JP Morgan and the Federal Reserve "Not QE" Money Spigot

Monday, Monday, can't trust that day...

So said the Mamas and Papas back in the 60s. We can still hear the echoes of their lament on the highways to work, in the coffee drive-throughs, and back seats of car pools (some people still do this).

Papers scattered over desks, it's time to get down to business, earn the paycheck, do whatever it is you do to keep yourself afloat.

Monday mornings are a grind, unless, that is, you happen to be a big bank, a global systemically important bank, otherwise known around financial circles as a G-SIB. Then, Monday is just another day to goose your bottom line. And this Monday was a good one.

Thanks to algo-spiking headlines suggesting - for about the 20th time in the past six months - that a China-US trade deal was on the way to becoming reality, stocks roared out of the gate at the opening bell, sending the Dow, S&P, and NASDAQ to all-time closing highs. All-time highs are all well and good, mind you, except when they're built on the back of a drama that never ends, like the ongoing US-China trade deal.

Since the US and China have been engaged in this delicate dance markets have soared every time a possible breakthrough is mentioned and fallen whenever snags are discovered. It's what happens when computers run markets instead of people, even though the computer algorithms were programmed, supposedly, by humans (ahem).

More interesting, however, is the lack of news surrounding the ongoing implosion in repo markets that began in late September and continued through October, now extending into November. It's a real crisis, but now it appears that all of this was triggered by the good people at JP Morgan, yes, that G-SIB bank at the top of the list in the up-article link.

According to the usual somewhat reliable folks at Zero Hedge, JPM was going about its work to keep the economy humming along by selling loans and buying long-dated bonds, according to rules laid out by none other than the Federal Reserve.

How tidy, for Morgan and CEO, Jamie Dimon, to have the incredible good fortune to be able to make more money selling loans than making them (not making this up; it's what happens when interest rates are too low). But, because of JPM's massive portfolio, it cause a not-insignificant disruption in the overnight lending market (repo), that prompted the Fed - hearing the wailing of cash-poor clients - to offer up some emergency TOMO (Temporary Open Market Operations) overnight auctions and eventually cede to POMO (Permanent) and "not QE," to quiet the troubled sector at the heart of the global economy.

So far, it seems to be working, though the general public doesn't even notice, probably because of the fabulous Dodd-Frank legislation that allows the Fed to do essentially bailouts on an ongoing basis without having to go to congress, as was the case in 2008 with TARP.

Jimmy Dore, with help from Dylan Ratigan explain in the 12-minute video below (worth the watch):



John Pepin chines in with pithy commentary from his incapp.org blog:

If the demand for debt exceeds the banks ability to loan then one of several things must happen. Either the interest rate rises, (and we all know that is unacceptable), or the banks have to take hidden loans from the federal Reserve to cover that demand for debt.

Monday, Monday, can't trust that day. Worry not, the week is just getting started.

At the Close, Monday, November 4, 2019:
Dow Jones Industrial Average: 27,462.11, +114.75 (+0.42%)
NASDAQ: 8,433.20, +46.80 (+0.56%)
S&P 500: 3,078.27, +11.36 (+0.37%)
NYSE Composite: 13,355.44, +55.14 (+0.41%)

Burnout

Over the course of the Martin Luther King Jr. holiday weekend, I burned out.

I no longer had any interest in penning my "Weekend Wrap," as it has come to be known. The stock market was no longer of any interest to me. I didn't write my usual column, and, I didn't write my daily market commentary on Tuesday either.

It's not as if this was a sudden, knee-jerk reaction to anything. This has been brewing inside me for a long time. Obviously, I don't even care anymore to write in the third person, as has been the usual mode of this blog. It's just not important, just as money and markets aren't important, to me, at least.

Maybe money is important to you. Maybe the ups and downs of Wall Street matter to you, to your feelings of well being, to your existence. Money and markets are not existential prerogatives to me. Never have been. And now, they really don't matter at all.

I took an interest in stocks, bonds, money, and business when I was very young. At the age of six, I was intrigued by the small type in the newspaper displaying the gains and losses of big companies. To me, at such a tender age, the world of business and finance was a fantastic place populated by titans of industry, upstanding men of character and wisdom who employed their thinking and inventiveness to build fabulous engines of wealth. Such a fascination with money and business served me well along my path through adolescence and into adulthood. I conceived any number of business ideas, launched most, failed at many, until finally, by age 30, I found success in the newspaper business.

