The Year That Was: Investors Bid 2018 GOOD RIDDANCE; Worst Year Since 2008

Should all acquaintance be forgot and never brought to mind,
Should all acquaintance be forgot and the days of auld lang syne.
For auld lang syne, my dear, for auld lang syne,
We'll take a cup of kindness yet for the sake of auld lang syne.
Let's have a drink or maybe two or maybe three or four
Or five or six or seven or eight or maybe even more.

A cup of kindness, indeed. It's what some investors would have liked in December, or October, or maybe February or March.

Those were the worst months for stocks.

Dow loss, February, 2018: -1120.19
March, 2018: -926.09
October, 2018: -1341.55
December, 2018: -2211.10

As the year wore on, conditions proceeded to deteriorate for holders of US large cap equities. On the S&P and the NASDAQ, some stocks suffered losses of 30, 40, 50% or more.

Facebook (FB) was the poster child for tech stocks breaking bad. On July 25, the famous brainchild of Mark Zuckerberg topped out at 217.50. As of December 24, it bottomed out at a closing price of 124.06, a 43% loss. It wasn't a very merry Christmas for Facebook. Still, Zuckerberg is still one of the richest persons in the world, just not quite as rich as he used to be.

Netflix (NFLX) was another one being hammered in the second half of the year. Closing at 418.97 on July 9, the streaming video service lost 44% by December 24, closing that session at 233.88.

Stocks weren't the only asset class that was sucker-punched during the year. One standout of the commodities class was crude oil, where the price of a barrel of West Texas Intermediate (WTI) shot up from $60 to $76 in October - coincidentally, on the same day the Dow peaked - before retreating to under $45 nearing the end of December, striking a low of $42.53 on Christmas Day.

In similar manner, precious metals were abused during the year. Gold spent the early part of the year fluctuating in the $1300-1350 per ounce range, never closing above $1352. By June, signs of weakness were appearing, with the metal of kings dipping into the $1200 range, eventually bottoming out at $1178 by August. With stocks on the decline in the fourth quarter, gold was the beneficiary, ending the year at $1278 per ounce.

Silver was damaged more severely. Peaking at $17.52 per ounce on January 25, silver slumped all the way to 13.97 in November. December was the best month of the year for gentleman's coin, as it closed at a five-month high on December 31, with a price of $15.46. Both gold and silver ended the year on high notes, suggesting that they are due for a long-overdue rally.

Bonds were perhaps the most entertaining of the financial assets, with investors watching for an inversion in the treasury yield curve between the two and 10-year notes. While that did not materialize, a smaller inversion between 2 and three-year and the five-year yield presented itself in December, but only persisted for three weeks. The five-year was actually yielding less than both the 2s and 3s on December 4, but corrected back to normalcy - with yields rising over duration - on December 21. Still, it was a wake-up call to investors fearing a recession in 2019 and may have contributed to some of the panic selling during the final month of 2018.

Yield on the barometric 10-year note ended the year at an 11-month low, checking in at 2.69% on New Year's Eve. The 30-year was also pushed lower. By year's end, it was yielding a mere 3.02%, all of this occurring in the face of four quarterly federal funds rate hikes over the course of the annum. Surely, the bond vigilantes are out in force, and as the year of 2018 comes to a close, fear is winning out over greed in rather obvious manner.

What 2019 will bring is anyone's guess, considering the continuing dysfunction coming out of the nation's capitol. Republicans and Democrats are at war, leaving the American people to fend as best they can as casualties or collaterally-damaged bystanders. Rhetoric from both sides of the aisle has been inflamed to a combustible state, and, with the partial government shutdown already in its second week, when the Democrats seize control of the House of Representatives on January 3, chaos will reign.

Despite honest effort from President Trump, nothing good will come out of Washington this year, unless one considers complete rejection of government by the people to be constructive, because that is precisely where the swamp dwellers inside the beltway - with ample assistance from a media that operates as a free press in name only - are taking the country.

2019 may be a year worse than the one preceding it, perhaps much worse, as the political leaders of the greatest nation on the planet can do no better than bicker, posture, and fail in their duties.

Until and unless Washington changes its ways, the financial picture will be clouded by the politicians, whose only aim seems to be one of destroying anything good in the country. While the Democrats can largely be blamed for inciting division, Republicans in the Senate share nearly equal responsibility for not standing up for the public.

Sadly, Washington has made it clear that it wants to be all-important, all the time. The cost will be borne by the people in ways that exceed mere finance.

Dow Jones Industrial Average December Scorecard:

Date	Close	Gain/Loss	Cum. G/L
12/3/18	25,826.43	+287.97	+287.97
12/4/18	25,027.07	-799.36	-511.39
12/6/18	24,947.67	-79.40	-590.79
12/7/18	24,388.95	-558.72	-1149.51
12/10/18	24,423.26	+34.31	-1115.20
12/11/18	24,370.24	-53.02	-1168.22
12/12/18	24,527.27	+157.03	-1011.19
12/13/18	24,597.38	+70.11	-941.08
12/14/18	24,100.51	-496.87	-1437.95
12/17/18	23,592.98	-507.53	-1945.58
12/18/18	23,675.64	+82.66	-1862.92
12/19/18	23,323.66	-351.98	-2214.90
12/20/18	22,859.60	-464.06	-2678.96
12/21/18	22,445.37	-414.23	-3093.19
12/24/18	21,792.20	-653.17	-3746.36
12/26/18	22,878.45	+1086.25	-2660.11
12/27/18	22,878.45	+260.37	-2399.74
12/28/18	23,062.40	-76.42	-2476.16
12/31/18	23,327.46	+265.06	-2211.10

At the Close, Monday, December 31, 2019:
Dow Jones Industrial Average: 23,327.46, +265.06 (+1.15%)
NASDAQ: 6,635.28, +50.76 (+0.77%)
S&P 500: 2,506.85, +21.11 (+0.85%)
NYSE Composite: 11,374.39, +83.44 (+0.74%)

WEEKEND WRAP: Bombs Away, Markets Crack, Mid-Term Turmoil

October is always full of surprises, whether they be political or financial in nature.

