Let's talk about money, your work experience, and taxes, just what you want to think about this morning, right?
It is an important topic, however, just because so many people avoid thinking about their work and its relation to taxation and general well-being.
Right from jump street, if you're working for an hourly wage, everybody's getting cheated. You, your employer, even the government which takes part of your pay before you even see it is getting a raw deal, though it could be argued that the government, which has little to no "skin in the game" when it comes to your income, your employment, and your work habits, has nothing to lose and so much to gain.
By taking a job or a position in exchange for so form of compensation based on time, you've rendered yourself about as useful or resourceful as a drone. You show up, you punch the clock, you perform your duties, you go home. Nothing more, nothing less. It's a dreadful condition, draining the life force out of you on a regularly scheduled basis. Making matters even worse, your boss probably thinks you aren't working hard enough and the government takes a percentage of everything - before you even see it - and wants more.
The concept of hourly wages is a relatively recent development in the great pantheon of civilization and labor. Prior to 1900, workers were paid by the day, week, or month, or by the task, which, being that much of the labor of the era was performed on farms, often included lodging and/or meals. This made sense because the world was a hard-scrabble place, weather took its toll on the amount and quality of work performed over days and even weeks, and it was generally well-known that workers wore down after six to eight hours on a particular job and the quality might suffer as the day wore away at their muscles and bones.
It wasn't until the industrial revolution and the great immigration from Europe to America that hourly wages became established. Employers and unions established scales of wages and requirements for work-weeks (a typical week of work was from 50 to 60 hours). In the early days of industrialization, unions became necessary because naturally, employers wanted to pay as little as possible, but workers needed to earn a decent living, provide for their families, and maybe have a little left over for savings.
It wasn't until 1938 - in the throes of the Great Depression - that minimum wage laws were established, at the time, a necessary evil, because not just workers, but employers as well, were suffering from the maladies of slack demand and massive deflation. During that developmental period and since then, the hourly wage became the standard compensation for menial tasks and the government didn't miss the opportunity to get its unfair share, beginning in the early 1940s, when they imposed payroll deductions as a means to fund the war effort incurred during world War II.
When the war was over, the feds didn't stop there, they just kept taking part of everybody's pay, increasing their percentage over the years. States jumped on that bandwagon as well, many imposing their own income taxes. Many still believe that income tax or any tax on wages is unconstitutional. They're actually right, and why the IRS calls income tax "voluntary," but try not paying your share and see what happens. There's nothing voluntary about wage taxes and deductions from your paycheck. It's theft on a grand scale.
It's a crying shame that somebody making $15 per hour only gets to take home about $12 of that hourly rate after the feds take their withholding amount, Social Security (FICA) and Medicaid "contribution" and the state piles in for another piece of your pie. People making more are penalized even further. That's the government side of the equation. Making it all the more unbearable, the various governments waste what they take from you and have to borrow even more and still can't manage to balance their budget. It's like throwing money down a black hole, this one lined with $26 trillion in federal debt which will never be repaid.
Getting back to the hourly wage and why it makes everybody a crook, you're probably not happy about the government taking 12-20% or more right out of your paycheck. You may decide to work 12-20% less or slow your productivity because of that unfair practice. That, in effect, steals from your employer, who isn't at fault for the government's intrusion into an agreement made between you and your boss' company, but it is he who pays for lost productivity, slack standards, theft, and the other unintended consequences of hourly wages.
Because, like you, the employer feels threatened by both sides - workers and the government - he cuts hours, or lays off unproductive employees, putting more strain on those that remain. He or she might also makes use of accountants and any other tricks available to limit his contributions to the government. It's the employer who writes the checks after all, and it is the employer who must remit to the government. Many have tried to cheat the government. Many have failed. Many are out of business, but the point is that the hourly wage and payroll deductions have spawned all sorts of bad behavior by employees and employers alike. More often than not, it's payments made to the "silent partners" - governments - that bankrupt businesses and put people out of work through no faults of their own.
