Sure, all of the major indices closed higher today.
They did it on abysmally-low volume, the third such low-volume day in a row.
The industrial machine, the engine of progress, the economic miracle once known as the United states economy is in the toilet.
Stocks should be at a peak, now, or very shortly, simply because the underlying conditions for not only growth, but even the plain maintenance of the basic infrastructure of the US system is unsustainable.
Congress has been rushed back from their "August recess" in order to vote on a $26 billion bailout for states, this, on top of last year's record federal assistance to the states in the stimulus bill. Not only is the private sector still reeling from the worst economic nightmare of all time - commonly known as the sub-prime meltdown - but the public sector also has been unable to escape its mighty grasp.
As I've probably mentioned too many times over the past three years, the USA is bankrupt and failing. That point has never been so obvious as right now, as local governments struggle to survive on a paucity of tax revenue, due to - big surprise - the failure of the unholy fascist union of government and big business to provide even the basic measure of economy to the citizens upon which it preys.
I am unable to put into words precisely how bad the economic condition in America has become. Much worse is the breakdown of social mores and values, which continue to deteriorate, seemingly, by the moment.
About a year ago, I declared the beginning of the post-governmental era, though apparently my inauguration was a bit premature. The government propped up the economy for most of the past 22 months since the breakdown of the financial system in Autumn of 2008. That gambit has ended. The federal government of the United States of America is completely off-the-rails (has been since somewhere in the first term of past president George W. Bush, probably about the time they began to lie us all into a war in Iraq), and cannot control the devastation - financial, social and political - which awaits.
The November elections are already a farcical affair, with people such as Rand Paul, Sharon Angle and Sarah Palin trolling for votes and outrage. Tea party candidates, or, those who espouse to be "endorsed" by the nebulous, imaginary "Tea Party" (there really is no such thing) are nothing more than the modern-day equivalent of Nazi Brown-shirts, thugs, impostors and paid political mercenaries. The upcoming elections are meaningless in terms of survival, the topic most on the minds of the vast majority of the American public (or at least it should be), and more focused on political will from the top down, a sick, twisted folly being played on the American people, complete with bread, circuses, dancing elephants, innuendo impersonating fact, celebrity masquerading as leadership.
As a nation, we are lost, we are doomed, we are dead.
That stocks would post gains in light of the conditions present puts on display positively some of the most-deranged market manipulations of all time. Shares of publicly-held US corporations are likely worth one-half to one-third of their stated market values because their future prospects (Remember that discounting mechanism we all so loved and cherished?) are skeptical, nightmarish, horrific... take your pick.
On Tuesday, the Fed will supposedly make some kind of announcement toward another round of quantitative easing, probably though some mechanism shrouded from view that will no doubt involve purchasing debt, specifically, US Treasury debt, though in reality, the program never actually stopped. What the Fed will announce will only serve to signal the banks and brokerages that the decimation of the dollar will continue and that they can commence with the further gutting of the wealth of America and Americans.
That I would like it to be something other than that goes without saying, but the cloth has been laid, the emperor - in this case, Ben Bernanke - will don the imagined suit and parade, like a clown, in front of the assembled world with nothing better to wear than a Zero interest rate policy which will at once equal both his IQ and his moral character. Tuesday, August 10, 2010, shall be a very sad day for Americans.
Dow 10,698.75, +45.19 (0.42%)
NASDAQ 2,305.69, +17.22 (0.75%)
S&P 500 1,127.79, +6.15 (0.55%)
NYSE Composite 7,188.30, +34.58 (0.48%)
On Monday, advancing issues far outweighed declining ones, 4498-1978. New highs overwhelmed new lows, 443-67. If it wasn't for the absurdly low volume of trading, one might believe we're on the cusp of a new bull market, which is precisely what the Wall Street hucksters wish you to believe, all along ready to hit the sell button and exit profitable positions built up over the past month, six months and since March of 2009. By the time the bear market has finished with what's available, all of those gains will be gone, forgotten, vanished. Valuations are so abnormally outside reality that a crash is nearly inevitable and has been for many months. It will occur, probably prior to the November elections, if only to better serve the interests of the so-called conservative faction, they being the paid lackeys of the ruling Wall Street elite.
NASDAQ Volume 1,642,519,125
NYSE Volume 3,631,964,750
Crude oil for September delivery was up another 78 cents on the day, to $81.48. Its relationship to the declining dollar is well-defined and will follow that same path of least resistance. If the dollar hegemony in oil pricing is ever broken, the world financial system will be in calamity for some period, the United States bearing the worst of it. Oil prices are going to rise for the near term, only because the US dollar is going to continue to fall. That's just the current case.
