Showing posts with label 30-year bond. Show all posts
Showing posts with label 30-year bond. Show all posts

Friday, May 15, 2020

Stocks Post Weak Gains Ahead of April Retail; Gold, Silver Bid, Approaching Breakout Levels

Following a weak open, which looked to see stocks extend their losing streak to a third straight session in the red, stocks pivoted, gradually rising off the lows (the Dow down more than 400 points early on) to eventually finish with fair, though hardly secure gains, the advance prompted right at the Dow Jones Industrials' 50-day moving average.

For the seventh time in the past eight weeks, the major averages put on gains in the face of staggering employment losses, as new unemployment claims came in hotter than anticipated, with 2.98 million fresh filings, bringing the two-month total over 36 million out of work.

Equity moves were likely not correlated well to the unemployment data, as the gains all appeared after the news had been known for hours. The more likely scenario was one which has been playing out since the Federal Reserve stepped up its bond-buying activity, but quantitatively and qualitatively. Flush with cash, primary dealers and cohorts ramped into stocks, erasing some of the losses from the prior two sessions.

The move, which is mostly market noise rather than anything substantial, is likely to have been in vain. With investors eyeing what are certain to be horrific April retail sales figures Friday morning, futures are pointing down two hours prior to the opening bell.

Sensing weakness in equities, precious metals caught a long-overdue bid, with gold bounding as high as $1732.70, and silver breaking out to a high in early Friday morning trading of $16.48 per troy ounce.

Premiums on both gold and silver remain high, with popular one-ounce silver bars and coins selling in a range of $23-30, while gold fetches well above $1840 routinely for one ounce coins, rounds, or bars. Despite whatever nonsense the mainstream financial media is throwing out as justification for stocks over real money, demand for precious metals is, and has been, at extremely high levels since early March with no abatement seen on the horizon. The outsized demand has created a supply shortage and has miners and smelting operations working at breakneck speed to maintain at least some modicum of reliability.

With input costs around $1250 for gold miners, exploration and excavation should continue at a strong pace as prices rise and demand continues strong. Undervalued for the past seven years at least, gold and silver mining companies may be looking at solid, if not spectacular, profits in coming quarters.

Bond traders were also able to capitalize on the recent weakness in stocks. The yield on the 10-year note has fallen from a May high yield of 0.73% on Monday to close at 0.63% on Thursday. The 30-year closed Monday at 1.43%, its highest level since March 25, but finished Thursday yielding 1.30% and under pressure.

Oil continues to be a favorite plaything of the speculative class, making a two-month high at $28.25 on hopes that some pickup in demand has occurred since states began getting back to business from May 1 forward. Despite an enormous glut on the supply side, specs and oil company execs are latching onto any rumor or fantasy to get the price off the recent decades-deep lows.

The world continues in a state of shock and despair over the coronavirus debacle and various government attempts to both stem its advance and keep their economies on life support. Indications are that some of it's working, but not very well, overall.

Stocks will need a three percent gain on Friday to avoid a negative print for the week. Only the rosiest prognosis would believe that even remotely possible, though the Fed's heft has overcome dire predictions more than once during the current crisis.

Stay liquid. Next posting will be Sunday's WEEKEND WRAP. Life on Wall Street may be not so sweet if all the currency thrown into markets doesn't produce anything more than a 50% spike off the lows, but that head-and-shoulders pattern on the Dow - now with a sloping right shoulder - is beginning to appear ominous.

At the Close, Thursday, May 14, 2020:
Dow: 23,625.34, +377.37 (+1.62%)
NASDAQ: 8,943.72, +80.56 (+0.91%)
S&P 500: 2,852.50, +32.50 (+1.15%)
NYSE: 10,927.41, +97.97 (+0.90%)

Friday, May 8, 2020

Are Markets Awakening to Reality? Gold, Silver, Bonds Higher; Stocks, Oil Lose Momentum As Argentina Approaches Default, US April Job Losses 20.5 Million

Stocks, bonds, oil and precious metals all had their ups and downs on Thursday, as the focus early was on stocks, which put on impressive gains, only to give half of them back in afternoon trading.

Oil was higher in early trading, spiking to $26.27 a barrel for WTI crude before collapsing all the way down to $23.13.

With a turn right after noon, money began to flow away from riskier assets and into safe havens, with bonds, gold, and silver all being bid as the day wore onward.

Silver started the day at $14.81, languished early, and finished sharply higher, at $15.36. Gold was also cold in the morning, but found its legs later, moving from Wednesday's NY close of $1684.10 to finish at $1718.00.

Treasuries were bought with unusual gusto on the long end. The yield on the 5-year note moved from 0.37% to 0.29% on the day, the 10-year yield went from 0.72% to 0.63%, and the 30-year dropped 10 basis points, from 1.41% to 1.31%. The curve flatted out by 10 basis points, 121 bips covering the entire complex.

All of this activity was against a backdrop of 3.2 million initial unemployment claims, bringing the recent total to 33 million over the past seven weeks.

April non-farm payrolls were also on the mind, with the number - expected to be a record for one month - due out Friday morning.

Argentina (silvery) is about to default on $65 billion of its foreign debt today, Friday, May 8, as bondholders and the government are at loggerheads over a restructuring, though the government appeared to be willing to make some concessions late Thursday. A harder deadline comes May 22, when the country could enter certain default, as a grace period for $500 million of interest payments comes to an end. The clock is ticking for the nation that has defaulted on debt eight times previously.

Argentina could be the doomsday clock the financial world is watching. Other nations are sure to be on the brink of debt default and currency crises after weeks and months of lockdowns, supply chain breakdowns, social unrest, and deaths caused by COVID-19.

Is this the beginning of the end of the stock market rally and a rush to the safety of hard assets? The Dow popped above 24,000 intraday, but it's been unable to surpass the seven-week high of 24,633.66, which is roughly a half retrace of the March pullback. Another failure at this level would signal a short-term selling condition.

Just moments ago, the BLS reported April non-farm payrolls, registering a loss of 20.5 million jobs, pushing the unemployment rate to 14.7%.

With COVID-19 continuing to cause dislocations in everything from meat distribution to pro sports to education, the debate over whether this economic maelstrom will eventually result in a sharp rebound or a long, drawn out recession or even a depression.

Siding with the sharp rebound are those who gave up the ghost back in March with lockdowns, the government, media, and most of the financial community following the lead of the Federal Reserve.

Naysayers, viewing the global economy at a severe breaking point with no good solutions, include James Rickards, Mike Maloney of, Peak Prosperity's Chris Martenson, Peter Schiff (a fiat money perma-bear and gold perma-bull) and others.

Greg Mannarino, the Robin Hood of Wall Street adds some perspective:

At the Close, Thursday, May 7, 2020:
Dow: 23,875.89, +211.25 (+0.89%)
NASDAQ: 8,979.66, +125.27 (+1.41%)
S&P 500: 2,881.19, +32.77 (+1.15%)
NYSE: 11,121.67, +121.68 (+1.11%)

Wednesday, March 18, 2020

Stocks Gain Tuesday, Busy Fed Monetizes Stocks Amid Spreading COVID-19 Virus: Boeing Wants $60 Billion

On the heels of Monday's knee-knocking losses, Tuesday's trade to the upside was somewhat predictable, in that a dead cat bounce usually follows massive losses, so the major indices continued along their path of one step forward, two (or three, four, or five) steps back.

