Showing posts with label fed funds rate. Show all posts
Showing posts with label fed funds rate. Show all posts

Friday, March 6, 2020

Stocks Struck, Bonds Bought, Gold Soaring As COVID-19 Coronavirus Continues to Prompt Worldwide Response; Fed Powerless

While no records were broken on Thursday, US stocks gave back most of the gains made on Wednesday, as volatility remained elevated. The most-widely quoted measure of volatility, the VIX, spiked to 46.25, a level not seen since the onset of the Great Financial Crisis (GFC) in October 2008. A normal range for the VIX is between 12 and 18. The measure is currently indicating extreme stress in equity markets.

Another gauge of how severe this latest foray into and out of correction territory is the treasury yield curve and individual duration yields. The benchmark of the treasury complex is the 10-year note, which continues to be bought, sending the yield spiraling downward to unprecedented levels.

On Thursday, yields across the treasury complex were hammered lower. The 10-year-note fell from 1.02% on Wednesday to as low as 0.87% on Thursday, finally settling at another new record low of 0.92%. As long as equities remain under pressure - a timeline which could extend not just days or weeks, but months - bonds will be the safe haven and yields will fall.

The 30-year bond, which began the year at 2.33% and was at 2.09% as recently as February 12, crashed another nine basis points on the day, to a record low 1.56%. Shorter duration bills and notes were also being bought, sending yields skidding. The 2-year note was yielding 1.44% a month ago, closed out Thursday at 0.59%. The 1-year continues to offer the lowest yield, 0.48%, while the shortest duration, the 1-month bill yields 0.92. The short end is inverted, signaling economic chokepoints dead ahead.

All of this market turmoil has been the cause of the widely-spread coronavirus, or COVID-19, its official name. With worldwide cases now over 100,000, deaths over 3,400, and the increase in daily infections outside of mainland China now surpassing those from inside China, there's little doubt that the pandemic has reached crisis proportions.

The current hotspots continue to be South Korea (6,593 cases), Iran (4,747) and Italy (3,858), though countries in Europe are beginning to spike higher, especially in Germany, France, Spain, and Switzerland.

The United States is currently reporting 233 cases, though the lack of preparedness and test kits assures that the number is higher by orders of magnitude. With an asymptomatic (not showing obvious symptoms of infection) period of up to 27 days in which the carrier can spread the virus, the number of cases in the United States - as wel as everywhere else - is likely to spike higher within the next week or two. While this is speculation, it is based upon recognizable patterns of the virus, from evidence gathered in South Korea, Italy and on the cruise ship, Diamond Princess, which was ported in Japan for a month and served as a kind of petri dish for study of the disease.

With quarantine the most effective measure to mitigate the spread of coronavirus, the fear in markets is that entire communities will become isolated, workplaces shuttered, large events cancelled. Those scenarios and more have already been evidenced in China, South Korea, Italy and elsewhere. There's no escaping the realities of this global outbreak.

Along the lines of seeking out safe havens, gold has been a superstar, at a seven year high, $1,686.30 per ounce. Silver has lagged, but continues to appreciate, the current price $17.46 per ounce.

Crude oil continues to languish as global demand has collapsed. Even after OPEC announced a cut of half a million barrels a day, the price of WTI crude oil slipped further, currently at $44.06 per barrel.

In what has to be the most inconsequential data release in recent memory, the Labor Department released the February non-farm payroll report, which showed employers added 273,000 jobs nationwide, dropping the unemployment rate to 3.5%, though all of this data is viewed through a lens that was looking prior to the extreme global outbreak of COVID-19.

Markets will remain unsettled as long as the virus remains in its virulent form. With no good remedies or a vaccine readily available, fear will dominate financial markets and it is more likely to get worse before it gets any better. The United States has not yet seen the effects of widespread outbreak, which is all but certain to occur.

Even with Thursday's large losses, stocks are still ahead for the week from two to three percent, depending on the index in question. Bank stocks have suffered tremendous losses, as have airlines, but the damage to stocks has been pretty much an all-in matter. 90% of stocks on the S&P 500 are trading below their 10-day moving averages.

As of Friday morning, the Dow is still ahead by 2.80% on the week, but the market is poised for another down day and the near-term bottom of 24,681.01 (intraday) is certain to be tested in short order.

The Federal Reserve, which cut the federal funds rate by 50 basis points in an emergency cut on Tuesday, meets on March 17-18, with the market calling for a 50 to 75 basis point cut, which would bring the rate down below one percent. Even though the Fed will likely cut the rate at the meeting - and again at its April meeting - it is unlikely to offer much in the way of relief. The Fed cannot print a vaccine, nor halt the spread of an invisible, virulent virus which is rampaging around the world.

At the Close, Thursday, March 5, 2020:
Dow Jones Industrial Average: 26,121.28, -969.58 (-3.58%)
NASDAQ: 8,738.59, -279.49 (-3.10%)
S&P 500: 3,023.94, -106.18 (-3.39%)
NYSE: 12,593.03, -416.93 (-3.20%)

Tuesday, October 29, 2019

S&P Sets Record All-Time High; Fake Trump Tweet; FOMC Meeting to Begin

With an FOMC meeting in the dock for Tuesday, investors took the opportunity to ramp stocks higher prior to the expected 25 basis point cut to the federal funds rate. Just prior to the opening bell, an apparently fake news story about a presidential tweet appeared on, saying President Trump tweeted, "today will be a good day in the stock market," and, "the China deal is moving forward ahead of schedule."

We checked the president's twitter feed and could not find any such tweet. We also checked Bloomberg, which featured an article on President Trump's tweets that related to the stock market. No such tweet was shown in the article.

This clearly looks like a somebody spoofed the grammatically-challenged Zero Hedge website. It was most likely one of their "reliable" email contacts trying to look good. It's a shame that "the Hedge" has slumped to such low levels of journalism - if that's what you want to call it - because it is normally a pretty good source for economic news not found elsewhere.

Recently, Zero Hedge has taken to posting political and other non-economic articles, to its detriment. Many of the commentators who frequented Zero Hedge in its heyday (2008-2009), prior to it being purchased by ABC Media (British Columbia, not the US media giant). According to the one-liner in the website's footer - Copyright ©2009-2019 Media, LTD - the company took it out of the original owner's hands in 2009, as the GFC was winding down.

For the S&P 500, Monday was a special occasion, setting a new all-time record high closing. Trump may not have pumped it with a tweet, but his "America First" policies have certainly contributed to the rise of all US indices.

If stocks were overvalued prior to Monday, they are even more overvalued now, and will likely be uber-overvalued after the FOMC announces another rate cut on Wednesday.

