Showing posts with label Alan Greenspan. Show all posts
Showing posts with label Alan Greenspan. Show all posts

Sunday, December 2, 2018

WEEKEND WRAP: Powell Puts Positive Spin On Rates, Economy; Stocks Respond With Banner Gains

As much as stocks were flattened last week, they gained back this week, and then some, rebounding mainly off the lips of Fed Chairman Jerome Powell, who uttered two words which are sure to become ensconced within the annuls of great Fed Chairman one liners, such as Alan Greenspan's notorious "irrational exuberance."

Having a way with words, especially concise two-word constructs, Powell uttered, in a speech at the Economic Club of New York, that interest rates were "just below" neutral, sending stocks spiraling upwards on Wednesday.

Those gains followed two prior sessions with more pedestrian advances, the Wednesday push a 617-point blast on the Dow which sent the industrials into positive territory not only for the month, but for the year as well. The week's gains were capped off by a window-dressing close on Friday, with the Dow posting a nearly 200-point gain, all of which came after 1:30 pm ET.

Events of the week - from Powell's speech to Trump's dealings at the G20 in Buenos Aires - managed to put a positive spin on the outlook for stocks going into the final month of the year and the holiday shopping season.

Effectively, what Powell's statement on interest rates did was virtually assure a 25 basis point hike in the federal funds rate and then a pause at what would have been the next logical rate increase, at the March FOMC meeting, and beyond. Whether the Fed's members actually believes that an overnight rate of 2.25-2.50% neither hinders nor aids the US economy is a question open for debate, as most believed that more rate hikes were necessary per the minutes of the last FOMC meeting earlier in November.

That sentiment put a bit of a damper on the market when released on Thursday, but, as Wall Street memories seem exceedingly short these days, the flattish close didn't have any lasting effect.

Once into 2019, the Fed is likely to continue to spin positively, as Janet Yellen's honorable mention entry in the two-word scrabble that is Fedspeak, "data dependent" should be rolling off the lips of more than a few Fed officials in the cold months of winter.

Undeniably, a dovish Federal Reserve can be nothing but good for stocks, which are the de facto underpinning of the US economy. The Fed - and Powell in particular - may have been taking a sideways glance at the housing market as well, another pillar in the economic construct. Rising mortgage rates have shut down advances in new and existing home sales, punishing home builder stocks like Lennar (LEN), D.R. Horton (DHI), and KB Home (KBH). A stagnant housing market may have been instrumental in the formation of Powell's suddenly-accomodative stance.

Even with the rebound this week, stocks still have a pretty large slope to scale to get back to September or October's all-time highs. The NASDAQ still has issues with falling tech stocks and GM's announcement that it was shuttering five factories and laying off 14,000 workers had a chilling effect on what was an overwhelmingly positive week.

Elsewhere, oil continued to hover at the $50 level for WTI crude, precious metals remained flat to negative, but other global markets perked up a bit.

When the FOMC meets on December 18-19, there will be little doubt about their direction. A rate hike of 0.25% is practically baked into the cake. After that, however, it certainly appears the Fed will consider its work done, for now, at least. The next rate hike - and there is almost certainly to be one or two in the next 12-18 months - will probably come after some gaudy economic data or fresh highs in the stock market.

Until then, the skies are blue and smooth sailing is ahead.

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
11/5/18 25,461.70 +190.87 +345.94
11/6/18 25,635.01 +173.31 +519.25
11/7/18 26,180.30 +545.29 +1064.54
11/8/18 26,191.22 +10.92 +1075.46
11/9/18 25,989.30 -201.92 +873.54
11/12/18 25,387.18 -602.12 +271.42
11/13/18 25,286.49 -100.69 +170.27
11/14/18 25,080.50 -205.99 -35.72
11/15/18 25,289.27 +208.77 +173.05
11/16/18 25,413.22 +123.95 +297.00
11/19/18 25,017.44 -395.78 -98.78
11/20/18 24,465.64 -551.80 -650.58
11/21/18 24,464.69 -0.95 -651.53
11/23/18 24,285.95 -178.74 -830.27
11/26/18 24,640.24 +354.29 -475.98
11/27/18 24,748.73 +108.49 -367.49
11/28/18 25,366.43 +617.70 +250.21
11/29/18 25,342.72 -23.71 +226.50
11/30/18 25,538.46, +199.62 -23.71 +426.12

At the Close, Friday, November 30, 2018:
Dow Jones Industrial Average: 25,538.46, +199.62 (+0.79%)
NASDAQ: 7,330.54, +57.45 (+0.79%)
S&P 500: 2,760.17, +22.41 (+0.82%)
NYSE Composite: 12,457.55, +68.18 (+0.55%)

Dow: +1,252.51 (+5.16%)
NASDAQ: +391.55 (+5.64%)
S&P 500: +127.61 (+4.85%)
NYSE Composite: +421.31 (+3.%0%)

Monday, June 6, 2016

Janet Yellen And The Fed Are Dangerous To Your Well-Being

Apologies for the blaring headline, but this is getting a bit ridiculous. Truthfully, the headline suggested by our ace writer, Fearless Rick, had a definite Donald Trump tone to it, so it was scrapped in favor of the watered-down version.

For seven years - since the great collapse of 2008-09 - we've been listening to the babble coming out of the mouths of various Federal Reserve governors, and none of it was believable nor helpful. The US economy is circling the toilet drain, and various economies around the globe have already been flushed down the sinkhole of fetid monetary policy.