There has not been back-to-back gains on the majors since a four-day stretch from February 4-7, as stocks rose relentlessly to new highs, the general top coming on February 12, in itself a surprising date, since the coronavirus was already in the process of devastating China and its economy, already having disrupted the global supply chain. How could investors have been so short-sighted? Greed has a certain blinding element to it, as does the opposite market reaction, fear, which has taken firm hold in the US markets and around the world.

Tuesday's events surrounding the viral outbreak were more of the standard fare of shutdowns, closures, government-imposed rules, as Europe closed its borders, every nation inside the EU locking down, as did the city of San Francisco, soon to be followed, most likely, by a similar "shelter in place" order in New York City, hinted at by Mayor Bill DeBlasio, shutting down all commerce for the foreseeable future.

The global case count has no exceeded that of mainland China and continues to outpace it. China's figures are still suspect, as they claim to have all but conquered the virus, the number of new cases since February 18 having grown by only 7,000, leveling off in the 81,000 range, a minuscule percentage of China's 1.4 billion population. However, China did lock down more than half of the country, especially in the province of Hubei, he original epicenter. There's probably never going to be any way to verify China's figures, since they announced Tuesday that reporters from The New York Times, The Wall Street Journal and The Washington Post would have their media credentials revoked, essentially barring them from reporting on anything.

With the March FOMC meeting underway, the Fed was very busy, boosting QE, extending credit for commercial paper to businesses large and small, and, after the market closed, re-instituting a loan facility to primary dealers from the 2008-09 crisis.

Officially called the Primary Dealer Credit Facility, or PMDF, the program will supply primary dealers of equities and other financial instruments loans of up to 90 days for at least the next six months, essentially monetizing stocks by allowing the 24 primary dealers to use stocks as collateral for short-term funding.

Also making headlines were Secretary Steven Mnuchin and President Trump, who were touting a plan to send $1000 checks to most Americans, specifically singling out millionaires, who, according to their statements, would not receive any handouts.

Boeing (BA), besieged by their own errors, is asking for a $60 billion bailout from the federal government. Boeing stock has fallen from a high of 440.62 to 124.14 currently, but the aerospace and airplane manufacturer should not be afforded such generosity, given that the company has been derelict in its corporate money management. Over the past 12 years, Boeing has repurchased at least $40 billion of its own shares, so, if it is in need of capital, it should just sell those stocks in the open market.

Boeing's stock buyback scheme worked to enrich shareholders and top executives as the share price soared as available stock was taken out of circulation and dividends were increased. Instead of reinvesting their profits, Boeing executives showered themselves with lavish bonuses and stock options. Now that a rainy day has arrived, they come begging for money from US taxpayers.

The same is true of major airlines, who spent almost all of their free cash flow on stock buybacks since the Great Financial Crisis of 2008-09. It's a travesty beyond compare.

While stocks held their own private party, other parts of the economic landscape obviously didn't share in the celebratory mood. Crude oil was sent to fresh lows, WTI crude cratering to $26.95 on Tuesday, and falling even more, to $26.04, in early Wednesday trading.

Gold and silver have been ravaged for days, though gold rallied sharply on Tuesday while silver fell to new lows, sending the gold-silver ratio to unimaginable heights. The last spot silver price in New York was $12.56 per ounce. Gold settled Tuesday at $1527.90, leaving the ratio at 121.65, an unbelievable figure, far and away the highest level in the 5,000 years of gold and silver being used as money.

As investment grade (IG) spreads have blown out to crisis levels, the treasury curve steepened dramatically on Tuesday, as the short end was bought and longer-dated maturities were sold. The total spread from 1-month bills out to 30-year bonds increased from 109 basis points on Monday to 151 Tuesday, the 30-year yield spiking 29 basis points to 1.64%, the 10-year note yielding 1.02%, also 29 basis points higher. At the short end, the 1-month bill yields 0.12%, falling from 0.25% on the day.

Thus, with millions of Americans at home for the next two weeks, with no sports, little work, and high anxiety, high finance drama continues to play out daily in the markets, which, for better or worse, remain unfettered and open for business.

The world is witnessing a financial calamity in real time.

At the Close, Tuesday, March 17, 2020:
Dow Jones Industrial Average: 21,237.38, +1,048.86 (+5.20%)
NASDAQ: 7,334.78, +430.19 (+6.23%)
S&P 500: 2,529.19, +143.06 (+6.00%)
NYSE: 10,063.36, +495.83 (+5.18%)

Monday, February 24, 2020

WEEKEND WRAP: Coronavirus (COVID-19) Providing Effective Cover For Profit Taking In Stocks; Bonds Rallying; Gold, Silver Flying

Making new all-time highs during the week were the NASDAQ and S&P, while the NYSE and Dow lagged, despite having reached a similar pinnacle earlier this year.

Market news is abuzz with coronavirus as the culprit for this week of losses, as stocks turned south mid-week. While the virus has yet to kill or infect significant numbers outside mainland China - less than 20 deaths worldwide, sans the red nation - it's the damage to supply chains and earnings that most bothers the money mavens of lower Manhattan.

Seriously, the people working the computers, phones, tickers, and squawk boxes could care less about 75,000 sick Chinese people or even the 2500 dead from the virus. They're much more concerned that critical parts in a just-in-time (JIT) production process won't be arriving from across the Pacific. The wheels of enterprise and consumerism need to be kept turning, and essential parts not being delivered puts a severe kink in those plans.

While much of China is under quarantine, some segments have gotten back to work, though the timeline continues to shift. Originally, communities under quarantine were supposed to get back to work in early February. As the virus spread and the severity of the situation sank in, those dates continued to be moved back later and later. Presently, many companies in China won't be getting back to full production before the second week of March.

Stocks haven't really suffered amid all the fear, uncertainty, and doubt (FUD), but they are likely to in the immediate future. As of Monday morning of February 24, a global blood-letting is underway. Asian stocks were down in a range of one to two percent, but Europe is taking it harder, with indices in Germany, France, England, and elsewhere down more than three percent, making for one of the biggest one-day drops this century.

The US markets, set to open within the hour, are showing futures off by staggering amounts, indicating a serious decline at the opening bell. Indications are that the Dow could be down nearly 1000 points, while the NASDAQ may shed more than 300. Both would qualify as among the largest declines in history.

If markets panic, which appears to be what they're setting up for, a mixed message is going to be sent. While the money managers are concerned primarily with business disruption, the general population will read the message quite differently, assuming from the massive drops on Wall Street that the virus is a killer and is coming to a neighborhood or household near you, and soon.

This is the height of cognitive dissonance and what anyone with half a wit would like to avoid. Widespread public panic over a virus that has claimed ZERO deaths in the United States and far less infections than the ordinary flu is not a condition conducive to a functioning society. Further fears could be stoked by officials at the WHO and CDC, who readily dropped the ball on the virus from the start and are now becoming the leading cheerleaders for what is likely to be largely unwarranted despair.

What the virus represents is more a threat to sanity than one's physical health. Even taking the total number of cases including those in China, the chances of contracting COVID-19 are not even as good as getting into a traffic accident. People in America are more likely to suffer injury from slipping in a bathtub, falling off a ladder, or cutting themselves with a kitchen knife than catching Wuhan Flu.