In the meantime, earnings season is in full swing. The big story was Google parent, Alphabet, third quarter earnings, reported after the close. Alphabet posted a per-share profit of $10.12 in the quarter, decidedly below the $13.06 a share from the same period last year. Analysts polled by Bloomberg were expecting a per-share profit of $12.35.

The sizable miss was due largely to losses in investments. Among investments that may have contributed to the loss, Alphabet was involved with Uber and Slack, two companies that recently IPO'd and have lost value.

Little of this will affect Tuesday's trade outside of Alphabet (GOOG). There's far too much enthusiasm for equities and anticipation of looser monetary policy from the Fed already backed into the mix.

At the Close, Monday, October 28, 2009:
Dow Jones Industrial Average: 27,090.72, +132.66 (+0.49%)
NASDAQ: 8,325.99, +82.87 (+1.01%)
S&P 500: 3,039.42, +16.87 (+0.56%)
NYSE Composite: 13,186.43, +40.19 (+0.31%)

Thursday, January 3, 2019

Stocks Slammed, Bonds Rally As Global Slowdown Fears Rise

Apple computer, maker of the iconic iPhone, was the cause of much of today's equity angst, as the tech giant warned that fourth quarter sales were likely to come in under revenue estimates.

Apple CEO Tim Cook issued a letter late Wednesday to investors advising that a slowdown in China sales would cause fourth quarter revenue to decline 4.8% year over year to $84 billion, well below analyst estimates. It's not that Apple is losing money - far from that - it's just not making as much as expected. Shares of Apple (AAPL) were down nearly 10% on the news, the largest one-day loss in six years.

Combined with a report from the Institute for Supply Management (ISM) that had December's PMI fall by the most since the financial crisis of 2008, stocks were on the defensive all day long. The report concluded that December PMI fell from 59.3 to 54.1, a descent of 5.4%. While anything over 50 is considered expansion, the falloff is considered to be a harbinger of worse data to come, as many participants in the survey blamed trade tensions with China as a leading cause for the slowdown.

Thus, the 1000+ point gain from December 26 was cut down by two-thirds on Thursday, just a week later, sending the Dow and other major indices closer to bear market territory once again.

January has gotten off to a horrible start, as though December's rout hadn't ended, which, of course, would be correct. Losses on stocks are only just beginning. By March of this year, expect stocks to be another 10-15% lower than where they stand today, and, even then, with signs of a global slowdown flashing red, a bottom won't likely be put in until the market has flushed out all of the weak hands and sent fund managers scurrying in even greater numbers to cash and bonds.

Presently, the treasuries are telling an interesting story about the economy. While the Federal Reserve insisted on raising rates four times in 2019, the bond market has expressed extreme displeasure, sending the yield on the 10-year note to 2.56%, down ten basis points just today, marking the lowest yield since January of last year. Additionally, short-maturity bills spiked (thanks to Fed hikes at the low end) with the one-year yielding 2.50%, as compared to 2.39% for the 2-year and 2.37% for the five-year note. Inversion in accelerating at the short end of the curve.

While this is traditionally not the pairs that signal recession, that distinction belonging to the 2s-10s spread, it is highly unusual. Bond traders are saying they don't want to issue longer-term, for fear that the economy will weaken as time progresses. The 30-year also was slammed lower, yielding 2.92%, down five basis points from yesterday.

2019 is looking to be an even worse year for equity investors, and a rout in the stock market could cause panic to spread to many diverse levels of economic activity. A recession within the next three to twelve months is looking more a certainty with each passing day.

Dow Jones Industrial Average January Scorecard:

Date Close Gain/Loss Cum. G/L
1/2/19 23,346.24 +18.78 +18.78
1/3/19 22,686.22 -660.02 -641.24

At the Close, Thursday, January 3, 2019:
Dow Jones Industrial Average: 22,686.22, -660.02 (-2.83%)
NASDAQ: 6,463.50, -202.43 (-3.04%)
S&P 500: 2,447.89, -62.14 (-2.48%)
NYSE Composite: 11,190.44, -193.09 (-1.70%)

Tuesday, September 13, 2016

Volatility Returns As Stocks Retrace Friday's Losses

Writing just after noon on Tuesday, stocks seem to be in a certain funk over the future of not just corporate earnings, but the direction of the Federal Reserve and the outcome of the 2016 presidential race.

On the latter, Hillary Clinton's continued lying (even about her health, which is in terrible condition) may be costing her the election, to say nothing of the idea that many people who may have held their noses and voted for the Democrat status quo choice over the maverick Trump, may be changing their minds given that Hillary may not be able to effectively serve as president, yet alone make it to the finish line in the election process come November.

While Trump has held his tongue over Hillary's health issues, he continues to gain in the polls and in popularity with the American people. With the election less than two months away, any more gaffes by Clinton could prove fatal to her presidential aspirations, which, in the long run, would likely be a good thing for the American public.

Wall Street doesn't apparently appreciate the way things are going, though with Hillary losing ground, there's even less chance that the FOMC will announce a rate hike at their meeting next week. Trump's bashing of Janet Yellen earlier is also weighing on markets, and while the stock market may not like the way he's talking, as usual, he's speaking the unblemished truth: stocks are overpriced due to Fed meddling.

Is this how it all ends, with a Trump presidency and a wholesale cleansing of the sick economic policy apparatus?

We can only hope.

After Monday's dead-cat rally, stocks have given back all of those gains by midday, and then some. Get ready for a rocky ride this afternoon and more days of heightened volatility to come as the election takes precedence over all other economic and political events.

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%)

Friday, December 18, 2015

The Big Reset Has Begun; Prepare Accordingly; Stocks Skid to 2-Month Lows


Try these events from the past three days:

Kerry meets with Putin, says Assad can stay as ruler of Syria. US policy neutered.

Biden calls off Turkey, tells them to stop violating Iraq's borders. US policy neutered.

Fed raised Fed funds rate, banks raise prime rate.

Putin publicly backs Trump.

Ukraine defaults on Russian debt. While this may appear bad for Russia, it's worse for Ukraine, and even worse for US policy.

Today, the plug will be pulled on over a trillion$ in SPY options. Winners and losers, lots of both.

The world has changed radically in the past week. Trump is now the de facto US President. Obama can go to Hawaii and stay there for all the world leaders care. Kerry had no power; now he has even less, if that's possible.

Just watch: terrorism will be a non-starter for 2016. US intel has been found out (by Putin) and he's putting an end to it all.

Will truth and justice return to America? Just like bankruptcy, gradually, then all of a sudden.

h/t to Ernest Hemingway

Then, there's this cryptic note - citing Jim Willie's Hat Trick Letter - found in the comments section on a Zero Hedge article.


