On the second day of the fourth quarter, US stocks took a fairly big hit, with the most widely-watches indices each dropping nearly two percent on the day. The current downdraft comes on the heels of two consecutive down weeks in the US markets, but the damage has been relatively mild.
Prior to Tuesday and Wednesday's heavy declines, the Dow Jones Industrial Average was down just over 300 points, a little more than a one percent drop. Combined, the Dow fell over 800 points on Monday and Tuesday, making the entire dip about 1100 points, or just over four percent.
This is nothing to be concerned with, for now, though a repeat of 2018, when stocks ripped lower in October and December, should not be ruled out. By many measures, a slew of US equites are significantly overvalued, thanks in large part to the long-running bull market fueled by excess money printing by central banks and corporate buybacks. These are the two major components of the heady bull market and it is readily apparent that neither of these policies are going to end anytime soon.
The Fed is planning another 25 basis point cut in the federal funds rate at their next FOMC meeting, October 29-30 and corporate stock buybacks are still close to all-time high levels. With the pair policies funding all manner of excess, it would not be surprising to see any sharp decline - such as a 10% correction - countered with more easy money policy.
If there is going to be a recession, Europe will undoubtably encounter one before the United States. The EU is being battered by Brexit fears and poor economic data at the same time and its own measures of QE are barely making a dent in the declining economic conditions on the Continent. Thus, investors in the US will likely have advance warning of any GDP suffering.
Bear in mind that an official recession is defined as two consecutive quarters of negative growth. Therefore, a recession doesn't even become apparent until it is well underway. If third quarter GDP returns a positive number, that would indicate that a recession is still at least three months ahead. The world would find out if the US is headed into recession if fourth quarter GDP came in as a negative number, and that would only be reported by late January 2020.
Finally, a recession is not the end of the world for commerce nor stock investing. There will be a general malaise, as the low tide would affect all stocks in some manner, but there will still be winners, most likely in consumer staples, utilities, and dividend plays. If and when dividend-yielding stocks start taking on heavy water, that would be a time for more focused concern.
For now, caution, not panic, is advisable.
At the Close, Wednesday, October 2, 2019:
Dow Jones Industrial Average: 26,078.62, -494.42 (-1.86%)
NASDAQ: 7,785.25, -123.44 (-1.56%)
S&P 500: 2,887.61, -52.64 (-1.79%)
NYSE Composite: 12,608.43, -226.92 (-1.77%)
Showing posts with label stock buybacks. Show all posts
Showing posts with label stock buybacks. Show all posts
Thursday, October 3, 2019
Monday, August 19, 2019
WEEKEND WRAP: Stocks Lower Third Straight Week; Treasury Curve Inverts
Stocks took another turn for the worse, the third straight week in which the major averages shed points. That would constitute a trend, especially considering what happened on the Treasury yield curve, where the two-year note inverted against the 10-year-note, yielding - for a short time - one basis point more than its longer-term counterpart.
Additionally, bonds with negative yields globally moved beyond the $16 trillion mark, with Germany, among other EU countries, having its entire bond complex falling below zero yield.
Those two events in bond-land are going to prove to be crippling to global growth and the effects are already becoming apparent.
Negative interest rates destroy the time value of money. Debt is discarded. Without debt, there is no money, except for that which has no interest or counterparty. That would be gold, silver, hard assets. Gold and silver have been rallying while national central-bank fiat currencies fluctuate against each other in the desperate race to the bottom.
The idea that the country which can devalue its currency fastest and lowest will be the winner in the trade arena is offset by the fact that weak currencies - while great for exporters - are not necessarily good for that nation's consumers, because imports would necessarily become more dear.
The desire to send interest rates into negative territory - a concept launched by the Japanese and quickly taken up by Europe after the GFC - is a marker for the death of currencies, i.e., fiat money.
Negative rates are inherently deflationary, which is exactly what central banks wish to avoid, because it voids their franchise. Fiat money - which is in use globally - will die, not by hyperinflation, but by hyper-deflation.
That has been the working thesis at Money Daily since 2008, and it appears to finally be setting off into a new phase.
Facts must be faced. After the crash in 2008, banks became insolvent and were bailed out by trillions of dollars, yen and euros from central banks, which, by their very nature of money creation out of thin air, are also insolvent. Most governments are either deeply in debt or insolvent, with massive debts to their central banks offset by national resources (see Greece). Most people's finances are in a state of insolvent, with debt far outweighing assets. That leaves corporations, large and small, as the only solvent entities in the world, though many of those corporations are also insolvent, with more debt than equity, and much of their equity accounted for by stock buybacks. When the market takes a meaningful dive, many of these corporations will be prime bankruptcy targets, though the government would almost surely step in - as it did with the banks and General Motors during the crisis - with freshly-minted money to stave off creditors.
All roads lead back to the fiat money system and fractional reserve banking.
We have broken countries undertaking broken trade in broken markets. Mal-investments and wealth inequality are proliferating. Big government, running enormous deficits, carries on the fraud of counterfeiting by central banks. The currencies commonly used in exchange are worth nothing more than the ink and paper upon which are printed the pretty pictures and numbers. They are all debt instruments and negative interest rates extinguish debt. The world is headed for a radical reconfiguration of the monetary system.
At the Close, Friday, August 16, 2019:
Dow Jones Industrial Average: 25,886.01, +306.61 (+1.20%)
NASDAQ: 7,895.99, +129.37 (+1.67%)
S&P 500: 2,888.68, +41.08 (+1.44%)
NYSE Composite: 12,580.41, +170.91 (+1.38%)
For the Week:
Dow: -401.43 (-1.53%)
NASDAQ: -63.15 (-0.79%)
S&P 500: -29.97 (-1.03%)
NYSE Composite: -168.01 (-1.32%)
Dow Transports: -239.89 (-2.35%)
Additionally, bonds with negative yields globally moved beyond the $16 trillion mark, with Germany, among other EU countries, having its entire bond complex falling below zero yield.
Those two events in bond-land are going to prove to be crippling to global growth and the effects are already becoming apparent.
Negative interest rates destroy the time value of money. Debt is discarded. Without debt, there is no money, except for that which has no interest or counterparty. That would be gold, silver, hard assets. Gold and silver have been rallying while national central-bank fiat currencies fluctuate against each other in the desperate race to the bottom.
The idea that the country which can devalue its currency fastest and lowest will be the winner in the trade arena is offset by the fact that weak currencies - while great for exporters - are not necessarily good for that nation's consumers, because imports would necessarily become more dear.
The desire to send interest rates into negative territory - a concept launched by the Japanese and quickly taken up by Europe after the GFC - is a marker for the death of currencies, i.e., fiat money.
Negative rates are inherently deflationary, which is exactly what central banks wish to avoid, because it voids their franchise. Fiat money - which is in use globally - will die, not by hyperinflation, but by hyper-deflation.
That has been the working thesis at Money Daily since 2008, and it appears to finally be setting off into a new phase.
