Wednesday, November 26, 2014

Lower Oil Prices + Deflation = Prosperity

Money Daily stopped being a daily post blog in March, 2014. While the name remains the same, the posts are now on an intermittent basis, as conditions warrant, though it is advised to read the archives (from 2006-2014) regularly, even daily, for insights and historical perspective.

The economy will boom with lower oil and gas prices. This has probably been planned a long time ago. The bulls--t about marginal production from fraking keeps ringer ever more hollow. First, it was shale drillers will default at $80, then $70, now, it's $50.
The other day on CNBC, Kramer (the biggest a$$hat of all time) announced that the shale drillers won't default until oil hits $40. If that's the case - and, the number is probably lower for drills already in the ground - let's go for $30, which should get gas back to about $1.50/gallon or less.
There are already 17 states under $2.75 a gallon, so we're on our way. Average is about $2.84, so if oil is at $75 now, cut that in half, $37.50, and presto, average gallon of gas in the US is $1.42, and, no, it does not have to go back up. There's no law, physical or otherwise, that posits that prices must always rise.
Thanks to endless central bank meddling, the world's economies are deflating, and, with any luck, the governments will deflate as well, or die.
This is just the start of what should have happened in 2008-09. The past 6 years have been a complete farce, designed only to keep stocks up and the rich richer. The essential problem is that if the economy collapses, what happens to incomes and pensions?
Well, kids, they get cut, too. In the end, it should be a wash. If your average cost of living falls by 40%, you need 40% less money to live. The heck with the public pension plans with $100,000+++ retired cops and teachers. They'll be happy campers at $60+ with lower prices for everything.
Morons are everywhere, but most of them live and work in state and national capitols (DC and NYC have the highest percentages, for sure). Fuck them. Stop the consumer shit. Save, don't spend. Let everything drop in price. Deflation is wonderful so long as the government and economists GET THE FracK OUT OF THE WAY.
There's just one kicker: The cost of nearly everything will decline, except housing. Anybody who bought before 2008, or after, thinking they were getting a bargain, will once again be upside-down.
Get ready for housing crash, part two!
(Best part about it is that the Fed now owns most of the worthless MBS paper.)

Tuesday, November 18, 2014

Familial Relations and the River of Dreams

Money Daily stopped being a daily post blog in March, 2014. While the name remains the same, the posts are now on an intermittent basis, as conditions warrant, though it is advised to read the archives (from 2006-2014) regularly, even daily, for insights and historical perspective.

It's been a long day.

Worse, it's not over yet.

There are three things, though, which I know will get me through the day and into the night.

Three things, which I possess:

  • A clear conscience
  • Peace of mind
  • The will to seek the truth
That's all I need to say. I'll get by. Always do.

Oh, yeah, and then there's my theme song, courtesy of Billy Joel:

I don't know whether to laugh or cry, so I might as well just dance.

And, just in case, here's the lyrics:

In the middle of the night
I go walking in my sleep
From the mountains of faith
To the river so deep

I must be looking for something
Something sacred I lost
But the river is wide
And it's too hard to cross

And even though I know the river is wide
I walk down every evening and I stand on the shore
And try to cross to the opposite side
So I can finally find out what I've been looking for

In the middle of the night
I go walking in my sleep
Through the valley of fear
To a river so deep

And I've been searching for something
Taken out of my soul
Something I would never lose
Something somebody stole

I don't know why I go walking at night
But now I'm tired and I don't want to walk anymore
I hope it doesn't take the rest of my life
Until I find what it is that I've been looking for

In the middle of the night
I go walking in my sleep
Through the jungle of doubt
To a river so deep

I know I'm searching for something
Something so undefined
That it can only be seen
By the eyes of the blind

In the middle of the night

I'm not sure about a life after this
God knows I've never been a spiritual man
Baptized by the fire, I wade into the river
That runs to the promised land

In the middle of the night
I go walking in my sleep
Through the desert of truth
To the river so deep

We all end in the ocean
We all start in the streams
We're all carried along
By the river of dreams

In the middle of the night

Wednesday, July 16, 2014

US Interest Rate Yields on Ten-Year Treasuries Will Go Lower

Money Daily stopped being a daily post blog in March, 2014. While the name remains the same, the posts are now on an intermittent basis, as conditions warrant, though it is advised to read the archives (from 2006-2014) regularly, even daily, for insights and historical perspective.

I wrote this post today in response to an article that said interest rates can't get any lower...(FR)

The 10-year treasury still has a long way down to go. Hell, we're still at 2.55% or thereabouts, while the Bund is hovering around 1.7%, and the Jap 10-year is fagedaboutit! like 0.6%. So, the US gov and the Fed and Wall St. still have more time to shake, rattle and roll that paper. QE has been winding down and the stock market keeps going up, so, the Fed must be happy with that, and, remember, now they can always unwrap a new round of QE, since the last few have worked out so well.
Just in case nobody's noticing, there are still a lot of (take your pick) well-off middle class retirees, pretty well-off working class stiffs (albeit fewer than before, and most of them are in the Public sector), welfare queens, idiots spending $XXXX to send their spoiled kids to school, mammoth tax receipts (wanna get sick, try a school district budget of $67 million to educate 3600 kids from K-12), car loans and leases, people buying houses at ridiculously-inflated prices.
OK, you get my drift. There's still lots of money floating around and the bankers, .gov and the Fed still have more to skim. Why would they willingly end this massive ponzi upon which they sit at the top? This is going to go on and on and on. It's been six years since the crash of '08, and nobody expected us to be where we are now, back then, so, I think nobody expects this to go on much longer, but normalcy bias and cognitive dissonance will outlast rational economic policies (already have).
Consider: Five years ago today, my father died. Left me his house and other assets. I stopped paying the mortgage immediately. Bank started foreclosure in March 2010, since then, crickets. I am still here. Bank knows the house is worth maybe 2/3rds or less of what they appraised it for in 2007. If they prevail in foreclosure, they lose. If they make a deal with me, they lose. If they keep the non-performing loan on their books at par: WIN, WIN, WIN, because they never have to realize the loss.
Some people ask me if it is stressful to live in a house I do not own (depends on how you look at it). I've rationalized that the bank (BofA) does not have any good solution. I also don't want to move, or pay, so, essentially, we're (the bank and me) both faking it, which makes certain sense, since the money is fake, the mortgage was based on fraud and all wealth is just more massive fakery.
Who's rich? I know a guy with $5-7 million in the bank and he doesn't know what the hell to do with it. He's still working at retirement age, for god's sake. I have almost nothing, and love my life, my little garden, fish ponds, a life of leisure and literature, could care less about money because it's all fake, and I've always been able to make as much as I need since I was 16 (now 60).
So, who's rich? The "wealthy" boob without a clue, or me, as I sit by the fish pond, reading Thoreau or Dante or Milton, in the sunshine as my garden grows by nature. The garden will sustain me. All the money in the world cannot buy that kind of security nor peace of mind.
You judge for yourself. Sure, I'd take that guy's $6 million, buy a big-assed piece of land and you'd never see me again. But this fool can't figure that far. I stopped working full time in 1999, because I always felt the rat race was just that: working just to pay bills. A fool's game. So, I don't have much in terms of money, but I have lots of physical assets which are either useful or valuable, tangible and intangible, no stress and much happiness.
Everybody talks about retirement, but what is the point? I know some idiots who retired and then got a job. WTF? My idea of retirement is what I do now. Work a little (I average about two hours a day), chill, drink, laugh. It's pretty easy.
OK, I'm rambling, but I keep thinking about that cryptic message by the IMF chief, Christine LaGarde,  about the number seven and 7/20/2014. Having studied numerology (did you know it was invented by Pythagoras? Yep, that guy!) I see it this way: If she was sending a message, well, too many people caught on, and, yeah, something may have been planned for that date, but plans change, and, things seem to be going pretty good for the status quo right now, so why mess with it? Something may happen this Sunday, but it probably won't be as dramatic as anyone expects. I'm thinking it's all hot air. Personally, I'm going to a party. Here's the video clip in question:
I believe the author of this youtube clip is overstating the case, taking too much for granted to make his point. There's no G7 or G20 meeting scheduled for that weekend, except for G20 meeting of trade ministers in Sydney, Australia on the 19th. So, if anything earth-shaking is to occur, it would likely come out of that meeting, so it's worth keeping an eye on. Just in case, I'll be pulling some cash out of my bank on Friday, especially if there are other clues, though, so far, none.
Try to change your lifestyle. Be more self-reliant. Try not driving for a day, a few days. Don't watch TV. Cook for yourself. It's refreshing.

Thursday, July 3, 2014

In Celebration of Dow 17,000 and a Boffo NFP Report, the Yellen Shriek

Money Daily stopped being a daily post blog in March, 2014. While the name remains the same, the posts are now on an intermittent basis, as conditions warrant, though it is advised to read the archives (from 2006-2014) regularly, even daily, for insights and historical perspective.

A stroke of brilliance this morning:

The Lord's Prayer, revised as "The Yellen Shriek" for Wall Street:

Our fiat,
Which art in dollars,
hollow be thy worth.
Thy stocks go up,
thy vix be down
on CBOE as it is on Wall Street.
Give plebes this day their daily crumb of bread
and deliver us thy dividends,
as we distribute to the one percent.
And lead us not into recession,
but deliver us more POMO,
for the kingdom and the power,
and the glory resides at the Fed,
QE forever and ever,

Go viral, and, have a Happy 4th of July, AKA, INDEPENDENCE DAY!

Thursday, March 13, 2014

The Biggest Bubble of All Time is About to Be Popped

Money Daily stopped being a daily post blog in March, 2014. While the name remains the same, the posts are now on an intermittent basis, as conditions warrant, though it is advised to read the archives (from 2006-2014) regularly, even daily, for insights and historical perspective.

