For a second time in the past three weeks, stocks suffered another round of losses which accelerated as the week progressed. Of the major indices, taking the biggest hit were the Dow Industrials, followed by the NYSE Composite, S&P 500, and NASDAQ, in percentage terms.
The Dow's 3.31% fall was made possible by a Friday selloff which saw the blue chips decline by 730 points, the largest selloff since June 11, when stocks suffered a major blow preceded by an ominous island reversal of June 5, 8, 9, and 10. (see video below for more)
Friday's action may be presaging an oncoming decline of a magnitude rivaling the initial slide in March. The second quarter comes to a close on Tuesday and everybody on wall Street knows that it's difficult to "price in" a GDP decline which may be on the order of 35-50% when the first figure is announced on July 30.
Prior to that momentous milestone, corporate earnings reports will begin to flow to the street following next week's July 4 Independence Day holiday. The coming week will be shortened by a day, as Friday is a national holiday, giving most Americans a three-day weekend. Stock markets, banks, the postal service and most city and county offices will be closed. Hopefully, most of them will reopen on July 6.
For the week just concluded, treasury yields were clobbered, the 10-year note falling from 0.71 to 0.64%, the lowest since May 14 and approaching the record low of 0.58% from April 21st. As the 30-year bond yield fell from 1.47 to 1.37 over the course of the week, the curve flattened significantly, 125 basis points covering the entire complex. If this is what the Fed considers success in "curve control," they can have it, with the short end - one-month to two-years - covered by just five basis points (0.12 to 0.17%).
These low rates at the front end aren't by accident. They are policy and they are indicative of a recession if not outright depression. Adamant that they will not go to negative rates as has been the case in the Eurozone and Japan for years, the Fed's real rates have been in the red pretty much since the previous crisis in '08-'09, i.e., they were lower than the inflation rate. The one year note only crested above one percent in 2017. A year ago, it was yielding 1.92%, a stark comparison to Friday's close at 0.17%.
The Fed promised cheap credit and they are delivering.
Oil prices were slapped down after WTI crude tested $40/barrel, peaking at $40.73 on Monday, only to close out at $38.49 on Friday. Expect oil to continue trading sideways to lower if stock prices begin to falter, or, vice versa. Oil declines could help trigger or exacerbate a rundown on equities.
Precious metals were by far the big winners for the week. Both gold and silver advanced smartly despite a desperate attempt to crater their prices Friday on the NYMEX failed miserably. The morning rout sent gold reeling $20 to the downside, bottoming just below $1745 per ounce. So enamored with "V"-shaped recoveries, Wall Street got an unexpected one when gold prices recovered all of the losses within an hour and proceeded to close near the high for the day at $1771.50. Laughably, Friday's recorded London PM fix was set at $1747.60, setting up a $24 weekend arbitrage gap. Maybe, considering the problems the paper COMEX markets have had in recent months, it's not so funny for gold shorts, which are burning.
Silver savers should be delighted with the price action this week. Not only was a raid similar to the gold price suppression thwarted on both Thursday and Friday, but spot edged three cents higher than the closeout future price, at $17.83 the ounce, the highest Friday price since February 21, just prior to the epic COVID collapse.
Current physical prices continue to demand high premiums. This week saw prices for silver art bars absolutely explode higher, some one ounce bars selling above $40. Average and median prices for one ounce gold coins and bars were captured at prices $33 to $45 higher than a week ago.
Here's a glimpse at current selected prices on eBay (shipping included):
Item: Low / High / Average / Median
1 oz silver coin: 25.95 / 40.95 / 30.92 / 29.47
1 oz silver bar: 27.00 / 45.44 / 34.62 / 32.93
1 oz gold coin: 1,827.85 / 2,109.95 / 1,919.39 / 1,901.60
1 oz gold bar: 1,861.66 / 1,920.65 / 1,879.77 / 1,873.92
Argentina's Debt Crisis Far From Resolution
Argentina's government continues to play cat and mouse with international creditors, extending the deadline for negotiations concerning $65 billion worth of bonds to July 24.
Having already defaulted on a $500 million interest payment on May 22, the government is doubling down, indicating that it will miss another similar payment in June, which has a 30-day grace period. The chances of a settlement agreeable to the government and its creditors continue to deteriorate as interest payments are missed and the value of the bonds plummets, some selling off to as low as 37 cents on the dollar.
Talks stalled over the past two weeks as investors including BlackRock, Fidelity, AllianceBernstein, and Ashmore Group PLC, rejected a government proposal tied to agricultural exports while seeking recovery of between 49 and 57 cents on the dollar.
At the same time, the province of Buenos Aires, Argentina’s largest province, is negotiating with bondholders on the restructuring of $7.148 billion in debt and extended its deadline for a negotiated settlement to July 31.
Per previous proposals, payments would not begin being made on the currently-defaulted bonds until 2025. This article, published by the Council on Foreign Relations, offers the most comprehensive details, including charts that break down Argentina's $323 billion of debt, all of which is at dangerous risk levels.
At a time when the country's GDP is predicted to decline by 10 percent, the severity of the financial crisis cannot be understated, though mainstream television media in America has nearly completely neglected to report on the issue. Argentina has suffered through decades of boom and bust over the past 45 years, 20 of which showed GDP in decline.
It's not a question of when Argentina defaults on its debts, it's a question of how severe the defaults will be, how they will affect government pensions, and the ability of the government to maintain its status as a going concern. With a population estimated at 45 million, Argentina's problems are quickly becoming everybody's, as tens and perhaps hundreds of billions are in the process of being eviscerated.
With the government of President Alberto Fernandez content to play kick the can by extending the negotiation deadline for a fifth time, the dithering is taking its toll on investors. While a formal default has only been declared on portions of Argentina's debt, triggering the awarding of a credit default swap (CDS) recently, these things have a nasty way of snowballing into global crises, as was the case with Mexico in 1982, the Asian Crisis in 1997, and when Russia devalued the ruble in 1998.
Having to deal with some of the most severe lockdowns in the world due to the COVID-19 panic, Argentina is ill-prepared to deal with a financial hardship of this magnitude. The situation could spiral out of control at any time, when one side or the other finally throws in the towel and walks away. Consider Argentina's plight a fluid situation with more headlines and fireworks likely over coming months.
At the Close, Friday, June 26, 2020:
Dow: 25,015.55, -730.05 (-2.84%)
NASDAQ: 9,757.22, -259.78 (-2.59%)
S&P 500: 3,009.05, -74.71 (-2.42%)
NYSE: 11,604.43, -260.68 (-2.20%)
For the Week:
Dow: -855.91 (-3.31%)
NASDAQ: -188.90 (-1.90%)
S&P 500: -88.69 (-2.86%)
NYSE: -375.19 (-3.14%)
Peak Prosperity's Adam Taggert and friends discuss threats to the stock market, highlighted by their charting of the recent Island Reversal:
Showing posts with label Argentina. Show all posts
Showing posts with label Argentina. Show all posts
Sunday, June 28, 2020
Tuesday, June 16, 2020
Stocks Stutter, Rise On Fake Fed News; Federal Debt Surges Past $26 Trillion; Argentina Default Triggers CDS
Wall Street got a bit of a shock Monday morning as stocks sold off first in the futures market and transitioned into a gap lower at the opening bell. What looked like a continuation of Thursday's selloff - interrupted by the dead cat bounce Friday - turned out to be a short-lived event.
With the Dow down below 25,000, losing more than 700 points just minutes into the session, buyers began to emerge, pushing stocks higher by 2:00 pm ET, the major indices had made up considerable ground. The NASDAQ was already positive when the Fed issued a press release, rehashing some old news to make it look new to the algos.
The press released looked like the Fed was launching another credit facility for corporations when in fact this facility (SMCCF) had been in the pipeline since March. They announced they'd begin buying individual corporate bonds, so that when companies go looking for a lender - for whatever purpose - they need look no further than the Federal Reserve, now not only the buyer and lender of last resort, but of first resort as well.
Per the Fed's press release:
That sent all indices into positive territory, and everything was again alright with the world as stocks sported gains to start the week.
Whether the "recovery" looks like a V or no V, the US national debt vaulted past $26 Trillion over the weekend without much fanfare (in fact, none). Some thought it would make it by the 4th of July. It came in 45 lengths ahead of predictions, like Secretariat winning the 1973 Belmont Stakes.
By the end of June the federal government will have added more than three trillion dollars ($3 trillion) to the national debt, an astonishing pace. At the current run rate of a trillion every two months, by the end of 2020, the debt would rise to $29 trillion, and to $35 trillion by December 2021. What's either frightening or amusing about the growth rate of the national debt is that it is more likely to accelerate than back off as the dollar heads for a fiscal cliff. Combined federal, state, and local government expenditures currently account for nearly half of America's GDP, and, since nearly half of that is borrowed, it means a good quarter of the GDP is an accounting fiction. Government produces exactly nothing of value. They spend. Total combined spending by government will exceed $10 trillion for the fiscal year ending on September 30.
If one were to take from the GDP calculation all government spending that was done on borrowed money, GDP wouldn't be over $20 trillion as the official version purports. Instead, it would be bumping up against $15 trillion. If one took out all the purchases made on credit cards or by mortgages, it would be even lower. The fact is that the GDP calculation is a convenient reference for Wall Street and government, but it does not really reflect the actual condition of the economy. What's happening is that as expenditures are growing, tax revenues are falling, and borrowing must continue to rise to fill the gap.
It's about as an unsustainable condition as one could imagine. With any luck (and even that's in doubt), the entire system might make it through to November, just in time to implode after the elections. That's hardly a certainty. The US and global economic systems are now so fragile that about a third of the entire global GDP is borrowed. Eventually, half of GDP will be borrowed, then all of it, at which time the system will have completely broken down. Companies which must borrow just to meet payroll cannot last. Governments which borrow to meet spending demands cannot last. Consumers with low to no income and piles of debt will default. It's beginning to happen and will accelerate in the third and fourth quarters of this year.
Everything is in play. Jobs, retirement funds, even Social Security, a ponzi scheme from the start that may not make it through the end of this decade.
Not to be outdone, Argentina extended the deadline for negotiations for a fourth time, to June 19, on $65 billion in sovereign debt.
They missed a $500 million interest payment in May, prompting the lenders to meet with Argentine officials to discuss a solution. It also triggered a credit default swap (CDS) event. Lenders of Argentina's debt include PIMCO, BlackRock, and Franklin Templeton. Because CDS are private contracts, it's not known whether any of them hold the swaps, which acts as insurance against default.
One thing is for certain. Somebody's out $1.5 billion and some other entities made a killing on the trade. Problem arise in credit default swaps are when the company insuring against the loss doesn't have the funds to cover the bet when it goes south. That's what happened with AIG in the GFC back in 2008. If Argentina doesn't solve this issue soon (it may already be too late) other swaps are sure to be triggered, more people will lose money and the derivative market may begin to look like a pock-marked battlefield.
Could Argentina be the canary in the coal mine that sets off a wave of sovereign defaults? Possibly, though such things tend to take years to develop and there are many attempts at remediation in the interim. Sovereign defaults are at the end of the list of things about which central banks need to worry. For now, they've got global stock markets that will melt down without their tacit support, growing civil unrest, and COVID-19 with which to contend.
