Showing posts with label inflation. Show all posts
Showing posts with label inflation. Show all posts

Thursday, May 7, 2020

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

Everything that has happened so far was predictable.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

-- Nasim Taleb

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

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

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

Friday, January 24, 2020

Stocks Flat As Lagarde Offers Inflation Policy Change in Europe

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

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

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

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

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

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

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

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

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

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

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

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

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

Tuesday, December 10, 2019

Stocks Struggle Second Straight Monday; Paul Volker Passes

In what is beginning to look like a recurrent theme, stocks struggled to open the week, with all the major US indices down on the day.

This is the same condition that prevailed last week. Stocks were down hard to start the week, only to be rescued on Friday by a surprisingly good jobs report.

That may not be the case this time around. There will be no salvation by numbers later on the week. Market participants will have to deal with the troika of incessant impeachment hearings, troubling trade talks, and fruitless Federal Reserve operations.

It's no secret that the Fed has opened the spigots again, starting in September with what they're currently calling "not QE," a series of open market operations conducted on a daily basis that was originally intended to ease the malaise in overnight lending markets, and, while still performing that function, has morphed into another monstrosity, already having increased the size of the Fed balance sheet by some $300 billion.

And this will go on at least through the first quarter of next year, and probably further, because once the Fed shuts down the free money booth, there will be carnage, which is not to say there won't be carnage beforehand or that they will ever be able to completely close down their operations of largesse to the yield-starved banks.

Beyond the ordinary absurdities that has become the financial world, a moment of pause was given to mourn the passing of former Fed Chairman Paul Volker, who served in that post from August 1979 to August 1987, under presidents Carter and Reagan. Widely credited as the man to defeat the high inflation of the 70s and 80s through the use of tight money controls and ridiculously high interest rates, Volker was first seen as ridiculous, then hated, and finally emerged an American hero, rescuing the US economy from a terrific bout of inflation, unemployment, and a deep recession - caused, in part, by his raising of the federal funds rate from 11% to a record 20% - in 1981-82, that lasted 16 months.

Volker died Sunday. He was 92.

At the Close, Monday, December 9, 2019:
Dow Jones Industrial Average: 27,909.60, -105.46 (-0.38%)
NASDAQ: 8,621.83, -34.70 (-0.40%)
S&P 500: 3,135.96, -9.95 (-0.32%)
NYSE Composite: 13,555.07, -33.22 (-0.24%)

Wednesday, December 19, 2018

Stocks Tank On Fed Rate Hike (Thank You, Captain Obvious); Transportation Index In Bear Market

What a racket!

As if there was ever any doubt that the Fed would hike the federal funds rate another 25 basis points, stocks shot up at the open and maintained a very positive stance right up until 2:00 pm ET, when the Fed did what everybody knew they would do all along.

Seriously, who in their right mind was buying prior to the rate hike? People with money to burn?

To get an idea of the kind of lunatics trading stocks on Wall Street, the Dow was up just about 300 points at 1:57 pm. By 2:08 pm - following the policy announcement - it was essentially flat... and it went down from there, eventually losing 351 points, closing at a new low for 2018.

Over the same time span, the NASDAQ was up 65 points, but 11 minutes later was down 38. The same fate that befell the Dow was true for NASDAQ, S&P, and NYSE Composite: fresh 2018 lows.

The Transportation Index was absolutely devastated, closing at 9,147.66, down 297.81 points (-3.15%), pushing the transports into bear market territory, down 21% from its September high.

OK, so it was one of those "heads, Fed wins, tails, you lose," kind of deal. There was no way the Fed was going to surprise anybody. It's simply not their style. They telegraph everything they do, because they're so, so important to the proper functioning of the economy, and they never balk at even the most obvious data or implication. Balderdash.

The Fed should be run out of town just like all other central banks have been, but the US sheeple population has put up with this particular band of thieves for the past 105 years. The Fed is why we have booms and busts, never-ending inflation, recessions, absurdly high interest rates on credit cards, and incomes that just don't quite match up with expenses for much of the former middle class.

The good news about the Fed's rate increase is that it may be the last one for a while. They may hike a few times in 2019, or, depending on how the stock market and/or ec responds, they may not hike at all. Meanwhile, they'll keep losing money by unwinding their massive, overvalued bond portfolio of US treasuries and toxic mortgage-backed securities dating from the sub-prime glory days.

Elsewhere, crude oil rallied a little bit, gaining to $47 and change per barrel. Gold and silver were punished, though each was down less than one percent. The real lashing will come tomorrow or at the latest, by the end of the year.

Thus, the Fed, in its infinite wisdom (greed), decided that it would be in its own best interests to destroy the global economy by hiking the overnight and prime rate for the ninth time since 2015.

Happy days for some. tears and more pain to come for many more.

Dow Jones Industrial Average December Scorecard:

Date Close Gain/Loss Cum. G/L
12/3/18 25,826.43 +287.97 +287.97
12/4/18 25,027.07 -799.36 -511.39
12/6/18 24,947.67 -79.40 -590.79
12/7/18 24,388.95 -558.72 -1149.51
12/10/18 24,423.26 +34.31 -1115.20
12/11/18 24,370.24 -53.02 -1168.22
12/12/18 24,527.27 +157.03 -1011.19
12/13/18 24,597.38 +70.11 -941.08
12/14/18 24,100.51 -496.87 -1437.95
12/17/18 23,592.98 -507.53 -1945.58
12/18/18 23,675.64 +82.66 -1862.92
12/19/18 23,323.66 -351.98 -2214.90

At the Close, Wednesday, December 19, 2018:
Dow Jones Industrial Average: 23,323.66, -351.98 (-1.49%)
NASDAQ: 6,636.83, -147.08 (-2.17%)
S&P 500: 2,506.96, -39.20 (-1.54%)
NYSE Composite: 11,371.84, -130.32 (-1.13%)

Wednesday, October 17, 2018

Why Stocks Are Unlikely To Go Any Higher

Forget about today's Fed Minutes. Forget about corporate third quarter earnings lowing to markets this week and next, and for the next month.

