Dispensing with the usual diatribe over coronavirus and the botched government response, today's edition of Money Daily will focus on stocks that pay out quarterly dividends, the mother's milk of investing, as Larry Kudlow might phrase it.
But first, US first quarter 2020 GDP was just announced at 8:30 am ET, and the result was as Money Daily predicted, a decline of 4.8%. A few weeks back, various analysts from the likes of Bank of America Merrill Lynch and Goldman Sachs were making projections for second quarter GDP losses, somewhat overlooking what we considered obvious: a negative number for 1Q GDP. While the corporate analysts were busy downplaying the effect of a nationwide lockdown on business activity, they were missing an existential point.
Assuming that the second quarter was going to be in the red, a decline in first quarter GDP would satisfy the textbook requirement for a recession, which is two consecutive quarters of declining GDP growth. The definition is something of a non sequiter because nothing in nature actually grows at a negative rate. A truer definition might be worded as "two consecutive quarters of contraction," and that's now in play meaning one might as well assume that there's already a recession, and it started roughly the second week of February, when the world started to become focused on coronavirus and how to halt its spread.
Thus, we have the first quarter contraction of 4.8%, which will be revised twice, in late May and again in late June, though the number is so far into the red that there's no practical probability of it being revised into the positive. Second quarter GDP will be an outright train wreck. Figure on something on the order of -40% just for openers. That kind of number will have even the most ardent equity investor seeking safe harbor and scurrying away from stocks. Even today's figure should give everyone pause, and, in normal times, stocks would be falling into the ocean, but, thanks to the generosity of the Federal Reserve, the major indices will likely post more gains.
Underscoring the absurdity of the Fed's fool's errand - one in which they will bankrupt themselves - stock futures all soared higher on this morning's GDP announcement. How's that for in-your-face obstinance and stupidity?
Along with higher stock prices (unbelievable), the political ramifications are stupendous. This places the economy and a recession as front-and-center issues for the election season. Second quarter results will be in place come late July, and they will be undeniably ugly, since April was a complete washout and May isn't going to look much better. There are still vast swaths of the economy that are not operating at even 50% of optimal productivity and others that are not operating at all. Small businesses were shut down across the country for roughly six weeks to the tune of hundreds of billions of dollars in lost revenue and GDP, to say nothing of the lack of velocity in the economy. From late March through all of April and into May, velocity was basically stalled out.
What this means in terms of elections is the very real possibility of a President Biden and a takeover by the Democrats of the Senate, which would give the socialist movement firm footing in the three important branches of the federal government, the presidency, the House, and the Senate, which spells doomsday for America because socialist ideology will only exacerbate the already horrid condition of money-printing and profligate spending. It's doubtful that any of this has been factored into the Wall Street calculations. Current prices on the major indices and in "recovering" individual stocks reflect that, glowingly.
With the opening bell just minutes away, Money Daily will wrap here for Wednesday morning, cutting a little short the look at dividend stocks.
Wolf Richter of WolfStreet.com penned a noteworthy post on Tuesday, titled, Dividend Massacre in This Crisis is Already Breaking Records, But it Just Started, within which he details the number of companies which have already slashed or canceled their dividend payouts and how 2020 compares to other recent years in which dividends were targeted, 2001, 2008, and 2009.
What investors often lose sight of in times of financial turmoil is how mathematics deceives and often leads to false conclusions when considering buying a particular stock.
Picking up this theme on Thursday, along with the latest unemployment figures, the 30 stocks that comprise the Dow Jones Industrial Average - all of which pay dividends - will be examined, with considered opinion on whether or not these companies will maintain, increase, reduce or cancel their normal dividend payouts.
For today, the recession has arrived, though many in the know already think we're at the beginning of what is being hailed as "The Greater Depression."
At the Close, Tuesday, April 28, 2020:
Dow: 24,101.55, -32.23 (-0.13%)
NASDAQ: 8,607.73, -122.43 (-1.40%)
S&P 500: 2,863.39, -15.09 (-0.52%)
NYSE: 11,319.70, +54.86 (+0.49%)
Showing posts with label depression. Show all posts
Showing posts with label depression. Show all posts
Wednesday, April 29, 2020
Wednesday, April 15, 2020
The COVID-19 Cure Figures To Be Far Worse Than The Disease As The World Enters A Global Depression
Incredible. Surreal. Amazing. Ludicrous. Ridiculous.
Those are just a few of the choicest words to describe Tuesday's equity rally in US stocks. Nothing says "out-of-touch" better than a nearly four percent gain on the NASDAQ when 75% of the world's population is under some form of restrictive lockdown, quarantine, or other form of social suppression.
While millions of soon to be extinct working class Americans citizens patiently wait at their homes for a $1200 check from the federal government, their future taxes flowed to Wall Street in currency supplied by the Treasury Department and Federal Reserve, lining the pockets of billionaires with even more filthy lucre.
As nothing was learned from the Great Financial Crisis of 2008-09, the Federal Reserve has become the de facto World Central Bank (hat tip to the Robin Hood of Wall Street, Gregory Mannarino, for that new coinage), backstopping stocks and bonds and ETFs and any kind of financial instrument not tied to a physical asset such as gold or silver. The Fed is buying, hand over fist, treasury debt, mortgage-backed securities, commercial paper which funds the day-to-day needs of major corporations, foreign debt, and even junk bonds.
This is what the so-called Modern Monetary Theory looks like in practice. Markets rigged via infinite quantitative easing (QE), according to Minneapolis Fed President Neel Kashkari, whose main claim to fame is as the overseer of TARP, the $700 billion bailout of the banking system in 2008. Forget free markets. Forget fair wages and salaries. Forget the Bill of Rights and your guarantees of free speech, freedom of the press, freedom of religion. All that is gone, thanks to the worldwide worship of the world currency, the US Dollar.
Want to see somebody lie with a straight face? Watch Kashkari's 60 Minutes interview from March 23. During the interview, Kashkari mentions printed currency on a number of occasions, saying things that suggest physical cash will be available through banks and ATMs. This is a patent untruth. There are only $1.7 trillion physical Federal Reserve Notes in circulation, enough for just more than $5,000 for every American citizen, an impossibility, since much of the printed bills circulate overseas.
Here's another bit of wisdom from a former Fed Chairman:
Kashkari's ravings aside, the Fed probably couldn't print enough actual cash - besides it being the job of the US Treasury Department - to satisfy the ongoing needs of American business. However, via the brilliance of underfunding the Main Street bailout for small business (the so-called "forgivable" loans) in the bill recently passed by congress and signed by President Trump, when the effects of lockdowns and business closures are finally assessed, there won't be that many small businesses to fund. Current estimates suggest there is only enough money in the $349 billion allocated to finance the payrolls of less than half the small businesses in America for six to eight weeks.
In a recent survey by Lending Tree 64% of small business owners who applied for emergency funding reported that they were having trouble getting approved.
Meanwhile, employers' doors are closed in counties where there have been only a handful of coronavirus cases reported. Its overkill on a grand scale, and what's being killed is small business. While many owner-operated restaurants have been forced to shut down, the Burger Kings, McDonalds, and Dominos of the world have remained open, offering deliver or drive-through service and advertising heavily. Americans face a future of limited choice, and those choices aren't very appealing.
With the president and governors of various states arguing over who gets to call the shots on re-opening the economy, small businesses are going broke and out of business permanently. The closed up storefronts that have been a familiar sight in small towns across America for the past decade are soon to become a feature of cities and once-healthy suburbs. The commercial real estate market is going to collapse along with residential real estate. Thinking that the process of foreclosure in the aftermath of the sub-prime crisis was a nightmare, what happens in real estate and property rental markets over the next few years is going to be mind-blowing.
The coronavirus is real. Government response, complete with lockdowns, travel restrictions, violations of civil rights, business closures, and assorted "stimulus" packages, is a hoax, put in place to cover up the massive bailout needed to keep Wall Street's stock market above water. Stocks clambered down more then 20% in March only to rise from those losses in April, while the entire country is virtually out of business. This is the kind of government Americans get for electing people who serve only themselves and their campaign contributors.
Some day, Americans will be going back to work. Not all of them, maybe not even half of them. The current condition is only the beginning of a depression that will rival the 1920s. The coronavirus may kill 60,000, but the "cure" will kill millions.
At the Close, Tuesday, April 14, 2020:
Dow Jones Industrial Average: 23,949.76, +558.99 (+2.39%)
NASDAQ: 8,515.74, +323.32 (+3.95%)
S&P 500: 2,846.06, +84.43 (+3.06%)
NYSE: 11,172.20, +222.67 (+2.03%)
Those are just a few of the choicest words to describe Tuesday's equity rally in US stocks. Nothing says "out-of-touch" better than a nearly four percent gain on the NASDAQ when 75% of the world's population is under some form of restrictive lockdown, quarantine, or other form of social suppression.
While millions of soon to be extinct working class Americans citizens patiently wait at their homes for a $1200 check from the federal government, their future taxes flowed to Wall Street in currency supplied by the Treasury Department and Federal Reserve, lining the pockets of billionaires with even more filthy lucre.
As nothing was learned from the Great Financial Crisis of 2008-09, the Federal Reserve has become the de facto World Central Bank (hat tip to the Robin Hood of Wall Street, Gregory Mannarino, for that new coinage), backstopping stocks and bonds and ETFs and any kind of financial instrument not tied to a physical asset such as gold or silver. The Fed is buying, hand over fist, treasury debt, mortgage-backed securities, commercial paper which funds the day-to-day needs of major corporations, foreign debt, and even junk bonds.
This is what the so-called Modern Monetary Theory looks like in practice. Markets rigged via infinite quantitative easing (QE), according to Minneapolis Fed President Neel Kashkari, whose main claim to fame is as the overseer of TARP, the $700 billion bailout of the banking system in 2008. Forget free markets. Forget fair wages and salaries. Forget the Bill of Rights and your guarantees of free speech, freedom of the press, freedom of religion. All that is gone, thanks to the worldwide worship of the world currency, the US Dollar.
Want to see somebody lie with a straight face? Watch Kashkari's 60 Minutes interview from March 23. During the interview, Kashkari mentions printed currency on a number of occasions, saying things that suggest physical cash will be available through banks and ATMs. This is a patent untruth. There are only $1.7 trillion physical Federal Reserve Notes in circulation, enough for just more than $5,000 for every American citizen, an impossibility, since much of the printed bills circulate overseas.
Here's another bit of wisdom from a former Fed Chairman:
"And higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion."― Ben Bernanke (2010)
Kashkari's ravings aside, the Fed probably couldn't print enough actual cash - besides it being the job of the US Treasury Department - to satisfy the ongoing needs of American business. However, via the brilliance of underfunding the Main Street bailout for small business (the so-called "forgivable" loans) in the bill recently passed by congress and signed by President Trump, when the effects of lockdowns and business closures are finally assessed, there won't be that many small businesses to fund. Current estimates suggest there is only enough money in the $349 billion allocated to finance the payrolls of less than half the small businesses in America for six to eight weeks.
In a recent survey by Lending Tree 64% of small business owners who applied for emergency funding reported that they were having trouble getting approved.
Meanwhile, employers' doors are closed in counties where there have been only a handful of coronavirus cases reported. Its overkill on a grand scale, and what's being killed is small business. While many owner-operated restaurants have been forced to shut down, the Burger Kings, McDonalds, and Dominos of the world have remained open, offering deliver or drive-through service and advertising heavily. Americans face a future of limited choice, and those choices aren't very appealing.
With the president and governors of various states arguing over who gets to call the shots on re-opening the economy, small businesses are going broke and out of business permanently. The closed up storefronts that have been a familiar sight in small towns across America for the past decade are soon to become a feature of cities and once-healthy suburbs. The commercial real estate market is going to collapse along with residential real estate. Thinking that the process of foreclosure in the aftermath of the sub-prime crisis was a nightmare, what happens in real estate and property rental markets over the next few years is going to be mind-blowing.
The coronavirus is real. Government response, complete with lockdowns, travel restrictions, violations of civil rights, business closures, and assorted "stimulus" packages, is a hoax, put in place to cover up the massive bailout needed to keep Wall Street's stock market above water. Stocks clambered down more then 20% in March only to rise from those losses in April, while the entire country is virtually out of business. This is the kind of government Americans get for electing people who serve only themselves and their campaign contributors.
Some day, Americans will be going back to work. Not all of them, maybe not even half of them. The current condition is only the beginning of a depression that will rival the 1920s. The coronavirus may kill 60,000, but the "cure" will kill millions.
At the Close, Tuesday, April 14, 2020:
Dow Jones Industrial Average: 23,949.76, +558.99 (+2.39%)
NASDAQ: 8,515.74, +323.32 (+3.95%)
S&P 500: 2,846.06, +84.43 (+3.06%)
NYSE: 11,172.20, +222.67 (+2.03%)
Friday, February 21, 2020
JP Morgan Says No Recession This Year; Professional Handicappers Likely To Want Some of That Action
What catches the eye this morning is the headline on Yahoo! Finance, "Recession odds haven't been this low in 15 months."
That's remarkable for any number of reasons, chief among them the idea that somebody actually calculates odds on whether or not the US GDP is going to go negative for two consecutive quarters (the classic definition of a recession) and the idea that these odds are so low.
The article goes on to tell that it's JP Morgan making the odds, as their quantitative model of the US economy is in a very positive state. The firm makes odds at 3:1 that the US economy will enter a recession this year. So, anyone wishing to plunk down a shekel, drachma, euro, or yen on JP Morgan's table would get three back if the economy tanks. It would not be too much of an assumption to think that Morgan would hold the bet, put it in an interest-bearing account and make a few bucks in the interim as the earliest this could possibly pay out would be well after the end of the second quarter, like August, or, in the event that a recession occurred in the thrid and fourth quarter, the firm could be holding the dough until well into 2021.
Anyone of the belief that the US economy will not turn down, gets short-ended to the tune of 1:3, putting up three units to make one. Morgan would surely like that wager, being that they'd be holding - and investing - three times the amount of the potential payout. It's always good for the house that punters like favorites. It's also well known amongst the brotherhood of gamblers that favorites only pay out 1/3 of the time at race tracks and less than half the time on flat wagers on say, sporting events.
Unless one has a doom and gloom attitude toward investing, the favored play would be the short side, even though the payout will be minimal. According to the boys at Morgan, this is about as sure a thing as Muhammad Ali in a 15-rounder against a 120-pond nun.
We'll pass. Oddsmakers are notorious for being wrong. Just ask Joe Namath, quarterback of the 1969 Jets, who went into Super Bowl III as a 15-point underdog, guaranteed a victory and managed to beat the heavily favored Baltimore Colts, 16-7. It's almost a sure thing that the analysts at JP Morgan are equally clueless about putting up ridiculous numbers on the chance of recession when the real issue is how long the continued depression will carry forward.
According to James Rickards, famous gold investor, the US economy has been in a depression at least since 2008, when the entire global economic structure came within 23 trillion dollars of complete meltdown. Those 23 trill were supplied after the fact by our friends at the Federal Reserve and their friends at other central banks. Rickards' assertion is that the US economy suffered a near-death experience in 2008 and economic activity, though not negative for long, has been sub-par, which qualifies, in his mind, as a depression.
He's got plenty of evidence to back up his claim, notably the Great Depression of the 1930s, in which GDP mostly grew year-over-year, but at a snails pace, not keeping up with population growth or inflation. Today's situation is different, in that population growth in the US is pretty much stagnant, but GDP growth since then has been bolstered by changes in definition and plenty of funny money printed up by the Fed. The 2-2.5 percent growth that has been the hallmark of the past 12 years has not kept pace with inflation, the official numbers be damned.
With evidence piling up that coronavirus will continue to spread and that industrial production and unemployment may have peaked, there's at least a distinct possibility that US GDP will slow to about 1.5 to 1.7 percent for 2020. While there may not be a recession, the economy is almost certain to struggle with slack demand caused by fear of catching something worse than the flu. People can't be blamed for not wanting to get sick or dying, but they will be, with certain segments of the population eschewing the occasional night out on the town, attending a sporting event or generally avoiding close human contact.
