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

Wednesday, January 22, 2014

Market Direction Is Decidedly Indecisive; Ebay, NetFlix Report, Soar

For the second straight session, the Dow was down while the S&P and NASDAQ sported small gains.

A bifurcated market is often one which is about to change direction, so, since the general direction has been up, up and up, a change would indicate, what, lower prices for stocks?

Bernanke, Yellen and company simply cannot have that, thus, like everything else since 2008, everything depends solely upon the whims of the central bank. So sad.

Aftre the bell, eBay announced 4Q earnings, which were decidedly upbeat, with revenues up 14% from a year ago, and earnings per share of 81 cents, a decisive beat. Additionally, the company announced a $5 billion stock buyback program and also received a proposal from meddling Carl Icahn, who wants to see PayPal split out and an independent company, a move which would make a good deal of sense, since PayPal is the company's main profit driver. Shares soared more than eight percent in after-hours trading.

Netflix also announced fourth-quarter earnings after the bell and absolutely blew out the estimates. The company earned $48 million, or 79 cents per share, during final three months of 2013, compared to $8 million, or 13 cents per share, at the same time in 2012.

Revenue rose 24 percent from the previous year to nearly $1.2 billion and the US subscriber base grew by 2.3 million in the quarter. The stock was up more than 17% in the after-hours.

Look for NASDAQ futures to be up about 25 points prior to Thursday's open.

DOW 16,373.34, -41.10 (-0.25%)
NASDAQ 4,243.00, +17.24 (+0.41%)
S&P 1,844.86, +1.06 (+0.06%)
10-Yr Note 99.02, -0.06 (-0.06%) Yield: 2.87%
NASDAQ Volume 1.88 Bil
NYSE Volume 3.36 Bil
Combined NYSE & NASDAQ Advance - Decline: 3467-2224
Combined NYSE & NASDAQ New highs - New lows: 424-43
WTI crude oil: 96.73, +1.76
Gold: 1,238.60, -3.20
Silver: 19.84, 0.031
Corn: 426.00, +1.25

Tuesday, January 21, 2014

Many Signs Beginning to Appear That Signal the End of the Bull Run

These times, trying for some, are inscrutable for others.

While a small fraction of the population can see the changes in culture, society and technology clear as day, the majority only gets a grasp of the situation when the changes have taken hold and new trends already developed.

We are currently in a period of great change. Two years from today, one will not recognize America. Other countries will undergo massive upheavals. It is already underway.

Look around. The kinds of people - average, middle class folks - you used to see on a regular basis are gone, replaced by walking zombies on food stamps. Get used to it. The welfare-police state is upon us. Alternately, the people who have seen this coming are preparing to prosper. It will get worse before it improves, but, when the current power structure and domination of mega-corporations ultimately fails, small businesses, which have been under the thumb from competition from larger rivals and government regulations gone wild, will emerge, grow and prosper. It's just a matter of time.

As for today's roller-coaster on Wall Street, the movements were up, down, up, with the Dow closing at the mid-point of its 62-point high of the day and the -142-point lows, but still in the red. The S&P and NASDAQ finished with gains, though small.

Reporting prior to the opening bell, Johnson & Johnson (JNJ) reported better-than-expected earnings, but finished the day lower on poor guidance. A similar scenario played out for insurance giant, Travelers (TRV), and cell carrier, Verizon (VZ).

Following the trading close, IBM reported an earnings beat (6.13 ex-items vs. 5.99 est.), but a huge miss on revenues. Analysts were looking for $28.25 billion and got only $27.70 billion.

Sadly, for Big Blue, they are trading at roughly an 11 P/E multiple. The company is a dinosaur and headed for extinction, though that reality is still a way off.

Another slow-footed beast, Texas Instruments (TXN) reported 0.46 per share on revenue of $3.03 billion. Both of these tech behemoths were trading lower in after-hours, with IBM down nearly three percent. Dead money. It's what's not for dinner.

Among the more obvious signs that change is permanent and the bull market in stocks is coming ever closer to a crashing climax:

  • Sears, JC Penny and Target.
  • Analyst on CNBC says stocks will fall 10%, then fumbles targets of 16,000 on the Dow and 1800 on the S&P. Basic math: FAIL.
  • Chris Christie
  • Hillary
  • Mohamed El-Erian steps down as Pimco CEO
  • Another former Pimco exec, Neel Kashkari announces he is running for governor of California.
  • Complaints that the Dow is down because some stocks are priced too high. (At least there's a solution for that.)

More are certain to follow.

