What a week!
Not only was President Trump brought up on impeachment charges of abuse of power and obstruction of congress (whatever that is) by Jerry Nadler's gutless judiciary committee, it came on the heels of a crushing conservative victory for Boris Johnson in England. And that came just after the Federal Reserve's FOMC decided to keep the federal funds interest rate right where it was, at 1.50-1.75%.
All of this happened on Wednesday, Thursday, and Friday. There was little time, in between, for the United States and China to announce, denounce, defer, define, defend, and eventually demystify the outlines of some vague phase one trade deal, which still hasn't happened, but is supposed to, any time, any day now.
So there it was, except for a few details that may have slipped over the transom or under the proverbial rug, like the Federal Reserve supplying $500 billion in liquidity to REPO markets to handle "the turn" from December 31, 2019 to January 1, 2020.
That little nugget came and went. Everybody was too much involved over impeachment and Boris and the trade deal to notice. Such an amount of money just to get from 2019 to 2020? It sounded absurd, spending half a trillion dollars to change the calendar. Remember, there was $700 billion in TARP, back in 2009, and that supposedly rescued the entire global financial system. This amount is more than two thirds of that.
In a related story, Lee Adler of The Wall Street Examiner purports that the Federal Reserve has bought up 90% of the government's issuance of treasury bills, notes, and bonds since September 16, effectively monetizing the debt.
So, this $500 billion of liquidity from the benevolent Fed, is it a precursor of more debt monetization, or simply a safeguard against some hedge fund or larger institution crashing as one year turns to the next? Its hard to say. Like recessions, the world will likely have to wait until after the fact to find out.
On a weekly basis, the Dow has gained in seven of the last 10 weeks. The S&P was up nine of the last 10, the NASDAQ moved higher nine of the last 11, and the Composite Index finished higher nine out of the last 10 and this week closed at an all-time high, proving, once again, that it's folly to fight the Fed.
As a footnote to the coming week, the full house is expected to vote on articles of impeachment on Wednesday.
At the Close, Friday, December 13, 2019:
Dow Jones Industrial Average: 28,135.38, +3.28 (+0.01%)
NASDAQ: 8,734.88, +17.56 (+0.20%)
S&P 500: 3,168.80, +0.23 (+0.01%)
NYSE Composite: 13,697.34, -0.06 (-0.00%)
For the Week:
Dow: +120.32 (+0.43%)
NASDAQ: +78.35 (+0.91%)
S&P 500: +22.89 (+0.73%)
NYSE Composite: +109.05 (+0.80%)
Showing posts with label TARP. Show all posts
Showing posts with label TARP. Show all posts
Monday, December 16, 2019
Tuesday, December 10, 2013
Another Dismal Day in the Dumps for Stock Owners
Certainly, nobody is going to feel sorry for the Wall Street lemmings, vultures and whales for another losing day on stocks. After all, the major averages are up more than 25% on the year and a good number of individual issues are up much more than that, many having doubled in price over the past 48 weeks.
So, excuse us if we cry crocodile tears for well-heeled investors and speculators.
There is, however, a little bit of a problem in the markets, and it is completely and everlastingly tied to the Federal reserve and their Zero Interest Rate Policy (ZIRP) and continuing quantitative easing (QE), about which there is much debate, constrnation and confusion.
The final meeting of the year for the FOMC is slated for next Tuesday and Wednesday, and, while nobody in their right mind expects this august body to announce any rate policy changes, there is the small matter of decreasing the amount of securities the Fed is buying every month (QE) from the current $85 billion to something less than that, otherwise known as "tapering."
CNBCs Steve Liesman, who has a pipeline directly to and from the Fed, announced today that tapering would be announced at the December meeting. That news, and the final acceptance and future implementation of the Volker Rule, sent stocks backpedaling from the outset. The Volker Rule, in essence, disallows banks from engaging in speculative trading with depositors' money, something the various agencies feel was responsible for at least a part of the financial crisis of the past five years.
The rule puts severe restrictions on what banks can and can't do in terms of proprietary trading (i.e., speculating), but it is dense, long, deep, and riddled with potential loopholes for crafty lawyers and bankers to slither all kinds of nefarious doings through. The Volker Rule document - three years and 585 pages in the making - is, in reality, nothing more than a full-employment bill for litigation attorneys. Bully for them.