Gold lost $2.70, to settle neatly at everyone's favored price level, $1,200.70. It's a number not-too-threatening to the central bankers of the fiat-money nations, not too disliked by gold bugs, not subject to speculation nor implications of manipulation. It's about the only stable currency (oops, did I call gold "currency?") there is these days.
Silver continues to drift rudderless, losing 23 cents, to $18.23. It has lagged so far behind gold as to be almost untethered from its metallic counterpart.
The low volume price gains in the major markets are screaming sell signals on low volume. A topping out is underway in equities, but be not surprised if the averages continue a light climb until options expiration on August 20. After that, there is no bottom.
Monday, August 9, 2010
Friday, August 6, 2010
The Stock Market is Broken
Today's trading supplied more than sufficient evidence that the major stock exchanges in the United States are broken.
Following the release of the most important data in a month's time, the monthly US non-farm payroll report, futures fell, and so did stocks at the open, and with good reason.
The Bureau of Labor Statistics reported a July payroll decline of 131,000, mostly due - according to the completely inept and inefficient government - to layoffs of of thousands of census workers, though private sector payrolls were said to have increased by some 70,000.
Overall, it was an inexcusable report, with private payrolls even failing to meet the needed capacity to keep up with population growth. In normal, orderly markets, the Dow Jones Industrials would have declined some 200 to 300 points, possibly more, but, being that Wall Street and Washington are so completely corrupt and in cahoots, stocks only fell during the session, closing with what cannot even be called "modest" losses. The minuscule size of today's declines are not in proper proportion with economic reality.
The maximum the Dow was down on the day was 160 points, with the other indices generally in line. Thanks to a late-day rally which began precisely an hour and fifteen minutes before the markets were to close, stocks ended nearly flat.
An exceptional article by Jim Sinclair sums up the current condition rather succinctly.
Dow 10,653.56, -21.42 (0.20%)
NASDAQ 2,288.47, -4.59 (0.20%)
S&P 500 1,121.64, -4.17 (0.37%)
NYSE Composite 7,153.72, -20.55 (0.29%)
Decliners beat advancing issues, 3590-2804. New highs ramped past new lows, 347-127. Volume was once again on the sorry side of pathetic. Surely there was a great deal of arbitrage within particular stocks, mostly the volume leaders, which is where the hedge funds frolic these days. The overall tone of the market is one in which a few players are actually still interested. It is flat and lacking dynamism and liquidity, due to fail, though apparently not on any genuine bad news.
NASDAQ Volume 1,886,263,625
NYSE Volume 4,467,197,500
The commodity space was much more entertaining today than the equity markets. Oil fell $1.30, to $80.70, in line with the decimation of the US dollar. Gold gained a tidy $6.20, finishing the work-week at $1,203.40. Silver added 15 cents, to $18.46. There seems to be no stopping Forex traders from hammering the dollar versus other currencies. The greenback was slaughtered by the Euro and the Yen, in a nearly honest appreciation of the employment situation in the US.
For investment purposes, stocks should be almost completely shunned at the juncture. With a Fed meeting next week, some are hoping for action, in the form of more quantitative easing, or at least the announcement of such, in response to the horrible economic conditions within the US borders, though none is likely, and, even if it is, will only provide more cover for the clowns in suits who occupy the Fed, Treasury and all three branches of the federal government.
The United States is slowly being bled to death by a thousand paper cuts applied by the government-approved banking/financial cartel.
Markets which cannot properly respond to critical economic data are rouge casinos, not orderly mechanisms for the trade of investment vehicles.
To further illustrate how the stock market is not in sync with reality, bonds tumbled like dominoes. The 10-year yield, already closing in on historic lows, fell 8 basis points to 2.82%. The five-year yield, which only a month ago was 1.78%, fell today to 1.50%. These Treasury bond prices truly reflect the economic condition of a country without support other than that which it commands from within. Fear is writ large in the bond prices. Unless there is a sudden change in political thinking and practicality, the economy will continue to languish.
Following the release of the most important data in a month's time, the monthly US non-farm payroll report, futures fell, and so did stocks at the open, and with good reason.
The Bureau of Labor Statistics reported a July payroll decline of 131,000, mostly due - according to the completely inept and inefficient government - to layoffs of of thousands of census workers, though private sector payrolls were said to have increased by some 70,000.
Overall, it was an inexcusable report, with private payrolls even failing to meet the needed capacity to keep up with population growth. In normal, orderly markets, the Dow Jones Industrials would have declined some 200 to 300 points, possibly more, but, being that Wall Street and Washington are so completely corrupt and in cahoots, stocks only fell during the session, closing with what cannot even be called "modest" losses. The minuscule size of today's declines are not in proper proportion with economic reality.
