Friday, November 29, 2019

China Balks At US Legislation; Consumers Gear Up for Black Friday, Holiday Shopping

Wednesday saw new all-time highs all around, except the lagging NYSE Composite, which finished the day just 30 points below its record close of 13,637.02, marked on January 26, 2018.

Undeterred by potential blowback on trade negotiations due to President Trump's signing of two bills passed almost unanimously by both houses of congress, investors held steady. The bills were aimed at China's leadership, citing US support for the protesters in Hong Kong and making reference to "human rights."

China's official reaction was slow at first, but escalated on Thursday, when the US ambassador was summoned to lodge official protest by China's government and throngs of protesters took to the streets of Hong Kong to give thanks to the United States.

Since US markets were closed on Thursday for the Thanksgiving Day holiday, China's sharp rebuke will be felt on Friday's trading. Futures point to a modestly lower open as the bumpy ride toward ending the trade war between China and the US continues.

Friday's session will be shorted, with markets closing at 1:00 pm ET.

Meanwhile, shoppers have been snapping up deals online and at various retailers who sought to get the jump on Black Friday by offering deals on popular electronics, toys, and clothing as early as Wednesday. Stores may be under pressure to log high sales volumes on Black Friday and Cyber Monday (next week) since the calendar this year has allowed for the shortest possible holiday shopping season, a mere 26 days.

Since the first of November was a Friday, and Thanksgiving is always the fourth Thursday of November, this year's shopping season will be much shorter than last year's, when Thanksgiving was at its earliest possible date, the 22nd of November. A full six days shorter, this holiday shopping spree may make same store sales on a year over year basis are likely to fall short of targets for many retailers unless door-busting deals and heavy advertising can draw shoppers into stores.

Complicating matters further is Christmas falling on a Wednesday, making the last two shopping days a Monday and Tuesday, normally working days for most Americans.

With the economy in excellent shape, the short shopping season may not be much of an issue for adroit retailers, as spending per consumer is expected to be higher than last year. It remains to be seen whether consumers, the bulwark of the US economy, will respond with record-setting spending or whether relentless talk of a coming recession or the pending impeachment of President Trump will have a negative effect.

One thing is certain: Americans love to shop. It's practically the national pastime.

At the Close, Wednesday, November 27, 2019:
Dow Jones Industrial Average: 28,164.00, +42.32 (+0.15%)
NASDAQ: 8,705.17, +57.24 (+0.66%)
S&P 500: 3,153.63, +13.11 (+0.42%)
NYSE Composite: 13,607.62, +47.91 (+0.35%)

Wednesday, November 27, 2019

Gold Is Real Money; Goldbacks Are Real Currency In Utah; South Carolina Proposes Gold and Silver as Legal Tender

Like rich stouts, the Dow Industrials, S&P 500, and NASDAQ indices all closed Tuesday at new all-time highs and it's not even Black Friday yet. Sure enough, many investors will give thanks to the stock market and their portfolio managers come Thursday.

The world needs to continue on this path of ever-increasing wealth for some reason, even though it defies logic because the global economy is not growing very rapidly. In fact, some European countries are on the brink of a recession if not already ensconced in one, and the future prospects of Germany, Italy, France, and most of the members of the European Union are, due to demographics, not likely to sustain any growth whatsoever in the coming decade (2020s).

But stocks, representing shares in massive multi-national companies, continue to rise, as though the future is already cast in gold.

Speaking of gold, it was revealed Tuesday that the South Carolina House of Representatives has prefiled a bill that would make gold and silver legal tender in the state.

The bill was introduced on November 20, but there was almost no news coverage in the mainstream media. If passed by the full legislature and signed by the governor, it would make the Palmetto State the fourth to recognize precious metals on a par with Federal Reserve Notes (AKA, US dollars, $). Utah, Wyoming, and Oklahoma have passed similar measures.

The movement to return back to constitutional money is gaining momentum as people become more aware and fearful of the profligate spending by the federal government and its use of the Federal reserve as a currency printing press.

Utah has teamed with the United Precious Metals Association (UPMA) to promote what it calls the "goldback," a paper certificate much like a dollar bill, that has actual gold embedded in its form. Individuals and merchants in Utah are using the goldback for transactions within the state, and the UPMA offers online gold, silver and goldback accounts to people and businesses anywhere in the world.

As the Federal Reserve and other central banks continue to fiddle with their fiat currencies, some states are taking the initiative and striking back with money that has the backing of the US constitution. The United States Constitution states in Article I, Section 10, “No State shall…make any Thing but gold and silver Coin a Tender in Payment of Debts.”

With a federal debt of $23 trillion dollars, perhaps people are finally awakening to the fact that the Federal Reserve System is a private bank lacking proper oversight by congress, unconstitutional, which issues debt-based currency at interest.

Therein lies the root of many of the problems within our great nation. While Democrats and other liberal and radical elements within government and the media trouble US citizens with phony "impeachment" claims and feeble attempts to dispose of a legally-elected president, the Federal Reserve continues to undermine our freedoms via debt servitude at every level, from the federal government down to the individual.

Gold and silver remain the only real money in a world overrun by fiat currencies.

At the Close, Tuesday, November 26, 2019:
Dow Jones Industrial Average: 28,121.68, +55.21 (+0.20%)
NASDAQ: 8,647.93, +15.44 (+0.18%)
S&P 500: 3,140.52, +6.88 (+0.22%)
NYSE Composite: 13,559.71, +26.82 (+0.20%)

Tuesday, November 26, 2019

Monday Push-ups; How the Dow Jones Industrial Average Makes New Highs

Players, speculators and people with more money than they know what to do with stepped up on Monday to buy the dip created when all four major indices closed in the red last week.

Such action is like stepping on a pile of dog poo, wiping it off and stepping into it again. The insanity of investors apparently has no bounds because of ever-increasing liquidity created by the Federal Reserve, the seeming limitlessness of stock buybacks by hundreds of corporations and the hunt for yield by fund managers.

This activity, while cheered on by the financial press, the mainstream press and every other value-clueless pundit of the wonders of free market capitalism, cannot continue without some reckoning, not perhaps a final one, but at least a corrective phase. What happened in October and December of last year has apparently been forgotten, as investors piled into stocks with abandon in this holiday-shortened trading week.

Markets will be closed on Thanksgiving Thursday and close early (1:00 pm ET) on Black Friday, the day celebrated as an orgy of spending and holiday shopping, replete with door-busting deals and the associated mayhem and violence that stems from hundreds of people trying to get into stores earliest to grab oversized TVs, plastic junk from the Republic of China, and other goods marked as low as 50-80% off.

Winning days on Wall Street have - over the course of the last 10 years or so - become something of a yawn-fest, as stocks breached record highs on numerous occasions every year since the Great Financial Crisis (GFC) of 2008. Higher stock prices are to be expected. They are the norm, but nobody wants to actually look at what they're buying, only the gains they're making. It's almost as if the companies in which people are investing will return massive profits for 100 years or longer, or that the 30 stocks comprising the Dow Industrials will never change (they do, and frequently).

Beginning with AIG being dropped from the Dow in September of 2008, 10 companies have been either ousted, merged and/or replaced in the world's leading index. That's a third of the companies. No wonder it's at record highs. The bad companies - the latest being General Electric (GE) - are replaced with companies with better growth potential and the capacity for higher share prices. It would be like lowering the height of the basket a few inches every year for LeBron James. Upon reaching 40 years of age, the NBA superstar could dunk without jumping or even reaching up very high.

