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

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

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

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

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

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

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

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

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

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

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

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

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

Dow Jones Industrial Average November Scorecard:

Date	Close	Gain/Loss	Cum. G/L
11/1/18	25,380.74	+264.98	+264.98
11/2/18	25,270.83	-109.91	+155.07
11/5/18	25,461.70	+190.87	+345.94
11/6/18	25,635.01	+173.31	+519.25
11/7/18	26,180.30	+545.29	+1064.54
11/8/18	26,191.22	+10.92	+1075.46
11/9/18	25,989.30	-201.92	+873.54
11/12/18	25,387.18	-602.12	+271.42
11/13/18	25,286.49	-100.69	+170.27
11/14/18	25,080.50	-205.99	-35.72
11/15/18	25,289.27	+208.77	+173.05
11/16/18	25,413.22	+123.95	+297.00
11/19/18	25,017.44	-395.78	-98.78
11/20/18	24,465.64	-551.80	-650.58
11/21/18	24,464.69	-0.95	-651.53
11/23/18	24,285.95	-178.74	-830.27
11/26/18	24,640.24	+354.29	-475.98
11/27/18	24,748.73	+108.49	-367.49
11/28/18	25,366.43	+617.70	+250.21
11/29/18	25,342.72	-23.71	+226.50
11/30/18	25,538.46, +199.62	-23.71	+426.12

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

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

Fed Finishes Rate Hike Regimen for Year; Stocks Close Off Highs

Folks old enough to remember the comedy group Firesign Theatre might recall the famous, "Department of Redundancy Department," which is applicable to the never-ending, record-breaking after record-breaking stock market.

As Janet Yellen dispatches her final 0.25% rate increase to the federal funds rate, the markets did what they usually (always) do.

At the end of the day, the surprise was that the major indices closed well off the highs of the day, making for an interesting setup for Thursday.

At the Close, Wednesday, December 13, 2017:
Dow: 24,585.43, +80.63 (+0.33%)
NASDAQ: 6,875.80, +13.48 (+0.20%)
S&P 500: 2,662.85, -1.26 (-0.05%)
NYSE Composite: 12,699.54, +1.76 (+0.01%)

Witch Doctors at the Fed Brewing Something Wicked?

Eventually, everything matters.

Whether it's a hurricane ravaging Houston, Miami, or Puerto Rico, Toys 'R Us going chapter 11, or JP Morgan Chase CEO Jamie Dimon bashing cryptocurrencies in general and Bitcoin in the specific, all actions have consequences. It's the butterfly flapping its wings in Africa resulting in the subtropical windstorm, pure physics, action, reaction, cause and effect.

Thus it is consequential that the Fed's announcement in June indicating that it would begin to sell off it's hefty bag of assets - confirmed just yesterday - beginning in October (a scant ten days from now) should have some noticeable effect.

Market reaction to the announcement three months ago was muted. It was more serious yesterday and took on a gloomy tone today as all of the major indices retreated from all-time highs, the hardest hit being the speculative NASDAQ index, though one could posit that the knee-jerk nature of the selling today was nothing more than casual.

Suppose it is more than that.

Wouldn't the biggest players in the investing universe be monitoring market movements closely, making incremental moves, buying insurance? Of course. None of them want to tip their hand, but, they are concerned that the Federal Reserve has lost control of the monetary side of the equation. After all, ZIRP (zero interest rate policy) didn't work, nor did quantitative easing (QE). With all of their bullets spent, the Fed has nonchalantly called the financial crisis over and done and signaled to the market that they are going to raise interest rates, sell off the assets they've been hoarding for some six, seven, or eight years and the economy of the United States - and the world - will suddenly and magically be wonderful again.

As Dana Carvey playing the "Church Lady" might say, "how convenient!"

The Fed is at a loss and has been for eight or nine years running (some may say longer), because they cannot control distant event, geological occurrences, sunrises, or the whims of people with money. They are what Ayn Rand and Rollo May might have called witch doctors whose power is derived from people's belief in their so-called powers.

When the Fed begins selling their cache of securities (mostly treasury bonds and mortgage-backed securities) expect some degree of howling from various quarters, notably those who have been calling the central bank's attempts to control global markets a scam, sham, or film-flam from the start.

Especially when it comes to the mortgage-backed securities (MBS) there will be great gnashing of teeth, especially deep inside the bowels of the Eccles Building, where it cannot be heard, as Fed governors (a number of them already jumping ship) bemoan their dissatisfaction over the task at hand.

They are about to become scorned, and with good reason. They've mismanaged other people's money (practically everybody's) to their own profit. Bernie Madoff would look like a saint compared to the crimes the people at the Fed have committed. Those crimes continue, and they will be manifest in the "great unwind."

As the case may be, all of these high priests and witch doctors of finance will claim they didn't see the carnage coming, but come it will. There's a place for people who use deceit and obfuscation to achieve their ends, and it's certainly not in heaven.

Keep a close eye on three things: the price of silver, the price of corn and wheat, and the performance of the major stock indices. If suspicions play out, all three (or two of three, with the only gainer being silver) will decline for months before there's true confirmation that, in the long scheme of things, the Fed officials, from Greenspan to Bernanke to Yellen, knew exactly what they were doing but did it anyway.

