Trump Ramps Up Social Media Battle; Argentina Continues Defaulting; Gold, Silver Premiums Persist

Not that anybody should be concerned, but Argentina defaulted on a $500 million interest payment a week ago, on May 22nd. Money Daily had been covering the story but slipped up and missed the breaking news over the Memorial Day Weekend. No excuse. We blew it. 20 lashes.

Anyhow, it's not over down Buenos Aires way, as representatives from both sides - the Argentine government and a gaggle of international creditors - continue to seek a solution, setting a June 2nd date for a plan to restructure $66 billion of the country's debt. Realistically, this being the ninth time Argentina has defaulted on its obligations and the third time this century, hopes of reaching any kind of deal that satisfies both the creditor and debtor seems well removed from the realm of the possible.

President Trump issued another executive order Thursday afternoon, this one coming after Twitter tagged a couple of his tweets with fact-checks.

The order calls for new regulations under Section 230 of the Communications Decency Act "to make it so that social media companies that engage in censoring or any political conduct will not be able to keep their liability shield," Trump said.

The tweets in question concerned Trump's opposition to mail-in ballots in the upcoming November election, which he believes would result in a cascade of fraud. Twitter added some fact-checking language stating that fraud isn't an issue with absentee ballots.

That, and his announcement of a press conference Friday to address growing concerns over China's dispute with Hong Kong (and now India), sent markets tumbling into the red after making small gains in Thursday's session.

Escalating the situation, early Friday morning, Trump tweeted about the ongoing violence in Minneapolis and elsewhere:

....These THUGS are dishonoring the memory of George Floyd, and I won’t let that happen. Just spoke to Governor Tim Walz and told him that the Military is with him all the way. Any difficulty and we will assume control but, when the looting starts, the shooting starts. Thank you!

— Donald J. Trump (@realDonaldTrump) May 29, 2020

Accessing the President's tweet on the Twitter platform brings up the following message: This Tweet violated the Twitter Rules about glorifying violence. However, Twitter has determined that it may be in the public’s interest for the Tweet to remain accessible. Beside it is a button that gives the user the option to display the tweet or keep it hidden. That seems to be an exercise in futility on Twitter's part, possibly drawing even more attention to the tweet in question than had they just left it alone and allowed the public to decide and debate its appropriateness.

Twitter continues to dig its own grave because the President certainly isn't going to back down when he has the complete arsenal of the Department of Justice at his disposal. It's become rather obvious to just about everybody that Twitter, along with their social media counterparts, Google, Facebook, and others, that these companies have abused their free reign over what gets published and where on the internet for a long time without any oversight. Having set up their own rules and guidelines they've often trampled on first amendment rights of users, citing their status as private companies as cover for their subjective agenda.

It would appear that President Trump is serious about limiting their ability to shape opinion. It's certain that the issue will end up in the courts and may take years to resolve. Meanwhile, the mainstream TV networks, ABC, NBC, CBS, CNN, and Fox, and newspapers such as the New York Times and Washington Post continue to spread half-truths, fake news, and outright lies on a regular basis. Whether the president's wrath extends to limitations or punishments for biased reporting in other areas of the media remains to be seen, but there is sure to be intense focus on the media leading up to the November elections.

Elsewhere, confusion reigns supreme in the precious metals space. Since mid-March there has been a schism between the futures price of gold and the spot price, with the gap sometimes great enough to encourage arbitrage in a relatively risk-free trade. Usually, the spot price is a few dollars below the futures bid, but the spread has widened and exhibited volatile behavior recently. Silver has also joined the party, with spot and futures prices deviating sporadically.

Of course, the spot and futures prices are little more than bookmarks these days compared to the premium prices being paid for actual physical metal on eBay. Gold and silver are both sporting heavy premiums, with gold selling at the one ounce level at $120-180 over spot and one ounce silver going for $23-30 when the spot price has been hovering in the $16-17 range. Silver, probably the most undervalued commodity in the world, has approached 100% premiums in recent days.