So, when stocks crash on Monday, bear in mind that they were wildly overvalued and COVID-19 and its associated panic is providing a friendly cover for profit-taking. A rout is what this market is badly in need of, and, if stocks head into bear territory (a place they're not even close to approaching at this time), it's not likely to last much longer than the time it takes for coronavirus to spread worldwide, inflict disease and death, and finally peter out by June.

First quarter results for China are going to be horrendous, with GDP growth probably plummeting by 35-50 percent. In Europe, a quarter that avoids a negative number would be a surprise, while the US is likely to print something on the order of a onesie, in the range of 0.6 to 1.5 percent gain.

It's far too early to predict how the second quarter shapes up, but there's plenty of evidence that the first quarter is going to come in positive. Feeding that data into the political landscape, it suggests that even if the US does fall into a recession, it's not going to be confirmed until near the end of October, just in time to have an effect on US elections, as GDP would have to decline for two consecutive quarters.

There's a risk that the second quarter will be in the red, but prospects for the third are better if the virus carries along the same pathway as other similar infectious strains such as SARS and MERS. Warm weather and humidity are virus-killers.

It's getting interesting, though the fears of widespread infections are currently oversold.

Bonds have been and continue to take the situation with all due seriousness. The 30-year bond ripped lower on Friday to an all-time low yield of 1.90% and the 10-year is chasing it down, closing out the week at 1.45%, perilously close to its all-time low. The 10-year note yielded 1.37 on 07/05/16, and again on 07/08/16. That level could be tested this week and a sustained drop into the 1.15 to 1.25% range would not be unwarranted during a panic condition.

The curve, however, remains nearly flat for the 2s-10s, which are holding up a 12-basis point difference (2s at 1.34%), but the shortest duration paper, 1, 2, 3, and 6-month bills are all sporting yields higher than 10-year, so concern is evident that the US economy is vulnerable to a major shock.

Gold and silver made significant gains over the course of the week, as the flight to true safety accelerated. Gold ended at a seven-year high, at 1643.00 the ounce. Silver closed out on Friday at 18.45 per ounce. A good start to a real rally, but far away from a breakout point. Both are up sharply early Monday morning.

Crude oil had a relatively good week, though the price for WTI crude in Monday morning's futures are looking rather grim, down more than three percent and approaching the Maginot line of $50 per barrel. It's unlikely to hold that level. Speculators are currently eyeing the $45-48 range and the next support level.

All of this points to a near-term washout in stocks. While there's currently not any markers being set down for a sustained rout, it is possible, though considered unlikely, as is the case for what some call "the great reset" where markets crumble like in 2008 and the entire global financial edifice is blown asunder.

No serious person is calling for anything more than a short-term correction, though markets have a unique way of making everybody look like fools.

Stay informed, stay calm, prepare.

At the Close, Friday, February 21, 2020:
Dow Jones Industrial Average: 28,992.41, -227.59 (-0.78%)
NASDAQ: 9,576.59, -174.37 (-1.79%)
S&P 500: 3,337.75, -35.48 (-1.05%)
NYSE: 13,975.78, -85.72 (-0.61%)

For the Week:
Dow: -405.67 (-1.38%)
NASDAQ: -174.38 (-1.79%)
S&P 500: -42.41 (-1.25%)
NYSE: -121.56 (-0.86%)

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%)

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%)

Thursday, August 22, 2019

Stocks Bounce As Germany Sells First Negative-Yielding 30-Year Bond

The "scary" thing - mentioned here yesterday - that sent traders rushing for the exits on Tuesday in major markets from Germany, to France, to the United States, was probably anxiety and anticipation of Germany pricing the first 30-year bond at a negative interest rate.

Germany was looking to sell $2 billion of the bonds, but managed to only sell $965 million of the debt, which eventually priced out at a yield of -0.11%. So, essentially, it was a failed auction, with the Bundesbank scooping up the rest, allegedly to be sold later on to other suckers, er, investors.

Now, that may not sound like a big deal at the outset, but losing a little more than a tenth of one percent on your money over 30 years can add right up. On $1 million, in the first year, it would be $1,100 that you'd just let go. Each year, the amount you'd lose would be lower, but it would still be 0.11%.

Just rounding it off, you'd lose about $30,000 of your money, leaving $970,000. If there was inflation during that period of time, the money would be worth much less in buying power at maturity in 2050.

There are some very bad implications surrounding negative interest rates. First, they are money destroyers. In the fiat money, fractional reserve banking system now in play worldwide, all money is debt. The Fed or other central banks create money (more accurately, "currency") by floating bonds, selling them to interested parties, at interest, creating a debt. The primary dealers, who are the principal buyers of the Fed's bonds (treasuries), create more debt by reselling the bonds or loaning money to companies or individuals.

However, bonds with negative interest rates cause negative debt, or, rather, a surplus, to the Fed, but this money extinguishes debt rather than creating it. If the supply of negative interest-bearing bonds becomes too large, it will cause a contraction in the money supply, which is what is happening in Germany and most of Europe presently. All of Germany's sovereign bonds are yielding negative returns, as are most of Europe's.

The continuation of such a program, especially if it catches on and sends yields further into the red, like one, two, or even three percent, would have the effect of choking off the money supply completely, destroying, once and for all, that currency.

The math is straightforward. If you have a million dollar bond with a -3.00% yield, you lose $30,000 the first year, and smaller amounts each consecutive year, since your principal is getting smaller year-over-year.

If that bond is for 10 years, it's going to lose somewhere in the neighborhood of 25% of its value, leaving you with $750,000 of your original million dollars. At three percent for 30 years, the result is the loss of up to 90% of your original investment, if the bond (at par), continues to pay -3% on one million dollars.

I may not have that exactly right, but the principle is correct and the money supply will be shrunk by negative yielding bonds. This is a very dangerous situation which bears close scrutiny because it very well may be the signal that global central banks are on the verge of forcing all sovereigns into default, destroying the money supply of many nations, and replacing national currencies with a worldwide unit of exchange.

It is, as the conspiracy theorists contend, what the globalists have had in mind for many years. With negative interest rates, they can slowly kill off the yen first, then the euro, then the US dollar. What will happen with the Chinese yuan or Russian ruble and other not-so-mainstream currencies remains to be seen, but a calamity of this proportion is likely to leave most other countries begging for some kind of solution, which the central banks will gladly supply.

At the Close, Wednesday, August 21, 2019:
Dow Jones Industrial Average: 26,202.73, +240.29 (+0.93%)
NASDAQ: 8,020.21, +71.65 (+0.90%)
S&P 500: 2,924.43, +23.92 (+0.82%)
NYSE Composite: 12,697.01, +97.61 (+0.77%)

Just for fun, somebody posted this on Zero Hedge the other day:
Nostradamus: (Cent. 8 Quat. 28)

Les simulacres d'or & argent enflez,
Qu'apres le rapt au lac furent gettez
Au desouvert estaincts tous & troublez.
Au marbre script prescript intergetez.

Translates as:

The copies of gold and silver inflated,
which after the theft were thrown into the lake,
at the discovery that all is exhausted and dissipated by the debt.
All scripts and bonds will be wiped out.


The simulacra of gold and silver swell,
After the lake rapture were gone
At the open all are overcome & trouble.
At the marble script prescript intergetez.

Thursday, August 15, 2019

Stocks Crumble As Treasury Yield Curve Inverts; 30-year Tumbles Below 2%

It is certainly getting interesting in terms of global economics.