The maximum the Dow was down on the day was 160 points, with the other indices generally in line. Thanks to a late-day rally which began precisely an hour and fifteen minutes before the markets were to close, stocks ended nearly flat.
An exceptional article by Jim Sinclair sums up the current condition rather succinctly.
Dow 10,653.56, -21.42 (0.20%)
NASDAQ 2,288.47, -4.59 (0.20%)
S&P 500 1,121.64, -4.17 (0.37%)
NYSE Composite 7,153.72, -20.55 (0.29%)
Decliners beat advancing issues, 3590-2804. New highs ramped past new lows, 347-127. Volume was once again on the sorry side of pathetic. Surely there was a great deal of arbitrage within particular stocks, mostly the volume leaders, which is where the hedge funds frolic these days. The overall tone of the market is one in which a few players are actually still interested. It is flat and lacking dynamism and liquidity, due to fail, though apparently not on any genuine bad news.
NASDAQ Volume 1,886,263,625
NYSE Volume 4,467,197,500
The commodity space was much more entertaining today than the equity markets. Oil fell $1.30, to $80.70, in line with the decimation of the US dollar. Gold gained a tidy $6.20, finishing the work-week at $1,203.40. Silver added 15 cents, to $18.46. There seems to be no stopping Forex traders from hammering the dollar versus other currencies. The greenback was slaughtered by the Euro and the Yen, in a nearly honest appreciation of the employment situation in the US.
For investment purposes, stocks should be almost completely shunned at the juncture. With a Fed meeting next week, some are hoping for action, in the form of more quantitative easing, or at least the announcement of such, in response to the horrible economic conditions within the US borders, though none is likely, and, even if it is, will only provide more cover for the clowns in suits who occupy the Fed, Treasury and all three branches of the federal government.
The United States is slowly being bled to death by a thousand paper cuts applied by the government-approved banking/financial cartel.
Markets which cannot properly respond to critical economic data are rouge casinos, not orderly mechanisms for the trade of investment vehicles.
To further illustrate how the stock market is not in sync with reality, bonds tumbled like dominoes. The 10-year yield, already closing in on historic lows, fell 8 basis points to 2.82%. The five-year yield, which only a month ago was 1.78%, fell today to 1.50%. These Treasury bond prices truly reflect the economic condition of a country without support other than that which it commands from within. Fear is writ large in the bond prices. Unless there is a sudden change in political thinking and practicality, the economy will continue to languish.
Thursday, August 5, 2010
Dead Money Littering Wall Street as Suckers Flee
When you buy into a stock that refuses to go up in a meaningful way (Pfizer over the past five years is a good example) you have what is known among traders as "dead money." It's just sitting there doing nothing, not earning interest, just kind of lying around.
Now, that might be a good thing during a deflationary debacle like the one we're currently undertaking, so, maybe the dead money issue isn't all that earth-shattering a concept, after all, though, if you're used to the usual 15% returns that Wall Street hucksters promise, money lying around isn't your typical bag.
For the rest of us, those smart enough to stick our money in a coffee can or inside a wall safe, it's all well and good, so long as prices don't go ridiculously higher all of a sudden. There are a slew of misconceptions about money and its uses and usefulness, most of them aimed at baby-boomers with excess cash they're supposedly saving for a child's college, or a wedding or retirement, and most of those misconceptions usually involve keeping your money at work and not lazing around in a lounge chair in the back yard getting a tan.
However, based on the trading (in)activity the past few days, the concept of dead money might just be catching on. Stocks have just undergone a pretty significant rally - first, off the lows of March 2009, and more recently, about an 11% move back to where they now have settled, and nobody seems willing to sell, or to buy. Volume has dried up rather abruptly over the past two days, leaving open the question of whether Wall Street is even relevant anymore.
It seems that the majority of Americans who don't really have a whole lot of faith in the publicly-traded equity markets and have moved, over the past two years, into largely bond-related funds, are more than content with just keeping what they have instead of risking it in stocks. With the small investor clearly out of the market, that leaves mostly professionals and the very wealthy to do most of he trading on a day-to-day basis, but even they have become significantly more risk-averse of late, which means that the bulk of the trading has been left in the rather unstable hands of hedge fund managers and high-frequency traders.
Now, when these boys slow down there's really nothing left to keep markets bubbling, creating a sea of dead money, or more in the vernacular of economists, a liquidity crunch, which is precisely what we're staring at today.
