Home Sales and Stocks Are Diverging?

Stocks staged an incredible rally on Monday set against a backdrop of the second straight monthly decline in both new and existing home sales.

Existing home sales for January were reported last Wednesday; new home sales came out on Monday morning and were far from encouraging, showing a January decline of 7.8% after December's 9.3% drop.

With a shrug, stock investors ignored yet another sign that the general economy is not operating at optimal efficiency. Apparently, the mindset is such that owning stocks is a better investment than owning a place to live. Maybe when Americans are all renters, they will be encouraged to buy even more stocks, to balance things out, so to speak.

Wall Street may have a mind of its own, though it appears that mind is being led by some very false rhetoric about the strength of the US - and global - economy.

Monday's big gains puts the Dow in position to erase all of the losses from earlier in the month. The NASDAQ is already back above where it began the month.

Dow Jones Industrial Average February Scorecard:

Date	Close	Gain/Loss	Cum. G/L
2/1/18	26,186.71	+37.32	+37.32
2/2/18	25,520.96	-665.75	-628.43
2/5/18	24,345.75	-1,175.21	-1,803.64
2/6/18	24,912.77	+567.02	-1,236.62
2/7/18	24,893.35	-19.42	-1,256.04
2/8/18	23,860.46	-1,032.89	-2288.93
2/9/18	24,190.90	+330.44	-1958.49
2/12/18	24,601.27	+410.37	-1548.12
2/13/18	24,640.45	+39.18	-1508.94
2/14/18	24,893.49	+253.04	-1255.90
2/15/18	25,200.37	+306.88	-949.02
2/16/18	25,219.38	+19.01	-930.01
2/20/18	24,964.75	-254.63	-1184.64
2/21/18	24,797.78	-166.97	-1351.61
2/22/18	24,962.48	+164.70	-1186.91
2/23/18	25,309.99	+347.51	-839.40
2/26/18	25,709.27	+399.28	-440.12

At the Close, Monday, January 26, 2018:
Dow Jones Industrial Average: 25,709.27, +399.28 (+1.58%)
NASDAQ: 7,421.46, +84.07 (+1.15%)
S&P 500: 2,779.60, +32.30 (+1.18%)
NYSE Composite: 12,999.62, +115.51 (+0.90%)

Dull Start As New Home Sales Fall For Third Straight Month

Wall Street wasn't particularly troubled over the fact that new home sales fell for the third month in a row, and by the end of the day, it hardly mattered, as stocks staged a mild comeback from opening losses.

The drop of 1.5% (511,000 annualized, seasonally adjusted) was led by a huge, 23.6% plunge in the West, according to the commerce department. The median home price also fell, to 288,000, a level many are finding difficult to justify.

For instance, even at today's low rates, a $250,000, 30-year mortgage runs $1,088 per month, with interest paid over the life of the loan of $141,686, making the total amount paid a stunning $391,686. With more than half the wage-earners in the United States making less than $30,000 per year, that's a price too high to bear, but, that's what the Fed has thrust upon would-be homebuyers in their quest to boost asset prices and inflation.

Many new-home buyers of today will find themselves stuck - like many home owners during the sub=prime bust - if interest rates rise over the coming years. Not only will these buyers be burdened by an enormous debt, their properties would become unsalable, due to a glut on the market and higher carrying costs. That same $250,000 mortgage, at, say 5%, would jump to $1,342, making the now-used home even less affordable and the current residents trapped in an underwater condition.

It's actually surprising that anybody is actually building and buying new homes. The prices are at astronomical levels. The median home price may actually have peaked a few months ago, hitting a record 317,000 in November, 2015, setting the stage for another round of hand-wringing by banks and homeowners alike when the next recession hits, something for which the US economy is now overdue. It's been eight years since the last one and the Fed has not convinced anyone that it has finally vanquished the business cycle; they've only managed to delay the inevitable.

Speaking of the Fed, the FOMC begins a two-day meeting at which they will do nothing other than remind the world that they are in control of everything and that the US economy is still not to their liking, meaning another rate hike is still months away, if at all. Normalizing rates may prove to be the undoing of central banking, because it will absolutely destroy many leveraged, hedged market constituents.