As more people become aware of the fraudulent nature of futures trading where major players such as JP Morgan Chase are allowed to flaunt size limits and engage in spoofing, naked shorting, and are never forced to stand for delivery, physical markets are becoming the go-to for investors with serious intentions of protecting their wealth with precious metals.

Yields in the treasury space rose across the curve on Thursday, with the 30-year bond hitting 1.47%, a two-month high. The spread between the 2-year note (0.17%) and the 30 is now 130 basis points, 10 points higher than a week ago. Tighter lending conditions may not be in the Fed's best interests at this time, but the present issue is likely one of supply. The Fed has been begging fiscal authorities (congress and the president) to unleash more stimulus spending so as to facilitate the Fed's monetizing of the debt, spreading its largesse to equity market participants.

If the government isn't going to ramp up deficit spending, the Fed will be looking over its shoulder at rising rates with too little supply coming to market. This is just one of the unintended consequences of massive money printing on a global scale. At some point, with all hands outstretched, there's not enough to go around and a struggle is engaged for the scraps thrown to the market. The Fed is committed to buying everything, but if there's not enough everything around, they risk severe impairment of credit markets.

Congress needs to get on the bandwagon with all due alacrity lest the Fed run out of debt to monetize, jeopardizing the massive stock rally they have recently engendered.

Finally, in spite of the price of oil (once again, on the futures market) having roughly doubled over the past month, and with it, rising gas prices at the pump, there's still a massive glut on the supply side and slack demand against it. WTI crude in the $32-36 range is a resistance level the market will find difficult to overcome. Economies aren't roaring back to life following the global lockdowns, rather, they're reengaging in fits and starts, and not nearly at capacity. The major oil producers have done their level best to halt the price decline, but there's only so much production that can be cut from counties whose very existence relies upon regular selling of crude oil.

The summer, if authorities allow free movement, should be affordable, at least as concerns automotive touring.

Friday's trading session opens in a little more than an hour from this posting. With the Dow ahead by nearly 1000 points this week, unless there's a major pullback on Friday, Wall Street will shove another fat week of gains into America's face.

At the Close, Thursday, May 28, 2020:
Dow: 25,400.64, -147.63 (-0.58%)
NASDAQ: 9,368.99, -43.37 (-0.46%)
S&P 500: 3,029.73, -6.40 (-0.21%)
NYSE: 11,804.91, -32.62 (-0.28%)

Weekend Wrap: This Is Bad; Oil Crashes; Stock Futures Limit Down; Global Market Panic in Progress

Thanks to a late-day ramp on Friday afternoon, the week turned out to be mostly positive for the investor class, though it certainly didn't seem to be that way most as the days wore onward.

With a 600-point buying spree on the Dow Jones Industrial Average - which pulled all the other indices higher as well - stocks finished with gains instead of substantial losses. After a week of wild swings, the mood had turned ugly, accentuated by cascading drops on Thursday and Friday at the opening bells both days and concerted selling in airline stocks, banks, and hospitality.

As pronounced as the near-panic over the prior five trading sessions was, what's ahead on Monday will be worse by orders of magnitude.

Beginning with the coronavirus (COVID-19) decimating economies and social structure from China to Italy to South Korea, Iran, and beyond, slumping demand and forecasting of a bleak near-term future prompted extreme action from Saudi Arabia over the weekend. On Friday, when Russia refused to go along with a planned 1.5 million barrels a day reduction in crude production by OPEC+ nations, the Saudis decided to put the screws to everyone in the oil business by slashing their rates and ramping up production.

The impact of this momentous decision on Saturday was immediately felt across not just the oil futures markets but equity and credit markets around the world. With all major indices closed as usual on Sunday, focus was attuned to futures, which were being hammered lower by as much as seven percent in some cases. In the US, futures trading was halted when the Dow, S&P, and NASDAQ futures fell by five percent, otherwise known as limit down.

Crude futures were down by extreme amounts. WTI crude was last seen at $32.07 per barrel, a 22% loss from Friday, when it was selling in the low 40s per barrel.

