Other than the idea that Chinese and US officials were "talking" about trade and tariffs, nothing much changed in the world of high finance during the week, though investors thought they heard the "all clear" whistle.
Major indices broke off a four-week losing streak, bounding higher by 2.5 to three precent over the course of the week, heading into the Labor Day holiday.
The end of August marks the unofficial end of summer, back to school activity, and a return from the idyllic Hamptons or other leisure locales of the Wall Street hard-liners, the big boys with big money who guide trades, firms and financial fates.
Over the holiday weekend, the US slapped on the promised tariffs on September 1, with China responding with some of their own on US imports. That ran in stark contrast to the trading sentiment from the week past and suggests that the gains may be fleeting.
As the opening approaches for the first trading day of September, US futures are sliding. Anticipation of easing tensions in the trade wars are fading fast, though the narrative that the trade and tariff foibles of Trump and Xi are the sole motivator for moving equities is likely a contrived one.
What really worries Wall Street and should concern anybody with a pension tied to a 401k or other stock market vehicle is the shaky state of global commerce. The World Bank, IMF, and pundits far and wide have been predicting a recession for well over a year. Though the timing of such a downturn is far from settled science, evidence continues to build. More than just recession concerns are deeper fears that central banks have run out of ammunition with which to save the world again.
Interest rates, long regarded as the primary tool of central banks to stave off natural downturns in the business cycle are already low and many negative, prompting unbelievers to portend the end of central bank monetary hegemony. While such calls for an impending end to the global financial scheme are almost always present, this time appears to hold some truth.
Fractional reserve lending of debt has impoverished the lower and middle classes, expanded wealth inequality, and may now be acting as a brake on the system as money movement is nearing stall speed. It's been nearly 50 years since President Nixon closed the gold window and set the world on a path of unbacked, floating currencies. The result has been a revolving bubble, boom-bust scenario, punctuated by massive counterfeiting by coordinated central banking interests, each successive round more severe than the last.
Considering the depth of the last crisis in 2007-2009, central banks are desperate to keep the financial plates spinning for as long as possible, because the next crisis may well be their last.
These prospects are not pretty for central banks, or, for that matter, anybody. However, change is always in the wind, and the wind is blowing with a hot breath.
2001 was a malinvestment correction. 2008 was a liquidity affair. 202---? will be a currency crisis that will shake the foundations of monetary policy.
At the Close, Friday, August 30, 2019:
Dow Jones Industrial Average: 26,403.28, +41.08 (+0.16%)
NASDAQ: 7,962.88, -10.51 (-0.13%)
S&P 500: 2,926.46, +1.88 (+0.06%)
NYSE Composite: 12,736.88, +32.88 (+0.26%)
For the Week:
Dow: +774.38 (+3.02%)
NASDAQ: +211.12 (+2.72%)
S&P 500: +79.35 (+2.79%)
NYSE Composite: +320.43 (+2.58%)
Showing posts with label crisis. Show all posts
Showing posts with label crisis. Show all posts
Tuesday, September 3, 2019
Sunday, December 23, 2018
WEEKEND WRAP: Stocks Wrecked, Bull Market Finished; Bears' Claws Are Out
If the week prior to last was characterized as one in which "the wheels fell off" (Money Daily, 12/16/18), the most recent week was nothing short of a full-blown train wreck.
Everything was on sale, but especially stocks, as the Fed raised rates, the US federal government ground to a halt over a $5 billion border wall, and investors were spooked by collapsing long-term interest rates and the specter of a recession in coming months.
More than anything else, however, stocks were on sale mostly because they were being perceived as overpriced, and by most accounts they were and still are. According to Robert Shiller's CAPE index, the week ended with the Shiller PE ratio for the S&P 500 at 26.75, down from the peak of 30 two weeks ago, but still well above the mean (16.59) and the median (15.69) levels.
This is how bubbles are pricked, and, as Doug Noland candidly attests, "There is never a good time to pierce a Bubble." More from Noland:
Noland's entire Credit Bubble Bulletin commentary can be seen here.
If Noland's perception is accurate (and there's little reason to doubt it), this week's cascading declines are merely the end of the first act in what is likely a three-act drama to be played out over the next 12-18 months. Surely, the tremors from February and March were early warnings that the persistent bull market was coming to a conclusion.
October's declines were blamed by some analysts - incorrectly - on the lack of stock buybacks during the "quiet period," and were nothing about which to be worried. Obviously, that analysis was short-sigthed and based upon the bubble hypocrisy that has guided markets since the Great Financial Crisis of 2008-09.
December's nosedive was pretty predictable. Stocks hadn't shown any inclination toward the upside for months and there wasn't a good catalyst for investors, nothing even remotely resemblant of a buying opportunity. Of course, some too the "buy the dip" bait a few times this year and have been destroyed. That concept is a dead doornail for the time being. Selling into any strength is likely to be the prevailing rear-guard action.
Once 2018 comes to an end - in just five more trading days - there will be some regrouping, repositioning, but until there's resolution of some basic issues (the Wall, Brexit, China, tariffs), there isn't going to be any kind of rally. Gains will be hard-fought, and sellers will be eager on short-term wins. The second phase of the selloff will last well past January, into the summer and possibly the fall before the endgame commences, with sellers capitulating en masse. By this time next year it may be nearing a bottom some 40-60 percent below the all-time highs. Investor confidence will have been at first shaken, then eroded, and finally, shattered. Wall Street will have a crisis of its own making, and the economy will be embarking into recession.
Markets have come full circle. Central banks have decided that the experiments of QE, ZIRP, and NIRP which propelled stocks to dizzying heights, are over, their purpose achieved, and now comes the hard work of withdrawing some level of liquidity from markets in an attempt to normalize markets.
The problems lie in execution. It's not going to be easy to take corporations off the baby bottle of leveraged stock buybacks which blew up expectations and prices but caused serious long-term harm to capital structures. This current crisis may turn out to be worse than the sub-price fiasco or the dotcom malaise simply because it involves so many companies that have gutted their balance sheets and will have no other recourse than to slash production, wages, jobs, capital expenditures or all of the above.
This week was a full stop.
There aren't going to be any more bailouts, white knights, back-room deals or "Fed Put." The coming regime is going to be one of hard and cold capitalism, where the strong get stronger and the weak are slaughtered. Wall Street brokerages are sure to be among the most celebrated casualties when everybody realizes these heroes of the past ten years aren't all that bright and that there aren't that many good stock pickers in down markets. The financial industry, already under siege, is about to be breached and downsized to more human and humane proportions.