Monday's Mangled Mess:
S&P 500: 2,087.79, -3.79 (0.18%)
Dow: 17,977.24, -26.51 (0.15%)
NASDAQ: 4,895.79, -10.44 (0.21%)

Crude Oil 42.86 -1.99% Gold 1,239.10 +0.74% EUR/USD 1.1269 +0.42% 10-Yr Bond 1.90 +0.74% Corn 384.50 +2.40% Copper 2.25 -0.60% Silver 16.99 +0.53% Natural Gas 2.19 -3.22% Russell 2000 1,138.09 -0.75% VIX 14.08 +6.51% BATS 1000 20,682.61 0.00% GBP/USD 1.4483 +0.16% USD/JPY 111.1950 -0.56%

Stocks Higher on Assumption That Fed Will NOT Immediately Taper Further

On the eve of Ben Bernanke's final FOMC meeting as Chairman of the Fed, stocks perked up in anticipation that the Fed will NOT decrease their monthly bond buying by another $10 billion.

The reasonings behind this are numerous, but mostly rely upon some poor economic data, dating back to early January's release of December non-farm payrolls, which were an admitted disaster.

Piling upon the low job creation and further decline in the workforce participation rate were Monday's new home sales for December, which fell by seven percent in the month, to a seasonally adjusted annual rate of 414,000, as reported by the Commerce Department. In November, sales fell 3.9 percent, making December the second consecutive monthly decline.

Hopping on the decline bandwagon Tuesday morning, the Case-Shiller housing index showed a month-over-month decline in November, something professor Shiller had been warning about since last May. The Standard & Poor's Case-Shiller index of home prices in 20 top cities fell 0.1% in November. A separate 10-city index also fell by 0.1%, though prices were higher by more than 13% on year-over-year data.

Perhaps the most overlooked piece of data also came forward prior to the opening bell, in the form of a massive miss on Durable Goods for December, down 4.3%. The decline was the largest since July. November was also revised lower, from 3.5% to 2.6%.

What that did for stocks was give investors further confidence that the Fed would not decrease their monthly allotment of bond purchases past the $75 billion mark come tomorrow afternoon, when the rate policy announcement is offered at 2:00 pm ET. The currency splashdown in various emerging economies - Venezuela, Argentina and Turkey, in particular - has been, in part, caused by the Fed's "tapering", withdrawing liquidity at a time when most sovereign economies are weak, at best.

A further tapering come tomorrow seems to be out of the question, according to the stock market's "bad news is good news" reaction on Tuesday. The rally could prove to be quite ephemeral, however, as stocks may very well add on more gains Wednesday after the Fed's announcement, but the condition persists. The Fed and most of their central banker brethren have been backed into a corner, wherein they cannot exit their market-propping QE policy, lest markets collapse.

With Bernanke handing over the chairmanship to Janet Yellen, there's at least some good odds that the new Fed chairwoman might even reverse course and begin adding even more QE to the mix, which would, naturally, lead to even more speculation in equities, commodities and rare works of art and real estate, sending the global economy further into the debt spiral from which it seems escape is impossible.

After the bell, AT&T modestly beat earnings expectations, and Yahoo beat on the bottom line, showing fourth quarter earnings of 46 cents on expectations of 39 cents. Revenues were in line, though shares of the oldest search portal were seen down more than five percent in after hours trading. Rumors that profit expectations fell short were being discussed as a primary cause for the selloff.

Additionally, the central bank of Turkey was expected to raise interest rates by as much as two to three percent in order to stave off further decline in the value of the Turkish Lira. The midnight meeting was taking place as of this writing though no news reports were available at the time of this posting.

DOW 15,928.56, +90.68 (+0.57%)
NASDAQ 4,097.96, +14.35 (+0.35%)
S&P 1,792.50, +10.94 (+0.61%)
10-Yr Note 99.93, +0.62 (+0.63%) Yield: 2.76%
NASDAQ Volume 1.85 Bil
NYSE Volume 3.35 Bil
Combined NYSE & NASDAQ Advance - Decline: 4069-1635
Combined NYSE & NASDAQ New highs - New lows: 68-64
WTI crude oil: 97.41, +1.69
Gold: 1,250.80, -12.60
Silver: 19.50, -0.29
Corn: 432.00, +0.25

Stocks Plunge, Recover, End Flat on Fed's Beige Book, Data

A raft of economic news hit the street on Wednesday, but, for the most part, all it did was add to the confusion surrounding the Fed's bond-buying scheme and Friday's non-farm payroll release for November.

Leading off the hit parade - prior to the open - was ADP's November private payroll number, gushing at a robust 215,000 new jobs created during the month, which turned futures sour and set a negative tone for the session (remember, good news is bad because the Fed would likely diminish the free money carry trade known as QE).

Then came data on the US trade deficit, which narrowed to $40.6 billion, more good news. New home sales surged 25%, though the median price declined slightly, another positive for the economy.

The mood changed with ISM Services data, showing a slowing from 55.4 in October to 53.9 in November. Overall, the mood on Wall Street turned to fear of an improving economy (sad, but true how twisted the logic is), sending stocks to their lows of the session around midday.