Their plate seems rather full for the moment.
At the Close, Monday, June 15, 2020:
Dow: 25,763.16, +157.62 (+0.62%)
NASDAQ: 9,726.02, +137.21 (+1.43%)
S&P 500: 3,066.59, +25.28 (+0.83%)
NYSE: 11,942.91, +75.74 (+0.64%)
With the Dow down below 25,000, losing more than 700 points just minutes into the session, buyers began to emerge, pushing stocks higher by 2:00 pm ET, the major indices had made up considerable ground. The NASDAQ was already positive when the Fed issued a press release, rehashing some old news to make it look new to the algos.
The press released looked like the Fed was launching another credit facility for corporations when in fact this facility (SMCCF) had been in the pipeline since March. They announced they'd begin buying individual corporate bonds, so that when companies go looking for a lender - for whatever purpose - they need look no further than the Federal Reserve, now not only the buyer and lender of last resort, but of first resort as well.
Per the Fed's press release:
The Federal Reserve Board on Monday announced updates to the Secondary Market Corporate Credit Facility (SMCCF), which will begin buying a broad and diversified portfolio of corporate bonds to support market liquidity and the availability of credit for large employers.
As detailed in a revised term sheet and updated FAQs, the SMCCF will purchase corporate bonds to create a corporate bond portfolio that is based on a broad, diversified market index of U.S. corporate bonds. This index is made up of all the bonds in the secondary market that have been issued by U.S. companies that satisfy the facility's minimum rating, maximum maturity, and other criteria. This indexing approach will complement the facility's current purchases of exchange-traded funds.
The Primary Market and Secondary Market Corporate Credit Facilities were established with the approval of the Treasury Secretary and with $75 billion in equity provided by the Treasury Department from the CARES Act.
That sent all indices into positive territory, and everything was again alright with the world as stocks sported gains to start the week.
Whether the "recovery" looks like a V or no V, the US national debt vaulted past $26 Trillion over the weekend without much fanfare (in fact, none). Some thought it would make it by the 4th of July. It came in 45 lengths ahead of predictions, like Secretariat winning the 1973 Belmont Stakes.
By the end of June the federal government will have added more than three trillion dollars ($3 trillion) to the national debt, an astonishing pace. At the current run rate of a trillion every two months, by the end of 2020, the debt would rise to $29 trillion, and to $35 trillion by December 2021. What's either frightening or amusing about the growth rate of the national debt is that it is more likely to accelerate than back off as the dollar heads for a fiscal cliff. Combined federal, state, and local government expenditures currently account for nearly half of America's GDP, and, since nearly half of that is borrowed, it means a good quarter of the GDP is an accounting fiction. Government produces exactly nothing of value. They spend. Total combined spending by government will exceed $10 trillion for the fiscal year ending on September 30.
If one were to take from the GDP calculation all government spending that was done on borrowed money, GDP wouldn't be over $20 trillion as the official version purports. Instead, it would be bumping up against $15 trillion. If one took out all the purchases made on credit cards or by mortgages, it would be even lower. The fact is that the GDP calculation is a convenient reference for Wall Street and government, but it does not really reflect the actual condition of the economy. What's happening is that as expenditures are growing, tax revenues are falling, and borrowing must continue to rise to fill the gap.
It's about as an unsustainable condition as one could imagine. With any luck (and even that's in doubt), the entire system might make it through to November, just in time to implode after the elections. That's hardly a certainty. The US and global economic systems are now so fragile that about a third of the entire global GDP is borrowed. Eventually, half of GDP will be borrowed, then all of it, at which time the system will have completely broken down. Companies which must borrow just to meet payroll cannot last. Governments which borrow to meet spending demands cannot last. Consumers with low to no income and piles of debt will default. It's beginning to happen and will accelerate in the third and fourth quarters of this year.
Everything is in play. Jobs, retirement funds, even Social Security, a ponzi scheme from the start that may not make it through the end of this decade.
Not to be outdone, Argentina extended the deadline for negotiations for a fourth time, to June 19, on $65 billion in sovereign debt.
They missed a $500 million interest payment in May, prompting the lenders to meet with Argentine officials to discuss a solution. It also triggered a credit default swap (CDS) event. Lenders of Argentina's debt include PIMCO, BlackRock, and Franklin Templeton. Because CDS are private contracts, it's not known whether any of them hold the swaps, which acts as insurance against default.
One thing is for certain. Somebody's out $1.5 billion and some other entities made a killing on the trade. Problem arise in credit default swaps are when the company insuring against the loss doesn't have the funds to cover the bet when it goes south. That's what happened with AIG in the GFC back in 2008. If Argentina doesn't solve this issue soon (it may already be too late) other swaps are sure to be triggered, more people will lose money and the derivative market may begin to look like a pock-marked battlefield.
Could Argentina be the canary in the coal mine that sets off a wave of sovereign defaults? Possibly, though such things tend to take years to develop and there are many attempts at remediation in the interim. Sovereign defaults are at the end of the list of things about which central banks need to worry. For now, they've got global stock markets that will melt down without their tacit support, growing civil unrest, and COVID-19 with which to contend.
Their plate seems rather full for the moment.
At the Close, Monday, June 15, 2020:
Dow: 25,763.16, +157.62 (+0.62%)
NASDAQ: 9,726.02, +137.21 (+1.43%)
S&P 500: 3,066.59, +25.28 (+0.83%)
NYSE: 11,942.91, +75.74 (+0.64%)
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 goldsilver.com, 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%)
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 goldsilver.com, 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%)
Tuesday, December 3, 2019
Trade Uncertainty Tempers Markets on First Full Day of Holiday Trading
The first week of the final month of 2019 was a deviation from the general theme of 2019. Stocks were sold with reckless abandon, as were bonds, with the 10-year note bounding back to yield 1.83% - though higher during the day - a level not visited since mid-November.
The bond market felt more like churning than the start of actual long-term selling, but stocks had a different sense about them. Bad news on the US-China trade situation has the financial world in a near-panic as the deadline approaches for added tariffs to be applied on Chinese exports to the US. Additionally, President Trump reimposed tariffs on steel from Argentina and Brazil, citing the two South American countries' recent currency devaluations as reason for slapping on the tariffs "immediately."
While the steel tariffs boosted shares of US steel producers, it only exacerbated the unease surrounding the wider Chinese issue and sent stocks into a day-long tailspin. Selling was the order of the day globally, as bourses from Japan, China, Europe and the Americas all suffered declines with the sourness continuing into Tuesday as trade resumed Tuesday in international markets.
While the focus may currently be on trade and tariffs, there appears to be more to the sudden swing from buying to selling than just the movement of goods around the planet. Recall that Friday (ubiquitously know as Black Friday in the US) also witnessed declines, not the usual euphoria associated with the start of the holiday shopping season. Other concerns are various recent populist uprising in places as diverse as Hong Kong, Iran, Lebanon, India and elsewhere. Besides, it is December, so one can safely assume that any concerted selling is going to be enhanced by year-end profit-taking.
While the mainstream (now nearly completely fake) media will focus on the stock markets' generous advances during the year, they will also conveniently gloss over the dual declines from October and December of 2018, which, taken in such context, renders gains from September 2018 as practically nil.
The Dow Jones Industrial Average, for instance, is up only 1000 points since mid-September of 2018, accounting for a gain of less than a half percent. The NASDAQ has tacked on about 450 points since August of last year, while the S&P 500, at current levels, has added just 183 points over the past 15 months, the point being that stocks, though they've recently made new all-time highs, are really not much further ahead than they were more than a year ago, but the media will remind us only of what's happened in the current calendar year, which might be a tad misleading.
In any case, internationally, stocks are being whacked again Tuesday morning and US futures are looking pretty dismal, with Dow futures down nearly 300 points less than an hour prior to the opening bell.
Corporate profits have been underwhelming, to say the least, for the past few quarters, so some fundamental shift may be underway. If a flight into the safely of bonds develops, that will be a sign that the stock market is going to finish off the year on a negative note, though there's always the possibility of a Sant Calus rally the week between Christmas and New Year to save everybody's bacon.
At the Close, Monday, December 2, 2019:
Dow Jones Industrial Average: 27,783.04, -268.37 (-0.96%)
NASDAQ: 8,567.99, -97.48 (-1.12%)
S&P 500: 3,113.87, -27.11 (-0.86%)
NYSE Composite: 13,448.26, -96.95 (-0.72%)
The bond market felt more like churning than the start of actual long-term selling, but stocks had a different sense about them. Bad news on the US-China trade situation has the financial world in a near-panic as the deadline approaches for added tariffs to be applied on Chinese exports to the US. Additionally, President Trump reimposed tariffs on steel from Argentina and Brazil, citing the two South American countries' recent currency devaluations as reason for slapping on the tariffs "immediately."
While the steel tariffs boosted shares of US steel producers, it only exacerbated the unease surrounding the wider Chinese issue and sent stocks into a day-long tailspin. Selling was the order of the day globally, as bourses from Japan, China, Europe and the Americas all suffered declines with the sourness continuing into Tuesday as trade resumed Tuesday in international markets.
While the focus may currently be on trade and tariffs, there appears to be more to the sudden swing from buying to selling than just the movement of goods around the planet. Recall that Friday (ubiquitously know as Black Friday in the US) also witnessed declines, not the usual euphoria associated with the start of the holiday shopping season. Other concerns are various recent populist uprising in places as diverse as Hong Kong, Iran, Lebanon, India and elsewhere. Besides, it is December, so one can safely assume that any concerted selling is going to be enhanced by year-end profit-taking.
While the mainstream (now nearly completely fake) media will focus on the stock markets' generous advances during the year, they will also conveniently gloss over the dual declines from October and December of 2018, which, taken in such context, renders gains from September 2018 as practically nil.
The Dow Jones Industrial Average, for instance, is up only 1000 points since mid-September of 2018, accounting for a gain of less than a half percent. The NASDAQ has tacked on about 450 points since August of last year, while the S&P 500, at current levels, has added just 183 points over the past 15 months, the point being that stocks, though they've recently made new all-time highs, are really not much further ahead than they were more than a year ago, but the media will remind us only of what's happened in the current calendar year, which might be a tad misleading.
In any case, internationally, stocks are being whacked again Tuesday morning and US futures are looking pretty dismal, with Dow futures down nearly 300 points less than an hour prior to the opening bell.
Corporate profits have been underwhelming, to say the least, for the past few quarters, so some fundamental shift may be underway. If a flight into the safely of bonds develops, that will be a sign that the stock market is going to finish off the year on a negative note, though there's always the possibility of a Sant Calus rally the week between Christmas and New Year to save everybody's bacon.
At the Close, Monday, December 2, 2019:
Dow Jones Industrial Average: 27,783.04, -268.37 (-0.96%)
NASDAQ: 8,567.99, -97.48 (-1.12%)
S&P 500: 3,113.87, -27.11 (-0.86%)
NYSE Composite: 13,448.26, -96.95 (-0.72%)
Thursday, October 25, 2018
Stocks Rebound, 11 Major Stock Indices In Correction, Down 10% Or More
Knee-jerk. That's all today's trading was. It evolved as an opportunity to see how many trades could be made on the assumption that stocks will continue to rise, that they are still good values, that despite the fact that major indices of at least 10 different important countries are in correction (down 10%), the US is still the best dirty shirt in the laundry, or something like that.