Bonds were being battered as well, with reports that the benchmark 10-year note was trading with a yield below 0.48% (at one point yielding an all-time low of 0.31%) and other bond yields were being destroyed in markets that began to open, first in Japan, China and the Far East, then to Europe. If fear of COVID-19 contagion was palpable, the contagion from the economic fallout had become all to real.

With US markets set to open in an hour, the condition is dire.

A quick rundown of the carnage on major indices around the world:

• NIKKEI (Japan) -5.07%
• 
  
• Straits Times Index (Taiwan, Pacific Rim) -6.03%
• 
  
• SSE Composite (China) -3.01%
• 
  
• Hang Seng (Hong Kong) -4.23%
• 
  
• BSE Sensex (India) -5.17%
• 
  
• All Ordinaries (Australia) -7.40%
• 
  
• KOSPI (South Korea) -4.19%
• 
  
• MOEX (Russia) -3.45
• 
  
• Jakarta Composite (Indonesia) -6.58%
• 
  
• FTSE Bursa (Malaysia) -3.97%
• 
  
• DAX (Germany) -7.00%
• 
  
• CAC-40 (France) -7.14%
• 
  
• FTSE 100 (England) -6.93%
• 
  
• EuroNext 100 (Europe composite) -7.50%

Suppression of the precious metals, the only remaining asset class that may hold some value, continues unabated as global economies come under severe pressure. Gold gained marginally, to $1678.00 per ounce, following a banner performance last week. Silver is under even more pressure, trading at $16.83 on futures markets, making a mockery of the gold/silver ratio, which is nearly 100:1. In more measured times - as in all centuries prior to this one - the gold silver ratio was pretty steady at 12:1 to 16:1. The current measure is a bad joke on a bad day, told by bad people with nothing but evil intentions (central banks).

Silver would have to rise to $100 per ounce for the gold/silver ratio to be anywhere near historical norms. With gold on the verge of a major breakout above $2000 per ounce, silver should - some day, maybe - be worth over $150 per ounce or similar equivalent in some other currency.

Monday's open should be epic. The aftermath, and the expected coordinated response by central banks figures to be a complete clown show, highlighted by massive injections of cash, POMO, TOMO, market-neutral rates, negative rates, and eventually, some collapsing banks. Couldn't happen to a more deserving crowd.

Money Daily will provide updates as time allows. Panic is a mild term for what's about to occur.

At the Close, Friday, March 6, 2020:
Dow Jones Industrial Average: 25,864.78, -256.52 (-0.98%)
NASDAQ: 8,575.62, -162.97 (-1.86%)
S&P 500: 2,972.37, -51.57 (-1.71%)
NYSE: 12,352.03, -240.97 (-1.91%)

For the Week:
Dow: +455.42 (+1.79%)
NASDAQ: +8.25 (+0.10%)
S&P 500: +18.15 (+0.61%)
NYSE: -28.94 (-0.23%)

Deflation, Followed by More Deflation

In its simplest terms, deflation is defined as a decline in the money supply, but, because of central bank meddling such as QE and ZIRP (Zero Interest Rate Policy), money supply isn't really an issue, but, where the money is going turns out to be the bogey.

For all the pumping the Fed and other central banks have done since the Lehman crash in 2008, inflation and growth have failed to materialize because the money is stuck in transmission lines between the central banks and the TBTF banks, who don't want to take the risk of loaning money to real people, preferring instead to speculate in stocks and reward their cronies with fat bounties, otherwise known as bonuses.

The three trillion dollars by which the Fed has expanded its balance sheet since 2008 hasn't found its way into the real economy. Meanwhile, governments, from municipalities on up to the federal level, have done their best to over-regulate and over-tax working people, causing further strain on the bulk of consumers. So, if money, on one hand, is stuck in transmission, and taxes and fees are going up on the other hand, with incomes stagnant or falling, people have less to spend, and make their spending choices with just a little bit more prudence.

Depending on your age and circumstances, you may or may not be experiencing a bout of deflation this winter.

It really depends on what you spend your money on, where you live, where you shop, and what you do for a living.

