Showing posts with label ZIRP. Show all posts
Showing posts with label ZIRP. Show all posts

Sunday, October 27, 2019

WEEKEND WRAP: Green Lights for Stocks; Flight From High Tax States Varies US Landscape

For equity investors, the week was all about Friday.

After flailing about the prior four sessions, US indices got a sizable boost on the final day of the week, sending traders home satisfied with a positive result for the week.

With the Dow, NASDAQ, and Composite mere percentage points short of all-time highs, the S&P 500 is within three points of its record closing high, recorded earlier this year, on July 26 (3,025.86).

So, with all the uncertainty surrounding geo-political events - impeachment, Brexit, trade war - stocks continue to perform magic as solid investments in a ZIRP and NIRP environment.

With the Fed committed to "not QE" through the second quarter of 2020 (at least), stocks have in front of them a glowing green light signaling fresh all-time highs. The FOMC is expected to cut another 25 basis points at its meeting this week, the second to last of the year.

In commodity trading, WTI crude oil was bid, closing out the week at 56.63 a barrel after slumping down to $52.45 over the prior two weeks. Gold and silver, both sluggish over the past month, finally were bid on Thursday and Friday. Gold was as high as $1518 on Friday, settling in at $1504, while silver crested above $18 per ounce and closed right on that number Friday.

Ten-year treasury notes continued to be shunned, finishing out the week with a yield of 1.80%, with some correlation to ongoing cuts in the federal funds rate. Bond traders are expressing a preference for short-term maturities, with 1, 2, and 3-month bills nearly at the same yield as the 10-year. While the yield curve has returned from inverted to a rather dull slope, there's certainly no consensus on direction. With the 10-year yield at its best level since August, it is still well below the average 2.72% which prevailed in the first quarter.

Earnings reports have been unreassuring, with as many misses as those topping estimates. Overall, mega-corps are still making money, just not so much to boost their prices significantly. In this environment, banging out 5-8% year-over-year gains has to be considered pretty solid, being that the current economic cycle is well past the mid-point and may be nearing an end.

Recession talk has subsided for now, though different regions throughout the vast US landscape offer varied results. In general, flight from high-tax states - New York, New Jersey, Massachusetts, Maryland, Connecticut, Illinois, and California, in particular - to Southern enclaves continues apace. Retirees are taking their money and running for the state line, seeking reduced property, income, and estate taxes in more conservative states.

States that have not raised their minimum wages significantly are experiencing an influx of new residents, and with that, housing, roads, and commercial spaces are being constructed at a hot pace. Meanwhile, the Northeast continues to suffer from an overabundance of taxation, regulation, and handouts to the indigent at the same time its infrastructure is crumbling and best residents are leaving.

New York is a prime example of the dangers of liberal policies causing middle and upper class flight. While undocumented (illegal) migrants (aliens) are offered free food, housing, and education, long-suffering native New Yorkers are feeling put out, footing the bill for government largesse while good jobs are scarce and property taxes are near the highest in the nation. Home values are depressed, despite low interest rates and job creation is limited by the excessive minimum wage and other requirements of employment paid for by companies.

New York leads the nation in lost manufacturing jobs in 2019, estimated to have shed 10,000 positions through the first nine months of the year. The Empire State has also suffered significant losses in the hospitality and construction industries, due to the higher minimum wage and lack of growth in commercial and residential building.

These so-called "high tax states" are going to face a cash crunch, as higher paid workers are replaced with low-skill, low pay employees. The revenue will not be enough to sustain the high costs of state agencies and pensions. A major bust has been building for years in many states who will have to face the reality that the days of big promises are over and government staff reduction and budget cuts are on the table.

The United States is a big country, and, similar to the nations of Europe, some states may be booming while others are failing.

Caveat Emptor.

At the Close, Friday, October 25, 2019:
Dow Jones Industrial Average: 26,958.06; +152.53 (+0.57%)
NASDAQ: 8,243.12, +57.32 (+0.70%)
S&P 500: 3,022.55, +12.26 (+0.41%)
NYSE Composite: 13,146.24, +27.33 (+0.21%)

For the Week:
Dow: +187.86 (+0.70%)
NASDAQ: +153.58 (+1.90%)
S&P 500: +36.35 (+1.22%)
NYSE Composite: +139.60 (+1.07%)

Monday, December 17, 2018

Global Stock Rout Deepens; Dow Loses Another 500 Points; NASDAQ Down 16.7% Since August

The pain is spreading, and it doesn't seem to be about to abate any time soon.

According to Dow Jones Market Data, the S&P 500 closed at its lowest level since October of 2017, the NASDAQ finished at its lowest since November of 2017, while the Dow closed at lowest level since March 23. Only a rally in the final 15 minutes of trading kept the Dow from closing at its lowest level of the year.

The Dow had plunged as low as 23,456.8 with just minutes to the closing bell, but short-covering boosted the industrials more than 100 points in the final minutes of trading. Not that it matters very much, but the closing low for the year was 23,533.20. Prior to that, the Dow closed at a low of 23,271.28 on November 15, 2017.

Both of those levels are likely to be subsumed, as the stock rout about to be hit with another dose of reality. Trumping anticipation, the Fed meeting which ends Wednesday afternoon at 2:00 pm ET, is almost certain to include a 25 basis point raise to the federal funds rate. On Friday, the federal government, unable to reach a suitable compromise on President Trump's border wall, will go into a partial shutdown.

Neither event - especially the federal shutdown - is of the earth-shattering variety, but they come at a very inopportune time for the market, which is struggling to find any good news upon which to hang a rally.

Europe is either in flames (France), in a bear market (Germany), or about to enter a recession thanks to the end of the ECB's brand of QE. Beyond that, there's the uncertainty of an orderly departure from the EU by Great Britain. The official date for Britain to separate itself from the EU is March, but there have been rumblings of an extension and more than just a little unrest from the island nation to the continent concerning what effect a member country departing will have on the solidarity of remaining members.

In China and Japan, an economic slowdown is already well underway, so it appears that the sellers have reason enough to move away from stocks, and rapidly. There are just too many negatives floating around geopolitical and financial circles for all of them to be resolved in the near term. Rather, these worries turn into realities which the market doesn't appreciate, such as the actual imposition of tariffs rather than mere rumors and threats of them. The same goes for the Fed's upcoming rate hike and the government shutdown. It's become a market that's twisted the old saw into "sell the rumor, sell the news." Everything is on sale and buyers have been heading to the sidelines beginning in February. Since October, the pace has picked up noticeably, but December threatens to be the worst month of the year for the Dow, at least.