For today, the NBA basket is still 10 feet off the floor, but the mastery of financial deception belongs in those goal-post movers on the executive board of Dow Jones.

At the Close, Monday, November 25, 2019:
Dow Jones Industrial Average: 28,066.47, +190.85 (+0.68%)
NASDAQ: 8,632.49, +112.60 (+1.32%)
S&P 500: 3,133.64, +23.35 (+0.75%)
NYSE Composite: 13,532.89, +91.94 (+0.68%)

Monday, November 25, 2019

WEEKEND WRAP: Stocks End Long Weekly Win Streaks; Negative Interest Rates Will Destroy Advanced Economies

Oh, Snap! Weekly winning steaks were ended with the first down week in the last eight on the NASDAQ. The S&P 500 and NYSE Composite saw their winning streaks ended at six weeks, while the Dow saw the underside of the unchanged line after four straight positives.

That US stock indices were all lower by less than one-half of one percent points up the resiliency and absurdity of the markets. Eminently malleable, stocks have been guided higher seemingly by Adam Smith's invisible hand, the one that keeps pension plans from imploding, sovereign governments from defaulting, and fiat currencies from the ruinous effects of unacceptability.

Putting into focus the NASDAQ, its seven-week upside move was the second-longest of the year. It began 2019 with an eight-week short-crushing rally on the heels of the final two weeks of 2018, which saw the index rise from the December ashes of a 6,190 low. While that 10-week advance boosted the index by some 1400 points, the most recent weekly gains accounted for only 800 additional points, although it recorded a new high in the week prior to the most recent and has backed down only slightly.

Anyone wise enough to have put all their money into the NASDAQ at the start of this year would be up a whopping 25% with just over a month remaining to add onto those lush profits. For ordinary folks locked into a buy and hold fund strategy, the gains since the highs of August-September 2018 to the present add up to only five percent. That's a more realistic figure for the real world and one which fits like a glove with the slowing pace of GDP and the generally dull data drops over these past 14 months.

While the stock markets may have the appearance of being big, bold, large and in charge, the truth is a somewhat more sobering landscape. Recovering so quickly from 20% losses has kept the investing public soothed and subdued, the politics of passive investing intact, and the wheels of industry churning, albeit at a lower crunch rate.

While stocks took this brief pre-holiday pause, interest rates were moving in the same direction, only with quickened pace. Negative interest rates rode across the plain of developed nations (Europe, Japan), suggesting that US treasuries were underpriced. Indeed, the long end of the curve was where most of the drama occurred, with the 30-year bond trimmed 21 basis points - from 2.41% to 2.22% - since November 8 (10 trading days). The 10-year note shed 17 basis points, slumping from 1.84% to 1.77% over the same period.

That's a trend sure to continue, as it represents a massive carry trade for investors outside the US. With yields in their native nations prefaced with minus signs, your bold-thinking French, German, Swiss, or Japanese investor is afforded a nearly risk-free two percent or more on money that otherwise would be eroded over time if held in sovereign securities. It's a neat trick that only the biggest and richest can perform. The rest of the population is unwittingly blinded by the stagnation and destruction ongoing behind the scenes.

Only a savvy few see negative interest rates for what they really are: a devious central bank device designed to wind down the fiat currency regime. In thirty to fifty years, the euro, yen, pound and even the dollar will be remnants of the industrial and information ages, replaced by something, we hope. while that may sound like a distant projection into the future, anybody in their 20s, 30s, or 40s might be best to be scared to death, because currency death-watches and funerals are morbid events played out over long periods of time.

Those of advanced age may better survive the utterly deflationary effects of negative interest rates and the impending currency decapitation in lower prices on everyday goods, but saving for retirement might best be measured in canned goods and precious metals instead of scraps of paper with important people on them or digitized numerical amounts on smart phone screens.

For many, the future is going to be destroyed before it arrives.

That's right. The world as it is now known will be a vastly different place in 2050 and it's unlikely to be prettier unless one has made the proper preparations into hard assets that will maintain value over harder times. Keeping up with the Joneses will be replaced by outrunning the Zombies. Fuel, food, water, shelter, and arable land - which, by the way, can be had on the cheap in some areas - are life-sustaining. Debt will be repudiated and rejected by a class of people similar to those of the depression era, whose lives were ruined by the influence of a currency they did not control, one which held neither value nor promise for a generation after 1929.

In case one is unconvinced of the effects of negative interest rates, just consider the math. Most pension plans in developed nations are already underfunded and have targets of six or seven percent annual gains written into their accountancy. If the best one can expect is two percent or less, a long-term shortfall is not only inevitable, it is assured.

All of this occurs over a long period of time, not all at once, but the effects on economies will nevertheless be devastating. Pension plans will not fail nor will sovereign debt default outright, but like rows of dominoes falling in super-slow motion, major currencies and first-world economies will gradually, inexorably decline and self-destruct.

Ah, but you say, these are negative thoughts marring the cheery landscape of the holidays.

Nay, if you get coal in your stockings this Christmas, consider yourself lucky. At least you will stay warm over the coming long winter.

At the Close, Friday, November 22, 2019:
Dow Jones Industrial Average: 27,875.62, +109.32 (+0.39%)
NASDAQ: 8,519.88, +13.67 (+0.16%)
S&P 500: 3,110.29, +6.75 (+0.22%0
NYSE Composite: 13,440.95, +34.55 (+0.26%)

For the week:
Dow: -129.27 (-0.46%)
NASDAQ: -20.94 (-0.25%)
S&P 500: -10.17 (-0.335)
NYSE Composite: -52.01 (-0.39%)

Friday, November 22, 2019

Stocks Lose Ground As US-China Trade Deal Stalls

Though not quite as quiet as last week, trading on US exchanges has been slow as the year winds down and the holiday season approaches.

What differentiates this week from last is the tenor of the trade, noticeably negative, with all of the major indices lower heading into Friday. The losses have not been significant, but Thursday marked three straight sessions in the red.

Losses have been very limited, however, with the Dow leading the downside, off by 0.81% through Thursday. Even a modest gain on Friday would push the averages back into record territory. The S&P 500 needs a gain of just 20 points to break out to new all-time highs.

There is still abundant interest in US-China trade relations, though the market has grown a bit weary of the on-again, off-again nature of the negotiations and is likely pricing in a positive outcome. This stalemate of sorts could last another year, with the Chinese playing the waiting game.

President Trump is up for re-election in November, 2020, and Chinese leaders are watching political developments in the US with jaded eyes. having Trump out of the way would suit their purposes. Getting back to the monstrous trade deficit imposed upon the US over the years seems to be the ultimate aim for China. Nobody wants to give up on a good thing, and trade relations with the US have been nothing short of spectacular for China over the past 30 years. Trump vowed to put an end to those practices in his election campaign and he's stuck to his guns, dealing the Chinese a hand they thought they'd never have to play.

A negative view of the ongoing feud would be an escalation of tariffs, leading to an overall slowdown and possible military actions. No wonder the market is pricing in a positive conclusion, because the alternative is more disruptive than anybody would ever hope.

At the Close, Thursday, November 21, 2019:
Dow Jones Industrial Average: 27,766.29, -54.80 (-0.20%)
NASDAQ: 8,506.21, -20.52 (-0.24%)
S&P 500: 3,103.54, -4.92 (-0.16%)
NYSE Composite: 13,406.42, -12.89 (-0.10%)

Thursday, November 21, 2019

Disturbance in the Force? Stocks Suffer Losses

Dow Components Apple (AAPL) and Home Depot (HD) sent the Dow Industrials lower, dragging the tech sector, NASDAQ and S&P 500 down with it.