Here is just one quote from Janet Yellen in her address to the World Affairs Council (another bunch of clueless monetarists) that speaks volumes about what she knows and doesn't know:

I see good reason to expect that the positive forces supporting employment growth and higher inflation will continue to outweigh the negative ones.

If Mrs. Yellen would care to elaborate on just what those positive forces could be, it's expected that almost nothing would come out of her mouth, because she's doing what she does best, spout nonsense, in the best tradition of the Maestro himself, the venerable former Fed Chairman, Alan Greenspan. In all honesty, just what positive forces are there supporting employment growth after last week's disastrous non-farm payroll report for May, in which the US economy created a paltry 38,000 jobs when 164,000 were expected.

Additionally, Chair Yellen believes inflation is good for the economy, when most people in the real world would like to see some softening of prices and/or an increase in their wages. On the one hand, deflation in consumer prices stretches one's money; on the other, wage hikes usually occur when the economy is growing robustly. Since Americans can't have both at once, it is supposed that we'll get the former, and like it.

Naturally, the bozos on Wall Street took all of it in stride and just bought more overpriced stocks:

S&P 500: 2,109.41, +10.28 (0.49%)
Dow: 17,920.33, +113.27 (0.64%)
NASDAQ: 4,968.71, +26.20 (0.53%)

Crude Oil 49.69 +2.20% Gold 1,247.70 +0.39% EUR/USD 1.1362 -0.02% 10-Yr Bond 1.72 +1.12% Corn 426.75 +2.03% Copper 2.12 +0.31% Silver 16.49 +0.73% Natural Gas 2.81 +1.41% Russell 2000 1,176.62 +1.07% VIX 13.61 +1.04% BATS 1000 20,677.17 0.00% GBP/USD 1.4455 -0.14% USD/JPY 107.6200 +1.10%

Thursday, April 7, 2016

Stocks Slammed Back Into The Red As Resistance Has Been Met

The stock market is getting too predictable, and when that happens, it's generally a sign that change is at hand.

Not individual stocks, mind you, but at the macro level - entire indices, countries, or specific sectors - movement is largely telegraphed, as if some floor brokers have bullhorns shouting out the trades of the day, the week, the quarter.

On an impersonal level, US indices are ready for another bruising earnings season, having already touched recent highs, now dipping into negative territory for the year. It's all about the flow at this juncture, and the flow is out of stocks and into cash, or bonds, or any place safe.

All of this begs out for the buy-and-hold mentality that persisted during the true heyday of the American stock markets, from the mid-80s through Greenspan's irrational exuberance regime of the late 90s, but that epoch is long past and investors must be more nimble and adroit, being that there are so many more pitfalls and potholes in modern markets.

Above all, the Fed's role is out-sized and outdated. They've simply overstayed their welcome in equity markets, politicizing them to such an extent that honest trading on fundamentals has become passe - a relic from a long-lost civilization.

And so we embark into earnings season with the worst-looking week in nearly two months. Stocks were pounded without mercy on Thursday, setting up either a massive bounce on Friday or a continuation of the dolorous trading that has prevailed for the better part of this week.

As stated here yesterday, resistance has been met, and the only way out is to the downside. How far? That kind of conceit will kill you and leave your heirs penniless.

Many commodities - take your pick, but steer clear of oil - are close to short-term lows and may be the way ahead, though it would be advisable to tread very lightly for at least the next few months.

S&P 500: 2,041.91, -24.75 (1.20%)
Dow: 17,541.96, -174.09 (0.98%)
NASDAQ: 4,848.37, -72.35 (1.47%)

Crude Oil 37.54 -0.56% Gold 1,242.00 +1.49% EUR/USD 1.1377 -0.14% 10-Yr Bond 1.69 -3.65% Corn 361.25 +0.91% Copper 2.08 -3.01% Silver 15.23 +1.17% Natural Gas 2.02 +5.65% Russell 2000 1,092.79 -1.45% VIX 16.16 +14.69% BATS 1000 20,682.61 0.00% GBP/USD 1.4057 -0.45% USD/JPY 108.1250 -1.49%

Wednesday, January 27, 2016

Wall Street Sulks as Fed Is Not Dovish Enough

In the aftermath last month's federal funds rate hike - the first in eight years, and, a paltry 0.25% at that - the Fed held their first FOMC rate policy meeting of the year and the reaction from Wall Street was nothing short of derisive.

While the Fed governors did their level best to hem, haw, and dance around their policy "mistake" - which has taken US stocks roughly seven percent lower and cratered confidence - market participants apparently wanted more, as in a complete roll back of the hike and a return to ZIRP, the policy that had prevailed since the fall of 2008.

Stocks were trading close to the flatline until the 2:00 pm announcement by the Fed. After a small amount of see-sawing, sentiment turned radically negative, with all indices taking a punch to the gut that extended into the close.

The Fed cannot escape its fate. It will be overseeing the utter calamity of a global currency crisis, brought about by their excessive credit policies from the Greenspan and Bernanke eras. Janet Yellen, the current Fed Chair, will be scapegoated, and rightfully, as she is completely tone deaf to the needs of the US and global economies, which are screaming deflation at every turn.