There's only so much one can say about stock routs. The numbers are there for perusal and they are horrifying enough all by themselves. Hashing over the events of the week, as stocks slid, then rallied and slid more, and finally crashed on a Friday afternoon would be little more than overkill.
It was a very, very bad week, the worst since 2008, and some say, since the Great Depression. It may not have been the worst we will witness however, as this is only the beginning of the bear market.
Dow Jones Industrial Average December Scorecard:
At the Close, Friday, December 21, 2018:
Dow Jones Industrial Average: 22,445.37, -414.23 (-1.81%)
NASDAQ: 6,332.99, -195.42 (-2.99%)
S&P 500: 2,416.62, -50.80 (-2.06%)
NYSE Composite: 11,036.84, -185.96 (-1.66%)
For the Week:
Dow: -1655.14 (-6.87%)
NASDAQ: -577.67 (-8.36%)
S&P 500: -183.33 (-7.05%)
NYSE Composite: -718.54 (-6.11%)
Everything was not gloom and doom, however. Here's Darlene Love, in one of her many appearances on the Late Show with David Letterman, performing "Chirstmas (Baby Please Come Home)." This is one of her best.
Everything was on sale, but especially stocks, as the Fed raised rates, the US federal government ground to a halt over a $5 billion border wall, and investors were spooked by collapsing long-term interest rates and the specter of a recession in coming months.
More than anything else, however, stocks were on sale mostly because they were being perceived as overpriced, and by most accounts they were and still are. According to Robert Shiller's CAPE index, the week ended with the Shiller PE ratio for the S&P 500 at 26.75, down from the peak of 30 two weeks ago, but still well above the mean (16.59) and the median (15.69) levels.
Shiller PE ratio is based on average inflation-adjusted earnings from the previous 10 years, known as the Cyclically Adjusted PE Ratio (CAPE Ratio), Shiller PE Ratio, or PE 10
This is how bubbles are pricked, and, as Doug Noland candidly attests, "There is never a good time to pierce a Bubble." More from Noland:
"Expiration for the aged “Fed put” was long past due. For too long it has been integral to precarious Bubble Dynamics. It has promoted speculation and speculative leverage. It is indispensable to a derivatives complex that too often distorts, exacerbates and redirects risk. The “Fed put” has been integral to momentous market misperceptions, distortions and structural maladjustment. It has been fundamental to the precarious “moneyness of risk assets,” the momentous misconception key to Trillions flowing freely into ETFs and other passive “investment” products and strategies. It was central to a prolonged financial Bubble that over time imparted major structural impairment upon the U.S. Bubble Economy."
Noland's entire Credit Bubble Bulletin commentary can be seen here.
If Noland's perception is accurate (and there's little reason to doubt it), this week's cascading declines are merely the end of the first act in what is likely a three-act drama to be played out over the next 12-18 months. Surely, the tremors from February and March were early warnings that the persistent bull market was coming to a conclusion.
October's declines were blamed by some analysts - incorrectly - on the lack of stock buybacks during the "quiet period," and were nothing about which to be worried. Obviously, that analysis was short-sigthed and based upon the bubble hypocrisy that has guided markets since the Great Financial Crisis of 2008-09.
December's nosedive was pretty predictable. Stocks hadn't shown any inclination toward the upside for months and there wasn't a good catalyst for investors, nothing even remotely resemblant of a buying opportunity. Of course, some too the "buy the dip" bait a few times this year and have been destroyed. That concept is a dead doornail for the time being. Selling into any strength is likely to be the prevailing rear-guard action.
Once 2018 comes to an end - in just five more trading days - there will be some regrouping, repositioning, but until there's resolution of some basic issues (the Wall, Brexit, China, tariffs), there isn't going to be any kind of rally. Gains will be hard-fought, and sellers will be eager on short-term wins. The second phase of the selloff will last well past January, into the summer and possibly the fall before the endgame commences, with sellers capitulating en masse. By this time next year it may be nearing a bottom some 40-60 percent below the all-time highs. Investor confidence will have been at first shaken, then eroded, and finally, shattered. Wall Street will have a crisis of its own making, and the economy will be embarking into recession.
Markets have come full circle. Central banks have decided that the experiments of QE, ZIRP, and NIRP which propelled stocks to dizzying heights, are over, their purpose achieved, and now comes the hard work of withdrawing some level of liquidity from markets in an attempt to normalize markets.
The problems lie in execution. It's not going to be easy to take corporations off the baby bottle of leveraged stock buybacks which blew up expectations and prices but caused serious long-term harm to capital structures. This current crisis may turn out to be worse than the sub-price fiasco or the dotcom malaise simply because it involves so many companies that have gutted their balance sheets and will have no other recourse than to slash production, wages, jobs, capital expenditures or all of the above.
This week was a full stop.
There aren't going to be any more bailouts, white knights, back-room deals or "Fed Put." The coming regime is going to be one of hard and cold capitalism, where the strong get stronger and the weak are slaughtered. Wall Street brokerages are sure to be among the most celebrated casualties when everybody realizes these heroes of the past ten years aren't all that bright and that there aren't that many good stock pickers in down markets. The financial industry, already under siege, is about to be breached and downsized to more human and humane proportions.
There's only so much one can say about stock routs. The numbers are there for perusal and they are horrifying enough all by themselves. Hashing over the events of the week, as stocks slid, then rallied and slid more, and finally crashed on a Friday afternoon would be little more than overkill.
It was a very, very bad week, the worst since 2008, and some say, since the Great Depression. It may not have been the worst we will witness however, as this is only the beginning of the bear market.
