Showing posts with label gas prices. Show all posts
Showing posts with label gas prices. Show all posts

Tuesday, March 24, 2020

Stocks, Bond Yields Tumble, Gold, Silver Sold Out at Most Dealers as Legislators Work on Stimulus Package

Stocks took another beating in the US on Monday, with the Dow Jones Industrial Average closing at its lowest level since the coronavirus crisis began in mid February. The close at 18,591.93 was lower than the previous low, but also lower than the intraday low (18,917.46, March 18). Intraday, the Dow was down nearly 1000 points from Friday's close (19,173.98), falling to 18,213.65.

The other indices fall in line for the most part, except the NASDAQ which was above the unchanged line most of the session and finished with a fractional loss. Being more speculative than the more stoic Dow, S&P and NYSE Composite, the NASDAQ is still experiencing some buying activity, though much of that is reserved for grocers and tech stocks.

Once again, the Fed stepped up to the plate prior to the market open, making an emergency statement about an hour prior to the opening bell U.S. to announce that Treasury and mortgage-backed securities (MBS) purchases would be expanded as much as needed. As with last Monday's pre-opening salvo by the Fed, traders were not swayed, sending the major indices into the red right off the bat.

As the trading wore on, there was some relief from the selling midday, as Senate majority leader, Mitch McConnell, and minority leader, Chuck Schumer, hinted that they were close to a deal on the $1.5 trillion relief package that would include a payment of up to $1200 (plus $500 per child) for most Americans making less than $75,000 a year.

When the measure failed to reach cloture on a 47-47 tie, stocks quickly reversed course and headed to the lows of the day. Any bill coming out of the Senate for a COVID-19 stimulus bill will need at least 60 votes to pass. The two parties are far from reaching compromise, especially after House Democrats released their $2.5 trillion plan that was much more generous. The Democrat bill calls for monthly payments of $2000 to nearly all Americans and $1000 per child under 18. It also provides provisions to shelter people who cannot make rent, mortgage, credit card, car leases or loans, or student loan payments, calling for forbearance without penalty for as long as the crisis is deemed a national emergency, plus 120 to 180 days after that.

In what would be essentially a debt jubilee, Democrats' are offering much more to individuals and families than are the Republicans. Their plan has many flaws, however, in that one could, conceivably, buy a new car, rent a swanky apartment, pay for neither and have use of them for up to a year, possibly longer. The bill would make whole all creditors harmed by the measure, presumably at some later date. It's a complete boondoggle that would crush the economy rather than help it.

Legislators will be back at it on Tuesday, looking for a bill that will satisfy both their constituents and their major campaign funders (corporations, banks).

Bonds were bid nearly across the board, with the one-month bill plummeting to 0.01 and the 30-year bond losing 22 basis points on the day, closing out with a yield of 1.33%. Yield on the 10-year note also crumbled, falling form 0.92% to 0.76%.

Precious metals were bid higher. Spot gold ended the day at $1551.20. Silver finished at $13.27 the ounce at the close of trading in New York. However, both were up significantly overnight. Silver adding 97 cents to $14.24, while gold was up $96 to $1647.20, as both metals, quoted in futures contracts, are actually selling far above those prices for physical. Buyers are paying up to 100% premiums on silver and $300-600 more for an ounce of gold and having to wait as much as a month for delivery as major metals dealers are simply overwhelmed with buyers and generally out of stock.

Oil closed at $23.36 per barrel. Gas prices in the USA have been seen as low as 99 cents at one Kentucky outlet. Most states are seeing the price at the pump under $2.00 per gallon and falling.

With trading set to resume in the US in a matter of hours, futures are looking absolutely dashing, suggesting that this Turnaround Tuesday could be one for the record books. Then again, futures have often been optimistic, only to see waves of selling throughout the open trading session.

At the Close, Monday, March 23, 2020:
Dow Jones Industrial Average: 18,591.93, -582.07 (-3.04%)
NASDAQ: 6,860.67, -18.85 (-0.27%)
S&P 500: 2,237.40, -67.52 (-2.93%)
NYSE: 8,777.38, -355.78 (-3.90%)

Tuesday, September 17, 2019

Oil and Gas Price Hikes Are a Central Banker Scam

Reiterating what was posted here Sunday in the Weekend Wrap, a recent article by Lance Roberts at Real Investment Advice, brings home the bacon in detail, of how the bottom 80% of all US workers, i.e., earners, is carrying a high debt burden that today cannot even cover basic necessities.

