Are We Recovering Enough?

Editor's Note: Money Daily stopped being a daily post blog in March, 2014. Well, it's now March, 2015, and, after a year off, little has changed, but Fearless Rick is once again re-charged to begin making daily (Monday - Friday) posts. This is, with hope, the first of many...

The following list is courtesy of the good squids over at Goldman Sachs.

From the start of February through March 2, these are the misses and beats of various US macro data.

MISSES

1. Personal Spending
2. Construction Spending
3. ISM New York
4. Factory Orders
5. Ward's Domestic Vehicle Sales
6. ADP Employment
7. Challenger Job Cuts
8. Initial Jobless Claims
9. Nonfarm Productivity
10. Trade Balance
11. Unemployment Rate
12. Labor Market Conditions Index
13. NFIB Small Business Optimism
14. Wholesale Inventories
15. Wholesale Sales
16. IBD Economic Optimism
17. Mortgage Apps
18. Retail Sales
19. Bloomberg Consumer Comfort
20. Business Inventories
21. UMich Consumer Sentiment
22. Empire Manufacturing
23. NAHB Homebuilder Confidence
24. Housing Starts
25. Building Permits
26. PPI
27. Industrial Production
28. Capacity Utilization
29. Manufacturing Production
30. Dallas Fed
31. Chicago Fed NAI
32. Existing Home Sales
33. Consumer Confidence
34. Richmond Fed
35. Personal Consumption
36. ISM Milwaukee
37. Chicago PMI
38. Pending Home Sales
39. Personal Income
40. Personal Spending
41. Construction Spending
42. ISM Manufacturing

BEATS

1. Markit Services PMI
2. Nonfarm Payrolls
3. JOLTS
4. Case-Shiller Home Price
5. Q4 GDP Revision (but notably lower)
6. Markit Manufacturing PMI

OK, so the US economy is going backwards at a 7:1 ratio of Misses to Beats, but stocks, since the beginning of February, have been roaring (today excluded).

The point is that stocks are ignoring the somber truth that the US economy is running on fumes and Wall Street is running on pretty much less than nothing (kinda like the motto for the NY Lottery - a dollar and a dream).

There are collapsing scenarios unfolding everywhere, from the disgusting behavior of executives at Lumber Liquidators (LL), who were exposed on 60 Minutes this past Sunday. There, the CEO says he didn't now that the below-cost flooring coming out of China didn't meet California (and much of the rest of the US states) standards for toxic emissions, especially formaldehyde. Sad fact is that after being punched down on Monday, the stock rallied more than 5% on Tuesday, but, worry not, it was at nearly 70 about a week ago, and was punished well before the TV coverage, down to around 40 now. Somebody knew something and obviously was front-running. Nothing new there, move along...

The award for most disgusting public display over the past few days is split between three distinct candidates:

• 1. The US congress, for cheering on the speech of Israeli Prime Minister, Benjamin Netanyahu, in a joint meeting.
• 2. The utter stupidity of millions on Twitter over whether some dress was white and gold or blue and black. Hasn't anyone ever heard of distortion?
• 3. The cops who shot the homeless guy in Los Angeles.

Like I said at the outset, not much has changed over the past year (or five years, for that matter). We're still kicking the can down the road, entrapped in a senseless bout of normalcy bias which is allowing the elite segment of society (Wall Street and DC, mostly) to trample on our freedoms and steal every last cent from the middle and lower classes, along with every shred of dignity.

Yep, like I said when I stopped writing daily diatribes a year ago, nothing is going to change until the Fed stops pumping money into the system. Well, they actually did stop, in the third quarter of last year, but the QE baton was quickly raised by Japan, and will shortly be taken up by the ECB, so, don't expect much to change any time soon. We've got at least a year and a half before the federal funds rate (you know, that one that seems to be permanently stuck between 0 and 0.25%, the rate at which the TBTF banks borrow) gets anywhere close to one percent, and even that could cause a panic in stocks.

In the meantime, the Baby Boomers are trying to figure out how to retire without any interest income, and that's an increasingly difficult trick, since the only reasonable yield one can get is at the far end of the curve, in 30-year bonds, currently hovering around 2.75%. $100,000 invested at that rate returns a whopping $2750 a year, so, you have to put up (and tie up) a million bucks just to live barely above the poverty level. Not much fun when you're 70 years old.

Deflation... it's what's for dinner (after the cat food).

Dow: 18,203.37, -85.26 (-0.47%)
S&P 500: 2,107.78, -9.61 (-0.45%)
Nasdaq 4,979.90, -28.20 (-0.56%)

More tomorrow...

The Biggest Bubble of All Time is About to Be Popped

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.

The handwriting, so to speak, is all over Wall Street. What has been the biggest financial bubble in the history of the world is on the verge of busting, or, what could be better still, slowly deflating.

After the crash of 2008-09, the Federal Reserve, in conjunction with central banks around the globe, injected massive amounts of liquidity into the fiat world currency markets, bolstering everything from junk bonds to consumer credit, but especially equities, otherwise known as stocks.

Since March 9, 2009, the major equity indices in the US - and, to a large degree, around the world - have rebounded on the strength of the Fed's largesse, nothing else. Now that the Fed has begun unwinding QE, the "juice" is being withdrawn. There will be no backstop for equities in the guise of unlimited liquidity from the Fed. The plan - already underway - is to reduce the amount of asset (bond) purchases by the Fed from their high of $85 billion per month, to zero. While it is unlikely the Fed will ever get to zero without reversing course or, at least, slowing the pace of their withdrawal, the March FOMC meeting will mark the third consecutive lowering of the monthly purchase level, timed in accordance with the 10-per-year FOMC schedule.

The Fed first announced in December, 2013 that it would be reducing purchases in January, 2014, and did the same in their first meeting of 2014, in January, lowering their purchase level to $65 billion in February. Since there was no meeting in February, they are expected to announce another $10 billion reduction at the March meeting next week (March 18-19). If they carry through with this expected drop to $55 billion, the market cracks which first occurred in January of this year, may turn into wholesale breaks, sending index levels below their recent lows, highlighted by the January 31 selloff.

With the S&P recovering all of its January and February losses and making new all-time highs earlier this month (the NASDAQ also made new 14-year highs), the Dow Jones Industrials did not, setting up the scenario for a bear market, according to strict Dow Theory.

If the Dow, having fallen short of its most recent high (16,588.25), continues on its path lower, exceeding the interim low of 15,340.69 (Feb. 4), this will confirm that a change in the primary tend has occurred, and a secular bear market is underway. This bear market could last anywhere from five to 20 years, possibly longer, because the recent, primary bull market - the second longest in market history - was built upon a foundation of incredibly easy money, low interest rates and global fiat currencies, unprecedented in financial history.

The fallout could be severe, popping the biggest financial asset bubble of all time, in stocks, affecting everything from individual stocks to your pension, IRA or 401k to muni bonds. In other words, be prepared for the biggest financial collapse of all time, because the last five years have been nothing but pure financial fantasy, and it's all about to come crashing to an end.

There are sure signs that the global economy is shrieking and straining to remain relevant and above water, but after blowing bubbles recently in dotcom stocks (1997-2001) and real estate (2003-2007), the Fed has reflated the economy with trillions of paper dollars, augmented by similarly spurious activities in Europe, China and Japan. The financial bubble created by central banks is of a magnitude much larger - possibly four to six times larger - than the sub-prime-induced housing meltdown, putting the figure of financial assets seriously at risk somewhere between $20 and $40 trillion dollars, an amount so unfathomable that nothing short of pure currency collapses can sufficiently make account.

(As this post is being composed (March 13, 2014, 1:10 pm EDT), the Dow Jones Industrial average has broken through its 50-day-moving average, down 194 points on the day.)

Beyond just charts and the scary finances of the central banks, China is the linchpin by which the financial dam may be breached. For the past two to three months, data out of the world's second-largest economy has been trending lower, especially in the areas of industrial production and exporting. In fact, China actually released data that showed it suffered a current account deficit, with imports exceeding exports, a very frightening development for one of the world's few export economies and a major trading partner with the US and Europe.

What the China data underscores is the overall weakness in US and European (developed) markets. The fraud of financialization has finally produced a result incompatible with the ponzi-scheme-like mantra of the central bankers. Consumers have been and are strapped for cash, a result of over-exuberant government spending, massive income disparity between the rich and poor and stagnant or declining wages in the middle of a labor shortfall crisis.

There are signs everywhere that the global economy is about to be brought back to reality, including, but by no means limited to, recent poor US unemployment data, a false housing recovery (inundated with cash buyers, flippers and speculation), inability of the government to prosecute bankers and financial operatives for mortgage and other frauds, declining adherence to the constitution and the trampling of civil rights, bogus car sales data with channel stuffing rampant, blaming the weather for poor economic results (seriously, the holiday shopping season was a complete bust), and overvaluation of speculative IPOs, tech stocks and other momentum stocks, enterprise valuations of stocks in the billions of dollars, based on nothing but pure speculation.

