Monday, January 20, 2020

WEEKEND WRAP: Virginia Lobby Day and Trump Impeachment Trial Take Center Stage

It being Martin Luther King Jr. Day, markets in the US are closed, but that didn't stop what looks to be more than 50,000 patriots from heading down to Richmond, Virginia for the state's annual "Lobby Day," usually an opportunity for Virginia citizens to meet with their legislators and discuss various agendas facing the state.

This year, most people won't even get a chance to see a legislator, as Governor Ralph Shearer Northam (he of blackface shame) last week declared a state of emergency for the state capitol from January 17 to January 21, over fears of violence stemming from the gun rights crowds expected.

Northam was wrong to declare the emergency. After all, beyond the extra police presence, there are so many well-armed citizens in attendance, anybody thinking of causing trouble would probably think twice.

It's still early, and very chilly, in Richmond right now, but so far, the crowds have been peaceful. The day should end without incident unless something gets stirred up by anti-gun reactionaries like Antifa or a false flag event staged by one of the three-letter agencies overseeing the ongoings.

With many live streams being broadcast and thousands of people with cell phones, it's unlikely anything underhanded should happen, and if something does happen, it's likely to be recorded. This isn't going to be a rerun of the melee at Charlottesville back in 2017.

If Virginia's Lobby Day doesn't produce any grotesque footage for the fake media, then Tuesday, all eyes will turn to the impeachment trial which opens in the Senate. This is another made-for-TV type event, but Republicans led by Mitch McConnell (R-KY) are doing their level best to blunt the desired effect the Democrats are seeking, which is to drag out a long trial, complete with new witnesses, demands for documents, calls of a cover-up, issues of executive privilege ruled upon by the Supreme Court and other such nonsense.

The impeachment of President Trump was a sham from the start, when Intelligence Committee chairman Adam Schiff launched a plot and counseled a "whistleblower" over a single phone call made by Trump to Ukraine president Zelensky.

Drawing from shades of the Bill Clinton impeachment, there never was, nor never will be any "there" there.

If cooler heads (Republicans) prevail, this sorry escape into stupidity should be all over in less than two weeks. Many Americans wish it could end in two days, if not sooner.

With all the tumultuous political theater taking place it's a wonder that stocks move at all, especially in an upward direction, though the recent buying spree - which began in September 2019 - has been aptly aided by continuous money printing and liquidity being shoved into the REPO market by the Federal Reserve. Until the Fed ceases its now-daily operations, stocks will never suffer losses. It's just a matter of fact. Like Warren Buffett supposedly quipped, "Give me a trillion dollars and I'll show you a good time, too."

Meanwhile, inflation will be ramping up sooner, as per the wishes of the Fed, whose various voices and charts keep telling the American public that the US economy hasn't yet met their target of two percent inflation, as if higher inflation were a good thing (it's not). All along, however, inflation has been raging in health care, education, and housing, but those factors are not apparently part of the Fed's purview. Therefore, they continue to print at a rate faster than previous bouts of QE while Chairman Jerome Powell insists this round of liquidity pumping is "not QE."

Sure, we'll buy that. And that horse over there is actually a rabbit.

Just how hard has the liquidity pump been working?

Since mid-October, on a weekly basis, the Dow has been up 10 weeks, down three; the NASDAQ, since late September, 14 weekly gains, two weeks with losses; S&P: 13 up, two down; NYSE: 13 up, two down.

That's a nice-looking rabbit ya got there. Mind if I ride him?

At the Close, Friday, January 17, 2020:
Dow Jones Industrial Average: 29,348.10, +50.50 (+0.17%)
NASDAQ: 9,388.94, +31.81 (+0.34%)
S&P 500: 3,329.62, +12.81 (+0.39%)
NYSE: 14,183.20, +41.40 (+0.29%)

For the Week:
Dow: +524.33 (+1.82%)
NASDAQ: +210.08 (+2.29%)
S&P 500: +64.27 (+1.97%)
NYSE: +225.23 (+1.61%)

Friday, January 17, 2020

Confluence Of Impeachment, Virginia State Of Emergency, Peter Schweizer Book Could Damage Stocks

With stocks soaring to even higher new record highs again on Thursday, there's little doubt over the levles of irrationality and exuberance being displayed by the hoi poloi investing elite, their magic money spigot at the Fed and their marvelous algorithms which interpret all news as positive for stocks.

