Dow At Record Highs 11 Staight Sessions; Eye On PPT, Central Bank Intervention

As has been the case for multiple sessions over many years, a rally in the final hour of trading pushed the Dow Jones Industrial Average to a new all-time high, with the NASDAQ and S&P averages also closing up, but short of record highs. They NYSE Composite was fractionally lower.

In the red the entire session, the Dow gained 70 points from 3:00 to 4:00 pm ET, with other major averages also gaining. This kind of activity has been a market feature since at least 2001, when the existence of the Plunge Protection Team (PPT) turned from urban myth to global reality. The PPT, created by Presidential Order #12631, signed on March 18, 1988 by President Ronald Reagan is also known as The Working Group on Financial Markets, is, in reality, a body of financial authorities consisting of:

• The Secretary of the Treasury, or his or her designee (as Chairperson of the Working Group);
• The Chairperson of the Board of Governors of the Federal Reserve System, or his or her designee;
• The Chairperson of the Securities and Exchange Commission, or his or her designee; and
• The Chairperson of the Commodity Futures Trading Commission

Writers such as John Crudele of the New York Post have been critical of the Working Group's market-bending actions and foreign journalists from the Daily Telegraph and The Observer have suggested that the group has often exceeded its mandate.

Thus, tin-foil-hat type conspiracies have continued to suggest that the Federal Reserve and other central banks have been manipulating markets higher for years, and, while such coordinated action has yet to be unearthed by the mainstream media, sites such as ZeroHedge.com and other fringe outlets report that while the PPT may or may not be always active in markets, there's no doubt that central banks, notable, the European Central Bank (ECB), Swiss National Bank (SNB) and Bank of Japan (BOJ) are heavily invested in US and other global equities, making a mockery of the global regime of fiat money.

There are those who say intervention by government-sponsored agencies is not altogether nefarious, and some who believe such market-rigging is a good and reliable replacement for Adam Smith's "invisible hand" of the markets, it cannot be understated adequately that such activity will eventually undermine the integrity of financial markets and instruments.

Being based almost entirely upon faith and trust, financial markets have become the backbone of the global economy. If that faith and trust is broken - an unlikely occurrence, as the central banks, governments, and major brokerages work hand-in-hand largely toward the same end (higher stock prices) - the fragile system would crumble. An antecedent (and, much larger market) to the inner workings of financial markets is the bond market, which has also been pistol-whipped regularly by central bank policy and directive. On Friday, the US Treasury 10-Year Note fell to its lowest level in nearly three months, closing out the week at 2.3170, a direct result of higher stock prices, also known in the investing world as TINA (There Is No Alternative... to stocks).

With central banks and government agencies regularly interjecting themselves and their policies into financial markets, the natural question becomes: how stable and trustworthy are these markets and who gains from such manipulation?

Answering the question bluntly, the markets are only as stable as the institutions behind them, which is today a matter of considerable conjecture and discordant viewpoints. Purists posit that the mountains of debt produced by individuals, businesses, and governments is simply unsustainable and that a rout and crash, while unpredictable, is inevitable. The obvious conclusion to the other half of the question "qui bono" (who gains) is those in power and in control of such vast swaths of money, the governments, oligarchs, commercial and central banks. Beyond that, those in power consider themselves to be benefactors of the millions who gain from higher stock prices, inflation and boosts to massively underfunded pension funds.

With this degree of chutzpah in and on the minds of the central bankers and government leaders of the world, there is little doubt that they believe their actions to be highly beneficial to the orderly running of global finances while also not taking into account the falsity and pervasive inequities that are given rise by those same actions. Those with power over financial markets hold an incredible degree of responsibility, a responsibility that seemingly has gone beyond the pale, over the moon and into its own orbit.

Essentially, those who have questioned or taken positions contrary to the policies of the Fed and their brethren central banks, especially since the GFC of 2008, have been serially decimated in the markets. With stock indices raging without underlying fundamental bases, the planet may have reached a point of no return, wherein all matters financial are no longer in the control of individuals, but, rather, controlled by an opaque group of self-appointed masters.

One can only hope that they are well-grounded and essentially good-natured, because the alternatives would be brazen in concept and bizarre in execution.

At The Close, 2.24.17:
Dow: 20,821.76, +11.44 (0.05%)
NASDAQ: 5,845.31, +9.80 (0.17%)
S&P 500: 2,367.34, +3.53 (0.15%)
NYSE Composite: 11,541.29, -14.87 (-0.02%)

For the Week:
Dow: +197.71 (0.96%)
NASDAQ: +6.73 (0.12%)
S&P 500: +16.18 (0.69%)
NYSE Composite: +30.38 (0.26)

The Rush To Safety Has Begun In Earnest; 10-Year Yields Drop to 2.41%

With one of the most amazing sporting spectacles - Super Bowl 51 (LI, for those of the Roman numeral persuasion) - behind, most people got back to work today, including the rabid money-grubbers of Wall Street, but all was not rosy and peachy after the New England Patriots won in overtime, 34-28, over the Atlanta Falcons.

As President Donald Trump continues to attempt to "make America great again," much of the focus on the first trading day of the week was not on stocks, but rather, bonds, most noticeably on the 10-year treasury note, which plummeted eight basis points on the day to produce the lowest yield in two weeks, to 2.41%.

That figure may not seem so attractive to the yield-seekers of the world, but to countless hedge and managed bond fund professionals, it was a pretty awesome start to the week. Prices - which preform in the opposite direction of yield - for the 10-year were rocketing higher and any continuation of the move over the next few days and through the week might make for a trend-setting reversion following weeks of speculation after the Fed hiked federal funds rates at the end of last year.

Stocks were down modestly, but that was antecedent to the speculative ride in bonds, which was focused on the long end, thereby flattening the curve. What is more than just passing interest in treasury bonds figures to keep a lid on stock prices for the near term, at least until the next Fed meeting, in mid-March, at which time the FOMC will likely keep interest rates at the same levels. It's simply going to be too early for the Fed to believe that the economy is on sound footing toward expansion, something they've been sniffing around for over the past eight years. To their dismay, and possible demise, the Fed hasn't found much in the data to suggest that the US economy is going to be great, again, or with any other adverbial disclaimer.

So, today can be summed up as bond traders getting calls to buy safety and executing on the wishes of their clients. Any assumption that the Trump rally or any other concoction of the news and financial media is going to send stocks even higher than the stratospheric levels they've already achieved in one of the longest multiple expansions in history may be similar to a dog whistle.

Dogs may hear it and lower-thinking humans might get a strange beeping sound, but long-term financial experts aren't going to notice. They've already made up their minds about where stocks are headed and, from today's indications, they're not going to a pleasant place.

Gird your loins and whatever else you might think appropriate for a trip of declining prices and some creative destruction in stocks. Hopefully, it won't be your money that's being lost.

At the Close, Monday, January 6, 2017:
Dow: 20,052.42, -19.04 (-0.09%)
NASDAQ: 5,663.55, -3.21 (-0.06%)
S&P 500: 2,292.56, -4.86 (-0.21%)
NYSE Composite: 11,264.11, -46.63 (-0.41%)

Trump Presidency Day One Sends Stocks Lower; Bonds, Precious Metals Up

Recall how everything was up on Friday, the day Donald Trump was sworn in as the 45th president of the United States?

Maybe it was a sugar high, market enthusiasm over the new faces in Washington, or just plain old vanilla speculation. Whatever it was, it certainly faded fast, as Monday, Trump's first full weekday as president saw markets getting closer and closer to a point of no return, at one point near midday having erased all of Friday's gains.

Fortunately for those of the bullish persuasion stocks held their own and finished with only minor losses. Oil was lower as well, though only marginally. In their places were some of the usual suspects from the other side of the trade; gold, silver, bonds, all rallied nicely. Gold continues to be the top asset performer for 2017, a welcome respite after three years of declines and a 2016 that saw it bounce nicely higher in the firt half of the year only to give back those gains in the second half, like a football team with a tiring defense.

As for the new president, he was busy. In the morning, President Trump met with business leaders and told them he'd like to roll back as much as 75% of existing regulations, most of them causing unnecessary reporting and tax burdens on businesses of all sizes.

Trump also signed three executive orders. One imposes a federal hiring freeze on all departments except the military, another pulled the US out of the Trans-Pacific Partnership (TPP), and the third re-imposed the so-called Mexico City Policy, outlawing funding of international organizations which promote abortion.

