Situation in Cyprus Still Unresolved; European, US Stocks Hit

If Americans could pull themselves away from their TV sets and the NCAA tournament for a few moments, some of them might come to the realization that what's happening in Cyprus might just have huge global implications in the not-so-distant future.

While the story so far consists of a multitude of moving parts, what is known so far is that Cypriot banks - oversized in relation to the nation's GDP - are in deep, deep trouble and that the "troika" (EU, ECB and IMF) has given the tiny island nation until Monday to come up with a viable plan.

Cyprus has been told it must raise 5.8 billion euros ($7.5 billion) if it is to receive 10 billion euros ($12.9 billion) from its fellow eurozone countries and the International Monetary Fund.

In the meantime, the banks remain closed, ostensibly to reopen on Tuesday of next week.

Many ATM machines have already run out of cash and one bank (Laiki) has already imposed capital controls, limiting withdrawals to 260 euros ($340) per person to conserve its dwindling funds. Rumors have it that Laiki will be folded into one or two of the other major banks in the nation, even though reported by CNBC, those reports have not been verified by reliable sources. The situation remains fluid with European officials, Russia (whose residents are responsible for the bulk of deposits in Cyprus' banks) and the Cypriot parliament are busy concocting ideas to rescue the banking system and the government, though nothing seems to be working particularly well at the moment.

Possible outcomes for Cyprus are varied and somewhat indecipherable at present, but what is known is that depositors almost certainly will be forced to surrender some of their funds via a tax, or levy, because there aren't enough bondholders in the banks to make up for the shortfall. Normally, those holders of bank debt would be first on the hook, but this situation is different from what has already occurred in Ireland, Greece, Spain, Portugal and Italy.

Nonetheless, whatever happens in Cyprus will have ramifications across Europe and the world. If the troika's plan to tax deposits becomes reality, it will almost certainly cause some degree of bank runs in the aforementioned countries that are already in trouble. The damage done to confidence in the system will be more severe. Banking and finance, largely based upon trust, cannot withstand wholesale looting of depositor accounts, no matter how small or seemingly trivial the amounts. The expectation is that banks are a safe place to park funds and the potential of either not having access to funds or having money appropriated (read: stolen) in order to bail out the bank itself or the government, is not part of the agreement.

Europeans are now looking at events in Cyprus through jaundiced eyes. The crisis is nigh upon four years old and the peripheral countries are still in recession, as is the whole of Europe. To date, all the plans of the EU, ECB and the IMF have amounted to only playing for time, and time is running short, both on the patience of the populaces and the viability of various governments.

The fear is that once the genie of appropriating depositor funds comes out of the bottle, it will be hard, if not impossible, to put back and will likely spread. No matter the eventual deal struck in Cyprus, capital flight is a certainty, the question being from where and to where the money will flow.

There's a certain unfairness about all of it, and a general sense of fear that hit markets this week with a thud. In the US, the damage has been downplayed thus far, but today's losses were the worst of the week and sent the major average to their lowest closes in nearly two weeks.

With the situation still unresolved, the anxiety on Wall Street and in other money centers around the globe is palpable. Unrestrained money printing, QE, low interest rates and other assorted "emergency" measures will not be able to trump a wholesale loss of confidence in the financial system itself, a condition which is likely long overdue.

Naturally, one cannot expect ordinary citizens and businesspeople around to world to immediately and simultaneously catch onto what's really occurring, but word is spreading, and quickly.

A piece of advice to everyone would be to watch one's finances carefully and keep a stash of cash outside the banking system, just in case. After all, it was one of our founding fathers - Benjamin Franklin - who opined, "an ounce of prevention is worth a pound of cure." And the cure has yet to be found.

Also of note is that traditional "safe havens" - gold and silver - have been appreciating slightly, with today's moves the most significant.

Dow 14,421.49, -90.24 (0.62%)
NASDAQ 3,222.60, -31.59 (0.97%)
S&P 500 1,545.80, -12.91 (0.83%)
NYSE Composite 9,009.66, -71.43 (0.79%)
NASDAQ Volume 1,691,711,000
NYSE Volume 3,571,124,500
Combined NYSE & NASDAQ Advance - Decline: 2138-4254
Combined NYSE & NASDAQ New highs - New lows: 303-28 (stretched)
WTI crude oil: 92.45, -1.05
Gold: 1,613.80, +6.30
Silver: 29.21, +0.395

Dow Gains 9th Straight Day to Another Record High

For the first time since November, 1996, the Dow Jones Industrial Average has risen for nine sessions in a row, the last seven of which made new record closing highs.