Forget all the gains made over the past nine years. The market has peaked, and there's good reasons to believe that and data to back it up.

First of all, stocks are wildly overvalued. By many measures, US equities are priced at the highest point they've ever been. Higher than during the dotcom phase, higher than the subprime wildness, stocks today are carrying just plain stupid valuations, like they are darling growth stocks with improving bottom lines. Many are not.

As an example, take Coca-Cola (KO) a standard of the Dow Industrials for many long years. KO is not a growth stock. It's an income stock with a dividend of 1.56, yielding a healthy 3.46% on its share price of around 45. But, here's the kicker. The P/E of Coca-Cola is a whopping 82. That's a number usually reserved for hot tech start-ups, not globally-engaged, long-in-the-tooth mature companies. It's a ridiculous situation because as the price of the stock falls, the dividend yield will rise, making it the attractive investment it is today.

But it's not. If Coke goes from 45 to 35 in a year or two, the dividend yield will be in a higher range. Revenue is falling. Earnings may be stable due to stock buybacks, which is a hidden portfolio killer. Other stocks like Coke exist, like McDonald's, Home Depot, Goldman Sachs, or just about half of the Dow Industrials.

If the simple overvaluation isn't enough to keep people from dumping their money into stocks, then there's the economic data, like unemployment, currently at 3.7%, which is an historic low. Economists generally consider anything below five percent as full employment because there are always a certain number of people changing jobs, retiring, or otherwise out of the employment market.

Inflation is moderate, but interest rates continue to rise, thanks to the Fed. Their rate hikes are putting a much needed brake on what could be a runaway speculative stock market and maybe already is. The Fed isn't going to suddenly stop raising rates, so, as 2018 winds down as a very dull year for stocks, bonds, currencies, and commodities, 2019 is shaping up to be even worse.

IN many ways, President Trump's promise to "Make America Great Again" may already have been kept. America is pretty great already. Anything more would be Nirvana. We've reached a peak. It's time to slow down a little. Recessions are healthy because they clear out excess malinvestment, like Sears, which recently filed for bankruptcy protection. Or Toys 'R Us, which went belly up last year but had been a zombie company for many years prior to its implosion.

There are other issues as well, from political turmoil in Europe, to trade tensions, to the huge credit bubble that's affecting individuals, businesses, and governments. They're all over-leveraged and deeply indebted.

For these reasons, stocks can't really go much higher, if at all. The bull run is coming to an end, but that's not necessarily bad news, it just means that investors will have to be more disciplined if they hope to profit.

Dow Jones Industrial Average October Scorecard:

Date Close Gain/Loss Cum. G/L
10/1/18 26,651.21 +192.90 +192.90
10/2/18 26,773.94 +122.73 +315.63
10/3/18 26,828.39 +54.45 +370.08
10/4/18 26,627.48 -200.91 +169.17
10/5/18 26,447.05 -180.43 -11.26
10/8/18 26,486.78 +39.73 +28.47
10/9/18 26,430.57 -56.21 -27.74
10/10/18 25,598.74 -831.83 -859.57
10/11/18 25,052.83 -545.91 -1405.48
10/12/18 25,339.99 +287.16 -1118.32
10/15/18 25,250.55 -89.44 -1207.76
10/16/18 25,798.42 +547.87 -659.89
10/17/18 25,706.68 -91.74 -751.63

At the Close, Wednesday, October 17, 2018:
Dow Jones Industrial Average: 25,706.68, -91.74 (-0.36%)
NASDAQ: 7,642.70, -2.79 (-0.04%)
S&P 500: 2,809.21, -0.71 (-0.03%)
NYSE Composite: 12,613.05, -32.90 (-0.26%)

Wednesday, October 3, 2018

Donald Trump Is Goldilocks In Disguise; Stocks Rally; Treasury Yields Rocket Higher

Odd thing about politics: As soon as one man comes into the picture promising to fix everything that's broken with the US economy, all the other politicians instantly hate him, fight him, and actively try to get rid of him... by any means necessary.

That man, of course, is none other than the current president, Donald J. Trump, who has fended off non-stop assaults from Democrats, members of his own party, even having to defend himself against attacks from within his own administration, such as the FBI and the Justice Department.

Meanwhile, Trump, while he hasn't kept all of his election promises, has delivered on a good number of them, especially those dealing with the economy, trade, and taxes.

Trump has cut taxes for many, he's re-negotiated bad trade deals such as NAFTA, and he's presided over an economy that by most accounts is booming.

Yet, the vast majority of politicians, bureaucrats, and Baltway insiders still want him gone. They'd love to impeach him, shame him into resigning, or otherwise undermine his America First policies.


Because they're jealous, and they're petty, and Trump has exposed them as swamp dwellers whose sole interests are enriching themselves at the public's expense and getting re-elected.

Trump has delivered - with assistance from the Federal Reserve and some members of congress - the United States into the goldilocks economy: not too hot, not too cold, just right. Stocks are up, yields on treasury bonds are rising, but inflation and unemployment are low. There's so much good going o in the US economy it's actually difficult to find problem areas.

401k accounts are fatter, paychecks have less tax taken from them, incomes are rising. Just what about all of this isn't to like? Ask Diane Feinstein, Chuck (sellout) Schumer, Nancy Pelosi or any of a handful of petty thieves masquerading as honorable congress-people. They have no answer and they're worried about losing their prestige and power in the upcoming mid-term elections. That's why they and their lackeys in the media are so intent on tearing down everything related to Trump and his successes. They accuse his Supreme Court nominee of sexual assault that supposedly happened more than 35 years ago, when Brett Kavenaugh - who will almost surely be confirmed by the Senate - was a teenager in high school.