Dow Jones Industrial Average December Scorecard:
| Date | Close | Gain/Loss | Cum. G/L |
| 12/3/18 | 25,826.43 | +287.97 | +287.97 |
| 12/4/18 | 25,027.07 | -799.36 | -511.39 |
| 12/6/18 | 24,947.67 | -79.40 | -590.79 |
| 12/7/18 | 24,388.95 | -558.72 | -1149.51 |
| 12/10/18 | 24,423.26 | +34.31 | -1115.20 |
| 12/11/18 | 24,370.24 | -53.02 | -1168.22 |
| 12/12/18 | 24,527.27 | +157.03 | -1011.19 |
| 12/13/18 | 24,597.38 | +70.11 | -941.08 |
| 12/14/18 | 24,100.51 | -496.87 | -1437.95 |
| 12/17/18 | 23,592.98 | -507.53 | -1945.58 |
| 12/18/18 | 23,675.64 | +82.66 | -1862.92 |
| 12/19/18 | 23,323.66 | -351.98 | -2214.90 |
| 12/20/18 | 22,859.60 | -464.06 | -2678.96 |
| 12/21/18 | 22,445.37 | -414.23 | -3093.19 |
At the Close, Friday, December 21, 2018:
Dow Jones Industrial Average: 22,445.37, -414.23 (-1.81%)
NASDAQ: 6,332.99, -195.42 (-2.99%)
S&P 500: 2,416.62, -50.80 (-2.06%)
NYSE Composite: 11,036.84, -185.96 (-1.66%)
For the Week:
Dow: -1655.14 (-6.87%)
NASDAQ: -577.67 (-8.36%)
S&P 500: -183.33 (-7.05%)
NYSE Composite: -718.54 (-6.11%)
Everything was not gloom and doom, however. Here's Darlene Love, in one of her many appearances on the Late Show with David Letterman, performing "Chirstmas (Baby Please Come Home)." This is one of her best.
Wednesday, May 30, 2018
Will May End With A Bang Or A Thud? Italy And Tommy Robinson Creating European Chaos
Following a three-day weekend, US markets caught up to the panic that was gripping Europe, adding onto the global rout in stocks by sending the Dow Jones Industrials lower by nearly 400 points.
Tuesday's big fallout left the Dow's gains for the month at great risk. The Industrial Average was close to erasing all of May's gains before a late-stage rally brought the index back up by 147 points into the close.
With only two trading days left in the month, May looks to follow April with a gain of less than one percent. April's total gain was a mere 50 points, following massive losses in February (-1120.19) and March (-926.09). With Europe's problems far from over (Italy being the main culprit), selling in May could turn out to be the most prudent - if not cliched - advice as global events are continuing to tarnish the shine on America's nascent economic rebirth.
Italians, struggling with immigration issues, have seen their government devolve into autocracy, as president Sergio Mattarella unilaterally quashed the creation of a right-leaning government coalition.
Chaos in Italy has sparked a run on bonds and European banks, spreading to stocks. On Tuesday, most of the major national exchanges saw losses in excess of one percent, adding onto previous declines.
News out of Britain also contributed to the sea of madness, as authorities arrested activist Tommy Robinson and immediately sentenced him to 13 months in prison, adding a media ban on his arrest and the pedophile grooming trial on which he was attempting to report. The unjustified jailing of Robinson has sparked outrage and rallies for his release throughout Britain and some European capitals.
Overarching political events are merely masking the underlying weakness in global markets which still seem incapable of forgetting the Great Financial Crisis of 2008 and Europe's own mini-crisis in 2011. Since little to nothing was done to correct the issues which plagued the world's largest economies, the past appears to have risen from the crypt and threatens to plunge economics and nations into another depressing episode.
With the Dow taking its worst loss in over a month, January 23rd's all-time high of 26,616.71 is now four months off in the fading distance. Bear market dynamics continue to drive a stake into the heart of the "recovery" narrative.
At the Close, Tuesday, May 29, 2018:
Dow Jones Industrial Average: 24,361.45, -391.64 (-1.58%)
NASDAQ: 7,396.59, -37.26 (-0.50%)
S&P 500: 2,689.86, -31.47 (-1.16%)
NYSE Composite: 12,442.69, -192.25 (-1.52%)
Tuesday's big fallout left the Dow's gains for the month at great risk. The Industrial Average was close to erasing all of May's gains before a late-stage rally brought the index back up by 147 points into the close.
With only two trading days left in the month, May looks to follow April with a gain of less than one percent. April's total gain was a mere 50 points, following massive losses in February (-1120.19) and March (-926.09). With Europe's problems far from over (Italy being the main culprit), selling in May could turn out to be the most prudent - if not cliched - advice as global events are continuing to tarnish the shine on America's nascent economic rebirth.
Italians, struggling with immigration issues, have seen their government devolve into autocracy, as president Sergio Mattarella unilaterally quashed the creation of a right-leaning government coalition.
Chaos in Italy has sparked a run on bonds and European banks, spreading to stocks. On Tuesday, most of the major national exchanges saw losses in excess of one percent, adding onto previous declines.
News out of Britain also contributed to the sea of madness, as authorities arrested activist Tommy Robinson and immediately sentenced him to 13 months in prison, adding a media ban on his arrest and the pedophile grooming trial on which he was attempting to report. The unjustified jailing of Robinson has sparked outrage and rallies for his release throughout Britain and some European capitals.
Overarching political events are merely masking the underlying weakness in global markets which still seem incapable of forgetting the Great Financial Crisis of 2008 and Europe's own mini-crisis in 2011. Since little to nothing was done to correct the issues which plagued the world's largest economies, the past appears to have risen from the crypt and threatens to plunge economics and nations into another depressing episode.
With the Dow taking its worst loss in over a month, January 23rd's all-time high of 26,616.71 is now four months off in the fading distance. Bear market dynamics continue to drive a stake into the heart of the "recovery" narrative.
