Showing posts with label fiat currency. Show all posts
Showing posts with label fiat currency. Show all posts

Thursday, June 11, 2020

Fed To Keep Rates At ZERO Through 2022; Are Gold and Silver Investors Batty?; Implications of Global Madness

If Forex is in your wheelhouse, you've no doubt noticed the recent decline in the US dollar against other major currencies. The Dollar Index has been pretty shaky as of late, but the current trend in the aftermath of the worst of the coronavirus pandemic is lower, with no bottom in sight.

After sinking to 94.89 on the 3rd of March, the dollar leapt back to an interim high of 102.82 on March 20th. Wednesday's quote was 95.96, a decline of nearly seven precent, most of that happening within the last three weeks.

That's not surprising, given that American cities have been beset upon by hordes of protesters, complete with rioters, looters, cop killings, tear gassings, rubber bullet maimings, autonomous zones (Seattle's Capitol Hill is one, recently claimed and occupied by protesters as police vacated the 3rd Precinct) and general lawlessness, making dollar holdings somewhat of a risky bet in the near term and, as dollar dominance recedes, maybe for much longer.

At the conclusion of the Fed's Tuesday and Wednesday's FOMC policy meeting, Chairman Jerome Powell made a definitive statement on interest rates, saying that the overnight federal funds rate would remain at the zero-bound at least until 2022. That kind of central bank sentiment doesn't exactly inspire confidence in the world's reserve currency. It indicates nothing less than a failure of financial system underpinning, a condition that first appeared in 2007, was not adequately addressed and has now become a systemic crisis without hope of positive resolution.

While the Fed still has the monetary muscle to backstop financial assets it does so with counterfeit, a fictional fiat currency without backing that eventually will be worthless. History has shown this to always be the case. Fiat currencies die and a new financial system is erected. Normally, the new system is backed by gold or silver, or a combination of the two. This time is no different than any other. The Federal Reserve and other central banks can continue their charade for only so long. Eventually, income disparity results in runaway inflation and widespread poverty, prompting clamor from the masses, which we are witnessing on a global scale today as an epochal societal revolution.

Such incalculable convulsions encourage escape from the clutches of unfair finances promulgated by central banks. People seek refuge from currencies that are losing value rapidly. Housing, health care, and eventually, food become unaffordable to the vast swath of middle and lower classes. Alternatives are sought. Gold and silver are the most readily available to the public. Silver becomes particularly of interest due to its lower price points. The availability of metallic money becomes a point of contention as people with limited means crowd into the space, which is exactly what's happened since the onset of the coronavirus.

A 10 troy ounce gold bar at Apmex.com is offered for $18,255.90. At Scottsdale Mint, the popular one ounce silver bar dubbed "The One" starts at $25.05 and goes down in price to $23.42 depending on quantity and method of payment. Of course, given that one would be willing to pay a price that carries a premium of seven dollars over spot, one would be out of luck, as "The One" is currently out of stock.

These are just a few examples of what happens when a confluence of events (pandemic, endless fiat currency creation, summer-long protests, high unemployment, rampant inflation) strikes the minds of people with money and assets. They either go with the flow and stay in stocks or look to gold and/or silver for some safety. With bonds yielding little to nothing - sometimes less than that via negative rates - and default risk rising (hello, Argentina!), precious metals offer a reasonable alternative.

Futures and spot prices for the precious metals might as well be cast upon stones for what they fail to deliver in terms of price discovery. Being holdovers from the failing fiat regime, they are being left behind as physical holdings dominate the marketplace. Prices are exploding on eBay and at dealers, as shown in the examples above. Money Daily tracks prices on eBay for one ounce gold and silver coins and bars weekly in it's Weekend Wrap every Sunday.

Other ways to deploy currency are in art, collectibles (comic book prices are through the roof), vintage automobiles, commodity futures, real estate, ad other asset classes, but none of those share the characteristics of precious metals as real money, except possibly cryptocurrencies like Bitcoin.