This week was not an exception, but, rather, the rule. Losses being sustained this month - since a topping out on October 3 - have been more severe and more significant than those encountered during February and March of this year.

That's saying quite a bit, since those winter months were quite scary. President Trump was under assault from Robert Mueller, the Special Prosecutor assigned to look into allegations (not a crime, mind you, but mere allegations, an unprecedented situation in American jurisprudence) of collusion with Russian operatives in the 2016 presidential election. Since there's been no mention of "Russia, Russia, Russia" for more than a few months now, it's safe to say that Trump was right all along: the entire investigation was a massive witch hunt.

Fast forwarding to October, Trump is still being assailed, though lately it's been over what really rankles Democrats and other detractors of the billionaire in the White House: his manners, or lack thereof, his incessant tweeting, and his very obvious disdain for liberals, Democrats and especially the media at his campaign rallies. Trump gets under people's skins. Some of it is by design. He likes making people uncomfortable. It's a way of seeing what they're made of; whether they'll lash out emotionally or display grace under pressure. For the most part, the people he's attacked, prodded, and called out have reacted with a modicum of restraint, though astute observers of the political class can tell that some, like Nancy Pelosi or Maxime Waters, are becoming unhinged or already were and Trump's thumping on them is only exacerbating their conditions of unease.

Not to belabor the point, but Trump hasn't been a bad president. In many regards, he's been good for the country. It's his rhetoric that annoys people, even his supporters. He's just not very mild-mannered or even-tempered as Americans are used to in their politicians. Some people actually enjoy his brash, unvarnished behaviors, taking them as a breath of fresh air and realism, apart from the usual stultified, superficial, and, yes, condescending attitude so popular among the Washington, DC elite.

Wall Street has taken a semi-political stance on Mr. Trump. Largely, they'll tolerate his decisions and commentaries on trade, tariffs, jobs, the economy, the Federal Reserve, and unemployment. Beneath the surface in many board rooms, however, there's a distaste for his bluster and boldness. It's just not the way things are done in higher-up circles of business. C-Suite executives prefer evenhandedness couched in cloudy rhetoric, ensconced in data points. Thus, there's a willingness to blame corporate shortfalls on this president. He presents himself as a convenient scapegoat and Wall Street honchos are more than willing to cast blame his way.

More than a few earnings reports this week included references to Trump's tariffs - those either in place or those he's only proposed - as excuses for shortfalls in revenue or earnings, or, most often, in forward guidance. There is a not-so-cleverly-disguised blame game being played at the highest levels of corporate America. Executives in growing numbers are calling out Trump's trade policies as a rationale for their own failures, and, for some, rightly so.

President Trump never promised Wall Street or anybody else a Rose Garden party. He always knew, and often made clear, that his imposition of tariffs on a variety of trading parties - but particularly, China - were going to have some negative effects. Naturally, he was right. Prices for many things made outside US borders are going up, a direct result of tariffs, but the end goal is not higher prices, but fairer trade, and that is not going to occur without some pain, and some of that will be significant.

Laying ahead for the economy, Wall Street and US consumers are higher prices right at the most inopportune time, the holiday buying season. When the final tallies from the fourth quarter are posted via retail sales figures and fourth quarter earnings in January, 2019, the numbers are likely to cause an even bigger shock. With all of America preconditioned for ever-expanding economic data, the fourth quarter of 2018 may look to some like the end of the world, if certain conditions are met, those being, retailers will slash prices to boost demand, resulting in lower profit margins and poor performance for some major companies. Trump and his terrible tariffs will be blamed.

This week was also overwhelmed by the "one big story" about the mad bomber from Florida who sent poorly-designed pipe bombs to former presidents and officials, presidential detractors, and a few current office-holders, all of whom shared one characteristic: they disliked or disagreed with President Donald J. Trump. Fortunately, the bomb-maker was highly unprofessional. None of his masterpieces of terror actually detonated.

Nevertheless, the "suspicious" packages that appeared all at once in mailrooms, postal facilities and elsewhere engendered a media frenzy and resulted in a quick arrest of the very obvious suspect, Cesar Sayoc. His background and the continuing investigation and eventual trial will extend well beyond the mid-term elections. For those wearing tin-foil caps and assigning this event to the "false flag" files, Sayoc's timing appeared to be too coincidentally close to election day. There's all sorts of spin. Most of it is not worth a moment's reflection.

Which brings up the matter of the mid-term elections, as if they were some world-changing event upon which the ultimate survival of American democracy and the rule of law hinged. That's how the media would have us view it, though contention for House of Representative seats occurs every two years without fail. Which party controls it gives power over committees to the winning side, the losers left to plot ways to undermine and unseat their successful opponents. This one's a little different, as it is something of a referendum on the Trump presidency, or so we've been told. The results won't matter much in the larger scheme of things since Washington DC politicians seldom do anything well, or right, or, at all. The mid-terms are just an excuse for advertising companies to make money and for politicians to claim they're on the right sides of various issues. Generally speaking, the American public would be better off if there were less politicking, less government overall, and less preening and posing for cameras by the stuffy types that populate the interior the DC Beltway.

How does politics affect stock prices: a little, but, in the end, not much at all. The mid-terms are all about bloviating and posturing and ballot-box stuffing, and boasting. Whoever wins will claim the juicy committee chairs. Should the House flip from Republican to Democrat this year, though, it will be an unmitigated mess, rom media crowing about the victory of globalism over nationalism, to absurd proposals to impeach President Trump. That is the one scenario that even Wall Street is afraid to embrace. It could unhinge everybody and everything.

Notwithstanding any such Democrat miasma, the mid-terms will come and go in another 10 days or so, and with it any chance to blame either party for the downfall of the economy (which is actually doing quite well) or for particular industries or companies. They'll be done and the media can dance around the implications until the new political faces are sworn in come January. None of it will make any difference to stocks, bonds, or the prices of oil, natural gas, gold, silver, sugar, tea, coffee, or Diet Pepsi. Nothing. Unless the Democrats take control of the House. Then, look out.