| Date | Close | Gain/Loss | Cum. G/L |
| 5/1/18 | 24,099.05 | -64.10 | -64.10 |
| 5/2/18 | 23,924.98 | -174.07 | -238.17 |
| 5/3/18 | 23,930.15 | +5.17 | -233.00 |
| 5/4/18 | 24,262.51 | +332.36 | +99.36 |
| 5/7/18 | 24,357.32 | +94.81 | +194.17 |
| 5/8/18 | 24,360.21 | +2.89 | +197.06 |
| 5/9/18 | 24,542.54 | +182.33 | +379.39 |
| 5/10/18 | 24,739.53 | +196.99 | +576.38 |
| 5/11/18 | 24,831.17 | +91.64 | +668.02 |
| 5/14/18 | 24,899.41 | +68.24 | +736.26 |
| 5/15/18 | 24,706.41 | -193.00 | +543.26 |
| 5/16/18 | 24,768.93 | +62.52 | +605.78 |
| 5/17/18 | 24,713.98 | -54.95 | +550.73 |
| 5/18/18 | 24,715.09 | +1.11 | +551.84 |
| 5/21/18 | 25,013.29 | +298.20 | +850.04 |
| 5/22/18 | 24,834.41 | -178.88 | +671.16 |
| 5/23/18 | 24,886.81 | +52.40 | +723.56 |
| 5/24/18 | 24,811.76 | -75.05 | +648.51 |
| 5/25/18 | 24,753.09 | -58.67 | +589.84 |
| 5/29/18 | 24,361.45 | -391.64 | +198.20 |
At the Close, Tuesday, May 29, 2018:
Dow Jones Industrial Average: 24,361.45, -391.64 (-1.58%)
NASDAQ: 7,396.59, -37.26 (-0.50%)
S&P 500: 2,689.86, -31.47 (-1.16%)
NYSE Composite: 12,442.69, -192.25 (-1.52%)
Sunday, May 27, 2018
Weekend Wrap: Oil Slips Lower, Stocks Stagnate, Bond Yields Plunge
On Friday, the Dow Jones Industrial Average bottomed out at 2:45 pm EDT, down by 124 points on the day. From that point - with an hour and fifteen minutes remaining in the session - stocks magically rose by 68 points to end the day down marginally.
This pattern had been tested on both Wednesday and Thursday, as stocks took deep losses on both days, though Friday's low was much later in the session than it was the previous two days. Friday's low was also more shallow, the implication being that a major force (such as the - hush now - PPT) came to the market's aid in the nick of time.
That there might have been intervention on Friday, and indeed, on all three days, is not far-fetched. Nobody in positions of power were interested in a market crash just before the Memorial Day weekend. That is being saved for a more opportune time, such as just prior to the November mid-term elections.
If this is too much intrigue and conspiracy theory for you, dear reader, you can stop reading right here, though the naivety of burying one's head in a sand dune isn't going to make you any smarter, nor is it going to grant you immunity from market dynamics, be they either contrived or natural.
As seen in the scorecard and weekly data below, the Dow ended with a small 38-point gain and is lower than where it was two weeks ago, the bulk of May's advance made during an eight-day run starting on the 3rd and ending on the 14th, which was, notably a Monday. Tuesday the 15th saw the streak ended with a thud of -193 points. Since then, stocks have essentially gone nowhere and this week saw minor advances on the major indices with the notable exception of the NYSE Composite, which suffered a loss commensurate with the gain on the NASDAQ.
Confused? Not yet. Trading in stocks, always a risky business, is about to become something that defies quantification. Money is moving around markets at a dizzying rate, fueled by geo-politics and, in the main, a massive amount of misunderstanding of how markets are being distorted and defiled.
It's now more than three months since the waterfall effects of February which sent stocks into a state of bearish hibernation or paralysis from which they have yet to recover. The longer stocks fail to reflate towards their all-time highs the stronger the argument for a bear market becomes.
The problem with a bear market at this juncture is that stocks continue to underpin all manner of funds, especially public employee pensions, which are already massively underfunded. An extended market decline would push these funds further underwater and possibly trigger a liquidity trap which would make the 2008-09 financial crisis appear tame by comparison.
States like Illinois, California, Connecticut and New Jersey have the biggest underfunding problem and a bear market would blow out all of their actuarial projections. Not that these massive pension funds are going to go broke right away, rather they would see their future positions eroded to a point at which raising taxes, seeking higher employee contributions, reduction in services, or slashing payouts to retires will all be proposals on the table in an effort to salvage the failed over-promises of delinquent politicians.
A pension crisis might be just the tip of the proverbial iceberg that is the cumulative national debt shared by federal and state governments, businesses and individuals. Of the three, private businesses are most likely the best insulated from a market downturn and subsequent liquidity emergency, though they are by no means standing on safe ground. With the average American family or individual deeply indebted, businesses large and small will suffer from decreased volume and a general deterioration of business conditions. Such conditions are already well underway in small, rural communities lacking sufficiently large markets and audiences. Some largely Northeast and Midwest areas have never recovered from the Great Financial Crisis of a decade ago and another negative event could be potentially devastating. Government would be unable to collect taxes from an overburdened population and businesses would be faced with the indelicate choices of laying off employees, cutting back on goods or services or closing the doors for good.
The heavy reliance on stocks alone to lead the nation out of the deep depression of 2008 has set the stage for a rather unwelcome asset collapse and recent stock market activity is serving fair warning.
The only data this week that suggested a possible way out or easing of the tightening conditions (which the Fed is fueling with reckless abandon) were the decline in oil prices (from above $72 to below $68) and the crunching of yields in the treasury market. The 10-year note topped out at 3.11% before ending the week massively lower, at 2.93%, a huge move in a significant market.
What oil and bonds are foretelling is nothing less than a full-blown recession within six to eight months, signaling that consumers cannot sustain demand for energy and businesses and government cannot withstand rising borrowing costs.
All of these conditions are contributing to a very volatile situation which, thus far, has been contained by the Fed and the deep underground traders, attempting to keep equity prices at premiums. The chances of this lasting though the summer into the fall are Slim to None, and Slim has left town.
Dow Jones Industrial Average May Scorecard:
At the Close, Friday, May 25, 2018:
Dow Jones Industrial Average: 24,753.09, -58.67 (-0.24%)
NASDAQ: 7,433.8535, +9.42 (+0.13%)
S&P 500: 2,721.33, -6.43 (-0.24%)
NYSE Composite: 12,634.94, -61.75 (-0.49%)
For the Week:
Dow: +38.00 (+0.15%)
NASDAQ: +79.51 (+1.08%)
S&P 500: +8.36 (+0.31%)
NYSE Composite: -82.48 (-0.65%)
This pattern had been tested on both Wednesday and Thursday, as stocks took deep losses on both days, though Friday's low was much later in the session than it was the previous two days. Friday's low was also more shallow, the implication being that a major force (such as the - hush now - PPT) came to the market's aid in the nick of time.
That there might have been intervention on Friday, and indeed, on all three days, is not far-fetched. Nobody in positions of power were interested in a market crash just before the Memorial Day weekend. That is being saved for a more opportune time, such as just prior to the November mid-term elections.
If this is too much intrigue and conspiracy theory for you, dear reader, you can stop reading right here, though the naivety of burying one's head in a sand dune isn't going to make you any smarter, nor is it going to grant you immunity from market dynamics, be they either contrived or natural.