When the coronavirus (COVID-19) claims a few lives in the US, watch the panic. It's already well underway in China, with Japan, South Korea and Hong Kong about to be sharing the sentiment. The virus will plague the US and many other nations, particularly those in Europe, already on the brink of an actual recession, because quarantines have not been sufficiently enforced on most travel, particularly by air.
The virus has shown to have an incubation period of anywhere from five to 24 days, so there are likely multiple carriers everywhere. In a few weeks time, the number of reported cases will begin to spike in non-Asian countries and then it will be too late. The big hope is that warmer weather will slow the spread, as it usually does with these kinds of infectious diseases.
We'll see. But, if you're looking for better odds, better head to the race track. Long shots often arrive at the wire in time.
At the Close, Thursday, February 20, 2020:
Dow Jones Industrial Average: 29,219.98, -128.05 (-0.44%)
NASDAQ: 9,750.96, -66.21 (-0.67%)
S&P 500: 3,373.23, -12.92 (-0.38%)
NYSE: 14,061.48, -25.65 (-0.18%)
That's remarkable for any number of reasons, chief among them the idea that somebody actually calculates odds on whether or not the US GDP is going to go negative for two consecutive quarters (the classic definition of a recession) and the idea that these odds are so low.
The article goes on to tell that it's JP Morgan making the odds, as their quantitative model of the US economy is in a very positive state. The firm makes odds at 3:1 that the US economy will enter a recession this year. So, anyone wishing to plunk down a shekel, drachma, euro, or yen on JP Morgan's table would get three back if the economy tanks. It would not be too much of an assumption to think that Morgan would hold the bet, put it in an interest-bearing account and make a few bucks in the interim as the earliest this could possibly pay out would be well after the end of the second quarter, like August, or, in the event that a recession occurred in the thrid and fourth quarter, the firm could be holding the dough until well into 2021.
Anyone of the belief that the US economy will not turn down, gets short-ended to the tune of 1:3, putting up three units to make one. Morgan would surely like that wager, being that they'd be holding - and investing - three times the amount of the potential payout. It's always good for the house that punters like favorites. It's also well known amongst the brotherhood of gamblers that favorites only pay out 1/3 of the time at race tracks and less than half the time on flat wagers on say, sporting events.
Unless one has a doom and gloom attitude toward investing, the favored play would be the short side, even though the payout will be minimal. According to the boys at Morgan, this is about as sure a thing as Muhammad Ali in a 15-rounder against a 120-pond nun.
We'll pass. Oddsmakers are notorious for being wrong. Just ask Joe Namath, quarterback of the 1969 Jets, who went into Super Bowl III as a 15-point underdog, guaranteed a victory and managed to beat the heavily favored Baltimore Colts, 16-7. It's almost a sure thing that the analysts at JP Morgan are equally clueless about putting up ridiculous numbers on the chance of recession when the real issue is how long the continued depression will carry forward.
According to James Rickards, famous gold investor, the US economy has been in a depression at least since 2008, when the entire global economic structure came within 23 trillion dollars of complete meltdown. Those 23 trill were supplied after the fact by our friends at the Federal Reserve and their friends at other central banks. Rickards' assertion is that the US economy suffered a near-death experience in 2008 and economic activity, though not negative for long, has been sub-par, which qualifies, in his mind, as a depression.
He's got plenty of evidence to back up his claim, notably the Great Depression of the 1930s, in which GDP mostly grew year-over-year, but at a snails pace, not keeping up with population growth or inflation. Today's situation is different, in that population growth in the US is pretty much stagnant, but GDP growth since then has been bolstered by changes in definition and plenty of funny money printed up by the Fed. The 2-2.5 percent growth that has been the hallmark of the past 12 years has not kept pace with inflation, the official numbers be damned.
With evidence piling up that coronavirus will continue to spread and that industrial production and unemployment may have peaked, there's at least a distinct possibility that US GDP will slow to about 1.5 to 1.7 percent for 2020. While there may not be a recession, the economy is almost certain to struggle with slack demand caused by fear of catching something worse than the flu. People can't be blamed for not wanting to get sick or dying, but they will be, with certain segments of the population eschewing the occasional night out on the town, attending a sporting event or generally avoiding close human contact.
When the coronavirus (COVID-19) claims a few lives in the US, watch the panic. It's already well underway in China, with Japan, South Korea and Hong Kong about to be sharing the sentiment. The virus will plague the US and many other nations, particularly those in Europe, already on the brink of an actual recession, because quarantines have not been sufficiently enforced on most travel, particularly by air.
The virus has shown to have an incubation period of anywhere from five to 24 days, so there are likely multiple carriers everywhere. In a few weeks time, the number of reported cases will begin to spike in non-Asian countries and then it will be too late. The big hope is that warmer weather will slow the spread, as it usually does with these kinds of infectious diseases.
We'll see. But, if you're looking for better odds, better head to the race track. Long shots often arrive at the wire in time.
At the Close, Thursday, February 20, 2020:
Dow Jones Industrial Average: 29,219.98, -128.05 (-0.44%)
NASDAQ: 9,750.96, -66.21 (-0.67%)
S&P 500: 3,373.23, -12.92 (-0.38%)
NYSE: 14,061.48, -25.65 (-0.18%)
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, September 28, 2017
Has the United States Been in a Depression Since 2007?
We're going to dispense with the usual stock market blather today and promote an article posted on Zero Hedge titled, "We Are Already In Depression (If Borrowing Money Is Not Income) written by Baker & Company Advisory Group (Tim Baker).
The article is available HERE.
At the Close, Thursday, September 28, 2017:
Dow: 22,381.20, +40.49 (+0.18%)
NASDAQ: 6,453.45, +0.19 (0.00%)
S&P 500: 2,510.06, +3.02 (+0.12%)
NYSE Composite: 12,179.33, +21.68 (+0.18%)
The article is available HERE.
At the Close, Thursday, September 28, 2017:
Dow: 22,381.20, +40.49 (+0.18%)
NASDAQ: 6,453.45, +0.19 (0.00%)
S&P 500: 2,510.06, +3.02 (+0.12%)
NYSE Composite: 12,179.33, +21.68 (+0.18%)
Sunday, June 25, 2017
The Long and Short of the Approaching Recession (Depression)
For those out there reading this short missive, a warning that time and space are constraints upon the lives we live, the bread we bake, the food we eat, the products we produce, the jobs that sustain us and the government that pretends to cater to us.
Time and space - according to most adherents of pure physics - are not constraints upon thinking, thought, creativity and imagination.
Indulgence should be given more, in these days of financial peril and social inequality, to solutions derived in the mind, translated to the body by practicality and functionality.
In both the long and short discussions of current finance, there can be little doubt that the system of capitalism by which the developed world has grown and prospered is under severe strain and the solutions offered by the central bankers and government entities who pretend to know how it all works are nothing more than stop-gap measures intended solely to prevent, or at least, delay, a complete collapse of a fragile, human-made system.
Economics, being mostly theoretical, and therefore, unbound, unfortunately needs to operate in a closed, bound, system, restrained by those old devils of time and space. As has been frequently mentioned in higher-level economic discussions, "infinite growth is unsustainable in a finite world."
With that in mind, this weekend edition of Money Daily offers but a brief insight into the unraveling of the world order of finance already well underway.
On the whole, Friday was a washout to a week in which the major indices - with the notable exception of the NASDAQ - vacillated around the unchanged line. In the current nomenclature, stock indices - wherein the vast bulk of trading is performed by computer algorithms and central banks - are a control mechanism. So long as they are stable or going higher, the general population feels comforted and won't look around for cracks in the not-so-golden facade of global finance. As such, this week was very much like the previous six, or eight, or eighty. It was, in general terms, a big nothing-burger.
But, what does the outsize gain on the NASDAQ tell us, when the other indices were going exactly nowhere fast?
It says that the NASDAQ is where the speculation exists, where all the funny money or phony money is going to seek yield, mostly in tech-land, but also in energy stocks and in short-squeezes on the most-shorted list. It's how the game is being played at the top. If shorts are numerous on a particular equity, that where the money flow will be most pronounced, on the long side. Boom! Instant profits and a great weekend in the Hamptons awaits.
For the rest of us, we are placated with the rest of the market going sideways. At least - we comfort ourselves in saying - it didn't go down, much.
An expanded view looks at a couple of issues. Oil took another beating this week as the glut continues, though this fact is not to be promulgated to the general population. We are led to believe that oil is scarce and the price of gas with which to fill our cars should remain at elevated levels.
Nothing could be further from the truth. A variety of factors, including, but not limited to, better fuel consumption, an aging population, alternative energy sources, stagnant or slowing employment, and a more stay-at-home, economically-depressed middle America, is leading to the reality of oversupply meeting slack or declining demand. Oil will continue to fall until it becomes apparent that the big energy companies are squeezing every last nickel and dime out of consumers in the form of stubbornly high gas prices. At some point, the price of gasoline will merit a meeting with reality and then, gas will average, nationally, under $2.00 a gallon, notwithstanding the absurdly-high state and federal taxes on each and every gallon pumped. It's coming. It cannot be denied.
Overseas, the demise of two Italian banks on Friday was, typically, underreported. Banca Popolare di Vicenza and Veneto Banca, with combined assets of roughly 60 billion euros, were green-lighted by the ECB on Friday for liquidation. In other words, these banks are belly-up, bankrupt, kaput!
The Wall Street Journal, Reuters, Bloomberg, the AP, all reported the story. The mainstream media, such as ABC, NBC, CBS, CNN, et. al., i.e, the fake news propagandists, did not.
There you have it. The general public will not be told the truth about the fraility of the banking system for fears people would recall the horrors of the GFC of 2008-09.
Two Italian banks failing may not make the radar of disinterest parties such as the 98% of Americans who don't pay attention to nor understand economics or finance. Neither did the closure of two Bear Stearns funds back in the Spring of 2008. You are now forewarned and forearmed, with knowledge.
The world'd financial system is unwinding and the pace is quickening. Disruptions are already apparent in the forms of capital controls - mostly overseas, but heading to US shores soon - supply chain disorder, falling tax receipts, social unrest, and, most importantly and glaringly obvious, income disparity.
Stay informed, not from the mainstream sources, but from outside. The internet is s treasure trove of information that you're not supposed to know about. It will help you form opinions and strategies by which you can deal with the coming hard times.
Your thoughts and ideas have no limits. Time and space cannot prevent you from thinking, strategizing and planning for your won welfare.
At the Close, 6/23/17:
Dow: 21,394.76, -2.53 (-0.01%)
NASDAQ: 6,265.25, +28.56 (0.46%)
S&P 500: 2,438.30, +3.80 (0.16%)
NYSE Composite: 11,733.20, +20.68 (0.18%)
For the Week:
Dow: +10.48 (0.05%)
NASDAQ: +113.49 (1.84%)
S&P 500: +5.15 (0.21%)
NYSE Composite: -38.83 (-0.33%)
Time and space - according to most adherents of pure physics - are not constraints upon thinking, thought, creativity and imagination.
Indulgence should be given more, in these days of financial peril and social inequality, to solutions derived in the mind, translated to the body by practicality and functionality.
In both the long and short discussions of current finance, there can be little doubt that the system of capitalism by which the developed world has grown and prospered is under severe strain and the solutions offered by the central bankers and government entities who pretend to know how it all works are nothing more than stop-gap measures intended solely to prevent, or at least, delay, a complete collapse of a fragile, human-made system.
Economics, being mostly theoretical, and therefore, unbound, unfortunately needs to operate in a closed, bound, system, restrained by those old devils of time and space. As has been frequently mentioned in higher-level economic discussions, "infinite growth is unsustainable in a finite world."
With that in mind, this weekend edition of Money Daily offers but a brief insight into the unraveling of the world order of finance already well underway.
On the whole, Friday was a washout to a week in which the major indices - with the notable exception of the NASDAQ - vacillated around the unchanged line. In the current nomenclature, stock indices - wherein the vast bulk of trading is performed by computer algorithms and central banks - are a control mechanism. So long as they are stable or going higher, the general population feels comforted and won't look around for cracks in the not-so-golden facade of global finance. As such, this week was very much like the previous six, or eight, or eighty. It was, in general terms, a big nothing-burger.
But, what does the outsize gain on the NASDAQ tell us, when the other indices were going exactly nowhere fast?
It says that the NASDAQ is where the speculation exists, where all the funny money or phony money is going to seek yield, mostly in tech-land, but also in energy stocks and in short-squeezes on the most-shorted list. It's how the game is being played at the top. If shorts are numerous on a particular equity, that where the money flow will be most pronounced, on the long side. Boom! Instant profits and a great weekend in the Hamptons awaits.
For the rest of us, we are placated with the rest of the market going sideways. At least - we comfort ourselves in saying - it didn't go down, much.
An expanded view looks at a couple of issues. Oil took another beating this week as the glut continues, though this fact is not to be promulgated to the general population. We are led to believe that oil is scarce and the price of gas with which to fill our cars should remain at elevated levels.
Nothing could be further from the truth. A variety of factors, including, but not limited to, better fuel consumption, an aging population, alternative energy sources, stagnant or slowing employment, and a more stay-at-home, economically-depressed middle America, is leading to the reality of oversupply meeting slack or declining demand. Oil will continue to fall until it becomes apparent that the big energy companies are squeezing every last nickel and dime out of consumers in the form of stubbornly high gas prices. At some point, the price of gasoline will merit a meeting with reality and then, gas will average, nationally, under $2.00 a gallon, notwithstanding the absurdly-high state and federal taxes on each and every gallon pumped. It's coming. It cannot be denied.
Overseas, the demise of two Italian banks on Friday was, typically, underreported. Banca Popolare di Vicenza and Veneto Banca, with combined assets of roughly 60 billion euros, were green-lighted by the ECB on Friday for liquidation. In other words, these banks are belly-up, bankrupt, kaput!
The Wall Street Journal, Reuters, Bloomberg, the AP, all reported the story. The mainstream media, such as ABC, NBC, CBS, CNN, et. al., i.e, the fake news propagandists, did not.
There you have it. The general public will not be told the truth about the fraility of the banking system for fears people would recall the horrors of the GFC of 2008-09.
Two Italian banks failing may not make the radar of disinterest parties such as the 98% of Americans who don't pay attention to nor understand economics or finance. Neither did the closure of two Bear Stearns funds back in the Spring of 2008. You are now forewarned and forearmed, with knowledge.
The world'd financial system is unwinding and the pace is quickening. Disruptions are already apparent in the forms of capital controls - mostly overseas, but heading to US shores soon - supply chain disorder, falling tax receipts, social unrest, and, most importantly and glaringly obvious, income disparity.
Stay informed, not from the mainstream sources, but from outside. The internet is s treasure trove of information that you're not supposed to know about. It will help you form opinions and strategies by which you can deal with the coming hard times.
Your thoughts and ideas have no limits. Time and space cannot prevent you from thinking, strategizing and planning for your won welfare.
At the Close, 6/23/17:
Dow: 21,394.76, -2.53 (-0.01%)
NASDAQ: 6,265.25, +28.56 (0.46%)
S&P 500: 2,438.30, +3.80 (0.16%)
NYSE Composite: 11,733.20, +20.68 (0.18%)
For the Week:
Dow: +10.48 (0.05%)
NASDAQ: +113.49 (1.84%)
S&P 500: +5.15 (0.21%)
NYSE Composite: -38.83 (-0.33%)
Friday, May 6, 2016
Jobs Miss Mark: To Markets, OK, But FED COURTS DEPRESSION
Jobs. Who needs 'em?
Friday's epic non-farm payroll data turned out to be disappointing to the Fed cheerleaders and assorted brain-dead economists and analysts who are still touting the "recovery" mantra.
Instead of the predicted 205,000 net new jobs that were supposed to be created in April, the BLS reported a net gain of just 160,000, a 20% miss, but at least something to seize upon by those who believe in ultra-low interest rates (aka, free money).
Thus, in the world of bass-ackward economics, stocks actually gained on the final day of the week, thinking (probably correctly) that more evidence of a weak economy would cause the Fed to continue to pause on their relentless rate-hiking journey, which, to date, has been confined to one measly 0.25% hike in December of last year, which was a prima facia cause for a wicked stock market decline in January.