As far as stocks are concerned, well, they're still largely overvalued by most traditional measures, those being straight up PE ratios or the more in-vogue CAPE (Cyclically Adjusted Price Earnings) ratio, a Robert Schiller concept that measures PE over a 10-year period rather than just the most recent one. It's sensible, and now, widely employed. According to the current chart, the CAPE is at 30.00, down a little due to the recent sliding, but still above 2008 levels and about even with 1929's Black Tuesday, from which the stock market crashed and was a contributing factor in the Great Depression.

That said, this bout of volatility in markets is not about to abate. Not by any means. All of the major indices closed out the week below their 200-day moving averages, and, maybe more importantly, the weekly charts put them below their 40-month moving averages, something that hasn't happened since 2008-09.

Stating the all-too-obvious, markets move in cycles, and the bullish cycle is about over. The bearish case - and this again is confirmed by Dow Theory, and we will spare readers the explicit numbers for now - has been signaled and is already underway. The only way up from here is to get to the bottom. There will be bumps, grinds, irrational exuberance, toil, trouble, relief rallies and false alarms, but the trend is your friend and the trend, friend, is down.

Dow Jones Industrial Average October Scorecard:

Date	Close	Gain/Loss	Cum. G/L
10/1/18	26,651.21	+192.90	+192.90
10/2/18	26,773.94	+122.73	+315.63
10/3/18	26,828.39	+54.45	+370.08
10/4/18	26,627.48	-200.91	+169.17
10/5/18	26,447.05	-180.43	-11.26
10/8/18	26,486.78	+39.73	+28.47
10/9/18	26,430.57	-56.21	-27.74
10/10/18	25,598.74	-831.83	-859.57
10/11/18	25,052.83	-545.91	-1,405.48
10/12/18	25,339.99	+287.16	-1,118.32
10/15/18	25,250.55	-89.44	-1,207.76
10/16/18	25,798.42	+547.87	-659.89
10/17/18	25,706.68	-91.74	-751.63
10/18/18	25,379.45	-327.23	-1,078.86
10/19/18	25,444.34	+64.89	-1,013.97
10/22/18	25,317.41	-126.93	-1,140.90
10/23/18	25,191.43	-125.98	-1,265.88
10/24/18	24,583.42	-608.01	-1,873.89
10/25/18	24,984.55	+401.13	-1,472.76
10/26/18	24,688.31	-296.24	-1,769.00

At the Close, Friday, October 26, 2018:
Dow Jones Industrial Average: 24,688.31, -296.24 (-1.19%)
NASDAQ: 7,167.21, -151.12 (-2.06%)
S&P 500: 2,658.69, -46.88 (-1.73%)
NYSE Composite: 11,976.95, -141.90 (-1.17%)

For the Week:
Dow: -756.03 (-2.97%)
NASDAQ: -281.81 (-3.78%)
S&P 500: -109.09 (-3.94%)
NYSE Composite: -480.32 (-3.86%)

Wall Street Yawns at Tax Reform; Hashgraph May Supercede Bitcoin

Wall Streeters aren't completely happy with the tax reform package that passed both houses of congress on Wednesday, despite howls of victory from assembled Republicans at the White House. If they had, the "sell the news" trading of the past two days would have been overwhelmed by a furious buying frenzy as US corporations see their federal tax burden reduced from 35% to 21%, below the world average.

While the politicians are happy back-slapping each other and highly paid traders on Wall Street see their tax burden increase due to the loss of some deductions for local taxes (SALT), there are bigger, less-well-defined events occurring far from DC or New York.

Bitcoin and other cryptocurrencies are all the rage, now that the CBOE has gotten into the game with bitcoin futures trading, assuring that the financial genii that DID NOT invent blockchain technology will be able to participate.

That's all the more reason that crypto is soaring, both in value and interest. The promise of the blockchain was initially to exclude current government and financial entities (banks, brokers, exchanges) from transactions, freeing up the new "money."

That has changed, but, outside that, a newer, potentially even more disruptive idea has emerged: Hashgraph, which speeds up transaction processing by light years over Bitcoin and provides even better security and privacy in a distributed ledger environment.

It's the latest development in a fast-changing game and deserves full attention to anyone who is thinking about freedom. Mike Maloney has put together an interesting look behind the scenes of the crypto world in his latest installment of the Hidden Secrets of Money (Episode 8) in Bitcoin to Hashgraph: The Crypto Revolution.

The video is over an hour long, but it should be tops on every Christmas list for thinking individuals, silver and gold bugs, heads of companies and anybody looking for better solutions than tax brackets, thousands of pages of federal tax code (estimated at over 70,000), a puzzling phalanx of rules, regulations and confusing calculations all of which are the bread and butter of the stock market and fractional reserve skimmers.

A day will come when stock prices, interest rates, and tax considerations aren't the most important financial parameters. That day is coming sooner than many people with knowledge want to accept.

Happy (Hashgraph) Holidays.

At the Close, Wednesday, December 20, 2017:
Dow: 24,726.65, -28.10 (-0.11%)
NASDAQ: 6,960.96, -2.89 (-0.04%)
S&P 500: 2,679.25, -2.22 (-0.08%)
NYSE Composite: 12,747.55, +0.01 (0.00%)

Stocks Stumble As Marco Rubio Voices Concern Over Republican Tax Plan

Appropriately, with the latest installment of the "Star Wars" franchise opening in cinema theaters around the country, Wall Street sensed a disturbance in the "force," the force being Janet Yellen and her merry band of storm trooping central bankers, the disturbance being upstart senator "little" Marco Rubio, who inadvisably pondered that he may not cast his vote in favor of the magnificent GOP tax plan that's been bandied about the halls of congress for months.

The former presidential candidate and current senator from Florida, Rubio voiced concerns over a minuscule detail in the overall grand scheme, the child tax credit, and on Friday morning made it clear that unless the amount of the credit that is deductible ($1,100 of $2,000) is increased, he's voting against the plan.