Facts must be faced. After the crash in 2008, banks became insolvent and were bailed out by trillions of dollars, yen and euros from central banks, which, by their very nature of money creation out of thin air, are also insolvent. Most governments are either deeply in debt or insolvent, with massive debts to their central banks offset by national resources (see Greece). Most people's finances are in a state of insolvent, with debt far outweighing assets. That leaves corporations, large and small, as the only solvent entities in the world, though many of those corporations are also insolvent, with more debt than equity, and much of their equity accounted for by stock buybacks. When the market takes a meaningful dive, many of these corporations will be prime bankruptcy targets, though the government would almost surely step in - as it did with the banks and General Motors during the crisis - with freshly-minted money to stave off creditors.
All roads lead back to the fiat money system and fractional reserve banking.
We have broken countries undertaking broken trade in broken markets. Mal-investments and wealth inequality are proliferating. Big government, running enormous deficits, carries on the fraud of counterfeiting by central banks. The currencies commonly used in exchange are worth nothing more than the ink and paper upon which are printed the pretty pictures and numbers. They are all debt instruments and negative interest rates extinguish debt. The world is headed for a radical reconfiguration of the monetary system.
At the Close, Friday, August 16, 2019:
Dow Jones Industrial Average: 25,886.01, +306.61 (+1.20%)
NASDAQ: 7,895.99, +129.37 (+1.67%)
S&P 500: 2,888.68, +41.08 (+1.44%)
NYSE Composite: 12,580.41, +170.91 (+1.38%)
For the Week:
Dow: -401.43 (-1.53%)
NASDAQ: -63.15 (-0.79%)
S&P 500: -29.97 (-1.03%)
NYSE Composite: -168.01 (-1.32%)
Dow Transports: -239.89 (-2.35%)
Thursday, December 20, 2018
Stock Carnage Continues; NASDAQ Down 20%; Why It Is Happening
Stocks continued to sell off on Thursday, extending the December decline to dangerous levels.
The Dow has registered what is easily the worst month of 2018, while the NASDAQ joined the Dow Jones Transportation Index in bear market territory, down 20% from its August 29 high.
Pundits in the financial media are trying to assign blame wherever they can, on the Fed's recent rate hike, fear of a coming recession, the possible federal government partial shutdown, China's slump, a looming trade war. While those are contributing factors, the real culprits are the Federal Reserve and their cohorts in central banking in Japan, China, the ECB, the Bank of England and the Swiss National Bank.
These are the architects of the past decade's debacle of debt, beginning in the depths of 2008-09 and continuing through until today. Their schemes of zero interest rate policy (ZIRP), negative interest rate policy (NIRP) and quantitative easing (QE), which made money all-too-easily available to their willing friends in the C-suites of major corporations.
The corporations took the easy money, at rates of one to two percent or less, and repurchased their own corporate stock at inflated prices. Now that the executives have cashed out, milked dry their own businesses, they are upside-down, owning shares of stock purchased at 20, 30, 40 percent or more than they will sell for today.
2018 was the culmination of this global corporate theft, inspired by the gracious money printers at the Federal Reserve and other central banks. Over the past ten years, trillions of dollars, yen, yuan, euros, pounds and other currencies were brought into existence, lent to various large corporate interests in a variety of complex and/or simple transactions and now the gig is up, though one will never hear talk of this in the mainstream media.
What happens to a corporation that is holding shares it bought at $90, when the stock is selling for $60 and may be worth less than that? Nothing good, including cutbacks, rollbacks, layoffs, and the general demise of once-strong companies.
When these companies offer shares for sale - and they eventually will - they will realize losses and they will still have the loans from the central banking system to repay. Some will file for bankruptcy. Others will cut payrolls and expenses to the bone. The past ten years have been nothing short of complete and total corruption of the financial system, from top to bottom. This is why the selling has been intense and relentless and likely will not cease until stocks are 40 to 60 percent off the artificial highs created by reducing the number of shares available through stock buybacks.
It was a swell scheme that paid off handsomely for some of the top executives at many of the largest corporations, and the general public, the people with 401k or retirement or college funds tied to the stock market, are going to end up bag-holders, broke and dismayed, as well they should be.
If there is any justice in this world, the bankers will be fingered, the corporate executives tried and jailed, and money clawed back from their ill-gotten gains. But we all know from the 2008-09 experience that that will not happen. Nobody will be tried. Nobody will serve a single day in jail, and the Federal Reserve will continue on its merry way, inflating and deflating to their heart's content, stealing from the public as they have been since 1913.
That's all there is to it. Hopefully, you are not a victim, though in many ways, we all are.
Dow Jones Industrial Average December Scorecard:
At the Close, Thursday, the solstice, December 20, 2018:
Dow Jones Industrial Average: 22,859.60, -464.06 (-1.99%)
NASDAQ: 6,528.41, -108.42 (-1.63%)
S&P 500: 2,467.42, -39.54 (-1.58%)
NYSE Composite: 11,222.79, -149.05 (-1.31%)
The Dow has registered what is easily the worst month of 2018, while the NASDAQ joined the Dow Jones Transportation Index in bear market territory, down 20% from its August 29 high.
Pundits in the financial media are trying to assign blame wherever they can, on the Fed's recent rate hike, fear of a coming recession, the possible federal government partial shutdown, China's slump, a looming trade war. While those are contributing factors, the real culprits are the Federal Reserve and their cohorts in central banking in Japan, China, the ECB, the Bank of England and the Swiss National Bank.
These are the architects of the past decade's debacle of debt, beginning in the depths of 2008-09 and continuing through until today. Their schemes of zero interest rate policy (ZIRP), negative interest rate policy (NIRP) and quantitative easing (QE), which made money all-too-easily available to their willing friends in the C-suites of major corporations.
The corporations took the easy money, at rates of one to two percent or less, and repurchased their own corporate stock at inflated prices. Now that the executives have cashed out, milked dry their own businesses, they are upside-down, owning shares of stock purchased at 20, 30, 40 percent or more than they will sell for today.
2018 was the culmination of this global corporate theft, inspired by the gracious money printers at the Federal Reserve and other central banks. Over the past ten years, trillions of dollars, yen, yuan, euros, pounds and other currencies were brought into existence, lent to various large corporate interests in a variety of complex and/or simple transactions and now the gig is up, though one will never hear talk of this in the mainstream media.
What happens to a corporation that is holding shares it bought at $90, when the stock is selling for $60 and may be worth less than that? Nothing good, including cutbacks, rollbacks, layoffs, and the general demise of once-strong companies.
When these companies offer shares for sale - and they eventually will - they will realize losses and they will still have the loans from the central banking system to repay. Some will file for bankruptcy. Others will cut payrolls and expenses to the bone. The past ten years have been nothing short of complete and total corruption of the financial system, from top to bottom. This is why the selling has been intense and relentless and likely will not cease until stocks are 40 to 60 percent off the artificial highs created by reducing the number of shares available through stock buybacks.
It was a swell scheme that paid off handsomely for some of the top executives at many of the largest corporations, and the general public, the people with 401k or retirement or college funds tied to the stock market, are going to end up bag-holders, broke and dismayed, as well they should be.
If there is any justice in this world, the bankers will be fingered, the corporate executives tried and jailed, and money clawed back from their ill-gotten gains. But we all know from the 2008-09 experience that that will not happen. Nobody will be tried. Nobody will serve a single day in jail, and the Federal Reserve will continue on its merry way, inflating and deflating to their heart's content, stealing from the public as they have been since 1913.
