Where's the Money? Sellers Swamp Market Late on Last Day of May

The only major index that finished up on the last day in May was the Nikkei, but, that index closed the month in negative territory - not by much - but that was a result the "unlimited" QE by the BOJ was supposed to make impossible.

Impossibility. It's a word tossed around until the impossible become possible, then probable, then actually happens. The Titanic sank. Buster Douglas beat Mike Tyson. Secretariat lost (I was there, at the whitney Stakes at Saratoga in 1973). Sometimes, the Yankees don't make the playoffs, let alone win the world series.

As impossible as it may seem for the Dow Industrials to reverse course in the final 2 1/2 weeks of May and lose all the momentum supplied by $85 billion a month in bond purchases by the Fed, it happened. Unlimited money printing, when al is said and done, may not be the panacea for free market capitalism. In fact, it may be just the opposite, and Mr. Market may finally have seen enough, though we probably won't know, at the earliest, until Friday of next week, when the June employment data is released in the BIS non-farm payroll figures.

If this is the beginning of the end for failed central bank policy-making, that may take longer to discern.

In any case, stocks meandered in the early going on Friday, before settling into selling mode at 2:00 pm EDT, and really accelerating in the final hour of trade. There doesn't need to be a reason, just a sentiment, which could be a reality: that the general world economy is slow at best, receding, at worst.

It could be technical, since the US indices were making new all-time highs on just about a daily basis until just about a week ago.

The culprit could be bonds, as the 10-year's spike to 2.18 intra-day had some investors and speculators re-examining the stocks versus bonds paradigm.

Or it could be Ben Bernanke, whose exit strategy from the relentless easy money will be to retire from the chairmanship of the Federal Reserve. We wish him... well, we're not going there.

In any case, stocks sold off to give the Dow and S&P back-to-back losing weeks for the first time this year, with possibly more to come. Volume on the day was quite robust, the A-D line was better than 4:1 losers over winners, and, no, the number of new 52-week lows did not exceed the new highs, but it was close.

To finish off what could be a watershed week, here's Dan Hicks and His Hot Licks performing part of today's title, "Where's the Money" from the 1972 album of the same name:


Dow 15,115.57, -208.96 (1.36%)
NASDAQ 3,455.91, -35.38 (1.01%)
S&P 500 1,630.74, -23.67 (1.43%)
NYSE Composite 9,302.27, -157.79 (1.67%)
NASDAQ Volume 1,879,071,500
NYSE Volume 4,366,197,000
Combined NYSE & NASDAQ Advance - Decline: 1358-5007
Combined NYSE & NASDAQ New highs - New lows: 215-182
WTI crude oil: 91.97, -1.64
Gold: 1,392.60, -18.90
Silver: 22.24, -0.447

Money, Money Everywhere, But Not a Buck to Lend

The world is awash in liquidity, but nobody seems to have any money.

At least that is the case for the 90% of Americans - and probably 95% of the rest of the world - that don't have access to easy money from central banks around the world.

Consider today's action by the Bank of Japan's new finance minister Haruhiko Kuroda, pladging unprecedented monetary stimulus by doubling Japan's central bank balance sheet by the end of 2014 through outright purchases of government bonds, ranging anywhere from short term notes to the 40-year Japanese bond.

The move puts Japan on a par with the mad money printer, Ben Bernanke, and in the same camp as the ECB's Mario Draghi, who vowed last year to do anything possible to save the Euro.

Such policies, like the Fed's $85 billion monthly purchases of treasuries and MBS (near-worthless), would have been unheard of just ten years ago, but today they are accepted as matter-of-fact as the bank heads continue trying to prop up zombie banks that have been bankrupt since 2008 (1992 in Japan's case) and governments which made promises to their people in the form of health care and retirement benefits that are slowly but surely bankrupting their entire nations.

These policies are doomed to fail, as they inflate various economies, crushing the purchasing power of the average citizen to a point at which many are priced out of mere survival. Ergo, the 49 million Americans receiving food stamps, unprecedented numbers on disability or welfare, programs which strip away the dignity of the individual, making them wards of the state.

Governments worldwide cannot balance their budgets due to these absurd entitlement programs, yet common people go about their business like the legendary "Annie Hall," tripping through life, dismissing any pitfalls with a cheery "la-dee-da."

Wall Street and the markets in Japan, London and Europe are no different. Obvious economic headwinds, like today's massive miss on first time unemployment claims (385,000 on expectations of 345K) are simply shrugged off as investors have no other place to put money to work but in risky stocks, though the correct strategy in times of impending hyper-inflation would be to park in cash and tangible assets such as land, gold, silver and productive machinery, because today's prices will look like peanuts compared to what people will be paying once the inflation tiger is unleashed.

Thus far, central bankers have been lucky. Inflation hasn't been all that ferocious, though spikes in oil, gas, food and other commodities have already been notable. Keeping inflation in line has been the stagnant to negative growth of incomes. With less money, people simply can't afford to splurge, and if less money is chasing the same amount of goods, prices will remain relatively stable, though that certainly cannot be guaranteed with the incredible amount of liquidity being force-fed into the system.

Also aiding their efforts is the fact that most of the inflation has been in stocks, which are ridiculously priced. All this may be coming to an abrupt ending with first quarter earnings reports. Many companies are just barely making their estimates even though the bar continues to be lowered. At some point, investors will demand more, along the lines of 15% year-over-year earnings acceleration, higher dividends and better margins, all the things a healthy market economy would normally expect.

Earnings begin trickling out on Monday, but before that, Friday's non-farm payroll report for March needs to be presented, and, from the looks of the close today, nobody is really sweating that.

After the last three weeks of unemployment figures, however, maybe they should.

Dow 14,606.11, +55.76 (0.38%)
NASDAQ 3,224.98, +6.38 (0.20%)
S&P 500 1,559.98, +6.29 (0.40%)
NYSE Composite 9,027.83, +44.44 (0.49%)
NASDAQ Volume 1,470,237,625
NYSE Volume 3,566,827,500
Combined NYSE & NASDAQ Advance - Decline: 4003-2357
Combined NYSE & NASDAQ New highs - New lows: 123-65
WTI crude oil: 93.26, -1.19
Gold: 1,552.40, -1.10
Silver: 26.77, -0.03