Monday, February 29, 2016

Stormy Monday Portends Trouble for Bullish Case

It's the last day of February. The market bulls could have added a little window dressing to make their case, but, instead, stocks vacillated from the open until just before noon, with losses mounting through the afternoon and into the close.

Not only is this an end of month Monday, but it is also the start of "jobs week," wherein all eyes will be peeled open in anticipation of Friday's non-farm payroll report for February. The structure of the market and the charts suggest that the rally of the prior two weeks has not only stalled out, but lost its bearings, since oil was markedly higher on the day. Stocks did not follow.

The problem with the oil/stocks pairing is that they are not and should not be aligned. Lower oil prices, have, over time, proven to be a boost for economies, but not necessarily the stock market. In reality, lower oil and distillate prices should be an overall boon for businesses, lowering a variable cost, thus potentially boosting profits. With the massive, global oversupply of crude that exists presently, the natural price of oil should be closer to $20 per barrel than $30.

Since the oil/stocks dichotomy is likely a false paradigm, the decoupling exposes the rigged market for what it really is: front-running algos, insider trading, forced trades at stops, short-covering rallies on vaporish volume and insidious surprise rebounds off questionable low points.

That's what makes today's slide all the more concerning. Perhaps the masks are coming off and the knives are coming out. We are undoubtably at the beginning of a secular bear market, with the long-toothed bull dying back in May of 2015. It's been downhill - with assorted fits and starts - since then, and markets are still in a search for the bottom.

Perhaps a one-off isn't enough to convince the bulls that the party is over. Stocks may well resume their rally as the week continues. As noted in Money Daily's weekend recap, the rally should have legs through the FOMC meeting before capitulation commences. However, it won't be the first time to be proven wrong, and surely not the last.

S&P 500: 1,932.23, -15.82 (0.81%)
Dow: 16,516.50, -123.47 (0.74%)
NASDAQ: 4,557.95, -32.52 (0.71%)

Crude Oil 33.89 +3.39% Gold 1,239.30 +1.55% EUR/USD 1.0877 -0.50% 10-Yr Bond 1.74 -1.25% Corn 357.25 -0.63% Copper 2.13 +0.19% Silver 14.94 +1.50% Natural Gas 1.71 -4.63% Russell 2000 1,033.90 -0.32% VIX 20.55 +3.74% BATS 1000 20,677.17 0.00% GBP/USD 1.3919 +0.41% USD/JPY 112.7050 -0.88%

Saturday, February 27, 2016

Stocks Gain For Second Straight Week; Rally Should Continue to FOMC Meeting

Chalking up another week of gains, US equity markets are putting the disaster that was January in the rear view mirror and moving on. The week ending February 26 was the second consecutive week of gains for the three major indices, though this one was not as potent as the first, signaling that while the rally in stocks may continue for some time, its momentum almost certainly is on the wane.

Over the past two weeks, the indices have clawed back roughly half of the losses suffered in January and the first week of February, a significant advance. Chart-watchers will be looking at key levels on the Dow and, especially, the S&P, seeking exit points before the eventual next downturn.

For the Dow, the next critical level is in the range between 17,200 and 17,350, about a two percent gain from where the market closed on Friday. The S&P is eyeing the 1985 to 2015 level, where significant resistance resides, again, roughly two percent from the close on the 26th.

The NASDAQ, already bumping up against its 50-day moving average, may have already lost momentum, though a move through the 4,620 mark could convince bulls that there's more upside on the horizon. The NASDAQ was the big winner, percentage-wise, on the week, but it remains at the heart of skepticism, loaded with risky energy and tech stocks, which comprise a hefty share of its index.

If the NASDAQ rolls over, this mini-rally could end quickly. A resumption of already well-established bear market conditions could extend into the Spring. One way or another, it's difficult seeing stocks surpassing the points from which they opened the new year. There's still much more risk to the downside than there are opportunities for a continuation of any rally.

While the past two weeks may have been "buy the dip" conditions in an oversold market, the converse, "selling the rip" should become apparent by the end of next week or, if the market and its participants grow increasingly patient and/or greedy, after the FOMC meeting on March 15-16.

A move to the downside prior to the meeting would signal a growing unease concerning Fed policies, which, to this point, have been less-than-reassuring to bullish plungers. While there's not much conviction among Fed-watcvhers that another rate increase is forthcoming, the risk remains. Another 25 basis point hike in the Federal Funds rate would send stocks to a semi-permananet shower. That's why the Fed won't move at this meeting, and the market pretty much knows it, so stocks are free to rally and investors are also free to take short-term profits.

With options expiration - a triple witching event - coming quick on the heels of the FOMC meeting, things could get very interesting on the 16th and 17th, as Fed policy is unveiled and the bulls have another chance to slaughter the shorts.

Look for stocks to gyrate at current levels, without much in the way of conviction, this week and into the next. Of course, the BLS non-farm payroll report for February will be closely followed, even though it has cemented its status as the worst barometer of both labor conditions and the general economy. The massaged numbers from the BLS are so statistically insignificant that they may well become more of an asterisk than an important inflection point as time progresses and the bear market resurfaces.

For now, however, the bulls have found a sweet spot. The smart money will be getting out shortly, the smarter money will squeeze out even more gains, and, as usual, the unsuspecting buy-and-hold muppets will be mercilessly stabbed, slashed and burned at the top of the short-term rally. The last two weeks of March and the advent of Spring should convince even the most optimistic that stocks have nowhere to go but down.

For the Week:
S&P 500: +30.27 (1.58)
Dow: +247.98 (1.51)
NASDAQ: +86.04 (1.91)

Friday's Foibles:
S&P 500: 1,948.05, -3.65 (0.19%)
Dow: 16,639.97, -57.32 (0.34%)
NASDAQ: 4,590.47, +8.27 (0.18%)

Crude Oil 32.84 -0.70% Gold 1,223.00 -1.28% EUR/USD 1.0932 0.00% 10-Yr Bond 1.7620 +3.83% Corn 358.75 -0.49% Copper 2.12 +2.29% Silver 14.71 -3.22% Natural Gas 1.79 +0.11% Russell 2000 1,037.18 +0.54% VIX 19.81 +3.66% BATS 1000 20,677.17 0.00% GBP/USD 1.3872 +0.03% USD/JPY 113.9850 0.00%

Thursday, February 25, 2016

Tickle Me Elmo Version Of Durable Goods Sends Stocks Soaring

Reactions to this morning's January Durable Goods report ran from the mildly surprised to grossly exuberant, with the most apropos metaphor being the one in which the stock market is Christmas, the traders are children (not far from the truth) and the report was a Tickle Me Elmo doll.

The doll was immediately unwrapped, hugged and unconditionally loved by all the kids, who seemed to wish that Christmas would never end, sending the major indices solidly higher and yields on bonds noticeably lower.

It was as though the year was hard, winter came early and any present would have sufficed to ease some of the woes, though this particular gift was simply perfection, wiping away the past six weeks of anguish and anger, tears, fears and jeers. Even oil gained 2 1/2%, finishing just over $33/bbl.