The other major problem with a hourly wage it that it stifles productivity and efficiency. Maybe you can produce six widgets an hour, but everybody else on your shift can only produce four. If you're all making the same wage, there's absolutely no upside for you to work more efficiently than your peers unless you believe you'll get a raise, which, in a union setting, would be impossible. Even then, if you were to get a raise for your more efficient use of time, when your fellow workers find out, they'll castigate you and tell you you're making their lives more difficult. It's a no win condition.
If you get paid $15 an hour to do a job in five hours, but you could do it in four, why would you? The hourly wage not only does not encourage efficiency, it retards it. Or, would you rather make $60 instead of $75 for the same job?
The hourly wage is one of the worst inventions ever created in terms of labor effectiveness and efficiency. It stifles creativity, encourages bad behavior and spawns more government rules, regulations, and taxes. It reduces an erstwhile valuable human being to little more than a punch-press machine. It's degrading and demoralizing and nearly universal. Anything that becomes that widespread without competition - like a monopoly - should be done away with, the sooner the better.
As much as we'd all like to believe that everybody is created equal, it just isn't the case. In the eyes of the law, maybe. Hours and days are not created equally either. It's a proven fact that less work gets done after two o'clock than before noon; Fridays are radically different from Mondays.
Maybe some good will come from the lockdowns and stay-at-home impositions caused by the coronavirus. If anything, it's given people the opportunity to work from home, unsupervised, and maybe given everybody a chance to ponder the value of work versus an hourly wage. Hopefully, this time will encourage people to do their own thing, to start a home-based business, or at least look into alternatives to the time-worn nine-to-five practice.
The main beneficiaries of standardized hourly wages seem to be governments and their tax regimes. Might a return to the sanity of daily or weekly wages, piece work, or by-the-job work become reasonable alternatives?
We can only hope.
The Markets:
Gold futures soared on Monday, peaking at $1765 before being knocked down to just under $1755 an ounce at the New York close. Silver reached out above $18 an ounce prior to a late-morning smackdown, closing at the regrettable - an utterly unrealistic - price of $17.68.
While goldbugs continue to cry about manipulation, it seems obvious that any continuing control over precious metals markets is about keeping the gold to silver ratio near the historical absurdity of 100 and the forces in opposition to real money at the futures windows. After all, silver is more plentiful, more affordable to everybody and much more divisible than gold. Remember, prior to the Crime of 1873, silver was money, but the banking elite of the day wanted to establish a gold standard, and did, impoverishing many independent businesspeople and farmers in the process.
Now that the entire planet is on a fiat standard, which is no standard at all, it's time for silver to take its rightful place as the money of gentlemen and of the world. It can start with a readjustment to a reasonable gold:silver ratio of 20, eventually to 16 or 12. If gold is to persist at $1750 or higher, silver should be at least $85 an ounce. Market forces are at work. Prices for single ounce coins and bars on eBay are routinely over $30, and dealers are charging $23 and upwards for the same, if they can get their hands on it.
With eBay charging a ten percent fee on all bullion sales, the actual price of physical silver in one ounce increments is realistically approaching $32 to $35 per ounce. That's Troy ounces, and Troy approves (joke).
Silver may be kept down in the spot and futures markets, to the detriment of dealers and paper-pushers worldwide. In the meantime, the actual, true, honest, real physical market is exploding and will continue to until such a time that silver holders will be satisfactorily compensated.
Fight the Fed. Buy silver.
Bonds: eh, who needs them? The Fed wants to control the curve to keep short term rates near zero forever. Let them. It can only serve to hasten the return to real money.
Oil prices continue to be inflated, serving only the needs of drillers, shippers, and distillers. When the price of WTI crude falls back to realistic levels around $24-30 a barrel and states begin reducing their onerous gasoline taxes, the economy can begin recovering. Until then, we're stuck in an artificial stagflationary environment.
Stocks gained. They always do. Shares of public companies have never been as expensive.