For perspective, February's loss on the Dow was 1120.19 points.

March saw a decline of 926.09.

In October the Dow lost 1341.55 points.

So far this month, the Dow is lower by 1945.58 points, making the October through December (November's gain was 426.12 points) period worse than the February-March spasm.

The NASDAQ is down 16.7% since August 29. WTI Crude was seen at $49.45 per barrel, the lowest price since September, 2017.

Throughout the years of experimental financial chicanery of QE and ZIRP, and NIRP (negative interest rate policy) by the Federal Reserve and fellow central bankers following the Great Financial Crisis (GFC) of 2007-09, the question was always, "how is this all going to end?"

Now, we have the answer, firsthand, and, as many predicted, it's not pretty and likely to get worse.

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

At the Close, Monday, December 17, 2018:
Dow Jones Industrial Average: 23,592.98, -507.53 (-2.11%)
NASDAQ: 6,753.73, -156.93 (-2.27%)
S&P 500: 2,545.94, -54.01 (-2.08%)
NYSE Composite: 11,532.12, -223.27 (-1.90%)

Monday, April 9, 2018

It's OVER! Dow Transports Confirm Dow Theory Primary Trend Change Bull to Bear

Right off the bat, here's the theme for today's trading: Frankie Valli and the Four Seasons 1964 hit, "Dawn."

For the uninformed, today's epic pump-and-dump collapse on all the major indices was more than just "the usual." It was, simply put, a day to be marked in financial history, the day the most phony, contrived and manipulated bull market that ever existed, died an overdue death and gave birth to a bona fide bear market, something most of today's millennial day-trading demons have never experienced.

Why would the death of a bull market and the beginning of a bear market be something suitable for celebration?

Good question.

Here's an even better answer: because the bull market, which started March 9, 2009 - nine years and one month, to the day - was one built on fumes and Fed happy talk, endless fiat money printing, rounds and rounds of Quantitative Easing (QE), artificially low interest rates approaching zero (ZIRP) and corporate stock buybacks of unprecedented quantity. Almost nowhere was there a single sign of real growth; much of the gains in stocks were due to buyback manipulation as gross revenue stagnated for nearly a decade.

It was a decade of fakery, of spoofing and high frequency trading as GDP never reached three percent until nearing the end, and never actually did for a full year, including 2017, the last. Almost all of the supposed growth in the "recovery" was due to inflation, nothing else. A false sense of security was promoted by the governors and presidents of the Federal Reserve System and their regional banks and the public gobbled it up.

Meanwhile, in the real world, mark to market had been replaced by mark to fantasy, and price discovery was banished from the equity world.

According to Dow Theory - a nearly infallible projecting tool - as the Dow Transportation Index closed today below the February 9 low of 10,136.61, at 10,119.36, confirming the primary trend change, the bull market can be properly buried and a bear market born.

For anyone unfamiliar with Dow Theory, the primary trend change goes like this:
New Closing Low
Interim High, Below Previous High
New Low Below Previous Low.

This simple pattern must occur on both the Dow Jones Industrial Average and the Dow Jones Transportation Index (confirmation), and here's how it happened.

The Dow Jones Industrial Average made a new all-time high on January 26, 2018 (26,616.71).
On February 8, it closed at 23,860.46 (new low).
On February 26, it closed at 25,709.27 (interim high, lower than previous high).
On March 23, the Industrials closed at 23,533.20 (new low, lower than previous low).

For confirmation, the Dow Jones Transportation Index had made it's new high on January 12, 2018 (11,373.38).
On February 8, it closed at 10,136.61 (new low)
On February 26, it closed at 10,769.84 (interim high, lower than previous high)
On April 9, the Transportation Index closed at 10,119.36 (new low, lower than previous low = primary trend change, bull becomes bear).

Why is this good?

This is good because markets in a stable, trustworthy financial system must have a mechanism to clear mal-investment. Otherwise, stupid money must be purged from the system in order to create real value.

For instance, Facebook, Google, and many other stocks should not be trading as high as they currently are. They are overvalued, promoted by shysters and traded up by fools, one fool greater than the previous one. In other words, this is money chasing an unrealistic return. In order to get back to a realistic, fair, honest market, these stocks must lose value. Some companies will achieve their true value, which is zero. Others will lose 20, 30, maybe even more than 50%. The market will sort out the winners (there will be a few) from the losers (there will be many).

In the end, stocks will be properly valued, but when that time is to come, nobody knows. The perma-bulls out there can take heart that bear markets generally last 14-18 months, some like the one during the Great Depression which began with the stock market collapse in 1929, last much longer. How deep this one will be depends on how quickly stocks revert to an undervalued position, because the market always overshoots on the upside and the downside. There will be a bottom, when it will be wise to buy stocks. The only winning position presently is to sell stocks at a profit, park the money in bonds or money markets and wait for the bottom, which, just like the primary change from bull to bear, will be repeated - in reverse - according to Dow Theory.

For those wishing for the good old days of January 26, a return to those levels may take four to seven years, possibly longer, and, judging by the general insanity plaguing the human race presently, one should prepare for the much longer period. There are mountains of bad investments and onerous debts to be flushed from the system, since they were not flushed out in 2008-09, only papered over by TARP, QE, and ZIRP.

If you must, cry in your beer over the death of the bull. The rest of us will be having a cold one with the new-born bear.

Dow Jones Industrial Average April Scorecard:

Date Close Gain/Loss Cum. G/L
4/2/18 23,644.19 -458.92 -458.92
4/3/18 24,033.36 +389.17 -69.75
4/4/18 24,264.30 +230.94 +161.19
4/5/18 24,505.22 +240.92 +402.11
4/6/18 23,932.76 -572.46 -170.35
4/9/18 23,979.10 +46.34 -134.01

At the Close, Monday, April 9, 2018:
Dow Jones Industrial Average: 23,979.10, +46.34 (+0.19%)
NASDAQ: 6,950.34, +35.23 (+0.51%)
S&P 500: 2,613.16, +8.69 (+0.33%)
NYSE Composite: 12,380.55, +31.44 (+0.25%)

Thursday, September 21, 2017

Witch Doctors at the Fed Brewing Something Wicked?

Eventually, everything matters.

Whether it's a hurricane ravaging Houston, Miami, or Puerto Rico, Toys 'R Us going chapter 11, or JP Morgan Chase CEO Jamie Dimon bashing cryptocurrencies in general and Bitcoin in the specific, all actions have consequences. It's the butterfly flapping its wings in Africa resulting in the subtropical windstorm, pure physics, action, reaction, cause and effect.

