How To Tell The Economy Is Really Horrible

A number of interesting developments highlighted today's off-the-street action concerning US stock markets and the general global economy. They were all internet-related, but have nothing to do with the share prices of the companies affected, but first, let's take a recap of the actual carnage in the markets today.

Asia was awash in red ink, as Japan circles the monetary drain (must be Adam Smith's "invisible hand" pulling the plug) sending the Nikkei down to new depths, as noted below, along with Hong Kong's Hang Seng Index, which suffered an even more severe loss in points and percentage:

Nikkei 225: 15,713.39, -372.05, -2.31%
Hang Seng Index 18,545.80, -742.37, -3.85%

With China's markets closed for the week as the country celebrates Chinese New Year, over in Hong Kong, it was back to work after a three-day hiatus. The HSI fell out at the open and never recovered. As many in the US apparently do not know, all of Asia's major markets - including Australia, recently - are in bear market territory. The Hang Seng topped out at 28,588 in late April, 2015. Today's loss puts it down 35% from its highs.

While the Asian markets were spitting up blood, Europe opened with a bang to the downside, as Sweden announced its central bank was cutting interest rates further into the negative. Sweden’s Riksbank cut its benchmark interest rate from -0.35% to -0.5%. So, theoretically, anyone wishing to keep 100,000 Krona in a Swedish bank has the awesome privilege of paying the bank 500 of those Krona for the year.

That, in addition to the ongoing banking collapse (Duetshe Bank, in particular), sent Euro stock bourses reeling. Germany's DAX was off 2.93%. In England, the FTSE was down 2.36%. France's CAC 40 fell by 4.05%, and the Euro Stoxx 50 was battered some 108 points, a 3.90% downside.

US traders left no stone unturned, sending the markets close to the August lows and the NASDAQ within 50 points of the magic bear market line (-20%), until a spurious story about Saudi oil cuts saved the day around 2:30 pm. The Dow was down more than 400 points at the lows, and there was some talk about the S&P bouncing off a key level at 1812. Truth be told, key levels and support lines aren't going to matter much in coming days, weeks and months, because there is growing evidence that recession has arrived in the US, just as it has washed up on the shores of Asia and Europe.

Now, back to those off-Wall Street developments that offer many clues on how to know the economy isn't doing very well.

First, there was the outage at ZeroHedge.com just as the market was opening. Anybody who wants the straight, uncensored, bearish view of markets instinctively heads for "the Hedge" as it is known, the site famous for it's inveterate grinding on the wheels of finance. An apparent DDOS attack took the site offline for about 30 minutes and was the second such attack in as many weeks.

While the culprit is unknown, tin-foil cap types point to the NSA or another government agency which wishes to keep at least a leash on the unruly junkyard dog.

Second, MSN Money disabled comments on all its stories. While news of this was not reported widely, its unknown exactly when the company decided it didn't want to hear from its readers. MSN Money follows the lead of Bloomberg, which disabled commenting across its web properties last year. Censorship. It's what's for dinner, and you can't complain about it.

Third, Janet Yellen completed her annual testimony to congress today with a visit to the Senate Banking Committee, chaired by Richard Shelby (R-AL), and failed to goose the markets. When the Fed Chair has less influence on markets than a teen beauty queen at a gay pride rally, take that as a sign markets are more than a little jittery.

Gold and silver continued to rally, with gold up more than $50 at one point in the day. Silver was fast approaching $16/oz. It was under $15 as of Monday's fix. The two precious metals are the best-performing assets (along with select bonds) of 2016.

And finally, Yahoo Editor-in-Chief, Andy Serwer, had to pen this little gem of statist nonsense, explaining that nobody knows why stocks are going down. Server proves that he has quit an imagination, or none.

All in all, it appears the media, government, and the financial world are not about ready to let the muppets get a feeling that something bad is heading their way, despite Yellen fielding questions about the Fed being "out of bullets" and negative interest rates.

The status quo is getting very, very nervous and it's beginning to show. With the US heading into a three-day weekend (Monday is President's Day. In case your boss didn't tell you, you don't have to come in.) and China's markets re-opening on Monday, tomorrow's trading might be more than just a little interesting. The week has gone badly so far, and it is doubtful many will want to head into the break long.