Previously, on Friday, when the President finally made his way to the Oval Office, he kept a campaign promise by signing an executive order that directs federal agencies to ease the “regulatory burdens” of ObamaCare. It orders agencies to “waive, defer, grant exemptions from, or delay the implementation of any provision or requirement” of ObamaCare that imposes a “fiscal burden on any State or a cost, fee, tax, penalty, or regulatory burden on individuals, families, healthcare providers, health insurers, patients, recipients of healthcare services, purchasers of health insurance, or makers of medical devices, products, or medications.”

One would think that the order covered just about everything, making ObamaCare a ruined piece of legislation, soon to be formally repealed.

There was also movement on clearing the way for confirmation of any number of the President's cabinet choices and more speculation on whether the congress would approve a tax overhaul suggested by Trump during the campaign. The changes are still off in the distance, but congress should be getting on with it as soon as the foot-dragging over cabinet nominees ends.

Use the calculator below to see how Trump's tax plan would affect you:

At The Close 1.23.17:
Dow: 19,799.85, -27.40 (-0.14%)
NASDAQ: 5,552.94, -2.39 (-0.04%)
S&P 500: 2,265.20, -6.11 (-0.27%)
NYSE Composite: 11,170.63, -22.16 (-0.20%)

The Dow 20,000 Ceiling

After the release of the non-farm payroll data for December, futures rose on the news that the nation created 156,000 net new jobs in the month, just shy of consensus estimates for 170,000. What may have been the cause for optimism was the 0.4% increase in wages carried in the report. The unemployment rate rose a notch to 4.7%, but that was at 8:30 am ET, an hour before the market open.

The bigger event began hours later as the Dow Jones Industrial Average - with the other major indices in tow - powered higher, eventually getting to within 0.37 points of the mystical, magic mark of Dow 20,000. The stall occurred at 19,999,63, the high for the day, right around noon.

For roughly the next four hours, the Dow tantalized and amused traders and spectators alike, hovering just below 20,000, reaching to within single points on various occasions.

But it never made it, as though somebody had placed a lid on the market right at the 20,000 mark. The index struggled and failed, over and over again throughout the afternoon, to no avail. Finally, with less than ten minutes remianing in the trading day, all the stops apparently run, the ghost was given up and the Dow closed not only short of 20,000 but also shy of a new record, at 19,963.80, a few ticks short of the all-time high close made on December 20 of last year, 19,974.62.

Explanations abound as to why the Dow cannot break through this hysterical, purely-psychological number, the best of them probably involving program trading, as computer algos have been set to sell as the number is approached. If that is the case, there's more than a few sharpies on Wall Street thinking that stocks are severely overvalued, or that even if Dow 20,000 is pierced, it will not hold.

Stocks are severely overvalued, boosted over the past eight years by cheap funding courtesy of the Federal Reserve, whose pockets are being emptied, replaced by promises to pay in the form of treasury and mortgage bonds, many of them losing value.

This was a close call for sure, but the 20,000 mark still stands triumphant over a market that continues to show weakness and an unwillingness to carry through to even higher figures.

With this in mind, the question to be answered over the weekend is, will it do it on Monday? Tuesday? Ever?

From all appearances, with markets stretched to the breaking point, it's not a very good bet, no matter how close it gets.

Thus, the first trading week of the new year ends in tears, though it was a profitable one for stocks with the notable exception of the NYSE Composite, which closed down for the day. Gains were made on all major indices, but perhaps people should be paying more attention to interest rates, which, after an initial surge in yield following last month's 25 basis point hike in the federal funds rate, have fallen hard. The 10-year note yielded 2.418%, but closed Thursday at 2.368%, the lowest yield in a month. While the apparent reversal from the Fed's induced yield above 2.50% is not set in concrete, it is surely something which bears close inspection. Spreads have narrowed since the rate hike, an ominous sign of rough times ahead. If stocks falter, the stampede into bonds will be overwhelming, but possibly the move has already begun in anticipation of a stock market correction or reversal into a bear market.

However, elite traders can pat themselves on the back as they head home for the weekend. So far, January 2017 is looking good for equities, despite the obvious failure at Dow 20,000.

At the Close 1.6.16:
Dow: 19,963.80, +64.51 (0.32%)
NASDAQ: 5,521.06, +33.12 (0.60%)
S&P 500: 2,276.98, +7.98 (0.35%)
NYSE Composite: 11,237.63, -10.06 (-0.09%)

For the Week:
Dow: +201.20 (1.02%)
NASDAQ: +137.94 (2.56%)
S&P 500: +38.15 (1.70%)
NYSE Composite: +180.73 (1.63%)

Seven Straight: Dow Misses 20,000 Mark Again; Stocks Slip; Fearless Rick Calls 20,000 In 2023

In what was the Dow's narrowest trading day since 2013, the widely-watched industrial average failed to ramp over the 20,000 mark. The DJIA fell on light volume, as did all other major indices, along with WTI crude, silver, gold and treasury yields.

Financials managed to hold green post-Fed but all other sectors are lower since the rate hike announcement a week ago. Speaking of lower, volume has completely dried up. Bonds got a small bid on the day, pushing yields slightly lower, the benchmark 10-year note was down 0.022, finishing at 2.546.

It was a day of reflecting on what has happened in 2016 and weighing the possibilities of the rally extension beyond the magical 20,000 number, which, in the long and short of it, is wholly psychological and largely meaningless unless one has invested heavily in "DOW 20,000" baseball caps.

This leaves managers with just seven more trading days to square their books for the year, something any smart (read: few, if any) player would have already accomplished prior to heading off for the holidays. Seven is also the number of days that people thought the Dow would breach 20,000. Something about that number...

A betting man would give good odds that the Dow won't break the 20,000 barrier this year and might get an even better shake on the Dow busting through by June of 2017, but it may be a bet worth taking. Failure of markets, especially after a long run-up and a bull market that's extremely overextended, is rather common. The chances of a pullback between now and February seem almost certain, especially beyond the rate hike and the obvious tax incentives to sell come January 3rd, the opening trading day of next year.

Since Money Daily publisher Fearless Rick has already established himself on two accounts lately (the Trump call in Ocotber and the more recent "silver under $16" post a week ago, he's ready to plunge headlong into this debate. Here's the call:

The Dow isn't going to make it to 20,000 this year, and it won't make it by June of next year. In fact, it may not hit 20,000 until 2023. Book it.

Obviously, our intrepid publisher is going out on a limb rather than risking one. He's currently long machinery and undeveloped real estate. Yikes!

At The Close, 12/21/16:
Dow: 19,941.96, -32.66 (-0.16%)
NASDAQ: 5,471.43, -12.51 (-0.23%)
S&P 500: 2,265.18, -5.58 (-0.25%)
NYSE Composite: 11,142.57, -29.62 (-0.27%)

Market Week In Review: December 10-16, 2016; Stocks Moribund, Silver Slammed, Oil, Banks Up

Highlighted by Wednesday's (Dec. 14) FOMC rate policy announcement, the week as a whole saw its fair share of ups and downs, mostly confined to intra-day movement, but eventually ending mildly positive, at least for stocks.

The Dow recorded a pair of all-time closing highs on Monday and Tuesday, but failed to reach for the stars after the Fed announced a 0.25% hike in the federal funds rate, the first in exactly one year. The move from 0.25-0.50 to 0.50-0.75 triggered a sharp sell-off in Wednesday afternoon trading, though stocks recovered nicely on Thursday and ended flat on Friday.

If the week was uneventful for stocks, it was not the same for commodities, particularly silver and gold, or for the US dollar, which reached nearly-unprecedented highs over 102.20 on the Bloomberg dollar index. As the dollar gained, the precious metals were slammed, gold losing over $30 top to bottom, but eventually leveling off at $1134.60 at Friday's finish, a loss of just $26 from the rate announcement. Silver took a much harder hit, dropping in price on the COMEX from $17.10 an ounce on Wednesday to end the week about a buck lower, at $16.07, a six percent loss.

Following OPEC's announced production cuts for 2017, crude spiked over $55 per ounce, but retreated during the week, still ahead somewhat at 53.03 as the week's trading closed out. Despite the strong dollar - supposedly a brake on oil prices - oil managed to ramp up to the highest price in three years.

Financials and industrials led the way for US stocks, not surprisingly continuing the Dow rally spurred forward by notables Goldman Sachs, 3M, Boeing, and General Electric. The Dow Industrial Average being the only major index to finish in the green for the week, markets continue to show strength in only the largest of large caps while smaller stocks are only being nibbled upon and, in the main, sold. The fracturing of markets into large leaders and small losers cannot bode well for the continuation of any meaningful rally going forward.