With third quarter results not as good as expectations, there's pressure on US stocks, especially now that China has balked again at phase one of the proposed on-again, off-again trade deal between the globe's two largest economies.

Also weighing on equites are repeated stories of recession fears from Europe, especially in the major economies: Germany, France, and Italy. Brexit is still not resolved and there's renewed optimism among remainers that the result of the 2016 referendum might still be overturned. As Europe is one of the major US trading powers, what happens over the pond affects many companies in the US.

Bond yields dipped again, especially at the long end of the treasury curve, with the 10-year note falling to a yield of 1.74%. With the Fed now officially on hold, bond vigilantes may have their day in the sun, pushing yields down to near record levels if the holiday season doesn't produce a bounty of stock buys.

Markets are at an unusual crossroads with many swirling stories that have the potential to send equities flying in either direction. What looks like a sideways trading regimen may hold sway the remainder of the year, though more and more economists and predictors are saying that a recession in the United States is not a foregone conclusion for 2020.

Third quarter results from a plethora of companies are now in the books and though most beat expectations, such were lowered and cannot be counted on to produce a buying frenzy. A repeat of last year's monumental losses in December could reoccur, though the Fed and nefarious forces behind the scenes have the power to deflect losses and turn indices around on various dimes.

Control is in the hands of the algorithms and central bankers. Don't expect much downside as long as hope for a trade deal remains present.

At the Close, Wednesday, November 20, 2019:
Dow Jones Industrial Average: 27,821.09, -112.93 (-0.40%)
NASDAQ: 8,526.73, -43.93 (-0.51%)
S&P 500: 3,108.46, -11.72 (-0.38%)
NYSE Composite: 13,419.30, -47.05 (-0.35%)

Tuesday, November 19, 2019

Stocks Close Lower

Once again, on the road, another drive-by post...

At the Close, Tuesday, November 19, 2019:
Dow Jones Industrial Average: 27,934.02, -102.20 (-0.36%)
NASDAQ: 8,570.66, +20.72 (+0.24%)
S&P 500: 3,120.18, -1.85 (-0.06%)
NYSE Composite: 13,466.35, -17.46 (-0.13%)

Follow Through for Stocks Beyond New Highs; European Pensions In Deep Trouble

After Friday's epic melt-up brought last week to a positive conclusion, traders on Monday though the diea of higher asset prices a good one, so pushed stocks to even higher all-time highs, a trend that could easily accelerate as the holiday season of irrational goodness begins.

At the bottom of rising equity valuations is the need to keep economies afloat for as long as humanly possible. By enhancing the price of stocks, asset values create the perception of wealth, though the main beneficiaries of higher asset values happen to be the top 10% of the income spread, mostly focused in the top one percent, who own the majority of equities. For the bottom 90% of the population, the effect of increased stock prices is negligible at best.

A corollary to stock market gains being the only game in town (or, There Is No Alternative, TINA) is the pain felt by savers, both individual and institutional. Pension funds have been under stress to keep assets growing. As employees retire and become not contributors, but receivers as pensioners, funds need to increase their asset base, a task made more difficult by lower and negative interest rates.

Funds have charters that require they purchase certain types of investments, making their job even more difficult, as they are forced into negative-yielding government bonds, especially in Europe, but also in the US, where the pain has yet to be felt in any real way outside of places like Detroit, which cut pension benefits massively in order to rebalance the city's finances.

Europe is already in the throes of a crisis, the latest victims being Dutch pensioners in the Netherlands, where cuts are planned or already in the works. Europe's fascination with negative interest rates have wreaked havoc in the pension universe.

A one percentage point fall in long-term interest rates will increase liabilities of a typical pension scheme by around 20 per cent, but the value of their assets would only go up by about 10 per cent, estimates Ros Altmann, a former UK pensions minister.

The current condition is nothing compared to what is coming if the ECB and member nations of the EU don't reverse course on interest rates. They are clearly having more negative consequences than anticipated when the Dutch first entertained negative yields in 2009, to be followed quickly by Japan and a slew of other European nations.

Pension problems haven't happened overnight. Money Daily was warning about them as early as 2006, and conditions have deteriorated exceedingly since then.

Don't expect the politicians and bankers to change their tune, however. As Money Daily has repeatedly noted, negative interest rates are currency killers, and they are quickly becoming much more of a destructive force than initially imagined.

As investing and economies become more and more intertwined, complex and convoluted, don't look for concrete solutions from politicians, bankers, or financial advisors. They created these problems and should not be relied upon to provide solutions. They will offer blankets for the cold, soup for the hungry, and limited shelter for the homeless. In other words, they will only be able to limit the suffering, not eliminate it.

To accentuate the level of madness permeating through the financial class consider this:

“In 20 years we may find ourselves with a real global crisis where we haven’t saved enough money for retirement,” says Calstrs’ Mr Ailman. “Returns can fluctuate, but longevity has been extended dramatically . . . We just have to explain to millennials that their parents might have to move back in with them.”

Somebody needs to point out to Mr. Ailman that many millennials are already living in their parents' basements!

At the Close, Monday, November 18, 2019:
Dow Jones Industrial Average: 28,036.22, +31.33 (+0.11%)
NASDAQ: 8,549.94, +9.11 (+0.11%)
S&P 500: 3,122.03, +1.57 (+0.05%)
NYSE Composite: 13,483.81, -9.15 (-0.07%)

Sunday, November 17, 2019

WEEKEND WRAP: PayPal Credit/Synchrony Update; All About Friday and George Carlin FTW

It was an oddly calm week on Wall Street, as stocks barely budged Monday through Thursday.

Not to disappoint, however, Friday saw the three major indices break through the doldrums and reach all-time record closing highs. Huzzah!

Friday's ramp was due to one thing and one thing only: the promise (again) of a US-China trade deal. There wasn't one. There was the promise of one, and that's all it took to send stocks soaring again.

Being skeptical of the one-day wonder of new highs in the stock market is not a crime. It takes a rational person to recognize that stocks are overvalued, and have been for maybe the past six years. The Fed keeps pumping fresh cash into the system, the corporations continue buying back their own stock and the media continues to promote the breakthrough in trade negotiations between the United State and China.

Presto! New highs.

Without the assistance of Friday's gains, for the week, the Dow would have been up 100 points, but, the NASDAQ would have gained less than four points, the S&P would have been up three points and change, and the NYSE Composite would actually have registered a loss of 15 points. TGIF, indeed.

At the Close, Friday, November 15, 2019:
Dow 30: 28,004.89, +222.93 (+0.80%)
NASDAQ: 8,540.83, +61.81 (+0.73%)
S&P 500: 3,120.46, +23.83 (+0.77%)
NYSE Composite: 13,492.96, +100.96 (+0.75%)

For the Week:
Dow 30: +323.65 (+1.17%)
NASDAQ: +65.52 (+0.77%)
S&P 500: +27.38 (+0.89)
NYSE Composite: +85.16 (+0.64%)

On to more stupid banking tricks, such as Money Daily's recent enquiry into the continuing consumer-fleecing practices of the banking industry. This was covered in the post Scam Alert: PayPal Credit and Synchrony Financial Playing Hide and Seek with Special financing Purchase Offers

It's not enough that banks and credit card companies charge what were once considered usurious interest rates to their customers. No, their 18, 22.5, 26.75 percent interest rates are not enough. They need to offer zero percent interest Special Financing Purchases, of which Money Daily discussed at length last week - to lure consumers into even more debt with these offers. Of the most egregious and widespread is the offer of zero percent interest for six months if the purchase is paid in full, a device employed by PayPal Credit through Synchony Financial, which handles the details online.