For the record, the rise in durable goods was 4.9%, the best move in 10 months.

According to a one-time reading of the stock market (today), there are no longer any issues regarding ultra-low interest rates, the slowdown in China (the SSE slipped by 6.41% overnight), chaos in Europe, or the ongoing wars in Syria and Ukraine.

We know this is untrue, but today's action would have one believe that a bull market was in full gear, GDP was booming at 5% and peace had broken out around the globe. Such are the vicissitudes in a market driven solely by headlines and not by fundamentals, because, in reality, the problems have not been resolved - not the ones from last week, last month, last year, or even from 2008. The issues remain, as do the fast-buck artists populating the trading stations and computer terminals of the markets.

Tomorrow should prove more prescient, with the second estimate of 2015 4th quarter GDP hitting the wires at 8:30 am, a good hour prior to ringing the opening bell.

But today was an undoubted victory for the bulls. Let them celebrate tonight and face the music as time presses forward. The Gold Bugs and Silver Eagles continue to be constrained, shackled, handcuffed, quarantined.

Best quote of the day: "Nobody will see it coming." They usually don't.

Tickle These, Elmo:
S&P 500: 1,951.70, +21.90 (1.13%)
Dow: 16,697.29, +212.30 (1.29%)
NASDAQ: 4,582.21, +39.60 (0.87%)

Crude Oil 33.06 +2.83% Gold 1,235.30 -0.31% EUR/USD 1.1028 +0.09% 10-Yr Bond 1.6970 -2.58% Corn 360.25 -1.17% Copper 2.08 -0.86% Silver 15.15 -0.93% Natural Gas 1.79 -2.56% Russell 2000 1,031.58 +0.93% VIX 19.11 -7.77% BATS 1000 20,677.17 0.00% GBP/USD 1.3964 +0.22% USD/JPY 112.8855

Wednesday, February 24, 2016

Crash Is A Certainty Despite Today's Idiocy

Fundamentals - whether they be in individual stocks or the macro economy - have not mattered for a long time, but today's crash and dash was an epic.

Stocks fell out of bed at the open, with the major indices down one to 1 1/2 percent, and then gained for the remainder of the session ending marginally in the green.

On Friday, the second revision to fourth quarter 2015 GDP will be issued, after the first estimate was a gain of a paltry 0.7%. With proper accounting in place, the US economy likely shrank by 1.25%, but it's unlikely the correct data will show that. The criminal enterprise of government - from local to federal - is about to be hit by a typhoon otherwise known as an unhappy citizenry with a new hero in Donald Trump.

The status quo is about to become status done. It may not happen this week, or next, or for six months, but, rest assured, by this time next year (probably sooner) the United States is going to look very different from the mess the banks and politicians and Wall Street has produced.

Today's nonsense:
S&P 500: 1,929.80, +8.53 (0.44%)
Dow: 16,484.99, +53.21 (0.32%)
NASDAQ: 4,542.61, +39.02 (0.87%)

Crude Oil 32.26 +1.22% Gold 1,230.20 +0.62% EUR/USD 1.1011 -0.08% 10-Yr Bond 1.7420 -0.17% Corn 364.75 -0.55% Copper 2.12 +0.45% Silver 15.26 +0.10% Natural Gas 1.83 +0.27% Russell 2000 1,022.08 +0.98% VIX 20.72 -1.24% BATS 1000 20,677.17 0.00% GBP/USD 1.3925 -0.71% USD/JPY 112.1830 +0.14%

Tuesday, February 23, 2016

Everybody, Limbo!

Stocks and oil slumped, while gold and silver held their own as the market took another pause to reflect on the possibility of a Trump presidency, housing prices which seem to be reaching an affordability limit and a two-week wait until the next FOMC meeting.

For the Trmpster, Las Vegas is a second home to him, so it's only fitting that he's expected to win Tuesday's caucuses in Nevada handily.

The S&P/Case-Shiller index for December, 2015, showed gains in prices for median homes increasing month-over-month and year-over-year.

Stocks appeared to be charting their own course, with stocks falling into the red early and staying near the lows of the day for much of the session. After ramping from losses two weeks ago, the current mini-rally has run out of steam, and there doesn't seem to be much on the bid to push prices higher in the near term.

The price of crude fell by more than 4 1/2% as recent talks of a production freeze by Russia, Saudi Arabia, Iraq and Iran (depending upon which source you wish to believe) turned out to be - like the cease-fire in Syria - all bluster and no bite.

Midweek, stocks are looking at a slight bias to the positive, as Tuesday's losses failed to overcome Monday's winners. Markets are ostensibly entering a late-winter limbo phase, as volatility and geopolitical tensions have leveled off.

S&P 500: 1,921.27, -24.23 (1.25%)
Dow: 16,431.78, -188.88 (1.14%)
NASDAQ: 4,503.58, -67.02 (1.47%)

Crude Oil 31.85 -4.61% Gold 1,227.50 +1.44% EUR/USD 1.1018 -0.07% 10-Yr Bond 1.7450 -1.19% Corn 362.25 -1.43% Copper 2.10 -0.76% Silver 15.31 +0.80% Natural Gas 1.83 -1.61% Russell 2000 1,012.15 -0.94% VIX 20.98 +8.26% BATS 1000 20,682.61 0.00% GBP/USD 1.4021 -0.92% USD/JPY 112.0950 -0.76%

Monday, February 22, 2016

Donald Trump Shock Wave Shakes Nation

Winning every available delegate in a truly historic presidential primary victory in South Carolina on Saturday, business billionaire Donald J. Trump now sets his sights on the state of Nevada and its upcoming caucus on Tuesday.

After what appears to be a sure win for Mr. Trump, the big test comes the following Tuesday, when 13 states will hold Republican primary votes, led by the inartfully-named "SEC" states of Alabama, Georgia, Virginia, Arkansas, Texas and Tennessee. Equally important are tests in Massachusetts, Minnesota, Oklahoma, Colorado and Alaska. 595 delegates are up for grabs on March 1. Texas alone accounts for 155, and is one of the few states in which Donald Trump does not lead. There, Ted Cruz, who is a senator from the state, holds a slim advantage, though the latest poll was taken prior to Trump's victory in the Palmetto State.

No candidate that has won both New Hampshire and South Carolina has failed to capture the Republican nomination, a fact that completely eluded the commentators on the Sunday talk show circuit, most of whom spent their air time desperately searching for an antidote to Trump fever, which is sweeping a nation angry with politicians, politics, a do-nothing congress and an administration that has sold its constituency down the proverbial river.

Trump offers a refreshing change of pace from the status quo. From his apparent off-the-cuff remarks to his infectious enthusiasm, Trump embodies a new paradigm for the American electorate and its making the establishment parties and the supine news media quake in its collective booties.