Naturally, with the Fed hiking rates, if only modestly, Treasuries were sold, but mainly on the short-duration issues. The five-year note broke through the mythical 2.00% threshold this week (2.05%), while the 10-year popped briefly above 2.60%, clinging close to that level as markets went dark for the weekend (2.57%). A flattening yield curve was evident as the 30-year bond remained steady, at 3.16%, pushing down the spread between fives and thirties to a unitary 1.11%.

All of this came against a backdrop of national news media hyping futile and largely-baseless claims by the US intelligence community that Russia hacked the 2016 presidential election, somehow making Vladimir Putin responsible for the election of Donald J. Trump (who will be formally elected by the Electoral College on Monday) and the demise of Hillary Clinton, the choice of the much-discredited leftist status quo.

The folly of the intelligence claims was completely ignored by Wall Street, and rightly so. The last thing investors need is a fresh injection of political skullduggery, after slogging through nearly two years of endless campaign rhetoric from all sides.

With a week left before Christmas, retailers have yet to ring bells of any kind, neither of alarm or of joyous peals f profit. The Christmas shopping experience over the past decade has morphed from mad dashes on Black Friday to a controlled button-pushing event on computers nationwide, as the internet has revolutionized the retail buying experience and forever changed the shopping mall landscape and holiday experience.

With two weeks remaining in 2016, it's likely that markets will respond to calmer views going forward though a sharp Santa Claus rally, taking the Dow beyond 20,000, is a distinct possibility over the final ten trading days of the year.

At The Close: Friday, December 16
Dow: 19,848.60, -3.64 (-0.02%)
NASDAQ: 5,437.29, -19.56 (-0.36%)
S&P 500: 2,258.20, -3.83 (-0.17%)
NYSE Composite: 11,122.44, -9.46 (-0.08%)

For the Week:
Dow: +86.65 (0.44%)
NASDAQ: -7.34 (-0.13%)
S&P 500: -1.46 (-0.06%)
NYSE Composite: -66.57 (-0.59%)

Stocks Continue Surging Into Year-End; Fed Rate Hike Baked In, Unsubstantial

He said, "Call the doctor. I think I'm gonna crash."
"The doctor say he's comin', but you gotta pay him cash."
They went rushin' down that freeway,
messed around and got lost
They didn't care they were just dyin' to get off
--Life in the Fast Lane, Eagles, 1976

Stocks careened higher on Friday, finishing off a week that saw increased investor buying virtually across the board. It was the best week for stocks, especially on the Dow, since the week immediately following the US elections, an odd scenario for analysts and talking media heads who predicted turmoil and collapse if anybody but Hillary Clinton was elected president.

Since the election of Donald Trump, we now know that what emerges from the mouths of Wall Street psychopaths and media slaves is usually incorrect, politically driven and nine times out of ten wrong. What we still don't understand is why the same people are relied upon for their opinions, having been proven completely wrong over and over again, the best examples of this kind of nepotistic following being seen regularly on the financial networks, Bloomberg, Fox, and notoriously, CNBC, which has its own designated cheerleader, Jim Cramer.

How could all of these pundits and overpaid professionals have gotten it so wrong? Easy. The chances of stocks advancing or declining is almost always a 50/50 proposition, but, anybody reading the tea leaves from leftover elections would have known that a Republican president following a lame duck incumbent makes for a major bull market (that's made up, but it's probably true anyhow, and, in the age of "fake news" all one needs is a headline and story, right?).

Maybe people with money think Donald Trump's various positions on trade, immigration, wages, borders and culture will usher in another gilded age of American exceptionalism. For the most part, anybody with half a brain still in working order would welcome such a change. More than likely, following the initial post-election stock surge the rest of the advances have been driven largely by herd behavior.

It should be widely accepted, though it isn't, that stocks are valued extremely high, but the right thing is that bonds have been collapsing over the past five weeks, at the same time stocks have been rising. That's not your run-of-the-mill pair trade, but it is imaginative. As bonds fall, yields rise, making them more attractive as safety plays. In the meantime, with interest rates largely remaining at bargain basement levels, stocks have continued to be the investment de jour.

If there's a cloudy lining inside the silver cloud of stocks, it's that a correction is long overdue. However, bears and shorts have been saying that for the better part of the past four years and it hasn't happened. Instead, we happen to be in the midst of a massive valuation expansion. Whether or not individual stocks are good or bad investments presently does not seem to matter. There's an explosion of cash coming into the market, the same cash that was being hoarded pre-election. Once that money is exploited and exposed, the intensity of the rally should subside, but probably not until the calendar turn to 2017, the attractiveness and continual pimping of the "Santa Claus Rally" expected to be the main driver over the remaining weeks of 2016.

So, if a crash is coming, January's your huckleberry, or, right after the Fed raises the federal funds rate next week, which has evolved from a possibility to a near-certainty. The Fed and their one quarter of one percent hike in overnight lending is more a canard than a reality. Only the monumentally stupid or disconnected will suffer on a small rate increase. It's so tiny that almost nobody will notice. Certainly, it's not the kind of event that will cause a run, a panic, a rout, so the best action for next week is probably inaction.

Crashes and sudden downturns in the market normally come from out of the blue, caused by forces to which nobody (or only a select, ridiculed few) had been paying attention. If there's going to be a turn, the most likely causes are going to come from Japan or China or Europe, possibly even Brazil or another major portion of Latin America. More likely is that after Mr. Trump is inaugurated, US markets stabilize and places such as those mentioned above suffer. Such is the way of the world. There will be winners and losers. If America is going to be "great again" other countries are going to be not so great. The market is economics in motion and the chances for a crash in America are minimal over the short term. Longer term, dependent on too many factors to delineate here, corrections and crashes are bound to occur. The truth of the matter, is that the usually-wrong analysis from Wall Street is actually right on this account: if your time horizon is 20 or more years, crashes and corrections are buying opportunities and nothing more. The world won't end tomorrow or the next day, or the next month or the next year.

Thus, the outlook for stocks remains fairly solid, albeit a bit on the high side right now. Since the election, the Dow is more than 1400 points higher, a gain of nearly eight percent. That's a pretty healthy gain for five weeks and something that should be taken into account whatever investment decision one is making or about to make.

Friday's Closing Quotes:
Dow: 19,756.85, +142.04 (0.72%)
S&P 500: 2,259.53. +13.34 (0.59%)
NASDAQ: 5,444.50, +27.14 (0.50%)
NYSE Composite: 11,191.79, +41.83 (0.38%)

For the Week Ending 12/09/16:
Dow: +586.43 (+3.06%)
S&P 500: +67.58 (+3.08%)
NASDAQ: +188.85 (+3.59%)
NYSE Composite: +353.21 (+3.26%)

As Britain Votes To Leave European Union, The Establishment Is Losing Control

Just a few days ago, our Fearless Editor, Rick Gagliano, penned a post here at Money Daily espousing the belief that the Brexit/Bremain vote and the US presidential election were sideshows and being overblown in importance by the media. Perhaps it was a faux pas or even a veiled negotiation maneuver designed to keep "remain" voters away from the polls (we doubt the latter to be true). In any case, voters in Great Britain did - in establishment terms - the unthinkable, voted to depart from the European Union, and quite possibly delivered a verdict on the perilous future of the EU.

We now present the post mortem.

All hail Nigel Farage, head of the UKIP party and leader of the "Brexit" movement in Great Britain, for he has brought the nation out from under the Orwellian totalitarianism that is essentially the bloated bureaucracy of the European Union, and unshackled the common Briton from enslavement to the status quo.

Here is what Farage said as the tally was coming in, looking favorable for Britain exit from the EU:

If the predictions now are right, this will be a victory for real people, a victory for ordinary people, a victory for decent people. We have fought against the multinationals, we have fought against the big merchant banks, we have fought against big politics, we have fought against lies, corruption and deceit. And today honesty, decency and belief in nation, I think now is going to win. And we will have done it without having to fight, without a single bullet being fired…. Win or lose this battle tonight, we will win this war, we will get our country back, we will get our independence back and we will get our borders back.

Having fought the good fight as an MEP and a representative to the European Parliament for nearly two decades and yesterday, Farege's unwavering rhetoric for freedom and against oppression struck the first salvo for the people against the leading technocratic superstate of the EU, headquartered in Brussels.

For Farage, the victory may have greater consequences. With PM David Cameron admitting defeat and promising to step down come October, Farage figures to be a natural candidate for the vacated post of Prime Minister. Already the mainstream press has put the face of Boris Johnson, former mayor of London, front and center, ahead of Farage, who has said openly that he doesn't want to be Britain's PM.

That battle has a long way to go, but, for now, a rundown of just what Brexit has meant to markets around the world.