With the Dow off 125 points and the other major indices following suit, the Fed's beige book was released at 2:00 pm ET, and, apparently, enough investors and traders found enough evidence to believe that the Fed was nowhere close to tapering their bond purchases, igniting a rally that sent the Dow into positive territory briefly in the final half hour of trading.

While this is a plausible explanation of the day's roller coaster activity, some did not get the memo or read the tea leaves of the Fed clearly enough, as the rally sizzled, then fizzled into the close, leaving the Dow and S&P modestly lower, the NASDAQ up a couple of points.

At the end of the day, it was a big, fat, nothing=burger, though some adroit day-traders certainly cashed in on the movement and momentum.

With the Dow down for the third time in three December days, it marks the first time that's happened to start a month since September, 2011.

The BLS monthly non-farm payroll report will be released Friday morning, leaving Thursday as a kind of limbo trade. Based on the smashing results of the ADP report, expectations are for a boffo government report, producing, alas, another downdraft on stocks. such is the madness that moves markets in the age of QEternity and ZIRP until the end of time.

Thursday, therefore, would be a good day to relax, take some time off and buy some gold or silver, both of which saw heavy buying after weeks and weeks of relentless selling. A bottom may have been put in on the precious metals, or not. In any case, they're very cheap compared to prices over the past three years. Besides, they're shiny and guaranteed not to rust.

Bonds sold off, with the 10-year note hitting 2.84% yield at the end of the day, a watershed mark and the highest yield since October.

Volume was relatively strong, the advance-decline line continued to post a negative number, and the gap between new highs and new lows narrowed to its lowest point since the government shutdown in October, a key number on which to train one's investment eyes.

DOW 15,889.77, -24.85 (-0.16%)
NASDAQ 4,038.00, +0.80 (+0.02%)
S&P 1,792.81, -2.34 (-0.13%)
10-Yr Note 99.18, -0.03 (-0.03%)
NASDAQ Volume 1.81 Bil
NYSE Volume 3.59 Bil
Combined NYSE & NASDAQ Advance - Decline: 2236-3418
Combined NYSE & NASDAQ New highs - New lows: 150-111
WTI crude oil: 97.20, +1.16
Gold: 1,247.20, +26.40
Silver: 19.83, +0.765
Corn: 436.50, +5.25

Friday Wrap: New Home Sales Plummet; Stocks Thin Trade Up; Joe Cocker's Response?

Where we are, it's a beautiful summer day. Crickets are chirping, bees buzzing, birds singing, everything is green and red and gold, warm and wonderful.

Speaking of gold, what was that spike just after 10:00 am, all about? Oh, housing. Yes. New home sales fell by 13% in July, due - according to most usually-misinformed experts - mainly to rising interest rates. It was the lowest level of sales in nine months. Additionally, June figures were revised dramatically lower.

Well, OK, so new homes, already overvalued and, like new cars, worth less than what you paid (and will be paying for 30 years) the moment you walk in the front door for the first time, aren't such a bargain anymore. But why does that affect the price of gold? And, concomitantly, why did interest rates dip at the same time?

Maybe because the economy isn't as good as the doves at the Fed would like us to believe. They still think there's a good chance that they can stop stimulating the economy in September, or maybe October, or, or, or... maybe some day, without crashing the market. And that leads some people to run for safety, in things they can actually touch and feel and believe are undervalued, like gold (and silver, which was up big again today), or to bonds, which are traditionally safer investments than stocks (we'll reserve judgement on that one for now).

Stocks were higher at the close today, but, despite today's thinly-traded silliness, the Dow ended the week down 71 points, the NASDAQ (even being closed half the day yesterday) was still up 55 points (bubble?), and the S&P gained 7.62. Pretty much, the week was a non-event. That's three down weeks in a row for the Dow, and a little bit of a break for the S&P and NASDAQ, down the previous two weeks.

As for the Fed, all they need is some solid economic data that shows the US (and by proxy, the global) economy is healing nicely, or "recovering" as they say, but, like a wounded patient, recovery is an empirical event, one which can be seen, not hocus-pocus numerology or fantasy ripped from the headlines. It is a phenomenon which can be observed. The gal with the broken leg takes off the cast and walks again. The guy who had a heart attack can do jumping jacks or go jogging. That's what recovery looks like.

If the US economy was a patient with an illness, it would have been flat on its back, probably on an operating table, back in 2008-09. Since then, it has been pumped full of fluids, fitted with prosthetics and taken from critical condition to "under observation." Take away the fake limbs and it can't walk or feed itself. Cut off the fluids and the patient will atrophy and die.