The Voice gives an urgent warning that finally the breakdown is accelerating, the damage profound, the effects unmistakable, the plug pulled. The officials have not undertaken any remedy for several years. His message is clear and stark, the first time such a communication has been given to the Jackass and colleagues. It was given just a few days before the USFed rate hike decision was made. "Guys, the plug has been pulled. Let the show begin. Our organization has been alerted accordingly to that effect this morning at 4am, that the deed is done. The battle trigger code has been chosen. It will get incredibly ugly, as real casualties will result. The annihilation of entire groups of people within the corrupt and criminal systems will be unimaginable to normal humanoids. These systems will be totally dismembered and crushed, never to be resurrected. The cabal is being caught in a grand dragnet, with the outcome certain to be their extermination, along with all their agents and collaborators. [1] The effects of this event driven scenario will become visible to the ordinary people in early 2016 and forward. Once the dust settles, it is clear to me that the human population will be noticeably lower, with fewer people roaming this planet." The Voice is referring to the Satanist Bank Cabal groups. We mere mortals hope that reason prevails, that remedy is agreed upon, that transition is orderly, so that a billion people do not needlessly perish. But the Anglo-Americans have their favorite nuclear and virus toys. We have seen ample evidence of their chemical plant explosions as a warm-up to main events.

Our organization has been alerted accordingly...

At 11:00 am ET, the S&P already dumped 2030 and 2020. Getting closer to the magic mark of 2000.

Don't actually think it matters if it happens today, tomorrow, next week or next year. The crash has been underway since late May, the last time the NAZ, S&P and Dow all set new all time highs.

The trash is being taken to the dumpster. Watch terrorism disappear as a major story. The meme for 2016 will be economic security, and Trump will win easily.

In fact, since Putin's endorsement yesterday, some would wager that in the minds of most world leaders, Trump is already the US de facto president. Obummer is so over. Hillary is a non-starter. Change is good; best to be out in front of it. The elections will be all for show, since Trump is self-financed. The money machine(s) is/are grinding to a halt.

Americans are going to see the fruits of what the Fed and the federal government, state governments, and local governments have sewn: TRASH. Loads of TRASH, piled high, heaped upon more loads of TRASH.

Bankruptcies should absolutely soar in 2016. Corporate failures and bond defaults will accelerate. Pensions will default on payments. The US will slowly, painfully, resort to honest money. GOLD AND SILVER WILL SOAR.


David Stockman really nailed it in his post at Contra Corner Blog.

And, while the economy slowly crumbles, congress (which obviously didn't get the memo that they're fired) conveniently passed a $1.15 trillion omnibus budget bill with the notorious CISA government spying act included.

At the end of the week (the last full week of 2015), the figures for the major averages look pretty stupid.

The Dow was smacked down a whipping 367 points, closing at 17,128.59, the lowest closing price since mid-October. For the week, the DJI was off nearly one percent, down 136.62 points.

The S&P nearly got to the 2000 mark, closing down 36.43, at 2005.46 on the day, but lost just 6.95 for the week. On the NASDAQ, it was a 1.59% loss, down 79.47, at 4973.08. On a weekly basis, it doesn't look bad on the surface, as the NAZ lost a mere 10 points.

However, Monday, Tuesday and Wednesday were all up days for the major indices. Thursday and Friday were down, and down big, erasing all of the early-week gains. From the highs after the FOMC meeting, on Wednesday's close, the losses portend further losses next week. a cleansing of bad assets is well underway, and there are plenty of bad ones in all markets.

Also, the entire treasury curve flattened. The 10-year yield, in particular, dropped 10 basis points from 2:00 pm ET on Wednesday, the moment of the FMOC rate hike announcement, ending the week at 2.20%. If the Fed's master plan was working, shouldn't all bond yields - especially those of shorter durations - have gone up? This is a classic example of the market rejecting the Fed, with more to come, as the Fed thinks it's going to raise rates four more times in 2016, a recipe for economic cataclysm.

Lastly, keep a close eye on the banks (JPM, BAC, C, GS, WFC, MS) as they were all lower by 2-3% on the day.

David Bowie's Changes should suffice as an appropriate song for a truly epic week:

Thursday, March 12, 2015

Stocks Gain Wildly On Weak Retail Sales, Bank Buyback Plans

Part of the reason Money Daily ceased publishing on a daily basis last year was because of the total ad complete idiocy of markets which have given up control to the Federal Reserve.

Today was another shining example of the absurdity of that proposition, but, fear not, Money Daily will be here tomorrow, next week and on into the future, boldly going where no central banker has gone before.

Prior to the opening bell, the government announced retail sales for the month of February, which came in at a -0.6%, marking the third straight month of declines in retail sales, the worst such string of misses and losses since the collapse of Lehman Brothres back in 2008.

Add to that, on the back of the government's stress tests on capital formation for the largest financial institutions, these big money centers announced upwards of $55 billion in share repurchase plans, led by Morgan Stanley, which announced a repurchase plan of $3.1 billion of it own stock. Remember, stock buybacks serve one purpose: to decrease the number of shares outstanding, which makes the EPS look better by comparison to either the prior quarter or the prior year. Beyond that, there is only a little - questionable - reasoning for such moves in a business sense.

The response to what can only be described as negative news, was a galloping rally right out of the gate for all indices and just about every momentum stock, income stock, growth stock, tech stock, tick tock and sock puppet.

There's no bubble. Uh-uh.

The whole concept here is that if the economy is weak, then the Fed may delay raising interest rates, with the Federal funds rate currently - and for the last six years - sitting at ZERO. The Fed has hinted that they'll raise rates in June, probably by 25 basis points.

That's what has Wall Street all riled up and excited. Imagine if we actually had a functioning economy.

Dow 17,895.22, +259.83 (1.47%)
S&P 500 2,065.95, +25.71 (1.26%)
NASDAQ 4,893.29, +43.35 (0.89%)

Tuesday, March 6, 2012

Individual Investors Not Buying Growth and Recovery Myths

Institutional investors, like hedge funds, mutual funds, retirement funds and the like, have a vested interest in keeping stock prices on the rise, such as has been seen in the first few months of this new year.

On the flip side, individual investors have shied away from equities in a meaningful way since the economic collapse of 2008 and few have ventured back. Their reasoning became evident today as stocks were hard-hit globally, beginning overnight in Asia and accelerating with large losses on the european exchanges. By the time the opening bell rang in New York, Wall Street was bracing for a world of hurt.

Remember that disturbing, repeating pattern mentioned at length here yesterday? The one in which stocks fell sharply at the open, only to gradually improve throughout the remainder of the session?