The message is clear and unqualified. Trump promises to build a wall on the Mexican border to halt the flow of illegal immigrants, and, to make sure nobody misses the message, Trump always reminds supporters and detractors alike that he'll make Mexico pay for it. Other policy initiatives include bringing back American jobs from places like Mexico, China and Vietnam, taking better care of veterans, destroying ISIS, cutting taxes for the middle class and business, repatriating profits earned in foreign countries by American enterprises, and protecting the rights of American citizens outlined by the Bill of Rights, especially the second amendment, the right to bear arms.

Not surprisingly, Trump's forthrightness and honesty go a long way in an age dominated by skepticism, innuendo and false prophets. His campaign message to "Make America Great Again" resounds in a country fed up with liberal concepts like multiculturalism, atheism and statist elitism. Trump, while himself a very rich man, is self-made and down-to-earth in ways that Americans have demonstrably appreciated. His approach is common-sensical and sometimes bordering on comical, calling politicians incompetent, self-important and dishonest, most of which applies in spades to the current crop of paid-off crony representatives of lobbyists, big business and special interests.

And then today, there was this:

If Trump is willing to abolish Obamacare, Common Core and reopen the wounds of 9/11 and the Iraq War, why not tackle the biggest buffoons in the room, the rentiers of the Eccles Building, the clueless illuminati which has brought us bubbles and busts and threatens to do the same again?

The world is waiting.

Today's Rigged Results:
S&P 500: 1,945.50, +27.72 (1.45%)
Dow: 16,620.66, +228.67 (1.40%)
NASDAQ: 4,570.61, +66.18 (1.47%)

Crude Oil 33.60 +5.83% Gold 1,209.40 -1.74% EUR/USD 1.1026 -0.96% 10-Yr Bond 1.7660 +1.03% Corn 368.00 +0.68% Copper 2.11 +1.81% Silver 15.19 -1.22% Natural Gas 1.86 -0.16% Russell 2000 1,021.74 +1.16% VIX 19.38 -5.60% BATS 1000 20,682.61 0.00% GBP/USD 1.4148 -1.09% USD/JPY 112.9550

Friday, February 19, 2016

Stocks Finish Week Mixed to Flat, as CPI Confuses Markets

Odd for a day of options expiration, the day on Wall Street was marked by light volatility and a narrow trading range, the tone set for confusion prior to the open when CPI showed a spike in January to 0.3%, the biggest jump in more than four years.

On a year-over-year basis, excluding food and energy, CPI grew by 2.2%, the highest inflation rate since June 2012. While on the one hand, the data was supportive of further hikes in the federal funds rate, investors were concerned that such a data-driven move by the Fed might cause further declines in stocks.

With that, equities got stuck in cautious trading, ending just about where they started the day.

The minor moves did little to derail the mini-rally that comprised the better part of the holiday-shortened week.

The Dow finished ahead for the week by 418.15 (+2.62%); the S&P added 53.00 points (+2.84%); the NASDAQ ended ahead by 166.92 (+3.85%). The gains were the best of the seven weeks of trading this year, though the indices remain mired in the red zone.

With no FOMC meeting in February, investors will have to ride along until March 15-16, the dates of the next Open Market Committee, though odds are still in favor of the committee keeping rates at 0.25-0.50%, considering the poor performance of stocks following the first rate hike in December.

As was the case at the end of last year, the Fed is stuck in a serious spot, hoping to hike rates three more times this year, while the US and global economies continue to look ragged, worn out and teetering on the brink of recession.

About the best the Fed can offer in its assessment of US markets is that at least they're doing better than all other advanced economies, including France, UK, Germany, Japan, China, and Australia.

Friday's Totals:
S&P 500: 1,917.78, -0.05 (0.00%)
Dow: 16,391.99, -21.44 (0.13%)
NASDAQ: 4,504.43, +16.89 (0.38%)

Crude Oil 31.71 -3.70% Gold 1,232.10 +0.47% EUR/USD 1.1133 +0.01% 10-Yr Bond 1.7480 -0.63% Corn 365.00 -0.14% Copper 2.09 +0.58% Silver 15.44 +0.02% Natural Gas 1.80 -2.65% Russell 2000 1,010.01 +0.53% VIX 20.53 -5.13% BATS 1000 20,682.61 0.00% GBP/USD 1.4406 0.00% USD/JPY 112.5750 0.00%

Thursday, February 18, 2016

Chinks In The Global Ponzi Armor

What the central banks have constructed today as a "global economy" would make Bernie Madoff blush for all its arrogance and chutzpah.

The Fed buys Treasury bills, notes and bonds from the US government, the French government, Japan, Germany, UK, Australia, China, and the central banks of those countries do likewise. In essence, they are all borrowing from each other, and all of them, in the aggregate - and often enough singularly - are insolvent. It's the world's largest kiting scheme, being played on a global scale with money created out of thin air, backed by debt, most of which will never be repaid.

This kind of scam is typically known as a pyramid scheme, an airplane game, or, a Ponzi scheme, in which the creators and early adopters receive the bulk of the benefit, and those last in are left whining about promises made and unkept, with a loss of their investment and great remorse.

When one views the global economic structure from outside, it's clear that the creators of the Ponzi are the central banks, the early adopters are governments, and the vast majority of losers are savers, investors, retirees and, eventually, the young and future generations, who will inherit literally, a world of hurt, where the assets have been stripped away, wealth belongs to an upper, upper echelon of self-annoited masters, and social mobility is largely a myth.

Already, in the United States - the wealthiest nation in the world - there is evidence that the next generation to retire beyond he baby boomers, will be less well off than the previous one. Baby boomers have been retiring steadily, but their wealth has been neutered by the Zero Interest Rate Policy (ZIRP) of the Fed (soon to become NIRP), the COLAs (Cost of Living Adjustment) has been likewise zeroed out due to recalibration of how inflation is measured by the government, and taxes will take care of the rest. And that's just the Social Security end of it.

The Federal government has already put in place methods and scenarios in which they can confiscate the holdings of retirees, in 401k confiscations, wealth extraction taxes and "national emergency" legislation. In fact, senior debt holders (derivatives) would already have priority over depositors in an orderly liquidation of a major bank.

There's only one way to win at this game, and that's to not play. If possible, one would work outside the system, avoiding all taxation and contributions to unemployment insurance, social (in)security, worker's compensation theft, and the latest money extraction scheme, the ACA, otherwise known as Obamacare. Savings would likewise have to be outside the system, acquiring and holding everything from undeveloped land to precious metals, gems, to canned food, tools and machinery of trades.

It's a tough game to play, though, as the global Ponzi scheme continues to unravel in front of our very eyes, one which must be given consideration, even as a partial remedy to outright wealth confiscation through inflation, taxation or fiat.