The best Ms. Yellen can hope for in her sure-to-be-short tenure as Chairwoman of the Federal Reserve is for Japan or Europe to somehow come to the rescue with additional QE in coming weeks and months, which will buy her additional time to exit in an orderly manner.

The handwriting is on the wall and the handwringing can be seen on the faces populating the video screens from CNBC and Bloomberg TV. Nobody wants stocks, and soon enough, nobody will want dollars, at least not for long. But first, the powerful grip of deflation will have to work its way through the system, crushing the investor class while shoring up those at the bottom of the societal and economic ladders.

That process has been underway for at least a year, as shown by the price of crude oil. It will eventually infest all consumer goods, crushing corporate profits in manufacturing and retail. The systemic underutilization will commence until governments fall, first in emerging markets, then developed ones.

There is no escaping a monetary event such as what is coming. Gold continued to ramp up. Silver is lagging, but will eventually follow and then surpass the gains made by gold.

Today's closing quotes:
S&P 500: 1,882.95, -20.68 (1.09%)
Dow: 15,944.46, -222.77 (1.38%)
NASDAQ: 4,468.17, -99.51 (2.18%)

Crude Oil 32.19 +2.35% Gold 1,124.90 +0.42% EUR/USD 1.09 +0.32% 10-Yr Bond 2.0010 +0.35% Corn 369.75 +0.14% Copper 2.06 +1.08% Silver 14.50 -0.44% Natural Gas 2.15 -0.51% Russell 2000 1,002.75 -1.50% VIX 23.11 +2.71% BATS 1000 20,083.96 -0.92% GBP/USD 1.4245 -0.72% USD/JPY 118.63 +0.18%

Monday, February 3, 2014

Wall Street Has a Problem, So Everybody Will Suffer; Stocks Smashed on Yellen's 1st Day

Fed Chairwoman, Janet Yellen, is just about to head home from her first day as head of the US Federal Reserve System. Judging by what happened on Wall Street, she's probably not going to cook herself a wholesome meal, but rather will order out, Chinese the most likely choice.

Stocks went absolutely South on the first day of February, largely in response to the Fed's decision to continue their asset purchase tapering, but moreso on US and China economic weakness.

China's PMI for January edged down to 50.5, the lowest level in six months, not exactly the kind of news Ms. Yellen was seeking. Making matters worse for the new Fed head, US ISM fell from 56.5 to 51.3, sending stocks, already down on the session, into a tailspin after their release at 10:00 am ET.

The lethal combination of the Fed cutting back on bond purchases, in the face of weakening data from the world's two largest economies, set the stage for a massive selloff on Wall Street and a flight to the safety of US treasury bonds, which closed at their lowest yield level - on the benchmark 10-year note - in three months.

The carnage on Wall Street was not isolated to just today, however. Stocks have been performing poorly all year, and the level of fear is perceptibly rising, with the Dow, NASDAQ and S&P 500 all closing down more than 2%, after the Nikkei fell 295 points and officially into a correction, down 10% off the recent highs.

The losses on Wall Street were monumental. For the Dow, it was the worst start to a month since 1982; for the NASDAQ, the losses were the worst since the inception of the index (1972).

Auto sales were down for January, with weather blamed for sluggish sales. Bond funds saw 20-30 time normal volume of inflows. The VIX has gone from the mid-12s to over 21 in a month, a 70%-plus rise in risk perception. Not only were stocks down, but volume was large, and has been throughout the slide which began in January.

The reaction in bond markets - sending the 10-year down to a yield of 2.58% - was perfectly rational. As risk assets (stocks) deteriorate, safety is sought, and there's nothing safer than US treasuries, or, maybe, German bunds, also lower during the past month and today.

Looking forward, Ms. Yellen should have expected this, or worse. After all, history tells us that all new Fed chairs inherit crises. as did Volker, Greenspan and Bernanke before her. Surely, the shared wisdom of decades of Federal Reserve actions will guide Ms. Yellen to a logical solution, stopping the slide in stocks while keeping the US economy growing.

Or will it?

Yellen is trapped. QE tapering is already the de facto standard policy. To reverse it would be to admit defeat, and possibly undermine any confidence left in the institution of the Federal Reserve, which, admittedly, isn't much. The true solution is for the Fed to stand back, watch the markets deteriorate, witness the destruction of the US and global economy over the near term and hope that people, individuals and businesses, will have enough of their wits remaining to muddle through a few years of truly hard times.

The Fed has no choice. Interest rates are already at zero and QE has had limited effect. It's time for the Fed to turn its back on the economy and the markets and let chips fall where they may. Any other action will only result in more asset dislocations, of which there are already too many.

For those of us who are not heavily invested in stocks (that leaves out anybody depending upon a pension, either now or in the future), SHORT AT WILL. This downward thrust will eventually manifest itself into a correction (the Dow is less than 500 points from it) and, by May or June or July, at the latest, a fully-blown bear market.

Bull markets do not last forever, and this current bull, which began in March, 2009, has reached its end. If proof is needed, check the highs on the indices from December and see how long it takes to get back to those levels. A reasonable guess, at this juncture, would be seven to ten years, maybe as long as 20.

The globalization experiment, as it always does, is failing. Economies must begin to fend for themselves and become more localized. Faith in Wall Street, which took a severe blow in 2008-09, will lose all credibility in coming months. Already, there are hordes of individuals who do not trust the wizards of Wall Street, as it was in the 1930s, during the Great Depression.