It would seem, after the worst weekly unemployment claims figures since April came out this morning, and retail sales from a wide variety of chain stores showed poorly, that stocks would be sold off rather dramatically, and that seemed to be the case early on, but, buyers stepped in midday to soak up some of the losses, leaving the markets in a rather untidy state of affairs, with all indices down slightly, spending the entire session in the red, on volume that has to be one of the lightest five days of the year.
Truly pathetic, it was.
Dow 10,674.98, -5.45 (0.05%)
NASDAQ 2,293.06, -10.51 (0.46%)
S&P 500 1,125.81, -1.43 (0.13%)
NYSE Composite 7,174.27, -7.87 (0.11%)
Market internals showed a different side of the story as declining issues ran rampant over advancers, 3898-2509. New highs managed to maintain their sizable edge over new lows, 372-92.
NASDAQ Volume 1,704,054,000
NYSE Volume 4,089,902,750
In commodities, the September light crude oil futures contract fell by 48 cents, to $82.01. Gold gained $3.50, to finish at $1,197.20. Silver was up 4 cents, to $18.31.
With the July non-farm payroll report out tomorrow prior to the open, one would have expected a little more excitement, especially in light of the dreary economic data that seems to roll onto the street every day, but there was little movement overall, suggesting that these markets are suffering from a lack of interest bordering on apathy, due to a number of factors, but mostly, distrust, fear, uncertainty of the future and having been burned once too often.
It's the same kind of thing that happens with crooked card games. In the early stages, there a pigeons a'plenty. But, once word begins to get around and a few mouthy types get taken to the cleaners, the game dries up, and the cheaters end up playing penny-ante games amongst themselves, wiling away the hours, days and weeks.
We may be witnessing the initial stages of the final collapse of the Wall Street Ponzi scheme. They may have run out of suckers.
Now, that might be a good thing during a deflationary debacle like the one we're currently undertaking, so, maybe the dead money issue isn't all that earth-shattering a concept, after all, though, if you're used to the usual 15% returns that Wall Street hucksters promise, money lying around isn't your typical bag.
For the rest of us, those smart enough to stick our money in a coffee can or inside a wall safe, it's all well and good, so long as prices don't go ridiculously higher all of a sudden. There are a slew of misconceptions about money and its uses and usefulness, most of them aimed at baby-boomers with excess cash they're supposedly saving for a child's college, or a wedding or retirement, and most of those misconceptions usually involve keeping your money at work and not lazing around in a lounge chair in the back yard getting a tan.
However, based on the trading (in)activity the past few days, the concept of dead money might just be catching on. Stocks have just undergone a pretty significant rally - first, off the lows of March 2009, and more recently, about an 11% move back to where they now have settled, and nobody seems willing to sell, or to buy. Volume has dried up rather abruptly over the past two days, leaving open the question of whether Wall Street is even relevant anymore.
It seems that the majority of Americans who don't really have a whole lot of faith in the publicly-traded equity markets and have moved, over the past two years, into largely bond-related funds, are more than content with just keeping what they have instead of risking it in stocks. With the small investor clearly out of the market, that leaves mostly professionals and the very wealthy to do most of he trading on a day-to-day basis, but even they have become significantly more risk-averse of late, which means that the bulk of the trading has been left in the rather unstable hands of hedge fund managers and high-frequency traders.
Now, when these boys slow down there's really nothing left to keep markets bubbling, creating a sea of dead money, or more in the vernacular of economists, a liquidity crunch, which is precisely what we're staring at today.
It would seem, after the worst weekly unemployment claims figures since April came out this morning, and retail sales from a wide variety of chain stores showed poorly, that stocks would be sold off rather dramatically, and that seemed to be the case early on, but, buyers stepped in midday to soak up some of the losses, leaving the markets in a rather untidy state of affairs, with all indices down slightly, spending the entire session in the red, on volume that has to be one of the lightest five days of the year.
Truly pathetic, it was.
Dow 10,674.98, -5.45 (0.05%)
NASDAQ 2,293.06, -10.51 (0.46%)
S&P 500 1,125.81, -1.43 (0.13%)
NYSE Composite 7,174.27, -7.87 (0.11%)
Market internals showed a different side of the story as declining issues ran rampant over advancers, 3898-2509. New highs managed to maintain their sizable edge over new lows, 372-92.
NASDAQ Volume 1,704,054,000
NYSE Volume 4,089,902,750
In commodities, the September light crude oil futures contract fell by 48 cents, to $82.01. Gold gained $3.50, to finish at $1,197.20. Silver was up 4 cents, to $18.31.