The consumer squeeze is in focus after the attacks on a Saudi oilfield and the Abqaiq refinery, which, according to most sources, will affect five percent of global oil supply. Somehow, cutting off five percent of global supply magically raises oil prices 15 percent.

Without anybody knowing exactly who is behind the attacks, many fingers are being pointed toward Iran, naturally, since the Iranians are fighting a proxy war with Saudi Arabia in Yemen. has a solid account with photos of how the attack might have been staged, who was behind it and future implications.

From a central banker's perspective, the attack and subsequent rise in the global price of oil could not be more opportune on a number of fronts. First, in desperate need of inflation, the bankers get the gift of core inflation in both PPI and CPI. Second, the rise in the price of oil, translated to gas at the pump and some home heating fuel, will show up in the convoluted GDP calculations, just in time for the third quarter and also adding a boost to the fourth if high prices persist.

Further down the road, high input prices and consumer prices for oil and gas should put the brakes on the economy eventually, putting a dent in discretionary spending which could spark a recession in 2020, just in time for the November US elections. Sure, higher prices and profits are good for some, for a while, but eventually, high gas prices act effectively as a tax on all consumers.

If you happen to be a central banker, this sounds great, doesn't it?

There are also political and financial aspects to the story. The attacks come right on the heels of President Trump's firing of John Bolton, the infamous neocon whose penchant for war with Iran was no secret. Conspiracy theorists believe this was long-ago planned, but Bolton's removal as National Security Advisor to the president was the trigger.

There's also the upcoming IPO of Saudi Aramco to consider. Initially, following the attack, the Saudis hinted that they would delay their long-awaited IPO, but now, a day beyond, they say they will forge ahead as planned. At issue is valuation. The Saudis believe the company should be worth $2 trillion at IPO, while the consensus among bankers handling the deal have the figure closer to $1.5 trillion. A lasting boost in the price of oil would naturally add to the valuation, bringing it closer to the level desired by the Saudis, who, after all, have control of the flow of oil, but not the price.

With no culprit positively identified, the entire affair looks to be highly organized - from the accuracy of the missiles and/or drones employed in the attack to the coordinated record trading in the oil futures pits - and the work of people or nations with an agenda. While this may appear far fetched to some, the power of the globalist banking cartel is well-known and could be pulling all the strings behind the scenes. It is not outside the realm of possibility that deep state globalists staged the attacks and price surge. It's also possible the the attacks were completely faked, just to get the price of oil higher.

There has been a glut of global oil supply since the US embarked on its fracking and shale output, becoming the world leader a few years ago. Russia is also pumping like mad, as are most of the OPEC nations. The amount of oil on world markets is so large that even small disruptions should not affect price - which has been falling for over a year - very much, but, in this case, it did.

While there isn't much the general population as a whole can do about higher gas prices outside of mass protests (a likelihood in Europe), there are a few actions the average motorist can take.
  • Plan driving trips - organize your schedule to include multiple stops, thus reducing the amount of gas used rather than making individual trips for each task
  • Seek lower prices - use online resources like to find the lowest prices in your area.
  • Ride-sharing - organize with neighbors, friends and co-workers to share rides heading in similar directions.
  • Drive smarter - slower speeds, properly inflated tires, and good driving habits can significantly reduce your fuel usage.
  • Avoid wasted trips - deciding whether or not a trip is an absolute necessity can cut your overall fuel consumption considerably.
You don't have to buy into the price panic the global banking cartel seeks to impose upon you. As an end-user, you have to power of decision and information at your fingertips to help make wise choices. Share information with your friends, relatives and co-workers. A loose band of informed citizens can thwart the intentions the central bankers. Reduced demand should result in lower prices, eventually.

Most of all, don't buy into the media hype over gas prices, recession or any other narrative (like climate change) that the media water-carriers throw at you.