Since then, however, the Fed has talked down the rate hike theme with alarming accuracy as relates to paper assets (stocks), and the markets have responded in kind, reversing all of the losses from January and the first two weeks of February.
Odds of the Fed raising the federal funds rate in June are now approaching infinity, because the one thing the Fed wants to avoid is another market correction. They are, in the estimation of many leading private money managers, OUT OF THEIR MINDS.
A return to "normalized rates," - something on the order of 3-5% on the fed funds front - is still years out, and, since the only data the Fed is interested in happens to be the levels on the Dow, S&P and NASDAQ, the market is probably going to overrule the ivory tower charlatans at the Fed. Corporate profits are and have been heading south since the third quarter of 2015, and will likely continue to do so, as capital is being mis-allocated to an alarming degree.
The levels of absurdity between stock prices and profits also are approaching extreme levels. It's only a matter of time before investors (and the term is used loosely, because most of the market is algo-driven, speculative, and dominated by institutional buyers and sellers) give up on future gains, cash out and head to the safety of alternatives, those being cash, bonds, and precious metals to a small degree.
In other words, the Fed has not abolished the business cycle. They've managed only to delay the inevitable, and by delaying, in a perverse avoidance of any pain, will cause degrees more devastation to not just financial markets, but markets in everything.
The Fed is courting depression by denying the failure of their experiment in fiat money with no backing save faith, and that faith has been on the wane. Expect a cratering of the economy just in time for the November presidential election. Between now and then, plenty of market noise, but nothing any good at all.
For the Week:
Dow: -33.01 (-0.19%)
S&P 500: -8.16 (-0.40)
NASDAQ: -39.20 (-0.82)
On the day:
S&P 500: 2,057.14, +6.51 (0.32%)
Dow: 17,740.63, +79.92 (0.45%)
NASDAQ: 4,736.16, +19.06 (0.40%)
Crude Oil 44.56 +0.54% Gold 1,289.70 +1.37% EUR/USD 1.1405 -0.04% 10-Yr Bond 1.78 +1.83% Corn 377.25 +0.94% Copper 2.15 -0.09% Silver 17.50 +1.03% Natural Gas 2.09 +0.82% Russell 2000 1,114.72 +0.61% VIX 14.72 -7.48% BATS 1000 20,677.17 0.00% GBP/USD 1.4431 0.00% USD/JPY 107.1050 -0.02%
Friday's epic non-farm payroll data turned out to be disappointing to the Fed cheerleaders and assorted brain-dead economists and analysts who are still touting the "recovery" mantra.
Instead of the predicted 205,000 net new jobs that were supposed to be created in April, the BLS reported a net gain of just 160,000, a 20% miss, but at least something to seize upon by those who believe in ultra-low interest rates (aka, free money).
Thus, in the world of bass-ackward economics, stocks actually gained on the final day of the week, thinking (probably correctly) that more evidence of a weak economy would cause the Fed to continue to pause on their relentless rate-hiking journey, which, to date, has been confined to one measly 0.25% hike in December of last year, which was a prima facia cause for a wicked stock market decline in January.
Since then, however, the Fed has talked down the rate hike theme with alarming accuracy as relates to paper assets (stocks), and the markets have responded in kind, reversing all of the losses from January and the first two weeks of February.
Odds of the Fed raising the federal funds rate in June are now approaching infinity, because the one thing the Fed wants to avoid is another market correction. They are, in the estimation of many leading private money managers, OUT OF THEIR MINDS.
A return to "normalized rates," - something on the order of 3-5% on the fed funds front - is still years out, and, since the only data the Fed is interested in happens to be the levels on the Dow, S&P and NASDAQ, the market is probably going to overrule the ivory tower charlatans at the Fed. Corporate profits are and have been heading south since the third quarter of 2015, and will likely continue to do so, as capital is being mis-allocated to an alarming degree.
The levels of absurdity between stock prices and profits also are approaching extreme levels. It's only a matter of time before investors (and the term is used loosely, because most of the market is algo-driven, speculative, and dominated by institutional buyers and sellers) give up on future gains, cash out and head to the safety of alternatives, those being cash, bonds, and precious metals to a small degree.
In other words, the Fed has not abolished the business cycle. They've managed only to delay the inevitable, and by delaying, in a perverse avoidance of any pain, will cause degrees more devastation to not just financial markets, but markets in everything.
The Fed is courting depression by denying the failure of their experiment in fiat money with no backing save faith, and that faith has been on the wane. Expect a cratering of the economy just in time for the November presidential election. Between now and then, plenty of market noise, but nothing any good at all.
For the Week:
Dow: -33.01 (-0.19%)
S&P 500: -8.16 (-0.40)
NASDAQ: -39.20 (-0.82)
On the day:
S&P 500: 2,057.14, +6.51 (0.32%)
Dow: 17,740.63, +79.92 (0.45%)
NASDAQ: 4,736.16, +19.06 (0.40%)
Crude Oil 44.56 +0.54% Gold 1,289.70 +1.37% EUR/USD 1.1405 -0.04% 10-Yr Bond 1.78 +1.83% Corn 377.25 +0.94% Copper 2.15 -0.09% Silver 17.50 +1.03% Natural Gas 2.09 +0.82% Russell 2000 1,114.72 +0.61% VIX 14.72 -7.48% BATS 1000 20,677.17 0.00% GBP/USD 1.4431 0.00% USD/JPY 107.1050 -0.02%
Thursday, February 11, 2016
Yellen's Congressional Testimony Fails to Inspire Confidence
As Janet Yellen testified to the House of Representatives (on Thursday, she speaks and takes questions from the Senate), stocks hung on her every, stuttering, stammering word, but eventually fell in late trading as the Fed Chair seemed a bit too concerned about recent data, stock declines and global tensions to allow congress or investors any happy talk on the now-stalled "recovery."
S&P: 1851.86, -0.35 (-0.02%)
Dow: 15914.74, -99.64 (-0.62%)
NASDAQ: 4283.59, +14.83 (+).35%)
As per this article, JP Morgan economists are now "not all that worried" about negative interest rates in the US, my response:
Of course, negative interest rates are the embodiment of absolute insanity, madness of the markets. Whats worse, perhaps, is that some commentators are touting that this will bring on hyperinflation, though none of them explain the mechanism.
Here at Money Daily, the widely-held belief is that if rates go any lower, we will have an outright deflationary depression, or, an extension of the deflationary depression which has been underway since 2008. We've been hearing about hyperinflation for years now, and, while there admittedly is some inflation, there's more deflation, especially when it comes to cash.
If the banks go NIRP and put on more capital controls (ban on cash not going to actually occur in some places), cash will surely be king, as it was in the Great Depression. Gold and silver should be worth even more, but that's not until the COMEX gets stung (still waiting on that one).
Anybody who's read "When Money Dies" by Adam Fergusson should recall that during Germany's Weimar, the farmers were barely affected until near the end when hordes of people came out from the cities and actually slaughtered animals and raided crop stores.
There's a free PDF, though this is not recommended for everyone - it's somewhat dense:
When Money Dies: The Nightmare of the Weimar …
In the meantime, farmers figure on getting started with seedlings in about three weeks here in (now, finally) snowy upstate NY. Then, investors with any sense should go long vegetable stands. If the banks want to charge money to hold cash, figure people will be more than willing to exchange it for FOOD.
The central bankers have lost their minds. Ask a farmer about storage costs for cash and you'll probably hear, after a long, sidewards stare, that he'd be happy to help you out, since he has plenty of storage for livestock, tools, equipment, produce, and his family (commonly known as a home or household).
People in a city or large town/village should be concerned. Out in the country, not an issue. Besides, this madness will only last - at best - a year. Donald Trump will be president and life will get better. We are (pun intended) banking on it.
This, from a poster called "The Continental," is apropos:
S&P: 1851.86, -0.35 (-0.02%)
Dow: 15914.74, -99.64 (-0.62%)
NASDAQ: 4283.59, +14.83 (+).35%)
As per this article, JP Morgan economists are now "not all that worried" about negative interest rates in the US, my response:
Of course, negative interest rates are the embodiment of absolute insanity, madness of the markets. Whats worse, perhaps, is that some commentators are touting that this will bring on hyperinflation, though none of them explain the mechanism.
Here at Money Daily, the widely-held belief is that if rates go any lower, we will have an outright deflationary depression, or, an extension of the deflationary depression which has been underway since 2008. We've been hearing about hyperinflation for years now, and, while there admittedly is some inflation, there's more deflation, especially when it comes to cash.
If the banks go NIRP and put on more capital controls (ban on cash not going to actually occur in some places), cash will surely be king, as it was in the Great Depression. Gold and silver should be worth even more, but that's not until the COMEX gets stung (still waiting on that one).
Anybody who's read "When Money Dies" by Adam Fergusson should recall that during Germany's Weimar, the farmers were barely affected until near the end when hordes of people came out from the cities and actually slaughtered animals and raided crop stores.
There's a free PDF, though this is not recommended for everyone - it's somewhat dense:
When Money Dies: The Nightmare of the Weimar …
In the meantime, farmers figure on getting started with seedlings in about three weeks here in (now, finally) snowy upstate NY. Then, investors with any sense should go long vegetable stands. If the banks want to charge money to hold cash, figure people will be more than willing to exchange it for FOOD.
The central bankers have lost their minds. Ask a farmer about storage costs for cash and you'll probably hear, after a long, sidewards stare, that he'd be happy to help you out, since he has plenty of storage for livestock, tools, equipment, produce, and his family (commonly known as a home or household).
People in a city or large town/village should be concerned. Out in the country, not an issue. Besides, this madness will only last - at best - a year. Donald Trump will be president and life will get better. We are (pun intended) banking on it.
This, from a poster called "The Continental," is apropos:
Positive interest rates cause capital to form. Negative interest rates destroy capital.
The banks are desperate to prevent the bond bubble from collapse and are extrapolating to negative interest rates. In short, it's game over for the dollar and its fiat currency brethren.
Central bank reserves were growing exponentially after 1948 up to mid 2014 whilst going vertical they suddenly stopped and plateaued. In the last year, ~$1 trillion of reserves have "disappeared" the collective balance sheets of the world. This means that cash/credit dollars are being created while counterbalancing bonds are being destroyed. This is monetization at its worst. The reserve base of the currency is slowly vanishing.
In the short run, cash dollars will become scarce and valuable. In the long run there is nothing, not even bonds, backing cash dollars and they will collapse (hyperinflate) when trillions of dollars return home looking for assets to convert to.
Buying physical gold (and silver) at any price is not only a no brainer vis-Ã -vis protecting capital; it is financial suicide not to buy gold.
Wednesday, January 6, 2016
The End? Stocks Slammed Again; Economic Prospects for 2016 Appear Grim
What should have happened in 2008-09 may be beginning to happen now, in 2016. Investors should take losses, companies should go broke, and government apologists should have a "come to Jesus" moment and admit that they've been lying about the recovery for years.
There is and there has been no recovery. GDP has been stuck between one-and-a-half and two-and-a-half percent since the financial crisis (and that's if you believe government accounting). 2015 will be fortunate to register at two percent growth.
Meanwhile, wages are stagnant and falling, 95 million able-bodied Americans are not officially counted as part of the workforce. The middle class has been hollowed out by Wall Street greed, government over-taxation, and unrealistic government salaries and pensions that suck the life out of local and state budgets.
The jobs that made America great have long gone, shipped overseas to China and elsewhere, and now we are exacerbating our pitiful condition by allowing in more immigrants - legal and illegal - taking away the few jobs left for natural-born citizens.
Baby boomers are retiring, replaced by their dumbed-down progeny. Our national debt of nearly $19 trillion - and growing - is a universal disgrace. Meanwhile the Federal Reserve, in cahoots with the shiftless Treasury Department, debases our currency by print a full 40% of government expenditures.
The federal government wants to grab our guns, the states want to charge us rent - in the form of property taxes - on the property we own, and neither of them can balance their books. The American public is at a breaking point, through with political correctness, suspicious of a government that spies upon us, regulates us, lies to us and sends our kids to die in useless wars which are never won. The controlled mainstream media propagandizes and cajoles anyone who doesn't align properly with the official corporate-government-military line.
Truly, in the short history of our Republic, we are on the cusp of complete breakdown in finance, education, morals, and decency.
And, while the blame can be placed on the people itself, because we voted for the spineless, unaccountable elected officials who have led us to this point, it should fall on the shoulders of those doing the governing, the legislating, the ones who are routinely bribed to pass legislation that favors corporations over people, banks over homeowners, and diminishment of our rights and liberties over common sense.
Our current government is the most corrupt to ever inhabit the halls of congress and the White House, our state houses and our government mansions. Is it any wonder that only half of the people who can vote, do vote?
Wall Street insiders hold all the cards, and they're gradually folding them. The Dow Industrials, S&P 500 and NASDAQ were all lower by massive amounts again today, for the second time in three this year. If this is a portent of what's ahead for the rest of the year, the ride may not be bumpy at all, merely a slide into the mediocrity created by greed, failed, moronic policies of the Federal Reserve, all with the implicit consent of the government, a government that is not worth the support of the people.
The slow collapse of stocks that has been on display the first week of this year has already been gaining steam since prior to last summer. Stocks peaked in late May and are 6-8% lower (depending on which index you choose) from their inflated high points. The Dow is down nearly 500 points in just three days this year and more than 850 points since the Fed decided, in their insipid, desperate desire, to raise interest rates mid-December.
Manufacturing, as measured by the ISM, has shown contraction for two consecutive months. US Services PMI dropped to 54.3 - the lowest since January 2015. ISM Services fell to 55.3, the lowest level since March 2014.
US factory orders for November fell 4.2% year-over-year, the 13th consecutive monthly drop. We are on the verge of a recession, in the middle of a depression. The emperor has no clothes and this time, with federal funds rates straining to hold between 0.25 and 0.50%, there is no place to hide.
If this isn't the end, it's getting pretty close. According to the most widely-accepted charting methods, stocks will enter a correction phase within a month, if not sooner. Corporate profits are falling, as companies cannot concoct any more accounting tricks to show even meager profits. Quarterly results are due out over the next three to four weeks and prospects for corporate earnings are poor. For retailers, energy stocks and consumer goods producers, the results - stemming from missing expectations for the holiday season and an oversupply of crude oil and distillates - might be devastating.
Stores are being shuttered in malls across the country and with them, marginal jobs which will not come back. The only bright spots are that inflation is nil, gasoline is cheap, and the winter, thus far, has been mild, at least in the heavily-populated Northeast.
Somehow, America will survive. However, the America of 2016 is a far cry from what the country was just 30 years ago, and a dim representation of what our Founding Fathers conceived.
S&P 500: 1,990.26, -26.45 (1.31%)
Dow: 16,906.51, -252.15 (1.47%)
NASDAQ: 4,835.76, -55.67 (1.14%)
There is and there has been no recovery. GDP has been stuck between one-and-a-half and two-and-a-half percent since the financial crisis (and that's if you believe government accounting). 2015 will be fortunate to register at two percent growth.
Meanwhile, wages are stagnant and falling, 95 million able-bodied Americans are not officially counted as part of the workforce. The middle class has been hollowed out by Wall Street greed, government over-taxation, and unrealistic government salaries and pensions that suck the life out of local and state budgets.
The jobs that made America great have long gone, shipped overseas to China and elsewhere, and now we are exacerbating our pitiful condition by allowing in more immigrants - legal and illegal - taking away the few jobs left for natural-born citizens.
Baby boomers are retiring, replaced by their dumbed-down progeny. Our national debt of nearly $19 trillion - and growing - is a universal disgrace. Meanwhile the Federal Reserve, in cahoots with the shiftless Treasury Department, debases our currency by print a full 40% of government expenditures.
The federal government wants to grab our guns, the states want to charge us rent - in the form of property taxes - on the property we own, and neither of them can balance their books. The American public is at a breaking point, through with political correctness, suspicious of a government that spies upon us, regulates us, lies to us and sends our kids to die in useless wars which are never won. The controlled mainstream media propagandizes and cajoles anyone who doesn't align properly with the official corporate-government-military line.
Truly, in the short history of our Republic, we are on the cusp of complete breakdown in finance, education, morals, and decency.