Wall Street will not respond well. Stocks will fall. Bond yields and mortgages will be even lower than in recent years. While those who have bought into the system - government employees, pensioners of many stripes, plain idiots and "investors" - will suffer, the prudent, the goldbugs, silverbugs and savers will eventually be rewarded for their patience and their frugality.

Put one's faith not in the data and derivatives of Wall Street, but in the strength of individuals, work ethic and survivability. That's a trade which has stood the test of time.

Note to Dan K (who may or may not be interested), and Adam Smith theorists, corn was up 0.40% today; silver gained 1.51%. Deflation.

DOW 15,372.80, -326.05 (-2.08%)
NASDAQ 3,996.96, -106.92 (-2.61%)
S&P 1,741.89, -40.70 (-2.28%)
10-Yr Note 101.48, +1.21 (+1.21%) Yield: 2.58%
NASDAQ Volume 2.41 Bil
NYSE Volume 4.72 Bil
Combined NYSE & NASDAQ Advance - Decline: 839-4976 (extreme)
Combined NYSE & NASDAQ New highs - New lows: 83-197 (trending)
WTI crude oil: 96.43, -1.06
Gold: 1,259.90, +20.10
Silver: 19.41, +0.289
Corn: 435.75, +1.75

Wednesday, March 13, 2013

Dow Gains 9th Straight Day to Another Record High

For the first time since November, 1996, the Dow Jones Industrial Average has risen for nine sessions in a row, the last seven of which made new record closing highs.

Not that it matters at all to ordinary investors (whatever that term means today), but the referenced date was during one of the market's greatest bull runs of all time and just prior to the famous "irrational exuberance" speech then-chairman Alan Greenspan gave just a month later, warning that the markets were overheating.

The chances of current chairman Ben Bernanke saying something similar are essentially nil. There's a better chance that Mr. Bernanke would fan, rather than cool, the flames of capitalism in coming months. It's simply not in the cards for the Fed to change course any time soon.

Today's gains were slim, with a range and volume that were slimmer by comparison. The Dow traded in a 50-point span from top to bottom, and volume, which has been non-existent throughout the current rally, was decidedly dull.

For all the talk of recovery and new highs, this leg of the rally has been noticeably dull and unappreciated.

But, that's where we are, QE, ZIRP and all the jolly talk aside.

The main catalyst for today's gains was a surprising jump in consumer spending for February, up 1.1%, far ahead of projections and the best reading in five months.

But, judging by the tepid response, this rally seems to be nearly out of gas. Not to worry, however, as any setback in stocks will almost immediately be washed away by some new rally, likely due to massive injections of liquidity by the Federal Reserve.

While the current prices of stocks and levels of the major indices may be irrational, there's little exuberance to be found anywhere.

Dow 14,455.28, +5.22 (0.04%)
NASDAQ 3,245.12, +2.80 (0.09%)
S&P 500 1,554.52, +2.04 (0.13%)
NYSE Composite 9,057.00, +2.96 (0.03%)
NASDAQ Volume 1,552,400,375
NYSE Volume 3,327,864,500
Combined NYSE & NASDAQ Advance - Decline: 3538-2872
Combined NYSE & NASDAQ New highs - New lows: 386-31
WTI crude oil: 92.52, -0.02
Gold: 1,588.40, -3.30
Silver: 28.96, -0.213

Wednesday, June 13, 2012

Stocks on Roller Coaster Ride with Greek Vote Looming; Greenspan Calls Euro a Failure

As mentioned in this space yesterday, the day-trading hedge funds and bank-owned brokerages (please, bring back Glass-Steagall) booked profits early in the day and went net short, their nifty algos doing the heavy lifting, as stocks drifted early and sank in the afternoon, making the market pulse for the week, down, up, down.

Today's action had all the earmarks of a seminal decline, with no oomph in the morning and a swift, brutal selloff which developed some serious downside momentum after 2:00 pm EDT.

While there was little to no news out of Europe to affect US stocks besides the downgrade of Spain from B to CCC+ by ratings firm Egan Jones, there was plenty right here on the home front.

JP Morgan Chase (JPM) CEO Jamie Dimon testified before the Senate Banking committee concerning his firm's $2 billion trading loss, though that made-for-TV event was little more than a dog-and-pony show, as most - if not all - of the committee members were recipients of sizable campaign contributions from the financial interests represented by the TBTF Wall Street banks, JPM a prominent donor to campaign slush funds of both parties.

Former Federal Reserve Chairman, Alan Greenspan, made some noise about the crisis in Euroland, saying that while the Euro was a "noble experiment" it is being proven ultimately a failure.

The consummate financial criminal enabler, Greenspan was an ardent advocate for repeal of Glass-Steagal beck in 1987, according to this flashback article by American Banker.

While market participants digested the day's disturbing headlines and news stories, stocks exhibited the kind of behavior befitting a system on the verge of breaking down, though outright panic still appears to be just a glimmer on the horizon.

Breadth was on the negative side for the day and new lows outpaced new highs for the second session consecutively. Oil continued its descent, continuing in bear territory following the absurd February run-up, while the fear trade in gold pressed higher, though silver continues to be suppressed, mostly by Blythe Masters, a protege of JPM's Dimon.

