For three weeks running, it's been the same story: stocks down, and today's malaise was particularly embarrassing to the NASDAQ and to the underwriters of the Facebook (FB - which should stand for Fail Badly) on a Friday that most traders would likely rather forget.
The Dow Jones industrials closed down for the 12th time in the last 13 sessions, while the S&P and NASDAQ recorded their 10th down day in the last 12. All of the major averages finished in the red every day this week an occurrence so unique that barely a broker or trader can recall the last time it happened. Even on major declines, there's usually a day or two of snap-back rallies, but the current condition is such that all confidence is being shattered as events unfold without a whimper of defiance from the usual monied or political oligarchs.
For the week, the Dow lost a cumulative 451 points, easily the worst performance of the year; ditto for the S&P and NASDAQ, which lost, respectively, 52 and 155 points, while the NYSE Composite shed 388, the broadest measure taking the worst percentage loss.
As for the Facebook IPO, which priced Thursday night at a robust $38 per share, finished the day ahead a measly 23 cents, one of the poorest showings ever for a major tech stock right out of the box. The trading, which was supposed to have begun at 11:00 am EDT, didn't open until after 11:30, the culprit being the usual "system glitches." Traders reported throughout the day that they were not receiving confirmations of their orders, the earliest of which had bought in at levels of 41 and 42 dollars per share, and were, thus, stuck at whatever price they placed their orders. It was a complete embarrassment for all parties - the company, the underwriters and the NASDAQ - though it's almost certain that newly-minted billionaire Mark Zuckerberg will lose little sleep over today's fiasco.
All told, the week, and especially the last two days, have been particularly painful for all involved, though gold and silver investors have enjoyed two consecutive days of gains after prolonged weakness. With precious metals beginning to show strength again, the dynamics of a failing global economy based on fiat dollars are showing their true colors.
Over the weekend, members of the G8 will be meeting at Camp David, purportedly to issue some kind of proclamation that all is well, or, ostensibly, to hammer out some new paradigm for global economic salvation. With any luck, they'll all agree to go home and do nothing, something for which they're all well trained.
In European news, the woes for the Southern states continued as Moody's downgraded 16 of the nation's banks and Fitch cut Greece's banks to CCC (big surprise there).
The weekend at hand, two words known well to hoarders of gold and silver: keep stacking.
Dow 12,369.38, -73.11 (0.59%)
NASDAQ 2,778.79, -34.90 (1.24%)
S&P 500 1,295.22, -9.64 (0.74%)
NYSE Composite 7,413.01, -67.42 (0.90%)
NASDAQ Volume 2,571,980,000
NYSE Volume 4,450,551,500
Combined NYSE & NASDAQ Advance - Decline: 1470-4143
Combined NYSE & NASDAQ New highs - New lows: 22-345 (worst since March of '09)
WTI crude oil: 91.48, -1.08
Gold: 1,591.90, +17.00
Silver: 28.72, +0.70
Friday, May 18, 2012
Thursday, May 17, 2012
Dark Day for Wall Street as Financial System Stressed to Limit
Compared to the preceding twelve days of market meltdown, today's finish qualified as the worst on a number of different levels.
The paucity of buyers produced something of a free-fall right from the opening bell, which accelerated in the final hour of trading. There were a couple of attempts at rallies - at 10:00 am and again just after noon - but both failed horribly as there was no support and traders, many of whom have been in the "buy the dip" camp until recently, sold into the brief upticks.
Volume was also noticeably higher, an indication that the selling has more room to run over the next days and weeks. The causes of today's particular collapsing equity valuations were the same that have dominated the markets over the past three weeks and are no nearer resolution than they were at the beginning of the month.
Greece continues to slide into anarchy and chaos, taking the rest of the EU - and the world - along for the careening ride to oblivion, unemployment fears in the US remain high, global growth may be nearing stall-out speed and an inactive congress and Federal Reserve - both eerily quiet - are doing nothing to alleviate any of the political, tax and regulatory issues.
The 156-point loss on the Dow was the second worst since the slide began on May 2nd, beaten only by the 168-pont decline of Friday, May 4th, the day the BLS disappointed everybody with poor April jobs numbers. That such a massive decline would come nearly two weeks later, without a respite rally in between, displays clearly how weak and uncertain markets are at the present juncture.
Through today's close, the Dow has lost a stunning 837 points since the May 1 close; the NADSAQ, with a loss of more than two percent today alone, has been beaten back 246 points since May 2nd, while the S&P 500 has given back just over 100 points since May 1st, finishing just above the technically-insignificant 1300 mark, though emotionally, the number carries great sentiment weight.
