Trouble In Paradise As Trump Presidency Looms

Normally, stocks are flat - as they were Monday - in anticipation of an FOMC rate policy meeting.

This time is different.

Stocks took a turn for the worse on Tuesday, with the major averages dipping more than 1/2 percent all around. The cause: the truly frightening possibility of a Donald Trump presidency, signifying a change from the crony capitalism of the past 30 years to a more measured, honest, workable structure favoring small business instead of major corporations erecting barriers to business through their henchmen in the US congress and various state assemblies.

That Trump could win the White House - disappointing the supporters of Hillary Clinton and the status quo - is a very disturbing development for Wall Street insiders who have counted on special favors, underhanded practices, and a compliant government to rack up big profits and fleece taxpayers and the investing public, all at the same time.

People who say that a Trump win would cause a market crash may be right, and it's just the medicine this sick globalized economy would need to mend itself. Trump is for a level playing field, lower taxes for individuals and corporations, tariffs as opposed to "free" trade, tighter border control, and fewer regulations.

While those proposals generally sound positive for US business, the devil is in the details. Policy leads reality and Trump's policies would likely put fire to the feet of fat-cat corporate types, ending the corruption and control frauds that plague business and government alike.

Yesterday's drop on the markets was not a one-time event and it also had nothing at all to do with the Fed and their FOMC meeting, which wraps up 2:00 pm ET Wednesday. As has been the case for the past ten months, the Fed will huff and puff and then do nothing. It's obviously too close to the election for the Fed to do anything that might upset the apple cart.

With a Trump presidency now a real, emerging possibility (since Clinton has finally been exposed as corrupt, incompetent, and dishonest) there may be more of these daily dips, especially if the media is forced to tell the truth about the economy and investments.

Time will tell. It's a week to the election and Trump is surging. Like it or not, stocks may take a dive and the economy will probably fall into a recession, all of which will be net positive for America. A good draining of the swamps in Washington and Wall Street is long overdue.

Dow Jones Industrial Average
18,037.10, -105.32 (-0.58%)

NASDAQ
5,153.58, -35.56 (-0.69%)

S&P 500
2,111.72, -14.43 (-0.68%)

NYSE Composite
10,414.05, -67.84 (-0.65%)

Slump Continues For Stocks; Oil Lower As Discontent Grows

While the world awaits an edict from the high halls of the Federal Reserve on Wednesday, when the FOMC concludes their two day meeting and announces no change in the federal funds rate, investors appear increasingly nervous, not over the expected nothingness dictum from the Fed, but from the overall malaise that has captured markets, otherwise known as stagnation.

What capitalists fear more than anything else is an economy going backwards. What we have today is an economy at stall speed, needing only the slightest of nudges to fall into recession. The US is not alone in these fears; most of Europe is teetering on the brink of a receding growth curve, and this time, there is not enough left of policy maneuvers by central bankers in the EU, Japan, China, or anywhere else in the developed or underdeveloped world, should a recession occur, to keep it from becoming a global depression.

Lessons learned from the near-collapse of the global economy in 2008-09 are that stimuli only is a short-term fix, QE is a waste of money, and lower interest rates do not stir a dormant economy. In essence, the world's central bankers are out of ideas and have been for some time. They are, and have been, pushing on a string, kicking a can down a road, keeping their fingers crossed, and hoping for an economic miracle all at the same time.

Nothing has worked. Nothing will work... until the economies of both the developed world and underdeveloped world purge themselves of debt, stop trying to implement policies that clearly do not work, go back to money backed by something other than empty promises, and stop allowing governments to run up enormous deficits serviced by ever-lower interest payments (debasing the currency all the way along).

Those are just for starters. The world finds itself on the cusp of economic, societal and philosophical revolution. Ordinary people are fed up with government, the media, and various other institutions supposedly in place to provide for the public weal. They are tired of lies, cheating at the highest levels, institutional regulatory strangulation, higher and higher taxes, and an endless stream of regulations that have stripped away their liberties and much of what some may have previously called the "good life."

The few people currently in power are only interested in keeping and maintaining their control over the populations and their power and positions. They are being seriously questioned by populations who feel betrayed, unappreciated and desperate for relief from the very governments and institutions which are supposed to improve their lives, not impoverish them.

Therefore, stocks continue to wallow. And though today's declines are not noteworthy in and of themselves, there's a growing chorus of discontent that continues to rise.

The policies and practices of the past 20 or 30 years cannot continue indefinitely.

The time is coming for major change.

Today's Dippity-Do:
S&P 500: 2,075.32, -3.74 (0.18%)
Dow: 17,674.82, -57.66 (0.33%)
NASDAQ: 4,843.55, -4.89 (0.10%)

Crude Oil 48.56 -0.65% Gold 1,287.90 +0.08% EUR/USD 1.1208 -0.71% 10-Yr Bond 1.61 -0.31% Corn 435.25 +1.22% Copper 2.04 -0.46% Silver 17.40 -0.25% Natural Gas 2.89 -0.86% Russell 2000 1,147.09 -0.31% VIX 20.54 -2.05% BATS 1000 20,677.17 0.00% GBP/USD 1.4109 -0.74% USD/JPY 106.1300 -0.03%

Stocks Finish Red As Global Economic Data Exhibits Slowdown

News out of Japan, Europe and the US put a negative spin on markets to open the week.

After the Dow closed exactly at 17,500 on Friday, there was fear that a further decline below the level - which had held for more than two months (March 17 was the last time the Dow closed under 17,500) - might trigger a more precipitous decline.

However, with bad news all around, traders figured that the Fed would have enough sense to pause on a rate hike at their June meeting.

Japan experienced deep declines in both imports and exports to major trading partners such as the USA and China. It was the seventh consecutive monthly decline in exports from Japan.

Europe's Manufacturing PMI was below estimates; the US had similar results, with the lowest Markit Manufacturing PMI (50.5) since the financial crisis in 2009.

Stock traders put on a stern face, keeping the major averages in the green most of the day, but stocks slumped in he final hour of trading, with all three majors losing ground.

Now, it appears that not only is the Federal reserve intent on raising rates sooner rather than later, but it is also becoming crystal clear that the general global economy is ailing as well and may be approaching recessionary levels.

