Before getting to the important part of this posting, a quick recap of the day on Wall Street is the usual requisite, so...
Here's what happened:
Dow 10,607.85. +13.02 (0.12%)
NASDAQ 2,315.61, +12.36 (0.54%)
S&P 500 1,125.59, +0.93 (0.08%)
NYSE Composite 7,154.64, -14.84 (0.21%)
NASDAQ Volume 2,174,708,250
NYSE Volume 4,437,062,000
Not much, even for a quad-witching options day, which is supposed to be "volatile." US markets are, if anything, operating on borrowed money and borrowed time. The money's been borrowed from the Fed and the time is just a matter of when somebody with a large enough stake says, "good-bye." It's a game of chicken and nobody wants to be the last one in the room.
Note that the NYSE, the broadest measure of equities, was the only one down, and also the only index usually not quoted by the major news services.
Advancing issues beat decliners, 3321-2395, but it's mostly just churning. New highs maintained their daily edge over new lows, 413-58, another meaningless metric, due to the large, unannounced number of issues de-listed in the past six to nine months. Volume was higher than normal, but still not of any degree anyone would get excited about. Most of the additional trading was due to the aforementioned quadruple-witching in options.
There was probably more action at Belmont Park than on the floor of the NYSE, and it was certainly more fun to watch.
Oil was hammered down another 91 cents lower, to $73.66, but remains stuck in a trading range, emblematic of the global economic condition. Gold closed up $3.70, at $1,275.60, another all-time high. Silver gathered only a nickel higher, to $20.79.
Then there was word on the housing market, from a number of economists, including the widely-quoted Mark Zandi of Moody's, who's been proven wrong so many times that most people have stopped counting.
Zandi believes housing prices will drop another 5% by 2013, and then says, "After reaching bottom, prices will gain at the historic annual pace of 3 percent..." He's probably wrong on the magnitude by a measure of three or four times. Residential real estate likely has 15-20% more to decline. As to his predicted annual growth pace of 3%, it's already well-established that home prices normally rise by about one per cent, not triple that.
Somebody ought to hand Zandi a golden parachute and shove him off a skyscraper so he can stop deluding himself that he's making sense. After all, he does work for one of the rating agencies which said all that toxic, sub-prime, re-packaged, securitized mortgage garbage was AAA-rated. The guy ought to be in jail rather than on CNBC.
The upshot is that the banks have such a monster of a problem on their hands that they and the courts cannot handle it in a reasonably timely manner. The absolute implosion of the US housing market has left a crater in the economy the size of Rush Limbaugh's ego, and that's enormous. The basic paradigm for buying a house these days is to offer 30% below the asking price, and see how badly the owners - either a bank or a homeowner or a combination of both - want out of it.
Then try and get a mortgage. A million more laughs.
The glut of homes - unoccupied, unrented, in need of repair, under-water financially - is mammoth and everywhere. Count on a minimum of three and probably more like five more years of pain, price declines and associated nonsense about finding "the bottom," which will only be reached when the banks realize that it's not worth their time or expense to pursue further exposure and foreclosures and they become the party which "walks away." When the banks no longer want the properties, no longer feel there's any gain in bleeding consumers dry with fees and interest, and the property taxes, maintenance and insurance exceed what they can hope to recover on unsold inventory, there will be a bottom, and it's going to be one heck of a lot lower and a heck of a lot further out than most people anticipate.
Too many houses at prices too many people can't afford. Simple math.
Following are the promised quotes. Have a lovely weekend.
"I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs."
-- Thomas Jefferson, (Attributed)
3rd president of US (1743 - 1826)
"Permit me to issue and control the money of a nation, and I care not who makes its laws."
-- Mayer Amschel Rothschild
"Income tax is nothing but wage slavery. If you have payroll deductions, you are a slave. Only way to fix it is for everyone to quit, or, as in Europe, the whole nation goes on strike. It won't happen here. Americans are too stupid and too frightened by their own government. I am not. I could care less. Let them come and take my house and my belongings. I will start over, stronger. I love this country, but I hate the people who run it."
-- Ed.