The attacks and assaults will continue up to the November elections and beyond. Russia and collusion will be thumbed up again by the wicked special prosecutor from hell (and hopefully soon to return there). The New York Times will continue to run stories in vain attempts to tarnish President Trump's image. None of it will work. The American people see results and see through the media attacks, the howling senatorial rhetoric, and the baseless accusations. Jobs are plentiful. Money is flowing. Things are good, very good.

The Dow Jones Industrial Average closed at yet another record high today, despite backing off substantially from intra-day highs. The yield on the benchmark 10-year-note reached the highest point in more than a decade, at 3.16%, a number that has Fed officials smiling, lenders beaming, and most consumers and small business owners a little bit piqued, but still not worried or upset. Interest rates are still low compared to other times; mortgages are reasonably priced. With business prosperity, the cost of money should be a little higher and it's not at a point that it does damage to one's bottom line.

Goldilocks has arrived and his name is Trump.

(Plus, baseball playoffs are underway and Alabama is #1 in college football.)

Dow Jones Industrial Average October Scorecard:

Date Close Gain/Loss Cum. G/L
10/1/18 26,651.21 +192.90 +192.90
10/2/18 26,773.94 +122.73 +315.63
10/3/18 26,828.39 +54.45 +370.08

At the Close, Wednesday, October 3, 2018:
Dow Jones Industrial Average: 26,828.39, +54.45 (+0.20%)
NASDAQ: 8,025.08, +25.54 (+0.32%)
S&P 500: 2,925.51, +2.08 (+0.07%)
NYSE Composite: 13,118.55, +12.54 (+0.10%)

Friday, August 10, 2018

Stocks Stall Out, Dow Down Second Straight Day; Turkey Sparks Global Sell-Off

Things began turning ugly late on Thursday as the Dow - for the second day in a row - fell sharply nearing the close of the session.

Stocks had been trading nearly unchanged heading into the final hour, but dropped deep into the red to end the day down nearly 75 points. While the drop is hardly more than a rounding error (0.29%), the pattern of losing ground at the end of the session is troubling.

Notice has been taken by market participants. As of Friday morning, Asian bourses closed lower and European indices were off significantly, with the German DAX off by two percent.

In the US, futures are pointing to a large sell-off at the opening bell. The culprit appears to be the currency crisis in Turkey, where the Lira was down more than 12% on the day against the US dollar and is down 66% on the year.

It appears that Turkey is on the verge of a major collapse as President Erdogan defies his critics by refusing to raise interest rates in order to stave off incipient inflation.

The Dow is up just over 40 points for the week. A negative close could end a streak of five straight winning weeks for the 30 blue chip stocks.

Dow Jones Industrial Average August Scorecard:

Date Close Gain/Loss Cum. G/L
8/1/18 25,333.82 -81.37 -81.37
8/2/18 25,326.16 -7.66 -89.03
8/3/18 25,462.58 +136.42 +55.05
8/6/18 25,502.18 +39.60 +94.65
8/7/18 25,628.91 +126.73 +221.38
8/8/18 25,583.75 -45.16 +176.22
8/9/18 25,509.23 -74.52 +101.70

At the Close, Thursday, August 9, 2018:
Dow Jones Industrial Average: 25,509.23, -74.52 (-0.29%)
NASDAQ: 7,891.78, +3.46 (+0.04%)
S&P 500 2,853.58, -4.12 (-0.14%)
NYSE Composite: 12,956.66, -31.25 (-0.24%)

Tuesday, July 24, 2018

Stubborn Dow Remains Range-Bound; NASDAQ Dips

Since March 9, the Dow has traded in a fairly tight range - considering the time elapsed (nearly six months) - of just more than 1400 points, or less than six percent of total market value.

Recently, it has been trading near the upper end of this range, but has repeatedly failed to surpass the previous interim high and is still another 1400-1500 points away from January's all-time high of 26,616.71.

The range, 23,924.98 - 25,335.74, has been wide enough to offer hope to both bulls and bears, though neither a breakout nor a breakdown has occurred, with much of the betting money on the latter. Current and prior sentiment sees a second half slowdown, with the Trump tax cuts already measured in, inflation becoming more of an issue, and the tariff tug-fo-war on the world stage only in the early stages.

Thus, seasoned investors are wary of sudden impulse moves such as today's and also have an eye toward the political spectrum, midterm elections and what now appears to be a runaway federal budget-busting deficit for the current fiscal year. These are the factors contributing to the skeptical view, while the more subdued bull case rests largely on the employment picture. Americans are well-employed at present, even though labor force participation remains near record lows.

Inside the demographics of the United States, there exists a virtuous cycle, in which retiring baby boomers give up jobs to millennials and Generation Xers, while spending their retirement incomes without a care. There's plenty of money to go around, though, with a country as large and diverse as the US, it's difficult to pigeonhole any particular stocks that should benefit the greatest.

Consumer staples are and have been the safest bets along with energy, tech, and basic materials, but the gains have been paltry outside the smoking tech sector. A diversified portfolio is probably the best insurance against a market rout, but being in the right stocks can prove tricky, if not altogether impossible to attain anything better than the average index fund.

On the day, the Dow and NASDAQ diverged, a sign that everything is not in sync, and that issues remain unresolved, though that is a normal case and not anything about which to be overly pessimistic.

With crosswinds at the crossroads of prosperity and desperation, there's more than ample rationale for either argument.

This remains a sit-tight-and-hold-cash condition.