Not that it matters at all to ordinary investors (whatever that term means today), but the referenced date was during one of the market's greatest bull runs of all time and just prior to the famous "irrational exuberance" speech then-chairman Alan Greenspan gave just a month later, warning that the markets were overheating.

The chances of current chairman Ben Bernanke saying something similar are essentially nil. There's a better chance that Mr. Bernanke would fan, rather than cool, the flames of capitalism in coming months. It's simply not in the cards for the Fed to change course any time soon.

Today's gains were slim, with a range and volume that were slimmer by comparison. The Dow traded in a 50-point span from top to bottom, and volume, which has been non-existent throughout the current rally, was decidedly dull.

For all the talk of recovery and new highs, this leg of the rally has been noticeably dull and unappreciated.

But, that's where we are, QE, ZIRP and all the jolly talk aside.

The main catalyst for today's gains was a surprising jump in consumer spending for February, up 1.1%, far ahead of projections and the best reading in five months.

But, judging by the tepid response, this rally seems to be nearly out of gas. Not to worry, however, as any setback in stocks will almost immediately be washed away by some new rally, likely due to massive injections of liquidity by the Federal Reserve.

While the current prices of stocks and levels of the major indices may be irrational, there's little exuberance to be found anywhere.

Dow 14,455.28, +5.22 (0.04%)
NASDAQ 3,245.12, +2.80 (0.09%)
S&P 500 1,554.52, +2.04 (0.13%)
NYSE Composite 9,057.00, +2.96 (0.03%)
NASDAQ Volume 1,552,400,375
NYSE Volume 3,327,864,500
Combined NYSE & NASDAQ Advance - Decline: 3538-2872
Combined NYSE & NASDAQ New highs - New lows: 386-31
WTI crude oil: 92.52, -0.02
Gold: 1,588.40, -3.30
Silver: 28.96, -0.213

Boom Times: Stocks Up Every Friday in 2013

Want to know what the easiest trade of 2013 has been?

Simple. Buy any index fund, future or call on Thursday just prior to the market close and sell it for a profit some time on Friday.

Stocks have been up on each and every Friday of 2013, ten in a row, including today's push higher thanks to a BLS non-farm payroll report that showed creation of 236,000 jobs in February and the unemployment rate falling from 7.9 to 7.7%.

Never mind that most of the jobs were part time or that the jump in the unemployment rate was due to a furher deterioration in the labor participation rate, Wall Street took the headline number and ran with it.

As has been said ad nauseum on this and other like-minded blogs, there has probably never been a safer environment in which to invest in stocks. Due to the low level of returns on bonds, equities are the only game in town and one would have to have been one of the worst stock pickers or timers of the last century not to have made money in this unprecedented, elongated bull run.

Besides being in the midst of one of the best market advances of all time, today marks the four-year anniversary of the bottom. On March 9, 2009, stocks bottomed, began to rise and have never looked back.

Whether one agrees with the tactics or not, one has to hand it to the federal reserve and Chairman Bernanke. Through their efforts of quantitative easing, sero interest rate policy and coordination with central banks around the globe, the Fed - with an assist from the Treasury Department - averted what could have been one of the most devastating financial collapses of all time.

Bravo! Mr. Bernanke.

Dow 14,396.92, +67.43 (0.47%)
NASDAQ 3,244.37, +12.28 (0.38%)
S&P 500 1,551.15, +6.89 (0.45%)
NYSE Composite 9,059.53, +46.09 (0.51%)
NASDAQ Volume 1,574,870,375
NYSE Volume 3,734,663,750
Combined NYSE & NASDAQ Advance - Decline: 4298-2148
Combined NYSE & NASDAQ New highs - New lows: 601-21 (WOW!)
WTI crude oil: 91.95, +0.39
Gold: 1,576.90, +1.80
Silver: 28.95, +0.14

Stocks Trashed Again on Brace of Poor Economic Data

Possibly more than anything else, the horrific -12.5 print by the Philadelphia Fed was responsible for the added declines on Thursday, following Wednesday's setback after the FOMC minutes from january were announced.

The market was expecting a reading of 1.5 from the Philly Fed in its survey of business conditions, which, in and of itself, is a bit of an embarrassment, but were greeted with an even lower number for February after january came in at a disappointing -5.8. Obviously, there's little to no catalyst for improvement in the region, and the same is pretty much true in other Fed outposts, though the Philadelphia survey gets more attention, it representing a solid hub of business activity.

Beyond the sorry report, other economic data was less-than-encouraging. First-time unemployment claims ticked up 20,000, from a revised 342K last week, to 362K in the latest reporting period, dashing - for the time being - any hope of a rebound in employment.

This is a fickle, almost psychotic market. On the one hand, traders get worried that the Fed will take away the punch bowl of unlimited QE and low interest rates, but, on the other, they are equally concerned that the general economy is again approaching stall speed, as it did last year and in 2011 in the early months.