Friday, September 17, 2010
Thursday, September 16, 2010
Wheels Coming Off Global Economy
Today may have been a watershed day for the demise of the global economy. There were any number of troubling events - most of which were completely overlooked by the computers making trades on US markets - that signal a major event could decouple governments from their economies, people from their money, banks from credits, and on and on...
Take, for instance, the activity in the Forex markets, where the Bank of Japan decided to intervene for the first time in six years, to keep the Yen from appreciating. The intervention actually took place on Wednesday, but it's effects will be far-reaching and continual. All currencies are seeking levels at which they can find comfort in trade - cheap imports, value on exports - but, not everybody can have it their way, obviously. These kinds of things lead to crises, political, economic and sometimes military.
But that's probably not going to get too many people worked up. Maybe the thought of foreclosures on the rise might suffice. The banks are apparently trying to manage the foreclosure process, in other words, slowing it down so that they don't create a glut of homes on the market and cause prices to fall even further.
It's a gamble that isn't likely to work out, however. Prices do what they're supposed to do. Mismanaged properties sell for less. Homes which were overpriced to begin with will find their correct level. Despite what the bankers holding most of the mortgages (Bank of America) believe, Americans are smarter than they think, and with an economy suffering from 20% real unemployment, keeping prices suspended artificially is probably more wishful thinking than prudent planning.
The real estate market has gone through this before, as in the past two years the flood of foreclosures was partially stemmed by various government programs and tax bribes, modifications and work-outs. Home prices fell precipitously, nevertheless. So, as with anything having to do with banks these days, we offer a hearty, "good luck with that!"
How about thinking ahead a bit, like how much you'll be taking in every month when you're retired? The news there isn't very rosy either. Here's a report that offers the sobering conclusion that at the end of 2008 (hey, that was almost two years ago!), public pension funds were experiencing a shortfall of anywhere between $1 Trillion and $4.4 TRILLION! That's a lot of money that people are unlikely to be receiving in their "golden years."
But, that's just the start of it. Of the more than 1700 publicly-traded companies which operate pension plans for employees almost all of them are seriously underfunded. "The assets of corporate pensions relative to their deficits, known as the funded ratio, fell to 70.1% in August..." says a report by the Milliman 100 Pension Funding Index.
And that's without even looking at Social Security or Medicare, both systems hopelessly bankrupt and already bleeding red ink. When baby-boomers begin retiring in droves in the next two to five years, the systems will be beyond repair and likely need major modifications, such as no COLA, raised retirement ages and lower benefits. (Ed. Note: Being 56 myself, this doesn't make me necessarily happy, though my choice to not pay into any kind of pension plan and avoid SS tax at all costs now seems a prudent maneuver.)
OK, had enough? How about chewing on an arcane document of the American Monetary Institute from 2004, delivered by Director Stephen Zarlenga to the British House of Lords, which outlines, among other things, how government issuing money (not the Federal Reserve, a private bank), without the backing of gold or silver, has been the most fruitful.
This shoots major holes in the argument that "gold is money," and a true store of value and all the other clap-trap that have made gold the most speculative, over-priced commodity on the planet. As I and some non-gold-infused friends like to say, "you can't eat a gold bar and you can't buy a candy bar with it", or, "try buying a loaf of bread with a Kruggerand. Ypu've have better luck buying the whole bakery."
So much for the bad news. There was some good news, somewhere, but nobody seemed able to locate it. Nonetheless, the computers trading US stocks (You do know that 70% of all trades are executed without human involvement, don't you?) managed to issue forth another split decision, with the Dow and NASDAQ up, but the S&P and NYSE down, that, in itself, troubling. market divergence is almost always a telling sign that a correction isn't far off. Making matters more complex and compelling, trading volumes were down to absurdly low levels once again, running at a rate 30% below last year.
Dow 10,594.83, +22.10 (0.21%)
NASDAQ 2,303.25, +1.93 (0.08%)
S&P 500 1,124.66, -0.41 (0.04%)
NYSE Composite 7,169.48, -10.31 (0.14%)
In opposition to the benign headline numbers, declining issues pounded advancers, 3419-2260. The number of new highs to new lows remained static and statistically insignificant, at 308-48.