That's all there is to it. Hopefully, you are not a victim, though in many ways, we all are.
Dow Jones Industrial Average December Scorecard:
| Date | Close | Gain/Loss | Cum. G/L |
| 12/3/18 | 25,826.43 | +287.97 | +287.97 |
| 12/4/18 | 25,027.07 | -799.36 | -511.39 |
| 12/6/18 | 24,947.67 | -79.40 | -590.79 |
| 12/7/18 | 24,388.95 | -558.72 | -1149.51 |
| 12/10/18 | 24,423.26 | +34.31 | -1115.20 |
| 12/11/18 | 24,370.24 | -53.02 | -1168.22 |
| 12/12/18 | 24,527.27 | +157.03 | -1011.19 |
| 12/13/18 | 24,597.38 | +70.11 | -941.08 |
| 12/14/18 | 24,100.51 | -496.87 | -1437.95 |
| 12/17/18 | 23,592.98 | -507.53 | -1945.58 |
| 12/18/18 | 23,675.64 | +82.66 | -1862.92 |
| 12/19/18 | 23,323.66 | -351.98 | -2214.90 |
| 12/20/18 | 22,859.60 | -464.06 | -2678.96 |
At the Close, Thursday, the solstice, December 20, 2018:
Dow Jones Industrial Average: 22,859.60, -464.06 (-1.99%)
NASDAQ: 6,528.41, -108.42 (-1.63%)
S&P 500: 2,467.42, -39.54 (-1.58%)
NYSE Composite: 11,222.79, -149.05 (-1.31%)
Wednesday, October 31, 2018
Dip-Buyers Step In, Send Stocks Soaring; ADP, Non-Farm Payrolls On Tap
Nothing says bear market like wild rallies from out of the blue and Tuesday's late afternoon jacking of stocks was right out of the market maker's textbook with buy the dip the mantra of the day.
At 1:30 pm ET, the Dow Industrials were up a mere 40 points, but bargain hunters stepped up their games, frantically buying up shares at reduced prices. The result was a big rise in all of the indices with the Dow leading the way higher.
Even though stocks avoided falling into official correction, at the end of the day the major indices were still well off their all-time highs, with the Dow nearly 2000 points lower than its close on October 3rd (26,828.39).
The day's action was similar to rallies on the 16th and 25th, when the Dow gained 547.87 and 401.13, respectively, only to meet larger declines in the days ahead.
What should buoy markets for the time being are a pair of employment reports, the first by ADP on Wednesday morning tracking private payrolls, followed by Friday's non-farm payroll data from the Bureau of Labor Statistics (BLS). Both are predicted to show job gains approaching 200,000 for October.
Another potential boost to markets could come from resumption of stock buybacks as the blackout period during earnings reports frees up shares to be repurchased by the companies that normally sell them to the public.
Analysts are calling the buybacks the backbone of the bull market, which begs the question of just how high a price are companies willing to pay for their own stock. While many in the investment community believe stock buybacks are good for companies and investors as they reduce the number of shares available and make earnings per share measurements easier to meet or beat, others point out that spending company money on own stock points up a paucity of creativity at the highest levels of corporate America as well as an unwillingness to expand a company's business.
In other words, if companies aren't interested in expansion of existing business or creation of new business units within the corporate structure, they must feel that their market penetration is fully saturated or that economic conditions are not conducive to growth.
Buybacks, in addition to massive injections of liquidity by the Fed has been the fluid of the nine-plus-year expansion. What is concerning to long-term investors is what happens when the well runs dry.
Dow Jones Industrial Average October Scorecard:
At the Close, Tuesday, October 30, 2018:
Dow Jones Industrial Average: 24,874.64, +431.72 (+1.77%)
NASDAQ: 7,161.65, +111.36 (+1.58%)
S&P 500: 2,682.63, +41.38 (+1.57%)
NYSE Composite: 12,129.94, +187.42 (+1.57%)
At 1:30 pm ET, the Dow Industrials were up a mere 40 points, but bargain hunters stepped up their games, frantically buying up shares at reduced prices. The result was a big rise in all of the indices with the Dow leading the way higher.
Even though stocks avoided falling into official correction, at the end of the day the major indices were still well off their all-time highs, with the Dow nearly 2000 points lower than its close on October 3rd (26,828.39).
The day's action was similar to rallies on the 16th and 25th, when the Dow gained 547.87 and 401.13, respectively, only to meet larger declines in the days ahead.
What should buoy markets for the time being are a pair of employment reports, the first by ADP on Wednesday morning tracking private payrolls, followed by Friday's non-farm payroll data from the Bureau of Labor Statistics (BLS). Both are predicted to show job gains approaching 200,000 for October.
Another potential boost to markets could come from resumption of stock buybacks as the blackout period during earnings reports frees up shares to be repurchased by the companies that normally sell them to the public.
Analysts are calling the buybacks the backbone of the bull market, which begs the question of just how high a price are companies willing to pay for their own stock. While many in the investment community believe stock buybacks are good for companies and investors as they reduce the number of shares available and make earnings per share measurements easier to meet or beat, others point out that spending company money on own stock points up a paucity of creativity at the highest levels of corporate America as well as an unwillingness to expand a company's business.
In other words, if companies aren't interested in expansion of existing business or creation of new business units within the corporate structure, they must feel that their market penetration is fully saturated or that economic conditions are not conducive to growth.
Buybacks, in addition to massive injections of liquidity by the Fed has been the fluid of the nine-plus-year expansion. What is concerning to long-term investors is what happens when the well runs dry.
Dow Jones Industrial Average October Scorecard:
| Date | Close | Gain/Loss | Cum. G/L |
| 10/1/18 | 26,651.21 | +192.90 | +192.90 |
| 10/2/18 | 26,773.94 | +122.73 | +315.63 |
| 10/3/18 | 26,828.39 | +54.45 | +370.08 |
| 10/4/18 | 26,627.48 | -200.91 | +169.17 |
| 10/5/18 | 26,447.05 | -180.43 | -11.26 |
| 10/8/18 | 26,486.78 | +39.73 | +28.47 |
| 10/9/18 | 26,430.57 | -56.21 | -27.74 |
| 10/10/18 | 25,598.74 | -831.83 | -859.57 |
| 10/11/18 | 25,052.83 | -545.91 | -1,405.48 |
| 10/12/18 | 25,339.99 | +287.16 | -1,118.32 |
| 10/15/18 | 25,250.55 | -89.44 | -1,207.76 |
| 10/16/18 | 25,798.42 | +547.87 | -659.89 |
| 10/17/18 | 25,706.68 | -91.74 | -751.63 |
| 10/18/18 | 25,379.45 | -327.23 | -1,078.86 |
| 10/19/18 | 25,444.34 | +64.89 | -1,013.97 |
| 10/22/18 | 25,317.41 | -126.93 | -1,140.90 |
| 10/23/18 | 25,191.43 | -125.98 | -1,265.88 |
| 10/24/18 | 24,583.42 | -608.01 | -1,873.89 |
| 10/25/18 | 24,984.55 | +401.13 | -1,472.76 |
| 10/26/18 | 24,688.31 | -296.24 | -1,769.00 |
| 10/29/18 | 24,442.92 | -245.39 | -2,014.39 |
| 10/30/18 | 24,874.64 | +431.72 | -1,582.67 |
At the Close, Tuesday, October 30, 2018:
Dow Jones Industrial Average: 24,874.64, +431.72 (+1.77%)
NASDAQ: 7,161.65, +111.36 (+1.58%)
S&P 500: 2,682.63, +41.38 (+1.57%)
NYSE Composite: 12,129.94, +187.42 (+1.57%)
Sunday, October 14, 2018
Weekend Wrap: Stocks Suffer Worst Week Since February As Earnings Arrive
What should be front of mind for investors this weekend and heading into the third trading week of the fourth quarter is whether the massive slip-sliding of the past week was, a) rehearsal for a full blown bear market; b) beginnings of a normal correction; or, c) a buying opportunity.