With the July non-farm payroll report out tomorrow prior to the open, one would have expected a little more excitement, especially in light of the dreary economic data that seems to roll onto the street every day, but there was little movement overall, suggesting that these markets are suffering from a lack of interest bordering on apathy, due to a number of factors, but mostly, distrust, fear, uncertainty of the future and having been burned once too often.
It's the same kind of thing that happens with crooked card games. In the early stages, there a pigeons a'plenty. But, once word begins to get around and a few mouthy types get taken to the cleaners, the game dries up, and the cheaters end up playing penny-ante games amongst themselves, wiling away the hours, days and weeks.
We may be witnessing the initial stages of the final collapse of the Wall Street Ponzi scheme. They may have run out of suckers.
Wednesday, August 4, 2010
A Thousand Points of (False) Hope
Stocks on the major indices closed near their highs of the day, pushing the averages ahead for the 14th time in the last 21 sessions - about a month's worth.
Most of the upside movement since the 4th of July holiday has been on lighter-than-normal volume, and today was certainly no exception. Out of a universe of over 3000 stocks, the top five most active on the NYSE accounted for 12.5% of the volume, a skewing to the degree of magnitude of nearly 100 times normal, proving that when analysts say that most people trade the same stocks, they surely aren't lying about it.
Those five stocks - Citigroup (C), Bank of America (BAC), Motorola (MOT), Pfizer (PFE) and Ford (F) all trade for under $20 per share and have since Autumn of 2008, when the systemic financial collapse made everyone rethink valuation models. It's patently clear that investors have gotten stuck in a routine, especially in the case of Citi and BofA, two stocks which, under better-managed conditions would have been bankrupted and de-listed long ago. The pair of zombie banks consistently lead the most actives, as gamblers attempt to profit from fairly large percentage moves in what have become, essentially, penny stocks.
Another interesting side note on those top five is that all but Bank of America posted a gain, though Citigroup's was only a slim penny advance. BofA dropped by 14 cents, making the two most actively traded stocks the worst of the bunch. One can only speculate as to why so many trades occur on these two dogs, but there are, almost without a doubt, plenty of sellers, long-term holders who a quietly slipping their money out of them.
The advances over the past three days have pushed the Dow to a 1000-point gain over the past month, putting them right at (for Fibonacci fans) a 67% retracement of the 1500-point decline which commenced from mid-April to the first days of July.
At what appears to be a key inflection point, stocks face an uphill battle to surpass the April high of 12,200 on the Dow. Since the latest move has been fueled largely by excellent second quarter results from a wide swath of companies (notably, neither BAC nor C among them), the propellant seems to be missing for the final push, replaced by two key data points: Thursday's unemployment claims figures and Friday's July non-farm payroll report.
There were an equal amount of groans and cheers this morning when ADP released its own private payroll report for July, showing 42,000 new jobs being created during the month. Since the report does not include government employment, it serves as a proxy for Friday's figures, which are likely to come in only slightly on the positive side or even negative, due to layoffs from expired census employment. Thursday morning's unemployment data will provide another clue.
It's probably safe to say, barring any outsize surprise on the upside, that stocks are ready for a reversal after a month in a fantasy zone, though those of the bearish camp will contend that the stock market does not represent the US economy, and thus will continue to climb on their own.
There is some degree of truth to that argument, but if US-based companies refuse to hire US citizens, as they have for the past two years (ad for some, much longer than that), there will be bottom-line damage eventually, unless the companies in question are doing 75% or more of their business outside the USA, in which case they should be listed on another, non-US exchange. The US market is still the largest and most important, and people without jobs cannot continue to buy good and services at a steadily-growing rate. Of course, should congress deem that unemployment benefits should continue indefinitely, beyond the currently-absurd 99 weeks, companies might as well just lay off all US employees and allow the government to pick up the tab.
ISM services index rose from 53.8 in June, to 54.3 in July, eliciting another big whoop from perma-bulls, various tea-partiers and clueless analysts, who seem to be everywhere at once this summer.
Dow 10,680.43, +44.05 (0.41%)
NASDAQ 2,303.57, +20.05 (0.88%)
S&P 500 1,127.24, +6.78 (0.61%)
NYSE Composite 7,182.14, +35.15 (0.49%)
Advancing issues dominated decliners on the day, 4577-1880; new highs soared past new lows, 408-68; but volume, as previously mentioned, was the real story, well below normal levels and embarrassingly below what used to serve as average prior to the 2008 meltdown.
NASDAQ Volume 1,881,489,125
NYSE Volume 4,293,061,500
Commodity traders seemed unable to gain traction. Oil paused, dropping 8 cents, to $82.47. Gold gained $8.50, to $1,193.70, though silver did not follow on, losing 14 cents to $18.26.