NASDAQ Volume 1,703,297,625
NYSE Volume 3,354,712,000
Crude oil futures were slammed down $1.45, to $74.57, but gold made another all-time high, at $1,271.90. up $5.20. Silver kept climbing in stride, up 20 cents, to $20.74.
Now, if there's anything we should have learned from first, the tech bubble of the late 90s and second, the housing bubble of the 2000s, that when the object of the bubble is advertised heavily on TV - remember Pets.com? How about 125% home equiy loans? - it's usually safe to say the asset is overpriced and due for a fall. It happened with tech stocks. It happened with houses, so it's probably going to happen with gold (and probably silver) because of the rampant number of ads telling us to buy gold, cash in our gold and get gold or cash in some manner. It's a mania, pure and simple. Gold and silver have increased in value by 400% or more over the past decade. When will it end? Nobody really knows, but buying at these nosebleed levels is the stuff of fools. Real estate looks much better, especially if you're assigned to the basic tenet of all investing, "buy low, sell high."
Take, for instance, the activity in the Forex markets, where the Bank of Japan decided to intervene for the first time in six years, to keep the Yen from appreciating. The intervention actually took place on Wednesday, but it's effects will be far-reaching and continual. All currencies are seeking levels at which they can find comfort in trade - cheap imports, value on exports - but, not everybody can have it their way, obviously. These kinds of things lead to crises, political, economic and sometimes military.
But that's probably not going to get too many people worked up. Maybe the thought of foreclosures on the rise might suffice. The banks are apparently trying to manage the foreclosure process, in other words, slowing it down so that they don't create a glut of homes on the market and cause prices to fall even further.
It's a gamble that isn't likely to work out, however. Prices do what they're supposed to do. Mismanaged properties sell for less. Homes which were overpriced to begin with will find their correct level. Despite what the bankers holding most of the mortgages (Bank of America) believe, Americans are smarter than they think, and with an economy suffering from 20% real unemployment, keeping prices suspended artificially is probably more wishful thinking than prudent planning.
The real estate market has gone through this before, as in the past two years the flood of foreclosures was partially stemmed by various government programs and tax bribes, modifications and work-outs. Home prices fell precipitously, nevertheless. So, as with anything having to do with banks these days, we offer a hearty, "good luck with that!"
How about thinking ahead a bit, like how much you'll be taking in every month when you're retired? The news there isn't very rosy either. Here's a report that offers the sobering conclusion that at the end of 2008 (hey, that was almost two years ago!), public pension funds were experiencing a shortfall of anywhere between $1 Trillion and $4.4 TRILLION! That's a lot of money that people are unlikely to be receiving in their "golden years."
But, that's just the start of it. Of the more than 1700 publicly-traded companies which operate pension plans for employees almost all of them are seriously underfunded. "The assets of corporate pensions relative to their deficits, known as the funded ratio, fell to 70.1% in August..." says a report by the Milliman 100 Pension Funding Index.
And that's without even looking at Social Security or Medicare, both systems hopelessly bankrupt and already bleeding red ink. When baby-boomers begin retiring in droves in the next two to five years, the systems will be beyond repair and likely need major modifications, such as no COLA, raised retirement ages and lower benefits. (Ed. Note: Being 56 myself, this doesn't make me necessarily happy, though my choice to not pay into any kind of pension plan and avoid SS tax at all costs now seems a prudent maneuver.)
OK, had enough? How about chewing on an arcane document of the American Monetary Institute from 2004, delivered by Director Stephen Zarlenga to the British House of Lords, which outlines, among other things, how government issuing money (not the Federal Reserve, a private bank), without the backing of gold or silver, has been the most fruitful.
This shoots major holes in the argument that "gold is money," and a true store of value and all the other clap-trap that have made gold the most speculative, over-priced commodity on the planet. As I and some non-gold-infused friends like to say, "you can't eat a gold bar and you can't buy a candy bar with it", or, "try buying a loaf of bread with a Kruggerand. Ypu've have better luck buying the whole bakery."
