Fun With the Fed and Negative Interest Rates Spooking (and breaking) Markets

Stocks took a beating on Tuesday as trade and impeachment worries were reinforced and the Fed quietly reintroduced QE on the heels of the recent repo panic.

Most of this Fed stuff is beyond almost everybody's pay grade, but the simple finding is that the Fed and other central banks, having expanded their balance sheets to outrageous levels after the GFC in '08-'09, can't find a suitable mechanism to reintroduce all that money back into the system without blowing something up. Ergo, the REPO-related funding issues and now, POMO, because the Fed has backed themselves into a corner painted green with excessive amounts of securities (Treasuries and MBS) and they have to continue being the buyer of last resort, though even moreso now.

So, is cash tight? Kind of, depending on who you talk to, but the Fed's going to ease us all onto easy street again and will lower the federal funds rate again at the end of this month, by at least 25 basis points. At the rate they're going, the Fed is going to find itself at the zero-bound and staring negative interest rates squarely in the face right around the November elections next year.

The fed funds rate is currently 1.75-2.00%. After October's expected 25 basis point (maybe 50?) cut, it will only take six more similar cuts to put the rate at 0.00-0.25%, right back where it was from 2009-2015. However, given the odds for a slowdown in Europe and Japan and elsewhere, interest rates on a global basis are expected to continue their decline.

In order for the US to remain competitive, it may, at some point be forced to tease out negative rates, a slippery slope for certain. A little at first, like -0.10, and soon the market sends it snowballing, like in Europe and Japan where the entire yield curves are under zero.

Happy days! Some day a bank might come to Mr. or Miss Creditworthy and offer to pay them to buy a house or a car or maybe an electric blender if they open an account. But by then, bank charges will exceed the value of anything anybody can whip up in a blender, smoothie or otherwise.

We all want to live in interesting times, but thanks to the banking institutions and fiat currencies floated out of thin air, it's already bizarro-world and getting stranger each passing day.

At the Close, Tuesday, October 8, 2019
Dow Jones Industrial Average: 26,164.04, -313.96 (-1.19%)
NASDAQ: 7,823.78, -132.51 (-1.67%)
S&P 500: 2,893.06, -45.73 (-1.56%)
NYSE Composite: 12,590.91, -186.79 (-1.46%)

Washington's Impeachment Addiction, Trade Fiasco, Brexit, Global Condition Damaging Wall Street

The headline says it all. Things are coming apart at a rapid rate. Anybody who is even the least bit jittery is moving out of stocks as fast as possible. Rerun of last year's fourth quarter massacre is commencing apace. This iteration may be comparable to the New England Patriots playing a football game against a high school girl's rugby team.

More than caution is needed. A little panic would do the world's markets some good and maybe get the back-slapping bureaucrats and politicians to actually do some thing constructive (fat chance).

China will not negotiate fairly and especially so until the impeachment chorus is silenced for good. Even if President Trump is elected to a second term, Democrats will not stop their harassment, but likely accelerate efforts to remove him from office by any means. One saving grace could come from Republicans recapturing the House of Representatives, but that's a real Hail Mary.

In England, the anti-democratic forces are pushing ahead toward four years since the original referendum to leave the European Union was approved by the general population (June 23, 2016). Since, there has been a non-stop war waged against the wishes of the people. With no apparently-workable deal in sight, it may be the case that Britain won't leave the EU at all until the people rise up against their government. All is needed is a spark, in Britain, in the US, in China, everywhere, for the global condition to turn to global contagion and conflagration.

The global condition - which has generally been worsening since September 11, 2001 - is deteriorating at a quickened pace. There will be pain, but, in the end, if one is consistent, conservative, and constructive, a better future lies just ahead.

At the Close, Monday, October 7, 2019:
Dow Jones Industrial Average: 26,478.02, -95.70 (-0.36%)
NASDAQ: 7,956.29, -26.18 (-0.33%)
S&P 500: 2,938.79, -13.22 (-0.45%)
NYSE Composite: 12,777.74, -53.81 (-0.42%)

WEEKEND WRAP: Stocks Bounce Badly, Bonds Rally In Charged Political, Economic Environment

Stocks ripped higher on Friday after September non-farm payrolls missed estimates, stoking expectations of another 25 basis point rate cut by the FOMC in their upcoming, October 29-30, meeting.

All US indices posted gains over one percent, offsetting about half of the losses made during Tuesday and Wednesday sessions. Despite the huge Friday gains, three of the four major indices finished in the red for a third straight weekly decline as fears of an upcoming recession, continued parlor games in Washington fueling fears of an impeachment of President Trump, and ongoing fits and starts in trade negotiations with China outweighed monetary politics and policy direction.

The NASDAQ was the lone survivor, with a gain of just over 1/2 percent.

Jittery as it has been, US equity markets continue to show signs of weakness but not of breaking down in a capitulating move. With third quarter earnings about a week away, there's optimism that corporate America still has not lost its profitable manner, meanwhile, the flight to US treasuries and corporate bonds continued apace throughout the week, with the yield on the 10-year note dropping 17 basis points - from 1.69 to 1.52% - for the week, and losing 38 basis points since the recent bond selloff sent to 10-year yield to a high of 1.90 on September 13.

Friday's closing bond price for the benchmark 10-year is nearing the lows made in late August and early September of 1.47%.

There seems to be little standing in the way of the 10-year note heading below its historic low yield made on July 5, 2016, of 1.37%, as comparable notes in developed nations - Germany, Japan, Switzerland - are all offering negative yields.

How long the treasury complex can withstand the onslaught of buying worldwide is a minor concern since the Fed has already signaled to markets that they were willing and able to offer negative yields, like the rest of the world's developed nations.

The specter of negative yielding bonds looms closer in the US, but is probably at least two years away, if it develops at all. A recession, such as has been predicted for 2020 (and also was predicted for 2019), could push the 10-year below one percent, but it's a long way down to zero for the world's most popular bond and the world's largest economy.

Unless Democrats succeed in unseating President Trump through impeachment or other means, the onus of recession remains, though it could very well be short-lived, since the US has plenty of untapped capital and productivity.

For the present time, it would be prudent to keep a close eye on the impeachment fiasco underway in congress. There's a strong likelihood that push-back by the Trump administration could send the entire bag of nonsense and dubious Democrat claims into the courts, pushing the narrative through the Democrat primaries in Spring 2020 all the way to November's presidential and congressional elections.

That actually could be the plan for Democrats, since they have made some very spurious allegations about the president, but, the mainstream media loves a circus and promotes the impeachment mantra in an unalterable, monotonous, fallacious chorus.

The American public has grown tired of the repeated attempts to besmirch the duly elected chief executive and the result could be an historic landslide victory for Republicans in the fall of 2020. The alternative, should the Democrats and their obedient lackeys in the media succeed is more than likely to cause a rift in the populace - generally between urban liberals and rural conservatives - that could foment tremendous civil unrest and lawlessness. That is the disruption Wall Street - and most of the civilized world - fears most.

Bumpy will be the ride for the economy, politics, and society over then next 12 to 16 months unless the Democrats are exposed and soundly defeated.

At the Close, Friday, October 4, 2019:
Dow Jones Industrial Average: 26,573.72, +372.68 (+1.42%)
NASDAQ: 7,982.47, +110.21 (+1.40%)
S&P 500 2,952.01, +41.38 (+1.42%)
NYSE Composite: 12,831.54, +145.78 (+1.15%)

For the Week:
Dow: -246.53 (-0.92%)
NASDAQ: +42.85 (+0.54%)
S&P 500: -9.78 (-0.33%)
NYSE Composite: -140.43 (-1.08%)

September Non-farm Payrolls Fall Short; Stocks Brace for Selloff or Liftoff

Thursday's trading was another typical banker-assisted positive close on US indices. Stocks continued their descent from Tuesday and Wednesday's losses at the open, but quickly rebounded into positive territory. This pattern has been a feature for the Dow, S&P and NASDAQ since the late 1980s, when the PPT or President's Working Group was created, buoying stocks when losses appeared to be overwhelming.

Free markets? Probably not now and not in the near future. The Fed can put its fingers on the scales at any time, frustrating short sellers but acting as an artificial booster rocket for stocks. While the blatant manipulation is nearly-universally disliked, holders of 401k or retirement funds find the benefit of a backstop beneficial to the health of their portfolios.

That's why fundamentals really haven't mattered for some time, and especially since the GFC of 2008. The Fed or their proxies step in and stop the losses in their tracks. It's not exactly fair or transparent, but it is effective.

Prior to Friday's opening bell, September's non-farm payroll data was released by the BLS, showing an increase of 136,000 jobs for the month, below expectations of 145,000. August payrolls were adjusted upward to 168,000. Due to July's low numbers, the three-month average for payroll additions between July, August and September fell to 119,000, representing the lowest since 2012.

The jobs report sends a clear signal that the economy is slowing, but not yet going in reverse. The weak September report paves the way for the Fed to cut another 25 basis points from the federal funds overnight lending rate. Mixed signals are being sent as this produces a "bad news is good news" condition, as weaker economic numbers push the Fed to continue lowering rates.

TGIF.

At the Close, Thursday, October 3, 2019:
Dow Jones Industrial Average: 26,201.04, +122.42 (+0.47%)
NASDAQ: 7,872.27, +87.02 (+1.12%)
S&P 500: 2,910.63, +23.02 (+0.80%)
NYSE Composite: 12,685.77, +77.34 (+0.61%)

How Deep Will Stocks Dive In October?

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%)

Is Another October Surprise Developing for US Stocks?

On the opening day of trading for the fourth quarter, stocks were beaten down, with all of the major US averages losing more than one percent on the day.

Following Monday's end-of-quarter window dressing session, the losses on Tuesday were unexpected, but not to any extreme extent.

Could the indices be entering an October surprise, not dissimilar to that which occurred in 2018, when the stock markets retreated en masse from all-time highs and then took further flight in December?