At the Close, Monday, September 16, 2019:
Dow Jones Industrial Average: 27,076.82, -142.70 (-0.52%)
NASDAQ: 8,156.40, +2.86 (+0.04%)
S&P 500: 2,994.17, -3.79 (-0.13%)
NYSE Composite: 13,107.98, -16.36 (-0.12%)

Sunday, March 4, 2018

The Week That Wasn't: February Flop Folds Into March Madness

This was a generally unsightly week for stocks. All of the major indices suffered losses, despite a late-Friday rally that boosted three of the four to positive, the notable exception, the stoic Dow Jones Industrial Average.

Taking a three percent hit for the week, the Dow suffered its third weekly setback in the last five, the most recent being the second-largest of the year, following the debacle from the first week in February. The other averages were down smaller percentages, the least of which was the NASDAQ, with just over one percent to the downside, staggered by the S&P (-2.04%) and the NYSE Composite (-2.53%).

Bonds were less volatile for the week as a whole, as the 10-year-note stabilized around 2.85%, finishing officially at 2.86%. Crude oil weakened, though not much, and gas prices eased a little as refiners switch over from winter to summer blends. With the US Dollar Index firming up early in the week, precious metals took it on the chin, but both gold and silver rebounded on Thursday and Friday as the short-lived dollar rally faded.

Most of the ballyhoo was over President Trump's announcement of tariffs on steel and aluminum imports, with a 25% fee on the former and a 10% duty on the latter. Critics mouthed off about rising prices on everything from automobiles to beer, though the effects are likely to be negligible. A 12-pack of beer is expected to cost about two cents more if duty-added aluminum is used, while a car contains roughly a ton of steel, which at $750 a ton, will amount to an additional $250 in the price of the already-bloated cost of a new vehicle.

Some countries are already crying foul, the loudest being Canada, from which the US imports the most steel, but many products from Canada, including lumber, are already highly regulated on the producer end, so even despite the NAFTA agreements, the US's neighbor to the North likely has little upon which to argue unfairness.

On the main, it was a poor week for stock holders, with mounting declines heading back toward the lows reached in the early days of February. The only index that can claim victory for the first two months of the year is the NASDAQ, holding tenuously onto a roughly three percent gain, with the S&P flat for the year, the Composite and Dow down the most, but none more than 2% for the annum.

Looking ahead, the FOMC is set to meet on March 16, with expectations of another 25 basis point hike to the federal funds rate. That is still disquieting to equity longs, and feeding into the ongoing rout in stocks. The week ahead will be indicative of the market's ability to digest another rate hike. So far, it's done well enough, but there is a point at which nearly risk-free yields will attract more money. Buoying up the stock market are massive buybacks, however, courtesy of the recent tax bill passed late last year. While companies that have been handing out bonuses have received most of the headlines, little to no reporting has been done on the same companies buying back even more of their own stock in an effort to assuage shareholders and keep their stock prices afloat at high tide.

How much money will be pumped back into stocks by the very owners and executives of said stocks is unknown, but eventually the tap will run dry and then interest rates will look more and more attractive. Without the buybacks of recent years, stocks would be more fairly valued, rather than being excessively overpriced as they have been for some time.

Sideways could be the most-favored direction for the next few weeks and months, with many experts calling for the eventual market blowout decline sometime in the third quarter (July-September), which would fit with the anti-Trump narrative leading into November's midterm elections.

Now the markets have not only become algo-driven and reactionary, but they are soon-to-be politically-charged as well.

Dow Jones Industrial Average March Scorecard:

Date Close Gain/Loss Cum. G/L
3/1/18 24,608.98 -420.22 -420.22
3/2/18 24,538.06 -70.92 -491.14

At the Close, Friday, March 2, 2018:
Dow Jones Industrial Average: 24,538.06, -70.92 (-0.29%)
NASDAQ: 7,257.87, +77.31 (+1.08%)
S&P 500: 2,691.25, +13.58 (+0.51%)
NYSE Composite: 12,557.99, +39.26 (+0.31%)

For the Week:
Dow: -771.93 (-3.05%)
NASDAQ: -79.52 (-1.08%)
S&P 500: -56.05 (-2.04%)
NYSE Composite: -326.12 (-2.53%)

Wednesday, March 4, 2015

Deflation, Followed by More Deflation

In its simplest terms, deflation is defined as a decline in the money supply, but, because of central bank meddling such as QE and ZIRP (Zero Interest Rate Policy), money supply isn't really an issue, but, where the money is going turns out to be the bogey.

