Showing posts with label dollar. Show all posts
Showing posts with label dollar. Show all posts

Thursday, May 7, 2020

Deflation, Inflation, Hyperinflation, Signal to Noise Ratio, Gold, Silver, and the End of the Dollar

Everything that has happened so far was predictable.

The worldwide government response to the COVID-19 pandemic was as easy to see for cynics and skeptics as the eventual lying that would take place. First, back in January and early February, the federal government told the public that the threat to Americans from the coronavirus that was ravishing China was minimal. Gradually, that advice was replaced by travel restrictions to and from mainland China, then to and from Europe, until finally, infections and deaths from the virus began to multiply in America.

By mid-March and into the first days of Spring, the veil had been lifted and the virus was spreading rapidly across the United States, thanks to millions of international travelers on ships and airplanes that had been allowed to come and go as they pleased through the winter. Individual cases turned into clusters and clusters to severe outbreaks, especially in New York City, not surprisingly a hub for international travel.

By the time congress got around to passing emergency legislation, lockdowns and shelter-in-place recommendations were put into play by governors of the individual states. The legislation contained the usual: massive injections of currency into Wall Street (because we can't have a stock market crash), a pittance for the public, and payments to hospitals for treating patients infected with COVID-19: $13,000 for each patient admitted; $39,000 for each patient put on a ventilator.

Anybody who has been following government and Federal Reserve policy knew that the response would be to throw massive amounts of currency at the problem because that's all they know about how to handle crises.

And here we are. The government is now readying a fourth "stimulus" bill, chock full of more handouts, bailouts, and currency drops. This time, the public gets nothing. States and municipalities are going to get tons of currency to bail out their broken, drained public coffers and keep millions of teachers, cops, firemen, and paper-pushers on the job and their pensions partially funded because having the Fed backstop municipal bonds simply wasn't enough. Hospitals will get more currency. Small businesses will get another tranche of loans, pressing cynics to respond that cities get grants, while businesses have to pay it back.

All of this currency printing and government deficits won't amount to a hill of beans because the transmission mechanism for the velocity of money is broken. Cops, teachers, and firemen will get paid, but they'll be scared to take on new debt and will spend much of their money paying down credit card bills and overpriced mortgages. After another crash to lower levels, the stock market will stabilize.

The US will have deflation, widely, in big-ticket assets like stocks (market crash), bonds (rolling defaults), real estate (forbearance today leads to foreclosure tomorrow), trickling down to things like furniture (no interest for 5, 6, 7 years), cars (rebates, cash back, 0% financing), and appliances (oversupply). Food, especially meat, which is getting a bit pricey right now due to chinks in the supply chain, will not be affected much. Food was the one thing that didn't go up or down much during the Great Depression of the 1930s. It was cheap enough so that people didn't starve, though meats were generally considered close to being luxuries, so no worries there, until hyperinflation. Besides, even if you have a tiny back yard, you can grow some vegetables of your own to offset any price rises in meats. Why do you think your mother was always telling you to eat your vegetables? Sometimes there just isn't enough meat.

After six to 18 months of deflation, all the while the Fed printing dollars like maniacs and the government running massive deficits (probably over $8 trillion this fiscal year alone (through September 30), prices will seem to stabilize. By this time next year (2021), many will think the crisis has passed, mostly because that's what they'll be telling you on TV. But, it's just a lull. Inflation will return as all that currency begins to be spent into the economy. As the velocity of money ramps up, the Fed will respond by raising interest rates, but it won't matter. The game is on, with hyperinflation underway, the currency will continue losing value and eventually, there will be a massive default on dollar debt.

Forget, for for a few weeks or a few months what's happening on a day-to-day basis. It's mostly noise. The signal to noise ratio (SNR or S/N), a measure used in science and engineering that compares the level of a desired signal to the level of background noise, in today's economy, politics, and society, is very low, meaning the signal is barely transmitting the message as it is being drowned out by the noise.

In terms of decibels, to hear what's really happening in the world, the signal has to be about 60, the level of sound as conversational speech. If the noise is that of a rocket launch (180), the SNR is 0.33 and the noise drowns out the signal. When the SNR gets to above one (1), the signal can be heard. Putting that in perspective, a signal sound of a balloon popping is 125, a toilet flushing is 75, producing a SNR of 1.67. Those are appropriate today, as the balloon popping can metaphorically represent the debt bubble bursting and the toilet flushing the sound of US dollars losing value, going down the drain. That hasn't happened yet, but, as time progresses, the SNR will rise, pass 1.00 and the signal will eventually be loud and clear, one that everybody can hear. That's when inflation proceeds to hyperinflation, with prices rising faster than the Fed can print new currency.

It is at that point that you'll want to have gold, but especially, silver, because it will outperform the currency, just by standing still. Truth of the matter is that gold and silver don't really rise in price. An ounce of silver or a gram of gold is still an ounce or a gram. But the purchasing power of the currency is falling because there's more money circulating. Thus, in a very natural correspondence, gold and silver rise in value as the currency falls, which is why three 1964 dimes (90% silver) can buy more gas at the pump today, in 2020, than in 1964.

In the year 1964, the average retail price of gas in the U.S. was $0.30. So, back then, you could put a gallon of gas in your car with three 1964 (or earlier) dimes. Today, three dimes from 1964 or earlier are worth a silver melt value of about $1.10 each, so, with gas prices currently deflating to around $1.50 a gallon, you could buy more than two gallons of gas, even with silver (and gold) prices being suppressed. That's deflation. One could buy just one gallon and use the other roughly dime-and-a-half to help pay for the increased price of pork or beef. That's inflation. Inflation and deflation can and will occur - in different products or services - simultaneously.

Silver, even under the severe constraints imposed by the futures, central banks, the BIS, and other manipulators, has increased in value 1100% since 1964, an annual, non-compounded return of 16.67%. Try getting that from stocks or bonds. And silver is going higher. Much higher. The price of an ounce of silver in dollars is likely to double in the next few years, then double again, and again, as the dollar is gradually debased, losing all that's left of its purchasing power. Your 1964 dime will buy at least a gallon of gas or the equivalent in bread or beef or whatever items you wish to purchase. It will have value, as precious metals have for more than 5000 years. The dollar, and with it, the pound, yen, euro, yuan, and any other currency not backed by or tethered to a tangible asset (it doesn't have to be gold; it can be anything) will revert to its intrinsic value of ZERO, or close to it because every other country will be going through similar scenarios as the United States.

That's where this is all headed. Price deflation with currency inflation through Spring or Summer 2021, relative calm from 2021 to maybe the beginning of 2023, but likely before then, with inflation ramping up; then hyperinflation for two years before a complete monetary system reset is the only solution. It's not the length of time for these varying processes to occur that's importance, it's the sequence (deflation, calm (some inflation), inflation, hyperinflation) and the ability to spot the subtle changes that matters most.