At the Close, Monday, June 22, 2020:
Dow: 26,024.96, +153.50 (+0.59%)
NASDAQ: 10,056.47, +110.35 (+1.11%)
S&P 500: 3,117.86, +20.12 (+0.65%)
NYSE: 12,028.91, +48.79 (+0.41%)
Showing posts with label productivity. Show all posts
Showing posts with label productivity. Show all posts
Tuesday, June 23, 2020
Thursday, February 7, 2013
Stocks Drift Lower on Unemployment, Productivity Figures
It appears that the stock market may well be topped out for the short term, though the background of $85 billion in additional monthly stimulus will almost certainly help contain any declines to mere "noise" other than a true correction or change in market sentiment.
About the only thing that could alter the relentless, upward direction of stocks would be war, a series of natural disasters or an alien space invasion, and of those three, war would be the most likely. The suspected antagonists would be China vs. Japan, Israel vs. Iran or an expansion of US efforts in Northern Africa. Even in such a scenario, so intent is the Federal Reserve on its path to devaluing the currency in the name of progress or some nebulous, idealized vision of "growth at all costs," one would tend to believe their efforts at keeping stocks high and interest rates low would only redouble.
So it is that the major indices have come nearly all the way back to previous highs in the nearly five years since the epic crash of 2008-09 without the participation of many individual investors. The reasons contributing to such widespread investor shyness are manifold, highlighted by fear of high frequency trading, flash crashes, suspected manipulation, or the plain and simple conclusion that the stock market is riding on a bubble of Fed largesse which is eventually unsustainable.
It's unfortunate that so many have fled from the market in the midst of one of its most stridently bullish eras, but doubts and fears can linger for generations, and, beyond the market there is widespread distrust of other institutions which place themselves above the common man and often, the law.
While the United States, and, to a large part, Europe, struggles through this long winter of discontent, millions have made adjustments to their lifestyles, opting for more sustainable personal economies as opposed to the heavy-handed debt-as-money regime that seemed to have creaked and cracked in the '08-09 economic downturn. Many such individuals will never return to the market and among those that do, they will be cautious to a fault and ready to flee at the first signs of trouble.
Even though economists and stock-pushers continue the mantra of "recovery,' for most, the results of five years of heavy stimulus has produced perceptibly limited results, keeping the skeptics unconvinced.
Today's action was possibly (who knows for sure?) a reaction to economic data released this morning that say initial unemployment claims nearly steady at 366,000 and a dip in productivity for the fourth quarter of 2012 of two percent, pushing unit labor costs to an inflation-inducing 4.5% gain over the same period.
It is just those kinds of choppy data sets and unintended consequences that serve to amplify fears from main Street to Wall Street. the level of uncertainty about everything from price discovery to government machinations over the budgetary process continuing to put a ceiling on true progress toward a resoration of normalcy.
Dow 13,944.05, -42.47 (0.30%)
NASDAQ 3,165.13, -3.35 (0.11%)
S&P 500 1,509.39, -2.73 (0.18%)
NYSE Composite 8,892.85, 41.38 (0.46%)
NASDAQ Volume 1,916,361,875
NYSE Volume 3,865,233,750
Combined NYSE & NASDAQ Advance - Decline: 2441-3979
Combined NYSE & NASDAQ New highs - New lows: 357-26
WTI crude oil: 95.83, -0.79
Gold: 1,671.30, -7.50
Silver: 31.40, -0.474
About the only thing that could alter the relentless, upward direction of stocks would be war, a series of natural disasters or an alien space invasion, and of those three, war would be the most likely. The suspected antagonists would be China vs. Japan, Israel vs. Iran or an expansion of US efforts in Northern Africa. Even in such a scenario, so intent is the Federal Reserve on its path to devaluing the currency in the name of progress or some nebulous, idealized vision of "growth at all costs," one would tend to believe their efforts at keeping stocks high and interest rates low would only redouble.
So it is that the major indices have come nearly all the way back to previous highs in the nearly five years since the epic crash of 2008-09 without the participation of many individual investors. The reasons contributing to such widespread investor shyness are manifold, highlighted by fear of high frequency trading, flash crashes, suspected manipulation, or the plain and simple conclusion that the stock market is riding on a bubble of Fed largesse which is eventually unsustainable.