As it appears today, those dips and rises might have been nothing more than smart money getting out ahead of the carnage to come. The repeated attempts and failures for the Dow to close over 13,000 were at least a set-up for a trend top in stocks and may have signaled an impending correction or even outright rout.

The reasons for weakness in stocks could have been predicted by the constancy of low trading volumes, mixed to negative economic data and the non-confirmation by the transportation index. Wall Street's professional prostelitizing over the need for individuals to "get back into the market" or "stay invested" has been running contrary to evidence for quite some time, and it may finally begin to sink in that continual growth is an impossibility and the US "recovery" is nothing but a well-managed myth, propagated by the control freaks in Washington and New York and promulgated by the whores of the media.

Wall Street's five-month-long, liquidity-fueled bogus rally is coming to a quick end. All the cheerleaders for "dow 13,000" are going to look pretty stupid in coming weeks and months as the widely-watched average hovers closer to 12,000 and possibly even lower. How low it will go nobody knows for sure, though there are elements already in place, like Greece, Europe in recession, slowing economies in China, India and Brazil, high food and fuel prices, that could plunge the world into a re-enactment of the 2008 crash, only that this time, fed funds rates are already at zero and tens of trillions of dollars have been thrown at the problems without results.

Today's drop was the first triple-digit decline for the Dow of the new year and the largest percentage decline since November 23. That it comes a day before the release of the ADP private employment data report - which serves as a proxy for Friday's NFP call - is probably not a coincidence. Neither is it coincidental that private bond investors in the Greek bailout will vote on whether or not to accept the terms of a debt restructuring (read: haircut) on Thursday. Bad news might remain in the shadows for a while and might be purposely ignored, but eventually it surfaces, and by then it's usually worse than expected.

In the globally-connected world created by the Keynesian genii central bank economists, Greece's problems are Europe's and our own, and Chinas and everybody's. The contagion which will proceed from Europe will engulf all markets and all countries. Central bankers will have two options: lying and printing, which has been proven ineffective, or, bank liquidations, sovereign defaults and global deflation. They will likely opt for more "pretend and extend" tactics, leading to more inflation and more phony markets in which people of common sense will not participate. The other, proper, Austrian-style solution may be more painful at first for some, but once the toxic debts and zombie banks are flushed from the system, real recovery can begin.

This week and the next two may prove to be as pivotal in terms of the survivability for the entire global economic structure as any time in the last thirty years.

One should not be worried unless one has a job, a pension or most of one's wealth in stocks because the one-percenters of the world are about to become even more vilified than ever as the world's problems are brought out into the open and some may even join the ranks of the feeble top 20 percent. What the global nanking and political cartel has wrought will almost surely destroy more than a few ill-gotten fortunes and many more honestly-made ones, but, whatever path is taken, more economic pain is nearly assured, though this time it will be more evenly distributed.

In fact, those clinging to the bottom rungs of the economic ladder may fare best of all.

Dow 12,759.15, -203.66 (1.57%)
NASDAQ 2,910.32, -40.16 (1.36%)
S&P 500 1,343.36, -20.97 (1.54%)
NYSE Composite 7,920.13, -171.14 (2.12%)
NASDAQ Volume 1,870,041,375
NYSE Volume 4,171,692,250
Combined NYSE & NASDAQ Advance - Decline: 724-4956
Combined NYSE & NASDAQ New highs - New lows: 50-82 (flipped, finally)
WTI crude oil: 104.70, -2.02
Gold: 1,672.10, -31.80
Silver: 32.78, -0.91

Thursday, June 30, 2011

QE2 Ends in No-Resistance Window Dressing Rally

Stocks made outsize gains for the fourth consecutive session; with the end of QE2 marking the end to more than $600 billion in monetary stimulus, traders, fittingly, went on a buying spree on the final day of the second quarter, whipping up stocks to sell to anybody willing to buy somewhere down the road.

The finality to the Fed's second attempt to re-invigorate the US economy has had some dubious effects, such as pushing crude oil and other commodities - with the notable exception of the precious metals - to nose-bleed levels, spiking interest rates (the 10-year is up more than 40 basis points in just the past three days) and generally applying relief to the banks, who have parked excess reserves at the Fed, without having done a thing to improve the horrific states of the housing and jobs markets. The US dollar is also down substantially against other currencies.

When the history books are written, QE1 and QE2 will be seen from the prism of a new present, and the look back will reveal whether or not the stimulus help or hastened the end of the fiat money era. For now, it continues to be an exercise in futility to bet against the Fed. Shorts have been burned repeatedly, as the flavor of fresh, daily money proved too difficult to resist for speculators.

With it over, the markets will have to go it alone, without the assistance or accommodation of the Federal Reserve, though it should be noted that the Fed stands ready to print more dollars and pump the banks further with liquidity at extraordinarily low rates. On top of that, the federal fund rate remains at 0.25-0.00%, an historical low, both of level and time. The rates have been down at those levels for nearly three years.

With half a year in the books, the major indices sport marginal gains for the year, bolstered by the past four days of hope and reckless buying. The markets even ignored another in a series of poor reports from the BLS on initial unemployment claims, which again came in higher than the rosy expectations, at 428,000, a drop of one thousand from the previous week, which supposedly was reason enough to cheer.

With one trading session remaining before the 4th of July holiday, not much is expected on Friday, as most of the big players will already be at their beach homes in the Hamptons or aboard their yachts. Yes, it is good to be rich.

Dow 12,414.34, +152.92 (1.25%)
NASDAQ 2,773.52, +33.03 (1.21%)
S&P 500 1,320.64, +13.23 (1.01%)
NYSE Composite 8,319.10, +90.60 (1.10%)

Advancers led decliners, 4774-1827. NASDAQ new highs: 103; new lows: 35. NYSE new highs: 112; new lows: 12. Combined, 215 new highs, 47 new lows. Volume was consistent with Wednesday's flow rate, nothing surprising there.

NASDAQ Volume 1,837,387,750.00
NYSE Volume 4,199,619,000

Crude continued to rise, gaining 65 cents, to $95.42. Expect to be gouged for gas no matter where you live in America this weekend. Though the price of oil has fallen over the past month, it has surged in the past week.

Gold dropped $11.90, to 1499.90, while silver also took it on the chin, losing 20 cents, to $34.68.

It should be clear to everyone by now that fighting the Fed is a losing proposition, and, with the markets front-loaded for the primary dealers, there's no margin for error for the individual investor. For the present, it's up, up and away for stocks. Let's see how long it lasts.

Thursday, June 2, 2011

Interest Rate Math and the Gathering Collapse of GDP

Taking a break from the usual, tired explanations of why the economy is imploding or why stocks went up or down on a particular day, today we will endeavor to discovre how much money is being lost to the US economy via the Federal Reserve's Zero Interest Rate Policy, that drives all other rates towards ZERO.