Completely wrecking a global economy takes time. The Fed's been at it since 1913, and in 107 years have reduced the purchasing power of the dollar by about 97%. The last three percent - and the sopping up of all the malinvestment and toxic assets will take time... about three to four years.

Anything that has more upside than downside from random events (or certain shocks) is antifragile; the reverse is fragile.

We have been fragilizing the economy, our health, political life, education, almost everything… by suppressing randomness and volatility. Much of our modern, structured, world has been harming us with top-down policies and contraptions… which do precisely this: an insult to the antifragility of systems. This is the tragedy of modernity: As with neurotically overprotective parents, those trying to help are often hurting us the most.

-- Nasim Taleb

It would be nice if we started listening to the people who have been right rather than the people who have theories.

-- Mike Maloney, The Hidden Secrets of Money, Episode 7, Velocity & the Money Illusion

At the Close, Wednesday, May 6, 2020:
Dow: 23,664.64, -218.45 (-0.91%)
NASDAQ: 8,854.39, +45.27 (+0.51%)
S&P 500: 2,848.42, -20.02 (-0.70%)
NYSE: 10,999.99, -135.41 (-1.22%)

Friday, September 20, 2019

What the Heck is Phugoid Dollar Funding and Why Does It Matter?

So far this week, markets have encountered a major disruption in oil supply, an interest rate cut, three repo auctions, and the usual assortment of nonsense from Washington, DC.

Through all that, stocks have barely budged, leading up to a quad-witching day on Friday, with multiple options and futures expirations expected to add some volatility to the week. If it goes anything like the prior four days, the week will end with a thud, rather than a bang.

After the Fed's unsurprising announcement to lower the federal funds rate 25 basis points on Wednesday, a third straight repo auction was held Thursday morning, offering cash settlements on another $75 billion in collateral, mostly Treasuries and MBS.

While the repos signal some cash flow issues for some unidentified primary dealer banks, cause for the cash shortfall has not been ascertained.

Perhaps, as described in the link below, it is a case of Phugoid Funding, a condition which matches up pretty well with the current out-of-kilter global economy.

In an incredibly prescient post - although from April, 2019 - from Alhambra Investments (some of the brightest minds out there) about what is happening with the ongoing liquidity crunch that has the Federal Reserve conducting three consecutive repo auctions (Tuesday, Wednesday, Thursday), Phugoid Dollar Funding is explained in detail with an explanation of how it applies to current economic conditions.

At the Close, Thursday, September 19, 2019:
Dow Jones Industrial Average: 27,094.79, -52.29 (-0.19%)
NASDAQ: 8,182.88, +5.49 (+0.07%)
S&P 500: 3,006.79, +0.06 (+0.00%)
NYSE Composite: 13,111.25, -8.05 (-0.06%)

Monday, May 7, 2018

Index Divergence Not A Pretty Sight; Higher Dollar, Oil, Gas Prices To Kill Economy

Friday's across the board gains in stocks managed to get the Dow into positive territory for the month, but paradoxically, not the week, which included the last day of April, a 148-point decline.

Thus, three of the major indices took it on the collective chins, with only the NASDAQ allowing for gains on a weekly basis. This kind of divergence - often seen in bear markets - is just another signal to astute investors that all is not well in the land of unicorns and lollipops otherwise known as Wall Street.

There's a significant amount of panic on display if one know where to look for it, one the best locations being the dollar index, which has been staging a rather relentless rally since mid-April, rising from 89.42 to 92.89, which may not seem like much on the surface, but in real terms, it's a huge matter to international trade. Companies not nimble enough to adjust to sudden currency movements may be caught flat-footed, on the wrong sides of trades, with losses in capital amounting to staggering sums if not accordingly hedged.

A rising dollar does rather damaging things to trading partners and to the US itself. Most obvious is that a strong dollar makes imports cheaper, dampens commodity prices should cause oil prices to decline, but, since the United States has become the world's largest producer of crude, perversely, oil is rising in tandem with the dollar (by Monday morning it had crested above $70/barrel), a condition which is going to cause some considerable pain to Americans who use more distilled products (gasoline) than any other nation.

If there's anything that will put a lid on economic expansion, it's high fuel prices, and the current level, if it remains so, primarily threatens the budgets of small businesses and individuals, acting as an up-front tax on production and consumption.

Practically every recession in modern history has been tied to the price of oil and/or gas. The current runaway price surge, if not contained and reversed, is likely to send the economy into a vicious tailspin. Since consumer credit is at an all-time high, the average driver cannot afford to spend more on fuel, be it to power an automobile, heat a home, or run a small business.

Once again, nefarious forces are at work, spiking the dollar and the price of crude simultaneously, when there is oil sloshing around everywhere and dollars returning to their US home thanks to congress and the president's tax reforms.

Those dollars, upon return, are being used by corporations for more stock buybacks, boosting - temporarily - stock prices, and are not reaching the consumption level, keeping inflation somewhat in check. The good news is that consumer goods will not skyrocket in price, though getting to the stores (what few of them remain) to buy such will cost more and more.

Greed will go where greed wants, and it always seems to manifest itself most profoundly in the price of a gallon of gas. Thank Larry Kudlow for this windfall for the Exxons and Chevrons of the world as his "king dollar" theory will be tested on the world stage.

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

At the Close, Friday, May 4, 2018:
Dow Jones Industrial Average: 24,262.51, +332.36 (+1.39%)
NASDAQ: 7,209.62, +121.47 (+1.71%)
S&P 500: 2,663.42, +33.69 (+1.28%)
NYSE Composite: 12,493.35, +100.84 (+0.81%)

For the Week:
Dow: -48.68 (-0.20%)
NASDAQ: +89.92 (+1.26%)
S&P 500: -6.49 (-0.24%)
NYSE Composite: -100.68 (-0.80%)

Wednesday, August 30, 2017

Stocks, Gold, Silver, Bonds Ominously Reverse Course

As noted in the previous post, stocks were poised - via lower futures pricing - for a major downdraft on Tuesday, but, oddly enough, or, thanks to the good folks at the PPT, that never actually occurred to any great extent.

Instead, stocks did indeed start the session lower, but quickly reversed course and ended mostly on the upside. Additionally, the dollar dropped then popped on the widely-watched dollar index, crushing the gains in gold, silver and bonds, with the 10-year note ending at 2.14% yield.