As seen in the scorecard and weekly data below, the Dow ended with a small 38-point gain and is lower than where it was two weeks ago, the bulk of May's advance made during an eight-day run starting on the 3rd and ending on the 14th, which was, notably a Monday. Tuesday the 15th saw the streak ended with a thud of -193 points. Since then, stocks have essentially gone nowhere and this week saw minor advances on the major indices with the notable exception of the NYSE Composite, which suffered a loss commensurate with the gain on the NASDAQ.
Confused? Not yet. Trading in stocks, always a risky business, is about to become something that defies quantification. Money is moving around markets at a dizzying rate, fueled by geo-politics and, in the main, a massive amount of misunderstanding of how markets are being distorted and defiled.
It's now more than three months since the waterfall effects of February which sent stocks into a state of bearish hibernation or paralysis from which they have yet to recover. The longer stocks fail to reflate towards their all-time highs the stronger the argument for a bear market becomes.
The problem with a bear market at this juncture is that stocks continue to underpin all manner of funds, especially public employee pensions, which are already massively underfunded. An extended market decline would push these funds further underwater and possibly trigger a liquidity trap which would make the 2008-09 financial crisis appear tame by comparison.
States like Illinois, California, Connecticut and New Jersey have the biggest underfunding problem and a bear market would blow out all of their actuarial projections. Not that these massive pension funds are going to go broke right away, rather they would see their future positions eroded to a point at which raising taxes, seeking higher employee contributions, reduction in services, or slashing payouts to retires will all be proposals on the table in an effort to salvage the failed over-promises of delinquent politicians.
A pension crisis might be just the tip of the proverbial iceberg that is the cumulative national debt shared by federal and state governments, businesses and individuals. Of the three, private businesses are most likely the best insulated from a market downturn and subsequent liquidity emergency, though they are by no means standing on safe ground. With the average American family or individual deeply indebted, businesses large and small will suffer from decreased volume and a general deterioration of business conditions. Such conditions are already well underway in small, rural communities lacking sufficiently large markets and audiences. Some largely Northeast and Midwest areas have never recovered from the Great Financial Crisis of a decade ago and another negative event could be potentially devastating. Government would be unable to collect taxes from an overburdened population and businesses would be faced with the indelicate choices of laying off employees, cutting back on goods or services or closing the doors for good.
The heavy reliance on stocks alone to lead the nation out of the deep depression of 2008 has set the stage for a rather unwelcome asset collapse and recent stock market activity is serving fair warning.
The only data this week that suggested a possible way out or easing of the tightening conditions (which the Fed is fueling with reckless abandon) were the decline in oil prices (from above $72 to below $68) and the crunching of yields in the treasury market. The 10-year note topped out at 3.11% before ending the week massively lower, at 2.93%, a huge move in a significant market.
What oil and bonds are foretelling is nothing less than a full-blown recession within six to eight months, signaling that consumers cannot sustain demand for energy and businesses and government cannot withstand rising borrowing costs.
All of these conditions are contributing to a very volatile situation which, thus far, has been contained by the Fed and the deep underground traders, attempting to keep equity prices at premiums. The chances of this lasting though the summer into the fall are Slim to None, and Slim has left town.
Dow Jones Industrial Average May Scorecard:
| Date | Close | Gain/Loss | Cum. G/L |
| 5/1/18 | 24,099.05 | -64.10 | -64.10 |
| 5/2/18 | 23,924.98 | -174.07 | -238.17 |
| 5/3/18 | 23,930.15 | +5.17 | -233.00 |
| 5/4/18 | 24,262.51 | +332.36 | +99.36 |
| 5/7/18 | 24,357.32 | +94.81 | +194.17 |
| 5/8/18 | 24,360.21 | +2.89 | +197.06 |
| 5/9/18 | 24,542.54 | +182.33 | +379.39 |
| 5/10/18 | 24,739.53 | +196.99 | +576.38 |
| 5/11/18 | 24,831.17 | +91.64 | +668.02 |
| 5/14/18 | 24,899.41 | +68.24 | +736.26 |
| 5/15/18 | 24,706.41 | -193.00 | +543.26 |
| 5/16/18 | 24,768.93 | +62.52 | +605.78 |
| 5/17/18 | 24,713.98 | -54.95 | +550.73 |
| 5/18/18 | 24,715.09 | +1.11 | +551.84 |
| 5/21/18 | 25,013.29 | +298.20 | +850.04 |
| 5/22/18 | 24,834.41 | -178.88 | +671.16 |
| 5/23/18 | 24,886.81 | +52.40 | +723.56 |
| 5/24/18 | 24,811.76 | -75.05 | +648.51 |
| 5/25/18 | 24,753.09 | -58.67 | +589.84 |
At the Close, Friday, May 25, 2018:
Dow Jones Industrial Average: 24,753.09, -58.67 (-0.24%)
NASDAQ: 7,433.8535, +9.42 (+0.13%)
S&P 500: 2,721.33, -6.43 (-0.24%)
NYSE Composite: 12,634.94, -61.75 (-0.49%)
For the Week:
Dow: +38.00 (+0.15%)
NASDAQ: +79.51 (+1.08%)
S&P 500: +8.36 (+0.31%)
NYSE Composite: -82.48 (-0.65%)
Thursday, November 1, 2012
ADP Jobs Data Sends Stocks Soaring; Hurricane Sandy Forgotten by Wall Street
Apparently, if we use Wall Street as a proxy for the general economy (which has proven over and over again to NOT be the case), the damages from Hurricane Sandy will not cost corporations anything. In fact, today's gains all but forgot that most of the Eastern coastline of the United States - from Maryland and Delaware to Connecticut - are federal disaster areas.
All that mattered to Wall Street was getting stocks higher, putting on a good face, especially after the "new methodology" of the ADP private payroll survey - with an assist from Moody's (now there's a clean bunch) - is acceptable in advance of Friday's October non-farm payroll data.
The ADP report was hardly believable, showing that there were 158,000 new private sector jobs created in the month of October. This makes the estimates for NFP of 250,000 tomorrow a slam dunk and possibly already priced in.
Off the ADP news, which was released at 8:15 am EDT, stocks shot up at the open, ramped to highs between 10:00 and 11:00 am and held their gains well into the close.