Adding to the existing problems were a couple of key economic data points released today. Initial unemployment claims came in flat for the most recent reporting week at 370,000, still stubbornly high. The Philadelphia Fed manufacturing index, which was supposed to ring up a slightly higher reading, to 8.8, from 8.5 in April, was a sorry disappointment when it printed at a devastating -5.8. And the index of leading indicators, which was expected to post a gain of 0.2%, actually fell by 0.1%, all of this adding up to excessive worry and a rush to get out of equities for the safety of bonds.
The 10-year benchmark bond closed at an historic low of 1.702, which is probably a solid number considering the level of deflation that is expected over the coming months. A yield approaching 2% against an environment of low to no growth - or even a recession or worse - is likely to be a pretty good hedging instrument.
JP Morgan Chase's (JPM) continuing drama with its $2 billion portfolio loss has expanded by another billion according to the NY Times, while the FBI and SEC have both opened inquiries into the trade and CEO Jaime Dimon has been called to testify before the Senate Banking Committee on the matter.
Mr. Dimon, whose firm also faces a number of shareholder lawsuits stemming from the trade, continues to maintain the position in the trade, attempting to slowly unwind the derivative bet from hell while counter-parties turn the screws tighter. It would not be a surprise to see eventual losses from this blunderbust approach the $5 or $6 billion figure, wiping out the entire quarter's profit for the bank with the supposed "fortress balance sheet."
Dimon will have to do some fancy tap-dancing when he appears before the Senate inquiry, because the trade, widely known as the "London Whale" was the furthest it could have been from an outright hedge, being a pure speculation trade, exacerbated by piling in deeper as the losses worsened.
On brighter notes, gold and silver did an abrupt about-face, despite the dollar index continuing to rise and the Euro settling nearly flat on Forex markets, while oil slid again, along with wholesale gasoline prices, which will eventually result in further price declines at the pump.
The widely-anticipated Facebook IPO, slated to hit the street Friday morning, priced at $38 per share, at the upper end of the expected range. While Mark Zuckerberg and others will become instant billionaires tomorrow, the timing for such a lucrative cash-out day could not have come at a worst time. Facebook will almost certainly reward early investors, but the story of one good stock will do little to alleviate long-term, long-standing economic issues that have plagued the markets for weeks.
Greek banks are seeing devastating outflows of capital, as are those in Spain. Europe's descent into economic hell has accelerated and the EU ministers and ECB economists have found now way out.
Widespread defaults, from sovereign nations, to banks, to businesses will be at the top of the news for at least the next six to 12 months.
It's been 41 years since then-president Richard M. Nixon closed the gold window and nations have been trading on pure fiat - backed only by promises - ever since. The promises now broken, the era of debt-money is quickly drawing to an unseemly and devastating end.
Real estate, precious metals and cash are all that stand between personal devastation for not millions, but billions of people worldwide. All paper assets, including stocks, bonds, letters of credit and contracts will be blown away by winds of economic chaos and change.
Dow 12,442.49, -156.06 (1.24%)
NASDAQ 2,813.69, -60.35 (2.10%)
S&P 500 1,304.86, -19.94 (1.51%)
NYSE Composite 7,480.75, -112.07 (1.48%)
NASDAQ Volume 1,915,098,500
NYSE Volume 4,597,205,500
Combined NYSE & NASDAQ Advance - Decline: 915-4734
Combined NYSE & NASDAQ New highs - New lows: 31-310 (1-10 on the wrong side; never good)
WTI crude oil: 92.56, -0.25
Gold: 1,574.90, +38.30
Silver: 28.02, +0.82
The paucity of buyers produced something of a free-fall right from the opening bell, which accelerated in the final hour of trading. There were a couple of attempts at rallies - at 10:00 am and again just after noon - but both failed horribly as there was no support and traders, many of whom have been in the "buy the dip" camp until recently, sold into the brief upticks.
Volume was also noticeably higher, an indication that the selling has more room to run over the next days and weeks. The causes of today's particular collapsing equity valuations were the same that have dominated the markets over the past three weeks and are no nearer resolution than they were at the beginning of the month.
Greece continues to slide into anarchy and chaos, taking the rest of the EU - and the world - along for the careening ride to oblivion, unemployment fears in the US remain high, global growth may be nearing stall-out speed and an inactive congress and Federal Reserve - both eerily quiet - are doing nothing to alleviate any of the political, tax and regulatory issues.
The 156-point loss on the Dow was the second worst since the slide began on May 2nd, beaten only by the 168-pont decline of Friday, May 4th, the day the BLS disappointed everybody with poor April jobs numbers. That such a massive decline would come nearly two weeks later, without a respite rally in between, displays clearly how weak and uncertain markets are at the present juncture.
Through today's close, the Dow has lost a stunning 837 points since the May 1 close; the NADSAQ, with a loss of more than two percent today alone, has been beaten back 246 points since May 2nd, while the S&P 500 has given back just over 100 points since May 1st, finishing just above the technically-insignificant 1300 mark, though emotionally, the number carries great sentiment weight.