It's a real possibility, since, despite making new all-time highs during the summer months, stocks have been relatively flat for the past year. On October 1, 2018, the Dow stood at 26,447.05, which is just 126 points shy of where it closed on Tuesday. Economic conditions haven't really improved. In fact, many might posit that they have degraded.

The World Trade Organization (WTO), which in April 2018 projected global growth at four percent, recently downgraded all of 2019's growth to a paltry 1.2%. Employment, at least in the US, has peaked, with average monthly non-farm payroll data down from last year and September's figures are likely to come in soft.

ISM Manufacturing in the US fell to its lowest level in a decade, registering a 47.8, down from 49.1 points in August and the lowest level since June 2009. Two straight months below 50 indicates not only contraction, but an acceleration in the level of decline. That, in addition to the inverted yield curve, suggests that a recession is due in the US, as Europe is on the brink of recession as well and the condition has a tendency for global contagion.

Thus, stocks get sold, bonds - in a flight to relative safety - get bought and the result is depressed moods all around.

If general chaos is what one desires, this would seem like the perfect opportunity to impeach a sitting president on little more than hearsay. And that is precisely what House Democrats are attempting.

At the Close, Tuesday, October 1, 2019:
Dow Jones Industrial Average: 26,573.04, -343.79 (-1.28%)
NASDAQ: 7,908.68, -90.65 (-1.13%)
S&P 500: 2,940.25, -36.49 (-1.23%)
NYSE Composite: 12,835.35, -169.39 (-1.30%)

Investors Unconcerned Over Impeachment, Recession

As end-of-quarter trading sessions go, this one was quite on the tame side.

Sure enough, funds bought up some of the most-favored names as "window dressing" for clients, present and future, pleasure. It's an age old tactic to garner new business. "Look what we have," is how funds tout their portfolios to prospective investors, since there are no regulations prohibiting such misleading behavior.

Nonetheless, the practice is commonplace, but less and less significant as consumers become more aware of some Wall Street tactics.

Otherwise, most of the buzz on Monday was over the ongoing impeachment coup against President Trump being conducted in the House of Representatives. The Democrats are using unnamed sources in second-hand, hearsay-colored, whistleblower complaints as their latest weapon against the president.

House Speaker Nancy Pelosi also changed House rules back in December to allow committee members to take depositions from interviewees and people subpoenaed without minority (Republican) representation, which is why the Democrats are working swiftly to take statements while they are actually in recess. Clearing out the opposition is a truly underhanded tactic, not worthy of the US congress, though the Democrat party has apparently now sunk to new levels of sleaziness. More on all of this in an article authored by Raul Ilargi Meijer via The Automatic Earth blog.

Much of what's occurring in DC is apparent to the sharpest minds on Wall Street, and there's certain to be monitoring of events as the happen. Taking wall Street's apparent unconcerned posture as a clue, there's likely less than a 10 percent chance of the Democrats succeeding in impeaching President Trump. Their narrative is weak, not all members of the party are in agreement with approach and, further, if the House actually voted to impeach, a trial would have to be held in the Senate, where a 2/3rds vote is needed to convict and that is highly unlikely, given that Republicans are in the majority.

The weeks ahead will surely be replete with accusations and arguments about the president's "unfitness." A spirited counter-attack from the administration is also expected, and that should be a spectacle to behold.

Wall Street seems confident that the tremors in Washington, DC will not result in a political earthquake. While a positive outcome from their proceedings is far from assured, it is probably best to keep a level head, understanding that much of what the House Democrats are calling "crimes" are actually the president investigating the root causes of the non-stop witch hunt against him.

At the Close, Monday, September 30, 2019:
Dow Jones Industrial Average: 26,916.83, +96.58 (+0.36%)
NASDAQ: 7,999.34, +59.71 (+0.75%)
S&P 500: 2,976.74, +14.95 (+0.50%)
NYSE Composite: 13,004.74, +32.76 (+0.25%)

WEEKEND WRAP: Despite Impeachment Overhang, Wall Street Is Oddly Calm

By midweek, political events had overtaken actual financial news and numbers as House Democrats turned up the heat on yet another attempt to impeach President Trump.

People with intact frontal lobes understand that the Democrats have once again fabricated the "crime" committed by President Trump. Still, the mainstream mass media complex cannot help itself from flailing about furiously at the behest of their liberal handlers. Would the media actually be impartial, this farcical drama - and the Mueller investigation that yielded nothing - would never even see the light of day.

It's further proof that most Democrats in the House have nothing constructive to add to the national debate other than outsized hatred for President Trump and all of his millions of supporters. If there is justice in this insane world, the Democrats will be outed, joe Biden's son, Hunter, will be tried, convicted and imprisoned, and the Democrat party will implode entirely in the aftermath of a massive Trump landslide.

That's for the future to tell. For the present, Wall Street would rather focus on facts, reality, data, and numbers. Third quarter results for traded corporations will begin rolling out next week. Prior to that, September non-farm payroll data will be released on Friday of this week. Whether traders and speculators can divorce themselves from the kabuki theater that is Washington DC long enough to focus on true economic data is the big question. Fast-moving headlines pushing the impeachment narrative will be difficult to ignore in coming days.

For whatever it's worth, the US economy may not be exactly a juggernaut of capitalist endeavor, it is, however, firing on all cylinders, albeit at a slow pace. By the end of October the world will have the first estimate of third quarter GDP, a number that should make headlines, whether it is good (above 2.5%) or bad (below 2.0%). Anything in the range of 2.2-3.0% will be considered a win for the economy (and President Trump), while across the pond, Europe teeters on the brink of recession.

Also on the horizon is quietude from the Federal Reserve, as the next FOMC meeting is scheduled for October 29-30. Thus, the next possible federal funds rate cut will only be under consideration and newsworthy the last two weeks of the coming month. Should economic data and corporate third quarter earnings reports come in positively there would be a rationale for the Fed to just keep rates where they are. The economy isn't struggling, jobs seem to be still plentiful and inflation fears have been kept in check. The few scenarios under which a rate cut could be considered are, at this juncture, unlikely, including a banking blowup, or taking the impeachment folly as serious.

With all that could go wrong, the world continued to turn following the attack on Saudi oil installments a few weeks back. President Trump tactfully pulled the United States back from the brink of escalation against Iran, instead opting for increased sanctions and a peaceful resolution to never-ending mid-East fanaticism and the associated war-mongering by elements in the US and Israel.

Oil, the lifeblood of the global economy, retreated as the situation de-escalated, and may actually fall below $50 per barrel as winter season looms.

Bonds seem to have found a sweet spot, despite the continued inversion of the 3-month:10-year pair, with the 10-year settling into a range between 1.55 and 1.75%. Should that range prevail over the coming weeks and months, clear sailing for the US economy may be a prudent call. While stocks, still somewhat overvalued, continue to flirt with all-time levels, the NASDAQ notably took the brunt of the selling from last week. That's probably a positive, since the NASDAQ contains some of the more pricey shares of tech companies that may need to be tamped down.

Conclusively, the week was far short of either a disaster or a rousing rally. Could it be, for a change, that the most sane place on the planet was lower Manhattan?

These are indeed strange days.

At the Close, Friday, September 27, 2019:
Dow Jones Industrial Average: 26,820.25, -70.85 (-0.26%)
NASDAQ: 7,939.63, -91.03 (-1.13%)
S&P 500: 2,961.79, -15.83 (-0.53%)
NYSE Composite: 12,971.98, -56.72 (-0.44%)

For the Week:
Dow: -114.82 (-0.43%)
NASDAQ: -178.05 (-2.19%)
S&P 500: -30.28 (-1.01%)
NYSE Composite: -121.82 (-0.93%)

Nothing Good Can Come From Impeachment

Stocks were lower on Thursday, amid impeachment charges being leveled against President Trump and further increases and concerns over the Fed's now-daily repurchase (REPO) auctions.

With the media and Democrat members of congress piling on the president with lies and accusations of bribery anda cover-up, Wall Street has reason to be concerned. It has been a Democrat prerogative to unseat or derail Mr. Trump since before he won the election over Hillary Clinton. Their "Russia-gate" investigation dragged the president and America through mud, muck, baseless accusations and political divisiveness for the better part of three years. The current Ukraine polemic is more of the same, stemming from the hopelessly corrupted intelligence agencies through congress, aided by media bleating.

Alert and awake investors are aware of the dangers such unsubstantiated attacks on a sitting president are producing. As the rhetoric grows louder and more poignant the country will be pulled apart politically to even more extremes, putting the world's most powerful nation on the verge of widespread civil unrest.

Meanwhile, congress is essentially worthless in terms of passing meaningful legislation of benefit to the general population, something they have been unable to produce in nearly forty years. The only person getting anything done at the federal level is the president, though he is harassed and undercut by his opponents at every juncture.

In the widest general terms, this overblown impeachment proceeding in the House of Representatives and the six or seven investigating committees involved will engender nothing good.

At the Close, Thursday, September 26, 2019:
Dow Jones Industrial Average: 26,891.12, -79.59 (-0.30%)
NASDAQ: 8,030.66, -46.72 (-0.58%)
S&P 500: 2,977.62, -7.25 (-0.24%)
NYSE Composite: 13,028.74, -8.87 (-0.07%)

Impeachment, Liquidity Concerns Don't Slow Equity Traders, For Now

On Wednesday, he Fed conducted another in a series of overnight repurchase auctions (REPO) which was oversubscribed by the most since the operations began to be a daily fixture last week. Wednesday's overnight funding fiasco was for a maximum of $75 billion, but offers were up to $92 billion, meaning somebody didn't get ready cash for operations.

This is becoming more and more of a liquidity crisis, which, as learned from the Lehman crash of 2008, can readily become a solvency crisis, as Lehman and Bear Stearns before them both were forced into liquidation.