Such offers are widespread on eBay and offered via emails to PayPal Credit account holders. These are bona fide offers and they are good, but, as explained in the prior article, they do not fully disclose the details, one of which is actually encoded into law, specifically, by the Consumer Financial Protection Bureau (CFPB), the agency created in the aftermath of the Great Financial Crisis (GFC) of 2008, via the Dodd–Frank Wall Street Reform and Consumer Protection Act, which handed rule-making, incorporated in the 1968 Truth in Lending Act (TILA) over to the CFPB. 12 CFR 1026 Truth in Lending (Regulation Z, section 1026.53(b)(1)(i) and (ii)

(Editor's Note: Yes, we have far too many laws. "The more corrupt the state, the more numerous the laws." - Tacitus, 56 AD - 117 AD)

Naturally, providing a link to the regulation is not required under the disclosure rules, so the banks don't provide such a link, because doing so might cause consumers to take a moment to consider just what they're getting themselves into. Specifically, the passage does indeed spell out, succinctly, that the lender is not required to allocate payments that are beyond the required minimum payments except in the final two cycles immediately preceding the expiration of the deferred interest offer or Special Financing Purchase.

Here it is, in all its deeply-buried glory:

(b) Special rules —

(1) Accounts with balances subject to deferred interest or similar program. When a balance on a credit card account under an open-end (not home-secured) consumer credit plan is subject to a deferred interest or similar program that provides that a consumer will not be obligated to pay interest that accrues on the balance if the balance is paid in full prior to the expiration of a specified period of time:

(i) Last two billing cycles. The card issuer must allocate any amount paid by the consumer in excess of the required minimum periodic payment consistent with paragraph (a) of this section, except that, during the two billing cycles immediately preceding expiration of the specified period, the excess amount must be allocated first to the balance subject to the deferred interest or similar program and any remaining portion allocated to any other balances consistent with paragraph (a) of this section; or

(ii) Consumer request. The card issuer may at its option allocate any amount paid by the consumer in excess of the required minimum periodic payment among the balances on the account in the manner requested by the consumer.

Money Daily had reached out to various individuals expressing concern over the banking practices regarding allocation of payments. One of the people who was kind enough to respond was the media representative for Synchrony Financial, Lisa Lanspery, who responded thus:

Rick – After reading your piece entitled “Scam Alert: PayPal Credit, Synchrony Bank Playing Hide and Seek with Special Financing Purchase Offers,” I wanted to address the misleading premise of your piece.

Synchrony is committed to transparency and consumer protection. Our advertising, applications, and billing statements provide clear, concise, and comprehensive education around the consumer’s financing options, including popular promotional financing options.

On payments to a PayPal Credit account, our process is to apply any overpayments beyond the required minimum payment due to the highest interest bearing balance -- therefore excess payments are typically applied first to non-promotional balances as required by applicable law to help the customer avoid paying interest. However, if an accountholder prefers the additional payments be allocated across their bill in a different manner, they may contact customer service to do that.

For background, here is the specific language that account holders on payment allocation.

We will use each payment in the amount of the minimum payment due or less, first to pay billed monthly plan payments on any Easy Payments purchases, then billed interest, then billed fees, then the principal balance, and then any other amounts due.

However, if you have a balance on a deferred interest purchase, during both the billing cycle preceding its expiration date and the billing cycle in which such deferred interest purchase expires, we may use the payment, after the amount to pay billed monthly plan payments on any Easy Payments purchases, to pay the balance on such deferred interest purchase(s).

We will use any amount in excess of the minimum payment due to pay the balances with the highest interest rate, then the next highest interest rate, and so forth. However, during both the billing cycle preceding the expiration date and the billing cycle in which a deferred interest purchase expires, we may use payments first to pay the balance on such deferred interest purchase(s).

Thanks for your interest in Synchrony and getting the facts correct.


Lisa Lanspery
SVP, Public Relations
Synchrony which Money Daily responds, "thanks Lisa, for getting the law right. You could have just directed us to Regulation Z, which you did upon request for the specific law, but may I point out that your "background" on payment allocations is incorrect. Please read the following carefully and note the words emboldened:"

during the two billing cycles immediately preceding expiration of the specified period, the excess amount must be allocated first to the balance subject to the deferred interest or similar program and any remaining portion allocated to any other balances consistent with paragraph (a) of this section

While you are correct that the credit issuer is not required, for the most part, to allocate excess payments to the "deferred interest" offering, you are incorrect about the timing of the last two cycles. They are the two cycles immediately preceding expiration of the specified period of deferred interest financing, not "both the billing cycle preceding its expiration date and the billing cycle in which such deferred interest purchase expires..." as you stated in your email correspondence.

If this is indeed the practice by which Synchrony is allocating payments, then Synchrony is in violation of the law. If, however, you simply made a misstatement of Synchrony's policy, then let's just all apologize to one another (Money Daily for being alarmist, Synchrony Financial for being a credit issuer, and you, for making a small error), sit around the campfire and sing kumbaya.

The final point is that banks and credit companies have the consumers over various barrels when it comes to financing, disclosure, rules, and, especially, lawmaking, most likely because most of the laws are written for congressional representatives - who don't understand even a third of what's contained in the laws on which they vote ("we have to pass it to see what's in it" comes to mind) - by lobbyists or lawyers for the corporate interests involved, in this case banking. They write the laws to benefit their clients, the banks, not consumers.

Whew! That's more than enough for a Sunday morning. If any readers have chosen the TL;DR option, that is completely understandable.

Please enjoy the entire 10-minute video of the late, great George Carlin, uncovering, near the end, some truth about America.

Friday, November 15, 2019

Stocks Remain In Slumber Zone for Fourth Straight Session

The slowdown continues...

Rather, this is what happens when humans make poor decisions, over and over again, allowing computers to do most of the decision-making on trading. Now you're stuck between a rock and a hard place.

The rock: China's refusal to concede on many points in a trade deal.

The hard place: US insistence that a deal is "close."

This has been going on for months, about 16 to be precise, and stocks have been whipsawed in either direction depending on what the algos are going to interpret as good and/or bad news.

The latest, by presidential economic advisor and former financial talk show host, Larry Kudlow, has futures pointing higher prior to Friday's opening bell. But, we've seen this picture before. By he end of the day, there won't be a deal, and the Chinese will issue forth a press announcement that they don't agree to this or that or anything, maybe, and stocks will erase the gains they've made.

Count on it.

Judging by the figures below for Thursday's session, markets - outside of bonds - were essentially flat for the fourth consecutive day. Money Daily's headline yesterday, that this was about a dull a market as has ever been, was confirmed on Thursday.

Will Friday be any different, and, does it matter?

The chances that Friday will be different, and that stocks will find some direction, are good. It's an options expiration day, which usually adds some volatility, and it's the end of the week, so the market has those things going for it. On the other hand, there's nothing really new or different upon which to base trades.