DOW 16,414.44, -44.12 (-0.27%)
NASDAQ 4,225.76, +28.18 (+0.67%)
S&P 1,843.80, +5.10 (+0.28%)
10-Yr Note 99.30, +0.18 (+0.18%) Yield: 2.83%
NASDAQ Volume 1.91 Bil
NYSE Volume 3.75 Bil
Combined NYSE & NASDAQ Advance - Decline: 3649-2079
Combined NYSE & NASDAQ New highs - New lows: 466-36
WTI crude oil: 94.99, +0.62
Gold: 1,241.80, -10.10
Silver: 19.87, -0.434
Corn: 425.00, +1.00

Friday, January 17, 2014

Dow, NASDAQ Up for Week, Dow, S&P Down Thus Far in 2014

Stocks ended the week in truly bizarre fashion, with the Dow up, but the S&P and NASDAQ lower. Obviously, trading was not uniform across the indices and the Dow was higher due primarily to gains by American Express (AXP) and Visa (V), which really skewed the average, as there were only ten stocks showing gains on the day, versus 20 which ended the session lower.

While the market is somewhat bifurcated and, and maybe even trifurcated, the various swings on the indices are caused mainly by excessive trading in story stocks, those which have reported earnings either after the previous day's close or in the morning prior to the open.

Overall, earnings season is just barely underway, with 10% of companies in the S&P 500 having reported, but the distressing trend is that fully half of those companies have missed earnings estimates and top-line growth (revenues) continues to just beat or fall short, a pattern five years running that is giving not just investors, but the markets themselves, pause.

There hasn't been much progress in terms of the January Barometer, and with Monday a holiday, markets are closed, leaving just nine sessions remaining in January. Time flies, and, it seems some money wants to flee away with it.

What is down solidly is the yield on the 10-year note, which hit a 2014 low of 2.82 today, less than two weeks after seeping through the 3.00% mark. Despite the Fed's tapering by $10 billion, its $85 billion per month bond purchase program (QE by any other name), interest rates have not followed the game plan.

What is up? Gold. Higher by 4% so far this year, and, likewise, silver, also higher by about 4%.

For the week:
Dow +21.51
S&P 500 -3.67
NASDAQ +22.92

For the year:
Dow -118.10
S&P 500 -9.66
NASDAQ +20.99

DOW 16,458.56, +41.55 (+0.25%)
NASDAQ 4,197.58, -21.11 (-0.50%)
S&P 1,838.70, -7.19 (-0.39%)
10-Yr Note 99.37, +0.31 (+0.31%) Yield: 2.82%
NASDAQ Volume 2.10 Bil
NYSE Volume 3.60 Bil
Combined NYSE & NASDAQ Advance - Decline: 2337-3366
Combined NYSE & NASDAQ New highs - New lows: 352-38
WTI crude oil: 94.37, +0.41
Gold: 1,251.90, +11.70
Silver: 20.30, +0.25
Corn: 424.00, -4.00

Thursday, January 16, 2014

Stock Stories: Best Buy, Intel, Citi, more; What Does Friday Hold; Up or Down?

Markets reversed direction again on Thursday, evening out the week at two down, two up sessions with a weekly gain or loss for the major averages hanging in the balance, all coming down to Friday's closing bell.

The Dow Jones Industrials are 20 points below break even for the week, the S&P is already in the green, by a scant 3.52 points and the NASDAQ is defiantly 44.02 into positive territory, so unless Friday is dramatically lower, there's a very good chance that all three averages will finish the week with positive returns. Jolly good.

Interest rates, particularly the 10-year note, have been trending gradually lower through the first two weeks of 2014, with the lid fully on inflation expectations after this week's PPI and CPI nothing-burger-type data.

Making headlines was Best Buy (BBY), the remaining national electronics retailer, was absolutely bludgeoned, down more than 28% on the day, after reporting total holiday same-store sales dropped 0.8% from the previous year, while analysts so an increase of 0.5%. Total revenue declined to $11.45 billion in the holiday period from $11.75 billion a year earlier, and the company lowered its fourth-quarter guidance. With fourth-quarter and full-year results still forthcoming, investors took a quick exit, en masse, leaving many searching for answers to the retail conundrum that was the 2013 holiday season.

Citigroup reported adjusted earnings of $0.82 a share which missed on estimates of $0.96. Revenue also missed coming in at $17.94 billion versus estimates of $18.18 billion, down from last year's $18.66 billion. The company also announced it will replace all customer debit cards involved in the Target data breach last month, sending shares down 2.39 to 52.60 at the close, a loss of 4.35%.

After the bell, Intel reported a slight miss at 0.51 cents per share on estimates of 0.52 and issued some downbeat guidance, sending shares lower by more than 3% in after-hours trading.

American Express (AXP) and Capital One (COF) each missed on their fourth-quarter reports, sending shares down in the after hours. American Express reported a one-cent miss (1.25 vs. 1.26), while credit provider misses by a solid dime - 1.45 versus expected 1.55 - prompting the question from investors, "what's in their wallet?" Clearly, it was not what they were hoping.

