Sunday, February 18, 2018

Dow Hangs Onto Friday Gains Amid Late-Session Selloff

It was options expiration Friday and the volatility showed up late in the day, as the Dow shed more than 200 points off a morning rally, closing marginally ahead. The S&P gained a point and change, but the NASDAQ slipped into the red for the day.

The entire trading day came to matter little in the larger scheme, especially for the NASDAQ, which led all indices with a gain of more than five percent for the week.

With markets closed for President's Day on Monday, February 19, investors will take the time off to evaluate foreign markets and prepare for the seven remaining trading days of the month.

Stocks have clawed back more than half of the losses incurred earlier in the month, setting up for a continuation of the short-term rally well in advance of expected rate hikes at the next FOMC meeting on March 20-21.

This leaves stock indices with strong support at their respective 200-day moving averages, bottoms which look less likely to be revisited any time soon.

After some tumult earlier in February, it appears that nothing of import has changed - besides the value of the dollar and rates on treasury bonds - supportive of the proposition that central banks are still in charge and complete control.

Should investors be worried?

Always. But, presently, they are not.

Dow Jones Industrial Average February Scorecard:

Date Close Gain/Loss Cum. G/L
2/1/18 26,186.71 +37.32 +37.32
2/2/18 25,520.96 -665.75 -628.43
2/5/18 24,345.75 -1,175.21 -1,803.64
2/6/18 24,912.77 +567.02 -1,236.62
2/7/18 24,893.35 -19.42 -1,256.04
2/8/18 23,860.46 -1,032.89 -2288.93
2/9/18 24,190.90 +330.44 -1958.49
2/12/18 24,601.27 +410.37 -1548.12
2/13/18 24,640.45 +39.18 -1508.94
2/14/18 24,893.49 +253.04 -1255.90
2/15/18 25,200.37 +306.88 -949.02
2/16/18 25,219.38 +19.01 -930.01

At the Close, Friday, February 16, 2018:
Dow Jones Industrial Average: 25,219.38, +19.01 (+0.08%)
NASDAQ: 7,239.47, -16.96 (-0.23%)
S&P 500: 2,732.22, +1.02 (+0.04%)
NYSE Composite: 12,874.36, +17.49 (+0.14%)

For the Week:
Dow Jones Industrial Average: +1028.48 (+4.25%)
NASDAQ: +364.97 (+5.31%)
S&P 500: +112.67 (+4.30%)
NYSE Composite: +468.54 (+3.78%)

Friday, February 16, 2018

Rally On! Dow Regains More Than Half of February Losses

With the Dow Industrials posting the fifth straight positive session, he blue chip average has regained more than half of the losses incurred during the first six trading sessions of February.

Standing just above 25,200, the Dow has been an impressive performer following the instant, interest rate sensitive melt-down earlier in the month.

The Dow is up more than 1000 points this week, with Friday's session important as stock options reach expiration.

Last week's scare has morphed into this week's buying opportunity, as investors have scrambled back into stocks after equity funds experienced record outflows just a week prior.

Those who sold at the interim bottom may be experiencing some seller's remorse presently, though the stock market has still has some distance to travel back to all-time highs.

Has anything changed besides sentiment, which is now returning to bullishness after a spat of fear entered the minds of speculators?

Certainly, rising interest rates are a concern, with the 10-year-note reaching four-year highs. The value of the US dollar, as reflected in currency FX pairs and the Dollar Index, is another new feature of the cycle-weary market. The dollar has weakened considerably over the past 12 months and does not appear to have four support.

Higher interest rates on treasuries usually causes strengthening in the dollar, but not this time, befuddling the normally-smug bond and currency analysts. If bond yields continue to rise and the dollar does not recover substantially, then all manner of economic theory can be tossed out the proverbial window.

Whatever the case may be - not discounting the effect of accelerating volatility during the recent downturn - there remains considerable uncertainty which must somehow be resolved, either by a permanent change in market direction from bull to bear, or a continuation of the long rally off the GFC lows of 2009.