With the oversubscribed condition seemingly becoming worse by the day, the NY Fed quietly announced that the operations proposed last week - daily $75 billion overnight until October 10 and three $30 billion two-week terms - were to be raised to $100 billion overnight and $60 billion in the two-week auctions.

Markets seemed more concerned with making money quickly rather than focus on a looming issue or the impeachment farce currently making the rounds in Washington. For what it's worth, Wall Street either doesn't want to look or considers these events inconsequential. In the case of impeachment, they may be right, since the Democrats are pushing on a string in their flimsy argument that President Trump committed some kind of crime by discussing with the president of Ukraine some possibly-underhanded dealings by former vice president Joe Biden.

It's nonsense, as the White House has released the complete transcript of the two leaders' phone conversation and there is no quid pro quo element to it and the Bidens (Joe and his son, Hunter) were brought up by Ukrainian President Volodymyr Zelensky.

As far as the Fed's actions are concerned, traders are normally blind to the much larger world of bonds and credit. Doug Noland, a reputable bond and credit analyst (possibly the world's best) writes in his most recent credit bubble bulletin that the Fed's actions are a response to excessive speculative leverage, mainly in the bond markets, which have been whipsawed of late, but spilling over into equities and currencies - especially China - as well.

While the street may have its focus on near term profits and end-of-quarter positioning, real experts see nothing good from the Fed's reach for substantial amounts of liquidity and expect volatility to continue over the next month or more.

At the Close, Wednesday, September 25, 2019:
Dow Jones Industrial Average: 26,970.71, +162.94 (+0.61%)
NASDAQ: 8,077.38, +83.76 (+1.05%)
S&P 500: 2,984.87, +18.27 (+0.62%)
NYSE Composite: 13,037.61, +45.35 (+0.35%)

Impeachment of President Trump Is Irresponsible and a Vile Attack by Desperate Democrats

Markets were roiled throughout the session on Tuesday, as the Fed continued overnight repo operations, Europe appeared headed for a recession, and, late in the day, Speaker of the House, Nancy Pelosi, announced an impeachment enquiry would commence against President Donald J. Trump, ostensibly for comments (or, promises, as Democrats allege) made during a telephone call to the president of Ukraine.

Sadly, the Democrats in the House (and, loosely, the Senate) have lost all hope of winning the presidential election in 2020, so they've resorted to the most vile political weapon available and are willing to drag the citizens of the United States through an arduous and ridiculous process that in the end will yield nothing.

The Democrats have no crime to pin on President Trump. Rather, they see no chance of beating him in the upcoming election, so, being as desperate for power as they are, seem willing to abandon all sense of propriety and decency.

For his part, President Trump had already agreed to make the entire, unredacted transcript of the phone call in question prior to Pelosi's announcement. It's apparent to most legal scholars - and apparently to Wall Street investors - that the president has done nothing wrong and that the impeachment call is merely another step away from responsibility by the Democrat party, continuing a vendetta against Trump which began on election eve, 2016, when he defeated their darling, Hillary Clinton, in the presidential election.

Wall Streeters understand well that more turmoil from Washington, DC is unwarranted, unnecessary, and potentially disruptive to markets. Whatever President Trump has done during his nearly three years in office, he certainly has not undermined American business interests. For the most part, he's battled the fake Russia-gate hoax investigation, and this is being viewed by interested parties as a continuation of Democrat hatred of the president.

What may be even worse than launching an impeachment enquiry on flimsy grounds is that the Democrats currently do not have enough votes to pass the impeachment onto the senate. A simple majority is needed for referral to the senate for a trial, but, while the Democrats do have a majority, they may not have the full support of their members.

Thus, unless charges against President Trump are solid and can show intent and criminality, House Democrats may have bitten off more than they can chew. It's nowhere near certain that any evidence will be enough to indict the president and charge him with a crime. It's even less clear that moderate Democrats will support the effort.

In the end, the president is likely to run roughshod over the Democrat haters in congress, as he did with the Mueller investigation, now relegated to ancient history. As Bill Clinton famously said during his impeachment hearings, "there's no there there."

Impeachment is an issue that should be taken with the utmost seriousness and only be entertained in the interest of the American citizenry. There is not one shred of evidence that President Trump is anything but a true patriot, an honorable American, doing his best - against violent opposition by the democrats and the press - to serve the American people.

Pelosi's green-lighting of an impeachment investigation is both irresponsible and likely to fail.

And it should.

At the Close, Tuesday, September 24, 2019:
Dow Jones Industrial Average: 26,807.77, -142.22 (-0.53%)
NASDAQ: 7,993.63, -118.83 (-1.46%)
S&P 500: 2,966.60, -25.18 (-0.84%)
NYSE Composite: 12,992.26, -93.07 (-0.71%)

Stocks Flat on Eurozone Recession Fears; Fed Committed to $1 Trillion Liquidity Injection

Stocks gained early and faded late as poor economic data from Europe dampened the mood on Wall Street at the start of the last week of the third quarter.

Eurozone manufacturing PMI fell to 45.6 on Monday, the worst reading in nearly seven years, with the German manufacturing PMI falling to 41.4 in September from 43.5, the worst number since the fall of Lehman Brothers sparked the global financial crisis.

The poor figures sent European stocks reeling, fearing recession, especially in Germany, Europe's powerhouse, could be right around the corner. US indices were less-affected, though the Dow Industrials was the only index to post a positive close.

At the same time, the US banking system was being monitored, as the Fed continued its series of repo auctions. In this statement from the New York Federal Reserve, the central bank committed to 1.05 trillion in overnight repo auctions through October 10, and at least an additional $90 billion in two-week term repo auctions.

The sudden appearance of repo auctions, with the Fed buying back treasuries or MBS in exchange for ready cash from (supposedly) primary dealers has economists on edge, especially considering the huge amount of excess reserves clogging up the system.

Those not so alarmed point out that these extraordinary repo auctions are the result of a highly-predictable cash crunch for banks as corporations tax payments are due at the end of the quarter. This causes a drain on the system overall, though there was no need for such measures since the Lehman debacle a decade ago.

What happens next in markets is probably more volatility and sideways trading due to uncertainty. Recession fears in the Eurozone are probably real, though the US may actually be in good enough shape to avoid a significant downturn through 2020. The Fed has cut rates twice this year after raising them by decidedly too much. Political forces are bound to keep the Fed honest and operating largely at the behest of the markets and President Trump, who has loudly criticized the Fed's step-behind operations.

At the Close, Monday, September 23, 2019:
Dow Jones Industrial Average: 26,949.99, +14.92 (+0.06%)
NASDAQ: 8,112.46, -5.21 (-0.06%)
S&P 500: 2,991.78, -0.29 (-0.01%)
NYSE Composite: 13,085.33, -8.47 (-0.06%)

Weekend Wrap: Cash Crunch Easing, Though Culprits Remain Anonymous

Ending a streak of three consecutive weekly gains, all major US indices took an about-face when Friday's quad-witching day sent stocks South.

Losses were not large, though they were widespread, as fear of a looming recession and confusion over the Fed's four straight days of repo auctions took away market enthusiasm.

Make that five straight days, as the Fed held another $75 billion repo auction on Monday, prior to the opening of equity markets in the US. Signs that the cash crunch was easing, only $66.75 billion was accepted as collateral by the Fed, making the auction officially undersubscribed.

On Friday, the Fed had also announced that it would conduct overnight repo auctions every day until October 10, and additionally would provide three 14-day term repo operations for an aggregate amount of at least $30 billion each, Tuesday, Thursday, and Friday of this week.

While nobody is certain which banks - or single institution - is having a hard time balancing its nightly books, any sense of panic has been effectively blunted by the Fed's actions.

As markets open the final week of trading for the third quarter, it will be instructive to note how markets respond, especially on Thursday and Friday. With the close of the quarter, some firms traditionally buy stocks in favor, as so called "window dressing," though it appears that this quarter might have a wholly different tone, given the stress in the system.

In what could be a most important week for markets, any words from Fed speakers should also be quantified in relation to ongoing cash shortages and the global condition.

At the Close, Friday, September 20, 2019:
Dow Jones Industrial Average: 26,935.07, -159.73 (-0.59%)
NASDAQ: 8,117.67, -65.21 (-0.80%)
S&P 500: 2,992.07, -14.72 (-0.49%)
NYSE Composite: 13,093.80, -17.50 (-0.13%)

For the Week:
Dow: -284.45 (-1.05%)
NASDAQ: -59.04 (-0.72%)
S&P 500: -15.32 (-0.51%)
NYSE Composite: -30.54 (-0.23%)

What the Heck is Phugoid Dollar Funding and Why Does It Matter?

So far this week, markets have encountered a major disruption in oil supply, an interest rate cut, three repo auctions, and the usual assortment of nonsense from Washington, DC.

Through all that, stocks have barely budged, leading up to a quad-witching day on Friday, with multiple options and futures expirations expected to add some volatility to the week. If it goes anything like the prior four days, the week will end with a thud, rather than a bang.

After the Fed's unsurprising announcement to lower the federal funds rate 25 basis points on Wednesday, a third straight repo auction was held Thursday morning, offering cash settlements on another $75 billion in collateral, mostly Treasuries and MBS.

While the repos signal some cash flow issues for some unidentified primary dealer banks, cause for the cash shortfall has not been ascertained.

Perhaps, as described in the link below, it is a case of Phugoid Funding, a condition which matches up pretty well with the current out-of-kilter global economy.

In an incredibly prescient post - although from April, 2019 - from Alhambra Investments (some of the brightest minds out there) about what is happening with the ongoing liquidity crunch that has the Federal Reserve conducting three consecutive repo auctions (Tuesday, Wednesday, Thursday), Phugoid Dollar Funding is explained in detail with an explanation of how it applies to current economic conditions.