And, while the blame can be placed on the people itself, because we voted for the spineless, unaccountable elected officials who have led us to this point, it should fall on the shoulders of those doing the governing, the legislating, the ones who are routinely bribed to pass legislation that favors corporations over people, banks over homeowners, and diminishment of our rights and liberties over common sense.
Our current government is the most corrupt to ever inhabit the halls of congress and the White House, our state houses and our government mansions. Is it any wonder that only half of the people who can vote, do vote?
Wall Street insiders hold all the cards, and they're gradually folding them. The Dow Industrials, S&P 500 and NASDAQ were all lower by massive amounts again today, for the second time in three this year. If this is a portent of what's ahead for the rest of the year, the ride may not be bumpy at all, merely a slide into the mediocrity created by greed, failed, moronic policies of the Federal Reserve, all with the implicit consent of the government, a government that is not worth the support of the people.
The slow collapse of stocks that has been on display the first week of this year has already been gaining steam since prior to last summer. Stocks peaked in late May and are 6-8% lower (depending on which index you choose) from their inflated high points. The Dow is down nearly 500 points in just three days this year and more than 850 points since the Fed decided, in their insipid, desperate desire, to raise interest rates mid-December.
Manufacturing, as measured by the ISM, has shown contraction for two consecutive months. US Services PMI dropped to 54.3 - the lowest since January 2015. ISM Services fell to 55.3, the lowest level since March 2014.
US factory orders for November fell 4.2% year-over-year, the 13th consecutive monthly drop. We are on the verge of a recession, in the middle of a depression. The emperor has no clothes and this time, with federal funds rates straining to hold between 0.25 and 0.50%, there is no place to hide.
If this isn't the end, it's getting pretty close. According to the most widely-accepted charting methods, stocks will enter a correction phase within a month, if not sooner. Corporate profits are falling, as companies cannot concoct any more accounting tricks to show even meager profits. Quarterly results are due out over the next three to four weeks and prospects for corporate earnings are poor. For retailers, energy stocks and consumer goods producers, the results - stemming from missing expectations for the holiday season and an oversupply of crude oil and distillates - might be devastating.
Stores are being shuttered in malls across the country and with them, marginal jobs which will not come back. The only bright spots are that inflation is nil, gasoline is cheap, and the winter, thus far, has been mild, at least in the heavily-populated Northeast.
Somehow, America will survive. However, the America of 2016 is a far cry from what the country was just 30 years ago, and a dim representation of what our Founding Fathers conceived.
S&P 500: 1,990.26, -26.45 (1.31%)
Dow: 16,906.51, -252.15 (1.47%)
NASDAQ: 4,835.76, -55.67 (1.14%)
Monday, December 14, 2015
Is a Global Recession Just Ahead, or, A Global Depression?
Gas prices at the pump haven't been this low since 2009, though the prices back then maintained for a very brief time, as oil plummeted during the financial crisis (remember that?), but quickly rebounded as the Fed and other central banks added extreme amounts of liquidity to markets globally and before long, crude oil was back in the $90-100/barrel range.
Last year, the price of a barrel of crude - both Brent and WTI - began a precipitous decline, cutting in half the traded price. As 2014 turned to 2015 and many culprits were blamed (Saudi Arabia, US frackers, Russia(?), the price continued to hover in the $45-65 range. By late summer, all bets were off as the price of a barrel of crude fell into the low-$40 range, and then this month declined into the 30s.
While gas at $2/gallon and lower is a boon for drivers, especially in the US, where commuters and businesses were burdened with gas above $3.00 and sometimes over $4/gallon for years, it's not such a great deal for oil producers, especially the aforementioned frackers, whose marginal profitable price per barrel was estimated at somewhere between $45 and $75 per barrel.
Plenty of rigs have gone idle, but debt has to be serviced, and most of these drillers are on the hook for millions, borrowed from banks when the getting was good, now having to pay back the costs of exploration, drilling and extraction while operating at a loss.
The oil patch is just one element of the global liquidity crunch which may be about to enter a new, more dangerous phase, when, in two days time, the FOMC of the Federal Reserve is supposed to raise the federal funds rate for the first time in more than seven years.
The Fed plans to set the rate at 0.25% for money banks can borrow from the Fed, and, while that may not sound like a big deal to most, it certainly is to banks and corporations, which have been borrowing and spending at record paces since mid-2009.
With the FOMC rate policy decision now less than 48 hours away, there's a growing nervousness on Wall Street over this unprecedented move by the Fed. It's unprecedented because there's a vast amount of evidence that the bubble the Fed has blown is about to be not only pricked, but popped and blown wide open. Simply put, the party is about to end, and the drunks on the dance floor will be looking for a ride home, but nobody will be available for a safe trip, because not just the investment and corporate community, but the Fed itself, is staggering and woozy.
It may be a big, bad boogey man, like the 2000 scare, or the Mayan calendar, or those pesky asteroids which dare to come within 100,000 miles of dear planet earth. Or, it could be the real thing.
Nothing lasts forever, and, from the looks of the bond, commodity, and emerging markets, the long "recovery" and stock market rally seems to have run out of steam. Global trade is down, global GDP keeps being revised lower, US manufacturing is fading, China is becoming a basket case. It all points to reduced growth, or, in proper recession terms, negative growth.
If you're in the market, there's still a day and a half to get out, and probably more, if you can handle small losses. If you're not in the market, but still have to drive, eat, and breath, good news. In recessions and, especially, depressions, everything (except debt) is cheaper.
Hedge, buy, or sell accordingly.
--FR
Last year, the price of a barrel of crude - both Brent and WTI - began a precipitous decline, cutting in half the traded price. As 2014 turned to 2015 and many culprits were blamed (Saudi Arabia, US frackers, Russia(?), the price continued to hover in the $45-65 range. By late summer, all bets were off as the price of a barrel of crude fell into the low-$40 range, and then this month declined into the 30s.
While gas at $2/gallon and lower is a boon for drivers, especially in the US, where commuters and businesses were burdened with gas above $3.00 and sometimes over $4/gallon for years, it's not such a great deal for oil producers, especially the aforementioned frackers, whose marginal profitable price per barrel was estimated at somewhere between $45 and $75 per barrel.
Plenty of rigs have gone idle, but debt has to be serviced, and most of these drillers are on the hook for millions, borrowed from banks when the getting was good, now having to pay back the costs of exploration, drilling and extraction while operating at a loss.
The oil patch is just one element of the global liquidity crunch which may be about to enter a new, more dangerous phase, when, in two days time, the FOMC of the Federal Reserve is supposed to raise the federal funds rate for the first time in more than seven years.
The Fed plans to set the rate at 0.25% for money banks can borrow from the Fed, and, while that may not sound like a big deal to most, it certainly is to banks and corporations, which have been borrowing and spending at record paces since mid-2009.
With the FOMC rate policy decision now less than 48 hours away, there's a growing nervousness on Wall Street over this unprecedented move by the Fed. It's unprecedented because there's a vast amount of evidence that the bubble the Fed has blown is about to be not only pricked, but popped and blown wide open. Simply put, the party is about to end, and the drunks on the dance floor will be looking for a ride home, but nobody will be available for a safe trip, because not just the investment and corporate community, but the Fed itself, is staggering and woozy.
It may be a big, bad boogey man, like the 2000 scare, or the Mayan calendar, or those pesky asteroids which dare to come within 100,000 miles of dear planet earth. Or, it could be the real thing.
Nothing lasts forever, and, from the looks of the bond, commodity, and emerging markets, the long "recovery" and stock market rally seems to have run out of steam. Global trade is down, global GDP keeps being revised lower, US manufacturing is fading, China is becoming a basket case. It all points to reduced growth, or, in proper recession terms, negative growth.
If you're in the market, there's still a day and a half to get out, and probably more, if you can handle small losses. If you're not in the market, but still have to drive, eat, and breath, good news. In recessions and, especially, depressions, everything (except debt) is cheaper.
Hedge, buy, or sell accordingly.
--FR
Monday, May 4, 2015
FOMC (in)Action Does Nothing for Wall Street; 1Q GDP Weak
Apologies again for the brevity of this missive. We are currently under severe time restraints, though the thought of a more regular schedule appears for next week. -Editor
The week can be summed up as "much ado about nothing," as the FOMC again held the federal fund rate at near-zero and stocks were more or less unresponsive over the course of the week.
A preliminary reading of first quarter GDP showed the economy nearly slipping into recession, growing at a rate of just 0.2% for the first three months of 2015. The outlier was a three percent inventory build, without which the number would have been negative. Naturally, naysayers on the economy contend that the recession for the US economy never ended after 2009, and that the United States has been mired in a deep depression since the implosion of the financial system back in the fall of 2008 and that only extreme dosages of liquidity supplied by the central bankers of the world have saves us all from misery.
Wall Street continues to hum along with record amounts of stock buybacks buoying share prices for many firms, with growth and capital expenditures now becoming things of the past.
The first three days of trading were somewhat lackluster, followed by a huge downdraft on Thursday and a dead-cat monster bounce-back on Friday, which kept the major indices from outright implosion. Analysts are keeping a keen eye on the German DAX, which is coming close to correction territory.
The NASDAQ was the worst-performer, dropping nearly two percent as biotechs imploded and speculative money was coming off the table at a rapid rate.
For the week ending May 1:
Dow: 18.024.06, -56.08 (-0.31)
S&P 500: 2,108.29, -9.40 (-0.44)
NASDAQ: 5,005.39, -86.69 (-1.70)
The week can be summed up as "much ado about nothing," as the FOMC again held the federal fund rate at near-zero and stocks were more or less unresponsive over the course of the week.
A preliminary reading of first quarter GDP showed the economy nearly slipping into recession, growing at a rate of just 0.2% for the first three months of 2015. The outlier was a three percent inventory build, without which the number would have been negative. Naturally, naysayers on the economy contend that the recession for the US economy never ended after 2009, and that the United States has been mired in a deep depression since the implosion of the financial system back in the fall of 2008 and that only extreme dosages of liquidity supplied by the central bankers of the world have saves us all from misery.
Wall Street continues to hum along with record amounts of stock buybacks buoying share prices for many firms, with growth and capital expenditures now becoming things of the past.
The first three days of trading were somewhat lackluster, followed by a huge downdraft on Thursday and a dead-cat monster bounce-back on Friday, which kept the major indices from outright implosion. Analysts are keeping a keen eye on the German DAX, which is coming close to correction territory.
The NASDAQ was the worst-performer, dropping nearly two percent as biotechs imploded and speculative money was coming off the table at a rapid rate.
For the week ending May 1:
Dow: 18.024.06, -56.08 (-0.31)
S&P 500: 2,108.29, -9.40 (-0.44)
NASDAQ: 5,005.39, -86.69 (-1.70)
Friday, June 1, 2012
Dow Erases All 2012 Gains; Global Depression Dead Ahead
T.G.I.F., or, more succinctly, thank God this Friday is over.
After the release of some really poor employment numbers in May's non-farm payroll report from the BLS, stocks fell off a cliff right from the open and continued to slide all day in the single worst trading session since last November.
With only 69,000 net new jobs created in May - well below the average estimate of 150,000 - the false "recovery" meme from just a few months ago was completely eviscerated as a rash of poor data which had been flowing to the market all week culminated in the worst employment figures in a year.
In addition to the unemployment rate rising to 8.2% - the first rise in over a year - March and April data were revised lower. March job growth total was reduced from 154,000 to 143,000 and the April number slashed from 115,000 to just 77,000.
While the US had its own woes, the deepening recession in Europe only made matters worse as Markit's Eurozone Manufacturing Purchasing Managers' Index (PMI) dropped to 45.1 in May from 45.9 in April, its lowest level since June 2009. The index's latest reading was all the more frightening as data showed manufacturing in France and Germany - supposedly the two strongest members of the EU - slowing at its fastest rate in nearly three years.
Even in developing nations like China, India and Brazil, growth has been slowing and the pace of decline continues to gather momentum. Since the economies of these and other developing nations depend greatly on exports to Europe and the US, the slowdown of the developed economies produces a knock-on effect to the exporters.
The only bright spot of the day came from automakers, which saw double-digit sales gains when compared to a year ago, though all of the US figures were below expectations. GM posted a gain of 11% from May of last year, Ford sales were up 13%, Chrysler, 30%, while Toyota, rebounding from the tsunami and Fukushima nuclear disaster of a year ago, saw a sales increase of 87%.
The Dow Jones Industrials and NYSE Composite index each saw all of 2012 advances wiped out as of the close today. The S&P 500 is just 20 points better than the close on December 30, 2011, while the NASDAQ still sports a gain for the year of better than 100 points. All but the NASDAQ closed today below their 200 day moving average, a sure sign that there is more downside to come.
Along with stocks hitting the skids hard on the day, the US 10-year note hit yet another historic low, ending the week at 1.45%. Its counterpart in Germany, the 10-year Bund, has also been chasing yield lower, with a reading of 1.12% seen today.
Gold had a rapid rise on the news, regaining its status as a safe-haven currency, along with silver, which also posted a healthy increase. Precious metals investors should not be fooled, however, by today's moves alone. During the crash of 2008, all asset classes were decimated, though the metals improved earlier and with more ferocity than equities.
All around, even though it was a shortened trading week, it was the worst of 2012 on the major indices. Internals are screaming correction in equities, while the price of oil continues to signal a cold, deflationary environment in the face of a rising dollar, which seems to be a silver lining to a worsening economy. Gas prices will be lower, though many will be unable to afford to go anywhere.
After governments and central banks have thrown trillions in quantitative easing and stimulus for bailouts and bank balance sheet bolstering, the global financial system seems on the verge of another major breakdown, one that may make 2008 look like a picnic by comparison. As all fiat money systems in the history of civilization have eventually failed, our current regime of "money from nothing" appears to be coming to a cataclysmic demise, and it is gaining momentum at a terrifying pace.
Eventually, all the bad debts run up by governments and financial institutions are going to result in ruination of the global system, to be replaced by some forms of gold and/or silver-backed currencies. Only then will the world's economies become honorable and stable once again.
Welcome back to the Greater Depression.
Dow 12,118.57, -274.88 (2.22%)
NASDAQ 2,747.48, -79.86 (2.82%)
S&P 500 1,278.04, -32.29 (2.46%)
NYSE Composite 7,292.25, -171.71 (2.30%)
NASDAQ Volume 1,875,578,750
NYSE Volume 4,605,786,000
Combined NYSE & NASDAQ Advance - Decline: 853-4802
Combined NYSE & NASDAQ New highs - New lows: 34-307
WTI crude oil: 83.23, -3:30
Gold: 1,622.10, +57.90
Silver: 28.51, +0.76
After the release of some really poor employment numbers in May's non-farm payroll report from the BLS, stocks fell off a cliff right from the open and continued to slide all day in the single worst trading session since last November.
With only 69,000 net new jobs created in May - well below the average estimate of 150,000 - the false "recovery" meme from just a few months ago was completely eviscerated as a rash of poor data which had been flowing to the market all week culminated in the worst employment figures in a year.
In addition to the unemployment rate rising to 8.2% - the first rise in over a year - March and April data were revised lower. March job growth total was reduced from 154,000 to 143,000 and the April number slashed from 115,000 to just 77,000.
While the US had its own woes, the deepening recession in Europe only made matters worse as Markit's Eurozone Manufacturing Purchasing Managers' Index (PMI) dropped to 45.1 in May from 45.9 in April, its lowest level since June 2009. The index's latest reading was all the more frightening as data showed manufacturing in France and Germany - supposedly the two strongest members of the EU - slowing at its fastest rate in nearly three years.
Even in developing nations like China, India and Brazil, growth has been slowing and the pace of decline continues to gather momentum. Since the economies of these and other developing nations depend greatly on exports to Europe and the US, the slowdown of the developed economies produces a knock-on effect to the exporters.
The only bright spot of the day came from automakers, which saw double-digit sales gains when compared to a year ago, though all of the US figures were below expectations. GM posted a gain of 11% from May of last year, Ford sales were up 13%, Chrysler, 30%, while Toyota, rebounding from the tsunami and Fukushima nuclear disaster of a year ago, saw a sales increase of 87%.