Adding to the existing problems were a couple of key economic data points released today. Initial unemployment claims came in flat for the most recent reporting week at 370,000, still stubbornly high. The Philadelphia Fed manufacturing index, which was supposed to ring up a slightly higher reading, to 8.8, from 8.5 in April, was a sorry disappointment when it printed at a devastating -5.8. And the index of leading indicators, which was expected to post a gain of 0.2%, actually fell by 0.1%, all of this adding up to excessive worry and a rush to get out of equities for the safety of bonds.
The 10-year benchmark bond closed at an historic low of 1.702, which is probably a solid number considering the level of deflation that is expected over the coming months. A yield approaching 2% against an environment of low to no growth - or even a recession or worse - is likely to be a pretty good hedging instrument.
JP Morgan Chase's (JPM) continuing drama with its $2 billion portfolio loss has expanded by another billion according to the NY Times, while the FBI and SEC have both opened inquiries into the trade and CEO Jaime Dimon has been called to testify before the Senate Banking Committee on the matter.
Mr. Dimon, whose firm also faces a number of shareholder lawsuits stemming from the trade, continues to maintain the position in the trade, attempting to slowly unwind the derivative bet from hell while counter-parties turn the screws tighter. It would not be a surprise to see eventual losses from this blunderbust approach the $5 or $6 billion figure, wiping out the entire quarter's profit for the bank with the supposed "fortress balance sheet."
Dimon will have to do some fancy tap-dancing when he appears before the Senate inquiry, because the trade, widely known as the "London Whale" was the furthest it could have been from an outright hedge, being a pure speculation trade, exacerbated by piling in deeper as the losses worsened.
On brighter notes, gold and silver did an abrupt about-face, despite the dollar index continuing to rise and the Euro settling nearly flat on Forex markets, while oil slid again, along with wholesale gasoline prices, which will eventually result in further price declines at the pump.
The widely-anticipated Facebook IPO, slated to hit the street Friday morning, priced at $38 per share, at the upper end of the expected range. While Mark Zuckerberg and others will become instant billionaires tomorrow, the timing for such a lucrative cash-out day could not have come at a worst time. Facebook will almost certainly reward early investors, but the story of one good stock will do little to alleviate long-term, long-standing economic issues that have plagued the markets for weeks.
Greek banks are seeing devastating outflows of capital, as are those in Spain. Europe's descent into economic hell has accelerated and the EU ministers and ECB economists have found now way out.
Widespread defaults, from sovereign nations, to banks, to businesses will be at the top of the news for at least the next six to 12 months.
It's been 41 years since then-president Richard M. Nixon closed the gold window and nations have been trading on pure fiat - backed only by promises - ever since. The promises now broken, the era of debt-money is quickly drawing to an unseemly and devastating end.
Real estate, precious metals and cash are all that stand between personal devastation for not millions, but billions of people worldwide. All paper assets, including stocks, bonds, letters of credit and contracts will be blown away by winds of economic chaos and change.
Dow 12,442.49, -156.06 (1.24%)
NASDAQ 2,813.69, -60.35 (2.10%)
S&P 500 1,304.86, -19.94 (1.51%)
NYSE Composite 7,480.75, -112.07 (1.48%)
NASDAQ Volume 1,915,098,500
NYSE Volume 4,597,205,500
Combined NYSE & NASDAQ Advance - Decline: 915-4734
Combined NYSE & NASDAQ New highs - New lows: 31-310 (1-10 on the wrong side; never good)
WTI crude oil: 92.56, -0.25
Gold: 1,574.90, +38.30
Silver: 28.02, +0.82
Wednesday, May 16, 2012
Volume Up, Stocks Down As Malaise in May Exhibits the Results of Bad Karma
With higher and higher volumes showing up on individual stocks as well as the major averages virtually every passing day, the idea that there's something basically wrong with the markets and the global economy is beginning to build into a self-defeating, repeating, cyclical tailspin.
The major indices did another midday about-face, in classic bear market fashion, even though economic data in the US was relatively positive.
Housing starts were up - at an annualized rate of 717K on expectations of 675K, though building permits were lower than anticipated. That stocks, especially those of home builders, would rally on such news was not unexpected, though just because somebody puts a shovel in the ground does not necessarily imply that these newly-constructed homes will eventually be bought, much less completed.
However, two more broad measures of the economy were also positive. Industrial production grew at a rate of 1.1% in April, while capacity utilization for the month printed at 79.2%, a very strong and encouraging number.