Today's position: Fetal.

At the Close, Thursday, September 21, 2017:
Dow: 22,359.23, -53.36 (-0.24%)
NASDAQ: 6,422.69, -33.35 (-0.52%)
S&P 500: 2,500.60, -7.64 (-0.30%)
NYSE Composite: 12,133.62, -13.88 (-0.11%)

Stocks Bounce, but Fail to Erase Previous Losses; Congressional Republicans in Shock

Stocks rebounded from Tuesday's drubbing, but not nearly enough to erase the damage done, a classic dead cat bounce.

News was heavy, most of it coming out of Washington, where President Donald Trump reportedly reached agreement with congressional democrats on not only a debt ceiling increase but funding for hurricane Harvey victims and at least the outline of a continuing resolution. The proposed legislative deal would fund the government through December 15, upsetting - only in Washington - Republicans, who hoped for a longer debate on all of the issues.

Obviously, Trump has determined that with friends like his fellow Republicans in congress, he doesn't need enemies, thus making compromises with Democrats. It's actually - for a fellow who's supposedly not a politician - pretty smart politics. Republicans, included Senate majority leader, Mitch McConnell and House leader, Paul Ryan, were reportedly angered over the development.

Wall Street was immediately impressed, though stocks tailed off noticeably into the close.

Trump also tamped down recent bellicosity toward North Korea, hoping that China would do more to keep leader Kim Jong-un on a short leash.

Federal Reserve vice-chairman, Stanley Fischer announced that he would retire from his position on October 13, a surprise leaving open one of the most prestigious seats in Washington and a puzzler for Fed watchers. Fischer cited personal reasons for his decision, but speculation is that the departure has more to do with health than money, but suspect that Janet Yellen will be out at the culmination of her term in February.

Hurricane Irma continued to barrel towards Florida, the Fed's beige book revealed that members thought the economy was showing signs of improvement, though the continuing bemoaning over a lack of inflation was prominent.

While stocks improved modestly, the effect was greater on fixed income and precious metals. Gold and silver halted their recent advances and bond yields rose, with the 10-year note increasing to 2.11%

Overall, nothing was settled, except that Washington might actually avoid the drama that usually surrounds debt ceiling and budget debates, which is actually quite a positive development.

Trump making deals? Who knew?

At the Close, 9/6/17:
Dow: 21,807.64, +54.33 (+0.25%)
NASDAQ: 6,393.31, +17.74 (+0.28%)
S&P 500: 2,465.54, +7.69 (+0.31%)
NYSE Composite: 11,872.92, +45.77 (+0.39%)

Stocks Flat, Gold, Silver, Bonds Explode Higher

Editor's Note: Money Daily is eventually going to move to its own server at dtmagazine.com, but issues implementing the blogging platform while integrating ad serving has kept the blog from being fully integrated. Thus, for the time being, until these issues resolved, the blog will appear here.

Stocks were relatively unmoved as the world's central bankers wrapped up their annual economic symposium at Jackson Hole, Wyoming over the weekend.

What did move were precious metals and bonds, both boosted by ambiguous speeches by Fed Chair, Janet Yellen, and ECB president, Mario Draghi.

Both speakers failed to address the bubbling equity markets, and instead opted for a can-kicking, all is well, "stay the course" approach. Markets were effectively unimpressed, though fixed investments saw massive gains.

The benchmark 10-year note was bid, knocking the yield down to 2.16, and to levels not seen since before last year's November elections, at 2.09% just prior to the Tuesday open.

Gold has blown through resistance at the psychologically-important $1300 level, kicking up to $1325 in early Tuesday futures trading. Silver also advanced, blasting through $17, hovering in the $17.60 range at this time.

Stock futures are down massively, setting Tuesday up for a massive downdraft.

With congress coming back to debate the debt ceiling and federal budget and the FOMC meeting in September, the final days of August appear to be presaging the volatile days and weeks ahead.

Hang on to your hats. This looks to be a wild ride.

At the Close, August 28, 2017:
Dow: 21,808.40, -5.27 (-0.02%)
NASDAQ: 6,283.02, +17.37 (+0.28%)
S&P 500: 2,444.24, +1.19 (+0.05%)
NYSE Composite: 11,800.22, -11.81 (-0.10%)

Small Pullback Friday; Stocks Mixed For Week

It was a week to forget.

Nothing much occurred during the week besides the usual NASDAQ pumping, zig-zagging indices and Thursday and Friday's minor profit-taking sessions.

Equities remain elevated, though a little movement in precious metals has the markets a bit on notice that the fiat Ponzi is still in quite a fragile state.

Not that it matters, but gold and silver remain real money, while the Janet Yellens and Mario Draghis of the world continue to print and talk endlessly, their blathering covering up a multitude of malinvestment sins around the world.

All the major indices finished in the red on Friday, a somewhat unusual set-up going into next week, which will be highlighted by a do-nothing-but-talk-a-good-game FOMC meeting which concludes Wednesday.

After that? Off to the races (Saratoga opened this weekend), or back to sleep until Labor Day? With congress failing to come to grips with reality, their August vacation in the balance, the betting is that nothing good gets done in Washington and that will be just fine with Wall Street.

Onward and upward!