Whatever the market is feeling these past two days, it is mostly confusion and consternation. The major averages took some serious dips into the red today before a wicked, final-hour, short-covering rally brought them close to unchanged on the day, eventually failing in the final half hour of trading.

One can hardly blame the shorts for pulling a quick trigger on their positions this afternoon. Attempting to short this market and counter the Fed's relentless money creation machine has been a losing trade for the better part of four years and its a testament to the resolve of the non-believers to hold true even on a two-day reversal.

US markets were not the only ones being handed their hats on Thursday. European markets were shattered even worse after a key reading on services and manufacturing fell from 48.6 in January to 47.3 in February, well short of expectations, where the consensus was 49. It may be finally dawning on european investors that various bond schemes by the ECB and austerity measures in various countries aren't producing the desired effects and may even be contributing to continued weakness in the Eurozone.

Taken together, the Eurozone and the US are beginning to look like a pair of gussied-up party girls after a long night on the town. The makeup is fading and cracking and the hangover is setting in with a passion.

Even though two days of trading does not constitute a trend of any sort, the past two have been the worst in succession for US stocks this year and there may not be much of a respite with sequestration issues and a budget battle looming between the opposing parties in the nation's capitol, and those are two fights the American public is hardly keen on, as congress and the president have both shown an unwavering reluctance to handle pressing business like adults, preferring to play the blame game and seek short-term, band-aid types of approaches.

How the markets play out over the next few weeks and months will go a long way toward determining the mood on Wall Street and Main Street, and the mood - despite the best intentions by business - is beginning to show signs that patience is growing exceedingly thin.

Elsewhere, gold got a bit of a dead-cat-bounce after a month of steady declines, giving back those gains during the open session, though silver remains mired at multi-month lows. The metal prices may move even lower, in union with stocks, although one would be hard-pressed to find an actual physical holder of either willing to part with any or all of his or her holdings. Suppression by central banks and other operators has been well-documented, and the more they push down, the more dire conditions for a sharp response become.

Crude oil also has been taken a beating as speculators are having their lunch eaten. Overabundant supplies of WTI crude and slack demand is causing a serious disruption in the trading, which has been nothing but straight up since December. Oil and gas at the pump are about to get a whole lot cheaper.

It's getting a little bit interesting out there after the champagne rally of the first seven weeks of the year. The A-D line has been in reversal for two straight days and today's new highs - new lows reading was nearly at parity, a condition foreign to these markets since last November.

Dow 13,880.62, -46.92 (0.34%)
NASDAQ 3,131.49, -32.92 (1.04%)
S&P 500 1,502.42, -9.53 (0.63%)
NYSE Composite 8,816.74, -66.88 (0.75%)
NASDAQ Volume 2,007,395,000
NYSE Volume 4,414,224,500
Combined NYSE & NASDAQ Advance - Decline: 1942-4569
Combined NYSE & NASDAQ New highs - New lows: 104-78
WTI crude oil: 92.84, -2.38
Gold: 1,578.60, +0.60
Silver: 28.70, +0.077

Fed Minutes Send Shock Waves, Stocks Plummet

Was today the day that the skeptics and shorts have been waiting for the four months? The day the market turned and rolled over, ending ridiculous speculation that the rally had more legs and major indices - S&P, Dow - would reach all-time highs?

Maybe. And to think that it would be the Fed, the very same Federal Reserve that continues relentlessly pumping money at a rate of $85 billion a month into the market, that would cause the turn is simply delicious in its irony.

Stocks were cruising along aimlessly most of the session, down slightly, until last month's Fed minutes were released at 2:00 pm ET. The initial reaction was muted, as most algos were turned off for the event, not being able to peer into the minutes from the FOMC meeting of January 29-30.

The minutes revealed extensive discussion over the current expansionary Fed policy of QE, focused around the purchase of Treasury and mortgage-backed bonds that has been in effect since September of 2012 and whether or not the Fed should continue the policy along the lines of its current stature - until unemployment targets of 6.5% are met - or modify the existing arrangement as market actions warrant.

The committee discussed its options at the January meeting, but voted in favor of keeping the current polify intact, though today's minutes show that fissures in Fed policy are beginning to appear, with not all members completely in line with Chairman Ben Bernanke's policy of unusually easy money.

Once enough wall Street experts were able to read and comprehend what the Fed was transmitting, the selling ensued and at times became quite raucous, especially in the more speculative issues on, mainly on the NASDAQ, which suffered its worst loss of the year.