Dow Jones Industrial Average February Scorecard:

Date Close Gain/Loss Cum. G/L
2/1/18 26,186.71 +37.32 +37.32
2/2/18 25,520.96 -665.75 -628.43
2/5/18 24,345.75 -1,175.21 -1,803.64
2/6/18 24,912.77 +567.02 -1,236.62
2/7/18 24,893.35 -19.42 -1,256.04
2/8/18 23,860.46 -1,032.89 -2288.93
2/9/18 24,190.90 +330.44 -1958.49
2/12/18 24,601.27 +410.37 -1548.12
2/13/18 24,640.45 +39.18 -1508.94
2/14/18 24,893.49 +253.04 -1255.90
2/15/18 25,200.37 +306.88 -949.02

At the Close, Thursday, February 15, 2018:
Dow Jones Industrial Average: 25,200.37, +306.88 (+1.23%)
NASDAQ: 7,256.43, +112.81 (+1.58%)
S&P 500: 2,731.20, +32.57 (+1.21%)
NYSE Composite: 12,856.87, +110.15 (+0.86%)

Thursday, February 15, 2018

Despite Relatively Hot CPI, Stocks Rip Higher

What's that old saying?

It's something like... "don't wish too hard, you may get what you want."

Well, it applies to the Fed, ECB, BoJ and other central banks, which have been screaming for higher inflation ever since the Great Financial Crisis of 2008-09.

On Wednesday, they got some of the "good" news. The CPI for January came in with a gain of 0.54 month-over-month, the biggest increase since January of 2017. Being that both January of this and last year were the high points for CPI, it might be a statistical anomaly, though that thought seemingly hasn't crossed the minds of any economic reporters.

Higher consumer prices in January, however, didn’t substantially alter the overall picture on inflation. The increase in the CPI over the past 12 months remained unchanged at 2.1%.

After stripping out volatile gas and food, the more closely followed core rate of inflation rose 0.3% last month. The 12-month rate of core inflation was also flat at 1.8%.

So, once stock players digested the news, which was released an hour prior to the opening bell, futures nosedived, stocks opened deep in the red, but, within an hour, it was off to the races, despite interest rates - especially the 10-year-note - rising sharply.

The 10-year-note popped over 2.9% yield, while gold and silver - traditional inflation hedges - soared throughout the day.

Seems nobody really knows what will happen, though many profess to have deep inner knowledge of how economics actually works.

Maybe we're all just being played for fools.

Pull my finger...

Dow Jones Industrial Average February Scorecard:

Date Close Gain/Loss Cum. G/L
2/1/18 26,186.71 +37.32 +37.32
2/2/18 25,520.96 -665.75 -628.43
2/5/18 24,345.75 -1,175.21 -1,803.64
2/6/18 24,912.77 +567.02 -1,236.62
2/7/18 24,893.35 -19.42 -1,256.04
2/8/18 23,860.46 -1,032.89 -2288.93
2/9/18 24,190.90 +330.44 -1958.49
2/12/18 24,601.27 +410.37 -1548.12
2/13/18 24,640.45 +39.18 -1508.94
2/14/18 24,893.49 +253.04 -1255.90

At the Close, Wednesday, February 14, 2018:
Dow Jones Industrial Average: 24,893.49, +253.04 (+1.03%)
NASDAQ: 7,143.62, +130.10 (+1.86%)
S&P 500: 2,698.63, +35.69 (+1.34%)
NYSE Composite: 12,746.72, +172.35 (+1.37%)

Wednesday, February 14, 2018

Stocks Struggle to Small Gains Through Listless Session

Like Chinese water torture, the slow drip... drip... drip... of the stock market's dips and ascents had Wall Street hoping for better on Tuesday, but, after an early rally erased opening losses, stocks lost momentum into the close, finishing with insignificant gains.

While January was kind to investors of all stripes, February has been rude, sending stocks briefly into correction territory and still hovering just above recent lows.

Dow Jones Industrial Average February Scoreboard:

Date Close Gain/Loss Cum. G/L
2/1/18 26,186.71 +37.32 +37.32
2/2/18 25,520.96 -665.75 -628.43
2/5/18 24,345.75 -1,175.21 -1,803.64
2/6/18 24,912.77 +567.02 -1,236.62
2/7/18 24,893.35 -19.42 -1,256.04
2/8/18 23,860.46 -1,032.89 -2288.93
2/9/18 24,190.90 +330.44 -1958.49
2/12/18 24,601.27 +410.37 -1548.12
2/13/18 24,640.45 +39.18 -1508.94

At the Close, Tuesday, February 13, 2018:
Dow Jones Industrial Average: 24,640.45, +39.18 (+0.16%)
NASDAQ: 7,013.51, +31.55 (+0.45%)
S&P 500: 2,662.94, +6.94 (+0.26%)
NYSE Composite: 12,574.37, +14.25 (+0.11%)

Tuesday, February 13, 2018

How Long Before Stocks Regain Previous Highs?