QE, and, more specifically, the tapering of QE, is another animal altogether. The Fed has been jawboning about the possibility of scaling back their bond purchases - $45 billion in treasuries and $40 billion in MBS - since May, with varying degrees of success. Wall Street banks, being the main beneficiaries of the program, would like the policy to extend to infinity and beyond, though they know in their dark heart of hearts that it must come to some kind of conclusion. The US economy cannot be force-fed money by the central bank forever.
Besides the program being excessively beneficial to banks and somewhat harmful to small businesses, consumers and emerging market nations, there is another problem that the Fed may never have considered. Due to their monopolizing of the MBS and treasury markets, the available bond issuance is dwindling, so much so, that the Fed may have no choice but to wind down such programs.
The other side of the equation is such that the Fed has so far crowded out potential bidders that there may not be many who actually want to participate. Thus, many in the bond world see even a slight decrease of buying by the Fed as a potential for higher interest rates, including interest on government debt itself, which is already a large portion of the Federal budget but could grow into a behemoth should the federal government have to begin paying back interest at higher and higher rates.
These are the unforeseen, though somewhat predictable, ramifications of the Fed's actions, actions that forestalled an implosion of the financial system and the insolvency of many of the world's largest financial institutions, dating back to the halcyon days of 2008 and $800 billion in TARP money and then-Fed Chairman Hank Paulson holding a gun to the economy's head.
So, Liesman may be bluffing at the behest of the Fed, or he could have just issued the warning shot to the markets that the plundering of assets with free money is about to come to an end.
The signs that the policy has run its course are profligate: record art and collectible car auctions, record high-end real estate prices, record stock prices.
Enough is enough. The party is about to come to a crashing, cataclysmic conclusion, and as cataclysms usually are, this one is not likely to be pretty.
Technically speaking, the advance-decline line deteriorated again today, the gap between new highs and new lows continues to show signs of shrinking and potentially flipping, and outside of Friday's massive vapor-rise, stocks have fallen every day since Thanksgiving.
The good news (for some) is that commodity prices took a lift today, with silver and gold leading the way.
DOW 15,973.13, -52.40 (-0.33%)
NASDAQ 4,060.49, -8.26 (-0.20%)
S&P 1,802.62, -5.75, (-0.32%)
10-Yr Note 99.43, +0.37 (+0.37%), Yield: 2.80%
NASDAQ Volume 1.71 Bil
NYSE Volume 3.07 Bil
Combined NYSE & NASDAQ Advance - Decline: 2115-3553
Combined NYSE & NASDAQ New highs - New lows: 206-113
WTI crude oil: 98.51, +1.17
Gold: 1,261.10, +26.90
Silver: 20.32, +0.614
Corn: 436.00, -2.00
So, excuse us if we cry crocodile tears for well-heeled investors and speculators.
There is, however, a little bit of a problem in the markets, and it is completely and everlastingly tied to the Federal reserve and their Zero Interest Rate Policy (ZIRP) and continuing quantitative easing (QE), about which there is much debate, constrnation and confusion.
The final meeting of the year for the FOMC is slated for next Tuesday and Wednesday, and, while nobody in their right mind expects this august body to announce any rate policy changes, there is the small matter of decreasing the amount of securities the Fed is buying every month (QE) from the current $85 billion to something less than that, otherwise known as "tapering."
CNBCs Steve Liesman, who has a pipeline directly to and from the Fed, announced today that tapering would be announced at the December meeting. That news, and the final acceptance and future implementation of the Volker Rule, sent stocks backpedaling from the outset. The Volker Rule, in essence, disallows banks from engaging in speculative trading with depositors' money, something the various agencies feel was responsible for at least a part of the financial crisis of the past five years.
The rule puts severe restrictions on what banks can and can't do in terms of proprietary trading (i.e., speculating), but it is dense, long, deep, and riddled with potential loopholes for crafty lawyers and bankers to slither all kinds of nefarious doings through. The Volker Rule document - three years and 585 pages in the making - is, in reality, nothing more than a full-employment bill for litigation attorneys. Bully for them.