Investors simply cannot shake the co-mingled issues of Europe, especially Greece, the falling Euro and rising dollar, all of which contributes to what could be a tough state of affairs for many of the US markets' global entities, which ship and sell around the world. Exports from the US will be especially damaged as the weaker foreign currencies and stronger US dollar make for pricier goods in faraway markets where demand has been slowing.
Following along the same logic, commodity prices are trending lower as well, which would help companies' bottom line cost structures and help keep them competitive, though traders are not confident there will be strong enough demand to produce meaningful pricing power and sustainable profit margins.
Underlying all these concerns are three major issues: Greece and the Euro, the upcoming presidential and congressional elections, and, political implications of US policy: the expiration of tax cuts at the end of 2012 along with uncertainty regarding President Obama's health care bill (now in the hands of the US Supreme Court) and a closetful of unwritten regulations, many of them centered on the financial industry through the Dodd-Frank legislation.
Further below the surface lies the uncertainty regarding the Fed's next move, as Operation Twist, aka QE3, expires at the end of June. Thus far, Fed chair Ben Bernanke nor any of the Fed's governors have hinted whether further easing would be forthcoming, and, at the end of the day, that is simply a nightmare scenario for the general economy and the banks, because without easy money, the fears are that global commerce will grind to a halt.
Markets hate uncertainty, and there's an abundance of that commodity in the flow right now, so there's no reason to believe that stocks will do anything but decline as profits are taken and few new positions are being staked out until there is resolution on some of these issues.
In the meantime, consumers are enjoying a bit of relief at the pump, as oil has fallen in just the past two weeks to its lowest level since December of last year and show no signs of bottoming. At the same time, housing prices keep declining and therein lies the conundrum of deflation. Everything costs less, but nobody is willing to pay now, because prices will likely be lower in a few days, weeks or months.
Obviously, there's no quick fix to any of this and behind closed doors, the leaders of the world's great nations and their central bankers are scared stiff.
The bad karma that's been spread worldwide by the political and monetary leaders is coming full circle it seems.
Dow 12,598.55, -33.45 (0.26%)
NASDAQ 2,874.04, -19.72 (0.68%)
S&P 500 1,324.80, -5.86 (0.44%)
NYSE Composite 7,592.80, -43.01 (0.56%)
NASDAQ Volume 1,842,974,250
NYSE Volume 4,254,574,000
Combined NYSE & NASDAQ Advance - Decline: 1843-3756
Combined NYSE & NASDAQ New highs - New lows: 76-255
WTI crude oil: 92.81, -1.17
Gold: 1,536.60, -20.50
Silver: 27.20, -0.88
The major indices did another midday about-face, in classic bear market fashion, even though economic data in the US was relatively positive.
Housing starts were up - at an annualized rate of 717K on expectations of 675K, though building permits were lower than anticipated. That stocks, especially those of home builders, would rally on such news was not unexpected, though just because somebody puts a shovel in the ground does not necessarily imply that these newly-constructed homes will eventually be bought, much less completed.
However, two more broad measures of the economy were also positive. Industrial production grew at a rate of 1.1% in April, while capacity utilization for the month printed at 79.2%, a very strong and encouraging number.
Investors simply cannot shake the co-mingled issues of Europe, especially Greece, the falling Euro and rising dollar, all of which contributes to what could be a tough state of affairs for many of the US markets' global entities, which ship and sell around the world. Exports from the US will be especially damaged as the weaker foreign currencies and stronger US dollar make for pricier goods in faraway markets where demand has been slowing.
Following along the same logic, commodity prices are trending lower as well, which would help companies' bottom line cost structures and help keep them competitive, though traders are not confident there will be strong enough demand to produce meaningful pricing power and sustainable profit margins.
Underlying all these concerns are three major issues: Greece and the Euro, the upcoming presidential and congressional elections, and, political implications of US policy: the expiration of tax cuts at the end of 2012 along with uncertainty regarding President Obama's health care bill (now in the hands of the US Supreme Court) and a closetful of unwritten regulations, many of them centered on the financial industry through the Dodd-Frank legislation.
Further below the surface lies the uncertainty regarding the Fed's next move, as Operation Twist, aka QE3, expires at the end of June. Thus far, Fed chair Ben Bernanke nor any of the Fed's governors have hinted whether further easing would be forthcoming, and, at the end of the day, that is simply a nightmare scenario for the general economy and the banks, because without easy money, the fears are that global commerce will grind to a halt.
Markets hate uncertainty, and there's an abundance of that commodity in the flow right now, so there's no reason to believe that stocks will do anything but decline as profits are taken and few new positions are being staked out until there is resolution on some of these issues.
In the meantime, consumers are enjoying a bit of relief at the pump, as oil has fallen in just the past two weeks to its lowest level since December of last year and show no signs of bottoming. At the same time, housing prices keep declining and therein lies the conundrum of deflation. Everything costs less, but nobody is willing to pay now, because prices will likely be lower in a few days, weeks or months.