It's unfortunate that so many have fled from the market in the midst of one of its most stridently bullish eras, but doubts and fears can linger for generations, and, beyond the market there is widespread distrust of other institutions which place themselves above the common man and often, the law.
While the United States, and, to a large part, Europe, struggles through this long winter of discontent, millions have made adjustments to their lifestyles, opting for more sustainable personal economies as opposed to the heavy-handed debt-as-money regime that seemed to have creaked and cracked in the '08-09 economic downturn. Many such individuals will never return to the market and among those that do, they will be cautious to a fault and ready to flee at the first signs of trouble.
Even though economists and stock-pushers continue the mantra of "recovery,' for most, the results of five years of heavy stimulus has produced perceptibly limited results, keeping the skeptics unconvinced.
Today's action was possibly (who knows for sure?) a reaction to economic data released this morning that say initial unemployment claims nearly steady at 366,000 and a dip in productivity for the fourth quarter of 2012 of two percent, pushing unit labor costs to an inflation-inducing 4.5% gain over the same period.
It is just those kinds of choppy data sets and unintended consequences that serve to amplify fears from main Street to Wall Street. the level of uncertainty about everything from price discovery to government machinations over the budgetary process continuing to put a ceiling on true progress toward a resoration of normalcy.
Dow 13,944.05, -42.47 (0.30%)
NASDAQ 3,165.13, -3.35 (0.11%)
S&P 500 1,509.39, -2.73 (0.18%)
NYSE Composite 8,892.85, 41.38 (0.46%)
NASDAQ Volume 1,916,361,875
NYSE Volume 3,865,233,750
Combined NYSE & NASDAQ Advance - Decline: 2441-3979
Combined NYSE & NASDAQ New highs - New lows: 357-26
WTI crude oil: 95.83, -0.79
Gold: 1,671.30, -7.50
Silver: 31.40, -0.474
Thursday, May 3, 2012
Stocks Retreat on Employment Fears
Is it possible? Could the programmed trading bots actually be learning? What happens when the computers become self-aware?
Stocks stumbled out of the gate (deft Kentucky Derby reference) at the opening bell and today there was no turning back, as the major indices suffered telling losses, hitting resistance near 3 1/2 - 4-year highs.
More sluggish data and trepidation over Friday's non-farm payroll number had investors (and machines) taking profits and looking for places to hide.
First quarter productivity was lower by 0.5%, though expectations were for a larger decline of -0.8%. The missing and/or exceeding of poor expectations has become something of a sport on Wall Street, with the bullish head-cases believing that anything better than even lousy expectations is a good thing. It's not. Even the burliest New Jersey fixed income book trader should be aware of that.
Unit labor costs rose 2% in the quarter, a stick in the eye of the 1-percenters.
ISM Services was where the big miss occurred, however, breaking down to 53.5 for April on expectations of 55.5 after booking 56.0 in March. After the Poor PMI data earlier in the week and the anomalous ISM manufacturing number that showed modest positive spin, a breakdown in the services sector would be a death knell for the "recovery at all costs" addicts, since service has become mainstream to the US economy.
Meanwhile, it's been eerily quiet on the continent, as Europe slinks into recession. Some economist with a sense of sick humor actually penned an article pointing out how conditions were improving in Greece, of all places, where 80% of businesses in the Athens business district have closed their doors in the past two years and tax receipts are easily outweighed by bribes. The article was so obtuse and fundamentally flawed, it may have been scrubbed from the internet.
The best news of the day was crude oil dropping by $2.68 a barrel, it's biggest one-day decline in over a month, and long overdue, though all commodities were lower, especially gold and silver, a sign of redemption amidst what may be the beginning of a scramble for cash.
Everything hinges on Friday's job number: Obama's re-election bid, general confidence in the economy, and more. Many sleazy banker types around Wall Street are silently praying for a poor number, so that the Fed will continue it Zero Interest Rate policy and maybe drop another round of QE on their best buddies.
My, oh, my, these bankers are a sly lot. Not.