Today's notch in the Ponzi wood:
S&P 500: 1,917.83, -8.99 (0.47%)
Dow: 16,413.43, -40.40 (0.25%)
NASDAQ: 4,487.54, -46.53 (1.03%)

Crude Oil 32.73 -0.76% Gold 1,231.30 +1.64% EUR/USD 1.1112 -0.12% 10-Yr Bond 1.76 -3.30% Corn 366.25 -0.27% Copper 2.07 -0.22% Silver 15.42 +0.28% Natural Gas 1.85 -4.63% Russell 2000 1,004.71 -0.64% VIX 21.64 -3.00% BATS 1000 20,682.61 -0.29% GBP/USD 1.4338 +0.34% USD/JPY 113.2550 -0.74%

Wednesday, February 17, 2016

Market Moves on Fiction

Money Daily's new policy will be (most of the time) to just post the closing figures when stocks close to the upside and offer more analysis and "insight" when the markets close in the red, sometimes, when we feel like it, or not.

After all the carnage that's happened this year, apparently, the bulls are back for another slaughter. Bulls, being the central banks of the world, are desperately buying equities in an attempt to shore up the last vestiges of the industrial revolution, information age and dot-com 3.0.

The current three-day rally offers the same kind of background as all of the previous uplifting moves in stocks; nothing of lasting value.

Today's fiction:
DJIA: 16,453.83, +257.42
S&P 500: 1,926.82, +31.24
NASDAQ: 4,534.07, +98.11

Crude Oil 31.00 +6.75% Gold 1,210.20 +0.17% EUR/USD 1.1135 +0.09% 10-Yr Bond 1.8190 +2.31% Corn 367.00 -0.07% Copper 2.07 +1.05% Silver 15.36 +0.20% Natural Gas 1.93 +1.21% Russell 2000 1,011.13 +1.54% VIX 22.31 -7.47% BATS 1000 20,743.15 +1.55% GBP/USD 1.4294 +0.04% USD/JPY 113.9950 -0.17%

Tuesday, February 16, 2016

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

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

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

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

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

Friday, February 12, 2016

Stocks Always Rebound After Sound Drubbings... Except When They Don't

Regular readers of Money Daily may notice that our editorial point of view - on days like today - sees no reason for stocks to go higher for just about any reason.

There's a method to the madness: it's because the economy stinks and most of the stocks that comprise the major averages are either overpriced or making use of devious accounting tactics to hide the truth.

Today was textbook manipulation to the upside, and, as it turns out, insufficient to cover the losses from earlier in the week. That's the problem with glowing headlines about stocks going up: the writers of such headlines and articles fail to point out that these stocks are coming off being beaten down.

For instance, today's gain on Bank of America (BAC) was 7%, but, it closed at 11.95. It was 18 six months ago, and 14 just a few weeks ago. Some for WTI crude oil, which was up a whopping 11.33% today. Outstanding. However, the closing price was $29.18, more than a 70% decline from 18 months ago.

Anybody even remotely suggesting that the economy and/or equity markets are sound should be shackled, drug off to the nearest body of water and thrown in. Stupidity (from central banks and paid economists) is what got the markets and the economy into the current mess.

Enough is enough, today's results notwithstanding.

For the week:
S&P 500: -15.27 (-0.81%)
Dow: -231.13 (-1.43%)
NASDAQ: -25.63 (-0.59%)

Today's fancy, farcical feast:
S&P 500: 1,864.78, +35.70 (1.95%)
Dow: 15,973.84, +313.66 (2.00%)
NASDAQ: 4,337.51, +70.67 (1.66%)

Crude Oil 29.18 +11.33% Gold 1,239.30 -0.68% EUR/USD 1.1250 -0.57% 10-Yr Bond 1.7480 +6.33% Corn 358.75 -0.42% Copper 2.03 +1.37% Silver 15.76 -0.25% Natural Gas 1.97 -1.45% Russell 2000 971.99 +1.92% VIX 25.40 -9.74% BATS 1000 20,089.57 +1.80% GBP/USD 1.4499 +0.10% USD/JPY 113.2750 +0.60%

Thursday, February 11, 2016

How To Tell The Economy Is Really Horrible

A number of interesting developments highlighted today's off-the-street action concerning US stock markets and the general global economy. They were all internet-related, but have nothing to do with the share prices of the companies affected, but first, let's take a recap of the actual carnage in the markets today.

Asia was awash in red ink, as Japan circles the monetary drain (must be Adam Smith's "invisible hand" pulling the plug) sending the Nikkei down to new depths, as noted below, along with Hong Kong's Hang Seng Index, which suffered an even more severe loss in points and percentage:
Nikkei 225: 15,713.39, -372.05, -2.31%
Hang Seng Index 18,545.80, -742.37, -3.85%

With China's markets closed for the week as the country celebrates Chinese New Year, over in Hong Kong, it was back to work after a three-day hiatus. The HSI fell out at the open and never recovered. As many in the US apparently do not know, all of Asia's major markets - including Australia, recently - are in bear market territory. The Hang Seng topped out at 28,588 in late April, 2015. Today's loss puts it down 35% from its highs.

While the Asian markets were spitting up blood, Europe opened with a bang to the downside, as Sweden announced its central bank was cutting interest rates further into the negative. Sweden’s Riksbank cut its benchmark interest rate from -0.35% to -0.5%. So, theoretically, anyone wishing to keep 100,000 Krona in a Swedish bank has the awesome privilege of paying the bank 500 of those Krona for the year.

That, in addition to the ongoing banking collapse (Duetshe Bank, in particular), sent Euro stock bourses reeling. Germany's DAX was off 2.93%. In England, the FTSE was down 2.36%. France's CAC 40 fell by 4.05%, and the Euro Stoxx 50 was battered some 108 points, a 3.90% downside.

US traders left no stone unturned, sending the markets close to the August lows and the NASDAQ within 50 points of the magic bear market line (-20%), until a spurious story about Saudi oil cuts saved the day around 2:30 pm. The Dow was down more than 400 points at the lows, and there was some talk about the S&P bouncing off a key level at 1812. Truth be told, key levels and support lines aren't going to matter much in coming days, weeks and months, because there is growing evidence that recession has arrived in the US, just as it has washed up on the shores of Asia and Europe.

Now, back to those off-Wall Street developments that offer many clues on how to know the economy isn't doing very well.

First, there was the outage at just as the market was opening. Anybody who wants the straight, uncensored, bearish view of markets instinctively heads for "the Hedge" as it is known, the site famous for it's inveterate grinding on the wheels of finance. An apparent DDOS attack took the site offline for about 30 minutes and was the second such attack in as many weeks.

While the culprit is unknown, tin-foil cap types point to the NSA or another government agency which wishes to keep at least a leash on the unruly junkyard dog.

Second, MSN Money disabled comments on all its stories. While news of this was not reported widely, its unknown exactly when the company decided it didn't want to hear from its readers. MSN Money follows the lead of Bloomberg, which disabled commenting across its web properties last year. Censorship. It's what's for dinner, and you can't complain about it.

Third, Janet Yellen completed her annual testimony to congress today with a visit to the Senate Banking Committee, chaired by Richard Shelby (R-AL), and failed to goose the markets. When the Fed Chair has less influence on markets than a teen beauty queen at a gay pride rally, take that as a sign markets are more than a little jittery.