DOW 16,417.01, -64.93 (-0.39%)
NASDAQ 4,218.69, +3.80 (+0.09%)
S&P 1,845.89, -2.49 (-0.13%)
10-Yr Note 99.15, +0.91 (+0.92%) Yield: 2.85%
NASDAQ Volume 1.83 Bil
NYSE Volume 3.46 Bil
Combined NYSE & NASDAQ Advance - Decline: 3069-2613
Combined NYSE & NASDAQ New highs - New lows: 382-38
WTI crude oil: 93.96, -0.21
Gold: 1,240.20, +1.90
Silver: 20.05, -0.08
Corn: 428.00, +2.25

Wednesday, January 15, 2014

S&P Close at All-Time High; January Barometer and 2014 Now a 'Go'

Apologies are in order for the excitement generated by Monday's selloff. We have been fooled again.

By .02 cents, the S&P set a record high close; the NASDAQ is at 13 1/2 year highs and the Dow is closing in on all-time highs, again, something it did no fewer than 50 times in 2013.

The markets will not relent in their ever-higher pursuit until the Fed substantially reduces its QE regimen.

That's all one needs to know, for now, and until it's too late. Investors will likely be afforded plenty of time to "get out of Dodge" when the trend reverses. Until then, buy the dips, buy the all-time highs, buy, buy, buy stocks and look for Treasuries to head lower, with support for the 10-year note in the 2.63% area. Give it a few weeks time, like after the non-event which will be the raising of the US debt ceiling to close to $20 trillion in early February.

JC Penny (JCP) announced after the bell that it will close 33 stores and eliminate 2000 jobs as part of their strategic initiative. Good strategy, downsizing. Five of the stores are located in Wisconsin and three are in Pennsylvania. There should be some pretty good sales soon at these store closing locations, but, consumers are advised to pay cash, a la Target. What's not to like?

DOW 16,481.94, +108.08 (+0.66%)
NASDAQ 4,214.88, +31.87 (+0.76%)
S&P 1,848.38, +9.50 (+0.52%)
10-Yr Note 98.74, +0.44 (+0.45%) Yield: 2.90%
NASDAQ Volume 1.96 Bil
NYSE Volume 3.71 Bil
Combined NYSE & NASDAQ Advance - Decline: 3687-1953
Combined NYSE & NASDAQ New highs - New lows: 490-31
WTI crude oil: 94.17, +1.58
Gold: 1,238.30, -7.10
Silver: 20.13, -0.148
Corn: 425.75, -5.75

Tuesday, January 14, 2014

Why the Hyper-Inflationists Have Been Wrong, Are Still Wrong and Will Continue to be Wrong

The hyperinflation argument is completely worn out. The proponents of such nonsense have been pitching it for five years now and the Fed continues to print, print, print.


The deflation which began in earnest in 2008 is still staring them in the face.

Look at it this way: When the Fed prints, it creates debt. That's their job and they're working overtime. On the other side of the equation are the countless numbers of homes (millions of them) that went into foreclosure or are on their way to forclosure and all the mortgages that are still being paid down. That last bunch constitutes the bulk, and that is destroying debt.

The Fed is promoting bubbles in stocks and college loans, car loans and any other loans they can find because many, many consumers and businesses are paying down debt and not incurring any more.

If the Fed keeps its foot to the pedal at $75B or $100B or more per month, it's because there's at least that much debt being eradicated at the same time, so they're trying to keep up.

Remember, in our fiat debt-based system, if there is no debt, there is no money and that's why the Fed keeps printing. And if interest rates rise too much, that's game over because then nobody could afford debt and most debtors would, facing higher rates they cannot pay, default.

The Fed has itself backed nicely into a corner. They need to keep the US dollar strong, but at the same time, they'd like inflation at 2-3%, and GDP growth at 3-4%, which they consider equilibrium.

They've managed to keep the dollar stable, even higher lately, but that plays against their inflation and growth desires.

They can't have it all and deflation is winning and will keep winning as long as people have choices and there's no wage increases. If a loaf of bread doubles in price, people will eat half a loaf. Yep, some will starve, which lowers consumption, and thus, lowers again, the price of a loaf of bread.

The Fed is totally screwed with ZIRP and QE, which, the evidence is beginning to prove out, cannot exist at the same time, lest you get a result of zero growth (which is probably what we've really had the past five years in sum when you take out all of the BS hedonics and other magnificent calculations).

They're completely screwed. If I could borrow at 0.25%, like the banks, I'd do it all day long and pay it back just as quickly. So, what does the Fed gain from that? They created cheap money, and just as fast as it was borrowed, it was repaid.

Businesses are also self-funding, with stock buybacks and their own debt issuance, which, if you've read the Creature from Jekyll Island, the bankers hate, because corporate stock and debt is like having your own currency, and the banks make nothing off that.

The deflation will continue as long as interest rates remain low, like a 10-year under 3.5%, which is likely to remain that way for at least another year or two or three.