Pessimists amongst us will surely side with answer (a), noting that the bull market, now the longest ever, has to come to an end at some point, and that the various factors leading to its demise are obvious (rising interest rates, global contagion, trade and tariff paroxysm, currency confusion and convulsion).
Realists might prefer answer (b), because inflation is still tame, jobs are plentiful, unemployment is low, and interest rates are still below historical averages.
Optimists obviously will go with answer (c) because, well, you know, the market always goes up and there's money to be made.
There's a very good chance that the optimists are over-optimistic after US markets nose-dived through the worst week since February, wiping out almost all third quarter gains, leaving investors with the kind of feeling one gets about an hour after eating at McDonald's (if you've never done it, don't start now), a blase, indecisive feeling in the pit of one's stomach, as though eating was not what one should have done. In this case, that feeling may have come on Wednesday or Thursday, with Friday providing something of an Alka-Seltzer relief rally.
Even with the sizable gains to close out the week, all of the major averages suffered badly, and the condition may only be at a beginning. It would be difficult to pinpoint an exact culprit for the crime of this week's market turbulence, though the Federal Reserve is always a convenient scapegoat. Just ask President Trump, who said that the esteemed central bankers had gone crazy.
While adding 25 basis points to the federal funds rate every quarter - especially after they'd been affixed to near-zero for seven years - may not exactly define madness, there are those (such as Money Daily) who believe the Fed has overstepped its escape from years of the other madness now known as saving the global financial system from the ruinous aspects of the 2008-09 collapse.
Certainly, credit is excessive, especially the funding of corporate stock buybacks, which have reached a crescendo this annum, with more than a trillion dollars worth of corporate malinvestment on tap. The federal government has binged on debt to ungodly proportions and is getting even worse, while your average, everyday consumer has also ratcheted up the mortgage, student loan, car payment, and credit card bills to historic heights.
One could posit the expression, "nothing says white trash like a blue tarp" has an ancillary phrase in, "nothing says bubble like a new car in front of a new house with kids in college wearing new shoes."
Have we cumulatively reached the end of the road? Probably not. But, if last week's savviest stock sellers were on their marks, the road is likely to be a bumpy one through to the end of the year.
What was witnessed not just in US markets but around the world last week raised a fair share of eyebrows and lowered even more expectations. With earnings cranking up this coming week if will be most instructive to see which companies are punished, which ones prevail, and which ones offer excuses and/or outlooks suggesting more trouble ahead.
There's a lot of money sloshing around, and none of it is without a debt burden attached to it. There will be winners and losers in the fourth quarter, and, from the looks of it, tech, financials, and consumer stocks may tend to pull all the other sectors down with them.
Or, it just could be a buying opportunity, just five percent off of all-time highs, a dubious prospect.
Dow Jones Industrial Average October Scorecard:
At the Close, Friday, October 12, 2018:
Dow Jones Industrial Average: 25,339.99, +287.16 (+1.15%)
NASDAQ: 7,496.89, +167.83 (+2.29%)
S&P 500: 2,767.13, +38.76 (+1.42%)
NYSE Composite: 12,439.42, +89.89 (+0.73%)
For the Week:
Dow: -1107.06 (-4.19%)
NASDAQ: -291.55 (-3.74%)
S&P 500: -118.44 (-4.10%)
NYSE Composite: -552.53 (-4.25%)
Pessimists amongst us will surely side with answer (a), noting that the bull market, now the longest ever, has to come to an end at some point, and that the various factors leading to its demise are obvious (rising interest rates, global contagion, trade and tariff paroxysm, currency confusion and convulsion).
Realists might prefer answer (b), because inflation is still tame, jobs are plentiful, unemployment is low, and interest rates are still below historical averages.
Optimists obviously will go with answer (c) because, well, you know, the market always goes up and there's money to be made.
There's a very good chance that the optimists are over-optimistic after US markets nose-dived through the worst week since February, wiping out almost all third quarter gains, leaving investors with the kind of feeling one gets about an hour after eating at McDonald's (if you've never done it, don't start now), a blase, indecisive feeling in the pit of one's stomach, as though eating was not what one should have done. In this case, that feeling may have come on Wednesday or Thursday, with Friday providing something of an Alka-Seltzer relief rally.
Even with the sizable gains to close out the week, all of the major averages suffered badly, and the condition may only be at a beginning. It would be difficult to pinpoint an exact culprit for the crime of this week's market turbulence, though the Federal Reserve is always a convenient scapegoat. Just ask President Trump, who said that the esteemed central bankers had gone crazy.
While adding 25 basis points to the federal funds rate every quarter - especially after they'd been affixed to near-zero for seven years - may not exactly define madness, there are those (such as Money Daily) who believe the Fed has overstepped its escape from years of the other madness now known as saving the global financial system from the ruinous aspects of the 2008-09 collapse.
Certainly, credit is excessive, especially the funding of corporate stock buybacks, which have reached a crescendo this annum, with more than a trillion dollars worth of corporate malinvestment on tap. The federal government has binged on debt to ungodly proportions and is getting even worse, while your average, everyday consumer has also ratcheted up the mortgage, student loan, car payment, and credit card bills to historic heights.
One could posit the expression, "nothing says white trash like a blue tarp" has an ancillary phrase in, "nothing says bubble like a new car in front of a new house with kids in college wearing new shoes."
Have we cumulatively reached the end of the road? Probably not. But, if last week's savviest stock sellers were on their marks, the road is likely to be a bumpy one through to the end of the year.
What was witnessed not just in US markets but around the world last week raised a fair share of eyebrows and lowered even more expectations. With earnings cranking up this coming week if will be most instructive to see which companies are punished, which ones prevail, and which ones offer excuses and/or outlooks suggesting more trouble ahead.
There's a lot of money sloshing around, and none of it is without a debt burden attached to it. There will be winners and losers in the fourth quarter, and, from the looks of it, tech, financials, and consumer stocks may tend to pull all the other sectors down with them.
Or, it just could be a buying opportunity, just five percent off of all-time highs, a dubious prospect.