Gold and silver continued to rally, with gold up more than $50 at one point in the day. Silver was fast approaching $16/oz. It was under $15 as of Monday's fix. The two precious metals are the best-performing assets (along with select bonds) of 2016.

And finally, Yahoo Editor-in-Chief, Andy Serwer, had to pen this little gem of statist nonsense, explaining that nobody knows why stocks are going down. Server proves that he has quit an imagination, or none.

All in all, it appears the media, government, and the financial world are not about ready to let the muppets get a feeling that something bad is heading their way, despite Yellen fielding questions about the Fed being "out of bullets" and negative interest rates.

The status quo is getting very, very nervous and it's beginning to show. With the US heading into a three-day weekend (Monday is President's Day. In case your boss didn't tell you, you don't have to come in.) and China's markets re-opening on Monday, tomorrow's trading might be more than just a little interesting. The week has gone badly so far, and it is doubtful many will want to head into the break long.

Hate Crime for Thursday:
S&P 500: 1,829.08, -22.78 (1.23%)
Dow: 15,660.18, -254.56 (1.60%)
NASDAQ: 4,266.84, -16.76 (0.39%)

Crude Oil 27.30 -0.55% Gold 1,247.00 +4.39% EUR/USD 1.1316 +0.32% 10-Yr Bond 1.64 -3.58% Corn 360.00 -0.07% Copper 2.01 -0.72% Silver 15.80 +3.36% Natural Gas 1.99 -2.79% Russell 2000 953.72 -1.01% VIX 28.14 +7.04% BATS 1000 19,734.69 -1.33% GBP/USD 1.4484 -0.35% USD/JPY 112.5900 -0.01%

Yellen's Congressional Testimony Fails to Inspire Confidence

As Janet Yellen testified to the House of Representatives (on Thursday, she speaks and takes questions from the Senate), stocks hung on her every, stuttering, stammering word, but eventually fell in late trading as the Fed Chair seemed a bit too concerned about recent data, stock declines and global tensions to allow congress or investors any happy talk on the now-stalled "recovery."

S&P: 1851.86, -0.35 (-0.02%)
Dow: 15914.74, -99.64 (-0.62%)
NASDAQ: 4283.59, +14.83 (+).35%)

As per this article, JP Morgan economists are now "not all that worried" about negative interest rates in the US, my response:

Of course, negative interest rates are the embodiment of absolute insanity, madness of the markets. Whats worse, perhaps, is that some commentators are touting that this will bring on hyperinflation, though none of them explain the mechanism.

Here at Money Daily, the widely-held belief is that if rates go any lower, we will have an outright deflationary depression, or, an extension of the deflationary depression which has been underway since 2008. We've been hearing about hyperinflation for years now, and, while there admittedly is some inflation, there's more deflation, especially when it comes to cash.

If the banks go NIRP and put on more capital controls (ban on cash not going to actually occur in some places), cash will surely be king, as it was in the Great Depression. Gold and silver should be worth even more, but that's not until the COMEX gets stung (still waiting on that one).

Anybody who's read "When Money Dies" by Adam Fergusson should recall that during Germany's Weimar, the farmers were barely affected until near the end when hordes of people came out from the cities and actually slaughtered animals and raided crop stores.

There's a free PDF, though this is not recommended for everyone - it's somewhat dense:

When Money Dies: The Nightmare of the Weimar …

In the meantime, farmers figure on getting started with seedlings in about three weeks here in (now, finally) snowy upstate NY. Then, investors with any sense should go long vegetable stands. If the banks want to charge money to hold cash, figure people will be more than willing to exchange it for FOOD.

The central bankers have lost their minds. Ask a farmer about storage costs for cash and you'll probably hear, after a long, sidewards stare, that he'd be happy to help you out, since he has plenty of storage for livestock, tools, equipment, produce, and his family (commonly known as a home or household).

People in a city or large town/village should be concerned. Out in the country, not an issue. Besides, this madness will only last - at best - a year. Donald Trump will be president and life will get better. We are (pun intended) banking on it.

This, from a poster called "The Continental," is apropos:

Positive interest rates cause capital to form. Negative interest rates destroy capital.

The banks are desperate to prevent the bond bubble from collapse and are extrapolating to negative interest rates. In short, it's game over for the dollar and its fiat currency brethren.

Central bank reserves were growing exponentially after 1948 up to mid 2014 whilst going vertical they suddenly stopped and plateaued. In the last year, ~$1 trillion of reserves have "disappeared" the collective balance sheets of the world. This means that cash/credit dollars are being created while counterbalancing bonds are being destroyed. This is monetization at its worst. The reserve base of the currency is slowly vanishing.

In the short run, cash dollars will become scarce and valuable. In the long run there is nothing, not even bonds, backing cash dollars and they will collapse (hyperinflate) when trillions of dollars return home looking for assets to convert to.

Buying physical gold (and silver) at any price is not only a no brainer vis-à-vis protecting capital; it is financial suicide not to buy gold.

Tuesday, February 9, 2016

Stocks Finish Flat, But Internals Signal Something Is Seriously Wrong

US Stocks closed today marginally on the downside, though appearances can be deceiving, as there was outright catastrophe in Japan which spilled over into worried European markets.

With Chinese markets (including the SSE and Hang Seng) the Nikkei took a magnificent beating on Tuesday, losing 918 points, a 5.40% loss on the day, sending the main index of Japan further into bear market territory. Perhaps even more significant, the JCB 10-year note yield fell to a negative number, under ZERO, for the first time in history. This marks Japan and Switzerland as the only countries in the world with negative yields out to ten years, though other countries are rapidly approaching that benchmark, in particular, Germany.

European bourses all finished their session with losses of one percent or more, and, at the open in the US, the situation appeared dire, with Dow futures down more than 150 points. Stocks quickly gained traction, turned positive near midday, flirted with the unchanged line throughout the session until finally giving it up late in the day.

But, the story is not the minor loss the major indices took, but the skew of all manner of metrics toward the negative. Bond yields continued to collapse, with the ten-year down to 1.71%. The spread between the ten and two-year note compressed down to 1.04, something of a danger zone, as the two-year actually rose two bits, to yield 0.67%.

Bank stocks were unhappy spots, with Bank of America (BAC) closing at 12.20, a new 52-week and multi-year low.

Advancers were also far behind declining stocks by a margin of more than 2-to-1. Also of note, the number of new lows (NASDAQ and NYSE combined) dwarfed new highs, 812-70, with only six of those new highs on the Naz. The central planners at the central banks can pin their hats on the day as they successfully halted the manic rallies in silver and gold, for a day, anyway.

Additionally, oil was sent back well below the $30 mark, finishing in New York at $28.38 a barrel.

The VIX is also signaling more turbulence, hanging steadily in the mid-20s range.