Hate Crime for Thursday:
S&P 500: 1,829.08, -22.78 (1.23%)
Dow: 15,660.18, -254.56 (1.60%)
NASDAQ: 4,266.84, -16.76 (0.39%)

Crude Oil 27.30 -0.55% Gold 1,247.00 +4.39% EUR/USD 1.1316 +0.32% 10-Yr Bond 1.64 -3.58% Corn 360.00 -0.07% Copper 2.01 -0.72% Silver 15.80 +3.36% Natural Gas 1.99 -2.79% Russell 2000 953.72 -1.01% VIX 28.14 +7.04% BATS 1000 19,734.69 -1.33% GBP/USD 1.4484 -0.35% USD/JPY 112.5900 -0.01%

When Three Strikes Is a Home Run

In the game of baseball, there are rules, immutable and unchanging. Three outs per inning. A caught fly ball is an out. Three strikes and you're out.

The world of high finance, as demonstrated daily on the trading platforms, carries no such rules, other than simple casino-style paradigms. Make the right bet, at the right time, and you're a winner, after the various parties to the trade take their respective cuts, of course. The broker gets theirs, the government, another. It's more about timing and luck, especially these days, when nothing much matters other than the directionality of the various computer algos plying and playing the indices.

So it is that in stocks, you have situations like today, wherein three strikes equates to hitting a home run. Prior to the opening bell, three different sets of economic data were presented, and, against expectations, all were swings and misses, except maybe the seasonally-adjusted building permits, which could be weighed as a foul tip into the catcher's mitt, a strike by any other name.

First came the May CPI, up 0.1%, on expectation of a rise of 0.2%, well short of the Fed's annualized two percent inflation target. Strike one. Next up, housing starts, which banked 914K, well below expectations of 950K. Strike two. As mentioned above, building permits, which mean nothing other than somebody is planning to do something, like put up a fence or remodel a bathroom, were just under the expected annualized rate of 975K - at 974K. Strike three.

The market response was as expected, with deference and possibly blissful ignorance toward the headline numbers, straight up all day, a veritable home run, even as auto sales in Europe reached 20-year lows and an agent of our very own secret police, the NSA (No Such Agency, to wise guys) testified to congress that the wholly unconstitutional massive spying program that filters every American's phone calls, emails and internet activity, prevented the bombing of the NY Stock Exchange by some nefarious, insidious suspect known only as "the doctor" in 2008. The NSA says more than 50 terrorist plots were uncovered by their spy programs since 9/11/2001. Not even the best Hollywood script writers could have come up with a better narrative to deprive citizens of their fourth amendment rights. Those NSA guys hire only the best, you know.

Thus stocks ended the day close to all-time highs once again. The Dow Industrials are within spitting distance - less than 100 points - of the May 28 closing high of 15,409.39 as the Fed ponders what to do next, wrapping up their two-day FOMC meeting on Wednesday. A policy decision is due out at 2:00 pm EDT, followed by a reading of the statement and press conference, by everybody's favorite "doctor," the dis-honorable Ben Bernanke, balding, bearded, wizened Chairman of the Federal Reserve.

With recent jawboning efforts pointing toward some tightening of Fed policy, the markets seem to be expecting no change in course for the every-easy Fed, and, while there's some nervousness over the wording of the statement, one might suspect that an even more important date - expiry of June options contracts on Friday - may be what's really driving the markets higher this week.

With baited breath we await the words of fearless leader the Chairman. Can't wait.

Dow 15,318.23, +138.38 (0.91%)
NASDAQ 3,482.18, +30.05 (0.87%)
S&P 500 1,651.81, +12.77 (0.78%)
NYSE Composite 9,399.63, +61.74 (0.66%)
NASDAQ Volume 1,593,283,375
NYSE Volume 3,392,735,750
Combined NYSE & NASDAQ Advance - Decline: 4430-2051
Combined NYSE & NASDAQ New highs - New lows: 327-76
WTI crude oil: 98.44, +0.67
Gold: 1,366.90, -16.20
Silver: 21.68, -0.081

Stocks Decline Globally as QE and ZIRP Show There are Limits

With losers outpacing gainers by a 4:1 margin, stocks got trashed today around the globe, starting in Japan - which triggered the entire equity rout - and ending here in the USA where the Dow lost 108 points, and, despite that stiff selloff, was still easily the best performer of the major indices on a percentage basis.

The NASDAQ and NYSE Composite took the day's losses the worst, off 1.06% and 1.10% respectively. The S&P dropped by just more than one percent.