Dow Jones Industrial Average October Scorecard:
| Date | Close | Gain/Loss | Cum. G/L |
| 10/1/18 | 26,651.21 | +192.90 | +192.90 |
| 10/2/18 | 26,773.94 | +122.73 | +315.63 |
| 10/3/18 | 26,828.39 | +54.45 | +370.08 |
| 10/4/18 | 26,627.48 | -200.91 | +169.17 |
| 10/5/18 | 26,447.05 | -180.43 | -11.26 |
| 10/8/18 | 26,486.78 | +39.73 | +28.47 |
| 10/9/18 | 26,430.57 | -56.21 | -27.74 |
| 10/10/18 | 25,598.74 | -831.83 | -859.57 |
| 10/11/18 | 25,052.83 | -545.91 | -1405.48 |
| 10/12/18 | 25,339.99 | +287.16 | -1118.32 |
At the Close, Friday, October 12, 2018:
Dow Jones Industrial Average: 25,339.99, +287.16 (+1.15%)
NASDAQ: 7,496.89, +167.83 (+2.29%)
S&P 500: 2,767.13, +38.76 (+1.42%)
NYSE Composite: 12,439.42, +89.89 (+0.73%)
For the Week:
Dow: -1107.06 (-4.19%)
NASDAQ: -291.55 (-3.74%)
S&P 500: -118.44 (-4.10%)
NYSE Composite: -552.53 (-4.25%)
Wednesday, June 13, 2018
FOMC On Deck: Stock Rally Should End at 2:00 pm EDT
Void of volatility the past two days, US and global stock markets are about to get shock treatment courtesy of the Federal Reserve's FOMC, which will almost certainly increase the federal funds rate by 25 basis points, to 1.75-2.00%, the highest rate in well over a decade.
While the expected rate hike is well-anticipated, priced in (according to the usual suspect sources), and measured (one 25 BP hike per quarter is the new normal), markets will still see the rising rate environment for what it is: an economy killer, attracting all money to US treasuries and out of competing negative or near-zero-interest-paying bills, notes and bonds in other countries.
When the FOMC announces its policy decision at 2:00 pm EDT, the world will change in some small but all bad ways. Credit card payers will see their required monthly debt installments rise, any interest-rate sensitive debt obligations (most of it) will become more expensive, and, perhaps most important of all, stock buybacks will no longer appear to be the bargain they once were, when companies could borrow at extremely low interest rates to repurchase their own stock, rather than invest in capital equipment and labor.
The elephant in the room is the buyback scheme, one which has boosted stock prices to dizzying levels, based largely on lowered expectations via reducing the number of shares outstanding. Companies which had chosen to engage in the dumbest money move in recent history will still be clueless about how to expand their existing businesses. They will not invest in their own operations. They will not increase wages nor hire more human capital. They will continue their cowardly retreat into self-interested stock incentive bonuses for key executives, as if those people are the only ones in the organization who matter.
Sadly, US corporations are badly managed and have been for quite some time. The rot within the boardrooms and executive suites began many decades ago and has only accelerated though the first two decades of the new century, long after the "Greed is Good" Gordon Gecko exclamation point from the 90s.
Today, the fictional Mr. Gecko would be ridiculed for his naivety, modesty, and restraint by the avaricious purveyors of corporate theft currently occupying the positions of CEO and CFO at many major corporations traded globally.
As corporate executives continue to be glorified as champions of free enterprise and business leaders, elevated to the level of gods and goddesses, the corruption that has engulfed the entire political and economic spectrum will come to full bloom, the excesses and poor decisions exacerbated by tightening finial conditions. Just when everything becomes more dear and out of reach to the ordinaries, the wealthy and connected will resort to outright, in-your-face larceny, justified by an entitled mindset.
Once it begins to get worse, the levels of lawlessness, greed, immorality, and corruption will become unbearable, but, as it was in 2008 and 2009, none of the most obvious criminals will go to jail. Few will even be indicted.
When it's obvious that stocks are going to continue devaluing - a condition that's probably well-understood already by the elite - the rats will jump ship en masse along with their ill-gotten gains.
The short-term rally that began on June 1 may not end immediately after the FOMC decision, but it almost certainly will end shortly thereafter. The NASDAQ made a new all-time high on Tuesday while the Dow languished with a minor loss, ending a four-day win streak as it reached the upper band of its recent trend line.
Now comes the losing.
Next comes the lying.
Dow Jones Industrial Average June Scorecard:
At the Close, Tuesday, June 12, 2018:
Dow Jones Industrial Average: 25,320.73, -1.58 (-0.01%)
NASDAQ: 7,703.79, +43.87 (+0.57%)
S&P 500: 2,786.85, +4.85 (+0.17%)
NYSE Composite: 12,844.72, -12.24 (-0.10%)
While the expected rate hike is well-anticipated, priced in (according to the usual suspect sources), and measured (one 25 BP hike per quarter is the new normal), markets will still see the rising rate environment for what it is: an economy killer, attracting all money to US treasuries and out of competing negative or near-zero-interest-paying bills, notes and bonds in other countries.
When the FOMC announces its policy decision at 2:00 pm EDT, the world will change in some small but all bad ways. Credit card payers will see their required monthly debt installments rise, any interest-rate sensitive debt obligations (most of it) will become more expensive, and, perhaps most important of all, stock buybacks will no longer appear to be the bargain they once were, when companies could borrow at extremely low interest rates to repurchase their own stock, rather than invest in capital equipment and labor.
The elephant in the room is the buyback scheme, one which has boosted stock prices to dizzying levels, based largely on lowered expectations via reducing the number of shares outstanding. Companies which had chosen to engage in the dumbest money move in recent history will still be clueless about how to expand their existing businesses. They will not invest in their own operations. They will not increase wages nor hire more human capital. They will continue their cowardly retreat into self-interested stock incentive bonuses for key executives, as if those people are the only ones in the organization who matter.
Sadly, US corporations are badly managed and have been for quite some time. The rot within the boardrooms and executive suites began many decades ago and has only accelerated though the first two decades of the new century, long after the "Greed is Good" Gordon Gecko exclamation point from the 90s.
Today, the fictional Mr. Gecko would be ridiculed for his naivety, modesty, and restraint by the avaricious purveyors of corporate theft currently occupying the positions of CEO and CFO at many major corporations traded globally.
As corporate executives continue to be glorified as champions of free enterprise and business leaders, elevated to the level of gods and goddesses, the corruption that has engulfed the entire political and economic spectrum will come to full bloom, the excesses and poor decisions exacerbated by tightening finial conditions. Just when everything becomes more dear and out of reach to the ordinaries, the wealthy and connected will resort to outright, in-your-face larceny, justified by an entitled mindset.
Once it begins to get worse, the levels of lawlessness, greed, immorality, and corruption will become unbearable, but, as it was in 2008 and 2009, none of the most obvious criminals will go to jail. Few will even be indicted.
When it's obvious that stocks are going to continue devaluing - a condition that's probably well-understood already by the elite - the rats will jump ship en masse along with their ill-gotten gains.
The short-term rally that began on June 1 may not end immediately after the FOMC decision, but it almost certainly will end shortly thereafter. The NASDAQ made a new all-time high on Tuesday while the Dow languished with a minor loss, ending a four-day win streak as it reached the upper band of its recent trend line.
Now comes the losing.
Next comes the lying.