So much for the bad news. There was some good news, somewhere, but nobody seemed able to locate it. Nonetheless, the computers trading US stocks (You do know that 70% of all trades are executed without human involvement, don't you?) managed to issue forth another split decision, with the Dow and NASDAQ up, but the S&P and NYSE down, that, in itself, troubling. market divergence is almost always a telling sign that a correction isn't far off. Making matters more complex and compelling, trading volumes were down to absurdly low levels once again, running at a rate 30% below last year.
Dow 10,594.83, +22.10 (0.21%)
NASDAQ 2,303.25, +1.93 (0.08%)
S&P 500 1,124.66, -0.41 (0.04%)
NYSE Composite 7,169.48, -10.31 (0.14%)
In opposition to the benign headline numbers, declining issues pounded advancers, 3419-2260. The number of new highs to new lows remained static and statistically insignificant, at 308-48.
NASDAQ Volume 1,703,297,625
NYSE Volume 3,354,712,000
Crude oil futures were slammed down $1.45, to $74.57, but gold made another all-time high, at $1,271.90. up $5.20. Silver kept climbing in stride, up 20 cents, to $20.74.
Now, if there's anything we should have learned from first, the tech bubble of the late 90s and second, the housing bubble of the 2000s, that when the object of the bubble is advertised heavily on TV - remember Pets.com? How about 125% home equiy loans? - it's usually safe to say the asset is overpriced and due for a fall. It happened with tech stocks. It happened with houses, so it's probably going to happen with gold (and probably silver) because of the rampant number of ads telling us to buy gold, cash in our gold and get gold or cash in some manner. It's a mania, pure and simple. Gold and silver have increased in value by 400% or more over the past decade. When will it end? Nobody really knows, but buying at these nosebleed levels is the stuff of fools. Real estate looks much better, especially if you're assigned to the basic tenet of all investing, "buy low, sell high."
Wednesday, September 15, 2010
QE Working Marvelously for Wall Street
Hello, broken record department, how can I help you?
More quantitative easing, please.
Not a problem. Thank you.
Dow 10,572.73, +46.24 (0.44%)
NASDAQ 2,301.32, +11.55 (0.50%)
S&P 500 1,125.07, +3.97 (0.35%)
NYSE Composite 7,179.79, +17.71 (0.25%)
Advancing issues held sway over decliners, 3132-2554. New highs towered over new lows, 309-41. This should be regarded as entirely cosmetic. Even bad companies are good. Volume was higher than it's been in some time.
NASDAQ Volume 2,085,158,125
NYSE Volume 3,617,492,750
News flash: the world is afloat in oil due to slack demand. The current futures contracts sold off 78 cents today, to $76.02. Gold is beginning to feel pricey, down $3.00 today, to $1,266.70. Silver gained 14 cents, to $20.54, a bargain by comparison, though closing in on a 2 1/2 year high.
I played golf and didn't bother to keep score. It was fabulous. Playing alongside one of my very best friends surely didn't diminish the pleasures of the afternoon. Played 18 holes. Even parred one.
It's all a matter of perspective, expectation and liquidity, after all. Right now, liquidity seems to be the position most favored. Buyers markets are springing forth everywhere. When will the money come without strings?
More quantitative easing, please.
Not a problem. Thank you.
Dow 10,572.73, +46.24 (0.44%)
NASDAQ 2,301.32, +11.55 (0.50%)
S&P 500 1,125.07, +3.97 (0.35%)
NYSE Composite 7,179.79, +17.71 (0.25%)
Advancing issues held sway over decliners, 3132-2554. New highs towered over new lows, 309-41. This should be regarded as entirely cosmetic. Even bad companies are good. Volume was higher than it's been in some time.
NASDAQ Volume 2,085,158,125
NYSE Volume 3,617,492,750
News flash: the world is afloat in oil due to slack demand. The current futures contracts sold off 78 cents today, to $76.02. Gold is beginning to feel pricey, down $3.00 today, to $1,266.70. Silver gained 14 cents, to $20.54, a bargain by comparison, though closing in on a 2 1/2 year high.
I played golf and didn't bother to keep score. It was fabulous. Playing alongside one of my very best friends surely didn't diminish the pleasures of the afternoon. Played 18 holes. Even parred one.