Thus it is consequential that the Fed's announcement in June indicating that it would begin to sell off it's hefty bag of assets - confirmed just yesterday - beginning in October (a scant ten days from now) should have some noticeable effect.

Market reaction to the announcement three months ago was muted. It was more serious yesterday and took on a gloomy tone today as all of the major indices retreated from all-time highs, the hardest hit being the speculative NASDAQ index, though one could posit that the knee-jerk nature of the selling today was nothing more than casual.

Suppose it is more than that.

Wouldn't the biggest players in the investing universe be monitoring market movements closely, making incremental moves, buying insurance? Of course. None of them want to tip their hand, but, they are concerned that the Federal Reserve has lost control of the monetary side of the equation. After all, ZIRP (zero interest rate policy) didn't work, nor did quantitative easing (QE). With all of their bullets spent, the Fed has nonchalantly called the financial crisis over and done and signaled to the market that they are going to raise interest rates, sell off the assets they've been hoarding for some six, seven, or eight years and the economy of the United States - and the world - will suddenly and magically be wonderful again.

As Dana Carvey playing the "Church Lady" might say, "how convenient!"

The Fed is at a loss and has been for eight or nine years running (some may say longer), because they cannot control distant event, geological occurrences, sunrises, or the whims of people with money. They are what Ayn Rand and Rollo May might have called witch doctors whose power is derived from people's belief in their so-called powers.

When the Fed begins selling their cache of securities (mostly treasury bonds and mortgage-backed securities) expect some degree of howling from various quarters, notably those who have been calling the central bank's attempts to control global markets a scam, sham, or film-flam from the start.

Especially when it comes to the mortgage-backed securities (MBS) there will be great gnashing of teeth, especially deep inside the bowels of the Eccles Building, where it cannot be heard, as Fed governors (a number of them already jumping ship) bemoan their dissatisfaction over the task at hand.

They are about to become scorned, and with good reason. They've mismanaged other people's money (practically everybody's) to their own profit. Bernie Madoff would look like a saint compared to the crimes the people at the Fed have committed. Those crimes continue, and they will be manifest in the "great unwind."

As the case may be, all of these high priests and witch doctors of finance will claim they didn't see the carnage coming, but come it will. There's a place for people who use deceit and obfuscation to achieve their ends, and it's certainly not in heaven.

Keep a close eye on three things: the price of silver, the price of corn and wheat, and the performance of the major stock indices. If suspicions play out, all three (or two of three, with the only gainer being silver) will decline for months before there's true confirmation that, in the long scheme of things, the Fed officials, from Greenspan to Bernanke to Yellen, knew exactly what they were doing but did it anyway.

Today's position: Fetal.

At the Close, Thursday, September 21, 2017:
Dow: 22,359.23, -53.36 (-0.24%)
NASDAQ: 6,422.69, -33.35 (-0.52%)
S&P 500: 2,500.60, -7.64 (-0.30%)
NYSE Composite: 12,133.62, -13.88 (-0.11%)

Thursday, July 6, 2017

More NASDAQ Losses Cause For Concern

There are those in the financial hinterlands who believe that the latest bout of indigestion in equities is simply another round of petty games played by central bank elitists who continue to exert extreme control, especially at times when it seems a correction may be at hand.

There are others who believe that the entire eight years of QE-and-ZIRP-inspired gains have been the exclusive province of the central banks and that they are preparing to pull the proverbial rug out from under markets via interest rate hikes and a general cessation of currency creation.

Both parties may be right, insofar as the central banks have been the epicenter of all financial activity, surreptitiously aiding the money center banks and primary dealers closest to the Fed's largesse.

Thus, the declines on the NASDAQ - not just today, but for the past three weeks - are sending signals to smaller market participants and there has been the beginning of a realignment of asset allocations, from tech to cash, from consumer staples and cyclicals to dividend-payers and utilities.

The issue at present, as was the case in 2008-09 and most other major market corrections or reversals from bull to bear, is that nowhere is there a safe place to hide, though the usual standouts are cash, precious metals and treasuries. On the latter, the 10-year note continued its ascent, finishing the day at 2.37, a multi-month high. That's a notable move, signifying that money may be indeed becoming tighter, even though that is a relative term, heading north from a real rate approaching zero.

At this juncture, it's still too early to raise the alarm bells, though the heavily-leveraged may be getting margin calls in short order. The NAZ is closing in on a five percent decline from the June 9 high of 6341.70, currently at a level of -3.98%. The even one percent loss on the NASDAQ today was followed in close order by the other major indices.

Caution is advised. Do NOT buy this dip as there are far too many worrying factors in the mix.

At the Close, 7/6/17:
Dow: 21,320.04, -158.13 (-0.74%)
NASDAQ: 6,089.46, -61.39 (-1.00%)
S&P 500: 2,409.75, -22.79 (-0.94%)
NYSE Composite: 11,702.42, -107.07 (-0.91%)

Wednesday, June 15, 2016

Fed Does Not Hike Rates, As Expected; Markets Dull

Not only has the Fed run out of inflation-and-recession-fighting tools and rhetoric, but the US central bank seems to be running out of mental acuity and moral purpose.

What they do possess is an abundance of political correctness and political policy, used to keep watchers of global economies on their toes and the general populace in a trance.

The FOMC did today what they have done for most of the past seven years: they kept the federal funds rate unchanged. Since December, 2008 the federal funds rate has remained at 0.00-0.25%, until a one-time hike in December of 2015, raised the rate to 0.25-0.50, where it remains.

Citing a troubling employment picture after May's non-farm payroll figures came in at just 38,000 jobs, the Fed decided to delay their threatened rate hike for the foreseeable future, or, at least until the next meeting, in July, at which time they will likely find another reason to keep rates at ridiculously low levels to enrich those at the top of the money tree while at the same time impoverishing and punishing savers.

The policies of the Federal Reserve and their fellow central bankers in other countries are pointless and harmful. Since the financial collapse of 2008-09, their mangled ideologies have done little to stimulate any economy of any country. What's worse, these policies have afforded spendthrift governments the world over to borrow trillions at absurdly low rates, enslaving their populations to onerous taxation, promises of pension which will eventually collapse, and a general overburden of rules, regulations, fees, and legislation.

At the same time, civil liberties are dying at a pace close to that of a once-promising middle class, thanks to the moral turpitude of the central banker cabal and the lap-dog behavior of national governments.

While Wall Street has variously loved and desired low interest rates for a long time, this era has seemingly run its course, as today's market reaction shows. No longer is Wall Street enamored of rates close to zero; banks can't make much money on any spread, and debt over-saturation is a risk which few, if any, honest bankers wish to address.