It's amusing to see such theatrics carried out by those mostly "in charge" of global finance, i.e., the central bankers and government operatives in the Treasury Department, SEC and State. It's going to get more amusing, if that's what one wants to call outright market manipulation via direct, clandestine equity purchases, once congress comes back from vacation following the long Labor Day holiday.

One obvious feature of late has been the decline of the dollar over the past six months. It's been steady and in a bear market since July, but yesterday's rapid descent was apparently too much, too soon.

At the Close, Tuesday, August 28, 2017:
Dow: 21,865.37, +56.97 (+0.26%)
NASDAQ: 6,301.89, +18.87 (+0.30%)
S&P 500: 2,446.30, +2.06 (+0.08%)
NYSE Composite: 11,791.88, -8.34 (-0.07%)

Tuesday, April 19, 2016

Silver Pops Above $17/oz.; Intel Slashes 11,000 Jobs; Markets Steady

...and the beat goes on.

How long will it take before the majority of traders realize they've been fed a pack of lies in non-GAAP earnings reports, loaded with non-recurring, one-time charges, which oddly keep cropping up every other quarter, and profits that are the result of stock buybacks (fewer shares equals higher EPS)?

For most, the answer is "too long." Since Wall Street can only make money if stocks appear to be good investments - and that concept is quickly fleeing the coop - and have the confidence of investors, the con game of lowered expectations and "beats" will keep the dancers dancing well past midnight and into the wee hours of the morning.

When the party does finally end, there are going to be a lot of long faces, hung-over losers and poor explanations for why the market simply didn't keep going up forever and ever and ever. Central bankers the world over will be falling over each other before that happens, though, because where goes Wall Street, so goes central bank - and thus, fiat money - credibility, and that must be maintained at all costs, which just might include printing trillions and trillions more dollars, euros and yen before the money finds its justifiable price, that being the cost of ink on paper, or, essentially, nothing.

So, when pensioners find their nest eggs shattered and barren, and are being told that the paper promises are not going to be honored, it will be too late for the masses.

Only those free of debt, with some reasonable amount of hard assets - land, building, machinery, tools, art, gemstones, silver, and gold - will be whole and beholding to nobody. The rest will have to fend for themselves and their families as best as they can.

It is against this backdrop that the recent rise in the value of silver becomes important. Gold's little brother has risen from an even $14/ounce to close today just under 17 dollars an ounce, making it the best-performing asset of the year, passing by gold in the process.

There are numerous reasons that silver has been set afire in recent days. Less than a week ago, Deustche Bank agreed to settle lawsuits claiming the bank had engaged in price manipulation of silver as well as gold. This admission really put the afterburners to an already hopped-up commodity. Gold has been slower to respond, likely because silver had been manipulated much lower for much longer.

Traditionally, silver had been valued in relation to gold at anywhere from 16 to 20 ounces of silver to one ounce of gold. Earlier this year, the gold:silver ratio screamed above 80, signifying that silver was likely undervalued by a magnitude of four. In other words, the true value of silver must come back to historical norms, either by the price of gold falling dramatically, or the price of silver rising astronomically (i.e., silver, at a 16:1 ratio to gold, would be selling for $78/ounce, with gold at $1250, where it currently resides).

What is a more plausible outcome is that - and this process could take several years, maybe as many as ten - both gold and silver will rise, though silver will rise at a much faster pace, eventually coming in line at 20:1 per ounce of gold. Both precious metals will see enormous advances in coming years as currencies depreciate and eventually die, paramount among them the Japanese Yen, the Euro, and the US Dollar, since the currencies of the most developed nations are also the most at risk, due to many factors, not the least of which being the excessive levels of debt held by the general public and government.

The Fed, the ECB and the BOJ will print to infinity, eventually bankrupting their counties and their currencies. Holders of gold and silver will be rewarded for both their vision and their patience.

The process has begun, but only those willing to hold an asset that offers no interest or rate of return, but also does not carry any counter-party risk, will prosper. Dollars, Yen and Euro will eventually devalue and finally default.

In the words of James Pierpont (J.P.) Morgan, spoken in 1912, a year before he helped launch the Federal Reserve:

Gold is Money. Everything Else is Credit.

Today's closing figures:
S&P 500: 2,100.80, +6.46 (0.31%)
Dow: 18,053.60, +49.44 (0.27%)
NASDAQ: 4,940.33, -19.69 (0.40%)

Crude Oil 42.46 +3.08% Gold 1,251.80 +1.36% EUR/USD 1.1359 +0.41% 10-Yr Bond 1.78 +0.56% Corn 383.50 +0.66% Copper 2.23 +2.84% Silver 16.96 +4.35% Natural Gas 2.09 +7.63% Russell 2000 1,140.23 +0.08% VIX 13.24 -0.82% BATS 1000 20,682.61 0.00% GBP/USD 1.4394 +0.82% USD/JPY 109.1975 +0.33%

Wednesday, January 27, 2016

Wall Street Sulks as Fed Is Not Dovish Enough

In the aftermath last month's federal funds rate hike - the first in eight years, and, a paltry 0.25% at that - the Fed held their first FOMC rate policy meeting of the year and the reaction from Wall Street was nothing short of derisive.

While the Fed governors did their level best to hem, haw, and dance around their policy "mistake" - which has taken US stocks roughly seven percent lower and cratered confidence - market participants apparently wanted more, as in a complete roll back of the hike and a return to ZIRP, the policy that had prevailed since the fall of 2008.

Stocks were trading close to the flatline until the 2:00 pm announcement by the Fed. After a small amount of see-sawing, sentiment turned radically negative, with all indices taking a punch to the gut that extended into the close.

The Fed cannot escape its fate. It will be overseeing the utter calamity of a global currency crisis, brought about by their excessive credit policies from the Greenspan and Bernanke eras. Janet Yellen, the current Fed Chair, will be scapegoated, and rightfully, as she is completely tone deaf to the needs of the US and global economies, which are screaming deflation at every turn.

The best Ms. Yellen can hope for in her sure-to-be-short tenure as Chairwoman of the Federal Reserve is for Japan or Europe to somehow come to the rescue with additional QE in coming weeks and months, which will buy her additional time to exit in an orderly manner.

The handwriting is on the wall and the handwringing can be seen on the faces populating the video screens from CNBC and Bloomberg TV. Nobody wants stocks, and soon enough, nobody will want dollars, at least not for long. But first, the powerful grip of deflation will have to work its way through the system, crushing the investor class while shoring up those at the bottom of the societal and economic ladders.

That process has been underway for at least a year, as shown by the price of crude oil. It will eventually infest all consumer goods, crushing corporate profits in manufacturing and retail. The systemic underutilization will commence until governments fall, first in emerging markets, then developed ones.

There is no escaping a monetary event such as what is coming. Gold continued to ramp up. Silver is lagging, but will eventually follow and then surpass the gains made by gold.