Everything's great! Except that real unemployment is somewhere around 15%, the US borrows 40% of every dollar it spends and fraud and manipulation by banks and corporations continues to go unchecked. Not to worry, we're going to elect Mitt Romney, who will fix it all, because the fix is in, at least according to Wall Street and Fox news.
There's another scandal brewing, however, that will overshadow everything up to this point in the now-four-year-old financial crisis, involving gold, specifically, the gold stored in vaults in New York and London for other nations. Germany has been trying to get a peek at their gold, but has been continually rebuffed.
Jim Willie's latest salvo at the banking elite has a very good take on the matters at hand.
Here's what one of the commenters had to say about gold and bankers:
Kind of says it all, doesn't it?
Dow 13,232.62, +136.16 (1.04%)
NASDAQ 3,020.06, +42.83 (1.44%)
S&P 500 1,427.59, +15.43 (1.09%)
NYSE Composite 8,311.36, +89.97 (1.09%)
NASDAQ Volume 1,884,510,500
NYSE Volume 3,925,129,250
Combined NYSE & NASDAQ Advance - Decline: 3949-1550
Combined NYSE & NASDAQ New highs - New lows: 291-77
WTI crude oil: 87.09, +0.85
Gold: 1,715.50, -3.60
Silver: 32.25, -0.068
All that mattered to Wall Street was getting stocks higher, putting on a good face, especially after the "new methodology" of the ADP private payroll survey - with an assist from Moody's (now there's a clean bunch) - is acceptable in advance of Friday's October non-farm payroll data.
The ADP report was hardly believable, showing that there were 158,000 new private sector jobs created in the month of October. This makes the estimates for NFP of 250,000 tomorrow a slam dunk and possibly already priced in.
Off the ADP news, which was released at 8:15 am EDT, stocks shot up at the open, ramped to highs between 10:00 and 11:00 am and held their gains well into the close.
Everything's great! Except that real unemployment is somewhere around 15%, the US borrows 40% of every dollar it spends and fraud and manipulation by banks and corporations continues to go unchecked. Not to worry, we're going to elect Mitt Romney, who will fix it all, because the fix is in, at least according to Wall Street and Fox news.
There's another scandal brewing, however, that will overshadow everything up to this point in the now-four-year-old financial crisis, involving gold, specifically, the gold stored in vaults in New York and London for other nations. Germany has been trying to get a peek at their gold, but has been continually rebuffed.
Jim Willie's latest salvo at the banking elite has a very good take on the matters at hand.
Here's what one of the commenters had to say about gold and bankers:
“Tiny Ghana demanded its gold return from London, but suddenly its leader (John Atta Mills) showed up dead.”
We’re supposed to be surprised by this? Consider that president Andrew Jackson messed with the banksters and had 5 unsuccessful attempts on his life. President Lincoln messed with the banksters via printing debt-free greenbacks and ended up dead. President James Garfield supported a bi-metallic money standard and ended up dead. President William McKinley was assassinated after publicly supporting sound money and a gold standard. President Kennedy authorized the US Treasury to print silver certificates, interfering with the Fed’s position of sole US money creator and ended up dead. Am I missing anyone who messed with the banksters honey pot and was killed? Probably. Murdering your opponents IS the routine behavior of a thugocracy.
Kind of says it all, doesn't it?
Dow 13,232.62, +136.16 (1.04%)
NASDAQ 3,020.06, +42.83 (1.44%)
S&P 500 1,427.59, +15.43 (1.09%)
NYSE Composite 8,311.36, +89.97 (1.09%)
NASDAQ Volume 1,884,510,500
NYSE Volume 3,925,129,250
Combined NYSE & NASDAQ Advance - Decline: 3949-1550
Combined NYSE & NASDAQ New highs - New lows: 291-77
WTI crude oil: 87.09, +0.85
Gold: 1,715.50, -3.60
Silver: 32.25, -0.068
Wednesday, October 24, 2012
Dead Cats Don't Bounce; No Joy in Fraudville; Stocks Continue Slide
Maybe, as the movie title suggests, white men can't jump, but Wall Street proved today that dead cats don't bounce... at least not very high.
Stocks got a little bit of a boost from futures pumping prior to the opening bell, but the dismal nature of earnings for the third quarter made any gains transitory, fleeting and utterly disappointing (much like a lot of people in this author's life).
It is as it should be, perhaps. Fed policies do not a market make, so the major indices are now well below the levels encountered when the Chairman, the pseudo-salubrious Ben Bernanke, announced QE3, or, rather, QEtc. or QEternity on September 13.
The prescription the good doctor of economics gave the markets was unlimited buying of mortgage-backed securities (MBS), those ubiquitous instruments of mass financial destruction that essentially started the whole financial and economic mess in the first place, and which will, almost without doubt, end up worth less than what the Federal Reserve pays for them.
With any luck, the Fed's foray into economic wonderland, replete with diamond-farting unicorns and frogs that belch profits, will end in tears and anguish for not only the lower and middle classes, but the rich and self-appointed masters of the universe as well. We wish them no luck, because tactically, they have erred in their assessment of the global economy, not once or twice, but repeatedly since the advent of the crisis in 2007 or 2008, take your pick.
Today's FOMC rate policy decision was another non-event, the Fed reiterating that it would stick to its plans until 2015, which would be long after the chairman has departed, ostensibly in early 2014, should he even last that long.
The market is more interested these day in politics and earnings, each of which offering a mixed bag of blessings or banes, so precarious is the global outlook. Fears are rising that President Obama will win re-election, though the real fears are over the poor earnings reports pouring into the street like so many viperous snakes ready to bite the legs of impudent investors standing still.
Layoff announcements from Ford, Dow Chemical and Volkswagen were only whispered on Wall Street today. In the coming months, workforce reductions will be major headlines as all attempts to revive the economy the banks destroyed will ultimately fail. Europe is sinking steadily deeper into a black hole of debt and deflation, with Asia following soon, and the US - the last bastion of relief in a sea of declining opportunity - to join them in the hell of destroyed currencies and wrecked economies within short order.
Stocks have levitated for months, but the handwriting is clearly written and the game is nearly up. The US elections of November 6 mark a turning, a reckoning that will be absolute and without reprieve. All of the Merkels, Bernankes, Legardes and Draghis of the world cannot resurrect that which was already dead when they first took notice.