Nothing will stop the wreckage that the Fed and global central banks working in collusion have set in motion. The numbers are ghastly and overwhelming and the warnings have been written about for years. The time to prepare was yesterday, though there is still time, but thought processes must change. Status and wealth should not be measured by the size of one's McMansion, the price of one's car or the depth of one's stock portfolio. True wealth consists of something along these lines: a fully-paid-for home on five or more acres of land, two-thirds of it arable, food and water storage to last at least a year, a horde of cash, gold and/or silver, absolutely ZERO DEBT, and the ability and weaponry to defend it all.

Ask yourself, who among you can make claim to that, because that is real wealth, not the paper promises from Wall Street or Washington.

It's coming. And it may be approaching even faster than anyone wants to consider (think Ukraine).

Good luck.

Why the Boom Went Bust Today; Stocks Rocked; Gold, Silver, Bonds Higher

Despite a pair of great earnings reports after the bell Wednesday - Netflix and eBay - stocks sold off dramatically on Thursday, starting even before the opening bell, as futures pointed to a grim opening.

When trading began, the Dow slumped an immediate 135 points, while the S&P and NASDAQ took on deep losses. The negative condition persisted throughout the day, actually getting worse in the afternoon.

While stocks have already begun the year on a less-than-enthusiastic note, today's drops were the worse seen since last August and quite possibly are foretelling of further declines to come.

Commentators in the financial media mostly failed to comprehend the causes for today's collapse in equities, which were, in no particular order, the Chinese banking system becoming unglued, Turkey's economy falling apart at the seams, heightened tensions in the Ukraine, fear over terrorist attacks at the Olympics in Soshi, Russia, continuing civil war in Syria and 1.37 million people dropping off of the Emergency Unemployment Compensation roles.

Let's examine this last bit of news first, because it is so US-centric and is a troubling sign of the ongoing impotence of the federal government. Recall, the noises out of Washington, DC, earlier this month about restoring the aid to the people whose 99 weeks of unemployment were ending. Democrats were screaming "unfair," and that we need to help these people, as the money for these continuing unemployment benefits was eliminated by the widely-hailed budget "deal" that passed through congress in December.

Recall, also, that pension and benefits for military retirees and disabled vets was also slashed by that budget and roundly criticized by congress-people on the left and the right. The cuts were said to be "unpatriotic", and many vowed to restore them. A month has gone by and those cuts are still in place. Veterans are getting the shaft, and now, the long-term unemployed, without the media (controlled by the government) raising as much as an eyebrow over these issues, proving, without any shadow of a doubt, that the politicians in Washington have not only lost all sense of justice, decency or propriety, but they are also quickly losing their ability to make coherent policy.

What politicians in Washington, DC, have accomplished, however, is the uncanny ability to lie ruthlessly about anything at all, and to now lose what little support remained from the people of the United States. With the approval rating of congress already at multi-generational lows, it's about to go even lower. People should have been in the streets already, but their voices have been silenced by the Federal Reserve, together with the false statistics about the "improving economy" bantered about the past four to five years.

What will be lost next by the politicians is their ability to rule. They have lost all credibility and the consent of the people has long since been quietly withdrawn by many. The federal government, either by design or incompetence, has been failing and is about to fail completely. Without somebody stepping up to right the ship - and don't count on it - the ship of state, already rudderless and with torn sails, has begun to sink. Special interests to which the politicians have catered, have blown a hole in the hull, and it's not readily repairable. The United States is rapidly devolving into a fascist, welfare/police state, and, making matters worse and more worrisome, this is only the beginning.

Other than the United States collapsing in a major hurry, the rest of the world doesn't look much rosier. If nobody gets killed at the Olympics - if they even go off as planned - it will be nothing short of a miracle.

The other major events of the day were the widespread devaluation in the value of the Turkish Lira and a bank failure in China, also just beginning.

Turkey's currency fell three percent against the dollar, the most of any currency outside of Argentina (already a basket case, down 14% just today), despite intervention by the central bank, which was reportedly in the process of unloading $3 billion in foreign reserves.

In China, the evolving shadow banking crisis just went from bad to worse as it was reported today that some rural credit unions have been unable to pay back depositors for over a year. This would, in most countries, have been major news, prompting a flight of money from banks (bank run), but the circumspect Chinese media suppresses most of this kind of information from the outside world. In a nutshell, China's dubious "boom" economy may be going bust, or, realistically, may already be well down the path of self-immolation.

Taking just these few "newsy" items into perspective, it just might be time to return to "clinging to their guns and bibles," for more than just a few Americans. As for the rest of the world, well, their guns have largely already been confiscated and bibles don't offer much protection. Pitchforks and torches, anyone? God save them.

Others may be taking some time to polish up the gold and silver, which were the main winners on the day, along with the 10-year note, which fell to 2.80, the lowest yield in roughly two months.

As if that wasn't enough, teen idol, Justin Beiber, was arrested last night for DUI. Oh, the horror!... and, no, we're not linking to that story.

DOW 16,197.35, -175.99 (-1.07%)
NASDAQ 4,218.87, -24.13 (-0.57%)
S&P 1,828.46, -16.40 (-0.89%)
10-Yr Note 99.56, +1.25 (+1.27%) Yield: 2.80%
NASDAQ Volume 2.00 Bil
NYSE Volume 3.91 Bil
Combined NYSE & NASDAQ Advance - Decline: 1829-3918
Combined NYSE & NASDAQ New highs - New lows: 196-62
WTI crude oil: 97.32, +0.59
Gold: 1,262.30. +23.70
Silver: 20.01, +0.171
Corn: 429.00, +2.75

Recovery? BLS Reports Just 74,000 New Jobs in December

It's tough to wrap one's head around numbers like the BLS released prior to the opening bell Friday morning, but they reported a paltry 74,000 jobs created in December of last year, the lowest print in nearly three years and magnitudes lower than consensus estimates of 200,000.

The number was fabulously rejected by Moody's economist Mark Zandi, who, live on CNBC, said the number should be "thrown out." Oddly enough, Zandi helps create the monthly private payroll report by ADP, which reported 238,000 December jobs on Wednesday.

The markets didn't take Zandi's advice, especially the bond market, as the 10-year note ripped higher, the yield dropping to 2.88%, the lowest since mid-December. Stocks spent most of the week's final session in the red, before rallying slightly into the close. The NASDAQ and S&P finished with gains on the day, though the Dow was down once again, though only slightly.

For the week, the Dow lost 32.94 points, the S&P gained 11.00 points and the NASDAQ was ahead by 42.76 points, so, depending on one's perspective, the lack of new job creation in the US just doesn't seem important to the valuation of equities, a judgement nuanced by the fact that the labor force participation rate fell to its lowest level in 35 years, at 62.8%.

Because so many people dropped out of the work force, the unemployment rate magically dropped to 6.7%, the lowest since the onset of the recession, in October, 2008.

The numbers belie what's really happening in the real world. Jobs are just not being created with any kind of rapidity, at least not at the rate one would associate with a falling unemployment rate.

But, as the saying goes, it's "good enough for government work," which is always shabby and usually falls apart before long.

The facade promoted over the past five years by the government and the media, that we're in the midst of a recovery, just met a reality that competes with the accepted propagandized narrative.

Just a note: the huge jump in corn prices (up $20.75) was due to the January crop report, which showed corn stocks at just a shade under 14 million bushels. The rise in price was largely due to short covering. Prices are expected to stabilize near 415-435 cents per bushel over the near term.

DOW 16,437.05, -7.71 (-0.05%)
NASDAQ 4,174.66, +18.47 (+0.44%)
S&P 1,842.37, +4.24 (+0.23%)
10-Yr Note 98.86, +0.81 (+0.83%) Yield: 2.88%
NASDAQ Volume 2.01 Bil
NYSE Volume 3.31 Bil
Combined NYSE & NASDAQ Advance - Decline: 3708-1994
Combined NYSE & NASDAQ New highs - New lows: 390-23
WTI crude oil: 92.72, +1.06
Gold: 1,246.90, +17.50
Silver: 20.22, 0.54
Corn: 432.75, +20.75

November Jobs: 203,000; So, Now Good News Is Good News?

Highly anticipated all week, the November Non-farm payroll report from the BLS showed 203,000 jobs created during the month. The official unemployment rate fell to 7.0%, which, for all intents and purposes, is pretty close to not just the Fed's 6.5% target for raising interest rates, but not too distant from what is regarded as full employment at five percent unemployed.