The Dow Jones Industrials and NYSE Composite index each saw all of 2012 advances wiped out as of the close today. The S&P 500 is just 20 points better than the close on December 30, 2011, while the NASDAQ still sports a gain for the year of better than 100 points. All but the NASDAQ closed today below their 200 day moving average, a sure sign that there is more downside to come.
Along with stocks hitting the skids hard on the day, the US 10-year note hit yet another historic low, ending the week at 1.45%. Its counterpart in Germany, the 10-year Bund, has also been chasing yield lower, with a reading of 1.12% seen today.
Gold had a rapid rise on the news, regaining its status as a safe-haven currency, along with silver, which also posted a healthy increase. Precious metals investors should not be fooled, however, by today's moves alone. During the crash of 2008, all asset classes were decimated, though the metals improved earlier and with more ferocity than equities.
All around, even though it was a shortened trading week, it was the worst of 2012 on the major indices. Internals are screaming correction in equities, while the price of oil continues to signal a cold, deflationary environment in the face of a rising dollar, which seems to be a silver lining to a worsening economy. Gas prices will be lower, though many will be unable to afford to go anywhere.
After governments and central banks have thrown trillions in quantitative easing and stimulus for bailouts and bank balance sheet bolstering, the global financial system seems on the verge of another major breakdown, one that may make 2008 look like a picnic by comparison. As all fiat money systems in the history of civilization have eventually failed, our current regime of "money from nothing" appears to be coming to a cataclysmic demise, and it is gaining momentum at a terrifying pace.
Eventually, all the bad debts run up by governments and financial institutions are going to result in ruination of the global system, to be replaced by some forms of gold and/or silver-backed currencies. Only then will the world's economies become honorable and stable once again.
Welcome back to the Greater Depression.
Dow 12,118.57, -274.88 (2.22%)
NASDAQ 2,747.48, -79.86 (2.82%)
S&P 500 1,278.04, -32.29 (2.46%)
NYSE Composite 7,292.25, -171.71 (2.30%)
NASDAQ Volume 1,875,578,750
NYSE Volume 4,605,786,000
Combined NYSE & NASDAQ Advance - Decline: 853-4802
Combined NYSE & NASDAQ New highs - New lows: 34-307
WTI crude oil: 83.23, -3:30
Gold: 1,622.10, +57.90
Silver: 28.51, +0.76
Tuesday, May 15, 2012
Commodities, Stocks Continue to Slide in Deflationary Downturn
It's time to look at some numbers in a broad macro view to get a handle of where the global economy is heading over the next six to twelve months.
In less than six months, Americans will head to the polls to either elect a new president or give Barack Obama the benefit of the doubt and return him for a second term. There are also key Senate races and all members of the House of Representatives are up for re-election. The implications of who becomes president and which party controls congress will have profound implications for the US economy going forward.
However, the presidency is the most important piece of the puzzle. In a nutshell, if Obama wins, we will have a continuation of the descent into a welfare state. If Romney takes it, bet on police state, with brutal, militarized police forces mobilized to quell citizen uprisings throughout the country.
Either way, the USA is in a tough spot, because neither the Republicans or Democrats will do anything remotely positive to improve conditions for millions of Americans.
Let's look at the numbers:
America's current deficit is $1.3 trillion for 2012.
The total US debt is beyond $15 trillion, and, if you add in unfunded liabilities - pensions, Social Security and Medicare - that number grows to somewhere between $125 and $150 trillion. That's a number that cannot be paid out or paid back easily.
In just the past 15 days, reality seems to have struck all the way from Washington to Wall Street. The economy is just barely limping along; in some areas of the country, local economies are dead or nearing a fatal state. More than half the US states face budget shortfalls for fiscal 2013 (starting July 1), the worst being California, Massachusetts (thank you, Mitt!), Illinois and Louisiana. The total gap for the states is estimated at $49 billion and that may be low.
Since the states have to balance their budgets, there will be layoffs and cuts in services. These will be anything but bullish for the general economy.
Retail sales have slowed for four straight months. In related news, JC Penny's (JCP) just today reported second quarter (non) earnings. They lost 0.25 cents per share on estimates of an 11-cent loss. Top-line revenue also missed the projected target of $3.41 billion, coming in at a squeamish $3.15 billion.
CEO Ron Johnson, who took over the reigns of the struggling merchandiser recently and had been widely praised as the master planner of Apple's signature stores, has a difficult road ahead. His Apple experience cannot be rightly compared to what he is dealing with at JC Penny's . Apple's stores were designed to sell only Apple products, which are unique and the envy of the retail world. Penny's deals with thousands of products from a multitude of vendors. It's not the same, and, even though Mr. Johnson is a bright fellow, he's in over his head in an environment that is not favorable to retailers.
Penny's also announced they were discontinuing their dividend of 80 cents per share. The stock was trading down more than 10% in the after-hours.
There are more than 44 million Americans - nearly one in six - receiving food stamps.
New home sales in 2011 had their worst year since 1961.
Stocks on the major averages are down between 4.5 and 5% in just the last 10 trading days. The Dow lost ground on nine of the last ten days; the S&P and NASDAQ have finished in the red eight of the last 10 sessions.
Meanwhile, the dollar index has soared, from 78.71 on April 27, to 81.26 at the close today. Meanwhile the Euro has collapsed to under 1.28 against the US dollar, finishing at 1.2729 at today's close. The move up in the value of the dollar has sent commodities screaming lower, with gold, oil and silver all suffering steep losses in the month of May. That's actually good news for Americans, particularly because lower oil prices eventually will translate into lower gas prices at the pump.
So, what is all of this data telling us? Surprisingly, despite tens of trillions of dollars pumped into the economy since 2008 by the Fed and the federal government, the wailing tone of deflation is unmistakable. Prices are falling rapidly, though incomes are stagnant or declining. There simply are not enough people working and making sufficient money to keep price levels high.
Anecdotally, food prices are coming down. Real estate remains in a moribund, deep slump and home foreclosures are once again rising. Everything will get cheaper as the economy continues down the inescapable path of deflation because the Federal Reserve's money spigot has directed all the flows to the banks, and they are not lending, mainly because they're still repairing their badly damaged balance sheets, and, even when they do cough up some dough, the borrower has to have absolutely pristine credit, a circumstance which is becoming something of a rarity.
Some say the US economy will be destroyed because its unpayable debts will undermine the value of the dollar and cause hyper-inflation. That may be so, though it's difficult to see inflation in anything when 15-20% of Americans are living in what's essentially a day-to-day fight for survival.
If hyper-inflation does one day come about and the dollar is smashed to a fraction of its former value, a deflationary depression will occur first. The government needs low interest rates to continue paying off the massive debt it has created, and will do everything it can to keep rates low.
But, because the Federal reserve has failed so miserably on the second part of its mandate - employment - all the money in the world (and the Fed has most of it now) cannot make people spend when they have no jobs, no prospects, and are worried about having enough food to eat tomorrow. Food prices are likely to stabilize, but, for the most part, the rest of the economy is toast, though it is still marginally better than that of Europe, of which half the countries are already in recession.
The money that was furnished to the banks by the American taxpayer, courtesy of the Fed and Treasury, went straight to financial institutions, and we know that they are profligate gamblers and thieves who will only enrich themselves, leaving Main Street, small business and the American public to fend for themselves in a mostly cash system which is quietly, albeit quickly, turning into a massive black market, underground economy.
Eventually, the government will fail horribly, and many will suffer. Those with wits, skills, cunning and a propensity to see the future and break rules, will prosper. Europe will fall first, but you can bet your bottom dollar (if you still have any) that their problems will come to roost on the shimmering shores of America.
Dow 12,632.00, -63.35 (0.50%)
NASDAQ 2,893.76, -8.82 (0.30%)
S&P 500 1,330.66, -7.69 (0.57%)
NYSE Composite 7,635.81, -69.64 (0.90%)
NASDAQ Volume 1,835,801,375
NYSE Volume 4,114,145,250
Combined NYSE & NASDAQ Advance - Decline: 2214-3408
Combined NYSE & NASDAQ New highs - New lows: 77-236 (gap widening)
WTI crude oil: 93.98, -0.80
Gold: 1,557.10, -3.90
Silver: 28.08, -0.27
In less than six months, Americans will head to the polls to either elect a new president or give Barack Obama the benefit of the doubt and return him for a second term. There are also key Senate races and all members of the House of Representatives are up for re-election. The implications of who becomes president and which party controls congress will have profound implications for the US economy going forward.
However, the presidency is the most important piece of the puzzle. In a nutshell, if Obama wins, we will have a continuation of the descent into a welfare state. If Romney takes it, bet on police state, with brutal, militarized police forces mobilized to quell citizen uprisings throughout the country.
Either way, the USA is in a tough spot, because neither the Republicans or Democrats will do anything remotely positive to improve conditions for millions of Americans.
Let's look at the numbers:
America's current deficit is $1.3 trillion for 2012.
The total US debt is beyond $15 trillion, and, if you add in unfunded liabilities - pensions, Social Security and Medicare - that number grows to somewhere between $125 and $150 trillion. That's a number that cannot be paid out or paid back easily.
In just the past 15 days, reality seems to have struck all the way from Washington to Wall Street. The economy is just barely limping along; in some areas of the country, local economies are dead or nearing a fatal state. More than half the US states face budget shortfalls for fiscal 2013 (starting July 1), the worst being California, Massachusetts (thank you, Mitt!), Illinois and Louisiana. The total gap for the states is estimated at $49 billion and that may be low.
Since the states have to balance their budgets, there will be layoffs and cuts in services. These will be anything but bullish for the general economy.
Retail sales have slowed for four straight months. In related news, JC Penny's (JCP) just today reported second quarter (non) earnings. They lost 0.25 cents per share on estimates of an 11-cent loss. Top-line revenue also missed the projected target of $3.41 billion, coming in at a squeamish $3.15 billion.
CEO Ron Johnson, who took over the reigns of the struggling merchandiser recently and had been widely praised as the master planner of Apple's signature stores, has a difficult road ahead. His Apple experience cannot be rightly compared to what he is dealing with at JC Penny's . Apple's stores were designed to sell only Apple products, which are unique and the envy of the retail world. Penny's deals with thousands of products from a multitude of vendors. It's not the same, and, even though Mr. Johnson is a bright fellow, he's in over his head in an environment that is not favorable to retailers.
Penny's also announced they were discontinuing their dividend of 80 cents per share. The stock was trading down more than 10% in the after-hours.
There are more than 44 million Americans - nearly one in six - receiving food stamps.
New home sales in 2011 had their worst year since 1961.
Stocks on the major averages are down between 4.5 and 5% in just the last 10 trading days. The Dow lost ground on nine of the last ten days; the S&P and NASDAQ have finished in the red eight of the last 10 sessions.
Meanwhile, the dollar index has soared, from 78.71 on April 27, to 81.26 at the close today. Meanwhile the Euro has collapsed to under 1.28 against the US dollar, finishing at 1.2729 at today's close. The move up in the value of the dollar has sent commodities screaming lower, with gold, oil and silver all suffering steep losses in the month of May. That's actually good news for Americans, particularly because lower oil prices eventually will translate into lower gas prices at the pump.
So, what is all of this data telling us? Surprisingly, despite tens of trillions of dollars pumped into the economy since 2008 by the Fed and the federal government, the wailing tone of deflation is unmistakable. Prices are falling rapidly, though incomes are stagnant or declining. There simply are not enough people working and making sufficient money to keep price levels high.
Anecdotally, food prices are coming down. Real estate remains in a moribund, deep slump and home foreclosures are once again rising. Everything will get cheaper as the economy continues down the inescapable path of deflation because the Federal Reserve's money spigot has directed all the flows to the banks, and they are not lending, mainly because they're still repairing their badly damaged balance sheets, and, even when they do cough up some dough, the borrower has to have absolutely pristine credit, a circumstance which is becoming something of a rarity.
Some say the US economy will be destroyed because its unpayable debts will undermine the value of the dollar and cause hyper-inflation. That may be so, though it's difficult to see inflation in anything when 15-20% of Americans are living in what's essentially a day-to-day fight for survival.
If hyper-inflation does one day come about and the dollar is smashed to a fraction of its former value, a deflationary depression will occur first. The government needs low interest rates to continue paying off the massive debt it has created, and will do everything it can to keep rates low.
But, because the Federal reserve has failed so miserably on the second part of its mandate - employment - all the money in the world (and the Fed has most of it now) cannot make people spend when they have no jobs, no prospects, and are worried about having enough food to eat tomorrow. Food prices are likely to stabilize, but, for the most part, the rest of the economy is toast, though it is still marginally better than that of Europe, of which half the countries are already in recession.
The money that was furnished to the banks by the American taxpayer, courtesy of the Fed and Treasury, went straight to financial institutions, and we know that they are profligate gamblers and thieves who will only enrich themselves, leaving Main Street, small business and the American public to fend for themselves in a mostly cash system which is quietly, albeit quickly, turning into a massive black market, underground economy.
Eventually, the government will fail horribly, and many will suffer. Those with wits, skills, cunning and a propensity to see the future and break rules, will prosper. Europe will fall first, but you can bet your bottom dollar (if you still have any) that their problems will come to roost on the shimmering shores of America.
Dow 12,632.00, -63.35 (0.50%)
NASDAQ 2,893.76, -8.82 (0.30%)
S&P 500 1,330.66, -7.69 (0.57%)
NYSE Composite 7,635.81, -69.64 (0.90%)
NASDAQ Volume 1,835,801,375
NYSE Volume 4,114,145,250
Combined NYSE & NASDAQ Advance - Decline: 2214-3408
Combined NYSE & NASDAQ New highs - New lows: 77-236 (gap widening)
WTI crude oil: 93.98, -0.80
Gold: 1,557.10, -3.90
Silver: 28.08, -0.27
Wednesday, March 21, 2012
US Economy an Express Train to Nowhere
Where to begin...
Let's start with housing, which continues to be a complete bugaboo for the friends of the Fed (FOF), meaning governments at all levels, financial institutions, public sector employees (overpaid, irresponsible), welfare and entitlement recipients and anybody who spends beyond their means.
This morning, the NAR released their almost-fully-discredited monthly report on existing home sales, which, despite marvelous weather across most of the country, fell 0.9% in February as compared to January's figures. The NAR was quick to point out that sales rose 8.8% from a year earlier to a seasonally adjusted annual rate of 4.59 million.
Median prices were nearly flat, at $157,100, just 0.1% higher than February 2011.
It wasn't such a disheartening report, overall, but points to the idea that any uptick in activity is usually short-lived and not sustainable. Prices have remained mired in the mud, and, with interest rates on mortgages rising recently, March may have come in like a Lamb, weather-wise, but it may go out like a hungry lion in terms of real estate.
Then there was the brilliantly-timed commentary by Goldman Sachs chief global equity strategist, Peter Oppenheimer, titled "The Long Good Buy" which postulates that "the prospects for future returns in equities relative to bonds are as good as they've been in a generation."
Not to throw much cold water (a bathtub of ice might be more appropriate) on this particular bit of financial wisdom, but Mr. Oppenheimer and his buddies at the giant squid must think the muppets are prime for a fleecing. Stocks have not been at these current levels for more than 3 1/2 years, the major indices have pretty much doubled since the bottom of March '09 and he thinks NOW, today is a good time to buy stocks?
Not to be too pushy or overburdened with facts, but isn't the oldest bit of market timing knowledge to buy low, sell high? Oppenheimer seems to want to stand that time-worn adage on its head, which, considering the extent to which Goldman Sachs will go to defraud the public, the government and even its own clients, is about par for the course. (A video, assessing the relative value of Mr. Oppenheimer's call appears at the end of this post.)
As far as stocks are concerned, they are currently stalled out at high levels and while they floated along in bifurcated fashion through most of today's session, there was some significant selling pressure at the close. It probably means nothing, but if you think a quick selloff in stocks at the end of the day is a sure sign to buy more gold and silver, nobody around these parts is going to do anything to dissuade you from that line of thinking.
As usual, volume was unseen and at levels indicating a lack of interest, sponsorship or near-panic, but we've been over that bridge too many times already. Let it just be said that there are many, many, many fewer individual investors playing stocks than there were five years ago. Some went broke, some profited but are scared to death of the markets, others are merely awaiting a return to normalcy, something that isn't likely to occur until there's a crash, a credit "event", a war or something very ugly to shake the stranglehold of the banksters and politicians to their core.