Wall Street, the Federal Reserve, and the federal government are hanging onto their prized positions of monetary and political authority by their teeth. It's only a matter of time before all of it fails. The nationwide protests are proof that the federal government is losing control of the country in manifest ways. Unrelenting gains in precious metal prices - and the attendant, repeated attempts to contain those gains in the futures markets - is evidence of the Fed's desperation, just as Wall Street's recent snapback rally is a mirage based on easily available fiat currency and nothing else.

It's all tumbling down and there's nothing that can stop it. The demise of the dollar has been an ongoing orgy of dislocation for decades. Trillions of dollars added to the Fed's balance sheet, euros at the ECB, yen at the Bank of Japan, yuan at at PBOC are mere stop-gap measures which do not address the underlying solvency issues. If the stock market crash in March wasn't enough to scare people out of stocks and fiat, the coming wave will surely devastate those who failed to heed the warning. Via the Fed's emergency measures, Wall Street has given investors a golden opportunity to diversify out of stocks. Those who fail to take the opportunity will suffer a heavy economic blow.

At the Close, Wednesday, June 10, 2020:
Dow: 26,989.99, -282.31 (-1.04%)
NASDAQ: 10,020.35, +66.59 (+0.67%)
S&P 500: 3,190.14, -17.04 (-0.53%)
NYSE: 12,449.22, -170.30 (-1.35%)

Friday, January 24, 2020

Stocks Flat As Lagarde Offers Inflation Policy Change in Europe

For the second consecutive day, stocks posted mediocre results, most likely a pause in the overall giant run they've been on since late September of 2019, and hardly anything over which to be concerned.

The manners in which these last two trading sessions found the same end were radically different, a chartists' dilemma in which Wednesday started on the upside before relenting late in the day and Thursday found stocks mired deep in the red, finding salvation in the afternoon.

Essentially, the indices produced an elongated "V" pattern, stretching over two sessions.

Being that the market is run by algorithms and influenced heavily by macro momentum, this recent spate of weakness is probably going to be downplayed by the uber-bulls and supported by dovish tones from the Federal Reserve along with more sloshing capital from their burgeoning balance sheet.

The Fed's FOMC convenes on Tuesday and Wednesday of next week, but the market seems uninterested in whatever they might announce, being that they will almost surely keep interest rates precisely at the present level, the federal funds rate in a sweet spot between 1.50 and 1.75 percent, good enough to attract investors to bonds and other fixed income products and not onerous enough to preclude lending to all but the least worthy.

In Europe, newly-installed ECB head, Christine Lagarde quipped about inflation, launching a review of the bank's policies and hinting that the long-standing target of two percent might be few tenths too high under the current environment of negative interest rates and slowing national economies.

Inflation in the Eurozone has been nearly non-existent since the turn of the century, last year checking in at a subdued 1.3 percent. The call for a policy review by Lagarde is a timorous one, since practically anyone with a rudimentary understanding of economics realizes that the "Japanization" of Europe is well underway and that lowering the target for inflation to 1.6 or 1.5% is just more posturing by the central bank which has no control over the forces of mass immigration, low birth rates, and over-juiced financial markets.

Perhaps Ms. Largarde is on to something, however. Could she actually be headed for an Austrian awakening in which an epiphany guides her to understanding that any inflation is unnatural in a world of sound money?

Next thing you know, she'll be calling for a new currency to replace the flawed fiat euro, one backed by gold and silver.

Surely there would be many who scoff at the idea, but, when even negative interest rates fail to produce positive results, isn't it time to stop examining policy and start critiquing the currency itself.

Partially-backed gold and silver backed money - be it digital, paper, or coinage - may not seem such a bad idea, especially to people drowning in debt.

Central bankers have engaged in lunacy for the better part of 50 years (since Nixon's closing of the gold window in 1971). Maybe it's time for sound thinking and sound money.

At the Close, Thursday, January 23, 2020:
Dow Jones Industrial Average: 29,160.09, -26.18 (-0.09%)
NASDAQ: 9,402.48, +18.71 (+0.20%)
S&P 500: 3,325.54, +3.79 (+0.11%)
NYSE: 14,102.04, -8.20 (-0.06%)

Sunday, August 25, 2019

Weekend Wrap: Trade, Recession, Currency Fears Stoke Week-Ending Sell-Off

These days, it doesn't take much to spook markets.

