Showing posts with label economics. Show all posts
Showing posts with label economics. Show all posts

Friday, May 25, 2018

Sliding Oil, Spanish Crisis, Mid-Week Ramp-Fest May Produce A Dizzying Friday Plunge

Just for the heck of it, let's look at the markets from a trader's perspective as the entire US population prepares to end the work week and head off for a three-day, fun-in-the-sun weekend.

Now, this trader, call him Bob, yeah, Trader Bob, has to be looking at the charts from Wednesday and Thursday, seeing that the Dow took a deep dive on both days before recovering, but also that Thursday's dive was deeper than Wednesday's and the closing level significantly lower as well. So, Trader Bob may be thinking, "This looks suspiciously like the work of the PPT or maybe even short-covering."

Scanning the headlines for Friday morning on his Bloomberg terminal, Trader Bob takes interest in a story out of Spain that is saying Prime Minister Mariano Rajoy is facing a vote of no confidence in that country's parliament, meaning that an entire country could be soon plunged into a chaotic situation. Bob also recalls that part of Spain - Catalonia - tried, unsuccessfully, to secede from the nation last year.

Then, Trader Bob sees the price of oil dropping off the chart, and notes that Saudi and Russian oil officials are stating that crude supply increases are likely in the near future.

Trader Bob, considering how much he's made for clients by going long oil futures, produces the following thought bubble:

Amazing, isn't it, that even Saudi government people and those pesky Russians understand some of the principles of economics?

Whoda thunk that if gas prices go up from about $2.30 a gallon to roughly $3.00 a gallon (a 30% increase), some people might not have as much disposable income?

And, if that lessened amount of disposable income is not spent on consumer goods, then whole industries might suffer?

And, if whole industries suffer, that might affect the greater economy?

It's not rocket science, it's the dismal science called economics.

So, what's Trader Bob likely to do Friday morning when the opening bell rings?

Well, for one thing, since he has 24-7 access to the futures market, he's dumping all his WTI crude futures calls. Fast. When the market opens, he's probably going to sell some stocks, just to get out in front of the herd, where he won't be trampled by the rush to the exits.

But, Trader Bob isn't actually convinced that a selloff is a done deal, so he's not going to get too far out in front, just enough to trim some of his more speculative positions. He doesn't want to be, as surfers call it, "hanging ten."

Trader Bob will be patient, with one eye on oil but a more focused eye on the US equity markets. If things go from bad to worse, he'll consider whether or not it's time to bail. 200 points down on the Dow would be a test of Thursday's low (24,605.40). Breaching that level might produce the stampede everyone on Wall Street fears.

An hour prior to the opening bell, at 8:30, Bob sees the Dow, S&P, and NASDAQ futures plunging into the red. He sells more oil futures. He looks around the trading floor. Some of the younger traders are looking a little queasy, green in the face. The older, more experienced guys are handling it better, having coffee and donuts while taking up substantial short positions is selected stocks, some of them whacking away at oil companies, others focused on Facebook (FB) and Apple (AAPL).

Trader Bob's hands are getting sweaty. He knows that he's prone to panic attacks, but so is all of Wall Street. He's not thinking about a three-day weekend. He's thinking about selling everything and moving to Maine.

Dow Jones Industrial Average May Scorecard:

Date Close Gain/Loss Cum. G/L
5/1/18 24,099.05 -64.10 -64.10
5/2/18 23,924.98 -174.07 -238.17
5/3/18 23,930.15 +5.17 -233.00
5/4/18 24,262.51 +332.36 +99.36
5/7/18 24,357.32 +94.81 +194.17
5/8/18 24,360.21 +2.89 +197.06
5/9/18 24,542.54 +182.33 +379.39
5/10/18 24,739.53 +196.99 +576.38
5/11/18 24,831.17 +91.64 +668.02
5/14/18 24,899.41 +68.24 +736.26
5/15/18 24,706.41 -193.00 +543.26
5/16/18 24,768.93 +62.52 +605.78
5/17/18 24,713.98 -54.95 +550.73
5/18/18 24,715.09 +1.11 +551.84
5/21/18 25,013.29 +298.20 +850.04
5/22/18 24,834.41 -178.88 +671.16
5/23/18 24,886.81 +52.40 +723.56
5/24/18 24,811.76 -75.05 +648.51

At the Close, Thursday, May 24, 2018:
Dow Jones Industrial Average: 24,811.76, -75.05 (-0.30%)
NASDAQ: 7,424.43, -1.53 (-0.02%)
S&P 500: 2,727.76, -5.53 (-0.20%)
NYSE Composite: 12,696.69, -46.71 (-0.37%)

Tuesday, October 10, 2017

Economics - and Nobel Prizes - Aren't What They Used To Be

In 1946, with the world recovering from the devastation of a global war, Henry Hazlitt wrote Economics in One Lesson. It's become a classic of Austrian Economics.