Doug Casey offers three variations on the definition of a depression, plus some valuable insights in an interview, titled Doug Casey on the Illusion of a Recovery. It's an intelligent read. (Hint: Doug likes gold)
Dow 13,124.62, -45.57 (0.35%)
NASDAQ 3,075.32, +1.17 (0.04%)
S&P 500 1,402.89, -2.63 (0.19%)
NYSE Composite 8,219.33, -21.95 (0.27%)
NASDAQ Volume 1,551,352,875
NYSE Volume 3,534,241,000
Combined BYSE & NASDAQ Advance - Decline: 2776-2764
Combined BYSE & NASDAQ New highs - New lows: 174-32
WTI crude oil: 107.27, +1.20
Gold: 1,650.30, +3.30
Silver: 32.23, +0.39
Let's start with housing, which continues to be a complete bugaboo for the friends of the Fed (FOF), meaning governments at all levels, financial institutions, public sector employees (overpaid, irresponsible), welfare and entitlement recipients and anybody who spends beyond their means.
This morning, the NAR released their almost-fully-discredited monthly report on existing home sales, which, despite marvelous weather across most of the country, fell 0.9% in February as compared to January's figures. The NAR was quick to point out that sales rose 8.8% from a year earlier to a seasonally adjusted annual rate of 4.59 million.
Median prices were nearly flat, at $157,100, just 0.1% higher than February 2011.
It wasn't such a disheartening report, overall, but points to the idea that any uptick in activity is usually short-lived and not sustainable. Prices have remained mired in the mud, and, with interest rates on mortgages rising recently, March may have come in like a Lamb, weather-wise, but it may go out like a hungry lion in terms of real estate.
Then there was the brilliantly-timed commentary by Goldman Sachs chief global equity strategist, Peter Oppenheimer, titled "The Long Good Buy" which postulates that "the prospects for future returns in equities relative to bonds are as good as they've been in a generation."
Not to throw much cold water (a bathtub of ice might be more appropriate) on this particular bit of financial wisdom, but Mr. Oppenheimer and his buddies at the giant squid must think the muppets are prime for a fleecing. Stocks have not been at these current levels for more than 3 1/2 years, the major indices have pretty much doubled since the bottom of March '09 and he thinks NOW, today is a good time to buy stocks?
Not to be too pushy or overburdened with facts, but isn't the oldest bit of market timing knowledge to buy low, sell high? Oppenheimer seems to want to stand that time-worn adage on its head, which, considering the extent to which Goldman Sachs will go to defraud the public, the government and even its own clients, is about par for the course. (A video, assessing the relative value of Mr. Oppenheimer's call appears at the end of this post.)
As far as stocks are concerned, they are currently stalled out at high levels and while they floated along in bifurcated fashion through most of today's session, there was some significant selling pressure at the close. It probably means nothing, but if you think a quick selloff in stocks at the end of the day is a sure sign to buy more gold and silver, nobody around these parts is going to do anything to dissuade you from that line of thinking.
As usual, volume was unseen and at levels indicating a lack of interest, sponsorship or near-panic, but we've been over that bridge too many times already. Let it just be said that there are many, many, many fewer individual investors playing stocks than there were five years ago. Some went broke, some profited but are scared to death of the markets, others are merely awaiting a return to normalcy, something that isn't likely to occur until there's a crash, a credit "event", a war or something very ugly to shake the stranglehold of the banksters and politicians to their core.
Doug Casey offers three variations on the definition of a depression, plus some valuable insights in an interview, titled Doug Casey on the Illusion of a Recovery. It's an intelligent read. (Hint: Doug likes gold)
Dow 13,124.62, -45.57 (0.35%)
NASDAQ 3,075.32, +1.17 (0.04%)
S&P 500 1,402.89, -2.63 (0.19%)
NYSE Composite 8,219.33, -21.95 (0.27%)
NASDAQ Volume 1,551,352,875
NYSE Volume 3,534,241,000
Combined BYSE & NASDAQ Advance - Decline: 2776-2764
Combined BYSE & NASDAQ New highs - New lows: 174-32
WTI crude oil: 107.27, +1.20
Gold: 1,650.30, +3.30
Silver: 32.23, +0.39
Thursday, September 22, 2011
Market Crash Alert... Oops, Too Late, Dow Drops 391 Points
Editor's note: Switching over to first person singular tense for today, as it seems to work when I'm happy and the market is not. Some may be confused as to why I'd be happy over a market crash. That will be explained below.
The Markets
Today was another one of those doozies that come along... well, about once a week these days and I really wanted to issue a crash alert yesterday after the close, but didn't, even though I was alarmed over the number of new lows in relation to new highs. Anybody who reads this blog on a semi-regular basis (that's you, Dan K.) would know that the new lows - new highs is my favorite - and highly reliable - sentiment and direction indicator and it was flashing red at the end of the day on Wednesday.
Sure enough, Thursday turned into an all-out rout for equities on significantly higher volume, to say nothing of what happened to gold and silver (well, you can't have everything). Asian markets started the ball rolling downhill, with losses between 2 and 4%, then Europe kicked in with average losses of about 4.5% on the various exchanges.. The US declines were tempered by the usual late-day rally, in this case taking the Dow up about 130 points off the lows of the day, set at about 3:20 pm EDT.
The catalysts for the sell-off were various, but by no means, exclusive. Most market commentaries are blaming the Fed for their squeamish "Operation Twist" maneuver, which, upon further inspection, is a worse program than originally thought when we noticed this statement from yesterday's FOMC release:
The more telling stories came out of China and Europe. China's PMI (Purchasing Managers Index) for the month was 49.4, down from 49.9 in August. In Europe, the PMI dropped to its weakest level since July 2009 with a reading of 50.8. Anything under 50 indicates contraction, so the Chinese are already moderately contracting (read: recession), while Europe is right on the cusp. Their PMI's are at levels very similar to those in the US.
Speaking of the banks, the biggest of them, the TBTF types, took more body blows on the day. Our personal favorite, Bank of America (BAC) sold down to 6.04 at the close, making Warren Buffett's $5 billion investment look pretty stupid, along with the warrants to buy to up 750,000 shares for $7.14. Mr. Buffett used to be one of the wisest investors of all time, but after investing $5 billion in Goldman Sachs - also with similar underwater warrants - and now BAC, he seems to have lost the Midas touch. Of course, Mr. Buffett normally makes better investments than the ones he has been forced into by President Obama.
So, stocks are down big again, and closing in on bear market territory, and the future looks pretty grim. Those of you still putting your money into a retirement fund or IRA, having not heeded my advice from August of 2007 (you can check) when I advised to cash out, take the penalty hit and move on, are probably looking at a 20% loss over the past two months. That is more than the usual early withdrawal penalty, so, sure, you made some dough in 2009 and 2010, but you're about to be giving it back now.
There seems to be little left for stocks to do but go down, so long as the following conditions exist (see if you can find a positive catalyst in this list):
All of this sounds pretty gloomy, like a coming recession and a deflationary depression on the front burner, but there is hope, and that hope explains why I cheer when stocks look like they're about to crash (when they actually do crash, I really start to party!). The reason for this is pretty obvious from my perspective. I've been pretty much out of stocks since August of 2007, and completely out since the fall of 2009. There's too much risk involved for my simple tastes.
I'm also an independent businessman who fights red tape and higher prices constantly in order to keep the doors open. It's a struggle, but, as I say, it beats working for a living.
When the deflation and depression become full-blown, there's a very real possibility that the banksters and politicians will be eating each other's lunches, and I suspect there is some of that going on already. The public backlash against the kleptocracy of fractional reserve banking and ridiculous levels of taxation (like the 15% Social Security tax ponzi scheme) will be ferocious and many of the people in power will be knocked from their perches.
In a deflationary environment, cash and specialized skills will become more valuable. So too, gold and silver, we hope. Oil will - must - go lower, and along with it, gas, meaning more money in everyone's pocket to spend on other things than just basic transportation. Prices and wages will return to more manageable levels and business will eventually boom. It's all relative. If you're making $50,000 a year and you get cut down to $30,000, if prices have declined by 40% in general, it's a wash.
So, yes, I firmly believe that bank failures and a stock market crash will eventually result in a stronger, better-balanced economy, after a lot of pain and suffering, of course, but nothing good has ever come from anything earned without commensurate sacrifice.
(Oh, and I almost forgot, minus signs are easier to type than plus signs - no shift key required.)
Dow 10,733.83, -391.01 (3.51%)
NASDAQ 2,455.67, -82.52 (3.25%)
S&P 500 1,129.56, -37.20 (3.19%)
NYSE Composite 6,726.62, -254.71 (3.65%)
NASDAQ Volume 2,928,526,750
NYSE Volume 7,893,035,000
Combined NYSE & NASDAQ Advance - Decline: 928-5812
Combined NYSE & NASDAQ New highs - New Lows: 10-1385 (yes, you're reading that right)
WTI crude oil: 80.51, -5.41 (yippie!)
Gold: 1737.70, -45.20
Silver: 35.85, -3.84 (buying opportunity)
Quick note on silver. I believe it will go lower, possibly materially lower, as no true support for anything exists in a deflationary environment, of which we are clearly entering. Silver could crash all the way back to the mid-20s, depending on the severity of the overall global crash, so I would advise scaling in at this bargain point, and using dollar cost averaging to keep your basis reasonable. Eventually, silver should top out at well over $100, possibly even more, especially of much of the world finds the wisdom to return to real money.
The Markets
Today was another one of those doozies that come along... well, about once a week these days and I really wanted to issue a crash alert yesterday after the close, but didn't, even though I was alarmed over the number of new lows in relation to new highs. Anybody who reads this blog on a semi-regular basis (that's you, Dan K.) would know that the new lows - new highs is my favorite - and highly reliable - sentiment and direction indicator and it was flashing red at the end of the day on Wednesday.
Sure enough, Thursday turned into an all-out rout for equities on significantly higher volume, to say nothing of what happened to gold and silver (well, you can't have everything). Asian markets started the ball rolling downhill, with losses between 2 and 4%, then Europe kicked in with average losses of about 4.5% on the various exchanges.. The US declines were tempered by the usual late-day rally, in this case taking the Dow up about 130 points off the lows of the day, set at about 3:20 pm EDT.
The catalysts for the sell-off were various, but by no means, exclusive. Most market commentaries are blaming the Fed for their squeamish "Operation Twist" maneuver, which, upon further inspection, is a worse program than originally thought when we noticed this statement from yesterday's FOMC release:
To help support conditions in mortgage markets, the Committee will now reinvest principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities.The Fed is becoming the buyer of last resort for toxic and other MBS, the Wall Street concoctions which started the whole financial contagion back in 2007. We wish them well with their purchases, especially since housing is about to embark on another 10-15% price decline over the next year to two years. The conditions for residential real estate have not changed much materially in three years, and, despite some cheerleading headlines, prices continue to slide and will until the entire mess is wiped from the books of our favorite zombie banks, which, if the Fed and the banks have their ways, will be never.
The more telling stories came out of China and Europe. China's PMI (Purchasing Managers Index) for the month was 49.4, down from 49.9 in August. In Europe, the PMI dropped to its weakest level since July 2009 with a reading of 50.8. Anything under 50 indicates contraction, so the Chinese are already moderately contracting (read: recession), while Europe is right on the cusp. Their PMI's are at levels very similar to those in the US.
Speaking of the banks, the biggest of them, the TBTF types, took more body blows on the day. Our personal favorite, Bank of America (BAC) sold down to 6.04 at the close, making Warren Buffett's $5 billion investment look pretty stupid, along with the warrants to buy to up 750,000 shares for $7.14. Mr. Buffett used to be one of the wisest investors of all time, but after investing $5 billion in Goldman Sachs - also with similar underwater warrants - and now BAC, he seems to have lost the Midas touch. Of course, Mr. Buffett normally makes better investments than the ones he has been forced into by President Obama.
So, stocks are down big again, and closing in on bear market territory, and the future looks pretty grim. Those of you still putting your money into a retirement fund or IRA, having not heeded my advice from August of 2007 (you can check) when I advised to cash out, take the penalty hit and move on, are probably looking at a 20% loss over the past two months. That is more than the usual early withdrawal penalty, so, sure, you made some dough in 2009 and 2010, but you're about to be giving it back now.
There seems to be little left for stocks to do but go down, so long as the following conditions exist (see if you can find a positive catalyst in this list):
- US banks have been recapitalized since the collapse of 2008, but are still not lending and still are holding scads of bad loans both on and off their books, plus some have significant exposure to Europe - notably Morgan Stanley (MS) which is set to implode on the first whiff of a Greek default.
- Unemployment is officially at 9.2% and heading higher, though the real number is somewhere North of 17% and there doesn't seem to be much of a rush in Congress to pass comprehensive tax reform or jobs program.
- Congress, the President and the leaders of most of the nations of the world are blithering idiots, a fact made worse by the level of inbreeding among the elite class of society.
- Foreclosures are on the rise again, and the glut of homes on the market remains at or near record high levels.
- There is oversupply in just about everything, from gas and oil to houses to computers to automobiles. Prices are being or will be forced down in nearly every consumer class.
- Banks are still reluctant to lend to anyone except the biggest and most secure individuals and companies, leaving little room for start-ups and small businesses, the real drivers of job growth.
- Europe has more problems than one can imagine. The Germans are upset over having to guarantee such a large portion of the Greek bailout, now on its second time to the trough, with Italy, Spain and Portugal waiting in the wings.
- The federal government will continue to run deficits of over a trillion dollars per year for at least two more years.
- State and local governments are just now catching up to the private sector, laying off thousands of employees a month.
- The US poverty rate is at an all time high.
- The number of people receiving food stamps is at an all time high and still rising.
- Did I mention the people in congress and the president are nitwits?
All of this sounds pretty gloomy, like a coming recession and a deflationary depression on the front burner, but there is hope, and that hope explains why I cheer when stocks look like they're about to crash (when they actually do crash, I really start to party!). The reason for this is pretty obvious from my perspective. I've been pretty much out of stocks since August of 2007, and completely out since the fall of 2009. There's too much risk involved for my simple tastes.
I'm also an independent businessman who fights red tape and higher prices constantly in order to keep the doors open. It's a struggle, but, as I say, it beats working for a living.
When the deflation and depression become full-blown, there's a very real possibility that the banksters and politicians will be eating each other's lunches, and I suspect there is some of that going on already. The public backlash against the kleptocracy of fractional reserve banking and ridiculous levels of taxation (like the 15% Social Security tax ponzi scheme) will be ferocious and many of the people in power will be knocked from their perches.
In a deflationary environment, cash and specialized skills will become more valuable. So too, gold and silver, we hope. Oil will - must - go lower, and along with it, gas, meaning more money in everyone's pocket to spend on other things than just basic transportation. Prices and wages will return to more manageable levels and business will eventually boom. It's all relative. If you're making $50,000 a year and you get cut down to $30,000, if prices have declined by 40% in general, it's a wash.
So, yes, I firmly believe that bank failures and a stock market crash will eventually result in a stronger, better-balanced economy, after a lot of pain and suffering, of course, but nothing good has ever come from anything earned without commensurate sacrifice.
(Oh, and I almost forgot, minus signs are easier to type than plus signs - no shift key required.)
Dow 10,733.83, -391.01 (3.51%)
NASDAQ 2,455.67, -82.52 (3.25%)
S&P 500 1,129.56, -37.20 (3.19%)
NYSE Composite 6,726.62, -254.71 (3.65%)
NASDAQ Volume 2,928,526,750
NYSE Volume 7,893,035,000
Combined NYSE & NASDAQ Advance - Decline: 928-5812
Combined NYSE & NASDAQ New highs - New Lows: 10-1385 (yes, you're reading that right)
WTI crude oil: 80.51, -5.41 (yippie!)
Gold: 1737.70, -45.20
Silver: 35.85, -3.84 (buying opportunity)
Quick note on silver. I believe it will go lower, possibly materially lower, as no true support for anything exists in a deflationary environment, of which we are clearly entering. Silver could crash all the way back to the mid-20s, depending on the severity of the overall global crash, so I would advise scaling in at this bargain point, and using dollar cost averaging to keep your basis reasonable. Eventually, silver should top out at well over $100, possibly even more, especially of much of the world finds the wisdom to return to real money.