With new economic data on the horizon, there appears to be no new catalyst with which to lift equities near-term, and longer-term prospects, heading into 2011, also seem pinned to dim, or even false, hopes.
Most of the upside movement since the 4th of July holiday has been on lighter-than-normal volume, and today was certainly no exception. Out of a universe of over 3000 stocks, the top five most active on the NYSE accounted for 12.5% of the volume, a skewing to the degree of magnitude of nearly 100 times normal, proving that when analysts say that most people trade the same stocks, they surely aren't lying about it.
Those five stocks - Citigroup (C), Bank of America (BAC), Motorola (MOT), Pfizer (PFE) and Ford (F) all trade for under $20 per share and have since Autumn of 2008, when the systemic financial collapse made everyone rethink valuation models. It's patently clear that investors have gotten stuck in a routine, especially in the case of Citi and BofA, two stocks which, under better-managed conditions would have been bankrupted and de-listed long ago. The pair of zombie banks consistently lead the most actives, as gamblers attempt to profit from fairly large percentage moves in what have become, essentially, penny stocks.
Another interesting side note on those top five is that all but Bank of America posted a gain, though Citigroup's was only a slim penny advance. BofA dropped by 14 cents, making the two most actively traded stocks the worst of the bunch. One can only speculate as to why so many trades occur on these two dogs, but there are, almost without a doubt, plenty of sellers, long-term holders who a quietly slipping their money out of them.
The advances over the past three days have pushed the Dow to a 1000-point gain over the past month, putting them right at (for Fibonacci fans) a 67% retracement of the 1500-point decline which commenced from mid-April to the first days of July.
At what appears to be a key inflection point, stocks face an uphill battle to surpass the April high of 12,200 on the Dow. Since the latest move has been fueled largely by excellent second quarter results from a wide swath of companies (notably, neither BAC nor C among them), the propellant seems to be missing for the final push, replaced by two key data points: Thursday's unemployment claims figures and Friday's July non-farm payroll report.
There were an equal amount of groans and cheers this morning when ADP released its own private payroll report for July, showing 42,000 new jobs being created during the month. Since the report does not include government employment, it serves as a proxy for Friday's figures, which are likely to come in only slightly on the positive side or even negative, due to layoffs from expired census employment. Thursday morning's unemployment data will provide another clue.
It's probably safe to say, barring any outsize surprise on the upside, that stocks are ready for a reversal after a month in a fantasy zone, though those of the bearish camp will contend that the stock market does not represent the US economy, and thus will continue to climb on their own.
There is some degree of truth to that argument, but if US-based companies refuse to hire US citizens, as they have for the past two years (ad for some, much longer than that), there will be bottom-line damage eventually, unless the companies in question are doing 75% or more of their business outside the USA, in which case they should be listed on another, non-US exchange. The US market is still the largest and most important, and people without jobs cannot continue to buy good and services at a steadily-growing rate. Of course, should congress deem that unemployment benefits should continue indefinitely, beyond the currently-absurd 99 weeks, companies might as well just lay off all US employees and allow the government to pick up the tab.
ISM services index rose from 53.8 in June, to 54.3 in July, eliciting another big whoop from perma-bulls, various tea-partiers and clueless analysts, who seem to be everywhere at once this summer.
Dow 10,680.43, +44.05 (0.41%)
NASDAQ 2,303.57, +20.05 (0.88%)
S&P 500 1,127.24, +6.78 (0.61%)
NYSE Composite 7,182.14, +35.15 (0.49%)
Advancing issues dominated decliners on the day, 4577-1880; new highs soared past new lows, 408-68; but volume, as previously mentioned, was the real story, well below normal levels and embarrassingly below what used to serve as average prior to the 2008 meltdown.
NASDAQ Volume 1,881,489,125
NYSE Volume 4,293,061,500
Commodity traders seemed unable to gain traction. Oil paused, dropping 8 cents, to $82.47. Gold gained $8.50, to $1,193.70, though silver did not follow on, losing 14 cents to $18.26.
With new economic data on the horizon, there appears to be no new catalyst with which to lift equities near-term, and longer-term prospects, heading into 2011, also seem pinned to dim, or even false, hopes.
Tuesday, August 3, 2010
Deflation Debate Rages as Fed Ponders QE2
Editor's Note: This is a post covering two days - Monday and Tuesday, August 2 and 3 - due to my summer schedule, which includes a late afternoon round of golf on Mondays. The market stats are for Tuesday.