Just to placate the unbelievers, here is a partial list of stock indices already in correction or worse:
Ummm, that's 11, but who's counting?
Bear in mind, some of the biggest gains are made during periods of volatility and the beginnings of bear markets. For proof of that, just go back to the NASDAQ in 2000, or the Dow in October of 2008. There were plenty of big days to the upside. Unfortunately, for those taking positions in stocks during those periods, the downside prevailed, and in vey large ways.
Put in perspective, today's broad gains covered about 2/3rds of yesterday's losses. That's not enough, and there is absolutely no guarantee that tomorrow is going to be a repeat performance.
Dow Jones Industrial Average October Scorecard:
At the Close, Thursday, October 25, 2018:
Dow Jones Industrial Average: 24,984.55, +401.13 (+1.63%)
NASDAQ: 7,318.34, +209.94 (+2.95%)
S&P 500: 2,705.57, +49.47 (+1.86%)
NYSE Composite: 12,118.85, +149.11 (+1.25%)
Just to placate the unbelievers, here is a partial list of stock indices already in correction or worse:
- DAX, Germany
- FTSE, Great Britain
- CAC 40, France
- Nikkei 225, Japan
- Hang Seng, Hong Kong
- SSE Composite, China
- SENSEX, India
- KOSPI, South Korea
- Jakarta Composite, Indonesia
- MERVAL, Argentina
- IPC, Mexico
Ummm, that's 11, but who's counting?
Bear in mind, some of the biggest gains are made during periods of volatility and the beginnings of bear markets. For proof of that, just go back to the NASDAQ in 2000, or the Dow in October of 2008. There were plenty of big days to the upside. Unfortunately, for those taking positions in stocks during those periods, the downside prevailed, and in vey large ways.
Put in perspective, today's broad gains covered about 2/3rds of yesterday's losses. That's not enough, and there is absolutely no guarantee that tomorrow is going to be a repeat performance.
Dow Jones Industrial Average October Scorecard:
| Date | Close | Gain/Loss | Cum. G/L |
| 10/1/18 | 26,651.21 | +192.90 | +192.90 |
| 10/2/18 | 26,773.94 | +122.73 | +315.63 |
| 10/3/18 | 26,828.39 | +54.45 | +370.08 |
| 10/4/18 | 26,627.48 | -200.91 | +169.17 |
| 10/5/18 | 26,447.05 | -180.43 | -11.26 |
| 10/8/18 | 26,486.78 | +39.73 | +28.47 |
| 10/9/18 | 26,430.57 | -56.21 | -27.74 |
| 10/10/18 | 25,598.74 | -831.83 | -859.57 |
| 10/11/18 | 25,052.83 | -545.91 | -1,405.48 |
| 10/12/18 | 25,339.99 | +287.16 | -1,118.32 |
| 10/15/18 | 25,250.55 | -89.44 | -1,207.76 |
| 10/16/18 | 25,798.42 | +547.87 | -659.89 |
| 10/17/18 | 25,706.68 | -91.74 | -751.63 |
| 10/18/18 | 25,379.45 | -327.23 | -1,078.86 |
| 10/19/18 | 25,444.34 | +64.89 | -1,013.97 |
| 10/22/18 | 25,317.41 | -126.93 | -1,140.90 |
| 10/23/18 | 25,191.43 | -125.98 | -1,265.88 |
| 10/24/18 | 24,583.42 | -608.01 | -1,873.89 |
| 10/25/18 | 24,984.55 | +401.13 | -1,472.76 |
At the Close, Thursday, October 25, 2018:
Dow Jones Industrial Average: 24,984.55, +401.13 (+1.63%)
NASDAQ: 7,318.34, +209.94 (+2.95%)
S&P 500: 2,705.57, +49.47 (+1.86%)
NYSE Composite: 12,118.85, +149.11 (+1.25%)
Sunday, October 7, 2018
Weekend Wrap: Stocks Whacked At Week's End, NASDAQ Suffering Most; Global Condition Questionable
Back-to-back down sessions left the Dow Jones Industrial Average lower for the week and month, though only by 11 points, the dual declines amounting to a 380-point loss after the Dow had recorded three-straight all-time highs, so a pullback was not only likely, but probably helpful in the long term.
Stocks have been soaring due to strong economic data, but, at some point, valuation becomes an issue, and that point may have been reached this week. By far, the NASDAQ suffered more than the other indices as investors fled speculative positions in favor of more defensive ones, especially as treasury bond prices tumbled, sending yields on the 10-year note to their highest point since 2011.
The 10-year note closed out the week yielding 3.23, while the 30-year bond offered a yield of 3.40. Better yet, spreads widened, as the 2-year bill finished at 2.88, widening the spread on 2s-10s to 35 basis points, allaying some of the fears for an inversion in the curve, a condition that normally precedes a recession.
Friday's September non-farm payroll data from the BLS came in below expectations of 180,000, at 134,000 new jobs, adding to the shifting sentiment late in Wall Street's week. Unemployment ticked lower, however, from 3.9% to 3.7%, keeping the jobs picture still very much a positive one.
Losses on the NASDAQ (-3.21%) were the worst since March. Such a large loss, especially in the leadership group, may cause investors to reconsider their allocations, especially since October is normally a very volatile time. Besides the risk of further declines on valuation, many speculative tech stocks offer no dividends, an important element for stability in any portfolio.
Globally, markets were lower, with Europe suffering steep declines. The stock index of Europe's leading economy, Germany's DAX, is already in correction territory. Tremors from Italy's burgeoning funding crisis have caused concern in European bourses as the runaway Italian government continues to criticize the European Central Bank's (ECB) practices.
While Italy is unlikely to withdraw from the EU, there is mounting pressure on recently-elected leaders for more autonomy, citing the disastrous condition in Greece, following years of bailouts and forced austerity by EU leaders.
Emerging markets, including behemoths China and India, have been suffering from banking and regulatory malaise, and from a growing suspicion that the official data cited by governments is often fudged to appear better than reality.
The dollar eased late in the week against some currencies, a relief to those emerging markets, though not enough to avoid wholesale capitulation of home currencies, especially in Turkey and Argentina, two basket-case economies on the verge of inflationary and solvency collapses.
Those are the leading factors which has prompted investor flight to US equities and bonds, considered a global safety net, though the crowding of those markets has led to what currently is the condition of overvaluation in some sectors.
Gold and silver were bid slightly through the week, though the precious metals still remain close to there-year lows with no bottom having been found.
While general economic news in the US is good and should continue to be so, global conditions are far from rosy, which is leading to some shift in sentiment and flights to safety.
Dow Jones Industrial Average October Scorecard:
At the Close, Friday, October 5, 2018:
Dow Jones Industrial Average: 26,447.05, -180.43 (-0.68%)
NASDAQ: 7,788.45, -91.06 (-1.16%)
S&P 500: 2,885.57, -16.04 (-0.55%)
NYSE Composite: 12,991.95, -50.35 (-0.39%)
For the Week:
Dow: -11.26, (-0.04%)
NASDAQ: -257.91 (-3.21%)
S&P 500: -28.41 (-0.97%)
NYSR Composite: -90.67 (-0.59%)
Stocks have been soaring due to strong economic data, but, at some point, valuation becomes an issue, and that point may have been reached this week. By far, the NASDAQ suffered more than the other indices as investors fled speculative positions in favor of more defensive ones, especially as treasury bond prices tumbled, sending yields on the 10-year note to their highest point since 2011.
The 10-year note closed out the week yielding 3.23, while the 30-year bond offered a yield of 3.40. Better yet, spreads widened, as the 2-year bill finished at 2.88, widening the spread on 2s-10s to 35 basis points, allaying some of the fears for an inversion in the curve, a condition that normally precedes a recession.
Friday's September non-farm payroll data from the BLS came in below expectations of 180,000, at 134,000 new jobs, adding to the shifting sentiment late in Wall Street's week. Unemployment ticked lower, however, from 3.9% to 3.7%, keeping the jobs picture still very much a positive one.
Losses on the NASDAQ (-3.21%) were the worst since March. Such a large loss, especially in the leadership group, may cause investors to reconsider their allocations, especially since October is normally a very volatile time. Besides the risk of further declines on valuation, many speculative tech stocks offer no dividends, an important element for stability in any portfolio.
Globally, markets were lower, with Europe suffering steep declines. The stock index of Europe's leading economy, Germany's DAX, is already in correction territory. Tremors from Italy's burgeoning funding crisis have caused concern in European bourses as the runaway Italian government continues to criticize the European Central Bank's (ECB) practices.
While Italy is unlikely to withdraw from the EU, there is mounting pressure on recently-elected leaders for more autonomy, citing the disastrous condition in Greece, following years of bailouts and forced austerity by EU leaders.
Emerging markets, including behemoths China and India, have been suffering from banking and regulatory malaise, and from a growing suspicion that the official data cited by governments is often fudged to appear better than reality.
The dollar eased late in the week against some currencies, a relief to those emerging markets, though not enough to avoid wholesale capitulation of home currencies, especially in Turkey and Argentina, two basket-case economies on the verge of inflationary and solvency collapses.
Those are the leading factors which has prompted investor flight to US equities and bonds, considered a global safety net, though the crowding of those markets has led to what currently is the condition of overvaluation in some sectors.
Gold and silver were bid slightly through the week, though the precious metals still remain close to there-year lows with no bottom having been found.
While general economic news in the US is good and should continue to be so, global conditions are far from rosy, which is leading to some shift in sentiment and flights to safety.
Dow Jones Industrial Average October Scorecard:
| Date | Close | Gain/Loss | Cum. G/L |
| 10/1/18 | 26,651.21 | +192.90 | +192.90 |
| 10/2/18 | 26,773.94 | +122.73 | +315.63 |
| 10/3/18 | 26,828.39 | +54.45 | +370.08 |
| 10/4/18 | 26,627.48 | -200.91 | +169.17 |
| 10/5/18 | 26,447.05 | -180.43 | -11.26 |
At the Close, Friday, October 5, 2018:
Dow Jones Industrial Average: 26,447.05, -180.43 (-0.68%)
NASDAQ: 7,788.45, -91.06 (-1.16%)
S&P 500: 2,885.57, -16.04 (-0.55%)
NYSE Composite: 12,991.95, -50.35 (-0.39%)
For the Week:
Dow: -11.26, (-0.04%)
NASDAQ: -257.91 (-3.21%)
S&P 500: -28.41 (-0.97%)
NYSR Composite: -90.67 (-0.59%)
Saturday, September 8, 2018
Weekend Wrap: Investors Disappointed, Spurring September Selloff; Tesla On The Ropes; EM Bears
Tech and transportation stocks, the Dow, and the S&P 500 all registered positive gains in August, but once the three-day Labor Day holiday turned the calendar to September, much of summer's optimism turned to autumn angst as all four of the major indices - lead by tech and the NASDAQ - began showing signs of weariness.