Monday, July 11, 2011
Problems Abound: Jobs, Italy, Greece; Stocks in Retreat
Quoting from Friday's post: "Monday may, in fact, turn into a real blood-bath."
Well, it may not have been real blood, and it was more of a dousing rather than a bath, but stocks got hit pretty hard on Monday, following the less-than-impressive sell-off after the dismal non-farm payroll report which ended last week's rally in rather abrupt fashion.
The poor start to the new week was blamed - according to most pundits and exclamatory TV barkers - almost entirely on debt issues related to Italy, though there are more issues and problems popping up every day. The scapegoat Italians seem to be having the same problem most Western nations are: too much debt and not enough revenue.
What has the EU concerned is the not the size of the bailout which might be needed to shore up Italy's evolving debt crisis, it is the size of Italy's economy, the third largest in the European Union. Halping out smaller countries like Greece or Ireland are mere child's play by comparison. Italy is a nation of 60 million people, or, about 1/5th the size of the United States. That's a big problem, akin to having Texas, New Mexico, Arizona, Colorado, Wyoming and Louisiana all threaten to default on public debt at once.
The absolute fact of the matter is that the EU simply cannot go about printing up more Euros to bail out nation after nation. Sooner or later, the currency will become worthless and the nascent "grand experiment" of a unified Europe will fall completely apart. Already, there are signs of trouble in Germany, which has been acting - along with the US Federal Reserve - as the main funding source for bailout money, but in the end the major European banks will become victims of their own Ponzi scheme.
You see, money really doesn't grow on trees and just whipping it up out of thin air makes for instability and eventual anarchy. This is the situation in which we all are headed, and in a hurry. Would the financiers of the leading nations have confessed to their sins during the Lehman debacle in 2008, much of this would not be occurring, but, being the type of people who are prone to lie and cover up crimes and major blunders, world leaders would rather play this silly game of bailout rather than face the music (and jail time or guillotines).
Eventually, it's all going to implode into a global depression, rivaling or exceeding the pain and suffering of the 1930s. By some accounts, parts of the world, such as the Middle East, the Horn of Africa, certain counties in Georgia and Florida, along with Greece and Ireland, are already in a deep, never-ending depression. All that's keeping the rest of the world from falling apart is the non-stop printing of US dollars and the helping hand of uncle Ben Bernanke at the Fed.
While there are those who believe we in America will suffer a bout of hyper-inflation a la the Weimar Republic, the fact remains that wage growth is stagnant, money supply is insufficient to handle all claims in a mass default and the other income-producing part of the great capitalist triangle (money, labor, materials), that being materials, are still rather abundant.
We should all be preparing for the "great reset" in which everything becomes worth less than it was the day before, except maybe food, for that is the only requisite commodity essential to sustaining human life. One hates to be the messenger for bad news, but starvation and death may indeed become preferable, for some, to living under the thumb of a global police state in a condition of abject poverty. It's coming, and, as today's evidence and that of the past three years can attest, it's gaining momentum.
Incidentally, only eight stocks in the S&P 500 were winners today, and all 30 Dow components finished on the downside. Financials led the way, with Bank of America (BAC) and Morgan Stanley (MS) hitting new 52-week closing lows.
Here are the sad facts from fat-cat Wall Street:
Dow 12,505.76, -151.44 (1.20%)
NASDAQ 2,802.62, -57.19 (2.00%)
S&P 500 1,319.49, -24.31 (1.81%)
NYSE Composite 8,228.73, -181.46 (2.16%)
Losing issues trampled gainers, 5494-1122, the largest margin of losers to winners in quite some time, probably not since 2008. On the NASDAQ, there were, hard to believe, 49 new highs and 32 new lows. On the NYSE, a little closer to reality, 34 new highs and 30 new lows. The combined total of 83 new highs and 66 new lows masks the fact that many of the new highs were nothing but bear funds, inverse, triple leveraged ETFs and other derivative products. Even looking through the listings of new highs on the NYSE shows most stocks finishing well below their stated 52-week high. Surely, we can trust the Rupert Muchdoch-owned Wall Street Journal to not fudge statistics, right?
Volume was pretty weak, even for a massive down day, though this low level of trading has by now morphed into a new normal, so lower and lower volume figures should not be cause for alarm as market participants exit or are destroyed.
NASDAQ Volume 1,778,419,250
NYSE Volume 3,843,530,000
WTI crude oil traded down again, losing $1.05, to $95.15. Gold gained $7.60, to $1,549.20, close to an all-time high, though silver was punished once more for attempting to be regarded as money, dipping 85 cents, to $35.70 per ounce.
Not all the news was bad... well, yes it was, as Alcoa (AA) reported after the bell that it missed LOWERED estimates by a penny, at 32 cents per share as opposed to the consensus of 33 cents. Share were lower all day, preceding the after-hours announcement and continued to slide.
That is not a good way to kick off 2nd quarter earnings season.
Well, it may not have been real blood, and it was more of a dousing rather than a bath, but stocks got hit pretty hard on Monday, following the less-than-impressive sell-off after the dismal non-farm payroll report which ended last week's rally in rather abrupt fashion.
The poor start to the new week was blamed - according to most pundits and exclamatory TV barkers - almost entirely on debt issues related to Italy, though there are more issues and problems popping up every day. The scapegoat Italians seem to be having the same problem most Western nations are: too much debt and not enough revenue.
What has the EU concerned is the not the size of the bailout which might be needed to shore up Italy's evolving debt crisis, it is the size of Italy's economy, the third largest in the European Union. Halping out smaller countries like Greece or Ireland are mere child's play by comparison. Italy is a nation of 60 million people, or, about 1/5th the size of the United States. That's a big problem, akin to having Texas, New Mexico, Arizona, Colorado, Wyoming and Louisiana all threaten to default on public debt at once.
The absolute fact of the matter is that the EU simply cannot go about printing up more Euros to bail out nation after nation. Sooner or later, the currency will become worthless and the nascent "grand experiment" of a unified Europe will fall completely apart. Already, there are signs of trouble in Germany, which has been acting - along with the US Federal Reserve - as the main funding source for bailout money, but in the end the major European banks will become victims of their own Ponzi scheme.
You see, money really doesn't grow on trees and just whipping it up out of thin air makes for instability and eventual anarchy. This is the situation in which we all are headed, and in a hurry. Would the financiers of the leading nations have confessed to their sins during the Lehman debacle in 2008, much of this would not be occurring, but, being the type of people who are prone to lie and cover up crimes and major blunders, world leaders would rather play this silly game of bailout rather than face the music (and jail time or guillotines).
Eventually, it's all going to implode into a global depression, rivaling or exceeding the pain and suffering of the 1930s. By some accounts, parts of the world, such as the Middle East, the Horn of Africa, certain counties in Georgia and Florida, along with Greece and Ireland, are already in a deep, never-ending depression. All that's keeping the rest of the world from falling apart is the non-stop printing of US dollars and the helping hand of uncle Ben Bernanke at the Fed.
While there are those who believe we in America will suffer a bout of hyper-inflation a la the Weimar Republic, the fact remains that wage growth is stagnant, money supply is insufficient to handle all claims in a mass default and the other income-producing part of the great capitalist triangle (money, labor, materials), that being materials, are still rather abundant.
We should all be preparing for the "great reset" in which everything becomes worth less than it was the day before, except maybe food, for that is the only requisite commodity essential to sustaining human life. One hates to be the messenger for bad news, but starvation and death may indeed become preferable, for some, to living under the thumb of a global police state in a condition of abject poverty. It's coming, and, as today's evidence and that of the past three years can attest, it's gaining momentum.
Incidentally, only eight stocks in the S&P 500 were winners today, and all 30 Dow components finished on the downside. Financials led the way, with Bank of America (BAC) and Morgan Stanley (MS) hitting new 52-week closing lows.
Here are the sad facts from fat-cat Wall Street:
Dow 12,505.76, -151.44 (1.20%)
NASDAQ 2,802.62, -57.19 (2.00%)
S&P 500 1,319.49, -24.31 (1.81%)
NYSE Composite 8,228.73, -181.46 (2.16%)
Losing issues trampled gainers, 5494-1122, the largest margin of losers to winners in quite some time, probably not since 2008. On the NASDAQ, there were, hard to believe, 49 new highs and 32 new lows. On the NYSE, a little closer to reality, 34 new highs and 30 new lows. The combined total of 83 new highs and 66 new lows masks the fact that many of the new highs were nothing but bear funds, inverse, triple leveraged ETFs and other derivative products. Even looking through the listings of new highs on the NYSE shows most stocks finishing well below their stated 52-week high. Surely, we can trust the Rupert Muchdoch-owned Wall Street Journal to not fudge statistics, right?
Volume was pretty weak, even for a massive down day, though this low level of trading has by now morphed into a new normal, so lower and lower volume figures should not be cause for alarm as market participants exit or are destroyed.
NASDAQ Volume 1,778,419,250
NYSE Volume 3,843,530,000
WTI crude oil traded down again, losing $1.05, to $95.15. Gold gained $7.60, to $1,549.20, close to an all-time high, though silver was punished once more for attempting to be regarded as money, dipping 85 cents, to $35.70 per ounce.
Not all the news was bad... well, yes it was, as Alcoa (AA) reported after the bell that it missed LOWERED estimates by a penny, at 32 cents per share as opposed to the consensus of 33 cents. Share were lower all day, preceding the after-hours announcement and continued to slide.
That is not a good way to kick off 2nd quarter earnings season.
Tuesday, September 21, 2010
When The Boom Really Goes Bang, Bang, Bang!
Pensions become Ponzi, Recess becomes recession and eventually depresses into depression. There's a natural progression to these things and trying to stop them is like throwing water back over a broken dam. There's some temporary relief, a feeling that it may all work out for the best, but eventually, the dam bursts, flooding everything and drowning most. This is the situation in which most of the world's economies - but mainly the United States - currently find themselves. Patches have been applied to the broken dam, but, even though all the experts know that it will eventually burst, they will not, either from some misguided confidence or fear of what may occur should they reveal the truth.
Either way, they'll look bad when it does, but they'll probably be long gone, either dead or expatriated.
Since there's nothing worthwhile happening in the equity markets other than the usual churn associated with the Fed's POMOs (Permanent Open market Operations), today we offer some background, which only took a little bit of searching on the internet. (Apparently, there are quite a few skeptics on the loose these days.)
First, though, let's make sure we know what really happened today.
Any and all trading centered around the FOMC statement at 2:15 pm, in which the Fed neither raised nor lowered rates (Actually, they can't lower them below ZERO, where they currently sit.), but they did change some of the wording in their release.
The salient points were, "the pace of recovery in output and employment has slowed in recent months.", "Housing starts are at a depressed level. Bank lending has continued to contract, but at a reduced rate in recent months." and "The Committee will continue to monitor the economic outlook and financial developments and is prepared to provide additional accommodation if needed to support the economic recovery and to return inflation, over time, to levels consistent with its mandate."
That final quote is a mouthful, though most have interpreted it to mean that the Fed is ready to engage in further quantitative easing (i.e., printing money), to keep the economy from falling off a cliff. Ouch! Ohh!
The market reaction was odd. Stocks first went straight up, as in "Happy days! More free money!" and then did an about face when moron buyers realized they had been taken and that the reason the Fed is printing more money is because the economy sucks. There, it's been said. The economy sucks, and the Fed writ that large today.
Dow 10,761.03, +7.41 (0.07%)
NASDAQ 2,349.35, -6.48 (0.28%)
S&P 500 1,139.78, -2.93 (0.26%)
NYSE Composite 7,245.95, -20.07 (0.28%)
Once again, the markets delivered a split decision, with the Dow up and everything else down. In contrast to the soft headline numbers, declining issues far outpaced advancers, 3612-2095. New highs ramped past new lows, 428-38 and volume was actually a bit on the strong side (poor timing).
Commodities took a hit, too, though they were trending lower prior to the Fed statement. Crude oil slipped $1.34, to $73.52. Gold fell $6.60, to $1,272.40 and silver dropped 16 cents, to $20.62, all of which makes perfect sense if we are actually going to slide quietly into a deflationary depression. Shhh! Don't tell anybody.
NASDAQ Volume 2,148,134,500
NYSE Volume 4,403,680,500
Please note, this following little piece is someone else's work. It is not my intent to plagiarize.
Here's a step-by-step look at the banks and bailouts.
1) All the global banks were up to their eye-balls in toxic assets. All the AAA mortgage-backed securities etc. were in fact JUNK. But in the balance sheets of the banks and their special purpose vehicles (SPVs), they were stated to be worth US$ TRILLIONS.
2) The collapse of Lehman Bros and AIG exposed this ugly truth. All the global banks had liabilities in the US$ Trillions. They were all INSOLVENT. The central banks the world over conspired and agreed not to reveal the total liabilities of the global banks as that would cause a run on these banks, as happened in the case of Northern Rock in the U.K.
3) A devious scheme was devised by the FED, led by Bernanke to assist the global banks to unload systematically and in tranches the toxic assets so as to allow the banks to comply with RESERVE REQUIREMENTS under the fractional reserve banking system, and to continue their banking business. This is the essence of the bailout of the global banks by central bankers.
4) This devious scheme was effected by the FED’s quantitative easing (QE) – the purchase of toxic assets from the banks. The FED created “money out of thin air” and used that “money” to buy the toxic assets at face or book value from the banks, notwithstanding they were all junks and at the most, worth maybe ten cents to the dollar. Now, the FED is “loaded” with toxic assets once owned by the global banks. But these banks cannot declare and or admit to this state of affairs. Hence, this financial charade.
5) If we are to follow simple logic, the exercise would result in the global banks flushed with cash to enable them to lend to desperate consumers and cash-starved businesses. But the money did not go out as loans. Where did the money go?
6) It went back to the FED as reserves, and since the FED bought US$ trillions worth of toxic wastes, the “money” (it was merely book entries in the Fed’s books) that these global banks had were treated as “Excess Reserves”. This is a misnomer because it gave the ILLUSION that the banks are cash-rich and under the fractional reserve system would be able to lend out trillions worth of loans. But they did not. Why?
7) Because the global banks still have US$ trillions worth of toxic wastes in their balance sheets. They are still insolvent under the fractional reserve banking laws. The public must not be aware of this as otherwise, it would trigger a massive run on all the global banks!
8) Bernanke, the US Treasury and the global central bankers were all praying and hoping that given time (their estimation was 12 to 18 months) the housing market would recover and asset prices would resume to the levels before the crisis. . Let me explain: A House was sold for say US$500,000. Borrower has a mortgage of US$450,000 or more. The house is now worth US$200,000 or less. Multiply this by the millions of houses sold between 2000 and 2008 and you will appreciate the extent of the financial black-hole. There is no way that any of the global banks can get out of this gigantic mess. And there is also no way that the FED and the global central bankers through QE can continue to buy such toxic wastes without showing their hands and exposing the lie that these banks are solvent. It is my estimation that they have to QE up to US$20 trillion at the minimum. The FED and no central banker would dare “create such an amount of money out of thin air” without arousing the suspicions and or panic of sovereign creditors, investors and depositors. It is as good as declaring officially that all the banks are BANKRUPT.
9) But there is no other solution in the short and middle term except another bout of quantitative easing, QE II. Given the above caveat, QE II cannot exceed the amount of the previous QE without opening the proverbial Pandora Box.
10) But it is also a given that the FED will embark on QE II, as under the fractional reserve banking system, if the FED does not purchase additional toxic wastes, the global banks (faced with mounting foreclosures, etc.) will fall short of their reserve requirements.
11) You will also recall that the FED at the height of the crisis announced that interest will be paid on the so-called “excess reserves” of the global banks, thus enabling these banks to “earn” interest. So what we have is a merry-go-round of monies moving from the right pocket to the left pocket at the click of the computer mouse. The FED creates money, uses it to buy toxic assets, and the same money is then returned to the FED by the global banks to earn interest. By this fiction of QE, banks are flushed with cash which enable them to earn interest. Is it any wonder that these banks have declared record profits?