Obviously, there's no quick fix to any of this and behind closed doors, the leaders of the world's great nations and their central bankers are scared stiff.
The bad karma that's been spread worldwide by the political and monetary leaders is coming full circle it seems.
Dow 12,598.55, -33.45 (0.26%)
NASDAQ 2,874.04, -19.72 (0.68%)
S&P 500 1,324.80, -5.86 (0.44%)
NYSE Composite 7,592.80, -43.01 (0.56%)
NASDAQ Volume 1,842,974,250
NYSE Volume 4,254,574,000
Combined NYSE & NASDAQ Advance - Decline: 1843-3756
Combined NYSE & NASDAQ New highs - New lows: 76-255
WTI crude oil: 92.81, -1.17
Gold: 1,536.60, -20.50
Silver: 27.20, -0.88
Tuesday, May 15, 2012
Commodities, Stocks Continue to Slide in Deflationary Downturn
It's time to look at some numbers in a broad macro view to get a handle of where the global economy is heading over the next six to twelve months.
In less than six months, Americans will head to the polls to either elect a new president or give Barack Obama the benefit of the doubt and return him for a second term. There are also key Senate races and all members of the House of Representatives are up for re-election. The implications of who becomes president and which party controls congress will have profound implications for the US economy going forward.
However, the presidency is the most important piece of the puzzle. In a nutshell, if Obama wins, we will have a continuation of the descent into a welfare state. If Romney takes it, bet on police state, with brutal, militarized police forces mobilized to quell citizen uprisings throughout the country.
Either way, the USA is in a tough spot, because neither the Republicans or Democrats will do anything remotely positive to improve conditions for millions of Americans.
Let's look at the numbers:
America's current deficit is $1.3 trillion for 2012.
The total US debt is beyond $15 trillion, and, if you add in unfunded liabilities - pensions, Social Security and Medicare - that number grows to somewhere between $125 and $150 trillion. That's a number that cannot be paid out or paid back easily.
In just the past 15 days, reality seems to have struck all the way from Washington to Wall Street. The economy is just barely limping along; in some areas of the country, local economies are dead or nearing a fatal state. More than half the US states face budget shortfalls for fiscal 2013 (starting July 1), the worst being California, Massachusetts (thank you, Mitt!), Illinois and Louisiana. The total gap for the states is estimated at $49 billion and that may be low.
Since the states have to balance their budgets, there will be layoffs and cuts in services. These will be anything but bullish for the general economy.
Retail sales have slowed for four straight months. In related news, JC Penny's (JCP) just today reported second quarter (non) earnings. They lost 0.25 cents per share on estimates of an 11-cent loss. Top-line revenue also missed the projected target of $3.41 billion, coming in at a squeamish $3.15 billion.
CEO Ron Johnson, who took over the reigns of the struggling merchandiser recently and had been widely praised as the master planner of Apple's signature stores, has a difficult road ahead. His Apple experience cannot be rightly compared to what he is dealing with at JC Penny's . Apple's stores were designed to sell only Apple products, which are unique and the envy of the retail world. Penny's deals with thousands of products from a multitude of vendors. It's not the same, and, even though Mr. Johnson is a bright fellow, he's in over his head in an environment that is not favorable to retailers.
Penny's also announced they were discontinuing their dividend of 80 cents per share. The stock was trading down more than 10% in the after-hours.
There are more than 44 million Americans - nearly one in six - receiving food stamps.
New home sales in 2011 had their worst year since 1961.
Stocks on the major averages are down between 4.5 and 5% in just the last 10 trading days. The Dow lost ground on nine of the last ten days; the S&P and NASDAQ have finished in the red eight of the last 10 sessions.
Meanwhile, the dollar index has soared, from 78.71 on April 27, to 81.26 at the close today. Meanwhile the Euro has collapsed to under 1.28 against the US dollar, finishing at 1.2729 at today's close. The move up in the value of the dollar has sent commodities screaming lower, with gold, oil and silver all suffering steep losses in the month of May. That's actually good news for Americans, particularly because lower oil prices eventually will translate into lower gas prices at the pump.
So, what is all of this data telling us? Surprisingly, despite tens of trillions of dollars pumped into the economy since 2008 by the Fed and the federal government, the wailing tone of deflation is unmistakable. Prices are falling rapidly, though incomes are stagnant or declining. There simply are not enough people working and making sufficient money to keep price levels high.
Anecdotally, food prices are coming down. Real estate remains in a moribund, deep slump and home foreclosures are once again rising. Everything will get cheaper as the economy continues down the inescapable path of deflation because the Federal Reserve's money spigot has directed all the flows to the banks, and they are not lending, mainly because they're still repairing their badly damaged balance sheets, and, even when they do cough up some dough, the borrower has to have absolutely pristine credit, a circumstance which is becoming something of a rarity.