Notwithstanding Rubio's need to be seen, heard and appear important on occasion, his grandstanding is purely designed as entertainment value over the weekend for the cable news outlets. A final rollout of the bill and votes will come next week, just prior to congress' two-week holiday vacation.

Also adding to the folly is John McCain, who was hospitalized this week with complications from his cancer treatment, may not be present for a vote, should his condition worsen. Republicans cannot survive more than two defections, and Senator Bob Corker, the statist senator from Tennessee is staunchly opposed to the measure, purely out of hatred for president Trump.

Failure of the bill's passage would be a blow to Wall Street being that the measure approves a reduction of corporate taxes from 35 percent to 21 percent, something for which major corporations - many of which pay little to no federal tax already - have been lobbying for years.

Thus, with doubt overshadowing the happy passage of bellwether legislation, stocks took a notable turn for the worse on Thursday. The loss ended a string of five straight days higher on the Dow, and an overall run-up from 23,200 to beyond 24,600 over the past month.

As is the usual case, there's probably nothing about which to worry, since the Fed has Wall Street's back, front, and middle, and little tolerance for anything more than a few hundred point drop on the hallowed Dow Jones Industrial Average.

With Christmas a little more than a week away, neither congress, the Fed, nor Wall Street want to appear as Scrooges or Grinches, much less a poor likeness of Darth Vader or the death planet, especially with heavy upside bets on options and futures, which expire today. Trying not to mix metaphors - but failing badly - Friday is a quad witching day.

Happy trading, and happy Friday.

At the Close, Thursday, December 14, 2017:
Dow: 24,508.66, -76.77 (-0.31%)
NASDAQ: 6,856.53, -19.27 (-0.28%)
S&P 500: 2,652.01, -10.84 (-0.41%)
NYSE Composite: 12,629.07, -70.41 (-0.55%)

Wall Street Stalling As DC Politicians Fight Over Nothing, Threaten Shutdown

The NASDAQ recorded another record close (6,048.94), but stocks struggled to remain positive Thursday as politicians in Washington continued to wrangle over funding the government and a potential vote on a replacement for Obamacare.

Democrats have called for a government shutdown if the Republicans bring a health care bill to the House floor before passing a continuing resolution for federal government funding.

This seems to be all that the politicos in Washington - and, apparently, the wizards of Wall Street - care about at present, though first quarter corporate earnings continue to be largely impressive.

Amazon (AMZN) and Alphabet, parent of Google (GOOG), released impressive first quarter results. Both stocks were up sharply on the day, but there was little luster elsewhere.

With gridlock having become the norm for the sacred cows of congress, investors need to begin looking beyond the sham that is government, which loses money all the time and is generally a burden to taxpayers rather than a benefit, for other catalysts to keep the eight-year bull market ramping along.

Nothing good is going to come out of Washington, DC, for the foreseeable future. Investors should turn a blind eye toward the nation's capitol and focus in on business, the true creator of capital.

At The Close, Thursday, April 27, 2017:
Dow: 20,981.33, +6.24 (0.03%)
NASDAQ: 6,048.94, +23.71 (0.39%)
S&P 500: 2,388.77, +1.32 (0.06%)
NYSE Composite: -11,578.52, -14.39 (-0.12%)

Fearless Rick Predicts: Trump To Win In Landslide Victory

Dispensing with the usual market noise and fury, today let’s look at the political spectrum, in particular, the presidential race.

In the aftermath of the leaked Trump video, the further Wikileaks of Hillary Clinton’s speeches to the Wall Street elite, and Sunday night’s debate, a common theme has emerged. The Democrats have, as usual, nothing more than empty rhetoric and the politics of personal destruction.

Republican candidate Trump has been dealt a bag of lies, dirty tricks, one-sided media reportage and bias, inaccurate, dubious polling data, slurs, baits, and typical trash talk, but he has not folded, not has he bent to the pressure in the least.

While Donald Trump may not be the ideal Republican candidate, he is largely better than his Democrat rival, Hillary Clinton, whose over 30 years of public service have yielded no tangible, positive results for the majority of Americans.

Trump is correct in pointing out that the Democrats - for whom the African-American populace slavishly vote for in every election, be it local, state or national in scale - have done nothing to enhance the ling conditions of the black community. The same goes for nearly every other minority. The Democrats are full of promises and negligent on deliverance. It is the same tactic trotted out year after year, in election after election. Democrats preach equality and tolerance, but demonstrate neither.

It’s time for Americans to see through the Democrat party as nothing more than socialism on steroids. Every problem is solved by more policies, more spending, higher taxes, greater regulation. The majority of taxpaying people in this country (and even tax-avoiders) are - or should be - fed up with the dictates and policies promulgated by the left and they should be energized enough to put an end to it next month, when millions will make their voices heard through their votes.

There are no sure things in life, but if ever there was a moment for a complete convulsion in the fabric of American life, it is now. Eight years of Obama’s socialism has led to this moment. Mr. Trump has prevailed over all his Republican rivals, many of whom - as much a part of the elite status quo as the Democrats - have withdrawn their support or never supported the nominee at all.

Hillary Clinton is another empty suit. Donald Trump is a businessman who has had great success and celebrity over the years. The Democrats have tried in vain to denigrate and demonize him precisely because they are afraid of losing the election and increasingly desperate.

If the truth be known, most of the polls are so wickedly biased toward the Democrats (see this story by Sharyl Attkisson for more) they cannot be believed. This race is not even close. More and more people are being swayed by the power of Trump’s persuasion for a greater America, for a return to traditional values, for supporting the constitution, lowering taxes, eliminating regulations and improving the quality of life for the middle class.

There should be no doubt when the buttons are pushed or levers pulled. Donald Trump will win the presidential election in an absolute, stunning landslide on a scale of Ronald Reagan’s victory in 1980.

The only caveat - and it is a serious one - is if the election is rigged and stolen outright by the Democrats or the powers that be. Both sides have done it and there is a very good chance that if Clinton is seen as losing midday on November 8, all bets are off, all votes will be nullified electronically or by other means. It’s a real threat, but, otherwise, Donald Trump will win convincingly.