At the Close, Thursday, September 19, 2019:
Dow Jones Industrial Average: 27,094.79, -52.29 (-0.19%)
NASDAQ: 8,182.88, +5.49 (+0.07%)
S&P 500: 3,006.79, +0.06 (+0.00%)
NYSE Composite: 13,111.25, -8.05 (-0.06%)

Fed Cuts Rate, Markets Slightly Bearish Initially

Initial reactions to the Fed's cut of 25 basis points on the federal funds rate announced Wednesday afternoon were unusually bearish.

Not only did stocks sell off - only to be rescued by mysterious bids in the final hou of trading - but so too crude oil, gold, silver. Bonds languished, with the 10-year note down a single basis point to 1.81% yield, though shorter maturities sold off, the two-year note gaining five basis points, from 1.72 to 1.77%, threatening to invert with the 10-year again.

One-month bills reacted naturally, with yields dropping from 2.10% on Tuesday to 1.96% on Wednesday's close.

Rumors of the Fed announcing a restart of QE were dismissed. The federal funds rate was lowered to 1.75-2.00%.

The vote was seven for the cut and three against. Voting against the action were James Bullard, who preferred at this meeting to lower the target range for the federal funds rate to 1.50 to 1.75 percent, a 50 basis point drop; and Esther L. George and Eric S. Rosengren, who preferred to maintain the target range at 2.00% percent to 2.25 percent.

The FOMC's penultimate meeting for 2019 is scheduled for October 29-30.

Considering the volatility in bonds and the unusual repo auctions held the past two days, market reaction was rather muted and refined overall. No panic was seen, though some degree of caution was notable.

At the Close, Wednesday, September 18, 2019:
Dow Jones Industrial Average: 27,147.08, +36.28 (+0.13%)
NASDAQ: 8,177.39, -8.63, (-0.11%)
S&P 500: 3,006.73, +1.03 (+0.03%)
NYSE Composite: 13,119.31, -12.09 (-0.09%)

Anticipating Federal Funds Rate Slash, Fed Conducts Repo for Cash-Strapped Banks

In case you missed it, on Tuesday, the Federal Reserve conducted a repurchasing event - known in the business as a "repo" - to inject cash into the system, which had run low on reserves.

Essentially, the primary dealers, among them the nation's largest banks, found themselves a little short on cash and needed to sell some bonds back to the Fed. In all, the Fed took back $53 billion and the system survived a rare liquidity crunch. It was the first repo auction since the great Financial Crisis of 2008.

This kind of activity may not be so rare going forward. The Financial Times reports that the Fed is holding another repo auction on Wednesday morning, offering up $75 billion in cash in exchange for various types of bonds, most typically, Treasuries or Mortgage-backed securities (MBS).

What triggered the double-dip into repo-land is the unusually high volatility in bond markets, which have been whipsawed of late. The benchmark 10-year-note, for instance, has yielded as low as 1.46% and as high as 1.90% just this month, and currently sits at a yield of 1.81%. The high rate at which bonds are turned over by the primary dealers and others may have left some banks upside down, or wrong-footed, this week.

The second repo has taken place, ending before 8:30 am, Wednesday morning.

The results were less-than-encouraging going forward. The auction was oversubscribed by $5 billion, meaning somebody has a short-term cash flow problem. The Fed offered up $75 billion and $80 was bid, so somebody didn't get what they were seeking. $5 billion is a lot of money, no matter how you slice it. This is going to show up somewhere and it won't be pretty. Prepare for bank failures at an increasing rate.

Otherwise, the markets stay relatively calm on the surface, with futures modestly in the red. At 2:00 pm ET Wednesday, the FOMC will announce their policy directive, ending a two-day meeting. They are widely expected to decrease the federal funds rate by 25 basis points, from 2.00-2.25 to 1.75-2.00.

If the idea of a range, rather than a distinct point for the federal funds rate seems different, it is. The Fed used to just set the rate at a distinct point, like 2.50%, but now they issue a range. That change occurred in 2008, when they dropped the rate to zero, or actually, 0.00 to 0.25. The Fed didn't like the rate being exactly zero bacuse that would have sent a bad signal, so they changed to a range.

What really happened is that the global fiat currency economy broke in 2008. ZIRP and the various forms of QE were bandages when a splint and a cast were needed. The system is still broken, moreso than in 2008 and the injury, once a break, is now amplified with a fever, an infection, and the hospital is out of meds.

Tra-la-la.

At the Close, Tuesday, September 17, 2019:
Dow Jones Industrial Average: 27,110.80, +33.98 (+0.13%)
NASDAQ: 8,186.02, +32.47 (+0.40%)
S&P 500: 3,005.70, +7.74 (+0.26%)
NYSE Composite: 13,131.41, +23.43 (+0.18%)

Oil and Gas Price Hikes Are a Central Banker Scam

Reiterating what was posted here Sunday in the Weekend Wrap, a recent article by Lance Roberts at Real Investment Advice, brings home the bacon in detail, of how the bottom 80% of all US workers, i.e., earners, is carrying a high debt burden that today cannot even cover basic necessities.

The consumer squeeze is in focus after the attacks on a Saudi oilfield and the Abqaiq refinery, which, according to most sources, will affect five percent of global oil supply. Somehow, cutting off five percent of global supply magically raises oil prices 15 percent.

Without anybody knowing exactly who is behind the attacks, many fingers are being pointed toward Iran, naturally, since the Iranians are fighting a proxy war with Saudi Arabia in Yemen. MoonofAlabama.com has a solid account with photos of how the attack might have been staged, who was behind it and future implications.

From a central banker's perspective, the attack and subsequent rise in the global price of oil could not be more opportune on a number of fronts. First, in desperate need of inflation, the bankers get the gift of core inflation in both PPI and CPI. Second, the rise in the price of oil, translated to gas at the pump and some home heating fuel, will show up in the convoluted GDP calculations, just in time for the third quarter and also adding a boost to the fourth if high prices persist.

Further down the road, high input prices and consumer prices for oil and gas should put the brakes on the economy eventually, putting a dent in discretionary spending which could spark a recession in 2020, just in time for the November US elections. Sure, higher prices and profits are good for some, for a while, but eventually, high gas prices act effectively as a tax on all consumers.

If you happen to be a central banker, this sounds great, doesn't it?

There are also political and financial aspects to the story. The attacks come right on the heels of President Trump's firing of John Bolton, the infamous neocon whose penchant for war with Iran was no secret. Conspiracy theorists believe this was long-ago planned, but Bolton's removal as National Security Advisor to the president was the trigger.

There's also the upcoming IPO of Saudi Aramco to consider. Initially, following the attack, the Saudis hinted that they would delay their long-awaited IPO, but now, a day beyond, they say they will forge ahead as planned. At issue is valuation. The Saudis believe the company should be worth $2 trillion at IPO, while the consensus among bankers handling the deal have the figure closer to $1.5 trillion. A lasting boost in the price of oil would naturally add to the valuation, bringing it closer to the level desired by the Saudis, who, after all, have control of the flow of oil, but not the price.

With no culprit positively identified, the entire affair looks to be highly organized - from the accuracy of the missiles and/or drones employed in the attack to the coordinated record trading in the oil futures pits - and the work of people or nations with an agenda. While this may appear far fetched to some, the power of the globalist banking cartel is well-known and could be pulling all the strings behind the scenes. It is not outside the realm of possibility that deep state globalists staged the attacks and price surge. It's also possible the the attacks were completely faked, just to get the price of oil higher.

There has been a glut of global oil supply since the US embarked on its fracking and shale output, becoming the world leader a few years ago. Russia is also pumping like mad, as are most of the OPEC nations. The amount of oil on world markets is so large that even small disruptions should not affect price - which has been falling for over a year - very much, but, in this case, it did.

While there isn't much the general population as a whole can do about higher gas prices outside of mass protests (a likelihood in Europe), there are a few actions the average motorist can take.

• Plan driving trips - organize your schedule to include multiple stops, thus reducing the amount of gas used rather than making individual trips for each task
• Seek lower prices - use online resources like GasBuddy.com to find the lowest prices in your area.
• Ride-sharing - organize with neighbors, friends and co-workers to share rides heading in similar directions.
• Drive smarter - slower speeds, properly inflated tires, and good driving habits can significantly reduce your fuel usage.
• Avoid wasted trips - deciding whether or not a trip is an absolute necessity can cut your overall fuel consumption considerably.

You don't have to buy into the price panic the global banking cartel seeks to impose upon you. As an end-user, you have to power of decision and information at your fingertips to help make wise choices. Share information with your friends, relatives and co-workers. A loose band of informed citizens can thwart the intentions the central bankers. Reduced demand should result in lower prices, eventually.

Most of all, don't buy into the media hype over gas prices, recession or any other narrative (like climate change) that the media water-carriers throw at you.

At the Close, Monday, September 16, 2019:
Dow Jones Industrial Average: 27,076.82, -142.70 (-0.52%)
NASDAQ: 8,156.40, +2.86 (+0.04%)
S&P 500: 2,994.17, -3.79 (-0.13%)
NYSE Composite: 13,107.98, -16.36 (-0.12%)

Weekend Wrap: Financial Warfare

When Mario Draghi announced on Thursday that the European Central Bank (ECB) would cut overnight lending rates an additional 10 basis points - to 0.50% - and another round of QE, markets responded with a bit of a yawn as the news had already been largely leaked and played upon.

Such are financial markets these days, wherein nobody is supposed to feel even the slightest degree of pain or anguish and central banks telegraph their every move. There's no feel to markets, especially stocks, other than that of a rigged game. Analysis is useless in the face of dovish banking motives, all coordinated and supposedly well-intentioned.

Truth of the matter is that there is a fierce financial war on over money, finance, and trade, with competition among unbacked currencies (all of them) terrific and without wane. The Europeans want to beat the US and Japan, Japan wishes to devalue against the Euro. China, clearly the world's leader in discounted exporting, parlays its wobbly currency against everybody.