The idea for this enterprise came from an article n the September, 2010, edition of Reader's Digest, titled "Bonus Question" by Michael Crowley, abot how Wall Street profits at the expense of the middle class, especially through low interest rates. There's a podcast of the article available here.

The premise is simple. A long time ago, somebody, probably one or both of our parents, told us that saving was a good idea. And it was, especially when you could get 5% interest in a savings account.

Well, times have changed. One per cent is now the norm for CDs, savings accounts, money markets and other similar investments. So, the question emerges: how much has the Fed's Zero Interest Rate Policy (ZIRP) cost the middle class and the overall GDP?

Let's take an example of a person or couple having put away $300,000 for retirement, their plan, to retire on that money (they'll probably need more) and use the interest to pay for much of their daily living expenses. At 5% interest, they'd be looking at $15,000 a year, which is a very good start and would cover at least food, fuel and probably most of the rent.

But, let's suppose they've still retired, but they are only earning 1% today. That's only $3000, or, in other words, $12,000 that now has to come out of the principal, so every year that the Fed keeps ZIRP in place, they'll have to spend more and their net worth declines, impoverishing themselves and their heirs, someday in the future.

Editor's Note: I would like to point out that I'm using $300,000 in savings as an example here, figuring it is probably around the median savings of the already retired. Surely, many have saved less, but quite a few have saved even more. Actually, prior to 2000, the number was probably quite a bit higher.

OK, so now we can clearly see that the ZIRP has benefitted banks and Wall Street, as they borrow at nearly zero and lend at higher rates while investing in riskier assets like stocks and commodities. Retired individuals have no doubt tried to do the same with their savings, but the results have been poor over the past decade.

Getting back to our original premise, we have an average of $12,000 being lost to ZIRP, the money coming from the principal rather than interest. But suppose we say that this money is not being spent - and in some very real ways it isn't - because these retired folks are spending less on discretionary items since they have poor prospects for the future. Any way you look at it, ZIRP is causing a reduction in spending by seniors.

How much? Good question. We took a look and found that in April, 2011, there were 36,378,000 people collecting Social Security aged 65 or over.

So, simple math tells us that because of the Fed's ZIRP, there's roughly (36,378,000 X $12,000) $436,536,000,000 being lost in general spending to the economy. That's close to half a trillion dollars, and since we're two-and-a-half years into the Fed's ZIRP experiment, we lost that much in 2009, again in 2010 and are well on our way to doing it again this year.

Also, it's worth pointing out that Fed Chairman Greenspan, Ben Bernanke's predecessor, cut the federal funds rate to one per cent in the aftermath of the dot-com bust in 2001. Through the decade of the 2000s, the federal funds rate never got higher than 5 1/2%, and for much of the time it was well below that level, so the savings destruction has been going on for some time. We have been slowly eroding the wealth of seniors and future generations for over a decade and the effects are beginning to become quite a strain on the US economy.

So, how much damage is being done. If we can trust that number of $436,536,000,000 as the difference between 5% interest on savings versus 1%, it comes to about 3% of annual GDP, about the same amount the government would like the economy to grow annually. With the Fed's ZIRP in place, though, GDP will actually have to grow 6% just to make up the slack. And it isn't. It's not even close.

Charles Hugh Smith penned a very poignant essay on the topic of GDP on his Of Two Minds blog, in which he suggests that the economy isn't growing at all, thus reinforcing our point.

Since economics is mostly guesswork, extrapolation and statistics, please take this back-of-the-envelope with appropriate grains of salt, but the upshot is still the same: the Fed is actively destroying the savings and spending potential of seniors and anyone else who might be prudent enough to want to put something away for "a rainy day." Add in the implications of inflation, and it becomes clear why we're stuck in a no-growth economy and why deflation is not only desirable, but the best path out of our current morass.

Now, for our usual market recap:

Stocks went almost nowhere today, bothered by Wednesday's wicked sell-off and cognizant of Friday morning's May Non-farm Payroll release. Nobody seemed willing to put much "risk on", as they say, in advance of what could be a game-changing number. Most of the residual pain from Wednesday was felt in the Dow and in commodities, with the notable exception of crude oil (go figure).

Two pieces of economic data should have moved markets further to the downside, but the stubborn "recovery" crowd still refuses to buckle.

Initial jobless claims came in again above expectations (400,000) at 424,000, and factory orders fell 1.2% in April. This news, though bad, is about as good as anything seen in the past month. The Dow Jones Industrials were down nearly 100 points close to midday, but, as usual, recovered during the afternoon.

Dow 12,248.55, -41.59 (0.34%)
NASDAQ 2,773.31, +4.12 (0.15%)
S&P 500 1,312.94, -1.61 (0.12%)
NYSE Composite 8,277.76, -3.83 (0.05%)

Declining issues topped advancers, 3411-3119. On the NASDAQ, there were 30 new highs and uh, oh, 68 new lows. The NYSE saw 48 new highs and 47 new lows. Taken together, we have the expected flip, with 78 new highs being exceeded by 115 new lows. Unless the BLS pulls a rabbit out of its hat tomorrow morning and announces 150,000 or more new jobs created in May, it could mark a very important market turn that has taken many months to set up.

Volume on the day was back to pedestrian, depressed levels.

NASDAQ Volume 1,886,108,625
NYSE Volume 4,256,270,500

Crude oil was lower for much of the session, but finished the day up 11 cents, at $100.40, even though the government reported an inventory build of 2,878,000 barrels for the week ending 5/28.

Gold was punished again for being an alternative to paper money, losing $4.80, to $1534.30, though still very near all-time highs. Silver took more lumps, down 64 cents, to $36.18.

Just for fun, here's a chart which helps explain where the US economy is really heading via the Debt-to-GDP ratio:

And if that doesn't whet your technical appetite, try this long term chart of the S&P 500 measured in gold.

Wednesday, January 26, 2011

27 Months of ZIRP

For those not in the know, ZIRP stands for Zero Interest Rate Policy, the policy which the FOMC of the Federal Reserve reiterated again today, ensuring that the federal funds rate will remain at zero at least until March 15, the date of their next meeting, unless some exogenous event - unlikely - forces their hand in the interim.

The zero per cent federal funds rate obviously applies to banks only, those borrowing from the Federal Reserve. Sadly, you and I cannot receive such largesse. Were that the case, the conditions under which most Americans suffer - high debt and high rates - would be greatly alleviated.