Monday's Markets:
Dow Jones Industrial Average
18,329.04, +88.55 (0.49%)

NASDAQ
5,328.67, +36.27 (0.69%)

S&P 500
2,163.66, +9.92 (0.46%)

NYSE Composite
10,682.71, +55.79 (0.53%)

Government Shutdown Day 11: It's Over

As usual, the Republican leadership folded like a cheap suit.

The status quo will remain.

Sorry to have gotten all worked up about it the past few weeks. It's obvious that neither party wishes to change anything.

In 1492, Christopher Columbus discovered what would be known as the "New World." Turns out, it's been so plundered and beaten and exploited that now it looks just like the Old World, a feudal socialistic state which benefits old money and the oligarchy atop the human pyramid.

Good luck with that.

Dow 15,237.11. +111.04 (0.73%)
Nasdaq 3,791.87, +31.13 (0.83%)
S&P 500 1,703.20, +10.64 (0.63%)
10-Yr Bond 2.68% 0.00
NYSE Volume 2,942,500,500
Nasdaq Volume 1,721,708,875
Combined NYSE & NASDAQ Advance - Decline: 4125-1472
Combined NYSE & NASDAQ New highs - New lows: 343-43
WTI crude oil: 102.02, -0.99
Gold: 1,268.20, -28.70
Silver: 21.26, -0.637
Corn: 433.25, -5.00

The Day After: Buyer's Remorse and the Tea Party Gambit

One day after the Fed did the unexpected - which really should have been expected, after all, since the Fed is so good at doing nothing - and kept its asset purchase program intact, stocks on Wall Street were shaken, not stirred, with the Dow and S&P posting modest losses and only the NASDAQ ahead at the close.

Since yesterday's post-announcement feeding frenzy was done at such a rapid pace, there was a feeling today that the party was great, but some may have overdone it, so positions were squared in front of tomorrow's quadruple-witching options expiry, locking in profits.

There was also a bit of nastiness coming out of Washington, DC, in the form of forty or so House Republicans promoting a bill that would fund the federal government, but only if a provision to defund the Affordable Care Act (ObamaCare) was included.

While that measure could survive a House vote, and well might, the chances of it making its way through the Senate are a different-striped animal altogether. And the chances of Obama signing it into law are absolutely zero.

If the House Republicans have their way, this stalemate could produce a partial shutdown of the federal government (please save your applause for the end of the performance) on October 1, which is just 12 days hence, so traders may have been taking a few chips off the table in advance of those ugly consequences.

Certain members of the House, known widely as Tea Partiers, would like to find a way to accomplish one of two goals: stopping ObamaCare before it is fully implemented, or, the more popular alternative, stopping the federal government from borrowing the Treasury into debt hell, a course which is already well-trodden. If the government cannot borrow any more, it stops the Federal Reserve's treasury purchases dead in its tracks and generally ends the economy as we know it, which, come to think of it, might be a brilliant idea, since the economy has strayed far from free market economics and is wholly controlled by the Federal Reserve and its vassals, the mega-bank primary dealers. Gains of all kind are generally flowing only to the top 3% or even the top 1% of the wealthiest Americans, with the rest of the populace nothing more than debt slaves.

If the Republicans in the House can stand their ground, force the government to pay its bills without further borrowing (a seeming impossibility), it could be the best thing that's happened in this country since Benny Goodman played Carnegie Hall in 1938, and that's a long time coming.

Sure, there will be dislocations and a massive depression, but on the other side would be prosperity and a more even playing field for entrepreneurs and citizens without the overarching dictates of an out-of-control oligarchy.

Sounds good, doesn't it? Let's see how this plays out, though nobody is betting that the House Tea Partiers could destroy the global economy with just one, grandiose, spectacular move.

Dow 15,636.55, -40.39 (0.26%)
Nasdaq 3,789.38, +5.74 (0.15%)
S&P 500 1,722.34, -3.18 (0.18%)
10-Yr Bond 2.75%, +0.04
NYSE Volume 4,047,428,000
Nasdaq Volume 1,742,718,375
Combined NYSE & NASDAQ Advance - Decline: 2837-3763
Combined NYSE & NASDAQ New highs - New lows: 564-34
WTI crude oil: 106.39, -1.68
Gold: 1,366.20, -3.10
Silver: 23.10, -0.192

Markets Stall as Fiscal Cliff Negotiations Are a Nullity

Talk about tight trading ranges, the major averages barely budged off the flat line today, and, considering the backdrop of the fiscal cliff non-negotiating stances of the warring parties, it's actually quite remarkable.

The NASDAQ was the most volatile of the majors, trading in negative territory the entire session, trading in a narrow band of 22 points. The S&P, top to bottom, moved an entire nine points and change, finishing ever-so-slightly in the red.

By comparison, the Dow's movement was phenomenal, covering an entire 82 points throughout the day. However, after giving up an initial thrust higher of some 53 points, the Dow's trading range from 11:00 am ET until the close was a mere 46 points. Just in case anybody is keeping tack, the Dow crossed over the unchanged line 27 times.

There was no economic data released, but the president did take to the airwaves in his first one-on-one interview since the election, exclusively on Bloomberg (take THAT CNBC!).

Basically reiterating that he would not budge from his position the the Bush tax breaks for the highest two percent earners (making over $250,000 per annum) must be allowed to expire before he and his democratic counterparts would seriously consider any proposal.

That did not inspire any reaction in either direction from the markets. It could be early onset of "cliff fatigue," since the two sides have engaged mostly in verbal sparring and little else. Wall Streeters may be getting a bit worn out, playing the waiting game for the past four weeks.

Without any movement in negotiations, the investment community will look to a crush of economic data releases beginning with the ADP Employment Change index for November, at 8:15 tomorrow, followed in close order by Q3 productivity revision and unit labor costs, factory orders, ISM services and crude oil inventories.

At the least, the ADP figure will give the non-farm payroll junkies a little to chew on until Friday when the BLS makes its monthly estimate of job growth in the nation.