Initially thought to be a negative if the number came in anywhere above official estimates of 185,000, index futures got ramped higher and stocks were off to the races, opening with a huge gap higher and maintaining price levels throughout the final session of the first week of December.

For the week, the Dow was down just 66.21 points; the S&P missed closing positive by a mere 0.72; and, the NASDAQ actually closed in the green for the week by 2.63 points.

Opinions varied widely about what the movement in stocks meant, based upon the potential for tapering of the bond buying program by the Fed. In general terms, the Fed now has Wall Street's tacit approval to begin winding down the $85 billion a month program as early as this month. either that, or today's trading, and all the supposed "fearful profit taking" of the first four days of the week were simply short-term momentum trades, rooted in absolutely nothing.

In any case, those who were short the market for the better part of the first four days of the week and then went long at the close on Thursday (cue insider bankster types) were big winners. Anybody who waited for the number to be released prior to the opening on Friday, ate dust.

And that, my friends, is how the game is played. Good news may very well be perceived as bad news, until the size players decide that good news is good news, after all. Pure thievery at a high level is probably the most apt description of how this week played out. A telltale sign was the absurdly low volume, especially coming in anticipation, and, on the heels of a critically "important" number.

Thank goodness, Christmas is less than three weeks away and the retailers haven't had much to say, but that card will be turned shortly, and it could be a wild one.

DOW 16,020.20, +198.69 (+1.26%)
NASDAQ 4,062.52, +29.36 (+0.73%)
S&P 1,805.09, +20.06 (+1.12%)
10-Yr Note 99.03, +0.74 (+0.76%)
NASDAQ Volume 1.49 Bil
NYSE Volume 2.74 Bil
Combined NYSE & NASDAQ Advance - Decline: 3965-1711
Combined NYSE & NASDAQ New highs - New lows: 310-112
WTI crude oil: 97.65, +0.27
Gold: 1,229.00, -2.90
Silver: 19.52, -0.047
Corn: 434.25, +0.75

Green Arrows for Stocks as Non-Farm Payrolls Surprise

As the work-week ended, everything was up, except, of course, gold and silver, because we just can't have those ancient relics of real money ruining the fiat-fest currently underway.

After the government reported October non-farm payrolls up a shocking 204,000 in October and revised August and September reports upward as well, futures slid, in sympathy with the idea that the Fed would - due to the "strong" jobs figure - reconsider its $85 billion-a-month bond-buying binge and begin to taper such efforts.

However, once the markets opened, good news was once again good news, and stocks staged a massive rally, erasing all of the prior day's losses on the major indices, sending the Dow Industrials to another record close.

Mortgage rates rocketed higher on the news, as did treasuries, the 10-year note ripping upward by 13 bips.

The logic may be a bit twisted - then again, what, concerning Wall Street and our current "crisis management" economy isn't? - but here's the take: Sure, the effects of the government shutdown the first two weeks of October were minimized, and the economy was creating jobs, but the unemployment rate actually rose - from 7.2 to 7.3% - due to a decline in the labor force participation rate, which has steadily trended downward for the past decade, making what looked, on the surface, as good news, actually bad news for the economy, which is good news for stocks because the Fed will just keep buying up treasuries and MBS, sloshing even more cheap money into the already liquidity-bloated system.

As usual, bankers and their kindred traders, hedgies and speculators were the main beneficiaries, after selling yesterday on a move that suggests the payroll data was privately leaked, were able to buy on the cheap Friday morning.

That's about the only analysis that makes any sense, though rational, logical arguments aren't always adequate predictors of market economics and trading patterns.

The guys with the inside scoop always do better than Mr. and Mrs. Average Joe and Jane. And they do it every day, whether the market is up or down, because they own the data.

Dow 15,761.78, +167.80 (1.08%)
Nasdaq 3,919.23, +61.90 (1.60%)
S&P 500 1,770.61, +23.46 (1.34%)
10-Yr Bond 2.75%, +0.13
NYSE Volume 3,770,251,500
Nasdaq Volume 1,934,757,875
Combined NYSE & NASDAQ Advance - Decline: 3706-1971
Combined NYSE & NASDAQ New highs - New lows: 231-99
WTI crude oil: 94.60, +0.40
Gold: 1,284.60, -23.90
Silver: 21.32, -0.34
Corn: 426.75, +6.25

NFP Jobs Data Disappoints; Fed-Taper in Question; Liesman's Big Lie

Following an early-session smack-down and a subsequent rally, stocks came right back to terra firma at the close, ending the session essentially flat.

Non-farm payroll data and Middle east posturing were the main catalysts for the early decline, the rally had little catalyst othe than empty reassurances from the president, or Bomber-in-Chief, who, after Russian President Vladimir Putin said that his nation would support and defend Syria in the face of any attacks, promised, once again, that strikes against Syria would be measured and brief.

Mr. Obama speaks as if he's planning a family outing of some sort rather than an act of war against a sovereign nation and his posturing and promising is nauseating, misguided and insincere. While the congress dithers over whether to grant him authority - as it must under the War Powers Act - to bomb Syria, a nation that poses no imminent threat to US interests, the president continues to tiptoe toward conflict, one which is likely to inflame parties in an already-tense region.

Market reactions to the president and congress are equally superfluous and without much forethought. To date, the US has done nothing but threaten Syria. If it ever comes to actual bombing, then the market will make up its mind as to whether such actions have consequences for stocks and bonds.

The other contributing factor to today's rocky trade was the August Non-Farm Payroll report which showed the US gaining 169,000 new jobs, well below consensus, and revising June and July data lower. The BLS also advised that the labor force participation rate had fallen again, to 63.2%, a number not seen since 1978, thirty-five years ago.

This item in the BLS calculus continues to plunge, and many, including CNBC's Chief Economist, Steve Liesman, cite the aging baby-boomers retiring as the main culprit, though other economists disagree, and heartily so. The number usually thrown about is that 10,000 baby boomers are retiring every day, though, if that were true, there would be something on the order of 300,000 jobs available every month and the labor condition would be booming, but those numbers are not showing up in the NFP reports.

A few of the prominent factors contributing to the lower participation rate are: 1) the coming of Obamacare, which is prompting more and more employers to hire only part-time workers; 2) a reluctance by companies large and small to replace workers lost through attrition or layoffs due to uncertainty in the economy or outright slowdown; 3) the ease by which individuals can qualify for public relief programs such as unemployment insurance, welfare or disability and the generosity of those programs, and; 4) a thriving underground economy of self-employed or off-the-books workers who simply aren't part of the statistical sample. It's been long known that government statistics are wildly faulty and unreliable, and the labor stats simply don't account for the literally millions of Americans who are making ends meet by working around, though or otherwise outside the system, a system which sucks the lifeblood, via taxation and regulation, out of both employers and workers.

The government's statistics may be relied upon by Wall Street investors, but the logic and realism of their assumptions is faulty at best and downright improper at worst. Americans have always found means to an end, and, when the government - all all levels - exerts undue, stifling restrictions upon the citizenry, the people quietly move on without them. Beating back the government by hook or by crook is an American tradition and it will remain that way, so long as people in power feel the necessity to invade every aspect of a citizen's life.

Dow 14,922.50, -14.98 (0.10%)
NASDAQ 3,660.01, +1.23 (0.03%)
S&P 500 1,655.17, +0.09 (0.01%)
NYSE Composite 9,439.66, +19.31 (0.20%)
NASDAQ Volume 1,668,595,250
NYSE Volume 3,384,952,750
Combined NYSE & NASDAQ Advance - Decline: 3718-2834
Combined NYSE & NASDAQ New highs - New lows: 206-54
WTI crude oil: 110.53, +2.16
Gold: 1,386.50, +13.50
Silver: 23.89, +0.636

Dovish Bernanke Speaks, Market Goes Full Retard, to Record Highs

Free market and Austrian economists beware!

There is a dangerous monster afoot, who by merely speaking a few words can alter global markets to whatever whim he so desires.

On Wednesday, shortly after the market closed, this monster, this unsightly beast, one Benjamin Shalom (we kid you not) Bernanke, Chairman of the United States Federal Reserve Bank (an international cartel), spoke in Cambridge, Massachusetts, and intoned, in part, that the 7.6% unemployment rate "overstated" the health of the labor market.

Translated into Fed-speak - which is all that matters to equity markets these days - what he meant was that there was no need for investors to panic. The Federal reserve has every intention of keeping monetary policy incredibly loose, so that even if the Fed dials back its $85 billion-a-month bond purchasing program a little, they do not believe that the US or global economy is strong enough to survive without stimulative measures.