At the Close, 7/21/17:
Dow: 21,580.07, -31.71 (-0.15%)
NASDAQ: 6,387.75, -2.25 (-0.04%)
S&P 500: 2,472.54, -0.91 (-0.04%)
NYSE Composite: 11,924.60, -19.90 (-0.17%)

For the week:
Dow: -57.67 (-0.27%)
NASDAQ: +75.29 (1.19%)
S&P 500: +13.27 (0.54%)
NYSE Composite: +27.29 (0.23%)

All Janet Yellen, All The Time Sends Stocks Soaring

“Because the neutral rate is currently quite low by historical standards, the federal funds rate would not have to rise all that much further to get to a neutral policy stance.”

-- Janet Yellen, in prepared remarks to House Financial Services Committee, Wednesday, July 12, 2017

Since that statement, released prior to the opening bell on Wednesday, stocks have taken flight to new highs. For instance, the Dow Jones Industrial Average closed Tuesday at 21,409.07, and closed Friday at 21,637.74. A couple hundred points isn't bad, but check out the NASDAQ:
NASDAQ close 7/11/17: 6,193.30
NASDAQ close 7/14/17: 6,312.47

119 points in three days is OK work if you can get it, and Wall Street perfectly got it, interpreting Yellen's statement that the Fed's controlled federal funds interest rate would not be rising very quickly this year, if at all. Good news! Buy!

The soft underbelly of that statement is that the US - and by extension, the global - economy is not growing, inflation is not roaring (June CPI was flat, as in 0.0%, and the Fed is desperate for inflation), wages are not rising and employment is still flagging. Additionally, the number of people out of the labor force is enormous, pension plans in states such as Illinois, Connecticut, California and elsewhere are imploding, putting additional pressure on the Fed, Wall Street and the PPT to keep asset prices rising. Otherwise, the entire financial system collapses.

Also, P/E ratios on the S&P 500 are hovering around 25%, which is about 40% higher than the norm. The market badly needs to correct, but, thanks to Yellen and her cohorts, central banks continue to purchase assets at exorbitant prices.

What could go wrong?

Have a great weekend.

At the Close, 7/14/17:
Dow: 21,637.74, +84.65 (0.39%)
NASDAQ: 6,312.47, +38.03 (0.61%)
S&P 500: 2,459.27, +11.44 (0.47%)
NYSE Composite: 11,897.31, +52.69 (0.44%)

For the week:
Dow: +223.40 (1.04%)
NASDAQ: +159.39 (1.59%)
S&P 500: +34.09 (1.41%)
NYSE Composite: +144.33 (1.23%)

Wall Street To Yellen: We Love You, Janet

Wall Street's reaction to Fed Chairwoman Janet Yellen's appearance on Capitol Hill the past two days has been nothing short of a high school romance.

It's been impulsive, short and intense.

And now, with hope, it's over. Perhaps we'll all be spared the details of the jilting. Janet will probably say something about stocks being overvalued and the traders will quietly sulk away, probably over to the bond pits, where they know true love - albeit at low yields - can be found.

The idea that frumpy Janet Yellen can make the masters of industry and, say some, the universe, trip and fall over each other on their ways to buying stocks is as ludicrous as the entire idiocy of centralized financial planning by the Federal Reserve.

Since global finance and economics is vast and unpredictable, the power of the Fed to control it is diminished. Certainly, the Federal Reserve has tools at its disposal to direct policy actions which often translate into tangible results in the real world, but, more often than not, they cannot direct the actions of billions of individuals, millions of businesses, and trillions in currencies.

Those engaged in the business known as the financial industry would like to believe - and to pass that belief along to clients - that the Fed does have everything under control. The facts speak differently. In the fall of 2008, when Lehman Brothers collapsed, the Fed had lost control and they scrambled, along with their central banking brethren from other countries, to restore some sense of balance and sanity.

But, they were too late. Stocks crashed. Banks needed massive injections of liquidity (money) from taxpayers in the form of a $700 billion monstrosity known in the day as TARP. Strange as it may seem, TARP actually stood for Troubled Asset Relief Program. The troubled assets were mortgages. The relief was in the form of taxpayer money. Essentially, the crooked banking cabal tacked another $700 billion onto the trillions of debt already owed by the federal government, i.e., the citizens and businesses of the United States of America.

So, there's no wonder that Wall Street loves the Fed and the fair-haired Janet Yellen. They're assured that whatever numbskull trades or risky maneuvers the banks and financial institutions make will be promptly papered over by Janet and her gang of official-looking thieves.

The Federal Reserve has robbed Americans and the rest of the world since 1913. It has endured two World Wars, a massive global depression, countless smaller recessions, booms, busts, inflations, deflations, devaluations, the start and end of Bretton Woods, confiscation of gold, manipulation of silver and mostly, inflation that has devalued the US Dollar, the currency of the United States of America, by 97% over the past 104 years.

When the next financial crisis arrives - and it will, eventually - the Fed will be standing firm, looking cute and sweet, with a plan to revive the spirit and stability of the "system." When that time comes, Wall Street must be restrained by the public. They must be told, like the high school boys they imitate, "she's no good for you."

Investors and fund managers and pensioners must be told, "you're in an abusive relationship. You need to get out."

It's time to end the love affair with the Fed.