The Fed (in)action and the slumbering reaction are signs that the age of ZIRP is at an end, and the sooner it ends, the better, but nobody is holding his or her breath waiting for central bankers to admit their mistakes and return to more normal, productive interest rates.

The Rise and Fall of Everything in One Day:
S&P 500: 2,071.50, -3.82 (0.18%)
Dow: 17,640.17, -34.65 (0.20%)
NASDAQ: 4,834.93, -8.62 (0.18%)

Chart for ^IXIC
Crude Oil 47.50 -2.06% Gold 1,295.80 +0.58% EUR/USD 1.1265 +0.04% 10-Yr Bond 1.60 -0.93% Corn 430.75 -1.32% Copper 2.09 0.00% Silver 17.56 +0.30% Natural Gas 2.87 -0.97% Russell 2000 1,149.30 +0.13% VIX 20.14 -1.76% BATS 1000 20,677.17 0.00% GBP/USD 1.4196 0.00% USD/JPY 105.8460 -0.14%

Wednesday, March 9, 2016

Oil Glut Yet Prices Higher; Gold, Silver Demand Up, Prices Down

There is a serious disturbance in the Farce called the global economy, and it is the role of central bankers who create absurd amounts of fiat currencies, literally out of thin air.

Policies adopted by the financial elite experts who control nearly all currencies worldwide have caused markets to virtually stop functioning. After seven years of base interest rates at near zero - and recently, below zero - endless stimulus programs otherwise known by the catchy name, quantitative easing, and a serious lack of transparency, regulation, and discipline in all markets, global growth is a non-starter for 2016 and the foreseeable future.

Businesses, fed a diet of easy money for nearly a decade (two decades, if one includes the Greenspan "put" years) are loathe to spend on capital improvements, labor or infrastructure. Businesses are, so to speak, "living off the land," by cutting budgets while fattening the salaries and bonuses of crony CEOs and others occupying the executive suites and boards of directors.

It's a horrible condition, with disinflation and outright deflation popping up in pockets like food production, energy, and most hard commodities (see natural gas and copper). Price discovery has become a function less of supply and demand and more driven by derivative bets, options, credit default swaps, and hedging. Over-finacialization of nearly all markets that matter has turned fundamentals on their heads and what once were functional markets into nothing more than trap-laden casinos. The effect has been to alienate a generation of investors (millenials), impoverish another (retirees) and overburden those not yet ready to enter the economy (the youth). In the middle is generation X, condemned to toil away towards an uncertain future.

The argument that fundamental supply and demand is defunct rests largely on the oil market, currently carrying the largest global glut on record, yet pushed to levels indicative of a shortage. Oil was ranging toward $25 per barrel just a month or so ago; today it is approaching $40, mostly a function of short-covering and naked short selling.

Much the same can be said of the markets for precious metals, the price held down by nefarious forces while the demand continues to expand. In many quarters, gold, silver, and gemstones are considered the only investments worth having and holding. They carry no counterparts risk, are relatively easy to transport and can be converted into money or any other asset with relative ease.

As Bill Bonner and his enlightened crew love to postulate, a day of reckoning is coming, though just exactly when that day arrives and how it is manifested are known to exactly nobody.

It's a mess. Better to put money in a mattress or buy canned goods than risk in capital markets, as moribund and compromised as they are. US equity indices peaked in May of 2015. It's nearly a year from the all-time highs without any rally catalysts in sight.

All eyes and ears will be tuned to the ECB tomorrow, when Mario Draghi does what he can only do, signal more easing, more fraud, and more of the relentless can-kicking that has typified the past seven years.

Nobody is holding his or her breath on this coming non-event because there is no longer any air to breathe.

Wednesday's Wackiness:
S&P 500: 1,989.26, +10.00 (0.51%)
Dow: 17,000.36, +36.26 (0.21%)
NASDAQ: 4,674.38, +25.55 (0.55%)

Crude Oil 38.23 +4.74% Gold 1,253.90 -0.71% EUR/USD 1.1001 -0.06% 10-Yr Bond 1.8920 +3.28% Corn 360.25 -0.07% Copper 2.23 +0.54% Silver 15.31 -0.52% Natural Gas 1.76 +2.92% Russell 2000 1,072.77 +0.46% VIX 18.34 -1.77% BATS 1000 20,677.17 0.00% GBP/USD 1.4217 +0.03% USD/JPY 113.3350 +0.60%

Thursday, February 18, 2016

Chinks In The Global Ponzi Armor

What the central banks have constructed today as a "global economy" would make Bernie Madoff blush for all its arrogance and chutzpah.

The Fed buys Treasury bills, notes and bonds from the US government, the French government, Japan, Germany, UK, Australia, China, and the central banks of those countries do likewise. In essence, they are all borrowing from each other, and all of them, in the aggregate - and often enough singularly - are insolvent. It's the world's largest kiting scheme, being played on a global scale with money created out of thin air, backed by debt, most of which will never be repaid.

This kind of scam is typically known as a pyramid scheme, an airplane game, or, a Ponzi scheme, in which the creators and early adopters receive the bulk of the benefit, and those last in are left whining about promises made and unkept, with a loss of their investment and great remorse.

When one views the global economic structure from outside, it's clear that the creators of the Ponzi are the central banks, the early adopters are governments, and the vast majority of losers are savers, investors, retirees and, eventually, the young and future generations, who will inherit literally, a world of hurt, where the assets have been stripped away, wealth belongs to an upper, upper echelon of self-annoited masters, and social mobility is largely a myth.

Already, in the United States - the wealthiest nation in the world - there is evidence that the next generation to retire beyond he baby boomers, will be less well off than the previous one. Baby boomers have been retiring steadily, but their wealth has been neutered by the Zero Interest Rate Policy (ZIRP) of the Fed (soon to become NIRP), the COLAs (Cost of Living Adjustment) has been likewise zeroed out due to recalibration of how inflation is measured by the government, and taxes will take care of the rest. And that's just the Social Security end of it.

The Federal government has already put in place methods and scenarios in which they can confiscate the holdings of retirees, in 401k confiscations, wealth extraction taxes and "national emergency" legislation. In fact, senior debt holders (derivatives) would already have priority over depositors in an orderly liquidation of a major bank.

There's only one way to win at this game, and that's to not play. If possible, one would work outside the system, avoiding all taxation and contributions to unemployment insurance, social (in)security, worker's compensation theft, and the latest money extraction scheme, the ACA, otherwise known as Obamacare. Savings would likewise have to be outside the system, acquiring and holding everything from undeveloped land to precious metals, gems, to canned food, tools and machinery of trades.