Not only are nations and regions waging financial war, governments continue to stick their grubby hands into the pockets of domestic populations at an increasingly torrid pace. The level of regulations, rules, taxes, fees and tariffs has risen substantially over the past ten years, as political forces get in on the action which inflation has long forwarded. Now, deflation threatens to skew the balance more toward government confiscation of labor's remuneration. Wages have stagnated and may slow further, but the tax load will only increase, making discretionary spending for many no longer a choice, but a command imperative.

As money (more accurately, currency) becomes less available and devalued on a widespread basis, after government comes the corporate grab of every last consumer penny. Regulation in developed nations has stifled small business creation to the point of near-extinction. Instead of choice, say, along a road from a variety of local food purveyors, Americans are offered only fast foods from giant companies. It's a Big Mac, Whopper, or Wendy's or nothing.

Locally-owned and operated retail stores are being killed at an alarming rate, and with it goes choice, and with choice goes freedom. The global financial war is threatening not to just the major players, but to individuals, increasingly squeezed by forces well beyond their control.

The cartel-like Amazon-ification of retail feels the same when it comes to nearly every segment of consumer goods and services. Cell phones? Not much choice of carriers there. Data, ditto. Clothing, all the same from China, Cambodia, or other SW Asian countries where labor is cheap. Investments? If you haven't been in stocks, you're a loser, and that game will continue to separate money from former savers and younger people who delay household-making because it seems fruitless and beyond budget.

Tariffs, and Donald Trump's imposition of them, are actually a symptom of the problem, which is loosely described as crony capitalism with a hint of nationalism and monetary monopolism.

The choices for regular citizens are stark and scary. Divert funds away government (federal, state, and local) and mega-corporations, and towards friends and neighbors, barter, frugality. In developed nations, the fruits of labor are being scooped up at a rapacious rate, by big business and government, much of it before it is even in the hands of the laborer.

When more than half of your income goes to taxes, and another third to basis household costs, there isn't much left over for either saving or discretion. It's a problem that's been building since Nixon took the US off the gold standard, it's global, and it's unstoppable.

At the Close, Friday, September 13, 2019:
Dow Jones Industrial Average: 27,219.52, +37.07 (+0.14%)
NASDAQ: 8,176.71, -17.75 (-0.22%)
S&P 500: 3,007.39, -2.18 (-0.07%)
NYSE Composite: 13,124.34, +8.29 (+0.06%)

For the week:
Dow: +442.06 (+1.57%)
NASDAQ: +73.64 (+0.91%)
S&P 500: +28.68 (+0.96%)
NYSE Composite: +190.96 (+1.48%)

Wall Street Awaiting Fed's Next Move

On the road again... drive by post.

As one can see from the figures below, there was muted reaction in the US to the ECB rate dump early in the day.

Wall Street is no doubt waiting for the Fed's response in kind, next week, when they're expected to drop the federal funds rate another 25 basis points. They're now behind the curve in the currency race into the abyss (a new term because "race to the bottom" would assume there is some stopping point... thanks to negative interest rates, there isn't), and will be playing catch-up the next year or more, at least into the election season.

What a horrible hotel. Hilton Airport in Knoxville, TN. The room smells like a doctor's office. The air is antiseptic and stifling, the coffee machine doesn't work properly and the sheets on the bed are treated with some kind of agent which induces congestion and itching. Not recommended. In the spirit of negative interest rates, I'm giving it -4 stars.

At the Close, Thursday, September 12, 2019:
Dow Jones Industrial Average: 27,182.45, +45.41 (+0.17%)
NASDAQ: 8,194.47, +24.79 (+0.30%)
S&P 500: 3,009.57, +8.64 (+0.29%)
NYSE Composite: 13,116.05, +33.64 (+0.26%)

Global Banker Duplicity: Draghi Cuts ECB Overnight Rate to -0.50%

At Thursday's announcement, the ECB's Chief Governing Council (sounds impressive, doesn't it?) cut the bank’s overnight deposit rate, trimmed by 10 basis points, to −0.50%, meaning that commercial banks must effectively pay just a little bit more to the ECB to hold their excess cash balances overnight.

There were other policy moves, such as a restart to the ECB's Asset Purchase Program, otherwise known as QE, with an unlimited timeline. The bank will purchase assets at a rate of 20 billion euros per month, until they see inflation begin to tick up, so, essentially, forever, or, until the currency is completely worthless or eviscerated by the continuous destruction of capital by negative interest rates.

It would be easy to say that the central bankers don't know what they're doing, because all of the stimulus applied to economies around the world for the past ten years hasn't produced anything close to a desired result, either increased inflation (which isn't good, by the way), or rising GDP in developed nations.

What the ECB and other central banks like the BoJ and the US Federal Reserve are doing is choking down the currency in desperate, disparate attempts to conceal the rot within the system, which essentially imploded in 2008.

Nothing has been done at the micro level to induce business formation. It's all been macro level stuff, aiding governments and big corporations, which have a stranglehold on the most profitable franchises worldwide.

This is apparently good for asset prices in risky segments, such as stocks, but also for gold and silver, which have popped on the news, but will no doubt retreat.

The end game is a global depression, which some claim we've been in since 2008, but that's splitting hairs. The final blow comes when currencies backed by nothing are thrown out with the bathwater by populations tired of being taxed to death and dragged roundly their ears and noses with shifting central bank tricksterism.

Negative interest rates, if they prevail, will destroy all fiat currency. It's just math.

At the Close, Wednesday, September 11, 2019:
Dow Jones Industrial Average: 27,137.04, +227.64 (+0.85%)
NASDAQ: 8,169.68, +85.52 (+1.06%)
S&P 500: 3,000.93, +21.54 (+0.72%)
NYSE Composite: 13,082.41, +88.41 (+0.68%)

It's September 11

It's September 11.

Since this is a very solemn day in American life, there will be no economic or political analysis here. Just take a few moments and reflect upon what being an American means to you. Reflect upon what is important to you. Be honest with yourself. You may want to read what's below.

Recently, I was driving from upstate NY to Eastern Tennessee (moving... thank you, Andrew Cuomo). Watching all the cars and trucks moving up and down the highways, I thought, "all this law enforcement, laws, rules, regulations, restrictions, are bullshit. Look at all these people, traveling wherever they want, carrying whatever they please; there is no way the government can stop people from doing what they want, being free. There are just too many people. They can't control them all."

People need to stop being sheep, being herded, being told what to do. Unfortunately, the public school system has brought us to the brink, but, that was being said 50 years ago, when I was in high school. There are 330 million of us, a handful of them. Throw off the yoke of fear and the control net they throw over us via the media.

It takes a long time for individuals to awaken to the truth, but it can happen in an instant. The moment you shake off all the lies that have been told to you since you were a little kid is the moment you become free. Free to do as you please, without harming anybody else. If you want to farm, do it. If you want to weld, do it. Anything you want can be accomplished if you only have the will to start.

In the classic, "Think and Grow Rich," by Napoleon Hill, there is a great line which never fails:

Whatever the mind of man can conceive and believe, it can achieve.

Anyone who truly wants freedom can have it. Nobody needs to raise arms, fire a single bullet. All the power rests in the minds of the people, individually, and collectively.

At the Close, Tuesday, September 10, 2019:
Dow Jones Industrial Average: 26,909.43, +73.92 (+0.28%)
NASDAQ: 8,084.16, -3.28 (-0.04%)
S&P 500: 2,979.39, +0.96 (+0.03%)
NYSE Composite: 12,993.96, +33.24 (+0.26%)

Stocks Flat; Britain Should Leave The EU ASAP

Markets - whatever is left of them - seemed to be running on fumes Monday, as no Trump tweets nor economic news were sufficient to move stocks in general either way.

This kind of quiet may be just what investors are seeking: less volatility, less media madness, a more sanguine environment and some degree of security and safety. With all the talk of recession, the past few months have spooked some of the more ardent longs, but the market is still not conducive to short trades in any form.

One could conclude from recent action that stocks will hold their ground and move to new highs, as has been the case throughout the run from 2009 (buy the dip philosophy), and with another 1/4 point rate cut from the Fed a sure thing next week, that is the likely trading strategy for the day-trader and short-termer. Long term investors should be seeking value or growth, best, a combination of the two. With interest rates so low, dividend-yielding stocks with long track records are the safest and surest, plus, many will survive well under difficult conditions, should a recession actually arrive.

Central banks still have control of markets, a condition that may persist for quite a long time. It should serve memory well to reconsider the aftermath of the 2008 crash, wherein central banks coordinated to save everything, even unworthy companies, from default.

This might be a prime time to move from passive to active investing, with individual stocks preferred over ETFs or mutuals. Expect some noisy ups and downs over the next few months, though the next major event is Brexit, with a hard-line, no-deal escape from the EU by Great Britain set for October 31 by Boris Johnson, the most recent Prime Minister of the country.

It's been more than three years since jolly ole' England voted to leave the EU. Parliamentarians and stubborn bureaucrats have delayed the wishes of the people for too long and the wait may soon be over. Anything short of England removing itself from the EU - without onerous conditions - will be very bad for markets. The hyperbole of the media and those on the "remain" side of the issue have played the hysterics card for all it's worth.

Time is up. Populism should prevail in England and the result of leaving the EU, while dramatic, does not have to be traumatic.

At the Close, Monday, September 9, 2019:
Dow Jones Industrial Average: 26,835.51, +38.05 (+0.14%)
NASDAQ: 8,087.44, -15.64 (-0.19%)
S&P 500: 2,978.43, -0.28 (-0.01%)
NYSE Composite: 12,960.72, +27.34 (+0.21%)

Weekend Wrap: Stocks Gain, All Clear Signal Given Investors; Gold, Silver Dashed

Sorry. On the road again, drive-by post:

Two straight weeks of positive returns have pushed the major Us indices back above their 50-day moving averages, an okey-dokey signal to investors that the 0.25% federal funds interest rate cut from the FOMC is in the bag later this month (September 17-18), and the trade/tariff food fight between the US and China will continue unabated, alternating between "talks are ongoing," to "talks are off again," to "all options are on the table," or other such nonsense.