At the Close, 7/13/17:
Dow: 21,553.09, +20.95 (0.10%)
NASDAQ: 6,274.44, +13.27 (0.21%)
S&P 500: 2,447.83, +4.58 (0.19%)
NYSE Composite: 11,844.62, +18.73 (0.16%)

What Janet Yellen Said To Congress...

Janet Yellen, Fed Chairwoman, blathered on about the economy, monetary and fiscal policy on Wednesday before the House Financial Services Committee, at one point saying that chances for the economy to improve or decline were roughly equal.

Those words set off the market like a bottle rocket, essentially painting the Fed as "dovish," meaning that both interest rate hikes and the winding down of its enormous balance sheet were subject to adjustments.

In other words, easy money as far as the eyes can see, and Wall Street took up the baton and ran with it, sending the Dow to new all-time highs and the NASDAQ up sharply.

Janet Yellen obviously doesn't know squat about the economy. Anybody capable of fogging a mirror could have made a statement such as hers, as in, "oh, sure, the economy might improve, or maybe not."

It's amazing that people put so much faith (and money matters) into the hands of fools such as Yellen and her fellow central bankers, all of whom have as their primary interest, themselves, not you, not the consumer, not the economy of any nation.

On Thursday, Yellen testifies before the Senate Banking Committee.

Cheers!

At the Close, 7/12/17:
Dow: 21,532.14, +123.07 (0.57%)
NASDAQ: 6,261.17, +67.87 (1.10%)
S&P 500: 2,443.25, +17.72 (0.73%)
NYSE Composite: 11,825.90, +81.13 (0.69%)

Bull or Bear? By October, It Probably Won't Matter

Another day, another boring stock market supposedly awaiting Janet Yellen's annual testimony before the the House Financial Services Committee on Wednesday and the Senate Finance Committee, Thursday.

Big YAWN.

Janet Yellen's words are worthless. She mouths big words like macro-prudential, as though she actually practices it while heads spin and eyes glaze over trying to comprehend its meaning.

In reality, the term refers to policy actions designed to mitigate systemic risk. It's rubbish. It's Fed-speak. While it sounds good on the surface, everything is at risk, including the entire global financial system that nearly imploded in 2008. If enough companies, or, heaven forbid, banks, default on their obligations, the risk is interconnected, and probably more so than in 2008-09.

There are no safeguards. There are only bigger bets, known as derivatives, credit default swaps (CDS), leverage, and arbitrage.

The system is as fragile now as it was just prior to the Great Financial Crisis (GFC) of 2008-09, and probably, it is even more fragile, simply because the Fed does not have the tools to fight back against deflation and recession, the dual threats to capitalism.

So, Janet Yellen will testify to congress on Wednesday and nothing at all will change. Meanwhile, markets are stuck in neutral, which means, in these absurd times, a tilt toward slightly positive.

Another big YAWN.

The big moves will be in September, when the laid-back congress will be forced to raise the debt ceiling and come up with another annual budget. It's likely to be a wild time, even for this do-nothing congress. President Trump will be holding both Republican and Democrat feet to various fires.

If not September, then October should be another possible meltdown time frame. It always has been, and, with the markets and economy showing severe signs of fraud and stress, a market "event" is long, long overdue.

At the Close, 7/11/17:
Dow: 21,409.07, +0.55 (0.00%)
NASDAQ: 6,193.30, +16.91 (0.27%)
S&P 500: 2,425.53, -1.90 (-0.08%)
NYSE Composite: 11,746.72, -5.07 (-0.04%)

Something To Do While Awaiting Speaking By Janet Yellen

Stocks were briefly lower, then higher, but finished split, almost even, for the day.

This is part of the effect of having globalists like Janet Yellen and the Federal Reserve controlling global economics. ON Monday, all of Wall Street is apparently waiting for the Fed Chairwoman's speech before congress on Wednesday and Thursday, or the release of the Fed's Beige Book of economic conditions on Wednesday.

Or the market is waiting for something else. Earnings, CPI, Industrial Production. It's always something, and it seems that the market is always waiting.

Over the past eight years this strategy has worked out pretty well for stock investors. Waiting has resulted in massive market gains over time, even though data has been less-than-splendid and often outrightly bad. That's where the "bad news is good news" meme came about: even though economic conditions were seen as negative, it was good for stocks because interest rates would remain low (making sure that stocks were the only game in town) and the free money from the Fed fountainhead would continue to flow.

Seriously, nobody is actually waiting for anything, no matter how much the TV and newspaper financial pundits like to propound on the topic. Investment decisions aren't exactly made based on data, at least not since the GFC. Stocks, and to a large extent, central banks and the Federal Reserve, have become disconnected from reality.

By almost all generally-accepted measures, stocks are overvalued. However, they remain the principal product of the Wall Street hucksters in terms of return. Bonds are returning little, and, if there is any appreciable inflation, they will return nothing in nominal value.

Stocks go up. They also go down. Some do better than others, but, to believe that the entire market is making a conscious choice to wait until Janet Yellen drools and stutters her way through her annual congressional hearings, is a monumental fraud in thinking.

Those who are buying are buying. The sellers are selling. Mostly, it's computers doing all the work and there's no good reason, presently, to make any meaningful changes in any meaningful portfolio.

At least that's what it looks like, but we'll wait and see.