The handwriting, so to speak, is all over Wall Street. What has been the biggest financial bubble in the history of the world is on the verge of busting, or, what could be better still, slowly deflating.

After the crash of 2008-09, the Federal Reserve, in conjunction with central banks around the globe, injected massive amounts of liquidity into the fiat world currency markets, bolstering everything from junk bonds to consumer credit, but especially equities, otherwise known as stocks.

Since March 9, 2009, the major equity indices in the US - and, to a large degree, around the world - have rebounded on the strength of the Fed's largesse, nothing else. Now that the Fed has begun unwinding QE, the "juice" is being withdrawn. There will be no backstop for equities in the guise of unlimited liquidity from the Fed. The plan - already underway - is to reduce the amount of asset (bond) purchases by the Fed from their high of $85 billion per month, to zero. While it is unlikely the Fed will ever get to zero without reversing course or, at least, slowing the pace of their withdrawal, the March FOMC meeting will mark the third consecutive lowering of the monthly purchase level, timed in accordance with the 10-per-year FOMC schedule.

The Fed first announced in December, 2013 that it would be reducing purchases in January, 2014, and did the same in their first meeting of 2014, in January, lowering their purchase level to $65 billion in February. Since there was no meeting in February, they are expected to announce another $10 billion reduction at the March meeting next week (March 18-19). If they carry through with this expected drop to $55 billion, the market cracks which first occurred in January of this year, may turn into wholesale breaks, sending index levels below their recent lows, highlighted by the January 31 selloff.

With the S&P recovering all of its January and February losses and making new all-time highs earlier this month (the NASDAQ also made new 14-year highs), the Dow Jones Industrials did not, setting up the scenario for a bear market, according to strict Dow Theory.

If the Dow, having fallen short of its most recent high (16,588.25), continues on its path lower, exceeding the interim low of 15,340.69 (Feb. 4), this will confirm that a change in the primary tend has occurred, and a secular bear market is underway. This bear market could last anywhere from five to 20 years, possibly longer, because the recent, primary bull market - the second longest in market history - was built upon a foundation of incredibly easy money, low interest rates and global fiat currencies, unprecedented in financial history.

The fallout could be severe, popping the biggest financial asset bubble of all time, in stocks, affecting everything from individual stocks to your pension, IRA or 401k to muni bonds. In other words, be prepared for the biggest financial collapse of all time, because the last five years have been nothing but pure financial fantasy, and it's all about to come crashing to an end.

There are sure signs that the global economy is shrieking and straining to remain relevant and above water, but after blowing bubbles recently in dotcom stocks (1997-2001) and real estate (2003-2007), the Fed has reflated the economy with trillions of paper dollars, augmented by similarly spurious activities in Europe, China and Japan. The financial bubble created by central banks is of a magnitude much larger - possibly four to six times larger - than the sub-prime-induced housing meltdown, putting the figure of financial assets seriously at risk somewhere between $20 and $40 trillion dollars, an amount so unfathomable that nothing short of pure currency collapses can sufficiently make account.

(As this post is being composed (March 13, 2014, 1:10 pm EDT), the Dow Jones Industrial average has broken through its 50-day-moving average, down 194 points on the day.)

Beyond just charts and the scary finances of the central banks, China is the linchpin by which the financial dam may be breached. For the past two to three months, data out of the world's second-largest economy has been trending lower, especially in the areas of industrial production and exporting. In fact, China actually released data that showed it suffered a current account deficit, with imports exceeding exports, a very frightening development for one of the world's few export economies and a major trading partner with the US and Europe.

What the China data underscores is the overall weakness in US and European (developed) markets. The fraud of financialization has finally produced a result incompatible with the ponzi-scheme-like mantra of the central bankers. Consumers have been and are strapped for cash, a result of over-exuberant government spending, massive income disparity between the rich and poor and stagnant or declining wages in the middle of a labor shortfall crisis.

There are signs everywhere that the global economy is about to be brought back to reality, including, but by no means limited to, recent poor US unemployment data, a false housing recovery (inundated with cash buyers, flippers and speculation), inability of the government to prosecute bankers and financial operatives for mortgage and other frauds, declining adherence to the constitution and the trampling of civil rights, bogus car sales data with channel stuffing rampant, blaming the weather for poor economic results (seriously, the holiday shopping season was a complete bust), and overvaluation of speculative IPOs, tech stocks and other momentum stocks, enterprise valuations of stocks in the billions of dollars, based on nothing but pure speculation.

Nothing will stop the wreckage that the Fed and global central banks working in collusion have set in motion. The numbers are ghastly and overwhelming and the warnings have been written about for years. The time to prepare was yesterday, though there is still time, but thought processes must change. Status and wealth should not be measured by the size of one's McMansion, the price of one's car or the depth of one's stock portfolio. True wealth consists of something along these lines: a fully-paid-for home on five or more acres of land, two-thirds of it arable, food and water storage to last at least a year, a horde of cash, gold and/or silver, absolutely ZERO DEBT, and the ability and weaponry to defend it all.

Ask yourself, who among you can make claim to that, because that is real wealth, not the paper promises from Wall Street or Washington.

It's coming. And it may be approaching even faster than anyone wants to consider (think Ukraine).

Good luck.

Friday, February 14, 2014

So, This is Good-bye; Good Luck with Janet Yellen

After 1828 posts, spanning nine years (started in 2006), this may be the last post for Money Daily - at least in its current form. Perhaps at some point I will change the name to Finance Weekly or Rick's Occasional Posts on the Economy or something like that, but the effort involved in producing a relevant post every day (as opposed to the ridiculous ranting often seen here) seems to be not worth the effort anymore.

Since the economic collapse of 2008-09, the global financial system has been wildly distorted by the actions of central banks, primarily by the US Federal Reserve, via their Zero Interest Rate Policy (ZIRP) and Quantitative Easing (QE) mechanisms.

While Wall Street regulars laud praise upon former Chairman Ben Bernanke, and surely they will do the same with Janet Yellen, the Fed policies of the past six years have benefitted only banks and speculators, often those two disparate entities being one and the same. Surely, anybody who receives money at close to zero percent interest can make a buck, and it's even easier when you're in collusion with other bankers or speculators, as is the case with our current system.

Nothing other than the Fed matters when it comes to stocks, bonds, or even money in general. The Fed creates it out of thin air in copious amounts, and, even though they've recently cut back on their rampant printing - from $85 billion to a mere $65 billion per month - it's still a hugely distorting factor in all markets.

There is no stopping it, and any kind of qualitative analysis of financial markets must factor this element in as a major bulwark.

Thus, there is little to discuss on a day-to-day ongoing basis, because, in the end, nothing else matters or makes perfect sense, and, in economics, as in any "science," perfection is demanded, though all too often it is lacking, covered up by innuendo and a false sense of security supplied by the Fed and their lackeys in the financial media and Wall Street hack talkers, disguised as "analysts" for public consumption.

Since a more balanced, sustainable approach is preferred by your humble author, it's time to move on to other creative pursuits. I may, from time to time, pen a financial piece and post it here, but the numbing daily schedule will be no more.

It's been fun, for the most part, and I wish anyone and everyone who has gained from this the best in their investment and financial decisions. For my money, I prefer to keep stacking silver (which made an enormous move today), learn more about and engage in sustainable farming and leave the financial gimmickry to those better suited (pun intended) to that kind of soulless lying.

In closing, since we are engaged in a world that often makes little sense, a few lines from George Orwell's 1984:


Via con Dios, mis amigos!


DOW 16,154.39, +126.80 (+0.79%)
NASDAQ 4,244.03, +3.35 (+0.08%)
S&P 1,838.63, +8.80 (+0.48%)
10-Yr Note 100.06, +0.02 (+0.02%) Yield: 2.74%
NASDAQ Volume 1.73 Bil
NYSE Volume 3.10 Bil
Combined NYSE & NASDAQ Advance - Decline: 3417-2261
Combined NYSE & NASDAQ New highs - New lows: 278-24
WTI crude oil: 100.30, -0.05
Gold: 1,318.60, +18.50
Silver: 21.42, +1.026
Corn: 445.25, +4.75

Thursday, February 13, 2014

Yellen Testimony Delayed; Markets Rise Despite Lack of Noise

Was anybody not connected to the Wall Street/Washington Ponzi scheme really impressed with Janet Yellen?

The woman sounds like she's been speech-and-brain-impaired since childhood. Sure, she may be among the "best and brightest" but her answers to the softball questions proffered by the House Financial Services Committee didn't raise the bar of professional standards one centimeter, nor did they offer anything other than the usual, plodding "we-will-continue-to-print-until-we-don't" message the Fed's been spouting for the past three to four years.

Sorry, but it's boring, and Janet Yellen may be the "Chair" of the Fed, but she surely doesn't have the backs of regular American citizens. She works for banks, period.

So, paraphrasing our illustrious president, "if you like your Fed Chair, you can keep your Fed Chair."

A snowstorm pushed Yellen's scheduled Thursday testimony before the Senate Banking Committee back to next week. The markets, not wanting to wait until then, rallied anyway, on poor retail sales and unemployment data.

What a scheme. The markets are so distorted, it makes writing about them a difficult, annoying chore, almost not worth doing. This may be the final week of Money Daily.

DOW 16,027.59, +63.65 (+0.40%)
NASDAQ 4,240.67, +39.38 (+0.94%)
S&P 1,829.83, +10.57 (+0.58%)
10-Yr Note 100.05, +0.85 (+0.85%) Yield: 2.73%
NASDAQ Volume 2.08 Bil
NYSE Volume 3.25 Bil
Combined NYSE & NASDAQ Advance - Decline: 4143-1528
Combined NYSE & NASDAQ New highs - New lows: 275-41
WTI crude oil: 100.35, -0.02
Gold: 1,300.10, +5.10
Silver: 20.40, +0.054
Corn: 440.50 , +0.50

Wednesday, February 12, 2014

Quiet Yellen, Dow's a'Sellin'

Since Fed Chair Janet Yellen wasn't stuttering... er, um, speaking today, stocks pretty much ran in place.