For conspiracy theorists, the constant droning about deflation which began on Friday with St. Louis Fed President James Bullard appearing on "Squawk Box" in the aftermath of his paper, Seven Faces of “"The Peril”", seems ominous enough to conclude that the new master plan is to plunge the economy into a deflationary depression.
While that may or may not be so, there are some views that make future prospects - even with the deflation element added in - not quite so frightening, such as Jim Rickards' thought-provoking response to Paul Krugman that deflation can actually benefit the economy, though Gary North's Economic Warnings From Niall Ferguson and Nassim Taleb and the Golden Jackass (Jim Wilie CB) Kindergarten Double Dip Recession Economics offer less-rosy scenarios.
Of course, here at Money Daily, my position has been consistent - that we've been deflating since August of 2007 - running diametrically-opposed to the views of Puru Saxena, who boldly penned, Debunking the Mainstream Economists Deflation Myths, while neither establishing economic realities as "myths" nor debunking any deflationary tendencies.
For whatever it's worth, the view here is that deflation is a soluble way out of the financial conundrum and relatively painless for regular people who would like their dollars to stretch a little further. For those invested in non-liquid assets with malleable price structures, the result of prolonged deflation might not be so pretty, and could actually be quite messy, ending up in bankruptcy court, where, indeed, many of the mal-investments of the past 20 years belong.
Since the non-stop talking heads on CNBC can't seem to leave the topic alone, it's probably a good sign that deflation is well underway. Either that, or they're purposely trying to scare investors, for whatever nefarious purpose they or their corporate masterminds may have concocted. It wouldn't be the first time that the on-air talent at CNBC was so far behind the curve that it appeared as a straight line, nor will it be the last. One only has to recall the archives from the Fall of '08 for some fresh views of the then-shocked and dismayed countenances witnessing the market meltdown in unanticipated awe.
If deflation truly takes hold and begins a spiral downward - something oil certainly seems not to want to do - day-to-day changes in stock or market indices will become more and more irrelevant over the near term, as will the generally feeble attempts by the Fed to do anything about any part of the economy, except, that is, to make it worse.
A paragraph from Jim Wilie's latest article (linked above) sums up the current catastrophe nicely:
What seems clear is the Fed's desire to re-inflate via Quantitative Easing once again, a plan that has largely failed once and continues to do so, with what has become known as QE2. Should the Fed decide to expand its purchases of Treasuries, agency and mortgage slush, the result will be more of the same: banks will hoard cash, consumers won't spend and the dollar will be reduced in value against other currencies, which, naturally, may be the Fed's plan in a nutshell.
Debasing the greenback may (probably) not stimulate the US economy, but it will have the effect of improving our trade balance if only by making exports cheaper. That benefit accrues mostly to multi-national corporations, the very same ones that have been reporting stellar second quarter results while the real world wallows in a sea of debt, fear and uncertainty.
They'll probably do it, and it will probably fail, deflation will rule, and the brainy folks who call themselves economists can all go scratch their collective heads. While inflation, according to Milton Friedman, is always a "monetary event," deflation will prov to be a global fiscal event with long-lasting implications.
On Monday, traders sent stocks soaring like the Yankees had just won the World Series, based upon some very suspect ISM numbers, which actually fell from the previous month and were only buoyed by the artificial stimulus of public sector (government) spending.
Tuesday saw no visible follow-through, a hint that the massive Monday rally was only a trading ploy, designed to maximize profits from shorting into Friday's non-farm payroll report. Stocks plummeted right off the open and spent the rest of the day underwater, partially recovering.
Dow 10,636.38, -38.00 (0.36%)
NASDAQ 2,283.52, -11.84 (0.52%)
S&P 500 1,120.46, -5.40 (0.48%)
NYSE Composite 7,146.99, -27.91 (0.39%)
Decliners led advancers, 4000-2430; new highs lead new lows, 361-73. Volume was downright pathetic, even for August.
NASDAQ Volume 2,011,883,125
NYSE Volume 4,551,798,500
Oil continued to confound, gaining $1.21, to $82.55, an overshoot of dramatic proportions. Gold gained $1.80, to $1,185.20, while silver was unchanged, at $18.41.
For conspiracy theorists, the constant droning about deflation which began on Friday with St. Louis Fed President James Bullard appearing on "Squawk Box" in the aftermath of his paper, Seven Faces of “"The Peril”", seems ominous enough to conclude that the new master plan is to plunge the economy into a deflationary depression.
While that may or may not be so, there are some views that make future prospects - even with the deflation element added in - not quite so frightening, such as Jim Rickards' thought-provoking response to Paul Krugman that deflation can actually benefit the economy, though Gary North's Economic Warnings From Niall Ferguson and Nassim Taleb and the Golden Jackass (Jim Wilie CB) Kindergarten Double Dip Recession Economics offer less-rosy scenarios.