It is precisely in conditions such as these (the Dow Jones Industrial Average has vaulted over 29,000 with ease and is up a stunning 3,219 points since October 3rd, a 12.3% gain in just three-and-a-half months. The time period in question coincides neatly with the Federal Reserve's stoking engagement into the repo market, pumping, by some estimates, over $1.5 trillion into the hands of primary dealers and hedge funds, ramping the Fed's own balance sheet by more than $413.7 billion since the end of August.

The Fed's particular brand of irrational exuberance is at a pace reminiscent of prior bouts of QE in 2009, 2010-11, and 2012-14, even though the Fed cutely insists this is "not QE." Balderdash.

Normally, nobody gets alarmed over gigantic gains in stocks, giving their overall pleasant scent (go ahead, you know you want to sniff your currency) and beneficial purchasing power, but this severe repricing of stocks is beginning to look Weimar-like, when stocks in 1920s Weimar Germany rose by obscene percentages, but cashing in hundreds of shares could only purchase a day's worth of food due to the overarching hyperinflation of the currency.

Not to say that the same is or will be happening in the United States, though signs of runaway inflation are prevalent, but something may go wrong at some point that tears the social construct and eventually affects stocks and currency.

Consider that a confluence of events are about to take place between now and Tuesday, January 21. Equity and security markets will be closed over the weekend and on Monday, Martin Luther King Day, a national holiday. In the meantime, there's already a state of emergency declared in Richmond, Virginia with concern over the gun rights rally set up for Lobby Day on Monday.

On Tuesday, the impeachment trial of President Trump begins in the Senate.

Also on Tuesday, Peter Schweizer's new book, Profiles in Corruption drops. On the book's cover are the faces of Elizabeth Warren, Joe Biden, Bernie Sanders and others. Uh, Oh, it's already at #3 on Amazon's Best Sellers list.

Tuesday may be too late to get out of positions, so if there's some quiet pullback on Friday, it could be a tell.

At the Close, Thursday, January 16, 2020:
Dow Jones Industrial Average: 29,297.64, +267.44 (+0.92%)
NASDAQ: 9,357.13, +98.43 (+1.06%)
S&P 500: 3,316.81, +27.52 (+0.84%)
NYSE Composite: 14,141.78, +88.58 (+0.63%)

Thursday, January 16, 2020

SNAFU Market Thrives On Chaos As China Deal Signed, Trump Impeached (again)

Since it's probably naive to believe that US equity markets are anything other than "fair and open," Wednesday's solid gains - record highs all around - have more to do with internal tinkering than any outside effects. Algorithms that apparently think sending articles of impeachment against President Donal J. Trump from the House of Representatives over to the Senate (after a month-long delay) is not as important an event as the signing of Phase 1 of the US-Chaina trade accord, both of which occurred almost simultaneously.

One can wonder exactly what traders are thinking these early days of 2020, but the algos may be on the right track given that the impeachment drama has been and ought to have been discounted as bad theatre, whereas the trade deal might turn out to be a big deal for global commerce.

No matter the details, stocks continue to soar, practically every day notching new record highs, without as much as a superfluous pullback every few weeks or so. The driver of this irrationals madness has recently been the Fed's easy money via daily repo injections, with the Federal Reserve providing ready cash in exchange for treasury bills, notes, and bonds they sold to primary dealers just days prior.

It's an open secret that the Fed's balance sheet is growing by monstrous proportions again, having begun in September and continued to burgeon through the holidays and into the new year. The Fed has plans to cease such onerous operations sometime in April, though there's ample consideration that such a move might prompt a dipsy-doo on the order of the ones that accompanied rate tightening in October and again in December of 2018.

For now, the bloom is on the rose and for all intents manages to stay blushing through impeachments, royal defections, plane crashes, Middle East noise, and all other hyperbolic geopolitical events. If nothing is done to stop the SNAFU (Situation Normal, All F--ked Up) 2020 could end up being a lot like 2019, replete with outsized gains for everybody, despite chaos all around.

At the Close, Wednesday. January 15, 2020:
Dow Jones Industrial Average: 29,030.22, +90.55 (+0.31%)
NASDAQ: 9,258.70, +7.37 (+0.08%)
S&P 500: 3,289.29, +6.14 (+0.19%)
NYSE Composite: 14,053.23, +16.10 (+0.11)

Wednesday, January 15, 2020

Stocks Stumble After Mnuchin Trade Remarks; JPM, Citi Earnings Solid

After Treasury Secretary Steven Mnuchin remarked that tariffs on many Chinese goods would remain in place until later in the eyar and possibly beyond, only the Dow Jones Industrial Average managed to remain positive, as the major indices erased solid gains from earlier in the day, sending stocks sliding through the afternoon.