The NASDAQ lost ground in all four of the short week's trading sessions, combining for a 2.55% decline in the first week of September. While much of the losses can be attributed to profit-taking, the biggest declines belonged to the beloved FAANGs, all of which fell in a wide-based tech retreat. Facebook (FB) Amazon (AMZN), Apple (APPL), Netflix (NFLX) and Alphabet, parent of Google (GOOG) all suffered losses, though the biggest decline was seen on the stock of Tesla (TSLA), as continuing concerns over the health not only of the company's finances, but of founder and CEO, Elon Musk, snatched nearly 13% off its price in four days.
Shares of the electric car-maker are down 30% since reaching a peak of 379.57 on August 7. Tesla closed out the week at 263.24, within 10 points of its 52-week low due to a rash of executive departures and strange behavior by Musk, which included threats to critics, talk of taking the company private, crying, drinking, and taking a toke on a joint during a podcast interview.
While Musk's behavior is certainly a major factor influencing the share price, more concerning are questions over the company's continued viability. Yet to turn a profit, Tesla is burdened with an excessive amount of debt and faces competition in the electric car space from the likes of BMW, Porsche, Audi, and scores of Japanese and American automakers as the number of competitive electric autos already in market or due to be soon has steadily increased over the past 18 months.
With a poor track record, mounting issues with reliability and safety, and Musk's seemingly manic-depressive behavior, investors are bracing for the worst, fleeing in record numbers. With share prices still at stratospheric levels, the declines should continue for the foreseeable future.
As for the other tech titans, it would appear that Apple, Google, and Amazon are still in a safe zone, despite lofty valuations, but Facebook and Netflix may suffer further declines. Both companies have internal and external problems which have yet to be addressed adequately. The numbers suggest that users of the social platform and streaming video service are not increasing at the same rates previously encountered and continued growth is a major question.
The Dow appeared to be the safe space for traders until Friday, when it led markets lower despite positive news on employment, with September jobs increasing by 201,000 in August, ahead of analyst estimates, and wage growth increasing to 2.9% annualized.
Though the numbers were encouraging for the middle class, the investor class may have been eyeing the bullish employment figures with a jaded eye, focusing on the upcoming FOMC meeting at the end of the month (September 25-26), in which the Fed is expected to raise the key federal funds rate another 25 basis points, to 2.00-2.25%. The usual knee-jerk reaction to Fed rate hikes is to sell equities and buy bonds, and that dynamic may well have been in play on Friday and might contribute to further selling in the weeks leading up to the policy meeting.
Also on the minds of investors was the global drawdown in emerging markets, which is approaching or already is in bear market conditions. The strong dollar and use of the US as a safe haven has led to capitulation in currencies and markets, especially in Turkey and Argentina, each of which have suffered sharp currency devaluations over the past six months. Turkey is stubbornly fighting the carnage from within, whereas Argentina has supposedly reached agreement on a bailout loan from the International Monetary Fund (IMF). Argentina's condition in world markets seems to be that of a chronic abuser as this is a repetitive pattern by that deadbeat debtor nation.
While the EM bust has yet to affect US markets in any major way, European and Far East markets have felt some pain, especially in Germany, as the DAX is already in correction, down more than 10% this year. If and when the EM issues become a contagion will be a top of mind issue in the weeks and months ahead.
Precious metals and the entire commodity complex continued to face stiff selling. Gold and silver are trading at three-year lows and are vulnerable to any number of potential market shocks. They are traditionally the first assets sold in a widespread market rout and may be signaling more trouble ahead.
While caution is always advisable, the run-up to the US midterm elections may be particularly volatile as cantankerous political forces vie for control of the enormous state and federal governmental complex.
Dow Jones Industrial Average September Scorecard:
At the Close, Friday, September 7, 2018:
Dow Jones Industrial Average: 25,916.54, -79.33 (-0.31%)
NASDAQ: 7,902.54, -20.18 (-0.25%)
S&P 500: 2,871.68, -6.37 (-0.22%)
NYSE Composite: 12,911.12, -27.79 (-0.21%)
For the Week:
Dow: -48.28 (-0.19%)
NASDAQ: -207.00 (-2.55%)
S&P 500: -29.84 (-1.03%)
NYSE Composite: -105.77 (-0.81%)
The NASDAQ lost ground in all four of the short week's trading sessions, combining for a 2.55% decline in the first week of September. While much of the losses can be attributed to profit-taking, the biggest declines belonged to the beloved FAANGs, all of which fell in a wide-based tech retreat. Facebook (FB) Amazon (AMZN), Apple (APPL), Netflix (NFLX) and Alphabet, parent of Google (GOOG) all suffered losses, though the biggest decline was seen on the stock of Tesla (TSLA), as continuing concerns over the health not only of the company's finances, but of founder and CEO, Elon Musk, snatched nearly 13% off its price in four days.
Shares of the electric car-maker are down 30% since reaching a peak of 379.57 on August 7. Tesla closed out the week at 263.24, within 10 points of its 52-week low due to a rash of executive departures and strange behavior by Musk, which included threats to critics, talk of taking the company private, crying, drinking, and taking a toke on a joint during a podcast interview.
While Musk's behavior is certainly a major factor influencing the share price, more concerning are questions over the company's continued viability. Yet to turn a profit, Tesla is burdened with an excessive amount of debt and faces competition in the electric car space from the likes of BMW, Porsche, Audi, and scores of Japanese and American automakers as the number of competitive electric autos already in market or due to be soon has steadily increased over the past 18 months.
With a poor track record, mounting issues with reliability and safety, and Musk's seemingly manic-depressive behavior, investors are bracing for the worst, fleeing in record numbers. With share prices still at stratospheric levels, the declines should continue for the foreseeable future.
As for the other tech titans, it would appear that Apple, Google, and Amazon are still in a safe zone, despite lofty valuations, but Facebook and Netflix may suffer further declines. Both companies have internal and external problems which have yet to be addressed adequately. The numbers suggest that users of the social platform and streaming video service are not increasing at the same rates previously encountered and continued growth is a major question.
The Dow appeared to be the safe space for traders until Friday, when it led markets lower despite positive news on employment, with September jobs increasing by 201,000 in August, ahead of analyst estimates, and wage growth increasing to 2.9% annualized.
Though the numbers were encouraging for the middle class, the investor class may have been eyeing the bullish employment figures with a jaded eye, focusing on the upcoming FOMC meeting at the end of the month (September 25-26), in which the Fed is expected to raise the key federal funds rate another 25 basis points, to 2.00-2.25%. The usual knee-jerk reaction to Fed rate hikes is to sell equities and buy bonds, and that dynamic may well have been in play on Friday and might contribute to further selling in the weeks leading up to the policy meeting.
Also on the minds of investors was the global drawdown in emerging markets, which is approaching or already is in bear market conditions. The strong dollar and use of the US as a safe haven has led to capitulation in currencies and markets, especially in Turkey and Argentina, each of which have suffered sharp currency devaluations over the past six months. Turkey is stubbornly fighting the carnage from within, whereas Argentina has supposedly reached agreement on a bailout loan from the International Monetary Fund (IMF). Argentina's condition in world markets seems to be that of a chronic abuser as this is a repetitive pattern by that deadbeat debtor nation.
While the EM bust has yet to affect US markets in any major way, European and Far East markets have felt some pain, especially in Germany, as the DAX is already in correction, down more than 10% this year. If and when the EM issues become a contagion will be a top of mind issue in the weeks and months ahead.
Precious metals and the entire commodity complex continued to face stiff selling. Gold and silver are trading at three-year lows and are vulnerable to any number of potential market shocks. They are traditionally the first assets sold in a widespread market rout and may be signaling more trouble ahead.
While caution is always advisable, the run-up to the US midterm elections may be particularly volatile as cantankerous political forces vie for control of the enormous state and federal governmental complex.
Dow Jones Industrial Average September Scorecard:
| Date | Close | Gain/Loss | Cum. G/L |
| 9/4/18 | 25,952.48 | -12.34 | -12.34 |
| 9/5/18 | 25,974.99 | +22.51 | +10.17 |
| 9/6/18 | 25,995.87 | +20.88 | +31.05 |
| 9/7/18 | 25,916.54 | -79.33 | -48.28 |
At the Close, Friday, September 7, 2018:
Dow Jones Industrial Average: 25,916.54, -79.33 (-0.31%)
NASDAQ: 7,902.54, -20.18 (-0.25%)
S&P 500: 2,871.68, -6.37 (-0.22%)
NYSE Composite: 12,911.12, -27.79 (-0.21%)
For the Week:
Dow: -48.28 (-0.19%)
NASDAQ: -207.00 (-2.55%)
S&P 500: -29.84 (-1.03%)
NYSE Composite: -105.77 (-0.81%)
Friday, September 7, 2018
Tech Rout Deepens As Users Shed Facebook, Global Meltdown Continues, Musk Lights Up
As the Dow posted a second straight smallish gain, the NASDAQ was once again bruised as investors reassessed positions in various high-profile social media and internet stocks.
On Thursday and into early trading Friday, equity indices around the world were in a sea of red, though South American stocks rebounded into their Thursday closes as Argentina prepares for a new round of financing from the IMF. Argentina's currency and stocks have been in free fall, and the IMF bailout is yet another in a series of bad financing deals for the South American basket case.
Facebook (FB) suffered another in a continuing series of declines, losing 4.65 points to close at 162.53. The 2.78% loss was the sixth in the last seven session, leaving the troubled social media platform down 55 points since July 25th, the most recent catalyst a Pew Research report that found one in four users deleting the Facebook app from their mobile phones among other startling statistics.
Facebook's problems stem from revelations that they violated their own privacy policies by sharing private user data with third parties, but perhaps more and more people are beginning to realize that the high school acquaintances they've reconnected with on Facebook are still boorish, stupid, or otherwise stuck on themselves.
Being the ultimate tool for narcissism, Facebook's days may be numbered.
Tesla (TSLA) stock was taking a hit (pun intended) after enigmatic founder and CEO, Elon Musk, was seen toking on a blunt filled with tobacco and marijuana on Joe Rogan's popular Podcast. Shares were trending lower, down 1.40% prior to the regular trading open.
Perhaps Musk's message to shareholders should be, "just chill."
Facebook and Tesla shares are both down more than 20% from recent highs.
Dow Jones Industrial Average September Scorecard:
At the Close, Thursday, September 6, 2018:
Dow Jones Industrial Average: 25,995.87, +20.88 (+0.08%)
NASDAQ: 7,922.73, -72.45 (-0.91%)
S&P 500: 2,878.05, -10.55 (-0.37%)
NYSE Composite: 12,938.91, -29.64 (-0.23%)
On Thursday and into early trading Friday, equity indices around the world were in a sea of red, though South American stocks rebounded into their Thursday closes as Argentina prepares for a new round of financing from the IMF. Argentina's currency and stocks have been in free fall, and the IMF bailout is yet another in a series of bad financing deals for the South American basket case.
Facebook (FB) suffered another in a continuing series of declines, losing 4.65 points to close at 162.53. The 2.78% loss was the sixth in the last seven session, leaving the troubled social media platform down 55 points since July 25th, the most recent catalyst a Pew Research report that found one in four users deleting the Facebook app from their mobile phones among other startling statistics.
Facebook's problems stem from revelations that they violated their own privacy policies by sharing private user data with third parties, but perhaps more and more people are beginning to realize that the high school acquaintances they've reconnected with on Facebook are still boorish, stupid, or otherwise stuck on themselves.