The question before Wall Street's punters, planners and prognosticators is measuring the length of time it will take for the main indices to regain their prior all-time-high levels.

Just in case the recent downturn isn't of the long-term variety (a 50-50 proposition), the guesses and estimates range from a few weeks to a matter of months. However, if circumstance prevail to keep stocks lower - higher interest rates, bouncy economic data, unexpected geopolitical events - regaining the high ground could take years.

A couple of recent retreats and rises may prove instructive.

After the NASDAQ shattered the 5000 mark in 2000 (5,048.62, March 10, 2000), it subsequently crashed and burned, shedding roughly 75% of its value by March 9, 2009 (1,268.64). It didn't get all the way back to the previous top until April 25, 2015, when it closed at 5,056.06.

Even more recent, when the Dow Jones Industrial Average topped out at 14,164.53 on October 9, 2007, less than 18 months later it had fallen by more than 50%, to 6,547.05, bottoming out on March 9, 2009. Fueled by central bank largesse in the form of ZIRP and QE, the Dow rocketed back to prior highs until March 5, 2013, closing at 14,253.77 that day, a period - from top to top - of a mere five-and-a-half years.

From this recent data, it appears the tops and bottoms are generally features of Spring and Fall, so the most recent January highs may not signal the market's last hurrah but portend another quick rise back beyond and then a fall.

Whatever the case may be, it does appear that the second-longest bull market in history is nearing an end, and may, in fact, be done. How long it takes to get back, after the eventual crash, is an open question, and one that should be correctly assessed in terms of years, and probably more than a decade.

For the record, the Dow regained some of what it lost over the past two weeks, but it still has a fair a distance to travel back toward the all-time highs, a touch more than 1500 points.

Next week? Why not?

Dow Jones Industrial Average February Scoreboard:

Date Close Gain/Loss Cum. G/L
2/1/18 26,186.71 +37.32 +37.32
2/2/18 25,520.96 -665.75 -628.43
2/5/18 24,345.75 -1,175.21 -1,803.64
2/6/18 24,912.77 +567.02 -1,236.62
2/7/18 24,893.35 -19.42 -1,256.04
2/8/18 23,860.46 -1,032.89 -2288.93
2/9/18 24,190.90 +330.44 -1958.49
2/12/18 24,601.27 +410.37 -1548.12

At the Close, Monday, February 12, 2018:
Dow Jones Industrial Average: 24,601.27, +410.37 (+1.70%)
NASDAQ: 6,981.96, +107.47 (+1.56%)
S&P 500: 2,656.00, +36.45 (+1.39%)
NYSE Composite: 12,560.12, +154.30 (+1.24%)

Saturday, February 10, 2018

Stocks Continue Downward Spiral Second Straight Week

With stocks rallying on Friday, the disastrous second straight week of declines came to a relieving finish for equity longs, but not without significant teeth-gnashing through the tortuous five trading days.

The Dow and S&P 500 each entered correction territory on Thursday, as the blue chip index posted its second-largest single-day point decline. With the focus on the 10% down mark, Friday's gains may serve only as a temporary salve to many frayed nerves.

With the Dow Industrials still down nearly 2000 points in just the first seven trading days of February it's going to take quite an effort to regain all-time highs. The major indices peaked simultaneously in late January, but it's been all downhill since then, and the probable causes for such a shakeout are still in effect, if not even more exacerbated in the case of bond yields.

Globally, outflows from equity funds set a record, as investors pulled $30.6 billion out in the week through Wednesday, according to global fund tracker EPFR.

Breaking down those flows, the U.S. dominated with a record $33 billion in equity redemptions, while Europe saw $3.3 billion exit, the largest in 79 weeks. Japan saw the strongest equity inflows in 65 weeks at $2.4 billion, while $2.4 billion flowed into emerging markets, according to Bank of America Merrill Lynch.

Weekly declines in US markets were uniform, as the four major indices were all lower by at least five percent, led by the Dow, at 5.21%.

The 10-year-note closed out the week at 2.83%, a level seen promoting a massive shift from stocks to bonds and risk to relative safety. Crude oil slipped to its lowest level of the year, finishing off Friday at $59.05. Though not directly related to the equity selloff, crude prices have been elevated for the past two months until they were devastated by a massive increase in supply, reported this week.