Dow Jones Industrial Average July Scorecard:

Date Close Gain/Loss Cum. G/L
7/2/18 24,307.18 +35.77 +35.77
7/3/18 24,174.82 -132.36 -96.59
7/5/18 24,345.44 +181.92 +85.33
7/6/18 24,456.48 +99.74 +185.07
7/9/18 24,776.59 +320.11 +505.18
7/10/18 24,919.66 +143.07 +648.25
7/11/18 24,700.45 -219.21 +429.04
7/12/18 24,924.89 +224.44 +653.48
7/13/18 25,019.41 +94.52 +748.00
7/16/18 25,064.36 +44.95 +792.95
7/17/18 25,119.89 +55.53 +848.48
7/18/18 25,199.29 +79.40 +927.88
7/19/18 25,064.50 -134.79 +793.09
7/20/18 25,058.12 -6.38 +786.71
7/23/18 25,044.29 -13.83 +772.88
7/24/18 25,241.94 +197.65 +970.53

At the Close, Tuesday, July 24, 2018:
Dow Jones Industrial Average: 25,241.94, +197.65 (+0.79%)
NASDAQ: 7,840.77, -1.10 (-0.01%)
S&P 500: 2,820.40, +13.42 (+0.48%)
NYSE Composite: 12,847.49, +53.44 (+0.42%)

Wednesday, May 23, 2018

Dow Turns Positive With Just 10 Minutes Left In Session; Thanks to Fed Minutes?

OK, lemmings, your nightly stock market news byte tells you that the Dow was up a whopping 52 points.

That's all you need to know, unless you want to know that the Dow and the other indices were down most of the day, with the industrials turning positive with just 10 minutes left in the trading day.

No need to worry about that 167-point drop by midday. By 4:00 pm EDT, that was ancient history because - according to the official narrative - the stock gurus were thrilled by the Fed Minutes from the May 2nd FOMC meeting.

Somehow, broad approval of two percent inflation and continued hiking of the federal funds rate (the betting is for four rate increases this year; one already in January) is good for the economy.

Just for fun, try out this nifty inflation calculator. You might be surprised to find that the cumulative rate of inflation since 1990 (28 years ago) is 91.7%, meaning the value of your dollars have decreased by nearly half. A $20 item in 1990 would cost $38.34 today.

Convinced that 2% inflation (about what it's been for the last 30 years) is a good thing? Think again. The Fed's mandate was to maintain stable prices, not constantly increasing prices. They've failed.

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

At the Close, Wednesday, May 23, 2018:
Dow Jones Industrial Average: 24,886.81, +52.40 (+0.21%)
NASDAQ: 7,425.96, +47.50 (+0.64%)
S&P 500: 2,733.29, +8.85 (+0.32%)
NYSE Composite: 12,743.40, -23.25 (-0.18%)

Thursday, March 22, 2018

Fed Has Ventured Into Dangerous Territory With Most Recent Rate Hike

Whether Wednesday's 25 basis point hike in the federal funds rate will eventually become a seminal moment in economic history, only time will tell. On the surface, there are a good number of indications that the Fed, by increasing the overnight lending rate to 1.50-1.75%, may have finally blundered into a crucial policy error.

The hike being the sixth such rate increase of 0.25% in the past 27 months, the Federal Reserve has ventured into an area which has the potential to do more harm than good, as evidenced by the sudden turnabout in stocks after the rate decision was announced, and, more to the point, during Fed Chairman Jerome Powell's first press conference.

Stocks initially rose on the release, but gave back all of the gains, finally ending with complete capitulation as the trading day drew to a close, turning what was a brief 250-point gain into a lasting 45-point loss at the close.

What has equity investors puzzled and anguished is the Fed's insistence on their continued insistence on higher interest rates, despite economic data that shows quite clearly that inflation is nascent and growth largely a chimera, a construct of rose-colored projections of the general economy added to massive increases in government spending, which is, in the end, fully lacking in productive qualities.

Governors of the Federal Reserve, ensconced, as they are, within their cocoons of smug condescension, are either uninformed to the realities of life in the real world or purposely interpreting their trumped-up economic data as reflective of a booming economy.

The other possibility is that the Fed officials know that the economy - both domestic and global - is headed for recession, and they are preparing for the worst, employing the only tool they believe effective, the varying of interest rates with the intent to either slow lending and economic activity by raising them, or increase the same by lowering them.

Sadly, the Fed has the cart well out in front of the horse. Their rate increases will slow the economy, precisely at a time in which they should be doing nothing. Eventually, the Fed will have to reverse the direction of their myopic monetary monopoly, as the economy - which has been limping along at two percent growth or less for the past ten years - and lower rates, ushering in another era of mad money machinations, sending valuations of stocks out into the cosmos, while the public watches the explosion of wealth inequality soar to unimagined heights.

Besides the folly of raising rates in a weak economic environment, the Fed continues to preach that they are decreasing their massive balance sheet, rolling off their horde of somewhat dubious mortgage-backed securities and treasury bills, notes and bonds.

Having taken a path toward a rather rapid depletion of liquidity, Mr. Powell and his cohorts will soon find that themselves vilified and, with any hope, bankrupt.

Their continuing charade of being the "best and brightest" know-it-alls in the financial universe must come to an end soon, lest the entire global economic structure be collapsed into one giant heap of unplayable debt, impoverishing the world's billions of citizens while laying bare their own conceit, deceit, and utter depravity.

Dow Jones Industrial Average March Scorecard:

Date Close Gain/Loss Cum. G/L
3/1/18 24,608.98 -420.22 -420.22
3/2/18 24,538.06 -70.92 -491.14
3/5/18 24,874.76 +336.70 -154.44
3/6/18 24,884.12 +9.36 -145.08
3/7/18 24,801.36 -82.76 -227.84
3/8/18 24,895.21 +93.85 -133.99
3/9/18 25,335.74 +440.53 +306.54
3/12/18 25,178.61 -157.13 +149.41
3/13/18 25,007.03, -171.58 -22.17
3/14/18 24,758.12 -248.91 -271.08
3/15/18 24,873.66 +115.54 -155.54
3/16/18 24,946.51 +72.85 -82.69
3/19/18 24,610.91 -335.60 -418.29
3/20/18 24,727.27 +116.36 -301.93
3/21/18 24,682.31 -44.96 -346.89

At the Close, Wednesday, March 21, 2018:
Dow Jones Industrial Average: 24,682.31, -44.96 (-0.18%)
NASDAQ: 7,345.29, -19.02 (-0.26%)
S&P 500: 2,711.93, -5.01 (-0.18%)
NYSE Composite: 12,683.76, +20.12 (+0.16%)

Thursday, March 15, 2018

Dow Sheds For Third Strat Day; Last Week's Gains In Jeopardy

Trade wars. Inflation. Rate hikes. Housing prices. Wealth inequality.