The result was a strong gap-up at the open on Thursday and an all-day party for Wall Street bulls with the S%P 500 and the Dow Industrials closing at all-time highs. Bears were once again crushed and the rookie Dow Theorists who surmised that the dip from a few weeks ago was a sure-fire reversal into a bear market (we here at MD did not confirm any such theoretical reversal, though indications were close) were once again proven not only wrong but absolutely clueless when it comes to Dow Theory.

Markets have now been completely voided of any validity to fundamental valuation. All that remains is intonations from the beast of the Fed and his minions, sending markets any which way they choose. These are markets distorted completely out of focus from reality, in 1984-esque fashion, where bad news (Bernanke is correct, 7.6% unemployment is, in itself, a gross distortion of reality - stripping out part-time, temporary and distressed and discouraged workers, unemployment is closer to 20%) is good because the Fed will continue to supply unlimited liquidity.

In the end, be it five days, five weeks, five months, five years or longer, the stimulus will save nothing. Sovereign economies will end in shambles (some, like Greece, Portugal, Cyprus and Ireland already are), but for now, all anybody with as much as half a brain left after all the brain-washing by the media and immoral rounds of bailouts, bail-ins, rescues and refinances can do is play along, go along or go one's own way, the latter of which is highly refreshing and the only proper course of action.

Five years into the global currency melt-down, carnage is everywhere, the rich are even richer, the middle class on the endangered species list and the bottom tier nothing more than debt slaves for life.

This is not your father's America. It is not even the America you grew up into, if you are more than 30 years of age. This is an abomination, a monstrosity of complexity, a leviathan more frightening than even Thomas Hobbes could have dreamt.

Happy sailing, oh rudderless ones!

Dow 15,460.92, +169.26 (1.11%)
NASDAQ 3,578.30, +57.55 (1.63%)
S&P 500 1,675.02, +22.40 (1.36%)
NYSE Composite 9,493.21, +152.52 (1.63%)
NASDAQ Volume 1,680,093,125
NYSE Volume 3,796,463,500
Combined NYSE & NASDAQ Advance - Decline: 5246-1307
Combined NYSE & NASDAQ New highs - New lows: 772-21 (abominal!)
WTI crude oil: 104.91, -1.61
Gold: 1,279.90, +32.50
Silver: 19.96, +0.791

Non-Farm Payrolls for April Send Markets Screaming Higher

When the BLS posted the non-farm payroll data for April at 165,000 - well beyond even the most optimistic guesses (average 145,000) - it was just what the Wall Street syndicate needed to push the S&P over 1600 - a new all-time high - and send everyone home for the weekend a winner.

Never mind that the numbers are mostly a fabrication of modeling, birth-death adjustments, include part-time employees and that the average workweek fell by 0.1%, effectively eliminating most of the gain, or that the March figure was 50% off and raised to a new level, it worked wonders for the market, soullessly searching for any kind of news, good, bad or inconsequential.

Whether one believes these numbers are meaningful, truthful or indicative of anything, doesn't really matter. It's simply more fodder for the one-percenters with which to feed their insatiable greed.

Welcome to the new world dis-order. Enjoy the Kentucky Derby and the weekend. At least we believe the horse races to be honest gambling venues.

Dow 14,973.96, +142.38 (0.96%)
NASDAQ 3,378.63, +38.01 (1.14%)
S&P 500 1,614.42, +16.83 (1.05%)
NYSE Composite 9,340.37, +93.64 (1.01%)
NASDAQ Volume 1,671,711,875
NYSE Volume 3,914,186,250
Combined NYSE & NASDAQ Advance - Decline: 4734-1747
Combined NYSE & NASDAQ New highs - New lows: 758-33 (beyond extreme: ridiculous)
WTI crude oil: 95.61, +1.62
Gold: 1,464.20, -3.40
Silver: 24.01, +0.184

March Payrolls Huge Miss; Economy a Pack of Lies, Rolling Over

Let's just get one thing straight: there are lies, statistics and more lies in their interpretation, and even worse prevarication when it comes to market response.

When today's March Non-Farm Payroll data was rolled out at 8:30 am EDT - an hour prior to the opening bell - the response in the futures was automatic and immediate.

On expectations that the recovering US economy was to have produced 197,000 new jobs during the month, the actual number - 88,000 - was a miss of such enormous magnitude that it begs for perspective.

The miss was the worst since December 2009, when the economy was still taking baby steps toward said recovery and it was the lowest number of new jobs since June of last year. Incredibly, the unemployment rate fell to 7.6%, though this was due to 663,000 individuals dropping out of the labor force, sending the labor participation rate to 63.3%, the lowest level since 1979, with a record 90 million Americans (aged 16 and up) out of the labor force.

Surely with numbers like these, the United States is on a sustainable path... to complete disintegration, anarchy and poverty. There simply is no way to get around how poorly the economy is performing, a full five years and three months after it entered recession in December 2007, and four years after it supposedly exited that recession (June 2009).

Whether or not one believes we ever exited the Great Recession (or, as some call it, the Greater Depression) is merely a matter of semantics, the truth is that the economy has been and is going nowhere fast. Growth is a chimera, more statistical noise boosted by inflation; jobs have been hard to come by and those that are available are mostly of the entry-level, burger-flipping variety. Meanwhile, the Federal Reserve continues to pump $85 billion into the banking system each and every month, and still, nothing.

The talking heads on CNBC and Bloomberg tried to blame it on everything from the weather to the sequester to the tax increase imposed in January to, probably, the phase of the moon, but the reality is that we have structural issues that are generational, worldwide and widely the cause of the gross inequalities between rich and poor, with the crony capitalists - in cahoots with cheap, shiftless politicians - pushing more and more debt onto a system already overburdened with it.

Anyone who purports to tell you that the economy is improving, ask them how and why, and wait for the usual non-answers that housing is improving (it's not), that there are more jobs (marginally, there are, but not enough to keep up with population growth) or, the usual, "this is America, and we are great," complete failure response.

The stock market took a huge dive at the open, the Dow losing as many as 172 points, the S&P off by 21 and the NASDAQ down a whopping 58 points before the riggers came in and bid up the whole complex - especially ramping it in the final half hour - to close down with losses erased by roughly two-thirds.

We are in a sad, sorry state of affairs, when what used to be the most efficient, dynamic markets in the world are now nothing more than a crooked casino, run by oligarchs, bankers and unseen hands that are both out of control and above the law.

Significantly, gold and silver were both up sharply on the day, as the flight to safety finally made an appearance.

This economy is rolling over, like a sick patient who hasn't received the correct treatment. We're about to go into a tailspin that will make 2008 look like a casual stroll along the beach. The bankers, politicians and the media continues to spin the happy "recovery" meme, when all data shows the economy going in reverse. Data-wise, the US was a woeful 0-for-6 the past eight days, with the Chicago PMI missing the mark, along with the ISM index, the ISM services index, the ADP employment report, initial unemployment claims and finally, today's non-farm payrolls.

How many misses and bad data points will it take for the politicians to admit their policies are failures, the media to admit they are blind and the bankers admit they've been robbing common people blind since time immemorial?

Nobody should be holding their breath waiting, that's for sure.

Dow 14,565.25, -40.86 (0.28%)
NASDAQ 3,203.86, -21.12 (0.65%)
S&P 500 1,553.28, -6.70 (0.43%)
NYSE Composite 9,000.24, -27.59 (0.31%)
NASDAQ Volume 1,608,289,875
NYSE Volume 3,788,675,500
Combined NYSE & NASDAQ Advance - Decline: 2866-3582
Combined NYSE & NASDAQ New highs - New lows: 118-81
WTI crude oil: 92.70, -0.56
Gold: 1,575.90, +23.50
Silver: 27.22, +0.453

Markets Up Following Three-Day Weekend; Congress Still on Vacation

Nothing like a three-day weekend to release pent-up demand.

Stocks took off like rockets into the sky at the open, leveled off and stayed about the same throughout the session. The S&P closed at a five-year high; the NASDAQ at a 12-year peak. Impressive.

Nobody is taking the issue of sequestration - which will cause some cuts in federal spending, but nothing too severe - seriously. Congress, like school-kids, teachers and administrators, has taken the entire week off.

One care hardly blame the hard-working members of congress for taking a nine-day vacation prior to sequestration to take effect on March 1. After all, they've worked tirelessly at getting re-elected and avoiding making hard choices, like putting together a budget or crafting a jobs bill to solve the unemployment situation.

Congress, like most of Washington, is a near-complete waste of effort. If there's any problem with the US economy, congress will surely attempt to make it worse. In fact, many in the business community will state quite plainly that congress and various levels of government - with its myriad rules, regulations and taxes - is the reason the economy only benefits Wall Street corporations and their shareholders. The rest of us will just have to struggle along, hopefully avoiding the taxes and rules government is so good at marking up and so bad at enforcing.