So, enjoy the deflation. Buy land, ammo, guns, vehicles, any reliable alternative energy source (wind, solar, deep cycle batteries, etc.), non-GMO seeds and opt out of the debt system. As long as the deflationary regime remains intact, you'll be fine. When it ends, you'll be prepared to survive without money.


Stocks did a serious about-face on Tuesday, based upon... hmmm, maybe the bogus retail sales data for December, which showed modest increases only by revising November sales down.

That's how it works in the present regime of making it up as the economy rolls along. While most retailers reported dismal holiday sales, we're supposed to believe the government's claim that everything was rosy in December. When the store, and later, entire malls, begin closing down, then what will they say? Go ahead, guess. They'll probably blame the weathre or threat of terrorist attacks or some other nonsense.

Also boosting stocks was, maybe, fourth quarter results from JP Morgan (JPM) and Wells-Fargo (WFC), two of the nation's mega-banks, which are supposedly flush with cash and making money hand over fist, even though their filings are so opaque and farcical, nobody really believes them at all, except those brokers and traders who make money by selling stocks to retail investors.

The banks aren't as unhealthy as they were in 2008, but, by no means are they the cash-cows we're led to believe.

Deflation, over-supply and an aging demographic will continue to erode the economy. And that ACA (Obamacare) isn't helping, either.

DOW 16,373.86, +115.92 (+0.71%)
NASDAQ 4,183.02, +69.71 (+1.69%)
S&P 1,838.88, +19.68 (+1.08%)
10-Yr Note 98.95, -0.15 (-0.15%) Yield: 2.87%
NASDAQ Volume 1.88 Bil
NYSE Volume 3.33 Bil
Combined NYSE & NASDAQ Advance - Decline: 4132-1568
Combined NYSE & NASDAQ New highs - New lows: 255-35
WTI crude oil: 92.59, +0.79
Gold: 1,245.40, -5.70
Silver: 20.28, 0.103
Corn: 431.50, -3.00

Monday, January 13, 2014

Markets Respond Suddenly to Structural Deficiencies in Global Economy

In case anybody was not noticing, stocks haven't exactly been on fire through the first few sessions of 2014 (eight of them, including today), but, apparently, a solid number of investors have been taking note and today decided to take action.

Friday's non-farm payrolls report may have been the initial impetus to really kick off today's selling spree, which accelerated throughout the session with stocks ending near the lows of the day on the major indices, sending all of the major exchanges into the red for the year.

Beyond the horrifying labor situation outlined by the aforementioned December payroll report, retail holiday sales figures have been coming in at well below anybody's best guesses and many retailers are now forecasting less-than-optimistic projections for January and beyond.

A few of today's highlights from the retail field (in addition to the meltdowns already underway via Sears and JC Penny) are Express (EXPR 18.15, -0.87(4.57%)) and Lululemon (LULU 49.70, -9.90(16.61%)), bot of which lowered their guidance on Monday. Others on the retail decliners' hit list include Coach (COH 54.30, -1.78(3.17%)), Gap (GPS 38.25, -1.59(3.99%)), and Michael Kors (KORS 76.67, -3.13(3.92%)).

Multi-faceted are the reasons for poor performances in stocks, from a stalled-out labor market to continued de-leveraging by consumers to the Obamacare fiasco to rising college tuition costs, these are just a few of the market-roiling scenarios playing out in the US and global economy.

There's more to today's selling than meets the eye, however, because there are serious cracks in the facade that is the US government, the status of the dollar as the world's reserve currency and the generally-frayed fabric of the Federal Reserve. Those in the know realize that time may be running short on fiat currency, of which all of the world's currencies are concurrently backed by nothing more than people's blind willingness to accept paper money in exchange for real goods and services.

That's at the root of the world's worries, but it is gaining prominence because individuals and businesses continue to shed debt, while the Fed, the Bank of Japan and the Eu monetary masters continue in their vain attempts to create more debt, which is, after all, their lifeblood. The only entities continuing to create debt are governments, making theirs and the days of their central bankers, numbered and in decline.

Losing faith completely in a particular government, national currency or system of exchange takes time, and when it comes to global currencies, such as the US dollar, even more time, but, as the events of 2007-2009 showed with sensational alarm, when faith becomes frayed in the minds of investors and speculators, events can spiral out of control, and, while that may not be precisely what's happening at present, it sure has the allure and feel of a full-blown currency/competency/confidence crisis in the making, one which actually started five to seven years ago, depending on which aspect one assigns as the starting point.

Demographically, the planet's population is aging and retiring; the current crop of up-and-coming youths don't inspire much in terms of leadership skills and a world dependent on handouts from government programs when the government itself is the main culprit and cause of the deterioration of global society is not a model upon which any sentient, thinking being would wager to last very long.