For all the pumping the Fed and other central banks have done since the Lehman crash in 2008, inflation and growth have failed to materialize because the money is stuck in transmission lines between the central banks and the TBTF banks, who don't want to take the risk of loaning money to real people, preferring instead to speculate in stocks and reward their cronies with fat bounties, otherwise known as bonuses.

The three trillion dollars by which the Fed has expanded its balance sheet since 2008 hasn't found its way into the real economy. Meanwhile, governments, from municipalities on up to the federal level, have done their best to over-regulate and over-tax working people, causing further strain on the bulk of consumers. So, if money, on one hand, is stuck in transmission, and taxes and fees are going up on the other hand, with incomes stagnant or falling, people have less to spend, and make their spending choices with just a little bit more prudence.

Depending on your age and circumstances, you may or may not be experiencing a bout of deflation this winter.

It really depends on what you spend your money on, where you live, where you shop, and what you do for a living.

Obviously, despite the best efforts of oil price manipulators to keep prices above $50 per barrel, the price of a gallon of gas has fallen precipitously over the past six months. That's a plus, as is the low price of natural gas. Consumers in the Northeast, experiencing one of the coldest winters in history, haven't had it too bad, because the cost of heating a home has dropped like a rock. It would be even better if Al Gore had actually been right about Global Warming. (Well, he did invent the internet, so you can't expect him to be perfect.)

Food prices have moderated, and, because fewer and fewer consumers are dining out, restaurants have been offering more specials. Food is one of those things that you really can't manipulate much, as it does have limited fresh shelf life. A decent summer growing season has kept a lid on food prices.

However, if you've got kids at all, and especially kids in college, you're likely feeling the pinch of higher tuitions and cost for college text books. Health care costs haven't moderated as much as the government would like you to think, either, so, if you have health insurance (Doesn't everybody? It's the LAW!), you're paying more.

Housing prices have moderated a bit, and bargains ca be found, especially in the Northeast and in rural areas. Farmland prices are coming down dramatically.

Behind all of this is the strong dollar, helped by the rest of the world, which is cutting interest rates and debasing currencies at a furious pace.

Thanks to Zero Hegde for the complete list of 21 central bank rate cuts so far in 2015:

Uzbekistan's central bank cuts refi rate to 9% from 10%.

2. Jan. 7/Feb. 4 ROMANIA
Romania's central bank cuts its key interest rate by a total of 50 basis points, taking it to a new record low of 2.25%.

The Swiss National Bank stuns markets by discarding the franc's exchange rate cap to the euro. The tightening, however, is in part offset by a cut in the interest rate on certain deposit account balances by 0.5 percentage points to -0.75 percent.

4. Jan. 15 EGYPT
Egypt's central bank makes a surprise 50 basis point cut in its main interest rates, reducing the overnight deposit and lending rates to 8.75 and 9.75 percent, respectively.

5. Jan. 16 PERU
Peru's central bank surprises the market with a cut in its benchmark interest rate to 3.25 percent from 3.5 percent after the country posts its worst monthly economic expansion since 2009.

6. Jan. 20 TURKEY
Turkey's central bank lowers its main interest rate, but draws heavy criticism from government ministers who say the 50 basis point cut, five months before a parliamentary election, is not enough to support growth.

7. Jan. 21 CANADA
The Bank of Canada shocks markets by cutting interest rates to 0.75 percent from 1 percent, where it had been since September 2010, ending the longest period of unchanged rates in Canada since 1950.

The ECB launches a government bond-buying programme which will pump over a trillion euros into a sagging economy starting in March and running through to September, 2016, and perhaps beyond.

9. Jan. 24 PAKISTAN
Pakistan's central bank cuts its key discount rate to 8.5 percent from 9.5 percent, citing lower inflationary pressure due to falling global oil prices.