As the week progresses, however, a rebalancing of the S&P 500 and quadruple-witching of options and futures on Friday should determine the tenor of trading for the balance.

Dow 12,496.38, -77.42 (0.62%)
NASDAQ 2,818.61, -24.46 (0.86%)
S&P 500 1,314.88, -9.30 (0.70%)
NYSE Composite 7,506.29, -51.52 (0.68%)
NASDAQ Volume 1,528,772,500
NYSE Volume 3,363,560,750
Combined NYSE & NASDAQ Advance - Decline: 1747-3744
Combined NYSE & NASDAQ New highs - New lows: 75-112
WTI crude oil: 82.62, -0.70
Gold: 1,619.40, +5.60
Silver: 28.94, -0.01

Wednesday, October 26, 2011

Irrational Exuberance, Part II or Squared to the Power of X

Talk about irrational exuberance, the term applied to stock market speculation by the liar-crook-Fed Chairman Alan Greenspan back in the heady days of the internet revolution of 1996 (actually, December 5, 1996), when the "esteemed" Chairman uttered:
Clearly, sustained low inflation implies less uncertainty about the future, and lower risk premiums imply higher prices of stocks and other earning assets. We can see that in the inverse relationship exhibited by price/earnings ratios and the rate of inflation in the past. But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade?

While Greenspan was a few years ahead of his time - the great dotcom bust occurred in 2000 - his warning to speculative investments was not well-heeded then, just as today, practically anybody not predicting unlimited growth potential and stocks soaring to new levels is routinely given short shrift by the establishment Wall Street press. But suppose someone were to look at the past three-and-a-half weeks (or, extrapolating out to the past three-and-a-half years)and say something to the effect:
Let me get this straight. The hopes of the US stock market are pinned to perpetual zero interest rates at home and hope that a collective of mostly bankrupt European nations will cobble together a lending facility designed to keep certain mostly Southern European governments from defaulting on their massive debts by bailing out banks and then borrowing even more hundreds of billions of euros from them. That sends stocks ten to twelve per cent higher over the course of the past three-and-a-half weeks and we haven't even seen details of the plan. I would call that either wishful thinking, a complete fake-out or irrational exuberance squared and to the power of X, X being the number of idiots who believe issuance of more debt will solve a problem that began because of excessive debt.

Perhaps the imagined quotation is not quite as erudite or economically succinct as Greenspan's more famous lines, but the message is very clear, nonetheless and it is exactly how the Europeans plan to solve their various deep and myriad problems with finance. Most of the known world is so heavily indebted - spilt between governments, banks and businesses and individual households - that most should be barred from going further into debt. Fortunately for most Americans, this is exactly the case, as banks have not lent to anybody or anything besides the most creditworthy since the financial calamities of 2008. The mega-banks' own fears of their own imminent demise forced them into tighter lending standards after they realized (too late, though, since they are bankers, after all, they should have known better) that the trillions of dollars in mortgage loans made to people without adequate credit, jobs or income might just default and spread the contagion of massive debt default throughout the banking system.

Let's face it, they knew exactly what they were doing, peddling s&*t securities, disguised as top-shelf, AAA credit risk, by bundling together all of the garbage sub-prime, alt-A and payday loan-type mortgage junk into massive tranches of mortgage-backed securities and selling them to whomever came up with the cash. The bankers didn't really care that they would implode the system, knowing full well that their well-paid lackeys, aka bought-and-paid-for elected representatives of the US Congress and the Presidency would not allow them to fail. Besides, they had already absconded with billions of dollars in fees and other payments from the unsuspecting suckers they swindled.

Of course, this is now ancient history, as none of the bankers have gone to jail, nor even been investigated, much less tried for their egregious crimes. Instead we have the little show of insider trading by a couple of immigrants, Raj Rajaratnam (already indicted, tried and sentenced) and Rajat Gupta (indicted today on five counts of securities fraud and one count of conspiracy to commit securities fraud) to act as fall guys for the white, Wall Street elite.

Both are (were) rich, important and notably non-white and not natural-born American citizens. Rajaratnam was born in Sri Lanka and is of Tamil descent. Gupta was born in India. The message is clear. White guys who commit white collar crimes walk free. All others can, and likely will, be used as fall guys, protecting the brotherhood of the saintly banker elite. These guys may do jail time, but it won't be tough. Rajaratnam is already appealing his conviction and 11-year sentence, a process that could take years. Meanwhile, he's still free, at least until November 28. That's the date the judge set for him to surrender to authorities. Place your wagers on whether "Raj" flees the country or is admitted to a hospital. He suffers from multiple health issues, including diabetes.

It's pretty clear that these dark-skinned fellows are just actors in a well-scripted play that goeswell outside the bounds of traditional jurisprudence. Steal a car or a sell a dime bag of grass and justice will be meted out swiftly and surely. Steal billions of dollars and walk away.

So, expecting Wall Street to respond properly to the current European stupidity is just another example of the absurdity of economics, circa. 2011. Greece is already half-way to default, with Italy, Belgium and Spain close behind. Portugal and Ireland have lost their sovereignty to the international banking cartel, the citizens of those countries reduced to nothing more than indentured debt slaves. France teeters on the precipice of recession and the whole bunch will probably take down Germany - the only semi-stable country on the continent - with the lot.