That's why the Fed can't taper in September. The patient is still too weak and has been propped up by artificial means (QE and ZIRP). Take those away and the patient will relapse, but, the Fed may give it a go anyway, despite strong empiricial evidence that it is the wrong course of action. That's what the Fed does best - hard to believe from people who are supposed to be smart; they usually make bad moves.

In the end, there will be pain, despite or in response to whatever the Federal reserve does. The economy remains weak and may actually be getting weaker. If they start trimming their bond purchases, it most certainly will not improve, prompting what we think may be the appropriate response for all of us, courtesy of Joe Cocker, from Woodstock, way, way, way back in 1969:



Dow 15,010.36, +46.62 (0.31%)
NASDAQ 3,657.79, +19.08 (0.52%)
S&P 500 1,663.47, +6.51 (0.39%)
NYSE Composite 9,474.75, +48.97 (0.52%)
NASDAQ Volume 1,453,646,250
NYSE Volume 2,586,104,750
Combined NYSE & NASDAQ Advance - Decline: 4141-2401
Combined NYSE & NASDAQ New highs - New lows: 156-52
WTI crude oil: 106.42, +1.39
Gold: 1,395.80, +25.00
Silver: 23.74, +0.703

Dow at New Record Close, NASDAQ, S&P Down, Apple Beats, Revenues In-Line

New home sales for June will be out tomorrow at 10:00 am EDT. This follows Monday's release of existing home sales data which was lower than June a year ago.

Also out tomorrow, prior to the bell, are earnings from Boeing (BA), which is trading near all-time highs.

Apple (AAPL) somewhat surprised markets after hours, beating eps estimates of 7.32 per share with a 7.47 show. Revenues were basically in-line, at 35.30 billion, on estimates of 35.02 billion. I-phone sales were well ahead of everyone's estimates and is a real driver for the company, even though same quarter earnings last year were 9.32. Growth is slowing, but Apple is still mightily profitable. As an investment, it may not be such a great performer going forward, much of its growth having been due to founder, Steve Jobs, who passed away October 5, 2011. Apple must stop pretending and create new and exciting products, not an easy task.

Incidentally, Apple's stock leapt in after-hours trading, just seconds before the earnings release, in yet another example of how the market is rigged to insiders and dangerous for individual investors.

For an idea as to how out-of-whack the markets are, consider the new highs to new lows today, at 536 new highs to 38 new lows. That's an extreme reading - sure, we're at all-time highs - but that's when things usually turn, and turn this market will, though probably without much notice. Keep powder dry.

Dow 15,567.74, +22.19 (0.14%)
NASDAQ 3,579.27, -21.11 (0.59%)
S&P 500 1,692.39, -3.14 (0.19%)
NYSE Composite 9,659.63, +9.04 (0.09%)
NASDAQ Volume 1,577,547,250
NYSE Volume 3,369,484,500
Combined NYSE & NASDAQ Advance - Decline: 3435-3033
Combined NYSE & NASDAQ New highs - New lows: 536-38
WTI crude oil: 107.23, +0.23
Gold: 1,342.80, +6.80
Silver: 20.44, -0.064

Sandy Weill, Hypocrite Bankster; Apple Sends S&P, NASDAQ Lower, Housing Bottom, NOT!

Like mountains that are climbed, we watch CNBC because it's there, not because they offer something other than the capitalist-claptrap-company-line of "buy stocks and keep buying stocks." They don't, usually, unless Rick Santelli is ranting or somebody like Sandy Weill says something so hypocritical that it cannot go unchallenged.

Weill, the former CEO of Citigroup, was the man most responsible for the repeal of the Glass-Steagall act during the Clinton administration years, which set in motion the deregulation of banks, ungodly high leverage, the sub-prime circus and eventually the global catastrophe of international finance through which we are all currently suffering, was polluting this morning's air with calls to break up the big banks.

Weill was on this morning's "Squawk Box," the normally tiresome pre-market news show, opining that the big banks need to be broken up. This is quite the turnabout from the man who, back in the 1990s, engineered the business model of the banking/financial supermarket, where customers could purchase not only CDs and checking accounts, but stocks, bonds, and all manner of derivative products, and where the bank would securitize obligations, repackaging and reselling to willing investors.

One should note that Weill profited greatly from the deregulation of the banking industry and that he is still very rich, though now, more than 15 years hence, his PR team has probably advised him that calling for the breakup of the too-big-to-fail (TBTF) banks would be a marvelous boost for his personal profile. No doubt, Weill has a profit motive behind his pronouncement, or is keying in a on lucrative, influential government position, which is all America needs right now, is another hypocritical bankster who puts self-interest far above public service running the Treasury Department, or maybe the Office of Thrift Supervision.