Mnuchin maintained that import tariffs would remain in place until the US and China agree on Phase 2 of their trade arrangement. His remarks came a day before the leaders of the world's two largest economies are set to sign a Phase 1 deal on Wednesday.

Washington and Beijing agreed to suspend tariffs on $160 billion in Chinese-made cellphones, laptop computers and other goods that were due to take effect on Dec. 15, and to cut in half existing tariffs on $120 billion of other goods to 7.5%. The Phase 1 deal keeps 25% tariffs on $250 billion of other Chinese goods in place. Mnuchin did not offer a timetable for when Phase 2 would be worked out, but the consensus believes such a deal would not be fully negotiated until after the November US elections.

A formal signing of Phase 1 documents is slated for 11:30 am ET, Wednesday at the White House.

Trade and tariffs continue to be the hot topic by which to move stocks and it seems likely that trend will continue through most of - if not all of - 2020, though with lesser impact. The Chinese representatives are sure to engage in some foot-dragging, hedging that President Trump may not be around for the completion of Phase 2. For its part, the administration will be busy with the politics of a presidential election, which will divert resources and attention away from trade dealings.

Those are positive developments in the larger scheme of things. The public is weary of Democrat attempts to weaken the president or impeach him. Business leaders largely view the entire political spectrum with jaded skepticism, believing that the poorly-managed impeachment proceedings initiated by the House of Representatives is a waste of time.

Right on cue, the House will debate and then vote on a resolution to advance articles of impeachment - which were passed nearly a month ago (December 18) - on Wednesday. Normally, no such vote is needed, though this impeachment process has been anything but normal. Another vote in the House gives Democrats another opportunity to bad-mouth the president while taking attention away from the signing of the trade accord. The measure is likely to sail through along party lines, with a Senate trial to begin on Tuesday of next week (January 21).

House Majority Leader, Nancy Pelosi's stalling of the process seems to have benefitted nobody except possibly President Trump. By not immediately handing over the articles of impeachment and naming managers, Pelosi comes off looking petty, conflicted, and frankly, ridiculous.

It is widely considered that President Trump will be acquitted by the Senate in short order, allowing democrat presidential candidates Elizabeth Warren, Amy Klobuchar, and Bernie Sanders to get back on the campaign trail before the Iowa caucuses the first week of February.

Until then, some market surprises could come in the form of earnings from various companies. Mega-banks JP Morgan Chase and Citigroup reported on Tuesday, with JPM showing EPS of $2.57, which smashed expectations for $1.98. Citi boosted revenues above consensus to over $18bn while EPS came at $1.90, beyond expectations for $1.83. Wells Fargo bucked the trend, reporting earnings below consensus. Share prices for JPM and Citi were up +1.17% and +1.56%, respectively, but Wells Fargo closed lower, down -5.39%.

Prior to the opening bell Wednesday morning, Bank of America said earnings for the fourth quarter were 74 cents per share, up 5.7% from the same period last year and better than the 68 cent consensus forecast.

Goldman Sachs (GS) reporting on Wednesday morning, showed quarterly earnings of $4.69 a share, trailing the $5.56 average of estimates from analysts surveyed by Refinitiv. Net income tumbled 24 percent to $1.92 billion. Those results sent stock futures tumbling further into the red.

The FOMC is scheduled to meet the last week of January. Their meeting is scheduled for the 28th and 29th.

At the Close, Tuesday, January 14, 2020:
Dow Jones Industrial Average: 28,939.67, +32.57 (+0.11%)
NASDAQ: 9,251.33, -22.60 (-0.24%)
S&P 500: 3,283.15, -4.98 (-0.15%)
NYSE Composite: 14,037.13, -5.47 (-0.04%)

Monday, January 13, 2020

WEEKEND WRAP: Nearing Mid-Month, Stocks Higher

Just time for the figures this week.

At the Close, Friday, January 10, 2020:
Dow Jones Industrial Average: 28,823.77, -133.13 (-0.46%)
NASDAQ: 9,178.86, -24.57 (-0.27%)
S&P 500: 3,265.35, -9.35 (-0.29%)
NYSE Composite: 13,957.97, -39.73 (-0.28%)

For the Week:
Dow: +188.89 (+0.66%)
NASDAQ: +158.09 (+1.75%)
S&P 500: +30.50 (+0.94%)
NYSE Composite: +40.92 (+0.29%)