As for stocks, they're rapidly approaching record highs, which, considering the GDP was -0.1 in the 4th quarter last year and unemployment is "officially" 7.9%, is quite a remarkable feat. Truly, the power of low interest rates and unlimited QE by central banks worldwide, is very robust.

Making money in this environment has been a complete no-brainer. A monkey throwing darts at a stock table could have ramped up 10% gains easily. If the S&P 500 ends the week in positive territory, it will be the eighth straight week of gains, never before accomplished in the history of the index.

There is absolutely no fear in the marketplace, which, in and of itself, is reason to be afraid.

Precious metals - particularly gold and silver - have been on sale for some time and got even cheaper today.

Dow 14,035.67, +53.91 (0.39%)
NASDAQ 3,213.59, +21.56 (0.68%)
S&P 500 1,530.94, +11.15 (0.73%)
NYSE Composite 9,004.40, +71.18 (0.80%)
NASDAQ Volume 1,790,308,875
NYSE Volume 4,003,571,000
Combined NYSE & NASDAQ Advance - Decline: 4400-2121
Combined NYSE & NASDAQ New highs - New lows: 640-39
WTI crude oil: 96.66, +0.80
Gold: 1,604.20, -5.30
Silver: 29.42, -0.427

In the video below, Senator Elizabeth Warren asks officials of various "supervisory" agencies the last time they took a big Wall Street bank to trial. The answers are, in a word, predictable.

Bernanke Drops Unemployment Bomb; Markets Get Cranky

After John Boehner chastised President Obama again from the floor of the House of Representatives in the morning, the markets got what they were so eagerly anticipating and pricing in for the last two weeks: Ben Bernanke's unveiling of QE4, the promise by the Federal Reserve to purchase an additional $45 billion in long-dated treasuries each month, commencing with the wind-down of a similar program known as "Operation Twist."

This new monetizing of government debt is in addition to the fed's commitment to continued purchasing agency mortgage-backed securities at a pace of $40 billion per month for the foreseeable future, which translates roughly into "forever, or until the fiat monetary system collapses."

What the market didn't expect was the Fed's statement tying interest rates to the unemployment rate. In the FOMC statement issued shortly after noon and prior to Bernanke's 2:00 pm ET press conference, the Fed announced, "the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored."

With inflation fairly tame and trending toward dis-inflation on the retail level, the Fed has finally embarked upon a robotic-like exit strategy, though with existential caveats and various loopholes and escape clauses.

After digesting the news, stocks were initially bought up, but, during the press conference, began to slip, finally ending the day with no gains.

While on the one hand the Fed is keeping the monetary floodgates wide open, they are anticipating economic recovery, though even the most ardent bulls don't see the official unemployment rate (U3) falling below 6.5% for at least another year. It currently stands at 7.7%, though that figure is largely due to the decline in the labor participation rate.

With baby boomers retiring at an estimated rate of 10,000 per day - many taking the offer of smaller benefits at age 62 - the labor market is in a state of generational flux unlike any seen in modern times, so there's literally no telling when unemployment might fall below the Fed's threshold level, if at all.

One thing's for certain: if the economy suddenly finds its legs and springs into a real recovery with job creation and rising GDP, Wall Street will be offended because the free money spigots will be turned off or borrowing costs will be significantly increased.

It's a double-edged sword of competitiveness vs. financial repression being played by Wall Street bankers against the population at large. Higher interest rates would tamp down rampant speculation and reverse the galloping higher market trends. In fact, the mere hint from the Fed that interest rates might rise already has seen some effect.

Withe the final Fed meeting of the year out of the way, all eyes will be on the Speaker and the President as they race against time to find a solution to their wide differences to solving the fiscal mess they've created (with ample assistance from Wall Street and the 2008 crash).

Time is running short on the politicians and Wall Street may not be so easily amused over the next few weeks.

Dow 13,245.45, -2.99 (0.02%)
NASDAQ 3,013.81, -8.49 (0.28%)
S&P 500 1,428.48, +0.64 (0.04%)
NYSE Composite 8,380.88, +14.40 (0.17%)
NASDAQ Volume 1,755,775,625
NYSE Volume 3,678,721,000
Combined NYSE & NASDAQ Advance - Decline: 2467-3083
Combined NYSE & NASDAQ New highs - New lows: 204-45
WTI crude oil: 86.77, +0.98
Gold: 1,717.90, +8.30
Silver: 33.78, +0.765

Payroll Number Slams Stocks to the Deck

Yesterday in this space, it was suggested that the immediate future for stocks was all tied to today's non-farm payroll number from the BLS, and, as the ADP figure from Wednesday foretold, the results were lower than expectations and on the whole, put a serious dent in the "road to recovery" theory.

The Bureau of Labor Statistics said 115,000 net new jobs were created in April, and the unemployment rate dipped to 8.1%, though the reason for the decline in unemployment were that more people ran to the end of their unemployment benefits and others left the workforce entirely. The US workforce participation rate shrank to 63.6% of the adult population, the lowest since 1981.

While the 115,000 new jobs are barely enough to keep pace with a growing workforce in normal times, in the abnormality of today, people are not entering the labor force, but leaving it, putting a very large question mark at the end of any discussion regarding jobs in the United State. It is obvious from this report and others before it that the country's businesses are simply not creating enough jobs to get back to anything even close to full employment. The reasons behind the non-hiring conditions are manifold, but are centered on lack of demand in a sluggish economy wracked by over-regulation and conflicting visions of the near future by legislators who have sat upon their hands and watched the economy deteriorate.

Stocks took a beating right at the start and continued their downward trajectory throughout the morning, finally bottoming out around the lunch hour. The remainder of the session was spent wringing hands, with no noticeable movement in either direction, as the major averages settled into a support range.

A variety of analysts took differing views on the NFP number, most making he point that this April number was a kind of "payback" for the strong numbers in January and February. However, those gains were - in a large part - due to accounting tinkering at the BLS with seasonal adjustments heading the suspect list of fudge-makers.

Governments shed 15,000 jobs, so the private sector growth was 130,000, which, after all, is still a gain, but the underlying trends of many marginally-employed people and those dropping out of the workforce remain problematic over the long haul. The 115,000 was well below consensus estimates for 162,000. whatever ways one wishes to spin it or slice it, a miss is still a miss and investors took note along with short term profits.

The results speak for themselves and put the country's economic future more or less on hold until the May numbers are released. That's a long time for uncertainty to fester and other events to take the situation to even worse levels. While a good portion of the labor condition is being led by political considerations, most of it is the pure stuff of economics textbooks. Slack demand and stagnancy, even in an era of absurdly low interest rates, makes hiring decisions problematic and possibly shelved for a future date. The decay of confidence at all levels of the business community continues to feed upon itself in a very non-virtuous loop, the most egregious effects being felt in the small and start-up areas, where most new jobs are created.

Analysts and pundits can make up all the excuses and white lies they like, but the numbers speak for themselves and they are not pretty.

Notably, new lows exceeded new highs for the first time in over a month, losing stocks were widespread, outnumbering winners by a 7:2 ratio. Oil took a severe downturn for the second straight day, closing below $99 per barrel for the first time since February. The $4.05 decline was the largest of 2012. Gas at the retail pump remains stubbornly high, despite recent pull-backs.

Gold and silver rebounded from recent declines, more in sympathy with unstable global economic conditions than any other factor.

Dow 13,038.27, -168.32 (1.27%)
NASDAQ 2,956.34, -67.96 (2.25%)
S&P 500 1,369.10, -22.47 (1.61%)
NYSE Composite 7,933.29, -116.59 (1.45%)
NASDAQ Volume 1,937,374,375
NYSE Volume 3,924,361,250
Combined NYSE & NASDAQ Advance - Decline: 1268-4345
Combined NYSE & NASDAQ New highs - New lows: 88-140
WTI crude oil: 98.49, -4.05
Gold: 1,645.20, 10.40
Silver: 30.43, +0.42

Amazing Stock Market Rally Rolls Along

One of the oldest adages of stock market investing is the time-honored, "the markets can remain irrational longer than you can remain solvent," or something to that effect.

This is particularly poignant in the midst of the current Wall Street "melt-up" which has been ongoing since the middle of December and shows little sign of letting up.

While corporate earnings continue to flow, the latest being from two big banks, Morgan Stanley (MS) and Bank of America (BAC), both of which met or exceeded expectations, though the accounting tricks and tactics employed by the mega-banks leave much to the imagination.

As far as Bank of America is concerned, their beat of expectations of 13 cents per share with a reported 15 cents included a bunch of one-time items and useful reserve and loan loss calculations, embedded deep within their monstrous 110-page quarterly report. Despite the discrepancies in the quarterly, Bank of America bounced higher again today, closing at 6.95, a 15 cent gain, after popping above $7 per share for the first time since Warren Buffett invested $5 billion in the bank in early 2011.