Alas, that is not the mandate of the Fed, however. Their goal is - despite what they or their slaves in congress might tell us - to nuke the toxic assets and malinvestments made by the big national banks into some far away wasteland, never to be heard of or seen again. The problem is that the banks are not happy with the condition. They wish to have their cake and eat it too. Not only have they been made whole for their subprime scandals and toxic mortgage mistakes by the Fed, but they continue to hold onto these assets as though they are magic candy, sending out delinquency notices and foreclosing on families who cannot meet their demands for payment.

Would the banks simply stop playing their charade on the American public and just take the losses as they should, our economy could get moving again and interest rates would rise to some acceptable level - maybe three to four per cent - where everybody would be happy. Of course, that would necessitate some degree of pain to the likes of Citigroup, JP Morgan Chase and the rotten Bank of America (could they please change their name? It makes all of us US citizens look bad.) and that would simply not be acceptable.

This two-year old Fed policy of zero per cent interest on federal funds has been a complete failure. The economy continues to limp along, though money flows freely to Wall Street and the banks, on a daily, regular basis. Meanwhile, real unemployment remains at 18-20% (Great Depression levels), the federal government continues to run extraordinary deficits ($1.5 trillion for fiscal 2011), and homes remain unaffordable to the majority of Americans. If the banks would write down and write off their bad loans, the real estate market would crash, making homes more affordable than ever.

But it won't happen. Not with a nitwit in the White House and a gaggle of othr equally worthless politicians demanding the status quo remain in play. No banks go down, which means no growth in the economy.

So be it.

We've had ZIRP since December 2008, and will have it for the rest of his year, probably. The Fed has long ago run out of good ideas with which to fix a broken economy. Now would be a good time to abolish it.

Dow 11,985.44, +8.25 (0.07%)
NASDAQ 2,739.50, +20.25 (0.74%)
S&P 500 1,296.63, +5.45 (0.42%)
NYSE Composite 8,193.64, +52.51 (0.64%)

Advancers finished well ahead of declining issues, 4128-1605. On the NASDAQ, there were 160 new highs and just 13 new lows. The numbers on the NYSE were similar, 241-11. Volume was just a tad better on the NASDAQ. The NYSE might just as well have been closed. The Dow punctured the 12,000 mark, but couldn't hold it; party hats were deferred until another day.

NASDAQ Volume 2,047,729,500
NYSE Volume 4,812,036,000

The new March front end oil contract got bid up $1.14, to $87.33, a price that is largely unsustainable. NYMEX crude should be sitting at $70 or less per barrel. Anything above that acts as a tax on consumers and slows the economy further. Gold was actually higher, though only by 70 cents, to $1,333.00. Silver gained 32 cents, to $27.13, and seems to be stabilizing along with gold at these levels.

The Fed says there's no inflation (except for food and fuel). Obviously, they live in a different world than ours, where one neither has to eat, stay warm or drive a car. No wonder they're keeping interest rates at ZERO. It matches their collective IQ.

Monday, September 20, 2010

OK, So Now What?

Stocks just pushed higher through resistance on Monday as traders searched for clues that either the economy was improving or the Fed would change some wording in Tuesday's FOMC rate policy meeting.

Rates are expected to remain unchanged, at ZERO, which, if one were to look at it objectively, would consider it a glorious time to take on additional risk. After all, borrowing money without any interest - or marginal at best - is accommodative to speculation, just the kind of easy credit policy which has created all the other prior bubbles.

From certain perspectives, it makes perfect sense to invest in US equities. On the side of caution are those who believe the entire Fed operation is nothing more than a grand illusion, destined to fail. In the meantime, investors simply cannot refrain from buying stocks with cheap money. Buy, buy, buy was the message delivered today, loud and clear.

The major indices have rallied through their 200-day moving average and are testing the high end of the recent range. Whether this current rally has enough impetus to surpass the highs of Spring will be known in a number of days or weeks, though there seems to be nothing standing in the way of new highs heading into the elections, despite what cynics might be assuming about the political nature of the markets.

Dow 10,753.62, +145.77 (1.37%)
NASDAQ 2,355.83, +40.22 (1.74%)
S&P 500 1,142.71, +17.12 (1.52%)
NYSE Composite 7,266.02, +111.37 (1.56%)

Advancing issues buried decliners, 4693-1152. New highs soared past new lows, 531-45. Even volume was a little improved from the sluggish levels of the past six weeks.

NASDAQ Volume 2,027,424,375
NYSE Volume 4,064,069,750

Commodities participated in the overall euphoria. Oil gained $1.20, to $74.86. Gold closed up $3.40, to another new record, at $1,279.00. Silver slid just a penny, to $20.78. Today's rally - and the general rally of the past two weeks would be more believable if commodity prices were more contained. The gains in commodities are only proving that while stocks may be favored in the short run, there's no scarcity of skepticism among investors, who are buying the precious metals and oil as protection... against exactly what, nobody seems certain. But, whether it's inflation or deflation, commodities and bonds have been rallying right alongside the stock market.

All asset classes usually do not gain or fall at the same moments in time, but, with the massive amount of liquidity being suppled constantly by the Federal Reserve, anything is possible, including re-flation, inflation and even hyper-inflation. The Fed is swimming in some very dangerous water, indeed.

Wednesday, June 23, 2010

New Home Sales Bomb; Market Reaction: Numb

If there was any more proof needed that the US residential housing market was about to take another turn for the worse, May data on new homes sales may have not only provided that, but threaten to push the entire economy into another recession.

Dogged by relentlessly-high unemployment, tight financing issues and coming the first month after expiration of the government's new home buyer tax credit, May new home sales fell to a record low of 300,000 units (seasonally adjusted), the worst sales figure since data was recorded, back in 1963.

Not only was the number 32.7% below April's downwardly-revised figure of 446,000, but the decline was also 18.6% lower year-over-year. The news, which was released at 10:00 am EDT, was met with little more than a yawn on Wall Street, where stocks were marginally lower in anticipation of the Fed's rate policy decision later in the day (2:00 pm EDT).

Traders may be disappointed by whatever it is the Fed will do as they already have the fed funds rate at ZERO, so they have no loosening mechanism left in place to staunch another economic downturn except a couple of bad choices, those being, reinstitution of quantitative easing (printing money to buy more Treasury debt), or, expansion of the already-bloated balance sheet with the purchase of more mortgage debt, most of it toxic sludge which nobody wants to touch.

What the Fed does today will be important only in the minds of those who actually believe that they and the federal government can rescue the economy from the worst economic nightmare since the Great Depression, possibly the worst economic slowdown of all time. While most lame media pundits still put some degree of faith in the exigencies of Keynesian economics, more stable-minded Austrian thinkers feel that nothing can be done to stem the deflationary decline except writing off bad investments, involving a great deal of pain and suffering, much more than is currently being felt in the grandest global economies.