Between now and then, don't look for a quick resolution to the fiscal cliff issues, as both sides appear to take the fight to the very last minute, if not beyond. Most of the politicians are planning on heading home for the holidays on the 14th of December, but, staying in the nation's capitol to iron out an agreement might be preferable to dealing with angry constituents back home, so the chance that congress might delay their holiday by a week is a distinct possibility.

While there are many voices expressing that the politicians will prevent the economy from going "over the cliff" more and more analysts are predicting that neither side sees any gain from negotiating a settlement and appearing weak in the eyes of constituents, especially from the Republican point of view, which is, has been and likely will be, completely intractable.

Things could get interesting at any time, though it appears more and more likely that the politicians will stall, posture and delay, to the ultimate detriment of everyone.

One can hardly blame the president for sticking to his guns on wanting to raise taxes on the rich. It's a no-brainer and long overdue. Besides, he did win re-election largely on the idea that the rich should pay more. How much more is the most cogent question, though the Republicans continue to appear myopic and standing in defense of their campaign contributors, not the people of America.

If the politicians don't come to agreement, blame will fall squarely on the shoulders of the Republican party, primarily the out-of-touch tea partiers in the House.

Dow 12,951.78, -13.82 (0.11%)
NASDAQ 2,996.69, -5.51 (0.18%)
S&P 500 1,407.05, -2.41 (0.17%)
NYSE Composite 8,223.87, +0.33 (0.00%)
NASDAQ Volume 1,746,404,375
NYSE Volume 3,218,542,500
Combined NYSE & NASDAQ Advance - Decline: 2638-2837
Combined NYSE & NASDAQ New highs - New lows: 94-55
WTI crude oil: 88.50, -0.59
Gold: 1,695.80, -25.30
Silver: 32.81, -0.951

So Much for Europe Being Fixed; US Stocks Dashed over Persistent Fear of Euro Collapse

Let's face it. There's no easy way for europe to fix the mess they've created without a lot of pain, including bank failures, a massive, long-term deflationary depression, government overthrows and the near disintegration of the Euro-zone, those countries which exclusively use the Euro as currency.

After last week's up-and-down Thursday and Friday sessions, marked by trepidation over the ECB's interest rate cut and a demure stance on monetary policy by new ECB head, Mario Draghi, and Friday's euphoric rally on the umpteenth outline of a Euro solution, Monday turned just plain ugly for European bourses and US indices.

Anybody who understands the enormity of debt that's been built up by Europe and the US - not only in the government, but by the banks, financial institutions and households as well - sees no end to the crisis in Europe, and the distinct probability that their problems - being partly those of our own banks and our Federal Reserve - will become ours. The massive overhang of public debt, much of it owing to national pension funds like Social Security, has always been an albatross around the necks of European leaders and now it is quickly becoming one for whoever leads the US (Take your pick from Obama, the banks or the congress. None of them are doing a good job.).

And while Social Security is set to run in the red for another year (this being the first), what are congress and the president fighting over? Whether to cut the Social Security contribution paid by employees and/or add a tax on the wealthy. The fact that the latest boondoggle is being branded as "payroll tax" - a wholly incorrect moniker - tells exactly how deep and severe the US fiscal condition has become.

If the government big-wigs actually came clean on the issue and said they want to cut Social Security contributions so people can afford to buy food, gas and maybe the occasional iPad or plasma TV, the cat would be out of the bag, permanently.

As it stands today, Social Security is DOA. Current beneficiaries can expect payments though the next five years, maybe, but, eventually, there's not enough money going into the system to support the huge numbers of upcoming recipients from the Baby Boom generation, most of whom have less than $40,000 saved for retirement (Hint: that's not enough), and cutting contributions is going in exactly the wrong direction.

On Capitol Hill, most senior congress-people know that Social Security will have to be substantially changed in order to survive and the changes will have to be dramatic measures, like raising the retirement age to 70 or 72, means testing, so that people who don't need it won't get it, and raising the limit of contributions from the current first $106,800 of income to something more realistic, like the first $200,000 of income.

Making high-earners pay more would add more money to the SS coffers at the same time the government is cutting the percentage take from employees. Still, most of the measures even considered by congress and the White House are nothing more than stop-gap measures designed to satiate the masses until the next big election, in November, 2012.

In the meantime, the economy continues to struggle along, unless one is inclined to take their lead from the ruthless bankers on Wall Street and cheat like crazy, paying people off the books, under-reporting income and generally skirting the IRS at every turn. Hey, the big corporations do it, so why not everyone else.

At the bottom of all the financial malaise is the collapse of government, as we've witnessed in the Middle east and North Africa, is now spreading to Europe and Russia, and thanks to people actually taking change of their own lives and their own finances, is quickly gaining ground here in the USA.

There is one way to stem the crisis in the United States. Elect Ron Paul president. The mainstream media is currently dancing around Dr. Paul, whose positions have been consistent and poisonous to the status quo, but there's no doubt mainstream America is listening to the 76-year-old Texan, as he continue to gain ground in Iowa and elsewhere.

Compared to the current leaders, Newt Gingrich and Mitt Romney, a Ron Paul - Michelle Bachmann ticket is sure beginning to look like a winner.

When Americans ask themselves, "which of the Republican candidates are most like us?" the answer becomes obvious.

BTW: Volume was so low today that the markets could have closed at noon and hardly anyone would have noticed. Even fewer would have cared. That's what happens when trust flees markets. People, and money, follow out the door.

The Euro hit a two-month low against the US Dollar, below 1.32. The end of the Euro is coming, and sooner than anyone dares think.

Dow 12,021.39, -162.87 (1.34%)
NASDAQ 2,612.26, -34.59 (1.31%)
S&P 500 1,236.47, -18.72 (1.49%)
NYSE Composite 7,363.49, -139.39 (1.86%)
NASDAQ Volume 1,523,045,375
NYSE Volume 3,421,469,750
Combined NYSE & NASDAQ Advance - Decline: 1272-4386
Combined NYSE & NASDAQ New highs - New lows: 79-120 (flipped to red)
WTI crude oil: 97.77 -1.64 (head back to 80-85 range)
Gold: 1,668.20 -48.60 (deflation signal)
Silver: 31.00, -1.25

House Passes Debt Ceiling Increase, 269-161

The theatrics could not have been any more pre-planned than to have Gabrielle Giffords make her first appearance in congress since her near-fatal shooting in Arizona on January 8 of this year.