Some say the US economy will be destroyed because its unpayable debts will undermine the value of the dollar and cause hyper-inflation. That may be so, though it's difficult to see inflation in anything when 15-20% of Americans are living in what's essentially a day-to-day fight for survival.
If hyper-inflation does one day come about and the dollar is smashed to a fraction of its former value, a deflationary depression will occur first. The government needs low interest rates to continue paying off the massive debt it has created, and will do everything it can to keep rates low.
But, because the Federal reserve has failed so miserably on the second part of its mandate - employment - all the money in the world (and the Fed has most of it now) cannot make people spend when they have no jobs, no prospects, and are worried about having enough food to eat tomorrow. Food prices are likely to stabilize, but, for the most part, the rest of the economy is toast, though it is still marginally better than that of Europe, of which half the countries are already in recession.
The money that was furnished to the banks by the American taxpayer, courtesy of the Fed and Treasury, went straight to financial institutions, and we know that they are profligate gamblers and thieves who will only enrich themselves, leaving Main Street, small business and the American public to fend for themselves in a mostly cash system which is quietly, albeit quickly, turning into a massive black market, underground economy.
Eventually, the government will fail horribly, and many will suffer. Those with wits, skills, cunning and a propensity to see the future and break rules, will prosper. Europe will fall first, but you can bet your bottom dollar (if you still have any) that their problems will come to roost on the shimmering shores of America.
Dow 12,632.00, -63.35 (0.50%)
NASDAQ 2,893.76, -8.82 (0.30%)
S&P 500 1,330.66, -7.69 (0.57%)
NYSE Composite 7,635.81, -69.64 (0.90%)
NASDAQ Volume 1,835,801,375
NYSE Volume 4,114,145,250
Combined NYSE & NASDAQ Advance - Decline: 2214-3408
Combined NYSE & NASDAQ New highs - New lows: 77-236 (gap widening)
WTI crude oil: 93.98, -0.80
Gold: 1,557.10, -3.90
Silver: 28.08, -0.27
In less than six months, Americans will head to the polls to either elect a new president or give Barack Obama the benefit of the doubt and return him for a second term. There are also key Senate races and all members of the House of Representatives are up for re-election. The implications of who becomes president and which party controls congress will have profound implications for the US economy going forward.
However, the presidency is the most important piece of the puzzle. In a nutshell, if Obama wins, we will have a continuation of the descent into a welfare state. If Romney takes it, bet on police state, with brutal, militarized police forces mobilized to quell citizen uprisings throughout the country.
Either way, the USA is in a tough spot, because neither the Republicans or Democrats will do anything remotely positive to improve conditions for millions of Americans.
Let's look at the numbers:
America's current deficit is $1.3 trillion for 2012.
The total US debt is beyond $15 trillion, and, if you add in unfunded liabilities - pensions, Social Security and Medicare - that number grows to somewhere between $125 and $150 trillion. That's a number that cannot be paid out or paid back easily.
In just the past 15 days, reality seems to have struck all the way from Washington to Wall Street. The economy is just barely limping along; in some areas of the country, local economies are dead or nearing a fatal state. More than half the US states face budget shortfalls for fiscal 2013 (starting July 1), the worst being California, Massachusetts (thank you, Mitt!), Illinois and Louisiana. The total gap for the states is estimated at $49 billion and that may be low.
Since the states have to balance their budgets, there will be layoffs and cuts in services. These will be anything but bullish for the general economy.
Retail sales have slowed for four straight months. In related news, JC Penny's (JCP) just today reported second quarter (non) earnings. They lost 0.25 cents per share on estimates of an 11-cent loss. Top-line revenue also missed the projected target of $3.41 billion, coming in at a squeamish $3.15 billion.
CEO Ron Johnson, who took over the reigns of the struggling merchandiser recently and had been widely praised as the master planner of Apple's signature stores, has a difficult road ahead. His Apple experience cannot be rightly compared to what he is dealing with at JC Penny's . Apple's stores were designed to sell only Apple products, which are unique and the envy of the retail world. Penny's deals with thousands of products from a multitude of vendors. It's not the same, and, even though Mr. Johnson is a bright fellow, he's in over his head in an environment that is not favorable to retailers.
Penny's also announced they were discontinuing their dividend of 80 cents per share. The stock was trading down more than 10% in the after-hours.
There are more than 44 million Americans - nearly one in six - receiving food stamps.
New home sales in 2011 had their worst year since 1961.
Stocks on the major averages are down between 4.5 and 5% in just the last 10 trading days. The Dow lost ground on nine of the last ten days; the S&P and NASDAQ have finished in the red eight of the last 10 sessions.