As for the bond market, specifically treasuries, a rally is well underway. The selloff that saw yield on the 10-year note go from 1.54% on October 4 to 1.94% on November 8, is reversing course. The benchmark closed out yesterday at 1.82% and appears to have momentum heading into the holiday season. A slow-moving equity market at or near all-time highs (the S&P set another closing high yesterday) isn't helping inspire confidence, so there are many seeking the safety of government bonds.

As we head toward the opening bell in what can only be described as the welcome end to a week of insignificance, it's worth noting that even the phony impeachment hearings on Capitol Hill aren't even making headlines. That speaks volumes about how poorly the news media is perceived and even more about how loathsome our political leaders have become.

OK, you can go back to sleep now...

At the Close, Thursday, November 14, 2019:
Dow Jones Industrial Average: 27,781.96, -1.63 (-0.01%)
NASDAQ: 8,479.02, -3.08 (-0.04%)
S&P 500: 3,096.63, +2.59 (+0.08%)
NYSE Composite: 13,392.00, +6.94 (+0.05%)

Thursday, November 14, 2019

This Is About As Dull A Market As There Ever Has Been

It's been a slow week.

"How slow is it," the crowd chants, Johnny Carson style.

Well, the Dow is up 102 points as of Wednesday's close. That's the good news, and it's about as good as it gets. The NASDAQ, in three sessions, has gained six points, the S&P just under one point, and the NYSE Composite is down 22.75 points.

That's how slow it is.

As for the causes, anybody's guess will do, but the most likely candidates are uncertainty over just about everything, from impeachment hearings in the House of Representatives, to ongoing and increasingly-violent protests in Hong Kong, to backtracking in US-China trade relations, to just plain old vanilla market overbought conditions. It's not like the economy is booming (1.9% 3rd quarter GDP), or that most of the fuel has been courtesy of the Federal Reserve (another $200 billion added to their balance sheet in just the past two months), or that stock buybacks have been responsible for more than 60% of the gains over the past five years (maybe).

There are ample reasons for people to take a look-and-see stance. Just in case nobody's noticed, it's almost the end of 2019, allocations have already been made and funds are sitting on their hands, lest they get burned hitting the BUY button before year end.

If the New York stock exchange shut down for a day or two, or even a week or two, would it matter to anybody but the ultra-wealthy? Probably not, and, since the ultra-wealthy are, ahem, ultra-wealthy, why should they be buying stocks at nosebleed levels anyhow? They're waiting for the next greater fool, so they can sell some of their holdings at nice profits.

Thus, it's a simple assumption to make that if there are few buyers, and ample sellers who are holding out for the best prices, not much is going to happen, and that's why this week has been so slow. Whether that translates into a major downdraft, as many have been predicting once new highs were made last week, or another step up the ladder of success depends largely on news flow, and that hasn't been particularly encouraging of late (see above).

There's an old adage that reads something like, "never short a dull market," which falls a bit short in the logic department. If a market is dull, it obviously is in need of a catalyst to move ahead, move quicker, move at all. Will selling short bring out buyers? Maybe that's the idea, but there's no proof that a dull market is any more prone to melt up than a volatile market. If things are hot, people are buying and selling, brokers are making commissions (well, that's how it used to be), and stocks are going somewhere, up or down, that would seem to be a more dangerous place into which to sell.

There will be short sellers, but, at the present, there doesn't seem to be many eager buyers out there.

This is what happens when nothing happens. You have to write about nothing happening as if there is actually something happening.

Nothing is happening.

At the Close, Wednesday, November 13, 2019:
Dow Jones Industrial Average: 27,783.59, +92.10 (+0.33%)
NASDAQ: 8,482.10, -3.99 (-0.05%)
S&P 500: 3,094.04, +2.20 (+0.07%)
NYSE Composite: 13,385.05, -2.57 (-0.02%)

Wednesday, November 13, 2019

Stalled Out: Dow Finishes Unchanged; NASDAQ, S&P Flat Following Trump Speech

After President Donald J. Trump's speech before the Economic Club of New York, stocks retreated, wiping out gains made earlier in the session. Trump spoke during the noon hour, maintaining a hard line on negotiations with China and the European Union.

The president reiterated the need for fair and reciprocal trade, addressing the unfairness in trading with China and praising his administration for raising tariffs on Chinese imports. As is his style, the president called out the Chinese for stealing intellectual property, subsidizing their own industries at the expense of the US, and dumping products on our shores at under-competitive prices.

Critical of the president's tough approach with the Chinese, the media produced enough negative headlines to send the algorithms into a spasmodic tailspin, selling stocks with abandon. The Dow was up nearly 80 points in early trading, but sold off in the afternoon, eventually finishing unchanged.

It was the first time the Dow had closed unchanged since 2014, and the third time since 2000. According to the Motley Fool, the chance that the Dow Jones Industrial Average would close unchanged for a single day became more difficult when the index adopted decimalization in 2001. Prior to that, advances and declines were measured in eights of a point, a much larger denominator than today's, which is one cent. The article points out that the Dow finished unchanged ten times in the 1990s and four times in just one year: 1979.

With the Dow flattened out for the day along with the other major indices, interest turned to global markets which uniformly reacted with negativity. All Asian markets were lower overnight and European exchanges were also showing declines, though the losses were less than spectacular. Other than Hong Kong's Hang Seng Index - which is a separate case altogether due to the ongoing protests and disruptions - none of the major indices were down more than one percent.

As daylight broke over America's Eastern shores, stock futures were pointing to a negative open. Dow futures were off more than 100 points.

At the Close, Tuesday, November 12, 2019:
Dow Jones Industrial Average: 27,691.49, 0.00 (0.00%)
NASDAQ: 8,486.09, +21.81 (+0.26%)
S&P 500: 3,091.84, +4.83 (+0.16%)
NYSE Composite: 13,387.62, -0.49 (-0.00%)

Tuesday, November 12, 2019

Stocks Stagger Into New Week

It was an unruly start to the trading week, as Veterans Day ushered in sellers of stocks and kept a lid on bids.

The Dow Jones Industrial Average, which opened at the low of the day, was off 164 points, but gathered momentum throughout the session and finished with the only positive close amongst the major indices.

Otherwise, everything else held fairly steady throughout the US session, with gold hitting a three-month low at 1448.90 and silver remaining below $17/ounce. The 10-year note held firm with a yield of 1.93% as bond markets were closed for the holiday.

As Mondays go, this one was lacking in luster. Big hitters in the market may be waiting for President Trump's speech on trade at the Economic Club of New York Tuesday afternoon, so Tuesday could also be something of a disappointment for those craving more excitement.

This temporary lull is likely a good thing for stocks, giving investors time to gather up the courage to trade stocks to even higher highs. Already at or near all-time highs, buying stocks at this level may be viewed as unnecessarily risky. The Shiller PE, or CAPE, stands at 30.01, nosebleed territory.

At the Close, Monday, November 11, 2019:
Dow Jones Industrial Average: 27,691.49, +10.25 (+0.04%)
NASDAQ: 8,464.28, -11.04 (-0.13%)
S&P 500: 3,087.01, -6.07 (-0.20%)
NYSE Composite: 13,388.12, -19.69 (-0.15%)

Sunday, November 10, 2019

WEEKEND WRAP: Stocks Set Records; Bonds, Precious Metals Battered

The three major averages - Dow, NASDAQ, S&P 500 - all reached record territory this week, and, despite some give-back on Wednesday, closed out the week with all-time high closing prices. The lone laggard was the NYSE Composite, which hasn't yet managed to get back to January 2018 levels, but it is close, within 250 points.