Republicans votes overwhelmingly in favor of the measure, by a margin of 174-66. Democrats were split on the vote, with 95 voting for and 95 against.

The bill goes before the Senate, where passage is assured, on Tuesday, then on to the president for final signing into law.

D-Day Minus Six: Beware Falling Stocks; Dow, NASDAQ in Second-Worst Decline of 2011

It is now just six days from August 2nd, the day the government of the United States of America either passes a bill increasing the debt ceiling or begins defaulting on said debt, which is fast approaching $15 trillion.

Through accounting gimmicks and "borrowing" from the pension funds of federal employees, the government has thus far avoiding making either the commitment to borrow more or claim deadbeat status and suffer a beating at the hands of the ratings agencies in the form of credit downgrades and subsequent higher interest payments.

Make no bones about it, it is time for the American people to come to grips with the reality that the officials in Washington are not doing the jobs they are paid to do, nor have they represented the best interests of the American people for quite a long time (at least the past 11 years).

If the debt ceiling is not raised, calamity will surely ensue, which is why both sides - Republicans and Democrats, except for a few ardent Tea Partiers - have repeatedly expressed sentiment that the debt ceiling must be raised by August 2nd, no matter the outcome of budget negotiations. In truth, both sides are coming to the realization that their parties are far apart and that no budget issues or long-term spending should have become tied to the debt ceiling issue. They are separate matters which should be dealt with separately.

Nonetheless, the politicians continue their annoying Kabuki theatre while the American public seethes over their inability to compromise, act like reasonable adults and do what they were elected to do.

Wall Street has taken notice as well, logging losses in each of the first three days of this week, with no end to the selling yet in sight. To say that our "leaders" have taken a walk to the end of the plank would be putting it mildly. This issue should never have gotten to this point and those wishing to play fast and loose with the US economy should be given a hearly heave-ho and be dutifully shoved off the plank and into the drink.

What both parties have done - though especially the Republicans, who picked this fight - is shrink from their responsibilities, putting politics ahead of their oaths. It is a shameful chapter in American governance which should never be allowed to be repeated, though the general consensus is that more of the same will be forthcoming as the 2012 election season heats up.

The leaders of both parties should be henceforth removed from office for putting the stability and good faith and credit of America at extreme risk. After that, the herd of politicians being led by money from various lobbyists should be summarily removed from office. The entire congress could run better with many fewer members, preferably none of those presently constituting that formerly-august body.

The American public want change, need change and have been promised change, but all it has gotten is a sordid soap opera of bad politics and even worse outcomes. We have reached the brink and it is very nearly time to throw off the yoke of oppression by the governors and take matters in hand in a more efficient and direct manner. Nothing gets done in Washington any more; maybe it's time to shut it down.

The wealthy barons of Wall Street, those who funded the campaigns and lined the pockets of these moronic, imbecilic politicians, should also be brought to task, something Attorney General Eric Holder seems reluctant to pursue. After all, Wall Street keeps him in nice suits and fancy offices. He should be impeached.

Today's losses on the major indices were the second-largest of 2011 (except for the S&P, for which it was the third-largest), surpassing the 68 points the NASDAQ lost on January 28, but less than the 77 point decline on February 22, though more than the 66 point loss on June 1.

The Dow dropped 166, 179 and 279 points, and the S&P fell 23, 28 and 30 points on the same dates, respectively.

Dow 12,302.55, -198.75 (1.59%)
NASDAQ 2,764.79, -75.17 (2.65%)
S&P 500 1,304.89, -27.05 (2.03%)
NYSE Composite 8,153.21, -178.46 (2.14%)

Declining issues slaughtered advancers, 5875-804. New highs on the NASDAQ numbered only 15, while new lows expanded to 89. On the NYSE, there were 28 new highs and 105 new lows. The combined totals of 43 new highs and 194 new lows puts this indicator clearly in the "sell signal" category. Volume was dynamic and huge. Make no doubt about it: this was a rout.

NASDAQ Volume 2,310,879,750
NYSE Volume 5,074,647,000

Commodities were rather tame throughout the equity carnage. WTI oil fell $2.19, to $97.40, from an artificial and fully inflated high point. Gold dipped $1.70, to $1,615.10, while silver fell a modest 13 cents, to $40.57. The losses in the precious metals are temporary, likely the result of margin calls. Eventually, if stocks continue to take on water, money will gush into gold and silver.

The delay in raising the debt ceiling was not the only issue making for a horrible day on Wall Street. Durable goods orders fell 2.1% in June, further evidence that the economy is slowing.

Tomorrow's initial unemployment claims reading from the BLS could be the proverbial straw that breaks this market's back. Should the number come in above 420,000, stocks could pick right up where they left off today, severely to the downside.

Deal on Budget Announced, Not Final, Government Remains in Business... for now

Within the past few moments, House Speaker John Boehner made a brief appearance and announced that a deal for funding the remainder of the 2011 budget has been reached.

Since the hour is so late, the House and Senate must vote on what turns out to be the seventh continuing resolution to keep the government functioning. Said resolution will fund the government for the next four or five days (Boehner did not go into specifics) until the final bill is written, approved and delivered to both houses, voted upon and eventually submitted to the president.

The final budget agreement should be completed and passed in law by mid-week, according to Boehner and other sources close to the negotiations, though neither Senator Reid, majority leader in the Senate, nor President Obama has yet to comment.

In the final analysis - and, it should be noted that this is by no means final - this entire exercise has been a prime example of the abject failure that is our federal government. The suspected cuts come to about $39 billion, but do not include any cuts to the defense department and are mostly directed at programs that affect primarily lower and middle class citizens.

The lawmakers missed the deadline. They will not vote on the continuing resolution until after midnight. A small technicality, but sometimes, detail matters, a fact completely lost on the current crop of poseur politicians in our nation's capitol.