The worldwide selling spree was set off when the Japanese leadership declined to extend their bond and market easing measures past what was already in place. Speculators expected the BoJ to increase bond and ETF purchases, but came away disappointed.

That sent the Nikkei and Topix tumbling to the downside, and greeted European investors with markedly negative prospects as their trading day began.

In the US, futures were heavily to the downside, resulting in the indices hitting their lowest points just minutes into trading. Remarkably, stocks came nearly all the way back - with the Dow going positive for a few moments before noon, but the low-volume rally fooled nobody and sellers came back in force to take stocks back down for the rest of the session.

Adding to the already nervous environment, the 10-year note bounced up as high as 2.28%, but ended the day at a relatively benign 2.18%, though fear of higher rates and a tapering of the Fed's bond buying program remained a key market driver in both stocks and bonds.

A fortnight of protests in Turkey finally exploded into a somewhat violent repression by government forces, who used water cannons and tear gas to disperse about 10,000 protesters. Also, late in the day, news broke that the ACLU had filed suit against the US government over the NSA's recently-exposed monitoring of nearly all domestic communications, calling the activity unconstitutional.

This is truly a dangerous environment, both for investors and ordinary citizens. Stocks are hovering in a range just below all-time highs and recent lows, while Washington is awash in scandals ranging from covering up the assassination of a diplomat and others in Libya (Benghazi), to wiretapping reporters to having the IRS harass political opposition. In another time, there would be protests all over the Washington Mall and cries for impeachment of president Obama would be drowning out reasonable discourse. But, Americans have grown so used to government malfeasance and the country has become so dependent on government entitlements that nobody seems capable of raising their voice to an administration and a congress that has trampled the constitution ever since 9/11/2001.

What will it take to shake things up and clean the garbage out of our corrupt-to-the-core political and financial system? A severe market crash? A politician with will and integrity? A hot war in Syria? Something else?

Stay tuned for what should develop into a very contentious, heated summer of pandemonium in markets and politics. The events of the past two to three weeks have been just the warm-up act. The main attraction begins when the cronies turn on each other.

Dow 15,122.02, -116.57 (0.76%)
NASDAQ 3,436.95, -36.82 (1.06%)
S&P 500 1,626.13, -16.68 (1.02%)
NYSE Composite 9,255.44, -102.56 (1.10%)
NASDAQ Volume 1,477,085,500
NYSE Volume 3,854,662,750
Combined NYSE & NASDAQ Advance - Decline: 1286-5251
Combined NYSE & NASDAQ New highs - New lows: 131-308
WTI crude oil: 95.38, -0.39
Gold: 1,377.00, -9.00
Silver: 21.65, -0.279

No Follow-Through after Big Friday Run-Up; Stocks Open Week Flat

Stocks meandered along the unchanged line all day in a fairly tight range (90 points top to bottom on the Dow), just one trading day removed from the second-largest gains of the year, attributed largely to the benign number supplied by the BLS on jobs.

The only news worth noting were S&P revising the US credit rating from neutral to stable and the weekend revelation that the whistleblower who exposed the wide-ranging NSA data collection of Americans' phone and internet dealings is a 29-year-old named Edward Snowden.

Neither story had much of a macro-level impact on markets, though the coming forward of Snowden has raised the stakes in the game of chicken the government is playing with the American public (remember, you're being watched right now... creepy, isn't it?).

Volume was typically summer-light, as many investors or traders have already gone into "stay away" mode for the season.

The market is desperate for direction, stuck between recent new all-time highs and the bottoms of last week's abbreviated pullback.

Where it goes from here depends largely on whatever comes out of the mouths of varius Fed governors and officials, leading up to next week's FOMC policy meeting, so this languishing could last a while.

Stocks haven't been in such a ho-hum mood since... well, last summer.

Dow 15,238.59, -9.53 (0.06%)
NASDAQ 3,473.77, +4.55 (0.13%)
S&P 500 1,642.81, -0.57 (0.03%)
NYSE Composite 9,353.20, -2.21 (0.02%)
NASDAQ Volume 1,495,601,750
NYSE Volume 3,068,391,750
Combined NYSE & NASDAQ Advance - Decline: 3326-3162
Combined NYSE & NASDAQ New highs - New lows: 258-120
WTI crude oil: 95.77, -0.26
Gold: 1,386.00, +3.00
Silver: 21.92, +0.182