All of that adds up to a buying frenzy of US stocks. If this isn't the most cockeyed, woeful example of irrational exuberance ever seen, I challenge anybody to make sense of it all. The contagion from the eventual failure of the Euro will spread like wildfire around the globe, affecting everything we buy, sell or touch. But until then, buy stocks, You can always sell them just before the next market crash.

Dow 11,869.04, +162.42 (1.39%)
NASDAQ 2,650.67, +12.25 (0.46%)
S&P 500 1,242.00, +12.95 (1.05%)
NYSE Composite 7,506.15, +105.33 (1.42%)
NASDAQ Volume 2,153,615,250
NYSE Volume 4,873,521,000
Combined NYSE & NASDAQ Advance - Decline: 4346-1278
Combined NYSE & NASDAQ New highs - New lows: 87-52
WTI crude oil: 90.92, -2.25
Gold: 1,723.50, +23.10
Silver: 33.31, +0.26

Wednesday, February 3, 2010

Signs of Stupidity, Deflation and Depression

We've all heard about how Ben Bernanke, Tim Geithner and Hank Paulson saved the world from imminent financial collapse. Oddly enough, there was a Time Magazine cover story from 1999 about a similar trio of swashbuckling economists - Alan Greenspan, Robert Rubin and Lawrence Summers - who were then called the "Committee to Save the World."

Hmmm... 1999. Do we all remember what happened after this bunch - as Time loudly proclaimed on their cover - prevented a global economic meltdown?

What are we, stupid? I guess so. How is it that just 10 years ago we hailed the Fed Chairman and two Treasury Secretaries as "saviors" just before the whole country went kaput, and are doing the exact same thing again right now? Americans, and probably the majority of the world's population has the word "STUPID" printed on their foreheads in invisible ink which only economists can see through the aid of their special contact lenses and eyeglasses. Thus, their ability to hoodwink us into trusting them and then to hail them as heroes is entirely of our own making. We are their enablers.

So, don't blame them for the problems we face. Blame yourself. Did you take out too many loans? Did you overspend? Did you run up non-payable credit card debt? Did you not save a nickel during all those "boom" years, first in the 90s and more recently, from 2003-2008?

Go ahead and cry, it's OK. I did it too. But, there's a happy ending to this story. Well, maybe not exactly "happy," but maybe not tragic either. Now that we're all broke and penniless, or soon to be so, we're all in it together, down here scratching for scraps of food and any kind of work. An old adage suggests that "misery loves company," and in this instance, it could not ring more truly. With the accumulated debt of the nation approaching $13 trillion (not including $4 trillion from Fannie Mae and Freddie Mac, or about $59 trillion from unfunded Social Security, Medicare or federal retirement benefits - or is it $107 trillion?), millions of our countrymen and women out of work, foreclosures continuing to rise and a federal government bent on nationalizing everything from banks to car manufacturing to health care, bells and buzzers should be going off all over the place, yet we, yes, we dopes with STUPID surreptitiously stamped upon our foreheads, continue to work and spend and pay and worry and buy and pay, invest and lose, leaving our money in the same hands of the same greedy bankers who took us down this path to ruin.

We all deserve to be lined up and summarily executed, along with the congress and every member of the administration (people we voted into office). That would leave just little kids with no understanding of debt, the ultimate solution. I pray that my little tirade of sarcasm hasn't scared you into thinking it might just turn out that way. It might. It shouldn't, but to think that the people we call our heroes, but are actually a lying bunch of hoodlums, scoundrels and crooks, would be plotting the decimation of the world's finest democracy doesn't take much of a stretch of credulity.

There are things you and I can do before the situation gets much worse. I'll be discussing them in future posts as we wend our way through this sad, messy chapter of American history. But, just for starters, two things that won't work are: 1. leaving the country; 2. Staying put in a job you hate that doesn't pay you what you're worth.

The first doesn't work because other countries are in just as bad, if not worse, conditions than ours, and the second doesn't make any sense, right from Jump Street. Why anyone would want to waste their time on the planet toiling for people they don't like in a job they hate is beyond me. It sounds so masochistic. For a real solution, try watching the movie "Fight Club" until you either puke from disgust or actually come to an understanding of the deeper, hidden message in that film. Or, if you just need a good regurgitation, read Camus' "Nausea." I've heard it's even better in French.

As for the markets, the place people go when they wish to flush money away, stocks were generally weak and going nowhere. The daily movements of the stock market really don't stack up to a hill of fried chicken anymore, so thick is the distrust of counter-parties. Nobody really wants to be left holding the bag, and some estimates suggest that 40% of all trading is done by insiders, with insiders, and most of them work at Goldman Sachs. Funny, they say the same thing about betting on horses. 40% of all the action is carried out by owners, trainers, jockeys, grooms and even stewards. So, how are you supposed to win at that game? You're not. Get it?

Dow 10,270.55, -26.30 (0.26%)
NASDAQ 2,190.91, +0.85 (0.04%)
S&P 500 1,097.28, -6.04 (0.55%)
NYSE Composite 7,042.62, -58.82 (0.83%)

Losers beat gainers, 3910-2504. New highs beat new lows, 172-57, mostly due to the fact that at this time last year, stocks were falling faster than meteors from 13 miles above ground. Volume? Well, it absolutely sucked, just as it has for most of this miracle rally period since last March. With insiders trading mostly with insiders, what do you expect? There are fewer and fewer people willing to put money at risk every day. If you ave a 401k or other retirement plan, they're playing with your money, too. Isn't that a thought that makes you sleep well at night? If you're getting the idea that I'm just a little bit soured on the stock market and the general economy, you're beginning to get the message. However, unlike you, I'm fighting back. I've done some things to protect myself and eventually prosper from the obvious deflation that's been in place since the latter months of 2007.