It's a tough game to play, though, as the global Ponzi scheme continues to unravel in front of our very eyes, one which must be given consideration, even as a partial remedy to outright wealth confiscation through inflation, taxation or fiat.

Today's notch in the Ponzi wood:
S&P 500: 1,917.83, -8.99 (0.47%)
Dow: 16,413.43, -40.40 (0.25%)
NASDAQ: 4,487.54, -46.53 (1.03%)

Crude Oil 32.73 -0.76% Gold 1,231.30 +1.64% EUR/USD 1.1112 -0.12% 10-Yr Bond 1.76 -3.30% Corn 366.25 -0.27% Copper 2.07 -0.22% Silver 15.42 +0.28% Natural Gas 1.85 -4.63% Russell 2000 1,004.71 -0.64% VIX 21.64 -3.00% BATS 1000 20,682.61 -0.29% GBP/USD 1.4338 +0.34% USD/JPY 113.2550 -0.74%

Thursday, December 17, 2015

Yellen's Rate Hike Timing Might Be A Little Off... Like Five, Six Or Seven Years

Now that the Fed has restored its own venerable credibility, the markets seem to think, "well, yeah, the fed is credible, but still wrong." Fed Chairwoman, Janet Yellen, will go down in history as the worst chairperson in the 102-year history of the Federal Reserve, followed closely by her predecessor, Ben Bernanke.

Hiking the federal funds rate even a measly 1/4%, as they did on Wednesday, seems to be anathema to all kinds of markets, except maybe the dollar index, which, unlike just about everything else, rallied today.

Stocks erased all of yesterday's gains and then some, sending the Dow Jones Industrials and S&P 500 into the red for the year. For investors of all stripes (and most importantly, hedge fund managers, who have gotten murdered this year), what's worse is that the year is almost over and there doesn't seem to be a catalyst available to overcome what damage the Fed has done with its unmistakable policy error.

Anybody with brain cells saw this coming well in advance. The global economy is virtually on its knees and the Fed thought it was time for a hike in interest rates. The hike amounted to the political equivalent of a punt. There was nowhere else to go, so they went through the only door open. Bad mistake, especially since that door had been open since 2009.

What were they thinking? Maybe the question should be "what were they not thinking?" because they ignored the obvious signs of slowing, not only in emerging markets, but in commodities, high yield bonds, corporate profits, sales, housing, and a plethora of other indicators that were signaling recession ahead rather than recovery accomplished.

The Federal Reserve is comprised of some of the worst thinkers on the planet, whose sole interest is in keeping their credibility intact, and they are quickly losing control over that. They've managed, in the short span of seven years - thanks to their dual policies of zero interest rate policy (ZIRP) and quantitative easing (QE) to completely dismantle the fabric of capitalism, enriching only the upper, upper crust of wealthy individuals while dashing the hopes and savings of millions of would-be retirees.

With any luck, the Fed's failed policies will lead to outright rejection of the currency, not just around the world, but right here in the United States as well. These are control freaks, and they've lost control, implying simply that worse decisions are already in the making.

In case anybody's paying attention, the Federal Reserve is busy wrecking what's left of the global economy by bringing the US economy into line with the rest of the world, which, if one would like to take a look at Argentina, Brazil, and Mexico, is already suffering deeply.

Global depression and a debt jubilee are on the plate for 2016. You can have it served directly or order it to go. Zombie banks, which should have gone out of business in 2008, don't deserve to be repaid again, as they've already stolen so much taxpayer money that they've bankrupted the US government.

It's a good thing there's only a few weeks left in the year, because the losses for 2015 will stop suddenly on December 31.

Sadly, those losses will resume promptly, when markets reopen on January 4, 2016.

In advance, Happy New Year (if we make it).

Monday, April 6, 2015

Exceedingly Poor Jobs Data Sends Stocks Soaring (the new normal)

Sometimes, it's just all too predictable.

When I saw the March jobs number on Friday, and the futures plunging, because, you know, 135,000 net new jobs in the US was about half of what was expected from the goal-seeking BLS.

Revisions to January and February cast an even more dismal pallor over the market, which, gratefully, was closed on Friday.

By Monday morning, stock futures were still in the doldrums and the Dow opened to an immediate loss of over 100 points, but the decline was soon to be erased by the "bad news is good news" crowd and voices from the Fed singing in united, dovish tones, to the tune of ZIRP 4 EVA.

Yep, like I had thought on Friday, a winning day for stocks. Meanwhile the US economy collapses like a house of cards in a wind storm.

Is there no end to this nightmare of a centrally-planned global economy? (Please, don't answer that.)

Dow 17,880.85, +117.61 (0.66%)
S&P 500 2,080.62, +13.66 (0.66%)
NASDAQ 4,917.32, +30.38 (0.62%)

Tuesday, March 17, 2015

Stocks Confused in Advance of Yellen, Fed Rates; A Glimpse into the Collapse of Upstate New York

Shockingly, the Dow industrials were lower on the day while the momentum-chasing NASDAQ stocks finished with a gain on the day before Janet Yellen and the FOMC issue a rate announcement.

Obviously, rates are not going to move at this meeting, but, what most market observers will be glued to come 2:00 pm EDT on Wednesday is the wording of the FOMC statement, specifically, the use of the "patient" in terms of how the Federal Reserve is viewing their pre-announced rate increase.

The Fed has been careful not to give an exact date or attach any hard figures to any proposed rate increase, only to remain in a prudent position of non-committed bliss.

That they prefer to be shrouded in this kind of monetary mystery has been more than a little disturbing to markets. Many operators would prefer the good old days of endless QE and ZIRP without any mention of a dreadful, future rate increase. However, the Federal Reserve has itself backed into a corner in which it will damage the equity markets with a rate increase and potentially upset the delicate bond-balancing act which has kept rates too low for too long.

It is self-evident that the Fed must do something. The only questions remaining to be answered are what will they do and when will they do it. Traders, speculators, and gamblers of all stripes are hoping to glean some knowledge from the Fed's statement tomorrow.

In the meantime, many are saying this prayer:

The FED is my shepherd, I shall not want.
They maketh me to lie down in fields of digital plenty; they leadeth me to financial liquidity;
They safeguard my portfolio; they leadeth me in paths of security for their financial sake.
Yea though I walk through the valley of the shadow of default, I shall fear no Credit Default Swaps,
For they art with me; their words and actions comfort me.
They have prepared a table of ZIRP and QE before me, in the presence of China and Russia; they have annointed me with POMO; my balances runneth over.
Surely, the American reserve currency shall follow me all the days of my life, and I will dwell in the House of the Almighty Dollar forever and ever.