Being the ultimate tool for narcissism, Facebook's days may be numbered.
Tesla (TSLA) stock was taking a hit (pun intended) after enigmatic founder and CEO, Elon Musk, was seen toking on a blunt filled with tobacco and marijuana on Joe Rogan's popular Podcast. Shares were trending lower, down 1.40% prior to the regular trading open.
Perhaps Musk's message to shareholders should be, "just chill."
Facebook and Tesla shares are both down more than 20% from recent highs.
Dow Jones Industrial Average September Scorecard:
| Date | Close | Gain/Loss | Cum. G/L |
| 9/4/18 | 25,952.48 | -12.34 | -12.34 |
| 9/5/18 | 25,974.99 | +22.51 | +10.17 |
| 9/6/18 | 25,995.87, | +20.88 | +31.05 |
At the Close, Thursday, September 6, 2018:
Dow Jones Industrial Average: 25,995.87, +20.88 (+0.08%)
NASDAQ: 7,922.73, -72.45 (-0.91%)
S&P 500: 2,878.05, -10.55 (-0.37%)
NYSE Composite: 12,938.91, -29.64 (-0.23%)
Wednesday, September 5, 2018
Stocks Start September Slowly As Trade Wars Widen, Currencies Collapse In Emerging Markets
The late-summer rally that saw fresh record highs on the NASDAQ and S&P, adding 1600 points to the Dow Jones Industrial Average, may be coming to an abrupt end in September.
As the dollar has soared against emerging market currencies, US markets have become a favorite of foreign money, lifting individual stocks and entire indices from already-high valuations. However, blowback from collapsing economies in emerging markets such and Turkey, Argentina, Indonesia, Brazil, India, and China may become severe if market participants decide its time to repatriate their gains.
With President Trump on a tariff crusade, imports from foreign shores are rapidly becoming less valuable to the source exporters and governments are taking note of the erosion in not just their currencies but in their trade balances.
Stock markets in South American countries are being wrecked, with Argentina and Brazil already in bear markets. Exchanges in Japan, China, and most of Europe - especially the powerhouse Dax of Germany - are already in correction territory and not far from becoming full-blown panicked bear markets.
Thus far, the US has been the beneficiary of other nations' pain, but, there's no free lunch and companies with heavy investment outside the US may soonest profits declining in what were recently solid, growing markets for their goods and services.
How the combination of trade warfare and declining currency valuations will play out may prove to be disastrous to all participants. A great decline in international trade was partially responsible for the global Great Depression of the 1930s. History may soon be repeating if countries don't heed the warnings from prior episodes of trade antagonism.
Casualties are beginning to mount with the precious metals complex already heading past the correction phase and closer to bear market conditions. Gold has been trading in the $1190 per troy ounce range after reaching close to $1360 in March. Silver has collapsed from from a high above $18/ounce to $14.15 at the close on Tuesday. That is already in a bear market.
Reminiscent of September 2008, when investors dumped gold and silver holdings to meet margin requirements and governments scrambled to meet current obligations, the precious metals decline may be a harbinger of things to come for the broader markets.
Insofar as US stocks have performed brilliantly since the brief February correction, there exists a danger that stocks have reached a climax and are overdue for a massive selloff.
Speculation and conjecture being worth exactly nothing until real money is put into play, market participants may soon find out just how far a rally can go before everyone runs for the exits at once, desiring to not be left holding a bag half full.
Tuesday, the first trading day of September started with a steep decline at the open. Stocks gained ground gradually throughout the session, eventually posting minor losses. It could have been worse and it's likely not yet over. The rest of the week and the weeks heading toward the next FOMC meeting on September 25 and 26 will be volatile and potentially damaging to heavily-leveraged, diverse portfolios.
Dow Jones Industrial Average September Scorecard:
At the Close, Tuesday, September 4, 2018:
Dow Jones Industrial Average: 25,952.48, -12.34 (-0.05%)
NASDAQ: 8,091.25, -18.29 (-0.23%)
S&P 500: 2,896.72, -4.80 (-0.17%)
NYSE Composite: 12,969.86, -47.03 (-0.36%)
As the dollar has soared against emerging market currencies, US markets have become a favorite of foreign money, lifting individual stocks and entire indices from already-high valuations. However, blowback from collapsing economies in emerging markets such and Turkey, Argentina, Indonesia, Brazil, India, and China may become severe if market participants decide its time to repatriate their gains.
With President Trump on a tariff crusade, imports from foreign shores are rapidly becoming less valuable to the source exporters and governments are taking note of the erosion in not just their currencies but in their trade balances.
Stock markets in South American countries are being wrecked, with Argentina and Brazil already in bear markets. Exchanges in Japan, China, and most of Europe - especially the powerhouse Dax of Germany - are already in correction territory and not far from becoming full-blown panicked bear markets.
Thus far, the US has been the beneficiary of other nations' pain, but, there's no free lunch and companies with heavy investment outside the US may soonest profits declining in what were recently solid, growing markets for their goods and services.
How the combination of trade warfare and declining currency valuations will play out may prove to be disastrous to all participants. A great decline in international trade was partially responsible for the global Great Depression of the 1930s. History may soon be repeating if countries don't heed the warnings from prior episodes of trade antagonism.
Casualties are beginning to mount with the precious metals complex already heading past the correction phase and closer to bear market conditions. Gold has been trading in the $1190 per troy ounce range after reaching close to $1360 in March. Silver has collapsed from from a high above $18/ounce to $14.15 at the close on Tuesday. That is already in a bear market.
Reminiscent of September 2008, when investors dumped gold and silver holdings to meet margin requirements and governments scrambled to meet current obligations, the precious metals decline may be a harbinger of things to come for the broader markets.
Insofar as US stocks have performed brilliantly since the brief February correction, there exists a danger that stocks have reached a climax and are overdue for a massive selloff.
Speculation and conjecture being worth exactly nothing until real money is put into play, market participants may soon find out just how far a rally can go before everyone runs for the exits at once, desiring to not be left holding a bag half full.
Tuesday, the first trading day of September started with a steep decline at the open. Stocks gained ground gradually throughout the session, eventually posting minor losses. It could have been worse and it's likely not yet over. The rest of the week and the weeks heading toward the next FOMC meeting on September 25 and 26 will be volatile and potentially damaging to heavily-leveraged, diverse portfolios.
Dow Jones Industrial Average September Scorecard:
| Date | Close | Gain/Loss | Cum. G/L |
| 9/4/18 | 25,952.48 | -12.34 | -12.34 |
At the Close, Tuesday, September 4, 2018:
Dow Jones Industrial Average: 25,952.48, -12.34 (-0.05%)
NASDAQ: 8,091.25, -18.29 (-0.23%)
S&P 500: 2,896.72, -4.80 (-0.17%)
NYSE Composite: 12,969.86, -47.03 (-0.36%)
Friday, August 17, 2018
Dow Surges Nearly 400 Points Even As Turkey Crisis Deepens
Apparently, those mystery buyers who emerged Wednesday after the Dow was down 360 points were not quite finished with their stock buying spree. On Thursday, blue chips were all the rage, with the Dow soaring nearly 400 points on the day, it's best one-day performance since a 428-point advance on April 10.
So, that's more than 750 points in less than two days. The message is clear: buy stocks. Buy stocks with dividends. Disregard the price you are paying.
Obviously, something is afoot, though it seems that these recent buys are wrong-footed, at the least.
Friday will open lower, though there's no telling where stocks will go after that. Turkey's currency crisis is not going to improve in a day or two, or even in a few weeks or months. The economy of the crossroads nation is going to be a basket case for years. The same is true of Argentina, which is suffering through another crisis, something that occurs on a regular basis in South America. Venezuela's economy is dead, Brazil is devolving into widespread chaos, and the rest of the so-called EM (Emerging Market) economies are being clubbed to death by a strong US dollar.
Now, perhaps the rest of the world suffering is good for the advanced nations such as the US and in Europe, but that should be viewed as a short-sighted point of view in the long run.
Eventually, between their currencies deteriorating and President Trump piling on tariffs and sanctions, most of the world's emerging market nations will not be very emergent at all. Rather, their economies will suffer, their populations will grow increasingly restive, and trade with them will decline.
The silver lining for the United States is that such conditions should drive more domestic innovation and jobs. Eventually, the smaller nations will adjust to the new normal and maybe the US will muddle through. However, this is not the kind of environment that necessitates massive investment in well-entrenched industries.
Or, maybe it is. Maybe these dip-buying professional traders really do know it all.
Dow Jones Industrial Average August Scorecard:
At the Close, Thursday, August 16, 2017:
Dow Jones Industrial Average: 25,558.73, +396.32 (+1.58%)
NASDAQ: 7,806.52, +32.41 (+0.42%)
S&P 500: 2,840.69, +22.32 (+0.79%)
NYSE Composite: 12,841.28, +118.19 (+0.93%)
So, that's more than 750 points in less than two days. The message is clear: buy stocks. Buy stocks with dividends. Disregard the price you are paying.
Obviously, something is afoot, though it seems that these recent buys are wrong-footed, at the least.
Friday will open lower, though there's no telling where stocks will go after that. Turkey's currency crisis is not going to improve in a day or two, or even in a few weeks or months. The economy of the crossroads nation is going to be a basket case for years. The same is true of Argentina, which is suffering through another crisis, something that occurs on a regular basis in South America. Venezuela's economy is dead, Brazil is devolving into widespread chaos, and the rest of the so-called EM (Emerging Market) economies are being clubbed to death by a strong US dollar.
Now, perhaps the rest of the world suffering is good for the advanced nations such as the US and in Europe, but that should be viewed as a short-sighted point of view in the long run.
Eventually, between their currencies deteriorating and President Trump piling on tariffs and sanctions, most of the world's emerging market nations will not be very emergent at all. Rather, their economies will suffer, their populations will grow increasingly restive, and trade with them will decline.
The silver lining for the United States is that such conditions should drive more domestic innovation and jobs. Eventually, the smaller nations will adjust to the new normal and maybe the US will muddle through. However, this is not the kind of environment that necessitates massive investment in well-entrenched industries.
Or, maybe it is. Maybe these dip-buying professional traders really do know it all.
Dow Jones Industrial Average August Scorecard:
| Date | Close | Gain/Loss | Cum. G/L |
| 8/1/18 | 25,333.82 | -81.37 | -81.37 |
| 8/2/18 | 25,326.16 | -7.66 | -89.03 |
| 8/3/18 | 25,462.58 | +136.42 | +55.05 |
| 8/6/18 | 25,502.18 | +39.60 | +94.65 |
| 8/7/18 | 25,628.91 | +126.73 | +221.38 |
| 8/8/18 | 25,583.75 | -45.16 | +176.22 |
| 8/9/18 | 25,509.23 | -74.52 | +101.70 |
| 8/10/18 | 25,313.14 | -196.09 | -94.39 |
| 8/13/18 | 25,187.70 | -125.44 | -219.83 |
| 8/14/18 | 25,299.92 | +112.22 | -107.61 |
| 8/15/18 | 25,162.41 | -137.51 | -245.12 |
| 8/16/18 | 25,558.73 | +396.32 | +151.20 |
At the Close, Thursday, August 16, 2017:
Dow Jones Industrial Average: 25,558.73, +396.32 (+1.58%)
NASDAQ: 7,806.52, +32.41 (+0.42%)
S&P 500: 2,840.69, +22.32 (+0.79%)
NYSE Composite: 12,841.28, +118.19 (+0.93%)
Tuesday, July 3, 2018
Stocks Turn Ugly In Short Session: Time Out On Wall Street
The Dow took a nearly 300-point round trip from top to bottom on the second trading day of the third quarter, rising by more than 137 points before collapsing in the final hour to close 1/2 percent lower. The NASDAQ was beaten down further, off 65 points on the day (-0.86%).