The rout in stocks, however, like the gains for the metals, is far from over. Consensus view on Wall Street is still concerned, but not yet panicked. Stocks are still about 5-7% away from official bear market territory, though a few bad days could send the indices reeling in the wrong direction.

In a story by Bernard Condon (AP) about how much money companies have lost doing stock buybacks, we find that the stock buybacks which goosed the market and individual stocks higher over the past six to seven years has been nothing short of a colossal flop and threatens to become an even heavier weight stopped to the stock market.

What stock buybacks did accomplish was to allow executives to boost their companies' earnings without devoting capital to expansion, while at the same time justifying their extraordinary salaries and cashing out their outrageous stock options and/or bonuses.

Investors should be outraged, and righteously so, because these companies should have been either expanding their capital base or market share or distributing dividends to their shareholders. What these stock buyback kings have done is nothing short of a fiduciary failure, which in other industries would be cause for criminal indictments.

Of course, since this all occurred within the cozy regulatory environment that is Wall Street, nothing even close to that will happen. The executives who personally profited from corporate paper profits will walk away with their cash after hollowing out scores of once-healthy companies. It may turn out to be good overall, if a few of the giant multi-nationals like Wal-Mart, Yum Brands and ExxonMobil get cut down to more reasonable sizes and markets open up for more nimble - and honest - competitors.

Tuesday's Cracker-jack pot:
S&P 500: 1,852.21, -1.23 (0.07%)
Dow: 16,014.38, -12.67 (0.08%)
NASDAQ: 4,268.76, -14.99 (0.35%)

Crude Oil 28.38 -4.41% Gold 1,189.20 -0.73% EUR/USD 1.1294 +0.86% 10-Yr Bond 1.7290 -0.35% Corn 360.50 -0.48% Copper 2.04 -2.61% Silver 15.23 -1.30% Natural Gas 2.10 -2.01% Russell 2000 964.17 -0.53% VIX 26.71 +2.73% BATS 1000 20,030.11 -0.07% GBP/USD 1.4468 +0.29% USD/JPY 115.0020 -0.51%

Monday, February 8, 2016

Bank Stocks Lead Market Rout as Bond Yields Plummet; Gold, Silver Soar

If anyone critical of the US economy is - as the great and almighty economic genius, President Obama recently posited - "peddling fiction," then why is Wall Street peeling away from equity positions like it's the Tour de France?

Relentless selling was the order of the day, especially in financials, until the final hour, as specs stepped in or shorts covered, cutting losses by 1/3 to 1/2.

While fiction writers may not think the stock markets are the modern day equivalents of "Moby Dick," they do have something of a beached whale quality to them. Germany's DAX is already in a bear market, as is China's SSE and Japan's NIKKEI, and the US markets are catching down somewhat quickly, with all three major indices already in correction territory.

With no real catalyst to move stocks higher, the prognosis is for further losses through the first quarter.

Banks were particularly ugly today, with Deutschebank (DB, -8.00%) teetering on the brink of insolvency, and losses suffered by Bank of America (BAC, -5.25%), Goldman Sachs (GS, -4.61%), Citigroup (C, -5.14), Wells-Fargo (WFC, -2.84%), and JP Morgan Chase (JPM, -2.10%).

At issue, as usual with banks, is interest rates, which soared today, pushing the 10-year note to an 18-month low yield of 1.74%). Credit spreads also continued to narrow, forecasting a recession, if not this quarter (and possibly last quarter), then almost surely in Q2.

Underlying the banking sector are questions of general solvency, quality of collateral, and, the size of their respective derivative books. Deutsche has the largest, estimated to be a total exposure of $75 trillion, with the US banks heavily into the game. Derivatives - CDS and other "bad bets" are what nearly took the entire Western economic system down in 2008, and they haven't gone away. Bank balance sheets are larger now and filled with just as much, if not more, toxic derivative soup.

When the financials lead the market down, it's usually not a good sign. Bank of America, Goldman Sachs and Citi are already in bear markets (down more than 20%), while Wells-Fargo and JPM are within one percent of being in the same sinking vote.

Following the underwhelming jobs report Friday, stocks have done nothing but decline and that trend doesn't look to be about to change anytime soon.

The world may be months - if not weeks - away from complete capitulation in stock markets, the precursor to a global depression.

Another telling sign is the rise of gold and silver, two of the top-performing assets (along with bonds) for 2016. Both were up smartly again today and have broken through strong points of resistance.

The day's damage:
S&P 500: 1,853.44, -26.61 (1.42%)
Dow: 16,027.05, -177.92 (1.10%)
NASDAQ: 4,283.75, -79.39 (1.82%)

Crude Oil 30.11 -2.53% Gold 1,191.40 +2.91% EUR/USD 1.1193 +0.30% 10-Yr Bond 1.74 -6.11% Corn 362.00 -1.03% Copper 2.09 -0.52% Silver 15.35 +3.90% Natural Gas 2.13 +3.30% Russell 2000 969.34 -1.65% VIX 26.00 +11.21% BATS 1000 20,045.01 -1.29% GBP/USD 1.4432 -0.47% USD/JPY 115.8500 -0.93%

Friday, February 5, 2016

Jobs Number Baffles Market, But, The Market Is Saying SELL, SELL, SELL

With a January jobs number that was well short of expectations, at 151,000, the reaction from Wall Street was truly a puzzler. One could have easily gone with the "bad news is good news" meme, because if the economy is deteriorating (hint: it is) and layoffs are rampant (they are), then the Fed may not be able to justify any more increases in the federal funds rate this year.

That would be undeniably good for stocks.

It wasn't.

All the major indices took a nosedive right out of the gate, correctly predicted by the futures trading, which collapsed as soon as the number came out, an hour prior to the open.

So, what were the market mavens reading into the garbled mess that was the January Non-farm payrolls report?

Perhaps they looked at the wage growth, which was impressive, up a solid 1/2 percent, an unusually large jump, but probably the result of new legislation in a number of states which mandated higher minimum wages, which were where all the new jobs are - at the low end.

Or, the market might have reacted to the 4.9% unemployment rate, an unbelievable number, and again, a sign of a strengthening economy, which gives the Fed some latitude in raising rates. In any case, the odds of a rate increase later this year jumped on the news, sending stocks down the drain.

What traders see in the numbers may be far removed from what the numbers actually revealed, and the numbers themselves may not be very believable. After all, who actually believes that of those 151,000 jobs created, 58,000 of them were in retail? Remember, this was January, when retailers are normally laying people off after the holiday season. And this was no normal January either. Big chains, from Wal-Mart to Macy's to Sears were closing stores and letting people go. So, just who was hiring all these retail employees?

Then there were the 47,000 jobs created in the food service industry. Really? McDonald's, Applebee's, et. al., were hiring in January? The report also included a manufacturing sector increase of 29,000 jobs, which runs contrary to the recent ISM and PMI manufacturing jobs outlooks.

Money Daily warned yesterday that the BLS is famous for convoluted schemes to concoct bad figures and massive revisions, making the initial releases almost comical, and this one certainly fit the bill.