QE, and, more specifically, the tapering of QE, is another animal altogether. The Fed has been jawboning about the possibility of scaling back their bond purchases - $45 billion in treasuries and $40 billion in MBS - since May, with varying degrees of success. Wall Street banks, being the main beneficiaries of the program, would like the policy to extend to infinity and beyond, though they know in their dark heart of hearts that it must come to some kind of conclusion. The US economy cannot be force-fed money by the central bank forever.
Besides the program being excessively beneficial to banks and somewhat harmful to small businesses, consumers and emerging market nations, there is another problem that the Fed may never have considered. Due to their monopolizing of the MBS and treasury markets, the available bond issuance is dwindling, so much so, that the Fed may have no choice but to wind down such programs.
The other side of the equation is such that the Fed has so far crowded out potential bidders that there may not be many who actually want to participate. Thus, many in the bond world see even a slight decrease of buying by the Fed as a potential for higher interest rates, including interest on government debt itself, which is already a large portion of the Federal budget but could grow into a behemoth should the federal government have to begin paying back interest at higher and higher rates.
These are the unforeseen, though somewhat predictable, ramifications of the Fed's actions, actions that forestalled an implosion of the financial system and the insolvency of many of the world's largest financial institutions, dating back to the halcyon days of 2008 and $800 billion in TARP money and then-Fed Chairman Hank Paulson holding a gun to the economy's head.
So, Liesman may be bluffing at the behest of the Fed, or he could have just issued the warning shot to the markets that the plundering of assets with free money is about to come to an end.
The signs that the policy has run its course are profligate: record art and collectible car auctions, record high-end real estate prices, record stock prices.
Enough is enough. The party is about to come to a crashing, cataclysmic conclusion, and as cataclysms usually are, this one is not likely to be pretty.
Technically speaking, the advance-decline line deteriorated again today, the gap between new highs and new lows continues to show signs of shrinking and potentially flipping, and outside of Friday's massive vapor-rise, stocks have fallen every day since Thanksgiving.
The good news (for some) is that commodity prices took a lift today, with silver and gold leading the way.
DOW 15,973.13, -52.40 (-0.33%)
NASDAQ 4,060.49, -8.26 (-0.20%)
S&P 1,802.62, -5.75, (-0.32%)
10-Yr Note 99.43, +0.37 (+0.37%), Yield: 2.80%
NASDAQ Volume 1.71 Bil
NYSE Volume 3.07 Bil
Combined NYSE & NASDAQ Advance - Decline: 2115-3553
Combined NYSE & NASDAQ New highs - New lows: 206-113
WTI crude oil: 98.51, +1.17
Gold: 1,261.10, +26.90
Silver: 20.32, +0.614
Corn: 436.00, -2.00
Wednesday, June 17, 2009
New Regs for Financials; TARP Repayment Sparks Midday Rally
The Obama administration announced a number of proposed regulatory changes which, if enacted, would materially impact the overall functioning of the US economy. The Office of Thrift Supervision would be replaced by a new Consumer Financial Protection Agency and the Federal Reserve would have a larger role in the supervision of the US economy.
To some - including myself - giving the Federal Reserve any more control of the economy is a step in the wrong direction. The Federal Reserve, far beyond any other government or commercial body, bears the brunt of any blame for current economic conditions. After all, they are the issuers of the currency.
Requiring banks and mortgage brokers to offer simplified, clear, concise mortgage documentation is a step in the right direction. Imposition of a national usury law would be even more helpful. The recommendations now fall into the lap of congress to debate.
On the markets, Dan Gallagher has an excellent piece on the record-breaking supply of new issuance in May and speculative analysis of the condition.
S&P lowered credit ratings on 18 banks including Wells Fargo and Capital One, among some of the largest. The first banks began to repay TARP money to Treasury and began negotiating terms to purchase warrants from the government. 10 banks are reportedly repaying $68 billion. While this is truly good news, it is dilutive to the banks. That understanding sent financials to substantial losses on the day.
Stocks began to hit their best stride in late morning, reaching highs of the day shortly before 2:00 pm, but the advances were spare and not broadly-based with only 5 of 12 sectors sporting gains. By day's end, only the NASDAQ ended in positive territory. As far as snap-back rallies are concerned, this had to rank as one of the more disappointing. Besides the NASDAQ, this is the third straight day of losses for major indices. Not only was the midday rally cut short, but the usual late-day bounce failed to materialize approaching the close.