Take your pick. These are but a few of the issues vexing investors as the Dow Jones Industrials recorded triple digit losses for the third straight session, wiping out the gains from the previous Friday and threatening to eviscerate all of the upside from a momentous prior week.

Anybody keeping score (and if you have a pension plan, college fund, or any other kind of tangential reach into the world of equities, you should be) has to be at least a little bit alarmed at the inability of stocks to regain their momentum. After a wildly positive January, February was fraught with panic and pain. Now March is beginning to shape up into a further continuation of the slippery slope upon which stocks are currently sliding downward.

Over the previous week, the Dow had ramped up nearly 800 points, but, as of the current mid-week, the blue chips are down nearly 600 points. Another day like Wednesday would not only eclipse the gains of last week, but it would also signal to chart-watchers a breach of the prior interim low, 24,538.06, achieved March 2nd.

A drop below that level would be an almost certain sign that the index - and stocks in general - are in for another round of relentless selling pressure. What matters little is the suspected cause. What matters most is the evaporation of profits and gains and the spread of fear in the accumulation of wealth.

It would not be the first time that investors had been hoodwinked by snake oil salesmen promoting a path to easy street via investments in minuscule percentage ownership of gigantic corporations. In all likelihood, it would not be the last.

As has been stated in prior posts here at Money Daily, the market is moving not only on money flows and fundamentals, but on political considerations, whether they be real or imagined.

There is very real danger at this juncture and investors would be wise to hold cash and/or take profits.

Dow Jones Industrial Average March Scorecard:

Date Close Gain/Loss Cum. G/L
3/1/18 24,608.98 -420.22 -420.22
3/2/18 24,538.06 -70.92 -491.14
3/5/18 24,874.76 +336.70 -154.44
3/6/18 24,884.12 +9.36 -145.08
3/7/18 24,801.36 -82.76 -227.84
3/8/18 24,895.21 +93.85 -133.99
3/9/18 25,335.74 +440.53 +306.54
3/12/18 25,178.61 -157.13 +149.41
3/13/18 25,007.03 -171.58 -22.17
3/14/18 24,758.12 -248.91 -271.08

At the Close, Wednesday, March 14, 2018:
Dow Jones Industrial Average: 24,758.12, -248.91 (-1.00%)
NASDAQ: 7,496.81, -14.20 (-0.19%)
S&P 500: 2,749.48, -15.83 (-0.57%)
NYSE Composite: 12,762.67, -69.08 (-0.54%)

Thursday, February 15, 2018

Despite Relatively Hot CPI, Stocks Rip Higher

What's that old saying?

It's something like... "don't wish too hard, you may get what you want."

Well, it applies to the Fed, ECB, BoJ and other central banks, which have been screaming for higher inflation ever since the Great Financial Crisis of 2008-09.

On Wednesday, they got some of the "good" news. The CPI for January came in with a gain of 0.54 month-over-month, the biggest increase since January of 2017. Being that both January of this and last year were the high points for CPI, it might be a statistical anomaly, though that thought seemingly hasn't crossed the minds of any economic reporters.

Higher consumer prices in January, however, didn’t substantially alter the overall picture on inflation. The increase in the CPI over the past 12 months remained unchanged at 2.1%.

After stripping out volatile gas and food, the more closely followed core rate of inflation rose 0.3% last month. The 12-month rate of core inflation was also flat at 1.8%.

So, once stock players digested the news, which was released an hour prior to the opening bell, futures nosedived, stocks opened deep in the red, but, within an hour, it was off to the races, despite interest rates - especially the 10-year-note - rising sharply.

The 10-year-note popped over 2.9% yield, while gold and silver - traditional inflation hedges - soared throughout the day.

Seems nobody really knows what will happen, though many profess to have deep inner knowledge of how economics actually works.

Maybe we're all just being played for fools.

Pull my finger...

Dow Jones Industrial Average February Scorecard:

Date Close Gain/Loss Cum. G/L
2/1/18 26,186.71 +37.32 +37.32
2/2/18 25,520.96 -665.75 -628.43
2/5/18 24,345.75 -1,175.21 -1,803.64
2/6/18 24,912.77 +567.02 -1,236.62
2/7/18 24,893.35 -19.42 -1,256.04
2/8/18 23,860.46 -1,032.89 -2288.93
2/9/18 24,190.90 +330.44 -1958.49
2/12/18 24,601.27 +410.37 -1548.12
2/13/18 24,640.45 +39.18 -1508.94
2/14/18 24,893.49 +253.04 -1255.90

At the Close, Wednesday, February 14, 2018:
Dow Jones Industrial Average: 24,893.49, +253.04 (+1.03%)
NASDAQ: 7,143.62, +130.10 (+1.86%)
S&P 500: 2,698.63, +35.69 (+1.34%)
NYSE Composite: 12,746.72, +172.35 (+1.37%)

Wednesday, January 3, 2018

Stocks Advance to Start 2018; Gold, Silver Rallies Continue

Stocks ramped higher at the opening of the first trading session of 2018, continuing a trend that carried equity investments to major gains in 2017.

At the same time, gold and silver continued their impressive three-week-old rally. Silver has been the out-performer of the pair, rising from a low of 15.67 per ounce on December 13 to 17.15 as of the close of trading in New York on Tuesday. Gold crested above the sticky $1300 level, finishing the day at 1317.10. It also bottomed out on December 13, dropping below 1240.90 on that date.

While there's certainly nothing unusual about stock gains, the rally in precious metals is raising some eyebrows and prompting talk of future Fed rate hikes and incipient inflation, which has been a false flag for eight years running.