That stands to reason, with all of the US major indices near all-time highs conjoined with a divisive political environment, global trade tensions, and a corrupted financial system run by central bankers bent on the globalization of currencies and nations.

Thus, on Friday, after Fed Chairman, Jay Powell, spoke to the assembled cognoscenti at Jackson Hole, Wyoming, and President Trump doubled down on his tariff mandate towards China, the runners, scalpers, and money-changers on Wall Street were so spooked that one might have assumed they'd seen the ghost of legendary China short-seller, Jim Chanos, stalking the trading floor, even though - as far as is known - Mr. Chanos is still alive and kicking the shorts out of the Chinese market.

Stocks had opened only marginally in the red on Friday and were improving into the eleven o'clock hour before suddenly reversing course, heading into the abyss, the Dow shedding more than 400 points in a matter of minutes.

With Wall Street struggling to regain some semblance of balance and propriety, stocks drifted lower, cratering in the final hour with the Dow Industrials down nearly 750 points before gaining back another hundred into the closing bell.

It was ugly. It was impressive. At the end of the day, it seemed completely appropriate.

The fuel for growth was fading fast and has been since well before Friday's melt-down. All of the fancy tricks the Fed and their central banking buddies had employed to goose equities skyward over the past decade were being exposed as fraudulent, artificial, unnecessary, and eventually harmful to the operation of what previously had been free markets.

Wall Street has lost confidence in the Fed's forward guidance, which, according to Mr. Powell, is decidedly negative. The Trump tariffs are a sideshow to the already-failing economies of the developed nations, slowing precipitously and taking down the emerging giants of China and India with them.

Over the weekend, while the leaders of the G7 powerhouse nations debate and will likely confirm that globalization is a crumbling edifice of one-percenter greed and that the world needs to be adjusted toward something that serves people other than just the mega-corporate interests and the skimming habits of the ultra-wealthy.

As has been of considerable mention here the past few days, negative interest-bearing sovereign debt instruments - those wildly popular $19 trillion worth of bonds - are ringing the death-knell of fiat currencies and central bank interference with the normal operation of capitalist design.

For now, the shock waves of fading confidence in the global Ponzi and counterfeit schemes of stock buybacks, quantitative easing, and negative interest rates is contained largely to the Wall Street crowd, but, it is spreading and the uproar will increase as stocks fall, ordinary people worry about their jobs and their futures, and the central bankers moan and cajole and mumble and stumble and fall.

Remnants of the global economic structure previously known as Bretton Woods are being shredded on a daily basis. A new world order is on the way, but any transition - like the one which dashed national currencies into one euro a few decades past - is going to be painful and consequential.

Sadly, when all the smoke is blown away and the dust settled, the planet will still largely be governed by the same morons and their predecessors who brought all of this upon us and their economic agents of destruction. The new currency regiment will be talked about as more fair, more balanced, more equitable, but those in the know will have already understood that it will be more of the same, damaging to the middle classes while barely scraping off a scintilla of the assets held by the rich and powerful.

Americans, Europeans, Japanese and all citizens are being shafted, and it's going to hurt.

The long-delayed reckoning from the global crisis of 2008 is about to be unleashed. Unless one holds hard assets such as precious metals, real estate, and/or income-producing assets like a productive business or needed service, one is likely to feel more pain than would otherwise be prescribed by the lords of finance.

At the Close, Friday, August 23, 2019:
Dow Jones Industrial Average: 25,628.90, -623.34 (-2.37%)
NASDAQ: 7,751.77, -239.62 (-3.00%)
S&P 500: 2,847.11, -75.84 (-2.59%)
NYSE Composite: 12,416.45, -272.01 (-2.14%)

For the Week:
Dow: -257.11 (-0.99%)
NASDAQ: -144.23 (-1.83%)
S&P 500: -41.57 (-1.44%)
NYSE Composite: -163.96 (-1.30%)
Dow Transports: -227.58 (-2.28%)

Monday, August 19, 2019

WEEKEND WRAP: Stocks Lower Third Straight Week; Treasury Curve Inverts

Stocks took another turn for the worse, the third straight week in which the major averages shed points. That would constitute a trend, especially considering what happened on the Treasury yield curve, where the two-year note inverted against the 10-year-note, yielding - for a short time - one basis point more than its longer-term counterpart.