NYSE Volume 4,917,465,000
NASDAQ Volume 2,341,595,500

Commodities were also weak. Oil, gold and silver were all lower. All the quotes I'm getting are different, depending on the source, so, for now, I'm not quoting specific prices, which is just what the market makers want: confusion. Haven't you ever wondered why currencies are so difficult to figure? The quotes most commonly used are Dollar:Yen, Euro:Dollar, Pound:Dollar. The Euro and Pound prices are inverted from the Yen, making comparisons and the real value of the dollar difficult, if not impossible, to decipher. It's a very confusing breakdown, but nobody cares to fix it? Why? Because it is confusing. Precisely.

According to Robert Prechter of the Elliott Wave, "a deflationary crash is characterized in part by a persistent, sustained, deep, general decline in people's desire and ability to lend and borrow. A depression is characterized in part by a persistent, sustained, deep general decline in production." (Conquer the Crash, Chapter 9)

Both of those conditions have been in place and at work since August, 2007. Efforts by the Fed, Treasury and the brilliant geniuses who troll Wall Street looking for suckers with money to forestall the inevitable have only lengthened the duration of the decline, then and now. Conditions seem to change with each month, quarter, economic or jobs report, but not much. Government statistics are so mangled that they no longer make sense or can be used as a true yardstick of economic vitality or disease.

We are in the throes of the worst depression the country has ever seen, kept afloat by federal payments to states, states to cites and so on, and by unemployment benefits, medicare transfers, retirement benefits, Social Security payments, and other seamless, unseen transfers of money like TARP, TALF, HAMP and other Federal Reserve machinations. Unemployment keeps rising, people keep losing their homes and most of us just go about their business as if things were normal.

Things are far from normal.

Monday, August 13, 2007

It's worse than you think...

Today's headline was inspired by some weekend and Monday morning reading.

The US equity markets, battered and bruised by fears of an underlying credit catastrophe, are in worse shape than most average investors - and even some experts - would like to believe.

After last week's rescue by the Federal Reserve, which injected $38 billion into the markets, word came to our shores that on Monday, the Fed was injecting another $2 billion on top of $5 billion shoved in by the Bank of Japan and the European Central Bank's "loan" of $65.3 billion. Over the last week of trading the ECB has added more than $200 billion. Since Thursday, the Fed has added $62 billion in liquidity. That's a lot of liquidity, yet it was only enough to lift the markets temporarily on Monday.

Dow 13,236.53 -3.01; NASDAQ 2,542.24 -2.65; S&P 500 1,452.92 -0.72; NYSE Composite 9,428.86 -6.18

We're in dire straits and headed for a crash of magnificent proportions. The BofJ and ECB are helping out because they have a vested interest in keeping the US economy afloat. Many of their wealthiest citizens are heavily invested in US stocks. Further, a crash of the US economy - which is, after all, a near certainty, since we've gone from being the world's largest creditor nation to the world's greatest debtor nation in a matter of just 50 years - would have a ripple effect so pronounced that if would take down most other markets with it.

So, the world economy is on the brink, and we're getting billions in financial aid from around the world. Anybody - and I mean ANYBODY - who is even considering investing in stocks at this juncture ought to be institutionalized. This is the most dangerous market situation since the 1929 crash, and nothing short of an economic miracle is going to prevent a serious, damaging, long-term, worldwide meltdown.

The multiple cash infusions by world banking interests are desperate gambits. By becoming the buyers of last resort, central banks are literally taking the place of real, live investors, those same people who are exiting the market at a speedy pace. All the cash infusions do is shore up stocks for the near term, allowing larger brokerages and mutual funds to exit as quietly as possible, with minor losses rather than huge ones.

In the end - and mind you, I'm no expert on global financial transactions - the central banks will be stuck with stocks that were purchased at significant premiums. Weeks and months from now, these "repo" purchases will look as foolhardy as a horse racing plunger's last bet on an aging and feeble nag.

The underlying problem is that the money being spent to buy these stocks is generally that of governments, or in other words, our tax dollars at work. Since we don't get to vote on how our money is spent, this exercise in futility is just another in a long series of bad spending examples by derelict national governments, which are really nothing more than massive criminal conspiracies, disigned to keep the lower and middle clasess in a condition of near slavery and relative poverty.

When the central banks get around to selling these stocks at 20, 30, 40% losses or better, the citizenry will get the bill in the form of massive tax increases, depleted services and general unaccountability by those supposedly in charge. It's a swindle of the highest, most despicable order.

We should be used to it.
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It's been going on for years. The final outcome will be massive disruptions to financial systems world-wide, a lower standard of living for nearly everyone, bankruptcies at an all time high, pension fund defaults, and misery all around.

We can thank our leaders and the heads of state-run banks for what they will have wrought, most notably, Sir Alan Greenspan (he was knighted by Queen Elizabeth II in 2002), whose sloppy handling of the economy and penchant for loose monetary policies produced the series of bubbles - first the dotcom debacle, then commodities and finally the housing blow up - that led to this eventuality.