On Wednesday, investors may get some indication of the Fed's intentions. Minutes from the December meeting - at which the Fed raised the federal funds rate for the third time in 2017 - are to be released during the session. Of particular interest is the discussion over rate increases and any dissenting opinion.

The Fed has made it clear that they intend to continue raising rates this year, with four increases of 25 basis points the proposed path. At the same time, the Fed will continue to unwind its bloated balance sheet, shedding billions of dollars worth of treasury bonds and mortgage-backed securities (MBS) and increasing the rate of disposal as the year commences. By October, the Fed is supposed to be dumping as many as $60 billion worth of notes, bills and bonds.

The combination of a general tax cut for consumers, a large tax cut for corporations, rising rates, bond dumping, and an improving economy suggests a formula for inflation, which is generally understood to be good for gold and silver, though the rise in precious metal prices may have more to do with currency debasement than a knee-jerk response to the economic climate.

At the Close, Tuesday, January 2, 2018:
Dow: 24,824.01, +104.79 (+0.42%)
NASDAQ: 7,006.90, +103.51 (+1.50%)
S&P 500 2,695.81, +22.20 (+0.83%)
NYSE Composite: 12,902.72, +93.88 (+0.7329%)

Thursday, October 12, 2017

Adam Smith, Grains, Silver, the PPI, and Deflation

For months, if not years, Federal Reserve officials have been harping on the absence of inflation during their era of unrelenting quantitative easing (money printing). This phenomenon has baffled the pointed heads of the Fed, since it would be only natural for prices to rise with the advent of scads of fresh money hitting the market.

The problem for the Fed is simple. Their transmission lines have been blunted for the past eight years, with their easy money stopped at the bank level, never actually reaching commercial or consumer participants in the general economy. Thus, stocks, bonds and various currencies have experienced outsize gains - those assets experiencing above average appreciation, i.e., inflation - while the more mundane elements of the vast economic landscape have wallowed in a regime of low inflation, disinflation or outright deflation.

As the Fed prepares to sell off assets from its enormous ($4.4 trillion) balance sheet, the matter of price inflation has once again become a major concern. Fed officials disingenuously mutter on and about wage growth, seeking to convey the impression that they are somehow concerned for the welfare of workers (labor). Wage growth, which has stagnated since the year 1999 if not earlier, is a false argument for inflation. what the Fed wants is price inflation for everyday goods, commercial mid-production products, and base goods.

It's not happening.

In his magnificent tome, "The Wealth of Nations," author Adam Smith takes pains - and many pages - in discussion of nominal prices, concerning himself in his writings with the price of corn. Scholars rightfully insist that Smaith's intention was to show how prices in base goods are more important a measurement of economic health than pricing in currency.

With that knowledge, variations in currencies and base grains - wheat, corn, rice - can serve as an impressive measurement of real inflation, since the cost of producing marketable grain from hectares of farm land is somewhat non-variable, considering that the labor and fuel costs are relatively static.

In other words, since farmers are paying their hired hands roughly the same wage and the cost of operating the machinery to harvest the grains is also somewhat static, the price of finished grain in terms of currencies of choice - in his case, silver, can determine whether the environment is inflationary, deflationary, or neutral.

This morning's release of PPI data showed an increase of 0.4% month-over-month and a rate of 2.6% year-over-year. The increase puts the PPI at a level last seen in 2012. CPI (Consumer Price Index) remains mired in mediocrity, at a rate of 1.9% annually. That is the final inflation number, though it is hardly a reliable one.

Since the US economy is so vast and dynamic, it's difficult to get a grip on the overall flow of anything, though it's fairly certain that the inflation rate is higher than what the government is reporting.

On the other hand, taking into account Adam Smith's famous measurements, grains - the basis for much of what Americans and animals of husbandry eat - have crashed in recent weeks and months, along with silver, which has been rangebound for the past four years and is thus a benign measurement, useful in actual discussions of nominal prices.

On that basis, the Fed is likely to be disappointed in their inflation expectations. Since their data is so badly maligned, it cannot be trusted, while Adam Smith's has stood the tests of time.

It's deflation, as far as the eye can see, no matter what the Federal Reserve officials - who have proven, time and again, to be nothing more than dunces with degrees - try to squeeze out of the economy. The deflation is especially evident considering the levels of price suppression in silver. Were silver to rise to somewhat more realistic levels, the cost of buying a bushel or wheat or corn or rice would fall substantially.

Stocks made new all-time highs on Wednesday, but are pulling back in early trading Thursday morning.

Friday, October 6, 2017

Easy Money Fosters a World of Fatties, Free-Spending, and Fallacies

Easy Street.

It's where we all reside these days, as stocks reach new all-time highs on a regular basis, quarterly fund notices are eagerly awaited for the good news, and no calamity, disaster, data, or dictator can hope to stem the flow of money into the pockets of Wall Street brokers and their eager investors.

Easy Money.

That's the ticket to lifestyles of the rich and famous. What's known widely as the "wealth effect," has everybody giddy with the possibilities of bigger homes, faster cars, more lavish lifestyles. Why would anybody claim that these manufactured dreams are not for the best?

Because they're dreams, fallacies, shadow plays on the collective psyche of investors, which these days happens to include anybody with a decent job and a 401k retirement plan. TV ads show healthy retirees working on sports cars, opening wineries, bicycling along the shore of some deserted beach.

It's a facade for the real lives people live. More than a fair share of people are either in poor health, somewhat destitute, unable to decide between paying for medication or food, and the rents or mortgages on those "bigger homes" are increasing at an unsustainable rate.

Everything, from pickle relish to cell phone plans, is massively overpriced and planning on going higher. The very priests and priestesses of high finance = the governors of the Federal Reserve - tell us that they would like to see more inflation. Seriously. Higher prices... for everything.

Walk through any upscale supermarket and witnessed the blank stares of shoppers strolling and trolling the aisles, mesmerized by colorful labels and delicious deals. It's enough to make the whole country obese.