That's all there is to this market, for now, but, stick around, the game will change at some point.

We do note that gold has been tearing it up lately, silver a little less so (though it made up some ground today), and don't we all love crude oil over $100 per barrel?

One can also buy more corn toady with the same amount or less silver than yesterday, so that's the deflationary argument.

DOW 15,963.94, -30.83 (-0.19%)
NASDAQ 4,201.29, +10.24 (+0.24%)
S&P 1,819.26, -0.49 (-0.03%)
10-Yr Note 99.94, -0.13 (-0.13%) Yield: 2.76%
NASDAQ Volume 1.88 Bil
NYSE Volume 3.30 Bil
Combined NYSE & NASDAQ Advance - Decline: 2995-2698
Combined NYSE & NASDAQ New highs - New lows: 232-36
WTI crude oil: 100.37, +0.43
Gold: 1,295.00, +5.20
Silver: 20.34, +0.188
Corn: 440.00, -1.50

Tuesday, February 11, 2014

Wall Street Goes Ga-Ga Over Fed Chair, Janet Yellen

Janet Yellen's testimony to congress and the subsequent question-answer period was a rather revolting display of crony capitalism in its most blatant form. Legislators swooned over the new Fed Chair (as she is now to be known), and Wall Street sent stocks to the moon, again.

Yellen's prepared testimony to the House Financial Services Committee:

Yellen Speech Feb 11

Bear in mind, these are the people/drones/robots elected/appointed to rule/run/govern the country/world/universe.

Hedge accordingly... or, just kill yourself now.

DOW 15,994.77, +192.98 (+1.22%)
NASDAQ 4,191.05, +42.87 (+1.03%)
S&P 1,819.75, +19.91 (+1.11%)
10-Yr Note 100.23, +0.01 (+0.01%) Yield: 2.72%
NASDAQ Volume 1.86 Bil
NYSE Volume 3.68 Bil
Combined NYSE & NASDAQ Advance - Decline: 3228-1494
Combined NYSE & NASDAQ New highs - New lows: 190-32
WTI crude oil: 99.94, -0.12
Gold: 1,289.80, +15.10
Silver: 20.15, +0.041
Corn: 441.50, -1.50

Monday, February 10, 2014

No Follow Through After Phony Friday Rally

Following Friday's dismal non-farm payroll data for January, the subsequent scream higher in equity markets (stocks) and the Money Daily contention that the market was rigged and traditional valuation metrics useless, Monday brought some confirmation of our position, in that markets barely budged.

The generally-accepted theory - for today - is that markets and investors are awaiting Janet Yellen's testimony before congress Tuesday and Thursday. On Tuesday, the newest -and first - Fed chairwoman will appear before the House Financial Services Committee. On Thursday, she addresses and takes questions from the Senate Banking Committee.

We'll take a different approach: BULL-PUCKEY! The reason markets didn't do much today is because they have nowhere to go after the massive ramping Thursday and Friday, on nothing but bad news, and the insiders are awaiting the influx of suckers to keep the rally going, so said insiders can SELL, SELL, SELL the stocks bought (at the behest of the NY Fed and the PPT) they bought last week that kept the market from entering a 10% correction.

Now, those suckers will surely appear at some point, soon after which the insiders will be selling, though not all at once, so as not to produce a self-reinforcing selling loop. No the selling will be niggling, nibbling, small amounts, though large enough to keep stock prices moderately higher or lower, for a while.

The key question at this juncture is not whether the market is manipulated - as it has been clearly demonstrated that all financial markets are manipulated - because, if the Fed isn't manipulating markets by its dual policy of ZIRP and QE, then what should we call it? No, the key question is how long it will take for the major indices to return to and exceed their recent all-time highs?

A month? Two? Six? It matters little, unless stocks tumble below their recent lows, because then, the fraud will be crystal clear and a correction will be in force, followed by a primary bear market.

The numbers to watch are these:
Dow: High: 16,576.66; Low: 15,372.80
S&P 500: High: 1,848.36' Low: 1,741.89
NASDAQ: High: 4,176.59; Low: 3,996.96

All of these figures are closing highs and lows and they all occurred on the same dates, the highs on December 31, 2013, the lows on February 3, 2014. Everything else in between is nothing but noise, but, it should be pointed out that the Dow, in particular, is a long way from those all-time highs, about 775 points away, and that matters.

So, what will the sociopaths of Wall Street and the crony capitalists in Washington DC dream up to achieve the facade of "recovery" this time? Or will they fight to the death over the debt ceiling all month long, only to resolve it in a late-night session, and then have the markets zoom forward? Any way they slice it, it's still one big stick of baloney, and not a choice cut, to boot.

A couple of other indications that support the theory that Thursday and, especially, Friday's rally was fake, are the slump in yield on the 10-year note, back down to 2.67% and stellar movement in gold and silver. If everything is supposed to be so fine and dandy, why then were investors rushing to safe haven assets on Monday?

There are more questions than answers, but, when dealing with fraud and fixing at such a high and clandestine level, there is much that is unknown and unseen, but, we've seen enough to know not to buy the sizzle nor the steak at this juncture.

DOW 15,801.79, +7.71 (+0.05%)
NASDAQ 4,148.17, +22.31 (+0.54%)
S&P 1,799.84, +2.82 (+0.16%)
10-Yr Note 100.65, +0.47 (+0.47%) Yield: 2.67%
NASDAQ Volume 1.68 Bil
NYSE Volume 3.30 Bil
Combined NYSE & NASDAQ Advance - Decline: 3338-2348
Combined NYSE & NASDAQ New highs - New lows: 129-29
WTI crude oil: 100.06, +0.18
Gold: 1,274.70, +11.80
Silver: 20.11, +0.176
Corn: 443.00, -1.25

Friday, February 7, 2014

Fake, Fake, Fake Rally After Non-Farm Payroll Jobs Disappointment

With baited breath, the world awaits the January non-farm payroll report, and, when it is released, and it is far worse, far weaker than expected, stocks go straight up.

Yes, that's exactly what happened. Yes, it defies logic. NO, we're not buying it.

Just in case anybody hasn't noticed, banks, brokers and high government officials have variously been accused - and some even admitted (though untried and none convicted) - of manipulating Libor rates, FX markets, precious metals, mortgages, commodities, municipal bonds and probably every other financial asset where a market is made.

So, should it surprise anyone if stocks are manipulated, rigged, fixed, flogged, whipped and played to the whims of the rentier class?

No, it certainly should not.

While the handwriting is plain as day on the Wall Street walls, scrolled in the signature style of the PPT.

When the announcement was made at 8:30 am ET Friday morning, that the US created a mere 113,000 jobs in January - after posting a horrifying 74,000 (upgraded to 75,000 this morning) for December - stock futures headed due south, sending the implied opens for the major indices to morning lows.

However, within minutes, those losses in the futures markets were wiped away, as the futures galloped up, up and away, pointing to a counterintuitive higher open for US markets.

The Dow, together with Thursday's vapor ramp, put in the best two-day performance since October, and US markets still haven't had a 10% correction since August of 2011.

Apparently, one should believe that the lower jobs numbers are somehow good for the economy, in that the Fed may begin to "un-taper" their recent tapering of bond purchases and bring the legendary punch bowl back to the Wall Street jubilee, where the connected truly do get "money for nothing" and the chicks (and coke) for free.

Apparently, one should believe that $100-per-barrel crude oil and $3.50-4.00-a-gallon gas are good for the economy.

We wisened investors should also believe that gold is permanently priced at $1250 per ounce, silver at $20, all mortgage-backed securities are worth 100% of their par value, real estate never goes down, Janet Yellen and the rest of her Fed brethren have the best interests of the US citizenry at heart, pigs fly and flying unicorns that poop rainbows are real and are stabled in the basement of the Mariner-Eccles building.

We should embrace a president who openly lies, a congress which will not impeach, a spy agency who reads this, knows you are reading it, listens in on everything, everywhere, all the time, a steadily-declining median household income even in the face of the top 10% making more than ever, part-time jobs replacing full-time ones, taxes that only go up, regulations on everything and penalties for anything not covered by regulations.

It's all good, all the time, even if you're losing your home, having your kids taken from you and starving to death. At this pace, as the US economy plunges even deeper into depression than it already has, stocks should set all-time highs endlessly, without pause, forever.

For the record, Money Daily will stick to its call made days ago, that the market has turned from bull to bear, be proven wrong, but understand that nothing is really as it seems. As conditions in the real world worsen, they'll only get better on Wall Street, in Washington and on the paper facade that is CNBC and Bloomberg. Buy it, own it, be it.

Good is evil. War is peace. Love is hate. Stay short and get slaughtered. After all, if Wall Street doesn't take your phony paper money, Washington will.

Emerging market economies will always be emerging, and never become "developed" even if their GDP is larger than that of all the developed nations combined. And, besides, they don't matter.

George Orwell would be proud.

We have always been at war with Eastasia... or Eurasia.

DOW 15,794.08, +165.55 (+1.06%)
NASDAQ 4,125.86, +68.74 (+1.69%)
S&P 1,797.02, +23.59 (+1.33%)
10-Yr Note 100.57, +0.44 (+0.44%) Yield: 2.68%
NASDAQ Volume 1.92 Bil
NYSE Volume 3.75 Bil
Combined NYSE & NASDAQ Advance - Decline: 4216-1466
Combined NYSE & NASDAQ New highs - New lows: 141-44
WTI crude oil: 99.88, +2.04
Gold: 1,262.90, +5.70
Silver: 19.94, +0.008
Corn: 444.25, +1.25

Thursday, February 6, 2014

Stocks March Higher Despite NFP Uncertainty

Stocks staged an enormous rally Thursday, just a day before crucial non-farm payroll data from January is to be released.