The Dow lost over 100 points on the day and the S&P pulled back substantially as well. Whether or not the declines will last for more than one session is still up in the air, but what is certain is that officials at the Fed are now openly questioning policy decisions - some insisting that QE is necessary and that the economy is too fragile to change policy, others suggesting that the extraordinary measures are leading to a bubble in equity markets, a view that is beginning to gain traction.

There's little doubt anywhere that if the Fed were to substantially reduce its asset-buying-binge, the economy - and especially the equity markets - would not respond favorably and the economy could be thrust into another round of recession, a reality that is much closer than anyone wishes to believe, after last quarter's -0.1 GDP print.

At this juncture, it would appear that the Fed has tied its own hands, and that any change in policy would be damaging to markets, if not the greater economy. Mere mention of discussion about change caused a selloff, so actual change would no doubt engender more severe reactions.

Dovetailing into the government's do-nothing policy regarding the upcoming sequestration issue, Fed policy should not materially change for the next three to six months, unless the president and congress find a way toward compromise on spending cuts without raising taxes, an outcome seen as remote by most.

How the market responds tomorrow and Friday will set the stage for the final week of February, which is loaded with important economic data releases, not the least of which is the second estimate on fourth quarter GDP on the 28th. Since next Friday is the first of March, the usual non-farm payroll data will be delayed until the 8th, giving the BLS more time to analyze and massage the data.

This may or may not be a significant turn in the markets, but for certain, it's an important development heading into at least three weeks of important data and serious fiscal issues that the government has thus far been reluctant to address.

Collateral damage was done in the precious metals as gold and silver took sizable hits after the Fed minutes release.

Dow 13,927.54, -108.13 (0.77%)
NASDAQ 3,164.41, -49.18 (1.53%)
S&P 500 1,511.95, -18.99 (1.24%)
NYSE Composite 8,883.63, -120.75 (1.34%)
NASDAQ Volume 1,998,613,000
NYSE Volume 4,576,938,000
Combined NYSE & NASDAQ Advance - Decline: 1519-5016
Combined NYSE & NASDAQ New highs - New lows: 470-59
WTI crude oil: 94.46, -2.20
Gold: 1,562.40, -41.80
Silver: 28.51, -0.912

Stocks Fall for 16th Monday in Last 17; Riots Shutter Foxconn Plant

Seriously, folks, this is getting old.

Major US averages fell for the 16th time in the last 17 Mondays.

This is the new regime. Stocks always go down on Mondays and up on Fridays. They trade in extremely narrow ranges with little to no volatility. Anybody making open orders is immediately raped by HFTs and only insiders win. There is no volume (actually today's volume on the NYSE was in the range from pathetic to morose).

There was actually some positive news on the day. According to a Sunday Times article, Goldman Sachs (GS) is planning to lay off as many as 100 partners in the immediate future. The firm denied the allegations, saying that the changes had been long-planned and many of the departures are due to retirements. No matter the case, it's always good to hear that some of the tentacles of the "giant squid" are being shorn off.

A huge riot of some 5000 workers forced the shutdown of a huge Foxconn facility in Taiyuan, China. The facility reportedly employs 79,000 workers and manufactures the Apple iPhone and other electronic devices for companies such as Dell and Hewlett-Packard.

The price of crude oil fell again on Monday, causing speculation that the Fed's new bond purchase program, otherwise known as QEternity, is not going to be effective in creating jobs or strengthening the sagging US and global economies.

Business as usual.

Dow 13,558.92, -20.55 (0.15%)
NASDAQ 3,160.78, -19.18 (0.60%)
S&P 500 1,456.89, -3.26 (0.22%)
NYSE Composite 8,356.56, -20.95 (0.25%)
NASDAQ Volume 1,706,535,750
NYSE Volume 2,992,098,250
Combined NYSE & NASDAQ Advance - Decline: 2337-3175
Combined NYSE & NASDAQ New highs - New lows: 307-27
WTI crude oil: 91.93, -0.96
Gold: 1,764.60, -13.40
Silver: 33.98, -0.65

Germany Goes All In; Wall St. Waits on the Fed

Today was Europe's turn. Tomorrow will be America's.

Before most Americans were even awake, Europeans were rejoicing the German Constitutional Court's ruling that the ESM (Emergency Stabilization Fund), used to bail out failing sovereign governments was, according to German law, constitutional, and the ECB could go forward with its plans to bail out Greece and Portugal, and, possibly Spain and Italy, if need be.

The court did add one stipulation, however, that the German portion of the funding would have to be approved by parliament if there wer any increases to the size of the fund.

Thus, Europe and the Euro were saved, once again, by the alchemy of Ponzi-economics, for now.

The ESM, along with other emergency funding mechanisms from the ECB, should "stabilize" the Eurozone for another year to 18 months. Then, well, who knows?