...and hoping for the best.

A Glimpse Into the Collapsing Nature of Upstate New York

Up here in Rochester, NY, there's a 1/2 hour show every Sunday by the area's largest real estate firm, called the "Nothnagle Gallery of Homes."

It's a good idea to catch it every week, because it provides a fascinating insight into a market that predominantly is a shuffling from one generation to another, without growth, and nearing death thoes due to a variety of economic ad social forces.

At the start of the show are the nice, expensive, executive homes, all over $400,000, some of them pretty decent with acreage, about half of them vacant. As the show continues, they display the moderately-priced category, 135k-250k. Not so good, smaller lots, older houses, more than half vacant, but, this week, a twist. They showed two houses under construction. Really, with the Tyvek™ showing and all. Priced over 200K.

Dead stop. Builders around here are nailed to a cross with with steel. Population is declining, there's a glut of bank REO that's been sitting and deteriorating for years and about 20-30% of everybody in the metro area is either in foreclosure, pre-foreclosure, about to be, underwater, or owes back taxes of two years or more. A massive implosion is coming to upstate NY (Syracuse and Rochester; Buffalo already in the proverbial pooper) which will take down not only the real estate market but the city governments and some of the older suburbs (hopefully state .gov too, but that's another story). Population decline and aging, lack of jobs, crumbling infrastructure, huge municipal pension costs and ineffective (and that's being nice) local governments are feeding the descent into chaos. Rochester, Syracuse and Buffalo's inner cities are crime-ridden, FSA (welfare) strongholds. The city school districts are a complete and utter disaster. High wages for teachers, low graduation rates, scandals, union vs. administration fights are common, as are fights, stabbings, gun confiscations, etc. TPTB are trying to ship some of the little minority cretins out to the suburbs in what they call something like "city-county partnership opportunity" or employing some other liberal wonderland imagery, but the voters in more than a few suburbs have shot down the school board recommendations, saying, in effect, "keep my schools white."

Trouble is brewing here, where the property taxes are the highest in the nation. Shocked was a fellow from South Carolina last week when told that a 30-year mortgage on a $100,000 house here would cost less monthly than the taxes.

That's the truth from an area of the country that's been stripped bare of manufacturing over the years and suffers from too many social programs, sponsored by too few - and becoming fewer every week - taxpayers.

Dow 17,849.08, -128.34 (-0.71%)
S&P 500 2,074.28, -6.91 (-0.33%)
NASDAQ 4,937.44, +7.93 (0.16%)

Monday, March 16, 2015

Stcks soar on No News; Michael Hudson's Scathing Remarks on Wealth Inequality

On a day in which there was an absolute vacuum of substantial news concerning the economy or stocks in general, markets did what they have become used to doing on such days in the era of ZIRP and QE. Stocks went straight up at the open and added to gains throughout the day.

It is specifically on days like today that the banks and brokerages make their best money, capturing the gains right at the opening bell, without interference from retail riff-raff, and holding them up with small trades during the session. Anybody even thinking about shorting or playing puts against the small tide of buyers gets what's come to be known as having one's face ripped off.

As gruesome as it sounds, the reality of losing money because one is not a member of the 1% tribe and does not believe stocks should be trading at astronomical levels, is painful to the pocket and a cause for many small-time investors and traders to throw in the towel completely.

Such is the nature of markets completely under the control of the biggest and most well-heeled players, complete with front-running HTF computer algos that are able to nab 20% or more of any gains simply by being there a millisecond ahead of any order. while that fact may not be disturbing to some, it should be a concern to anybody who feels that wealth inequality is consistently changing the nature of society, markets and money, and not in any good way.

To that effect, professor Michael Hudson recently provided a glimpse into the new world of finance - unregulated, unbalanced and utterly destructive - in an article published at Counterpunch called Quantitative Easing for Whom?

Hudson, a distinguished research professor of economics at the University of Missouri-Kansas City, was interviewed by SHARMINI PERIES, and his commentary spells out in detail how zero interest rates and quantitative easing has helped the elite to the detriment of the rest of society.

It's quite a read and elegant in its straightforward honesty and truthful simplicity. Perhaps the most poignant phrase is the following:
Banks lend money mainly to transfer ownership of real estate. They also lend money to corporate raiders. They lend money to buy assets. But they don’t lend money for companies to invest in equipment and hire more workers. Just the opposite. When they lend money to corporate raiders to take over companies, the new buyers outsource labor, downsize the work force, and try to squeeze out more work. They also try to grab the pensions.

or this:
...when hedge funds and the big banks – Goldman Sachs, Citibank – see a pension fund manager coming through the door, they think, “How can I take what’s in his pocket and put it in mine?” So they rip them off. That is why there are so many big lawsuits against Wall Street for mismanaging pension fund money.

It's a very good read for such a short article, and points up just how enslaved the middle class (what's left of it) has become and how government and the Fed have completely distorted the economy to the exclusive benefit of a small handful of very, very wealthy families.

The condition of the world is sad and true.

Dow 17,977.42, +228.11 (1.29%)
S&P 500, 2,081.19, +27.79 (1.35%)
NASDAQ 4,929.51, +57.75 (1.19%)

Friday, February 14, 2014

So, This is Good-bye; Good Luck with Janet Yellen

After 1828 posts, spanning nine years (started in 2006), this may be the last post for Money Daily - at least in its current form. Perhaps at some point I will change the name to Finance Weekly or Rick's Occasional Posts on the Economy or something like that, but the effort involved in producing a relevant post every day (as opposed to the ridiculous ranting often seen here) seems to be not worth the effort anymore.

Since the economic collapse of 2008-09, the global financial system has been wildly distorted by the actions of central banks, primarily by the US Federal Reserve, via their Zero Interest Rate Policy (ZIRP) and Quantitative Easing (QE) mechanisms.

While Wall Street regulars laud praise upon former Chairman Ben Bernanke, and surely they will do the same with Janet Yellen, the Fed policies of the past six years have benefitted only banks and speculators, often those two disparate entities being one and the same. Surely, anybody who receives money at close to zero percent interest can make a buck, and it's even easier when you're in collusion with other bankers or speculators, as is the case with our current system.

Nothing other than the Fed matters when it comes to stocks, bonds, or even money in general. The Fed creates it out of thin air in copious amounts, and, even though they've recently cut back on their rampant printing - from $85 billion to a mere $65 billion per month - it's still a hugely distorting factor in all markets.