The Final Tally:
Leave
Vote share 51.9%
Votes 17,410,742 Votes

Remain
Vote share 48.1%
Votes 16,141,241 Votes

Stocks indices around the world were pounded:
ASIA:
Nikkei 225: 14,952.02, -1,286.33 (-7.92%)
Hang Seng Index: 20,259.13, -609.21 (-2.92%)
SSE Composite Index: 2,854.29, -37.67 (-1.30%)
Straits Times Index: 2,735.39, -58.46 (-2.09%)
S&P/ASX 200: 5,113.20, -167.50 (-3.17%)

EUROPE:
FTSE 100: 6,138.69, -199.41 (-3.15%)
DAX: 9,557.16, -699.87 (-6.82%)
CAC 40: 4,106.73, -359.17 (-8.04%)
EURO STOXX 50 Index: 2,776.09, -261.77 (-8.62%)
EURONEXT 100: 819.99, -59.09 (-6.72%)

Some other interesting notes from early after the voting:
British pound falls as much as 11 percent to $1.3229, weakest since 1985
Yield on 10-year Treasuries drops 29 basis points to 1.46 percent, set for biggest daily decline since 2009
New York crude oil retreats 5.1 percent to $47.56 a barrel, poised for biggest loss since February
Gold rallies as much as 8.1 percent to $1,358.54 an ounce, highest since March 2014

By the end of trading in the US, the day's damage had been assessed, though it was hardly what anybody would call a bloodbath. After all, this was only the first salvo against the establishment, though it does set in motion a complete disintegration of the EU and all of its strictures, laws, rules, regulations and burdensome bureaucracy.

For Americans, it's a good day to be a supporter of Donald Trump for the presidency. Much of what Mr. Trump has been campaigned for was contained in the Brexit platform: an end to open immigration, more civil liberties for common people, smaller federal government, less regulation, lower taxes, more power to people and localities (state's rights in the US).

While the damage to stocks was minimized, the press fell all about itself in once again over-hyping the damage. Britain and her people will not vanish from the earth. New trade arrangements will be made with the countries still remaining in the EU, but it is notable that more than a few EU member states are now calling for exit votes by the people, especially in France, Spain, Italy, the Czeck Republic, Hungary, and elsewhere.

The word on the European Union: Done. It's now become not a matter of if the EU will disintegrate, but when, and how. Those will be the real fireworks. But, between then and now, expect the establishment status quo to fight like mad dogs to retain and enhance their positions of power and prestige. In the end, they too will fail.

US stocks got mangled, with a hefty drop at the open and further displeasure for bulls in the late afternoon, with the Dow - just one day after it broke through the 18,000 upper barrier - closing below 17,500, the long-standing support threshold, on heavy volume. Losses were widespread; banks and financial stocks took the worst of it.

The Dow finished the week lower for the third time in the last four; the S&P and NASDAQ each notched their third straight week of decline.

US Stocks Got Socked:
S&P 500: 2,037.41, -75.91 (3.59%)
Dow: 17,400.75, -610.32 (3.39%)
NASDAQ: 4,707.98, -202.06 (4.12%)

Crude Oil 47.57 -5.07% Gold 1,319.10 +4.43% EUR/USD 1.1118 +0.13% 10-Yr Bond 1.58 -9.20% Corn 391.50 -1.57% Copper 2.11 -2.27% Silver 17.77 +2.40% Natural Gas 2.70 -1.32% Russell 2000 1,127.54 -3.81% VIX 25.76 +49.33% BATS 1000 20,677.17 0.00% GBP/USD 1.3684 +0.06% USD/JPY 102.2550 0.00%

For the Week:
Dow: -274.41 (-1.55%)
S&P 500: -33.81 (-1.63)
NASDAQ: -92.36 (1.92)

Fed Jawboning Flattens Stocks, Boosts Dollar, Sends Treasury Yields Soaring

Hearing all this Fed-speak, one might pine for the days of old, when central bankers were seen and not heard, when their meetings were the stuff of secrets and rituals and transparency was reserved for a type of adhesive tape.

The current roster of the federal reserve is a lineup of chattering old men and women more suited for a Sunday festival than the stuff of high finance.

Regardless of one's opinion of the federal reserve, one thing is certain: they have Wall Street on edge. With the release of the minutes from April's FOMC fiasco, the dollar surged - in the main against the yen and euro - stocks tanked back to break-even for the day and the 10-year note yield shot up like a rocket, ending the day at 1.88%, a move of nearly seven percent.

Oil and PMs fell, as planned. It's ridiculous.


S&P 500: 2,047.63, +0.42 (0.02%)
Dow: 17,526.62, -3.36 (0.02%)
NASDAQ: 4,739.12, +23.39 (0.50%)

Crude Oil 48.40 -1.20% Gold 1,259.50 -1.36% EUR/USD 1.1217 -0.84% 10-Yr Bond 1.88 +6.88% Corn 399.50 +0.63% Copper 2.06 -1.17% Silver 16.92 -1.88% Natural Gas 2.01 -2.05% Russell 2000 1,102.95 +0.48% VIX 15.95 +2.44% BATS 1000 20,677.17 0.00% GBP/USD 1.4597 +0.94% USD/JPY 110.1950 +0.96%

BTO: Bespoke Tranche Opportunities; Look Out Below

Global economies are blowing up, led by BTOs, AKA Bespoke Tranche Opportunity.

Yahoo, as predicted here years ago, is kaput. One of the worst investments ever, and especially since the Gal from Google took over as CEO.

IRS hardware failure. Probably the best news of the day. Unless you are a sheeple. With a pension. And health care ripped from your paycheck. You. Are. Screwed.

The global economy is unraveling right in front of your eyes and you don't see it.

Don't forget to smell the roses and see the forest through the trees.

Maybe the worst condition is not knowing what a hard asset is. Maybe worse is spell-checking on blogger.

Keep prepping. If you're in a city, move.

Money Daily TacklesThe Best Of Wall Street With 2016 Predictions; The Big Fail: S&P, Dow Finish Lower for 2015

Stocks took it on the chin on the last trading day of 2015, and the S&P and Dow Industrials ended the year with losses. Only the NASDAQ showed a gain for the year.

Closing prices for December 31, 2015:

S&P 500

2,043.94

-19.42 (0.94%)

Dow

17,425.03

-178.84 (1.02%)

Nasdaq

5,007.41

-58.44 (1.15%)

That's a wrap for the year. Read on, because 2016 is going to be even more interesting.

Picks for 2016

Courtesy of Barron's, here are some of Wall Street's top strategists picks to click in 2016:

Note the groupthink among these masters of the universe posers.

Aside from Steven Auth's outrageous call for 2500 (it might be a typo) the target for the S&P 500 ranges from 2100 to 2250. The expected 2016 GDP is all in a range from 1.9% to 2.8%. These are not the brave and the bold, that's for sure.

So, since Wall Street analysts have decided to continue with the false narrative that all is well, Money Daily offers the following set-up for what figures to be a downright fascinating year.

Since it's a presidential election year and the past two which marked the end of an eight-year presidency (Bush replaced Clinton in 2000, Obama replaced Bush in 2008) both were near-disasters for equity traders, 2016 promises to be an explosive twelve months.

Now that you've seen theirs - which, by the way, don't vary much - here is what Money Daily believes will work in the coming year.

First, the equity markets will absolutely tank.

Stocks Take a Beating

While it would be foolhardy to predict where whole indices will be trading at the end of the year 2016, it may be more instructive to offer a timeline. Since the S&P and Dow haven't made new highs since May of 2015 and both ended the year lower than they closed out 2014, the table has been set for an absolute bear-fest in the opening quarter of the year.

As bears emerge from a short hibernation due to climate change (one of the warmest winters on record in the Northeastern US), they will be hungry to take down entire sectors of the market. Hardest hit will be consumer goods, financials, health care, technology and services. No sector will be spared, but the safest havens will be in basic materials and utilities. The best place of all to be will be largely in cash or bonds. The 10-year note is likely to rally strongly as people flee to safety, and, despite the best efforts of Janet Yellen and the Federal Reserve to boost interest rates, the market will set the tone.

The major indices will be looking up at highs which will seem ridiculous by June. Taken on a monthly basis, January will see outright selling, putting the major indices into correction (-10%). February and March may be mild, but could be wild, depending on the direction of most of the well-followed indicators, like industrial production, capacity utilization, the various Fed surveys, factory orders, ISM manufacturing and services, and, of course, non-farm payrolls.

By April or May, the bloom will truly be off the rose, as first quarter GDP comes in below expectations or even shows up negative, the most likely culprit, warmer weather, as opposed to cold weather, which was blamed for the last two Q1 debacles.