Hurrah.

In the US, markets hung close to the flat line in anticipation of the FOMC interest rate policy announcement, where the Federal Reserve may or may not announce another round of Quantitative Easing, better known as QE, and, in this case, since it would be the third (or fourth, if you count operation twist) round of easing, QE3.

Three cheers.

The announcement will be delivered around 2:15 pm EDT on Thursday, unless, of course, like the German court ruling, it is leaked to the press first.

Some day, investors will want to know about individual stocks, but not these days.

Dow 13,333.35, +9.99(0.07%)
NASDAQ 3,114.31, +9.78(0.32%)
S&P 500 1,436.56, +3.00(0.21%)
NYSE Composite 8,267.16, +21.01(0.25%)
NASDAQ Volume 1,680,020,000
NYSE Volume 3,555,939,250
Combined NYSE & NASDAQ Advance - Decline: 3429-2094
Combined NYSE & NASDAQ New highs - New lows: 336-30
WTI crude oil: 97.01, -0.16
Gold: 1,733.70, -1.20
Silver: 33.29, 10.27

Despite Big Move By Apple, Stocks Have No Monday Lift

As has been the case for many weeks (as noted in Friday's posting), stocks could simply not find any meaningful reasons to move to higher ground, even in the wake of a big move by Apple after a federal jury awarded Apple $1 billion in its patent infringement case over rival Samsung.

Apple stock hit an all-time high of 680.87 in early trading, but drifted lower throughout the session.

Veteran tape-watchers (we're fairly certain there are a few left out there) must have dozed off from another in a seemingly-endless stream of low-volume, noiseless, motion-defying trading. All but the first and last hours saw any significant action. The trading range on the Dow amounted to less than 80 points from top to bottom, with stocks selling off in the final hour and closing near the lows of the session.

Of the major averages, only the NASDAQ finished in positive territory, though it was green by only three points. The Dow was the biggest percentage loser, off 0.25% on the day.

Otherwise, there was little to no interest in equities on first day of the final unofficial week of summer, prior to the three-day Labor Day holiday.

Traders may be asleep at the switch and/or holding positions until after the holiday and Ben Bernanke's speech to the assembled central bankers and key economists at Jackson Hole on Friday.

Many on Wall Street are expecting Bernanke to signal another round of quantitative easing (QE), as he did in his 2010 speech, though skeptics of that theory abound, citing politics (the elections are nearly just two months away) and the muddled and murky economic picture as reasons the chairman of the world's largest central bank will not offer specificity in his remarks.

Additionally, ECB president Mario Draghi will present at the symposium, though his record for signaling specific policy actions are spotty at best. Draghi, as well as most European politicians, seems always to be long on rhetoric and short on delivery of specifics.

Outside of some M&A activity and Apple's move higher, the week began with a dolorous thud and will likely end that way unless Bernanke can be convinced that the time for the Fed to act - once again - is now. The high degree of uncertainty and doubt in the markets and general economy will likely keep a lid on what have to be viewed as excessively overpriced stocks and accompanying indices.

Dow 13,124.67, -33.30 (0.25%)
NASDAQ 3,073.19, +3.40 (0.11%)
S&P 500 1,410.44, -0.69 (0.05%)
NYSE Composite 8,033.93, -13.94 (0.17%)
NASDAQ Volume 1,363,789,875
NYSE Volume 2,439,756,500
Combined NYSE & NASDAQ Advance - Decline: 2676-2833
Combined NYSE & NASDAQ New highs - New lows: 162-45
WTI crude oil: 95.47, -0.68
Gold: 1,675.60, +2.70
Silver: 31.05, +0.43

The Chairman and His Golden Stick

Stocks took the path of least resistance on a lazy Wednesday afternoon, rising gently most of the day as investors, traders and analysts await the all-important speech from Fed Chairman Ben Bernanke at the Jackson Hole confab on Friday.

Last year, Jackson Hole was the scene for the chairman's announcement of QE2, and many in the financial community are expecting a repeat performance, though considering how the markets have behaved this week - gaining in a somewhat orderly fashion - those who believe Bernanke will embark on further money printing may, in fact, be disappointed.

Since QE2 didn't work very well and created a rash of inflation in many commodities, and while most banks have pretty much stabilized their balance sheets over the past two-and-a-half years, there may not be a need for further stimulus. Besides, QE1, 2, and all the rest of the Fed-inspired fixes didn't put Americans back to work, nor solve the housing decline.

So, this little ramp up on the prospects of more easy money (isn't money easy enough already, with the 10-year note below 2.5%?) may be a serious head fake.