And it is. Nobody in the financial realm will admit it, but easy money is a leading cause of obesity. It's also a leading cause of mass stupidity. It takes no financial discipline nor anything more than basic math skills to suck up the profits from the font of Wall Street. It's intellectually dishonest and mentally disarming. It results in being massively unprepared for the present and especially, the future.

Easy money fuels the general degradation of society because of it's essential falsity. The money is conjured out of thin air - with a dabble of debt added for good measure - to buy minuscule portions of companies at prices one would have sneered at 20 years ago. Most people with investments don't even know which companies they own, how many shares of such or what the price to earnings ratio is of the underlying securities.

Is this rational? People have so much trust in money-changers that they don't even know what they own, or why. That's what's troubling. American investors have entrusted their futures to the same group of people who brought us the dotcom disaster, the sub-prime mortgage bubble and the Great Financial Crisis (GFC) of 2008-09. It's lunacy of a high order.

There's an old adage that goes, "you get what you pay for." Besides being an example of poor grammar (another sign of the times), there is the ring of truth to the expression. What people have paid for their stocks, their perceived riches, their assumed wealth, is small, yet they expect the returns to be great.

After fees, taxes and the great wealth destroyer of inflation, they're not likely to be very pleased when they cash out.

At the close, Thursday, October 5, 2017: (all record closing highs)
Dow: 22,775.39, +113.75 (+0.50%)
NASDAQ: 6,585.36, +50.73 (+0.78%)
S&P 500: 2,552.07, +14.33 (+0.56%)
NYSE Composite: 12,338.93, +34.26 (+0.28%)

Tuesday, September 26, 2017

Janet Yellen Admits She May Not Know What She's Talking About

As Janet Yellen dispensed more gibberish about labor markets and inflation in a speech at the annual conference of the National Association for Business Economics, stocks drifted aimlessly, seeking some sense of direction from congress, the president, the Fed Chair, anybody.

The problem for the markets is that there isn't any other direction but down. In just the past few weeks, Houston, Florida and Puerto Rico and the Virgin Islands have been wracked by hurricanes, NFL protests became more important than the games themselves, Kim Jong-un and President Trump continue to trade insults. These are not exactly headlines or stories that make people confident about buying stocks, mutual funds, ETFs or any of the other wealth-enhancing products offered by the Wall Street swindle machine.

In fact, since the FOMC meeting came to a close last Wednesday, stocks have done nothing but go lower. The Dow Jones Industrial Average is down four straight days since the Fed confirmed that it would begin shrinking its balance sheet in October. Though the losses have not been great, they have been consistent. The blue chip index is off 128 points since closing at a record high of 22,412.59 on September 20.

The S&P 500 snapped a three-day losing streak, but only by 18 cents, finishing green for the first time since the Fed announcement. The NYSE Composite bucked the trend by making new highs on Friday, but has posted losses both days this week, and the NASDAQ finished higher on Tuesday, but is still down 42 points from FOMC day.

Yellen's remarks aren't of any help to markets seeking guidance. In here address today, she said the following:
"My colleagues and I may have misjudged the strength of the labor market, the degree to which longer-run inflation expectations are consistent with our inflation objective or even the fundamental forces driving inflation."
Essentially, statements like those are not going to inspire much confidence. Parsing the quote, she's basically saying all of the Fed's assumptions about the labor market, inflation and even the fundamentals of the economy itself may be wrong.

Wow. Just wow. And people actually listen to this witch doctor of finance for guidance and direction?

What's amusing, or scary, depending on your point of view, is the current madness is just the warm-up act to the Fed's actual sales of MBS and treasury bonds in upcoming months, a global garage sale that will commence over at least three to five years. Anything less would rapidly throw markets into a death spiral because of the number of assets, the size ($4.4 trillion) of the balance sheet and the lack of quality in the offerings.

For now, markets are taking it in stride, slowly adjusting to the new paradigm of rising interest rates in an environment of low inflation, slack wage demand and slow to no growth in GDP, globally.

If anything, the officials at the Fed should trade in their accountant vizors for dunce caps because they're sending the economy down a black hole with experimental policies and solutions to problems that don't already exist. Judging by past performance, the Fed will find a way to assure the business cycle is complete by plunging the economy into recession.

You can almost count on it.

At the Close, Tuesday, September 26, 2017:
Dow: 22,284.32, -11.77 (-0.05%)
NASDAQ: 6,380.16, +9.57 (+0.15%)
S&P 500: 2,496.84, +0.18 (+0.01%)
NYSE Composite: 12,127.93, -13.64 (-0.11%)

Friday, September 15, 2017

Dow Posts New All-Time High; Retail Sales Miss, Inflation Higher In August

With a 45-point gain on Thursday, the Dow Jones Industrial Average set a new all-time closing high (22,203.48), putting an exclamation mark on what has been an incredibly fruitful week for investors.

With a small gain last Friday, the Dow has now gone five straight sessions without posting a loss. The blue chip average is up 405 points for the week (1.86%) and despite some discouraging data prior to Friday's open, it appears set to finish the week on a healthy note.

The data Friday morning that sent futures lower was a pickup in inflation according to the CPI figures for August, showing a 0.4% increase, due largely to a spike in retail gas prices and a 0.5% increase in the rent factor. On a year-over-year basis, the index is up 1.9%, closing in on the Federal Reserve's two percent target rate.

Retail sales were down 0.2% in August, with the largest contributor to the decline the drop in auto sales which slumped 1.6% for the month after being flat in July.

With inflation up slightly (and understandably) and sales down, the Fed will find itself once again in a box on rate increases and likely do nothing when the FOMC meets next week. Some mention of the winding down of their enormous, $4.1 trillion balance sheet is expected and that could move markets, although the Fed has been extremely cautious to commence the wind-down as it could spark inflation, a market selloff or other unforeseen consequences.

Nonetheless, stocks are poised for another solid week while the economy appears to be slowing gradually during the third quarter.