Catalysts for the massive run-up through October and into November were supposed breakthroughs in the ongoing US-China trade deadlock and the Fed's 25 basis point cut in the federal funds rate last Wednesday (October 30). Positive news, or even the hint of such, was enough to ignite stocks in the US while Europe tetters on the verge of recession.

Gains made during the past five or six weeks look to be locked in for year-end, but there's barely a sniff of selling among the investment crowd. New records could be set in the indices through Thanksgiving, Black Friday and beyond, especially if indications of renewed vigor in manufacturing develops. It's been dragging lately, but the sector is wide and varied. Some states are doing well as opposed to ones like New York, which has lost 10,000 manufacturing jobs this year, and some sub-sectors are outperforming. Metal tooling is seeing a revival thanks to tariffs on steel, while semiconductors are slumping.

While stocks continued on their merry way to equity nirvana, fixed investment took a beating, especially in the case of the benchmark 10-year note, which appears headed back above two percent, closing out this week with a yield of 1.94%, the highest since July 31 (2.02%). The long end of the curve is certainly steepening, and in a hurry. The 30-year bond checked out on Friday with a yield of 2.43, just a basis point below the closing on August 1 (2.44%).

The short end of the treasury yield curve is still flat, with the difference between 1-month bills and the 5-year note a mere 18 basis points (1.56-1.74%). The curve has maintained an un-inverted posture for nearly three months now, since the 2s-10s crossed for three days in August of this year. That brief period of inversion did engender some recession fears at the time, but they have been allayed by the curve settling into a more orderly regimen.

Recession still being a possibility, always, chances of it occurring anytime soon were quelled when third quarter GDP came in hotter than expected, at 1.9%. Not a good number, the fact that it was above most estimates (1.6%) was enough to hold off the bears. If the measurement holds for the next two estimates of third quarter GDP, the absolute earliest recession bells could ring would be after the first quarter of 2020, if both the fourth quarter of 2019 and first of 2020 were negative, and those are some pretty big ifs.

Thus, it's unlikely that the US will encounter a recession - or at least have one reported - until after the second quarter of 2020, but the economy is looking like it will continue to grow, albeit modestly, until at least the elections in November, good news for President Trump and Republicans in general, and not-so-good for Democrats who wail about everything, even when nothing is amiss in any major way.

Also hammered were precious metals, with silver falling below the Maginot line of $17/ounce late in the week to close out at $16.77. Gold fell from right around $1500/ounce to end the week at its lowest level since the start of October, at $1458.80.

If interest rates continue to climb, it could exacerbate the bearish tone already developing in the metals. To holders, it may not be such a big deal, but more of an opportunity to buy more on the supposed cheap. Precious metals have been out of favor since their massive run-up from 1999 to 2011, and there seems to be no end in sight for the overall bear regime that has taken hold.

One has to consider the rationale for gold or silver as one of protection, so, from a buyer's standpoint there's absolutely nothing wrong with holding or storing some of the shiny stuff. It still maintains value, though it has been fluctuating greatly over the past 20 years, but what hasn't. Gold and silver still provide peace of mind and a store of value that is better, over the longest of terms, than any other investment, save possibly real estate, the difference being that no taxes have to be paid on the shiny metals.

Outlooking for the next seven weeks through Christmas is decidedly positive for stocks, which is all anybody really seems to care about these days. Pension funds are all in, as many have to be, in hopes that there will not be massive underfunding for the retiring baby boomers.

In the most simplistic of ways, stocks may be overvalued, but the rising yields on bonds may tempt some of the less-daring speculators to dive into a safety play. Worse things have happened, but, for now, there seems to be a nice balancing act between the Fed, the government, business, and heavily-indebted consumers, the latter group buoying and buying into the great money scheme of the longest bull market in history.

Some day, it will all come to a screeching halt. By most measures, it's not stopping any time soon.

At the Close, Friday, November 8, 2019:
Dow Jones Industrial Average: 27,681.24, +6.44 (+0.02%)
NASDAQ: 8,475.31, +40.80 (+0.48%)
S&P 500: 3,093.08, +7.90 (+0.26%)
NYSE Composite: 13,407.80, +12.26 (+0.09%)

For the Week:
Dow: +333.88 (+1.22%)
NASDAQ: +88.92 (+1.06%)
S&P 500: +26.17 (+0.85%)
NYSE Composite: +107.54 (+0.81%)

Friday, November 8, 2019

Scam Alert: PayPal Credit, Synchrony Bank Playing Hide and Seek With Special Financing Purchase Offers

by Fearless Rick Gagliano, editor, Money Daily

     When it comes to banking in general, most Americans (Europeans and Asians, as well, we might assume) are skeptical about institutional sincerity and customer care. After all, it was just a decade ago that some of the biggest banks in the world were caught up in a messy triage with overzealous rating agencies and absent regulators that sent global finance to its knees.

Image result for PayPal credit logoSince the Great Financial Crisis (GFC) of 2008, there have been more than few dubious practices entertained by major banks. Wells-Fargo comes to mind, whose employees, paragons of virtue all, no doubt, opened accounts in people's names without their knowledge, among other scandalous activity.

Certainly, the annals of banking history are rife with examples of financial trickery, pandering and assorted crimes and misdemeanors carried on by monied institutions, all in the name of profit and greed.

With the advent of the internet age, banking has become more streamlined, varied and accessible to anyone with a smartphone, tablet or computer. Offerings from non-bank institutions abound. The leader among transactional vendors being PayPal, the the online business-consumer, peer-to-peer middleman company founded in part by Elon Musk, Max Levchin, and Peter Thiel made its name by offering online accounts to anybody who could "fog a mirror" and with a few nickels to rub together.

With an IPO in 2002 and subsequent acquisition by online auctioneer eBay, PayPal became the de facto standard for online payments. Reacting to a squabble from investor Carl Ichan, eBay divested itself from PayPal in 2014 and since then PayPal has been a stand-alone company. It was late in 2008 and early 2009 that PayPal, after acquiring the company known as Bill Me Later, began to offer credit to consumers. Aptly named PayPal Credit, a complete credit and debiting system aimed at the massive consumer audience worldwide was established.

Among their many marketing tactics, PayPal Credit offered a wildly popular option called special purchase financing, bearing zero interest for six months on purchases of $99 or more if paid in full during the allotted time. That promotion still exists today, but the present and recent past are where the issues of dubious claims and incomplete disclosure of terms begins.

Enter Synchrony

Image result for Synchrony logoPayPal partnered with consumer credit giant, Synchrony Financial, to offer credit cards to PayPal account holders in 2004 and took the relationship even further in 2017, when it sold $5.8 billion in consumer credit receivables to Synchrony Financial, effectively yielding control over the operation of PayPal Credit to Synchrony.

It was around that time in 2017 that how payments on PayPal Credit accounts were allocated was altered. When parent company PayPal was operating PayPal Credit, allocations of payments on accounts were handled roughly as anything over the minimum required payment on the entire account was then allocated to the special purchase financing.

For example, a PayPal Credit account holder, with, say, $1000 existing outstanding balance and a minimum monthly payment of $40, makes a purchase for $500 and takes advantage of the Zero Interest for Six Months if Paid in Full Special Financing Purchase. When the account holder makes a payment, say $100, $40 would cover the outstanding minimum credit payment and the remaining $60 would be applied to the Special Financing Purchase. That was pretty standard, and logical.