Precious metals prices were muted, falling along with stocks, bonds and nearly every other asset class.

Trickling out from the corners of mouths were murmurings of getting long art, transportation, real estate and anything tangible.

Obviously, the correction is not over, having barely dipped a toe into the -10% water. It would not be unusual to see stocks bounce early next week and possibly beyond, though a retest of the prior lows is all but inevitable.

While caution had been thrown to the wind all of last year and through January of this year, consensus sentiment has changed dramatically and markets are likely to remain unstable until volatility subsides. That may not happen for some time, since the past nine years of bank-and-buyback-induced stock profits have been characterized by extremely low levels of volatility.

The past two weeks have been witness to a fundamental change in many regards. Extreme greed turned to a healthy level of fear in just a few days.

Rising rates and the prospect of profligate spending at the federal level point to further declines in the equity complex.

Dow Jones Industrial Average February Scorecard:

Date Close Gain/Loss Cum. G/L
2/1/18 26,186.71 +37.32 +37.32
2/2/18 25,520.96 -665.75 -628.43
2/5/18 24,345.75 -1,175.21 -1,803.64
2/6/18 24,912.77 +567.02 -1,236.62
2/7/18 24,893.35 -19.42 -1,256.04
2/8/18 23,860.46 -1,032.89 -2288.93
2/9/18 24,190.90 +330.44 -1958.49

At the Close, Friday, February 9, 2018:
Dow Jones Industrial Average: 24,190.90, +330.44 (+1.38%)
NASDAQ: 6,874.49, +97.33 (+1.44%)
S&P 500: 2,619.55, +38.55 (+1.49%)
NYSE Composite: 12,405.82, +135.17 (+1.10%)

For the Week:
Dow: -1330.06 (-5.21%)
NASDAQ: -366.46 (-5.06%)
S&P 500: -142.58 (-5.16%)
NYSE Composite: -679.53 (-5.19%)

Friday, February 9, 2018

The Gartman File (It's about time this fraud was exposed)

Well, after publicly calling out Dennis Gartman, celebrity investment advisor and frequent guest on CNBC, and trying to sign up for his newsletter (, Money Daily editor Fearless Rick has received no response.

Now, maybe it's because the people at The Gartman Letter are really, really busy, tracking stocks and currencies and ETFs and what not, though that's a serious doubt. It would make more sense to believe that Gartman is indeed lying - to his subscribers, primarily - about his year-to-date (as of March 10) performance of 12.3% and outperforming the S&P by 14%, especially after digging into Mr. Dennis Gartman's history.

On March 29, 2016Gartman "admits" that he's up 8.2%.

At one time, Gartman was pegged to manage an ETF for Horizons, a Canadian-based investment firm with various funds and ETFs under management. Specifically, the fund was known as the Horizons AlphaPro Gartman ETF, which was founded in March 2009 (perfect timing, being that was the market bottom), and went out of business four years later, on March 22, 2013.

Gartman, expert trader and analyst he claims to be, managed to lose money for the ETF and its clients while the S&P was up something on the order of 132% (from about 670 to roughly 1550).

Here's an article from the UK's Guardian (note: no mention of this on CNBC or any other US news media), published just before the AlphaPro Gartman ETF closed its doors at 7.90 per share, after opening four years earlier at $10.00.

But the Gartman ETF, named after advisor Dennis Gartman, ubiquitous author of the Gartman Letter, an investment advisory, couldn’t harness the benefits of its fortunate timing. The fund went public at $10 a share. Those same shares now fetch around $7.90.

More astonishing is that this closed-end fund actually saw the equivalent of massive redemptions. That’s unheard of in the closed-end world. With the asset base, and therefore fees, down sharply, it’s no surprise that Horizons Alphapro has decided to shut the fund down next month.

Here's an earlier article on Seeking Alpha, (June 23, 2011) that notes the fund had done OK for some time, but as of the article's writing, was down 7.7%.

Here is a rather humorous note from Peter Grandich, on Gartman's performance with a chart comparing his fund to the price of gold.

Nowhere to be found on any of Mr. Gartman's various postings and appearances are mention of his Hedge Fund, formed in August of 2009, as the River Crescent Fund (apparently named for the street on which he lives and likely does business from, in Suffolk, Virginia). At the time, Gartman was looking to raise the modest sum of $200 million from investors, and, according to his SEC filings, would accept a minimum of $5 million for starters.