It's all a matter of perspective, expectation and liquidity, after all. Right now, liquidity seems to be the position most favored. Buyers markets are springing forth everywhere. When will the money come without strings?
Tuesday, September 14, 2010
Gold, Silver Spike Higher; Stocks Take Rare Hit
Ed. Note: Sometimes, like today, I think I should be writing as a satirist rather than as a junior economist.
Gold soared to record highs today for no particular reason. The yellow metal has been poised for a breakout since mid-summer. Today's move was in concert with another big jump in the price of silver, itself notching a 2 1/2-year high (the London fix was $20.92 on the 17th of March, 2008).
The move in the metals - especially silver - has probably been long overdue, a condition many assign to covert and overt manipulation of the precious metals markets by JP Morgan and other well-connected instruments of the fiat money cartel.
Whatever the reason, the precious metals have been consistently outperforming stocks. 2010 is no exception. Silver is up nearly 20% for the year. Gold is up a nifty 16% while the major stock indices are just barely positive for the year. Could it be that gold and silver are finally becoming more mainstream investment vehicles, regarded by many as not only a hedge against inflation but a true store of value in a world gone mad with hedges, derivatives, deficits, and all manner of opaque investments?
Should that turn out to be the case, expect this move to be only the beginning, as heightened awareness turns into heightened demand. Both have quadrupled in price over the past 10 years. The stock markets, meanwhile, have shown virtually no tangible return over the past decade.
While the metals were making clanging noises, stocks took their first decline (though the NASDAQ was higher at the close) since last Monday, breaking a four-day winning streak, even though the declines were minor.
Dow 10,526.49, -17.64 (0.17%)
NASDAQ 2,289.77, +4.06 (0.18%)
S&P 500 1,121.10, -0.80 (0.07%)
NYSE Composite 7,162.08, +5.90 (0.08%)
For the first time in the past five sessions, declining issues outpaced advancers, 3148-2517. New highs remained at elevated levels compared to new lows, 356-39. Volume was significantly higher on the NASDAQ, though the NYSE continued its regime of exceedingly low volume. Since stocks were mostly lower - especially after a lower open, bounce to multi-day highs and a late-day pullback - volume data could be considered a significant indicator and should be closely monitored near-term.
NASDAQ Volume 2,106,687,000.00
NYSE Volume 3,952,214,250
Crude oil took a back seat, losing 39 cents, to $76.80. Gold, as mentioned above, hit an all-time high of $1,269.70, up a whopping $24.60 (1.98%). Silver also was bid higher, finishing up 29 cents, to $20.40.
Gold soared to record highs today for no particular reason. The yellow metal has been poised for a breakout since mid-summer. Today's move was in concert with another big jump in the price of silver, itself notching a 2 1/2-year high (the London fix was $20.92 on the 17th of March, 2008).
The move in the metals - especially silver - has probably been long overdue, a condition many assign to covert and overt manipulation of the precious metals markets by JP Morgan and other well-connected instruments of the fiat money cartel.
Whatever the reason, the precious metals have been consistently outperforming stocks. 2010 is no exception. Silver is up nearly 20% for the year. Gold is up a nifty 16% while the major stock indices are just barely positive for the year. Could it be that gold and silver are finally becoming more mainstream investment vehicles, regarded by many as not only a hedge against inflation but a true store of value in a world gone mad with hedges, derivatives, deficits, and all manner of opaque investments?
Should that turn out to be the case, expect this move to be only the beginning, as heightened awareness turns into heightened demand. Both have quadrupled in price over the past 10 years. The stock markets, meanwhile, have shown virtually no tangible return over the past decade.
While the metals were making clanging noises, stocks took their first decline (though the NASDAQ was higher at the close) since last Monday, breaking a four-day winning streak, even though the declines were minor.