This is not exactly how the masters of the universe wanted to start the week, though they have nobody except themselves to blame for whatever erosion of the global economy and their precious stock certificates occurs in coming months.

Stormy Monday:
S&P 500: 2,048.04, -4.28 (0.21%)
Dow: 17,492.93, -8.01 (0.05%)
NASDAQ: 4,765.78, -3.78 (0.08%)

Crude Oil 48.12 -0.60% Gold 1,249.50 -0.27% EUR/USD 1.1222 +0.03% 10-Yr Bond 1.84 -0.59% Corn 397.75 +0.82% Copper 2.06 +0.02% Silver 16.41 -0.77% Natural Gas 2.06 +0.05% Russell 2000 1,111.37 -0.08% VIX 15.82 +4.08% BATS 1000 20,677.17 0.00% GBP/USD 1.4484 -0.16% USD/JPY 109.2430 -0.81%

The End? Stocks Slammed Again; Economic Prospects for 2016 Appear Grim

What should have happened in 2008-09 may be beginning to happen now, in 2016. Investors should take losses, companies should go broke, and government apologists should have a "come to Jesus" moment and admit that they've been lying about the recovery for years.

There is and there has been no recovery. GDP has been stuck between one-and-a-half and two-and-a-half percent since the financial crisis (and that's if you believe government accounting). 2015 will be fortunate to register at two percent growth.

Meanwhile, wages are stagnant and falling, 95 million able-bodied Americans are not officially counted as part of the workforce. The middle class has been hollowed out by Wall Street greed, government over-taxation, and unrealistic government salaries and pensions that suck the life out of local and state budgets.

The jobs that made America great have long gone, shipped overseas to China and elsewhere, and now we are exacerbating our pitiful condition by allowing in more immigrants - legal and illegal - taking away the few jobs left for natural-born citizens.

Baby boomers are retiring, replaced by their dumbed-down progeny. Our national debt of nearly $19 trillion - and growing - is a universal disgrace. Meanwhile the Federal Reserve, in cahoots with the shiftless Treasury Department, debases our currency by print a full 40% of government expenditures.

The federal government wants to grab our guns, the states want to charge us rent - in the form of property taxes - on the property we own, and neither of them can balance their books. The American public is at a breaking point, through with political correctness, suspicious of a government that spies upon us, regulates us, lies to us and sends our kids to die in useless wars which are never won. The controlled mainstream media propagandizes and cajoles anyone who doesn't align properly with the official corporate-government-military line.

Truly, in the short history of our Republic, we are on the cusp of complete breakdown in finance, education, morals, and decency.

And, while the blame can be placed on the people itself, because we voted for the spineless, unaccountable elected officials who have led us to this point, it should fall on the shoulders of those doing the governing, the legislating, the ones who are routinely bribed to pass legislation that favors corporations over people, banks over homeowners, and diminishment of our rights and liberties over common sense.

Our current government is the most corrupt to ever inhabit the halls of congress and the White House, our state houses and our government mansions. Is it any wonder that only half of the people who can vote, do vote?

Wall Street insiders hold all the cards, and they're gradually folding them. The Dow Industrials, S&P 500 and NASDAQ were all lower by massive amounts again today, for the second time in three this year. If this is a portent of what's ahead for the rest of the year, the ride may not be bumpy at all, merely a slide into the mediocrity created by greed, failed, moronic policies of the Federal Reserve, all with the implicit consent of the government, a government that is not worth the support of the people.

The slow collapse of stocks that has been on display the first week of this year has already been gaining steam since prior to last summer. Stocks peaked in late May and are 6-8% lower (depending on which index you choose) from their inflated high points. The Dow is down nearly 500 points in just three days this year and more than 850 points since the Fed decided, in their insipid, desperate desire, to raise interest rates mid-December.

Manufacturing, as measured by the ISM, has shown contraction for two consecutive months. US Services PMI dropped to 54.3 - the lowest since January 2015. ISM Services fell to 55.3, the lowest level since March 2014.

US factory orders for November fell 4.2% year-over-year, the 13th consecutive monthly drop. We are on the verge of a recession, in the middle of a depression. The emperor has no clothes and this time, with federal funds rates straining to hold between 0.25 and 0.50%, there is no place to hide.

If this isn't the end, it's getting pretty close. According to the most widely-accepted charting methods, stocks will enter a correction phase within a month, if not sooner. Corporate profits are falling, as companies cannot concoct any more accounting tricks to show even meager profits. Quarterly results are due out over the next three to four weeks and prospects for corporate earnings are poor. For retailers, energy stocks and consumer goods producers, the results - stemming from missing expectations for the holiday season and an oversupply of crude oil and distillates - might be devastating.

Stores are being shuttered in malls across the country and with them, marginal jobs which will not come back. The only bright spots are that inflation is nil, gasoline is cheap, and the winter, thus far, has been mild, at least in the heavily-populated Northeast.

Somehow, America will survive. However, the America of 2016 is a far cry from what the country was just 30 years ago, and a dim representation of what our Founding Fathers conceived.

S&P 500: 1,990.26, -26.45 (1.31%)
Dow: 16,906.51, -252.15 (1.47%)
NASDAQ: 4,835.76, -55.67 (1.14%)

Is a Global Recession Just Ahead, or, A Global Depression?

Gas prices at the pump haven't been this low since 2009, though the prices back then maintained for a very brief time, as oil plummeted during the financial crisis (remember that?), but quickly rebounded as the Fed and other central banks added extreme amounts of liquidity to markets globally and before long, crude oil was back in the $90-100/barrel range.

Last year, the price of a barrel of crude - both Brent and WTI - began a precipitous decline, cutting in half the traded price. As 2014 turned to 2015 and many culprits were blamed (Saudi Arabia, US frackers, Russia(?), the price continued to hover in the $45-65 range. By late summer, all bets were off as the price of a barrel of crude fell into the low-$40 range, and then this month declined into the 30s.

While gas at $2/gallon and lower is a boon for drivers, especially in the US, where commuters and businesses were burdened with gas above $3.00 and sometimes over $4/gallon for years, it's not such a great deal for oil producers, especially the aforementioned frackers, whose marginal profitable price per barrel was estimated at somewhere between $45 and $75 per barrel.