Apparently, anybody with five million bucks didn't need Gartman's advice, because since its inception, there's been no news, no investments, no nothing, except for a lonely SEC filing. That's probably a good thing for most investors.

So, what does Gartman manage today, after failing miserably during one of the great bull markets of all time? According to sources, he manages his own retirement fund. And that's the one he claims is up 12.3% on the year, while the stock market was beaten down severely in January and early February, and gyrating in negative territory for the better part of the past month.

Essentially, from March 2009 through March 2013, Gartman should have had worn disclaimers every time he appeared on CNBC. whether he was or not is a question for the way-back machine. Certainly, there are clips from that time period and Money Daily will investigate further. Oddly enough, no mention is made of Gartman's failure with the AlphaPro Gartman EFT on his official CNBC biography.

Here's a particularly bad call, when Gartman said he was getting out of stocks in August of 2012, just prior to the Fed's launch of QE3, a mammoth stimulus, less than a month later.

Also, as far as can be discerned, Mr. Dennis Gartman is neither a registered equity trader, a member of FINRA, nor a futures trader (since 2005). Nor is Mr. Gartman a registered investment advisor.

The only conclusions one can reasonably assume is that Dennis Gartman, being well past his prime, is living off the $50 to $100 per day he makes appearing on CNBC and whatever meager earnings he derives from his newsletter.

Speaking of his newsletter - which I have never seen and doubt ever will as my request on his website has not elicited so much as a response - here are a few reviews. They're generally unflattering, again, begging the question as to why the clownish Gartman is even on CNBC at all.

Updating on April 21, 2016, Gartman says he likes Alcoa (AA) and Gold in Yen or Euro terms. Naturally, as soon as he had finished his on-air mouthings, gold fell $20... in US dollar terms, of course. As for the Alcoa call, it's a pretty safe one, since AA has been as high as 17.75 (November, 2014) and, recently, down to a multi-year low in January of 6.12 (intra-day). Calling it a buy around $10 a share isn't exactly rocket science. Gartman may actually have a winner here, but it won't be much of one.

UPDATE: Gartman has gone from bearish (in light of a face-ripping 200-point rally on the Dow, May 24) to bullish in 24 hours. This is the typical Gartman flip-flop and more evidence that he's a complete buffoon and plays with imaginary money.

What a clod!

Thursday, February 8, 2018

Dude, Where's My Retirement Pension?

Stocks took another punch to the gut on Thursday, extending the February losses on all global indices.

The Dow Jones Industrial Average officially (-10%) entered correction phase.

The NASDAQ is within a hair of a 10% drop, from 7,505.77 to 6,777.16. 6755.19 is the magic number in this case.

On the S&P 500, the January 26 top of 2,872.87 is far away from the close into correction territory (at 2585.87), achieved in today's session with a triple-digit loss.

The Dow Jones Industrial Average Scoreboard looks like this:

Date Close Gain/Loss Cum. G/L
2/1/18 26,186.71 +37.32 +37.32
2/2/18 25,520.96 -665.75 -628.43
2/5/18 24,345.75 -1,175.21 -1,803.64
2/6/18 24,912.77 +567.02 -1,236.62
2/7/18 24,893.35 -19.42 -1,256.04
2/8/18 23,860.46 -1,032.89 -2,288.93

That's in just six trading sessions, people. All the major averages are down for the year, but, hey, it's only February. Plenty of time to boost those profits.

This is only the beginning of a collapse that may be unprecedented. Considering the adherence to antiquated Keynesian economic theories spoon-fed to the masses, the unwinding will be a farce, fed by propagandists, though it's effects will be somewhat permanent on the financial status of almost everybody.

Precious metals were among the few gainers on the day.

At the Close, Thursday, February 8, 2018:
Dow Jones Industrial Average: 23,860.46, -1,032.89 (-4.15%)
NASDAQ: 6,777.16, -274.82 (-3.90%)
S&P 500: 2,581.00, -100.66 (-3.75%)
NYSE Composite: 12,270.65, -416.53 (-3.28%)

Wednesday, February 7, 2018

How is Your Money Doing? Here's the February Dow Scoreboard, Day 5

In the sports world, all manner of statistics and scenarios are routinely trotted out in attempts to reinforce how one team or player is better than another. All of this analysis is done every day on TV and radio talk shows, but the in the final analysis, as so perfectly expressed by the king of sports talk radio, Jim Rome, is "scoreboard," as in, who won the game, no matter the stats.