National currencies are in a race to the bottom, and Japan and the EU are winning.

With more than $14 trillion worth of bonds holding negative yields (you get back less than you invested), the world is looking like a place headed for disaster. European and Japanese bonds have the most negative yielding bonds. Their economies are not just heading for a recession, they're diving into depression territory.

There is no growth and that's not to blame on Trump's tariffs. In fact, the tariffs have little to nothing to do with the state of global trade. All economies are slowing. There's entirely too much uncertainty, piled atop too much malinvestment, coupled with an aging demographic, for which to promote any kind of meaningful growth.

By this time next year, expect to see at least six of the major developed nations in recession. The most likely candidates would be Japan, Germany, France, Italy, Spain, and Greece. Notably absent from the list are the US, Australia, Great Britain, and Canada. Since China claims to be still growing, they will admit only to slowing down, to about 3% growth, which might as well be a recession. India, which is not a developed nation (nor is China), is already a basket case.

These recessions will not end easily, and the US, Britain, and Canada will likely recede as well, but not quite as soon as the other nations, mostly European, because Brexit is going to change the dynamic to some degree. The EU is going to lose Britain as a trading partner come October 31. That is a near certainty and long overdue.

The US, Australia, and Canada will sign agreements with Britain to continue trade on a reasonable, fair basis. Europe will be shut out of any such agreement, due to their unwillingness to allow Britain an orderly exit for some three years running. The genii in the EU parliament have made their beds and will have to sleep in them. The populations of the EU countries should rightly riot since EU governance, in conjunction with their national leaders have sold them down the proverbial river via lax immigration standards and horrible economic policies.

In the end - though it may take some time - the EU will dissolve, disintegrate. It may take war, or it may take anger from the Greeks, Spanish, Irish or Italians to tip the EU contract overboard, but it will happen.

For the present, however, the world is focused on stocks and bonds, and stocks are not faring well. Wednesday's disaster was the worst trading day of 2019, rivaling some of the hours of last December.

With a global recession looming, investors may be rushing the exits at various stages over the coming months. Adding to the malaise is the upcoming US elections, whereby strident Democrats seek to unseat Mr. Trump. None have shown the qualities to lead or offer any reasonable path to a stable future. Trump should rightly win in a landslide.

With that, the 30-year bond became the latest victim of upside-down economics and the flight to safety, dipping below 2.00% in yield for the first time EVER. The entire treasury curve is now not only yielding less than two percent, it is inverted, and all of it is yielding lower returns than the effective overnight federal funds rate (2.11%).

We are witnessing the death of fiat money in real time. In the meantime, look for a short-lived relief rally which could extend through the rest of August. Real selling should commence after Labor Day.

At the Close, Wednesday, August 14, 2019:
Dow Jones Industrial Average: 25,479.42, -800.49 (-3.05%)
NASDAQ: 7,773.94, -242.42 (-3.02%)
S&P 500: 2,840.60, -85.72 (-2.93%)
NYSE Composite: 12,368.05, -356.32 (-2.80%)

Monday, November 5, 2018

WEEKEND WRAP: As Mid-Terms Approach, Stocks Gain, Volatility Remains

As October turned to November, volatility persisted with markets gyrating wildly, even as non-farm payroll data came in ahead of expectations and the US mid-term elections (Tuesday, November 6) approached.

Things looked like they were slipping away Friday afternoon, as the Dow registered a loss of 292 points approaching 2:30 pm ET. Near the lows of the day, out of the blue, buyers appeared suddenly, boosting the Dow 198 points in three minutes from 2:26 pm to 2:29 pm ET. A move like that had to be courtesy of the PPT, or, possibly massive, coordinated central bank buying (pretty much the same thing), because all the indices leapt higher at precisely the same time.

In case you think that's fishy, consider what would have happened if the Fed and their central bank cronies had NOT done such things over the past ten years. The world would be a far different place and stocks like Apple wouldn't have the absurd valuation of nearly a trillion dollars. The market's been rigged for a long time, and it's not going to change anytime soon.

Whether or not one ascribes to conspiracy theories, the undeniable truth lies in the nearly ten years of market gains and the week past was another example of how Wall Street manages to play the numbers like Vladimir Horowitz on a Steinway grand piano.

The week began and ended with losses, bracketing three days of upside moves, the result a winning week for stocks, led by a 2.88% move on the NYSE Composite. The other indices were all higher by more than two percent. The week was the second of the last six in which stocks have ended positively.

While the moves were dramatic, only the Dow Industrials managed to close above their 200-day moving average and the 40-week moving average. The other majors remain below key levels and still appear vulnerable. The mid-term elections may trigger a knee-jerk reaction by Wall Street, though any such move is unlikely to be long-lasting. What is apparent is that some big money is moving out of stocks, as distribution has been an obvious element on any upside move. Dip-buyers may have moved markets higher this week, but every rally has been met with selling, indicating a trimming of positions.

Amid the whipsawing of stocks, bonds were selling off, with the 10-year note ending the week at 3.21 and the 30-year long bond yielding 3.46%, the highest in more than five years (June 2014).

The until story is in oil. Both Brent and WTI crude have been losing pricing power for the last six weeks, with WTI settling in the low $60s. The persistent declines and current price of $62.78/barrel is resulting in lower prices at the pump, with the US national average below $2.75/gallon, the lowest level since April of this year.

Lower oil and gas prices are usually a boost for the general economy, as consumers end up with more disposable cash after filling up their vehicles. It's also a boon for homeowners, who see lower fuel costs during heating months.

The big event this week will be Tuesday's mid-term elections. The general thinking is that if Republicans can hold the House and Senate, it will be seen as a referendum on President Trump's first two years in office. The Democrats are counting on a change in the House, with as many as 100 races in the toss-up category. A win in the House for Dems would be seen as a win, though their chances of taking control of the Senate are seen as slim. If such a scenario occurs, the result will be nothing but gridlock in Washington, which is usually a good thing for Wall Street.

Politics aside, the current conditions call for caution. There has been no sign of volatility easing, so the triple-digit daily moves on the Dow and NASDAQ are likely to continue until Thanksgiving at least.

Dow Jones Industrial Average November Scorecard:

Date Close Gain/Loss Cum. G/L
11/1/18 25,380.74 +264.98 +264.98
11/2/18 25,270.83 -109.91 +155.07

At the Close, Friday, November 2, 2018:
Dow Jones Industrial Average: 25,270.83, -109.91 (-0.43%)
NASDAQ: 7,356.99, -77.06 (-1.04%)
S&P 500: 2,723.06, -17.31 (-0.63%)
NYSE Composite: 12,321.80, -34.70 (-0.28%)

For the Week:
Dow: +582.52 (+2.36%)
NASDAQ: +189.78 (+2.65%)
S&P 500: +64.37 (+2.42%)
NYSE Composite: +344.85 (+2.88%)

Thursday, July 5, 2018

Stocks, Bonds In Game Of Chicken With Fed, Economy

Who will blink first?

That's the essential question, especially whenever stocks advance in the face of disappointing news or data.

Just today, basking in the afterglow of Independence Day, the data was far from convincing of the official narrative that the economy is clicking, unemployment is low and happy days for all are just over the horizon.

Unemployment claims were higher than expected. For the last week of June, 231,000 were receiving government benefits. The low number of unemployment claims is partially due to a number of factors the government number crunchers don't readily report. First, there are no more extended claims. In most states, it's 26 weeks. That's it. Find a job in six months or be relegated to the "out of workforce" brigade, which are not counted in the official figures.