Today's closing quotes:
S&P 500: 1,882.95, -20.68 (1.09%)
Dow: 15,944.46, -222.77 (1.38%)
NASDAQ: 4,468.17, -99.51 (2.18%)

Crude Oil 32.19 +2.35% Gold 1,124.90 +0.42% EUR/USD 1.09 +0.32% 10-Yr Bond 2.0010 +0.35% Corn 369.75 +0.14% Copper 2.06 +1.08% Silver 14.50 -0.44% Natural Gas 2.15 -0.51% Russell 2000 1,002.75 -1.50% VIX 23.11 +2.71% BATS 1000 20,083.96 -0.92% GBP/USD 1.4245 -0.72% USD/JPY 118.63 +0.18%

Wednesday, April 4, 2012

S&P Closes Under 1400; Precious Metals Whacked

The follow-on from yesterday's FOMC minutes release, combined with scary data from Australia and China (slowing economies) sent markets tumbling globally.

Asia and Europe each saw aggressive selling, and by the time US markets opened - despite ADP March employment data posting a modest beat of 209,000 jobs - the Dow was set up for a 100-point loss at the open.

The opening move was swiftly lower, taking the other major indices along for the ride. Dow Industrials remained below 13,100 all day, with the S&P 500 - despite a late day rally - eventually closing below 1400 for the first time in eight sessions.

To say that the markets have topped out temporarily would be putting it lightly; rather, stocks seem to be in a steady drift lower, as Winter turns to Spring and investors seek to lock in profits from one of the most rambunctious first quarters in stock market history.

Conditions in Europe once again made noise in the states, as a poor showing for a Spanish bond offering and rumors of another bailout for Portugal fanned the flames of global recession.

While some commentators continue to spout nonsense that the US is "decoupling" from Europe and the rest of the world's economies, such talk is nothing but hot air, mostly from the same people who rightly contended during the struggles in the US that a large portion of US earnings are derived from abroad.

One simply cannot have it both ways. We are either a part of the global economy or we are not and the facts are strongly in favor of the "globalized" economy model.

What concerns investors most during this transitional period are fears of a prolonged slump in Europe which would exacerbate tepid conditions in the US. Economic data has been fragile of late, but hope for a renewal to the rally on first quarter earnings data from US companies is keeping the markets somewhat range-bound and in a position of relative strength, though the thought of the Fed cutting off the easy money with the end of "operation twist" in June are tempering the bullish sentiments.

While stocks were damaged on the day, gold and silver were even harder hit, which makes little sense from an historical perspective. In times of economic distress, the precious metals usually hold up better, but, since they have been turned into trading vehicles by the Wall Street madmen, such assumptions may not hold up this time around. The mood is eerily similar to that of September 2008, when a fragile economy was overturned by a number of random events. The situation is vastly different today, however, but a major crisis anywhere in the world could rapidly spread.

In the face of some chaos, the strengthening dollar is at least bringing down oil prices, which should eventually lower the price of gas in the US. The high price of fuel is in itself a condition which could severely slow the already turbid US economy, though the good news for drivers may not be welcomed by equity investors.

The new high - new low indicator flipped to the negative today for the first time in a long while. Any continuation of that trend indicator could signal a prolonged correction, something the three-year-old bull market has not experienced since the flagging days of last summer.

Dow 13,074.75, -124.80 (0.95%)
NASDAQ 3,068.09, -45.48 (1.46%)
S&P 500 1,398.96, -14.42 (1.02%)
NYSE Composite 8,111.48, -105.06 (1.28%)
NASDAQ Volume 1,779,653,500
NYSE Volume 3,810,047,500
Combined NYSE & NASDAQ Advance - Decline: 1079-4563
Combined NYSE & NASDAQ New highs - New lows: 65-109
WTI crude oil: 101.47, -2.54
Gold: 1,614.10, -57.90
Silver: 31.04, -2.22

Friday, November 11, 2011

Bond Market Closed, Stocks Go "ALL IN"; Jack Abramoff Says Congress Engages in Insider Trading

Guess what?

While some of you may have had the day off for observation of Veterans Day, the stock market was open, the Euro spiked higher and traders had a field day.

The correlation trade recently mentioned here between the Euro/Dollar and US equities went into high gear, with the Dow posting its 11th day this year with a gain of more than 200 points and the other major indices registering similar percentage gains. Not to be left behind, the commodity complex also saw dramatic gains, with oil, gold, silver and platinum leading the way.

For the week, all major indices closed with small gains due to Wednesday's wicked meltdown, which only served to fuel speculator appetite for risk assets in the final two trading days of the week.

There was no catalyst other than the Euro, which was boosted higher on hopes that the Italian parliament would continue to press for austerity measures. Italy's troubles seem to have subsided almost overnight, it's 10-year note falling well below the key seven percent level.

The disturbing story of the day came from CNBC, of all places, as disgraced and discredited lobbyist Jack Abramoff, on the heels of his explosive 60 Minutes interview last Sunday (see video below) spoke to reporter Eamon Javers about insider trading in congress.

Though Abramoff, who spent three years in prison for his crimes, refused to name names, he said he knew of at least twelve member of congress who traded stocks on inside information.

Naturally, these congress-critters and their staffers, belonging to the privileged one percent, will never be investigated, charged or tried. It's accepted practice in Washington to take advantage of information before it becomes general knowledge and therein lies the double-edged sword for anybody with a 401k, retirement account or an active brokerage account. While today's gains, and all gains, look great on one's balance sheet, the insiders of Wall Street and Washington are making ordinary people's profits look like chicken feed.

It's a sign of our times. Profits booked legally by 99% of the public are offset by the one percent's relentless, secretive, underhanded dealings.

That's all. Enjoy the weekend.

Dow 12,153.68, +259.89 (2.19%)
NASDAQ 2,678.75, +53.60 (2.04%)
S&P 500 1,263.85, +24.16 (1.95%)
NYSE Composite 7,576.18, +152.50 (2.05%)
NASDAQ Volume 1,575,004,500
NYSE Volume 3,326,831,000
Combined NYSE & NASDAQ Advance - Decline: 4629-984
Combined NYSE & NASDAQ New highs - New lows: 81-59
WTI crude oil: 98.99, +1.21
Gold: 1,788.10, +28.50
Silver: 34.68, +0.58

Thursday, November 10, 2011

Euro/Equities Correlation In Play; Largest US Municipal Bankruptcy in Alabama; Foreclosures Rise

As has been noted here recently, the correlation between the Euro and US stocks is operating in perfect harmony. Today, with the Italian 10-year note dipping below the magic 7% yield line, the euro gained in strength against other currencies, most notably the US dollar, which sent - as it always does - US stocks upward.