There is no stopping it, and any kind of qualitative analysis of financial markets must factor this element in as a major bulwark.

Thus, there is little to discuss on a day-to-day ongoing basis, because, in the end, nothing else matters or makes perfect sense, and, in economics, as in any "science," perfection is demanded, though all too often it is lacking, covered up by innuendo and a false sense of security supplied by the Fed and their lackeys in the financial media and Wall Street hack talkers, disguised as "analysts" for public consumption.

Since a more balanced, sustainable approach is preferred by your humble author, it's time to move on to other creative pursuits. I may, from time to time, pen a financial piece and post it here, but the numbing daily schedule will be no more.

It's been fun, for the most part, and I wish anyone and everyone who has gained from this the best in their investment and financial decisions. For my money, I prefer to keep stacking silver (which made an enormous move today), learn more about and engage in sustainable farming and leave the financial gimmickry to those better suited (pun intended) to that kind of soulless lying.

In closing, since we are engaged in a world that often makes little sense, a few lines from George Orwell's 1984:


Via con Dios, mis amigos!


DOW 16,154.39, +126.80 (+0.79%)
NASDAQ 4,244.03, +3.35 (+0.08%)
S&P 1,838.63, +8.80 (+0.48%)
10-Yr Note 100.06, +0.02 (+0.02%) Yield: 2.74%
NASDAQ Volume 1.73 Bil
NYSE Volume 3.10 Bil
Combined NYSE & NASDAQ Advance - Decline: 3417-2261
Combined NYSE & NASDAQ New highs - New lows: 278-24
WTI crude oil: 100.30, -0.05
Gold: 1,318.60, +18.50
Silver: 21.42, +1.026
Corn: 445.25, +4.75

Tuesday, February 4, 2014

Markets Pause After Monday's Pummeling; Stocks Bounce Is Feeble

When markets get roiled like they did on Monday, especially following four weeks in January of steady declines, the usual reaction is for investors to nibble at the edges, like rats who have been spooked by sprung traps on their coveted cheese.

The only data drop worth noting on the day was Factory Orders, which fell 1.5% in December, the most since July. Inventories of manufactured durable goods reached an all-time high for the series in December, to $387.9 billion, marking the fastest year-over-year inventory build in 6 months.

That same inventory build has been responsible in part for much of the two past GDP figures, from the third and fourth quarters of 2013, and, unless consumers come out of hiding soon, those inventories are going to sit and eventually be marked down, further stifling the Fed's efforts to re-inflate the economy, which continues to stall out at a moribund inflation rate well below two percent.

While lower costs for manufactured and consumer goods comes as pleasant news for individuals and small business, it works against the Fed's perverse mandate of "stable prices," which, in actuality, is defined in Fedspeak as "stably-increasing prices at a rate of at least two percent and preferably higher, stealing purchasing power from people, everywhere, all the time, while debasing the currency."

Since 2008, the Fed's playbook has been redesigned to include trick plays like ZIRP, QE, reverse-repos, re-hypothecation and other arcane financing stylings, most of which have had limited success. Now, with their implicit desire to end QE this year, the fruits of their laborious injections of trillions of dollars into the global economy are proving impotent as first, emerging markets are crushed, soon to be followed by developed markets, already occurring in Japan, where the Nikkei fell by more than 600 points overnight, and is clearly into "correction" territory.

While today's pause offered some relief for the bulls, the bears seem to be still in charge. Advances in early trading on the major indices were pared back throughout the session, the closing prices barely denting the declines of just Monday, to say nothing of the drops from January.

Everybody is going to get something of a clue Wednesday morning, when ADP releases its January private jobs report, a precursor to Friday's non-farm payroll data for January. Expectations are high that the US created 185,000 jobs in January, which would be a masterstroke of statistical wizardry, after the December reading of 74,000 jobs, sure to be revised higher.

Unless this January was both a statistical marvel and a reality-defying month in which auto sales and retail sales were well below estimates and blamed on the weather, the take-away is that while people were discouraged to brave the elements to shop, the very same weather encouraged job creation and the seeking of employment. The math does not match the reality. The truth is probable that while the weather was poor in some areas of the country, it was fine elsewhere, so the localized Northeast mindset likely has everything calculated improperly.

Whenever weather is blamed for anything - unless it's a localized event like a hurricane, flood or fires - one can be nearly certain the assumption is at least partially false, as will be proven in this case. Therefore, if Friday's jobs report blows the doors off estimates, one can assume the economy, based on auto and retail sales, is much weaker than propagandized, and that the BLS modeling, their birth/death assumptions and general massaging of data is flawed and should be disregarded.

Of course, a good-feeling jobs report will boost stocks, just as a continuation of the trend from December will send them even lower. Along with the weather as a culprit, other terms being bandied about include "correction" (a 10% decline off recent highs) and "bottom" (where stocks stop declining). Most of the analysts are saying the recent action is expected, following the massive gains of 2013, but that it is also temporary and investors should be looking at this as a buying opportunity.

Others have differing opinions, believing the US and global economy are contracting instead of expanding, that inflation is nowhere to be found and all of those corporate stock buybacks from the past three to four years are going to be painful to unwind. With corporations buying back their own stock at high prices, reducing the flow while increasing the price, what happens when they want to sell back into the market, at lower prices? The internal damage done to balance sheets will be dramatic and will only accelerate any downward pressure.

That's what investors have to look forward to in coming months, unless some economic miracle occurs. And, as we all are well aware, miracles don't usually just come along as needed.

Particularly telling, considering today's advance, was the new high-new low metric, which heavily favored new lows, indicating that today's advance was not broad-based nor technically supported. Additionally, late in the day, S&P downgraded Puerto Rico's debt to junk status, a move that was widely expected, but still a huge negative.

A disturbing trend is the slight rise in commodity prices. Corn, soybeans, wheat, crude oil and natural gas have been bid up recently, as money, needing a safe place to rest, may find a home in such staples, artificially raising prices, though the gains may (and probably should) prove to be arbitrary and temporary, a certain sign of naked speculation.

DOW 15,445.24, +72.44 (+0.47%)
NASDAQ 4,031.52, +34.56 (+0.86%)
S&P 1,755.20, +13.31 (+0.76%)
10-Yr Note 101.05, -0.10 (-0.10%) Yield: 2.63%
NASDAQ Volume 2.00 Bil
NYSE Volume 4.05 Bil
Combined NYSE & NASDAQ Advance - Decline: 3738-1977
Combined NYSE & NASDAQ New highs - New lows: 49-111
WTI crude oil: 97.19, +0.76
Gold: 1,251.20, -8.70
Silver: 19.42, +0.013
Corn: 441.75, +6.00

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

Wednesday, October 30, 2013

Fed Keeps QE at Full Throttle, Stocks, Markets Still Unhappy; ADP Misses

In September, when everybody thought the Fed was going to announce a scaling-back of their $85 billion-a-month bond buying bonanza, stocks rallied when they did nothing.