Plenty of rigs have gone idle, but debt has to be serviced, and most of these drillers are on the hook for millions, borrowed from banks when the getting was good, now having to pay back the costs of exploration, drilling and extraction while operating at a loss.

The oil patch is just one element of the global liquidity crunch which may be about to enter a new, more dangerous phase, when, in two days time, the FOMC of the Federal Reserve is supposed to raise the federal funds rate for the first time in more than seven years.

The Fed plans to set the rate at 0.25% for money banks can borrow from the Fed, and, while that may not sound like a big deal to most, it certainly is to banks and corporations, which have been borrowing and spending at record paces since mid-2009.

With the FOMC rate policy decision now less than 48 hours away, there's a growing nervousness on Wall Street over this unprecedented move by the Fed. It's unprecedented because there's a vast amount of evidence that the bubble the Fed has blown is about to be not only pricked, but popped and blown wide open. Simply put, the party is about to end, and the drunks on the dance floor will be looking for a ride home, but nobody will be available for a safe trip, because not just the investment and corporate community, but the Fed itself, is staggering and woozy.

It may be a big, bad boogey man, like the 2000 scare, or the Mayan calendar, or those pesky asteroids which dare to come within 100,000 miles of dear planet earth. Or, it could be the real thing.

Nothing lasts forever, and, from the looks of the bond, commodity, and emerging markets, the long "recovery" and stock market rally seems to have run out of steam. Global trade is down, global GDP keeps being revised lower, US manufacturing is fading, China is becoming a basket case. It all points to reduced growth, or, in proper recession terms, negative growth.

If you're in the market, there's still a day and a half to get out, and probably more, if you can handle small losses. If you're not in the market, but still have to drive, eat, and breath, good news. In recessions and, especially, depressions, everything (except debt) is cheaper.

Hedge, buy, or sell accordingly.

--FR

FOMC (in)Action Does Nothing for Wall Street; 1Q GDP Weak

Apologies again for the brevity of this missive. We are currently under severe time restraints, though the thought of a more regular schedule appears for next week. -Editor

The week can be summed up as "much ado about nothing," as the FOMC again held the federal fund rate at near-zero and stocks were more or less unresponsive over the course of the week.

A preliminary reading of first quarter GDP showed the economy nearly slipping into recession, growing at a rate of just 0.2% for the first three months of 2015. The outlier was a three percent inventory build, without which the number would have been negative. Naturally, naysayers on the economy contend that the recession for the US economy never ended after 2009, and that the United States has been mired in a deep depression since the implosion of the financial system back in the fall of 2008 and that only extreme dosages of liquidity supplied by the central bankers of the world have saves us all from misery.

Wall Street continues to hum along with record amounts of stock buybacks buoying share prices for many firms, with growth and capital expenditures now becoming things of the past.

The first three days of trading were somewhat lackluster, followed by a huge downdraft on Thursday and a dead-cat monster bounce-back on Friday, which kept the major indices from outright implosion. Analysts are keeping a keen eye on the German DAX, which is coming close to correction territory.

The NASDAQ was the worst-performer, dropping nearly two percent as biotechs imploded and speculative money was coming off the table at a rapid rate.

For the week ending May 1:

Dow: 18.024.06, -56.08 (-0.31)
S&P 500: 2,108.29, -9.40 (-0.44)
NASDAQ: 5,005.39, -86.69 (-1.70)

"Cliff" Negotiations Going Nowhere; Wall Street Begins to Get the Message

Anybody who took the time to watch any of the Sunday morning comedy shows, otherwise known as "Meet the Press", "This Week" or "face the Nation could come to no other conclusion than the Democrats and Republicans were still miles apart on solutions to fixing issues pertaining to the "fiscal cliff" that has become the cause celebre in Washington, on Wall Street and just about everywhere else in America.

Alternating between Treasury Secretary Timothy Geithner, House majority leader, John Boehner and a parade of politicians, pundits and philosophers (notably, Grover Norquist), there was widespread agreement on one thing: that there was no middle ground upon which anybody was seen standing. The Democrats and Republicans are so far apart that the idea that there might not be a deal in time for all the Bush tax cuts to expire, sequestration of mandatory budget cuts would take place and the US economy - and with it the world - would fall into recession early in 2013.

It took Wall Street most of the day to figure out that a deal might not be forthcoming by the clowns they purchased in the last election cycle, a thought so pregnant with dire consequences that many in the (cough, cough) investment community might just be in denial on the topic.

By late afternoon, President Obama took his case to the Twitter-world, answering questions from his point of view. A little later, there was a counter-offer from Boehner's office, though it was much like the president's original proposal: having no chance of acceptance and merely a bargaining salvo, testing the waters, so to speak.

By the end of the day, there was some damage done, though it was nothing like what may occur should Wall Street types begin embracing the idea of actually plunging over the "cliff."

Incidentally, the Dow pooped out right at its 200-day moving average, especially in light of the somewhat stunning November ISM index, which drooped into contraction territory with a 49.5 reading, on expectations of 51.2. Naturally, hurricane Sandy was blamed for the bad read, though a number of analysts did not agree with that assessment, believing that Sandy might be responsible for 0.3 to 0.5 of the shortfall, which would still render a reading of 50, at best.

Spain requested a 39.5 billion euro bailout for its ailing banks, but fell short of making an official request for a sovereign bailout. In the best counterintuitive fashion, European stocks rallied and bond yields fell. Talk about denial! The Euros have that market cornered.

As the cliff diving enters a critical phase this week - because the politicians plan on making their escape from DC on the 14th of December, naturally, taking an extra week off on the taxpayer's dime - expect markets to get ever more jittery. Adding to the unusual noise, Friday's non-farm payroll report for November might rattle a few cages as well.