There's really no further analysis to the US stock market needed, so long as Europe remains in crisis and the unannounced policy of the Fed and Treasury is to keep the US dollar weak. Whenever the Euro is rising, so too US stocks, and when the Euro is down, so are equities across the pond. It's a losing strategy in the big picture view, but that doesn't prevent Wall Street's masters of the universe from making bank on both sides of the trade.

One could suggest that the entire global economy is now tied to the fates of Greece and Italy, though in reality, it's the Fed and the major US banks that are pulling most of the strings. Just as fundamentals no longer matter for stock-picking, so too the daily drumbeat of Euro-craziness that manifests itself in speeches, statements and the occasional turnover of a sovereign government.

Keeping the dollar week and the Euro strong is all that matters, even though the Euro should, realistically, be trading at par with the dollar or lower. Eventually, this is a failing policy that will flatten everything: stocks, currencies, politicians and their weakened governments.

The correlation is not perfect, however, as our New highs - New lows indicator below demonstrates in perfect fashion. Today was a "risk on" event, though more of a momentum play than a true rally.

On the domestic front, Jefferson County, Alabama, filed for Chapter 9 bankruptcy protection on Wednesday after defaulting on a sewer project that plagued the county for nearly two decades. The county, which is home to Alabama's largest city, Birmingham, filed for $4 billion, making it the largest municipal bankruptcy filing in US history.

The story behind the bankruptcy is a pantheon of the the ills plaguing the once-great United States, involving the EPA - which ordered the county to upgrade its sewer system - corrupt local officials, who were offered and took sweetheart deals from - you guessed it - Wall Street speculators. There's blame and shame aplenty to go around, as 22 local officials were indicted and convicted for their roles in the corruption.

The federal government has bailed out banks, insurance companies and automakers, but when it comes to cites where Americans actually live and work, no dice. The county goes belly-up, leaving creditors holding worthless paper. It's an American tragedy brought to you by the crony capitalists spanning the nation.

Also making domestic headlines, RealtyTrac reported that foreclosure filings rose seven percent in October from the previous month, as lenders got back to work after the robo-signing scandal had derailed their efforts for a year. While Nevada remained atop the foreclosure rate for the 58th straight month, California took over as the top dog for October with a 17% spike in default notices. The top ten states for foreclosure activity (these are the places worth considering moving to in the next 3-5 years because housing prices will be ridiculously low) are Nevada, California, Arizona, Florida, Michigan, Georgia, Illinois, Idaho, Oregon and Colorado.

God bless America. We've been in a depression for three years but nobody will admit it. It's a shame, because this is a good country with some very wonderful people, but our political leaders and Wall Street bankers have bastardized the entire financial system.

Tomorrow being Veteran's Day, be sure to honor our living and fallen military men and women, and, maybe, save a little bit of wrath for those who made them fight, and die, for causes that benefitted a few at the expense of the many.

Dow 11,893.86, +112.92 (0.96%)
NASDAQ 2,625.15, +3.50 (0.13%)
S&P 500 1,239.70, +10.60 (0.86%)
NYSE Composite 7,423.64, +70.19 (0.95%)
NASDAQ Volume 1,908,959,750
NYSE Volume 4,015,058,500
Combined NYSE & NASDAQ Advance - Decline: 3629-1866
Combined NYSE & NASDAQ New highs - New lows: 36-104
WTI crude oil: 97.78, +2.04 (WTI is becoming WTF. Oil up more than $20 in the past six weeks.)
Gold: 1,759.60, -32.00
Silver: 34.11, -0.26

Wednesday, June 1, 2011

A Major Dose of Reality and the Beginning of the End of Paper Money

Confirming yesterday's hypothesis that "something is wrong," stocks righted themselves to the steady flow of horrible economic news on wednesday and took their largest losses in months.

What really sent the markets into a deep funk was the release of the ADP private payroll survey, which showed job gains for the month of May to be only 38,000, when most estimates ranged from 175,000 to as high as 300,000. That sent futures tumbling in the hour just prior to the open and stocks did a complete reversal from Tuesday's glorious rally, which, truth be told, was based on nothing but hot air, or even cold air, but air, nonetheless.

Once traders had tasted the bitter flavor of selling winners and losers alike, the ISM manufacturing index came in at 10:00 am, well below expectations of 57.0, at 53.5, after notching a 60.4 handle in April. Despite still being positive (above 50), it was the worst reading since the fall of 2009.

Lumped on top of Tuesday's Chicago PMI and Case-Shiller housing report, the first week of June looks like it may be a tide-turning one. The euphoria of Tuesday's happy-face rally all but extinguished, investors, economists and government talkers must face the grim reality that the economy is sputtering, even after trillions in stimulus over the past two-and-a-half years.

The fallout from the long series of poor to horrible economic reports was that the benchmark 10-year note fell to its lowest level since last summer, checking in at 2.94%, after closing at 3.06 yesterday. Sub-3% yields on the 10-year is swell for borrowers, but it also belies a grim truth: that the economy is dead in the water, and there is nowhere to go but into the relative safety of fixed income, albeit at very unattractive yields.

Dow 12,290.14, -279.65 (2.22%)
NASDAQ 2,769.19, -66.11 (2.33%)
S&P 500 1,314.55, -30.65 (2.28%)
NYSE Composite 8,281.59, -195.69 (2.31%)

Declining issues overwhelmed advancers, 5420-1222. It was the biggest rout of 2011. Still hanging on for dear life, the new high-new low indicator showed the NASDAQ dead even at 74 new highs and the same number of new lows. On the NYSE, a bit more resilience, with 101 new highs and 38 new lows, though once again, the margin is shrinking and it's only a matter of time before the market flips right over and a full-blown correction can be announced.

Naturally, since nobody wants or likes to face the reality of the situation, the US and global economies are almost completely kaput. Nothing more than wasted effort printing worthless Dollars, Euros and Yuan will be the requisite response from the league of central bankers whose policies have been exposed as outright disasters. A great reckoning is upon us, and those who have not prepared will be blind-sided and left in tears with paper assets worth nothing.

Volume was on a par with Tuesday's, unsurprisingly, though one could have expected even heavier selling. Apparently, not everyone is convinced that the game is over. The Too Big To Fail banks are still holding out hope for more dollar devaluation for the Fed and more handouts via the strapped and wrecked taxpayer base.

Of the more curious aspects of today's global melt-down was that the dollar actually looked like the best of a bad lot, rising 0.364 to 74.90, though that condition is - as the Chairman might express - transitory. Eventually, all paper money will be debased to nothing as the world sinks into global depression.