Dow 11,320.71, +143.95 (1.29%)
NASDAQ 2,467.69, +21.63 (0.88%)
S&P 500 1,177.60, +15.25 (1.31%)
NYSE Composite 7,273.13, +63.54 (0.88%)

Advancing issues smothered decliners, 4272-2269. There were 7 new highs and 54 new lows on the NASDAQ, and 16 new highs with 31 new lows on the NYSE, making the combined total 23 new highs and 85 new lows, still a slightly negative bias. Volume was lame, back to mid-summer levels.

NASDAQ Volume 1,859,268,750.00
NYSE Volume 5,275,260,000

WTI crude oil dropped 28 cents, to $85.16.

The only major development of the day was the wipe-out in the price of precious metals, another signal that Bernanke may not be plotting the further destruction of the dollar with more quantitative easing.

Gold was pounded down with incredible speed, losing $67.90, to $1761.30. Silver got whacked as well, dropping $2.10, to $39.70. Margin hikes and the departure of hot money (profit-taking) caused the steep sell-off.

One commentator put it into perspective, saying, "gold should go back to being a store of value, instead of a risk asset played for quick profit."

Following yesterday's late afternoon exchange over the future prospects of the Bank of America, I actually laid out a strategy on a message thread over at another financial blog. Here, in all it's simple glory, is my strategy for the next six to eight weeks:

While not exactly ludicrous, a JPM takeover of BAC is a long shot. I would be more inclined to see a Latin American or Far East involvement in a forced sale, liquidation or major buyout. Gotta figure that there's real money out there in less-developed nations who might see a move into BAC as a nice grab, maybe even China, as a hedge against their ugly UST position.

Since the rumor mill is so strong and the denials even more pronounced than ever, it looks like a matter of less than a month we'll see BAC taken out. It's been in the plans for a long time. Everybody from Bernanke on down knew CW was crap, Merrill was another boatload of shit and they'd throw money into it until it no longer made economic sense.

That said, look for major volatility (the VIX is still around 40 last I checked) beginning with Bernanke's non-eventful Jackson Hole speech and continuing through October.

The timeline goes something like:

Friday, Aug. 26 - Bernanke offers no QE, markets sell off, Dow down 300.

Monday, Aug. 29 - More fear, but some stability into end of day.

Friday. Sept. 2 - With a three-day weekend ahead and another poor jobs report behind (range: -25K - +35K NFP) nobody wants to hold, sell off, Dow -200-400 points.

After that it just gets worse as BAC is destroyed, Europe goes through another round of crisis, sending markets lower.

My personal positions haven't changed in four years. I'm out of everything except cash, silver and tools of trades. However, I am strongly considering a short market position, my favorite trade being the DIA, which tracks the Dow.

I see Dow 10,200 by October 5 at the latest, confirming a bear market. So, I'm seriously considering putting on some OCT DIA 102 and/or 98 puts before Friday. May even consider SPY puts on more volatility.

I seldom make calls, but this one is lining up nicely for late summer - early fall carnage.

QE2 Ends in No-Resistance Window Dressing Rally

Stocks made outsize gains for the fourth consecutive session; with the end of QE2 marking the end to more than $600 billion in monetary stimulus, traders, fittingly, went on a buying spree on the final day of the second quarter, whipping up stocks to sell to anybody willing to buy somewhere down the road.

The finality to the Fed's second attempt to re-invigorate the US economy has had some dubious effects, such as pushing crude oil and other commodities - with the notable exception of the precious metals - to nose-bleed levels, spiking interest rates (the 10-year is up more than 40 basis points in just the past three days) and generally applying relief to the banks, who have parked excess reserves at the Fed, without having done a thing to improve the horrific states of the housing and jobs markets. The US dollar is also down substantially against other currencies.

When the history books are written, QE1 and QE2 will be seen from the prism of a new present, and the look back will reveal whether or not the stimulus help or hastened the end of the fiat money era. For now, it continues to be an exercise in futility to bet against the Fed. Shorts have been burned repeatedly, as the flavor of fresh, daily money proved too difficult to resist for speculators.

With it over, the markets will have to go it alone, without the assistance or accommodation of the Federal Reserve, though it should be noted that the Fed stands ready to print more dollars and pump the banks further with liquidity at extraordinarily low rates. On top of that, the federal fund rate remains at 0.25-0.00%, an historical low, both of level and time. The rates have been down at those levels for nearly three years.

With half a year in the books, the major indices sport marginal gains for the year, bolstered by the past four days of hope and reckless buying. The markets even ignored another in a series of poor reports from the BLS on initial unemployment claims, which again came in higher than the rosy expectations, at 428,000, a drop of one thousand from the previous week, which supposedly was reason enough to cheer.