Dow 12,965.60, -59.98 (0.46%)
NASDAQ 3,002.20, -8.04 (0.27%)
S&P 500 1,409.46, -6.72 (0.47%)
NYSE Composite 8,223.54, -36.90 (0.45%)
NASDAQ Volume 1,666,248,500
NYSE Volume 3,060,504,000
Combined NYSE & NASDAQ Advance - Decline: 2307-3205
Combined NYSE & NASDAQ New highs - New lows: 213-44
WTI crude oil: 89.09, +0.18
Gold: 1,721.10, +8.40
Silver: 33.76, +0.48

Data Suggests Economies Weakening Worldwide

Mainstream media has tried - somewhat unsuccessfully - over the past few years, to convince the American public that all is well with ours and the world's economies. Of course, the rich media stars have a vested interest in maintaining the status of the status quo, because if they have to report the truth for a change, their political masters might think of replacing them, as has been the procedure for members of the elite media who don't play along.

That's why it's important to tune out the TV blur artists and tune into internet and alternative sources, who try their best to tell it like it is, without cheerleading for the corporatists and globalists who dominate the money.

Today's news out of China and Europe was nearly matched for awfulness by more sour data on the US housing market, sending stocks uniformly lower in one of the better routs of the year so far.

Early in the US morning, China reported the HSBC flash Purchasing Managers Index (PMI) fell to 48.1 in March, a four-month low, compared with a final reading of 49.6 in February. It was the fifth straight monthly reading that showed contraction, another worrisome sign that the the world is entering what looks like a global recession.

In Europe, the miss was huge in the EU PMI data, with the composite PMI for the Eurozone declining for the second consecutive month, to 48.7 in March from 49.3 in February. The rate of decline was also accelerating, stoking fears that the recession that is well underway in many Eurozone countries is spreading fast. Rosy expectations from expert economists (one should know well by now that said "experts" only know money printing and inflation, and not reality) called for a rise to 49.8. They were sorely disappointed and stocks fell across the european bourses. Any reading on any PMI under 50.0 signals contraction and the european economies are contracting more rapidly than the optimists in Brussels and London can imagine.

In the US, the bad news was exacerbated by a trifecta of gloom from the housing sector. Mortgage rates jumped above 4.0% for a 30-year fixed mortgage, home prices remained flat for the month of January (despite excellent house-buying weather) and the December gain of 0.7% was revised radically lower, to a gain of just 0.1%. Additionally, according to the Mortgage Bankers Association, mortgage applications fell 7.4% for the week ending March 16, compared with the week before.

As many skeptics have been saying for months, as US stocks posted incredible gains since October, there really isn't any recovery to be seen, anywhere.

And that's the nub of the argument. Government data is so overtly massaged, mangled, managed and misappropriated to meet the demands of the political and financial crowd that it can barely be trusted. The best advice is to just chop two percentage points off any data to get a realistic reading, rather than rely on the bogus statistics provided by the professional guessers in the governments' capture.

Of course, middle class Americans do have choices, though for the most part they are painful. Second jobs, kids at home, driving less, and eating a leaner more nutritious diet (you feel better and eat less) rather than the junk served at fast food and mid-priced restaurant chains are choices that are being made routinely by Americans forced to tighten their economic belts.

But of course, you won't hear that on either Bloomberg of CNBC, where everything is going up all the time, no matter what. It's been 3 1/2 years since the crash of '08. Nothing's changed, except that the lies have gotten larger.

Stocks were down hard until the closing hour, when, sure enough, a rally saved the major indices from finishing a heck of a lot lower. The day will come when all the pumping and pimping by the insiders won't be enough to save our precious stock markets from complete implosion. As usual, volume was non-existent.

With one more trading day ahead, stocks are poised for their worst weekly showing of the year.

Dow 13,046.14, -78.48 (0.60%)
NASDAQ 3,063.32, -12.00 (0.39%)
S&P 500 1,392.78, -10.11 (0.72%)
NYSE Composite 8,141.33, -78.01 (0.95%)
NASDAQ Volume 1,524,230,750
NYSE Volume 3,664,415,750
Combined NYSE & NASDAQ Advance - Decline: 1559-3952
Combined NYSE & NASDAQ New highs - New lows: 94-41
WTI crude oil: 105.35, -1.92
Gold: 1,642.50, -7.80
Silver: 31.34, -0.88

Failed German Bond Auction Sends Stocks Scurrying Lower

Germany, a tower of strength throughout the ongoing European debt crisis, got a taste of the bad medicine which has been doled out mostly across Southern European nations, as an auction for $8.1 billion in German Bunds was not well received, as bids covered only $5.9 billion of the offering.

Additionally, investors demanded a higher yield on the 10-year note, pushing the yield to a six-week high at 2.02%, higher than the corresponding 10-year note in US treasuries, which plummeted to as low as 1.88% during the course of the day.

Foremost on the minds of traders of all stripes, the question was simple, "If Europe's strongest nation cannot fund itself, what's next for the continent and for the rest of the planet?"

The news struck just prior to the opening of US markets. Along with unusual readings on US durable goods orders, personal income and personal spending, markets opened sharply lower and languished in the red all day.

Personal income for October showed a gain of 0.4%, while personal spending increased a mere 0.1%. Along with those figures, both below forecasts, the national savings rate fell to 4.1% in the third quarter compared to 5.1% in the second quarter, suggesting that Americans are dipping into savings or saving less in order to make ends meet, a scenario of which most lower and middle-income citizens are already well aware.

Durable goods orders, a key driver of broad economic growth, fell sharply, off 0.7% and yielded another odd number. Without transportation orders (autos, planes, etc.), durables were up 0.7%.

Spooking the market even more were poor results in the flash reading of China's PMI, which showed contraction, at 48.0, down from 51.0 in October. The flash reading generally captures about 85-90% of the businesses surveyed. The final reading will be released on December 1.

As US markets pause to give thanks (for what, nobody's exactly sure) on Thursday, economies and markets are gripped by turmoil, fear and trepidation over an imminent recession and possible currency collapse in Europe and elsewhere. With half of Europe likely already in recession, global growth seems to be stalling out in much the same fashion as it did in 2008. The Euro fell to its lowest level against the US dollar in six weeks, though still holding valiantly to the 1.33 level, though without relentless priming and pumping from the US Fed, the Euro seems doomed to fall to levels not seen since the Euro's earliest days.

That Europe can actually fund itself and fix the problems caused by decades of overspending appears more and more a fiction that only financial broadcasters and government officials mouth. Whether they actually believe what they're saying is a matter for speculators.