NASDAQ Volume 2,316,268,250
NYSE Volume 4,920,608,500

Of some small consolation to millions of consumers, oil fell abruptly, down $2.41, to $100.29. While still about $25 higher than it should be, the price of crude and the resultant price of gasoline should ease over the coming days and weeks to reflect the true status of the economy. Nothing kills growth as quickly or completely as high oil and gasoline prices, and, even though demand has been falling steadily since the average price of a gallon of unleaded gas hit just below $4.00, the price still remains a drag on the overall economy, at $3.77.

Gold was the greatest beneficiary of Wall Street's loathsome session, hitting a two-month high at $1551.20, before falling back to $1539.10, up $4.10 on the day. Naturally, the central banking cartel could not let silver go untouched, smashing the second precious metal down $1.65, to $36.82. Of course, in a deflationary depression, the metals offer no great relief, though they will tend to outperform all other asset classes and when the collapse of all fiat money occurs, they will shine as saviors.

June is shaping up to be a killer for the stock markets. Even though the ADP employment report has been widely criticized, there's little doubt that Friday's non-farm payroll report for May will be nothing short of disastrous, showing quite clearly that all the stimulus and wanton speculation of the past two years has done nothing to repair the deep wounds to the Main Street economy.

What little hope there is can be found amongst those who believe it is time for honesty and a change of policy, that people be favored over wealthy banks and their criminal CEOs and that government, if unable to serve the needs of the people, will be left behind. As during other times of hardship, the American public will turn to barter, black markets and other underground economies. Governments at all levels will be left holding onto unwieldy deficits as tax receipts fail to materialize.

The more one pays attention to what comes out of the mouths of bankers, government officials and elected legislators, the more one comes to realize that they have no interest but their own at heart and the American people will carry on without them, even if it means wholesale tax rebellion at every level. The system is burdened with unassailable costs and debts that cannot be paid. When and if congress decides to actually come to grips with these harsh realities, we will begin healing, though most with any sense of history feel that government has lost all control and the people are about to begin fending more or less for themselves.

Of course, the government will continue kiting checks to the "needy" and keeping the masses at bay with food stamps and other entitlement outlays, but the value will continue to erode and the already well-entrenched, wretched sub-class of welfare and government dole recipients will suffer even more.

It is truly a remarkable time in the world's history, and probably better to be young than old, for the young have the advantage of time - to repair, replenish and rebuild that which our absent leaders have destroyed.

Wednesday, April 20, 2011

Buy More Stocks Because the Dollar is Worthless

If anyone has any kind of notion that today's massive uptick in stocks had anything to do with the strength of the US economy, they'd better go back to economics 101 and check the chapter on currency devaluation.

Oh, there is no chapter on that? Well, allow me to explain how the dollar was absolutely savaged by - of all things - the Euro, and a host of other currencies including, but not limited to: the Aussie dollar, the Canadian looney, the Chinese Yuan and especially, the Swiss Franc.

On the dollar index (not a particularly great way to value US paper money, but sufficient for this discussion), the loss was 74 cents, or nearly one percent, meaning everything you buy that isn't produced in the United States - which is just about everything - costs 1% more today than it did yesterday. The corresponding rise in stocks only helps alleviate the pain for the richy-rich amongst us, but they usually find tax dodges or off-shore accounts for their hordes of cash anyhow.

The rest of you schmucks are just going to have to take it, see? You pay more so the Fed can print more billions, give them to the primary dealers and allow the government to continue overspending until eternity, which is a long, long, time. Next week, it will likely get worse, with gas heading for $5.00 a gallon nationally, and everything else going up accordingly, eventually, the average household will be able to buy food and fuel and little else, all the while watching those who own stocks make fortunes.

While the wizards of Wall Street frolic in the fields of greenbacks, you and I will be left holding the bag, containing manure, and be taxed into oblivion. Don't worry about Medicare and Social Security, most of us will die off before any benefits are actually paid out.

It's an ugly, severely evil set-up by the banks and our hands-out congress to create two distinct classes in the United States: the super, super rich and everyone else. You and I must learn how to raise our own crops and subsist off the land leased by our wealthy masters. Welcome to the golden age of feudalism!

I have nothing more to add except that if you haven't started some plants growing in your back yard and already own some silver or gold or both, you need to do so immediately, as time is running short and planting season is upon us. We are nearing the point of complete collapse of the middle class.

If your kids are planning to go to a big university and go into hock to the tune of $40, $50 or as much as $100,000 to get their degree, it might be time to sit them down and explain that their high school diploma will be sufficient, in their bleak future, to work as a mechanic, a gardener, or a chamber maid. Their dreams of becoming the next great biologist or astronaut will have to be put on indefinite hold.

Dow 12,453.54, +186.79 (1.52%)
NASDAQ 2,802.51, +57.54 (2.10%)
S&P 500 1,330.36, +17.74 (1.35%)
NYSE Composite 8,457.65, +125.62 (1.51%)

Advancing issues pounded decliners, 5245-1347. There were 133 new highs and 29 new lows. On the NYSE, 193 new highs and 16 new lows was the order of the day. Volume was relatively solid on the NASDAQ, where all the momentum stocks reside, but the usual miserable figures were posted on the NYSE. Almost all of the day's gains were made at the open, so the futures players made fortunes; the rest of the session was nothing more than churning.

NASDAQ Volume 2,112,464,250
NYSE Volume 4,657,346,000

Crude oil made a huge move of nearly 3%, gaining $3.17, to $111.45, making that $5.00 gallon of gas that the oil barons dream about that much closer to reality. Gold blasted through the $1500 mark again, but was taken down to $1,498.90, a gain of a mere $3.80. Silver continues to dazzle, gaining another 54 cents on the day, finishing in New York at $44.46.

While some argue that gold and silver are bubbles, if that is the case, then what is to be said of stocks, which have doubled off their March 2009 lows? Gold and silver are only a third to a fifth of the way to where they are eventually going. With every new dollar printed by the Chairman of the Fed, Ben Bernanke, an ounce of precious metals costs a little bit more, and that's about the only good news I can report today.

EDIT: Following the COMEX close in New York, gold bounced to $1502.10, and silver shot up to $45.22 an ounce at 5:18 pm EDT.

Friday, November 20, 2009

Stronger US Dollar Drags Down Stocks

This is an unusually strong market, even if volume indications do not verify such.

After a week of US Dollar jawboning and actual intervention, driving it off its lows against most of the raw material currencies - Brazil, Canada, Australia - and especially against the Euro, the US Dollar seems to have stabilized, taking US stock markets in the opposite direction.