November and December were revised in opposite directions. The change in total nonfarm payroll employment for November was revised from +252,000 to +280,000, and the change for December was revised from +292,000 to
+262,000, for a net loss of 2,000.

We also noted that the number would not be influential to markets unless it was a big overshoot or a big miss. It was a big miss, with the consensus estimate at 190,000. Besides being down more than 100,000 from December - even after the revision - it's a massive miss, and one that the market apparently could not readily overlook.

Overall, the damage to equity markets was pretty severe. The NASDAQ closed at its lowest level since October, 2014, some 17 months hence.

For the week:
S&P 500: -60.19 (-3.10%)
Dow: -261.33 (-1.59%)
NASDAQ: -250.81 (-5.44%)

The day's rout:
S&P 500: 1,880.05, -35.40 (1.85%)
Dow: 16,204.97, -211.61 (1.29%)
NASDAQ: 4,363.14, -146.42 (3.25%)

Crude Oil 31.02 -2.21% Gold 1,173.70 +1.40% EUR/USD 1.1162 -0.34% 10-Yr Bond 1.85 -0.86% Corn 366.50 -0.54% Copper 2.09 -1.88% Silver 15.02 +1.14% Natural Gas 2.07 +4.72% Russell 2000 985.62 -2.87% VIX 23.38 +7.05% BATS 1000 20,306.40 -1.64% GBP/USD 1.4503 -0.50% USD/JPY 116.8300 -0.05%

Thursday, February 4, 2016

BTO: Bespoke Tranche Opportunities; Look Out Below

Global economies are blowing up, led by BTOs, AKA Bespoke Tranche Opportunity.

Yahoo, as predicted here years ago, is kaput. One of the worst investments ever, and especially since the Gal from Google took over as CEO.

IRS hardware failure. Probably the best news of the day. Unless you are a sheeple. With a pension. And health care ripped from your paycheck. You. Are. Screwed.

The global economy is unraveling right in front of your eyes and you don't see it.

Don't forget to smell the roses and see the forest through the trees.

Maybe the worst condition is not knowing what a hard asset is. Maybe worse is spell-checking on blogger.

Keep prepping. If you're in a city, move.

There Are Still Stock Buyers, But They're Few and They're Wrong

Stocks in the US staged a half-hearted rally on Thursday, with virtually no news - good, bad or otherwise - to support the move, so, as they say in whispered tones, the market is trading on vapors.

Tomorrow's expected 185-195,000 January NFP may not have as much significance as previous iterations of the market's most-massaged number. There are other issues pressuring stocks that are of more importance. Also, with unemployment - according to "official" sources - very tame, only a huge beat or a huge miss could be cause for stocks to respond going into the weekend.

The money would be on "big miss," as Challenger, Gray and Christmas, the firm that monitors job layoff announcements in the US (and is a fairly reliable source), saw a 218% jump in announced job cuts in January, as employers issued more than 75,000 pink slips during the month.

Those figures aren't likely to be well-represented in the BLS figures on Friday, as the Labor Department has, over the years, garnered quite a reputation for seasonal adjustments and massive post hoc revisions, due, in the main, to the convoluted manner in which they arrive at their contrived conclusions.

In other words, the January non-farm payroll figures should be faded, no matter what they announce at 8:30 am tomorrow.

Gold and silver continued to rally strongly on Thursday, with gold crossing the $1150 rubicon and silver streaking toward $15/ounce, which, by the way, is still the bargain of the century (buy low, sell high, remember?)

Part of the reason for the metals to be heading higher is the decline in the dollar, which is down 4% on the week against competing currencies.

With the Super Bowl just a few days off, traders may tread lightly on Friday, with more interested in covering the spread then covering their clients' losses.

With the tiny uptick today, there's evidence of some level of buying interest, though it seems pretty non-committal and sparse, likely due to the fact that the Dow is still a solid 2000 points from all-time highs and those were set in May, 2015, which happens to be nine months ago.

If it looks like a bear, smells like a bear, it just could be a bear. Most people don't taunt bears. People on Wall Street may appear brave, but there's surely no shortage of stupidity.

Today's hopeful mess:
S&P 500: 1,915.45, +2.92 (0.15%)
Dow: 16,416.58, +79.92 (0.49%)
NASDAQ: 4,509.56, +5.32 (0.12%)

Crude Oil 31.68 -1.86% Gold 1,156.30 +1.31% EUR/USD 1.1215 +1.16% 10-Yr Bond 1.8640 -0.90% Corn 369.00 -0.54% Copper 2.12 +1.26% Silver 14.90 +1.16% Natural Gas 1.97 -3.14% Russell 2000 1,014.79 +0.44% VIX 21.84 +0.88% BATS 1000 20,644.48 +0.45% GBP/USD 1.4589 +0.0041% USD/JPY 116.7550 -1.09%

Wednesday, February 3, 2016

Stocks Gyrate; Gold and Silver Rally Continues

It's beginning to look a lot like a global currency endgame, with stocks in Japan taking a brutal beating overnight - down 559.43, (-3.15%); along with Hong Kong, as the Hang Seng wasn't singing, losing 455.25, (-2.34%). The Shanghai Stock Exchange got an ominous boost from its own version of America's PPT, losing a mere 10 points, closing at 2739.25.

European bourses likewise were battered, with the majors down between one and 1 1/2%. The US session looks ugly early, but turned around abruptly mid-morning, coinciding with the crude supply report. In what can only be perceived as a counter-intuitive, short-covering move (otherwise known as fake, or phony), oil closed nearly 8% higher on the day, despite the crude supply growing to an all-time high.

The desperation of central banker manipulation of markets to forestall the unavoidable defaults is palpable.

Advice, for whatever it's worth, is to flee stocks or sell rallies, if one must continue to play in the global money casino.

Bank stocks were down once again, with the bank index already in a bear market. It's difficult to mask the issues facing oil production firms with unplayable debts and the banks that issued them oodles of cheap credit over the preceding six to seven years. Defaults are already happening and the pace can only increase.

Meanwhile, gold and silver investors are finally feeling good about their precious metals. Gold touched $1145 an ounce, the best price since late October.

Silver ramped to 14.80, closed in NY at 14.65, the best level in more than three months.

While not quite a breakout, the metals seem an obvious choice in a world of fraud, overvalued equities and treasuries issuing notes with negative interest rates.

Today's fiasco:
S&P 500: 1,912.53, +9.50 (0.50%)
Dow: 16,336.66, +183.12 (1.13%)
NASDAQ: 4,504.24, -12.71 (0.28%)

Crude Oil 32.10 +7.43% Gold 1,139.90 +1.13% EUR/USD 1.1082 +1.42% 10-Yr Bond 1.8810 +0.91% Corn 370.50 -0.54% Copper 2.10 +2.09% Silver 14.65 +2.56% Natural Gas 2.04 +0.64% Russell 2000 1,010.30 +0.14% VIX 21.65 -1.50% BATS 1000 20,553.93 +0.97% GBP/USD 1.4591 +1.27% USD/JPY 118.04

Tuesday, February 2, 2016

Stocks, Oil Whacked Again; 10-Year Note at 1.86%; Yellen's Fed in Shambles

It's official.