The rape of our nation and much of the planet will continue. We remain the laughing stock of the world, our position in first place remains unchallenged in any way.

Added, 11:15 pm EDT: President Obama and Senator Reid have just spoken, both confirm that a deal has been struck. Reid confirms that the continuing resolution will last through Thursday (six full days for it to all fall apart, again).

Senator Mitch McConnell, the senate minority leader, could not resist the temptation to flap his gums a bit. Said little of importance, as usual. Everybody takes victory laps, even though nobody won.

Next up are showdowns on raising the debt ceiling and the fiscal year 2012 budget. This is not over, not by a long shot. This is only the beginning of more and more politics, all leading up to the general elections in 2012, should we all not die of boredom or disgust before then.

Three Hours Remain for Congress to Settle Budget Differences

Despite the glaring obviousness of the headline, there seems to be renewed energy that a deal will be struck before the stroke of midnight, as though that specific time would matter.

Knowing how this entire fiasco of a pubic relations event has thus far unfolded, one could assume that the squabbling and posturing (because that's all it is) will continue until after midnight before any kind of resolution can be found. Word has it that another in a series of continuing resolutions could keep negotiations ongoing over the weekend and keep the government from an "official" shutdown.

The alternative view is that the House Republicans will be seen as villains for slamming the doors over a paltry $350 million earmarked for Planned Parenthood, and, despite the innuendo, none of which money would be used for abortions.

A complete canard is what this Republican gambit is, in reality. It has nothing to do with cutting spending and is only a ploy with a dual intent, to have the government shut down and to make Democrats look bad in so doing. Thus far, it's a huge failure for the party of Lincoln.

If an agreement is to come about before the midnight deadline, it certainly will not be substantive, and it certainly will not address any of the real concerns foremost on the minds of most Americans. Taking the hubris further, expect, if no agreement is reached, for an extended period of unease and disruption, which is probably what at least one of the parties would like.

Another possible development is that in the case of a shutdown, and a prolonged one, watch for arguments to emerge based upon permanently cutting some of the 800,000 federal workers who would be furloughed without pay. By making some of the cuts permanent, the government could save billions. For instance, cutting the government workforce by 200,000 (one quarter of those being forced to stay home) could save $15 billion, using a figure of $75,000 as the average annual pay. Might be a good start.

If they're going to do anything, and I've held that neither side actually wants to pass this particular budget, they'd better get a move on. Just getting everyone back to the assembly when they're all out playing cards or having cocktails will take an hour or more alone.

This is political theater at its very worst. Two little schoolgirls could put on a better drama in their living room. The sad part is that it's only going to get worse from here. This congress is completely off the rails and out of touch with the American people. Shutting down government would be a good start if only we could begin by sending the congress critters home first.

Of course, this would soon shift these

Rattled Market Recovers in Late-Session Trade

Investors, worried over an imminent government shutdown, got another jolt of reality when it was reported that a 7.4 earthquake struck Japan just after 10:00 am EDT.

The quake struck in pretty much the same region as last month's 9.0 earthquake, but geologists quickly downgraded the temblor to 7.1 and eased fears over another tsunami, measuring this one at a mere one meter (roughly three feet). This most recent quake hit in what was the middle of the night in Japan, so reports were rather sketchy, though it appeared that damage had been minimal.

With the waning of that alarm, investors quickly got back to work buying stocks, bringing the major indices back to nearly break-even at the close.

Word out of Washington was still dire, suggesting that Republicans would force Democrats into a no-win situation without resolution of their differences and cause a government shutdown on Friday night, April 8, at midnight. While most Republicans and Democrats alike would prefer to work out the narrow $7 billion worth of difference on the current budget, the House Republicans, led by first-term Tea Partiers, seem intent on standing fast to ridiculous ideological riders that would defund Planned Parenthood and public support for PBS and NPR, and it appears that these freshman legislators are going to get what they cheered yesterday, an indefinite shutdown of non-essential government services, since the Obama administration and the Senate Democrats say they have negotiated in good faith and enough is enough.

Just a little more than a day is left to work out a compromise, though a meeting today between House leader John Boehner, senate leader Harry Reid and President Obama produced nothing other than a promise that the same leaders would meet again at 7:00 pm tonight.

In another grandstanding move, House Republicans pushed through a one-week funding bill that would provide paychecks for the military, though President Obama has promised a veto should the measure reach his desk. This is how the Republicans are holding the process captive, by using American servicemen and women as props in their political debate. This level of audacity and below-the-belt maneuvering is reserved to the worst politicians on the planet, though the House newcomers seem perfectly content to drive the country to the brink of insolvency.

Wall Street took it in stride, but the eventual fallout from shutting the government down for an extended period could have long-lasting consequences the newbie Republicans can hardly imagine.

Dow 12,409.49, -17.26 (0.14%)
NASDAQ 2,796.14, -3.68 (0.13%)
S&P 500 1,333.51, -2.03 (0.15%)
NYSE Composite 8,489.33, -18.90 (0.22%)

Even though the major indices finished in the red, there was a pronounced number of losers over winners, with declining issues beating back advancing ones, 4092-2427. The NASDAQ finished with 115 new highs and 24 new lows, while the NYSE saw 154 new highs and just 4 new lows. Volume, despite the drop and rally in the morning, was still very much on the light side.

NASDAQ Volume 1,811,538,125.00
NYSE Volume 4,322,927,000

The day's events did nothing to slow the rise in the price of oil, however, as WTI crude futures rose to $110.30, up another $1.47 on the day, as word that Libyan rebels were being pushed back by forces loyal to embattled leader Moammar Gadhafi.

Gold made another new closing high, but only by an 80 cent gain, to $1,459.30. Silver tacked on 17 cents, to $39.55, another 31-year high.

With a looming government shutdown less than 36 hours away, markets are more than likely to remain somewhat stable, though a prolonged battle by the political leadership might be more than the fragile economy can handle. Sadly, the amount in question is tiny compared to the intellectual vacuity of the Tea Party Republicans.