There really is no end or outer limit to the hubris of the banker class, but Weill's sudden change of heart, no doubt politically expedient, is the worst form of hypocritical doublespeak imaginable. Even Orwell would be amazed, abused, or, amused.

---

After Tuesday's post-market-close earnings miss by Apple (AAPL), the markets did as obedient markets will, as the S&P and NASDAQ, of which Apple is a huge component of both, sold off viciously right out of the gate.

The NASDAQ was down a quick 22 points, the S&P shedding seven points in the early going, but, with Ben Bernanke and the Fed providing cover, ostensibly standing ready with their bazooka loaded with QE stimulus, stocks gained ground and eventually turned positive (the Dow was in the green all day), before fading into the close. The Dow gave up more than half its gains, even though Apple is not a Dow component.

The current idea - floated around yesterday afternoon by the Fed's chief propagandist, Wall Street Journal writer John Hilsenrath - was that the Fed may act as soon as their very next FOMC meeting, which occurs next week, July 31 - August 1. About all the Fed can do, besides buying up more worthless MBS or some vague extension of Operation Twist, or more simple jawboning, all ideas which have been tried and proven failures.

But, the market being as rigged as it is, (according to Paul Criag Roberts, all markets are now rigged), the Federal Reserve must come off not looking like the powerless goon it really is, but rather as an engaged participant ready to swing into action to save the American people.

Tripe. The Fed has been without bullets or a gun for the better part of the past two years, and now, like the boy who cried "wolf," nobody is bothering to listen. QE1 and QE2 didn't fix anything and likely made matters worse, so QE3 isn't going to matter one iota.

---

For those who think the housing market has hit bottom, again! today's data must have been a chilling reminder of not only where we've been, but where the millions of underwater homes are headed: deeper into the blue, after new home sales for June plunged to an annualized rate of 350,000, well below the expected 373,000. The drop was made worse by the upward revision of the May data, from 369,000 to 382,000, but it was still a mighty miss by any standards.

The real estate market being diverse, there are some areas of strength, but, overall, the heartland of America is still suffering from the worst housing bust since the Great Depression, and it's not over with yet.

So, some big numbers and events are coming soon. Friday will witness the initial estimate of second quarter GDP, expected to be anywhere from 1.5% to 2.2% to the good, then there's the FOMC meeting Tuesday and Wednesday of next week, followed by next Friday's July non-farm payroll data.

Among all the usual market noise, new lows exceeded new highs for a third straight session, but, as we know, it won't last, because the Fed is coming to the rescue.

This is really beginning to get interesting.

Dow 12,676.05, +58.73 (0.47%)
NASDAQ 2,854.24, -8.75 (0.31%)
S&P 500 1,337.89, -0.42 (0.03%)
NYSE Composite 7,604.56, +13.94 (0.18%)
NASDAQ Volume 1,725,712,125
NYSE Volume 3,391,726,000
Combined NYSE & NASDAQ Advance - Decline: 3085-2522
Combined NYSE & NASDAQ New highs - New lows: 119-165
WTI crude oil: 88.97, +0.47
Gold: 1,608.10, +31.90
Silver: 27.47, +0.66

Apple Bifurcates Markets on Big Sell-off; Spain, Housing in Focus

Before getting to why the major indices were all over the map today, a couple of key economic data points:

The NAHB Housing Market Index fell for the first time in seven months, from 28 in March to 25 in April. A figure of 50 is considered "break even" wherein more builders are more confident. Obviously, this latest dip leasves new hoe builders nowhere close.

Regionally, the Northeast posted a four-point gain to 29 (its highest level since May of 2010), the West saw no change at 32, the South declined three poins to 24 and the Midwest was the weakest, posting an eight-point decline to 23.

With new home sales on tap for tomorrow, housing appears to be as weak as it ever has.

Retail sales for March posted an unexpected 0.8% gain on expectations of just a 0.3% rise, somewhat of a surprise considering high fuel costs and other issues facing consumers (no jobs, no homes, high debt, etc.).

On the downside, the Empire Manufacturing Index nose-dived from 20.21 in March to 6.56 in April. The collected wisdom of forecasters expected a decline - to 17.6. New orders and shipments were down, while the employment situation was mixed with more jobs, but for shorter durations.

Taken together, these data sets reveal a US economy that is crawling along and possibly sputtering to stall speed.

Investors in Apple (AAPL) took some long-overdue profits on Monday, sending the world's largest company by market cap down 25.10 points (4.15%), to close at 580.13, the worst decline for Apple in more than six months. Investors were buoyed by a 45% gain in the company stock since October, however.