At the Close, 7/10/17:
Dow: 21,408.52, -5.82 (-0.03%)
NASDAQ: 6,176.39, +23.31 (0.38%)
S&P 500 2,427.43, +2.25 (0.09%)
NYSE Composite: 11,751.79, -1.19 (-0.01%)

Fake News, Fake Markets, Fake Money: Big Losses As Central Bankers Talk Tightening

Good luck to anyone trying to do fundamental analysis in this market.

Jawboning by Fed officials and today, especially, the grand liar of Europe, Mario Draghi, led the assault on spec stocks and the market in general by threatening to take away the low interest rate punchbowl.

Draghi's comments came at an economic conference in Portugal, ECB President Mario Draghi said that as economic prospects improve in Europe, the ECB could make adjustments to its policies of sub-zero interest rates coupled with huge bond purchases.

As if that wasn't enough, a trio of Federal Reserve loudmouths set their jaws to yapping about asset values, cueing a collapse in the equity and bond markets.

Fed Chair, Janet Yellen, Vice-chair Stanley Fischer, and San Francisco Fed President John Williams all focused on high equity valuations in speeches at separate locales.

Thus, market participants wet their pants on the awful prospect that their enormous gains would somehow evaporate if the accommodative policies of the Federal Reserve were to be unwound. Of course, they're right. Almost all of the gains of the past eight years have been the result of loose monetary policy. Any tightening of such policies would mean that stocks might not be so easily gushed to higher levels.

Bond yield rose substantially, with the 10-year-note gaining to 2.19%, erasing all of June's gains.

Not that any of today's loose lip talking matters. Actions will determine the ultimate direction of the markets. While some degree of sanity and honest price discovery in markets would no doubt involve a lower rate of return than what's been considered normal since 2009, it also might result in crisis, as all manner of wealth is tied to stocks and their continued appreciation.

At the Close, 6/27/17:
Dow: 21,310.66, -98.89 (-0.46%)
NASDAQ: 6,146.62, -100.53 (-1.61%)
S&P 500 2,419.38, -19.69 (-0.81%)
NYSE Composite: 11,716.92, -41.94 (-0.36%)

If The Fed Is Upset On The CPI Drop And Stubbornly-Low Interest Rates, It Must Be A Good Friday

It's Good Friday and some of us have just finished doing our taxes (such as this writer), so, some of us are wondering what's so good about this particular Friday.

Aside from the generally-obvious religious conventions (Shouldn't it be called Bad Friday because it's the day Jesus Christ was crucified, and that doesn't seem so good?), there probably are some good things afoot.

First, the financial markets are closed, always a bonus. Second, the Labor Department announced today that the Consumer Price Index (CPI) dropped 0.3 percent, the first decline since February 2016. They said that lower cell phone service and gasoline costs outpaced higher rents and a slight increase in food costs (0.3%).

If those food costs are to be believed, since the amount of food most people eat (and buy) can be self-regulated, higher food costs aren't really an issue at all, especially since practically nobody in America is starving at the present time.

This CPI number brings up some interesting possibilities. If the United States is actually experiencing deflation (or, as the TV pundits like to call it, because deflation is bad, you know, "disinflation") then prices are going down, everything is going to cost less. That's the bane of a strong dollar. Imports are cheaper, and, in an economy that relies on lots of imports, that drives domestically-produced goods and services down as well.

It's a win-win-win for everybody, except, possibly, the Federal Reserve, banks and bond investors who are getting anxious and perhaps a bit desperate for higher interest rates.

Well, crocodile tears are the order of the day for them. Higher interest rates are not going to happen unless the economy is strong, meaning many excess jobs are being created, pushing wages higher, and producers are experiencing strong pricing power. Both of those items - jobs and pricing - seem to be going in reverse over the short term. Bond prices have been soaring because yields have been stubbornly opposed to any kind of rise, the now nearly constant urging and jawboning from the genii at the Federal Reserve, Janet Yellen, Stanley Fisher, et. al. notwithstanding.

The 10-year note is hovering around 2.25% yield. That doesn't bode well for inflation. No, not at all.

Stocks were lower for the week, but they're still within a few percentage points of all-time highs. Rich people and people with 401k or pension plans are probably not very concerned with their stock holdings.

In conclusion, this may actually be a pretty good Good Friday after all. Cheaper gas and phone service is a plus and eating a little less is probably not a bad idea in a nation of fatties. Plus, if the people over at the Fed are perplexed or constipated or otherwise annoyed or agitated, that's a huge bonus.

Happy Easter. Don't eat too much ham, lamb, or hard-boiled eggs.

At The Close, Thursday, April 13, 2017:
Dow: 20,453.25, -138.61 (-0.67%)
NASDAQ: 5,805.15, -31.01 (-0.53%)
S&P 500: 2,328.95, -15.98 (-0.68%)
NYSE Composite: 11,324.53, -98.64 (-0.86%)

For the Week:
Dow: -202.85 (-0.98%)
NASDAQ: -72.66 (-1.24%)
S&P 500: -26.59 (-1.13)
NYSE Composite: -121.05 (-1.06%)

Bubble Superfecta: Dow, NASDAQ, S&P 500, NYSE Composite All Close At New Records

As the week comes to a stunning close, it's official, every market in America is officially in deep into bubble territory.