While there may be a few days of brightness ahead in the near future for stocks, to outlook continues to deteriorate and today's market action verifies the quietly-held beliefs of the skeptics: all is lost.
There is no joy in Fraudville; mighty Bernanke has struck out.
Dow 13,077.34, -25.19 (0.19%)
NASDAQ 2,981.70, -8.76 (0.29%)
S&P 500 1,408.75, -4.36 (0.31%)
NYSE Composite 8,179.26, -16.05 (0.20%)
NASDAQ Volume 1,965,715,000
NYSE Volume 3,346,029,500
Combined NYSE & NASDAQ Advance - Decline: 2404-3120
Combined NYSE & NASDAQ New highs - New lows: 97-94
WTI crude oil: 85.73, -0.94
Gold: 1,701.60, -7.80
Silver: 31.62, -0.173
Stocks got a little bit of a boost from futures pumping prior to the opening bell, but the dismal nature of earnings for the third quarter made any gains transitory, fleeting and utterly disappointing (much like a lot of people in this author's life).
It is as it should be, perhaps. Fed policies do not a market make, so the major indices are now well below the levels encountered when the Chairman, the pseudo-salubrious Ben Bernanke, announced QE3, or, rather, QEtc. or QEternity on September 13.
The prescription the good doctor of economics gave the markets was unlimited buying of mortgage-backed securities (MBS), those ubiquitous instruments of mass financial destruction that essentially started the whole financial and economic mess in the first place, and which will, almost without doubt, end up worth less than what the Federal Reserve pays for them.
With any luck, the Fed's foray into economic wonderland, replete with diamond-farting unicorns and frogs that belch profits, will end in tears and anguish for not only the lower and middle classes, but the rich and self-appointed masters of the universe as well. We wish them no luck, because tactically, they have erred in their assessment of the global economy, not once or twice, but repeatedly since the advent of the crisis in 2007 or 2008, take your pick.
Today's FOMC rate policy decision was another non-event, the Fed reiterating that it would stick to its plans until 2015, which would be long after the chairman has departed, ostensibly in early 2014, should he even last that long.
The market is more interested these day in politics and earnings, each of which offering a mixed bag of blessings or banes, so precarious is the global outlook. Fears are rising that President Obama will win re-election, though the real fears are over the poor earnings reports pouring into the street like so many viperous snakes ready to bite the legs of impudent investors standing still.
Layoff announcements from Ford, Dow Chemical and Volkswagen were only whispered on Wall Street today. In the coming months, workforce reductions will be major headlines as all attempts to revive the economy the banks destroyed will ultimately fail. Europe is sinking steadily deeper into a black hole of debt and deflation, with Asia following soon, and the US - the last bastion of relief in a sea of declining opportunity - to join them in the hell of destroyed currencies and wrecked economies within short order.
Stocks have levitated for months, but the handwriting is clearly written and the game is nearly up. The US elections of November 6 mark a turning, a reckoning that will be absolute and without reprieve. All of the Merkels, Bernankes, Legardes and Draghis of the world cannot resurrect that which was already dead when they first took notice.
While there may be a few days of brightness ahead in the near future for stocks, to outlook continues to deteriorate and today's market action verifies the quietly-held beliefs of the skeptics: all is lost.
There is no joy in Fraudville; mighty Bernanke has struck out.
Dow 13,077.34, -25.19 (0.19%)
NASDAQ 2,981.70, -8.76 (0.29%)
S&P 500 1,408.75, -4.36 (0.31%)
NYSE Composite 8,179.26, -16.05 (0.20%)
NASDAQ Volume 1,965,715,000
NYSE Volume 3,346,029,500
Combined NYSE & NASDAQ Advance - Decline: 2404-3120
Combined NYSE & NASDAQ New highs - New lows: 97-94
WTI crude oil: 85.73, -0.94
Gold: 1,701.60, -7.80
Silver: 31.62, -0.173
Thursday, February 26, 2009
Treasury's Stress Test is Not a Plan at All
Editor's Note: I've had to break today's market coverage into two parts due to a need to provide some clarity on what the administration is planning to do with the nearly-insolvent banking sector. This entry will cover that issue, while the usual post - after 4:00 pm - will cover the day's market activity.
We've been hearing about Treasury Secretary Tim Geithner's "stress test" for the nation's largest banks in shrouded tones for over a week. Finally, late yesterday, some details of the plan emerged - in an exclusive interview with Jim Lehrer on the PBS Newshour - and elsewhere.
What the stress test will entail is having the banks examine their ability to function under a variety of very broad circumstances - first, a "moderate" scenario, in which unemployment
This commentary, by Adam S. Posen, Dep. Director, Peterson Institute for International Economics, lays out some guidelines which the Obama administration is conveniently avoiding.
And here's Paul Krugman opining in the New York Times that nationalization - in other words, having the federal government take over some banks, clean them up and resell the new, functioning, properly-capitalized entities to private investors.
Geithner and the Obama administration isn't listening, despite Krugman having won the Nobel Prize for Economics and other, similarly spot-on economists and commentators urging the government to make the appropriate hard choices, as opposed to the current piecemeal approach which hasn't - and isn't likely to - work.
The assumptions in the stress testing offers banks to look at two different sets of scenarios, a baseline and an extreme, or worst case outlook.
Under the baseline scenario, unemployment is at 8.4% in 2009 and 8.8% in 2010, housing prices decline by 14% in 2009 and another 4% in 2010, and the nation's Gross Domestic Product (GDP) falls by 2.0% in 2009 and rises by 2.1% in 2010.
In the worst case set-up, the assumptions are that unemployment reaches 8.9% in 2009 and 10.3 in 2010, housing prices fall 22% in 2009 and another 7% in 2010, and the nation's GDP falls by 3.3% in 2009 and gains 0.5% in 2010.
The banks will have about six weeks to report back to Geithner with either a confirmation that they're "OK" or a request for more funding from the government. That it will take six weeks to complete what is essentially nothing more than the testing of a theoretical set of circumstances against real world assets and liabilities suggests that the entire plan is nothing more than a politically-motivated cover-up for the banking giants which actually control the government.
This Bloomberg article suggests that the "worst case" scenarios laid out by the government are not severe enough, and that the banks will not not then be looking at what possibly lies ahead for the US economy.