There seems to be a concerted effort to eliminate the "risk trade" associated with the weak dollar, more than likely initiated by the Fed and US Treasury, under some darker moniker, no doubt, in advance of actual tightening by the Fed come this Spring or Summer at the latest. The risks associated with a weaker dollar are too great for the Fed and the rest of the developed nations to tolerate for long, so an unwinding of the carry trade has to be in the works, or so it seems.

Despite this effort, stocks barely stumbled in the week-long effort. There have been a number of casualties, but everybody with any experience in the markets knows that the liquidity-driven trade must be eventually replaced by a return to the normalcy of trading on fundamentals. The trick is to get it to happen somewhat seamlessly, without a huge downdraft in the already-heated markets.

The action this week kept the lid on stocks while giving quiet notice that the Fed and Treasury is not going to allow the US dollar to fall much further, if any.

Dow 10,318.16, -14.28 (0.14%)
NASDAQ 2,146.04, -10.78 (0.50%)
S&P 500 1,091.38, -3.52 (0.32%)
NYSE Composite 7,084.47, -33.17 (0.47%)

Stocks finished lower for the third straight session. Advancing issues were overshadowed by decliners, 3719-2713. It was the slightest margin of losers to winners of the past three days. New highs remained ahead of new lows, 127-64, which should be the case, as last year's ranges should not be difficult to beat. Highs should exceed lows all the way through March of next year and likely well beyond.

Volume was moderate, or, as the case may be, normal.

NYSE Volume 4,301,791,000
NASDAQ Volume 1,934,215,250

Once again, oil was caught up in the dollar trade, losing 74 cents, to $76.72. Gold continued on its own special track, now completely untethered from the dollar, up another $6.60, to $1,148.50, another closing high. Silver failed to keep pace, losing a penny, to $18.45.

The week was rather uneventful, though Dell's missing of targets and poor guidance was a highlight for the latter part of the week. The company seems to be in a very tight spot, with competition apparently eating into market share and margins, especially by HP, Acer and Toshiba.

Even after the small drop this week - between 1.25 and 2% on the major exchanges - the US stock rally that began in March of this year still appears to have some life remaining. Though stocks broke below the key 1100 mark on the S&P, that level should no longer provide strong resistance, since it was exceeded last week. While the skeptics will be weighing whether or not the rally has run out of steam, there's a pretty good bet that money managers will be diving right back in again on Monday, with money that needs to go to work. Unless the interventionists on the Dollar front overstep their mandate, stocks should continue apace until the end of the year.

Friday, October 30, 2009

Volatility Returns to End Wild Week

If you're looking for direction in this market, you're not alone. Following a week in which triple-digit moves on the Dow Jones Industrials were the norm, with the other indices more or less in concert, investors are scratching their heads, backs, bottoms and anything else nearby in almost total confusion.

The Dow was down more than 100 points three days, culminating in the biggest move of the week on Friday (-249.85), and up nearly 200 points on just one day - Thursday - after the government announced the preliminary reading on 3rd quarter GDP at a positive 3.5%. Only Tuesday was tame, with the index up a mere 14 points.

For the week, the Dow lost 260 points, one of the larger weekly declines of the year, but shallow by percentage comparison, at 2.8%. The NASDAQ gave back 109 points, and was the worst performer on a percentage basis, with a loss of 5% for the five days just ended. 43 points were disgorged from the S&P 500, a 4.5% decline. The NYSE Composite was down 327 points, nearly matching the NASDAQ with a 4.7% drop.

The main catalyst for the wild swings in the market seem to have been two-fold. First, the date, October 30, marking the last trading day of the month, also was the final reporting day for many mutual funds, so profits were being locked in with wholesale selling of weak hands. Second, the dollar was very strong against the Euro in particular, and whenever that set-up has been present, stocks have been whacked. The entire rally from March through today has been fueled by a declining dollar, making commodities and US equities more attractive.

Dow 9,712.73, -249.85 (2.51%)
Nasdaq 2,045.11, -52.44 (2.50%)
S&P 500 1,036.18, -29.93 (2.81%)
NYSE Composite 6,739.45, -215.86 (3.10%)

Losers overwhelmed gainers, 5359-1162 (nearly 5-1), and underscoring the lack of direction, new lows scored over new lows by the narrow margin of 3, 89-86. Volume was again above the norm, though reading too much into the volume scenario may be risky. Both of the big down days - Wednesday and Friday - saw increased volume, though it bears notice that Wednesday was the day before the much-feared 3rd quarter GDP report, and Friday, as mentioned above, was the end of the year for many funds. Thus, these outliers may have overtly influenced the general direction and volume of trade.

NYSE Volume 7,883,697,500
Nasdaq Volume 2,512,938,000

As expected with the strong dollar scenario, commodity prices could not be maintained. Oil was slammed the hardest, it being the de facto favorite of the speculative groups, losing $2.87, to $77.00. Gold dipped $6.70, to finish the week at $1,040.40, while silver shed 40 cents, to close at $16.26.

Whether or not the closing figures are some kind of pivot point upon which one can trade one way or another is a matter for the chartists. The NASDAQ made an intra-day double-bottom at 1040, last touched on October 2, at the start of a brisk rally. The Dow is sitting right on its 50-day moving average, while the S&P has crossed over its 50-day MA three times in the last three sessions, is above support at 1019, but broke below the previous support line at 1039 on Friday.

It's a pivot point all right, the question is still which way?

The answer to that is probably more psychological than technical. Traditionally, a strong dollar was good for stocks, though in this situation, the liquidity trade is working the other way. At some point, the leadership of banks, materials and technology will have to give way, though technology will probably still stand up better through whatever short term condition is presented. Longer term, the dollar will decline, but as the Fed hints at raising rates - and then actually does - a change in attitude must attend if stocks are to continue to advance.

There is almost certainly going to be a period of pause, and we are likely in the middle of that right now. Another 4-7% decline on the major indices should be forthcoming while the market sorts out what to do with the absence of easy money. If there is no solution, stocks will continue to decline, at least until people think they're really cheap enough.

Much has been made of the huge amount of cash still sitting out the dance, and this may present those wallflowers with ample opportunity to put some of their money to work. Not a wholesale dive in, but at least sticking a toe in the water would suffice. That could spark another rally before the end of they year, but there's also a very good chance that the highs for 2009 have already been met.

Therefore, heading into next week, pay particular attention to the dollar, financials and basic materials or commodities, and be on the lookout for a divergence from the established trend. If the dollar is higher and stocks do not sell off, look for new leadership in the other sectors. If the dollar trades lower, expect the same trade, which does nobody any good, since we've already determined that it is flawed. A weak dollar cannot support a true recovery.

Best case scenario is another drift lower, or, maybe a swift downdraft for another week before volatility settles down. It doesn't mean that one should stop trading, only that one needs to buy protection and remain nimble.

