Tuesday, November 14, 2017

Stocks Under Pressure; Bulls All Die At Some Point

Anybody who believes that this current bull market - fueled by easy money policies from central banks, fake statistics, and enormous government deficits - will continue much longer needs to take a reality check.

Just for those who cannot or will not see the forest for the trees, the following:

  • The 10-year-note is stuck in a perpetual yield range of 2.3-something.
  • Stocks have been going sideways for week.
  • There's almost no chance that the congress will pass any kind of tax reform bill this year as they are doing nothing more than posturing for the midterm elections.
  • The national debt continues to soar to new heights, despite happy talk from the administration (remember, congress holds the purse-strings).
  • The percentage of people in the workforce is still at near-record lows.
  • The Us trade deficit with China is not shrinking.
  • State pension plans and many private pension plans are underfunded by trillions of dollars.
  • Voting doesn't matter (see the fiasco over Roy Moore)
  • Corporate profits are beginning to show serious signs of a slowdown (GE, Chipolte, others)
  • Foreclosures, bankruptcies, student loan defaults are rising.

That is just a sampling, and today's market, in form with the past few sessions, took a nosedive at the open only to recover thanks to spirited heavy lifting by the PPT or central bank cronies on the heaviest volume in five months.

The Dow was down 168 points shortly after 10:00 am ET, only to close with a marginal loss. Even at its lowest point, the index was 900 points above its 50-day moving average.

Stocks are as overpriced as they've ever been, setting up for a crash of enormous proportions.

It's coming, but nobody knows when or why it will occur. The Fed is still insistent upon raising interest rates again in December, at a time at which the economy is neither growing fast enough to warrant such behavior nor robust enough to withstand repeated rate hikes.

Over the years, the Federal Reserve has caused more crashes and recessions than it will admit. Uncontrollable spending by government and cascading business and individual debt is reaching unprecedented heights, worse than preceding the Great Financial Crisis of 2007-09.

Extreme caution is advised.


At the Close, Tuesday, November 14, 2017:
Dow: 23,409.47, -30.23 (-0.13%)
NASDAQ: 6,737.87, -19.72 (-0.29%)
S&P 500: 2,578.87, -5.97 (-0.23%)
NYSE Composite: 12,280.11, -36.71 (-0.30%)

Monday, November 13, 2017

Stocks Stumble Early, Rally for Minor Gains; GE Tumbles, Halves Dividend

Stocks continue to show weakness on a day-to-day basis, with implicit underpinning via central bank purchases, much as was the case today as General Electric (GE) posted horrifying third quarter numbers which cost the stock more than seven percent of its market capitalization [19.02, -1.47 (-7.17%)].

The company cut its annual dividend in half, from $0.24 to $0.12, and announced a broad-based restructuring, shedding up to $20 billion of its core assets.

Jeff Immelt, former CEO and Chairman of the Board, had been under pressure from investors to make changes until his ouster just weeks ago.

There's speculation that General Electric could be bounced from the Dow Jones Industrial Average, a position its held since November 7, 1907, having fallen by as much as 35% in the past year while the overall market has posted strong gains. GE is the oldest continuous member of the blue chip index.

GE's hammering at the open no doubt contributed to the dour mood in the early going, but stocks regained their footing and gradually advanced throughout the somewhat lackluster session.

The Dow closed at a new all-time high last Tuesday, but has been subdued since. With the year of 2017 drawing to a close and many fund managers closing their books (or already having done so), it will be interesting to watch the movement of the major indices over the coming weeks and through the holiday season.

Black Friday is a mere 11 days off. Gobble, gobble.

At the Close, Monday, November 13, 2017:
Dow: 23,439.70, +17.49 (+0.07%)
NASDAQ: 6,757.60, +6.66 (+0.10%)
S&P 500 2,584.84, +2.54 (+0.10%)
NYSE Composite: 12,316.83, -5.78 (-0.05%)

Saturday, November 11, 2017

Stocks Slide for Week as Wall Street Sees Little Hope for Tax Reform

For the week, the Dow Jones Industrial Average declined 0.50% finishing with its first weekly decline after eight straight weekly gains, though the blue chip index remained less than 150 points from an all-time closing high set on Wednesday, November 8.

The S&P 500 finished the week lower as well, but only marginally so. It was the S&P's first weekly decline in nine weeks. The NASDAQ posted its first weekly loss in seven weeks. Both the NASDAQ and S&P closed at record highs on Wednesday as well.

The one index that did not reach record highs during the week past was also the broadest. The NYSE Composite index closed down for the second week in the past three, but those losses were more than offset by gains in the prior six weeks.

In general, analysts blamed congress for the poor performance in equities, citing the lack of a clear path to a tax overhaul that was a cornerstone of President Trump's winning strategy of a year ago. The House and Senate both introduced measures that vary widely and seem unlikely to offer much in the way of relief for individuals or businesses. Rolled out on Thursday, the Senate version pushes for a permanent (until they change it) tax rate of 20% for corporations, but delays implementing the proposed rate until 2019.