Trade and tariff talk seems to have a mysterious effect on traders, sending them into emotional buying and selling fits on headlines. Actually, the headline readers are algorithms, keyed to respond to major developments, or, in the case of the trade war, rumors of minor developments.

On the week, stocks vacillated, but moved higher in tandem, precious metals were dashed, as anyone who has an interest in the prices of such knew they would be. Both gold and silver are still trading near multi-year highs, so it's obvious that more flogging will be necessary until the morale of holders and buyers is sufficiently dashed.

As the global charade of overinflated sovereign budgets and overstretched consumers continues, the debt cycle looks to be extended at any cost by the overlords of banking, the central banks. Their position is as precarious as it has ever been. Rumors of an ouster of the Fed by congress in the United States are vastly overstated and wishful thinking by freedom-loving folks, yet they persist.

At this point in the day-to-day noise chamber that is Wall Street, caution is best served cold and reliance on a financial planner could be a major mistake going forward. It's all hands on deck, every man and woman for him/herself, babies being thrown overboard.

Happy sailing!

At the Close, Friday, September 6, 2019:
Dow Jones Industrial Average: 26,797.46, +69.26 (+0.26%)
NASDAQ: 8,103.07, -13.76 (-0.17%)
S&P 500: 2,978.71, +2.71 (+0.09%)
NYSE Composite: 12,933.38, +15.58 (+0.12%)

For the Week:
Dow: +394.18 (+1.49%)
NASDAQ: +140.19 (+1.76%)
S&P 500: +52.25 (+1.79%)
NYSE Composite: +196.50 (+1.54%)

Stocks Rise on Jobs Data, Fed Backing

Chalk up Thursday's stock gains to massive intervention by the Fed and/or their agents.

Not only did stocks go ballistic at the opening bell, but the day was marked by huge moves in bonds and precious metals.

Notably, the yield on the 10-year note rose by more than a full 10 basis points, bouncing off a low of 1.46% to clamber higher to a 1.57% close. That yield is the highest since August 22, and the 2s-10s settled non-inverted, with the two-year bouncing from 1.43% to 1.55%. However, all of the short-maturity bonds - 1 month through 1 year - are higher than the 10-year, suggesting that whatever magic was produced in markets will likely be short-lived.

As far as gold and silver are concerned, the central bankers - who hate competing currencies - slammed them both into the ground. Silver was treated with special disdain, the metal dropping from $19.57 per ounce to $18.64 during the day and the battering continued overnight. Silver, as of this writing, is quickly approaching $18.00.

Gold closed out trading in New York at $1552.00 per ounce on Wednesday, but, as of Thursday's close, was down more than $33, ending at $1518.70. It's still sliding, with the current bid at at $1505.00.

With August non-farm payroll data due out at 8:30 am ET, stocks are poised to whip higher if the numbers are solid. ADP reported on Thursday that private payrolls added 195,000 jobs in the month, a number well above estimates of 145,000.

As the US and China propose to resume talks, a good payroll report should help stocks continue their journey higher, heading back toward record highs. With the Fed surreptitiously backing stocks - because that's the only way they can save themselves from being completely discredited - it's plain and obvious where the money is going.

At the Close, Thursday, September 5, 2019:
Dow Jones Industrial Average: 26,728.15, +372.68 (+1.41%)
NASDAQ: 8,116.83, +139.95 (+1.75%)
S&P 500: 2,976.00, +38.22 (+1.30%)
NYSE Composite: 12,917.76, +121.45 (+0.95%)

Stocks Churn Higher; Currency Backed by Gold or Silver Is Possible

Churning continued on Wednesday, wiping up the losses from Tuesday. The up-and-down action in stocks is likely to continue for the near term, and quite possibly the longer term, as Fed officials and their global central banking brethren have severe solvency problems.

There is no abatement in the mammoth bond rally which has sent sovereign debt into negative yields in much of the developed world. The US has thus far escaped negativity, though the 10-year-note continues to dive, heading below a yield of 1.46% on Wednesday. The slow, grinding erosion of yield in bonds is a symptom of dying currencies. Negative interest yields will be discovered to be both symptoms AND causes of death. The Japanese yen is likely to die first, then the euro, followed by capitulation of the US dollar.

Evisceration of capital will be complete, widespread, and unrelenting as central banks cannot contain the over-saturation of debt, of individuals, companies, and governments. A new currency will be needed to replace the failed ones, and it's likely to be global and crypto.

Any country with the nerve to create and back its own currency with anything tangible will attract both the ire of central bankers (with attendant name-calling and possible military intervention) and the interest of investors seeking not just yield, but safety and security.

With global currencies facing serious headwinds, there has been talk of gold or silver-backed currencies from Greece to Mexico to Canada. Naysayers contend that there isn't enough of the precious metals to suitably service global commerce, though that argument depends entirely upon control of gold and silver prices. If the central banking cartel were to lose control of pricing via their deviate trading in the futures markets, the metals would explode exponentially. Gold might reach $5000 or $10,000 per ounce, silver would be priced in hundreds of dollars.

The solution is partial backing with precious metals. Sovereign governments issuing national currencies could readily assign a percentage of such to be backed by either gold or silver, or both, with the backing in a percentage of anywhere from 10% to 40% of the buck, loonie, yen, what have you.

Thus, the metals prices would not necessarily skyrocket beyond reason and debt would no longer be part of the formula for currency. While such a scenario may be a financial fantasy for now, history favors such, though the future, shaped by the current regime, would have to be radically different from the present state.

At the Close, Wednesday, September 4, 2019:
Dow Jones Industrial Average: 26,355.47, +237.45 (+0.91%)
NASDAQ: 7,976.88, +102.72 (+1.30%)
S&P 500: 2,937.78, +31.51 (+1.08%)
NYSE Composite: 12,796.32, +132.92 (+1.05%)

Stocks Slide As Economic Realities Continue to Worsen; Gold, Silver Soar

September didn't start out very well as stocks lost ground on all indices. Perhaps more concerning was the level to which yield on the 10-year note plunged, dipping to a low of 1.46% before closing out at 1.47%.

Low yields are indicative of demand, and, with some $19 trillion of government bonds globally yielding negative numbers, US bonds are attractive by comparison. This dynamic is not going to end soon, as Japan and the Euro area - the two economies with the most negative yields - are in no-win conditions, with inflation impossible to produce and a swirling drain of deflation threatening the confidence of their currencies.

If low yields are intriguing, consider the gains in gold and silver to be nothing short of demanding attention. Both metals have been on a hyperbolic flight path since May. On Tuesday, silver rocketed through the $19/ounce level, with a gain of more than 8 cents per ounce. Gold topped $1550, and is trading at record levels in most of the world. Only the super-strong dollar is keeping gold's level down, but only in the United States.

Stocks are going to continue a fluctuation with emphasis on the downside for the foreseeable future due to deteriorating economic conditions globally.

Cash is becoming king-like in many countries, with a focus on US dollars, but that dynamic will play out to flatten the wallets of nearly everyone holding hope in fiat currency. Central bankers have reached the proverbial brick wall, with nothing to save economies from crashing headlong into a solvency crisis, an immovable force from which there is no return, literally, as there will not only be no return on capital, but, in many regards - as is the case with negative rates - no return OF capital.

At the Close, Tuesday, September 3, 2019:
Dow Jones Industrial Average: 26,118.02, -285.26 (-1.08%)
NASDAQ: 7,874.16, -88.72 (-1.11%)
S&P 500: 2,906.27, -20.19 (-0.69%)
NYSE Composite: 12,663.40, -73.48 (-0.58%)

Weekend Wrap: Stocks Rebound in Face of Coming Currency Crisis

Other than the idea that Chinese and US officials were "talking" about trade and tariffs, nothing much changed in the world of high finance during the week, though investors thought they heard the "all clear" whistle.

Major indices broke off a four-week losing streak, bounding higher by 2.5 to three precent over the course of the week, heading into the Labor Day holiday.

The end of August marks the unofficial end of summer, back to school activity, and a return from the idyllic Hamptons or other leisure locales of the Wall Street hard-liners, the big boys with big money who guide trades, firms and financial fates.

Over the holiday weekend, the US slapped on the promised tariffs on September 1, with China responding with some of their own on US imports. That ran in stark contrast to the trading sentiment from the week past and suggests that the gains may be fleeting.

As the opening approaches for the first trading day of September, US futures are sliding. Anticipation of easing tensions in the trade wars are fading fast, though the narrative that the trade and tariff foibles of Trump and Xi are the sole motivator for moving equities is likely a contrived one.

What really worries Wall Street and should concern anybody with a pension tied to a 401k or other stock market vehicle is the shaky state of global commerce. The World Bank, IMF, and pundits far and wide have been predicting a recession for well over a year. Though the timing of such a downturn is far from settled science, evidence continues to build. More than just recession concerns are deeper fears that central banks have run out of ammunition with which to save the world again.

Interest rates, long regarded as the primary tool of central banks to stave off natural downturns in the business cycle are already low and many negative, prompting unbelievers to portend the end of central bank monetary hegemony. While such calls for an impending end to the global financial scheme are almost always present, this time appears to hold some truth.

Fractional reserve lending of debt has impoverished the lower and middle classes, expanded wealth inequality, and may now be acting as a brake on the system as money movement is nearing stall speed. It's been nearly 50 years since President Nixon closed the gold window and set the world on a path of unbacked, floating currencies. The result has been a revolving bubble, boom-bust scenario, punctuated by massive counterfeiting by coordinated central banking interests, each successive round more severe than the last.

Considering the depth of the last crisis in 2007-2009, central banks are desperate to keep the financial plates spinning for as long as possible, because the next crisis may well be their last.

These prospects are not pretty for central banks, or, for that matter, anybody. However, change is always in the wind, and the wind is blowing with a hot breath.