Morgan Stanley actually lost money for the quarter, but lost quite a bit less than expected. The firm’s net loss was $250 million, or 15 cents a share, compared with profit of $836 million, or 41 cents, a year earlier. The consensus expectation was for a loss of 57 cents per share. Traders took the data in stride, boosting the stock to its highest level since October. In this case, even P.T. Barnum would be proud, noting that "there's a sucker born every minute." All the better for momentum chasers in this beat-up financial.

There was a dose of economic data that surprised some and annoyed others, notably bearish investors. Initial unemployment claims came in at a sparkling 352,000 - the lowest number in months - after last week's upwardly revised 402,000. The unemployment figures continue to be a topic of some debate, in that the "seasonally-adjusted" model used by the BLS seems to have forgotten that December was holiday season, chock full of part time and temporary hires. Whatever the case, traders seemed less-than-satisfied with the numbers, as the markets began slowly but ground slowly higher through the session.

December CPI came in flat, after yesterday's -0.1% drop in the PPI, sparking fears of "disinflation" (a Federal reserve governor term) or deflation, the bogey man that haunts Fed chairman Ben Benanke.

Housing starts and building permits were flat to lower, though new home builders have been leading this rally, up more than 10% as a group since the first of the year.

How much longer can the rally last? Tomorrow being options expiration, one would think a major sell-off is in the cards for either Friday afternoon or Monday, though, as stated at the top of this piece, rationality is generally not a hallmark of recent rallies.

If you've not already taken part in this wild market ride, it may be a little late. Stocks are getting extremely overbought, as the advance-decline and new highs vs. new lows figures have been telegraphing lately.

Adding to the upside has been the unusually quiet tones coming out of Europe, as opposed to the rather hysterical daily dispatches that typified the latter half of 2011. Nothing's really changed over there, except perception, perhaps. Europe is mostly headed for a recession, which will hit the middle classes, though Greece, in particular, in already in the throes of a fiscal straightjacket which some might say is emulating a full-blown depression. To the Greeks, most of europe is saying "pay up," to which the Greeks respond with "shut up" or some other suitable and more demonstrable phraseology.

The long and short of it, if one is of the camp that believes a strong stock market is a proxy for a strong general economy, 2012 is shaping up to be a banner year or at least a good effort at kicking the can of economic woes down the road until after the elections in November.

Throwing a bit of cold water on the rally parade, as expected, Eastman Kodak (EK) filed for bankruptcy protection today, and Republican presidential nominee hopeful Mitt Romney has been found to have a number of accounts and holdings in off-shore banks, notably in the Cayman Islands, setting the stage - if he's the nominee - for a battle of ideologies between him as the ultimate one percenter and President Obama as the champion of the 99%.

While that may make for great TV, it's hardly honest, as President O'banker is about as 1% elitist as one can get without actually admitting to it.

Dow 12,625.19, +46.24 (0.37%)
NASDAQ 2,788.33, +18.62 (0.67%)
S&P 500 1,314.50, +6.46 (0.49%)
NYSE Composite 7,819.36, +52.41 (0.67%)
NASDAQ Volume 1,974,862,250
NYSE Volume 4,442,754,500
Combined NYSE & NASDAQ Advance - Decline: 3454-2119
Combined NYSE & NASDAQ New highs - New lows: 261-26 (yes, 10-1 is a bit extreme)
WTI crude oil: 100.39, -0.20
Gold: 1,654.50, -5.40
Silver: 30.51, -0.03

Stocks Drop Initially on Poor Employment Data, Recover Late; G20 Soothes Nerves

Friday was a fitting end of the week for stocks, a the BLS released some very sketchy employment data that sent investors initially to the sell windows, shedding stocks that have run up nicely over the past two sessions.

The week included two rather large down days followed by a pair of higher sessions and Friday's slight sell-off. The Labor Department reported that the US gained 80,000 jobs in its monthly non-farm payroll release, 104,000 of which came from the private sector, offset by 24,000 government job losses.

There were a number of revisions - all upward - to September and August data. September non-farm private payrolls, originally pegged at 137,000 job gains, was revised to 191,000. August, originally reported at a flat zero, was revised for a second time, adding in another 57,000 job gain, following last month's 47,000 upward revision, making August a much better month for employment - if one is inclined to believe government data, of which everyone is not - at a net jobs gain of 107,000.

Disappointing results at the outset sent stocks to their lows of the day in early trading, but as traders digested the data, found some reason for optimism, mostly in the revisions, and, though October's gains were not enough to keep pace with natural labor force growth (roughly 125,000 a month is needed), another positive month, on top of other positive economic data, was enough to erase those losses as the session wore on.

Catching up on other data releases, third quarter productivity increased by an estimated 3.1% after two consecutive quarterly declines.

Factory orders increased by 0.3% in October, on expectations of -0.5%, and the ISM services index inched lower, to 52.9, from 53.0 in September.

The official unemployment rate was pegged at 9.0, down from 9.1 in September, though most of the decline was due to job seekers falling off unemployment roles rather than finding new employment.

Another factor in the calculation of the overall strength or weakness of the US labor market comes in the form of the BLS' notorious birth/death adjustment, which measures the number of businesses closing and shedding jobs (death) and new business start-ups adding jobs (birth). According to this arcane, rather sloppy assessment, the BLS concludes that 103,000 more jobs were created in October by new businesses than were destroyed by business closures. In other words, almost all of the private sector job gains in October were statistically generated, which is why there is some doubt to the veracity and reliability of government statistics.

In Cannes, France, leaders of the G20 nations concluded a meeting without offering any new IMF funds to help Europe deal with its lengthy debt crisis. The fact that the member nations effectively told Europe to "fix it yourself" was less of a surprise than the IMF putting Italy under monitoring of its pension, privatization and labor reforms, long overdue.

That the leading economic powers of the world would defer to next year a decision on whether Europe needed additional help could be viewed as a positive development, especially after the referendum in Greece on that country's bailout money was effectively shut down on Thursday.

For the week, the Dow lost 248 points, the NASDAQ shed 51 points and the S&P dropped 32 points.

Dow 11,983.24, -61.23 (0.51%)
NASDAQ 2,686.15, -11.82 (0.44%)
S&P 500 1,253.23, -7.92 (0.63%)
NYSE Composite 7,552.23, -52.91 (0.70%)
NASDAQ Volume 1,959,105,000.00
NYSE Volume 3,947,110,000
Combined NYSE & NASDAQ Advance - Decline: 2093-2430
Combined NYSE & NASDAQ New highs - New lows: 73-59
WTI crude oil: 94.43, +0.17
Gold: 1,756.10, -9.00
Silver: 34.08, -0.41

Snow Job in May

It is difficult to express just how warped US markets have become, though, from the movements of the past two trading days, a case can be made that the markets are being guided by forces that are distinctively not based on free market ideology nor statistics that can be trusted within any degree of accuracy.

Taking a look first on the massive downdraft in commodities - mostly silver and crude oil - from Thursday's trading, one should look no further than the CME (Chicago Mercantile Exchange), the overarching body that controls trade in futures, options and various other derivatives.

The CME raised margin requirements - the cost to buy a futures contract - on silver four times in the past two weeks. That resulted in many speculators - generally honest traders working with leverage via margin - to reduce their exposure, thereby taking the price of silver from close to $50/ounce on Friday, April 29, to under $35/ounce by Thursday, May 5.

This really doesn't require much thought. If it costs more to buy something - in this case a silver futures contract - you either buy less of it or don't buy at all, waiting until the price is more reasonable. In the case of silver futures contract, a highly inelastic entity (You can't buy a fraction on one; you must buy a full contract.), one is either in or out. When margin requirements (cost) rise rapidly, many legitimate buyers head for the hills. This is exactly what happened all week, culminating in the final thrust downward on Thursday, May 5, as there were also fewer short contract holders which would have provided some support, having to cover as prices fell. Alas, the shorts were also out of the market due to exorbitant margin costs.

This makes a great deal of sense from a banker's perspective. Money flowing into either physical silver or gold is money out of circulation, and, more dangerously, into a competing currency. Precious metals compete with all fiat (paper) currencies, insofar as they are considered stores of wealth and mediums of exchange. Thus, when one buys Silver Eagles, silver bars, etc., bankers get worried because the buyer exchanged paper dollars (or Euros or Yen or Reals) for physical metal. And if the price of physical metal and the amount in circulation gets too high, the need for paper dollars is diminished.

Silver, being the "coin of gentlemen," as opposed to gold, "the coin of the realm (or, kings), is a very dangerous commodity to the banker line of thought. If more and more ordinary people - the "little guys" upon whom the banker depends - conduct transactions in silver - the utility of paper money declines, velocity decreases and all of a sudden there's a liquidity crisis.