Obviously, despite the best efforts of oil price manipulators to keep prices above $50 per barrel, the price of a gallon of gas has fallen precipitously over the past six months. That's a plus, as is the low price of natural gas. Consumers in the Northeast, experiencing one of the coldest winters in history, haven't had it too bad, because the cost of heating a home has dropped like a rock. It would be even better if Al Gore had actually been right about Global Warming. (Well, he did invent the internet, so you can't expect him to be perfect.)

Food prices have moderated, and, because fewer and fewer consumers are dining out, restaurants have been offering more specials. Food is one of those things that you really can't manipulate much, as it does have limited fresh shelf life. A decent summer growing season has kept a lid on food prices.

However, if you've got kids at all, and especially kids in college, you're likely feeling the pinch of higher tuitions and cost for college text books. Health care costs haven't moderated as much as the government would like you to think, either, so, if you have health insurance (Doesn't everybody? It's the LAW!), you're paying more.

Housing prices have moderated a bit, and bargains ca be found, especially in the Northeast and in rural areas. Farmland prices are coming down dramatically.

Behind all of this is the strong dollar, helped by the rest of the world, which is cutting interest rates and debasing currencies at a furious pace.

Thanks to Zero Hegde for the complete list of 21 central bank rate cuts so far in 2015:

1. Jan. 1 UZBEKISTAN
Uzbekistan's central bank cuts refi rate to 9% from 10%.

2. Jan. 7/Feb. 4 ROMANIA
Romania's central bank cuts its key interest rate by a total of 50 basis points, taking it to a new record low of 2.25%.

3. Jan. 15 SWITZERLAND
The Swiss National Bank stuns markets by discarding the franc's exchange rate cap to the euro. The tightening, however, is in part offset by a cut in the interest rate on certain deposit account balances by 0.5 percentage points to -0.75 percent.

4. Jan. 15 EGYPT
Egypt's central bank makes a surprise 50 basis point cut in its main interest rates, reducing the overnight deposit and lending rates to 8.75 and 9.75 percent, respectively.

5. Jan. 16 PERU
Peru's central bank surprises the market with a cut in its benchmark interest rate to 3.25 percent from 3.5 percent after the country posts its worst monthly economic expansion since 2009.

6. Jan. 20 TURKEY
Turkey's central bank lowers its main interest rate, but draws heavy criticism from government ministers who say the 50 basis point cut, five months before a parliamentary election, is not enough to support growth.

7. Jan. 21 CANADA
The Bank of Canada shocks markets by cutting interest rates to 0.75 percent from 1 percent, where it had been since September 2010, ending the longest period of unchanged rates in Canada since 1950.

8. Jan. 22 EUROPEAN CENTRAL BANK
The ECB launches a government bond-buying programme which will pump over a trillion euros into a sagging economy starting in March and running through to September, 2016, and perhaps beyond.

9. Jan. 24 PAKISTAN
Pakistan's central bank cuts its key discount rate to 8.5 percent from 9.5 percent, citing lower inflationary pressure due to falling global oil prices.

10. Jan. 28 SINGAPORE
The Monetary Authority of Singapore unexpectedly eases policy because the inflation outlook has "shifted significantly" since its last review in October 2014.

11. Jan. 28 ALBANIA
Albania's central bank cuts its benchmark interest rate to a record low 2%. This follows three rate cuts last year, the most recent in November.

12. Jan. 30 RUSSIA
Russia's central bank cuts its one-week minimum auction repo rate by two percentage points to 15 percent, a little over a month after raising it by 6.5 points to 17 percent, as fears of recession mount.

13. Feb. 3 AUSTRALIA
The Reserve Bank of Australia cuts its cash rate to an all-time low of 2.25%, seeking to spur a sluggish economy while keeping downward pressure on the local dollar.

14. Feb. 4/28 CHINA
China's central bank makes a system-wide cut to bank reserve requirements -- its first in more than two years -- to unleash a flood of liquidity to fight off economic slowdown and looming deflation. On Feb. 28, the People's Bank of China cut its interest rate by 25 bps, when it lowered its one-year lending rate to 5.35% from 5.6% and its one-year deposit rate to 2.5% from 2.75%. It also said it would raise the maximum interest rate on bank deposits to 130% of the benchmark rate from 120%.