The Dow Jones Industrial Average fell for the fifth time in the last sixth sessions. The NASDAQ and S&P 500 fell for the sixth consecutive day. All of the major averages are now back below where they started the year and each has fallen below its 50-day moving average. The number of advances was at a three-month low and new 52-week lows outpaced 52-week highs by its highest margin since August.

All sectors were lower, led by energy, basic materials, technology and financials. Bank of America, possibly the most-hated financial institution in the world (though Goldman Sachs may garner even more angst) fell to 5.14 at the close, the lowest level since March of 2009, the bottom of the 2008-09 downturn. All 30 Dow stocks finished lower on the day.

Gobble, gobble, Happy Thanksgiving. See you on Black Friday.

Dow 11,257.55, -236.17 (2.05%)
NASDAQ 2,460.08, -61.20 (2.43%)
S&P 500 1,161.79, -26.25 (2.21%)
NYSE Composite 6,951.56, -143.33 (2.02%)
NASDAQ Volume 1,715,325,750
NYSE Volume 3,798,937,500
Combined NYSE & NASDAQ Advance - Decline: 767-4911
Combined NYSE & NASDAQ New highs - New lows: 39-371
WTI crude oil: 96.17, -1.84
Gold: 1,695.90, -6.50
Silver: 31.88, -1.07

Stocks Continue Dive with 4th Straight Week of Losses

Not much changed overnight, and that was reflected in the performance of stock prices globally. The same themes continue popping up, causing confusion and derision among investors. The shaky situation in Europe, complete with protests and riots in England and Germany, the continued weak outlook for jobs in America and growth slowing to a standstill almost worldwide has fomented a rolling, four-week-long slide that has brought many of the national and sub-national indices close to bear territory.

In fact, adding in today's losses, the NASDAQ is on the precipice of becoming more than a correction, down 531 points since its April 29 highs, has lost 18.48%, only 1.52% from becoming a technical bear market.

The other averages are not quite so close. The Dow needs to lose roughly another 450 points before its losses from recent highs reach the dreaded 20% level, though the S&P 500 is closing ground, down 17.60%. Another drop of 35 points would not only send the highly-watched index into bear territory but underneath the psychologically important 1100 level.

After Asian markets tumbled and Europe continued the assault on investments, things looked dicey for US stocks prior to the opening, with futures sporting large downsides. After an initial thrust into the abyss, however, all the major US indices rebounded to post healthy gains by mid-morning.

But they were not to last. By 11:00 am EDT, most of the gains were wiped out and by 1:00 pm, the slide lower had resumed in earnest. Stocks eventually hit their low points of the day just minutes before the closing bell, a terrifying omen for Monday's trading.

Thus, trading ended badly, with major indices slumping for their fourth consecutive week.

Dow 10,817.65, -172.93 (1.57%)
NASDAQ 2,341.84, -38.59 (1.62%)
S&P 500 1,123.53, -17.12 (1.50%)
NYSE Composite 6,970.10, -109.31 (1.54%)

Declining issues beat back advancers, 4799-1807. New highs on the NASDAQ totaled just five (5), with 316 new lows. On the NYSE, there were only seven (7) new highs, but 279 new lows, putting the combined total at 12 new highs to 595 new lows. Citing those figures, anyone who believes this correction to have bottomed needs to seek professional help, preferably from any astute market watcher.

Volume was brisk, though not quite at yesterday's levels, another signal that the losses are only gathering momentum. The likelihood of all the indices falling into bear territory by Labor Day - ten trading sessions from now - is very high, almost a certainty, unless some major economic data changes the future outlook, which has turned from scarcely positive to undeniably negative over the past four weeks.

NASDAQ Volume 2,357,600,000
NYSE Volume 6,004,142,000

A slew of forecasters have cut their outlooks for GDP, including Moody's, which cut its forecast to 2%, and JP Morgan, who sees 4th quarter GDP at 1%, down from their previous 2.5% call and 1st quarter 2012 at 0.5%, down from 1.5% in their earlier outlook.

Citigroup cut its total 2011 growth forecast to 1.6% from 1.7% and lowered its projection for next year to 2.1 percent from 2.7 percent, according to a note to clients dated yesterday.

Of course, these analysts are known to be overly and overtly optimistic, so their tea leaves and crystal balls may not be the best estimates out there. Chances of a recession are being priced into stacks at about 60%.

Amid the carnage, oil prices, which had briefly dipped below $80/barrel early in the morning, went quickly positive when US markets opened, but closed the day with a 12 cent loss, at $82.26.

Once again, the big winners were precious metals, with gold cruising to another record high, up $26.60, at $1851.50 per ounce. Overnight, the intraday high topped out at $1878.90. The best gainer of the day, and also so far this year, was silver, which saw heavy buying, up $2.16 (a move of more than 5%), to $42.80, its highest price since May 3rd, when CME was putting on a series of six margin hikes to cool the shiny metal down.

Now, with the lid off and resistance broken, silver should continue to climb forward. Some strategists see it hitting the $44-46 range before labor day, which, considering today's drive, looks very possible.

One last note before the weekend. The Got Gold Report's Gene Arensberg updates his charts and concludes that silver is "very close to a short-murdering rocket launch again."

Nice Show, But Everybody Knows It's a Fake

Stocks continued to rally on Thursday, following up on the ridiculous upside surprise from the first day of September. There are many reasons to doubt that the US economy or US stocks are actually worth investing, and the overwhelming opinion from the average Joes and Janes of the world is that stocks are really just for suckers.

Outflows from mutual funds continued for the 17th consecutive week, so, if anyone is thinking that this is a good time to buy into the market, there are quite literally hundreds of thousands of people who are fleeing equities as quickly as they can. Bonds funds and cash are the asset classes du jour, and probably will remain so unless radical changes are made to the way Wall Street handles trading.

Investors have become wary of the Street's "wild West" approach and many believe the game is rigged against the small investor. These people have a case, after the meltdown of 2008, Bernie Madoff and the "Flash Crash" this past May. One cannot blame them for being careful; after all, it is their money we're talking about.

Today's action was in contrast to the prevailing news, again, as initial unemployment claims remained stubbornly high at 472,000 for the reported week and productivity was reported to have declined by 1.8% in the second quarter after slowing 0.9% in the first. About all this economy needs is less productive people working at the few jobs remaining. Unit labor coast are also on the rise, another bad omen for publicly-traded corporations.