The groundhog didn't see his shadow, and Janet Yellen didn't see the recession just ahead, proving, within a shadow of doubt, that animals have better sense than most humans.

At least in the case of furry rodents versus doctors of economics, the rodentia class is in a class all its own. Punxsutawney Phil, the most famous of ground hog prognosticators, came outside this morning and reassured everybody in the Northeast that the most mild winter in decades would continue, and, to boot, be short-lived.

By not seeing his shadow, Phil assuaged the assembled crowd that what remains of winter would be over within two weeks, rather than the usual six week span that extends nearly to the first day of Spring, March 20.

Despite this being a leap year, which adds a full day to the cruel month of February, residents in the most densely-populated area of the country seem to be settled in for a short stay on the chilly side.

In upstate New York, there is little to no snow on the ground. What remains are a few remnants of shoveled piles that take a little longer to melt, though even that should be gone by tomorrow, as temperatures from Buffalo to Albany are expected to approach sixty degrees on Wednesday.

Similar circumstances prevail throughout the Mid-Atlantic region and into New York, Pennsylvania, New Jersey and Massachusetts. The milder-than-normal conditions have resulted in lower use of heating fuels such as oil and natural gas, both of which are hovering around decades-long lows.

As for the Federal Reserve and the captain of that sinking ship, Janet Yellen, she and her hench-fellows seem to be on the wrong side of economic history, considering that since their historic rate hike in mid-December, interest rates have gone in the opposite direction, the 10-year note today closing at 1.86%, as the winds of global deflation and tight labor conditions continue to push consumer demand and consumption lower and lower.

Compounding the complexity of the Fed's non-tenable situation are the twin engines of stocks and oil, both of which have hit stall speed in 2016. WTI crude close in New York within whispering distance of the $30 mark, while the major stock indices were battered into submission by a combination of reduced earnings capacity and a growing confidence gap from investors.

Even with last week's brave showing by the markets in the face of a 2015 fourth quarter that slipped to 0.7% growth, stocks were unable to regain the footing which took the Dow 400 points higher on Friday as the Bank of Japan endorsed negative interest rates on its treasury bonds extending though eight years.

Supposedly, cheap, easy money was good news for the stock market. However, with the BOJ cancelling a treasury auction today due to lack of interest (no pun intended) from selected participants, equity markets around the world backtracked towards the lows of January. Apparently, there aren't many out there who see it as a prudent idea to pay somebody to hold your money.

Negative interest rate policy, aka NIRP, is the death-knell of central bankers. Traditionally, banks paid OUT interest on savings, but, in this decade of upside-down economics, the glorious kings and queens of monetary policy are sticking to the belief that people are so afraid of losing what they've earned that they will pay to have the banks hold it for them.

Mattresses and shotguns are back in style, kids, but nobody seems to have told the central bankers. Everybody from simple savers to mega-millionaires are losing confidence in a clearly broken system, pulling their assets out and into cash, precious metals, gemstones, art, real estate, or other stores of value that have stood the test of time. The only buyers of government debt are governments, a condition which cannot be sustained long.

Truth be known, the Fed, the ECB, BOJ and PBOC are all aware of this condition and have yet to devise a strategy that will resolve the liquidity and solvency crunch with a minimum of pain. Pain will come to many, precisely those holding debt which cannot be repaid. Ideally, this epoch of economic history will see the end of central banking with fiat currencies and fractional reserves.

We may be within weeks or months of a global reset, a change in the nature of money which will tear at the fabric of society itself.

Stay tuned. This is only the middle of the show which started in 2008.

Today's crap shoot:
S&P 500: 1,903.03, -36.35 (1.87%)
Dow: 16,153.54, -295.64 (1.80%)
NASDAQ: 4,516.95, -103.42 (2.24%)

Crude Oil 30.02 -5.06% Gold 1,129.20 +0.11% EUR/USD 1.0920 +0.27% 10-Yr Bond 1.8640 -5.19% Corn 372.00 +0.20% Copper 2.05 -0.29% Silver 14.31 -0.26% Natural Gas 2.03 -5.81% Russell 2000 1,008.84 -2.28% VIX 21.98 +10.01% BATS 1000 20,356.76 -1.72% GBP/USD 1.4411 -0.10% USD/JPY 119.84

Monday, February 1, 2016

January Was A Dud; February Starts Badly; Markets Due for Breakdown

Call this a "call 'em as we see 'em" post.

Stocks started February without continuation of the "Japan Negative Interest Rates" rally of Friday, falling out at the opening bell and doing little to inspire confidence throughout the session.

The stock market is down and will likely stay down for the remainder of 2016, go lower in 2017 and disintegrate in 2018. That's the optimistic point of view.

There's nothing good in this market. You pick stocks you think have a good business model, reliable earnings, maybe even a dividend, and, then, WHAM! it gets whacked like a mafioso underling who looked the wrong way at the boss.

Take for instance, the case of this stock (ADS), which last week released earnings above consensus, though the top line (revenue) fell a little short. What happened? Nobody is certain, but the stock took a 20% haircut on January 28. There seemed to be no justification for the radical downsizing of the price of Alliance Data Systems, a company heavily involved in online advertising.

That's just a sampling. Things like this happen every day, without warning nor explanation (we looked, and couldn't find a reasonable telling). So, say you had $20,000 tied up in this company. That was Wednesday. As of close of business on Thursday, you have $16,000. There's a couple months off your planned retirement.

Suppose you held it in a 401k or other such pension vehicle. There was absolutely nothing you could do about it, either before or after the fact. You were stuck, like a good sucker at a rigged casino. Thank you for playing. Come again. And individuals do. They come back for more and more punishment. They loved it the past seven years, when stocks went straight up, no matter what. But now, things have changed.

It's still not too late to pull all your money out and invest in silver, gold, cash, and anything else you might need in retirement (canned goods, anyone?).

The US stock markets - and likely, all markets, globally - suck. They suck the life out of investors and then, you get to pay taxes on any gains, and sometimes, on losses. So, suck it up or get out.

Today's closing fake numbers:
S&P 500: 1,939.38, -0.86 (0.04%)
Dow: 16,449.18, -17.12 (0.10%)
NASDAQ: 4,620.37, +6.41 (0.14%)

Crude Oil 31.64 -5.89% Gold 1,128.40 +1.07% EUR/USD 1.0888 +0.53% 10-Yr Bond 1.9660 +1.81% Corn 371.00 -0.27% Copper 2.06 -0.41% Silver 14.35 +0.75% Natural Gas 2.15 -6.48% Russell 2000 1,032.39 -0.29% VIX 19.98 -1.09% BATS 1000 20,713.55 +0.14% GBP/USD 1.4426 +1.35% USD/JPY 120.9405 -0.31%