Dow 13,206.59, -61.98 (0.47%)
NASDAQ 3,024.30, -35.55 (1.16%)
S&P 500 1,391.57, -10.74 (0.77%)
NYSE Composite 8,049.74, -74.59 (0.92%)
NASDAQ Volume 1,824,468,000
NYSE Volume 3,966,676,500
Combined NYSE & NASDAQ Advance - Decline: 1566-4050
Combined NYSE & NASDAQ New highs - New lows: 202-104
WTI crude oil: 102.54, -2.68
Gold: 1,634.80, -19.20
Silver: 30.01, -0.64
Stocks stumbled out of the gate (deft Kentucky Derby reference) at the opening bell and today there was no turning back, as the major indices suffered telling losses, hitting resistance near 3 1/2 - 4-year highs.
More sluggish data and trepidation over Friday's non-farm payroll number had investors (and machines) taking profits and looking for places to hide.
First quarter productivity was lower by 0.5%, though expectations were for a larger decline of -0.8%. The missing and/or exceeding of poor expectations has become something of a sport on Wall Street, with the bullish head-cases believing that anything better than even lousy expectations is a good thing. It's not. Even the burliest New Jersey fixed income book trader should be aware of that.
Unit labor costs rose 2% in the quarter, a stick in the eye of the 1-percenters.
ISM Services was where the big miss occurred, however, breaking down to 53.5 for April on expectations of 55.5 after booking 56.0 in March. After the Poor PMI data earlier in the week and the anomalous ISM manufacturing number that showed modest positive spin, a breakdown in the services sector would be a death knell for the "recovery at all costs" addicts, since service has become mainstream to the US economy.
Meanwhile, it's been eerily quiet on the continent, as Europe slinks into recession. Some economist with a sense of sick humor actually penned an article pointing out how conditions were improving in Greece, of all places, where 80% of businesses in the Athens business district have closed their doors in the past two years and tax receipts are easily outweighed by bribes. The article was so obtuse and fundamentally flawed, it may have been scrubbed from the internet.
The best news of the day was crude oil dropping by $2.68 a barrel, it's biggest one-day decline in over a month, and long overdue, though all commodities were lower, especially gold and silver, a sign of redemption amidst what may be the beginning of a scramble for cash.
Everything hinges on Friday's job number: Obama's re-election bid, general confidence in the economy, and more. Many sleazy banker types around Wall Street are silently praying for a poor number, so that the Fed will continue it Zero Interest Rate policy and maybe drop another round of QE on their best buddies.
My, oh, my, these bankers are a sly lot. Not.
Dow 13,206.59, -61.98 (0.47%)
NASDAQ 3,024.30, -35.55 (1.16%)
S&P 500 1,391.57, -10.74 (0.77%)
NYSE Composite 8,049.74, -74.59 (0.92%)
NASDAQ Volume 1,824,468,000
NYSE Volume 3,966,676,500
Combined NYSE & NASDAQ Advance - Decline: 1566-4050
Combined NYSE & NASDAQ New highs - New lows: 202-104
WTI crude oil: 102.54, -2.68
Gold: 1,634.80, -19.20
Silver: 30.01, -0.64
Wednesday, November 30, 2011
Santa (Ben Bernanke) Arrives Early in Europe; Gold, Silver Surge
Stocks worldwide were up sharply Wednesday on the news that the Federal Reserve, in conjunction with the Central Banks of Canada, England, Japan, Switzerland and the European Central Bank (ECB) agreed to lower the pricing on the existing temporary U.S. dollar liquidity swap arrangements by 50 basis points.
It was an early Christmas gift that sparked a speculative rally and kept Europe from unraveling, again.
What we've repeatedly heard is that the current calamities of the Euro-zone are nothing like those encountered on American soil in 2008.
The plain fact that banks in Europe are under dire stress and in need of liquidity not only reprises 2008, but adds a crescendo affect that's akin to adding the NY Philharmonic, the Ohio State marching band and the Mormon Tabernacle Choir to the efforts of the Boston Pops.