The weight of Apple on the various indices was obvious, with the NASDAQ the most severely affected, the S&P less so. Meanwhile, the Dow registered a strong showing, with 24 of the 30 components sporting gains, led by Travelers (TRV), Proctor & Gamble (PG), Wal-Mart (WMT) and DuPont (DD).

Otherwise, it was a straightforward session, with much of the focus centered on Spain's 10-year note, which spiked back above 6% on the day and sent bond holders scrambling for the safety of the German Bund, which is nearing historic lows. The pressure on Spain's funding continues to fuel speculation that the country will need a Greek-style bailout soon.

Dow 12,921.41, +71.82 (0.56%)
NASDAQ 2,988.40, -22.93 (0.76%)
S&P 500 1,369.57, -0.69 (0.05%)
NYSE Composite 7,949.57, +18.47 (0.23%)
NASDAQ Volume 1,566,279,375
NYSE Volume 3,444,850,000
Combined NYSE & NASDAQ Advance - Decline: 3083-2500
Combined NYSE & NASDAQ New highs - New lows: 109-106
WTI crude oil: 102.93, +0.10
Gold: 1,649.70, -10.50
Silver: 31.37, -0.02

March Market Madness: BofA's Own to Rent Plan; Apple Flash Crash, BATS batty IPO

College basketball's 68-team NCAA national championship tournament (AKA March Madness) has nothing on US stock markets in terms of sheer insanity and hair-raising antics.

Just when you think it can't get any weirder in our manipulated, over-hyped markets, along comes a day like today to convince you that the absurd is now the new normal.

To start things off, Bank of America announced a plan to "invite" roughly 1000 homeowners in default on their mortgages the chance to rent the home they formerly owned.

Think of it. BofA can now use the catchy, "Rent a Piece of the American Dream" as the tag line for what they're calling, subtly, the Mortgage to Lease Program. No lie. The bank that bought Countrywide Financial and all their horrible sub-prime, Alt-A, no-doc and NINJA loans, now wants to slither out from under the rock of the robo-signing scandal, fraudulent mortgage documentation and a host of other evils, by forgiving the original loan and renting the house back to the (former) mortgagor.

The absurdity of this plan, whereby people who can't afford their mortgage payments, are somehow supposed to be able to afford rent, or even want to, in the very same home they've been living in for free for two or three years or longer, is so over the top, some people might even buy into it. The Bank of America plan is to take title to the homes, tear up the old documents (supposedly before said homeowners rush to the nearest federal courthouse, documents in hand, and file fraud charges), pay the property taxes, rent the property back to the homeowners (or squatters, if you like), at - get this - rent that's less than the original monthly mortgage payment, then flip the house, along with the paying (below market rates) tenants to some investment gang. Are there real estate investors that dumb out there?

There are so many flaws to this abhorrent plan that it is hardly worth discussing, though actual landlords - real people who own and manage rental properties - have been laughing about it all day long. And, of course, the bank won't sully its pristine reputation by dirtying its hands with the mundane tasks of landlording, like maintaining the lawns, fixing leaks and making modest improvements. No, for that, they'll hire professional property managers, adding even more cost.

The plan is supposed to roll out shortly in the states of Nevada, Arizona and New York as a pilot program. Pilot, indeed. This plan is going to crash and burn on the runway. All of this sound and fury is designed for only one purpose: to save face and costly lawsuits, now that people have awakened to the criminality and fraud that Countrywide started and Bank of America openly perpetuated. They'd be much better off and propbably millions of dollars ahead if they'd just give the properties to the people living in them and simply walk away.

With that as a background, the housing market made more ugly noises on Friday when the Commerce Department reported that new home sales fell for the second straight month, dropping 1.6% in February, despite unusually warm weather, great for home-hunting and generational low mortgage rates.

Then there was Apple's flash crash, blamed on a fat-finger trade for 100 shares well below the market price on a trading platform known as BATS, which, incidentally, went public today, but after all of one trade, shut itself down due to technical difficulties, canceling its IPO indefinitely, which, if today's performance was any indication of the quality and integrity of its service, will likely be forever.

As if that wasn't enough, today marked the absolute thinnest volume in the last ten years. It was completely dreadful, yet stocks still finished with meagre gains, though down for the week. Ouch!