Additionally, bonds with negative yields globally moved beyond the $16 trillion mark, with Germany, among other EU countries, having its entire bond complex falling below zero yield.

Those two events in bond-land are going to prove to be crippling to global growth and the effects are already becoming apparent.

Negative interest rates destroy the time value of money. Debt is discarded. Without debt, there is no money, except for that which has no interest or counterparty. That would be gold, silver, hard assets. Gold and silver have been rallying while national central-bank fiat currencies fluctuate against each other in the desperate race to the bottom.

The idea that the country which can devalue its currency fastest and lowest will be the winner in the trade arena is offset by the fact that weak currencies - while great for exporters - are not necessarily good for that nation's consumers, because imports would necessarily become more dear.

The desire to send interest rates into negative territory - a concept launched by the Japanese and quickly taken up by Europe after the GFC - is a marker for the death of currencies, i.e., fiat money.

Negative rates are inherently deflationary, which is exactly what central banks wish to avoid, because it voids their franchise. Fiat money - which is in use globally - will die, not by hyperinflation, but by hyper-deflation.

That has been the working thesis at Money Daily since 2008, and it appears to finally be setting off into a new phase.

Facts must be faced. After the crash in 2008, banks became insolvent and were bailed out by trillions of dollars, yen and euros from central banks, which, by their very nature of money creation out of thin air, are also insolvent. Most governments are either deeply in debt or insolvent, with massive debts to their central banks offset by national resources (see Greece). Most people's finances are in a state of insolvent, with debt far outweighing assets. That leaves corporations, large and small, as the only solvent entities in the world, though many of those corporations are also insolvent, with more debt than equity, and much of their equity accounted for by stock buybacks. When the market takes a meaningful dive, many of these corporations will be prime bankruptcy targets, though the government would almost surely step in - as it did with the banks and General Motors during the crisis - with freshly-minted money to stave off creditors.

All roads lead back to the fiat money system and fractional reserve banking.

We have broken countries undertaking broken trade in broken markets. Mal-investments and wealth inequality are proliferating. Big government, running enormous deficits, carries on the fraud of counterfeiting by central banks. The currencies commonly used in exchange are worth nothing more than the ink and paper upon which are printed the pretty pictures and numbers. They are all debt instruments and negative interest rates extinguish debt. The world is headed for a radical reconfiguration of the monetary system.

At the Close, Friday, August 16, 2019:
Dow Jones Industrial Average: 25,886.01, +306.61 (+1.20%)
NASDAQ: 7,895.99, +129.37 (+1.67%)
S&P 500: 2,888.68, +41.08 (+1.44%)
NYSE Composite: 12,580.41, +170.91 (+1.38%)

For the Week:
Dow: -401.43 (-1.53%)
NASDAQ: -63.15 (-0.79%)
S&P 500: -29.97 (-1.03%)
NYSE Composite: -168.01 (-1.32%)
Dow Transports: -239.89 (-2.35%)

Monday, August 12, 2019

Far From Ordinary Times For National Economies

Empires rise and fall. Nations traverse through periods of feast and famine, disputes with other nations, sometimes wars, and economic booms and busts. History is rife with stories detailing the life and times of nations and their leaders.

The vast majority of nations today face conditions that are far from normal.

There are at least three major migrations taking place, Africans to Europe, Chinese to Africa, and South Americans to North America. These are disruptive events, not only for the individuals involved but for the entire populations of the nations affected. Changes are gradual, mostly, but the mundane can be cracked by atrocities, absurdities and maladjustments committed by migrants in the clash of cultures.

Such conditions are prevalent in Europe and the United States, with migration reaching epidemic proportions. Indeed, President Trump himself calls the illegal immigration at the southern US border an "invasion." He is not wrong. The United States was built on the back of immigrants - legal ones - whose individual efforts and respect for their fellows built the greatest nation on Earth.