Dow Jones Industrial Average June Scorecard:
| Date | Close | Gain/Loss | Cum. G/L |
| 6/1/18 | 24,635.21 | +219.37 | +219.37 |
| 6/4/18 | 24,813.69 | +178.48 | +397.85 |
| 6/5/18 | 24,799.98 | -13.71 | +384.14 |
| 6/6/18 | 25,146.39 | +346.41 | +730.55 |
| 6/7/18 | 25,241.41 | +95.02 | +825.57 |
| 6/8/18 | 25,316.53 | +75.12 | +900.69 |
| 6/11/18 | 25,322.31 | +5.78 | +906.47 |
| 6/12/18 | 25,320.73 | -1.58 | +904.89 |
At the Close, Tuesday, June 12, 2018:
Dow Jones Industrial Average: 25,320.73, -1.58 (-0.01%)
NASDAQ: 7,703.79, +43.87 (+0.57%)
S&P 500: 2,786.85, +4.85 (+0.17%)
NYSE Composite: 12,844.72, -12.24 (-0.10%)
Tuesday, February 9, 2016
Stocks Finish Flat, But Internals Signal Something Is Seriously Wrong
US Stocks closed today marginally on the downside, though appearances can be deceiving, as there was outright catastrophe in Japan which spilled over into worried European markets.
With Chinese markets (including the SSE and Hang Seng) the Nikkei took a magnificent beating on Tuesday, losing 918 points, a 5.40% loss on the day, sending the main index of Japan further into bear market territory. Perhaps even more significant, the JCB 10-year note yield fell to a negative number, under ZERO, for the first time in history. This marks Japan and Switzerland as the only countries in the world with negative yields out to ten years, though other countries are rapidly approaching that benchmark, in particular, Germany.
European bourses all finished their session with losses of one percent or more, and, at the open in the US, the situation appeared dire, with Dow futures down more than 150 points. Stocks quickly gained traction, turned positive near midday, flirted with the unchanged line throughout the session until finally giving it up late in the day.
But, the story is not the minor loss the major indices took, but the skew of all manner of metrics toward the negative. Bond yields continued to collapse, with the ten-year down to 1.71%. The spread between the ten and two-year note compressed down to 1.04, something of a danger zone, as the two-year actually rose two bits, to yield 0.67%.
Bank stocks were unhappy spots, with Bank of America (BAC) closing at 12.20, a new 52-week and multi-year low.
Advancers were also far behind declining stocks by a margin of more than 2-to-1. Also of note, the number of new lows (NASDAQ and NYSE combined) dwarfed new highs, 812-70, with only six of those new highs on the Naz. The central planners at the central banks can pin their hats on the day as they successfully halted the manic rallies in silver and gold, for a day, anyway.
Additionally, oil was sent back well below the $30 mark, finishing in New York at $28.38 a barrel.
The VIX is also signaling more turbulence, hanging steadily in the mid-20s range.
The rout in stocks, however, like the gains for the metals, is far from over. Consensus view on Wall Street is still concerned, but not yet panicked. Stocks are still about 5-7% away from official bear market territory, though a few bad days could send the indices reeling in the wrong direction.
In a story by Bernard Condon (AP) about how much money companies have lost doing stock buybacks, we find that the stock buybacks which goosed the market and individual stocks higher over the past six to seven years has been nothing short of a colossal flop and threatens to become an even heavier weight stopped to the stock market.
What stock buybacks did accomplish was to allow executives to boost their companies' earnings without devoting capital to expansion, while at the same time justifying their extraordinary salaries and cashing out their outrageous stock options and/or bonuses.
Investors should be outraged, and righteously so, because these companies should have been either expanding their capital base or market share or distributing dividends to their shareholders. What these stock buyback kings have done is nothing short of a fiduciary failure, which in other industries would be cause for criminal indictments.
Of course, since this all occurred within the cozy regulatory environment that is Wall Street, nothing even close to that will happen. The executives who personally profited from corporate paper profits will walk away with their cash after hollowing out scores of once-healthy companies. It may turn out to be good overall, if a few of the giant multi-nationals like Wal-Mart, Yum Brands and ExxonMobil get cut down to more reasonable sizes and markets open up for more nimble - and honest - competitors.
Tuesday's Cracker-jack pot:
S&P 500: 1,852.21, -1.23 (0.07%)
Dow: 16,014.38, -12.67 (0.08%)
NASDAQ: 4,268.76, -14.99 (0.35%)
Crude Oil 28.38 -4.41% Gold 1,189.20 -0.73% EUR/USD 1.1294 +0.86% 10-Yr Bond 1.7290 -0.35% Corn 360.50 -0.48% Copper 2.04 -2.61% Silver 15.23 -1.30% Natural Gas 2.10 -2.01% Russell 2000 964.17 -0.53% VIX 26.71 +2.73% BATS 1000 20,030.11 -0.07% GBP/USD 1.4468 +0.29% USD/JPY 115.0020 -0.51%
With Chinese markets (including the SSE and Hang Seng) the Nikkei took a magnificent beating on Tuesday, losing 918 points, a 5.40% loss on the day, sending the main index of Japan further into bear market territory. Perhaps even more significant, the JCB 10-year note yield fell to a negative number, under ZERO, for the first time in history. This marks Japan and Switzerland as the only countries in the world with negative yields out to ten years, though other countries are rapidly approaching that benchmark, in particular, Germany.
European bourses all finished their session with losses of one percent or more, and, at the open in the US, the situation appeared dire, with Dow futures down more than 150 points. Stocks quickly gained traction, turned positive near midday, flirted with the unchanged line throughout the session until finally giving it up late in the day.
But, the story is not the minor loss the major indices took, but the skew of all manner of metrics toward the negative. Bond yields continued to collapse, with the ten-year down to 1.71%. The spread between the ten and two-year note compressed down to 1.04, something of a danger zone, as the two-year actually rose two bits, to yield 0.67%.
Bank stocks were unhappy spots, with Bank of America (BAC) closing at 12.20, a new 52-week and multi-year low.
Advancers were also far behind declining stocks by a margin of more than 2-to-1. Also of note, the number of new lows (NASDAQ and NYSE combined) dwarfed new highs, 812-70, with only six of those new highs on the Naz. The central planners at the central banks can pin their hats on the day as they successfully halted the manic rallies in silver and gold, for a day, anyway.
Additionally, oil was sent back well below the $30 mark, finishing in New York at $28.38 a barrel.
The VIX is also signaling more turbulence, hanging steadily in the mid-20s range.
The rout in stocks, however, like the gains for the metals, is far from over. Consensus view on Wall Street is still concerned, but not yet panicked. Stocks are still about 5-7% away from official bear market territory, though a few bad days could send the indices reeling in the wrong direction.
In a story by Bernard Condon (AP) about how much money companies have lost doing stock buybacks, we find that the stock buybacks which goosed the market and individual stocks higher over the past six to seven years has been nothing short of a colossal flop and threatens to become an even heavier weight stopped to the stock market.
What stock buybacks did accomplish was to allow executives to boost their companies' earnings without devoting capital to expansion, while at the same time justifying their extraordinary salaries and cashing out their outrageous stock options and/or bonuses.