2001 was a malinvestment correction. 2008 was a liquidity affair. 202---? will be a currency crisis that will shake the foundations of monetary policy.

At the Close, Friday, August 30, 2019:
Dow Jones Industrial Average: 26,403.28, +41.08 (+0.16%)
NASDAQ: 7,962.88, -10.51 (-0.13%)
S&P 500: 2,926.46, +1.88 (+0.06%)
NYSE Composite: 12,736.88, +32.88 (+0.26%)

For the Week:
Dow: +774.38 (+3.02%)
NASDAQ: +211.12 (+2.72%)
S&P 500: +79.35 (+2.79%)
NYSE Composite: +320.43 (+2.58%)

Good News Lifts Stocks; No Pain Equals Gain

A tweet here, a headline there, and everything's all right in bizarro finance world.

News that China would not retaliate against President Trump's latest round of tariffs sent stocks soaring on Thursday, dismissing the belief that the tariffs on Chinese imports would cost consumers more.

Apparently, Wall Street doesn't really care about household budgets, so long as their favored companies make profits, and the tariffs, some of which take effect on September 1, aren't going to hurt bottom lines in the near future. Tariffs on many touchy consumer items were delayed until late December, a strategy composed by the White House to minimize pain during the holidays.

The avoidance of pain is what markets are all about these days. Stocks are not allowed to go down, to correct, even though their fundamentals may scream overpriced. Nobody is supposed to feel any pain.

The problem with such a nomenclature is that, like never telling a child not to touch a hot stove, investors are going to get burned badly when the pain is unavoidable.

So far, everybody's fingers are cool.

At the Close, Thursday, August 29, 2019:
Dow Jones Industrial Average: 26,362.25, +326.15 (+1.25%)
NASDAQ: 7,973.39, +116.51 (+1.48%)
S&P 500: 2,924.58, +36.64 (+1.27%)
NYSE Composite: 12,704.03, +144.80 (+1.15%)

Stocks Gain, Gold, Silver Gain More; 2s-10s Remain Inverted

Stocks. More noise.

And it will remain that way as long as the 2-year and 10-year notes remain inverted.

On Tuesday, the 2-year was yielding 1.53, the 10-year, 1.49.
On Wednesday, the 2-year was at 1.50, the 10-year, 1.47.

Gold and silver continue to outperform stocks by enormous margins. Spot silver closed the day in the US at $18.315 per ounce. Gold spot was $1538.70.

Keep a close watch on your 401K. It could vanish at a moment's notice. While that is not probable, the chances for it losing price are very good.

The global financial system is on the verge of complete collapse. Some say it has been since 2008. There is unlikely to be a bell rung when it all falls apart, but a steady, slow, wrenching decline is in the cards now that the marginal utility of a dollar is less than one.

The central bankers know this. Politicians know this. It's best to be informed.

At the Close, Wednesday, August 28, 2019:
Dow Jones Industrial Average: 26,036.10, +258.20 (+1.00%)
NASDAQ: 7,856.88, +29.94 (+0.38%)
S&P 500: 2,887.94, +18.78 (+0.65%)
NYSE Composite: 12,559.23, +85.18 (+0.68%)

Former NY Fed Goldmanite Dudley Attacks President Trump on Bloomberg Platform

It doesn't get any more transparent than this.

For anyone who doesn't already know, the Federal Reserve System is a private banking operation that controls the currency of the United States of America. The "System" issues "notes" at interest. The long-standing assumption is that the Fed is objective, impartial, and apolitical. Here's a taste of that "objectivism" from former NY Fed president, William Dudley.

(Bloomberg Opinion) -- U.S. President Donald Trump’s trade war with China keeps undermining the confidence of businesses and consumers, worsening the economic outlook. This manufactured disaster-in-the-making presents the Federal Reserve with a dilemma: Should it mitigate the damage by providing offsetting stimulus, or refuse to play along?

If the ultimate goal is a healthy economy, the Fed should seriously consider the latter approach.

Dudley states unequivocally that the President's trade policy is harmful and that the Fed should determine how to respond. Not exactly impartial, is it?

Here's more:

The Fed’s monetary policy makers typically take what happens outside their realm as a given, and then make the adjustments needed to pursue their goals of stable prices and maximum employment. They place little weight on how their actions will affect decisions in other areas, such as government spending or trade policy. The Fed, for example, wouldn’t hold back on interest-rate cuts to compel Congress to provide fiscal stimulus instead. Staying above the political fray helps the central bank maintain its independence.

So, according to conventional wisdom, if Trump’s trade war with China hurts the U.S. economic outlook, the Fed should respond by adjusting monetary policy accordingly — in this case by cutting interest rates. But what if the Fed’s accommodation encourages the president to escalate the trade war further, increasing the risk of a recession? The central bank’s efforts to cushion the blow might not be merely ineffectual. They might actually make things worse.

Fed Chairman Jerome Powell has hinted that he is aware of the problem. At the central bank’s annual conference in Jackson Hole last week, he noted that monetary policy cannot “provide a settled rulebook for international trade.” I see this as a veiled reference to the trade war, and a warning that the Fed’s tools are not well suited to mitigate the damage.

Yet the Fed could go much further. Officials could state explicitly that the central bank won’t bail out an administration that keeps making bad choices on trade policy, making it abundantly clear that Trump will own the consequences of his actions.

Again, Dudley appears to favor the Federal Reserve acting in a manner that runs contrary to the policy of the president. While that may be objective, it is hardly impartial...

...and it gets worse:

Such a harder line could benefit the Fed and the economy in three ways. First, it would discourage further escalation of the trade war, by increasing the costs to the Trump administration. Second, it would reassert the Fed’s independence by distancing it from the administration’s policies. Third, it would conserve much-needed ammunition, allowing the Fed to avoid further interest-rate cuts at a time when rates are already very low by historical standards.

I understand and support Fed officials’ desire to remain apolitical. But Trump’s ongoing attacks on Powell and on the institution have made that untenable. Central bank officials face a choice: enable the Trump administration to continue down a disastrous path of trade war escalation, or send a clear signal that if the administration does so, the president, not the Fed, will bear the risks — including the risk of losing the next election.

There’s even an argument that the election itself falls within the Fed’s purview. After all, Trump’s reelection arguably presents a threat to the U.S. and global economy, to the Fed’s independence and its ability to achieve its employment and inflation objectives. If the goal of monetary policy is to achieve the best long-term economic outcome, then Fed officials should consider how their decisions will affect the political outcome in 2020.

To Dudley's globalized mind, Trump's trade policies are "disastrous" and imperil his chances at "re-election." Since when are the unelected members of the Federal Reserve experts on election politics? Dudley's remarks reek of political partisanship.

The author and editor's emails are provided here as a public service. In a sane world, Dudley's email in-box would be flooded with contrarian opinions. The world of 2019 does not seem to be particularly sane, however.

To contact the author of this story: Bill Dudley at wcdudley53@gmail.com

To contact the editor responsible for this story: Mark Whitehouse at mwhitehouse1@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Bill Dudley is a senior research scholar at Princeton University’s Center for Economic Policy Studies. He served as president of the Federal Reserve Bank of New York from 2009 to 2018, and as vice chairman of the Federal Open Market Committee. He was previously chief U.S. economist at Goldman Sachs.

Other than the yield curve re-inverting and stocks reversing course midday, nothing much happened in the world of investing on Tuesday.

At the Close, Tuesday, August 27, 2019:
Dow Jones Industrial Average: 25,777.90, -120.93 (-0.47%)
NASDAQ: 7,826.95, -26.79 (-0.34%)
S&P 500: 2,869.16, -9.22 (-0.32%)
NYSE Composite: 12,474.05, -45.57 (-0.36%)

Amid Turmoil, Stocks Jump to Open Week

Despite Friday's stock slide and confused rhetoric from the G7, investors appeared unconcerned as trading opened the week, with all the major averages up sharply on the day.

Bounces such as the one witnessed on Monday are normal in times of high volatility and anxiety. They can be generally disregarded as more noise than anything meaningful. The gains only half erased Friday's losses, leaving the Dow, NASDAQ, S&P, and Composite all hanging between their 50 and 200-day moving averages, a sign of indecision among market makers.

Gold and silver held onto gains, bonds continued to rally, with the two-year and 10-year notes even, with yields of 2.54% at the end of the day.

With trade talks stalled, traders may be seeking more information on the economy. The Conference Board's gauge of consumer sentiment is due out shortly after the markets open at 10:00 am ET.

At the Close, Monday, August 26, 2019:
Dow Jones Industrial Average: 25,898.83, +269.93 (+1.05%)
NASDAQ: 7,853.74, +101.97 (+1.32%)
S&P 500: 2,878.38, +31.27 (+1.10%)
NYSE Composite: 12,519.62, +103.17 (+0.83%)

Weekend Wrap: Trade, Recession, Currency Fears Stoke Week-Ending Sell-Off

These days, it doesn't take much to spook markets.

That stands to reason, with all of the US major indices near all-time highs conjoined with a divisive political environment, global trade tensions, and a corrupted financial system run by central bankers bent on the globalization of currencies and nations.

Thus, on Friday, after Fed Chairman, Jay Powell, spoke to the assembled cognoscenti at Jackson Hole, Wyoming, and President Trump doubled down on his tariff mandate towards China, the runners, scalpers, and money-changers on Wall Street were so spooked that one might have assumed they'd seen the ghost of legendary China short-seller, Jim Chanos, stalking the trading floor, even though - as far as is known - Mr. Chanos is still alive and kicking the shorts out of the Chinese market.

Stocks had opened only marginally in the red on Friday and were improving into the eleven o'clock hour before suddenly reversing course, heading into the abyss, the Dow shedding more than 400 points in a matter of minutes.

With Wall Street struggling to regain some semblance of balance and propriety, stocks drifted lower, cratering in the final hour with the Dow Industrials down nearly 750 points before gaining back another hundred into the closing bell.