For the most part, trading is, and has been, orchestrated by the five big banks - Goldman Sachs, JP Morgan Chase, Bank of America, Citigroup and Morgan Stanley. That's reflected in the overcrowding of trades and the herky-jerky motion of the indices. When the big boys act in unison, with large blocks, markets jump. It truly does crowd out the small investor. The playing field is dramatically tilted in favor of HTFs (High Frequency Traders) and big money.

Nonetheless, the show must go on, so the money was spent today to boost stocks once again, though the rally may be cut short by tomorrow's non-farm payroll, which, maybe this time, will actually be regarded as something substantial to trade off. The past few monthly employment reports have been on the weak side. if not outright horrible, but traders seemed to keep their wits on days when the numbers are released. It's the following Monday that all hell breaks loose, giving more credence to the rigged nature of the markets.

Dow 10,320.10, +50.63 (0.49%)
NASDAQ 2,200.01, +23.17 (1.06%)
S&P 500 1,090.10, +9.81 (0.91%)
NYSE Composite 6,966.25, +55.27 (0.80%)

As expected, advancing issues finished well ahead of decliners, 4327-2026. New highs bettered new lows, 360-56, but volume reverted back to a pathetically low level. The indication is that there was some allocation into winning positions, though without much commitment.

NASDAQ Volume 1,691,904,250
NYSE Volume 4,269,796,500

One telling sign that the rally in equities is mostly a figment of the imaginative inside traders was that oil stood still, finishing unchanged at $73.91. Gold continued to close in on all-time highs, finishing up $5.20, to $1,251.50. Silver rocketed ahead another 28 cents, to $19.64. It has been by far the best performer over the past two weeks.

David Rosenberg penned a thoughtful piece, claiming that we're in a Depression, not a recession, and, of course, he's right.

No Cat, No Bounce In Dead Trade

Normally, following a massive decline like the one Wednesday, traders will be looking to see if the market shows any signs of strength with a bounce the following session. In bull markets, there's almost always some buoyancy with buyers stepping in to scoop up what they deem bargains. Even during bear markets there is usually enough optimism to promote some short-term relief, but there was none to be found on Thursday, as the major exchanges wrote down their third straight session on the red side of the ledger.

Although the markets opened down heavily and within minutes were trading at what would eventually be the lows of the day, stocks spent the entire session below the unchanged line, without even a hint of buying. This is a very bad sign for anybody holding stocks right now. An acute lack of buyers in the public marketplace presages not only a severe downturn in the values of stocks, but potentially a liquidity crisis in which stocks cannot even trade efficiently.

If there's going to be another shock to the financial system, it's likely to be in the form of liquidity since we've already entered into a deflationary environment. The one asset hailed as supreme during deflationary periods is CASH, simply because that's what everyone covets. Stocks will be shunned, and eventually bonds too, as the wisest choice will be seen as fast-appreciating cash, because it will buy more tomorrow than today as asset values are pounded down into the earth.

Since sellers are normally looking to "cash out" of positions, what happens when they don't recirculate their cash back into the equity markets is a lack of liquidity. This soon turns into a vortex, as buyers cannot be found except at deeply-discounted prices, sucking down the value of stocks with every trade. The abnormally low volume witnessed over the past week demonstrates, quite clearly, that buying interest has all but dried up. It's only a matter of time before stock holders cash in their chips and leave the markets for a long, long time.

Dow 10,319.95, -58.88 (0.57%)
NASDAQ 2,190.27, -18.36 (0.83%)
S&P 500 1,083.61, -5.86 (0.54%)
NYSE Composite 6,881.94, -20.77 (0.30%)

Declining issues ramped past advancers on the day, 3788-2646. Even more telling was the now-complete about-face in the daily new highs and lows. New lows took the upper hand for the second straight session, by a widening margin of 264-209. While volume has been decried as out of order, it is worth noting that the only positive daily finish of the week (Monday) was accompanied by the lowest volume, by a long shot. Overall, trading volume has improved each successive day since, though every day was a losing one. That's about all one needs to know about whether or not this downturn will continue. Volume continues to gain strength as more and more traders hit the panic button and sell. Since Tuesday was only the beginning of this current round of equity liquidation, expect further declines and the same or higher trading volumes in days and weeks ahead. There seems to be no stopping the markets from engaging in a race to the price discovery bottom.

NASDAQ Volume 2,211,456,250
NYSE Volume 4,563,876,000

As the dollar gained strength again, oil prices careened downward, losing $2.28, to $75.74, a quick reversal from the trades last week above the $80 mark. Gold got a sizable lift, up $17.30, to $1,214.80, now that speculators can read the Fed's hand without even having to peek. The Fed is out to eventually rip up the currency, making gold more valuable, and trader's aren't particularly concerned with short-term dollar strength, like today. They're ready to dive into gold and drive it to new highs, something that should surprise nobody, as gold has outperformed every other asset on nearly every level over the past ten years.

Silver gained slightly, adding 16 cents, to $18.05.

The markets were blind-sided once again prior to the open by another depressing report on initial unemployment claims, up to 484,000, following last week's stunning 479,000, which was revised higher, to 482,000. Not only are jobs not being created in the United States, more companies are beginning to lay workers off as the economy has stalled. If unemployment continues to rise, there is no hope for a recovery, which seems obvious. The double-dip recession which so many have discounted as unlikely, now seems a certainty, though one wonders why it took so many people so long to admit it.

For what it's worth, Bank of America (BAC) closed at another 52-week low today, down 13 cents, at 13.06.

Tomorrow's CPI report for July should show the effects of a moribund economy. Unless I've been completely wrong the past three years, the number should be lower, signifying further deflation.

Forget Double Dip, the Next Bottom May be Deeper

Stocks continued their now four-day rally with the weakest volume of the week on Friday. Most of the buying - mostly positioning for earnings releases beginning next week - occured in the final two hours of the session.

Nonetheless, it was a stellar performance for the holiday-shortened span, with stocks rebounding sharply after two months of relentless selling.