Dow 8,497.18, -7.49 (0.09%)
NASDAQ 1,808.06, +11.88 (0.66%)
S&P 500 910.71, -1.26 (0.14%)
NYSE Composite 5,864.55, -22.21 (0.38%)
Advancing and declining issues were nearly even, with losers leading winners, 3292-3003. New lows surpassed new highs for the 4th straight day, 70-32. Interestingly, volume was at its highest level in the past 8 sessions, suggesting that there's more dumping of stocks than would be apparent and that most of the buying was concentrated in tech and health care.
NYSE Volume 1,316,102,000
NASDAQ Volume 2,561,073,000
Commodities spent the day without much direction, but eventually ended mostly higher. Crude oil gained 56 cents, to $71.03, while gas prices in the US increased for the 50th straight day. Gold finished $3.90 higher, to $936.00. Silver gained another 15 cents, closing at $14.28 the ounce.
May CPI showed an increase of just 0.1%, a far slighter rise than analysts expected, furthering the deflationary argument. Stripping out the gains for gasoline and adjusting for the margin of error, consumer prices were net negative for the month.
Another sign of the times is today's bankruptcy filing by retailer Eddie Bauer (EBHI) and bid agreement to sell the remaining assets to a private equity firm.
For the optimistic crowd, here's Charles Schwab Chief Investment Advisor Liz Ann Sonders declaring that the recession is over. We'd like to believe her, but isn't she really longing to say that the worst of the recession may be over? See for yourself.
To some - including myself - giving the Federal Reserve any more control of the economy is a step in the wrong direction. The Federal Reserve, far beyond any other government or commercial body, bears the brunt of any blame for current economic conditions. After all, they are the issuers of the currency.
Requiring banks and mortgage brokers to offer simplified, clear, concise mortgage documentation is a step in the right direction. Imposition of a national usury law would be even more helpful. The recommendations now fall into the lap of congress to debate.
On the markets, Dan Gallagher has an excellent piece on the record-breaking supply of new issuance in May and speculative analysis of the condition.
S&P lowered credit ratings on 18 banks including Wells Fargo and Capital One, among some of the largest. The first banks began to repay TARP money to Treasury and began negotiating terms to purchase warrants from the government. 10 banks are reportedly repaying $68 billion. While this is truly good news, it is dilutive to the banks. That understanding sent financials to substantial losses on the day.
Stocks began to hit their best stride in late morning, reaching highs of the day shortly before 2:00 pm, but the advances were spare and not broadly-based with only 5 of 12 sectors sporting gains. By day's end, only the NASDAQ ended in positive territory. As far as snap-back rallies are concerned, this had to rank as one of the more disappointing. Besides the NASDAQ, this is the third straight day of losses for major indices. Not only was the midday rally cut short, but the usual late-day bounce failed to materialize approaching the close.
Dow 8,497.18, -7.49 (0.09%)
NASDAQ 1,808.06, +11.88 (0.66%)
S&P 500 910.71, -1.26 (0.14%)
NYSE Composite 5,864.55, -22.21 (0.38%)
Advancing and declining issues were nearly even, with losers leading winners, 3292-3003. New lows surpassed new highs for the 4th straight day, 70-32. Interestingly, volume was at its highest level in the past 8 sessions, suggesting that there's more dumping of stocks than would be apparent and that most of the buying was concentrated in tech and health care.
NYSE Volume 1,316,102,000
NASDAQ Volume 2,561,073,000
Commodities spent the day without much direction, but eventually ended mostly higher. Crude oil gained 56 cents, to $71.03, while gas prices in the US increased for the 50th straight day. Gold finished $3.90 higher, to $936.00. Silver gained another 15 cents, closing at $14.28 the ounce.
May CPI showed an increase of just 0.1%, a far slighter rise than analysts expected, furthering the deflationary argument. Stripping out the gains for gasoline and adjusting for the margin of error, consumer prices were net negative for the month.
Another sign of the times is today's bankruptcy filing by retailer Eddie Bauer (EBHI) and bid agreement to sell the remaining assets to a private equity firm.