Dow 10,526.49, -17.64 (0.17%)
NASDAQ 2,289.77, +4.06 (0.18%)
S&P 500 1,121.10, -0.80 (0.07%)
NYSE Composite 7,162.08, +5.90 (0.08%)
For the first time in the past five sessions, declining issues outpaced advancers, 3148-2517. New highs remained at elevated levels compared to new lows, 356-39. Volume was significantly higher on the NASDAQ, though the NYSE continued its regime of exceedingly low volume. Since stocks were mostly lower - especially after a lower open, bounce to multi-day highs and a late-day pullback - volume data could be considered a significant indicator and should be closely monitored near-term.
NASDAQ Volume 2,106,687,000.00
NYSE Volume 3,952,214,250
Crude oil took a back seat, losing 39 cents, to $76.80. Gold, as mentioned above, hit an all-time high of $1,269.70, up a whopping $24.60 (1.98%). Silver also was bid higher, finishing up 29 cents, to $20.40.
Monday, September 13, 2010
Fed-Led Rally Continues; Besides Big Five, Buyers Absent
Stocks just keep going up, up and away, as the Fed-induced liquidity rally lurched forward for the seventh day out of the last eight to the upside. This particular late-summer boost is courtesy of the Federal Reserve, remaining steadily along its path of QE (qualitative easing), today with a $3.4 billion POMO (Permanent Open Market Operation).
One could say the operation was a success, though the patient - US equity markets - are going to eventually become addicted to the easy money, if not already. With the Fed playing almost directly in the markets by purchasing and rolling over Treasuries from the Five Big Banks - JP Morgan, BofA, Citi, Morgan Stanley, Goldman Sachs - there's no good reason for stocks to do anything but go straight up, despite ridiculously low levels of trading volume.
Once the bands have the money in their grubby hands (all done electronically, so executing the movement of these massive amounts of money is both effortless and immediate), some of it surely finds its way into stocks, resulting in what most market viewers call a melt-up. With so much liquidity being provided at near-zero cost on a regular basis, stock indices could easily surpass the 2010 highs achieved in late April - early May.
There's still a way to go - about 600 points on the Dow - but the continuous flow of easy money virtually assures rising stocks and a falling dollar. It's really too bad the Fed and the banks had to resort to these tricks, but when you're broke and desperate, anything goes.
One has to question the policy of the Fed from the perspective of the political class. Republicans would like nothing better than a severe market crash prior to the elections, but the Fed seems to be working the wrong side of the aisle these days, so reports of the demise of the Democrats may be vastly overstated should this money-pumping activity proceed through to November.
As has been the case throughout the grand QE experiment in Keynesian economics, the only beneficiaries of this melt-up are the banks and some very savvy traders who have thrown fundamentals and caution to the wind. It's been a good trade for those involved. The Dow Jones Industrials are up 540 points since September began, with only one 107-point down day. The move will likely continue on course through the remainder of the week, as stock options expire this Friday, and boatloads of money are being made on the upside move.
For the rest of us, we sit back and watch the tableau unfold, secure in the fact that the gains are as artificial as a Vegas hooker's good looks. Banks are hedging as well, buying gold and recently, silver, along with oil and other rising commodities. Stocks, however, are the big kahuna for Wall Street, as the average Joe and Jane six-pack believe that a rising stock market equates to a burgeoning economy. It's truly not even close to being the case, and some data due out later this week may take issue with the "all good" theory circulating on the Street.
Dow 10,544.13, +81.36 (0.78%)
NASDAQ 2,285.71, +43.23 (1.93%)
S&P 500 1,121.90, +12.35 (1.11%)
NYSE Composite 7,156.18, +88.67 (1.25%)
Advancers danced all over declining issues, 4533-1261, and new highs bettered and battered new lows, 406-36, indicating that the rally has no stops in sight. Volume was better than normal on the NASDAQ, though once again in the doldrums on the NYSE. It's amusing to speculate, but once the volume ramps up, that's when a major correction has more probability, as fresh money generally gets trundled off to the big bank vaults.
NASDAQ Volume 1,966,425,500
NYSE Volume 3,893,587,000
Crude oil gained 74 cents, to $77.19. Gold managed a tiny 60 cent gain, to $1,245.10, while silver was up 31 cents, to $20.11, approaching its 2008 high.