The FMOC rate decision will be released shortly after 2:00 pm ET. A full report, with closing numbers, will be reported in a subsequent post after the close of trading today.

Tuesday, March 16, 2010

Fed Does As Expected: Nothing; Stocks Gain

It all went as expected. With the Fed holding their key federal funds rate at 0-0.25%, and promising to keep it there for the foreseeable future, using the key words, "for an extended period" once again, traders were assured that cheap, virtually free money would continue to flow.

Not surprisingly, they bought more stocks, because, at least perceptually, risk has been reduced to almost nothing. Of course, Wall Street professionals are supposed to be the very best of the best as pricing risk, though their track record has lately been tarnished badly by the toxic mortgage, collateralized debt obligation, credit default swaps and bailout fiasco. Over the past five to seven years, the accurate discovery and pricing of risk has taken a back seat to greed and wealth.

The moral hazard has not been corrected, merely pushed out further by free money thanks to the Fed.

Dow 10,685.98, +43.83 (0.41%)
NASDAQ 2,378.01, +15.80 (0.67%)
S&P 500 1,159.46, +8.95 (0.78%)
NYSE Composite 7,426.70, +75.74 (1.03%)

Gainers sailed past decliners on the day, 4536-1994. New highs reached ratcheted up to 757, though new lows crept higher, to 75. Volume was better than most recent sessions, though that is in large part due to options quadruple-witching on Friday.

NYSE Volume 4,965,576,000
NASDAQ Volume 2,142,418,500

Going along with the general theme of weaker dollar, cheaper money, oil shot right back up to $81.70, higher by $1.90. Gold soared another $17.10, to $1,122.20. Silver gained 25 cents, to $17.33.

Everyone is hoping the the nascent recovery remains intact and economic conditions improve, though the overhang of housing (in a completely depressed state with no good outcome, unless you're a low-ball buyer with cash) and a stagnant employment market continue to exert pressure on any optimism.

Essentially, stocks are fine until they aren't. That's the message, though many companies have raised their dividends recently, in hopes that markets will respect their high rates of return and favor them over more speculative issues.

Wednesday, April 29, 2009

Preparing For the Next Crash

One would have assumed that if 1st quarter GDP had come in worse than expected this morning - expectations were around -5%, the actual figure was -6.1% - that stocks would sell off.

One would have been wrong - very wrong - as the market merely shrugged off another indication that the recession was worsening and headed off to new heights. This makes trading stocks on fundamentals, or even economic conditions, not only difficult, but impossible. Every day there are new signs that the economy is mired in a negative-growth trench, yet stocks continue to rally, seemingly without end.

Today's activity was probably the most remarkable event of the past two months, noting the considerable obstacles to economic growth standing in the way, huge unemployment numbers, continued weakness in residential housing and now commercial real estate and the continuing saga of the spreading Swine Flu.

It was remarkable in that while stocks were poised to jump start at the open even before the 8:30 am release of 1st quarter GDP figures, but even more remarkable in that stock futures didn't even blink when it was revealed that actual GDP was falling at a faster rate than anticipated. One can only assume that insiders already knew the figures or had already decided the day's direction for stocks and would not be dissuaded regardless of reality. Had the actual NY stock exchange been blown to bits, traders would still have pushed stocks higher, such was the plan for the day.

It's a scam, a complete and total rigging by the controllers of the market and the country. In the end they will bankrupt all of us, but for now, they are in the business of pushing stock prices higher. It will not last. It cannot last. The fundamentals of the economy are entirely too weak to sustain stock valuations bordering on the absurd.

Making matters even more ridiculous, the Fed announced no change in interest rate policy - widely expected - but hinted that there were signs of "recovery" in the US economy. Though the press release announcing that the Federal Funds rate would remain between 0 and 0.25% (read: free money) was among the shortest on record, the following passage provided more insight than any other verbiage in the text:
"In light of increasing economic slack here and abroad, the Committee expects that inflation will remain subdued. Moreover, the Committee sees some risk that inflation could persist for a time below rates that best foster economic growth and price stability in the longer term."

Reading that sentence carefully, the Committee (FOMC: Federal Open Market Committee) is trying to avoid using the word "deflation," which is occurring across a wide swath of the economic landscape. They are also trying to rectify "inflation" and "price stability." In other words, the Fed isn't really promoting "price stability" as they are so chartered. They are hell-bent on inducing inflation, the very same inflation that has wrecked our economy for so many years, for as long as the Federal Reserve has operated as the nation's central bank there has been unstoppable, rampant inflation which has destroyed the value of the dollar and kept wages at poverty levels for a majority of the working population.

They simply cannot have inflation and price stability at the same time. The two are not polar opposites - inflation and deflation are - but price stability means equilibrium, a condition which spells death for the US economy, built on debt and tied inexorably to inflation and wealth destruction.

So, it is time to prepare for the next crash, which, in light of current economic policies of the Fed, is inevitable. The market's aberrant behavior is sending the strongest sell signal I've ever seen, violating all manner of resistance in charts and basic fundamental trading regimens.

It is time to unload all stocks, at once, because the retracement back to the March lows will commence shortly.

I wrote the above line at 3:03 pm EDT, after the Dow peaked at 8250 and was beginning to retreat. By the end of the day, the sell-off was in full bloom, just before last-minute buying punched stocks ahead right at the close (painting the tape).

Dow 8,185.73, +168.78 (2.11%)
NASDAQ 1,711.94, +38.13 (2.28%)
S&P 500 873.64, +18.48 (2.16%)
NYSE Composite 5,516.14, +146.29 (2.72%)

Just to illuminate my position that the recent advances in stock prices are unsustainable, below are some of the headlines for today, with links to the underlying articles:

CNN Money: Economy falls much more than expected
Associated Press: Jobless rates rise in all US metro areas in March
Reuters: U.S. to pay off mortgage investors

Do any of those headlines encourage you enough to go out and buy stocks? No? I didn't think so. The economy is sinking into a black hole, the United States is becoming even more of a welfare state than it already was and hope for lasting, robust recovery is nothing more than a fantasy. If you don't think so, I encourage you to read this exceptional article: Economic Obsolescence, by Andrew McKillop. Be forewarned. It is quite deep and lengthy, but filled with insights and observations you won't find on CNBC or any other fraudulent financial reporting service.