Consider that the major indices all closed at all-time highs today and that the Dow Jones Industrial Average is up a whopping 2200 points since election day, November 8, 2016. That amounts to a gain of just over 12% in three months. At that rate of ascent, 22,000 on the Dow should be a no-brainer by the end of 2017.

Nothing other than stupidity, other people's money, greed, and momentum were needed to foment one of the most rapid rises in the history of the Dow. The other indices have surely been along for the ride; even the broad measure of the entire NYSE Composite cracked to a record close today.

Not to suggest that a reversal is imminent (been that way for 6 years at least), but for some perspective, let's examine where these markets were at the depths of the Great Financial Crisis (GFC), on March 9, 2009.

Dow: 6,547.05
NASDAQ: 1,268.64
S&P 500: 676.53
NYSE Composite: 4,226.31

In the span of eight years, during what has ostensibly been the weakest recovery after a recession since the Great Depression, the Dow and S&P have more than tripled, the NASDAQ has more than quadrupled, and the poor old NYSE Comp. is just short of tripling.

So, if you missed it you missed it, but there still may be time to get in. Nobody knows where this is going to end, but we can all thank Ben Bernanke and Janet Yellen for oodles of free cash injections worldwide (QE), zero interest rate policy (ZIRP) and the most reckless economic policies the world has ever witnessed.

It's still ongoing, though. The ECB and BOJ are still pumping money into their markets, and, unless you missed it, none other than the Swiss National Bank holds more than $64 billion in US equities.

Who said these central bankers don't know what they're doing?

Enjoy the weekend!

At the Close, Friday, February 10, 2017:
Dow: 20,269.37, +96.97 (0.48%)
NASDAQ: 5,734.13, +18.95 (0.33%)
S&P 500: 2,316.10, +8.23 (0.36%)
NYSE Composite: 11,377.72, +50.04 (0.44%)

For the Week:
Dow: +197.91 (0.99%)
NASDAQ: +67.36 (1.19%)
S&P 500: +18.68 (0.81%)
NYSE Composite: +50.04 (0.44%)

Markets Brace For FOMC Nothing-Burger

Just in case you're keeping score at home, stocks remain in caution mode prior to the FOMC rate policy announcement due out tomorrow at 2:00 pm EDT.

Consensus sentiment is that the governors will do what they've done at every meeting except one since the end of 2008... nothing.

Federal funds rate will likely remain at 0.25-0.50, or effectively zero, and the financial world will once again be treated to the numb mumbling and vague interpretations of data by Chairwoman Janet Yellen at a press conference a half hour after the announcement.

This is all nonsense, all for show, and all for naught. Any attempt at "normalization" (as the Fed likes to put it) will send the interest on US debt to astronomical levels, upsetting the entire global financial universe.

It is precisely why the Fed and other central banks cannot raise rates, or, if they somehow choose to do so, it will be a gradual, drawn out process, because the unwinding of 5, 7, 10, and 30-year notes and bonds will take that many years. Unless the Fed intends to bankrupt all existing nation-states - always a possibility - interest rate increases will be gradual, if at all. The central banks have no way out of the mess they've created, except by creating another, even worse mess.

Tomorrow, like today and the day before, will be nothing but a dog-and-pony show, and a bad one at that.

Nothing even close to important will occur prior to the November elections. The Fed and their buddies are hoping that Hillary Clinton remains alive long enough to win and then, last until January 20, when she will supposedly assume the throne of president of the United States of America.

Those are two possibilities that fewer and fewer people are putting on hard money. There is one good future for the USA, and it does not include a Clinton presidency.

Tuesday's Close:
Dow 30
18,129.96, +9.79 (0.05%)

NASDAQ
5,241.35, +6.33 (0.12%)

S&P 500
2,139.76, +0.64 (0.03%)
^NYA

NYSE COMPOSITE (DJ)
10,573.98, +9.68 (0.09%)

Volatility Returns As Stocks Retrace Friday's Losses

Writing just after noon on Tuesday, stocks seem to be in a certain funk over the future of not just corporate earnings, but the direction of the Federal Reserve and the outcome of the 2016 presidential race.

On the latter, Hillary Clinton's continued lying (even about her health, which is in terrible condition) may be costing her the election, to say nothing of the idea that many people who may have held their noses and voted for the Democrat status quo choice over the maverick Trump, may be changing their minds given that Hillary may not be able to effectively serve as president, yet alone make it to the finish line in the election process come November.

While Trump has held his tongue over Hillary's health issues, he continues to gain in the polls and in popularity with the American people. With the election less than two months away, any more gaffes by Clinton could prove fatal to her presidential aspirations, which, in the long run, would likely be a good thing for the American public.

Wall Street doesn't apparently appreciate the way things are going, though with Hillary losing ground, there's even less chance that the FOMC will announce a rate hike at their meeting next week. Trump's bashing of Janet Yellen earlier is also weighing on markets, and while the stock market may not like the way he's talking, as usual, he's speaking the unblemished truth: stocks are overpriced due to Fed meddling.

Is this how it all ends, with a Trump presidency and a wholesale cleansing of the sick economic policy apparatus?

We can only hope.