10. Jan. 28 SINGAPORE
The Monetary Authority of Singapore unexpectedly eases policy because the inflation outlook has "shifted significantly" since its last review in October 2014.

11. Jan. 28 ALBANIA
Albania's central bank cuts its benchmark interest rate to a record low 2%. This follows three rate cuts last year, the most recent in November.

12. Jan. 30 RUSSIA
Russia's central bank cuts its one-week minimum auction repo rate by two percentage points to 15 percent, a little over a month after raising it by 6.5 points to 17 percent, as fears of recession mount.

13. Feb. 3 AUSTRALIA
The Reserve Bank of Australia cuts its cash rate to an all-time low of 2.25%, seeking to spur a sluggish economy while keeping downward pressure on the local dollar.

14. Feb. 4/28 CHINA
China's central bank makes a system-wide cut to bank reserve requirements -- its first in more than two years -- to unleash a flood of liquidity to fight off economic slowdown and looming deflation. On Feb. 28, the People's Bank of China cut its interest rate by 25 bps, when it lowered its one-year lending rate to 5.35% from 5.6% and its one-year deposit rate to 2.5% from 2.75%. It also said it would raise the maximum interest rate on bank deposits to 130% of the benchmark rate from 120%.

15. Jan. 19/22/29/Feb. 5 DENMARK
Incredibly, the Danish central bank cuts interest rates four times in less than three weeks, and intervenes regularly in the currency market to keep the crown within the narrow range of its peg to the euro. (The won't last. See Switzerland.)

16. Feb. 13 SWEDEN
Sweden's central bank cut its key repo rate to -0.1 percent from zero where it had been since October, and said it would buy 10 billion Swedish crowns worth of bonds.

17. February 17, INDONESIA
Indonesia’s central bank unexpectedly cut its main interest rate for the first time in three years.

18. February 18, BOTSWANA
The Bank of Botswana reduced its benchmark interest rate for the first time in more than a year to help support the economy as inflation pressures ease. The rate was cut by 1 percentage point to 6.5%, the first change since Oct. 2013.

19. February 23, ISRAEL
The Bank of Israel reduced its interest rate by 0.15%, to 0.10% in order to stimulate a return of the inflation rate to within the price stability target of 1–3% a year over the next twelve months, and to support growth while maintaining financial stability.

20. Jan. 15, March 3, INDIA
The Reserve Bank of India surprises markets with a 25 basis point cut in rates to 7.75% and signals it could lower them further (they did, yesterday, to 7.50%), amid signs of cooling inflation and growth struggling to recover from its weakest levels since the 1980s.

21. Mar. 4, POLAND
The Monetary Policy Council lowered its benchmark seven-day reference rate by 50 basis points to 1.5%.

There will be more rate cuts and currency debasement, especially once the ECB gets its own QE program going. Note that all of these countries want to reflate, inflate or otherwise spur demand. The problem, as discussed above, is that people just aren't buying it, and they aren't buying. People have been paying down debt and saving, because, in an era of unprecedented central bank intervention and government regulation, the average Joe and Jane is uncertain about the future. It's a social phenomenon the economists can't compute.

Perhaps, in a free market without central bank meddling and government intervention into every aspect of one's life, capitalist economies might just have a chance.

Who knew?

Bottom line, central banks hate deflation, because it causes debt-driven economies to seize up and die, which is exactly why consumers should appreciate it.

Dow 18,096.90, -106.47 (-0.58%)
S&P 500 2,098.53, -9.25 (-0.44%)
Nasdaq 4,967.14, -12.76 (-0.26%)

Friday, July 12, 2013

Boffo Week for Stocks; Gas Prices on the Rise

For investors, a week nearly devoid of any actionable news resulted in one of the best weekly gains in stocks of the year.

On the week, stocks roared higher, much of the gains based on Fed Chairman Ben Bernanke's dovish comments on unemployment and the economy following the close of trading on Wednesday. Fed governor James Bullard - the most dovish of the flock of doves comprising the Fed governors - chimed in late Friday to add more fuel to the hot money rally.