With one trading session remaining before the 4th of July holiday, not much is expected on Friday, as most of the big players will already be at their beach homes in the Hamptons or aboard their yachts. Yes, it is good to be rich.

Dow 12,414.34, +152.92 (1.25%)
NASDAQ 2,773.52, +33.03 (1.21%)
S&P 500 1,320.64, +13.23 (1.01%)
NYSE Composite 8,319.10, +90.60 (1.10%)

Advancers led decliners, 4774-1827. NASDAQ new highs: 103; new lows: 35. NYSE new highs: 112; new lows: 12. Combined, 215 new highs, 47 new lows. Volume was consistent with Wednesday's flow rate, nothing surprising there.

NASDAQ Volume 1,837,387,750.00
NYSE Volume 4,199,619,000

Crude continued to rise, gaining 65 cents, to $95.42. Expect to be gouged for gas no matter where you live in America this weekend. Though the price of oil has fallen over the past month, it has surged in the past week.

Gold dropped $11.90, to 1499.90, while silver also took it on the chin, losing 20 cents, to $34.68.

It should be clear to everyone by now that fighting the Fed is a losing proposition, and, with the markets front-loaded for the primary dealers, there's no margin for error for the individual investor. For the present, it's up, up and away for stocks. Let's see how long it lasts.

The End (of the ruling elite) is Here for the Taking... but is anybody listening?

Today is election day, but, for most of us, it is meaningless. The new bodies elected with do about the same as the ones being replaced: nothing, or make matters worse. To buttress my argument, I direct you to reading a post by Jim Quinn, detailing precisely how the government, with a grand assist by the private Federal Reserve, has misspent our fortune and has destined us to a future of depression and depravity. His tome is somewhat inappropriately titled, Suicide is Painless, because most people simply do not see that they and their neighbors are being slowly starved and/or bled to death, so maybe "assisted suicide is painless" would be preferable.

Now, how do we (wait, you did read the article linked above, right?) go about the destruction of the ruling elite?

Dispensing with the final scene of Fight Club, which would be thrilling and decisive, aleit never possible in the real world, we must find other means to our end.

We can start today by not voting, or voting for anybody but the candidates on the ballots (actually, the machines will change our votes to whatever they like, so just avoiding the polling places may be the best tactic).

Next, we must starve the beast. Grow your own fruits and veggies and instruct others to do the same. Cut out the Monsantos and McDonald's.

Cut utility bills by using less. Install a small solar panel or two, maybe a wind turbine, get the wasters (I have a neighbor who insists on keeping lights on in every room and two more outdoors almost all night long) to stop their own madness by showing them the reality of lower utility bills. If they don't listen, ridicule them, make them feel shame for their waste.

Kill the big banks. Take all money out of the 15 largest banks and put it in local banks or credit unions.

Keep buying gold and silver.

Fight and avoid taxation at every opportunity.

If opportunity presents itself, harm the interests of corporations. Be creative.

Foster an environment in which everybody is encouraged to be more self-reliant, less wasteful and point out the true enemies: banks, corporations, government at all levels.

It's a small start, but we must begin to take back the nation.

As for the markets, same old story. More gains on low volume.

Dow 11,188.72, +64.10 (0.58%)
NASDAQ 2,533.52, +28.68 (1.14%)
S&P 500 1,193.57, +9.19 (0.78%)
NYSE Composite 7,582.14, +72.93 (0.97%)

Advancers ran roughshod over declining issues, 4795-1663. There were 615 new highs and just 72 new lows. Volume: no comment.

NASDAQ Volume 1,923,377,125
NYSE Volume 4,254,097,500

My data is showing no change for oil, at $82.95, though I know it traded higher than that. Gold popped by $6.60, to $1,356.90; silver was also higher, up 28 cents, to $24.84.

There is a slew of data coming through on Wednesday, but tonight everybody will be focused on the election results. Somehow, Wall Street and their ilk believe that change is good or that somehow, electing a large number of nutjob, Tea Party Republicans is going to change policy in Washington. At best, it will produce a stalemate, which is exactly what is not needed. Change is needed. Changes in regulations, taxes, rules, but mostly in how we are governed and how the federal government communicates with the public. But that won't happen; we know it won't.

Wall Street, the real control of politicians, is full of itself and some other stuff that's usually found on cow pastures.

The data stream for tomorrow begins at 7:30 AM with the Challenger Job Cuts for October. At 8:15 AM, the release of ADP Employment Change for October, followed by the 10:00 AM release of ISM Services and Factory Orders. After the 10:30 AM release of Crude Inventories, the market will hold its collective breath, awaiting the FOMC Rate Decision at 2:15 PM, which is not really a rate decision, as federal funds rates are permanently stuck at ZERO, but the world expects to hear details on just how quickly the Fed is going to finish off the US economy through inflation, otherwise known as QE2, or, printing gazillions of dollars with nothing backing them.