Friday's employment numbers - expected to be in the range of 185,000 - stand in stark contradiction to December's paltry 74,000 jobs created. While weather has been roundly blamed for everything from auto sales to bond rallies, it may turn out that the weather will not affect payroll data, as the survey week was one that did not contain a severe weather event.

Investors may be gaming the number, figuring that December's figures will almost certainly be upgraded and the potential for two straight disappointments are slim.

On the other hand, since there was little in the way of news or earnings releases to juice today's rally, the huge run-up in stocks may have been due primarily to short-covering, as the bears - fairly fat and sassy of late - may want to be out of the way of such a volatile data set on Friday morning.

In the meantime, nothing much has changed on a global outlook. In fact, a failed bond auction in Ukraine set off some alarm bells and currency issues remain from India to Brazil to Turkey to Argentina to Indonesia. In essence, the Fed's decision to trim $20 billion in total from their monthly bond-purchasing program over the past two months is affecting everyone, everywhere.

That message did not seem to reach the ears of the bulls, at least for one day. Stocks had fallen pretty far in a short period of time, so the old "oversold" rationale has been trotted out as an explanation. For the record, the S&P had fallen about 100 points in just over a month, so, some giveback was to be expected. Same with the Dow, which had surrendered over 1000 points before gaining back about 250 this week.

On the day, volume was light, the advance-decline line was nearly 3:1 positive, but new highs just barely edged new lows, despite the huge, broad-based ramp in stocks. It appeared to be more of a "risk-off" kind of day rather than a serious, fundamental-based rally.

The 10-year note was sold off, registering a yield of 2.70, the highest in over a week. The troubling trend in short-dated maturities remained unresolved, with 3-month and 6-month bills matching up with identical 0.07% yields.

DOW 15,628.53, +188.30 (+1.22%)
NASDAQ 4,057.12, +45.57 (+1.14%)
S&P 1,773.43, +21.79 (+1.24%)
10-Yr Note 100.41, +0.20 (+0.20%) Yield: 2.70%
NASDAQ Volume 1.78 Bil
NYSE Volume 3.77 Bil
Combined NYSE & NASDAQ Advance - Decline: 4003-1691
Combined NYSE & NASDAQ New highs - New lows: 86-70
WTI crude oil: 97.84, +0.46
Gold: 1,257.20, +0.30
Silver: 19.93, +0.123
Corn: 443.00, -0.25

Wednesday, February 5, 2014

Stocks Flat to Lower After Disappointing ADP Employment Report

Stocks could not extend Tuesday's relief rally after hearing the ADP January Employment Report, which assumed US private sector job growth of 175,000, when estimates were for 185,000.

Note the use of the word "assumes" in the foregoing paragraph, because ADP does not rely upon hard data, but extrapolates and models from sampling, thus their estimates are often far afield from reality, as displayed clearly last month, when the private firm called 238,000 job growth (revised down to 227,000) and two days later, the BLS offered 74,000 in their monthly non-farm payroll data series.

Who's right and who's wrong is not the question. The question is who can be trusted, and clearly, with the goal-sought nature of economic data reports in the "Fed era" of economics in which we currently reside, the answer is, nobody.

Anecdotal and real-life experience may be more instructive than government or private data releases at this juncture, and, by most accounts, in most areas of the United States, there are few hirings and the jobs offered are either part-time or menial or both. The job market is definitely not what one could in any way, shape or form, call robust.

Stocks took a bumpy ride - mostly on the downside - to get to generally unchanged on the day. Being that the ADP numbers have long been deemed untrustworthy, most speculators are attempting to hang in the market until Friday, when the BLS releases January jobs numbers, which, if the weather is any guide, figure to be uninspiring.

The good news came in the form of gold and silver gains on the day, though, as has been noted, cannot be met with much enthusiasm, since the precious metals have been largely range-bound for the past three months and show no signs of breaking out. Still, those investing in hard assets have to be sleeping better than their counterparts in equities, since they can at least claim some degree of stability during the past six weeks of general market declines.

Reporting after the bell was Twitter (TWTR), showing a gain of two cents (ex-items) for the fourth quarter, against estimates of a two cent loss. User growth was around eight million for the quarter, below estimates, which sent the stock down 10-15% in after-hours trading. Regarding Twitter's valuation of 57-58 dollars per share, assuming they make ten cents in all of 2014, puts their price-earnings ration somewhere in the ionosphere, around 570-580. They don't call it speculation for nothing, folks.

Despite the small losses in the headline numbers, internals were rather nasty. The A-D line was nearly 2-1 in favor of losers and new 52-week lows were triple the number of new highs, an indicator which is trending very negatively.

Bonds sold off, sending the 10-year note to 2.67% yield, and the 3-month and 6-month bills matched up at at yield of 0.06, not an encouraging trend either, as, if they invert, history tells us conclusively that recessions follow, and a recession is not anything the economy can withstand right now.

DOW 15,440.23, -5.01 (-0.03%)
NASDAQ 4,011.55, -19.97 (-0.50%)
S&P 1,751.64, -3.56 (-0.20%)
10-Yr Note 100.67, -0.33 (-0.33%) Yield: 2.67
NYSE Volume 3.97 Bil
Combined NYSE & NASDAQ Advance - Decline: 2065-3617
Combined NYSE & NASDAQ New highs - New lows: 51-154
WTI crude oil: 97.38, +0.19
Gold: 1,256.90, +5.70
Silver: 19.80, +0.383
Corn: 443.25, +1.50

Tuesday, February 4, 2014

Markets Pause After Monday's Pummeling; Stocks Bounce Is Feeble

When markets get roiled like they did on Monday, especially following four weeks in January of steady declines, the usual reaction is for investors to nibble at the edges, like rats who have been spooked by sprung traps on their coveted cheese.

The only data drop worth noting on the day was Factory Orders, which fell 1.5% in December, the most since July. Inventories of manufactured durable goods reached an all-time high for the series in December, to $387.9 billion, marking the fastest year-over-year inventory build in 6 months.

That same inventory build has been responsible in part for much of the two past GDP figures, from the third and fourth quarters of 2013, and, unless consumers come out of hiding soon, those inventories are going to sit and eventually be marked down, further stifling the Fed's efforts to re-inflate the economy, which continues to stall out at a moribund inflation rate well below two percent.

While lower costs for manufactured and consumer goods comes as pleasant news for individuals and small business, it works against the Fed's perverse mandate of "stable prices," which, in actuality, is defined in Fedspeak as "stably-increasing prices at a rate of at least two percent and preferably higher, stealing purchasing power from people, everywhere, all the time, while debasing the currency."

Since 2008, the Fed's playbook has been redesigned to include trick plays like ZIRP, QE, reverse-repos, re-hypothecation and other arcane financing stylings, most of which have had limited success. Now, with their implicit desire to end QE this year, the fruits of their laborious injections of trillions of dollars into the global economy are proving impotent as first, emerging markets are crushed, soon to be followed by developed markets, already occurring in Japan, where the Nikkei fell by more than 600 points overnight, and is clearly into "correction" territory.

While today's pause offered some relief for the bulls, the bears seem to be still in charge. Advances in early trading on the major indices were pared back throughout the session, the closing prices barely denting the declines of just Monday, to say nothing of the drops from January.

Everybody is going to get something of a clue Wednesday morning, when ADP releases its January private jobs report, a precursor to Friday's non-farm payroll data for January. Expectations are high that the US created 185,000 jobs in January, which would be a masterstroke of statistical wizardry, after the December reading of 74,000 jobs, sure to be revised higher.

Unless this January was both a statistical marvel and a reality-defying month in which auto sales and retail sales were well below estimates and blamed on the weather, the take-away is that while people were discouraged to brave the elements to shop, the very same weather encouraged job creation and the seeking of employment. The math does not match the reality. The truth is probable that while the weather was poor in some areas of the country, it was fine elsewhere, so the localized Northeast mindset likely has everything calculated improperly.

Whenever weather is blamed for anything - unless it's a localized event like a hurricane, flood or fires - one can be nearly certain the assumption is at least partially false, as will be proven in this case. Therefore, if Friday's jobs report blows the doors off estimates, one can assume the economy, based on auto and retail sales, is much weaker than propagandized, and that the BLS modeling, their birth/death assumptions and general massaging of data is flawed and should be disregarded.

Of course, a good-feeling jobs report will boost stocks, just as a continuation of the trend from December will send them even lower. Along with the weather as a culprit, other terms being bandied about include "correction" (a 10% decline off recent highs) and "bottom" (where stocks stop declining). Most of the analysts are saying the recent action is expected, following the massive gains of 2013, but that it is also temporary and investors should be looking at this as a buying opportunity.

Others have differing opinions, believing the US and global economy are contracting instead of expanding, that inflation is nowhere to be found and all of those corporate stock buybacks from the past three to four years are going to be painful to unwind. With corporations buying back their own stock at high prices, reducing the flow while increasing the price, what happens when they want to sell back into the market, at lower prices? The internal damage done to balance sheets will be dramatic and will only accelerate any downward pressure.

That's what investors have to look forward to in coming months, unless some economic miracle occurs. And, as we all are well aware, miracles don't usually just come along as needed.

Particularly telling, considering today's advance, was the new high-new low metric, which heavily favored new lows, indicating that today's advance was not broad-based nor technically supported. Additionally, late in the day, S&P downgraded Puerto Rico's debt to junk status, a move that was widely expected, but still a huge negative.

A disturbing trend is the slight rise in commodity prices. Corn, soybeans, wheat, crude oil and natural gas have been bid up recently, as money, needing a safe place to rest, may find a home in such staples, artificially raising prices, though the gains may (and probably should) prove to be arbitrary and temporary, a certain sign of naked speculation.