Illegal immigration is challenging the normative behavior of well-established citizens. According to certain left-leaning politicians and a corrupted media, illegal immigrants should receive free health care, free schooling, and largely, freedom from gainful employment. Ordinary, established US citizens do not receive such largesse, nor should they. Nor should the illegal entrants, who have violated our borders, broken our laws and flaunted the lifestyles and even the national flags of whence they came.

Such activity is largely disruptive to the fine working condition of a nation and the United States has been building to this state of affairs for more than 40 years. Estimates of people living in the US illegally range from 11 million to as many as 60 million people. The higher end of that range is probably closest to the truth, which is why immigrants - mostly the illegal ones - disrespect US laws, commit crimes, and take advantage of an overly generous social framework and increasingly undisciplined judicial process.

The condition in many European countries is far worse, where theft, rape, and other human crimes are committed with impunity. Often, if an immigrant is accused of crime, there exists no punishment. The system feeds upon itself and eventually fails to protect the national culture.

That is not all. Every nation on earth is controlled economically by an unelected elite, otherwise know as a central bank. In Europe, where the financial condition is dire, all nations on the continent are controlled by one central bank, the ECB. Nations have usurped their right to issue currency, having been overwhelmed by the collectivist desires of the European Union. The ECB issues fiat currency, in the form of a counterfeit euro, bolstered most recently by negative interest rates because the system is a fraud and it imploded over 10 years ago, during the Great Financial Crisis. The global central banks added untold amounts of liquidity, but it will never be enough because the crisis is one not of liquidity, but of solvency. All central banks create currency out of thin air, charge interest for its use, and, via the magic of fractional reserve lending, multiply the amount of currency in circulation by ghastly amounts.

The system is broken and will remain broken until it is completely rejected by the various populaces which employ it. That moment in time is unknowable, but it is inevitable.

There is more.

Great Britain, wise enough to keep their currency - the pound - national in nature, is attempting to exit the EU, but has been met with resistance three years since a national referendum preferred exiting, or, in common parlance, Brexit.

This is a further disruption to the status quo, and the elites will have none of it.

President Donald J. Trump, of the United States, foments more radical departures, not the least of which being his penchant for fair trade via tariffs. For three decades, the globalists have promulgated their "free trade" jingoism, which is commonly broken, cheated upon, corrupted, deceitful, unequal, and decrepit. Global trade should well collapse, and if President Trump's tariffs are the agent of change, all the better.

Thus, these days are far from normal. Superficially, people go about their business as if nothing is brewing beneath the casual calm. There will be a shock, probably multiple shocks, similar to, and many of them larger than the events of 2007-2009.

How long the politicians, bankers, and the media can keep a lid on the calamity that is bubbling up below, is anyone's guess, but their time is running short. Currencies will collapse, nations will fall, there will be wars.

It would pay to keep a sharp eye on one's assets, hard and soft. Anything that is not well-protected can be stolen away in a flash. Consider the number of security breaches at financial institutions as warnings. The money is unsafe. Hard assets are safer, but must be protected, defended.

All of this is frighteningly real and happening at breakneck speed. The usual media sources will not tell you the truth. You must find it on your own.

Ten years is a long time for the central banks and their friends to keep the spinning plates of a corrupt, defunct global financial construct from experiencing inertia and crashing to the floor, shattering into millions of tiny, unrecoverable pieces.

The spinning will end. Everything will change.

At the Close, Monday, August 12, 2019:
Dow Jones Industrial Average: 25,897.71, -389.73 (-1.48%)
NASDAQ: 7,863.41, -95.73 (-1.20%)
S&P 500: 2,883.09, -35.56 (-1.22%)
NYSE Composite: 12,586.24, -162.18 (-1.27%)

Thursday, January 11, 2018

First Red Day of 2018 is Laughable

Major US indices had their first negative day of the year on Wednesday, but the losses amounted to nothing more than rounding errors.