Dow 13,080.73, +34.59 (0.27%)
NASDAQ 3,067.92, +4.60 (0.15%)
S&P 500 1,397.11, +4.33 (0.31%)
NYSE Composite 8,180.05, +38.72 (0.48%)
NASDAQ Volume 1,400,164,125
NYSE Volume 3,395,163,250
Combined NYSE & NASDAQ Advance - Decline: 3848-1709 (that's WACK!)
Combined NYSE & NASDAQ New highs - New lows: 133-28
WTI crude oil: 106.87, +1.52
Gold: 1,662.40, +19.90
Silver: 32.27, +0.93

Welcome to the Age of Financial Repression; Markets Fall, Metals Gain

This was truly a strange day in US equity markets. On the heels of Wednesday's Fed announcement that the federal funds rate would stay at 0-0.25% until the latter part of 2014 (read: as long as we need ZIRP to keep the economy from collapse) and blow-out earnings from Caterpillar (CAT), stocks opened sharply higher, but then nose-dived right at 10:00 am, after the Commerce Dept. reported that new home sales in December fell by 2.2%, to an annualized rate of 307,000. Additionally, the median price of a new house purchased last month declined 12.8% from a year ago. 2010 now stands complete as the worst year for new home sales since records began being kept in 1963.

On top of the earlier-reported initial unemployment claims spiking back up to 377,000 from an upwardly-revised 356,000 last week, not even the hope of endless largesse from the Federal Reserve could keep stocks in positive territory. All major indices ended in the red. By contrast, gold and silver posted solid gains.

A term one won't be hearing much on mainstream media is "financial repression," and if it sounds harsh, it's because it is, and it is the reality of much of today's economic world.

Here's a definition of Financial Repression from Investopedia:

A term that describes measures by which governments channel funds to themselves as a form of debt reduction. This concept was introduced in 1973 by Stanford economists Edward S. Shaw and Ronald I. McKinnon. Financial repression can include such measures as directed lending to the government, caps on interest rates, regulation of capital movement between countries and a tighter association between government and banks. The term was initially used in response to the emerging market financial systems during the 1960s, '70s and '80s.

Bingo. Another term for the collusion of business and government is fascism.

Welcome to the new world order. For a glimpse of who and what are destroying the value of capital and thus, your money, just take some time to view the goings-on at the World Economic Forum in Davos, Switzerland. Surely, George Soros, Mark Zuckerman, Jamie Dimon and a gaggle of billionaires have the worming men and women of the world's best interests at heart.

Dow 12,734.63, -22.33 (0.18%)
NASDAQ 2,805.28, -13.03 (0.46%)
S&P 500 1,318.43, -7.62 (0.57%)
NYSE Composite 7,883.90, -30.91 (0.39%)
NASDAQ Volume 2,061,939,750
NYSE Volume 4,521,722,000
Combined NYSE & NASDAQ Advance - Decline: 2651-2944
Combined NYSE & NASDAQ New highs - New lows: 332-21 (very extreme)
WTI crude oil: 99.70, +0.30
Gold: 1,726.70, +26.60
Silver: 33.74, +0.62

Markets End Losing Streak, but Are Up Only Slightly

Stocks started out in ugly fashion and got even uglier at 10:00 am when the Commerce Department announced that new home sales in July slipped to their lowest-ever level, selling at an annual rate of 276,000, down 12.4% from June and down 32.4% from July of last year. The number was the lowest ever recorded since the department began tabulating the data in the 1960s.

The media trotted out the usual commentary - just as it did trying to justify the horrific numbers in existing home sales - saying that the decline was tied to the April expiration of the government's $8,000 buyer home credit. The argument is weak, since the credit expired three months prior to the most recent recording period. May sales were awful, June's only slightly better, so the evidence seems to be pointing to widespread weakness in demand, like everything else in our stressed-out economic environment.

With prices falling as well, potential home buyers - the few that are out there - are either waiting for prices to drop further, which they most surely will, or waiting until there are some positive signs in the US economy. Either way, fewer and fewer people are diving into new or existing homes, and one can hardly blame them. Younger couples in particular may be concerned about their employment situation and don't feel an urgent need to take on massive new debt even though mortgage rates are at historic lows.

While the financial press continues to call the data "surprising," American households seem to have a better grip on what's really happening in the overall economy. At the best, it's stagnating, at the worst, we've never actually emerged from recession and are about to take another leg down.

The market's reaction to the report, along with a weak 0.3% reading on durable goods, was more salt into the wounds of already-battered bulls. The usual suspect experts were expecting durables to come in with an increase of 2.5-3.0%. As usual, they were sorely disappointed, especially since durable goods orders had fallen in the previous two months, and stripping out transportation, the numbers fell to -3.8%.

Some time around noon traders managed to piece together a soft rally which extended into the close, though there was little commitment among buyers. The gains looked more like dabbling in technology and heath care and consumer cyclical stocks, but didn't amount to much.