The same kind of metric can easily be applied to stocks and investments, as it no doubt should be. Thus, there's no need for analysis, no need for bald-headed, econo-speak commentators, no need for inverse correlations, causations, or extrapolations. All that matter can be found in the daily closing prices for individual stocks, or for individual stock indices, such as the Dow Jones Industrial Average, the measure by which everybody measures success.

Over the past four trading sessions, there's been more than sufficient ammunition for all kinds of wild speculation and analysis of what happened and why, and there may be a thousand reasons why the Dow and other indices were slaughtered last Friday and again this Monday. The more simplistic answers appear in the comeback sessions on Tuesday and Wednesday, which failed to recoup all of the losses. Thus, it's all in the scoreboard, i.e., the daily closes on the Dow. Nothing more, nothing less. No analysis necessary. You either won or you lost.

Let's just track the Dow through the month of February and see how well those precious stocks are doing.

Here are the only numbers that matter:

Dow Jones Industrial Average dates, closing prices, gains or losses:

Date Close Gain/Loss Cum. G/L
2/1/18 26,186.71 +37.32 +37.32
2/2/18 25,520.96 -665.75 -628.43
2/5/18 24,345.75 -1,175.21 -1,803.64
2/6/18 24,912.77 +567.02 -1,236.62
2/7/18 24,893.35 -19.42 -1,256.04

So, as can clearly be seen, even adding in the smallish gain on Feb. 1, the Dow is down a massive amount. The contention here at Money Daily is that there has been a sea change in the market. Not only is a correction in the works (-10%), but a bear market (-20%) is quickly developing. We'll keep tracking so you at home can keep score on your "investments."

At the Close, Wednesday, February 7, 2018:
Dow Jones Industrial Average, 24,893.35, -19.42 (-0.08%)
NASDAQ: 7,051.98, -63.90 (-0.90%)
S&P 500: 2,681.65, -13.49 (-0.50%)
NYSE Composite: 12,714.83, -30.62 (-0.24%)

Tuesday, February 6, 2018

Dow's Dramatic Comeback 4th-Best in History

That was something to behold.

Not only did the Dow open down a whopping 500 points, but it battled back and forth across the unchanged line - as did the other major indices - until finally launching itself into a hyperbolic ascent in the final hour of the session.

While the Dow's rise was the 4th-biggest point gain in its long history, there's still work to be done. Just to get back what it lost last Friday and Monday of this week will take two more days of equal heavy lifting, something that is unlikely unless one lives on the planet Utopia, where unicorns spit skittles and money grows on trees.

Even more daunting may be the return to all-time highs (26,616.71), a mere 1,700+ points away. It could happen. It very well may happen. However, if it does, stocks will once again be more expensive than ever before (they are still).

The market action over the past week has been a warm-up, conditioning the masses for more carnage to commence and shaking out the weak - or wise - hands. Those who cannot allocate by themselves (like people with 401ks or government retirement plans) will be stuck with whatever the fund managers deem prudent. Call them bag-holders.

The swift and the wise are playing the ups-and-downs, though that was quite the challenge in today's session. Volatility has returned and it should be pointed out that some of the greatest one-day gains (in fact, the two largest occurred in the fall of 2008) happened in bear markets.

The fun has just begun.

At the Close, Tuesday, January 6, 2018:
Dow Jones Industrial Average: 24,912.77, +567.02 (+2.33%)
NASDAQ: 7,115.88, +148.36 (+2.13%)
S&P 500: 2,695.14, +46.20 (+1.74%)
NYSE Composite: 12,745.45, +172.53 (+1.37%)

Dow Sheds Record 1,175 Points, Global Markets in Panic Mode

Anybody already not convinced that stocks have been relentlessly pumped by buybacks and central bank interventions over the past nine years may have had a rude awakening over the past few days and especially on Monday as the Dow Jones Industrial Average lost a record 1,175 points in the week-opening session.

While the percentage loss was nowhere near record-setting, it still managed to crack the top 20 of all-time percentage losses for a single trading day. Combined with Friday's collapse, the Dow is down over seven percent in just the past two sessions, wiping out all the gains from an over-exuberant January.

What happened?

Interest rates exploded. That was the first salvo from massively intertwined markets. The ten-year note, which has been comfortably below 2.5% for most of the last nine years of "recovery" following the Great Financial Crisis (GFC) from 2008-09, smashed through 2.80% on Friday and continued its ascent Monday before some odd force pushed US treasury rates lower across the curve. The 10-year note ended at 2.79, still higher than anybody expected, but not at a level that would cause a panic.