At the Close, Thursday, September 14, 2017:
Dow: 22,203.48, +45.30 (+0.20%)
NASDAQ: 6,429.08, -31.10 (-0.48%)
S&P 500: 2,495.62, -2.75 (-0.11%)
NYSE Composite: 12,062.62, +7.44 (+0.06%)

Monday, June 5, 2017

Unconvincing Open To the Week; Inflation/Deflation Debate Grows; Oil Continues Slide

In the ongoing inflation/deflation scrimmage, it's a draw, but, depending on where you've placed your bets, the victories may be huge.

For the investing crowd, stocks are golden and likely will continue to be so. Rough spots ahead include the June FOMC meeting (next Tuesday and Wednesday) and the coming fight in the congress over President Trump's proposed tax plan, which would constitute not only a major victory for the president, but also a big one for the American people, so it's far from a sure thing.

Congress, in case nobody has noticed, remains, for the most part, useless. Unless one is interested in hearings which lead to nothing or vacation time for rich Senators and soon-to-be-rich members of the House, neither the Republicans nor Democrats seem willing to actually legislate upon anything that will benefit anybody outside the District of Columbia. Truly, congress has become a closed loop between special interests represented by K Street lobbyists and insider deals that benefit one's own district (and that's becoming something of a rarity).

Noting that the government - outside of President Trump's ongoing efforts for change - remains powerless to do anything positive, Wall Street is probably giddy over the prospects, being that the major corporations which own, buy, and sell debt and equity are well insulated against any untoward legislation or outside shocks within their own cozy club.

Thus, it makes little sense to do anything except invest in the only asset class returning gains and/or dividends. Precious metals have floundered for the past four years, and oil has been in the dumps over the past two.

The slide from the low $50 range for WTI crude continued on Monday, dipping as down to 46.86 before recovering late in New York into the low $47 range.

So, in a nutshell, food and many other consumer staples remain without pricing power, restaurants are varyingly in a race to the bottom or towards diversifying menus with many of the large chains offering enticing deals. Retail overall is a basket case, now that online shopping has gone mainstream and will soon overtake brick and mortar from a gross revenue standpoint.

It's stocks for appreciation, though the wizards of Wall Street are somewhat blind to the disinflation, deflation and decimation of Main Street.

At the Close, 6/5/17:
Dow: 21,184.04, -22.25 (-0.10%)
NASDAQ: 6,295.68, -10.11 (-0.16%)
S&P 500: 2,436.10, -2.97 (-0.12%)
NYSE Composite: 11,693.65, -25.04 (-0.21%)

Wednesday, April 19, 2017

Stocks In Spring Funk, Well Off All-Time Highs

Monday's big rally failed to inspire much confidence as the major averages fell sharply on Tuesday, giving back most of the gains from the prior session.

If it seems that stocks have hit a wall or are in stall mode for the present, it's because they are. The last all-time high close on the Dow Jones Industrial Average was March 6, when the bellwether ended the day at 20,954.34.

The other averages have been in similar holding patterns, though the markets overall - despite their closeness to record levels - do not appear very fragile. It's just that there isn't very much velocity or volatility, and even with first quarter earnings thus far somewhat positive, they haven't supplied a catalyst to move stocks out of a Spring funk.

Without a clear case for an upside move, speculators may be looking more to politics for a positive tone, but the rancor in Washington has been at near-deafening levels since the inauguration of Donald Trump in January and the Democrats seem to be dug in to obstruct any and all of the President's agendas.

China and Russia moving troops to the borders of North Korea, along with US warships steaming towards its coast, probably has dampened investor appetite as well.

But that's all for the time being. Economic data is pointing to more of the same, a slow, dolorous economy that isn't making anybody happy, least of which are the governors of the Fed, who wish to see more robust job creation and some pricing power by corporations, but, exclusively in the latter case, are seeing the opposite. Consumers are no longer the suckers they once were, and are beginning to demand value for their dollars. Retailers and restaurants - the front lines for consumer inflation - have been feeling the pinch, with many regional and national chains already engaged in a pitched price war.

That kind of activity can only go one way, and it's not the way of inflation. Bond sellers are a happy bunch for this, with prices for their offerings high and yields down.

Trump may want to make America great again, but it may have to start with better deals for consumers.

At the Close, Tuesday, April 18, 2017:
Dow: 20,523.28, -113.64, (-0.55%)
NASDAQ: 5,849.47, -7.32 (-0.12%)
S&P 500: 2,342.19, -6.82 (-0.29%)
NYSE Composite: 11,378.58, -48.50 (-0.42%)

Wednesday, February 15, 2017

Four Straight: All Major US Indices Close At Record Highs

Shades of the Weimar Republic, as all financial assets are becoming ridiculously overpriced.

As was the case in the Weimar, this may not end well. Inflation statistics from this morning's CPI reading showed January up 0.6% and the core CPI higher by some 0.3%. Meanwhile, capacity utilization fell 0.3 from December, to 75.3%.

Retail sales figures were also positive, showing a gain of 0.4%, after December's numbers were magically improved, revised from 0.6% to 1.0%. This as holiday sales gains from major retailers were modest or unreported, and large chains such as Sears and Macy's announced mass store closings coming throughout the year.

Global stock indices have also been ramping higher of late, an indication that the inflation, so often promised by endless rounds of quantitative easing (money printing) and an extended period (8 to 15 years) of low interest rates (some below zero) is finally occurring. What the globalists have been touting and predicting to happen can only lead to one logical conclusion: higher prices for consumers, a condition that will prove to impoverish the average citizenry of nearly every country in the world.

All of this may have something to do with the globalists running scared that their era of "free trade" and fiat money is about to meet its logical conclusion.

But it's all good for Wall Street, and that's what counts, to Wall Street.

At the Close, 2/15/17:
Dow: 20,618.98, +114.57 (0.56%)
NASDAQ: 5,821.62, +39.05 (0.68%)
S&P 500: 2,351.15, +13.57 (0.58%)
NYSE Composite: 11,510.34, +41.47 (0.36%)