After Monday's dead-cat rally, stocks have given back all of those gains by midday, and then some. Get ready for a rocky ride this afternoon and more days of heightened volatility to come as the election takes precedence over all other economic and political events.

Yellen Speaks, Markets More Confused After Comments By Fisher, Bullard, Lockhart

After a week-long wait for something of substance from Fed Chair Janet Yellen in her widely-anticipated speech at Jackson Hole Friday, markets were somewhat disappointed when what they got from the aging, dowdy Fed Chairwoman was more of the same, a garbled, directionless mumbling about a strengthening US economy and plenty of buts, ahs, and well maybes.

Yellen seemed to express that a rate hike was on the table in September - just as it was in February, June and July - but offered certain caveats, not the least of which was that unexpected events could derail any plans the Fed might have considered.

Adding to the dismay and confusion were three separate comments by Fed officials in the immediate aftermath of Yellen's speech.

Vice Chairman, Stanley Fischer first spoke up with a weak affirmation that a rate hike in September was possible, but quickly afterward, Atlanta president, Dennis Lockhart, and St. Louis president James Bullard offered a different view, questioning the wisdom of a rate hike in September or even December.

Since markets have been on a razor's edge since Brexit and will be until the presidential election in November, it does seem a stretch that the Fed would risk a market collapse triggered by a rate hike, such as what happened after their last 1/4 basis point increase last December.

The Fed being less stoic and more political than ever, risking injury to Hillary Clinton's election - the choice of the status quo - would be foolhardy and dangerous.

Not to say that the Fed is not both of those, but when there's a real risk that an outsider - Donald J. Trump - could ascend to the highest office in the land, the Fed will be watching its own best interests, which would imply that a federal funds rate increase in September is certainly a no-go.

Now that the Fed has wasted the better part of a month and delivered nearly nothing of substance, one wonders what they can do for an encore. Oh, that's right. Eight years of loose, experimental monetary policy and promises of more to come.

What fun.

Friday's Closing Data:
Dow Jones Industrial Average
18,395.40, -53.01 (-0.29%)

NASDAQ
5,218.92, +6.71 (0.13%)

S&P 500
2,169.04, -3.43 (-0.16%)

NYSE Composite
10,749.33, -35.04 (-0.32%)

For the Week:
Dow 30: -157.17 (-0.85%)
S&P 500: -14.83 (0.68%)
NASDAQ: -19.46 (-0.37%)
NYSE Composite: -79.83 (-0.74%)

Continued Sluggishness In Equity Markets Awaiting Janet Yellen At Jackson Hole

Investors (if that's what they're being called these days) are largely on hold in advance of Fed Chair Janet Yellen's speech at Jackson Hole tomorrow and a return to what passes for normal conditions following the Labor Day holiday.

Essentially, stocks have been treading water for the past month, since setting new all-time highs mid-July and making a double top earlier this month.

For whatever it's worth, the one bid by the Fed and its central bank allies has produced a very dull market, if that's what we're calling it these days.

Of particular note is the current odds for a rate hike in September, currently hovering around 18%. For a December rate hike, it's basically a 50-50 proposition, though neither is actually very likely considering the fragility of the global economy.

Thursday's Closing Prices:
Dow Jones Industrial Average
18,448.41, -33.07 (-0.18%)

NASDAQ Composite
5,212.20, -5.49 (-0.11%)

S&P 500
2,172.47, -2.97 (-0.14%)

NYSE Composite
10,780.23, -10.95 (-0.10%)

Fed's John Williams Strikes The Alarm Bell; Markets, Economists Respond With Aburptness, Gibberish

President and CEO of the San Francisco Federal Reserve Bank, John Williams, released a white paper on Monday that caught the attention of just about everybody even tangentially aligned with economics or finance called Monetary Policy in a Low R-star World.

Williams, who was Janet Yellen's chief researcher when she was head of the San Fran Fed, has, with the release of this paper, struck the alarm bell with an enormous policy mallet. In effect, he's telling the world that the central banks of the world - including our own, all-powerful Fed - that the past seven years of low interest or zero interest rates have not produced the desired results, which would be a robust economic climate coupled with adequate inflation.

What the Fed and other central banks consider adequate inflation is something of a mythical, though essential, concept in Keynesian economics. Central bankers talk of a target inflation rate, figuring that two percent is about the right level to keep GDP and the associated debt burden growing.

In essence, the concept that any level of inflation is good for anybody other than central bankers is complete and absolute buffoonery, designed only to perpetuate the counterfeit of fractional reserve banking and fiat money. It should be pointed out that true inflation is always and everywhere a monetary phenomenon, strictly defined as an increase in the money supply, that being debt in every case involving fiat money. What Williams is talking about is price inflation, an entirely different animal. A price inflation rate of two percent, over any expanse of time, be it 10, 20 or 50 years, does nothing but erode the value of the currency, increasing the price of everything and impoverishing the citizenry coerced into using said currency.

It's horribly bad policy for the bulk of the population, enriching the banks, distorting the natural business cycle and inducing government spending beyond its means, causing deficits and eventually, unpayable, unservicable debt burdens, the exact condition the entire global economy finds itself in today.

Williams chooses to blame all of the central bank policy errors on an amorphous concept known as the natural rate of interest, or R*, or R-star. The conceit of his missive is where he states, "While a central bank sets its short-term interest rate, r-star is a function of the economy that is beyond its influence."