My message is simple. Wall Street, stocks, retirement plans, 401k plans and the like are a scam. You're better off investing in your own home, planting a garden, cutting your expenses and going back to a simpler lifestyle. However, depending upon where you live, you may need high walls and security devices to keep out intruders, because many of the people in the USA are going to face horrific economic conditions over the next 6-12 years. Six years of pain and no growth are in the cards at a minimum. Higher taxes, higher crime rates, rioting, corruption in government and an overwhelming debt burden on families and the government are inevitable. Bank failures have thus far been avoided only due to manipulation and intervention by the Fed and general obfuscation and outright lying by both the Treasury and the banksters (bank gangsters).

The longer we hand out money to the undeserving - be they banks or welfare recipients - the longer it will take and the harder it will be to restore any semblance of a functioning economy. Right now, the economy is on extended life support, but the patient, for all intents and purposes, is a vegetable, incapable of ever returning to a functional lifestyle. The government bailouts and stimulus plans, plus the heavy debt imposed by the upcoming federal budget, is tantamount to throwing money into a blazing bonfire. It will all go for naught, not for investment, and therefore will result in DEFLATION, not inflation, a point sorely missed by the ignorant morons at the Fed and at the top positions of government. Their actions are making the road to recovery longer and actually exacerbating the depth of the depression.

There is good news. The country formerly known as the land of the free and the home of the brave is now full of people living on government hand-outs, with steady incomes and no clue as to value. And don't believe that just welfare recipients - those with the plasma TVs, all the cable channels and usually a late-model car in the driveway - are alone in their status of money-takers. Add to it anybody on any government payroll anywhere: cops, teachers, mayors, social service workers; and retirees on military pensions, social security, what have you. There has never been a better time to screw people out of their money. The nation is full of dupes, dopes, pigeons and rubes, standing in line to be taken directly to the cleaners. That is the end result of the welfare state, where money is disrespected because it was not earned.

So, if you have an idea and some motivation, crooked or honest, you should do well. People just can't stop spending and the government is actually encouraging waste on a gigantic scale. The money is out there. You just need to go get it.

On the day, internals were mixed, though advancing issues outnumbered declining ones by a wide margin, 5233-1265. New highs came close to overtaking new lows, but failed with 93 new 52-week lows being reported to 55 new highs. Both numbers are elevated from previous readings but have not diverged significantly. They will - one way or the other - soon. A breakout or breakdown is overdue.

NYSE Volume 8,913,934,000
NASDAQ Volume 2,361,983,750

Commodities were mostly higher. Oil gained $1.05, to $50.80. Gold was up $6.90, to $900.50. Silver gained 35 cents, to $12.78. Pork bellies sold off, down $1.93, to $75.88 per pound, though live hog prices stabilized and were actually moderately higher.

Make no doubt about it. Today's late-day sell-off was just the opening salvo. Volume spiked incredibly after 2:30, when the Dow lost more than 100 points into the close. The selling will accelerate soon, maybe tomorrow, maybe Friday, maybe not even until next week, but it will come and it will be swift and severe. Count on it.

Keep an eye on the equally-bogus "swine flu pandemic" which will be blamed for the coming market downturn. More deaths will be caused by trying to prevent the disease - watch how Tamiflu and other medicines will be promoted - and the sure-to-come vaccine, than the disease itself, though the media will not report that fact.

Tuesday, May 8, 2007

Best Job In America: Do-Nothing Fed Governor

How would you like to have the entire financial community hanging on your every word, meet with your buddies 8 times a years and generally be rewarded handsomely for doing just about nothing?

If that sounds like a sweet gig to you, maybe it's time to look into becoming a member of the Board of Governors of the Federal Reserve. Naturally, some background (make that a lot of background) in economics is a necessary part of the resume, but once you're in, the perks are substantial and the hours are better than those of even the best-paid banker.

For 6 consecutive meetings the Federal Open Market Committee (FOMC) has met and done nothing. Sure, under the guidance of new chief Ben Bernanke, they were supposed to keep the economy cruising and hold the line on inflation, and they've achieved one of those objectives... well, maybe not, but they've managed to get through the last 10 months without changing the federal funds rate (the interest rate at which depository institutions lend balances at the Federal Reserve to other depository institutions overnight) and they aren't expected to do anything about it when they meet tomorrow, May 9, so make it a 7 in a row and a year of doing nothing. Not bad.

While some self-proclaimed experts are calling for a rate decrease, the nearly unanimous opinion is that the Fed will - and should - do nothing. America is pretty stable with a 5.25% fed funds rate, though the first quarter GDP (+1.3%) was the weakest in four years. While lowering the rate may prevent a hard landing later in the year or in 2008, is anybody really prepared to offer the oil companies any incentive to raise gas prices any further?

If anything, America needs to tighten the old economic belt a little. We're still wallowing in the aftermath of former Chairman Greenspan's unprecedented credit creation cycle, epitomized by the bust-up in the mortgage markets and a generally ailing real estate market.

And while loose money isn't exactly sound monetary policy, Wall Street isn't exactly complaining - today's modest decline was only the 4th down day for the Dow in the past 28 sessions.

So, after 2:15 pm tomorrow, expect the stock markets to get back to business and go on another in a long series of shopping sprees. Corporate profits have seldom been as good as the past couple of years and the 1st quarter of 2007 has turned out to be nearly exceptional across almost all industries.

Dow 13,309.07 -3.90; NASDAQ 2,571.75 +0.80; S&P 500 1,507.72 -1.76; NYSE Composite 9,788.03 -37.06

Market Internals: Declining issues held sway over advancers by nearly a 3-2 margin. New highs: 303, new lows: 88, in line, considering the A-D showing.

Oil kicked up a bit after 6 consecutive sessions of declines, gaining 79 cents to end up at $62.26, a manageable level which could actually auger - dare I speak - lower, or only moderately higher prices come summer. Consumers have had about enough pain, especially those driving trucks or SUVs which routinely take $80-100 or more to fill up.

Gold, again tantalizingly close to the $700 mark, backed off $3 to close at $687.40. Silver finished the day down 4 cents at $13.60.
Advertise on Blogs
Choose your own colors, dates and message for maximum impact.

One to watch: Marvel Enterprises (MVL), the people behind Spider-Man, turned in blowout numbers Tuesday morning, though investors thought best to sell into the news. The stock was down as much as 0.84, but gained all day to close down just 0.20 at 29.40. There could have been some options and short shenanigans going on, but the future of the company is still somewhat cloudy as they continue to move parts around. Significant is that Marvel will be making most of their own movies in 2008, as opposed the current practice of licensing their character rights and receiving only a portion of box office receipts.

Analysts expected 35 cents per share, but Marvel shocked with 56. 2007 profits are expected to at least double last year's, so the good news is already partially baked in or the stock could continue to run. It's gone from below 20 to a peak just over 30 in the last 9 months and may be in a consolidation phase. Still, the stock looks like a keeper, a good bet to hit the 38-42 range by next summer.