Timing the return to a bear market can be tricky, so let it suffice to say that by June at the very latest, stocks will be down more than 20% overall, and the scare will be on.

At the bottom, which will be any time prior to election day, here's where Money Daily expects the major indices to be residing:

S&P 500: 1450
Dow: 12,400
NASDAQ: 3200

Bonds Will Be Wonderful

The 10-year note will trade higher from February through September, with the yield going below the two percent mark and staying there for an extended period, perhaps through the end of the year. Since stocks will offer only losses, lowered guidance and dividend cuts, the flight to bonds will be massive. The short end will be anathema; the 10-year and 30-year will be the bright spots.

GDP May Appear Recessionary

If 2016 results in any growth at all, it will be anemic, in the 1-1.5% range at best. With either the first and second or the second and third quarters putting up negative numbers, the odds for a true recession are high, and the Fed, without any interest rate cuts to counter the slack in the economy, will prove powerless.

The long look will be on currency collapse. After the massive gains in 2015 for the US dollar, that trade will likely reverse. Either that, or a global depression will be the order of the day.

Precious Metals Still Shine

While shunned with near-unaniminity on Wall Street, gold, silver, and platinum will hold their own and probably explode to the upside in the face of outright recession or depression. Gold and platinum could easily see 30-40% gains, while silver, the most-suppressed metal (and most important) could double by year-end, but all the metals will pull back in the early stages of the bear market in stocks.

Once a base is set for the precious metals, it will be off to the races in what will be the resumption of the decades-long bull market that began in 2000. The declines from 2012-2015 will be seen only as a cyclical bear correction amidst a secular bull.

Commodities Useful in Any Environment

So beaten down has been the commodity index, investors may be able to pick and choose from their choice of useful basic materials. Coal, iron, copper, zinc, lumber, oil and other fuels can be a boon in the best or worst of times.

Low prices in crude oil, natural gas and coal should remain in place for the entire year, and beyond. The usefulness of any commodity is, naturally, the selling point, but, in an oversupply environment, end users, rather than producers, will be the main beneficiaries.

An outright deflationary environment should prevail, a boon to cottage industries and small business, which is a welcome change from the repressed conditions of the previous decade. Anyone with the ability to store or make productive use of any manner of commodity should benefit greatly.

Real Estate As Investment Could Be Solid

There are three good reasons to own real estate. Living in a residential home, farming or mining, and renting on a commercial basis.

Since residential real estate is and has been in the stratosphere in many parts of the USA, it's likely to take a serious hit in 2016, with price declines of 10-30% in selected areas, more in others. Speculators and flippers will be fed to the sharks and there will be a slew of defaults in the REIT space.

Farmland, especially anything under 30 acres, which can be handled by a family or small enterprise, could be the best investment of the year. Productive land is usually safe, and besides, you can eat what you grow, which is always a concern.

Commercial real estate will go begging. It's massively overpriced and over-leveraged, due for a massive decline.

Conclusions

The US and global economies have been on a collision course between a massive debt bubble and a large pin. It all comes to a head in 2016, some of it pre-planned, much of it unrehearsed, unwanted and unnecessary.

Stocks will be hated, Wall Street bankers will once again be the object of derision (as they so rightly deserve to be), and politicians will be exposed as mere vassals to the deep state and the banking cartel.

The US will be lucky to avoid a major war, as the Military-Industrial-Congressional-Conplex (MICC) seeks a way out of debt crash and currency debauchery. There isn't one. Only systemic collapse can heal what's wrong in the economies of the world. Watch Japan closely, then Europe. They are the proverbial canaries in the coal mines. China will set its own course, but will continue to emerge as a world power.

The outlook isn't very rosy, admittedly, but, the great oligarchs of the day have made it so. Unmanageable levels of government, business and household debt are screaming for a reset, a break, a jubilee, and it very well could happen.

On the other side of a currency collapse is a bright future, but, if any of the outcomes predicted here actually occur, it will only be the beginning, and there will be more pain for the remainder of the decade. Until Americans and people around the world throw off the shackles of governments, replete with their laws, rules, regulations and onerous taxes, there will be no prosperity.

Donald Trump will win the presidency in November, a sign that the American people have had enough of the status quo.

Happy New Year!

Financial Recap for w/e 4/17/15: Friday's China Fears Stun Markets

The week can be summarized succinctly as four normal days followed by a bummer of a Friday, which took back all of the week's gains and then some when it became obvious to anyone and everyone that China might not be the raging dynamo of capitalism once thought.

With a drop on the Dow of nearly 300 points, Friday's whiplash took the DJIA back to break-even for the year and ended the week with the Industrials off 231.35 (1.28%). The remainder of the week was mostly mundane, with the average down Monday, up Tuesday and finally into positive territory on Wednesday. Thursday was flat.

Following a pattern similar to that of the Dow, the S&P 500 also lost steam, down 20.88 (0.99) for the week, a loss not nearly as dramatic as the Blue Chips. However, the S&P ended up less than one percent on the year, a condition which central planners and fund managers are finding unpleasant and unprofitable.

Nearly four full months into the new year, investors are still searching for a catalyst beyond the usual dramatics from the Federal Reserve to move markets higher. Considering the poor performance out of China and the rest of the EM, the catastrophic condition that is the European Union, and the general negative tone of US macro data, in deference to the usual "recovery" noise, a very good argument for profit-taking has appeared.

The NASDAQ suffered a similar fate, gapping lower on Friday to post a massive 76-point decline for the day. On the week, the NASDAQ was lower by 64.25 points (1.28%), equaling the DJIA as the worst percentage performer.

Beyond the aforementioned wall of worries, what has markets particularly off-balance are comments from a variety of Federal Reserve officials, some which are for a rate increase ASAP, while others seem to have reversed course and favor the wait-and-see approach, which is wearing thin on all fronts. Clarity does not serve the Federal Reserve well at this juncture - indeed, maybe not at any time - as market reaction is exceedingly swift to judge.

The constant din of jawboning from current and former Fed officials has provided market participants with a kind of backstop mechanism, one which has successfully prevented an outright bubble in stocks (a debatable point) and, at the same time, limiting any downside action to less-than-correction levels.

As stocks have not seen a significant retreat since the summer of 2011 - and even that was mild and short-lived - the argument for a correction of ten percent or more has its followers, though bearish thoughts have been effectively eviscerated by the Fed and its hyperactive role in the market.

With a June rate increase now seen as nearly off the table, the view is that September will be the most opportune time for the Fed to act to raise the federal fund rate off the zero bound, though many voices are already saying that 2016 or beyond will be the date at which the "renormalization" process takes flight.

With central banks and, especially, the Fed, so deeply ingrained in equity and bond markets, it has become difficult, if not entirely impossible, to accurately predict future market movements.

Perhaps this is a condition with which markets should be desirous. Complacency and indecision might turn out to be the best weapons against deflation and outright recession. Lessons learned from past experience are no longer helpful as the global economy has never been so utterly and consistently commanded, contrived and controlled. Eventually, one would suspect a shakeout. As usual, getting the timing right is a paramount consideration, though the recent activities of markets and central banks has left all participants scratching for solutions.

Mario Draghi's Bold QE, Bank Stress Tests and February Payrolls

Thursday was a fascinating day for the world of finance ad markets (what's left of them), kicked off by the ECB rate announcement and finished up by US bank stress tests, released, cynically, after the close of equity markets.

And, the markets were largely unresponsive to what was happening in Europe because of their anticipatory stance toward the February Non-farm Payroll data due out on Friday.

Consequently, there were no major catalysts to propel markets in either direction generally, though, if one were to believe in the gospel according to Draghi (Mario Draghi, head of the ECB), al of Europe should be celebrating the prospect of EQE (European Quantitative Easing), because Draghi ad his cohorts see inflation rising by 1.5% in 2016 and GDP in the eurozone galloping ahead once the bond flow gets eaten entirely by the ECB.

This view is highly ignorant of facts, despite Draghi and the ECB having access to the best data in the world outside the Federal Reserve. First, the ECB should be well aware that QE has not driven either growth or inflation either in the United States or Japan (where they've been QE-ing it up for 20 years). Second, the amount of issuance of sovereign debt that the ECB proposes to purchase from the various government comprising the Eurozone might cause some significant crowding out of legitimate buyers of such debt.

QE is nothing more than a classic Ponzi scheme, with some big, fat-cat organization - be it the Fed, the BOJ or the ECB - striding atop government cash calls (bonds=debt). The central banks distribute the proceeds back into the system in whatever haphazard ways they can, the usual transmission mechanism being repos and open market "operations" directly to primary dealers (TBTF banks) that ends up in equity markets.