Stresses on European banks, especially those in France, Belgium and Italy, have been exacerbating on a near-daily basis, with the potential for global contagion even greater than when Lehman Bros. was allowed to flail and fail.
Thus, as some unknown Europe-based bank was about to go under - rumors say $265 million in overnight borrowings from the ECB was the tip-off - the global elitist Central Bankers conspired to lift liquidity by lowering the borrowing rates on US Dollar swap arrangements by 50 basis points (1/2 percent).
Magically, not only was the global Ponzi financial system saved for the day, week or month, but the added benefit of having global equity markets spike 3-4% higher came along as an intended consequence. Yes, the globalists know what they're doing. Too bad for them that it doesn't work long term, as we know so well from recent history, circa September, 2008.
Here's a post, by none other than some character calling himself John Galt, that has both the 2008 and current Federal Reserve press releases. The similarities are striking, but also magnificent was the 2008 aftermath, the worst financial crisis of the last 70 or so years, and the resultant crash of the equity markets.
So, Santa came to town (Europe) dressed as Ben Bernanke, with his trusty elf, Tim Geithner, in tow, passing off presents to the good (and bad) bankers across the continent. While this constitutes Christmas and a Santa Claus Rally about a month prematurely, what can Europe and the global economy expect when the holiday actually arrives on December 25, lumps of coal, or perhaps soaring gold and silver prices?
The actual timing of the eventual collapse is still unknown, though this desperation move seems to indicate that the global financial structure is crumbling faster than the "unseen hands" of the central banks can prop it up. A dive in equities may not coincide with Christmas - that would be a shame - but rather sometime in early 2012, likely in the first quarter and quite possibly in January as profits are taken early in the year on stocks pumped to unwieldy heights in December. The net results being a relatively weaker dollar and higher prices for just about anything one consumes or needs. When the crash comes, of course, the Euro will descend and the dollar will rise, though the effect is probably short-term, until the Easter Bunny fills up those empty bank liquidity baskets again.
As the adage implies, this massive liquidity gift may indeed have a silver lining, encrusted with much-higher-priced gold.
Prior to the Fed's announcement, the People's Bank of China cut bank reserve requirements for the first time in three years, by 0.5%, amid signs that the Chinese economy is slowing due to slack demand for China's exports, particularly from Europe.
After the announcement, with futures up dramatically, ADP released its November Employment Change results, showing the creation of 206,000 private sector jobs during the month. The private survey is a regular precursor to Friday's BLS non-farm payroll data.
Third quarter productivity was measured as up 2.3%, while unit labor costs fell 2.5% as companies hunker down, doing more with fewer employees.
Fifteen minutes into the trading session, Chicago PMI reported a big jump, from 58.4 in October to 62.6 in November. It was an unnecessary boost to a market which had already spiked higher at the open.
There was no fade in this one-day rally, coming conveniently on the last day of the month, traditionally the day reserved for "window dressing" by fund managers. Stocks were up monstrously on the open and continued along a high, flat line for the rest of the session, until a final short-covering episode in the final fifteen minutes pushed indices even higher.
Just speculating, but it had to be one of the best market moves of the year, if not the best. Volume was sufficient, though not overwhelming. The late-day surge may be indicating that even more easy money will flow from the Fed to the hampered Eurozone.
As to whether the moves in stocks are sustainable and the even more important question of whether or not Europe is "fixed," the answers will only be known at some future date. The most cogent commentaries on Europe suggest that today's coordinated central bank motivation only covers over a dire condition in the European banking sector and is nothing more than a liquidity band-aid on a solvency open gash. Europe's funding problems remain unresolved, though any mention of default or collapse has probably been delayed by a few weeks or a month.
And just in case you're worried about food shortages or another recession, the Obama administration and congress actually did accomplish something, recently having lifted the five-year-old ban on slaughtering horses in America. Not to worry, though. Americans won't be eating Little Red Pony or Trigger any time soon (we hope). The meat will likely be shipped to Japan or Europe. However, if this is a trend-setter, cans of Lassie, Rin Tin Tin or Boo Boo Kitty may be in supermarkets soon. Dog food and cat food may take on newer, twisted meanings.