This is exactly what the global (mostly in the USA) banking cartel feared as silver approached all-time highs, thus the need for margin hikes to kill the competing currency before it became a real threat.

The same is true for gold, to a lesser degree, as central banks hold gold as a final backstop to their paper currencies, though it is leased out, levered 100-1, and therefore, being a useful conduit for the bankers, not as volatile as silver.

As for oil, what caused Thursday's sell-off is a little less clear, but again, the CME, which owns the NYMEX, where West Texas Intermediate oil futures (the most popular and widely held) are traded, extended trading range limits from $10 to $20, exacerbating an already decisive decline.

In simple terms, the CME allowed oil to fall though the floor simply by changing the rules in the middle of the day. There's less concern in the price of oil declining, because lower oil prices are generally good for everybody outside of oil companies and Middle East sovereigns, so less attention was paid to the CMEs quick decision, but it still underscores the levels at which rules will be either broken or amended to accommodate the needs of the powers behind the money (read: the too big to fail banks, the Fed and Treasury Department).

Now to Friday's fiasco in the Bureau of labor Standards (BLS) non-farm payroll data for April (the establishment survey). While the consensus opinion had been trending toward lowered expectations, the BLS surprised everybody with the announcement of 244,000 new jobs created during the month, 268,000 in the private sector, offset by a loss of 24,000 public sector jobs - mostly municipal and state employees being furloughed.

What's intriguing about the non-farm payroll data is how the numbers are created, and the use of the word "created" is no accident, because the BLS employs such such extreme and convoluted data manipulation that pure statistics become rather murky. It's easy to say that our monthly "jobs data" is more a political process than an actual statistical survey with a margin of error in the low single digits. It's guided by a smallish sample and then amplified by what's known as the "birth/death model," a number created to reflect the number of businesses opening (birth) and closing down (death).

Does the BLS actually sample bankruptcy and new corporation filings in selected communities and states? No. Does the BLS ever adjust the number for seasonality. No. For accuracy, yes, but not in the month-to-month survey numbers.

So, from where did the 244,000 net new jobs in April come? 175,000 came from the birth/death model. And while some are contending that roughly 62,000 came from the widely-published McDonald's hiring, the Wall Street Journal begs to differ, stating that McDonald's hire date was April 19, a week after the BLS survey period.

Taking just the raw data, subtracting out the birth/death figures, the US economy consisting of existing businesses created 69,000 net new jobs - not so hot. If we can believe that a couple hundred thousand newly-minted entrepreneurs joined the business fray and 30 to 40,000 businesses went belly up in the same time frame, we could believe this figure. However, like the missing photo of a dead Osama bin Laden, there's no proof of these "births" and "deaths," only trust in the BLS, which, by the way, stretched credulity again by proclaiming the official unemployment rate to have risen, up to nine per cent (9%).

That rise correlated to the other side of the BLS coin, the household survey, which showed the number of employed persons to have fallen by 190,000 from the March reporting period to April.

Is it a gain of 244,000 jobs or a loss of 190,000? Who knows? The point is that many decisions are made based upon the BLS data, which, as shown, is more guesswork and massaging of data than trustworthy data, but one wonders if these decisions are based on reality, a perception of reality, or if the reality is being superimposed upon the American public to suit the current narrative of "recovery."

Whatever the case, it seems a shoddy way to run a country's economy, with dodgy data and questionable maneuvers by those running the exchanges.

It doesn't snow much in the USA in May, but that surely doesn't preclude a massive snow job by Wall Street and the federal government and their extensions.

Jobless Claims Jump, 1st Q GDP Anemic, Stocks Surge?

We've been officially in a financial twilight zone since about the middle of 2007. It was unofficial until the wheels of George W. Bush's second term as president began to fall off and the evils of crony capitalism began to appear. We all know what happened after that, but today's economic data and stock market reaction defies explanation of any rational kind except that the markets are completely out of whack, fed by the Fed's ZIRP and POMO.

Initial jobless claims printed this morning at 429,000, when the estimate was for 390,000. A miss of 39,000, especially when the economy is supposed to be improving, is pretty wide of the target and normally would cause a sell-off in stocks, since it signals trouble ahead. The last three reports on jobless claims all have come in over the "official" estimates, adding to the worry.

At the same time, the government released the first estimate of first quarter GDP, which has been revised downward over the past three months from 4 1/2% growth, to 3 1/2, to 3, and finally to 2%.

It didn't even make that. Estimated GDP for the first quarter was 1.8%, this on the heels of a 4th quarter 2010 final estimate of 3.1%. Blended, that puts annualized GDP at about 2.5%, which, in any sensible world, is under-achieving in a big way.

Normally, coming out of a recession, the economy grows at a 5% or higher clip for a few quarters and the Fed has to then apply the brakes by increasing the federal funds rate. However, in our current quagmire economy, we're not even hitting 3% annualized and interest rates are as low as they can be, effectively ZERO. This is truly distressing news, and anyone who thinks we're not headed right back into another recession (some believe the first one never actually ended), might be concerned or even downright perturbed.

Let's set the record straight. When a person's unemployment benefits run out - be they after 26 weeks, 60 weeks or the current standard for millions, 99 weeks, they no longer count in the BLS data, so the non-farms payroll report for April, which will be released a week from tomorrow, really does not count all the unemployed when they say the unemployment rate is 8.8% or whatever number they feel is appropriate.

Currently, REAL unemployment, measuring all the current UI recipients, plus those who have exhausted their benefits and are still without a job, is around 16-17%, maybe higher, and it's been at that level for the better part of three years.

Next, GDP growth has completely stalled out (the cynic in me wants to believe this is so we'll get a Republican president in 2012) and may turn negative, and that's will somewhere between $12 and $20 TRILLION in various forms of stimulus. Keep in mind, whenever a politician projects government budgets over any time frame longer than three years, that GDP growth is likely to be 3% or lower for the foreseeable future.

In other words, we are royally screwed and I'm not talking about tomorrow's wedding night of Prince William the Tragic.

The masters of the universe on Wall Street, however, apparently don't see any issues here, as they ramped up stocks after a slightly-declining opening 20 minutes.

Twilight Zone, folks. Rod Serling and the creepy music and all that.

Dow 12,763.31, +72.35 (0.57%)
NASDAQ 2,872.53, +2.65 (0.09%)
S&P 500 1,360.48, +4.82 (0.36%)
NYSE Composite 8,639.73, +30.45 (0.35%)

Gainers outnumbered losers, 3915-2644. 171 new highs and 28 new lows was the order of the day on the NASDAQ. Over on the NYSE, there were 355 new highs and 13 new lows. Volume, oh, why bother?

NASDAQ Volume 1,993,865,125.00
NYSE Volume 4,519,197,000

Crude oil futures were up on 10 cents today, closing at $112.86 on the NYMEX. As of %;40 PM EDT, spot gold was bid up $8.50, at $1535.80, another new record. Silver was up 48 cents, to $48.48, though it traded more than a dollar higher earlier in the day.

The $50 mark for silver may take some time to finally break through, but when it does, it will be an all-time high, and will likely tack on about another $6-8 in short order. Breaking through an all-time high, especially when the forces of central bankers and JP Morgan are shorting it with everything at their disposal will be a seminal event and likely signal the resumption of the gathering second great depression, of which we are already two-and-a-half years into.

When silver breaks loose, all manner of nastiness will be released onto the global economy. Markets are already strained to their limits, but when central banks and large money center banks see their currency finally debased and routed by "poor man's gold" (silver), market disruptions will become continuous events and price discovery mechanisms priced in Dollars, Euros or Yen will be completely lost, forever shattered.

The $50 mark on silver is coming, and soon, so best be prepared for all manner of craziness.

BTW: the Dollar Index fell to 73.118, and was as low as 72.87 today. The dollar index is quickly reaching for the lows of Spring 2008, around 71.58, and it's likely that level will be breached about the same time silver rockets ahead and gas prices in the US exceed $4.00 per gallon nationally. We're almost there!

Dow Breaks 12,000; Highest in 2 1/2 Years

It's hard to find the words to describe what happened today in the investing universe, because, seriously, if the economy is doing so well, why are 15 million Americans still out of work?

And why are home prices continuing to drop? Why are mortgage applications at their lowest levels in 25 years?

We have no manufacturing base to speak of in America, our federal government is running record-setting deficits and most states face bankruptcy from over-promising retirees.

43.5 million Americans are on food stamps.

There's a real disconnect between Wall Street and Main Street. As for Washington, well, they're doing what the American people have come to expect from them, nothing, except fighting with each other.

Since I don't have a rationale for why the market is so ebullient other than the continuous injection of $8-9 billion daily by the Federal Reserve, all I can say is enjoy it while it lasts.