DOW 15,445.24, +72.44 (+0.47%)
NASDAQ 4,031.52, +34.56 (+0.86%)
S&P 1,755.20, +13.31 (+0.76%)
10-Yr Note 101.05, -0.10 (-0.10%) Yield: 2.63%
NASDAQ Volume 2.00 Bil
NYSE Volume 4.05 Bil
Combined NYSE & NASDAQ Advance - Decline: 3738-1977
Combined NYSE & NASDAQ New highs - New lows: 49-111
WTI crude oil: 97.19, +0.76
Gold: 1,251.20, -8.70
Silver: 19.42, +0.013
Corn: 441.75, +6.00

Monday, February 3, 2014

Wall Street Has a Problem, So Everybody Will Suffer; Stocks Smashed on Yellen's 1st Day

Fed Chairwoman, Janet Yellen, is just about to head home from her first day as head of the US Federal Reserve System. Judging by what happened on Wall Street, she's probably not going to cook herself a wholesome meal, but rather will order out, Chinese the most likely choice.

Stocks went absolutely South on the first day of February, largely in response to the Fed's decision to continue their asset purchase tapering, but moreso on US and China economic weakness.

China's PMI for January edged down to 50.5, the lowest level in six months, not exactly the kind of news Ms. Yellen was seeking. Making matters worse for the new Fed head, US ISM fell from 56.5 to 51.3, sending stocks, already down on the session, into a tailspin after their release at 10:00 am ET.

The lethal combination of the Fed cutting back on bond purchases, in the face of weakening data from the world's two largest economies, set the stage for a massive selloff on Wall Street and a flight to the safety of US treasury bonds, which closed at their lowest yield level - on the benchmark 10-year note - in three months.

The carnage on Wall Street was not isolated to just today, however. Stocks have been performing poorly all year, and the level of fear is perceptibly rising, with the Dow, NASDAQ and S&P 500 all closing down more than 2%, after the Nikkei fell 295 points and officially into a correction, down 10% off the recent highs.

The losses on Wall Street were monumental. For the Dow, it was the worst start to a month since 1982; for the NASDAQ, the losses were the worst since the inception of the index (1972).

Auto sales were down for January, with weather blamed for sluggish sales. Bond funds saw 20-30 time normal volume of inflows. The VIX has gone from the mid-12s to over 21 in a month, a 70%-plus rise in risk perception. Not only were stocks down, but volume was large, and has been throughout the slide which began in January.

The reaction in bond markets - sending the 10-year down to a yield of 2.58% - was perfectly rational. As risk assets (stocks) deteriorate, safety is sought, and there's nothing safer than US treasuries, or, maybe, German bunds, also lower during the past month and today.

Looking forward, Ms. Yellen should have expected this, or worse. After all, history tells us that all new Fed chairs inherit crises. as did Volker, Greenspan and Bernanke before her. Surely, the shared wisdom of decades of Federal Reserve actions will guide Ms. Yellen to a logical solution, stopping the slide in stocks while keeping the US economy growing.

Or will it?

Yellen is trapped. QE tapering is already the de facto standard policy. To reverse it would be to admit defeat, and possibly undermine any confidence left in the institution of the Federal Reserve, which, admittedly, isn't much. The true solution is for the Fed to stand back, watch the markets deteriorate, witness the destruction of the US and global economy over the near term and hope that people, individuals and businesses, will have enough of their wits remaining to muddle through a few years of truly hard times.

The Fed has no choice. Interest rates are already at zero and QE has had limited effect. It's time for the Fed to turn its back on the economy and the markets and let chips fall where they may. Any other action will only result in more asset dislocations, of which there are already too many.

For those of us who are not heavily invested in stocks (that leaves out anybody depending upon a pension, either now or in the future), SHORT AT WILL. This downward thrust will eventually manifest itself into a correction (the Dow is less than 500 points from it) and, by May or June or July, at the latest, a fully-blown bear market.

Bull markets do not last forever, and this current bull, which began in March, 2009, has reached its end. If proof is needed, check the highs on the indices from December and see how long it takes to get back to those levels. A reasonable guess, at this juncture, would be seven to ten years, maybe as long as 20.

The globalization experiment, as it always does, is failing. Economies must begin to fend for themselves and become more localized. Faith in Wall Street, which took a severe blow in 2008-09, will lose all credibility in coming months. Already, there are hordes of individuals who do not trust the wizards of Wall Street, as it was in the 1930s, during the Great Depression.

Wall Street will not respond well. Stocks will fall. Bond yields and mortgages will be even lower than in recent years. While those who have bought into the system - government employees, pensioners of many stripes, plain idiots and "investors" - will suffer, the prudent, the goldbugs, silverbugs and savers will eventually be rewarded for their patience and their frugality.

Put one's faith not in the data and derivatives of Wall Street, but in the strength of individuals, work ethic and survivability. That's a trade which has stood the test of time.

Note to Dan K (who may or may not be interested), and Adam Smith theorists, corn was up 0.40% today; silver gained 1.51%. Deflation.

DOW 15,372.80, -326.05 (-2.08%)
NASDAQ 3,996.96, -106.92 (-2.61%)
S&P 1,741.89, -40.70 (-2.28%)
10-Yr Note 101.48, +1.21 (+1.21%) Yield: 2.58%
NASDAQ Volume 2.41 Bil
NYSE Volume 4.72 Bil
Combined NYSE & NASDAQ Advance - Decline: 839-4976 (extreme)
Combined NYSE & NASDAQ New highs - New lows: 83-197 (trending)
WTI crude oil: 96.43, -1.06
Gold: 1,259.90, +20.10
Silver: 19.41, +0.289
Corn: 435.75, +1.75

Friday, January 31, 2014

Stocks End January in Ugly Fashion with All Major Indices Down for the Month and Year


Friday capped off an extremely volatile week in stocks and world economics, though astute investors and money managers should have known this kind of activity was coming all along, as soon as the Fed began reducing its bond purchases last month.

With January in the can, one might be obligated to kick it, for it was one of the worst months in some time, in fact, the January decline was the worst since February of 2009. It was also the first January decline for stocks since 2011, and that turned out to be a very rocky year, so caution is advised for those with a bullish bent. Fund flows from emerging market stock and bond funds were massive over the past two weeks, as were equity outflows in US-based funds.

What really troubled markets this morning, when the Dow fell by more than 220 points in early trading, were outflows of capital from emerging markets everywhere, from Russia, to Hungary, to Poland, South Africa, Turkey, Argentina, Indonesia, India, Brazil and China, and that's just a partial list.

Adding to the woes was an earnings warning from Wal-Mart (WMT), which is viewing the passage of the farm bill in the House of Representatives as very detrimental to their business, as it will strip out $8 billion in food stamps, the life-blood of the Wally World economy.

As the Fed is committed to slowing their bond purchases and eventually ending quantitative easing (QE) over the next six to eight months, it will be instructive to view the new chairmanship of Janet Yellen, who has inherited the legacy of Ben Bernanke's reckless money printing and zero-interest rate policies of the past five years. Yellen, who by some measures is even more dovish than the white-tailed Bernanke, will, as is usually the case with a new Fed head, have to deal with a crisis condition in her first days as chairwoman and beyond, and there's really no telling how she may react to financial upheaval in not only the emerging economies, but also the developed ones.

Looking forward to next week, markets will have to digest official China PMI, released later tonight, then work through central bank policy meetings in England, the EU, Australia, Poland and the Czeck Republic before dealing with the potentially-devastating January non-farm payroll report on US jobs, due prior to the bell on Friday, making the first week of February no less nerve-wracking than all of January.

Here's how the major averages ended the week:
Dow -180.26 (-1.14%)
S&P 500 -7.70 (-0.43%)
NASDAQ -24.29 (-0.59%)

...and the month:
Dow -877.81 (5.3%)
S&P 500 -65.77 (-3.6%)
NASDAQ -72.71 (-1.7%)

It's not pretty, and, as expressed through post after post on Money Daily this month, it's almost certain to get worse, as huge imbalances turn into ugly dislocations of capital in every nook and cranny of the finance. The Fed, in its infinite wisdom, has gone too far since 2009 in trying to fix things that were broken by covering them up with wild slugs of capital and debt. Now, it is time to pay the piper, so to speak.

View the video below for Jim Grant's explanation of how the Fed distorts markets. His simple explanations provide deep insight for anyone who believe Keynesian economics has met its match in Ben Bernanke and the current crop of central bank "experimenters."

While this short clip is indeed concise and to the point, perhaps the most eloquent statement made on live TV by Mr. Grant was when he chided the erstwhile Steve Liesman with this pithy piece of pragmatism: "The FED can change what things look like, but, the FED can never change what things are." Our hats are permanently tipped to Mr. Grant. And with that, enjoy the weekend and the Super Bowl. The world may look the same come Monday, but, if one could see through eyes unclouded by hubris and propaganda, what a wonderful world it might be. DOW 15,698.85, -149.76 (-0.94%) NASDAQ 4,103.88, -19.25 (-0.47%) S&P 1,782.59, -11.60 (-0.65%) 10-Yr Note 100.86 +0.71 (+0.71%) Yield: 2.66 NASDAQ Volume 2.09 Bil NYSE Volume 4.05 Bil Combined NYSE & NASDAQ Advance - Decline: 1941-3780 Combined NYSE & NASDAQ New highs - New lows: 129-128 WTI crude oil: 97.49, -0.74 Gold: 1,240.10, -2.10 Silver: 19.12, -0.006 Corn: 435.00, +0.50

Thursday, January 30, 2014

3.2% Fourth Quarter GDP Sparks Relief Rally

Nothing really changed since Wednesday. The Fed is still going to purchase $65 billion in treasuries and mortgage-backed securities in February, $20 billion less than they did in December and in each month of 2013.