Retail sales will be reported tomorrow prior to the opening bell, but the real highlights of the week will come Wednesday and Thursday, when capacity utilization, PPI and CPI are reported. Besides the numbers being purposely managed and massaged, there may be no highlights at all, which, if the Fed and the banks have their way, would be just fine and dandy.
Despite the reflection Wall Street is throwing off, the US economy is still dangerously close to implosion. Employment and housing are still in the throes of a depression, and the fiscal authority is being held together by string and scotch tape. If deflation doesn't take complete hold, runaway inflation will surely be the result, though for the near and middle-term, the outlook remains blush, that is, not quite rosy, but hardly pale.
One could say the operation was a success, though the patient - US equity markets - are going to eventually become addicted to the easy money, if not already. With the Fed playing almost directly in the markets by purchasing and rolling over Treasuries from the Five Big Banks - JP Morgan, BofA, Citi, Morgan Stanley, Goldman Sachs - there's no good reason for stocks to do anything but go straight up, despite ridiculously low levels of trading volume.
Once the bands have the money in their grubby hands (all done electronically, so executing the movement of these massive amounts of money is both effortless and immediate), some of it surely finds its way into stocks, resulting in what most market viewers call a melt-up. With so much liquidity being provided at near-zero cost on a regular basis, stock indices could easily surpass the 2010 highs achieved in late April - early May.
There's still a way to go - about 600 points on the Dow - but the continuous flow of easy money virtually assures rising stocks and a falling dollar. It's really too bad the Fed and the banks had to resort to these tricks, but when you're broke and desperate, anything goes.
One has to question the policy of the Fed from the perspective of the political class. Republicans would like nothing better than a severe market crash prior to the elections, but the Fed seems to be working the wrong side of the aisle these days, so reports of the demise of the Democrats may be vastly overstated should this money-pumping activity proceed through to November.
As has been the case throughout the grand QE experiment in Keynesian economics, the only beneficiaries of this melt-up are the banks and some very savvy traders who have thrown fundamentals and caution to the wind. It's been a good trade for those involved. The Dow Jones Industrials are up 540 points since September began, with only one 107-point down day. The move will likely continue on course through the remainder of the week, as stock options expire this Friday, and boatloads of money are being made on the upside move.
For the rest of us, we sit back and watch the tableau unfold, secure in the fact that the gains are as artificial as a Vegas hooker's good looks. Banks are hedging as well, buying gold and recently, silver, along with oil and other rising commodities. Stocks, however, are the big kahuna for Wall Street, as the average Joe and Jane six-pack believe that a rising stock market equates to a burgeoning economy. It's truly not even close to being the case, and some data due out later this week may take issue with the "all good" theory circulating on the Street.
Dow 10,544.13, +81.36 (0.78%)
NASDAQ 2,285.71, +43.23 (1.93%)
S&P 500 1,121.90, +12.35 (1.11%)
NYSE Composite 7,156.18, +88.67 (1.25%)
Advancers danced all over declining issues, 4533-1261, and new highs bettered and battered new lows, 406-36, indicating that the rally has no stops in sight. Volume was better than normal on the NASDAQ, though once again in the doldrums on the NYSE. It's amusing to speculate, but once the volume ramps up, that's when a major correction has more probability, as fresh money generally gets trundled off to the big bank vaults.
NASDAQ Volume 1,966,425,500
NYSE Volume 3,893,587,000
Crude oil gained 74 cents, to $77.19. Gold managed a tiny 60 cent gain, to $1,245.10, while silver was up 31 cents, to $20.11, approaching its 2008 high.
Retail sales will be reported tomorrow prior to the opening bell, but the real highlights of the week will come Wednesday and Thursday, when capacity utilization, PPI and CPI are reported. Besides the numbers being purposely managed and massaged, there may be no highlights at all, which, if the Fed and the banks have their way, would be just fine and dandy.
Despite the reflection Wall Street is throwing off, the US economy is still dangerously close to implosion. Employment and housing are still in the throes of a depression, and the fiscal authority is being held together by string and scotch tape. If deflation doesn't take complete hold, runaway inflation will surely be the result, though for the near and middle-term, the outlook remains blush, that is, not quite rosy, but hardly pale.
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