For the optimistic crowd, here's Charles Schwab Chief Investment Advisor Liz Ann Sonders declaring that the recession is over. We'd like to believe her, but isn't she really longing to say that the worst of the recession may be over? See for yourself.
Tuesday, June 16, 2009
Stocks Bombed Second Straight Session
The turning point for the stock market has finally come. Stocks sold off broadly and sharply for the second straight session as investors increasingly take profits and head for the sidelines. Others, specifically speculators, have quite literally been shut out of the market by excessive valuations, which, as anyone who has ever done any kind of investing knows, is a path to ruin. Buying after a significant rally, such as the one which lasted from March 10 to June 12, will almost always lead to sizable losses mounting quickly.
Technical indicators have presaged the end of the rally astonishingly well. Just as the S&P 500 50-day and 200-day moving averages converged, the selling commenced. Today's market action was particularly acute and different from the usual fare. Instead of a positive response to benign PPI figures for May (a gain of 0.2%, against an expected rise of 0.5%) analysts took this as a sign that the economy was not recovering as quickly as some might hope and that inflation fears have been wildly overblown. Stocks were up mildly at the open, and after vacillating across the break even line for most of the morning, finally began to fall off just before noon. By 2:00 pm, the indices were striking new lows, and, instead of a late day rally, stocks sold off wildly in the final 15 minutes, closing at the lows of the day.
This should come as little surprise to anyone following the money. The Fed has more than doubled the size of its balance sheet since fall of 2008, the money supply has been ramped up gigantically, yet the banks still aren't lending, defaults on credit cards and auto loans are now matching up to the foreclosure numbers, and wages remain flat, if not declining. Companies are finding little in the way of pricing power, except in industries which have virtual, government-allowed monopolies, such as energy and utility companies.
Where has all this money gone? Directly into the hands of the banks, and much of it was certainly used to pump up stock prices. The timing of the rally and the second round of TARP funding were surely more than coincidental. Now that the money has been spent and distributed through the market, it has to be removed and put back on the banks' balance sheets. There is one fatal flaw to the government-Wall Street scheme: nobody's buying on the way down, just as nobody was buying during the secondary crash in early 2009, nor during the subsequent run-up. The entire three-month rally was nothing more than massive self-dealing, a complete sham, with the bank CEOs, the Fed, the Treasury and high-ranking government officials fully complicit in the charade.
While there's nothing implicitly illegal about buying stocks cheap and selling them a few months later at a profit, the obvious questions to ask are, first, how prevalent among the insider banking community and the government was the knowledge that stocks weren't really worth the asking prices of recent weeks and, second, what was being to to the general public and the banks' clients?
Telling clients to buy securities at the same time your own brokerage is unloading them is fraud, though, as far as Wall Street practice is concerned, it happens all the time, day in and day out. Seemingly, the only way to make money in this environment is to play along with the big money. Buy when they are buying, sell when they are selling. It's now time to sell.
Dow 8,504.67, -107.46 (1.25%)
NASDAQ 1,796.18, -20.20 (1.11%)
S&P 500 911.97, -11.75 (1.27%)
NYSE Composite 5,886.76, -80.50 (1.35%)
Once again, decliners beat back advancing issues, 4475-1914. For the second straight day, new lows outnumbered new highs, 68-26. Volume remained subdued, so get used to this level of activity. It's summer, and many of the usual heavy players are not involved.
NYSE Volume 1,176,238,000
NASDAQ Volume 2,262,585,000
Commodities were mixed. Oil spent most of the day with gains, but closed down 15 cents, at $70.47. Gold was up $4.70, to $932.20. Silver, after Monday's 85 cent bludgeoning, was up just a dime, to $14.13. Natural gas was down slightly. Pork bellies continued to price higher.
Other economic data of note included industrial production, down 1.1%, and capacity utilization, checking in at 68.3% for May, after posting a revised 69.0% for April. These numbers are continuing evidence of the severity of the recession. Rather than seeing "green shoots," of potential recovery, the latest round of figures suggests what reality is really showing us, a deepening and swelling depression which threatens to take down every segment of the US economy, and with it, much of the world's.