Best guess moving forward is the Republicans gain control of the House, nothing changes, but the Fed produces runaway inflation in food, fuel and utilities, further crushing the middle class. Stocks will go to the moon, but the economy will be dead with unemployment approaching 25%.

There's a way out, but it requires a thinking, functioning populace that isn't dependent on the government for anything. Considering the 47 million people already on food stamps and even more on some form of government assistance (along the lines of 50% of the population), hope is fading fast.

Every man for himself? Could be.

No Jobs, Free Homes, Cheap Money and High-Flying Stocks

The financial sector of the US economy delivered one of the more entertaining sessions of the past few months on Friday, first, trying to weight the relative benefits of a nation without jobs against the potential for more than a trillion dollars flowing into the currency via the Federal Reserve's Quantitative Easing, Part II, otherwise known as QE2.

At 8:30 am Eastern time, the Bureau of Labor Statistics released its survey of non-farm payrolls for the month of September. Wall Street and investors worldwide have shown a keen interest in this number all week, and the news that the US had shed another 95,000 jobs in the month was something of a surprise to many.

Watching the Dow Jones futures as the number was announced, the immediate, knee-jerk reaction was a drop of 88 points, though that was followed by a lightning-quick ramp up. Within minutes, the investor class had come to the perverse recognition that a poor showing in employment meant almost certainty for further QE by the Federal Reserve. In other words, much more free money would be headed to Wall Street and the corrupt banking system to keep stocks flying high.

The perversity of what was easily recognizable as bad news actually having an antecedent knock-on caused the market to open in positive territory and quickly surpass the 11,000 mark on the DJIA. Joining into the fray were most commodities, after some initial fits and starts, which also ramped up on the idea of a debased US dollar and limitless liquidity being supplied by the Fed.

With stocks cruising along, even word that Bank of America was halting all foreclosure activities in all 50 states - upping their previous call for a halt in just the 23 judicial foreclosure states - had virtually no effect on the celebratory mood. Sad as it may seem, investors somehow believe that outright inflationary policy against a backdrop of people with no jobs living in homes they cannot afford is somehow a great and marvelous thing.

Folks, I can't make this stuff up. We live in a country that's just about as upside-down as one can get.

Dow 11,006.48, +57.90 (0.53%)
NASDAQ 2,401.91, +18.24 (0.77%)
S&P 500 1,165.15, +7.09 (0.61%)
NYSE Composite 7,478.42, +53.41 (0.72%)
NASDAQ Volume 2,014,985,125
NYSE Volume 4,060,130,250

Advancing issues buried decliners, 4199-1500. New highs maintained their huge edge over new lows, stunningly, 471-33. Volume was anemic, being supplied by quants, Goldman Sachs, high frequency trading computers and the odd hedge fund here and there. Nobody seems to be concerned that the market is demonstrating absolutely the thinnest trading in our lifetimes.

In the commodity space, crude oil priced 99 cents higher, at $82.66 by the close. Gold resumed its ascent to the stratosphere, up $10.30, to $1,345.30. Silver tagged along with a gain of 52 cents, to $23.10.

Monday's a holiday, so the day's events will have plenty of time in which to sink in at cocktail parties and weekend outings. Somebody has to be able to make sense of it all, though that person isn't yet telling anyone.

QE Working Marvelously for Wall Street

Hello, broken record department, how can I help you?

More quantitative easing, please.

Not a problem. Thank you.

Dow 10,572.73, +46.24 (0.44%)
NASDAQ 2,301.32, +11.55 (0.50%)
S&P 500 1,125.07, +3.97 (0.35%)
NYSE Composite 7,179.79, +17.71 (0.25%)

Advancing issues held sway over decliners, 3132-2554. New highs towered over new lows, 309-41. This should be regarded as entirely cosmetic. Even bad companies are good. Volume was higher than it's been in some time.

NASDAQ Volume 2,085,158,125
NYSE Volume 3,617,492,750

News flash: the world is afloat in oil due to slack demand. The current futures contracts sold off 78 cents today, to $76.02. Gold is beginning to feel pricey, down $3.00 today, to $1,266.70. Silver gained 14 cents, to $20.54, a bargain by comparison, though closing in on a 2 1/2 year high.

I played golf and didn't bother to keep score. It was fabulous. Playing alongside one of my very best friends surely didn't diminish the pleasures of the afternoon. Played 18 holes. Even parred one.

It's all a matter of perspective, expectation and liquidity, after all. Right now, liquidity seems to be the position most favored. Buyers markets are springing forth everywhere. When will the money come without strings?