Weekend Wrap: Trade, Recession, Currency Fears Stoke Week-Ending Sell-Off

These days, it doesn't take much to spook markets.

That stands to reason, with all of the US major indices near all-time highs conjoined with a divisive political environment, global trade tensions, and a corrupted financial system run by central bankers bent on the globalization of currencies and nations.

Thus, on Friday, after Fed Chairman, Jay Powell, spoke to the assembled cognoscenti at Jackson Hole, Wyoming, and President Trump doubled down on his tariff mandate towards China, the runners, scalpers, and money-changers on Wall Street were so spooked that one might have assumed they'd seen the ghost of legendary China short-seller, Jim Chanos, stalking the trading floor, even though - as far as is known - Mr. Chanos is still alive and kicking the shorts out of the Chinese market.

Stocks had opened only marginally in the red on Friday and were improving into the eleven o'clock hour before suddenly reversing course, heading into the abyss, the Dow shedding more than 400 points in a matter of minutes.

With Wall Street struggling to regain some semblance of balance and propriety, stocks drifted lower, cratering in the final hour with the Dow Industrials down nearly 750 points before gaining back another hundred into the closing bell.

It was ugly. It was impressive. At the end of the day, it seemed completely appropriate.

The fuel for growth was fading fast and has been since well before Friday's melt-down. All of the fancy tricks the Fed and their central banking buddies had employed to goose equities skyward over the past decade were being exposed as fraudulent, artificial, unnecessary, and eventually harmful to the operation of what previously had been free markets.

Wall Street has lost confidence in the Fed's forward guidance, which, according to Mr. Powell, is decidedly negative. The Trump tariffs are a sideshow to the already-failing economies of the developed nations, slowing precipitously and taking down the emerging giants of China and India with them.

Over the weekend, while the leaders of the G7 powerhouse nations debate and will likely confirm that globalization is a crumbling edifice of one-percenter greed and that the world needs to be adjusted toward something that serves people other than just the mega-corporate interests and the skimming habits of the ultra-wealthy.

As has been of considerable mention here the past few days, negative interest-bearing sovereign debt instruments - those wildly popular $19 trillion worth of bonds - are ringing the death-knell of fiat currencies and central bank interference with the normal operation of capitalist design.

For now, the shock waves of fading confidence in the global Ponzi and counterfeit schemes of stock buybacks, quantitative easing, and negative interest rates is contained largely to the Wall Street crowd, but, it is spreading and the uproar will increase as stocks fall, ordinary people worry about their jobs and their futures, and the central bankers moan and cajole and mumble and stumble and fall.

Remnants of the global economic structure previously known as Bretton Woods are being shredded on a daily basis. A new world order is on the way, but any transition - like the one which dashed national currencies into one euro a few decades past - is going to be painful and consequential.

Sadly, when all the smoke is blown away and the dust settled, the planet will still largely be governed by the same morons and their predecessors who brought all of this upon us and their economic agents of destruction. The new currency regiment will be talked about as more fair, more balanced, more equitable, but those in the know will have already understood that it will be more of the same, damaging to the middle classes while barely scraping off a scintilla of the assets held by the rich and powerful.

Americans, Europeans, Japanese and all citizens are being shafted, and it's going to hurt.

The long-delayed reckoning from the global crisis of 2008 is about to be unleashed. Unless one holds hard assets such as precious metals, real estate, and/or income-producing assets like a productive business or needed service, one is likely to feel more pain than would otherwise be prescribed by the lords of finance.

At the Close, Friday, August 23, 2019:
Dow Jones Industrial Average: 25,628.90, -623.34 (-2.37%)
NASDAQ: 7,751.77, -239.62 (-3.00%)
S&P 500: 2,847.11, -75.84 (-2.59%)
NYSE Composite: 12,416.45, -272.01 (-2.14%)

For the Week:
Dow: -257.11 (-0.99%)
NASDAQ: -144.23 (-1.83%)
S&P 500: -41.57 (-1.44%)
NYSE Composite: -163.96 (-1.30%)
Dow Transports: -227.58 (-2.28%)

FOMC Focus: Will Stocks Change Direction After Labor Day?

Today's headline offers a provocative suggestion, though the simple answer to the question is a flat-out "NO," simply because the overtly political Federal Reserve will not - under an circumstances - raise interest rates in September.

That is almost so widely accepted within the financial community as to make it nearly a fact, a fait accompli, a gospel truth.

There are any number of reasons why the FOMC will not raise the federal funds rate even one basis point at their upcoming meeting on September 20 and 21, not the least of which is the assumption that such a rash move would derail the presidential bid by the status quo candidate, the fair-haired-soon-to-be-liar-in-chief, Hillary Clinton.

Naturally, that's a one-sided argument which has nothing to do with economics, but the Fed has other issues behind their upcoming decision to stand pat on rates for the foreseeable future.

Among these issues are the ongoing candidacy of Mr. Donald J. Trump, who is seen as anathema to anything and everything establishment, and that means the Fed itself. A Trump victory in November would almost certainly foment much in the way of chaos, including a pre-emptive attack from the Fed itself, sensing an almost perfect opening to raise rates and crash the market, maybe even do away with the entire post-Bretton Woods arrangement via a wholesale financial collapse.

That might be fun, but the projections fro the US economy going forward are not, have not been for some time and will not be. That's the main reason the Fed is stuck at the near-zero bound, because not only the US economy, but that of almost all developed nations are not growing. Rather, they are growling with intense citizen upset, declining labor utilization rates and a demographic wall that current policies can and will never scale.

The Fed is boxed in, as are all central banks. They can't do anything except buy up more overpriced assets even though that effort has failed to produce their highly-anticipated inflation and associated growth. One might say that all the central bank coddling of the system has produced is a massive over-supply of everything and a deflationary vortex that challenges their Keynesian orthodoxy.

The Fed - unless Hillary Clinton is elected president, and even that's no clincher - is toast.

Thursday's Results:
Dow Jones Industrial Average
18,419.30, +18.42 (0.10)

NASDAQ
5,227.21, 13.99 (0.27%)

S&P 500
2,170.86, -0.09 (0.00%)
^NYA

NYSE Composite
10,771.91, +7.16 (0.07%)