Stocks were off early in the day after reports that Japan and China were reducing their purchases of US treasury bonds, but the notion was simply shrugged off by the equity captains as buyers emerged to limit the losses.

Stocks have gain six of the first seven trading days of 2018, a trend that is likely to continue until central banks cease buying stocks outright. This story is getting rather stale, even though most Americans fail to realize that their pensions and 401k profits are being fueled by cash injections from the Bank of Japan, European Central Bank, Swiss National Bank, Bank of England, People's Bank of China, and, the US Federal Reserve.

To believe that the Fed, being the world's most influential central bank, is not engaged in the purchase of stocks - either outright through their trading desk at the NY Fed or through member banks such as Goldman Sachs, JP Morgan Chase, Bank of America and others - is to suspend reality.

Global markets have neither seen nor experienced anything like this unprecedented and outrageous activity by financial sources which create money at will, the ramifications of which are likely to result in a massive, destructive inflationary hyper-spiral.

Here in the US and across the pond in Europe, central bankers openly wring their hands and express concern that inflation is too low, when in fact the worldwide money supply - the lone reliable barometer of excess liquidity - has been increased by trillions of dollars during the post-crisis era which began in March of 2009.

Nearly nine years have passed since the great financial crisis and the excesses have only grown, reaching monstrous proportions. For what other reason would gold and silver be suppressed so virulently other than to eliminate their standing as real money? Why are governments so intent on clamping down on cryptocurrencies? Central banks do not want competition in currencies.

It is clear that the central banks of the world have pulled the global economy into a fully fiat regime, printing money backed by nothing at an unprecedented pace.

Future historians and economists - if there is indeed a future at the end of this madness - will look upon this era as one of rampant money creation by policy-makers whose only aim is to keep the failed economies of developed nations in endless debt.

The idea that the Federal Reserve wishes to "normalize" interest rates is a laughable concept. Doing so would only facilitate the ballooning of debt everywhere, to utterly unplayable levels.

Enjoy the ride.

At the Close, Wednesday, January 10, 2018:
Dow: 25,369.13, -16.67 (-0.07%)
NASDAQ: 7,153.57, -10.01 (-0.14%)
S&P 500: 2,748.23, -3.06 (-0.11%)
NYSE Composite: 13,106.60, -14.24 (-0.11%)

Thursday, July 20, 2017

All-Time Highs on S&P, NASDAQ, Dow Industrials, NYSE Composite

Thanks to central banks, all the major averages made new closing highs on Wednesday.

This is not investing. This is centralized control.

Nothing about these markets should be believed, especially since the money represented is conjured out of thin air by central bankers. Thinking people should question this unusual feature of money and markets. Most of the world is asleep, lulled into a trance by the power of money.

It's difficult to comprehend that all of the money flows are complete fiction, but that is the truth, unfortunately.

At the Close, 7/19/17:
Dow: 21,640.75, +66.02 (0.31%)
NASDAQ: 6,385.04, +40.74 (0.64%)
S&P 500: 2,473.83, +13.22 (0.54%)
NYSE Composite: 11,941.34, +63.92 (0.54%)

Thursday, June 30, 2016

Stocks Regain Nearly All Brexit Losses, But Silver Tells Another Tale

While the maintainers of the status quo managed to nearly erase all of the losses from Friday and Monday due to Brexit, there is an outlier which Money Daily has referenced in the past, and its name is silver.

Gold being the choice of elitists and very rich people worldwide, it gets most of the attention in the financial press, after stocks, of course. Silver is regarded largely as an afterthought by the all-powerful, but it has been, throughout human history, an essential element in commerce, trade and capital accumulation, and today, it outpaced every other asset class by a wide margin, closing in New York at a very favorable price of $18.695, the best closing price since September of 2014.

While other assets have been languishing or found range-bound, silver has forged ahead by a nifty 35% year-to-date.

As a monetary metal, silver has no equal in terms of affordability and value for the common man or woman. The recent rise will no doubt spur further demand and subsequent gains.

Silver's rise signals a threat to phony fiat money and the monopoly of gold as a store of value. It may also be presaging a new monetary order, one in which the general populace will not be thought of as chattel.