It was ugly. It was impressive. At the end of the day, it seemed completely appropriate.

The fuel for growth was fading fast and has been since well before Friday's melt-down. All of the fancy tricks the Fed and their central banking buddies had employed to goose equities skyward over the past decade were being exposed as fraudulent, artificial, unnecessary, and eventually harmful to the operation of what previously had been free markets.

Wall Street has lost confidence in the Fed's forward guidance, which, according to Mr. Powell, is decidedly negative. The Trump tariffs are a sideshow to the already-failing economies of the developed nations, slowing precipitously and taking down the emerging giants of China and India with them.

Over the weekend, while the leaders of the G7 powerhouse nations debate and will likely confirm that globalization is a crumbling edifice of one-percenter greed and that the world needs to be adjusted toward something that serves people other than just the mega-corporate interests and the skimming habits of the ultra-wealthy.

As has been of considerable mention here the past few days, negative interest-bearing sovereign debt instruments - those wildly popular $19 trillion worth of bonds - are ringing the death-knell of fiat currencies and central bank interference with the normal operation of capitalist design.

For now, the shock waves of fading confidence in the global Ponzi and counterfeit schemes of stock buybacks, quantitative easing, and negative interest rates is contained largely to the Wall Street crowd, but, it is spreading and the uproar will increase as stocks fall, ordinary people worry about their jobs and their futures, and the central bankers moan and cajole and mumble and stumble and fall.

Remnants of the global economic structure previously known as Bretton Woods are being shredded on a daily basis. A new world order is on the way, but any transition - like the one which dashed national currencies into one euro a few decades past - is going to be painful and consequential.

Sadly, when all the smoke is blown away and the dust settled, the planet will still largely be governed by the same morons and their predecessors who brought all of this upon us and their economic agents of destruction. The new currency regiment will be talked about as more fair, more balanced, more equitable, but those in the know will have already understood that it will be more of the same, damaging to the middle classes while barely scraping off a scintilla of the assets held by the rich and powerful.

Americans, Europeans, Japanese and all citizens are being shafted, and it's going to hurt.

The long-delayed reckoning from the global crisis of 2008 is about to be unleashed. Unless one holds hard assets such as precious metals, real estate, and/or income-producing assets like a productive business or needed service, one is likely to feel more pain than would otherwise be prescribed by the lords of finance.

At the Close, Friday, August 23, 2019:
Dow Jones Industrial Average: 25,628.90, -623.34 (-2.37%)
NASDAQ: 7,751.77, -239.62 (-3.00%)
S&P 500: 2,847.11, -75.84 (-2.59%)
NYSE Composite: 12,416.45, -272.01 (-2.14%)

For the Week:
Dow: -257.11 (-0.99%)
NASDAQ: -144.23 (-1.83%)
S&P 500: -41.57 (-1.44%)
NYSE Composite: -163.96 (-1.30%)
Dow Transports: -227.58 (-2.28%)

Hawkish Harker, George Bundesbank Comments, Fed Minutes Spill Stocks

Coincidence?

Just about the same time Germany's Bundesbank put the kibosh on stimulus, Philadelphia Fed President, Patrick Harker, and later, KC President, Esther George, indicated they would not be supportive of future rate cuts.

Notably, though Harker is not a voting FOMC member, there was a supposed "gag order" on Fed officials issued recently by Fed Chairman, Jay Powell. Apparently, not everybody got the memo, or, with Powell's Friday morning Jackson Hole speech in focus, it's open season on interest rate jawboning.

The hawkish commentary sent the two-year note soaring, plunging in yield below the 10-year. Inversion, again.

Later in the trading day, the Fed minutes from the July meeting were released, with a number of officials calling the 25 basis point rate cut a "mid-cycle adjustment," a laughable notion in the face of an expansion that has exceeded all others in US history, at 10 years, five months, and counting.

Since central bank commentary and interest rate movement in the bond market is just about the only thing Wall Street currently cares about, stocks sold off in afternoon trading.

We have entered bizarro-world.

At the Close, Thursday, August 22, 2019:
Dow Jones Industrial Average: 26,252.24, +49.51 (+0.19%)
NASDAQ: 7,991.39, -28.82 (-0.36%)
S&P 500: 2,922.95, -1.48 (-0.05%)
NYSE Composite: 12,688.46, -8.55 (-0.07%)

Stocks Bounce As Germany Sells First Negative-Yielding 30-Year Bond

The "scary" thing - mentioned here yesterday - that sent traders rushing for the exits on Tuesday in major markets from Germany, to France, to the United States, was probably anxiety and anticipation of Germany pricing the first 30-year bond at a negative interest rate.

Germany was looking to sell $2 billion of the bonds, but managed to only sell $965 million of the debt, which eventually priced out at a yield of -0.11%. So, essentially, it was a failed auction, with the Bundesbank scooping up the rest, allegedly to be sold later on to other suckers, er, investors.

Now, that may not sound like a big deal at the outset, but losing a little more than a tenth of one percent on your money over 30 years can add right up. On $1 million, in the first year, it would be $1,100 that you'd just let go. Each year, the amount you'd lose would be lower, but it would still be 0.11%.

Just rounding it off, you'd lose about $30,000 of your money, leaving $970,000. If there was inflation during that period of time, the money would be worth much less in buying power at maturity in 2050.

There are some very bad implications surrounding negative interest rates. First, they are money destroyers. In the fiat money, fractional reserve banking system now in play worldwide, all money is debt. The Fed or other central banks create money (more accurately, "currency") by floating bonds, selling them to interested parties, at interest, creating a debt. The primary dealers, who are the principal buyers of the Fed's bonds (treasuries), create more debt by reselling the bonds or loaning money to companies or individuals.

However, bonds with negative interest rates cause negative debt, or, rather, a surplus, to the Fed, but this money extinguishes debt rather than creating it. If the supply of negative interest-bearing bonds becomes too large, it will cause a contraction in the money supply, which is what is happening in Germany and most of Europe presently. All of Germany's sovereign bonds are yielding negative returns, as are most of Europe's.

The continuation of such a program, especially if it catches on and sends yields further into the red, like one, two, or even three percent, would have the effect of choking off the money supply completely, destroying, once and for all, that currency.

The math is straightforward. If you have a million dollar bond with a -3.00% yield, you lose $30,000 the first year, and smaller amounts each consecutive year, since your principal is getting smaller year-over-year.

If that bond is for 10 years, it's going to lose somewhere in the neighborhood of 25% of its value, leaving you with $750,000 of your original million dollars. At three percent for 30 years, the result is the loss of up to 90% of your original investment, if the bond (at par), continues to pay -3% on one million dollars.

I may not have that exactly right, but the principle is correct and the money supply will be shrunk by negative yielding bonds. This is a very dangerous situation which bears close scrutiny because it very well may be the signal that global central banks are on the verge of forcing all sovereigns into default, destroying the money supply of many nations, and replacing national currencies with a worldwide unit of exchange.

It is, as the conspiracy theorists contend, what the globalists have had in mind for many years. With negative interest rates, they can slowly kill off the yen first, then the euro, then the US dollar. What will happen with the Chinese yuan or Russian ruble and other not-so-mainstream currencies remains to be seen, but a calamity of this proportion is likely to leave most other countries begging for some kind of solution, which the central banks will gladly supply.

At the Close, Wednesday, August 21, 2019:
Dow Jones Industrial Average: 26,202.73, +240.29 (+0.93%)
NASDAQ: 8,020.21, +71.65 (+0.90%)
S&P 500: 2,924.43, +23.92 (+0.82%)
NYSE Composite: 12,697.01, +97.61 (+0.77%)


Just for fun, somebody posted this on Zero Hedge the other day:
Nostradamus: (Cent. 8 Quat. 28)

Les simulacres d'or & argent enflez,
Qu'apres le rapt au lac furent gettez
Au desouvert estaincts tous & troublez.
Au marbre script prescript intergetez.

Translates as:

The copies of gold and silver inflated,
which after the theft were thrown into the lake,
at the discovery that all is exhausted and dissipated by the debt.
All scripts and bonds will be wiped out.

or,

The simulacra of gold and silver swell,
After the lake rapture were gone
At the open all are overcome & trouble.
At the marble script prescript intergetez.

US and European Markets All Suffer End-of-Session Dumping

The major indices - not just in the US, but it Europe as well - fell victim to late-day large scale stock dumping, with all US indices, along with Germany's DAX, France's CAC 40, Britain's FTSE, and the Euronext 100, closing at the low points of their respective sessions.

This can only indicate one of two things: a rebalancing was taking place in the indices, or, big moneys getting out of stocks before Wednesday's opening.

The first case is probably not feasible, since these various indices do not rebalance all on the same day. That would lead to serious dislocations and confusion. Thus, that leaves the second case, in which some large traders with inside information made a hasty exit in anticipation of something terrible on Wednesday. What that terrible thing may be is currently unfathomable, but will probably come to light when European markets open on the morrow.

Market conditions such as this cannot be viewed as one-offs, as they are occurring with too much regularity. There's far too much volatility and sudden reversals to be credited to randomness; it's much more likely that markets are being manipulated by a cartel of central banks and their agencies, the major brokerages, meaning that the average investor is once again left holding a bag of stocks worth less than they were the day before.

One can claim conspiracy often enough to attract attention, and then division, which is why the regulars in the financial media will never let loose with any opinion even tangentially touching upon a conspiratorial theme. Those outside the mainstream have no such binding authority as a job or a narrative, so it's left to bloggers and speculators to sort out the less-than-obvious maneuverings in the market.

While the losses were not large, they were uniform, which indicates at least some coordination.

At the Close, Tuesday, August 20, 2019:
Dow Jones Industrial Average: 25,962.44, -173.35 (-0.66%)
NASDAQ: 7,948.56, -54.25 (-0.68%)
S&P 500: 2,900.51, -23.14 (-0.79%)
NYSE Composite: 12,599.41, -88.51 (-0.70%)