Presto! Government expands, stocks soar, while the general economy flummoxes, falters and fails. As is the usual case with all Ponzi schemes, everywhere and always, the last "investors" are left holding the bags of worthless paper. With the massive bond-buying monetization of government debt, the eventual losers will be regular people, whose pensions will be raided, whose cost of living will be untenable, whose lifestyles will be unstable, whose bank accounts will be bailed-in, whose futures will be null and void.

So, pay close attention to what's happening in Europe and Japan, because it eventually will find its way across both big ponds to the shores of North America. There is no doubt that QE and its after-effects will be crushing to ordinary people. The worst part of the story is that there will be nowhere on the planet to hide.

Well beyond the close of the moribund US equity markets, the Federal Reserve unleashed the current round of stress tests for the significant financial institutions.

All 31 banks passed. Halelujah!

These "tests" are nothing more than job security for CFOs and other executive who hang out in cushy corner offices. They are completely meaningless, especially since bank balance sheets are so opaque nothing of substance can be seen.

As far as the February, 2015 Non-farm Payrolls (due out at 8:30 am on Friday) are concerned, they'll contian the usual lies nd obfuscations that the BLS has become so famous for over the years. Ideally, the US will be shown to have created a couple zillion new jobs, but everybody will know that the numbers are wholly fiction and the economy is on its last legs. Wall Streeters will rejoice and send the major indices into the stratosphere, so that Fed Chair Janet Yellen can echo Greenspan and Bernanke by proclaiming the goodness of the "wealth effect."

Of course, most Americans will hardly notice said effect, as they struggle to make car and tuition payments.

Dow Jones 18,135.72, +38.82 (0.21%)
S&P 500 2,101.04, +2.51 (0.12%)
Nasdaq, 4,982.81, +15.67 (0.32%)

The Biggest Bubble of All Time is About to Be Popped

Money Daily stopped being a daily post blog in March, 2014. While the name remains the same, the posts are now on an intermittent basis, as conditions warrant, though it is advised to read the archives (from 2006-2014) regularly, even daily, for insights and historical perspective.

The handwriting, so to speak, is all over Wall Street. What has been the biggest financial bubble in the history of the world is on the verge of busting, or, what could be better still, slowly deflating.

After the crash of 2008-09, the Federal Reserve, in conjunction with central banks around the globe, injected massive amounts of liquidity into the fiat world currency markets, bolstering everything from junk bonds to consumer credit, but especially equities, otherwise known as stocks.

Since March 9, 2009, the major equity indices in the US - and, to a large degree, around the world - have rebounded on the strength of the Fed's largesse, nothing else. Now that the Fed has begun unwinding QE, the "juice" is being withdrawn. There will be no backstop for equities in the guise of unlimited liquidity from the Fed. The plan - already underway - is to reduce the amount of asset (bond) purchases by the Fed from their high of $85 billion per month, to zero. While it is unlikely the Fed will ever get to zero without reversing course or, at least, slowing the pace of their withdrawal, the March FOMC meeting will mark the third consecutive lowering of the monthly purchase level, timed in accordance with the 10-per-year FOMC schedule.

The Fed first announced in December, 2013 that it would be reducing purchases in January, 2014, and did the same in their first meeting of 2014, in January, lowering their purchase level to $65 billion in February. Since there was no meeting in February, they are expected to announce another $10 billion reduction at the March meeting next week (March 18-19). If they carry through with this expected drop to $55 billion, the market cracks which first occurred in January of this year, may turn into wholesale breaks, sending index levels below their recent lows, highlighted by the January 31 selloff.

With the S&P recovering all of its January and February losses and making new all-time highs earlier this month (the NASDAQ also made new 14-year highs), the Dow Jones Industrials did not, setting up the scenario for a bear market, according to strict Dow Theory.

If the Dow, having fallen short of its most recent high (16,588.25), continues on its path lower, exceeding the interim low of 15,340.69 (Feb. 4), this will confirm that a change in the primary tend has occurred, and a secular bear market is underway. This bear market could last anywhere from five to 20 years, possibly longer, because the recent, primary bull market - the second longest in market history - was built upon a foundation of incredibly easy money, low interest rates and global fiat currencies, unprecedented in financial history.

The fallout could be severe, popping the biggest financial asset bubble of all time, in stocks, affecting everything from individual stocks to your pension, IRA or 401k to muni bonds. In other words, be prepared for the biggest financial collapse of all time, because the last five years have been nothing but pure financial fantasy, and it's all about to come crashing to an end.

There are sure signs that the global economy is shrieking and straining to remain relevant and above water, but after blowing bubbles recently in dotcom stocks (1997-2001) and real estate (2003-2007), the Fed has reflated the economy with trillions of paper dollars, augmented by similarly spurious activities in Europe, China and Japan. The financial bubble created by central banks is of a magnitude much larger - possibly four to six times larger - than the sub-prime-induced housing meltdown, putting the figure of financial assets seriously at risk somewhere between $20 and $40 trillion dollars, an amount so unfathomable that nothing short of pure currency collapses can sufficiently make account.

(As this post is being composed (March 13, 2014, 1:10 pm EDT), the Dow Jones Industrial average has broken through its 50-day-moving average, down 194 points on the day.)

Beyond just charts and the scary finances of the central banks, China is the linchpin by which the financial dam may be breached. For the past two to three months, data out of the world's second-largest economy has been trending lower, especially in the areas of industrial production and exporting. In fact, China actually released data that showed it suffered a current account deficit, with imports exceeding exports, a very frightening development for one of the world's few export economies and a major trading partner with the US and Europe.

What the China data underscores is the overall weakness in US and European (developed) markets. The fraud of financialization has finally produced a result incompatible with the ponzi-scheme-like mantra of the central bankers. Consumers have been and are strapped for cash, a result of over-exuberant government spending, massive income disparity between the rich and poor and stagnant or declining wages in the middle of a labor shortfall crisis.

There are signs everywhere that the global economy is about to be brought back to reality, including, but by no means limited to, recent poor US unemployment data, a false housing recovery (inundated with cash buyers, flippers and speculation), inability of the government to prosecute bankers and financial operatives for mortgage and other frauds, declining adherence to the constitution and the trampling of civil rights, bogus car sales data with channel stuffing rampant, blaming the weather for poor economic results (seriously, the holiday shopping season was a complete bust), and overvaluation of speculative IPOs, tech stocks and other momentum stocks, enterprise valuations of stocks in the billions of dollars, based on nothing but pure speculation.

Nothing will stop the wreckage that the Fed and global central banks working in collusion have set in motion. The numbers are ghastly and overwhelming and the warnings have been written about for years. The time to prepare was yesterday, though there is still time, but thought processes must change. Status and wealth should not be measured by the size of one's McMansion, the price of one's car or the depth of one's stock portfolio. True wealth consists of something along these lines: a fully-paid-for home on five or more acres of land, two-thirds of it arable, food and water storage to last at least a year, a horde of cash, gold and/or silver, absolutely ZERO DEBT, and the ability and weaponry to defend it all.

Ask yourself, who among you can make claim to that, because that is real wealth, not the paper promises from Wall Street or Washington.

It's coming. And it may be approaching even faster than anyone wants to consider (think Ukraine).

Good luck.

Bernanke's Departure Marks the End of the Bull Market as Stocks Slump Again

There were so many moving parts to the economic and trading landscape since yesterday's close, it may be most instructive to review them in chronological order.

First, around 5:00 pm ET, the Turkish central bank raised overnight lending rates - along with all other key rates - from 7.75% to 12%. That's the overnight rate, the rate at which the central bank lends to member banks. Ouch! The move immediately sent US stock futures soaring, as though the global economy had been saved by this one clumsy, desperate stroke of policy.

At 9:00 pm ET, the impostor-in-chief, Barrack Obama, gave his fifth state of he union address, grossly misrepresenting the overall health and stability of the United States and glibly calling on American businesses to give employees a raise.

The euphoria spread to Asian markets, which were higher on the day, the Nikkei gaining more than 400 points on the session.

However, by the time the sun began to rise on Europe, the glad tidings had turned back to fear, as the Turkish Lira began to come under continued pressure from other currencies. Most European indices were trending lower, though marginally, with losses of under one percent on the majors.

By early morning in the US, the trend had completely reversed course, with stock futures deeply negative. At the open, the Dow Jones Industrials fell by roughly 120 points and held in that range until the 2:00 pm ET Fed policy announcement.