Markets can become discouraged by many factors, but for this current one, it seems to be merely a matter of during out after nine-plus years of unprecedented fantasy. Speculators, those eager early-day traders who took it on the chin today as they have on many other recent sessions, have to be concerned that investors might catch on to the fact that the global economy is not all roses and unicorns, but rather a patchwork of central bank machinations that have distorted what used to be free markets into stealthy, clandestine, controlled entities.
If that becomes the case, the second leg of the bear market will commence in short order and likely not cease until well after the Dow falls 20% from the January 26 high (26,616.71), a process that could last anywhere from three to six months. This is shaping up to be a long drawdown of asset values, considering that the central bankers will not readily abandon their chosen "low unemployment and moderate inflation" narrative, of which practically everyone who matters is in disbelief already. The proof is in stock market and bond returns, both of which suggest contraction instead of a healthy growth environment.
July 4, Independence Day in the United States, will be an anchor on foreign markets because there will be no trading on the day. China has already intervened in their equity markets to stem the outflows. Italy, and thus, all of the EU, is staring directly at a major solvency crisis which could explode and uncouple the southern nation from the rest of Europe. Already, the new Italian government has ECB officials on edge.
Argentina is already a basket case, as is Venezuela, with Brazil close to chaos as well.
Maybe it's time the politicians in Washington stop focusing on the "evil" Russians (who are doing quite well, despite sanctions and expulsions of their diplomats by the US), and begin taking account of the rest of the world, which seems to be not right at all.
Dow Jones Industrial Average July Scorecard:
At the Close, Tuesday, July 3, 2018:
Dow Jones Industrial Average: 24,174.82, -132.36 (-0.54%)
NASDAQ: 7,502.67, -65.01 (-0.86%)
S&P 500: 2,713.22, -13.49 (-0.49%)
NYSE Composite: 12,494.70, +9.12 (+0.07%)
Markets can become discouraged by many factors, but for this current one, it seems to be merely a matter of during out after nine-plus years of unprecedented fantasy. Speculators, those eager early-day traders who took it on the chin today as they have on many other recent sessions, have to be concerned that investors might catch on to the fact that the global economy is not all roses and unicorns, but rather a patchwork of central bank machinations that have distorted what used to be free markets into stealthy, clandestine, controlled entities.
If that becomes the case, the second leg of the bear market will commence in short order and likely not cease until well after the Dow falls 20% from the January 26 high (26,616.71), a process that could last anywhere from three to six months. This is shaping up to be a long drawdown of asset values, considering that the central bankers will not readily abandon their chosen "low unemployment and moderate inflation" narrative, of which practically everyone who matters is in disbelief already. The proof is in stock market and bond returns, both of which suggest contraction instead of a healthy growth environment.
July 4, Independence Day in the United States, will be an anchor on foreign markets because there will be no trading on the day. China has already intervened in their equity markets to stem the outflows. Italy, and thus, all of the EU, is staring directly at a major solvency crisis which could explode and uncouple the southern nation from the rest of Europe. Already, the new Italian government has ECB officials on edge.
Argentina is already a basket case, as is Venezuela, with Brazil close to chaos as well.
Maybe it's time the politicians in Washington stop focusing on the "evil" Russians (who are doing quite well, despite sanctions and expulsions of their diplomats by the US), and begin taking account of the rest of the world, which seems to be not right at all.
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 |
At the Close, Tuesday, July 3, 2018:
Dow Jones Industrial Average: 24,174.82, -132.36 (-0.54%)
NASDAQ: 7,502.67, -65.01 (-0.86%)
S&P 500: 2,713.22, -13.49 (-0.49%)
NYSE Composite: 12,494.70, +9.12 (+0.07%)
Thursday, February 6, 2014
Stocks March Higher Despite NFP Uncertainty
Stocks staged an enormous rally Thursday, just a day before crucial non-farm payroll data from January is to be released.
Friday's employment numbers - expected to be in the range of 185,000 - stand in stark contradiction to December's paltry 74,000 jobs created. While weather has been roundly blamed for everything from auto sales to bond rallies, it may turn out that the weather will not affect payroll data, as the survey week was one that did not contain a severe weather event.
Investors may be gaming the number, figuring that December's figures will almost certainly be upgraded and the potential for two straight disappointments are slim.
On the other hand, since there was little in the way of news or earnings releases to juice today's rally, the huge run-up in stocks may have been due primarily to short-covering, as the bears - fairly fat and sassy of late - may want to be out of the way of such a volatile data set on Friday morning.
In the meantime, nothing much has changed on a global outlook. In fact, a failed bond auction in Ukraine set off some alarm bells and currency issues remain from India to Brazil to Turkey to Argentina to Indonesia. In essence, the Fed's decision to trim $20 billion in total from their monthly bond-purchasing program over the past two months is affecting everyone, everywhere.
That message did not seem to reach the ears of the bulls, at least for one day. Stocks had fallen pretty far in a short period of time, so the old "oversold" rationale has been trotted out as an explanation. For the record, the S&P had fallen about 100 points in just over a month, so, some giveback was to be expected. Same with the Dow, which had surrendered over 1000 points before gaining back about 250 this week.
On the day, volume was light, the advance-decline line was nearly 3:1 positive, but new highs just barely edged new lows, despite the huge, broad-based ramp in stocks. It appeared to be more of a "risk-off" kind of day rather than a serious, fundamental-based rally.
The 10-year note was sold off, registering a yield of 2.70, the highest in over a week. The troubling trend in short-dated maturities remained unresolved, with 3-month and 6-month bills matching up with identical 0.07% yields.
DOW 15,628.53, +188.30 (+1.22%)
NASDAQ 4,057.12, +45.57 (+1.14%)
S&P 1,773.43, +21.79 (+1.24%)
10-Yr Note 100.41, +0.20 (+0.20%) Yield: 2.70%
NASDAQ Volume 1.78 Bil
NYSE Volume 3.77 Bil
Combined NYSE & NASDAQ Advance - Decline: 4003-1691
Combined NYSE & NASDAQ New highs - New lows: 86-70
WTI crude oil: 97.84, +0.46
Gold: 1,257.20, +0.30
Silver: 19.93, +0.123
Corn: 443.00, -0.25
Friday's employment numbers - expected to be in the range of 185,000 - stand in stark contradiction to December's paltry 74,000 jobs created. While weather has been roundly blamed for everything from auto sales to bond rallies, it may turn out that the weather will not affect payroll data, as the survey week was one that did not contain a severe weather event.
Investors may be gaming the number, figuring that December's figures will almost certainly be upgraded and the potential for two straight disappointments are slim.
On the other hand, since there was little in the way of news or earnings releases to juice today's rally, the huge run-up in stocks may have been due primarily to short-covering, as the bears - fairly fat and sassy of late - may want to be out of the way of such a volatile data set on Friday morning.
In the meantime, nothing much has changed on a global outlook. In fact, a failed bond auction in Ukraine set off some alarm bells and currency issues remain from India to Brazil to Turkey to Argentina to Indonesia. In essence, the Fed's decision to trim $20 billion in total from their monthly bond-purchasing program over the past two months is affecting everyone, everywhere.
That message did not seem to reach the ears of the bulls, at least for one day. Stocks had fallen pretty far in a short period of time, so the old "oversold" rationale has been trotted out as an explanation. For the record, the S&P had fallen about 100 points in just over a month, so, some giveback was to be expected. Same with the Dow, which had surrendered over 1000 points before gaining back about 250 this week.
On the day, volume was light, the advance-decline line was nearly 3:1 positive, but new highs just barely edged new lows, despite the huge, broad-based ramp in stocks. It appeared to be more of a "risk-off" kind of day rather than a serious, fundamental-based rally.
The 10-year note was sold off, registering a yield of 2.70, the highest in over a week. The troubling trend in short-dated maturities remained unresolved, with 3-month and 6-month bills matching up with identical 0.07% yields.
DOW 15,628.53, +188.30 (+1.22%)
NASDAQ 4,057.12, +45.57 (+1.14%)
S&P 1,773.43, +21.79 (+1.24%)
10-Yr Note 100.41, +0.20 (+0.20%) Yield: 2.70%
NASDAQ Volume 1.78 Bil
NYSE Volume 3.77 Bil
Combined NYSE & NASDAQ Advance - Decline: 4003-1691
Combined NYSE & NASDAQ New highs - New lows: 86-70
WTI crude oil: 97.84, +0.46
Gold: 1,257.20, +0.30
Silver: 19.93, +0.123
Corn: 443.00, -0.25
Friday, January 31, 2014
Stocks End January in Ugly Fashion with All Major Indices Down for the Month and Year
Whew!
Friday capped off an extremely volatile week in stocks and world economics, though astute investors and money managers should have known this kind of activity was coming all along, as soon as the Fed began reducing its bond purchases last month.
With January in the can, one might be obligated to kick it, for it was one of the worst months in some time, in fact, the January decline was the worst since February of 2009. It was also the first January decline for stocks since 2011, and that turned out to be a very rocky year, so caution is advised for those with a bullish bent. Fund flows from emerging market stock and bond funds were massive over the past two weeks, as were equity outflows in US-based funds.
What really troubled markets this morning, when the Dow fell by more than 220 points in early trading, were outflows of capital from emerging markets everywhere, from Russia, to Hungary, to Poland, South Africa, Turkey, Argentina, Indonesia, India, Brazil and China, and that's just a partial list.
Adding to the woes was an earnings warning from Wal-Mart (WMT), which is viewing the passage of the farm bill in the House of Representatives as very detrimental to their business, as it will strip out $8 billion in food stamps, the life-blood of the Wally World economy.
As the Fed is committed to slowing their bond purchases and eventually ending quantitative easing (QE) over the next six to eight months, it will be instructive to view the new chairmanship of Janet Yellen, who has inherited the legacy of Ben Bernanke's reckless money printing and zero-interest rate policies of the past five years. Yellen, who by some measures is even more dovish than the white-tailed Bernanke, will, as is usually the case with a new Fed head, have to deal with a crisis condition in her first days as chairwoman and beyond, and there's really no telling how she may react to financial upheaval in not only the emerging economies, but also the developed ones.
Looking forward to next week, markets will have to digest official China PMI, released later tonight, then work through central bank policy meetings in England, the EU, Australia, Poland and the Czeck Republic before dealing with the potentially-devastating January non-farm payroll report on US jobs, due prior to the bell on Friday, making the first week of February no less nerve-wracking than all of January.