Investors should be outraged, and righteously so, because these companies should have been either expanding their capital base or market share or distributing dividends to their shareholders. What these stock buyback kings have done is nothing short of a fiduciary failure, which in other industries would be cause for criminal indictments.
Of course, since this all occurred within the cozy regulatory environment that is Wall Street, nothing even close to that will happen. The executives who personally profited from corporate paper profits will walk away with their cash after hollowing out scores of once-healthy companies. It may turn out to be good overall, if a few of the giant multi-nationals like Wal-Mart, Yum Brands and ExxonMobil get cut down to more reasonable sizes and markets open up for more nimble - and honest - competitors.
Tuesday's Cracker-jack pot:
S&P 500: 1,852.21, -1.23 (0.07%)
Dow: 16,014.38, -12.67 (0.08%)
NASDAQ: 4,268.76, -14.99 (0.35%)
Crude Oil 28.38 -4.41% Gold 1,189.20 -0.73% EUR/USD 1.1294 +0.86% 10-Yr Bond 1.7290 -0.35% Corn 360.50 -0.48% Copper 2.04 -2.61% Silver 15.23 -1.30% Natural Gas 2.10 -2.01% Russell 2000 964.17 -0.53% VIX 26.71 +2.73% BATS 1000 20,030.11 -0.07% GBP/USD 1.4468 +0.29% USD/JPY 115.0020 -0.51%
Monday, May 4, 2015
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)
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)
Thursday, March 12, 2015
Stocks Gain Wildly On Weak Retail Sales, Bank Buyback Plans
Part of the reason Money Daily ceased publishing on a daily basis last year was because of the total ad complete idiocy of markets which have given up control to the Federal Reserve.
Today was another shining example of the absurdity of that proposition, but, fear not, Money Daily will be here tomorrow, next week and on into the future, boldly going where no central banker has gone before.
Prior to the opening bell, the government announced retail sales for the month of February, which came in at a -0.6%, marking the third straight month of declines in retail sales, the worst such string of misses and losses since the collapse of Lehman Brothres back in 2008.
Add to that, on the back of the government's stress tests on capital formation for the largest financial institutions, these big money centers announced upwards of $55 billion in share repurchase plans, led by Morgan Stanley, which announced a repurchase plan of $3.1 billion of it own stock. Remember, stock buybacks serve one purpose: to decrease the number of shares outstanding, which makes the EPS look better by comparison to either the prior quarter or the prior year. Beyond that, there is only a little - questionable - reasoning for such moves in a business sense.
The response to what can only be described as negative news, was a galloping rally right out of the gate for all indices and just about every momentum stock, income stock, growth stock, tech stock, tick tock and sock puppet.
There's no bubble. Uh-uh.
The whole concept here is that if the economy is weak, then the Fed may delay raising interest rates, with the Federal funds rate currently - and for the last six years - sitting at ZERO. The Fed has hinted that they'll raise rates in June, probably by 25 basis points.
That's what has Wall Street all riled up and excited. Imagine if we actually had a functioning economy.
Dow 17,895.22, +259.83 (1.47%)
S&P 500 2,065.95, +25.71 (1.26%)
NASDAQ 4,893.29, +43.35 (0.89%)
Today was another shining example of the absurdity of that proposition, but, fear not, Money Daily will be here tomorrow, next week and on into the future, boldly going where no central banker has gone before.
Prior to the opening bell, the government announced retail sales for the month of February, which came in at a -0.6%, marking the third straight month of declines in retail sales, the worst such string of misses and losses since the collapse of Lehman Brothres back in 2008.
Add to that, on the back of the government's stress tests on capital formation for the largest financial institutions, these big money centers announced upwards of $55 billion in share repurchase plans, led by Morgan Stanley, which announced a repurchase plan of $3.1 billion of it own stock. Remember, stock buybacks serve one purpose: to decrease the number of shares outstanding, which makes the EPS look better by comparison to either the prior quarter or the prior year. Beyond that, there is only a little - questionable - reasoning for such moves in a business sense.
The response to what can only be described as negative news, was a galloping rally right out of the gate for all indices and just about every momentum stock, income stock, growth stock, tech stock, tick tock and sock puppet.
There's no bubble. Uh-uh.
The whole concept here is that if the economy is weak, then the Fed may delay raising interest rates, with the Federal funds rate currently - and for the last six years - sitting at ZERO. The Fed has hinted that they'll raise rates in June, probably by 25 basis points.
That's what has Wall Street all riled up and excited. Imagine if we actually had a functioning economy.
Dow 17,895.22, +259.83 (1.47%)
S&P 500 2,065.95, +25.71 (1.26%)
NASDAQ 4,893.29, +43.35 (0.89%)
Saturday, January 3, 2015
Phantom GDP, Deflationary QE and Releasing the Consumer Kraken
Money Daily stopped being a daily post blog in March, 2014. While the name remains the same, the posts are now on an intermittent basis, as conditions warrant, though it is advised to read the archives (from 2006-2014) regularly, even daily, for insights and historical perspective.
OK, this is a little mind exercise for the new year.
Capital consists of money, labor, and resources (land, materials, machinery, buildings, infrastructure).
The Fed has control of just one of these three essential tenets of economy: money.
They make it out of nothing (to be more succinct, they create money from government debt - the Mandrake Mechanism, well-explained by G. Edward Griffin, in his expose of the Federal Reserve, The Creature from Jekyll Island - there are PDFs of this book available, or, buy it from Amazon or eBay, just go look.)
GDP growth is a canard, which the Fed and government can - and do - conspire to adjust according to their whims, wants, needs.
Unless somebody's building something that wasn't there beforehand, or there are more people building things (population growth, which is, after all, potential capital) or being more productive (technology), the only way to increase GDP is through money creation, i.e., inflation, which, in its most strict definition is an increase in the money supply, and, that is the essence of QE.
So, why hasn't there been inflation? In addition to the various reasons offered in this article, allow these meager observations:
What we have today is a nearly closed-loop of money creation and destruction. Government issues bonds, Fed (or one of their many conduits, or other central banks) buys them with newly-created-out-of-thin-air money. That money goes to banks, which buy stocks or hoard as reserves, adding nothing to the general economy. GDP stagnates. Any little that may trickle out as loans to businesses or mortgages, is actually productive, but the banks, being the arbiters of money and controllers of credit, don't trust the public, and, additionally, have a hard time making a profit at 2, 3, or 4%. The problem for the Fed is the massive oversupply in everything from existing homes to corn to cheap junk from China, to now, oil and gas.
You want inflation, raise interest rates, because the pent-up demand will be filled by banks which can make money at 5, 6, or 7%.
My conclusion is that either the Fed doesn't understand this process (unlikely), or they actually want stagnation and/or disinflation or deflation (very likely). Remember, the dollar was getting weak up until 2009 and beyond, but look what's happened, the dollar is strengthening, and people want more of those dollars (the 10-year yield at 2.15% is magnitudes better than the German bund or the Bank of Japan's 10-year yield.). The Fed, as usual, has been lying through their teeth about everything from the virtues of quantitative easing (QE, i.e., free money) to the strength of the global economy (fact: it's weak.). There's a long history of the Fed saying one thing and knowing that the complete opposite - or nearly so - is actually true. That's how they get everyone to go along with their schemes of booms, busts, inflations, depressions, recessions... they and their crony, member banks, front-running everything.