Whoopie!

Brexit Didn't Matter After All:
S&P 500: 2,098.86, +28.09 (1.36%)
Dow: 17,929.99, +235.31 (1.33%)
NASDAQ: 4,842.67, +63.43 (1.33%)

Crude Oil 48.39 -2.99% Gold 1,325.10 -0.14% EUR/USD 1.1101 -0.22% 10-Yr Bond 1.4880 +0.74% Corn 372.75 -2.68% Copper 2.20 +0.87% Silver 18.84 +2.38% Natural Gas 2.92 +2.10% Russell 2000 1,151.92 +1.79% VIX 15.78 -5.17% BATS 1000 20,677.17 0.00% GBP/USD 1.3312 -0.92% USD/JPY 103.2700 +0.34%

Thursday, July 3, 2014

In Celebration of Dow 17,000 and a Boffo NFP Report, the Yellen Shriek

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

A stroke of brilliance this morning:

The Lord's Prayer, revised as "The Yellen Shriek" for Wall Street:

Our fiat,
Which art in dollars,
hollow be thy worth.
Thy stocks go up,
thy vix be down
on CBOE as it is on Wall Street.
Give plebes this day their daily crumb of bread
and deliver us thy dividends,
as we distribute to the one percent.
And lead us not into recession,
but deliver us more POMO,
for the kingdom and the power,
and the glory resides at the Fed,
QE forever and ever,
Amen.


Go viral, and, have a Happy 4th of July, AKA, INDEPENDENCE DAY!

Friday, August 16, 2013

End-Game Begins as Stocks Are Sold, Bond Yields Rise, Precious Metals Take Off

What happened over the latter part of this week should be the stuff of history books for future economic historians, given there will even be an economic history after the worst crisis in history begins its second leg down.

Forget about Friday. That was mostly churn, finger-pointing, squaring of positions in options and a great deal of nail-biting by the financial elite and central bankers. The real action was on Wednesday and Thursday, and, more specifically, the close of the trading day Wednesday and the pre-market Thursday, when St. Louis fed president, James Bullard, made comments, first to a Rotary club in Paducah, Kentucky, at 3:15 pm EDT Wednesday, and then reiterated and expanded upon those comments Thursday prior to the opening bell.

Both attempts to jawbone the market back into a state of control were, as they say in current parlance, epics fails, because market fundamentals - those things like economic data and earnings reports - finally came to the forefront and overtook what little control the Federal Reserve had over markets - both stocks and bonds.

Wednesday was shaping up to be a painful session when Bullard attempted to soothe the pain by saying that the Fed needed more data in the second half of the year before committing to a slowdown in their bond-purchase program (aka QE) in September or sometime near that time frame. The market's knee-jerk reaction was a swift erasure of 30 losing Dow points, but almost as quickly, sellers swamped back in, with the Dow closing near the lows of the day.

After the close, Cisco (CSCO) released second quarter earnings, with a penny miss on EPS and a small shortfall in revenue. Making matters worse was the conference call afterwards, in which the company issued some negative guidance, as has been the mantra this earnings season, sending the stock down roughly 10% in after hours trading.

On Thursday morning, Wal-Mart (WMT) released their second quarter earnings report, eeril similar to Cisco's complete with negative guidance for the remainder of the year. Around 7:30 am EDT, when pre-market trading opened, Dow futures, already down substantially, took a nosedive.

Queue James Bullard, reiterating Wednesday's comments and adding some new verbiage, in a desperate attempt to satiate the trading community. Once again, Bullard's comments failed to incite any kind of rally in futures. The day was setting up to be a bad one for the bulls.

At 8:30 am, the final nail in the coffin was hammered home by the weekly unemployment claims report, which came in at 320,000, a six-year low and a complete misread by anyone thinking a better jobs picture would be a salve for jittery traders. It was the exact opposite, the thinking being that if the jobs picture was indeed improving, the Fed would be more than willing to begin curbing QE in September. Futures were pounded even lower and the market opened in a sea of red ink, the Dow quickly down 150, then 200 points, the other major indices following along in a coordinated dive. Interest rates spiked higher, prompting even the most steadfast into a selling frenzy.