Dow 10,198.03, +59.04 (0.58%)
NASDAQ 2,196.45, +21.05 (0.97%)
S&P 500 1,077.96, +7.71 (0.72%)
NYSE Composite 6,808.71, +52.90 (0.78%)

Advancers buried decliners, 4901-1497, and new lows were trampled by an onrush of new highs, 168-72. Volume was the lightest it has been in weeks, typical for summer trading, though potentially disconcerting to some trend-watchers who have noted many recent higher moves on inadequate volume. It's called speculation, and there's still plenty to go around.

NASDAQ Volume 1,601,902,625
NYSE Volume 3,999,371,000

Commodities were again positive for sellers, with oil up 65 cents, to $76.09, gold rocketing higher by $13.80, to $1,209.60 and silver tacking on 20 cents to the price of an ounce, at $18.05.

Following up on a recent post - June 1, US Markets the World's Laughing Stock; Second Great Depression Still Looming in which I compared current stock market conditions to those of the Great Depression, along come two esteemed commentators, Donald Luskin of Trend Macrolytics LLC, writing for the Wall Street Journal, and Daryl Guppy of GuppyTraders.com to solidify my position and rationale.

Luskin's article, Why This Isn't Like 1938—At Least Not Yet, carries my argument about the similarities a step further and somewhat in another direction, comparing today's stock market, and economy, to that of 1937-38, a recession within the Great Depression which exhibits an eerily-similar pattern to the recent S&P 500. Offering an over-imposed chart of the two periods, it's difficult to argue against his analysis, especially when he mentions:

In 1937 the economy was in a strong recovery from a severe crisis, and there was complacency that the worst was over—much like the exuberance about a "V-shaped' recovery this April. But after 1937 the economy relapsed into what historians call "the recession within the Depression," a downturn so severe that in any other context it would qualify as a depression itself.

It was triggered by a set of very specific policy mistakes. The Fed tightened by raising reserve requirements. Consumers were hit with new taxes to pay for the then-new Social Security program. Worried about excessive deficits, Roosevelt cut government spending. At the same time, his administration accelerated antibusiness rhetoric and regulation.

Those conditions sound quite a bit like what is directly ahead for the US economy, some of the same policies already set in motion.

Guppy's point is that there's a head-and-shoulders pattern developing that looks just like the one at the start of the Great Depression, the period to which I referred in my June 1 post. His analysis was released on July 5, when most of us were still enjoying the tail end of a three-day weekend, so it's unsurprising that many missed it.

Whether or not anyone agrees with history repeating itself, charting or comparisons, it certainly seems worth considering what might happen over the next 6 months to 6 years. Using reasonable market assumptions being a key tenet of any sound financial plan, might it not be time for people to begin using models which predict lower rates of return, possible deflation - instead of inflation - and benchmarks taken from actual conditions rather than the rosy assumptions (7-9% y-o-y gains, 3% inflation) usually thrown around by "respected" financial planners and analysts?

Which brings up yet another point of contention. Bull or Bear, optimist or pessimist, everyone has to have some kind of time horizon for investments, and, there being no better time than the present to plan for the future, one wonders just how long it might be before stocks return to the all-time highs of October, 2007.

I'll toss out a number here, just for argument's sake. With the Dow right around 10,000 today, I'll say that the index won't return to the 14,164 number (October 9, 2007) for maybe thirty years. How's that for perspective? Too gloomy? Bear in mind that it took more than 25 years years from stocks to recover from get back to the previous pre-crash high. The Dow Jones Industrials closed at 381.17 on September 3, 1929 and didn't rise back to that level until November 23, 1954, when they closed at 382.74. Surely, conditions were dire during the Great Depression and through world War II, but, considering the massive amount of debt overhang (still growing) and unfunded liabilities of around $130 Trillion (unfunded and unresolved), one might suggest that economic conditions are far worse, by degree, than they were some 80 years ago.

Just using a simple formula of 7% gains, compounded annually, it would take five years to retake the 14,164 level, and is anybody predicting five straight years of 7% returns? None that I know of, and if you know of any, do yourself a favor and seek out other opinions. With the ten-year treasury hovering around 3% and the 30-year around 4%, we all should be well aware that explosive growth is not in the near-term cards.

That's why I keep saying that cash is king, because if stocks and other assets decline in value, your cash will buy more down the road. That's what deflation is all about.

Stocks Continue Relentless Decline

Without any prodding from economic reports or corporate catalysts, stocks began the day and the week on a lower footing and spent the entire session in a protracted, broad retreat. If there's any better signal that stocks are on a negative bias, it's a big down day in the absence of news.

Not surprisingly, energy stocks, financials and raw materials were the biggest losers on Monday. These are the same sectors which investors had pumped to extraordinary gains in recent weeks.

The major indices hit their lows of the day around 1:30 pm, but no serious attempt at a rally ever materialized as stocks drifted, closing at or near their lowest levels of the session. The broadest measures - the NYSE Comp. and NASDAQ - were the hardest hit, suffering losses in excess of 3%.

Dow 8,339.01, -200.72 (2.35%)
Nasdaq 1,766.19, -61.28 (3.35%)
S&P 500 893.04, -28.19 (3.06%)
NYSE Composite 5,725.07, -209.17 (3.52%)

The number of advancing issues was dwarfed by declining ones, 5526-961, and new lows surpassed new highs for the 7th straight session, 69-33. Volume was once again a non-factor, remaining at generally sluggish recent levels, though marginally better than last week's levels.

NYSE Volume 6,119,741,000
Nasdaq Volume 2,238,124,250

Commodities responded to the downturn in equities by selling off sharply. Crude oil contracts for July delivery were down $2.62, to $66.93, a two week low. Gold was off $14.70, to $921.50, while silver lost 50 cents, to $13.71.

The declines in both equities and commodities reflects a complete change of sentiment from just a week ago, when all the talk concerned inflation. It seems investors had gotten a bit ahead of themselves regarding not only prospects for a recovery, but for inflationary forces, as well. Deflation remains dominant, as businesses struggle for pricing power. Slack demand across the board, due to stagnant wages, generalized fear of the future and excess household deb burdens, has kept a lid on prices and will likely do so for some time, no matter how much money the Fed attempts to pump into the economy.