Additionally, with so many baby boomers retiring (supposedly at a rate of 10,000 a day, though it's likely much lower), there should be jobs aplenty. However, many of those older folks are not being replaced. Corporations are saving through attrition, or, at best, hiring replacements at much lower wages with fewer benefits.

Then there's job growth. The numbers delivered by ADP this morning were uninspiring. Private employers added 177,000 to their payrolls, well below the expected 190,000. Prior to the opening bell on Friday, the BLS releases the non-farm payroll data for June, which is expected to come in at around 195,000 new jobs, but whether the numbers match expectations or not, almost anybody with a functioning brain knows that the data is largely fudged and massaged and generally not reflective of local conditions.

Thus, the wizards on Wall Street are playing chicken in the market, and well they should. The Wall Street elite have the ability to hedge, shed positions before the general public, and make moves faster than anybody else, especially the home-gaming day-traders. They are selling when everyone else is buying and vice versa. They're pros. That's why they're making mega-bucks on Wall Street and you're not.

The Federal Reserve released the minutes from June's FOMC meeting at 2:00 today, which initially sent stocks down, but they recovered to close near their highs. The minutes sent mixed signals, but little to suggest that the Fed would not raise the federal funds rate by another 25 basis points in September, despite a flattening treasury yield curve, which is a harbinger of an economic downturn.

Again, the market pros played chicken and bid up stocks in the face of the Fed minutes which revealed little beyond what was already known.

Bond yields edged slightly higher, except for the 30-year, which shed one basis point to 2.95%. Spreads on the 2s-10s dipped to 29 basis points, and the 2s-30s dropped to 40 bips. Bond traders are staring directly at a flatline instead of a curve, with potential for inversion a real concern. They're selling the short end, buying the long, challenging the Fed to tighten twice more this year, a move that almost certainly would send wild signals through the trading community.

If all of that isn't enough to churn the stomach, Trump's China tariffs go into effect at midnight EDT.

Chicken. It's not what's for dinner. It's what Wall Street plays these days.

Dow Jones Industrial Average July Scorecard:

Date Close Gain/Loss Cum. G/L
7/2/18 24,307.18 +35.77 +35.77
7/3/18 24,174.82 -132.36 -96.59
7/5/18 24,345.44 +181.92 +85.33

At the Close, Thursday, July 5, 2018:
Dow Jones Industrial Average: 24,345.44, +181.92 (+0.71%)
NASDAQ: 7,579.59, +83.75 (+1.03%)
S&P 500: 2,735.07, +21.85 (+0.81%)
NYSE Composite: 12,564.92, +90.53 (+0.56%)

Sunday, July 1, 2018

Weekend Wrap: End Of Quarter Fade Troubling at Half-Year Mark

Stocks were flying higher early on Friday, the final trading session of the second quarter, but, late in the day, waves of selling sent all of the major indices well off their highs by the close.

While the selling did not sent the averages into negative ground, sentiment the past two weeks has not been satisfying to investors, neither those with longer term aspirations nor for the speculative excesses in the short and day-trading regime.

The S&P and NASDAQ closed out the quarter with better success than the Dow, though the 30 industrial stocks comprising the Dow Jones Industrial Average continue to lead the market in the US and to a large extent are a barometer for business globally.

Thus, the Dow ended the month of June with a 144-point loss, and the quarter with a squeamish advance of 158.97 (April, +50.81; May +252.59), less than one percent.

At the year's midpoint, the Dow is down just over one percent. The S&P 500 is up better than two percent, while the NASDAQ is sporting a 9% gain, well into bubble territory.

2018 is turning out to be less and less impressive with each passing day. The search for yield is an everyday affair under current conditions, leaving little room for error. Investors are finding out rather suddenly that small mistakes are becoming more frequent, leading to steeper general losses. The trading environment is not for the faint of heart; cash is becoming more attractive, especially with the dollar resilient against many major foreign currencies.

Bloomberg’s Michael Regan noted Friday that global market caps have lost about $10 trillion since peaking in late January.

Bonds continue to fluctuate in narrow ranges, though consistently flattening the yield curve, with both short and long durations taking turns at lower yields. The 30-year bond ended the quarter at 2.98%, the 10-year note held at 2.85%, the five, 2.73%, and the 2-year, 2.52%.

Oil spiked in the final days of the month, just in time for the largest holiday travel week of summer.

The vix remains elevated with precious metals largely in the dumps. The most significant development for the upcoming, holiday-shortened week is Friday's non-farm payroll report for June. The expected number is +198,000 net new jobs for the month. It may be academic if the report comes close to consensus. A miss would surely be met with a negative reaction

With six months in the books, the second half kicks off on a very nervous note.

Dow Jones Industrial Average June Scorecard:

Date Close Gain/Loss Cum. G/L
6/1/18 24,635.21 +219.37 +219.37
6/4/18 24,813.69 +178.48 +397.85
6/5/18 24,799.98 -13.71 +384.14
6/6/18 25,146.39 +346.41 +730.55
6/7/18 25,241.41 +95.02 +825.57
6/8/18 25,316.53 +75.12 +900.69
6/11/18 25,322.31 +5.78 +906.47
6/12/18 25,320.73 -1.58 +904.89
6/13/18 25,201.20 -119.53 +785.36
6/14/18 25,175.31 -25.89 +759.47
6/15/18 25,090.48 -84.83 +674.64
6/18/18 24,987.47 -103.01 +571.63
6/19/18 24,700.21 -287.26 +284.37
6/20/18 24,657.80 -42.41 +241.96
6/21/18 24,461.70 -196.10 +45.86
6/22/18 24,580.89 +119.19 +165.05
6/25/18 24,252.80 -328.09 -163.04
6/26/18 24,283.11 +30.31 -132.73
6/27/18 24,117.59 -165.52 -298.25
6/28/18 24,216.05 +98.46 -199.79
6/29/18 24,271.41 +55.36 -144.43

At the Close, Friday, June 29, 2018:
Dow Jones Industrial Average: 24,271.41, +55.36 (+0.23%)
NASDAQ: 7,510.30, +6.62 (+0.09%)
S&P 500: 2,718.37, +2.06 (+0.08%)
NYSE Composite: 12,504.25, +28.27 (+0.23%)

For the Week:
Dow: -309.48 (-1.26%)
NASDAQ: -182.51 (-2.37%)
S&P 500: -36.51 (-1.33%)
NYSE Composite: -135.32 (-1.07%)

Wednesday, June 27, 2018

Dow Approaching Correction Territory; NASDAQ Smashed Lower Again

After calling yesterday's trading the "worst dead cat bounce ever", equity markets in the US clambered back into the high green on Wednesday morning. Running on nothing but day-trading and short-selling fumes, the markets turned dramatically just before noon and were in the red over the final two hours, led lower by the now-dead NASDAQ.

To say that the NASDAQ has nosedived recently would be putting it lightly, as the index has had only one winning session in the past five, and has shed some 336 points over that span, or, about 4.5% percent.

There has also been some pain over on the S&P 500, which really stalled out after making a double top around 2780 (2,782.00, June 11; 2779.66, June 15), is down a little more than three percent over the past two weeks.

While the Dow Industrials were down the least, percentage-wise, the point loss was the greatest among the various indices and the Dow also is leading the charge downhill, already well into the red for the year (-2.5%).