The upshot is that unemployment claims, despite being at multi-year lows, is a complete canard. The jobs created over the past past year, and primarily the last six months, have been mostly low-paying, service-type, part-time varieties, due to the coming slaughter of the jobs market via Obamacare, which mandates employer-provided insurance for companies with more than 50 full-time employees. While there are no real new jobs being created, nobody's leaving to look elsewhere for work and the slack caused by full-time jobs being split into part-time increments means more jobs overall, just not good ones and, especially, not full-time ones.

Thus, unemployment claims henceforth must be viewed with a skewed eye, despite the glad-handing by the media, financial pundits and politicians. Evidence that the overall economy is not even close to the so-called "recovery" we've all been anxiously awaiting since 2009, was amply provided by Cisco and Wal-Mart, two huge employers and both Dow components.

With the close on Thursday, the market was pointed for the worst week of the year heading into Friday, and, despite a lame attempt at tape-painting late in the session, it was delivered, with all of the indices closing marginally lower.

Treasuries hit their highest yields in two years, anathema to stocks and the housing market, further clouding the picture for the Fed and their plans for a graceful exit by Mr. Bernanke later this year. The Fed has lost control of all markets; they likely cannot slow their bond purchases in September, lest they risk a complete meltdown in stocks and melt-up in yields.

Gold and silver - especially the latter - had their best week in two-and-a-half years, with both hitting three-month highs and breaking out of the recent, depressed range.

Looking out a month to three months, the Fed is completely boxed in. On one hand, they can say that the economy is improving enough - even though the data doesn't remotely support such a claim - and begin tapering in September, even October. Or, they could face reality, admit their policies have been utter failures and continue the current pace of QE. Neither scenario is particularly bullish for stocks, the reality case the worst, as the decline off the August 2nd closing high has begun to accelerate with a strong downward trajectory, sending the Dow straight through its 50-day moving average, and the S&P closing out the week resting right upon its 50-day.

Nothing good will come from the politicians' return from their month-long hiatus, when they will once again entertain the markets with their rituals of piercing the debt ceiling and coming up with a budget or suitable continuing resolution. No matter what the Fed decides in September can be perceived as good, though from a trading standpoint, keeping QE at its current $85 billion per month will appear as a victory of sorts for the Wall Street crowd, when in reality it is admission that all has failed and the Fed can do nothing, other than continue debasing the currency until is ceases to exist.

The mathematical certainty that the experiment with fiat currency, back with nothing but promises and lies, will fail, is entering the second leg, or the third, after the crash in '08-09 and the nearly five years of false, liquidity-driven recovery. Any astute observer will immediately comprehend that lost faith in the currency foreshadows another crisis, this one likely more severe than that of 2008.

While many of the status quo will cringe at the prospect of the greenback's death throes and a complete collapse of the global economy, those fed up to their eyeballs with the current regime of lies, uncertainty, complete fraud by the major banks and totalitarian fear-mongering will welcome the change with open arms.

One can only hope that it won't drag on and out for years, as in europe and the Middle East, but the best advice at this point is to stay in precious metals, away from large population centers and hope for the best while preparing for the worst.

Other than those dire words, it looks to be a fine summer weekend in most of the US. Get out and enjoy some sun and taste the bounty of our land. Food, the fuel we humans - at the most basic level - need to survive, is still readily produced and relatively inexpensive. And that, my friends, is one shining silver lining.

Dow 15,081.47, -30.72 (0.20%)
NASDAQ 3,602.78, -3.34 (0.09%)
S&P 500 1,655.83, -5.49 (0.33%)
NYSE Composite 9,465.19, -24.10 (0.25%)
NASDAQ Volume 1,458,862,12
NYSE Volume 3,532,477,250
Combined NYSE & NASDAQ Advance - Decline: 2554-3882
Combined NYSE & NASDAQ New highs - New lows: 77-369
WTI crude oil: 107.46, +0.13
Gold: 1,371.00, +10.10
Silver: 23.32, +0.387