Both versions increase the standard deduction to $12,000 for individuals and $24,000 for married couples filing joint returns, but the congress and the media fail to mention that both versions cut out the personal exemption, which was $4,050 in 2016. That leaves the net gain for most single taxpayers at $1,650, and $3,300 for couples.

The standard deduction for 2016 was $6300 for singles, and $12,600 for married couples.

With Democrats generally understood to oppose any Republican plan, the chances for passage this year of either bill remain slim. President Trump and conservative leaders in the Senate face any number of challenges from the likes of Ted Cruz, John McCain, Bob Corker and others who have either stated their opposition to the measures or are likely to vote against any changes to the intricate, pitfall-ridden federal income tax code.

As far as Wall Street is concerned, lowering the corporate tax and the tax on offshore profits are at the top of the wish list, but, little is being done to address their concerns with a congress largely already focused on being re-elected in the 2018 midterms, now less than a year away.

It has become more than obvious to most Americans that congress is an inept, bought-and-paid body, loyal only to special interests which fund their expensive campaigns. Any thoughts of providing relief to beleaguered taxpayers or companies are beyond their admittedly limited legislative scope.

Thus, investors should treat any talk of reform coming from the mouths of elected officials in Washington as nothing more than make believe rhetoric, designed solely to make themselves appear to be working when they are, in fact, not.

At the Close, Friday, November 10, 2017:
Dow: 23,422.21, -39.73 (-0.17%)
NASDAQ: 6,750.94, +0.89 (+0.01%)
S&P 500: 2,582.30, -2.32 (-0.09%)
NYSE Composite: 12,322.60, -17.06 (-0.14%)

For the Week:
Dow: -116.98 (-0.50%)
NASDAQ: -13.50 (-0.20%)
S&P 500: -5.54 (-0.21%)
NYSE Composite: -50.46 (-0.41%)

Friday, November 10, 2017

Stocks Balk at Indecisive Congressional Tax Reform Efforts

Stocks tumbled at midweek as prospects for comprehensive tax reform dimmed in Washington.

The Senate was roundly blamed for the poor performance on the session, as a handful of Republicans expressed doubts over the version of the package submitted by the House days earlier.

A Republican bill was presented, with significant changes, including a permanent 20% business tax rate which would be implemented in 2019. The delay of more than a year concerned investors, though such concern is largely a canard, being that the effective rate for most significant corporations is about 14%.

As the day wore on the pain subsided and late buying boosted averages, though not enough to offset an across-the-board decline, putting the major indices in the red for the week.

Without a positive narrative and strategy for tax reform forthcoming for the congress, it appears that President Trump will be thwarted once again in his efforts to Make American Great Again, though many may argue that his initial tax proposals fell far short of any significant, progressive changes to the tax code.

Simplification would be an effective measure towards keeping the Trump loyalists in camp, but that does not appear to be on the congressional agenda, as per usual.

There's spreading sentiment that nothing will be done in terms of tax reform, which, like Social Security, Medicare/Medicaid, and immigration, has serious problems which year after year seem to defy the ability of congress to implement meaningful change. The more convenient route of promising change and delivering nothing of consequence appears to be the overriding theme of a congress that's essentially done nothing of benefit to the general population for the past twenty years.

As far as Wall Street is concerned, Washington is more a parody, a thinly-veiled lie at effective governance and thus it is, more often than not, discounted as meaningless.

The declines of Wednesday will be considered a sign of weakness, though most will express the opinion that "it's only a flesh wound."

At the Close, Thursday, November 9, 2017:
Dow: 23,461.94, -101.42 (-0.43%)
NASDAQ: 6,750.05, -39.06 (-0.58%)
S&P 500: 2,584.62, -9.76 (-0.38%)
NYSE Composite: 12,339.66, -45.05 (-0.36%)

Wednesday, November 8, 2017

Stocks Hit Roadblock as House Tax Plan Falters in Senate

With Rand Paul absent due to injury, senators John McCain and Ted Cruz already announced no votes, the much-ballyhooed house-Trump tax plan looks to be dead on arrival and investors are not pleased.

Tuesday's action in the markets were punctuated by a pronounced leveling of the yield curve, with 2-10 and 5-30 spreads plumbing new lows.

Just in case the bickering in Washington continues towards implosion - a highly likely event horizon - with Democrats aligning with no-vote Republicans, forward looking people will next look to the upcoming December deadline for the debt ceiling and an anticipated increase to the federal funds rate by the Fed's FOMC.

That's putting pressure on stocks as the market opens Wednesday, though the declines are far from substantial. Also of note is crude oil's decline off recent three-year highs, while precious metals continue to the upside, a split in the commodity complex.

President Trump continues his extensive Pacific tour, in China for the time being, as news flow should slow to a crawl as the week closes in on Friday. With stocks fluctuating, it may be time to seek out undervalued equities, if any are to be found. Stocks remain wildly overpriced with backing by central banks preventing any potential cascading declines.

At the Close, Tuesday, November 7, 2017:
Dow: 23,557.23, +8.81 (+0.04%)
NASDAQ: 6,767.78, -18.65 (-0.27%)
S&P 500: 2,590.64, -0.49 (-0.02%)
NYSE Composite: 12,371.25, -29.68 (-0.24%)