Gloom and doom scenarios such as this have roots in reality, though the psychological paradigms of cognitive dissonance and normalcy bias keep the general population in a state of suspended stupidity, though even the dullest among us can see the writing on the wall. Acceptance of such a harsh reality is not ready-made. It takes time, fear, and eventually, lots and lots of pain.

The time is growing short, the pain increasing (Have your wages gone up lately, while your costs continue higher and government regulations gain in stupidity, complexity and lack of enforceability?) and the fear, finally making a grand appearance at Wall Street, is beginning to spread.

Best to be prepared, and keep one's head while all about are panicking, because the panic is about to go mainstream.

As for the Fed, and how they create debt-money out of thin air, this brief, four-second clip should sufficiently explain:

DOW 16,257.94, -179.11 (-1.09%)
NASDAQ 4,113.30, -61.36 (-1.47%)
S&P 1,819.20, -23.17 (-1.26%)
10-Yr Note 99.20, +1.15 (+1.17%) Yield: 2.83%
NASDAQ Volume 2.17 Bil
NYSE Volume 3.58 Bil
Combined NYSE & NASDAQ Advance - Decline: 1526-4234
Combined NYSE & NASDAQ New highs - New lows: 325-42
WTI crude oil: 91.80, -0.92
Gold: 1,251.10, +4.20
Silver: 20.38, +0.162
Corn: 434.50, +1.75

Friday, January 10, 2014

Recovery? BLS Reports Just 74,000 New Jobs in December

It's tough to wrap one's head around numbers like the BLS released prior to the opening bell Friday morning, but they reported a paltry 74,000 jobs created in December of last year, the lowest print in nearly three years and magnitudes lower than consensus estimates of 200,000.

The number was fabulously rejected by Moody's economist Mark Zandi, who, live on CNBC, said the number should be "thrown out." Oddly enough, Zandi helps create the monthly private payroll report by ADP, which reported 238,000 December jobs on Wednesday.

The markets didn't take Zandi's advice, especially the bond market, as the 10-year note ripped higher, the yield dropping to 2.88%, the lowest since mid-December. Stocks spent most of the week's final session in the red, before rallying slightly into the close. The NASDAQ and S&P finished with gains on the day, though the Dow was down once again, though only slightly.

For the week, the Dow lost 32.94 points, the S&P gained 11.00 points and the NASDAQ was ahead by 42.76 points, so, depending on one's perspective, the lack of new job creation in the US just doesn't seem important to the valuation of equities, a judgement nuanced by the fact that the labor force participation rate fell to its lowest level in 35 years, at 62.8%.

Because so many people dropped out of the work force, the unemployment rate magically dropped to 6.7%, the lowest since the onset of the recession, in October, 2008.

The numbers belie what's really happening in the real world. Jobs are just not being created with any kind of rapidity, at least not at the rate one would associate with a falling unemployment rate.

But, as the saying goes, it's "good enough for government work," which is always shabby and usually falls apart before long.

The facade promoted over the past five years by the government and the media, that we're in the midst of a recovery, just met a reality that competes with the accepted propagandized narrative.

Just a note: the huge jump in corn prices (up $20.75) was due to the January crop report, which showed corn stocks at just a shade under 14 million bushels. The rise in price was largely due to short covering. Prices are expected to stabilize near 415-435 cents per bushel over the near term.

DOW 16,437.05, -7.71 (-0.05%)
NASDAQ 4,174.66, +18.47 (+0.44%)
S&P 1,842.37, +4.24 (+0.23%)
10-Yr Note 98.86, +0.81 (+0.83%) Yield: 2.88%
NASDAQ Volume 2.01 Bil
NYSE Volume 3.31 Bil
Combined NYSE & NASDAQ Advance - Decline: 3708-1994
Combined NYSE & NASDAQ New highs - New lows: 390-23
WTI crude oil: 92.72, +1.06
Gold: 1,246.90, +17.50
Silver: 20.22, 0.54
Corn: 432.75, +20.75

Thursday, January 9, 2014

Stocks Finish Flat to Lower; Alcoa, Sears Roil Markets After-Hours

2014 is not starting out the way 2013 ended. Stocks spent most of the day in the red, with only the S&P finishing with a fractional gain of 0.64 points.

Focus was on initial unemployment claims prior to the opening bell, as those seeking unemployment benefits fell 15,000 last week to a seasonally adjusted 330,000, but the numbers failed to ignite any fire under stocks. Investors are still largely on the sidelines, awaiting Friday's non-farm payroll report for December from the BLS.

Stocks languished throughout the sluggish session, though after the close a number of important earnings reports generated a good deal of fear.

Alcoa (AA), traditionally the first company to report, said per share earnings for the fourth quarter were below estimates of .06 per share, coming in at .04 after extraordinary items, including $384 million to settle allegations that one of its units bribed members of Bahrain’s royal family and officials at a state-owned company to win business in 2004. The company, outside of arcane and often absurd bookkeeping rules, experienced a massive loss.