Perhaps the rude awakening to how business actually operated was where my burnout began and it just took a long time for me to realize it. I don't like the way business is conducted anymore. When I was in business - in the 80s, before the internet - an office, a phone, and a car were just about all one needed to get oneself on the path to riches. Almost all of the deals and ad sales I did were in person. A few were done by phone, but a follow-up personal visit was always required. I did business with people, in person. Try that today and you'll be laughed out of most places. It's an email, a text, a slick website and an electronic funds transfer. Done.

Wall Street, for all it's glamor and glory, is different now as well. A quarter point or half point gain - which used to be a big deal - is now 0.25 or 0.50, and it's nothing. Hedge funds, fake news, the Federal Reserve, and a host of unseen forces - algorithms, HFTs, ETFs, the PPT - have destroyed whatever was left of free markets and the "old Wall Street after the ravages of 9/11/2001. There's no Louis Rukeyser's "Wall Street Week" on Friday nights. Today it's CNBC, wall-to-wall, all the time, blaring the trumpets for the honorable necessity of owning stocks all day long, all night long.

It's boring, and most of the time, it's meaningless, or downright wrong. Stocks all move in tandem today. There's no science; only emotion, and mine is spent.

My personal short literary demise - which this is - may have more to do with anxiety over the fate of our nation than my dislike for the current rigors of finance. Everything is in chaos and there doesn't seem to be any end to it. Nor is there any sense to it, anymore. Tucker Carlson's tirade from a few weeks back encapsulates much of what I'm feeling, but, for me, there's more.

There has to be more than stocks. When I figure out what that is, I'll be back.

Stocks Rise Despite Spate Of Bad News, Brexit No-Go Vote

Some are wondering whether the market is being run by computers or human operatives, or, worse yet, humans running computers front-running the market.

What may be happening is that humans are programming computer algorithms to react to fake news and the PPT is backstopping each and every tick lower by buying futures, resulting in the altos readjusting to buy more.

There was a good deal of bad news flow in the morning... and then just after 7:00 pm London time (2:00 pm ET), there was the Brexit vote.

Here's what passed across the wires prior to the opening bell and shortly thereafter:

• Both Wells Fargo (WFC) and JP Morgan Chase (JPM) missed on both earnings per share and revenue.
• Netflix (NFLX) announced the largest price increase in its 12-year history.
• China's economy grew by 6.4%, the slowest rate in over a decade.
• PPI cane in at -0.2%, a deflationary reading.
• Delta Airlines (DAL) beat, but warned that the partial government shutdown would negatively impact earnings in the current quarter.
• The Empire State Manufacturing Survey fell to a reading of 3.9 in January from an upwardly revised reading of 11.5 in December.
• Goodyear Tire (GT) lowered its fourth quarter outlook and full year (2018) guidance.

With all this in the cooker, stocks opened higher and took off from there. The Dow exploded to a gain of 190 points just before noon. The NASDAQ was up nearly 120 points.

After noon, the markets went into a wait-and-see mood as the Brexit vote approached. In what has to be the most convoluted, time-wasting exercise in government over-reach (possibly challenged by the partial shutdown in the US), Britain has been wrangling over just how to depart from the European Union after a referendum passed nearly two-and-a-half years ago (June 23, 2016).

With different constituents vying for complete Brexit, partial Brexit with a backstop, no Brexit, and other variants, the argument over how to implement what was voted upon by the constituency has been nothing short of a disaster and an indictment against the effectiveness of government everywhere.

Somebody should point out - we will - that with all the Brexit juggling, partial US shutdown jousting, and continuing French protesting, governments in developed nations are proving to be at least cracked, if not nearly completely broken. Besides the fact that none of them can manage to spend less than what they receive through their extreme, excessive, heavy-handed taxation - which is over the top - it seems all they're capable of doing at the highest levels is fight for positioning and power, all to the detriment of the people they're supposed to be representing. Collectively, they pass no new legislation that is of benefit to the people. Other than President Trump's efforts, government is a massive, obvious failure of human capacity.