Friday, October 9, 2009

Blowing The Top Off

On strength in the health care and technology sectors, US equities managed to finish one of their best weeks of the year with a strongly positive session. IBM led the Dow to new 52-week and 2009 highs, while the S&P finished just .17 short of its high for the year, set back on September 22 (1071.66). The NASDAQ also closed within shouting distance of its 200 closing high, just 7 points short of 2146.30, also the close on September 22.

The major indices closed higher every day this week except for the Dow, which posted a 6-point loss on Wednesday. This sets up an interesting scenario for the first big week of earnings season. A number of highly-traded stocks report next week, including Charles Schwab (SCHW) on Monday; Intel (INTC) and Johnson & Johnson (JNJ) on Tuesday; JP Morgan Chase (JPM) on Wednesday; Citigroup (C), Cypress Semi (CY), Goldman Sachs (GS), Google (GOOG), IBM (IBM) and Nokia (NOK) on Thursday; and Bank of America (BAC) and General Electric (GE) on Friday.

Dow 9,864.94, +78.07 (0.80%)
NASDAQ 2,139.28, +15.35 (0.72%)
S&P 500 1,071.49, +6.01 (0.56%)
NYSE Composite 7,015.54, +24.87 (0.36%)

Advancing issues beat decliners, 3942-2445, though the gains were not as broadly-based as earlier in the week. New highs beat new lows, 482-45. Volume was significantly below the levels of the rest of the week, but nobody seemed to care, with stocks soaring, even on a day in which the markets decoupled from the dollar trade, which was strengthened through intervention by the Bank of Japan and some veiled comments from the Fed Chairman, friendly uncle Ben Bernanke.

NYSE Volume 4,310,388,500
NASDAQ Volume 1,900,588,625

Due to the strong dollar, moves in the commodity markets were muted, though oil managed to gain 8 cents, to $71.77. Gold kicked back from its three-day record run, losing $7.70, to $1,048.60. Silver relinquished 13 cents to close at $17.69.

Considering the conditions in the market, it was something magnificent to see the Dow soar to a new closing high, but the US economy appears to be something of a coiled spring, about to explode with growth in all directions. Companies have cut the workforce to the bone while recovering from the worst financial crisis since the Great Depression. While there are still voices of macro-economics who believe that our debt levels are too high (they are) and the banking sector too weak (probably not in comparison to the rest of the world) to promote significant expansion, companies and investors are not convinced. Most of the working population is working, though this latest recession and the accompanying stimulus may have created an even larger underclass of unproductive cretins living off the earnings of the producers.

The big fear is that unemployment stays at elevated levels for too long a period. The government, by its actions such as extending unemployment benefits and increasing welfare payments only serves to exacerbate the condition, and washington must reign in its own profligacy. Otherwise, the massive spending the feds have thrown at the problem will create an ever more severe economic crisis in which the government cannot meet the demands of the people it is sworn to serve.

It's likely a very positive development that the dollar exhibited some strength and that bonds have sold off, increasing yields. If anything, the market, especially bond yields, will telegraph the next Fed move to raise interest rates, which seems to be coming sooner rather than later, and would be a good sign of real recovery and strength.

What most economics fail to include in their calculations are the robust dynamics of the US economy and the magic of innovation, which usually serves as a spur to both economic and job growth. The government jawboning about clean and green energy is a step in the right direction, but the markets will be the ultimate arbitrageur of what works and what doesn't. New products continue to come to market, and that builds economic activity more than any feeble weak-dollar trade ever could.

The US economy appears poised to break out into a new era of prosperity and the market is forecasting that development. As trite and cliche as it may sound, those who say that it's a mistake to bet against the US economy are probably dead right.

Tuesday, May 12, 2009

No Stopping the Industrial Giants

The stock markets are rigged. There, I said it. somebody mentioned that Goldman Sachs handles 20% of all the trades on the NYSE and NASDAQ exchanges. I tend to believe that, especially considering how one-sided the markets have become over the past two months.

It's a one-way bet, just like it was during the post-9/11 era, or, actually, as soon as the Iraq war began. Everything just keeps going up.

Now, I have nothing against profitable trading, I just think profits should be made by investing in companies with good fundamentals, growing earnings, dividends, things like that. The biggest leaders of the recent climb have been banks, many of which were on the brink of failure just a few months back, and were saved by infusions of cash from taxpayers.

That's not what I call sustainable or sound business. Eventually, I will be found to have been right all along. It will become apparent that Citigroup and Bank of America are insolvent. That JP Morgan has too much derivative exposure that they don't like to talk about, and that Goldman Sachs does manipulate the market at the behest of the Federal Reserve, itself a chimera of an organization, one which creates currency out of thin air. How can that be a viable business?

Others agree with me that the "dead cat bounce" has been overdone. Here's one.

Then there's talk of Social Security and Medicare going belly-up before they're supposed to. Well, even the idea that they are going to go broke should be cause enough to reform or dispose of these awful entitlements which are bankrupting the country, turning productive people and resources into wards of the state and, though they provide capital into the system, are nothing more than the manifestation of the worst form of the welfare state.

Dow 8,469.11, +50.34 (0.60%)
NASDAQ 1,715.92, -15.32 (0.88%)
S&P 500 908.35, -0.89 (0.10%)
NYSE Composite 5,859.14, +9.84 (0.17%)

Yesterday, I was reporting how the NASDAQ stocks fared much better than their counterpart indices. Today the opposite is the case, with Dow stocks leading the way. So, which is it? Old, stodgy industrials or new-age tech companies at which we should be throwing our money? Neither is likely the case. Gold or silver will outperform them both, as they have for the past five years.

Just to confuse matters further on one of the more confounding sessions of late, declining issues dominated advancers, 3885-2650. New lows: 73; New highs: 38. Volume was light.

NYSE Volume 1,611,161,000
NASDAQ Volume 2,529,090,000

The government continues to borrow and spend at a record-shattering pace. Americans will be paying through their eyeteeth until their dying breath just for the money being wasted trying to prevent the economy falling into an orderly and well-deserved depression. All they're doing is delaying the inevitable and making matters worse. The luckiest people on the planet today are those who know they don't have long to live. They won't be around to witness or deal with the devastation.

Crude oil was up another 35 cents, to $58.69, but gold gained more, rising $10.40, to $923.90. Silver shot up another 31 cents, to $14.22. They're probably all overpriced, but especially oil. When PPI and CPI figures are released later this week, there's likely to be some pull-back in all commodity prices. The economy is still just puttering along at a snail's pace. Growth is more than 9 months away.

Bonds were unmoved and the dollar was descending last we noticed.