As a result, emerging markets are still struggling with reduced liquidity and runs on their various currencies.

We learned, prior to the opening bell, that fourth quarter GDP increased by 3.2%, slightly less than expected, and that 19,000 more people signed up for unemployment benefits last week, pushing the total to 348,000, the highest in about a month.

The unemployment number was widely disregarded and blamed - like everything else these days - on the weather, as the market saw plenty of alpha in a buy-the-dip mentality in what has been a down January and a choppy week of scary trading.

How the markets recover the losses incurred over the past three weeks is the big question, especially with the Fed stomping on the QE brakes. Earnings season has been nothing to get excited about, especially when, after the bell, Google and Amazon reported some very mixed results.

Google (GOOG) missed on the bottom line but beat on revenues, posting profits of just $12.01 per share on expectations of $12.26,reporting actual sales of $16.86 billion on forecasts for $16.75 billion. Shares of the giant search and technology company. Despite the miss, shares were traing about four percent higher in the after hours.

Amazon (AMZN) reported earnings of 51 cents per share, short of estimates of 69 cents, a big swing and a miss. Revenues were just short of estimates - up 20% from a year ago - at $25.59 billion when analysts were seeking $26.08 billion. Shares of the shopping megalith were down between four and eight percent in after-hours trading.

With January concluding tomorrow, it's a slam-dunk that the month will end lower, setting expectations for the full year back to "reasonable" levels. The current churn is that the "January Barometer" is not all that reliable for predicting full-year results. Of course, were stocks higher at this juncture, the barometer would be hailed as the most accurate of all investing tools and stock jockeys would be adjusting their year-end estimates towards the moon.

And, with stocks juiced, straight off the opening bell, what better time could there have been to slam gold and silver lower, as they were, unjustifiably. Still, from the perspective of gold and silver holders and buyers, the precious metals, even with higher premiums everywhere, are considered bargains at current prices.

Such is the world in a contrived environment controlled by issuance of play money to the world's elite. Fundamentals being what they are, however, reality may make a comeback in the weeks and months ahead.

DOW 15,848.61, +109.82 (+0.70%)
NASDAQ 4,123.13, +71.69 (+1.77%)
S&P 1,794.19, +19.99 (+1.13%)
10-Yr Note 100.46, +0.27 (+0.27%) Yield: 2.70%
NASDAQ Volume 1.94 Bil
NYSE Volume 3.54 Bil
Combined NYSE & NASDAQ Advance - Decline: 4329-1390
Combined NYSE & NASDAQ New highs - New lows: 156-67
WTI crude oil: 98.23, +0.87
Gold: 1,242.20, -20.00
Silver: 19.13, -0.426
Corn: 434.00, +6/00

Wednesday, January 29, 2014

Bernanke's Departure Marks the End of the Bull Market as Stocks Slump Again

There were so many moving parts to the economic and trading landscape since yesterday's close, it may be most instructive to review them in chronological order.

First, around 5:00 pm ET, the Turkish central bank raised overnight lending rates - along with all other key rates - from 7.75% to 12%. That's the overnight rate, the rate at which the central bank lends to member banks. Ouch! The move immediately sent US stock futures soaring, as though the global economy had been saved by this one clumsy, desperate stroke of policy.

At 9:00 pm ET, the impostor-in-chief, Barrack Obama, gave his fifth state of he union address, grossly misrepresenting the overall health and stability of the United States and glibly calling on American businesses to give employees a raise.

The euphoria spread to Asian markets, which were higher on the day, the Nikkei gaining more than 400 points on the session.

However, by the time the sun began to rise on Europe, the glad tidings had turned back to fear, as the Turkish Lira began to come under continued pressure from other currencies. Most European indices were trending lower, though marginally, with losses of under one percent on the majors.

By early morning in the US, the trend had completely reversed course, with stock futures deeply negative. At the open, the Dow Jones Industrials fell by roughly 120 points and held in that range until the 2:00 pm ET Fed policy announcement.

Widely expected to taper their bond purchases by another $10 billion per month, dropping the total to $65 billion, the Fed did exactly that, to the ultimate dismay of equity investors. Those who had made the correct call prior to the action continued pulling money out of stocks, rotating, as it seemed prudent, into bonds, which continued to fall in the aftermath of the Fed's announcement.

By the end of the session, stocks had put in severe losses once again, with the Dow leading the way lower. Bonds reacted by rallying sharply, the 10-year-note finishing at its lowest yield - 2.68% - in more than two months. In addition to bonds, the main beneficiary of the Fed's reckless monetary policy at this juncture were precious metals, as gold and silver rallied throughout the day.

What becomes of equities, sovereign currencies and the global economy as the Federal Reserve says good-bye to Ben Bernanke (this was his final FOMC meeting as Fed chairman) and hello to Janet Yellen, is now an open question, though with obvious clues.

If the Fed continues to taper its bond purchases by an additional $10 billion per month, they would be completely out of the market sometime around September, though it is unlikely that the Fed's path will be so resolute and straightforward. Already, it's apparent that stocks are going to suffer in the short term, while bonds enjoy a day or two in the sun. With returns on equities becoming more and more risky endeavors, bonds will appear as a safe have, forcing more investors to rush in, thus, sending yields lower.

While a crash in the equity market may not exactly be what the fed had in mind, it may be unavoidable, as there is no neat way to unwind their massive QE program which unfolded over the past five years and should come to an end. As reckless as was Bernanke's policy directives of QE and ZIRP, unwinding these programs is going to cause massive economic disruptions and further fuel a gathering global deflation trade. It only makes sense. If the Fed withdraws liquidity, economies will suffer. At least it's a plan that makes some sense, though nobody really wants to endure the pain that comes from such an unwinding. In the long run, it may be the only way back to something resembling normalcy.

The pain will be acute - and already has been so - in emerging markets, where most of the hot money had been headed during the Fed's money-printing spree. Look for developed nations to maintain an aura of stability, while the rest of the world, in places as diverse as South Africa, Turkey, Argentina, Brazil, Indonesia, Mexico, India and eventually, China, become somewhat ungled, economically-speaking.

With money fleeing these former hotbeds of investment, their currencies will devalue against the rest of the developed world, Japan, the US and Europe remaining as the centrist states and most stable currencies... for a while. The risk is contagion from the emerging markets into the developed, as the destruction of deflation engulfs the globe.

Bonds should fare well. An expectation of the US 10-year note below two percent would be rational. However, carry trades, such as a Euro-Yen or Dollar-Yen might lose much of their luster, the better plays to be short the emerging currencies.

Of course, with dislocations of capital everywhere, gold and silver should be afforded a top-shelf position, though their advance will, as always, be suppressed by the concerted efforts of the central banks. Still, in a devaluing environment, the ultimate price of the precious metals, as measured against various currencies, may indeed become a top choice for wealth preservation.

With the current path of the Fed set in place (for now, because they can, have, and will move the goal posts), it would be safe to conclude that the bull market in stocks has come to an abrupt end and money in 401k and other accounts of storage will become victims of a nasty, clawing bear that has no regard for the future, only a perception of the unfolding present, complete with companies that are presently overvalued, have limited earnings growth potential and have to be unwound.

Unless the major indices can find a way to turn the tide and rally past recent highs, the bull market, spurred on by vast wasted sums of money from the Federal Reserve and other sources, is over.

From a technical perspective, Wednesday's trade was an outright disaster. Declining issues led advancers by a 7:2 margin and new lows exceeded new highs for the third day in the last four.

DOW 15,738.79, -189.77 (-1.19%)
NASDAQ 4,051.43, -46.53 (-1.14%)
S&P 1,774.20, -18.30 (-1.02%)
10-Yr Note 100.26, +0.97 (+0.97%) Yield: 2.68%
NASDAQ Volume 2.05 Bil
NYSE Volume 3.93 Bil
Combined NYSE & NASDAQ Advance - Decline: 1289-4441
Combined NYSE & NASDAQ New highs - New lows: 66-128
WTI crude oil: 97.36, -0.05
Gold: 1,262.20, +11.40
Silver: 19.55, +0.049
Corn: 427.50, -4.50

Tuesday, January 28, 2014

Stocks Higher on Assumption That Fed Will NOT Immediately Taper Further

On the eve of Ben Bernanke's final FOMC meeting as Chairman of the Fed, stocks perked up in anticipation that the Fed will NOT decrease their monthly bond buying by another $10 billion.

The reasonings behind this are numerous, but mostly rely upon some poor economic data, dating back to early January's release of December non-farm payrolls, which were an admitted disaster.

Piling upon the low job creation and further decline in the workforce participation rate were Monday's new home sales for December, which fell by seven percent in the month, to a seasonally adjusted annual rate of 414,000, as reported by the Commerce Department. In November, sales fell 3.9 percent, making December the second consecutive monthly decline.

Hopping on the decline bandwagon Tuesday morning, the Case-Shiller housing index showed a month-over-month decline in November, something professor Shiller had been warning about since last May. The Standard & Poor's Case-Shiller index of home prices in 20 top cities fell 0.1% in November. A separate 10-city index also fell by 0.1%, though prices were higher by more than 13% on year-over-year data.

Perhaps the most overlooked piece of data also came forward prior to the opening bell, in the form of a massive miss on Durable Goods for December, down 4.3%. The decline was the largest since July. November was also revised lower, from 3.5% to 2.6%.

What that did for stocks was give investors further confidence that the Fed would not decrease their monthly allotment of bond purchases past the $75 billion mark come tomorrow afternoon, when the rate policy announcement is offered at 2:00 pm ET. The currency splashdown in various emerging economies - Venezuela, Argentina and Turkey, in particular - has been, in part, caused by the Fed's "tapering", withdrawing liquidity at a time when most sovereign economies are weak, at best.