A report by the World Bank, which sees the global economy shrinking by 2.9% may have contributed to the dour tone on Wall Street, though european bourses were already trading lower prior to the release. The general mood is one of resignation that the recession will continue through most, if not all, of 2009, and recovery will be tepid, at best.

Noting that, prospects for individual companies are being reassessed. The process of unwinding the gains tacked on from March through June is now well underway. The Dow has shed 460 points since closing at 8799 on June 12, a span of just 6 sessions.

Not Such a Good Week; Stocks Continue to Tank

Friday capped off another ugly week for stocks, as the late January rally - built on the back of a whopping 1 1/4% in federal funds rate cuts - has proven to be nothing but a mirage. That's not surprising, considering the historical impact of rate cutting in the face of a depressed business cycle, which happens to be little to none.

On the other side of those rate cuts inevitably sits inflation, which will become the next bogey man to confront the balding and bespeckled geniuses at the Fed. The natural reaction to inflation is to raise rates, and since the Fed won't be doing that soon, expect to pay more for just about everything as the value of the US dollar on world markets continued to erode.

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In any case, stocks fell for the 4th day out of 5, with the notable exception of the NASDAQ, which managed to finish marginally positive two days this week.

At the final bell, the Dow lost 551 points for the week; the S&P gave back 64; the NASDAQ dropped 99 and the NYSE Composite fell 454. It certainly wasn't pretty, but investors are beginning to get the idea that the US is already in a recession and the only reasonable thing to do is to sell stocks and get out of the way until some safe bottom forms.

Dow 12,182.13 -64.87; NASDAQ 2,304.85 +11.82; S&P 500 1,331.29 -5.62; NYSE Composite 8,823.12 -35.92

That bottom could be a distance off, as our brilliant leaders in congress decided to pass a stimulus package that will cost roughly $168 billion - money that will produce a deficit - in rebates to a large swath of individuals and families.

The plan is ridiculous. Consider a family I know well. Husband and wife both work, and have three kids in school, ages 10, 11 and 12. The kids go to public schools and both earners are making upwards of $45,000. They're pretty comfortable. This plan gives them $1200, plus another $900 for the kids ($300 per child) for a total of $2100. They don't absolutely need the money and much of it will likely go directly into the bank or to investments for the future (read: retirement or college funds). Nice country. Free money.

How an additional $168 billion of borrowed money is going to save the nation from the ravishes of recession is a good question, one which nobody in congress bothered to ask. After all, it's an election year and the incumbents saw an easy path to more votes for themselves. Hoo-rah!

Market internals were expectedly in-line with the headlines. Declining issues bettered advancers, 3679-2611. New lows topped new highs, 226-75.

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The oil barons apparently grew tired of not making so much money over the past couple of weeks and drove crude for March delivery up $3.66 to $91.77. Traders were so busy selling off stocks, they barely noticed. Gold leapt another $12.30, closing at $922.30. Silver gained 34 cents to $17.11. There's still time to buy before the metals really take off.

The recession is here, and normally, I'd say there's nothing to worry about as it's just part of the normal business cycle. However, this one looks rather ominous and has rough edges to it, especially considering the dearth of leadership in Washington. Whomever inherits the White House in the fall, they'll be getting a very, very raw deal in an economy that's retreating quickly from 8 long years of wild excess.

Be sure to read the story directly below this for a better understanding of why US equity markets were not another 2-4% lower this week, as they should have been.

NYSE Volume 3,768,491,500
NASDAQ Volume 2,275,363,250

Dow -370, Worst Loss of 2008; Top Ten Declines of the Year

This is how it goes n bear markets: sharp rallies followed by devastating declines. As New Yorkers toasted the Super Bowl champion Giants with a ticker-tape parade, Tuesday's action on Wall Street was nothing short of a bloodbath.

By the time the closing bell rang, the Dow had registered its worst performance in what's turning out, so far, to be a very difficult year for bullish investors.

On the Dow, stocks opened 100 points below the previous close and slipped 200 points within the first 20 minutes. From there, all the indices drifted lower for the remainder of the session without even a hint of a rally.

What set the markets on their collective ears was the January reading by the Institute for Supply Management's (ISM) Services index, which drooped to 41.9, from a revised 53.2 the previous month. A reading below 50 indicates contraction; the unexpected decline reignited recessionary fears.

The ISM noted that its new non-manufacturing index measured 44.6% using a new methodology. Nevertheless, the number was devastating no matter how it was computed.

Dow 12,265.13 -370.03; NASDAQ 2,309.57 -73.28; S&P 500 1,336.64 -44.18; NYSE Composite 8,874.50 -327.61

As the day wound to a close, volume accelerated and the indices closed at, or very close to, their lows of the day. Though the weight of trade was somewhat moderate, there was absolutely no doubt as to the direction.

All 30 of the blue chips closed in the red, an indication of the carnage. Leading the way was beleaguered Cititgroup (C) -2.12 (-7.43), with 8 other Dow stocks down more than 4%. The only standout was McDonald's (MCD), which closed only 0.04 lower.

Here's a list of the ten largest losses on the Dow so far in 2008:

Feb. 5: -370 points
Jan. 17: -307
Jan. 15: -277
Jan. 4: -256
Jan. 10: -247
Jan. 9: -238
Jan. 2: -221
Jan. 25: -171
Jan. 22: -128
Feb. 4: -108

Bear in mind, there have only been 24 trading sessions thus far into the new year.

Losing issues beat back gainers, 5022-1275. New lows expanded the gap over new highs, 180-61.

Commodity traders were equally discouraged. Oil futures slipped $1.61, to $88.41. Gold was hammered down $19.10, to $890.30, while sister silver fell 44 cents to $16.35.

After a 1300+ intra-day point run on the Dow, the index has given back nearly 500 points in the past two sessions. All indicators are lining up in favor of a recession. The only people not yet convinced are the hopelessly clueless and the dead.

In a related issue, Downtown Magazine's (parent publication of Money Daily) new Misery News Index showed gains of between 10 and 20% week over week for most of the referenced terms. The Misery News Index tracks news stories containing one of twelve search words, such as inflation, layoffs, recession and homeless.

NYSE Volume 4,142,740,000
NASDAQ Volume 2,435,409,000