Other than the obvious villain in the bond pits, the other dynamic at play is the obvious overvaluation of stocks, and that is a global problem. By artificially keeping interest rates too low for too long (avoid the pain that should be measured across the board), boosting asset prices in stocks alone, the Fed, ECB, BOJ, PBOC and Swiss National Bank (SNB) created a market structure with one sure feature: failure.

Because borrowing money was such an easy proposition, many of the major corporations on the Dow, NASDAQ and S&P took to buying back their own shares, enriching only major shareholders and especially top executives with cushy compensation plans. That gambit appears to be over, and it's troubling, because when companies buy their own stock at inflated prices, they own it at those prices. Selling it back into the market at reduced prices causes a loss, which in turn causes earning to collapse. That is the expected conclusion, already evident in some recent quarterly filings. More carnage - much more - is to come.

It has been reported that 84% of all wealth created in 2017 went to the top one percent globally. That's an unsustainable level of wealth inequality largely gone unreported by the news-speakers, analysts and squawkers on Wall Street and the economists in the government. The one percent at the top of the wealth ladder will only be marginally affected by losses, largely because they have more money than they need and probably have been doing most of the trimming over recent days. Who will be harmed? Pension funds, which are already massively underfunded and cannot maintain any measure of credibility in a market crash currently gaining momentum.

Those who have been derided for warning about just this kind of occurrence are now being proven to have seen the most obvious overvaluation and manipulation of markets early. Being early and being wrong are two different animals, but anybody who isn't invested at the moment is - at long last - looking fairly smart.

The global economy has been sputtering and stuttering ever since the crash of 2008. Nothing that caused the problems then has been fixed. In fact, credit has been extended even further than the levels seen prior to that singular solvency event.

Claims (especially those by President Trump, who has unfortunately embraced the massive gains and now will bear the brunt of blame for the losses) that the economy is strong and growing are largely a smoke screen hiding mountains of debt and poor financial management in government. The US Treasury is more than $20 trillion in the hole. Other major governments, especially Japan, are over-leveraged and broke.

The continuing narrative that the economy is strong - which will be heard repeatedly as the market correction (or slow motion crash) extends - is complete garbage, shoveled to an unsuspecting public that desperately wants to hear only good news. The federal government is broke. State governments are broke. Pension plans cannot deliver on the promises made to employees and retirees. Households are deeply in debt and businesses have enriched only their shareholders in recent years. The recipe for collapse has been ripe and the meal is now on the table.

As Wall Street prepares for another onslaught of selling, markets in the East have already taken the low road. In Japan, the NIKKEI was down over 1,000 points. The Hang Song dropped 1,600, or five percent.

This is not over by a long shot. Instead of an end of the bull market, this should be characterized as the beginning of the end for globally-induced monetary madness and an epochal message to believers in what were once known as "free" markets.

Nothing is safe.

At the Close, Monday, February 5, 2018:
Dow Jones Industrial Average: 24,345.75, -1,175.21 (-4.60%)
NASDAQ: 6,967.53, -273.42 (-3.78%)
S&P 500: 2,648.94, -113.19 (-4.10%)
NYSE Composite: 12,572.93, -512.42 (-3.92%)

Sunday, February 4, 2018

Markets Turn Ugly As Bond Yields Soar in Ground Hog Day Massacre

Even as January's non-farm payroll report painted a rosy employment picture, adding 200,000 jobs for the month, the 10-year note crested over the 2.80% level on Friday, sending stocks into as vicious tailspin in a mid-winter crash.

The nearly 666-point decline on the Dow was the sixth largest one-day point drop in market history, though in percentage terms was the mildest of the top ten, all of which have occurred in the 21st century.

The fact that all of the major point losses happened since 2000 is made obvious by the enormity of the index, still standing at more then 25,000, an epochal figure in market terms. Notably, the Dow Jones Industrial Average first passed the 10,000 mark in 1999, amid the notorious dotcom boom, prior to the dotcom bust, which took a full three-and-a-half years to fully play out.

Friday's drop was the largest since a 634.76-point loss on August 8, 2011 which sent the blue chips down 5.55%, to 10,809.85. Noting the relative percentage puniness of the Ground Hog Day Massacre, it may be wise to expect larger point and percentage losses in the near to mid-range future (three months to one year).