With today's closing price, the Dow is down 9.4% from the January 26 high (26,616.71), on the brink of making a second excursion into correction territory. Meanwhile, the S&P and NASDAQ are still clinging to gains YTD, but are off the January highs as well. The NASDAQ is down just a fraction from January, but the S&P is down six percent over the same span.

Today's Dow downdraft was the 10th session with a negative close in the past 12, as the Dow turned a 903-point gain in June into a 298-point loss, a rapid, 1200-point descent. Whatever can be said about the demise of the Dow over the past three weeks it certainly is not good and does not portend well for the remaining two trading days of the month. Avoiding another correction is probably at the top of the list for the bulls still standing, because this foray will likely be more lasting and also lead to further losses.

Bonds were being bought with both hands on the day, with the yield on the 10-year note down five basis points to 2.83%, the lowest yield since April 17. The 30-year bond lost six bips, closing below 3.00%, at 2.97. This is 13 basis points below the close of 3.10% on the date of the latest FOMC rate hike, June 13. That's quite significant, since the Fed is intent on pushing rates higher, but the market is steadfastly resisting.

This recent spree of bond buying is signaling some dire consequences ahead. If the economy is strong enough to raise rates - as the Fed believes - then why is the market heading in the opposite direction? It's obvious that somebody is wrong-footed, and in this case, the money's on the Fed, which is usually well behind the trend, but currently is seeking to create the trend, something that is pretty much impossible, regardless of how much weight and force the central bank wants to exert on markets.

A explosive, toxic condition is at hand. The Fed and financial media are pushing a narrative of "all's well," but the market is saying, "I don't think so." Something is about to give, and soon. Expect stocks to continue their summer swoon, along with the requisite bouts of euphoria (short covering), though the fear factor will eventually take strong hold of conditions.

As has been stated ad nauseum on these pages for months, "this is a bear market. Trade accordingly."

Dow Jones Industrial Average June Scorecard:

Date Close Gain/Loss Cum. G/L
6/1/18 24,635.21 +219.37 +219.37
6/4/18 24,813.69 +178.48 +397.85
6/5/18 24,799.98 -13.71 +384.14
6/6/18 25,146.39 +346.41 +730.55
6/7/18 25,241.41 +95.02 +825.57
6/8/18 25,316.53 +75.12 +900.69
6/11/18 25,322.31 +5.78 +906.47
6/12/18 25,320.73 -1.58 +904.89
6/13/18 25,201.20 -119.53 +785.36
6/14/18 25,175.31 -25.89 +759.47
6/15/18 25,090.48 -84.83 +674.64
6/18/18 24,987.47 -103.01 +571.63
6/19/18 24,700.21 -287.26 +284.37
6/20/18 24,657.80 -42.41 +241.96
6/21/18 24,461.70 -196.10 +45.86
6/22/18 24,580.89 +119.19 +165.05
6/25/18 24,252.80 -328.09 -163.04
6/26/18 24,283.11 +30.31 -132.73
6/27/18 24,117.59 -165.52 -298.25

At the Close, Wednesday, June 27, 2018:
Dow Jones Industrial Average: 24,117.59, -165.52 (-0.68%)
NASDAQ: 7,445.08, -116.54 (-1.54%)
S&P 500: 2,699.63, -23.43 (-0.86%)
NYSE Composite: 12,412.06, -98.49 (-0.79%)

Tuesday, June 12, 2018

Stocks Lose Luster In Late Trading

Getting the usual Monday morning boost, stocks experienced widespread gains throughout the day but faded badly into the close, with the Dow suffering the worst, dropping 80 points off its early afternoon high at 25,402.83.

The blue chips ended the day with a gain of just less than six points, the smallest percentage higher (0.02%) of the major indices.

Monday's subdued trading preceded the signing of an historic agreement to denuclearize North Korea, signed Tuesday morning, Singapore time, by President Trump and North Korean leader, Kim Jong-un. The late-day selloff might have been a precursor to more meaningful action to come Tuesday and Wednesday as the Federal Reserve plans a widely-anticipated increase to the federal funds rate, also known as the overnight or interbank rate, the price banks pay to loan funds to each other or to and from the Federal Reserve.

With the FOMC set to open the rate policy meeting on Tuesday and conclude Wednesday afternoon, treasury bonds displayed relative quiet, though yields rose moderately across the treasury spectrum.

Most worrying to bond traders and economists is the continuing flattening of the yield curve, as it approaches possible inversion, a condition that has presaged every recession since 1955.

The 2-10-year spread reached its lowest point in the current cycle, dropping to 43 basis points. The 5-30 spread stood at a mere 30 basis points (0.30%) at the close of trading Monday.

Further rate hikes by the Fed treated to choke off investment and send shorter maturities higher while longer ones stand firm. Both the 5-year note and 30-year bond have risen in yield by six basis points since June 1, though the stability is not expected to last long past this week's FOMC meeting.

As far as trading is concerned, there is likely to be a period of quietude Tuesday and Wednesday morning, leading up to the policy announcement at 2:00 pm EDT.

Dow Jones Industrial Average June Scorecard:

Date Close Gain/Loss Cum. G/L
6/1/18 24,635.21 +219.37 +219.37
6/4/18 24,813.69 +178.48 +397.85
6/5/18 24,799.98 -13.71 +384.14
6/6/18 25,146.39 +346.41 +730.55
6/7/18 25,241.41 +95.02 +825.57
6/8/18 25,316.53 +75.12 +900.69
6/11/18 25,322.31 +5.78 +906.47

At the Close, Monday, June 11, 2018:
Dow Jones Industrial Average: 25,322.31, +5.78 (+0.02%)
NASDAQ: 7,659.93, +14.41 (+0.19%)
S&P 500: 2,782.00, +2.97 (+0.11%)
NYSE Composite: 12,856.96, +24.89 (+0.19%)

Friday, June 8, 2018

Dow Rally Fades, NASDAQ Drops From New Highs; Bonds Rally Sharply

As the first full week of June trudged forward, stocks ripped higher in the New York morning before hitting afternoon speed bumps that saw the Dow fade from the day's highs and the NASDAQ retreat from Wednesday's new all-time highs.

Late in the day, treasury yields were hammered lower. The 10-year note was bid dramatically, the yield falling from the 3.00% level to 2.89% on heavy demand.

Markets were generally orderly except for the flash-crash action in the treasury market. While the 10-year was being bid, so was the 30-year bond, as the spread between the two longest-dated securities fell to 16-18 basis points, the obvious elephant in the room fear of an inverted curve.

The treasury curve has been flat and flattening for over a year, ever since the Federal Reserve announced plans to sell assets on their bloated balance sheet while also raising rates via the federal funds rate.

If anything is clear from recent market action it is that high levels of volatility are evident in everything from oil prices to stocks to bonds.

As far as the Dow is concerned, the past five sessions have seen the index ramp higher by 825 points, the only pause a 13-point decline on Tuesday. For chartists, the industrial index was approaching the higher end of its recent Bollinger band range and also nearing critical Fibonacci levels.

Astute market observers are likely unsurprised by recent activity, noting that the June meeting of the FOMC - at which a new, higher federal funds rate is likely to be announced - is just days away. Market veterans are trimming exposure and limiting risk, shifting their positions from stocks to bonds. The Fed's action in the coming week will culminate on Wednesday when the policy decision will be announced to the general public.