15. Jan. 19/22/29/Feb. 5 DENMARK
Incredibly, the Danish central bank cuts interest rates four times in less than three weeks, and intervenes regularly in the currency market to keep the crown within the narrow range of its peg to the euro. (The won't last. See Switzerland.)

16. Feb. 13 SWEDEN
Sweden's central bank cut its key repo rate to -0.1 percent from zero where it had been since October, and said it would buy 10 billion Swedish crowns worth of bonds.

17. February 17, INDONESIA
Indonesia’s central bank unexpectedly cut its main interest rate for the first time in three years.

18. February 18, BOTSWANA
The Bank of Botswana reduced its benchmark interest rate for the first time in more than a year to help support the economy as inflation pressures ease. The rate was cut by 1 percentage point to 6.5%, the first change since Oct. 2013.

19. February 23, ISRAEL
The Bank of Israel reduced its interest rate by 0.15%, to 0.10% in order to stimulate a return of the inflation rate to within the price stability target of 1–3% a year over the next twelve months, and to support growth while maintaining financial stability.

20. Jan. 15, March 3, INDIA
The Reserve Bank of India surprises markets with a 25 basis point cut in rates to 7.75% and signals it could lower them further (they did, yesterday, to 7.50%), amid signs of cooling inflation and growth struggling to recover from its weakest levels since the 1980s.

21. Mar. 4, POLAND
The Monetary Policy Council lowered its benchmark seven-day reference rate by 50 basis points to 1.5%.

There will be more rate cuts and currency debasement, especially once the ECB gets its own QE program going. Note that all of these countries want to reflate, inflate or otherwise spur demand. The problem, as discussed above, is that people just aren't buying it, and they aren't buying. People have been paying down debt and saving, because, in an era of unprecedented central bank intervention and government regulation, the average Joe and Jane is uncertain about the future. It's a social phenomenon the economists can't compute.

Perhaps, in a free market without central bank meddling and government intervention into every aspect of one's life, capitalist economies might just have a chance.

Who knew?

Bottom line, central banks hate deflation, because it causes debt-driven economies to seize up and die, which is exactly why consumers should appreciate it.

Dow 18,096.90, -106.47 (-0.58%)
S&P 500 2,098.53, -9.25 (-0.44%)
Nasdaq 4,967.14, -12.76 (-0.26%)

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

Bernanke's Departure Marks the End of the Bull Market as Stocks Slump Again

There were so many moving parts to the economic and trading landscape since yesterday's close, it may be most instructive to review them in chronological order.

First, around 5:00 pm ET, the Turkish central bank raised overnight lending rates - along with all other key rates - from 7.75% to 12%. That's the overnight rate, the rate at which the central bank lends to member banks. Ouch! The move immediately sent US stock futures soaring, as though the global economy had been saved by this one clumsy, desperate stroke of policy.

At 9:00 pm ET, the impostor-in-chief, Barrack Obama, gave his fifth state of he union address, grossly misrepresenting the overall health and stability of the United States and glibly calling on American businesses to give employees a raise.

The euphoria spread to Asian markets, which were higher on the day, the Nikkei gaining more than 400 points on the session.

However, by the time the sun began to rise on Europe, the glad tidings had turned back to fear, as the Turkish Lira began to come under continued pressure from other currencies. Most European indices were trending lower, though marginally, with losses of under one percent on the majors.

By early morning in the US, the trend had completely reversed course, with stock futures deeply negative. At the open, the Dow Jones Industrials fell by roughly 120 points and held in that range until the 2:00 pm ET Fed policy announcement.

Widely expected to taper their bond purchases by another $10 billion per month, dropping the total to $65 billion, the Fed did exactly that, to the ultimate dismay of equity investors. Those who had made the correct call prior to the action continued pulling money out of stocks, rotating, as it seemed prudent, into bonds, which continued to fall in the aftermath of the Fed's announcement.

By the end of the session, stocks had put in severe losses once again, with the Dow leading the way lower. Bonds reacted by rallying sharply, the 10-year-note finishing at its lowest yield - 2.68% - in more than two months. In addition to bonds, the main beneficiary of the Fed's reckless monetary policy at this juncture were precious metals, as gold and silver rallied throughout the day.