Dow 12,040.16, +148.23 (1.25%)
NASDAQ 2,751.19, +51.11 (1.89%)
S&P 500 1,307.59, +21.47 (1.67%)
NYSE Composite 8,290.09, +150.93 (1.85%)

Advancing issues decimated decliners, 5218-1383. There were 185 new highs and 25 new lows on the NASDAQ. The NYSE recorded 329 new highs and a mere 8 new lows. Volume was actually fairly robust for a rare change.

NASDAQ Volume 2,281,301,250
NYSE Volume 5,423,585,500

Commodities reversed course completely from yesterday. Oil futures were off by $1.42, to $90.77, while gold added $5.80, to $1,340.30. Silver also gained, up 35 cents, to $28.51. One of the odder headlines ever seen was posted today on Yahoo Finance, saying, "Metals up due to improved economy," which is precisely why I didn't read the story. Normally, precious metals gain during times of unease or uncertainty. The unfolding drama in Egypt would be more a reason for them to gain that a wholly great economy.

It's a conundrum. Grow cauliflower.

Prepare For More Calamity

The President, Congress and the Federal Reserve finally got together on a unified theory of economics and apparently it is to borrow as much money from anywhere as possible, manipulate markets as much as possible, lie as fervently as possible and hope for the best.

With the "tax deal" done after-hours on Monday, the President bent to the will of the Republicans and sent the Bush tax cuts into permanent status (he says two years, but they'll never raise taxes again), extended unemployment insurance for another 13 months, meaning if you can manage to get laid off now, you're in for a three-year vacation, and to top it off, cut the social security withholding from 6.2% to 4.2%, a whopping 32% tax haircut.

All of this was done after the Tea Party Republicans were ushered into office on a "fiscal responsibility" platform just a month ago. It will be interesting to watch what happens when these newly-minted congress-critters actually are sworn in next month, because, if they're serious, they shouldn't stand for what amounts to a loss of about a trillion dollars in revenue to the feds.

Wall Street responded as it usually does to free money or lower tax regimes, it rallied right out of the gate. But late in he day, something odd happened. The markets suddenly rolled over and headed south, just like commodities - especially oil, gold and silver - did earlier in the session.

By the end of the day, the central planners in Washington and on Wall Street had a real mess on their hands: nobody trading stocks, bonds selling off, forcing yields higher (the Fed and the Govt. will go bust if this happens) and commodities being manipulated lower.

The insider crooks and their political lackeys have pushed the envelope over the proverbial cliff and now face what appears to be a disaster beyond even their control. Rising interest rates will destroy the Fed's balance sheet (QE was designed to do the opposite), absolutely plunge housing into another price collapse worse than what we've already witnessed and bankrupt just about every bank in the nation, to say nothing of the collateral damage done to the rest of the world.

As I've mentioned before on this blog, a deflationary depression may be one of those elements of financial nature that one cannot stop. It's going to happen no matter what. Lives will be lost, careers shattered, banks closed and general malaise will rule for an extended period. The morons running the Ponzi scheme in the financial markets and with tax policy will have to leave the country or face angry mobs who have nothing else to lose.

Pretty picture? Thank yourself for not taking action sooner, or not understanding what's happening or for trusting our government (yes, the one that hasn't done anything of any good for the average working-class person in the last ten years). These people and the coerced media represent the worst parasites in the world. They've ruined the global economy for their own enrichment. It's now every man and woman for his/herself.

I've hinted at this kind of statement in the past, but never actually put it in words: it's now time for Americans to take a stand. Stop paying taxes. Stop working. Stop buying. Just stop the government and the media in their tracks, force the politicians from office and arrest the heads of the largest financial institutions. They are all criminals and traitors and do not represent anything American, by any stretch of the imagination.

Dow 11,359.16, -3.03 (0.03%)
NASDAQ 2,598.49, +3.57 (0.14%)
S&P 500 1,223.75, +0.63 (0.05%)
NYSE Composite 7,739.64, -1.05 (0.01%)

Advancers narrowly edged decliners, 3397-3094. There were, due to the ramp up through most of the session, 783 new highs, and just 49 new lows. Volume, due to the bi-directionality (like that word?) of the market was strong.

NASDAQ Volume 1,925,702,500
NYSE Volume 6,967,751,000

The front end oil contract on the NYMEX was over $90/barrel early on, but reversed course and closed with a 69 cent loss, at $88.69. Gold and silver were both hammered mercilessly after the close in New York, by the Fed and their cohorts, JP Morgan, with gold losing $22.60, to $1401.10, while silver was absolutely blasted, losing $1.43, to $28.65 (buy, buy. buy!).

Here's one guy who gets it. The powers that be, both in Washington and Wall Street, cannot contain this much longer. Their schemes are too complex and will eventually implode back upon them either in a massive stock market crash (very high probability), a bond collapse (high probability), hyper-inflation (some probability) or the death-knell of the deflationary depression (high probability, but great for those on the mid-to-lower rungs of the ladder, as it implies debt forgiveness, lower carrying costs and a pretty basic reset).

The past two years have not been a picnic, but the coming three-to-four years seem to be flashing warning signals already. The worst - since there hasn't been any real pain yet - is still to come, and, by the looks of what occurred today, is about to get really serious.

Hold precious metals, keep as much cash on hand and out of banks as possible, hoard food and fuel and pray you and your kids don't get hit by stray bullets. When the shooting starts, it's not likely to end quickly. The guess is who fires the first shot, who gets it in the head and, not if, but now, when.

When Will the Music Stop, the Fraud End?

Following yesterday's post about Goldman Sachs, Greece and the intra-day triple top on the Dow, my midday work routine was broken by a screaming message from the ether: "Dow down 100 points in early trading!"

Being ever skeptical of my prognosticating prowess, I triple-clicked over to Yahoo! Finance (seriously, who puts an exclamation point after their corporate name? Wal-Mart!, Cisco!, Paris Hilton!) to confirm that stocks had already begun their ascent from the morning's depths. Surely, the short-covering and naked buying by all the Goldman traders was underway. By the time the market had closed, my best suspicions were confirmed, with the Dow finishing on the green side of the ledger, along with the S&P and a nifty gain on the NAZ.

Today's rally, as part of the endless rally that has become Wall Street in the post-crisis, pre-Goldman-settlement era, is about as plausible as 2007 California real estate prices. It's all part of the game, which, to my mind, only Robert Prechter (Elliott Wave) has figured out. Well, and me. Goldman moves the market, no doubt about it. They've been doing it since 1988 with ample assistance from the Plunge Protection Team and tacit approval from the upper crusters in DC.

Stocks can only go down when the powers that be wish them to do so. So it is written in the Book of Sachs. Fundamentals don't matter, p/e doesn't matter, all that matters is where the herd will head for feeding, following the hidden hand signals from the leader of the pack, clandestinely dictating market direction via sham trades, public bogus recommendations (remember Goldman's call for $200/barrel oil?) and equally dubious upgrades and downgrades.

Dow 11,134.29, +9.37 (0.08%)
NASDAQ 2,519.07, +14.46 (0.58%)
S&P 500 1,208.67, +2.74 (0.23%)
NYSE Composite 7,642.83, -1.84 (0.02%)

Advancing issues beat back decliners, 4085-2402, while new highs registered 867, to just 59 new lows. My occasional warning to ignore the new highs-lows divergence until at least June, as last year's fall and rise will produce a considerable amount of skew in those figures. Volume was again trending toward the upper end, which is reasonable considering the amount of trading that had to be undertaken to move the whole market higher.

NYSE Volume 6,682,984,000.00
NASDAQ Volume 2,727,952,500.00

What probably scared investors even more than bad news on the Greece front, and rightfully so, was the weekly initial unemployment claims figures issued at 8:30 am. Those came in at 456,000, below last week's unsightly 480,000, but still too high most most realists to stomach. Those figures must come down to around 300,000 weekly before anyone will speak "recovery" again.

But the chances of the unemployment figures falling soon seem slim, especially since congress passed an $18 billion extension last week that proffers "99 weekly unemployment checks averaging $335 to people whose 26 weeks of state-paid benefits have run out."

Yikes! That's two years worth of unemployment checks, or an average of just under $33,500 over the 99-week span, which is more than some people make actually working for a living. The government seems to be suggesting a longer-term unemployment lag than even most economists. Remember, employment is a lagging indicator, currently 9 months behind the official "end" of the recession.

Of course, Wall Street would rather most Americans believe the economy is continuing to improve, even while you're collecting unemployment checks and waiting for the bank to foreclose on your home. According to the elitists in our nation's capitol, it's all good.

Next they'll be selling us bridges... to nowhere, no doubt.

The underground economy is thriving on welfare, food stamps, unemployment and SS checks on a certain road to ruin.