A further tapering come tomorrow seems to be out of the question, according to the stock market's "bad news is good news" reaction on Tuesday. The rally could prove to be quite ephemeral, however, as stocks may very well add on more gains Wednesday after the Fed's announcement, but the condition persists. The Fed and most of their central banker brethren have been backed into a corner, wherein they cannot exit their market-propping QE policy, lest markets collapse.

With Bernanke handing over the chairmanship to Janet Yellen, there's at least some good odds that the new Fed chairwoman might even reverse course and begin adding even more QE to the mix, which would, naturally, lead to even more speculation in equities, commodities and rare works of art and real estate, sending the global economy further into the debt spiral from which it seems escape is impossible.

After the bell, AT&T modestly beat earnings expectations, and Yahoo beat on the bottom line, showing fourth quarter earnings of 46 cents on expectations of 39 cents. Revenues were in line, though shares of the oldest search portal were seen down more than five percent in after hours trading. Rumors that profit expectations fell short were being discussed as a primary cause for the selloff.

Additionally, the central bank of Turkey was expected to raise interest rates by as much as two to three percent in order to stave off further decline in the value of the Turkish Lira. The midnight meeting was taking place as of this writing though no news reports were available at the time of this posting.

DOW 15,928.56, +90.68 (+0.57%)
NASDAQ 4,097.96, +14.35 (+0.35%)
S&P 1,792.50, +10.94 (+0.61%)
10-Yr Note 99.93, +0.62 (+0.63%) Yield: 2.76%
NASDAQ Volume 1.85 Bil
NYSE Volume 3.35 Bil
Combined NYSE & NASDAQ Advance - Decline: 4069-1635
Combined NYSE & NASDAQ New highs - New lows: 68-64
WTI crude oil: 97.41, +1.69
Gold: 1,250.80, -12.60
Silver: 19.50, -0.29
Corn: 432.00, +0.25

Monday, January 27, 2014

Global Markets Tanking, US Stocks Down Again as Emerging Market Crisis Deepens

Little changed over the weekend to affect stocks, though the major issues remained. If you missed out Saturday Special Edition, it gives a good overview of what's occurring in world markets and what to expect.

Monday's action started on ominous beginnings as the Nikkei tumbled, along with all other Asian indices, most of them sporting losses of between one and two percent. When the world turned to European bourses, selling was the primary move, though losses in Europe were less severe than in Asia.

US indices opened higher, but quickly gave up their paltry gains. The NASDAQ was hardest hit, going negative and staying below the flat line for almost the entire session. The Dow - which closed lower for a fifth straight day - and S&P were up in the morning, down by midday, back up in the afternoon, but late-day selling finished them lower.

Word out of Turkey that the central bank is about to ratchet up interest rates offered some encouragement, and in Argentina, capital controls were announced, to the effect that citizens can buy up to $2,000 of US Dollars per month if their monthly salary is over 7,200 pesos ($900), after a two-year ban on buying dollars. Large businesses and investors were still barred from purchasing US Dollars as a hedge against Argentina's spiraling inflation.

The reaction to Friday's steep decline was more selling of US stocks, with declining issues beating advancers by more than a 3:1 ratio and new 52-week lows surpassing new highs for a second straight session.

The raging currency crisis did not prevent the powers that be from standing on precious metals, which were pounded down after gains in the Far East and again smoked at the NYMEX close and into the thinly-traded Globex session. At 4:00 pm ET, gold was down nearly $10 from its NYMEX high, with silver down more than 15 cents from its high mark.

After the close, tech monster Apple (AAPL) announced earnings that narrowly beat estimates, but, lagging iphone sales and a downbeat guidance for the current quarter sent shares down in after-hours trading by more than five percent.

If the Apple earnings are viewed negatively, it will only add fuel to the fire sale in stocks going forward. More companies are reporting this week, though much of investor focus is on the Fed meeting Tuesday and Wednesday. If the Fed maintains their stance of purchasing $75 billion in bonds per month - which is likely - that could provide some relief, though there seems to be a generally-mistaken idea that the Fed plans on cutting an additional $10 billion from their bond purchasing program each month. Such a move would, under current conditions, only exacerbate the flight of capital from equity markets and possibly plnge the global economy into a wide-ranging recession, which, on its own, may not be avoidable.

DOW 15,837.88, -41.23 (-0.26%)
NASDAQ 4,083.61, -44.56 (-1.08%)
S&P 1,781.56, -8.73 (-0.49%)
10-Yr Note 100.21, +0.13 (+0.13%) Yield: 2.76%
NASDAQ Volume 2.21 Bil
NYSE Volume 3.98 Bil
Combined NYSE & NASDAQ Advance - Decline: 1410-4350
Combined NYSE & NASDAQ New highs - New lows: 63-119
WTI crude oil: 95.72, -0.92
Gold: 1,263.40, -0.90
Silver: 19.79, +0.028
Corn: 431.75, +2.25

Saturday, January 25, 2014

Saturday Afternoon Quarterback: The Day After the Great January Stock Slide

OK, it's Saturday, and the world hasn't ended, but what's important is to keep abreast of developments over the weekend in places like Argentina and Turkey, both of which are experiencing significant currency issues.

The other part of today's exercise is to see if there is anything that might give a clue to the future, and as to whether the massive selloff on Friday (and all week on the Dow) was a one-off, or if it is going to lead to more dislocations in stocks, a further decline, a 10% correction, or a bear market, which is where the fun really starts for those bent on restoring some semblance of sanity to stock valuations.

Yes, Cry for Argentina

Argentina, a country already shut off from foreign credit markets (could be a blessing in disguise) after the financial collapse of 2001-2002, has been in crisis mode for most of the past three years, with citizens unable to purchase US Dollars with their local currency, the peso, except on black markets, where the going rate is roughly 11-1 or 12-1.

Other restrictions on the movement of money have been imposed by the autocratic government of Christina Kirchner during the recent past, but on Friday, the government was said to be lifting the ban on the purchase of dollars, with an official rate of 8-to-1, and a 20% surcharge, pushing the "official" exchange rate closer to black market prices, though not equal to them. The new policy is said to take effect on Monday, though local chatter is that the government won't have enough dollars available by then to meet expected demand.

The black market is thriving in Argentina's cities, the Euro and US Dollar being the main currencies accepted for millions in hidden transactions. With inflation running at about 30% over the past year, this crisis seems to have legs, eventually resulting in full-blown currency rejection, prompting various economic, social and political problems, likely precisely what the overlords at the World Bank and IMF have in mind.

Argentina is Greece writ large, without bailouts. The take-away is that this is nothing short of economic warfare, with the citizenry being the victims via inflation, social unrest, political uncertainty, with the goal being having the government succumb to the demands of international bankers, who will grind the country down with crushing debt packages disguised as "aid."

Turkey Stew?

In a nutshell, Turkey, a country that is a geographic crossroad between Europe, Asia and the Middle East, is at more crossroads - economic, social and political - than its current leaders can handle. While the country is mostly Sunni Muslim, most of its neighbors to the South (Syria, Iran and Iraq) are Shiite. On the other side to the West is Europe, and the struggle to admit Turkey to the EU has been ongoing for nearly a decade.

The rapid devaluation of the lira, the country's official currency, was a design of European technocrats, who seek to weaken the country's finances to a point at which acceptance of the Euro as the "new" currency would be greeted with cheers of economic progress and stability, though opponents of entering into full-blown Euro acceptance consider that a move characteristic of failure, and point to the loss of sovereignty that would result.

To the North, lies Georgia, Russia and, across the Black Sea, the Ukraine, which has descended into a condition close to civil war, mostly over the issue of whether to join the European Union or throw in with Russia, which holds sway over the country's gas supply. This is somewhat of the same situation facing the Turks and makes the situation all the more confusing. With so much turmoil in the region already, it wouldn't take much of a spark to turn Turkey into a pretty large battlefield, some of it, mostly the southern region, already torn up by the Syrian conflict.

It doesn't take much imagination to see the Turkish situation spiraling wildly out of control. Al Queda already runs arms and terrorists through the country, and Russia also smuggles weaponry to Syria through it. If Turkey were to erupt into violence, one could easily see a wide swath of nations - from Egypt all the way to the Ukraine - as a war zone, much of it already engulfed by violence.

The Wider View

If the situation in Turkey, Syria and the Ukraine wasn't enough to destabilize markets, Argentina and the brewing banking crisis in China certainly have to be rankling the money-handlers.

Here is a brief clip and transcript (about eight minutes) that describes the shadow banking problems in China. Essentially, shadow banking enterprises are financing loans made to companies who borrowed from official channels and have run out of credit or the ability to borrow more on good terms from China's official banking system has been exhausted. The issue is one of rolling over credit in order to avoid default, but, as the article explains, China is going to slow and some industries will be negatively affected, and whole businesses shuttered.

With the difficulty of getting straight information out of China still a huge problem, it's unclear how bad China's debt-to-GDP ratio has become, though it is certainly more than the officially reported 125%.

Of course, with debt-to-GDP at that level or higher in the bulk of developed and emerging nations, China's problems just add to the mix, though it's like dropping a whole stick of butter into a small bowl of flour and milk. It's so big, it threatens to clog up the entire operation and that's what is most worrisome.

There are, naturally, many more reasons why stocks plunged on Friday, from Italy's unemployment at an all-time high of 12.7%, to Spain's unemployment dwarfing that, at 26.8%.

Other indicators include the Baltic Dry Index (BDI), which collapsed in the two weeks after the holidays by an unprecedented amount, and, China's most recent PMI, which the financial media give a wide berth for the cause of the selloff in US stocks. The PMI fell to 49.6, indicating contraction in the manufacturing sector, the lifeblood of the Chinese - and to a great degree, the global - economy.

Here at home, retailers are feeling the pinch from a horrid holiday shopping season, the worst since 2008. JC Penny and Sears have already announced store closings and layoffs. Target and Wal-Mart announced layoffs on Friday, though they were small in number.