The net loss was $2.34 billion, or $2.19 a share, compared with net income of $242 million, or 21 cents, a year earlier, New York-based Alcoa said today in a statement. Profit excluding a settlement in a bribery case and other one-time items was 4 cents a share, trailing the 6-cent average of 16 estimates compiled by Bloomberg. Sales declined to $5.59 billion from $5.9 billion.

Shares of the world's largest aluminum manufacturer were down nearly four percent in after-hours trading.

Sears Holdings (SHLD), operators of Sears and K-Mart stores, was equally disappointing, maybe moreso, when it reported same-store sales declines of 7.4% during the quarter ended January 6. Amid the depressing holiday season miss, the company projected losses of between $2.35 and $3.39 for the quarter ending Feb. 1.

Shares of Sears Holdings were down more then 14% after-hours.

If those economic stories weren't enough to turn one's stomach, New Jersey governor and leading 2016 Republican presidential candidate, Chris Chistie, proved today that he is not only an overbearing, obnoxious, obese bully, but a terrible liar and scapegoater, capable of throwing even his highest-ranking administrators under any fast-approaching bus, as well.

DOW 16,444.76, -17.98 (-0.11%)
NASDAQ 4,156.19, -9.42 (-0.23%)
S&P 1,838.13, +0.64 (+0.03%)
10-Yr Note 97.87, +0.57 (+0.59%) Yield: 2.96%
NASDAQ Volume 2.10 Bil
NYSE Volume 3.56 Bil
Combined NYSE & NASDAQ Advance - Decline: 2878-2807
Combined NYSE & NASDAQ New highs - New lows: 415-42
WTI crude oil: 92.00. -0.33
Gold: 1,229.40, +3.90
Silver: 19.68, +0.144
Corn: 412.00, -5.00

Wednesday, January 8, 2014

Stocks Down Again, Failing at Second 2014 Benchmark

Amid economic cross-currents, the major indices failed at the second benchmark for the year, that being the first five days of trading, which turned out to be negative and indicative of a sub-par performance for stocks throughout 2014. The first benchmark was also negative, as stocks were sharply lower on the first trading day of the new year.

After the banner year that was 2103, in which the indices were ahead by anywhere from 26-30%, a pullback is, however, more likely than not.

Putting numbers to the reality, here's the performance for the first five trading days of 2014:
Dow: -114 points
S&P: -11 points
NASDAQ: -11 points
NYSE: -79 points

While these figures aren't anything dramatic, they are negative, suggesting that investors are taking a very cautious approach to stocks even as financial data appears to point toward a strengthening of the general economy.

ADP reported that 238,000 jobs were created in December, ahead of forecasts and predictive of an equally-strong number from the BLS when they report Friday on December non-farm payrolls.

On the flip side, retail traffic for the just-ended holiday shopping season was down 14%, though sales were still ahead by 2.7%, and, just ater the bell, Macy's (M) reported same-store sales gains in the 3.6% range but announced that they would be laying off 2500 employees and closing five stores. Shares of the company were up sharply on the news in after-hours trading.

Overall, markets were down throughout most of the day, especially the Dow Jones Industrials, which suffered the most. The NASDAQ was higher through most of the session and hit the unchanged mark with just about 20 minutes left in the trading day, but returned to slightly positive territory at the close.

Tomorrow, the first earnings report will be come to the markets as Alcoa (AA), a former Dow component, reports full-year and fourth quarter results.

DOW 16,462.74, -68.20 (-0.41%)
NASDAQ 4,165.61, +12.43 (+0.30%)
S&P 1,837.49, -0.39 (-0.02%)
10-Yr Note 97.94, -0.17 (-0.18%) Yield: 2.99%
NASDAQ Volume 2.20 Bil
NYSE Volume 3.47 Bil
Combined NYSE & NASDAQ Advance - Decline: 2585-3071
Combined NYSE & NASDAQ New highs - New lows: 336-29
WTI crude oil: 92.33, -1.34
Gold: 1,225.50, -4.10
Silver: 19.54 , -0.248
Corn: 417.00, -9.00

Tuesday, January 7, 2014

Wall Street Gets First Rally of 2014, Right on Queue

It took a few days (four to be exact), but Wall Street had its first rally of the new year, and it was kind of a big deal.

With two-thirds of the country under the deep freeze and the data streams of economic reports and corporate earnings in a kind of limbo, a little confidence boost was exactly the tonic needed, because, after all, Wall Street would largely cease to exist without a healthy dose of confidence.

Call it any way one likes, stocks needed to rally, and they did. If this is the way efficient markets work, or, how rigged, gamed, manipulated markets operate, so be it.

All is well... until it isn't, unless it's not real, then it doesn't really matter.