The weekly gains:
Dow: +328.46 (2.17%)
S&P 500: +48.30 (2.96%)
NASDAQ: +120.70 (3.47%)

That's it in a nutshell. Just remember that nothing matters except the words coming out of Fed members' mouths.

On the downside, oil prices have spiked higher, consequently raising the price of fuel at the pump. According to AAA, gas prices nationally rose an average of 7 1/2 cents this week to $3.550 for unleaded regular, but the price pass-along to stations has only just begun. Drivers should brace for gas at $3.80 to over $4.00, depending on location, long before Labor Day.

Dow 15,464.30, +3.38(0.02%)
NASDAQ 3,600.08, +21.78(0.61%)
S&P 500 1,680.19, +5.17(0.31%)
NYSE Composite 9,493.20, -0.06 (0.00%)
NASDAQ Volume 1,487,364,375
NYSE Volume 3,132,032,500
Combined NYSE & NASDAQ Advance - Decline: 3295-3092
Combined NYSE & NASDAQ New highs - New lows: 543-27
WTI crude oil: 105.95, +1.04
Gold: 1,277.60, -2.30
Silver: 19.79, -0.164

Thursday, March 29, 2012

Thursday Turnaround Mostly Vapors and Short-Covering

Let's see if we can find the good news that took the Dow back from a morning loss of 94 points to a gain of nearly 20 points by day's end?

Initial employment claims came in at 359K on expectations of 350K and the prior week was revised higher, from 348K originally reported to 364K. Well, that can't be it.

The third and final estimate for fourth quarter 2011 GDP remained steady at 3.0%. Maybe.

Moody's downgraded five Portugese banks. Nope.

Gas at the pump is still hovering around the $3.90/gallon range, on average, across the United States. Hmmm, probably not.

Those were the major headlines and issues on this Turnaround Thursday, as all the major averages fell out of bed, then through the magic of computer-programmatic algorithms, found a suitable bottom and rose through the afternoon and into the close.

In days past, chartists would say that the market put in another, higher bottom, but this intra-day bottom happened to be the low for the week. In other words, the monster rally from Monday was all eaten up by greedy, high-powered day-traders who more or less control this thinly-traded market.

Now, volume was a bit more perky today, but that would be due likely to short covering and the fact that it takes more trades to move all the indices from a cratered loss to near the break-even point. All of it is rather meaningless, since only the major banks, brokerages, fund managers and some moribund hedge funds have actually been engaging in this casino-style market since the middle of 2010, right after the flash crash scared out the last remaining individual investors.

As mentioned in yesterday's post, this is all leading up to a big rally coming either Friday (1st quarter window dressing) or Monday (first trading day of the quarter), or both. Not that the end of a quarter or the beginning of one has anything to do with fundamentals, they're just when the big boys open and close their books, so it gives them something upon which to hang their hats.

The bull market that began in March of 2009 has been one of the best in history, with the major indices all up close to or more than 100% from the bottom. Doubling your money in three years is a trick only the magicians of Wall Street can perform, though they got plenty of help from the taxpayers and rich Uncle Ben Bernanke at the Federal Reserve.

In fact, uncle Ben is still pumping out scads of greenbacks to keep the rally going, because in case anyone cares to look at the Fed's policies of the past three to four years, the stock market gains are about the only positive result among them.

Sure, sure, everyone pats Bernanke on the back for "saving" the economy, but what he really saved was the banks, which had fallen over a solvency cliff. The government has been running record deficits ever since the '08 crash, the value of the dollar is on a gentle glide-path to zero, just like Ben's interest rates, inflation continues to ravage household budgets, while low interest rates on savings are killing seniors. Housing is still declining, another credit bubble - in the form of student loans, auto leases and credit cards - is forming rapidly and small business is too busy keeping up with Washington's rule changes and mountains of regulations to actually hire anyone or expand. Entrepreneurs have been completely scared off and looking to foreign shores for opportunity.

So, really, what did Ben Bernanke save besides his banking buddies and his own job? Oh, that's right, Europe. But, but, but, that's not his job, is it?