Meanwhile, the dollar index has soared, from 78.71 on April 27, to 81.26 at the close today. Meanwhile the Euro has collapsed to under 1.28 against the US dollar, finishing at 1.2729 at today's close. The move up in the value of the dollar has sent commodities screaming lower, with gold, oil and silver all suffering steep losses in the month of May. That's actually good news for Americans, particularly because lower oil prices eventually will translate into lower gas prices at the pump.
So, what is all of this data telling us? Surprisingly, despite tens of trillions of dollars pumped into the economy since 2008 by the Fed and the federal government, the wailing tone of deflation is unmistakable. Prices are falling rapidly, though incomes are stagnant or declining. There simply are not enough people working and making sufficient money to keep price levels high.
Anecdotally, food prices are coming down. Real estate remains in a moribund, deep slump and home foreclosures are once again rising. Everything will get cheaper as the economy continues down the inescapable path of deflation because the Federal Reserve's money spigot has directed all the flows to the banks, and they are not lending, mainly because they're still repairing their badly damaged balance sheets, and, even when they do cough up some dough, the borrower has to have absolutely pristine credit, a circumstance which is becoming something of a rarity.
Some say the US economy will be destroyed because its unpayable debts will undermine the value of the dollar and cause hyper-inflation. That may be so, though it's difficult to see inflation in anything when 15-20% of Americans are living in what's essentially a day-to-day fight for survival.
If hyper-inflation does one day come about and the dollar is smashed to a fraction of its former value, a deflationary depression will occur first. The government needs low interest rates to continue paying off the massive debt it has created, and will do everything it can to keep rates low.
But, because the Federal reserve has failed so miserably on the second part of its mandate - employment - all the money in the world (and the Fed has most of it now) cannot make people spend when they have no jobs, no prospects, and are worried about having enough food to eat tomorrow. Food prices are likely to stabilize, but, for the most part, the rest of the economy is toast, though it is still marginally better than that of Europe, of which half the countries are already in recession.
The money that was furnished to the banks by the American taxpayer, courtesy of the Fed and Treasury, went straight to financial institutions, and we know that they are profligate gamblers and thieves who will only enrich themselves, leaving Main Street, small business and the American public to fend for themselves in a mostly cash system which is quietly, albeit quickly, turning into a massive black market, underground economy.
Eventually, the government will fail horribly, and many will suffer. Those with wits, skills, cunning and a propensity to see the future and break rules, will prosper. Europe will fall first, but you can bet your bottom dollar (if you still have any) that their problems will come to roost on the shimmering shores of America.
Dow 12,632.00, -63.35 (0.50%)
NASDAQ 2,893.76, -8.82 (0.30%)
S&P 500 1,330.66, -7.69 (0.57%)
NYSE Composite 7,635.81, -69.64 (0.90%)
NASDAQ Volume 1,835,801,375
NYSE Volume 4,114,145,250
Combined NYSE & NASDAQ Advance - Decline: 2214-3408
Combined NYSE & NASDAQ New highs - New lows: 77-236 (gap widening)
WTI crude oil: 93.98, -0.80
Gold: 1,557.10, -3.90
Silver: 28.08, -0.27
Monday, May 14, 2012
Correction, Crash, Deflation, Depression: the Superfecta of Fraud
I'm writing in the first person singular today because I think today was very important. Stocks just don't go down as consistently as they have over the past few weeks unless there's a problem, and there are lots of them.
I'm not going to link to anything, but I am going to shoot my mouth off a bit about where we all are in the larger scheme of things, because, while small things matter, the big picture matters more.
The global economy is in its death throes. We've had zero interest rate policy (ZIRP) from the Fed for three-and-a-half years, and it's simply not working. The federal government is a chain around the necks of the citizenry and the media is largely complicit in shading the truth.
The US taxpayer has bailed out the TBTF banks and, culminating with JPM CEO Jaime Dimon's mea culpa last Thursday night, we find that these same banks are even bigger than before and still making risky bets with other people's money. For its part, the federal government can't collect enough taxes and still borrows 40% of every dollar it spends. Social Security and Medicare are bankrupt already, and, with millions of baby boomers retiring, the money will not be there for anybody under the ago of say, 60, right now.
Americans are awakening to the nightmare that is a leaderless, stagnating economy, brought about by the biggest fraud ever perpetrated on any nation, that of the sub-prime mortgage and consequent banking crisis of 2008. It took years for the criminals on Wall Street to skewer the American public and not a one has been prosecuted. Getting back to Mr Dimon, the most perverse, sociopathic criminal there is - who smiles at you while slowly jutting a knife between your ribs - while some of his subordinates have taken the axe for the $2 billion "London Whale" blunder, he's still CEO and in charge. Seriously, in another, saner place and time, he'd already have met his maker.