What becomes of equities, sovereign currencies and the global economy as the Federal Reserve says good-bye to Ben Bernanke (this was his final FOMC meeting as Fed chairman) and hello to Janet Yellen, is now an open question, though with obvious clues.

If the Fed continues to taper its bond purchases by an additional $10 billion per month, they would be completely out of the market sometime around September, though it is unlikely that the Fed's path will be so resolute and straightforward. Already, it's apparent that stocks are going to suffer in the short term, while bonds enjoy a day or two in the sun. With returns on equities becoming more and more risky endeavors, bonds will appear as a safe have, forcing more investors to rush in, thus, sending yields lower.

While a crash in the equity market may not exactly be what the fed had in mind, it may be unavoidable, as there is no neat way to unwind their massive QE program which unfolded over the past five years and should come to an end. As reckless as was Bernanke's policy directives of QE and ZIRP, unwinding these programs is going to cause massive economic disruptions and further fuel a gathering global deflation trade. It only makes sense. If the Fed withdraws liquidity, economies will suffer. At least it's a plan that makes some sense, though nobody really wants to endure the pain that comes from such an unwinding. In the long run, it may be the only way back to something resembling normalcy.

The pain will be acute - and already has been so - in emerging markets, where most of the hot money had been headed during the Fed's money-printing spree. Look for developed nations to maintain an aura of stability, while the rest of the world, in places as diverse as South Africa, Turkey, Argentina, Brazil, Indonesia, Mexico, India and eventually, China, become somewhat ungled, economically-speaking.

With money fleeing these former hotbeds of investment, their currencies will devalue against the rest of the developed world, Japan, the US and Europe remaining as the centrist states and most stable currencies... for a while. The risk is contagion from the emerging markets into the developed, as the destruction of deflation engulfs the globe.

Bonds should fare well. An expectation of the US 10-year note below two percent would be rational. However, carry trades, such as a Euro-Yen or Dollar-Yen might lose much of their luster, the better plays to be short the emerging currencies.

Of course, with dislocations of capital everywhere, gold and silver should be afforded a top-shelf position, though their advance will, as always, be suppressed by the concerted efforts of the central banks. Still, in a devaluing environment, the ultimate price of the precious metals, as measured against various currencies, may indeed become a top choice for wealth preservation.

With the current path of the Fed set in place (for now, because they can, have, and will move the goal posts), it would be safe to conclude that the bull market in stocks has come to an abrupt end and money in 401k and other accounts of storage will become victims of a nasty, clawing bear that has no regard for the future, only a perception of the unfolding present, complete with companies that are presently overvalued, have limited earnings growth potential and have to be unwound.

Unless the major indices can find a way to turn the tide and rally past recent highs, the bull market, spurred on by vast wasted sums of money from the Federal Reserve and other sources, is over.

From a technical perspective, Wednesday's trade was an outright disaster. Declining issues led advancers by a 7:2 margin and new lows exceeded new highs for the third day in the last four.

DOW 15,738.79, -189.77 (-1.19%)
NASDAQ 4,051.43, -46.53 (-1.14%)
S&P 1,774.20, -18.30 (-1.02%)
10-Yr Note 100.26, +0.97 (+0.97%) Yield: 2.68%
NASDAQ Volume 2.05 Bil
NYSE Volume 3.93 Bil
Combined NYSE & NASDAQ Advance - Decline: 1289-4441
Combined NYSE & NASDAQ New highs - New lows: 66-128
WTI crude oil: 97.36, -0.05
Gold: 1,262.20, +11.40
Silver: 19.55, +0.049
Corn: 427.50, -4.50

India's Clumsy, Futile Attempts to Throttle Public Gold Purchases

1 kilogram = 35.2739619 ounces.

Why does this matter?

Because that's the amount of gold an Indian citizen is legally allowed to take into India after at least six months abroad.