Dow 12,045.68, +490.05 (4.24%)
NASDAQ 2,620.34, +104.83 (4.17%)
S&P 500 1,246.96, +51.77 (4.33%)
NYSE Composite 7,484.49, +334.78 (4.68%)
NASDAQ Volume 2,386,048,000
NYSE Volume 5,808,163,500
Combined NYSE & NASDAQ Advance - Decline: 4913-861
Combined NYSE & NASDAQ New highs - New lows: 161-68 (this has rolled over)
WTI crude oil: 100.36. +0.56
Gold: 1,745.50, +32.10
Silver: 32.73, +0.88
It was an early Christmas gift that sparked a speculative rally and kept Europe from unraveling, again.
What we've repeatedly heard is that the current calamities of the Euro-zone are nothing like those encountered on American soil in 2008.
The plain fact that banks in Europe are under dire stress and in need of liquidity not only reprises 2008, but adds a crescendo affect that's akin to adding the NY Philharmonic, the Ohio State marching band and the Mormon Tabernacle Choir to the efforts of the Boston Pops.
Stresses on European banks, especially those in France, Belgium and Italy, have been exacerbating on a near-daily basis, with the potential for global contagion even greater than when Lehman Bros. was allowed to flail and fail.
Thus, as some unknown Europe-based bank was about to go under - rumors say $265 million in overnight borrowings from the ECB was the tip-off - the global elitist Central Bankers conspired to lift liquidity by lowering the borrowing rates on US Dollar swap arrangements by 50 basis points (1/2 percent).
Magically, not only was the global Ponzi financial system saved for the day, week or month, but the added benefit of having global equity markets spike 3-4% higher came along as an intended consequence. Yes, the globalists know what they're doing. Too bad for them that it doesn't work long term, as we know so well from recent history, circa September, 2008.
Here's a post, by none other than some character calling himself John Galt, that has both the 2008 and current Federal Reserve press releases. The similarities are striking, but also magnificent was the 2008 aftermath, the worst financial crisis of the last 70 or so years, and the resultant crash of the equity markets.
So, Santa came to town (Europe) dressed as Ben Bernanke, with his trusty elf, Tim Geithner, in tow, passing off presents to the good (and bad) bankers across the continent. While this constitutes Christmas and a Santa Claus Rally about a month prematurely, what can Europe and the global economy expect when the holiday actually arrives on December 25, lumps of coal, or perhaps soaring gold and silver prices?
The actual timing of the eventual collapse is still unknown, though this desperation move seems to indicate that the global financial structure is crumbling faster than the "unseen hands" of the central banks can prop it up. A dive in equities may not coincide with Christmas - that would be a shame - but rather sometime in early 2012, likely in the first quarter and quite possibly in January as profits are taken early in the year on stocks pumped to unwieldy heights in December. The net results being a relatively weaker dollar and higher prices for just about anything one consumes or needs. When the crash comes, of course, the Euro will descend and the dollar will rise, though the effect is probably short-term, until the Easter Bunny fills up those empty bank liquidity baskets again.
As the adage implies, this massive liquidity gift may indeed have a silver lining, encrusted with much-higher-priced gold.
Prior to the Fed's announcement, the People's Bank of China cut bank reserve requirements for the first time in three years, by 0.5%, amid signs that the Chinese economy is slowing due to slack demand for China's exports, particularly from Europe.
After the announcement, with futures up dramatically, ADP released its November Employment Change results, showing the creation of 206,000 private sector jobs during the month. The private survey is a regular precursor to Friday's BLS non-farm payroll data.
Third quarter productivity was measured as up 2.3%, while unit labor costs fell 2.5% as companies hunker down, doing more with fewer employees.
Fifteen minutes into the trading session, Chicago PMI reported a big jump, from 58.4 in October to 62.6 in November. It was an unnecessary boost to a market which had already spiked higher at the open.
There was no fade in this one-day rally, coming conveniently on the last day of the month, traditionally the day reserved for "window dressing" by fund managers. Stocks were up monstrously on the open and continued along a high, flat line for the rest of the session, until a final short-covering episode in the final fifteen minutes pushed indices even higher.