12) The global banks get rid of some of their toxic wastes at full value and at no costs, and get paid for unloading the toxic wastes via interest payments. Additionally, some of the “monies” are used by these banks to purchase US Treasuries (which also pay interests) which in turn allows the US Treasury to continue its deficit spending. THIS IS THE BAILOUT RIP OFF of the century.
The rest is all original, and mine.
Ah, well, that's not even the worst of it. In order to stave off imminent implosion of the entire global banking system, some believe the Fed will have to print (and waste) some $30 TRILLION. Now, that happens to be just an round estimate, but it does amount to twice the annual GDP or twice the existing debt (choose your poison). Since the Fed is already in somewhere between $2 and $11 Trillion, depending on your level of pessimism and how you choose to crunch the numbers, we are only, at best, one third of the way down the path of complete, utter and final desolation.
If this first third of the way took three years (2007-2010), then we should finally be soup by 2016, though anybody with the uncanny ability to think that far ahead would probably be living in Brazil, China or Belize by then. The rest of us will just have to "suck it up" so to speak. The good/bad news is that you will be able to buy a traditional, three-bedroom home in a good suburb for about $30,000; a pound of tomatoes will be only $8.00, your utility bill will be 40-70% higher because usage will be very low and you have to take up the slack and your property taxes will be at least triple your mortgage payment (at least in the Northeast).
However, you won't be paying any taxes since there will be no jobs, but, for all you 50-and-60-somethings out there, that Social Security check you planned on receiving monthly will no longer be available. The overwhelming debt the nation has built up will see to it that almost all entitlements will have to be curtailed or, at a minimum, severely curtailed.
Soooooo, the lifestyles you've so carefully planned for yourselves and your children will go entirely up in the smoke of debt and default. The world will be a poorer place, you will be old and decrepit and the minions from nations to which we owe money we can never repay will be scouting the streets and byways of America for choice deals, to which they feel entitled!
The problem is that most Americans took it for granted that our government and our leaders were telling us the truth, not lying through their collective teeth in order to keep being re-elected. We - and I'm speaking mostly to the baby boomers - allowed them to tax us to the max, spend every last penny and then borrow more. we've brought it upon ourselves, you see.
And, just in case you're not convinced that we're well upon a path of self-destruction, in order to keep the public in the dark and at ease through our economic nightmare, the government is manipulating the stock market.
Either way, they'll look bad when it does, but they'll probably be long gone, either dead or expatriated.
Since there's nothing worthwhile happening in the equity markets other than the usual churn associated with the Fed's POMOs (Permanent Open market Operations), today we offer some background, which only took a little bit of searching on the internet. (Apparently, there are quite a few skeptics on the loose these days.)
First, though, let's make sure we know what really happened today.
Any and all trading centered around the FOMC statement at 2:15 pm, in which the Fed neither raised nor lowered rates (Actually, they can't lower them below ZERO, where they currently sit.), but they did change some of the wording in their release.
The salient points were, "the pace of recovery in output and employment has slowed in recent months.", "Housing starts are at a depressed level. Bank lending has continued to contract, but at a reduced rate in recent months." and "The Committee will continue to monitor the economic outlook and financial developments and is prepared to provide additional accommodation if needed to support the economic recovery and to return inflation, over time, to levels consistent with its mandate."
That final quote is a mouthful, though most have interpreted it to mean that the Fed is ready to engage in further quantitative easing (i.e., printing money), to keep the economy from falling off a cliff. Ouch! Ohh!
The market reaction was odd. Stocks first went straight up, as in "Happy days! More free money!" and then did an about face when moron buyers realized they had been taken and that the reason the Fed is printing more money is because the economy sucks. There, it's been said. The economy sucks, and the Fed writ that large today.
Dow 10,761.03, +7.41 (0.07%)
NASDAQ 2,349.35, -6.48 (0.28%)
S&P 500 1,139.78, -2.93 (0.26%)
NYSE Composite 7,245.95, -20.07 (0.28%)
Once again, the markets delivered a split decision, with the Dow up and everything else down. In contrast to the soft headline numbers, declining issues far outpaced advancers, 3612-2095. New highs ramped past new lows, 428-38 and volume was actually a bit on the strong side (poor timing).
Commodities took a hit, too, though they were trending lower prior to the Fed statement. Crude oil slipped $1.34, to $73.52. Gold fell $6.60, to $1,272.40 and silver dropped 16 cents, to $20.62, all of which makes perfect sense if we are actually going to slide quietly into a deflationary depression. Shhh! Don't tell anybody.
NASDAQ Volume 2,148,134,500
NYSE Volume 4,403,680,500
Please note, this following little piece is someone else's work. It is not my intent to plagiarize.
Here's a step-by-step look at the banks and bailouts.
1) All the global banks were up to their eye-balls in toxic assets. All the AAA mortgage-backed securities etc. were in fact JUNK. But in the balance sheets of the banks and their special purpose vehicles (SPVs), they were stated to be worth US$ TRILLIONS.
2) The collapse of Lehman Bros and AIG exposed this ugly truth. All the global banks had liabilities in the US$ Trillions. They were all INSOLVENT. The central banks the world over conspired and agreed not to reveal the total liabilities of the global banks as that would cause a run on these banks, as happened in the case of Northern Rock in the U.K.
3) A devious scheme was devised by the FED, led by Bernanke to assist the global banks to unload systematically and in tranches the toxic assets so as to allow the banks to comply with RESERVE REQUIREMENTS under the fractional reserve banking system, and to continue their banking business. This is the essence of the bailout of the global banks by central bankers.
4) This devious scheme was effected by the FED’s quantitative easing (QE) – the purchase of toxic assets from the banks. The FED created “money out of thin air” and used that “money” to buy the toxic assets at face or book value from the banks, notwithstanding they were all junks and at the most, worth maybe ten cents to the dollar. Now, the FED is “loaded” with toxic assets once owned by the global banks. But these banks cannot declare and or admit to this state of affairs. Hence, this financial charade.
5) If we are to follow simple logic, the exercise would result in the global banks flushed with cash to enable them to lend to desperate consumers and cash-starved businesses. But the money did not go out as loans. Where did the money go?
6) It went back to the FED as reserves, and since the FED bought US$ trillions worth of toxic wastes, the “money” (it was merely book entries in the Fed’s books) that these global banks had were treated as “Excess Reserves”. This is a misnomer because it gave the ILLUSION that the banks are cash-rich and under the fractional reserve system would be able to lend out trillions worth of loans. But they did not. Why?
7) Because the global banks still have US$ trillions worth of toxic wastes in their balance sheets. They are still insolvent under the fractional reserve banking laws. The public must not be aware of this as otherwise, it would trigger a massive run on all the global banks!
8) Bernanke, the US Treasury and the global central bankers were all praying and hoping that given time (their estimation was 12 to 18 months) the housing market would recover and asset prices would resume to the levels before the crisis. . Let me explain: A House was sold for say US$500,000. Borrower has a mortgage of US$450,000 or more. The house is now worth US$200,000 or less. Multiply this by the millions of houses sold between 2000 and 2008 and you will appreciate the extent of the financial black-hole. There is no way that any of the global banks can get out of this gigantic mess. And there is also no way that the FED and the global central bankers through QE can continue to buy such toxic wastes without showing their hands and exposing the lie that these banks are solvent. It is my estimation that they have to QE up to US$20 trillion at the minimum. The FED and no central banker would dare “create such an amount of money out of thin air” without arousing the suspicions and or panic of sovereign creditors, investors and depositors. It is as good as declaring officially that all the banks are BANKRUPT.
9) But there is no other solution in the short and middle term except another bout of quantitative easing, QE II. Given the above caveat, QE II cannot exceed the amount of the previous QE without opening the proverbial Pandora Box.
10) But it is also a given that the FED will embark on QE II, as under the fractional reserve banking system, if the FED does not purchase additional toxic wastes, the global banks (faced with mounting foreclosures, etc.) will fall short of their reserve requirements.
11) You will also recall that the FED at the height of the crisis announced that interest will be paid on the so-called “excess reserves” of the global banks, thus enabling these banks to “earn” interest. So what we have is a merry-go-round of monies moving from the right pocket to the left pocket at the click of the computer mouse. The FED creates money, uses it to buy toxic assets, and the same money is then returned to the FED by the global banks to earn interest. By this fiction of QE, banks are flushed with cash which enable them to earn interest. Is it any wonder that these banks have declared record profits?
12) The global banks get rid of some of their toxic wastes at full value and at no costs, and get paid for unloading the toxic wastes via interest payments. Additionally, some of the “monies” are used by these banks to purchase US Treasuries (which also pay interests) which in turn allows the US Treasury to continue its deficit spending. THIS IS THE BAILOUT RIP OFF of the century.
The rest is all original, and mine.
Ah, well, that's not even the worst of it. In order to stave off imminent implosion of the entire global banking system, some believe the Fed will have to print (and waste) some $30 TRILLION. Now, that happens to be just an round estimate, but it does amount to twice the annual GDP or twice the existing debt (choose your poison). Since the Fed is already in somewhere between $2 and $11 Trillion, depending on your level of pessimism and how you choose to crunch the numbers, we are only, at best, one third of the way down the path of complete, utter and final desolation.
If this first third of the way took three years (2007-2010), then we should finally be soup by 2016, though anybody with the uncanny ability to think that far ahead would probably be living in Brazil, China or Belize by then. The rest of us will just have to "suck it up" so to speak. The good/bad news is that you will be able to buy a traditional, three-bedroom home in a good suburb for about $30,000; a pound of tomatoes will be only $8.00, your utility bill will be 40-70% higher because usage will be very low and you have to take up the slack and your property taxes will be at least triple your mortgage payment (at least in the Northeast).
However, you won't be paying any taxes since there will be no jobs, but, for all you 50-and-60-somethings out there, that Social Security check you planned on receiving monthly will no longer be available. The overwhelming debt the nation has built up will see to it that almost all entitlements will have to be curtailed or, at a minimum, severely curtailed.
Soooooo, the lifestyles you've so carefully planned for yourselves and your children will go entirely up in the smoke of debt and default. The world will be a poorer place, you will be old and decrepit and the minions from nations to which we owe money we can never repay will be scouting the streets and byways of America for choice deals, to which they feel entitled!
The problem is that most Americans took it for granted that our government and our leaders were telling us the truth, not lying through their collective teeth in order to keep being re-elected. We - and I'm speaking mostly to the baby boomers - allowed them to tax us to the max, spend every last penny and then borrow more. we've brought it upon ourselves, you see.
And, just in case you're not convinced that we're well upon a path of self-destruction, in order to keep the public in the dark and at ease through our economic nightmare, the government is manipulating the stock market.
Thursday, September 2, 2010
Nice Show, But Everybody Knows It's a Fake
Stocks continued to rally on Thursday, following up on the ridiculous upside surprise from the first day of September. There are many reasons to doubt that the US economy or US stocks are actually worth investing, and the overwhelming opinion from the average Joes and Janes of the world is that stocks are really just for suckers.
Outflows from mutual funds continued for the 17th consecutive week, so, if anyone is thinking that this is a good time to buy into the market, there are quite literally hundreds of thousands of people who are fleeing equities as quickly as they can. Bonds funds and cash are the asset classes du jour, and probably will remain so unless radical changes are made to the way Wall Street handles trading.
Investors have become wary of the Street's "wild West" approach and many believe the game is rigged against the small investor. These people have a case, after the meltdown of 2008, Bernie Madoff and the "Flash Crash" this past May. One cannot blame them for being careful; after all, it is their money we're talking about.
Today's action was in contrast to the prevailing news, again, as initial unemployment claims remained stubbornly high at 472,000 for the reported week and productivity was reported to have declined by 1.8% in the second quarter after slowing 0.9% in the first. About all this economy needs is less productive people working at the few jobs remaining. Unit labor coast are also on the rise, another bad omen for publicly-traded corporations.
For the most part, trading is, and has been, orchestrated by the five big banks - Goldman Sachs, JP Morgan Chase, Bank of America, Citigroup and Morgan Stanley. That's reflected in the overcrowding of trades and the herky-jerky motion of the indices. When the big boys act in unison, with large blocks, markets jump. It truly does crowd out the small investor. The playing field is dramatically tilted in favor of HTFs (High Frequency Traders) and big money.
Nonetheless, the show must go on, so the money was spent today to boost stocks once again, though the rally may be cut short by tomorrow's non-farm payroll, which, maybe this time, will actually be regarded as something substantial to trade off. The past few monthly employment reports have been on the weak side. if not outright horrible, but traders seemed to keep their wits on days when the numbers are released. It's the following Monday that all hell breaks loose, giving more credence to the rigged nature of the markets.
Dow 10,320.10, +50.63 (0.49%)
NASDAQ 2,200.01, +23.17 (1.06%)
S&P 500 1,090.10, +9.81 (0.91%)
NYSE Composite 6,966.25, +55.27 (0.80%)
As expected, advancing issues finished well ahead of decliners, 4327-2026. New highs bettered new lows, 360-56, but volume reverted back to a pathetically low level. The indication is that there was some allocation into winning positions, though without much commitment.
NASDAQ Volume 1,691,904,250
NYSE Volume 4,269,796,500
One telling sign that the rally in equities is mostly a figment of the imaginative inside traders was that oil stood still, finishing unchanged at $73.91. Gold continued to close in on all-time highs, finishing up $5.20, to $1,251.50. Silver rocketed ahead another 28 cents, to $19.64. It has been by far the best performer over the past two weeks.
David Rosenberg penned a thoughtful piece, claiming that we're in a Depression, not a recession, and, of course, he's right.
Outflows from mutual funds continued for the 17th consecutive week, so, if anyone is thinking that this is a good time to buy into the market, there are quite literally hundreds of thousands of people who are fleeing equities as quickly as they can. Bonds funds and cash are the asset classes du jour, and probably will remain so unless radical changes are made to the way Wall Street handles trading.
Investors have become wary of the Street's "wild West" approach and many believe the game is rigged against the small investor. These people have a case, after the meltdown of 2008, Bernie Madoff and the "Flash Crash" this past May. One cannot blame them for being careful; after all, it is their money we're talking about.
Today's action was in contrast to the prevailing news, again, as initial unemployment claims remained stubbornly high at 472,000 for the reported week and productivity was reported to have declined by 1.8% in the second quarter after slowing 0.9% in the first. About all this economy needs is less productive people working at the few jobs remaining. Unit labor coast are also on the rise, another bad omen for publicly-traded corporations.
For the most part, trading is, and has been, orchestrated by the five big banks - Goldman Sachs, JP Morgan Chase, Bank of America, Citigroup and Morgan Stanley. That's reflected in the overcrowding of trades and the herky-jerky motion of the indices. When the big boys act in unison, with large blocks, markets jump. It truly does crowd out the small investor. The playing field is dramatically tilted in favor of HTFs (High Frequency Traders) and big money.
Nonetheless, the show must go on, so the money was spent today to boost stocks once again, though the rally may be cut short by tomorrow's non-farm payroll, which, maybe this time, will actually be regarded as something substantial to trade off. The past few monthly employment reports have been on the weak side. if not outright horrible, but traders seemed to keep their wits on days when the numbers are released. It's the following Monday that all hell breaks loose, giving more credence to the rigged nature of the markets.
Dow 10,320.10, +50.63 (0.49%)
NASDAQ 2,200.01, +23.17 (1.06%)
S&P 500 1,090.10, +9.81 (0.91%)
NYSE Composite 6,966.25, +55.27 (0.80%)
As expected, advancing issues finished well ahead of decliners, 4327-2026. New highs bettered new lows, 360-56, but volume reverted back to a pathetically low level. The indication is that there was some allocation into winning positions, though without much commitment.
NASDAQ Volume 1,691,904,250
NYSE Volume 4,269,796,500
One telling sign that the rally in equities is mostly a figment of the imaginative inside traders was that oil stood still, finishing unchanged at $73.91. Gold continued to close in on all-time highs, finishing up $5.20, to $1,251.50. Silver rocketed ahead another 28 cents, to $19.64. It has been by far the best performer over the past two weeks.
David Rosenberg penned a thoughtful piece, claiming that we're in a Depression, not a recession, and, of course, he's right.
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