If ever there was a time for a global revolution (not a new concept), it would be now, though nobody has any contingency plans for how to deal with the dystopian aftermath that would surely follow.

Experience teaches us that disposing of scoundrels, deposing tyrants, or overthrowing governments only makes matters seem better for a short period of time. At least in the original American revolution, the patriots were separated from their tyrannical rulers by a vast ocean which technology hadn't quite conquered.

Today's intertwined system is different, close at hand, and the scoundrels much better disguised. There isn't going to be any overthrow of anything except morals and values, people's faith and judgment, which seem to be going in the direction of all flesh. Anger, the most palpable manifestation of displeasure, is boiling over in all facets of urban life. People are becoming more and more ill-mannered, short-tempered, self-absorbed, and intolerant toward the views and objectives of others. All of this adds up to uncivil activities, flouting of the law, violence and strife. Essentially, when ordinary people lose faith in a government that they had become accustomed to relying upon, all that's left is chaos, and that seems to be the direction in which we're inexorably, sadly, headed.

... and then came the Brexit vote in Britain's Parliament. Prime Minister Teresa May's government proposal was rounded defeated by a 432-202 vote in the House of Commons. On the news, the Dow tanked... briefly, the other indices slumped shortly, and then shot back to from whence they came.

It's all fake, people. There are no more free markets. Face it. All the geese been thoroughly cooked.

Dow Jones Industrial Average January Scorecard:

Date	Close	Gain/Loss	Cum. G/L
1/2/19	23,346.24	+18.78	+18.78
1/3/19	22,686.22	-660.02	-641.24
1/4/19	23,433.16	+746.94	+105.70
1/7/19	23,531.35	+98.19	+203.89
1/8/19	23,787.45	+256.10	+459.99
1/9/19	23,879.12	+91.67	+551.66
1/10/19	24,001.92	+122.80	+674.46
1/11/19	23,995.95	-5.97	+669.49
1/14/19	23,909.84	-86.11	+583.38
1/15/19	24,065.59	+155.75	+739.13

At the Close, Tuesday, January 15, 2019:
Dow Jones Industrial Average: 24,065.59, +155.75 (+0.65%)
NASDAQ: 7,023.83, +117.92 (+1.71%)
S&P 500: 2,610.30, +27.69 (+1.07%)
NYSE Composite: 11,868.68, +69.57 (+0.59%)

Algos Plus Momentum, Herd Behavior Equals Wipeout In Stocks

Monday came as quite a surprise for many investors, as stocks sent a strong message of dislike about something, though nobody is certain just what sparked such a massive selling spree.

For the NASDAQ, it was complete wipeout of last week's gains, minus another 160 points. The other indices were down nearly as much as they were up all of last week.

As noted in Money Daily's Weekend Wrap, technical analysis, showing divergent positions amongst the major indices, was suggesting an imminent breakout in one direction or another. It seems that the market decided to make down the dominant direction... for now.

One might expect these divergences to be resolved in short order, though markets today are guided so much by programmatic trading and headline-chasing algorithms, it's difficult to pinpoint where the breaks are actually occurring and in just what direction they are going to move.

Volatility, as persisted throughout October, appears not to have abated, more than likely the result of many diverse factors, rather than just one. The increased employment of computer algorithms, combined with the market's distinctive her behavior, manifested as "momentum," produced another of 2018's banner sessions to the downside.

The Dow's 602-point drop was the 15th biggest in market history, but also the seventh largest of 2018, a distinction that will not be lost on market observers. 2018 figures to already be the most volatile year in market history.

All that can be said going into the holiday season is to be guardedly guarded. This time does appear to be different. America is beset by warring political parties in Washington and Wall Street is unhappy, at a time in which stocks are already overvalued and due for a mean reversion.

While this one-day event was a scary sight, it almost certainly will not be the last.

