! again)
WTI crude oil: 93.12, +1.30
Gold: 1,688.80, +13.00
Silver: 31.01, +0.78