Dow 10,060.06, +19.61 (0.20%)
NASDAQ 2,141.54, +17.78 (0.84%)
S&P 500 1,055.33, +3.46 (0.33%)
NYSE Composite 6,696.12, +15.09 (0.23%)

Advancers galloped past declining issues, 3577-2177, though new lows exceeded new highs for the second consecutive session, 344-188. Volume was about the same as yesterday's, still in a very depressed state.

NASDAQ Volume 1,859,870,000
NYSE Volume 4,530,124,500

Oil traded lower on initial reports of US inventory builds, but managed to close the day higher, up 89 cents, to $72.52 a barrel. Gold continued its march toward new highs, gaining $7.70, to $1,239.50. Silver made its second strong advance in as many days, rocketing 65 cents to close the day at $19.02.

Today's smallish rally off nothing but bad news was probably more wishful thinking than rational investing by fund managers whose mandate requires stock purchases. It's a kind of forced buying which can turn markets around on individual days, even when the overall trend is very negative. The little bit of optimism provided probably won't last into the next session, with initial jobless claims due out at 8:30 am on Thursday. The much-anticipated revision to second quarter GDP caps off a week dominated by economic reports on Friday prior to the opening bell.

New Home Sales Bomb; Market Reaction: Numb

If there was any more proof needed that the US residential housing market was about to take another turn for the worse, May data on new homes sales may have not only provided that, but threaten to push the entire economy into another recession.

Dogged by relentlessly-high unemployment, tight financing issues and coming the first month after expiration of the government's new home buyer tax credit, May new home sales fell to a record low of 300,000 units (seasonally adjusted), the worst sales figure since data was recorded, back in 1963.

Not only was the number 32.7% below April's downwardly-revised figure of 446,000, but the decline was also 18.6% lower year-over-year. The news, which was released at 10:00 am EDT, was met with little more than a yawn on Wall Street, where stocks were marginally lower in anticipation of the Fed's rate policy decision later in the day (2:00 pm EDT).

Traders may be disappointed by whatever it is the Fed will do as they already have the fed funds rate at ZERO, so they have no loosening mechanism left in place to staunch another economic downturn except a couple of bad choices, those being, reinstitution of quantitative easing (printing money to buy more Treasury debt), or, expansion of the already-bloated balance sheet with the purchase of more mortgage debt, most of it toxic sludge which nobody wants to touch.

What the Fed does today will be important only in the minds of those who actually believe that they and the federal government can rescue the economy from the worst economic nightmare since the Great Depression, possibly the worst economic slowdown of all time. While most lame media pundits still put some degree of faith in the exigencies of Keynesian economics, more stable-minded Austrian thinkers feel that nothing can be done to stem the deflationary decline except writing off bad investments, involving a great deal of pain and suffering, much more than is currently being felt in the grandest global economies.

The FMOC rate decision will be released shortly after 2:00 pm ET. A full report, with closing numbers, will be reported in a subsequent post after the close of trading today.

Week Ends Slightly Weaker on Mixed Bag

A late-day rally restored some respectability on the Dow and the S&P 500, but both indices fell back to break-even or worse for 2007.

In particular, the Dow briefly dropped into red for the year and ended the day - and week - just 23-and-change from the 2006 finish. The S&P fared a bit better, losing less than 2 points during the session, but it is perilously close to the 1418.30 close of December 29, 2006 - less than 4 points - at 1422.18.

The last day of what turned out to be a tumultuous week left the major indices split from where they began. The Dow and NASDAQ lost ground while the S&P gained a bit, and that seems to be par for the course. The much-anticipated January Barometer reading may turn out to be inconsequential as there are currently too many unresolved issues - bonds, Fed action, earnings, oil, conflicting economic readings - to place much emphasis on any kind of reading it may produce.

At best or worst, depending on your outlook, outside of a huge 3-day rally or sell-off, January is going to finish close to where it started. That gives traders essentially no guidance, just what we're getting used to from the markets, the military, the government and even a host of football prognosticators.

Friday's 15.54 loss on the Dow was driven by a confluence of diversity. Dow component Caterpillar (CAT) missed earnings forecasts but issued encouraging 2007 guidance. After the close last night, Microsoft (MSFT) beat estimates and this morning, fellow component Honeywell (HON) merely matched expectations.

Other market-moving news included Durable Orders rising 3.1% in December, the Commerce Dept. said new home sales rose at a 4.8% rate in December to 1.12 million, marking the highest level since April, but as the day wore on oil continued to price higher, closing above $55/bbl. once again.

It really is a mixed bag out there. Caveat Emptor Sellers too.