Here's how the major averages ended the week:
Dow -180.26 (-1.14%)
S&P 500 -7.70 (-0.43%)
NASDAQ -24.29 (-0.59%)
...and the month:
Dow -877.81 (5.3%)
S&P 500 -65.77 (-3.6%)
NASDAQ -72.71 (-1.7%)
It's not pretty, and, as expressed through post after post on Money Daily this month, it's almost certain to get worse, as huge imbalances turn into ugly dislocations of capital in every nook and cranny of the finance. The Fed, in its infinite wisdom, has gone too far since 2009 in trying to fix things that were broken by covering them up with wild slugs of capital and debt. Now, it is time to pay the piper, so to speak.
View the video below for Jim Grant's explanation of how the Fed distorts markets. His simple explanations provide deep insight for anyone who believe Keynesian economics has met its match in Ben Bernanke and the current crop of central bank "experimenters."
While this short clip is indeed concise and to the point, perhaps the most eloquent statement made on live TV by Mr. Grant was when he chided the erstwhile Steve Liesman with this pithy piece of pragmatism: "The FED can change what things look like, but, the FED can never change what things are." Our hats are permanently tipped to Mr. Grant. And with that, enjoy the weekend and the Super Bowl. The world may look the same come Monday, but, if one could see through eyes unclouded by hubris and propaganda, what a wonderful world it might be. DOW 15,698.85, -149.76 (-0.94%) NASDAQ 4,103.88, -19.25 (-0.47%) S&P 1,782.59, -11.60 (-0.65%) 10-Yr Note 100.86 +0.71 (+0.71%) Yield: 2.66 NASDAQ Volume 2.09 Bil NYSE Volume 4.05 Bil Combined NYSE & NASDAQ Advance - Decline: 1941-3780 Combined NYSE & NASDAQ New highs - New lows: 129-128 WTI crude oil: 97.49, -0.74 Gold: 1,240.10, -2.10 Silver: 19.12, -0.006 Corn: 435.00, +0.50
Friday capped off an extremely volatile week in stocks and world economics, though astute investors and money managers should have known this kind of activity was coming all along, as soon as the Fed began reducing its bond purchases last month.
With January in the can, one might be obligated to kick it, for it was one of the worst months in some time, in fact, the January decline was the worst since February of 2009. It was also the first January decline for stocks since 2011, and that turned out to be a very rocky year, so caution is advised for those with a bullish bent. Fund flows from emerging market stock and bond funds were massive over the past two weeks, as were equity outflows in US-based funds.
What really troubled markets this morning, when the Dow fell by more than 220 points in early trading, were outflows of capital from emerging markets everywhere, from Russia, to Hungary, to Poland, South Africa, Turkey, Argentina, Indonesia, India, Brazil and China, and that's just a partial list.
Adding to the woes was an earnings warning from Wal-Mart (WMT), which is viewing the passage of the farm bill in the House of Representatives as very detrimental to their business, as it will strip out $8 billion in food stamps, the life-blood of the Wally World economy.
As the Fed is committed to slowing their bond purchases and eventually ending quantitative easing (QE) over the next six to eight months, it will be instructive to view the new chairmanship of Janet Yellen, who has inherited the legacy of Ben Bernanke's reckless money printing and zero-interest rate policies of the past five years. Yellen, who by some measures is even more dovish than the white-tailed Bernanke, will, as is usually the case with a new Fed head, have to deal with a crisis condition in her first days as chairwoman and beyond, and there's really no telling how she may react to financial upheaval in not only the emerging economies, but also the developed ones.
Looking forward to next week, markets will have to digest official China PMI, released later tonight, then work through central bank policy meetings in England, the EU, Australia, Poland and the Czeck Republic before dealing with the potentially-devastating January non-farm payroll report on US jobs, due prior to the bell on Friday, making the first week of February no less nerve-wracking than all of January.
Here's how the major averages ended the week:
Dow -180.26 (-1.14%)
S&P 500 -7.70 (-0.43%)
NASDAQ -24.29 (-0.59%)
...and the month:
Dow -877.81 (5.3%)
S&P 500 -65.77 (-3.6%)
NASDAQ -72.71 (-1.7%)
It's not pretty, and, as expressed through post after post on Money Daily this month, it's almost certain to get worse, as huge imbalances turn into ugly dislocations of capital in every nook and cranny of the finance. The Fed, in its infinite wisdom, has gone too far since 2009 in trying to fix things that were broken by covering them up with wild slugs of capital and debt. Now, it is time to pay the piper, so to speak.
View the video below for Jim Grant's explanation of how the Fed distorts markets. His simple explanations provide deep insight for anyone who believe Keynesian economics has met its match in Ben Bernanke and the current crop of central bank "experimenters."
While this short clip is indeed concise and to the point, perhaps the most eloquent statement made on live TV by Mr. Grant was when he chided the erstwhile Steve Liesman with this pithy piece of pragmatism: "The FED can change what things look like, but, the FED can never change what things are." Our hats are permanently tipped to Mr. Grant. And with that, enjoy the weekend and the Super Bowl. The world may look the same come Monday, but, if one could see through eyes unclouded by hubris and propaganda, what a wonderful world it might be. DOW 15,698.85, -149.76 (-0.94%) NASDAQ 4,103.88, -19.25 (-0.47%) S&P 1,782.59, -11.60 (-0.65%) 10-Yr Note 100.86 +0.71 (+0.71%) Yield: 2.66 NASDAQ Volume 2.09 Bil NYSE Volume 4.05 Bil Combined NYSE & NASDAQ Advance - Decline: 1941-3780 Combined NYSE & NASDAQ New highs - New lows: 129-128 WTI crude oil: 97.49, -0.74 Gold: 1,240.10, -2.10 Silver: 19.12, -0.006 Corn: 435.00, +0.50
Saturday, January 25, 2014
Saturday Afternoon Quarterback: The Day After the Great January Stock Slide
OK, it's Saturday, and the world hasn't ended, but what's important is to keep abreast of developments over the weekend in places like Argentina and Turkey, both of which are experiencing significant currency issues.
The other part of today's exercise is to see if there is anything that might give a clue to the future, and as to whether the massive selloff on Friday (and all week on the Dow) was a one-off, or if it is going to lead to more dislocations in stocks, a further decline, a 10% correction, or a bear market, which is where the fun really starts for those bent on restoring some semblance of sanity to stock valuations.
Yes, Cry for Argentina
Argentina, a country already shut off from foreign credit markets (could be a blessing in disguise) after the financial collapse of 2001-2002, has been in crisis mode for most of the past three years, with citizens unable to purchase US Dollars with their local currency, the peso, except on black markets, where the going rate is roughly 11-1 or 12-1.
Other restrictions on the movement of money have been imposed by the autocratic government of Christina Kirchner during the recent past, but on Friday, the government was said to be lifting the ban on the purchase of dollars, with an official rate of 8-to-1, and a 20% surcharge, pushing the "official" exchange rate closer to black market prices, though not equal to them. The new policy is said to take effect on Monday, though local chatter is that the government won't have enough dollars available by then to meet expected demand.
The black market is thriving in Argentina's cities, the Euro and US Dollar being the main currencies accepted for millions in hidden transactions. With inflation running at about 30% over the past year, this crisis seems to have legs, eventually resulting in full-blown currency rejection, prompting various economic, social and political problems, likely precisely what the overlords at the World Bank and IMF have in mind.
Argentina is Greece writ large, without bailouts. The take-away is that this is nothing short of economic warfare, with the citizenry being the victims via inflation, social unrest, political uncertainty, with the goal being having the government succumb to the demands of international bankers, who will grind the country down with crushing debt packages disguised as "aid."
Turkey Stew?
In a nutshell, Turkey, a country that is a geographic crossroad between Europe, Asia and the Middle East, is at more crossroads - economic, social and political - than its current leaders can handle. While the country is mostly Sunni Muslim, most of its neighbors to the South (Syria, Iran and Iraq) are Shiite. On the other side to the West is Europe, and the struggle to admit Turkey to the EU has been ongoing for nearly a decade.
The rapid devaluation of the lira, the country's official currency, was a design of European technocrats, who seek to weaken the country's finances to a point at which acceptance of the Euro as the "new" currency would be greeted with cheers of economic progress and stability, though opponents of entering into full-blown Euro acceptance consider that a move characteristic of failure, and point to the loss of sovereignty that would result.
To the North, lies Georgia, Russia and, across the Black Sea, the Ukraine, which has descended into a condition close to civil war, mostly over the issue of whether to join the European Union or throw in with Russia, which holds sway over the country's gas supply. This is somewhat of the same situation facing the Turks and makes the situation all the more confusing. With so much turmoil in the region already, it wouldn't take much of a spark to turn Turkey into a pretty large battlefield, some of it, mostly the southern region, already torn up by the Syrian conflict.
It doesn't take much imagination to see the Turkish situation spiraling wildly out of control. Al Queda already runs arms and terrorists through the country, and Russia also smuggles weaponry to Syria through it. If Turkey were to erupt into violence, one could easily see a wide swath of nations - from Egypt all the way to the Ukraine - as a war zone, much of it already engulfed by violence.
The Wider View
If the situation in Turkey, Syria and the Ukraine wasn't enough to destabilize markets, Argentina and the brewing banking crisis in China certainly have to be rankling the money-handlers.
Here is a brief clip and transcript (about eight minutes) that describes the shadow banking problems in China. Essentially, shadow banking enterprises are financing loans made to companies who borrowed from official channels and have run out of credit or the ability to borrow more on good terms from China's official banking system has been exhausted. The issue is one of rolling over credit in order to avoid default, but, as the article explains, China is going to slow and some industries will be negatively affected, and whole businesses shuttered.
With the difficulty of getting straight information out of China still a huge problem, it's unclear how bad China's debt-to-GDP ratio has become, though it is certainly more than the officially reported 125%.
Of course, with debt-to-GDP at that level or higher in the bulk of developed and emerging nations, China's problems just add to the mix, though it's like dropping a whole stick of butter into a small bowl of flour and milk. It's so big, it threatens to clog up the entire operation and that's what is most worrisome.
There are, naturally, many more reasons why stocks plunged on Friday, from Italy's unemployment at an all-time high of 12.7%, to Spain's unemployment dwarfing that, at 26.8%.
Other indicators include the Baltic Dry Index (BDI), which collapsed in the two weeks after the holidays by an unprecedented amount, and, China's most recent PMI, which the financial media give a wide berth for the cause of the selloff in US stocks. The PMI fell to 49.6, indicating contraction in the manufacturing sector, the lifeblood of the Chinese - and to a great degree, the global - economy.
Here at home, retailers are feeling the pinch from a horrid holiday shopping season, the worst since 2008. JC Penny and Sears have already announced store closings and layoffs. Target and Wal-Mart announced layoffs on Friday, though they were small in number.
Technicals Matter
Technically, US indices are in pretty good shape, overall. The Dow and S&P had been making new all-time highs at the end of 2013, but the performance in the first three full weeks of 2014 are not encouraging. With Friday's decline, the Dow ripped right through its 50-day moving average. On just Thursday and Friday, the Dow more than tripled its losses for the year. The two-day decline was more than 500 points, a number that represents a roughly 3% loss, but, since the index has risen so high, the point total of over 300 points on Friday has a psychological impact.