Of course, here at Money Daily, my position has been consistent - that we've been deflating since August of 2007 - running diametrically-opposed to the views of Puru Saxena, who boldly penned, Debunking the Mainstream Economists Deflation Myths, while neither establishing economic realities as "myths" nor debunking any deflationary tendencies.
For whatever it's worth, the view here is that deflation is a soluble way out of the financial conundrum and relatively painless for regular people who would like their dollars to stretch a little further. For those invested in non-liquid assets with malleable price structures, the result of prolonged deflation might not be so pretty, and could actually be quite messy, ending up in bankruptcy court, where, indeed, many of the mal-investments of the past 20 years belong.
Since the non-stop talking heads on CNBC can't seem to leave the topic alone, it's probably a good sign that deflation is well underway. Either that, or they're purposely trying to scare investors, for whatever nefarious purpose they or their corporate masterminds may have concocted. It wouldn't be the first time that the on-air talent at CNBC was so far behind the curve that it appeared as a straight line, nor will it be the last. One only has to recall the archives from the Fall of '08 for some fresh views of the then-shocked and dismayed countenances witnessing the market meltdown in unanticipated awe.
If deflation truly takes hold and begins a spiral downward - something oil certainly seems not to want to do - day-to-day changes in stock or market indices will become more and more irrelevant over the near term, as will the generally feeble attempts by the Fed to do anything about any part of the economy, except, that is, to make it worse.
A paragraph from Jim Wilie's latest article (linked above) sums up the current catastrophe nicely:
The chain of ignominy includes gaping blind spots, blatantly wrong forecasts, minimized ignitions that spread crisis, misguided focus on goofy indicators, outright removal of important indicators, sloppy deception of monetization efforts (see last week's article), clumsy justification of Wall Street welfare, backwards perception of Too Big To Fail banks, and lying before the USCongress. The nation is dominated by fools who profess the lasting benefits of 'Hand to Mouth' approaches like tax rebates, purchase credits, jobless insurance extensions, and helicopter drops. Their worst investments are their biggest investments, like Fannie Mae and AIG nationalizations travesties. Harken back only to last winter, when economists were talking about a second half recovery, running all the red lights and stop signs. Then they shifted the klapptrapp to claims of a jobless recovery, which should evoke laughter from its impossibility. The economic counsel has forgotten what capital formation means, while they prepare for their next tourniquet to be applied to hemorrhages. The objective of monetary policy and banking policy is not recovery, but instead very clearly to retain power.
What seems clear is the Fed's desire to re-inflate via Quantitative Easing once again, a plan that has largely failed once and continues to do so, with what has become known as QE2. Should the Fed decide to expand its purchases of Treasuries, agency and mortgage slush, the result will be more of the same: banks will hoard cash, consumers won't spend and the dollar will be reduced in value against other currencies, which, naturally, may be the Fed's plan in a nutshell.
Debasing the greenback may (probably) not stimulate the US economy, but it will have the effect of improving our trade balance if only by making exports cheaper. That benefit accrues mostly to multi-national corporations, the very same ones that have been reporting stellar second quarter results while the real world wallows in a sea of debt, fear and uncertainty.
They'll probably do it, and it will probably fail, deflation will rule, and the brainy folks who call themselves economists can all go scratch their collective heads. While inflation, according to Milton Friedman, is always a "monetary event," deflation will prov to be a global fiscal event with long-lasting implications.
On Monday, traders sent stocks soaring like the Yankees had just won the World Series, based upon some very suspect ISM numbers, which actually fell from the previous month and were only buoyed by the artificial stimulus of public sector (government) spending.
Tuesday saw no visible follow-through, a hint that the massive Monday rally was only a trading ploy, designed to maximize profits from shorting into Friday's non-farm payroll report. Stocks plummeted right off the open and spent the rest of the day underwater, partially recovering.
Dow 10,636.38, -38.00 (0.36%)
NASDAQ 2,283.52, -11.84 (0.52%)
S&P 500 1,120.46, -5.40 (0.48%)
NYSE Composite 7,146.99, -27.91 (0.39%)
Decliners led advancers, 4000-2430; new highs lead new lows, 361-73. Volume was downright pathetic, even for August.
NASDAQ Volume 2,011,883,125
NYSE Volume 4,551,798,500
Oil continued to confound, gaining $1.21, to $82.55, an overshoot of dramatic proportions. Gold gained $1.80, to $1,185.20, while silver was unchanged, at $18.41.
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