The assessments may indeed be less severe than what's ahead, though the housing price assumptions appear somewhat on the money. Suppose GDP falls by 5% this year and another 2% next? What if unemployment hits 10.2% this year? Then the stress tests won't be testing the banks for reality and the entire plan will fail, meaning we will be sunk into a deeper recession for a longer time by supporting zombie banks which are at the heart of the problem.
In Geithner's interview with Lehrer, a the Treasury Secretary voiced a number of interesting comments, including, on the solvency of the banks involved:
In other words, Geithner seems to be wanting to tell us that the banks are sound, despite what's been reported concerning trillions of dollars worth of bad loans, even more toxic credit default swaps and continuing credit-creation issues.
Geithner would have us believe that all of these pre-existing conditions have suddenly, magically, vanished. It's not a believable scenario.
On "nationalization", Geithner opined, "it's the wrong strategy for the country and an unnecessary strategy." Again, Geithner would have us believe that what's always worked for smaller, insolvent institutions, that being take-over by FDIC, recapitalization and an eventual return to a functioning entity on the other side, is not acceptable for the largest banks in the nation.
This is the kind of thinking which inspires skepticism in the banking system and the government's remedies. This approach would allow the likes of John Mack, Lloyd Blankfien, Vikram Pandit and Kenneth Lewis to continue to run their failed institutions - the same ones which caused the crisis in the first place - with only a limited amount of scrutiny and accountability.
This would allow the same excesses in the securitization of loans and largely unsupervised lending and investing activity to continue, while failing to address the toxic loans and swaps at the root of the problem.
There will be no accountability for what's already occurred, no civil or criminal charges brought against the bank and finance executives whose institutions already have benefited from taxpayer capital infusions. The same executives who nearly brought the world's financial system to its knees will remain at the controls of their now-defunct banks.
Naturally, the banks have lined the coffers of both the Obama administration and all members of congress with campaign contributions, so there will be no opposition from any government official - elected or otherwise - to this plan whatsoever.
The stress test and Geithner financial band-aid plan should be recognized for exactly what it is: further denial of the root of the crisis and a sure recipe for disaster.
We've been hearing about Treasury Secretary Tim Geithner's "stress test" for the nation's largest banks in shrouded tones for over a week. Finally, late yesterday, some details of the plan emerged - in an exclusive interview with Jim Lehrer on the PBS Newshour - and elsewhere.
What the stress test will entail is having the banks examine their ability to function under a variety of very broad circumstances - first, a "moderate" scenario, in which unemployment
This commentary, by Adam S. Posen, Dep. Director, Peterson Institute for International Economics, lays out some guidelines which the Obama administration is conveniently avoiding.
And here's Paul Krugman opining in the New York Times that nationalization - in other words, having the federal government take over some banks, clean them up and resell the new, functioning, properly-capitalized entities to private investors.
Geithner and the Obama administration isn't listening, despite Krugman having won the Nobel Prize for Economics and other, similarly spot-on economists and commentators urging the government to make the appropriate hard choices, as opposed to the current piecemeal approach which hasn't - and isn't likely to - work.
The assumptions in the stress testing offers banks to look at two different sets of scenarios, a baseline and an extreme, or worst case outlook.
Under the baseline scenario, unemployment is at 8.4% in 2009 and 8.8% in 2010, housing prices decline by 14% in 2009 and another 4% in 2010, and the nation's Gross Domestic Product (GDP) falls by 2.0% in 2009 and rises by 2.1% in 2010.
In the worst case set-up, the assumptions are that unemployment reaches 8.9% in 2009 and 10.3 in 2010, housing prices fall 22% in 2009 and another 7% in 2010, and the nation's GDP falls by 3.3% in 2009 and gains 0.5% in 2010.
The banks will have about six weeks to report back to Geithner with either a confirmation that they're "OK" or a request for more funding from the government. That it will take six weeks to complete what is essentially nothing more than the testing of a theoretical set of circumstances against real world assets and liabilities suggests that the entire plan is nothing more than a politically-motivated cover-up for the banking giants which actually control the government.
This Bloomberg article suggests that the "worst case" scenarios laid out by the government are not severe enough, and that the banks will not not then be looking at what possibly lies ahead for the US economy.
The assessments may indeed be less severe than what's ahead, though the housing price assumptions appear somewhat on the money. Suppose GDP falls by 5% this year and another 2% next? What if unemployment hits 10.2% this year? Then the stress tests won't be testing the banks for reality and the entire plan will fail, meaning we will be sunk into a deeper recession for a longer time by supporting zombie banks which are at the heart of the problem.
In Geithner's interview with Lehrer, a the Treasury Secretary voiced a number of interesting comments, including, on the solvency of the banks involved:
"These banks now have very substantial amounts of capital relative to what you would have seen in the US economy going into previous recessions."
In other words, Geithner seems to be wanting to tell us that the banks are sound, despite what's been reported concerning trillions of dollars worth of bad loans, even more toxic credit default swaps and continuing credit-creation issues.
Geithner would have us believe that all of these pre-existing conditions have suddenly, magically, vanished. It's not a believable scenario.
On "nationalization", Geithner opined, "it's the wrong strategy for the country and an unnecessary strategy." Again, Geithner would have us believe that what's always worked for smaller, insolvent institutions, that being take-over by FDIC, recapitalization and an eventual return to a functioning entity on the other side, is not acceptable for the largest banks in the nation.
This is the kind of thinking which inspires skepticism in the banking system and the government's remedies. This approach would allow the likes of John Mack, Lloyd Blankfien, Vikram Pandit and Kenneth Lewis to continue to run their failed institutions - the same ones which caused the crisis in the first place - with only a limited amount of scrutiny and accountability.
This would allow the same excesses in the securitization of loans and largely unsupervised lending and investing activity to continue, while failing to address the toxic loans and swaps at the root of the problem.
There will be no accountability for what's already occurred, no civil or criminal charges brought against the bank and finance executives whose institutions already have benefited from taxpayer capital infusions. The same executives who nearly brought the world's financial system to its knees will remain at the controls of their now-defunct banks.
Naturally, the banks have lined the coffers of both the Obama administration and all members of congress with campaign contributions, so there will be no opposition from any government official - elected or otherwise - to this plan whatsoever.
The stress test and Geithner financial band-aid plan should be recognized for exactly what it is: further denial of the root of the crisis and a sure recipe for disaster.
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