Widely expected to taper their bond purchases by another $10 billion per month, dropping the total to $65 billion, the Fed did exactly that, to the ultimate dismay of equity investors. Those who had made the correct call prior to the action continued pulling money out of stocks, rotating, as it seemed prudent, into bonds, which continued to fall in the aftermath of the Fed's announcement.

By the end of the session, stocks had put in severe losses once again, with the Dow leading the way lower. Bonds reacted by rallying sharply, the 10-year-note finishing at its lowest yield - 2.68% - in more than two months. In addition to bonds, the main beneficiary of the Fed's reckless monetary policy at this juncture were precious metals, as gold and silver rallied throughout the day.

What becomes of equities, sovereign currencies and the global economy as the Federal Reserve says good-bye to Ben Bernanke (this was his final FOMC meeting as Fed chairman) and hello to Janet Yellen, is now an open question, though with obvious clues.

If the Fed continues to taper its bond purchases by an additional $10 billion per month, they would be completely out of the market sometime around September, though it is unlikely that the Fed's path will be so resolute and straightforward. Already, it's apparent that stocks are going to suffer in the short term, while bonds enjoy a day or two in the sun. With returns on equities becoming more and more risky endeavors, bonds will appear as a safe have, forcing more investors to rush in, thus, sending yields lower.

While a crash in the equity market may not exactly be what the fed had in mind, it may be unavoidable, as there is no neat way to unwind their massive QE program which unfolded over the past five years and should come to an end. As reckless as was Bernanke's policy directives of QE and ZIRP, unwinding these programs is going to cause massive economic disruptions and further fuel a gathering global deflation trade. It only makes sense. If the Fed withdraws liquidity, economies will suffer. At least it's a plan that makes some sense, though nobody really wants to endure the pain that comes from such an unwinding. In the long run, it may be the only way back to something resembling normalcy.

The pain will be acute - and already has been so - in emerging markets, where most of the hot money had been headed during the Fed's money-printing spree. Look for developed nations to maintain an aura of stability, while the rest of the world, in places as diverse as South Africa, Turkey, Argentina, Brazil, Indonesia, Mexico, India and eventually, China, become somewhat ungled, economically-speaking.

With money fleeing these former hotbeds of investment, their currencies will devalue against the rest of the developed world, Japan, the US and Europe remaining as the centrist states and most stable currencies... for a while. The risk is contagion from the emerging markets into the developed, as the destruction of deflation engulfs the globe.

Bonds should fare well. An expectation of the US 10-year note below two percent would be rational. However, carry trades, such as a Euro-Yen or Dollar-Yen might lose much of their luster, the better plays to be short the emerging currencies.

Of course, with dislocations of capital everywhere, gold and silver should be afforded a top-shelf position, though their advance will, as always, be suppressed by the concerted efforts of the central banks. Still, in a devaluing environment, the ultimate price of the precious metals, as measured against various currencies, may indeed become a top choice for wealth preservation.

With the current path of the Fed set in place (for now, because they can, have, and will move the goal posts), it would be safe to conclude that the bull market in stocks has come to an abrupt end and money in 401k and other accounts of storage will become victims of a nasty, clawing bear that has no regard for the future, only a perception of the unfolding present, complete with companies that are presently overvalued, have limited earnings growth potential and have to be unwound.

Unless the major indices can find a way to turn the tide and rally past recent highs, the bull market, spurred on by vast wasted sums of money from the Federal Reserve and other sources, is over.

From a technical perspective, Wednesday's trade was an outright disaster. Declining issues led advancers by a 7:2 margin and new lows exceeded new highs for the third day in the last four.

DOW 15,738.79, -189.77 (-1.19%)
NASDAQ 4,051.43, -46.53 (-1.14%)
S&P 1,774.20, -18.30 (-1.02%)
10-Yr Note 100.26, +0.97 (+0.97%) Yield: 2.68%
NASDAQ Volume 2.05 Bil
NYSE Volume 3.93 Bil
Combined NYSE & NASDAQ Advance - Decline: 1289-4441
Combined NYSE & NASDAQ New highs - New lows: 66-128
WTI crude oil: 97.36, -0.05
Gold: 1,262.20, +11.40
Silver: 19.55, +0.049
Corn: 427.50, -4.50

Fed Tapers Bond Purchases, Loosens Policy Guidance; Markets Love It

In a masterstroke of monetary legerdemain, outgoing Federal Reserve chairman Ben Bernanke delivered a final, resonant chord to his easy money policy of the past five years, announcing a reduction in the level of MBS and treasury bond purchases while simultaneously changing the guidance for rate policy going forward.

What the Fed has decided to do was to strike a delicate balance between the two policy initiatives currently employed. Bond purchases will henceforth be reduced from $85 billion to $75 Billion per month, shaving $5 billion from MBS and $5 billion from treasury purchases.

In its policy statement, however, the Fed took a different direction, emphasizing that the federal funds rate would remain at zero to 0.25% beyond the time at which unemployment falls below 6.5%. In other words, the Fed, as is their usual mode of operation, changed the game or moved the goal posts in terms of policy in order to accommodate a lower amount of bond purchases, in effect, maintaining equilibrium.

What the Fed is saying, somewhat tongue in cheek, is that their bond purchasing program (QE) has not quite brought about the desired results. The economy is not improving as rapidly as they anticipated, if at all, but, in order to not upset capital and equity markets with their bond purchase "tapering," they decided to loosen the language surrounding any future decision to raise interest rates.

It was quite the nifty move by the hands at the Fed, and both bond and stock markets behaved well along the lines anticipated by the manipulators of the world's money supply.

Stocks rose gratuitously, with the Dow and S&P closing at all-time highs; bonds remained distinctly calm. It was the perfect end to a reign of easy money that Bernanke has overseen, and gave the next man up, Janet Yellen, direction in which to pursue the Fed's policy directives.

The long and short of all the hype and hoopla over this final Fed meeting of the year and the last press conference by Mr. Bernanke is that the status quo was maintained and will be maintained for the foreseeable future. During his presser, the Chairman spoke of low inflation through 2016, with unemployment coming down gradually over a similar time period.

While the inflation expectations are well below what the Fed desires (2-2 1/2%), the 6.5% unemployment threshold has essentially been removed from all future Fed calculus.

When the world completes a couple more trips around the sun, at this time two years from now, it's expected that the Fed will no longer be purchasing bonds to the excessive degree it is today, and that unemployment will be much closer to "normalcy" at or near five percent.

In the real world, should everything proceed as the Fed anticipates, the economy, with interest rates still moored at zero, with 5% unemployment, the economy would be growing at a ripping rate so rapid that inflation would once again become a real problem.

Would it be so. The chances of everything working in straight lines toward a normalized economy is nothing more than a Fed fantasy. There will be disruptions and distortions and quite possibly another recession. Additionally, believing that pressures and changes from other parts of the planet would not be disruptive, is the purest height of folly.

The Fed hasn't really changed much at all. Reducing bond purchases by $10 billion per month is nothing more than a rounding error in the larger scheme of things. The punchbowl of free fiat has been left at the Wall Street party. Nothing has changed other than possibly, perception, and the person sitting in the Fed chair will be different.

The monetary can just got kicked down the road quite a stretch further. The new normal gets extended until something breaks.

DOW 16,167.97, +292.71 (+1.84%)
NASDAQ 4,070.06, +46.38 (+1.15%)
S&P 1,810.65, +29.65 (+1.66%)
10-Yr Note 98.78, -0.29 (-0.29%) Yield: 2.89%
NASDAQ Volume 1.83 Bil
NYSE Volume 3.74 Bil
Combined NYSE & NASDAQ Advance - Decline: 4252-1467
Combined NYSE & NASDAQ New highs - New lows: 311-112
WTI crude oil: 97.80, +0.58
Gold: 1,235.00, +4.90
Silver: 20.06, +0.219
Corn: 425.00, -1.75

Markets Flat in Advance of Fed Announcement

With little movement in the major indices - or individual stocks, for that matter - it is evident to anyone watching or participating in equity and bond markets that the financial world anxiously awaits the policy statement from the FOMC tomorrow at 2:00 pm ET, in which the Fed may or may not announce the tapering of its bond purchasing program.

Currently stuck at monthly figures of $45 billion in treasury purchases and another $40 billion in MBS (mortgage-backed securities), signs that the Fed may have enough reliable data to begin scaling the program back are still ambiguous. There have been hints, predictions and all manner of speculation on what the Fed will announce via their final policy meeting of the year, but one thing remains certain: the Fed must begin to curtail this program soon, not only because it has been ineffective, but that it could also do (and may have already) damage to the fragile economy.