In other words, Williams is conceding that the natural flow of economics is something a central bank cannot control, manipulate, massage, or otherwise rig. It's utter nonsense. The reason the mythical R-star is so low is because central banks worldwide have been dropping key interest rates to previously-unforeseen levels, in many cases (notably the BOJ and SNB) instituting negative interest rates. Central banks have caused the massive global economic problems and Williams' propose solutions indicate that the central bank models are broken beyond repair and that their only tools remaining are empty rhetoric and finger-pointing, obviously ill-suited to stave off recessions or induce growth and prosperity.

Williams wags his finger at governments, proposing that fiscal measures be taken to combat low inflation (eventually outright deflation) with more insanity such as targeting GDP or using some kind of sliding scale of taxation based on centrally-planned, goal-sought data points such as inflation and/or unemployment.

It this were a football game, Williams could be accused of punting on second down from his own goal line. He's given up, as he - and his central bank brethren - should have eight years ago at the height of the Great Financial Crisis (GFC), allowing the market to clear out the malinvestments, cripple the broken, over-leveraged banks and allow the economy to recover on its own terms, without the aid of central bank intervention. The associated pain might have been immense, but it would have been contained and recovery would have been swift.

Instead, Williams and the central bankers of the world have brought the global economy to the brink of a mammoth financial crisis, one in which entire nations' economies will be completely torn asunder. Williams and his friends have given us the most extreme policy initiatives the world has ever seen (ZIRP, NIRP, QE) and saddled governments, businesses and individuals with outrageous debt loads.

If ever the world has been at the cusp of a debt jubilee, this is it. The central banks have failed even themselves and their clandestine shareholders and its time they be relegated to the dustbin of history, along with other failed ideologies.

A return to gold and silver as base capital in a demand economy, various barter exchanges and fixed exchange rates in foreign currencies would be far better solutions than what Williams has proposed and eminently superior to the devilish constructs of the IMF, World Bank, the European Union, futures, derivatives, federal mandates, and other complexities of modern economics.

At the end of error-prone regimes, be they in finance or governance, wild, weird, unwieldy ideas will be promulgated by supposed "experts." Williams' institutional heresy is only the beginning of the coming madness. Expect even more desperate distortions and departures from reality from the very people who created the economic mess. They're uniquely positioned to cause nothing less than global economic, political and societal calamity.

Good luck.

*************

The market response to San Fran Fed's Williams' policy punt has been swift and poignant. In Japan, the Nikkei fell 273 points. European markets were lower across the board, with the Dax, FTSE and France's CAC-40 each losing ground. US stocks opened lower and remained in the red through the session.

It worth noting that this is still August and most of Wall Street's heaviest hitters are still stupefied by drugs and booze out at their Hampton retreats. US markets hit all-time highs in recent days, akin to ringing a bell at the tippy-top of the market. Values are extreme and detached from fundamentals. The dollar was whacked and will likely continue to decline, and, as just about the only barely viable economy and bond market, US treasuries are about to head further toward zero and negative rates. The world is upside down, ripe for complete overhaul. What many have been predicting and anxiously awaiting for the past seven or eight years may finally be upon us.

Of course, to offset the negative effects of Williams' paper, NY Fed head, Bill Dudley trotted out a statement just prior to US markets opening, saying, in effect, that a September rate hike by the Fed is under consideration. There you have it: more jaw-boning and utter nonsense designed to alter perception. To say that the Fed is close to another rate hike is tantamount to thinking that the moon is about to tumble into the earth.

Gold and silver were each up sharply overnight and in early morning trading on the COMEX. Precisely at 8:00 am EDT, both were hammered lower, yet another signal that central bankers are desperate and nearly delusional.

Be prepared.

US Markets at 3:00 pm EDT (prior to close due to scheduling conflict)
Dow Jones Industrial Average
18,583.22, -52.83 (-0.28%)

NASDAQ
5,237.45, -24.56 (-0.47%)

S&P 500
2,182.27, -7.88 (-0.36%)

NYSE Composite
10,825.95, -32.54 (-0.30%)

Money Daily Milestone Missed; Markets Non-Functional

So busy with other responsibilities, we didn't recognize our own milestone.

Friday's post was the 2000th post for Money Daily, just in case anybody is keeping track.

The markets were very dull in advance of Thursday's Brexit vote. Even Janet Yellen testifying to the senate today wasn't market-moving, though that's not surprising. She's easily the most incompetent speaker and communicator the Fed has ever had.

Tuesday Trauma:
S&P 500: 2,088.90, +5.65 (0.27%)
Dow: 17,829.73, +24.86 (0.14%)
NASDAQ: 4,843.76, +6.55 (0.14%)

Crude Oil 48.95 -0.85% Gold 1,271.30 -0.09% EUR/USD 1.1251 +0.02% 10-Yr Bond 1.70 +1.62% Corn 396.50 +0.06% Copper 2.12 +0.31% Silver 17.27 -0.25% Natural Gas 2.99 0.00% Russell 2000 1,153.87 -0.33% VIX 18.48 +0.60% BATS 1000 20,677.17 0.00% GBP/USD 1.4668 -0.01% USD/JPY 104.7795 0.00%