DOW 16,530.94, +105.84 (+0.64%)
NASDAQ 4,153.18, +39.50 (+0.96%)
S&P 1,837.88, +11.11 (+0.61%)
10-Yr Note 98.33, +0.27 (+0.27%) Yield: 2.95%
NASDAQ Volume 2.12 Bil
NYSE Volume 3.51 Bil
Combined NYSE & NASDAQ Advance - Decline: 2876-1841
Combined NYSE & NASDAQ New highs - New lows: 304-17
WTI crude oil: 93.67, +0.24
Gold: 1,229.60, -8.40
Silver: 19.79, -0.316
Corn: 426.00, -1.75

Monday, January 6, 2014

As Bitter Cold Grips the Nation, Are Bears Clawing at Wall Street?

In three days, the rally which started on March 9, 2009, will be 59 months long, or, just a month shy of five years. That's a long enough time, one should believe, to make gains and take profits, so why is Wall Street worried about the declines of the first few sessions of 2014?

Are they worried? Maybe not. After all, the rally has seen only one 10% correction in those five years, so taking a little off the top of all-time highs might actually be a buying opportunity.

Last week, the excuse was low volume because all the participants were still on vacation. That doesn't fly, now that Monday started off the first full week for markets with equally low volume.

Next, the weather will be blamed, for everything. Just watch.

DOW 16,425.10, -44.89 (-0.27%)
NASDAQ 4,113.68, -18.23 (-0.44%)
S&P 1,826.77, -4.60 (-0.25%)
10-Yr Note 98.23, +0.96 (+0.98%) Yield: 2.96%
NASDAQ Volume 2.14 Bil
NYSE Volume 3.23 Bil
Combined NYSE & NASDAQ Advance - Decline: 2409-3326
Combined NYSE & NASDAQ New highs - New lows: 256-28
WTI crude oil: 93.43, -0.53
Gold: 1,238.00, -0.60
Silver: 20.10, -0.108
Corn: 427.75, +4.25

Friday, January 3, 2014

Reinhart and Rogoff Return: Debt Overhang, Financial Repression, Inflation and 'Saver's Tax'

Forgetting the day-to-day action of the stock market for a moment to focus on the really, really larger issue of macro-economics, comes this daft little piece of literature from the infamous duo of Carmen M. Reinhart and Kenneth S. Rogoff, prepared for the IMF, entitled, boorishly, "Financial and Sovereign Debt Crises: Some Lessons Learned and Those Forgotten," as though the central bankers of the world have forgotten their purposes in life, which would be, in no particular order:
1. Create and control all of the world's currency;
2. Put governments, businesses and individuals in debt;
3. Act like you're doing everyone a favor.

The authors of this [PDF] 21-page memo to the IMF bring up some old tomes familiar to those in the central banking business, which, more likely than not, they have NOT forgotten, not at all, such as financial repression, inflation (the central way central banks enrich themselves and impoverish the rest of the world), and outright debt defaults, this final theme one which the central banks will encourage sovereigns to pursue, in the best interest of everyone.

When one reads this little write-up and thinks it through, a couple of ideas immediately sprout forth from the pages.

One, inflation, the central banker's ally in its never-ending quest to eventually destroy the value of all currencies, has been latent and absent for some time, something the Fed head, Ben Bernanke, has openly whined about, and probably privately been chastised by his handlers in the global banking cartel. Inflation will have to make a big comeback, soon, lest the Fed and fellow central banks lose out on massive profits from the ongoing, recent economic crises gripping all nations.

They have the means to do so, and they certainly will, now that they've successfully re-capitalized their member banks (all the biggest ones, which were insolvent in 2008), through various means, the most obvious being the "taper," or winding down of their balance sheet, and higher interest rates, making money more expensive and credit all-but-impossible to get, which will have the desired result of pushing prices skyward while crashing the stock markets and making most citizens, now already poorer due to the stealth tax of low interest rates over a prolonged period, severe debt slaves.

The central banks, through their conduits in central sovereign governments, will also encourage defaults on massive amounts of debt, causing even more panic and a rush of cries from governments to individuals for the central banks to "save us," when in reality, it is they who are causing the pain.

While Reinhart and Rogoff are surely on the right track - though a bit opaque in their language - they are telegraphing the next moves for central bankers, who will, soon enough, declare that all their efforts have not succeeded in creating economic prosperity, so they will embark on, sorry, more austere measures. Governments will overtax and overburden their citizens (to some degree this is already occurring in Europe and Japan), but eventually - maybe in five years, or ten, or more - there will at last be a period of economic "normalcy" with interest rates on, say, 10-year notes at about 5%, inflation raging along at 5-8% (payback for the years of no or low inflation) and employment (with associated confiscatory taxes and fees) steadily declining for some countries, still high for others.

For most people and businesses, surviving this period will be tantamount to picking up nickels in front of a runaway steamroller: barely profitable, but highly risky. Many will be crushed; others wounded, the steamroller that is the Fed, the ECB, the IMF, World Bank and the BIS will grind nations, businesses and individuals into wretched little nothings.