Dow 13,145.82, +19.61 (0.15%)
NASDAQ 3,095.36, -9.60 (0.31%)
S&P 500 1,403.28, -2.26 (0.16%)
NYSE Composite 8,166.37, -21.98 (0.27%)
NASDAQ Volume 1,755,819,875
NYSE Volume 3,772,621,250
Combined NYSE & NASDAQ Advance - Decline: 2268-3291
Combined NYSE & NASDAQ New highs - New lows: 108-61
WTI crude oil: 102.78, -2.63
Gold: 1,652.20, -5.70
Silver: 31.99, +0.16

Friday, September 30, 2011

Third Quarter a Stinker for Stocks; NASDAQ, SP Down 14%

The Markets

The third quarter officially ended today on September 30, and, unlike the usual quarter-ending, window-dressing ramp job, stocks suffered through their worst day of the week, in a month and quarter that was one of the worst of recent memory - and there have been some bad ones, recently.

The Dow Jones Industrials ended the quarter off more than 12%. The S&P and NASDAQ were rocked lower by 14%.

In simple terms, anybody in an index fund with $100,000 at the end of June, now has somewhere between $86,000 and $88,000. That may not sound like much, but $12-14,000 is roughly equivalent to the wages for a minimum-wage worker for a year. That's not a good sign for the bottom income earners in American society, because it means that the "wealth creators" so often cited by Republican office-seekers, have one minimum wage job less than they can create, should they now choose to part with some of that hard-earned (and easily lost) cash.

On the day, stocks started lower, stabilized, but fell off a veritable cliff into the close. There was no window dressing, no PPT push, no ETF re-balancing or anything to keep stocks afloat into the close. Nobody seemed willing to take significant positions in stocks, even though the 4th quarter is historically the best for stocks. The levels of gloom and doom rival those of the disastrous 4th quarter of 2008, when the global financial crisis was first realized and stocks gyrated lower and lower and lower.

Not only were stocks affected negatively during the month and quarter, but most commodities also fell by extraordinary percentages, especially gold and silver, which were whacked roughly 16 and 25% respectively. There was no place to hide for even the most conservative investors. Yields on Treasuries fell like rocks off a precipice. Bond yields for the 2-year, 5-year and 10-year note fell 40-45% in the quarter. The benchmark 10-year note closed out the quarter at a yield of 1.90%. The 30-year bond was the best performer of an ugly bunch, with yields falling only 35% since the end of June.

Crude oil was down 17% in the quarter, though gas prices at the pump have barely matched the decline. With gas prices nearly $4.00 a gallon at the beginning of summer, the average price - if 17% is the expected decline - should be around $3.35, though the AAA Fuel Gauge Report has the national average at $3.44. For perspective on how high real gasoline prices are, the price at the same time last year was a celebratory $2.69.

In company news, Eastman Kodak (EK), once a proud member of the Dow 30, fell 54% on the day amid reports that the company had hired the law firm Jones Day to discuss reorganization plans or a bankruptcy filing. Shares of Eastman Kodak dropped 91 cents to close at 0.78, an historic low.

Bank of America (BAC) plans to begin charging debit card users a $5 monthly fee in January, 2012, due to changes in the amounts banks can charge merchants per debit card use. BAC finished the day 23 cents lower, at 6.12.

Big corporate bankruptcies are dead ahead, likely to commence in the fourth quarter and accelerate through the first three quarters of 2012. Third quarter earnings reports kick off on October 11, when Alcoa (AA) reports after the bell.

Thank goodness for the baseball playoffs and football. Yeesh!

Dow 10,913.38 240.60 (2.16%)
NASDAQ 2,415.40 65.36 (2.63%)
S&P 500 1,131.42 28.98 (2.50%)
NYSE Compos 6,791.65 183.26 (2.63%)
NASDAQ Volume 2,081,539,875.00
NYSE Volume 5,323,945,500
Combined NYSE & NASDAQ Advance - Decline: 1442-5118
Combined NYSE & NASDAQ New highs - New lows: 31-515 (look out below!)
WTI crude oil: 78.65, -3.47
Gold: 1623.80, +7.90
Silver: 29.94, -0.73

Tuesday, August 16, 2011

Euro Fears Still Making Markets Shaky

As today's post title suggests, trading continues to focus on events - or the relative lack thereof - in Europe, where today French President Nicolas Zarkozy met with German Chancellor Angela Merkel, announcing some coordination of efforts, but fell short of endorsing the concept of Eurobonds to shore up shaky finances on the Continent.

"We want to express our absolute will to defend the euro and assume Germany and France's particular responsibilities in Europe," said Sarkozy.

In what has to be the most humorous statement to date concerning sovereign fiscal policies, the two leaders said they would push for balanced budget amendments for all 17 nations which use the Euro as their primary currency. The irony is that, excepting possibly Germany, none of the member nations have had a balanced budget in at least five years, most of them running continuous deficits since the Euro became the continental currency in 2000.

The specific proposals coming from the leaders of the two most powerful members of the Europen Union were slim. They said their finance ministers would meet four times a year and proposed that the member nations coordinate income tax policy and begin taxing financial transactions by 2013, kicking the proverbial can a bit further down the road to perdition.

By the time the two leaders met with the press, European markets had already closed, so the brunt of the effect from their statements was felt primarily in the US.

Stocks took a nose dive after the press conference, and fell to their lowest levels of the day just after 1:00 pm EDT. The Dow was off by 190 points at its bottom.

But, as usual, the mechanics of controlled markets took over, as all the major indices rallied for the final three hours, still closing down for the day, but with reasonable losses.

Stocks had gotten off to a shaky start, after economic data was mixed prior to the opening bell. July housing starts fell off to 604,000 on an annualized rate, after posting a figure of 613,000 in June. Building permits dropped by 20,000 from the annualized rate of 617,000 in June.

However, industrial production came in with a better-than-expected gain of 0.9% and capacity utilization also showed a bit of strength, with a reading of 77.5%, following a 76.9 figure in June. Of course, these are estimates prepared by an inept and failing government and should not be trusted as any true guide to financial conditions in the United States, even though they remain mired in the minds of traders and fund managers as the most reliable gauges.

Without any determinant structure of reform or policy coming from Europe, expect this see-saw battle of bulls and bears to rage on for weeks until something concrete cracks across the pond. There seems to be about the same level of political will over there as there is in the US to entertain policies that actually address structural issues in the economy - none - as the leaders on both sides of the Atlantic are easily more enthusiastic about getting re-elected than they are at doing their jobs well.

With the majority of the politicians on vacation this month (the NY Times reports that 80 members of the house of representatives have or will be visiting Israel this month) our political class appears quite cavalier when called on to solve pressing problems.

Until there is real political leadership (in other words, we better hope we make it to November, 2012 and then elect Ron Paul as our next president) markets will continue to stumble along and economies will continue to run up debt and deteriorate.

That's how it goes. Prepare.

Dow 11,405.93, -76.97 (0.67%)
NASDAQ 2,523.45, -31.75 (1.24%)
S&P 500 1,192.76, -11.73 (0.97%)
NYSE Composite 7,394.49, -88.22 (1.18%)

Declining issues got the better of advancers on the day, 4939-1664. On the NASDAQ, there were six (6) new highs, but 51 new lows. The NYSE showed 10 new highs and 15 new lows, keeping the bias to the downside, with the combined figure of 16 new highs and 66 new lows. Expect the gap between the few new highs and increasing new lows to expand as the crisis nobody wants to handle grows even deeper.

Volume was moderate, which, after the events of last week, shows a general lack of interest overall in staking out any new, long term positions.

NASDAQ Volume 2,085,979,250
NYSE Volume 5,009,345,000

Oil closed down $1.23, to $86.65, though gas prices at filling stations across the country have seen hardly any price decline at all.

The continued unease over macro-economic issues produced a renewed push into gold, which traded higher by $27.00, to $1,785.00, a new closing record, while silver also gained, finishing up 51 cents, at $39.82, though it traded above $40/ounce both earlier in the day and after equity markets had closed.

Tomorrow brings PPI numbers for July, the Mortgage Bankers Association Mortgage Index and a reading on crude oil inventories. Other than that, bonds look very good, as they continue to hold near low levels, but remain one of the primary safety plays.