Technicals Matter

Technically, US indices are in pretty good shape, overall. The Dow and S&P had been making new all-time highs at the end of 2013, but the performance in the first three full weeks of 2014 are not encouraging. With Friday's decline, the Dow ripped right through its 50-day moving average. On just Thursday and Friday, the Dow more than tripled its losses for the year. The two-day decline was more than 500 points, a number that represents a roughly 3% loss, but, since the index has risen so high, the point total of over 300 points on Friday has a psychological impact.

Imagine the Dow Jones Industrials as a 1600-pound animal, maybe a small hippo. A one-percent loss in weight - 16 pounds - wouldn't seem to matter much, but a 3% loss is close to 50 pounds, possibly worth notice. If the animal were to lose 10% (a correction, in market terms), or 160 pounds, veterinarians would be consulted, and, if a 20% loss in weight were to occur (indicative of a bear market), some might the 320-pound loss in weight was indicative of the animal having a severe disease.

The S&P likewise fell through its 50-day moving average, though the NASDAQ remained in suspended animation above its 50-day moving average, buoyed by Netflix and Google in recent days, though that position may be in jeopardy if the declines from the past few weeks persist and morph into something larger.

Key support areas on the Dow are at 15,450 and 1700 on the S&P, both the 200-day moving averages.

Also, the number of new lows exceeded new highs on Friday, the first time that has happened this year.

Forward Thinking

With earnings season in full gallop, next week should provide more fireworks. Apple and Google will be reporting, and those will be the big ones to watch. Since they are techs, they'll likely give the markets some pause and reason to ignore the declines of the past week, but the big enchilada is the two-day FOMC meeting on Tuesday and Wednesday, January 28 and 29, Ben Bernanke's last.

While the Fed didn't expressly say so when it announced the tapering of their bond purchase program by $10 billion last month, the fear on the Street is that they will announce another $10 billion reduction, bringing their monthly purchases down to $65 billion in February, from $85 billion in December.

Nowhere in its press release from last month
did the Fed even mention further cuts, so a reasonable expectation is that they will continue asset purchases at a rate of $75 billion per month, which, seriously, is more than enough, though market crybabies would like to see even more artificial stimulus.

Interest rates are also normalizing again, with the 10-year dropping to its lowest yield since prior to the "taper" announcement, closing Friday at a yield of 2.72%

Essentially, the turnback on Friday wasn't such a big deal, though any downturn is viewed with skepticism since the Fed is still supplying so much liquidity. If stocks can't maintain their current valuations, it means one of a couple of things. One, the Fed's policies are a complete failure, or, two, the economy is much weaker than anyone thought, or, three, stocks ran up to a highly overbought level and investors are just taking profits, albeit, at a rapid pace.

What's important to watch is how stocks act next week, the final week in January. The Fed announcement will be key, though they shouldn't influence markets considerably unless they taper even more, an unlikely event. If the major indices make it through the week without losing much or actually making gains, keep a close eye on the recent all-time highs on the S&P and the Dow. If these levels are not surpassed, that's a plain signal of a primary bear market. That should surprise nobody except perma-bulls, because this bull market will be a full five years old - 60 months - on March 9th. If the market makes a V bottom and rebounds past the highs (a correction and rebound), short at your own risk, because that would be a sign of a continuing liquidity-driven push higher.

One other indicator to consider is the January Barometer, which, at this juncture, looks certain to be negative. The direction of stocks in January has about a 90% correlation to direction for the rest of the year, so, unless there's a miracle rally this coming week, 2014 appears to be heading South.

For now, it's too early to call direction, but this brief summary of some of the key issues should provide background for all investors.

Friday, January 24, 2014

Mango! Stocks Rocked Again on Huge Volume Spike


There is simply too much data swirling around today for an accurate assessment, but, if anything, this looks like the absolute end of the bull market, now in its 59th month.

Believe it or not, there was actually an analyst on CNBC saying they're advising clients to buy! The VIX was down more than 30% at certain points during the day.

The January Barometer is predicting a sour 2014.

We'll have a special report by noon Saturday, which should not be missed as it will provide more granularity about this week's market events.

Just for starters, the new highs-new lows flipped over today, the 10-year note closed at 2.72%.

Here are the indices, at the close, for the week:
Dow -579.45 (-3.52%)
NASDAQ -69.41 (-1.65%)
S&P 500 -48.41 (-2.63%)

All this is just today:
DOW 15,879.11, -318.24 (-1.96%)
NASDAQ 4,128.17, -90.70 (-2.15%)
S&P 1,790.29, -38.17 (-2.09%)
10-Yr Note 100.23, +1.00 (+1.00%) Yield: 2.72%
NASDAQ Volume 2.32 Bil
NYSE Volume 4.61 Bil
Combined NYSE & NASDAQ Advance - Decline: 803-4983
Combined NYSE & NASDAQ New highs - New lows: 72-106
WTI crude oil: 96.64, -0.68
Gold: 1,264.30, +2.00
Silver: 19.76, -0.245
Corn: 430.00 +0.50

Thursday, January 23, 2014

Why the Boom Went Bust Today; Stocks Rocked; Gold, Silver, Bonds Higher

Despite a pair of great earnings reports after the bell Wednesday - Netflix and eBay - stocks sold off dramatically on Thursday, starting even before the opening bell, as futures pointed to a grim opening.

When trading began, the Dow slumped an immediate 135 points, while the S&P and NASDAQ took on deep losses. The negative condition persisted throughout the day, actually getting worse in the afternoon.

While stocks have already begun the year on a less-than-enthusiastic note, today's drops were the worse seen since last August and quite possibly are foretelling of further declines to come.

Commentators in the financial media mostly failed to comprehend the causes for today's collapse in equities, which were, in no particular order, the Chinese banking system becoming unglued, Turkey's economy falling apart at the seams, heightened tensions in the Ukraine, fear over terrorist attacks at the Olympics in Soshi, Russia, continuing civil war in Syria and 1.37 million people dropping off of the Emergency Unemployment Compensation roles.

Let's examine this last bit of news first, because it is so US-centric and is a troubling sign of the ongoing impotence of the federal government. Recall, the noises out of Washington, DC, earlier this month about restoring the aid to the people whose 99 weeks of unemployment were ending. Democrats were screaming "unfair," and that we need to help these people, as the money for these continuing unemployment benefits was eliminated by the widely-hailed budget "deal" that passed through congress in December.

Recall, also, that pension and benefits for military retirees and disabled vets was also slashed by that budget and roundly criticized by congress-people on the left and the right. The cuts were said to be "unpatriotic", and many vowed to restore them. A month has gone by and those cuts are still in place. Veterans are getting the shaft, and now, the long-term unemployed, without the media (controlled by the government) raising as much as an eyebrow over these issues, proving, without any shadow of a doubt, that the politicians in Washington have not only lost all sense of justice, decency or propriety, but they are also quickly losing their ability to make coherent policy.

What politicians in Washington, DC, have accomplished, however, is the uncanny ability to lie ruthlessly about anything at all, and to now lose what little support remained from the people of the United States. With the approval rating of congress already at multi-generational lows, it's about to go even lower. People should have been in the streets already, but their voices have been silenced by the Federal Reserve, together with the false statistics about the "improving economy" bantered about the past four to five years.

What will be lost next by the politicians is their ability to rule. They have lost all credibility and the consent of the people has long since been quietly withdrawn by many. The federal government, either by design or incompetence, has been failing and is about to fail completely. Without somebody stepping up to right the ship - and don't count on it - the ship of state, already rudderless and with torn sails, has begun to sink. Special interests to which the politicians have catered, have blown a hole in the hull, and it's not readily repairable. The United States is rapidly devolving into a fascist, welfare/police state, and, making matters worse and more worrisome, this is only the beginning.

Other than the United States collapsing in a major hurry, the rest of the world doesn't look much rosier. If nobody gets killed at the Olympics - if they even go off as planned - it will be nothing short of a miracle.

The other major events of the day were the widespread devaluation in the value of the Turkish Lira and a bank failure in China, also just beginning.

Turkey's currency fell three percent against the dollar, the most of any currency outside of Argentina (already a basket case, down 14% just today), despite intervention by the central bank, which was reportedly in the process of unloading $3 billion in foreign reserves.

In China, the evolving shadow banking crisis just went from bad to worse as it was reported today that some rural credit unions have been unable to pay back depositors for over a year. This would, in most countries, have been major news, prompting a flight of money from banks (bank run), but the circumspect Chinese media suppresses most of this kind of information from the outside world. In a nutshell, China's dubious "boom" economy may be going bust, or, realistically, may already be well down the path of self-immolation.

Taking just these few "newsy" items into perspective, it just might be time to return to "clinging to their guns and bibles," for more than just a few Americans. As for the rest of the world, well, their guns have largely already been confiscated and bibles don't offer much protection. Pitchforks and torches, anyone? God save them.

Others may be taking some time to polish up the gold and silver, which were the main winners on the day, along with the 10-year note, which fell to 2.80, the lowest yield in roughly two months.

As if that wasn't enough, teen idol, Justin Beiber, was arrested last night for DUI. Oh, the horror!... and, no, we're not linking to that story.

DOW 16,197.35, -175.99 (-1.07%)
NASDAQ 4,218.87, -24.13 (-0.57%)
S&P 1,828.46, -16.40 (-0.89%)
10-Yr Note 99.56, +1.25 (+1.27%) Yield: 2.80%
NASDAQ Volume 2.00 Bil
NYSE Volume 3.91 Bil
Combined NYSE & NASDAQ Advance - Decline: 1829-3918
Combined NYSE & NASDAQ New highs - New lows: 196-62
WTI crude oil: 97.32, +0.59
Gold: 1,262.30. +23.70
Silver: 20.01, +0.171
Corn: 429.00, +2.75