Today, when the Fed did exactly what the market expected, keeping the bond buying going full force with no mention of "tapering," stocks sold off, extending a decline that started in slow motion shortly after the opening bell.

It's probably asking too much to try and comprehend exactly what the algos or stock pickers were reading in the FOMC tea leaves, because a commitment by the Fed to continue easy money policies is exactly the best reason for equities to rise. Chalk it up to profit-taking by the slickest of the slick, on an old, "buy the rumor, sell the news" scenario.

As we've stated recently, stocks should continue to rise through the end of the year and beyond, being that there are now some unwritten rules in the market that say stocks can't decline during the Christmas season, there must be a "Santa Claus Rally" and a "New Year Rally."

So, despite this little blip of a disturbance in the force, investors should be good to go unless something really awful happens, like the economy suddenly shows unequivocal signs of strengthening.

OK, OK, stop the laughter. we all know that the economy is stuck in neutral since the Fed programs of QE and ZIRP are only beneficial to the top 1% of earners, those people you and I will never get to know personally, and that the government is going to do everything in its powers to see to it that the economy stumbles along at about 1.5-2.0% GDP growth, just enough to keep the recession dogs off the porch.

Investors and markets will digest today's losses and decide, around midnight tonight, that tomorrow morning would be a great time to add to their positions or open new ones in some of the more speculative, momentum stocks. That's really the mantra and it doesn't get any simpler.

In case nobody noticed, the October ADP jobs report showed that employment continued its gradual slowdown, adding just 130,000 net new private sector jobs - and revised September's 166,000 gain down to 145,000 - all blamed conveniently on the 16-day government shutdown earlier this month. Never mind that these are PRIVATE sector jobs and government is in the PUBLIC sector. Whatever scapegoat is available, that's the one that gets the blame.

As this missive is being prepared for publication, the president is pleading with less-than-enthusiastic supporters that the Affordable Care Act (ACA, or, ObamaCare) is going to work and actually good for America, despite all indications to the contrary.

You have officially entered the bizarro-zone and there is no escape if you keep watching the teevee.

Buy stocks. Can't miss.

Dow 15,618.76, -61.59 (0.39%)
Nasdaq 3,930.62, -21.72 (0.55%)
S&P 500 1,763.31, -8.64 (0.49%)
10-Yr Bond 2.53%, +0.02
NYSE Volume 3,486,428,250
Nasdaq Volume 1,795,014,125
Combined NYSE & NASDAQ Advance - Decline: 1596-4053
Combined NYSE & NASDAQ New highs - New lows: 487-42
WTI crude oil: 96.77, -1.43
Gold: 1,349.30, +3.80
Silver: 22.98, +0.491
Corn: 430.25, -1.75 (new 52-week low)

Friday, July 19, 2013

Stocks Spilt to End Uneventful Week

Microsoft and Google both missed the mark on earnings for the second quarter, which is why the NASDAQ was down significantly on the day. Otherwise, the S&P hit a new all-time closing high and the Dow just missed.

While normally, such news would send markets screaming in reverse, the new normal of continued money printing and zero interest rate policy (ZIRP) by the Federal Reserve keeps stocks high, along with WTI crude oil, which has almost reached parity with Brent Crude.

Sell NOW.

Oh, yes, the city of Detroit has filed for bankruptcy, the largest municipal bankruptcy in the history of the United States. Now that just reeks of "recovery," doesn't it?

Obama continues to backtrack on ObamaCare, because the regulators (mostly the IRS) cannot implement all of the regulations without bankrupting (oops, there's that word again) not only the entire medical industry, but the entire country. Already, employers nationwide are downsizing weekly hours worked for most employees to under 30, in order to avoid compliance with the Affordable Health Care Act (ObamaCare), so, in our new labor normal, 30 is the new 40, as in full-time employment.

Welcome to the American Gulag, comrades.

Dow 15,543.74, -4.80 (0.03%)
NASDAQ 3,587.61, -23.66 (0.66%)
S&P 500 1,692.09, +2.72 (0.16%)
NYSE Composite 9,618.46, +31.26 (0.33%)
NASDAQ Volume 1,775,103,250
NYSE Volume 3,510,552,500
Combined NYSE & NASDAQ Advance - Decline: 3228-3307 (odd, no?)
Combined NYSE & NASDAQ New highs - New lows: 466-27
WTI crude oil: 108.05, +0.01
Gold: 1,292.90, +8.70
Silver: 19.46, +0.071

Tuesday, July 9, 2013

Thanks to Bernanke, Stocks Can Only Go Up

It was another completely uneventful day on Wall Street - no earnings news outside of Alcoa (trading at a 34 p/e, wow!), no economic data - so the computer algos were free to ramp stocks higher, and they did so.

A small dip around 10:30 am EDT gave the bears some hope, but that faded fast, and stocks resumed their levitation, hovering listlessly around the highs of the session right into the close.

At these levels of (dis)interest and lack of meaningful news flow, the Dow could conceivably gain 1200-1500 points per month for the remainder of the year. Since nobody seems to give a whit about fundamental valuations, unchecked, Dow 20,000 becomes a distinct possibility by the end of the year.

Seriously, that's how warped these markets are.

God bless you, Ben Bernanke. You've brought untold wealth and prosperity to almost seven percent of Americans, those being the already rich and already prosperous, while denying safe investments bearing standard interest to hard-working, middle and lower-class savers. You are a scion. The bankers you've bailed out and bankrolled with ZIRP and QE should kiss your naked feet and bedeck you in roses and lavender.

Dow 15,300.34, +75.65 (0.50%)
NASDAQ 3,504.26, +19.43 (0.56%)
S&P 500 1,652.32, +11.86 (0.72%)
NYSE Composite 9,341.40, +75.11 (0.81%)
NASDAQ Volume 1,588,836,625
NYSE Volume 3,460,031,000
Combined NYSE & NASDAQ Advance - Decline: 4438-1990
Combined NYSE & NASDAQ New highs - New lows: 585-49
WTI crude oil: 103.53, +0.39
Gold: 1,245.90, +11.00
Silver: 19.14, 0.10

Wednesday, March 13, 2013

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

Friday, March 8, 2013

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