On Wall Street, there's widespread belief that a cut-back in bond purchases by the Federal Reserve would cause a dip in the equity indices, being that there would be less of the free champagne money flowing to the TBTF banks, but a growing suspicion that the extent of these bond purchases, with money going to the connected and already-well-heeled, may be causing a rift of considerable proportions between the monied interests of the financiers and the rest of the planet.

Income disparity, already at an extraordinarily-high rate preceding the crisis of 2008-09, has been exacerbated by the easy money put into the hands of the rich, a trend which may be leading to suspicion, distrust and eventually, class enmity.

So, with less than 24 hours before what may be a significant announcement, traders have chosen to sit upon their collective hands, leaving volume at some of the lowest levels of the year.

Wednesday's FOMC announcement should provide some pre-holiday fireworks. If not, markets could just as easily rally from relief as sell off from disappointment. Whatever the Fed has planned for tomorrow should affect everything from stock prices to mortgage rates.

DOW 15,875.26, -9.31 (-0.06%)
NASDAQ 4,023.68, -5.84 (-0.14%)
S&P 1,781.00, -5.54 (-0.31%)
10-Yr Note 99.05, +0.77 (+0.79%) Yield: 2.86%
NASDAQ Volume 1.59 Bil
NYSE Volume 2.82 Bil
Combined NYSE & NASDAQ Advance - Decline: 2593-2889
Combined NYSE & NASDAQ New highs - New lows: 154-117
WTI crude oil: 97.22, -0.26
Gold: 1,230.10, -14.30
Silver: 19.84, -0.261
Corn: 426.75, +3.50

Stocks Pop on Bad News from Philly Fed

Well, bad news for the economy is apparently good news for Wall Street once again.

The Philadelphia Fed's Index of business activity in the Mid-Atlantic region slowed significantly, according to the report issued today, which showed the index falling from 19.8 in October, to 6.5 in November, a drop that exceeded even the most pessimistic estimates.

The consensus was for the index to come in with a reading of 15.0, but the number was well below that. The convoluted thinking dominating the financial world today must have seen this as yet another sign of slowing economic activity, making it next to impossible for the Federal Reserve to begin slowing its monthly bond purchases from their current $85 billion per month.

Stocks, which were already showing healthy gains before the 10:00 am ET release, chopped their way higher throughout the session, with the Dow Jones Industrials ending the day at an all-time closing high.

With an eroding base economy and billions of created-out-of-thin-air dollars flooding the coffers of the primary dealers via the Fed, the market pricing mechanism is as broken as it has ever been in the history of economics.

Fantasy accounting, assets marked to nothing or anything, and all the other central bank meddling and criminality undertaken by Wall Street and global banking interests will eventually find its way back into the real world. The result may not be to the liking of anybody.

DOW 16,009.99, +109.17 (+0.69%)
NASDAQ 3,969.15, +47.88 (+1.22%)
S&P 1,795.85, +14.48 (+0.81%)
10-Yr Note 99.65, +0.48 (+0.49%)
NASDAQ Volume 1.64 Bil.
NYSE Volume 3.25 Bil.
Combined NYSE & NASDAQ Advance - Decline: 4246-1420
Combined NYSE & NASDAQ New highs - New lows: 327-102
WTI crude oil: 95.44, +1.59
Gold: 1,243.60, -14.40
Silver: 19.93, -0.124
Corn: 429.50, +4.25

Stocks Fall After October Fed Minutes Released; Deflation Commences

Just in case anyone forgot that the only thing that matters in this market is Federal Reserve policy, the message was forcefully driven home precisely at 2:00 pm ET, when the minutes from the last FOMC meeting were released.

Within those arcane discussions of all things monetary were warnings from more than a few members that tapering bond purchases by the Fed might begin sooner rather than later. Accepted thinking had been that the Fed would not taper until March, though after today, analysts are suggesting that December - just two weeks away - might mark the beginning of the end of the Fed's bond-buying spree.

While the cutback in bond purchases monthly may only be a decrease of $10 to $15 billion of the current $85 billion, Wall Street money-grubbers were spooked as usual at the suggestion that money would be anything other than nearly free to borrow.

Today's action in stocks shows just how fragile the 4 1/2-year-plus market rally is and how quickly paper profits may vanish if the Fed doesn't keep the money-printing machine going pedal to the metal.

It's a ridiculous market made up of ridiculous valuations and propositions, that, without Herculean-like support from the central bank, could fall apart in days or weeks.

The Fed will no doubt taper, the only remaining questions are when and by how much. Whatever the decision shall be, markets will not like it one bit, and the general economy may suffer even more than it already has as Wall Street will no doubt throw a massive hissy fit.

When it's all done with, when the Fed stops buying bonds altogether (when will that be, 2065?), either stocks or the US dollar (and maybe both) will be worth a lot less than they are today.

Lunatic policies by the Fed will be followed in time by equally hilarious conclusions to those misguided policies. The results will be a catastrophe financial markets have never seen before.

What is either amusing or distressing is the reaction in precious metal markets, which fell in concert with stocks and bonds. If the markets are correct, Fed tapering will be a deflationary event with magnificent outcomes ahead.

In the long term, the Fed cannot taper back on bond purchases because they have succeeded in crowding out the few remaining participants over the past four years. Deflations and defaults will be the most likely results, though emerging markets will feel the pain much sooner and to a much greater degree than established economies, though no nation will be spared the death spiral of deflation.

Dow 15,900.82, -66.21 (0.41%)
Nasdaq 3,921.27, -10.28 (0.26%)
S&P 500 1,781.37, -6.50 (0.36%)
10-Yr Bond 2.79%, +0.08
NYSE Volume 3,094,246,250
Nasdaq Volume 1,686,541,875
Combined NYSE & NASDAQ Advance - Decline: 2180-3428
Combined NYSE & NASDAQ New highs - New lows: 162-98
WTI crude oil: 93.33, -0.01
Gold: 1,258.00, -15.50
Silver: 20.06, 0.276
Corn: 425.25, -1.00

Stocks Split in Sloppy Session; Bond Yields Rising, Oil Sliding

Stocks slid at the opening bell, with the Dow down by as many as 117 points in the first half hour of trading, but quickly reversed direction at 10:00 am EST and continued a slow but steady gain the rest of the day.

Apparently, what turned stocks around was the October ISM Services reading, which came in at a solid 55.4, a full pint better than last month's data and a huge beat to the expected 54.0.

While questions concerning the veracity of these kinds of reports after the unusually-strong Chicago PMI data a week ago continue to swirl around, the beat on services - which is now the main production engine of the US, since we've hollowed out our manufacturing core and mostly export inflation - was enough for the Wall Street crowd to lift stocks off their lows.

That they were able to keep buying interest maintained for the remainder of the session was likely due to the usual POMO injection by the Fed, allowing for rampant speculation and unusually-high leverage.

While stocks were seeing the light of day - though the NASDAQ never quite made it into positive territory, bonds were getting slammed, up six bips in yield by the end of the day, as the gains following the end of the government shutdown are gradually being eroded. The closing level of 2.66% on the 10-year note was the highest in two-and-a-half weeks.

The big story happens to be in oil, which continues its retreat from $110/barrel highs just two months ago. Another $5.00 drop in the price of WTI will put oil into a bear market, a condition nobody has considered. While low oil prices relate positively to gas at the pump and is a boost for the economy, releasing more purchasing power, the underlying causes may be more nefarious and significant.

There is, at last, a supply-demand condition that is positive for the US, as more and more oil is being produced in North America, at the same time that demand is dwindling, or rather, has been dwindling for the past three to four years. Americans have tightened their collective belts and are much more careful about their driving habits these days, as lowered incomes have left less for transportation expenses. High unemployment also pays a part, as fewer people are driving to work five or six days a week.

So, while a period of lower gas prices is cause for celebration, the party may not be of the epic variety, with fewer participants and an overhang of disappointing economic circumstances.

Key numbers to watch tomorrow will be the MBA Mortgage Index (7:00 am), September Leading Indicators (10:00 am) and crude inventories (10:30 am).

Dow 15,618.22, -20.90 (0.13%)
Nasdaq 3,939.86, +3.27 (0.08%)
S&P 500 1,762.97, -4.96 (0.28%)
10-Yr Bond 2.66%, +0.06
NYSE Volume 3,485,473,500
Nasdaq Volume 1,899,388,750
Combined NYSE & NASDAQ Advance - Decline: 2064-3571
Combined NYSE & NASDAQ New highs - New lows: 248-74
WTI crude oil: 93.37, -1.25
Gold: 1,308.10, -6.60
Silver: 21.64, 0.064
Corn: 425.00, -1.25