Imagine the Dow Jones Industrials as a 1600-pound animal, maybe a small hippo. A one-percent loss in weight - 16 pounds - wouldn't seem to matter much, but a 3% loss is close to 50 pounds, possibly worth notice. If the animal were to lose 10% (a correction, in market terms), or 160 pounds, veterinarians would be consulted, and, if a 20% loss in weight were to occur (indicative of a bear market), some might the 320-pound loss in weight was indicative of the animal having a severe disease.
The S&P likewise fell through its 50-day moving average, though the NASDAQ remained in suspended animation above its 50-day moving average, buoyed by Netflix and Google in recent days, though that position may be in jeopardy if the declines from the past few weeks persist and morph into something larger.
Key support areas on the Dow are at 15,450 and 1700 on the S&P, both the 200-day moving averages.
Also, the number of new lows exceeded new highs on Friday, the first time that has happened this year.
Forward Thinking
With earnings season in full gallop, next week should provide more fireworks. Apple and Google will be reporting, and those will be the big ones to watch. Since they are techs, they'll likely give the markets some pause and reason to ignore the declines of the past week, but the big enchilada is the two-day FOMC meeting on Tuesday and Wednesday, January 28 and 29, Ben Bernanke's last.
While the Fed didn't expressly say so when it announced the tapering of their bond purchase program by $10 billion last month, the fear on the Street is that they will announce another $10 billion reduction, bringing their monthly purchases down to $65 billion in February, from $85 billion in December.
Nowhere in its press release from last month
did the Fed even mention further cuts, so a reasonable expectation is that they will continue asset purchases at a rate of $75 billion per month, which, seriously, is more than enough, though market crybabies would like to see even more artificial stimulus.
Interest rates are also normalizing again, with the 10-year dropping to its lowest yield since prior to the "taper" announcement, closing Friday at a yield of 2.72%
Essentially, the turnback on Friday wasn't such a big deal, though any downturn is viewed with skepticism since the Fed is still supplying so much liquidity. If stocks can't maintain their current valuations, it means one of a couple of things. One, the Fed's policies are a complete failure, or, two, the economy is much weaker than anyone thought, or, three, stocks ran up to a highly overbought level and investors are just taking profits, albeit, at a rapid pace.
What's important to watch is how stocks act next week, the final week in January. The Fed announcement will be key, though they shouldn't influence markets considerably unless they taper even more, an unlikely event. If the major indices make it through the week without losing much or actually making gains, keep a close eye on the recent all-time highs on the S&P and the Dow. If these levels are not surpassed, that's a plain signal of a primary bear market. That should surprise nobody except perma-bulls, because this bull market will be a full five years old - 60 months - on March 9th. If the market makes a V bottom and rebounds past the highs (a correction and rebound), short at your own risk, because that would be a sign of a continuing liquidity-driven push higher.
One other indicator to consider is the January Barometer, which, at this juncture, looks certain to be negative. The direction of stocks in January has about a 90% correlation to direction for the rest of the year, so, unless there's a miracle rally this coming week, 2014 appears to be heading South.
For now, it's too early to call direction, but this brief summary of some of the key issues should provide background for all investors.
The other part of today's exercise is to see if there is anything that might give a clue to the future, and as to whether the massive selloff on Friday (and all week on the Dow) was a one-off, or if it is going to lead to more dislocations in stocks, a further decline, a 10% correction, or a bear market, which is where the fun really starts for those bent on restoring some semblance of sanity to stock valuations.
Yes, Cry for Argentina
Argentina, a country already shut off from foreign credit markets (could be a blessing in disguise) after the financial collapse of 2001-2002, has been in crisis mode for most of the past three years, with citizens unable to purchase US Dollars with their local currency, the peso, except on black markets, where the going rate is roughly 11-1 or 12-1.
Other restrictions on the movement of money have been imposed by the autocratic government of Christina Kirchner during the recent past, but on Friday, the government was said to be lifting the ban on the purchase of dollars, with an official rate of 8-to-1, and a 20% surcharge, pushing the "official" exchange rate closer to black market prices, though not equal to them. The new policy is said to take effect on Monday, though local chatter is that the government won't have enough dollars available by then to meet expected demand.
The black market is thriving in Argentina's cities, the Euro and US Dollar being the main currencies accepted for millions in hidden transactions. With inflation running at about 30% over the past year, this crisis seems to have legs, eventually resulting in full-blown currency rejection, prompting various economic, social and political problems, likely precisely what the overlords at the World Bank and IMF have in mind.
Argentina is Greece writ large, without bailouts. The take-away is that this is nothing short of economic warfare, with the citizenry being the victims via inflation, social unrest, political uncertainty, with the goal being having the government succumb to the demands of international bankers, who will grind the country down with crushing debt packages disguised as "aid."
Turkey Stew?
In a nutshell, Turkey, a country that is a geographic crossroad between Europe, Asia and the Middle East, is at more crossroads - economic, social and political - than its current leaders can handle. While the country is mostly Sunni Muslim, most of its neighbors to the South (Syria, Iran and Iraq) are Shiite. On the other side to the West is Europe, and the struggle to admit Turkey to the EU has been ongoing for nearly a decade.
The rapid devaluation of the lira, the country's official currency, was a design of European technocrats, who seek to weaken the country's finances to a point at which acceptance of the Euro as the "new" currency would be greeted with cheers of economic progress and stability, though opponents of entering into full-blown Euro acceptance consider that a move characteristic of failure, and point to the loss of sovereignty that would result.
To the North, lies Georgia, Russia and, across the Black Sea, the Ukraine, which has descended into a condition close to civil war, mostly over the issue of whether to join the European Union or throw in with Russia, which holds sway over the country's gas supply. This is somewhat of the same situation facing the Turks and makes the situation all the more confusing. With so much turmoil in the region already, it wouldn't take much of a spark to turn Turkey into a pretty large battlefield, some of it, mostly the southern region, already torn up by the Syrian conflict.
It doesn't take much imagination to see the Turkish situation spiraling wildly out of control. Al Queda already runs arms and terrorists through the country, and Russia also smuggles weaponry to Syria through it. If Turkey were to erupt into violence, one could easily see a wide swath of nations - from Egypt all the way to the Ukraine - as a war zone, much of it already engulfed by violence.
The Wider View
If the situation in Turkey, Syria and the Ukraine wasn't enough to destabilize markets, Argentina and the brewing banking crisis in China certainly have to be rankling the money-handlers.
Here is a brief clip and transcript (about eight minutes) that describes the shadow banking problems in China. Essentially, shadow banking enterprises are financing loans made to companies who borrowed from official channels and have run out of credit or the ability to borrow more on good terms from China's official banking system has been exhausted. The issue is one of rolling over credit in order to avoid default, but, as the article explains, China is going to slow and some industries will be negatively affected, and whole businesses shuttered.
With the difficulty of getting straight information out of China still a huge problem, it's unclear how bad China's debt-to-GDP ratio has become, though it is certainly more than the officially reported 125%.
Of course, with debt-to-GDP at that level or higher in the bulk of developed and emerging nations, China's problems just add to the mix, though it's like dropping a whole stick of butter into a small bowl of flour and milk. It's so big, it threatens to clog up the entire operation and that's what is most worrisome.
There are, naturally, many more reasons why stocks plunged on Friday, from Italy's unemployment at an all-time high of 12.7%, to Spain's unemployment dwarfing that, at 26.8%.
Other indicators include the Baltic Dry Index (BDI), which collapsed in the two weeks after the holidays by an unprecedented amount, and, China's most recent PMI, which the financial media give a wide berth for the cause of the selloff in US stocks. The PMI fell to 49.6, indicating contraction in the manufacturing sector, the lifeblood of the Chinese - and to a great degree, the global - economy.
Here at home, retailers are feeling the pinch from a horrid holiday shopping season, the worst since 2008. JC Penny and Sears have already announced store closings and layoffs. Target and Wal-Mart announced layoffs on Friday, though they were small in number.
Technicals Matter
Technically, US indices are in pretty good shape, overall. The Dow and S&P had been making new all-time highs at the end of 2013, but the performance in the first three full weeks of 2014 are not encouraging. With Friday's decline, the Dow ripped right through its 50-day moving average. On just Thursday and Friday, the Dow more than tripled its losses for the year. The two-day decline was more than 500 points, a number that represents a roughly 3% loss, but, since the index has risen so high, the point total of over 300 points on Friday has a psychological impact.
Imagine the Dow Jones Industrials as a 1600-pound animal, maybe a small hippo. A one-percent loss in weight - 16 pounds - wouldn't seem to matter much, but a 3% loss is close to 50 pounds, possibly worth notice. If the animal were to lose 10% (a correction, in market terms), or 160 pounds, veterinarians would be consulted, and, if a 20% loss in weight were to occur (indicative of a bear market), some might the 320-pound loss in weight was indicative of the animal having a severe disease.
The S&P likewise fell through its 50-day moving average, though the NASDAQ remained in suspended animation above its 50-day moving average, buoyed by Netflix and Google in recent days, though that position may be in jeopardy if the declines from the past few weeks persist and morph into something larger.
Key support areas on the Dow are at 15,450 and 1700 on the S&P, both the 200-day moving averages.
Also, the number of new lows exceeded new highs on Friday, the first time that has happened this year.
Forward Thinking
With earnings season in full gallop, next week should provide more fireworks. Apple and Google will be reporting, and those will be the big ones to watch. Since they are techs, they'll likely give the markets some pause and reason to ignore the declines of the past week, but the big enchilada is the two-day FOMC meeting on Tuesday and Wednesday, January 28 and 29, Ben Bernanke's last.
While the Fed didn't expressly say so when it announced the tapering of their bond purchase program by $10 billion last month, the fear on the Street is that they will announce another $10 billion reduction, bringing their monthly purchases down to $65 billion in February, from $85 billion in December.
Nowhere in its press release from last month
did the Fed even mention further cuts, so a reasonable expectation is that they will continue asset purchases at a rate of $75 billion per month, which, seriously, is more than enough, though market crybabies would like to see even more artificial stimulus.
Interest rates are also normalizing again, with the 10-year dropping to its lowest yield since prior to the "taper" announcement, closing Friday at a yield of 2.72%
Essentially, the turnback on Friday wasn't such a big deal, though any downturn is viewed with skepticism since the Fed is still supplying so much liquidity. If stocks can't maintain their current valuations, it means one of a couple of things. One, the Fed's policies are a complete failure, or, two, the economy is much weaker than anyone thought, or, three, stocks ran up to a highly overbought level and investors are just taking profits, albeit, at a rapid pace.
What's important to watch is how stocks act next week, the final week in January. The Fed announcement will be key, though they shouldn't influence markets considerably unless they taper even more, an unlikely event. If the major indices make it through the week without losing much or actually making gains, keep a close eye on the recent all-time highs on the S&P and the Dow. If these levels are not surpassed, that's a plain signal of a primary bear market. That should surprise nobody except perma-bulls, because this bull market will be a full five years old - 60 months - on March 9th. If the market makes a V bottom and rebounds past the highs (a correction and rebound), short at your own risk, because that would be a sign of a continuing liquidity-driven push higher.
One other indicator to consider is the January Barometer, which, at this juncture, looks certain to be negative. The direction of stocks in January has about a 90% correlation to direction for the rest of the year, so, unless there's a miracle rally this coming week, 2014 appears to be heading South.
For now, it's too early to call direction, but this brief summary of some of the key issues should provide background for all investors.
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