In a fascinating story in the aftermath of the India government's harsh restrictions on the importation of gold, a plane from Dubai to the Indian airport at Calicut carried 80 passengers, each of them returning to their homeland with one kilogram of gold.

In dollar terms, the plane was carrying 2572.06 troy ounces of gold, valued at roughly $3,086,472 worth of gold if one uses $1200 per troy ounce as a baseline. The passengers were primarily laborers returning home from construction jobs in the Middle East. Full story, courtesy of the India Times here.

The actions by some of the more nefarious elements in Indian society point up the futility of governments' attempts to control money supplies, balances and trade in the face of independent people. All they ever end up doing is causing imbalances, which naturally favor those in control positions. Sadly, the bulk of the population doesn't see what's being done to their currencies and their freedoms until it is too late.

As it is in India, it is everywhere. Governments, once they have grown beyond their capacity to usefully serve the population, become nothing but a drag and anchor on society.

Thanks to oversize, bulky interference by government entities and their cohorts like central banks, besides the now near-daily ramping to new and newer all-time highs on the various US equity indices, there's not much worth reporting these days.

DOW 16,294.61, +73.47 (+0.45%)
NASDAQ 4,148.90 , +44.16 (+1.08%)
S&P 1,827.99, +9.67 (+0.53%)
10-Yr Note 98.45, +0.20 (+0.21%)
NASDAQ Volume 1.66 Bil
NYSE Volume 2.83 Bil
Combined NYSE & NASDAQ Advance - Decline: 4111-1647
Combined NYSE & NASDAQ New highs - New lows: 669-58
WTI crude oil: 98.91, -0.41
Gold: 1,197.00, -6.70
Silver: 19.41, -0.04
Corn: 434.25, +1.00

Stocks Slammed Again; 10-Year at 2.90%; Egypt Coming Apart

Make it four down days in a row and nine of the last 11 for the Dow Industrials, since making an all-time closing high of 15,658.36 on August 2nd, slipping today to the closest point to 15,000 since July 5th.

If one needs a catalyst or cause, it's Egypt. A former ally, the most populous Muslim nation in the Middle East, now up in flames and our government backing the wrong side. Tragic, complex and horrifying, the tableau playing out is enough to shatter the confidence of most of the globe.

Beyond the obvious implications of large nations devolving into anarchy and chaos, there are so many other issues - financial and political - roiling the markets, it is impossible to take all of them accurately into account. Suffice to say, it's a mess out there and politicians are about to make it messier, with a new round of budget battles and debt ceiling debate set to get underway in the nation's capitol.

On the global horizon, India is having a currency crisis, the Rupee falling to historic lows against the dollar as the Indian government attempts to limit and/or tax individual holdings of gold. It certainly will not work. India has the highest gold-ownership per capita on the planet.

Naturally, our very own Federal Reserve will not be outdone by foreign rivals. The Fed continues to tinker and experiment with the currency, becoming all-too-powerful a force in all markets, from commodities to stocks to treasuries.

Speaking of treasuries, the benchmark 10-year note touched 2.90% today, a 130-basis-point rise since May. Literally, nothing will destroy the economy better than uncontrollably-rising interest rates, and we have them across the curve.

It has long been said on this blog and elsewhere that these experimental attempts to revive a dead, decaying, US and global economy will not end well. The stark reality is that the global economy imploded in 2008. All the QE, ZIRP and presumptive actions by the Fed and other central banks is nothing but window dressing, the model in the storefront being a naked - and likely capitalist - pig.

If the carnage since 2008 has not been enough for this country to bear, imagine the pain as it's about to get worse, a lot worse.

Dow 15,010.74, -70.73 (0.47%)
NASDAQ 3,589.09, -13.69 (0.38%)
S&P 500 1,646.06, -9.77 (0.59%)
NYSE Composite 9,385.89, -79.70 (0.84%)
NASDAQ Volume 1,402,886,250
NYSE Volume 3,236,012,750
Combined NYSE & NASDAQ Advance - Decline: 1566-5077
Combined NYSE & NASDAQ New highs - New lows: 64-532 (how quickly it has turned!)
WTI crude oil: 107.10, -0.36
Gold: 1,365.70, -5.30
Silver: 23.17, -0.156

Dow Erases All 2012 Gains; Global Depression Dead Ahead

T.G.I.F., or, more succinctly, thank God this Friday is over.