Dow Jones Industrial Average November Scorecard:

Date	Close	Gain/Loss	Cum. G/L
11/1/18	25,380.74	+264.98	+264.98
11/2/18	25,270.83	-109.91	+155.07
11/5/18	25,461.70	+190.87	+345.94
11/6/18	25,635.01	+173.31	+519.25
11/7/18	26,180.30	+545.29	+1064.54
11/8/18	26,191.22	+10.92	+1075.46
11/9/18	25,989.30	-201.92	+873.54
11/12/18	25,387.18	-602.12	+271.42

At the Close, Monday, November 12, 2018:
Dow Jones Industrial Average: 25,387.18, -602.12 (-2.32%)
NASDAQ: 7,200.87, -206.03 (-2.78%)
S&P 500: 2,726.22, -54.79 (-1.97%)
NYSE Composite: 12,343.51, -194.02 (-1.55%)

Weekend Wrap: Dow Goes Positive For Week On Friday Ramp

Logicians need not apply.

Following the disappointment of the BLS August Non-Farm Payroll data, the general assumption was that stocks would sour, as also presaged by the index futures on the Dow Mini, et. al..

Such was not the case. Stocks rose throughout the day, based upon algorithms interpreting all news as positive, giving the Dow Industrials its best gain since July 25th.

The NASDAQ ended the week with both the best point and percentage gains, +74.60, and +0.96%, respectively.

One very prescient observation is that while volume has all but dried up the past few weeks, it's much easier for stocks to find bids than otherwise.

A resumption of the more serious selling seen in February and March is unlikely to occur until after Labor Day.

These are certainly dog days, a period in which short-side players should exercise extreme caution.

Dow Jones Industrial Average August Scorecard:

Date	Close	Gain/Loss	Cum. G/L
8/1/18	25,333.82	-81.37	-81.37
8/2/18	25,326.16	-7.66	-89.03
8/3/18	25,462.58	+136.42	+55.05

At the Close, Friday, August 3, 2018:
Dow Jones Industrial Average, 25,462.58, +136.42 (+0.54%)
NASDAQ: 7,812.01, +9.33 (+0.12%)
S&P 500: 2,840.35, +13.13 (+0.46%)
NYSE Composite: 12,953.34, +55.27 (+0.43%)

For the Week:
Dow: +11.52 (+0.05%)
NASDAQ: +74.60 (+0.96%)
S&P 500: +21.53 (+0.76%)
NYSE Composite +32.00 (+0.25%)

Dow Continues to Careen Higher as Other Indices Lag

Maybe the markets are broken by HFTs, computer algorithms, program trading, bid stuffing, and an assortment of hype, funny fiat money, low interest rates and the hunt for yield.

Maybe not, but, the week's look at the major indices indicates that only the Dow Jones Industrials posted solid gains (rising for the 9th straight session to another all-time high) while the other three major averages were essentially running in place, the NASDAQ actually posting a loss.

It's not unusual for one index to lead the market, but, since the 2008, stocks have made outsize gains and the darlings on the Dow have exceeded all expectations. Despite carrying some of the most obscenely-high P/E ratios in market history, traders continue to bang away at the McDonalds, Apples and Intels of the world, as though there is nothing other to buy.

These are the kinds of trading decisions which lead to apathy and eventual market convulsions. For now, however, there's nothing but the Dow Jones Industrial Average to prompt the cheerleading from everyone from the President of the United States on down.

Having a runaway stock market may be a sign of a strong economy, but, in this case, since it is so isolated, it should be viewed as a sign of imbalance.

At the Close, 8/4/17:
Dow: 22,092.81, +66.71 (0.30%)
NASDAQ 6,351.56, +11.22 (0.18%)
S&P 500 2,476.83, +4.67 (0.19%)
NYSE Composite: 11,984.89, +28.37 (0.24%)

For the Week:
Dow: +262.50 (1.20%)
NASDAQ: -23.11 (-0.36%)
S&P 500: +4.73 (0.19%)
NYSE Composite: +30.20 (0.25%)

The Long and Short of the Approaching Recession (Depression)

For those out there reading this short missive, a warning that time and space are constraints upon the lives we live, the bread we bake, the food we eat, the products we produce, the jobs that sustain us and the government that pretends to cater to us.

Time and space - according to most adherents of pure physics - are not constraints upon thinking, thought, creativity and imagination.

Indulgence should be given more, in these days of financial peril and social inequality, to solutions derived in the mind, translated to the body by practicality and functionality.

In both the long and short discussions of current finance, there can be little doubt that the system of capitalism by which the developed world has grown and prospered is under severe strain and the solutions offered by the central bankers and government entities who pretend to know how it all works are nothing more than stop-gap measures intended solely to prevent, or at least, delay, a complete collapse of a fragile, human-made system.