The Fed has been adamant in its position to raise rates, though it is still unclear whether they will hike three or four times this year. One rate increase is already in the books, and June's increase has been well-publicized. With the Fed actively affecting the treasury market, a 10-year note consistently above three percent poses a significant threat to the stock market, which has been shown to be at risk extremes this year. The safety of bonds appears to be more and more appealing as risk aversion rises with every violent action in stocks.

The NASDAQ continues to amaze and amuse, reaching an all-time high on Wednesday prior to Thursday's retreat. It's an outlier to the other major indices as the Dow, S&P and NYSE Composite continue to be range-bound below the January high points.

Something has to give in this scenario, since the Fed cannot have it both ways. A galloping stock market and rising bond yields cannot coexist in a peaceable manner. The money flows currently support a flight to the safety of bonds and Thursday's treasury stampede is more proof that smart money is quietly abandoning the most risky positions in stocks.

Dow Jones Industrial Average June Scorecard:

Date Close Gain/Loss Cum. G/L
6/1/18 24,635.21 +219.37 +219.37
6/4/18 24,813.69 +178.48 +397.85
6/5/18 24,799.98 -13.71 +384.14
6/6/18 25,146.39 +346.41 +730.55
6/7/18 25,241.41 +95.02 +825.57

At the Close, Thursday, June 7, 2018:
Dow Jones Industrial Average: 25,241.41, +95.02 (+0.38%)
NASDAQ: 7,635.07, -54.17 (-0.70%)
S&P 500: 2,770.37, -1.98 (-0.07%)
NYSE Composite: 12,788.50, +10.27 (+0.08%)

Thursday, August 17, 2017

Stocks Wracked On Poor Industrial Production Data, Led by Lower Auto Sales

When the opening bell rang today on Wall Street, there wasn't realistically any cause for alarm, except the data on Industrial Production, which rose 0.2% on expectations of 0.3%, driven lower on a 3.6% drop in the automotive sector.

Car sales have slowed sharply from the record pace in 2016. Production of motor vehicles and parts has fallen in five months this year, and have dropped five percent in the latest 12 months.

That may have been cause for alarm, though not to the extent to which the major indices took it. Stocks had their worst session overall since mid-March, with the S&P 500 and NASDAQ falling below support at their respective 50-day moving averages.

Bond yields were slashed as investors rushed out of equities to the safety of credit. The 10-year note closed the day with a 2.18 handle and the 30-year bond the lowest in a week, at 2.78%.

Oil caught a weak-hand bid, pushing above $47/barrel, but not holding that level. Gold and silver, which had been bid up in prior sessions, held onto gains.

This is the second major loss in the last six session, which, if one is inclined to be seeking trends, could be one to watch. On the other hand, with the Fed having the market's back, continued weakness is considered unlikely.

It has been said that Wall Street is more of a casino than ever before. The past six or seven sessions are proving that the house doesn't always win.

At the Close, Thursday, August 17, 2017
Dow: 21,750.73, -274.14 (-1.24%)
NASDAQ 6,221.91, -123.19 (-1.94%)
S&P 500 2,430.01, -38.10 (-1.54%)
NYSE Composite: 11,712.72, -156.13 (-1.32%)

Saturday, December 17, 2016

Market Week In Review: December 10-16, 2016; Stocks Moribund, Silver Slammed, Oil, Banks Up

Highlighted by Wednesday's (Dec. 14) FOMC rate policy announcement, the week as a whole saw its fair share of ups and downs, mostly confined to intra-day movement, but eventually ending mildly positive, at least for stocks.

The Dow recorded a pair of all-time closing highs on Monday and Tuesday, but failed to reach for the stars after the Fed announced a 0.25% hike in the federal funds rate, the first in exactly one year. The move from 0.25-0.50 to 0.50-0.75 triggered a sharp sell-off in Wednesday afternoon trading, though stocks recovered nicely on Thursday and ended flat on Friday.

If the week was uneventful for stocks, it was not the same for commodities, particularly silver and gold, or for the US dollar, which reached nearly-unprecedented highs over 102.20 on the Bloomberg dollar index. As the dollar gained, the precious metals were slammed, gold losing over $30 top to bottom, but eventually leveling off at $1134.60 at Friday's finish, a loss of just $26 from the rate announcement. Silver took a much harder hit, dropping in price on the COMEX from $17.10 an ounce on Wednesday to end the week about a buck lower, at $16.07, a six percent loss.

Following OPEC's announced production cuts for 2017, crude spiked over $55 per ounce, but retreated during the week, still ahead somewhat at 53.03 as the week's trading closed out. Despite the strong dollar - supposedly a brake on oil prices - oil managed to ramp up to the highest price in three years.

Financials and industrials led the way for US stocks, not surprisingly continuing the Dow rally spurred forward by notables Goldman Sachs, 3M, Boeing, and General Electric. The Dow Industrial Average being the only major index to finish in the green for the week, markets continue to show strength in only the largest of large caps while smaller stocks are only being nibbled upon and, in the main, sold. The fracturing of markets into large leaders and small losers cannot bode well for the continuation of any meaningful rally going forward.

Naturally, with the Fed hiking rates, if only modestly, Treasuries were sold, but mainly on the short-duration issues. The five-year note broke through the mythical 2.00% threshold this week (2.05%), while the 10-year popped briefly above 2.60%, clinging close to that level as markets went dark for the weekend (2.57%). A flattening yield curve was evident as the 30-year bond remained steady, at 3.16%, pushing down the spread between fives and thirties to a unitary 1.11%.

All of this came against a backdrop of national news media hyping futile and largely-baseless claims by the US intelligence community that Russia hacked the 2016 presidential election, somehow making Vladimir Putin responsible for the election of Donald J. Trump (who will be formally elected by the Electoral College on Monday) and the demise of Hillary Clinton, the choice of the much-discredited leftist status quo.

The folly of the intelligence claims was completely ignored by Wall Street, and rightly so. The last thing investors need is a fresh injection of political skullduggery, after slogging through nearly two years of endless campaign rhetoric from all sides.

With a week left before Christmas, retailers have yet to ring bells of any kind, neither of alarm or of joyous peals f profit. The Christmas shopping experience over the past decade has morphed from mad dashes on Black Friday to a controlled button-pushing event on computers nationwide, as the internet has revolutionized the retail buying experience and forever changed the shopping mall landscape and holiday experience.

With two weeks remaining in 2016, it's likely that markets will respond to calmer views going forward though a sharp Santa Claus rally, taking the Dow beyond 20,000, is a distinct possibility over the final ten trading days of the year.

At The Close: Friday, December 16
Dow: 19,848.60, -3.64 (-0.02%)
NASDAQ: 5,437.29, -19.56 (-0.36%)
S&P 500: 2,258.20, -3.83 (-0.17%)
NYSE Composite: 11,122.44, -9.46 (-0.08%)

For the Week:
Dow: +86.65 (0.44%)
NASDAQ: -7.34 (-0.13%)
S&P 500: -1.46 (-0.06%)
NYSE Composite: -66.57 (-0.59%)

Sunday, July 10, 2016

SPX Near All-Time Highs On June Jobs Euphoria

On May 20, 2015, the S&P 500 index (SPX) reached an all-time intra-day high of 2,134.72. The following session, May 21, it set a closing record at 2,130.82.