After the release of some really poor employment numbers in May's non-farm payroll report from the BLS, stocks fell off a cliff right from the open and continued to slide all day in the single worst trading session since last November.

With only 69,000 net new jobs created in May - well below the average estimate of 150,000 - the false "recovery" meme from just a few months ago was completely eviscerated as a rash of poor data which had been flowing to the market all week culminated in the worst employment figures in a year.

In addition to the unemployment rate rising to 8.2% - the first rise in over a year - March and April data were revised lower. March job growth total was reduced from 154,000 to 143,000 and the April number slashed from 115,000 to just 77,000.

While the US had its own woes, the deepening recession in Europe only made matters worse as Markit's Eurozone Manufacturing Purchasing Managers' Index (PMI) dropped to 45.1 in May from 45.9 in April, its lowest level since June 2009. The index's latest reading was all the more frightening as data showed manufacturing in France and Germany - supposedly the two strongest members of the EU - slowing at its fastest rate in nearly three years.

Even in developing nations like China, India and Brazil, growth has been slowing and the pace of decline continues to gather momentum. Since the economies of these and other developing nations depend greatly on exports to Europe and the US, the slowdown of the developed economies produces a knock-on effect to the exporters.

The only bright spot of the day came from automakers, which saw double-digit sales gains when compared to a year ago, though all of the US figures were below expectations. GM posted a gain of 11% from May of last year, Ford sales were up 13%, Chrysler, 30%, while Toyota, rebounding from the tsunami and Fukushima nuclear disaster of a year ago, saw a sales increase of 87%.

The Dow Jones Industrials and NYSE Composite index each saw all of 2012 advances wiped out as of the close today. The S&P 500 is just 20 points better than the close on December 30, 2011, while the NASDAQ still sports a gain for the year of better than 100 points. All but the NASDAQ closed today below their 200 day moving average, a sure sign that there is more downside to come.

Along with stocks hitting the skids hard on the day, the US 10-year note hit yet another historic low, ending the week at 1.45%. Its counterpart in Germany, the 10-year Bund, has also been chasing yield lower, with a reading of 1.12% seen today.

Gold had a rapid rise on the news, regaining its status as a safe-haven currency, along with silver, which also posted a healthy increase. Precious metals investors should not be fooled, however, by today's moves alone. During the crash of 2008, all asset classes were decimated, though the metals improved earlier and with more ferocity than equities.

All around, even though it was a shortened trading week, it was the worst of 2012 on the major indices. Internals are screaming correction in equities, while the price of oil continues to signal a cold, deflationary environment in the face of a rising dollar, which seems to be a silver lining to a worsening economy. Gas prices will be lower, though many will be unable to afford to go anywhere.

After governments and central banks have thrown trillions in quantitative easing and stimulus for bailouts and bank balance sheet bolstering, the global financial system seems on the verge of another major breakdown, one that may make 2008 look like a picnic by comparison. As all fiat money systems in the history of civilization have eventually failed, our current regime of "money from nothing" appears to be coming to a cataclysmic demise, and it is gaining momentum at a terrifying pace.

Eventually, all the bad debts run up by governments and financial institutions are going to result in ruination of the global system, to be replaced by some forms of gold and/or silver-backed currencies. Only then will the world's economies become honorable and stable once again.

Welcome back to the Greater Depression.

Dow 12,118.57, -274.88 (2.22%)
NASDAQ 2,747.48, -79.86 (2.82%)
S&P 500 1,278.04, -32.29 (2.46%)
NYSE Composite 7,292.25, -171.71 (2.30%)
NASDAQ Volume 1,875,578,750
NYSE Volume 4,605,786,000
Combined NYSE & NASDAQ Advance - Decline: 853-4802
Combined NYSE & NASDAQ New highs - New lows: 34-307
WTI crude oil: 83.23, -3:30
Gold: 1,622.10, +57.90
Silver: 28.51, +0.76