The rich will surely get richer by comparison. Many are already heavily invested in gold and other, more stable currencies than the greenback. The little guy, 20% of whom will find themselves out of work within the next two years, will be forced into a world of lowered expectations and general despair.


The market internals were suitably mixed. with declining issues beating out advancers barely. There were 346 new lows, but a paltry 73 new highs.

Oil was up marginally, while gold and silver were lower by negligible amounts. With so much uncertainty, inertia is beginning to set in everywhere. Volume on the equity markets was normal, but well below levels of last week.

Monday, June 4, 2007

Not Great, But Good Enough

US indices registered another positive session on Monday, even though the gains were marginal at best. Still, investors shrugged off weekend terrorism threat news and another big drop in China's markets.

Dow 13,676.32 +8.21; NASDAQ 2,618.29 +4.37; S&P 500 1,539.18 +2.84; NYSE Composite 10,064.45 +21.45

While investors in China's emerging market adjust to the realities of government intervention and an overheated environment, US shareholders are singing the praises of being old, established and considered ultra-safe.

As America slept, the Shanghai Composite divested itself to the tune of an 8.3% drop, the largest one-day decline since
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the 8.8% collapse in late February that triggered market selloffs throughout the global financial community. The Dow lost over 400 points then, but today's reaction was more of a yawn than a shriek.

Please send Alan Greenspan a note that he's no longer relevant.

Even though overall market gains were negligible, internal numbers were solid. Advancing issues outperformed losers by roughly a 5-4 margin. New highs trounced new lows, 545-69, an eye-popping differential.

As long as the A-D and High-Low lines remain so heavily positive, this market has no possibility of turning lower any time soon. Despite high gas prices and an inept, ineffectual federal government (that may be a good thing), stocks continue to be superb short term instruments.

One reason for the unprecedented long bull run may be summed up in three words: supply and demand. The heavy handed private capitalists have been snapping up shares and taking them private. At the same time, a slew of companies have been engaged in huge stock buy-back programs. While each of these activities indicates some degree of underappreciated value in US shares, they both dilute the number of shares available to the investing public.

Money has to go somewhere, and those shares previously invested in companies which have been taken private, gets re-invested elsewhere. Stock buy back programs takes more shares away from the investing public. According to Keynes, insufficient availability always results in higher prices, every time, and stocks are no different than apples or iPods.

With those two trends in place, expect public shares to continue rising for some time to come.

Checking commodities, those things which actually are in somewhat limited supply, oil gained another $1.13 to $66.21. Gold and silver barely budged. Grains and other foodstuffs were equally somnambulant.

Today was not a great day, but by any measure, it was a good one.

Tuesday, February 27, 2007

Sensational! Spectacular! WOW!

Finally, something to get excited about.

In case you missed it, US stock markets nearly collapsed wholesale on Tuesday.

Check out these figures:
Dow: 12,216.24, -416.02; NASDAQ: 2,407.86, -96.66; S&P 500: 1,399.04, -50.33

Like I said in the headline, WOW! But it wasn't as though we weren't warned. Just yesterday, right here, my headline read The Correction Has Begun. If my word wasn't enough of a warning to start taking those profits and paring losses, then maybe former Fed Chairman Alan Greenspan's remarks to an economic conference in Hong Kong yesterday might have given us a clue that something was in the works.

And boy was it. This was telegraphed like a club boxer's left hook.

The fact of the matter is that today's response from, first, the Chinese stock market, then Europe's markets, and finally the US markets, was entirely well-organized and a classic prototype of blatant manipulation.

In the long run, it means little. The biggest hit in the US, on a percentage basis, was taken by the NASDAQ, which lost nearly 4% on the day. We'll survive. That stunner was, however, dwarfed by China's 9% decline, which, according to the so-called experts, was the real reason for US stocks to take a beating.

What utter hooey! If the Chinese economy stutters and stumbles, we should, as a nation, applaud long and loud. Maybe we can get a better deal on plasma TVs if they feel a little pain for a change. We're all in it together, though the US trade deficit and government overspending does play into the whole mess.

Our loose fiscal policies are the prime factors behind the whole worldwide bubble economy and we're mortgaged to the hilt. But if China takes a hit, should we worry? Maybe a little, since they hold our debt and could start calling it in or floating their currency - the yuan - a little higher, or both. But it certainly isn't the end of the world and nothing's really changed since yesterday, right?

Oh, no. That's where you would be wrong. This story by Seymour Hersh in the New Yorker makes some very poignant and troubling claims about the state and nature and inner doings of our political leadership. I won't tip it off here, but leave it to you to read it for yourself.

Well, here's a clue. Hersh is the preeminent investigative reporter of our day. He broke the Iran-Contra story and he's been on to the shenanigans of the Bush administration from the start of the Iraq War. So, would the hoi poloi in the White House and on Wall Street and in London's City get a little bit twitchy if the leaders of the world's superpower were about to get a serious spanking by the media and maybe the Congress?

Here's the timeline:
Hersh's article hits the newsstands and the web on 2/25.
Greenspan warns of a US recession on 2/26.
China's markets implode, Europe and US markets follow on 2/27.

Welcome to the winter of our discontent. My advice: Watch for falling stocks... and politicians. Yesterday, I said the Dow should settle out in the 10,350 to 11,100 range. We've still got at least another 1100 points to go.