That's the message from these authors, and, no, the central bankers of the world have not forgotten. It's coming. Not all at once, and not with any dramatic waving of wands or arms or hands, but slowly, gradually, eventually...

On the second day of trading for 2014, stocks took a bit of a roller-caster ride not dissimilar to those encountered during bear markets, but with a twist of day-trading irony, up at the open, crashing back to unchanged mid-day, rallying late before giving all of it back, the Dow being the only average on the positive side of the ledger today, the NASDAQ still down, the S&P marginally negative.

No, this was not a snap-back rally, and no, again, everybody's not waiting for Monday to "really" start trading. These first two sessions of 2014 were real and they count. Money is being pulled out of the market because money knows what's ahead, and it's seeking safe harbor.

Two things to note: the divergence of the a-d line from the headline close, and the continued low numbers of new highs and new lows.

Thanks for a week of hope and no change.

DOW 16,469.99, +28.64 (+0.17%)
NASDAQ 4,131.91, -11.16 (-0.27%)
S&P 1,831.37, -0.61 (-0.03%)
10-Yr Note 97.90, +0.60 (+0.62%) Yield: 3.00%
NASDAQ Volume 1.56 Bil
NYSE Volume 2.76 Bil
Combined NYSE & NASDAQ Advance - Decline: 3577-2094
Combined NYSE & NASDAQ New highs - New lows: 205-21
WTI crude oil: 93.96, -1.48
Gold: 1,238.60, +13.40
Silver: 20.21, +0.083
Corn: 423.50, +3.00

Thursday, January 2, 2014

January Barometer? Stocks Fall on First Trading Day of 2014


Stocks are only supposed to go higher, and the idea that we would begin the new year with a large selloff in stocks is a disturbing development to those in charge of propagandizing our glorious and ever-expanding economy.

The last time stocks fell on the first trading day of a new year was 2008, and, unless you've been living under a rock the past five years, you know what happened that year.

Not to say that a precipitous decline on the first trading day of the new year is a bad omen or a signal of a down year for stocks, but, referencing the January Effect, there's an 88% positive correlation between the direction of stocks for the entire month of January and the rest of the year, so, starting off with a sharp decline is not the best indication of general health, wealth and happiness going forward.

Obviously, it's too early to tell wither stocks go from here, but the apologists were out in force on CNBC, citing the fact that volume was on the very low side, something they neglected to inform upon during the late-year rally of the past two weeks, when trading volume was among the lowest of the year. Actually, Thursday's volume was higher than the average of the previous two weeks on a daily basis, and closer to normal than at any time since December 16.

With the major indices all up more than 25% in 2013, it would not come as a surprise to anyone should the market face some headwinds in 2014. It deserves mention that while the indices did very well, profits - as Larry Kudlow so often opines, "the mother's milk of stocks" - were higher by only six percent for the year, trailing paper gains by a margin wide enough to haul a bear trap through.

The bad news for holders of stock certificates (or the electrons which signify ownership in a brokerage account - not quite exactly the same thing) is that the selling was rather broad-based, as per the advance-decline line. The good news for the rest of us - those who own hard assets like land, gold, silver, machinery and vehicles - is that deflation seems to not want to go away. Gold and silver were higher, with silver shining at a nearly 4% gain on the day, and corn was down, so the price of corn in silver terms continues the trend lower, which, as our notes imply, according to Adam Smith, that is a deflationary trend of great significance. Crude oil also was off sharply.

Lower prices for all manner of consumer goods would be a definite boon for consumers and the general economy, though it's arguable that Wall Street and the international banking cartel headquartered at the Federal Reserve and World Bank might not be so pleased.

A sneaking suspicion that another grand transfer of wealth - on a scale beyond that of 2008-09 - is about to commence has been bandied about by skeptics of the recovery story. Maybe it's just a one-day trade and there's nothing more to it, though it needs to be pointed out that trades made today - especially those sales at a profit - won't necessarily be taxed for a very long time, around March 15, 2015, to be precise. Now, that could explain more about today's price action than just about any other macro or micro-economic factor present.

DOW 16,441.35, -135.31 (-0.82%)
NASDAQ 4,143.07, -33.52 (-0.80%)
S&P 1,831.98, -16.38 (-0.89%)
10-Yr Note 98.00, -0.03 (-0.03%) Yield: 2.99%
NASDAQ Volume 1.62 Bil
NYSE Volume 3.06 Bil
Combined NYSE & NASDAQ Advance - Decline: 1995-3764
Combined NYSE & NASDAQ New highs - New lows: 185-41
WTI crude oil: 95.44, -2.98
Gold: 1,225.20, +22.90
Silver: 20.13, +0.758
Corn: 420.50, -1.50