The banks and other far-flung, covert, secluded monied interests are hoarding capital. The only way to wring it from their cold, clammy hands is through inflation, and that's not happening. Nobody knows where the bottom is, but a good bet would be that we're nowhere close to one. Government bailouts and stimulus have only quieted the rout for the time being. Unemployment continues to increase and deficits are growing as far as the eye can see. Now is definitely not a time to be speculating for stock gains.
Technical indicators have presaged the end of the rally astonishingly well. Just as the S&P 500 50-day and 200-day moving averages converged, the selling commenced. Today's market action was particularly acute and different from the usual fare. Instead of a positive response to benign PPI figures for May (a gain of 0.2%, against an expected rise of 0.5%) analysts took this as a sign that the economy was not recovering as quickly as some might hope and that inflation fears have been wildly overblown. Stocks were up mildly at the open, and after vacillating across the break even line for most of the morning, finally began to fall off just before noon. By 2:00 pm, the indices were striking new lows, and, instead of a late day rally, stocks sold off wildly in the final 15 minutes, closing at the lows of the day.
This should come as little surprise to anyone following the money. The Fed has more than doubled the size of its balance sheet since fall of 2008, the money supply has been ramped up gigantically, yet the banks still aren't lending, defaults on credit cards and auto loans are now matching up to the foreclosure numbers, and wages remain flat, if not declining. Companies are finding little in the way of pricing power, except in industries which have virtual, government-allowed monopolies, such as energy and utility companies.
Where has all this money gone? Directly into the hands of the banks, and much of it was certainly used to pump up stock prices. The timing of the rally and the second round of TARP funding were surely more than coincidental. Now that the money has been spent and distributed through the market, it has to be removed and put back on the banks' balance sheets. There is one fatal flaw to the government-Wall Street scheme: nobody's buying on the way down, just as nobody was buying during the secondary crash in early 2009, nor during the subsequent run-up. The entire three-month rally was nothing more than massive self-dealing, a complete sham, with the bank CEOs, the Fed, the Treasury and high-ranking government officials fully complicit in the charade.
While there's nothing implicitly illegal about buying stocks cheap and selling them a few months later at a profit, the obvious questions to ask are, first, how prevalent among the insider banking community and the government was the knowledge that stocks weren't really worth the asking prices of recent weeks and, second, what was being to to the general public and the banks' clients?
Telling clients to buy securities at the same time your own brokerage is unloading them is fraud, though, as far as Wall Street practice is concerned, it happens all the time, day in and day out. Seemingly, the only way to make money in this environment is to play along with the big money. Buy when they are buying, sell when they are selling. It's now time to sell.
Dow 8,504.67, -107.46 (1.25%)
NASDAQ 1,796.18, -20.20 (1.11%)
S&P 500 911.97, -11.75 (1.27%)
NYSE Composite 5,886.76, -80.50 (1.35%)
Once again, decliners beat back advancing issues, 4475-1914. For the second straight day, new lows outnumbered new highs, 68-26. Volume remained subdued, so get used to this level of activity. It's summer, and many of the usual heavy players are not involved.
NYSE Volume 1,176,238,000
NASDAQ Volume 2,262,585,000
Commodities were mixed. Oil spent most of the day with gains, but closed down 15 cents, at $70.47. Gold was up $4.70, to $932.20. Silver, after Monday's 85 cent bludgeoning, was up just a dime, to $14.13. Natural gas was down slightly. Pork bellies continued to price higher.
Other economic data of note included industrial production, down 1.1%, and capacity utilization, checking in at 68.3% for May, after posting a revised 69.0% for April. These numbers are continuing evidence of the severity of the recession. Rather than seeing "green shoots," of potential recovery, the latest round of figures suggests what reality is really showing us, a deepening and swelling depression which threatens to take down every segment of the US economy, and with it, much of the world's.
The banks and other far-flung, covert, secluded monied interests are hoarding capital. The only way to wring it from their cold, clammy hands is through inflation, and that's not happening. Nobody knows where the bottom is, but a good bet would be that we're nowhere close to one. Government bailouts and stimulus have only quieted the rout for the time being. Unemployment continues to increase and deficits are growing as far as the eye can see. Now is definitely not a time to be speculating for stock gains.
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