While it may be simplistic to point to the gaudy valuations placed on equities in the current market dynamic, it is nonetheless a significant factor in the current shaky environment and as good a reason to sell out of stocks as any, though the other major catalyst - rising bond yields - provides a more granular perspective.

The long end of the Treasury yield curve was extended on Friday as the 30-year bond smashed through the psychological 3.00% barrier, signaling to long-term investors that the aging bull market in stocks (and bonds) may be coming to a quick conclusion.

Bull and bear markets do not begin nor end in vacuums, which is why this most recent pullback should be regarded as a change of tone in market functioning. Nothing gos on forever, and empirical data suggests that while stocks have enjoyed salad days for years, the general economy and the welfare of millions of Americans has been less than a full meal.

It's easy to look at macro data and conclude that all is well and central banks have the markets and global economies under control, but sometimes one needs to look around and actually see the mountains of debt, stock buybacks, and central bank meddling which have fueled the gigantic recovery and historic stock gains.

Money is undoubtably becoming tighter and the labor market - according to government figures - is straining at full employment, but wages gains have not nearly kept pace with either inflation or taxes for at least the past 15 years. A breaking point is coming, wherein multi-national corporate behemoths are going to have to sacrifice the massive salaries bestowed upon top executives in exchange for pay increases for Mr. and Mrs. America.

With the Federal Reserve ready to hike the federal funds rate another 25 basis points at their upcoming March FOMC rate policy meeting, the world's central bank seeks to create a buffer against an almost certain recession, one which they, by their own reckless actions, will have caused.

If stock declines continue through February, expect the Fed to pause on their quest to raise rates and unload debt at the same time. The outward absurdity of their position is dangerous to the welfare of not only business entities, but individuals and governments as well.

What may have been the most telling circumstance from Friday's demolition of all asset classes, gold and silver also took precipitous drops, action which harkens back to the tumultuous days of the fall of 2008, when precious metals were slammed along with stocks. Notably, it was the metals which recovered first, but under the current conditions of mad money mindlessness, the shiny stuff may be suppressed even further, simply because central banks don't appreciate competition for their various fake currencies by real money.

The era of easy money is ending.

Real assets will endure.

At the Close, Friday, February 2, 2018:
Dow: 25,520.96, -665.75 (-2.54%)
NASDAQ: 7,240.95, -144.92 (-1.96%)
S&P 500: 2,762.13, -59.85 (-2.12%)
NYSE Composite: 13,085.35, -296.62 (-2.22%)

For the Week:
Dow: -1095.75 (-4.12)
NASDAQ: -264.83 (-3.53%)
S&P 500: -110.74 (-3.85%)
NYSE Composite: -551.67 (-4.05%)

Friday, February 2, 2018

Stocks Struggle Against Higher Bond Yields

Stocks may have had a wondrous January, but February is shaping up to be a story of a different kind.

Not only have yields on all manner of bonds risen with alacrity over the past three weeks, they show no signs of slowing, especially since the Federal Reserve has sent a signal to markets that the federal funds rate is going to be upped at last three times this year, the first hike scheduled at the next FOMC meeting in March.

Higher bond yields make stocks look less attractive by comparison, being that they are virtually without risk, as opposed to stocks, which can rise or fall on whims, trends, poor performance of the underlying companies, or without cause, simply because a company or a sector is "out of favor."

As the 10-year note created above 2.70% earlier in the week, stocks suddenly became not so much of a bargain, especially since valuations have been egregiously stretched as the nine-year-long rally in equities has exceeded all reasonable valuation metrics.

Countering the argument are the voices from the Trump train touting the meteoric rise in stock prices over the past year, and, certainly, the economy is in better condition than it was 12 months ago.

But, a strengthening economy has headwinds, such as higher wages and costs due to inflation, and that's being caused by the endless printing of fiat and buying of securities outright by central banks, which has distorted the landscape of global economics.

The rush to safety has begun, and, once started, such a trend is not easily pushed back. Investors should prepare for a sea change which will wipe out gains that have been largely the result of central bank intervention and stock buybacks by inefficient corporate managers.

At the Close, Thursday, February 1, 2018:
Dow: 26,186.71, +37.32 (+0.14%)
NASDAQ: 7,385.86, -25.62 (-0.35%)
S&P 500: 2,821.98, -1.83 (-0.06%)
NYSE Composite: 13,381.97, +14.01 (+0.10%)