Economics, being mostly theoretical, and therefore, unbound, unfortunately needs to operate in a closed, bound, system, restrained by those old devils of time and space. As has been frequently mentioned in higher-level economic discussions, "infinite growth is unsustainable in a finite world."

With that in mind, this weekend edition of Money Daily offers but a brief insight into the unraveling of the world order of finance already well underway.

On the whole, Friday was a washout to a week in which the major indices - with the notable exception of the NASDAQ - vacillated around the unchanged line. In the current nomenclature, stock indices - wherein the vast bulk of trading is performed by computer algorithms and central banks - are a control mechanism. So long as they are stable or going higher, the general population feels comforted and won't look around for cracks in the not-so-golden facade of global finance. As such, this week was very much like the previous six, or eight, or eighty. It was, in general terms, a big nothing-burger.

But, what does the outsize gain on the NASDAQ tell us, when the other indices were going exactly nowhere fast?

It says that the NASDAQ is where the speculation exists, where all the funny money or phony money is going to seek yield, mostly in tech-land, but also in energy stocks and in short-squeezes on the most-shorted list. It's how the game is being played at the top. If shorts are numerous on a particular equity, that where the money flow will be most pronounced, on the long side. Boom! Instant profits and a great weekend in the Hamptons awaits.

For the rest of us, we are placated with the rest of the market going sideways. At least - we comfort ourselves in saying - it didn't go down, much.

An expanded view looks at a couple of issues. Oil took another beating this week as the glut continues, though this fact is not to be promulgated to the general population. We are led to believe that oil is scarce and the price of gas with which to fill our cars should remain at elevated levels.

Nothing could be further from the truth. A variety of factors, including, but not limited to, better fuel consumption, an aging population, alternative energy sources, stagnant or slowing employment, and a more stay-at-home, economically-depressed middle America, is leading to the reality of oversupply meeting slack or declining demand. Oil will continue to fall until it becomes apparent that the big energy companies are squeezing every last nickel and dime out of consumers in the form of stubbornly high gas prices. At some point, the price of gasoline will merit a meeting with reality and then, gas will average, nationally, under $2.00 a gallon, notwithstanding the absurdly-high state and federal taxes on each and every gallon pumped. It's coming. It cannot be denied.

Overseas, the demise of two Italian banks on Friday was, typically, underreported. Banca Popolare di Vicenza and Veneto Banca, with combined assets of roughly 60 billion euros, were green-lighted by the ECB on Friday for liquidation. In other words, these banks are belly-up, bankrupt, kaput!

The Wall Street Journal, Reuters, Bloomberg, the AP, all reported the story. The mainstream media, such as ABC, NBC, CBS, CNN, et. al., i.e, the fake news propagandists, did not.

There you have it. The general public will not be told the truth about the fraility of the banking system for fears people would recall the horrors of the GFC of 2008-09.

Two Italian banks failing may not make the radar of disinterest parties such as the 98% of Americans who don't pay attention to nor understand economics or finance. Neither did the closure of two Bear Stearns funds back in the Spring of 2008. You are now forewarned and forearmed, with knowledge.

The world'd financial system is unwinding and the pace is quickening. Disruptions are already apparent in the forms of capital controls - mostly overseas, but heading to US shores soon - supply chain disorder, falling tax receipts, social unrest, and, most importantly and glaringly obvious, income disparity.

Stay informed, not from the mainstream sources, but from outside. The internet is s treasure trove of information that you're not supposed to know about. It will help you form opinions and strategies by which you can deal with the coming hard times.

Your thoughts and ideas have no limits. Time and space cannot prevent you from thinking, strategizing and planning for your won welfare.

At the Close, 6/23/17:
Dow: 21,394.76, -2.53 (-0.01%)
NASDAQ: 6,265.25, +28.56 (0.46%)
S&P 500: 2,438.30, +3.80 (0.16%)
NYSE Composite: 11,733.20, +20.68 (0.18%)


For the Week:
Dow: +10.48 (0.05%)
NASDAQ: +113.49 (1.84%)
S&P 500: +5.15 (0.21%)
NYSE Composite: -38.83 (-0.33%)