Just speculating, but it had to be one of the best market moves of the year, if not the best. Volume was sufficient, though not overwhelming. The late-day surge may be indicating that even more easy money will flow from the Fed to the hampered Eurozone.
As to whether the moves in stocks are sustainable and the even more important question of whether or not Europe is "fixed," the answers will only be known at some future date. The most cogent commentaries on Europe suggest that today's coordinated central bank motivation only covers over a dire condition in the European banking sector and is nothing more than a liquidity band-aid on a solvency open gash. Europe's funding problems remain unresolved, though any mention of default or collapse has probably been delayed by a few weeks or a month.
And just in case you're worried about food shortages or another recession, the Obama administration and congress actually did accomplish something, recently having lifted the five-year-old ban on slaughtering horses in America. Not to worry, though. Americans won't be eating Little Red Pony or Trigger any time soon (we hope). The meat will likely be shipped to Japan or Europe. However, if this is a trend-setter, cans of Lassie, Rin Tin Tin or Boo Boo Kitty may be in supermarkets soon. Dog food and cat food may take on newer, twisted meanings.
Dow 12,045.68, +490.05 (4.24%)
NASDAQ 2,620.34, +104.83 (4.17%)
S&P 500 1,246.96, +51.77 (4.33%)
NYSE Composite 7,484.49, +334.78 (4.68%)
NASDAQ Volume 2,386,048,000
NYSE Volume 5,808,163,500
Combined NYSE & NASDAQ Advance - Decline: 4913-861
Combined NYSE & NASDAQ New highs - New lows: 161-68 (this has rolled over)
WTI crude oil: 100.36. +0.56
Gold: 1,745.50, +32.10
Silver: 32.73, +0.88
Tuesday, August 10, 2010
Boxed-in Fed Takes Baby Steps on QE2
To help support the economic recovery in a context of price stability, the Committee will keep constant the Federal Reserve's holdings of securities at their current level by reinvesting principal payments from agency debt and agency mortgage-backed securities in longer-term Treasury securities.1 The Committee will continue to roll over the Federal Reserve's holdings of Treasury securities as they mature.
Besides keeping interest rates at ZERO, that's the only important message from today's FOMC rate decision. Essentially, the Fed will continue to purchase Treasuries, as they have been, surreptitiously, for the past three to four months and above board, prior to that. They will roll over some of their mortgage (toxic) debt into shorter-dated and (supposedly) more stable Treasuries.
Nothing to see here. The Fed is essentially boxed-in, has been for some time and we are now Japan.
Stocks made an immediate jump - the Dow gained back 100 points - after the announcement, but it's nothing more than a knee-jerk reaction to meaningless story. The Fed can't do anything to improve the economy substantially except print and roll over debt.
Dow 10,644.25, -54.50 (0.51%)
NASDAQ 2,277.17, -28.52 (1.24%)
S&P 500 1,121.06, -6.73 (0.60%)
NYSE Composite 7,139.75, -48.55 (0.68%)
Declining issues smacked down advancers, 4829-1662, and new highs remained ahead of new lows, 342-118. Volume, the real story of the week, and the weak, remained at suppressed, almost laughable levels. More than ever it seems that the same stocks are just changing hands amongst the same people, with the Wall Street firms skimming at the margins.
NASDAQ Volume 1,906,714,625
NYSE Volume 4,524,408,000
Since the dollar was appreciably higher against the Euro and most other currencies, oil slipped, losing $1.23, to $80.25. Gold fell $4.50, to $1,196.20; silver dropped 8 cents, to $18.15, though both were marginally higher after the FOMC announcement.
The price/volume action in stocks is demonstrating a clearly-defined topping pattern, as mentioned yesterday. With no catalyst to move the economy forward, expectations for another corrective period are likely to be proven correct.
One other important note was a 0.9% drop in productivity in the 2nd quarter, along with a paltry gain of 0.2% in unit labor costs, more signs of a slowing economy and deflationary environment.
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