No more. Now, when that same account holder (or any account holder) with an existing outstanding balance makes the same transaction, the entirety of his or her payment goes toward the account balance and NONE is allocated to the Special Financing Purchase until the final 60 days of said Special Financing Purchase. In the meantime, interest accrues on the Special Financing Purchase at the full amount, in our case, $500. If the Special Financing Purchase balance is not paid off in full at the expiration of the six months, all of the accrued interest becomes part of the account balance due.

Nowhere in the terms and conditions of Special Financing Purchase is this made obvious or even mentioned to consumers. It is only revealed when (as our Editor found out) one questions PayPal Credit customer support by phone or by online chat. The response to why this devious practice is maintained, is that PayPal Credit and/or Synchrony Financial uses best practices in allocating funds in this manner. It's almost a certainty that said best practices are what's best for the bank, not the consumer, and here's why:

Beyond the failure to disclose this in-house allocation rule, the bank (Synchrony, in this case), has interest accruing on that Special Financing Purchase (remember, ZERO interest for six months if paid in full) at the full amount of the purchase, not at a lesser amount if account holder payment allocations were done the old way, in a moral, reasonable, and logical manner. It also sets up the casual account holder for a shock, when he/she looks at the Special Financing Purchase and realizes that with two months left to pay off the Special Financing Purchase at Zero Percent he or she still owes the full amount.

Unless one is careful enough to scrutinize the monthly statements generated by PayPal Credit, this poor or mis-allocation of payments - done in the name of best practices - can easily go unnoticed, especially if one makes automatic or automated monthly payments, a practice which all banks and credit card companies strongly encourage.

There is some relief, maybe.

Calls to PayPal Credit on this or any credit account issue result in referral to Synchrony. The supervisor with which Money Daily spoke on Thursday, November 7, elicited the response that payments can be allocated to the Special Financing Purchase if one calls Synchrony at 1-844-373-4961 and requests the payments be directed according to the wishes of the account holder, and NOT in the manner usually employed by the BANK (Synchrony). Synchrony says they will honor such requests and process them, but allocations will not show up on online accounts for "a few days."

Additionally, none of this would apply to anybody who isn't carrying a balance (the wise and fortunate 20-30% of account holders) with PayPal Credit and the only purchase made was a Special Financing Purchase. In that case, all of the monthly payment would be applied to the deferred interest financing because that's all there is.

Therein lies the problem. Instead of doing business in a morally correct, logical, reasonable, responsible, and customer-friendly manner, Synchrony Financial has chosen the usual path of 21st century bankers: deceit, incomplete disclosure, "gotcha" terms and "special financing" with in-house rules designed to maximize the bank's profitability, the customer be damned. To do business in what would normally be considered the "best practice" for the consumer, the account holder has to go out of his or her way to make a special phone call, jump through hoops, listen to all of the recordings and prompts to get what should have been done automatically. This is, after all, the age of high-speed communications and the internet, not Ma Bell's twisted copper.

If this practice isn't illegal, it would be no shock today. Financial institutions have been afforded wide latitude in their dealings with the public, to encourage loans, credit, and debt in a wide array of products and offerings.

In a world in which sanity, fairness, and reasonableness would be the norm, this kind of operation might be considered fraud at worst, bait-and-switch at best. But today, in our world of glorification of all things money and financial, where the dollar sign is revered and worshipped, it barely registers a "lookie here." It's a sad commentary on the state of morality and banking when gigantic, faceless institutions are able to run roughshod over consumers. It goes against the public interest, an interest, incidentally, that nobody - from bankers to consumer credit agencies to politicians - seems to be even remotely interested in protecting.

So, what do you think? Is this practice just run-of-the-mill deceit and standard underhandedness by PayPal Credit and Synchrony Financial, or does it rise to or border on criminal mischief, something banking regulators or congress should address? Comments are open, and are moderated.

Anybody experiencing issues such as those outlined above should call Synchrony at 1-844-373-4961 and complain loudly.

Be polite, but overall, be careful.

UPDATE: Found a thread on the PayPal boards dealing with this very issue. Many are fuming about it.
See here:

UPDATE 11/27/19: This issue will remain, as the actions of Synchrony are guided by Regulation Z. See the updated blog post:

At the Close, Thursday, November 7, 2019:
Dow Jones Industrial Average: 27,674.80, +182.24 (+0.66%)
NASDAQ: 8,434.52, +23.89 (+0.28%)
S&P 500: 3,085.18, +8.40 (+0.27%)
NYSE Composite: 13,395.55, +43.98 (+0.33%)

Thursday, November 7, 2019

Nothing much happening in markets on Wednesday, November 6

Wednesday was a slow day. Thursday looks more promising.

At the Close, Wednesday, November 6, 2019:
Dow Jones Industrial Average: 27,492.56, -0.07 (-0.00%)
NASDAQ: 8,410.63, -24.05 (-0.29%)
S&P 500: 3,076.78, +2.16 (+0.07%)
NYSE Composite: 13,351.57, +11.98 (+0.09%)

Wednesday, November 6, 2019

Precious Metals Scrapped; Bonds Sold; Stocks Flat

Prospects for a breakthrough and potential finality to phase one of the US-China trade negotiations did little to move markets Tuesday. By midday, most of the hope and all of the hype had been wrung out of headlines, stocks staged a half-hearted rally, and slumped into the close.

The days activity in stocks was best described as sluggish, or possibly uneventful. The Dow Jones industrials were in the green all day but never higher by more than 100 points. Other indices were equally quiet. A mixed bag of earnings reports for the third quarter from mostly mid-cap companies did little to inspire confidence on the heels of fresh record closes on Monday.

Bonds were generally sold, with yield on the benchmark 10-year note rising six basis points, to 1.86%, the highest they've been since September 13. In stark contrast to the the Fed's recent rate cut, the long end was whipped, with yield on the 30-year bond reaching 2.34%. The short-dated end of the curve was well-behaved, with everything from one-month to two years yielding in a range from 1.56 to 1.63, extremely flat.

As yields were rising on less risky fixed income, precious metals were hammered lower, with silver dripped under $18/ounce to end New York trading at $17.58. Gold, too, was kicked to the curb, falling from $1505 to 1483 by the end of the day.

The entire day seemed to be one of selling just about anything that may have had value. That sentiment stood in sharp distinction to the ongoing narrative. It's likely that markets overall had been overbought and due for a letdown. The potential for continued upside still exists, though mixed messages are coming through the data.

Still, with holidays just a few weeks ahead and money conditions so easy, the possibility of a breakout rally prior to and/or inclusive of Black Friday is very strong. There remains a convincing argument for the ownership of stocks over all other asset classes and there is significant force - and money - behind that argument.

At the Close, Tuesday, November 6, 2019:
Dow Jones Industrial Average: 27,492.63, +30.53 (+0.11%)
NASDAQ: 8,434.68, +1.48 (+0.02%)
S&P 500: 3,074.62, -3.65 (-0.12%)
NYSE Composite: 13,339.59, -15.81 (-0.12%)

Tuesday, November 5, 2019

JP Morgan and the Federal Reserve "Not QE" Money Spigot

Monday, Monday, can't trust that day...

So said the Mamas and Papas back in the 60s. We can still hear the echoes of their lament on the highways to work, in the coffee drive-throughs, and back seats of car pools (some people still do this).

Papers scattered over desks, it's time to get down to business, earn the paycheck, do whatever it is you do to keep yourself afloat.

Monday mornings are a grind, unless, that is, you happen to be a big bank, a global systemically important bank, otherwise known around financial circles as a G-SIB. Then, Monday is just another day to goose your bottom line. And this Monday was a good one.