There's a free PDF HERE, that would be a good place for the 98% (probably more) of the population that has either never even heard of Henry Hazlitt nor read any of his material.

Since then, the study and application of economics has taken a path which mirrors that of the value of the US dollar. In other words, it's taken a fairly precipitous decline.

So it is that this year's winner of the Nobel Prize for economics is one Richard Thaler, a pop psychologist masquerading as an intelligent person. Thaler's prize-winning contribution to the field stems from a 2015 book he had published, called Misbehaving. Thaler's enormous discovery was that people don't always react to economic conditions in the ways Keynesian economists expect.

That revelation is so deep (sarcasm) that Thaler is being mocked in the comments section of an article in that bastion of higher learning, Yahoo! Finance.

It's not necessary to go into how insipid and uninspiring Thaler's work is. All that is necessary to understand the superficial nature of his "scholarship" is that he has been bestowed with the title of father of behavioral economics, whatever that's supposed to mean.

Now wonder central banks control the world. The rest of us are stupid.

At the Close, Monday, October 9, 2017:
Dow: 22,761.07, -12.60 (-0.06%)
NASDAQ: 6,579.73, -10.45 (-0.16%)
S&P 500: 2,544.73, -4.60 (-0.18%)
NYSE Composite: 12,293.95, -23.74 (-0.19%)

Tuesday, February 16, 2016

Crooked Markets Will Remain At or Above Key Levels Until the End

Pretty much within a few percent either way, the key levels for economic fraud remain at DJIA, 16,000; S&P 500, 1,800; NASDAQ, 4,500.

Global equity markets are being bought by central banks. Eight years ago, Money Daily told you to move your money out of retirement accounts, 401k and IRAs into cash, precious metals and useful machinery. It's still not too late.

DJIA: 16,196.41, +222.57
S&P 500: 1,895.58, +30.80
NASDAQ: 4,435.95, +98.44

Crude Oil 28.91 -1.80% Gold 1,204.30 -2.83% EUR/USD 1.1144 -0.16% 10-Yr Bond 1.7780 +1.72% Corn 361.50 +0.77% Copper 2.05 +1.03% Silver 15.27 -3.29% Natural Gas 1.90 -3.10% Russell 2000 995.80 +2.45% VIX 24.11 -5.08% BATS 1000 20,426.37 +1.68% GBP/USD 1.4304 -0.91% USD/JPY 114.0750 -0.35%

Saturday, March 21, 2015

Weekend Thinking: After Friday's Stock Ramp-fest, Nothing About Which to Worry

Editor's Note: Apologies for the late post. An unrelenting schedule is causing disruption to the usual appointed tasks. This condition may persist for a few months and posts on Money Daily may not - for a while - be as timely and/or detailed.

Friday's trade was all about getting back to the preferred narrative following the "prudent" nature of the latest FOMC release and Fed news conference, that of everything being just peachy, rosy and wonderful in the land of fairy tale economics, where flying unicorns discharge fiat from rainbow skies.

Reality may beg to differ with the ongoing assessment of the national and global economies, but, for the time being, the clowns, gamblers, skimmers and scammers are in control. What will wrest away domination of the markets from the hands of the manipulators is at best uncertain, at worst unknown, but all are aware that adam Smith's "invisible hand" is lurking, ready to snatch back sanity and price discovery to a state of natural order.

What is understandable at present is that Fed policy will remain neatly tucked into its quasi-accommodative commode for at least another six months and very likely longer. It is, in fact, beyond seven years since the past rate increase, and, as has been proven by other central banks, negative yields remain an unexplored horizon. Like the discovery of a new world, the Fed may be eyeing the current 10-year note yield of two percent as merely the shoreline, with untold riches and possibilities lying within the lower bound.

A socialist fantasy dream, bond yields that would cost savers and benefit spenders could be a panacea that eventually turns economic theory completely upon its head and ushers in a new world order of wealth redistribution under some mystical, benevolent oligarchy.

The future may well be one which attempts to disregard the past. And that new world would be brave indeed.

Dow 18,127.65, +168.62 (0.94%)
S&P 500 2,108.10, +18.83 (0.90%)
NASDAQ 5,026.42, +34.04 (0.68%)