The past few years have been good years for investing (ask anyone with a 401k or stocks), but it's not going to last. Maybe a few more years, because, once the banks start lending again in earnest, the inflation spigot will be wide open and the Fed knows this.
The Fed knows exactly what it is doing, and they're doing it slowly, as to avoid shocks. Anybody who hasn't been able to prosper (as in paying down debt, cutting expenditures, improving existing infrastructure - remodel your house, add solar panels, buy a better vehicle, increase acreage of productive land, learn new skills or improve existing ones) has missed the boat.
Point in fact: In 2005,6,7,8, I could not get a credit card with less than 22% interest. In 2009, I got a 4% home equity line of credit for roughly 50% of the value of my property (owned free and clear) from a local credit union (thank God for them). That one valued asset (my home) has, along with the meager line of credit, in five years time, allowed me to pay off all my existing credit card debt, buy inventory for my business, buy other assets (mostly silver) then get deals from various banks (yes, the very ones which caused the near-catastrophe of 2008), which now has me in this most unusual predicament: I have 0% credit - some of it guaranteed through June, 2016 - in an amount which far exceeds my original 4% home equity line, much of which I have already paid back.
My trick, if I can pull it off, will be to use the 0% credit as ready cash as part of a down payment on a better property for my home and business. With interest rates so low, it's almost foolish NOT to make this move.
The only risk, as far as I can tell, is if my income nosedives (not likely) and I'm unable to service my debt. In that case, I pay the mortgage (and taxes, the government always get theirs, don't they?) first, and let the banks figure out what to do with the defaulted CC debt. Long story short, I could then file for bankruptcy protection, and, even though the CC debt would not be fully discharged, I could get restructured and/or some forebearance/forgiveness and, keep my home, which, in the long run, is all that matters, the REAL, productive, improvable capital.
Seriously, I've been stacking silver, hoarding cash and business inventory for four years, and it's about time to unleash the Kraken!
Banksters beware! You've enabled your own worst nightmare. More adventures in high finance are sure to follow.
Today's advice: Pay attention and stay liquid. Interest rates keep going lower, meaning there's still another two years of embraceable low interest rates to be had.
OK, this is a little mind exercise for the new year.
Capital consists of money, labor, and resources (land, materials, machinery, buildings, infrastructure).
The Fed has control of just one of these three essential tenets of economy: money.
They make it out of nothing (to be more succinct, they create money from government debt - the Mandrake Mechanism, well-explained by G. Edward Griffin, in his expose of the Federal Reserve, The Creature from Jekyll Island - there are PDFs of this book available, or, buy it from Amazon or eBay, just go look.)
GDP growth is a canard, which the Fed and government can - and do - conspire to adjust according to their whims, wants, needs.
Unless somebody's building something that wasn't there beforehand, or there are more people building things (population growth, which is, after all, potential capital) or being more productive (technology), the only way to increase GDP is through money creation, i.e., inflation, which, in its most strict definition is an increase in the money supply, and, that is the essence of QE.
So, why hasn't there been inflation? In addition to the various reasons offered in this article, allow these meager observations:
- Money is moved off-shore
- Money is wasted
- Money goes into non-productive assets (stocks, especially stock buybacks, the most unproductive of all, actually deflationary)
- but, fewer people are working (unemployment)
- the amount of land in the US (and the world) is fixed
- a building burns, becomes dilapidated (impaired asset) or is vacant (lots of homes like that in the US thanks to the banks), becomes less-valued, non-productive, heading towards zero value, and that is deflation on a grand scale.
What we have today is a nearly closed-loop of money creation and destruction. Government issues bonds, Fed (or one of their many conduits, or other central banks) buys them with newly-created-out-of-thin-air money. That money goes to banks, which buy stocks or hoard as reserves, adding nothing to the general economy. GDP stagnates. Any little that may trickle out as loans to businesses or mortgages, is actually productive, but the banks, being the arbiters of money and controllers of credit, don't trust the public, and, additionally, have a hard time making a profit at 2, 3, or 4%. The problem for the Fed is the massive oversupply in everything from existing homes to corn to cheap junk from China, to now, oil and gas.
You want inflation, raise interest rates, because the pent-up demand will be filled by banks which can make money at 5, 6, or 7%.
My conclusion is that either the Fed doesn't understand this process (unlikely), or they actually want stagnation and/or disinflation or deflation (very likely). Remember, the dollar was getting weak up until 2009 and beyond, but look what's happened, the dollar is strengthening, and people want more of those dollars (the 10-year yield at 2.15% is magnitudes better than the German bund or the Bank of Japan's 10-year yield.). The Fed, as usual, has been lying through their teeth about everything from the virtues of quantitative easing (QE, i.e., free money) to the strength of the global economy (fact: it's weak.). There's a long history of the Fed saying one thing and knowing that the complete opposite - or nearly so - is actually true. That's how they get everyone to go along with their schemes of booms, busts, inflations, depressions, recessions... they and their crony, member banks, front-running everything.
The past few years have been good years for investing (ask anyone with a 401k or stocks), but it's not going to last. Maybe a few more years, because, once the banks start lending again in earnest, the inflation spigot will be wide open and the Fed knows this.
The Fed knows exactly what it is doing, and they're doing it slowly, as to avoid shocks. Anybody who hasn't been able to prosper (as in paying down debt, cutting expenditures, improving existing infrastructure - remodel your house, add solar panels, buy a better vehicle, increase acreage of productive land, learn new skills or improve existing ones) has missed the boat.
Point in fact: In 2005,6,7,8, I could not get a credit card with less than 22% interest. In 2009, I got a 4% home equity line of credit for roughly 50% of the value of my property (owned free and clear) from a local credit union (thank God for them). That one valued asset (my home) has, along with the meager line of credit, in five years time, allowed me to pay off all my existing credit card debt, buy inventory for my business, buy other assets (mostly silver) then get deals from various banks (yes, the very ones which caused the near-catastrophe of 2008), which now has me in this most unusual predicament: I have 0% credit - some of it guaranteed through June, 2016 - in an amount which far exceeds my original 4% home equity line, much of which I have already paid back.
My trick, if I can pull it off, will be to use the 0% credit as ready cash as part of a down payment on a better property for my home and business. With interest rates so low, it's almost foolish NOT to make this move.
The only risk, as far as I can tell, is if my income nosedives (not likely) and I'm unable to service my debt. In that case, I pay the mortgage (and taxes, the government always get theirs, don't they?) first, and let the banks figure out what to do with the defaulted CC debt. Long story short, I could then file for bankruptcy protection, and, even though the CC debt would not be fully discharged, I could get restructured and/or some forebearance/forgiveness and, keep my home, which, in the long run, is all that matters, the REAL, productive, improvable capital.
Seriously, I've been stacking silver, hoarding cash and business inventory for four years, and it's about time to unleash the Kraken!
Banksters beware! You've enabled your own worst nightmare. More adventures in high finance are sure to follow.
Today's advice: Pay attention and stay liquid. Interest rates keep going lower, meaning there's still another two years of embraceable low interest rates to be had.
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