Thanks to algo-spiking headlines suggesting - for about the 20th time in the past six months - that a China-US trade deal was on the way to becoming reality, stocks roared out of the gate at the opening bell, sending the Dow, S&P, and NASDAQ to all-time closing highs. All-time highs are all well and good, mind you, except when they're built on the back of a drama that never ends, like the ongoing US-China trade deal.

Since the US and China have been engaged in this delicate dance markets have soared every time a possible breakthrough is mentioned and fallen whenever snags are discovered. It's what happens when computers run markets instead of people, even though the computer algorithms were programmed, supposedly, by humans (ahem).

More interesting, however, is the lack of news surrounding the ongoing implosion in repo markets that began in late September and continued through October, now extending into November. It's a real crisis, but now it appears that all of this was triggered by the good people at JP Morgan, yes, that G-SIB bank at the top of the list in the up-article link.

According to the usual somewhat reliable folks at Zero Hedge, JPM was going about its work to keep the economy humming along by selling loans and buying long-dated bonds, according to rules laid out by none other than the Federal Reserve.

How tidy, for Morgan and CEO, Jamie Dimon, to have the incredible good fortune to be able to make more money selling loans than making them (not making this up; it's what happens when interest rates are too low). But, because of JPM's massive portfolio, it cause a not-insignificant disruption in the overnight lending market (repo), that prompted the Fed - hearing the wailing of cash-poor clients - to offer up some emergency TOMO (Temporary Open Market Operations) overnight auctions and eventually cede to POMO (Permanent) and "not QE," to quiet the troubled sector at the heart of the global economy.

So far, it seems to be working, though the general public doesn't even notice, probably because of the fabulous Dodd-Frank legislation that allows the Fed to do essentially bailouts on an ongoing basis without having to go to congress, as was the case in 2008 with TARP.

Jimmy Dore, with help from Dylan Ratigan explain in the 12-minute video below (worth the watch):

John Pepin chines in with pithy commentary from his blog:
If the demand for debt exceeds the banks ability to loan then one of several things must happen. Either the interest rate rises, (and we all know that is unacceptable), or the banks have to take hidden loans from the federal Reserve to cover that demand for debt.

Monday, Monday, can't trust that day. Worry not, the week is just getting started.

At the Close, Monday, November 4, 2019:
Dow Jones Industrial Average: 27,462.11, +114.75 (+0.42%)
NASDAQ: 8,433.20, +46.80 (+0.56%)
S&P 500: 3,078.27, +11.36 (+0.37%)
NYSE Composite: 13,355.44, +55.14 (+0.41%)

Sunday, November 3, 2019

WEEKEND WRAP: Fed Delivers, S&P, NASDAQ Make All-Time Highs

With the FOMC decision Wednesday to reduced the federal funds overnight lending rate another 25 basis points, to a range of 1.50-1.75%, stocks took a the rest of decision day and Thursday to digest the news, then ramped stocks on Friday, sending the NASDAQ and S&P 500 to record closings and the Dow Jones Industrials and NYSE Composite near all-time highs.

While the third consecutive rate cut was able to reawaken some of Wall Street's animal spirits, it may be the last one for a while. Changing the wording in some parts of their statement, the Fed took on a more hawkish stance concerning rates going forward. Fed policy will remain data dependent, but not necessarily active. That didn't bother stock traders, who saw the opportunity to ignite what may extend into a holiday rally, and ran with it.

Wall Street's enthusiasm came a day after the US House of Representatives voted along strict party lines to make their impeachment inquiry against President Trump just a little more public than it has been up to this point, wherein Democrats, led by Chairman of the Permanent Select Committee on Intelligence, Adam Schiff, held secret, closed door depositions and heard hearsay testimony from various witnesses in connection with a phone call the president made to Ukraine President Volodymyr Zelensky back in July.

The charges the Democrats have alleged against Mr. Trump may be scurrilous at worst and inconsequential at best, but that hasn't prevented the Democrats to continue to spread stories to their friends in the corrupt mainstream media to smear the president in the run-up to the 2020 election. Not a single Republican voted in favor of the resolution which formally enshrined the inquiry and expanded it to other committees.

Washington being thus rendered impotent as it wastes the taxpayer dime on ridiculous accusations and pointless investigations - along the same lines as the 2+ years of the infamous Mueller probe - it does give Wall Street some relief, understanding that the government will be introducing no new laws or regulations that might impede the current, long-standing bull run.

Elsewhere, outside the United States, the world is burning, either through popular strife in countries and places as diverse as Chile, Hong Kong, and Spain (Catalonia), or by economic policy, especially the brunt instrumentality of negative interest rates, in many European countries.

China's economic slowdown became an issue this week as well, demonstrating that the Chinese hard-line stance on trade negotiations with the United States is a charade. The Chinese government knows full well that it needs cooperation with its main trading partner, but insists on slow-walking any formal agreement. President Trump is well aware of China's condition and has maintained his equally-tough positions through whatever negotiations have been made or planned. China is eventually going to lose its grip and be forced to come to terms with the United States or risk popular uprisings of its own people.

Ignoring the background noise of geopolitics, companies continued to roll out third quarter earnings reports which were modest, but nowhere near disastrous. Additionally, US GDP came in at a stronger-than-expected 1.9% in the first estimate, and October job growth was muted, but well beyond expectations, delivering a non-farm payroll report that saw job gains of 128,000, following an upwardly revised 180,000 increase in September, easily beating market expectations of 89,000. Even though the BLS report is a damaged documentary on true economic growth, the trading community saw this as a positive one and responded accordingly.

Bonds rallied. The yield curve, having un-inverted in early August, continued to steepen, with the 10-year note at 1.69% on Thursday before closing out the week at 1.73%. The longer-duration, 30-year bond, which had fallen under two percent in July, and was being sold off until this week, rallied sharply, with yields falling from 2.34% on Monday to 2.17% on Thursday, settling on Friday at 2.21%.

Gold and silver were also bid, gold regaining the $1500 per ounce level and silver shooting beyond $18 per ounce.

The week ahead features more madness from Washington, a slew of earnings reports, including some popular names like Shake Shack, Uber, UnderArmor, Sprint, Hertz, Groupon, Mariott (Monday), Chesapeake Energy and Newmont Mining (Tuesday), Roku, CVS Health, Square, Humana, Qualcom (Wednesday), Teva, Planet Fitness, AMC Entertainment, Cardinal Health, (Thursday), and Duke Energy and US Concrete (Friday). The Walt Disney Company (DIS), a Dow component, reports Thursday.

Barring any unforeseen negative developments like bank runs (China), riots and street killings (Hong Kong), or desultory commentary on negative interest rates (Denmark), all appears to be smooth sailing through Black Friday, which approaches rapidly, just 19 trading days hence.

Happy Holidays? Too soon?

At the Close, Friday, November 1, 2019:
Dow Jones Industrial Average: 27,347.36, +301.13 (+1.11%)
NASDAQ: 8,386.40, +94.04 (+1.13%)
S&P 500: 3,066.91, +29.35 (+0.97%)
NYSE Composite: 13,300.27, +128.46 (+0.98%)

For the Week:
Dow: +389.30 (+1.44%)
NASDAQ: +143.28 (+1.74%)
S&P 500: +29.35 (+0.97%)
NYSE Composite: +154.03 (+1.17%)

The following is dedicated to California Rep. Adam Schiff: