For a day at least, reality set into equities, as early gains on the major indices were thwarted by waves of selling throughout the session.
The Dow Jones Industrial Average, which was higher by more than 140 points, peaked before 10:30 am and ended the day 101 points lower. Stuck at a very stubborn resistance level in the 24,300-24,650 range, this current attempt to break out is the fourth since the market collapse of March. Repeated efforts to surge through to new recent highs has met with considerable pressure on the sell side of the equation for the past two months and it appears that the rally has either lost all of its momentum or the investment community has become skeptical of the move higher so early in the cycle.
While the real economy has not even bottomed out yet, stocks seem to be of a mind of their own, pricing in every positive development but failing to realize the overall negative consequences from lockdowns and a dramatically reduced global economy.
More to the point, first quarter earnings for the bulk of companies on the exchanges have been recorded and they were, for the most part, uninspiring, with more than a handful of companies issuing cautious forward guidance and a slew of firms cutting dividends or eliminating them altogether. The recent gains have been fueled only by excessive amounts of Fed currency seeking a temporary place to park. Thus, share prices are unlikely to remain elevated for much longer.
More than 100 companies cut their dividend payout in the week ending April 16, and that number is on top of hundreds of other companies that have slashed and burned shareholders with dividend reductions or eliminations.
The folks at TradingStockAlerts.com keeps track of these important developments on a weekly basis and the numbers are scary for anyone investing in stocks for steady income.
What happens when second quarter GDP numbers arrive in July and show the economy slowing by 40% or further? Along with companies cutting their dividends, there's the likelihood of declines in the value of their shares as well, as profitability is eroded as markets shrink.
With Wall Street giddy with Fed fun money, it's something to thank about going forward.
Funny thing is, stocks are right about where they were just after the moonshot open Monday morning. They've managed to hold onto most of the gains from that huge gap up open, but have not moved forward since. How long stocks can maintain the facade of robustness when 20-25% of the working population is out of a job or thousands of companies are cutting dividends is unknown. What is known, however, is that financial fakery has been rewarded, but the probable end game is something completely different, with many more losers than winners.
Like it or not, the economic crisis is real and just getting started.
At the Close, Thursday, May 21, 2020:
Dow: 24,474.12, -101.78 (-0.41%)
NASDAQ: 9,284.88, -90.90 (-0.97%)
S&P 500: 2,948.51, -23.10 (-0.78%)
NYSE: 11,351.60, -68.44 (-0.60%)
Showing posts with label global economy. Show all posts
Showing posts with label global economy. Show all posts
Friday, May 22, 2020
Thursday, May 7, 2020
Deflation, Inflation, Hyperinflation, Signal to Noise Ratio, Gold, Silver, and the End of the Dollar
Everything that has happened so far was predictable.
The worldwide government response to the COVID-19 pandemic was as easy to see for cynics and skeptics as the eventual lying that would take place. First, back in January and early February, the federal government told the public that the threat to Americans from the coronavirus that was ravishing China was minimal. Gradually, that advice was replaced by travel restrictions to and from mainland China, then to and from Europe, until finally, infections and deaths from the virus began to multiply in America.
By mid-March and into the first days of Spring, the veil had been lifted and the virus was spreading rapidly across the United States, thanks to millions of international travelers on ships and airplanes that had been allowed to come and go as they pleased through the winter. Individual cases turned into clusters and clusters to severe outbreaks, especially in New York City, not surprisingly a hub for international travel.
By the time congress got around to passing emergency legislation, lockdowns and shelter-in-place recommendations were put into play by governors of the individual states. The legislation contained the usual: massive injections of currency into Wall Street (because we can't have a stock market crash), a pittance for the public, and payments to hospitals for treating patients infected with COVID-19: $13,000 for each patient admitted; $39,000 for each patient put on a ventilator.
Anybody who has been following government and Federal Reserve policy knew that the response would be to throw massive amounts of currency at the problem because that's all they know about how to handle crises.
And here we are. The government is now readying a fourth "stimulus" bill, chock full of more handouts, bailouts, and currency drops. This time, the public gets nothing. States and municipalities are going to get tons of currency to bail out their broken, drained public coffers and keep millions of teachers, cops, firemen, and paper-pushers on the job and their pensions partially funded because having the Fed backstop municipal bonds simply wasn't enough. Hospitals will get more currency. Small businesses will get another tranche of loans, pressing cynics to respond that cities get grants, while businesses have to pay it back.
All of this currency printing and government deficits won't amount to a hill of beans because the transmission mechanism for the velocity of money is broken. Cops, teachers, and firemen will get paid, but they'll be scared to take on new debt and will spend much of their money paying down credit card bills and overpriced mortgages. After another crash to lower levels, the stock market will stabilize.
The US will have deflation, widely, in big-ticket assets like stocks (market crash), bonds (rolling defaults), real estate (forbearance today leads to foreclosure tomorrow), trickling down to things like furniture (no interest for 5, 6, 7 years), cars (rebates, cash back, 0% financing), and appliances (oversupply). Food, especially meat, which is getting a bit pricey right now due to chinks in the supply chain, will not be affected much. Food was the one thing that didn't go up or down much during the Great Depression of the 1930s. It was cheap enough so that people didn't starve, though meats were generally considered close to being luxuries, so no worries there, until hyperinflation. Besides, even if you have a tiny back yard, you can grow some vegetables of your own to offset any price rises in meats. Why do you think your mother was always telling you to eat your vegetables? Sometimes there just isn't enough meat.
After six to 18 months of deflation, all the while the Fed printing dollars like maniacs and the government running massive deficits (probably over $8 trillion this fiscal year alone (through September 30), prices will seem to stabilize. By this time next year (2021), many will think the crisis has passed, mostly because that's what they'll be telling you on TV. But, it's just a lull. Inflation will return as all that currency begins to be spent into the economy. As the velocity of money ramps up, the Fed will respond by raising interest rates, but it won't matter. The game is on, with hyperinflation underway, the currency will continue losing value and eventually, there will be a massive default on dollar debt.
Forget, for for a few weeks or a few months what's happening on a day-to-day basis. It's mostly noise. The signal to noise ratio (SNR or S/N), a measure used in science and engineering that compares the level of a desired signal to the level of background noise, in today's economy, politics, and society, is very low, meaning the signal is barely transmitting the message as it is being drowned out by the noise.
In terms of decibels, to hear what's really happening in the world, the signal has to be about 60, the level of sound as conversational speech. If the noise is that of a rocket launch (180), the SNR is 0.33 and the noise drowns out the signal. When the SNR gets to above one (1), the signal can be heard. Putting that in perspective, a signal sound of a balloon popping is 125, a toilet flushing is 75, producing a SNR of 1.67. Those are appropriate today, as the balloon popping can metaphorically represent the debt bubble bursting and the toilet flushing the sound of US dollars losing value, going down the drain. That hasn't happened yet, but, as time progresses, the SNR will rise, pass 1.00 and the signal will eventually be loud and clear, one that everybody can hear. That's when inflation proceeds to hyperinflation, with prices rising faster than the Fed can print new currency.
It is at that point that you'll want to have gold, but especially, silver, because it will outperform the currency, just by standing still. Truth of the matter is that gold and silver don't really rise in price. An ounce of silver or a gram of gold is still an ounce or a gram. But the purchasing power of the currency is falling because there's more money circulating. Thus, in a very natural correspondence, gold and silver rise in value as the currency falls, which is why three 1964 dimes (90% silver) can buy more gas at the pump today, in 2020, than in 1964.
In the year 1964, the average retail price of gas in the U.S. was $0.30. So, back then, you could put a gallon of gas in your car with three 1964 (or earlier) dimes. Today, three dimes from 1964 or earlier are worth a silver melt value of about $1.10 each, so, with gas prices currently deflating to around $1.50 a gallon, you could buy more than two gallons of gas, even with silver (and gold) prices being suppressed. That's deflation. One could buy just one gallon and use the other roughly dime-and-a-half to help pay for the increased price of pork or beef. That's inflation. Inflation and deflation can and will occur - in different products or services - simultaneously.
Silver, even under the severe constraints imposed by the futures, central banks, the BIS, and other manipulators, has increased in value 1100% since 1964, an annual, non-compounded return of 16.67%. Try getting that from stocks or bonds. And silver is going higher. Much higher. The price of an ounce of silver in dollars is likely to double in the next few years, then double again, and again, as the dollar is gradually debased, losing all that's left of its purchasing power. Your 1964 dime will buy at least a gallon of gas or the equivalent in bread or beef or whatever items you wish to purchase. It will have value, as precious metals have for more than 5000 years. The dollar, and with it, the pound, yen, euro, yuan, and any other currency not backed by or tethered to a tangible asset (it doesn't have to be gold; it can be anything) will revert to its intrinsic value of ZERO, or close to it because every other country will be going through similar scenarios as the United States.
That's where this is all headed. Price deflation with currency inflation through Spring or Summer 2021, relative calm from 2021 to maybe the beginning of 2023, but likely before then, with inflation ramping up; then hyperinflation for two years before a complete monetary system reset is the only solution. It's not the length of time for these varying processes to occur that's importance, it's the sequence (deflation, calm (some inflation), inflation, hyperinflation) and the ability to spot the subtle changes that matters most.
Completely wrecking a global economy takes time. The Fed's been at it since 1913, and in 107 years have reduced the purchasing power of the dollar by about 97%. The last three percent - and the sopping up of all the malinvestment and toxic assets will take time... about three to four years.
At the Close, Wednesday, May 6, 2020:
Dow: 23,664.64, -218.45 (-0.91%)
NASDAQ: 8,854.39, +45.27 (+0.51%)
S&P 500: 2,848.42, -20.02 (-0.70%)
NYSE: 10,999.99, -135.41 (-1.22%)
The worldwide government response to the COVID-19 pandemic was as easy to see for cynics and skeptics as the eventual lying that would take place. First, back in January and early February, the federal government told the public that the threat to Americans from the coronavirus that was ravishing China was minimal. Gradually, that advice was replaced by travel restrictions to and from mainland China, then to and from Europe, until finally, infections and deaths from the virus began to multiply in America.
By mid-March and into the first days of Spring, the veil had been lifted and the virus was spreading rapidly across the United States, thanks to millions of international travelers on ships and airplanes that had been allowed to come and go as they pleased through the winter. Individual cases turned into clusters and clusters to severe outbreaks, especially in New York City, not surprisingly a hub for international travel.
By the time congress got around to passing emergency legislation, lockdowns and shelter-in-place recommendations were put into play by governors of the individual states. The legislation contained the usual: massive injections of currency into Wall Street (because we can't have a stock market crash), a pittance for the public, and payments to hospitals for treating patients infected with COVID-19: $13,000 for each patient admitted; $39,000 for each patient put on a ventilator.
Anybody who has been following government and Federal Reserve policy knew that the response would be to throw massive amounts of currency at the problem because that's all they know about how to handle crises.
And here we are. The government is now readying a fourth "stimulus" bill, chock full of more handouts, bailouts, and currency drops. This time, the public gets nothing. States and municipalities are going to get tons of currency to bail out their broken, drained public coffers and keep millions of teachers, cops, firemen, and paper-pushers on the job and their pensions partially funded because having the Fed backstop municipal bonds simply wasn't enough. Hospitals will get more currency. Small businesses will get another tranche of loans, pressing cynics to respond that cities get grants, while businesses have to pay it back.
All of this currency printing and government deficits won't amount to a hill of beans because the transmission mechanism for the velocity of money is broken. Cops, teachers, and firemen will get paid, but they'll be scared to take on new debt and will spend much of their money paying down credit card bills and overpriced mortgages. After another crash to lower levels, the stock market will stabilize.
The US will have deflation, widely, in big-ticket assets like stocks (market crash), bonds (rolling defaults), real estate (forbearance today leads to foreclosure tomorrow), trickling down to things like furniture (no interest for 5, 6, 7 years), cars (rebates, cash back, 0% financing), and appliances (oversupply). Food, especially meat, which is getting a bit pricey right now due to chinks in the supply chain, will not be affected much. Food was the one thing that didn't go up or down much during the Great Depression of the 1930s. It was cheap enough so that people didn't starve, though meats were generally considered close to being luxuries, so no worries there, until hyperinflation. Besides, even if you have a tiny back yard, you can grow some vegetables of your own to offset any price rises in meats. Why do you think your mother was always telling you to eat your vegetables? Sometimes there just isn't enough meat.
After six to 18 months of deflation, all the while the Fed printing dollars like maniacs and the government running massive deficits (probably over $8 trillion this fiscal year alone (through September 30), prices will seem to stabilize. By this time next year (2021), many will think the crisis has passed, mostly because that's what they'll be telling you on TV. But, it's just a lull. Inflation will return as all that currency begins to be spent into the economy. As the velocity of money ramps up, the Fed will respond by raising interest rates, but it won't matter. The game is on, with hyperinflation underway, the currency will continue losing value and eventually, there will be a massive default on dollar debt.
Forget, for for a few weeks or a few months what's happening on a day-to-day basis. It's mostly noise. The signal to noise ratio (SNR or S/N), a measure used in science and engineering that compares the level of a desired signal to the level of background noise, in today's economy, politics, and society, is very low, meaning the signal is barely transmitting the message as it is being drowned out by the noise.
In terms of decibels, to hear what's really happening in the world, the signal has to be about 60, the level of sound as conversational speech. If the noise is that of a rocket launch (180), the SNR is 0.33 and the noise drowns out the signal. When the SNR gets to above one (1), the signal can be heard. Putting that in perspective, a signal sound of a balloon popping is 125, a toilet flushing is 75, producing a SNR of 1.67. Those are appropriate today, as the balloon popping can metaphorically represent the debt bubble bursting and the toilet flushing the sound of US dollars losing value, going down the drain. That hasn't happened yet, but, as time progresses, the SNR will rise, pass 1.00 and the signal will eventually be loud and clear, one that everybody can hear. That's when inflation proceeds to hyperinflation, with prices rising faster than the Fed can print new currency.
It is at that point that you'll want to have gold, but especially, silver, because it will outperform the currency, just by standing still. Truth of the matter is that gold and silver don't really rise in price. An ounce of silver or a gram of gold is still an ounce or a gram. But the purchasing power of the currency is falling because there's more money circulating. Thus, in a very natural correspondence, gold and silver rise in value as the currency falls, which is why three 1964 dimes (90% silver) can buy more gas at the pump today, in 2020, than in 1964.
In the year 1964, the average retail price of gas in the U.S. was $0.30. So, back then, you could put a gallon of gas in your car with three 1964 (or earlier) dimes. Today, three dimes from 1964 or earlier are worth a silver melt value of about $1.10 each, so, with gas prices currently deflating to around $1.50 a gallon, you could buy more than two gallons of gas, even with silver (and gold) prices being suppressed. That's deflation. One could buy just one gallon and use the other roughly dime-and-a-half to help pay for the increased price of pork or beef. That's inflation. Inflation and deflation can and will occur - in different products or services - simultaneously.
Silver, even under the severe constraints imposed by the futures, central banks, the BIS, and other manipulators, has increased in value 1100% since 1964, an annual, non-compounded return of 16.67%. Try getting that from stocks or bonds. And silver is going higher. Much higher. The price of an ounce of silver in dollars is likely to double in the next few years, then double again, and again, as the dollar is gradually debased, losing all that's left of its purchasing power. Your 1964 dime will buy at least a gallon of gas or the equivalent in bread or beef or whatever items you wish to purchase. It will have value, as precious metals have for more than 5000 years. The dollar, and with it, the pound, yen, euro, yuan, and any other currency not backed by or tethered to a tangible asset (it doesn't have to be gold; it can be anything) will revert to its intrinsic value of ZERO, or close to it because every other country will be going through similar scenarios as the United States.
That's where this is all headed. Price deflation with currency inflation through Spring or Summer 2021, relative calm from 2021 to maybe the beginning of 2023, but likely before then, with inflation ramping up; then hyperinflation for two years before a complete monetary system reset is the only solution. It's not the length of time for these varying processes to occur that's importance, it's the sequence (deflation, calm (some inflation), inflation, hyperinflation) and the ability to spot the subtle changes that matters most.
Completely wrecking a global economy takes time. The Fed's been at it since 1913, and in 107 years have reduced the purchasing power of the dollar by about 97%. The last three percent - and the sopping up of all the malinvestment and toxic assets will take time... about three to four years.
Anything that has more upside than downside from random events (or certain shocks) is antifragile; the reverse is fragile.
We have been fragilizing the economy, our health, political life, education, almost everything… by suppressing randomness and volatility. Much of our modern, structured, world has been harming us with top-down policies and contraptions… which do precisely this: an insult to the antifragility of systems. This is the tragedy of modernity: As with neurotically overprotective parents, those trying to help are often hurting us the most.
-- Nasim Taleb
It would be nice if we started listening to the people who have been right rather than the people who have theories.
-- Mike Maloney, The Hidden Secrets of Money, Episode 7, Velocity & the Money Illusion
At the Close, Wednesday, May 6, 2020:
Dow: 23,664.64, -218.45 (-0.91%)
NASDAQ: 8,854.39, +45.27 (+0.51%)
S&P 500: 2,848.42, -20.02 (-0.70%)
NYSE: 10,999.99, -135.41 (-1.22%)
Saturday, March 14, 2020
WEEKEND WRAP: Cancel Everything Else, But Stock and Bond Markets Will Remain Open
Despite Friday's massive rally, this past week was one of the worst on record for Wall Street, as the Dow lost another 10 percent and the NYSE Composite, the broadest measure of equities in the United States, dropped more than 12 percent, below levels last seen in late 2016.
With all the major indices ensconced in bear market territory (-20%), which the Dow entered on Wednesday afternoon, Friday's jaunt to the upside was more short-covering and a boatload of pent-up, falsely-placed optimism than anything positive, manifesting itself in the final 27 minutes of trading while President Trump was declaring a national emergency over the COVID-19 crisis, the outbreak declared a global pandemic by the World Health Organization (WHO) two days prior.
The week in financial markets was literally one for the record books, with record gains and losses recorded on all US indices, Friday's meteoric rise becoming the largest one-day gain on the Dow, NASDAQ, and S&P 500, just a day after the biggest point losses. Market volatility has been off the charts as well, as the VIX has remained at an inflated level over the past three weeks, rising as high as 77.54 on Friday before coming down through the week-ending rally.
Putting that into perspective, the VIX closed at 17.08 on February 21. On Thursday, March 12, it ended the session at 75.47, and Friday, 57.83. These are extraordinary numbers.
It wasn't just stocks that were battered and bruised during the week. Bonds took painful hits at the long end of the curve, the 10-year note yield rising from 0.54% on Monday to 0.94% on Friday. Yield on the 20-year was up 44 basis points, from 0.87 to 1.31%. The 30-year bond yield went from 0.99 to 1.56, an enormous, 57 basis point move in just four days.
Shorter duration offerings were bought, sending yields in the other direction, which helped steepen the curve and iron out most of the inversion. Top-to-bottom, the curve was at a mere 73 basis points on Monday, increasing to 128 by Friday.
The most perplexing trade had to be precious metals, which were whipsawed to unforeseen levels as the week wore on. Gold, which had rocketed to 1683.65 on March 6, plummeted to 1529.90 on Friday. Silver fell from a high of 18.78 on February 24 to a close Friday of 14.69. That puts the gold:silver ratio at a record, 104.15.
Closings and cancellations were all the rage late in the week. The NBA canceled their remaining regular season games, as did the NHL. The NCAA cancelled the annual Men's and Women's basketball tournaments and all the major conferences canceled the remainder of their championships. Major League Baseball suspended all Spring Training games and pushed back the opening of the regular season temporarily by two weeks, from March 26th to April 9, at the earliest.
Broadway shows were cancelled in New York, as were any gatherings of 500 or more, throughout the state. California banned gatherings of 250 or more. Disney closed all of its major resort properties, including Disney World in Florida, and halted production on a number of films in progress.
More than 46,000 schools had announced closures by week's end. In Europe, Italy closed its borders, followed by Spain on Saturday. Just about any kind of social activity involving an audience has been shut down indefinitely. DollyWorld in Tennessee closed its doors on Friday. Augusta National postponed the Masters golf tournament and did not specify a date for when it would be held.
For many people, the cancellation of sporting events, shows, and theme parks leaves them with little to do. All cruise lines are on hiatus and President Trump imposed a travel ban to and from Europe and included Great Britain and Ireland on Saturday.
Shopping for essentials seemed to be on the mind of quite a few. Stores like Costco, Wal-Mart and other large grocery chains (Kroger's, Wegman's) saw some shelves emptied quickly, especially the staples, bread, milk, and toilet paper, which was apparently the hottest commodity on the planet this past week. The Players Championship, which was halted on Thursday due to darkness, never got the second round started, cancelling the event and dividing half the prize money evenly among players.
What will continue is the pursuit of money and all its derivatives in equity, bond, and commodity markets, as of this writing. Markets should open Monday as scheduled, though floor traders at the NYSE will surely be screened upon entering the building. Most trading is done electronically, and many traders are working from home instead of offices on Wall Street, throughout Manhattan and in New Jersey and Connecticut.
The Fed has promised as much as $1.5 trillion in repo operations and probably more will be needed. Additionally, the FOMC meeting this Tuesday and Wednesday promises to be of paramount interest, with expectations of another 75 to 100 basis points cut to the federal funds rate, bringing it effectively to the zero bound. The Fed executed an emergency cut of 50 basis points on March 3rd, bringing the overnight lending rate to 1.00-1.25% The Bank of England cut its main bank rate to 0.25% with a 50 basis point slash on March 11.
As the economy weighs the impacts of COVID-19 on the business community and global economies, the threat of recession looms large in all developed nations. With markets turning decidedly bearish since the spread of the disease expanded out of mainland China, companies are looking at major disruptions to business and first quarter earnings. If the crisis is an extended one, second quarter results will also be impacted to a greater degree than they already are.
Estimates for US GDP in the first quarter were already low, teetering around 1.5 to 2.0 percent and that will certainly come in lower than expected, but economists believe the hit to the second quarter (April-June) will be even greater, with some calling for a GDP decline of three to four percent.
With all that's gone on over the course of the past three weeks, nothing is for certain as the market searches for a bottom. While it's nearly assured that Thursday's knee-shaking rout will not prove to be the ultimate drop point, it brings some interesting perspectives to light, particularly, what if the virus does actually peter out with the onset of warmer weather and all this emergency preparedness turns out to be major overkill in addition to being a major buzz kill?
If conditions begin to improve rapidly, the impact to the second quarter would be minimal and first quarter results might actually be skewed positively due to all the panic buying by the general public. That would certainly wrong-foot any number of investors, sending alternate shock waves back at the bears.
Opinion is still out on how long this state of emergency will exist and whether measures will become more severe in coming weeks remains to be seen. The outbreak in the United States has not been particularly alarming, with 2,569 cases and now, 51 deaths, though those numbers continue to accelerate and probably will exceed 8,000 and 200 over the coming week. Most cases are mild, but lack of testing due to fumbling incompetence at the CDC and being slow in preparing overall might cause the numbers to spike.
Whatever the case, the money people will carry on, Washington will bail out anybody and anything with freshly printed greenbacks and the deficit will soar even further into the stratosphere. The global economy has reached a point of no return and is rapidly applying the principles of Modern Monetary Theory (MMT) to a system that has basically be dysfunctional since October 2008.
At the Close, Friday, March 13, 2020:
Dow Jones Industrial Average: 23,185.62, +1,985.00 (+9.36%)
NASDAQ: 7,874.88, +673.07 (+9.35%)
S&P 500: 2,711.02, +230.38 (+9.29%)
NYSE: 10,851.98, +791.21 (+7.86%)
For the Week:
Dow: -2679.16 (-10.36%)
NASDAQ: -700.74 (-8.17%)
S&P 500: -261.35 (-8.79%)
NYSE: -1500.06 (-12.14%)
With all the major indices ensconced in bear market territory (-20%), which the Dow entered on Wednesday afternoon, Friday's jaunt to the upside was more short-covering and a boatload of pent-up, falsely-placed optimism than anything positive, manifesting itself in the final 27 minutes of trading while President Trump was declaring a national emergency over the COVID-19 crisis, the outbreak declared a global pandemic by the World Health Organization (WHO) two days prior.
The week in financial markets was literally one for the record books, with record gains and losses recorded on all US indices, Friday's meteoric rise becoming the largest one-day gain on the Dow, NASDAQ, and S&P 500, just a day after the biggest point losses. Market volatility has been off the charts as well, as the VIX has remained at an inflated level over the past three weeks, rising as high as 77.54 on Friday before coming down through the week-ending rally.
Putting that into perspective, the VIX closed at 17.08 on February 21. On Thursday, March 12, it ended the session at 75.47, and Friday, 57.83. These are extraordinary numbers.
It wasn't just stocks that were battered and bruised during the week. Bonds took painful hits at the long end of the curve, the 10-year note yield rising from 0.54% on Monday to 0.94% on Friday. Yield on the 20-year was up 44 basis points, from 0.87 to 1.31%. The 30-year bond yield went from 0.99 to 1.56, an enormous, 57 basis point move in just four days.
Shorter duration offerings were bought, sending yields in the other direction, which helped steepen the curve and iron out most of the inversion. Top-to-bottom, the curve was at a mere 73 basis points on Monday, increasing to 128 by Friday.
The most perplexing trade had to be precious metals, which were whipsawed to unforeseen levels as the week wore on. Gold, which had rocketed to 1683.65 on March 6, plummeted to 1529.90 on Friday. Silver fell from a high of 18.78 on February 24 to a close Friday of 14.69. That puts the gold:silver ratio at a record, 104.15.
Closings and cancellations were all the rage late in the week. The NBA canceled their remaining regular season games, as did the NHL. The NCAA cancelled the annual Men's and Women's basketball tournaments and all the major conferences canceled the remainder of their championships. Major League Baseball suspended all Spring Training games and pushed back the opening of the regular season temporarily by two weeks, from March 26th to April 9, at the earliest.
Broadway shows were cancelled in New York, as were any gatherings of 500 or more, throughout the state. California banned gatherings of 250 or more. Disney closed all of its major resort properties, including Disney World in Florida, and halted production on a number of films in progress.
More than 46,000 schools had announced closures by week's end. In Europe, Italy closed its borders, followed by Spain on Saturday. Just about any kind of social activity involving an audience has been shut down indefinitely. DollyWorld in Tennessee closed its doors on Friday. Augusta National postponed the Masters golf tournament and did not specify a date for when it would be held.
For many people, the cancellation of sporting events, shows, and theme parks leaves them with little to do. All cruise lines are on hiatus and President Trump imposed a travel ban to and from Europe and included Great Britain and Ireland on Saturday.
Shopping for essentials seemed to be on the mind of quite a few. Stores like Costco, Wal-Mart and other large grocery chains (Kroger's, Wegman's) saw some shelves emptied quickly, especially the staples, bread, milk, and toilet paper, which was apparently the hottest commodity on the planet this past week. The Players Championship, which was halted on Thursday due to darkness, never got the second round started, cancelling the event and dividing half the prize money evenly among players.
What will continue is the pursuit of money and all its derivatives in equity, bond, and commodity markets, as of this writing. Markets should open Monday as scheduled, though floor traders at the NYSE will surely be screened upon entering the building. Most trading is done electronically, and many traders are working from home instead of offices on Wall Street, throughout Manhattan and in New Jersey and Connecticut.
The Fed has promised as much as $1.5 trillion in repo operations and probably more will be needed. Additionally, the FOMC meeting this Tuesday and Wednesday promises to be of paramount interest, with expectations of another 75 to 100 basis points cut to the federal funds rate, bringing it effectively to the zero bound. The Fed executed an emergency cut of 50 basis points on March 3rd, bringing the overnight lending rate to 1.00-1.25% The Bank of England cut its main bank rate to 0.25% with a 50 basis point slash on March 11.
As the economy weighs the impacts of COVID-19 on the business community and global economies, the threat of recession looms large in all developed nations. With markets turning decidedly bearish since the spread of the disease expanded out of mainland China, companies are looking at major disruptions to business and first quarter earnings. If the crisis is an extended one, second quarter results will also be impacted to a greater degree than they already are.
Estimates for US GDP in the first quarter were already low, teetering around 1.5 to 2.0 percent and that will certainly come in lower than expected, but economists believe the hit to the second quarter (April-June) will be even greater, with some calling for a GDP decline of three to four percent.
With all that's gone on over the course of the past three weeks, nothing is for certain as the market searches for a bottom. While it's nearly assured that Thursday's knee-shaking rout will not prove to be the ultimate drop point, it brings some interesting perspectives to light, particularly, what if the virus does actually peter out with the onset of warmer weather and all this emergency preparedness turns out to be major overkill in addition to being a major buzz kill?
If conditions begin to improve rapidly, the impact to the second quarter would be minimal and first quarter results might actually be skewed positively due to all the panic buying by the general public. That would certainly wrong-foot any number of investors, sending alternate shock waves back at the bears.
Opinion is still out on how long this state of emergency will exist and whether measures will become more severe in coming weeks remains to be seen. The outbreak in the United States has not been particularly alarming, with 2,569 cases and now, 51 deaths, though those numbers continue to accelerate and probably will exceed 8,000 and 200 over the coming week. Most cases are mild, but lack of testing due to fumbling incompetence at the CDC and being slow in preparing overall might cause the numbers to spike.
Whatever the case, the money people will carry on, Washington will bail out anybody and anything with freshly printed greenbacks and the deficit will soar even further into the stratosphere. The global economy has reached a point of no return and is rapidly applying the principles of Modern Monetary Theory (MMT) to a system that has basically be dysfunctional since October 2008.
At the Close, Friday, March 13, 2020:
Dow Jones Industrial Average: 23,185.62, +1,985.00 (+9.36%)
NASDAQ: 7,874.88, +673.07 (+9.35%)
S&P 500: 2,711.02, +230.38 (+9.29%)
NYSE: 10,851.98, +791.21 (+7.86%)
For the Week:
Dow: -2679.16 (-10.36%)
NASDAQ: -700.74 (-8.17%)
S&P 500: -261.35 (-8.79%)
NYSE: -1500.06 (-12.14%)
Thursday, February 13, 2020
China Announces Massive Increase In Number of New Cases of COVID-19 (coronavirus, Wuhan Flu, WuFlu)
Money Daily claims no special powers, but, just by coincidence, after yesterday's post cried out to the Chinese for transparency, some actually was delivered.
Coming too late to affect the meteoric rise in US stocks on Wednesday, China's official propaganda wing may be coming to its senses, albeit quite late in the game.
The new totals are being reported with some differences, but John Hopkins' usually-reliable counts have mainland China at 59,822, with worldwide reported cases at 60,349. There are 527 confirmed cases outside of China and a total of 1,370 deaths, all but two occurring in China.
These are alarming numbers, only now shedding some light on just how widespread the viral infection has gone on mainland China, and just how deeply Chinese officials have been trying to cover up the carnage. It's one thing to fudge economic numbers, which China does regularly and gratuitously, but quite another when human lives are at stake.
Revelation of the virus spreading faster, affecting more people by orders of magnitude and killing more than double the numbers previously reported raised eyebrows around the world, sending markets into reverse, though not to any alarming degree. Asian and European markets staged orderly retreats of less than one percent.
Hoping to avoid complete panic, international indices are being buoyed by central banks, no doubt furiously buying behind the scenes as the severity of the condition in China becomes more apparent. Supply chains already have broken down and this is only the beginning. With China looking to be out of commission for the better part of this and next month - possibly longer - the disruption to global trade and manufacturing cannot and should not be understated.
Being the global hub for manufacturing, China, by being late in its attempts to contain the spread of COVID-19 and then attempting to downplay the severity of the crisis it faces has put its own economy and that of the globalized world in jeopardy.
This story continues to evolve and the implications just became much more serious than the Chinese government, the WHO and health officials in other countries are admitting.
Money Daily will attempt to stay atop current developments on a daily, if not more frequent, basis.
At the Close, Wednesday, February 12, 2020:
Dow Jones Industrial Average: 29,551.42, +275.12 (+0.94%)
NASDAQ: 9,725.96, +87.02 (+0.90%)
S&P 500: 3,379.45, +21.70 (+0.65%)
NYSE: 14,136.98, +82.88 (+0.59%)
Coming too late to affect the meteoric rise in US stocks on Wednesday, China's official propaganda wing may be coming to its senses, albeit quite late in the game.
Late Wednesday, instead of the usual 2500-3000 new reported cases and 90-100 fresh deaths from the newly-named COVID-19, China's Ministry of Truth instead announced 14,840 new cases and 242 deaths.
The new totals are being reported with some differences, but John Hopkins' usually-reliable counts have mainland China at 59,822, with worldwide reported cases at 60,349. There are 527 confirmed cases outside of China and a total of 1,370 deaths, all but two occurring in China.
These are alarming numbers, only now shedding some light on just how widespread the viral infection has gone on mainland China, and just how deeply Chinese officials have been trying to cover up the carnage. It's one thing to fudge economic numbers, which China does regularly and gratuitously, but quite another when human lives are at stake.
Revelation of the virus spreading faster, affecting more people by orders of magnitude and killing more than double the numbers previously reported raised eyebrows around the world, sending markets into reverse, though not to any alarming degree. Asian and European markets staged orderly retreats of less than one percent.
Hoping to avoid complete panic, international indices are being buoyed by central banks, no doubt furiously buying behind the scenes as the severity of the condition in China becomes more apparent. Supply chains already have broken down and this is only the beginning. With China looking to be out of commission for the better part of this and next month - possibly longer - the disruption to global trade and manufacturing cannot and should not be understated.
Being the global hub for manufacturing, China, by being late in its attempts to contain the spread of COVID-19 and then attempting to downplay the severity of the crisis it faces has put its own economy and that of the globalized world in jeopardy.
This story continues to evolve and the implications just became much more serious than the Chinese government, the WHO and health officials in other countries are admitting.
Money Daily will attempt to stay atop current developments on a daily, if not more frequent, basis.
At the Close, Wednesday, February 12, 2020:
Dow Jones Industrial Average: 29,551.42, +275.12 (+0.94%)
NASDAQ: 9,725.96, +87.02 (+0.90%)
S&P 500: 3,379.45, +21.70 (+0.65%)
NYSE: 14,136.98, +82.88 (+0.59%)
Thursday, January 23, 2020
Stocks Slide As IMF Revises Global Growth Projections Lower... Again
In the Senate, the impeachment trial of President Trump is well underway, though some Senators are wondering how the House managers can keep up their opening statement for another 16 hours without being laughed out of the chamber.
Adam Schiff, Gerold Nadler and their associates dithered and danced around the same tired narrative that's been their staple for the past six months and nobody is really buying it. Perhaps that's why stocks slumped late in the day, due to overwhelming boredom.
Impeachment aside, stocks were off to a solid start on Wednesday, but failed to make much progress, with the Dow actually ending in the red after being up 124 points early in the session.
There are be a plethora of reasons to be selling stocks at this juncture, main among them valuation, but the continuing slowdown in global trade and potential for most of Europe to fall into a recession are probably the most "top of mind" as winter winds blow cold across the Northern Hemisphere.
Lowering its 2019 forecast (a little late) for the sixth straight time, the IMF dropped expectations for global growth to 2.9%, down 0.1 from it's previous 3.0% expectation. Most of the data is already in place. The IMF, like everyone else, is monitoring fourth quarter results from corporations around the world.
In what has to be regarded as somewhat on the cheeky side, the IMF also lowered its 2020 forecast, from 3.4% to 3.3%. It's ludicrous to believe that the amalgamated egoistic economists at the IMF can get any prediction right, especially one calling for improvement when the early evidence is clearly favoring decline. Within a few months, these brainiacs will be revising their crystal ball projections and tea leaf readings to something more aligned with reality.
Considering that the US, at least, is at the far end of an 11-year bull market, some slowdown would be expected and it's notable that the brain-dead at the IMF cannot fathom the declining birth rate effects of demographics in developed countries, most of which have fallen below replacement figures.
With cheerleaders like those at the IMF and the relentless money creation by the Fed, there's little wonder the rich get richer as fake predictions are afforded the most credence.
At some point, the Fed will stop printing or the dollar will hyper-inflate. At that point, the IMF can revise upward and still find itself woefully behind the curve.
At the Close, Wednesday, January 22, 2020:
Dow Jones Industrial Average: 29,186.27, -9.77 (-0.03%)
NASDAQ: 9,383.77, +12.96 (+0.14%)
S&P 500: 3,321.75, +0.96 (+0.03%)
NYSE: 14,110.24, +0.26 (+0.00%)
Adam Schiff, Gerold Nadler and their associates dithered and danced around the same tired narrative that's been their staple for the past six months and nobody is really buying it. Perhaps that's why stocks slumped late in the day, due to overwhelming boredom.
Impeachment aside, stocks were off to a solid start on Wednesday, but failed to make much progress, with the Dow actually ending in the red after being up 124 points early in the session.
There are be a plethora of reasons to be selling stocks at this juncture, main among them valuation, but the continuing slowdown in global trade and potential for most of Europe to fall into a recession are probably the most "top of mind" as winter winds blow cold across the Northern Hemisphere.
Lowering its 2019 forecast (a little late) for the sixth straight time, the IMF dropped expectations for global growth to 2.9%, down 0.1 from it's previous 3.0% expectation. Most of the data is already in place. The IMF, like everyone else, is monitoring fourth quarter results from corporations around the world.
In what has to be regarded as somewhat on the cheeky side, the IMF also lowered its 2020 forecast, from 3.4% to 3.3%. It's ludicrous to believe that the amalgamated egoistic economists at the IMF can get any prediction right, especially one calling for improvement when the early evidence is clearly favoring decline. Within a few months, these brainiacs will be revising their crystal ball projections and tea leaf readings to something more aligned with reality.
Considering that the US, at least, is at the far end of an 11-year bull market, some slowdown would be expected and it's notable that the brain-dead at the IMF cannot fathom the declining birth rate effects of demographics in developed countries, most of which have fallen below replacement figures.
With cheerleaders like those at the IMF and the relentless money creation by the Fed, there's little wonder the rich get richer as fake predictions are afforded the most credence.
At some point, the Fed will stop printing or the dollar will hyper-inflate. At that point, the IMF can revise upward and still find itself woefully behind the curve.
At the Close, Wednesday, January 22, 2020:
Dow Jones Industrial Average: 29,186.27, -9.77 (-0.03%)
NASDAQ: 9,383.77, +12.96 (+0.14%)
S&P 500: 3,321.75, +0.96 (+0.03%)
NYSE: 14,110.24, +0.26 (+0.00%)
Thursday, December 5, 2019
Stocks Reverse Course, But Do Not Recover Recent Losses; ADP Jobs Misses Target
After three days of losses, stocks bounced back on Wednesday, though they did not recover all of the ground lost.
Since the close Wednesday prior to Thanksgiving, the Dow is down over 500 points, the NASDAQ has shed 140 points, and the S&P 500 is off 40 points. The bounce on Wednesday, December 4, recovered less than half of the recent declines. Though the losses are nothing serious in the larger scheme of things, they are signaling that at least some of the investment community are not convinced the US economy, or US corporations, are in the best of ways. Thus, profits are being taken off the table. Further declines will feed into more year-end profit-taking and further loss prevention.
Recent movement in bonds also suggests that a countertrend is developing, with money shifting from risk assets into the bond market, where returns are low but widely accepted as safer than stocks. When money flows out of dividend-producing equities into treasuries or corporate debt, it's a sure sign that investors are nervous about the future direction. Last December witnessed massive declines, bordering on sending the stock market into bearish conditions, though at decline was stopped short by Treasury Secretary Steven Mnuchin, whose message to the President's Working Group on Financial Markets (AKA the Plunge Protection Team, or PPT) was clearly designed to rescue the stock market from rampant year-end selling.
Actions taken by the Working Group served to stem the tide of sellers and produce robust gains though the better part of 2019. With the year nearing an end, stocks are once again close to all-time highs, though recent data does not support such lofty valuations. From ISM manufacturing coming in below expectations, to Wednesday's ADP private sector jobs report for November, which reported an increase of just 67,000 jobs. The payroll number was well below the expected 150,000, and was the slowest growth since May.
Analysts are warning that the ADP number may be in stark contrast to what the BLS reports in Friday's non-farm payroll data, because the ADP report did not include General Motors workers returning from strike, whereas the BLS data will include those returning workers as "jobs added." The non-farm report for November is expected to show job gains in the range of 180,000 to 187,000 on Friday, up from 128,000 in October.
It makes reading the tea leaves of market sentiment and data just a little more confusing than it already is, given the daily up-and-down movements prompted by the changing signals regarding a US trade deal with China. The trade war has been and will continue to be the main directional driver of the stock market, probably for longer than most people would entertain. The Chinese appear intent on waiting out President Trump until the 2016 election in November, and it also appears that mr. Trump is fine with that.
A non-deal on trade can only cause more consternation for investors wishing to get a real perspective on the macro side of things, though one doesn't have to look far to see that global trade has been and continues to slip and slide away. Overall, global conditions are not suitable to induce a stock market rally, though they are also not severe enough to cause a crash. A slow grind down may be the path of least resistance, with days and weeks of gains and losses speckling the index charts.
At the Close, Wednesday, December 4, 2019:
Dow Jones Industrial Average: 27,649.78, +146.97 (+0.53%)
NASDAQ: 8,566.67, +46.03 (+0.54%)
S&P 500: 3,112.76, +19.56 (+0.63%)
NYSE Composite: 13,457.97, +91.88 (+0.69%)
Since the close Wednesday prior to Thanksgiving, the Dow is down over 500 points, the NASDAQ has shed 140 points, and the S&P 500 is off 40 points. The bounce on Wednesday, December 4, recovered less than half of the recent declines. Though the losses are nothing serious in the larger scheme of things, they are signaling that at least some of the investment community are not convinced the US economy, or US corporations, are in the best of ways. Thus, profits are being taken off the table. Further declines will feed into more year-end profit-taking and further loss prevention.
Recent movement in bonds also suggests that a countertrend is developing, with money shifting from risk assets into the bond market, where returns are low but widely accepted as safer than stocks. When money flows out of dividend-producing equities into treasuries or corporate debt, it's a sure sign that investors are nervous about the future direction. Last December witnessed massive declines, bordering on sending the stock market into bearish conditions, though at decline was stopped short by Treasury Secretary Steven Mnuchin, whose message to the President's Working Group on Financial Markets (AKA the Plunge Protection Team, or PPT) was clearly designed to rescue the stock market from rampant year-end selling.
Actions taken by the Working Group served to stem the tide of sellers and produce robust gains though the better part of 2019. With the year nearing an end, stocks are once again close to all-time highs, though recent data does not support such lofty valuations. From ISM manufacturing coming in below expectations, to Wednesday's ADP private sector jobs report for November, which reported an increase of just 67,000 jobs. The payroll number was well below the expected 150,000, and was the slowest growth since May.
Analysts are warning that the ADP number may be in stark contrast to what the BLS reports in Friday's non-farm payroll data, because the ADP report did not include General Motors workers returning from strike, whereas the BLS data will include those returning workers as "jobs added." The non-farm report for November is expected to show job gains in the range of 180,000 to 187,000 on Friday, up from 128,000 in October.
It makes reading the tea leaves of market sentiment and data just a little more confusing than it already is, given the daily up-and-down movements prompted by the changing signals regarding a US trade deal with China. The trade war has been and will continue to be the main directional driver of the stock market, probably for longer than most people would entertain. The Chinese appear intent on waiting out President Trump until the 2016 election in November, and it also appears that mr. Trump is fine with that.
A non-deal on trade can only cause more consternation for investors wishing to get a real perspective on the macro side of things, though one doesn't have to look far to see that global trade has been and continues to slip and slide away. Overall, global conditions are not suitable to induce a stock market rally, though they are also not severe enough to cause a crash. A slow grind down may be the path of least resistance, with days and weeks of gains and losses speckling the index charts.
At the Close, Wednesday, December 4, 2019:
Dow Jones Industrial Average: 27,649.78, +146.97 (+0.53%)
NASDAQ: 8,566.67, +46.03 (+0.54%)
S&P 500: 3,112.76, +19.56 (+0.63%)
NYSE Composite: 13,457.97, +91.88 (+0.69%)
Tuesday, September 3, 2019
Weekend Wrap: Stocks Rebound in Face of Coming Currency Crisis
Other than the idea that Chinese and US officials were "talking" about trade and tariffs, nothing much changed in the world of high finance during the week, though investors thought they heard the "all clear" whistle.
Major indices broke off a four-week losing streak, bounding higher by 2.5 to three precent over the course of the week, heading into the Labor Day holiday.
The end of August marks the unofficial end of summer, back to school activity, and a return from the idyllic Hamptons or other leisure locales of the Wall Street hard-liners, the big boys with big money who guide trades, firms and financial fates.
Over the holiday weekend, the US slapped on the promised tariffs on September 1, with China responding with some of their own on US imports. That ran in stark contrast to the trading sentiment from the week past and suggests that the gains may be fleeting.
As the opening approaches for the first trading day of September, US futures are sliding. Anticipation of easing tensions in the trade wars are fading fast, though the narrative that the trade and tariff foibles of Trump and Xi are the sole motivator for moving equities is likely a contrived one.
What really worries Wall Street and should concern anybody with a pension tied to a 401k or other stock market vehicle is the shaky state of global commerce. The World Bank, IMF, and pundits far and wide have been predicting a recession for well over a year. Though the timing of such a downturn is far from settled science, evidence continues to build. More than just recession concerns are deeper fears that central banks have run out of ammunition with which to save the world again.
Interest rates, long regarded as the primary tool of central banks to stave off natural downturns in the business cycle are already low and many negative, prompting unbelievers to portend the end of central bank monetary hegemony. While such calls for an impending end to the global financial scheme are almost always present, this time appears to hold some truth.
Fractional reserve lending of debt has impoverished the lower and middle classes, expanded wealth inequality, and may now be acting as a brake on the system as money movement is nearing stall speed. It's been nearly 50 years since President Nixon closed the gold window and set the world on a path of unbacked, floating currencies. The result has been a revolving bubble, boom-bust scenario, punctuated by massive counterfeiting by coordinated central banking interests, each successive round more severe than the last.
Considering the depth of the last crisis in 2007-2009, central banks are desperate to keep the financial plates spinning for as long as possible, because the next crisis may well be their last.
These prospects are not pretty for central banks, or, for that matter, anybody. However, change is always in the wind, and the wind is blowing with a hot breath.
2001 was a malinvestment correction. 2008 was a liquidity affair. 202---? will be a currency crisis that will shake the foundations of monetary policy.
At the Close, Friday, August 30, 2019:
Dow Jones Industrial Average: 26,403.28, +41.08 (+0.16%)
NASDAQ: 7,962.88, -10.51 (-0.13%)
S&P 500: 2,926.46, +1.88 (+0.06%)
NYSE Composite: 12,736.88, +32.88 (+0.26%)
For the Week:
Dow: +774.38 (+3.02%)
NASDAQ: +211.12 (+2.72%)
S&P 500: +79.35 (+2.79%)
NYSE Composite: +320.43 (+2.58%)
Major indices broke off a four-week losing streak, bounding higher by 2.5 to three precent over the course of the week, heading into the Labor Day holiday.
The end of August marks the unofficial end of summer, back to school activity, and a return from the idyllic Hamptons or other leisure locales of the Wall Street hard-liners, the big boys with big money who guide trades, firms and financial fates.
Over the holiday weekend, the US slapped on the promised tariffs on September 1, with China responding with some of their own on US imports. That ran in stark contrast to the trading sentiment from the week past and suggests that the gains may be fleeting.
As the opening approaches for the first trading day of September, US futures are sliding. Anticipation of easing tensions in the trade wars are fading fast, though the narrative that the trade and tariff foibles of Trump and Xi are the sole motivator for moving equities is likely a contrived one.
What really worries Wall Street and should concern anybody with a pension tied to a 401k or other stock market vehicle is the shaky state of global commerce. The World Bank, IMF, and pundits far and wide have been predicting a recession for well over a year. Though the timing of such a downturn is far from settled science, evidence continues to build. More than just recession concerns are deeper fears that central banks have run out of ammunition with which to save the world again.
Interest rates, long regarded as the primary tool of central banks to stave off natural downturns in the business cycle are already low and many negative, prompting unbelievers to portend the end of central bank monetary hegemony. While such calls for an impending end to the global financial scheme are almost always present, this time appears to hold some truth.
Fractional reserve lending of debt has impoverished the lower and middle classes, expanded wealth inequality, and may now be acting as a brake on the system as money movement is nearing stall speed. It's been nearly 50 years since President Nixon closed the gold window and set the world on a path of unbacked, floating currencies. The result has been a revolving bubble, boom-bust scenario, punctuated by massive counterfeiting by coordinated central banking interests, each successive round more severe than the last.
Considering the depth of the last crisis in 2007-2009, central banks are desperate to keep the financial plates spinning for as long as possible, because the next crisis may well be their last.
These prospects are not pretty for central banks, or, for that matter, anybody. However, change is always in the wind, and the wind is blowing with a hot breath.
2001 was a malinvestment correction. 2008 was a liquidity affair. 202---? will be a currency crisis that will shake the foundations of monetary policy.
At the Close, Friday, August 30, 2019:
Dow Jones Industrial Average: 26,403.28, +41.08 (+0.16%)
NASDAQ: 7,962.88, -10.51 (-0.13%)
S&P 500: 2,926.46, +1.88 (+0.06%)
NYSE Composite: 12,736.88, +32.88 (+0.26%)
For the Week:
Dow: +774.38 (+3.02%)
NASDAQ: +211.12 (+2.72%)
S&P 500: +79.35 (+2.79%)
NYSE Composite: +320.43 (+2.58%)
Monday, January 7, 2019
Volatility Tamped Down By PPT A Probable Cause For Monday's Dullness
Chip stocks (NVDA, ADM) led the big gain on the NASDAQ, but the session overall was lackluster, with a dip at the open and a weak close.
Investors are still unconvinced the volatility of the past few months has abated. Today felt more like a temporary reprieve rather than a new paradigm. There's also the very good possibility that the Plunge Protection Team (PPT) is still active, especially considering the quick turnaround this morning. It was classic insider action, like hitting sellers over the head with a sledgehammer.
The PPT has absolutely no subtlety about it which makes their intrusions somewhat obvious, as has always been the case, even back in the days when people thought they were a myth or some kind of financial urban legend. As it turned out, the PPT was always a real thing, and a threat to fair, unmolested, open markets. Now that they've been out in the open for at least a decade, not much is left to the imagination. US markets - and, likely, almost every other market in the world - have been highly manipulated by central banks and governments working in cahoots and that's unlikely to end soon.
With friends like these in markets and the preponderance of investments in stocks, investing today is riskier than it has ever been. Who wants to play in a casino knowing that the dealer has the ability to cheat at any time? As unsuitable as it is for large money players to intervene at times of crisis, it's even worse when they do so at the drop of a hat, or, as the case may be, a few thousand points on the Dow.
It's not pleasant to witness wild swings in entire indices on a regular basis, which is why so many individual investors are so jaded. They know their money is at extreme risk all the time. There has to be a better way, and there used to be, prior to the financialization era we currently are enduring, before everything from mom's mortgage to pizza stocks are part and parcel of every fund's basic needs.
The trouble with markets today are the real probability that in the case of an extended bear market, the entire global financial system would simply implode. It keeps more than just a few heads at the IMF, BIS, and the Fed from sleeping well at night.
Dow Jones Industrial Average January Scorecard:
At the Close, Monday, January 7, 2019:
Dow Jones Industrial Average: 23,531.35, +98.19 (+0.42%)
NASDAQ: 6,823.47, +84.61 (+1.26%)
S&P 500: 2,549.69, +17.75 (+0.70%)
NYSE Composite: 11,605.96, +72.62 (+0.63)
Investors are still unconvinced the volatility of the past few months has abated. Today felt more like a temporary reprieve rather than a new paradigm. There's also the very good possibility that the Plunge Protection Team (PPT) is still active, especially considering the quick turnaround this morning. It was classic insider action, like hitting sellers over the head with a sledgehammer.
The PPT has absolutely no subtlety about it which makes their intrusions somewhat obvious, as has always been the case, even back in the days when people thought they were a myth or some kind of financial urban legend. As it turned out, the PPT was always a real thing, and a threat to fair, unmolested, open markets. Now that they've been out in the open for at least a decade, not much is left to the imagination. US markets - and, likely, almost every other market in the world - have been highly manipulated by central banks and governments working in cahoots and that's unlikely to end soon.
With friends like these in markets and the preponderance of investments in stocks, investing today is riskier than it has ever been. Who wants to play in a casino knowing that the dealer has the ability to cheat at any time? As unsuitable as it is for large money players to intervene at times of crisis, it's even worse when they do so at the drop of a hat, or, as the case may be, a few thousand points on the Dow.
It's not pleasant to witness wild swings in entire indices on a regular basis, which is why so many individual investors are so jaded. They know their money is at extreme risk all the time. There has to be a better way, and there used to be, prior to the financialization era we currently are enduring, before everything from mom's mortgage to pizza stocks are part and parcel of every fund's basic needs.
The trouble with markets today are the real probability that in the case of an extended bear market, the entire global financial system would simply implode. It keeps more than just a few heads at the IMF, BIS, and the Fed from sleeping well at night.
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 |
| 1/4/19 | 23,433.16 | +746.94 | +105.70 |
| 1/7/19 | 23,531.35 | +98.19 | +203.89 |
At the Close, Monday, January 7, 2019:
Dow Jones Industrial Average: 23,531.35, +98.19 (+0.42%)
NASDAQ: 6,823.47, +84.61 (+1.26%)
S&P 500: 2,549.69, +17.75 (+0.70%)
NYSE Composite: 11,605.96, +72.62 (+0.63)
Tuesday, November 20, 2018
Crash Much? All 2018 Gains Wiped Out In Global Stock Rout
Where to begin?
Today's stock market rout was worldwide, starting in Japan, as the NIKKEI fell 238 points, the Hong Kong's Hang Sent slid 531 points and China's SSE Composite Index closed at 2,645.85, down 57.66 points, or -2.13%.
Europe was next up on the hit list, as the Germany's DAX was off 178.13 points (-1.58%), closing in on a 20% decline for the year. Other European stock indices were down between one and one-and-a-half percent.
As markets opened in the Western Hemisphere, the selling accelerated, sending the Dow down more than 400 points at the open and other North and South American indices falling sharply. By the end of the day, it was absolute carnage, a veritable sea of red. Every equity index on Yahoo's Major World Indices page was lower, save Malaysia's KLCI, which managed a 4-point, 0.25% gain.
Seriously, though, today's crash began in the fall of 2008, when stocks were wiped out in the face of the Lehman Brothers collapse and the sub-prime housing crisis, and also had roots from April 9, 2009, when stocks finally bottomed out as the FASB loosened accounting rules, issuing an official update to rule 157, allowing companies to deviate from standard mark-to-market principles in valuing assets.
The Fed and its central bank cohorts had their dirty little fingers in the dikes as well, conjuring up trillions of dollars in liquidity, effectively bailing out financial institutions that were, essentially, bankrupt. That's what brought us here today, ten years and trillions of dollars later. The everything bubble has finally popped.
This is a rolling crash, not a hard one, like on Black Tuesday in 1929. There have been - in just the past eight trading days - losses on the Dow of 201, 602, 100, 206, 395 points and today's 552. There were gains of 201 and 124 points on Thursday and Friday of last week, but the cumulative effect comes to a loss of 1731 points since November 8, roughly a seven percent dribble.
Tuesday's losses sent the S&P 500 hurtling toward correction territory. From the close of 2,930.75 on September 20 to today's finish at 2,641.89 is a 9.86% loss. For those in the rounding up-or-down crowd, that's 10 percent, or, close enough for horseshoes or hand grenades.
For those keeping score, the Dow is down 8.81% from it's closing high on October 3 (26,828.39). The NASDAQ, which has been in and out and back into correction since October 24, is still up on the year... a whopping five points and change. The index is down 14.82% since August 29. Albeit marginally, the Dow Industrials, S&P, NYSE Composite and the Dow Transports are all lower for the year.
The NYSE Composite which peaked at 13,637.02 on January 26 and never regained that height, is down 11.61%, reaching down to correction levels today, though, like the NASDAQ, it had breached the 10% down level on October 24 and since recovered.
Lastly, the Dow Jones Industrial Average finished today with a loss of 321.52 (-3.05%), at 10,212.94. That's an 11.74% drop from the all-time high close of 11,570.84, September 14.
In the commodity space, oil was crushed again today, as WTI crude futures ended at 53.22, down $3.98 per barrel (-6.94%). According to oilprice.com, that's the lowest price since mid-October of 2017.
Where do stocks go from here? That question almost answers itself.
Dow Jones Industrial Average November Scorecard:
At the Close, Tuesday, November 20, 2018:
Dow Jones Industrial Average: 24,465.64, -551.80 (-2.21%)
NASDAQ: 6,908.82, -119.65 (-1.70%)
S&P 500: 2,641.89, -48.84 (-1.82%)
NYSE Composite: 12,054.17, -226.74 (-1.85%)
Today's stock market rout was worldwide, starting in Japan, as the NIKKEI fell 238 points, the Hong Kong's Hang Sent slid 531 points and China's SSE Composite Index closed at 2,645.85, down 57.66 points, or -2.13%.
Europe was next up on the hit list, as the Germany's DAX was off 178.13 points (-1.58%), closing in on a 20% decline for the year. Other European stock indices were down between one and one-and-a-half percent.
As markets opened in the Western Hemisphere, the selling accelerated, sending the Dow down more than 400 points at the open and other North and South American indices falling sharply. By the end of the day, it was absolute carnage, a veritable sea of red. Every equity index on Yahoo's Major World Indices page was lower, save Malaysia's KLCI, which managed a 4-point, 0.25% gain.
Seriously, though, today's crash began in the fall of 2008, when stocks were wiped out in the face of the Lehman Brothers collapse and the sub-prime housing crisis, and also had roots from April 9, 2009, when stocks finally bottomed out as the FASB loosened accounting rules, issuing an official update to rule 157, allowing companies to deviate from standard mark-to-market principles in valuing assets.
The Fed and its central bank cohorts had their dirty little fingers in the dikes as well, conjuring up trillions of dollars in liquidity, effectively bailing out financial institutions that were, essentially, bankrupt. That's what brought us here today, ten years and trillions of dollars later. The everything bubble has finally popped.
This is a rolling crash, not a hard one, like on Black Tuesday in 1929. There have been - in just the past eight trading days - losses on the Dow of 201, 602, 100, 206, 395 points and today's 552. There were gains of 201 and 124 points on Thursday and Friday of last week, but the cumulative effect comes to a loss of 1731 points since November 8, roughly a seven percent dribble.
Tuesday's losses sent the S&P 500 hurtling toward correction territory. From the close of 2,930.75 on September 20 to today's finish at 2,641.89 is a 9.86% loss. For those in the rounding up-or-down crowd, that's 10 percent, or, close enough for horseshoes or hand grenades.
For those keeping score, the Dow is down 8.81% from it's closing high on October 3 (26,828.39). The NASDAQ, which has been in and out and back into correction since October 24, is still up on the year... a whopping five points and change. The index is down 14.82% since August 29. Albeit marginally, the Dow Industrials, S&P, NYSE Composite and the Dow Transports are all lower for the year.
The NYSE Composite which peaked at 13,637.02 on January 26 and never regained that height, is down 11.61%, reaching down to correction levels today, though, like the NASDAQ, it had breached the 10% down level on October 24 and since recovered.
Lastly, the Dow Jones Industrial Average finished today with a loss of 321.52 (-3.05%), at 10,212.94. That's an 11.74% drop from the all-time high close of 11,570.84, September 14.
In the commodity space, oil was crushed again today, as WTI crude futures ended at 53.22, down $3.98 per barrel (-6.94%). According to oilprice.com, that's the lowest price since mid-October of 2017.
Where do stocks go from here? That question almost answers itself.
Dow Jones Industrial Average November Scorecard:
| Date | Close | Gain/Loss | Cum. G/L |
| 11/1/18 | 25,380.74 | +264.98 | +264.98 |
| 11/2/18 | 25,270.83 | -109.91 | +155.07 |
| 11/5/18 | 25,461.70 | +190.87 | +345.94 |
| 11/6/18 | 25,635.01 | +173.31 | +519.25 |
| 11/7/18 | 26,180.30 | +545.29 | +1064.54 |
| 11/8/18 | 26,191.22 | +10.92 | +1075.46 |
| 11/9/18 | 25,989.30 | -201.92 | +873.54 |
| 11/12/18 | 25,387.18 | -602.12 | +271.42 |
| 11/13/18 | 25,286.49 | -100.69 | +170.27 |
| 11/14/18 | 25,080.50 | -205.99 | -35.72 |
| 11/15/18 | 25,289.27 | +208.77 | +173.05 |
| 11/16/18 | 25,413.22 | +123.95 | +297.00 |
| 11/19/18 | 25,017.44 | -395.78 | -98.78 |
| 11/20/18 | 24,465.64 | -551.80 | -650.58 |
At the Close, Tuesday, November 20, 2018:
Dow Jones Industrial Average: 24,465.64, -551.80 (-2.21%)
NASDAQ: 6,908.82, -119.65 (-1.70%)
S&P 500: 2,641.89, -48.84 (-1.82%)
NYSE Composite: 12,054.17, -226.74 (-1.85%)
Friday, May 25, 2018
Sliding Oil, Spanish Crisis, Mid-Week Ramp-Fest May Produce A Dizzying Friday Plunge
Just for the heck of it, let's look at the markets from a trader's perspective as the entire US population prepares to end the work week and head off for a three-day, fun-in-the-sun weekend.
Now, this trader, call him Bob, yeah, Trader Bob, has to be looking at the charts from Wednesday and Thursday, seeing that the Dow took a deep dive on both days before recovering, but also that Thursday's dive was deeper than Wednesday's and the closing level significantly lower as well. So, Trader Bob may be thinking, "This looks suspiciously like the work of the PPT or maybe even short-covering."
Scanning the headlines for Friday morning on his Bloomberg terminal, Trader Bob takes interest in a story out of Spain that is saying Prime Minister Mariano Rajoy is facing a vote of no confidence in that country's parliament, meaning that an entire country could be soon plunged into a chaotic situation. Bob also recalls that part of Spain - Catalonia - tried, unsuccessfully, to secede from the nation last year.
Then, Trader Bob sees the price of oil dropping off the chart, and notes that Saudi and Russian oil officials are stating that crude supply increases are likely in the near future.
Trader Bob, considering how much he's made for clients by going long oil futures, produces the following thought bubble:
So, what's Trader Bob likely to do Friday morning when the opening bell rings?
Well, for one thing, since he has 24-7 access to the futures market, he's dumping all his WTI crude futures calls. Fast. When the market opens, he's probably going to sell some stocks, just to get out in front of the herd, where he won't be trampled by the rush to the exits.
But, Trader Bob isn't actually convinced that a selloff is a done deal, so he's not going to get too far out in front, just enough to trim some of his more speculative positions. He doesn't want to be, as surfers call it, "hanging ten."
Trader Bob will be patient, with one eye on oil but a more focused eye on the US equity markets. If things go from bad to worse, he'll consider whether or not it's time to bail. 200 points down on the Dow would be a test of Thursday's low (24,605.40). Breaching that level might produce the stampede everyone on Wall Street fears.
An hour prior to the opening bell, at 8:30, Bob sees the Dow, S&P, and NASDAQ futures plunging into the red. He sells more oil futures. He looks around the trading floor. Some of the younger traders are looking a little queasy, green in the face. The older, more experienced guys are handling it better, having coffee and donuts while taking up substantial short positions is selected stocks, some of them whacking away at oil companies, others focused on Facebook (FB) and Apple (AAPL).
Trader Bob's hands are getting sweaty. He knows that he's prone to panic attacks, but so is all of Wall Street. He's not thinking about a three-day weekend. He's thinking about selling everything and moving to Maine.
Dow Jones Industrial Average May Scorecard:
At the Close, Thursday, May 24, 2018:
Dow Jones Industrial Average: 24,811.76, -75.05 (-0.30%)
NASDAQ: 7,424.43, -1.53 (-0.02%)
S&P 500: 2,727.76, -5.53 (-0.20%)
NYSE Composite: 12,696.69, -46.71 (-0.37%)
Now, this trader, call him Bob, yeah, Trader Bob, has to be looking at the charts from Wednesday and Thursday, seeing that the Dow took a deep dive on both days before recovering, but also that Thursday's dive was deeper than Wednesday's and the closing level significantly lower as well. So, Trader Bob may be thinking, "This looks suspiciously like the work of the PPT or maybe even short-covering."
Scanning the headlines for Friday morning on his Bloomberg terminal, Trader Bob takes interest in a story out of Spain that is saying Prime Minister Mariano Rajoy is facing a vote of no confidence in that country's parliament, meaning that an entire country could be soon plunged into a chaotic situation. Bob also recalls that part of Spain - Catalonia - tried, unsuccessfully, to secede from the nation last year.
Then, Trader Bob sees the price of oil dropping off the chart, and notes that Saudi and Russian oil officials are stating that crude supply increases are likely in the near future.
Trader Bob, considering how much he's made for clients by going long oil futures, produces the following thought bubble:
Amazing, isn't it, that even Saudi government people and those pesky Russians understand some of the principles of economics?
Whoda thunk that if gas prices go up from about $2.30 a gallon to roughly $3.00 a gallon (a 30% increase), some people might not have as much disposable income?
And, if that lessened amount of disposable income is not spent on consumer goods, then whole industries might suffer?
And, if whole industries suffer, that might affect the greater economy?
It's not rocket science, it's the dismal science called economics.
So, what's Trader Bob likely to do Friday morning when the opening bell rings?
Well, for one thing, since he has 24-7 access to the futures market, he's dumping all his WTI crude futures calls. Fast. When the market opens, he's probably going to sell some stocks, just to get out in front of the herd, where he won't be trampled by the rush to the exits.
But, Trader Bob isn't actually convinced that a selloff is a done deal, so he's not going to get too far out in front, just enough to trim some of his more speculative positions. He doesn't want to be, as surfers call it, "hanging ten."
Trader Bob will be patient, with one eye on oil but a more focused eye on the US equity markets. If things go from bad to worse, he'll consider whether or not it's time to bail. 200 points down on the Dow would be a test of Thursday's low (24,605.40). Breaching that level might produce the stampede everyone on Wall Street fears.
An hour prior to the opening bell, at 8:30, Bob sees the Dow, S&P, and NASDAQ futures plunging into the red. He sells more oil futures. He looks around the trading floor. Some of the younger traders are looking a little queasy, green in the face. The older, more experienced guys are handling it better, having coffee and donuts while taking up substantial short positions is selected stocks, some of them whacking away at oil companies, others focused on Facebook (FB) and Apple (AAPL).
Trader Bob's hands are getting sweaty. He knows that he's prone to panic attacks, but so is all of Wall Street. He's not thinking about a three-day weekend. He's thinking about selling everything and moving to Maine.
Dow Jones Industrial Average May Scorecard:
| Date | Close | Gain/Loss | Cum. G/L |
| 5/1/18 | 24,099.05 | -64.10 | -64.10 |
| 5/2/18 | 23,924.98 | -174.07 | -238.17 |
| 5/3/18 | 23,930.15 | +5.17 | -233.00 |
| 5/4/18 | 24,262.51 | +332.36 | +99.36 |
| 5/7/18 | 24,357.32 | +94.81 | +194.17 |
| 5/8/18 | 24,360.21 | +2.89 | +197.06 |
| 5/9/18 | 24,542.54 | +182.33 | +379.39 |
| 5/10/18 | 24,739.53 | +196.99 | +576.38 |
| 5/11/18 | 24,831.17 | +91.64 | +668.02 |
| 5/14/18 | 24,899.41 | +68.24 | +736.26 |
| 5/15/18 | 24,706.41 | -193.00 | +543.26 |
| 5/16/18 | 24,768.93 | +62.52 | +605.78 |
| 5/17/18 | 24,713.98 | -54.95 | +550.73 |
| 5/18/18 | 24,715.09 | +1.11 | +551.84 |
| 5/21/18 | 25,013.29 | +298.20 | +850.04 |
| 5/22/18 | 24,834.41 | -178.88 | +671.16 |
| 5/23/18 | 24,886.81 | +52.40 | +723.56 |
| 5/24/18 | 24,811.76 | -75.05 | +648.51 |
At the Close, Thursday, May 24, 2018:
Dow Jones Industrial Average: 24,811.76, -75.05 (-0.30%)
NASDAQ: 7,424.43, -1.53 (-0.02%)
S&P 500: 2,727.76, -5.53 (-0.20%)
NYSE Composite: 12,696.69, -46.71 (-0.37%)
Tuesday, January 23, 2018
Trump and Republicans Carry the Day (and Water) for Wall Street
Just to be certain that the big government shutdown over the weekend was a big puff of smoke that left nothing other than a fog and stench, here is a comment made by a presumably knowledgeable person on how big business perceives the machinations and meanderings of the politicians in Washington, DC.
Here's the link to the comment (from a site on which the Money Daily staff has been banned twice for speaking truth to power).
Thus, stocks gained on the eve of the shutdown and also on the end of the shutdown. The shutdown was bad theater engineered by obstructionist Democrats who have nothing left in their quiver of attack arrows outside of assiduously assaulting the sitting president.
...and, apparently, it wasn't even close to being enough, as their gambit blew up in their collectivist faces, and especially so on the visage of one NY Senator Chuck Schumer, a sell-out to his constituents and to his party.
At the Close, Monday, January 22, 2018:
Dow: 26,214.60, +142.88 (+0.55%)
NASDAQ: 7,408.03, +71.65 (+0.98%)
S&P 500: 2,832.97, +22.67 (+0.81%)
NYSE Composite: 13,470.37, +85.91 (+0.64%)
So far Wall Street is the dog that didn't bark in the night time. Indeed, all of Big Business is.
I work coordinating business meetings, mostly for Fortune 500 companies; the companies that spend enough on meetings to bother hiring professionals to handle them. I'm usually pretty busy during these meetings, but I keep an ear open for interesting tidbits when I can, and sometimes I have nothing to do but listen to every word.
Usually these companies do discuss politics, and how they plan to position themselves vis-a-vis the political climate. Not lately, they haven't been. Almost nary a peep. And that includes pharmaceutical companies, which usually are about as attuned politically as anyone.
The companies I work for, and you've heard of them, are ignoring:
- Attempts to change ACA (they know the entire healthcare finance system is already broken anyway, and they have to buy their employees health insurance no matter what happens so they don't care);
- Efforts to raise the US minimum wage to $15/hr. (they're already planning to raise pay because they can't hire people at the prevailing suppressed wages);
- The tax bill (they already pay corporate taxes at an effective rate so much lower than the headline rates it doesn't matter, and their top executives already mask most of their income from the tax system so effectively no legislation conceivable in the current political climate matters at all to them);
- Immigration (they simply don't care because they have no liability or consequences no matter what);
- Carbon-based fuels (they're all getting out of them anyway because they're too expensive and inefficient; if Trump wants to subsidize them while they're doing it they're fine with that);
- Government regulations (they pay their way out of them anyway, one way or the other, and write off the costs);
- Global trade agreements (all the methods they use to evade existing duties, tariffs and sanctions supersede such things anyway); etc.
- War and rumors of war (None of the wars involve or will involve anything they have an interest in. They have deep enough contacts to know there isn't going to be a nuclear war, and no other wars on the table pose more risk than profit opportunities to corporate interests);
- Ethics investigations, "RussiaGate," Uranium 1, PizzaGate, FISA-gate, or any of the popcorn nonsense dominating the partisan media (who invented ad campaigns in the first place?).
Indeed, most of the issues we concern ourselves with don't even interest the executives of the biggest corporations in America.
This is reflected in Wall Street. Where it matters, they know they've got the system dicked. It simply doesn't matter to them one way or the other, which faction of the Oligarchy has the upper hand today or tomorrow.
Here's the link to the comment (from a site on which the Money Daily staff has been banned twice for speaking truth to power).
Thus, stocks gained on the eve of the shutdown and also on the end of the shutdown. The shutdown was bad theater engineered by obstructionist Democrats who have nothing left in their quiver of attack arrows outside of assiduously assaulting the sitting president.
...and, apparently, it wasn't even close to being enough, as their gambit blew up in their collectivist faces, and especially so on the visage of one NY Senator Chuck Schumer, a sell-out to his constituents and to his party.
At the Close, Monday, January 22, 2018:
Dow: 26,214.60, +142.88 (+0.55%)
NASDAQ: 7,408.03, +71.65 (+0.98%)
S&P 500: 2,832.97, +22.67 (+0.81%)
NYSE Composite: 13,470.37, +85.91 (+0.64%)
Tuesday, August 16, 2016
Fed's John Williams Strikes The Alarm Bell; Markets, Economists Respond With Aburptness, Gibberish
President and CEO of the San Francisco Federal Reserve Bank, John Williams, released a white paper on Monday that caught the attention of just about everybody even tangentially aligned with economics or finance called Monetary Policy in a Low R-star World.
Williams, who was Janet Yellen's chief researcher when she was head of the San Fran Fed, has, with the release of this paper, struck the alarm bell with an enormous policy mallet. In effect, he's telling the world that the central banks of the world - including our own, all-powerful Fed - that the past seven years of low interest or zero interest rates have not produced the desired results, which would be a robust economic climate coupled with adequate inflation.
What the Fed and other central banks consider adequate inflation is something of a mythical, though essential, concept in Keynesian economics. Central bankers talk of a target inflation rate, figuring that two percent is about the right level to keep GDP and the associated debt burden growing.
In essence, the concept that any level of inflation is good for anybody other than central bankers is complete and absolute buffoonery, designed only to perpetuate the counterfeit of fractional reserve banking and fiat money. It should be pointed out that true inflation is always and everywhere a monetary phenomenon, strictly defined as an increase in the money supply, that being debt in every case involving fiat money. What Williams is talking about is price inflation, an entirely different animal. A price inflation rate of two percent, over any expanse of time, be it 10, 20 or 50 years, does nothing but erode the value of the currency, increasing the price of everything and impoverishing the citizenry coerced into using said currency.
It's horribly bad policy for the bulk of the population, enriching the banks, distorting the natural business cycle and inducing government spending beyond its means, causing deficits and eventually, unpayable, unservicable debt burdens, the exact condition the entire global economy finds itself in today.
Williams chooses to blame all of the central bank policy errors on an amorphous concept known as the natural rate of interest, or R*, or R-star. The conceit of his missive is where he states, "While a central bank sets its short-term interest rate, r-star is a function of the economy that is beyond its influence."
In other words, Williams is conceding that the natural flow of economics is something a central bank cannot control, manipulate, massage, or otherwise rig. It's utter nonsense. The reason the mythical R-star is so low is because central banks worldwide have been dropping key interest rates to previously-unforeseen levels, in many cases (notably the BOJ and SNB) instituting negative interest rates. Central banks have caused the massive global economic problems and Williams' propose solutions indicate that the central bank models are broken beyond repair and that their only tools remaining are empty rhetoric and finger-pointing, obviously ill-suited to stave off recessions or induce growth and prosperity.
Williams wags his finger at governments, proposing that fiscal measures be taken to combat low inflation (eventually outright deflation) with more insanity such as targeting GDP or using some kind of sliding scale of taxation based on centrally-planned, goal-sought data points such as inflation and/or unemployment.
It this were a football game, Williams could be accused of punting on second down from his own goal line. He's given up, as he - and his central bank brethren - should have eight years ago at the height of the Great Financial Crisis (GFC), allowing the market to clear out the malinvestments, cripple the broken, over-leveraged banks and allow the economy to recover on its own terms, without the aid of central bank intervention. The associated pain might have been immense, but it would have been contained and recovery would have been swift.
Instead, Williams and the central bankers of the world have brought the global economy to the brink of a mammoth financial crisis, one in which entire nations' economies will be completely torn asunder. Williams and his friends have given us the most extreme policy initiatives the world has ever seen (ZIRP, NIRP, QE) and saddled governments, businesses and individuals with outrageous debt loads.
If ever the world has been at the cusp of a debt jubilee, this is it. The central banks have failed even themselves and their clandestine shareholders and its time they be relegated to the dustbin of history, along with other failed ideologies.
A return to gold and silver as base capital in a demand economy, various barter exchanges and fixed exchange rates in foreign currencies would be far better solutions than what Williams has proposed and eminently superior to the devilish constructs of the IMF, World Bank, the European Union, futures, derivatives, federal mandates, and other complexities of modern economics.
At the end of error-prone regimes, be they in finance or governance, wild, weird, unwieldy ideas will be promulgated by supposed "experts." Williams' institutional heresy is only the beginning of the coming madness. Expect even more desperate distortions and departures from reality from the very people who created the economic mess. They're uniquely positioned to cause nothing less than global economic, political and societal calamity.
Good luck.
*************
The market response to San Fran Fed's Williams' policy punt has been swift and poignant. In Japan, the Nikkei fell 273 points. European markets were lower across the board, with the Dax, FTSE and France's CAC-40 each losing ground. US stocks opened lower and remained in the red through the session.
It worth noting that this is still August and most of Wall Street's heaviest hitters are still stupefied by drugs and booze out at their Hampton retreats. US markets hit all-time highs in recent days, akin to ringing a bell at the tippy-top of the market. Values are extreme and detached from fundamentals. The dollar was whacked and will likely continue to decline, and, as just about the only barely viable economy and bond market, US treasuries are about to head further toward zero and negative rates. The world is upside down, ripe for complete overhaul. What many have been predicting and anxiously awaiting for the past seven or eight years may finally be upon us.
Of course, to offset the negative effects of Williams' paper, NY Fed head, Bill Dudley trotted out a statement just prior to US markets opening, saying, in effect, that a September rate hike by the Fed is under consideration. There you have it: more jaw-boning and utter nonsense designed to alter perception. To say that the Fed is close to another rate hike is tantamount to thinking that the moon is about to tumble into the earth.
Gold and silver were each up sharply overnight and in early morning trading on the COMEX. Precisely at 8:00 am EDT, both were hammered lower, yet another signal that central bankers are desperate and nearly delusional.
Be prepared.
US Markets at 3:00 pm EDT (prior to close due to scheduling conflict)
Dow Jones Industrial Average
18,583.22, -52.83 (-0.28%)
NASDAQ
5,237.45, -24.56 (-0.47%)
S&P 500
2,182.27, -7.88 (-0.36%)
NYSE Composite
10,825.95, -32.54 (-0.30%)
Williams, who was Janet Yellen's chief researcher when she was head of the San Fran Fed, has, with the release of this paper, struck the alarm bell with an enormous policy mallet. In effect, he's telling the world that the central banks of the world - including our own, all-powerful Fed - that the past seven years of low interest or zero interest rates have not produced the desired results, which would be a robust economic climate coupled with adequate inflation.
What the Fed and other central banks consider adequate inflation is something of a mythical, though essential, concept in Keynesian economics. Central bankers talk of a target inflation rate, figuring that two percent is about the right level to keep GDP and the associated debt burden growing.
In essence, the concept that any level of inflation is good for anybody other than central bankers is complete and absolute buffoonery, designed only to perpetuate the counterfeit of fractional reserve banking and fiat money. It should be pointed out that true inflation is always and everywhere a monetary phenomenon, strictly defined as an increase in the money supply, that being debt in every case involving fiat money. What Williams is talking about is price inflation, an entirely different animal. A price inflation rate of two percent, over any expanse of time, be it 10, 20 or 50 years, does nothing but erode the value of the currency, increasing the price of everything and impoverishing the citizenry coerced into using said currency.
It's horribly bad policy for the bulk of the population, enriching the banks, distorting the natural business cycle and inducing government spending beyond its means, causing deficits and eventually, unpayable, unservicable debt burdens, the exact condition the entire global economy finds itself in today.
Williams chooses to blame all of the central bank policy errors on an amorphous concept known as the natural rate of interest, or R*, or R-star. The conceit of his missive is where he states, "While a central bank sets its short-term interest rate, r-star is a function of the economy that is beyond its influence."
In other words, Williams is conceding that the natural flow of economics is something a central bank cannot control, manipulate, massage, or otherwise rig. It's utter nonsense. The reason the mythical R-star is so low is because central banks worldwide have been dropping key interest rates to previously-unforeseen levels, in many cases (notably the BOJ and SNB) instituting negative interest rates. Central banks have caused the massive global economic problems and Williams' propose solutions indicate that the central bank models are broken beyond repair and that their only tools remaining are empty rhetoric and finger-pointing, obviously ill-suited to stave off recessions or induce growth and prosperity.
Williams wags his finger at governments, proposing that fiscal measures be taken to combat low inflation (eventually outright deflation) with more insanity such as targeting GDP or using some kind of sliding scale of taxation based on centrally-planned, goal-sought data points such as inflation and/or unemployment.
It this were a football game, Williams could be accused of punting on second down from his own goal line. He's given up, as he - and his central bank brethren - should have eight years ago at the height of the Great Financial Crisis (GFC), allowing the market to clear out the malinvestments, cripple the broken, over-leveraged banks and allow the economy to recover on its own terms, without the aid of central bank intervention. The associated pain might have been immense, but it would have been contained and recovery would have been swift.
Instead, Williams and the central bankers of the world have brought the global economy to the brink of a mammoth financial crisis, one in which entire nations' economies will be completely torn asunder. Williams and his friends have given us the most extreme policy initiatives the world has ever seen (ZIRP, NIRP, QE) and saddled governments, businesses and individuals with outrageous debt loads.
If ever the world has been at the cusp of a debt jubilee, this is it. The central banks have failed even themselves and their clandestine shareholders and its time they be relegated to the dustbin of history, along with other failed ideologies.
A return to gold and silver as base capital in a demand economy, various barter exchanges and fixed exchange rates in foreign currencies would be far better solutions than what Williams has proposed and eminently superior to the devilish constructs of the IMF, World Bank, the European Union, futures, derivatives, federal mandates, and other complexities of modern economics.
At the end of error-prone regimes, be they in finance or governance, wild, weird, unwieldy ideas will be promulgated by supposed "experts." Williams' institutional heresy is only the beginning of the coming madness. Expect even more desperate distortions and departures from reality from the very people who created the economic mess. They're uniquely positioned to cause nothing less than global economic, political and societal calamity.
Good luck.
*************
The market response to San Fran Fed's Williams' policy punt has been swift and poignant. In Japan, the Nikkei fell 273 points. European markets were lower across the board, with the Dax, FTSE and France's CAC-40 each losing ground. US stocks opened lower and remained in the red through the session.
It worth noting that this is still August and most of Wall Street's heaviest hitters are still stupefied by drugs and booze out at their Hampton retreats. US markets hit all-time highs in recent days, akin to ringing a bell at the tippy-top of the market. Values are extreme and detached from fundamentals. The dollar was whacked and will likely continue to decline, and, as just about the only barely viable economy and bond market, US treasuries are about to head further toward zero and negative rates. The world is upside down, ripe for complete overhaul. What many have been predicting and anxiously awaiting for the past seven or eight years may finally be upon us.
Of course, to offset the negative effects of Williams' paper, NY Fed head, Bill Dudley trotted out a statement just prior to US markets opening, saying, in effect, that a September rate hike by the Fed is under consideration. There you have it: more jaw-boning and utter nonsense designed to alter perception. To say that the Fed is close to another rate hike is tantamount to thinking that the moon is about to tumble into the earth.
Gold and silver were each up sharply overnight and in early morning trading on the COMEX. Precisely at 8:00 am EDT, both were hammered lower, yet another signal that central bankers are desperate and nearly delusional.
Be prepared.
US Markets at 3:00 pm EDT (prior to close due to scheduling conflict)
Dow Jones Industrial Average
18,583.22, -52.83 (-0.28%)
NASDAQ
5,237.45, -24.56 (-0.47%)
S&P 500
2,182.27, -7.88 (-0.36%)
NYSE Composite
10,825.95, -32.54 (-0.30%)
Monday, March 21, 2016
Sluggish Beginning To Week Has Stocks Cautious, Business Stalled
With little information upon which to base trading other than the recent dovish sentiments expressed by central banks, stocks in the US moved in a tight trading range to start the week.
The lack of volatility was something of a surprise, given that investors and speculators have been given the green light by Yellen and Co., though perhaps upon closer inspection, getting ahead of breakeven for the year has some of the more seasoned veteran traders taking a pause.
By just about any metric, stocks on the S&P and NASDAQ are highly overvalued, with most P/E estimates averaging in the low 20s on both exchanges. Dow Industrials are just a little less highly-valued, though some, such as Caterpillar (CAT) are showing severe signs of globalization stress.
CATs problems remain on the revenue side of the ledger, as the company hasn't met targets since the financial calamity of 2008. Global growth being as slow as it has been - and especially such in mining, infrastructure, and major construction, CATs bailiwick - the company is simply unable to deliver results like those during the housing and credit bubble.
That's largely the case for major industrial companies, which have weathered the storm via stock buybacks, close attention to labor levels, and an outright strike on capital improvements. While this short-term strategy may be worthwhile from quarter to quarter, in the long run, these companies have to get back to growing and maintaining their core business interests. Uncertainty - despite the easy credit conditions which are prevalent - concerning global monetary policy is keeping the lid on capital investment.
Worse yet, and this is not seen in any of the macro-metrics, is the paucity of new business development, either in the way of spin-offs or entrepreneurial endeavors. Small business, saddled by an onerous regulatory regime, high taxation and pressure on state legislatures to increase minimum wages, is stifling business formation.
These conditions cannot maintain for too long, lest the markets revolt, consumers retrench, and recession becomes reality.
Today's impish gains:
S&P 500: 2,051.60, +2.02 (0.10%)
Dow: 17,623.87, +21.57 (0.12%)
NASDAQ: 4,808.87, +13.23 (0.28%)
Crude Oil 41.68 +1.31% Gold 1,244.30 -0.80% EUR/USD 1.1245 -0.20% 10-Yr Bond 1.92 +2.78% Corn 369.00 +0.54% Copper 2.29 +0.31% Silver 15.86 +0.31% Natural Gas 1.82 -4.72% Russell 2000 1,098.58 -0.28% VIX 13.79 -1.64% BATS 1000 20,677.17 0.00% GBP/USD 1.4373 -0.62% USD/JPY 111.8770 +0.34%
The lack of volatility was something of a surprise, given that investors and speculators have been given the green light by Yellen and Co., though perhaps upon closer inspection, getting ahead of breakeven for the year has some of the more seasoned veteran traders taking a pause.
By just about any metric, stocks on the S&P and NASDAQ are highly overvalued, with most P/E estimates averaging in the low 20s on both exchanges. Dow Industrials are just a little less highly-valued, though some, such as Caterpillar (CAT) are showing severe signs of globalization stress.
CATs problems remain on the revenue side of the ledger, as the company hasn't met targets since the financial calamity of 2008. Global growth being as slow as it has been - and especially such in mining, infrastructure, and major construction, CATs bailiwick - the company is simply unable to deliver results like those during the housing and credit bubble.
That's largely the case for major industrial companies, which have weathered the storm via stock buybacks, close attention to labor levels, and an outright strike on capital improvements. While this short-term strategy may be worthwhile from quarter to quarter, in the long run, these companies have to get back to growing and maintaining their core business interests. Uncertainty - despite the easy credit conditions which are prevalent - concerning global monetary policy is keeping the lid on capital investment.
Worse yet, and this is not seen in any of the macro-metrics, is the paucity of new business development, either in the way of spin-offs or entrepreneurial endeavors. Small business, saddled by an onerous regulatory regime, high taxation and pressure on state legislatures to increase minimum wages, is stifling business formation.
These conditions cannot maintain for too long, lest the markets revolt, consumers retrench, and recession becomes reality.
Today's impish gains:
S&P 500: 2,051.60, +2.02 (0.10%)
Dow: 17,623.87, +21.57 (0.12%)
NASDAQ: 4,808.87, +13.23 (0.28%)
Crude Oil 41.68 +1.31% Gold 1,244.30 -0.80% EUR/USD 1.1245 -0.20% 10-Yr Bond 1.92 +2.78% Corn 369.00 +0.54% Copper 2.29 +0.31% Silver 15.86 +0.31% Natural Gas 1.82 -4.72% Russell 2000 1,098.58 -0.28% VIX 13.79 -1.64% BATS 1000 20,677.17 0.00% GBP/USD 1.4373 -0.62% USD/JPY 111.8770 +0.34%
Tuesday, December 15, 2015
Last Dance Before Yellen's Rate Hike; Stocks at the High End... with Tom Petty Video
In tribute to today's madcap stock rally in the face of tomorrow's FOMC policy rate decision, we present Tom Petty and the Heartbreakers classic, "Mary Jane's Last Dance."
Picture Mary Jane as Wall Street, High Yield Bonds, the global economy, or all three. Tom Petty is the Federal Reserve. That's all for today. Tomorrow's a big one.
Picture Mary Jane as Wall Street, High Yield Bonds, the global economy, or all three. Tom Petty is the Federal Reserve. That's all for today. Tomorrow's a big one.
Tuesday, January 27, 2015
And Now Comes the Crash
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.
Writing this morning as Dow futures are down around 275-300 points, market participants are reacting negatively to any number of factors, not the least of which was the truly ugly print of December durable goods orders, which came in at -3.4% against expectations of +0.3%.
Also revised lower were November's durable figures, from an already disappointing -0.7% to a dismal -2.1%.
The stock market crash, yes, the one that's been delayed since 2009 thanks to QE from the Fed, then Japan, and now, supposedly, from the European Union (EU), is upon us. The bull market that began when mark-t-market became mark-to-fantasy in March of 2009 has overstayed its welcome, and those who have not already jumped ship on tech stocks, income stocks, growth stocks (there's a real laugher for you; most companies' earnings for 2014 were lower than 2013 and 2015 will be lower still), or blue chip stocks, are about to get creamed, rapidly, starting today, but, when the Dow Industrials close below 17,068.87 (the close on December 16, 2014), for certain.
One only has to look at a recent chart of the Dow Jones Industrial Average and have a cursory understanding of Dow Theory to realize that the primary trend is about to change. Now, if it doesn't - if the Dow doesn't close below 17,068.87 and subsequently makes new highs, or, if it does close below that level and then makes new highs - then the market is being purposefully and blatantly manipulated. Besides the fact that most, if not all, markets have been manipulated since the crash of 2008, and probably well before that, a massive nosedive in stocks should come as little surprise to anybody, save those who hold out hope against hope that the Federal Reserve and the federal government, in all their wisdom, will save markets no matter what, which, in fact, is the core of manipulation itself.
Bull markets do not last forever. Lying and misguiding the public does not work forever. The public, that nebulous, unintelligible mass of humanity that follows blindly like sheep led to shearing or slaughter, will understand little of this, if any of it, but, we've collectively been led down a garden path to economic slavery and destruction by lying lawyers, bankers, CEOs, media and politicians, whose only concerns are their own, and against sound public policy.
Globally, economies are in a shambles. A raging currency war is merely pretext for a coming deep depression. While the United States may be the "cleanest shirt in a dirty laundry basket" it is no doubt still dirty, and a cleansing is overdue.
For too long, the American public has listened to the media, bankers and politicians who promised what they could not deliver: economic prosperity for everybody. It's a pipe dream, a facade, a fallacy, a Fugazy. The reckoning is upon us, just in time for the Super Bowl.
Just wait for the number: 17,068.87. When the Dow closes below that, it's game over, and no jawboning by Federal Reserve governors, or politicians, or media mouthpieces, can change that. A long, painful bear market will take the Dow and other averages to places nobody can imagine. At first, it will be called a correction (unless it absolutely crashes - like down 1000 points - today), but, make no doubt, it will be a bear market, followed by a recession, and then a depression (which, many will claim we are already in, since 2008).
Trust your own judgement, but, if you have not prepared for the worst of times, you are certain to live through them. Your portfolio allocations should look something like this: 20% Precious Metals; 60% cash; 20% survival/tradable/salable goods.
Best wishes to all.
Writing this morning as Dow futures are down around 275-300 points, market participants are reacting negatively to any number of factors, not the least of which was the truly ugly print of December durable goods orders, which came in at -3.4% against expectations of +0.3%.
Also revised lower were November's durable figures, from an already disappointing -0.7% to a dismal -2.1%.
The stock market crash, yes, the one that's been delayed since 2009 thanks to QE from the Fed, then Japan, and now, supposedly, from the European Union (EU), is upon us. The bull market that began when mark-t-market became mark-to-fantasy in March of 2009 has overstayed its welcome, and those who have not already jumped ship on tech stocks, income stocks, growth stocks (there's a real laugher for you; most companies' earnings for 2014 were lower than 2013 and 2015 will be lower still), or blue chip stocks, are about to get creamed, rapidly, starting today, but, when the Dow Industrials close below 17,068.87 (the close on December 16, 2014), for certain.
One only has to look at a recent chart of the Dow Jones Industrial Average and have a cursory understanding of Dow Theory to realize that the primary trend is about to change. Now, if it doesn't - if the Dow doesn't close below 17,068.87 and subsequently makes new highs, or, if it does close below that level and then makes new highs - then the market is being purposefully and blatantly manipulated. Besides the fact that most, if not all, markets have been manipulated since the crash of 2008, and probably well before that, a massive nosedive in stocks should come as little surprise to anybody, save those who hold out hope against hope that the Federal Reserve and the federal government, in all their wisdom, will save markets no matter what, which, in fact, is the core of manipulation itself.
Bull markets do not last forever. Lying and misguiding the public does not work forever. The public, that nebulous, unintelligible mass of humanity that follows blindly like sheep led to shearing or slaughter, will understand little of this, if any of it, but, we've collectively been led down a garden path to economic slavery and destruction by lying lawyers, bankers, CEOs, media and politicians, whose only concerns are their own, and against sound public policy.
Globally, economies are in a shambles. A raging currency war is merely pretext for a coming deep depression. While the United States may be the "cleanest shirt in a dirty laundry basket" it is no doubt still dirty, and a cleansing is overdue.
For too long, the American public has listened to the media, bankers and politicians who promised what they could not deliver: economic prosperity for everybody. It's a pipe dream, a facade, a fallacy, a Fugazy. The reckoning is upon us, just in time for the Super Bowl.
Just wait for the number: 17,068.87. When the Dow closes below that, it's game over, and no jawboning by Federal Reserve governors, or politicians, or media mouthpieces, can change that. A long, painful bear market will take the Dow and other averages to places nobody can imagine. At first, it will be called a correction (unless it absolutely crashes - like down 1000 points - today), but, make no doubt, it will be a bear market, followed by a recession, and then a depression (which, many will claim we are already in, since 2008).
Trust your own judgement, but, if you have not prepared for the worst of times, you are certain to live through them. Your portfolio allocations should look something like this: 20% Precious Metals; 60% cash; 20% survival/tradable/salable goods.
Best wishes to all.
Monday, January 13, 2014
Markets Respond Suddenly to Structural Deficiencies in Global Economy
In case anybody was not noticing, stocks haven't exactly been on fire through the first few sessions of 2014 (eight of them, including today), but, apparently, a solid number of investors have been taking note and today decided to take action.
Friday's non-farm payrolls report may have been the initial impetus to really kick off today's selling spree, which accelerated throughout the session with stocks ending near the lows of the day on the major indices, sending all of the major exchanges into the red for the year.
Beyond the horrifying labor situation outlined by the aforementioned December payroll report, retail holiday sales figures have been coming in at well below anybody's best guesses and many retailers are now forecasting less-than-optimistic projections for January and beyond.
A few of today's highlights from the retail field (in addition to the meltdowns already underway via Sears and JC Penny) are Express (EXPR 18.15, -0.87(4.57%)) and Lululemon (LULU 49.70, -9.90(16.61%)), bot of which lowered their guidance on Monday. Others on the retail decliners' hit list include Coach (COH 54.30, -1.78(3.17%)), Gap (GPS 38.25, -1.59(3.99%)), and Michael Kors (KORS 76.67, -3.13(3.92%)).
Multi-faceted are the reasons for poor performances in stocks, from a stalled-out labor market to continued de-leveraging by consumers to the Obamacare fiasco to rising college tuition costs, these are just a few of the market-roiling scenarios playing out in the US and global economy.
There's more to today's selling than meets the eye, however, because there are serious cracks in the facade that is the US government, the status of the dollar as the world's reserve currency and the generally-frayed fabric of the Federal Reserve. Those in the know realize that time may be running short on fiat currency, of which all of the world's currencies are concurrently backed by nothing more than people's blind willingness to accept paper money in exchange for real goods and services.
That's at the root of the world's worries, but it is gaining prominence because individuals and businesses continue to shed debt, while the Fed, the Bank of Japan and the Eu monetary masters continue in their vain attempts to create more debt, which is, after all, their lifeblood. The only entities continuing to create debt are governments, making theirs and the days of their central bankers, numbered and in decline.
Losing faith completely in a particular government, national currency or system of exchange takes time, and when it comes to global currencies, such as the US dollar, even more time, but, as the events of 2007-2009 showed with sensational alarm, when faith becomes frayed in the minds of investors and speculators, events can spiral out of control, and, while that may not be precisely what's happening at present, it sure has the allure and feel of a full-blown currency/competency/confidence crisis in the making, one which actually started five to seven years ago, depending on which aspect one assigns as the starting point.
Demographically, the planet's population is aging and retiring; the current crop of up-and-coming youths don't inspire much in terms of leadership skills and a world dependent on handouts from government programs when the government itself is the main culprit and cause of the deterioration of global society is not a model upon which any sentient, thinking being would wager to last very long.
Gloom and doom scenarios such as this have roots in reality, though the psychological paradigms of cognitive dissonance and normalcy bias keep the general population in a state of suspended stupidity, though even the dullest among us can see the writing on the wall. Acceptance of such a harsh reality is not ready-made. It takes time, fear, and eventually, lots and lots of pain.
The time is growing short, the pain increasing (Have your wages gone up lately, while your costs continue higher and government regulations gain in stupidity, complexity and lack of enforceability?) and the fear, finally making a grand appearance at Wall Street, is beginning to spread.
Best to be prepared, and keep one's head while all about are panicking, because the panic is about to go mainstream.
As for the Fed, and how they create debt-money out of thin air, this brief, four-second clip should sufficiently explain:
DOW 16,257.94, -179.11 (-1.09%)
NASDAQ 4,113.30, -61.36 (-1.47%)
S&P 1,819.20, -23.17 (-1.26%)
10-Yr Note 99.20, +1.15 (+1.17%) Yield: 2.83%
NASDAQ Volume 2.17 Bil
NYSE Volume 3.58 Bil
Combined NYSE & NASDAQ Advance - Decline: 1526-4234
Combined NYSE & NASDAQ New highs - New lows: 325-42
WTI crude oil: 91.80, -0.92
Gold: 1,251.10, +4.20
Silver: 20.38, +0.162
Corn: 434.50, +1.75
Friday's non-farm payrolls report may have been the initial impetus to really kick off today's selling spree, which accelerated throughout the session with stocks ending near the lows of the day on the major indices, sending all of the major exchanges into the red for the year.
Beyond the horrifying labor situation outlined by the aforementioned December payroll report, retail holiday sales figures have been coming in at well below anybody's best guesses and many retailers are now forecasting less-than-optimistic projections for January and beyond.
A few of today's highlights from the retail field (in addition to the meltdowns already underway via Sears and JC Penny) are Express (EXPR 18.15, -0.87(4.57%)) and Lululemon (LULU 49.70, -9.90(16.61%)), bot of which lowered their guidance on Monday. Others on the retail decliners' hit list include Coach (COH 54.30, -1.78(3.17%)), Gap (GPS 38.25, -1.59(3.99%)), and Michael Kors (KORS 76.67, -3.13(3.92%)).
Multi-faceted are the reasons for poor performances in stocks, from a stalled-out labor market to continued de-leveraging by consumers to the Obamacare fiasco to rising college tuition costs, these are just a few of the market-roiling scenarios playing out in the US and global economy.
There's more to today's selling than meets the eye, however, because there are serious cracks in the facade that is the US government, the status of the dollar as the world's reserve currency and the generally-frayed fabric of the Federal Reserve. Those in the know realize that time may be running short on fiat currency, of which all of the world's currencies are concurrently backed by nothing more than people's blind willingness to accept paper money in exchange for real goods and services.
That's at the root of the world's worries, but it is gaining prominence because individuals and businesses continue to shed debt, while the Fed, the Bank of Japan and the Eu monetary masters continue in their vain attempts to create more debt, which is, after all, their lifeblood. The only entities continuing to create debt are governments, making theirs and the days of their central bankers, numbered and in decline.
Losing faith completely in a particular government, national currency or system of exchange takes time, and when it comes to global currencies, such as the US dollar, even more time, but, as the events of 2007-2009 showed with sensational alarm, when faith becomes frayed in the minds of investors and speculators, events can spiral out of control, and, while that may not be precisely what's happening at present, it sure has the allure and feel of a full-blown currency/competency/confidence crisis in the making, one which actually started five to seven years ago, depending on which aspect one assigns as the starting point.
Demographically, the planet's population is aging and retiring; the current crop of up-and-coming youths don't inspire much in terms of leadership skills and a world dependent on handouts from government programs when the government itself is the main culprit and cause of the deterioration of global society is not a model upon which any sentient, thinking being would wager to last very long.
Gloom and doom scenarios such as this have roots in reality, though the psychological paradigms of cognitive dissonance and normalcy bias keep the general population in a state of suspended stupidity, though even the dullest among us can see the writing on the wall. Acceptance of such a harsh reality is not ready-made. It takes time, fear, and eventually, lots and lots of pain.
The time is growing short, the pain increasing (Have your wages gone up lately, while your costs continue higher and government regulations gain in stupidity, complexity and lack of enforceability?) and the fear, finally making a grand appearance at Wall Street, is beginning to spread.
Best to be prepared, and keep one's head while all about are panicking, because the panic is about to go mainstream.
As for the Fed, and how they create debt-money out of thin air, this brief, four-second clip should sufficiently explain:
DOW 16,257.94, -179.11 (-1.09%)
NASDAQ 4,113.30, -61.36 (-1.47%)
S&P 1,819.20, -23.17 (-1.26%)
10-Yr Note 99.20, +1.15 (+1.17%) Yield: 2.83%
NASDAQ Volume 2.17 Bil
NYSE Volume 3.58 Bil
Combined NYSE & NASDAQ Advance - Decline: 1526-4234
Combined NYSE & NASDAQ New highs - New lows: 325-42
WTI crude oil: 91.80, -0.92
Gold: 1,251.10, +4.20
Silver: 20.38, +0.162
Corn: 434.50, +1.75
Tuesday, January 8, 2013
Why Stocks Were Down Today and Other Ramblings... and Links
Getting right to the point, stocks slipped a little bit more today, oddly enough, right around another 50 points were knocked off the Dow. why is that odd, you ask?
Well, if you were going to dismantle something and didn't want anyone to take notice, you'd do it a little bit at a time, right? So, after a 50-point drop yesterday, another 55 points today receives little fanfare. Anything over 100 on the Dow, in either direction, gets the attention of Bob Pisani and the other market-watching noobs on CNBC and Bloomberg, and you don't want them going around shouting, "hey, look at this!" but 50 points, not so much.
The point is that stocks went down today (and yesterday) because that's the way the Goldman Sachs and Merrill Lynch's roll. If there were any good reason to bid stocks up, they certainly would have, but, that all got taken care of on January 2nd, to the tune of a 300-point rally. Now it's profit-taking harvest time for the quick-traders out there making all the loot, but, you know, they don't want anyone thinking it's time to head for the hills because there's a flood of bad stuff coming our way.
Uh-uh. Can't have that. The muppets must not be allowed to understand anything that is really happening. Only the global elitists are privy to the inside baseball stuff.
So, what's that bad stuff heading our way? How about a nasty, well-orchestrated fight over the debt ceiling that leads directly to a government shutdown? It has been mentioned only a few dozen times just this week, though every political empty hat says they want to avoid that at all costs. (Rubbish: we all know how loathe the pols in Washington are to actually do any work and how much they relish leisure time.)
So, yes, get ready for that, and that would precipitate some selling of stocks. Once the big guys get their profits, then the little people can take losses, all the while the talking head analysts saying things like, "this is just a little correction," or "stocks will rebound in the second half" (like Notre Dame did last night? Let's hope not).
It's been almost two weeks since the latest market moving event - the fiscal cliff miasma - so, a new crisis can't really be far off. Things should start getting heated up in a few more days or maybe around the end of January, once the new members of congress are all schooled up on their new roles and understand the rules of the game.
Yep, the debt ceiling showdown should prove to be some of the best political theatre of the year, and maybe the most disruptive. The Republicans keep threatening it, and they don't want to look like the boy who cried wolf, so, this time, they'll probably do it, and it will last maybe two or three weeks before a compromise is reached. Naturally, such a compromise will solve nothing except to get most of the furloughed federal employees back on the job, slow down the "recovery" a little and provice cover for Wall Street's anticipated lousy earnings.
So, that's why stocks were down today, but they'll be up sooner or later, and trade sideways a bit before the real deal comes down. Then, they'll drop like rocks from a tower, and it will be YOUR MONEY losing value, not THEIRS.
BTW: Alcoa (AA) kicked off earnings season after the bell, posting in-line earnings per share of six cents, which says plenty about the health of this global giant and the world economy in general. Their outlook is for aluminum demand to increase seven percent this year, due to, get this, increased demand from the aerospace industry (read: defense contractors). Whether or not that hike in demand ever materializes, well, we will just have to stay tuned. In the meantime, Alcoa is still a sub-$10 stock, which it's been for close to a year now. There's a reason for that.
Yesterday, I (that being me, Fearless Rick) opined on these pages that something was broken, though I could not quite put my finger on exactly what "it" was that had gone amiss, ending with the gloomy prospect that maybe everything was broken.
Of course, there are innumerable things broken in America and around the world, but there are many more that work, like the Internet, for instance. You're reading this, after all, on the internet. That works.
What's not working, and hasn't been for a long time is the media, but the internet is beginning to take care of that. Most people under the age of 30 get the majority of their news and opinion-making articles from the internet, not mainstream TV, newspapers or (heaven forbid!) the radio, so there's hope on that front.
So, thinking that I must find out just what it is that's broken, research ensued, which consisted of a couple of adult beverages and some internet surfing.
Well, I was right. The entire global economic system is broken, and has been broken for a long time, but I already knew that. I just didn't know exactly how badly broken it was until I came across this exceptional piece of video (8 parts) by one Ann Barnhardt, and her aptly-titled dissertation, The Economy Is Going To Implode...And You Deserve to now Why.
Ms. Barnhardt breaks the complexities of the modern global economy down to a very understandable, though frighteningly-real level that just about everyone (including politicians and tin-horn local office-holders) can understand. One may or may not agree with her approach or her views, but nobody can argue with the math, which presents an unshakable case for economic calamity. This is must viewing for anyone who wishes to understand why everything seems to be heading downhill in America or to relieve - at least for a short time - that nagging feeling that something is broken. Here's part one of the video series.
Just in case you were busy watching the disgrace of Notre Dame at the hands of Alabama last night, and missed this, here's Alex Jones going ballistic over gun control on the Piers Morgan Show. And, in case you don't know who Alex Jones is, well, you're probably just another sheeple, or maybe a sleeple (that's people who appear awake but are actually sleeping). So, here's a link to infowars.com. Enjoy the video rant.
Dow 13,328.85, -55.44 (0.41%)
NASDAQ 3,091.81, -7.00 (0.23%)
S&P 500 1,457.15, -4.74 (0.32%)
NYSE Composite 8,604.38, -32.53 (0.38%)
NASDAQ Volume 1,743,272,375
NYSE Volume 3,757,457,750
Combined NYSE & NASDAQ Advance - Decline: 3003-3411
Combined NYSE & NASDAQ New highs - New lows: 302-13
WTI crude oil: 93.15, -0.04
Gold: 1,662.20, +15.90
Silver: 30.46, +0.383
Well, if you were going to dismantle something and didn't want anyone to take notice, you'd do it a little bit at a time, right? So, after a 50-point drop yesterday, another 55 points today receives little fanfare. Anything over 100 on the Dow, in either direction, gets the attention of Bob Pisani and the other market-watching noobs on CNBC and Bloomberg, and you don't want them going around shouting, "hey, look at this!" but 50 points, not so much.
The point is that stocks went down today (and yesterday) because that's the way the Goldman Sachs and Merrill Lynch's roll. If there were any good reason to bid stocks up, they certainly would have, but, that all got taken care of on January 2nd, to the tune of a 300-point rally. Now it's profit-taking harvest time for the quick-traders out there making all the loot, but, you know, they don't want anyone thinking it's time to head for the hills because there's a flood of bad stuff coming our way.
Uh-uh. Can't have that. The muppets must not be allowed to understand anything that is really happening. Only the global elitists are privy to the inside baseball stuff.
So, what's that bad stuff heading our way? How about a nasty, well-orchestrated fight over the debt ceiling that leads directly to a government shutdown? It has been mentioned only a few dozen times just this week, though every political empty hat says they want to avoid that at all costs. (Rubbish: we all know how loathe the pols in Washington are to actually do any work and how much they relish leisure time.)
So, yes, get ready for that, and that would precipitate some selling of stocks. Once the big guys get their profits, then the little people can take losses, all the while the talking head analysts saying things like, "this is just a little correction," or "stocks will rebound in the second half" (like Notre Dame did last night? Let's hope not).
It's been almost two weeks since the latest market moving event - the fiscal cliff miasma - so, a new crisis can't really be far off. Things should start getting heated up in a few more days or maybe around the end of January, once the new members of congress are all schooled up on their new roles and understand the rules of the game.
Yep, the debt ceiling showdown should prove to be some of the best political theatre of the year, and maybe the most disruptive. The Republicans keep threatening it, and they don't want to look like the boy who cried wolf, so, this time, they'll probably do it, and it will last maybe two or three weeks before a compromise is reached. Naturally, such a compromise will solve nothing except to get most of the furloughed federal employees back on the job, slow down the "recovery" a little and provice cover for Wall Street's anticipated lousy earnings.
So, that's why stocks were down today, but they'll be up sooner or later, and trade sideways a bit before the real deal comes down. Then, they'll drop like rocks from a tower, and it will be YOUR MONEY losing value, not THEIRS.
BTW: Alcoa (AA) kicked off earnings season after the bell, posting in-line earnings per share of six cents, which says plenty about the health of this global giant and the world economy in general. Their outlook is for aluminum demand to increase seven percent this year, due to, get this, increased demand from the aerospace industry (read: defense contractors). Whether or not that hike in demand ever materializes, well, we will just have to stay tuned. In the meantime, Alcoa is still a sub-$10 stock, which it's been for close to a year now. There's a reason for that.
Yesterday, I (that being me, Fearless Rick) opined on these pages that something was broken, though I could not quite put my finger on exactly what "it" was that had gone amiss, ending with the gloomy prospect that maybe everything was broken.
Of course, there are innumerable things broken in America and around the world, but there are many more that work, like the Internet, for instance. You're reading this, after all, on the internet. That works.
What's not working, and hasn't been for a long time is the media, but the internet is beginning to take care of that. Most people under the age of 30 get the majority of their news and opinion-making articles from the internet, not mainstream TV, newspapers or (heaven forbid!) the radio, so there's hope on that front.
So, thinking that I must find out just what it is that's broken, research ensued, which consisted of a couple of adult beverages and some internet surfing.
Well, I was right. The entire global economic system is broken, and has been broken for a long time, but I already knew that. I just didn't know exactly how badly broken it was until I came across this exceptional piece of video (8 parts) by one Ann Barnhardt, and her aptly-titled dissertation, The Economy Is Going To Implode...And You Deserve to now Why.
Ms. Barnhardt breaks the complexities of the modern global economy down to a very understandable, though frighteningly-real level that just about everyone (including politicians and tin-horn local office-holders) can understand. One may or may not agree with her approach or her views, but nobody can argue with the math, which presents an unshakable case for economic calamity. This is must viewing for anyone who wishes to understand why everything seems to be heading downhill in America or to relieve - at least for a short time - that nagging feeling that something is broken. Here's part one of the video series.
Just in case you were busy watching the disgrace of Notre Dame at the hands of Alabama last night, and missed this, here's Alex Jones going ballistic over gun control on the Piers Morgan Show. And, in case you don't know who Alex Jones is, well, you're probably just another sheeple, or maybe a sleeple (that's people who appear awake but are actually sleeping). So, here's a link to infowars.com. Enjoy the video rant.
Dow 13,328.85, -55.44 (0.41%)
NASDAQ 3,091.81, -7.00 (0.23%)
S&P 500 1,457.15, -4.74 (0.32%)
NYSE Composite 8,604.38, -32.53 (0.38%)
NASDAQ Volume 1,743,272,375
NYSE Volume 3,757,457,750
Combined NYSE & NASDAQ Advance - Decline: 3003-3411
Combined NYSE & NASDAQ New highs - New lows: 302-13
WTI crude oil: 93.15, -0.04
Gold: 1,662.20, +15.90
Silver: 30.46, +0.383
Wednesday, May 9, 2012
Stocks Exhibiting Serious Weakness as Correction Completes Day Six
For the fourth straight day, US markets exhibited the same trading pattern on the major indices: A plunge at the open and the rest of the day spent trundling back higher. This is the effect of an overabundance of trading algos all programmed to begin buying at certain levels. Fully 85% or more of all trades are handled by machines, drwing into question the overall wisdom of a market built on lies, false assumptions, sketchy models and the overwhelming directive that stocks MUST go higher, all the time, no matter the news or events in the real world.
In any case, it's made it easier for real, human investors to get the heck out of dodge, and it's likely that a good portion of the really smart money has already exited. This is apparent from the price of bonds, which have been in rally mode all week, pushing yields near historic lows.
The cause for all of the latest market turmoil is no big surprise; it is Europe, specifically Greece, but peripherally Spain and France, which seem the two most likely targets for increased political volatility, and thus, stock declines.
The Greeks have the world by the proverbial short hairs at the moment. At any given time, the EU, ECB, IMF or any of the nearly nations could tell the the government of Greece that it's game over, or that they'll loan them money anyway, which is exactly what happened today.
It was reported that the Greek government, even if it received the latest round of bailout money, could not meet it's obligations, so, one has to wonder, why bother? That's the line of the hard left parties in Greece at the moment. They don't want any more IMF or ECB bailout funds, preferring to go it alone, presumably to leave the Euro as a currency behind and take back up the drachma as its national money.
Of course, all of this uncertainty has a negative effect on stocks, though US markets have suffered much less than their European counterparts, some of which have already fallen into bear market territories, along with China, which has been in the grip of the bear for the past two years, but that's another story, and something that is also worrying the gloablists and their plans to control world commerce.
There is a problem with the US markets and their repeating pattern of falls and rises. The intra-day plunges keep getting deeper and deeper, setting new support levels which will, over time, be proven to have about all the holding power of a paper towel in a hurricane. Eventually, the computers will either be turned off or reprogrammed and the flush of stocks down the drain will be swift and complete. Even as it stands, stocks are off sharply over the past six sessions, with the Dow down all six, and the S&P and NASDAQ down five of six, the only positive returns for the duo being extremely marginal gains on Monday - a point on the NASDAQ, less than that (0.48) on the S&P.
Tomorrow, the drama continues, with the US throwing in with initial unemployment claims, a number that may be secondary to the uneasiness in Europe, but should provide a secondary betting point for the open. Stay tuned. It's just beginning to get interesting, as the same pattern as 2011 is playing out again, almost to to day, when stocks peaked at the end of April.
Volume was elevated once again and new lows beat new highs for the fourth consecutive session.
Dow 12,835.06, -97.03 (0.75%)
NASDAQ 2,934.71, -11.56 (0.39%)
S&P 500 1,354.58, -9.14 (0.67%)
NYSE Composite 7,827.75, -59.51 (0.75%)
NASDAQ Volume 1,959,315,250
NYSE Volume 3,949,908,500
Combined NYSE & NASDAQ Advance - Decline: 1865-3709
Combined NYSE & NASDAQ New highs - New lows: 106-161
WTI crude oil: 96.81, -0.20
Gold: 1,594.20, -10.30
Silver: 29.24, -0.22
In any case, it's made it easier for real, human investors to get the heck out of dodge, and it's likely that a good portion of the really smart money has already exited. This is apparent from the price of bonds, which have been in rally mode all week, pushing yields near historic lows.
The cause for all of the latest market turmoil is no big surprise; it is Europe, specifically Greece, but peripherally Spain and France, which seem the two most likely targets for increased political volatility, and thus, stock declines.
The Greeks have the world by the proverbial short hairs at the moment. At any given time, the EU, ECB, IMF or any of the nearly nations could tell the the government of Greece that it's game over, or that they'll loan them money anyway, which is exactly what happened today.
It was reported that the Greek government, even if it received the latest round of bailout money, could not meet it's obligations, so, one has to wonder, why bother? That's the line of the hard left parties in Greece at the moment. They don't want any more IMF or ECB bailout funds, preferring to go it alone, presumably to leave the Euro as a currency behind and take back up the drachma as its national money.
Of course, all of this uncertainty has a negative effect on stocks, though US markets have suffered much less than their European counterparts, some of which have already fallen into bear market territories, along with China, which has been in the grip of the bear for the past two years, but that's another story, and something that is also worrying the gloablists and their plans to control world commerce.
There is a problem with the US markets and their repeating pattern of falls and rises. The intra-day plunges keep getting deeper and deeper, setting new support levels which will, over time, be proven to have about all the holding power of a paper towel in a hurricane. Eventually, the computers will either be turned off or reprogrammed and the flush of stocks down the drain will be swift and complete. Even as it stands, stocks are off sharply over the past six sessions, with the Dow down all six, and the S&P and NASDAQ down five of six, the only positive returns for the duo being extremely marginal gains on Monday - a point on the NASDAQ, less than that (0.48) on the S&P.
Tomorrow, the drama continues, with the US throwing in with initial unemployment claims, a number that may be secondary to the uneasiness in Europe, but should provide a secondary betting point for the open. Stay tuned. It's just beginning to get interesting, as the same pattern as 2011 is playing out again, almost to to day, when stocks peaked at the end of April.
Volume was elevated once again and new lows beat new highs for the fourth consecutive session.
Dow 12,835.06, -97.03 (0.75%)
NASDAQ 2,934.71, -11.56 (0.39%)
S&P 500 1,354.58, -9.14 (0.67%)
NYSE Composite 7,827.75, -59.51 (0.75%)
NASDAQ Volume 1,959,315,250
NYSE Volume 3,949,908,500
Combined NYSE & NASDAQ Advance - Decline: 1865-3709
Combined NYSE & NASDAQ New highs - New lows: 106-161
WTI crude oil: 96.81, -0.20
Gold: 1,594.20, -10.30
Silver: 29.24, -0.22
Wednesday, April 4, 2012
S&P Closes Under 1400; Precious Metals Whacked
The follow-on from yesterday's FOMC minutes release, combined with scary data from Australia and China (slowing economies) sent markets tumbling globally.
Asia and Europe each saw aggressive selling, and by the time US markets opened - despite ADP March employment data posting a modest beat of 209,000 jobs - the Dow was set up for a 100-point loss at the open.
The opening move was swiftly lower, taking the other major indices along for the ride. Dow Industrials remained below 13,100 all day, with the S&P 500 - despite a late day rally - eventually closing below 1400 for the first time in eight sessions.
To say that the markets have topped out temporarily would be putting it lightly; rather, stocks seem to be in a steady drift lower, as Winter turns to Spring and investors seek to lock in profits from one of the most rambunctious first quarters in stock market history.
Conditions in Europe once again made noise in the states, as a poor showing for a Spanish bond offering and rumors of another bailout for Portugal fanned the flames of global recession.
While some commentators continue to spout nonsense that the US is "decoupling" from Europe and the rest of the world's economies, such talk is nothing but hot air, mostly from the same people who rightly contended during the struggles in the US that a large portion of US earnings are derived from abroad.
One simply cannot have it both ways. We are either a part of the global economy or we are not and the facts are strongly in favor of the "globalized" economy model.
What concerns investors most during this transitional period are fears of a prolonged slump in Europe which would exacerbate tepid conditions in the US. Economic data has been fragile of late, but hope for a renewal to the rally on first quarter earnings data from US companies is keeping the markets somewhat range-bound and in a position of relative strength, though the thought of the Fed cutting off the easy money with the end of "operation twist" in June are tempering the bullish sentiments.
While stocks were damaged on the day, gold and silver were even harder hit, which makes little sense from an historical perspective. In times of economic distress, the precious metals usually hold up better, but, since they have been turned into trading vehicles by the Wall Street madmen, such assumptions may not hold up this time around. The mood is eerily similar to that of September 2008, when a fragile economy was overturned by a number of random events. The situation is vastly different today, however, but a major crisis anywhere in the world could rapidly spread.
In the face of some chaos, the strengthening dollar is at least bringing down oil prices, which should eventually lower the price of gas in the US. The high price of fuel is in itself a condition which could severely slow the already turbid US economy, though the good news for drivers may not be welcomed by equity investors.
The new high - new low indicator flipped to the negative today for the first time in a long while. Any continuation of that trend indicator could signal a prolonged correction, something the three-year-old bull market has not experienced since the flagging days of last summer.
Dow 13,074.75, -124.80 (0.95%)
NASDAQ 3,068.09, -45.48 (1.46%)
S&P 500 1,398.96, -14.42 (1.02%)
NYSE Composite 8,111.48, -105.06 (1.28%)
NASDAQ Volume 1,779,653,500
NYSE Volume 3,810,047,500
Combined NYSE & NASDAQ Advance - Decline: 1079-4563
Combined NYSE & NASDAQ New highs - New lows: 65-109
WTI crude oil: 101.47, -2.54
Gold: 1,614.10, -57.90
Silver: 31.04, -2.22
Asia and Europe each saw aggressive selling, and by the time US markets opened - despite ADP March employment data posting a modest beat of 209,000 jobs - the Dow was set up for a 100-point loss at the open.
The opening move was swiftly lower, taking the other major indices along for the ride. Dow Industrials remained below 13,100 all day, with the S&P 500 - despite a late day rally - eventually closing below 1400 for the first time in eight sessions.
To say that the markets have topped out temporarily would be putting it lightly; rather, stocks seem to be in a steady drift lower, as Winter turns to Spring and investors seek to lock in profits from one of the most rambunctious first quarters in stock market history.
Conditions in Europe once again made noise in the states, as a poor showing for a Spanish bond offering and rumors of another bailout for Portugal fanned the flames of global recession.
While some commentators continue to spout nonsense that the US is "decoupling" from Europe and the rest of the world's economies, such talk is nothing but hot air, mostly from the same people who rightly contended during the struggles in the US that a large portion of US earnings are derived from abroad.
One simply cannot have it both ways. We are either a part of the global economy or we are not and the facts are strongly in favor of the "globalized" economy model.
What concerns investors most during this transitional period are fears of a prolonged slump in Europe which would exacerbate tepid conditions in the US. Economic data has been fragile of late, but hope for a renewal to the rally on first quarter earnings data from US companies is keeping the markets somewhat range-bound and in a position of relative strength, though the thought of the Fed cutting off the easy money with the end of "operation twist" in June are tempering the bullish sentiments.
While stocks were damaged on the day, gold and silver were even harder hit, which makes little sense from an historical perspective. In times of economic distress, the precious metals usually hold up better, but, since they have been turned into trading vehicles by the Wall Street madmen, such assumptions may not hold up this time around. The mood is eerily similar to that of September 2008, when a fragile economy was overturned by a number of random events. The situation is vastly different today, however, but a major crisis anywhere in the world could rapidly spread.
In the face of some chaos, the strengthening dollar is at least bringing down oil prices, which should eventually lower the price of gas in the US. The high price of fuel is in itself a condition which could severely slow the already turbid US economy, though the good news for drivers may not be welcomed by equity investors.
The new high - new low indicator flipped to the negative today for the first time in a long while. Any continuation of that trend indicator could signal a prolonged correction, something the three-year-old bull market has not experienced since the flagging days of last summer.
Dow 13,074.75, -124.80 (0.95%)
NASDAQ 3,068.09, -45.48 (1.46%)
S&P 500 1,398.96, -14.42 (1.02%)
NYSE Composite 8,111.48, -105.06 (1.28%)
NASDAQ Volume 1,779,653,500
NYSE Volume 3,810,047,500
Combined NYSE & NASDAQ Advance - Decline: 1079-4563
Combined NYSE & NASDAQ New highs - New lows: 65-109
WTI crude oil: 101.47, -2.54
Gold: 1,614.10, -57.90
Silver: 31.04, -2.22
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