This Friday, the S&P closed at 2,190.90, settling off the day's high of 2,131.71, so, no records were set in the first full trading week of July (when nobody's paying particular attention), but the major indices are now poised to run beyond their previous highs, set more than a year ago.

Thus, the banking and global finance cartel - which is in complete and unbreakable control of all "trading" markets - has waived any consideration that the third-longest equity bull market in the history of US stock markets was coming to an end.

Bears, those sadly depressed members of the pessimism society (this blog included) are never going to be satisfied it seems. Drops on the major indices of 10% or more (corrections) are not tolerated. 20% declines - bear markets by definition - are not open for discussion within the megalithic construct of global central bank monetarism.

Expect new all-time highs on the S&P promptly Monday morning, with the Dow soon to follow (all time highs of 18,351.36 intra-day and 18,312.39 closing, both on May 19, 2015). The NASDAQ has a bit further to travel, having made its all-time closing high of 5,153.97 on June 22, 2015, reaching its zenith two days later with an intra-day value of 5,164.36.

Whether these prices and averages are justified by fundamental measures of valuation is debatable. By many measures stocks are overpriced. The trading prices of some of the more popular stocks - especially those focused in the technology area (Facebook, Google, Amazon, Apple to name a few) - currently trade at nose-bleed valuations.

According to the financial press, what prompted the sudden jerk higher of US stock markets was Friday's non-farm payroll figures from June.

The Bureau of Labor Statistics (BLS) said non-farm payrolls rose to a seasonally adjusted 287K, from 11K in May, that figure revised lower, from 38K.

Analysts had expected U.S. non-farm payrolls to rise 175K last month, so the surprise factor was enormous. Muddying the waters beyond the mystifying May numbers as compared to June - the largest net gain in eight months, is that the BLS numbers are largely massaged, maneuvered, and mangled into whatever pretzel-logical outcome is desired at the moment.

In a word, the BLS numbers are untrustworthy.

David Rosenberg suggests that the month of June did not in fact show a massive gain, but employment actually declined by 119,000 during the month.

When the Household survey is put on the same comparable footing as the payroll series (the payroll and population-concept adjusted number), employment fell 119,000 in June — again calling into question the veracity of the actual payroll report — and is down 517,000 through this span. The six-month trend has dipped below the zero-line and this has happened but two other times during this seven-year expansion.

Here is another article (from February 2016) that breaks down the faulty, misleading methodology employed by the BLS.

David Stockman opines that the monthly BLS survey is mostly noise and needs to be veiwed over longer periods in order to offer convincing trends and that the May and June tallies, taken together, amount to nothing more than statistical numbness.

Effectively, the BLS survey figures move markets as the algos respond entirely to the headlines, which were out-of-the-park awesome in June. The details were more nuanced, but such does not have influence on stocks.

In any case, since, the Brexit vote, central banks and central planners have returned in force to control the narrative, which, in their view, must continue to be nothing but positive.

For an alternative view, look at the response of gold, silver and especially, government bonds, the 10-year note and 30-year bond in particular, both of which continued to make all-time lows this week.

For the week:
Dow: +197.37 (+1.10%)
S&P 500: +26.95 (+1.28%)
NASDAQ: +94.19 (+1.94%)

Friday's Fantasy:
S&P 500: 2,129.90, +32.00 (1.53%)
Dow: 18,146.74, +250.86 (1.40%)
NASDAQ: 4,956.76, +79.95 (1.64%)

Crude Oil 45.12 -0.04% Gold 1,367.40 +0.39% EUR/USD 1.1051 -0.09% 10-Yr Bond 1.37 -1.51% Corn 361.25 +3.66% Copper 2.12 +0.02% Silver 20.35 +2.58% Natural Gas 2.82 +1.44% Russell 2000 1,177.36 +2.40% VIX 13.20 -10.57% BATS 1000 20,677.17 0.00% GBP/USD 1.2952 +0.30% USD/JPY 100.4600 -0.27%

Tuesday, July 5, 2016

Brexit Losses Erased; SIlver Soars To Near $20 Per Ounce

From Friday, July 1:

U.S. Treasuries advanced accompanied by a stimulus-fueled rally in European debt that pressured regional yields to new record lows. Treasuries were not far behind with demand pressuring the 30-yr yield to a fresh record low of 2.189% while the 10-yr yield hit 1.382%, pausing just above an all-time low of 1.381% that was notched four years ago. The 2-yr note posted a slight loss while the 5-yr note ended flat.

Silver closed in NY at 19.75 (+11.25% - best week since Aug 2013).

For the Week Ended 7/1:

Dow: +548.62 (+3.15%)
S&P 500: +65.54 (+3.22%)
NASDAQ: +154.59 (+3.25%)

Friday's Results:
S&P 500: 2,102.95, +4.09 (0.19%)
Dow: 17,949.37, +19.38 (0.11%)
NASDAQ: 4,862.57, +19.89 (0.41%)

Crude Oil 49.28 +1.97% Gold 1,344.90 +1.84% EUR/USD 1.1135 +0.35% 10-Yr Bond 1.46 -2.15% Corn 368.00 -0.88% Copper 2.22 +1.18% Silver 19.85 +6.62% Natural Gas 2.99 +2.12% Russell 2000 1,156.77 +0.42% VIX 14.77 -5.50% BATS 1000 20,677.17 0.00% GBP/USD 1.3269 -0.10% USD/JPY 102.5180 -0.80%

Monday, December 28, 2015

Santa Takes a Little Off the Top

Stocks fell today, first hard, then made a daylong comeback to close near the unchanged mark.

It was rather a random day in the world of high finance. Ten-year and 30-year treasuries each closed off a pip, 2.21 and 2.93, respectively, while the 2-year note budged upward from 0.97 to 0.98, tightening and flattening the spread. It wasn't a monumental move, but noticeable to anyone paying attention. The market didn't really appreciate the boost in the fed funds rate and the displeasure is being voiced by various, subtle means, like the desperation in high yields, and the shut-off of the banking spigot that funded stock buybacks for most of the last five years.

It's probably better, right now, to keep a close eye on the bond market. It may turn out to be the place for volatility and profit in 2016, especially if the Federal Reserve follows through on their plans for three or four more rate hikes by this time next year. That is an unlikely event, though "normalization" is what the Fed continues to say they are aiming for, though a truly normal economy won't likely materialize for three or four more years, if they're lucky.

To have a 10-year treasury yielding 4-5% would be quite an accomplishment by 2019 or 2020, considering all the damage already done by over a decade of fed fund rates at one percent or lower.

Equity markets were decidedly dull, as there are few trades to be made of any importance this late in the game, though the markets are still well below all-time highs reached in May, especially the broad gauge of the S&P, which cannot seem to get out of its own way.

Today was mostly gibberish, as will likely be the case the remainder of the week, and the year. It's hard to draw any conclusions from the last week's trading in a calendar year. The first week of January will be much more insightful.

WTI crude was slapped back down from last week's euphoric and ridiculous closing level, finishing the day at 36.72/barrel. Anyone calling a bottom around here just hasn't considered the slack in the economy and the production glut facing producers. It's a huge problem, but nobody wants to cut production, even at these lower prices, constituting a possible new normal.

S&P 500, 2,056.50, -4.49 (0.22%)
Dow, 17,528.27, -23.90 (0.14%)
NASDAQ, 5,040.99, -7.51 (0.15%)