In the visage of Mr. Dimon lies much of the problem. The aristocratic, oligarchical mindset shared by the Wall Steet masters of the universe and their lackeys in the capitol, provides them with an aura of invincibility, inevitability and smug self-assuredness, while the truth is that most of them have never worked an honest day's work, steal and murder with impunity by their various market actions and bear no responsibility, guilt or shame.
Meanwhile, the bulk of the world's population lives day-to-day, wondering what miracles of stupidity these monsters will bring down upon them. Income disparity has never been higher in America; it gets worse by the day and the oligarchs, from their thrones of power on Wall Street and in Washington could give a damn. All they care about is their money and their power. The power to tax, to control, to cheat, to set prices, to ruin smaller competitors, to lie bold-faced to the American public and to have either the unmitigated gall to retain their positions or, worse yet, to run for election or re-election.
Nearly four years into this global crisis (that's what the IMF is now calling it), conditions are not getting any better. The empirical data says it is getting worse and will get even more dire as the year progresses. Unskilled and low-skilled workers cannot find reliable jobs. The self-employed must fight every day just to keep the doors open or the wheels spinning. Never has just getting by been so difficult for so many in the private sector.
I've said for years that the only things keeping this economy going are the government transfers: welfare checks, food stamps, disability payments, retirement checks, medicare payments and the like. There is no growth in the general economy, while in the public sector, despite some layoffs, employees are receiving their annual pay increases without a hitch as the government casually takes a portion of their pay and says it's going into their retirement funds, when, in fact, these funds are underfunded and will fail like the rest of the programmed, social-based government economy. Many of these public sector employees who expect benefits will get less than they paid in. Eventually, all will get nothing.
Europe is a complete basket case. The Euro is dead as a currency, an idea the supra-governmental EU magistrates are only now beginning to comprehend. When Greece departs, Spain, Italy, Portugal, Ireland, and probably Belgiu will depart in short order. The world's economy will be smashed to pieces, governments have fallen and will continue to fall, eventually reaching the United States, the final battleground for fairness, decency, honesty and civil rights. It will come sooner than most expect, and the majority of people will be unprepared, just as they were unprepared for the current setbacks delivered by the centrally-planned failure machine in Washington and on Wall Street.
Realistically, there's little hope for the immediate future except complete destruction of the economy and a reset of priorities from the bottom up. In time, people will no longer look to government, to Washington, to solve their problems. Matters must and will be taken into one's own hands and out of those of the corrupt conspiracy of criminality that extends from Beijing to London to Washington and to Berlin.
The end is not here. Not yet. But it certainly is coming and it's going to be brutal for many. Prices have begun to fall on all manner of commodities. Deflation, the one, true, unstoppable market force, will prove to be the end of the Federal Reserve and the all banking nightmares and false facades. The American public, and the general public of the rest of the world, cannot afford to have its wealth stolen by feudalistic lords disguised as nice guys like Barack Obama or Mitt Romney, just to name a few.
Today's headlines were rife with departures of top executives, scandals and defections. The icons are beginning to tumble at a more rapid pace. The rats are jumping off the ship, not one by one, but in bunches now, as collapse - in the inner power circles - is seen as inevitable.
The emperors of the power and political structures have no clothes and nowhere to hide.
When the history books are written, they will note that the second Great Depression began in 2008, and, through various means of both government intervention and inaction, worsened in 2012.
There is now no doubt.
Dow 12,695.35, -125.25 (0.98%)
NASDAQ 2,902.58, -31.24 (1.06%)
S&P 500 1,338.35, -15.04 (1.11%)
NYSE Composite 7,705.45, -110.44 (1.41%)
NASDAQ Volume 1,691,608,250
NYSE Volume 3,688,124,000
Combined NYSE & NASDAQ Advance - Decline: 1105-4571
Combined NYSE & NASDAQ New highs - New lows: 65-204 (WOW! Screaming red!)
WTI crude oil: 94.78, -1.35
Gold: 1,561.00, -23.00
Silver: 28.35, -0.54
I'm not going to link to anything, but I am going to shoot my mouth off a bit about where we all are in the larger scheme of things, because, while small things matter, the big picture matters more.
The global economy is in its death throes. We've had zero interest rate policy (ZIRP) from the Fed for three-and-a-half years, and it's simply not working. The federal government is a chain around the necks of the citizenry and the media is largely complicit in shading the truth.
The US taxpayer has bailed out the TBTF banks and, culminating with JPM CEO Jaime Dimon's mea culpa last Thursday night, we find that these same banks are even bigger than before and still making risky bets with other people's money. For its part, the federal government can't collect enough taxes and still borrows 40% of every dollar it spends. Social Security and Medicare are bankrupt already, and, with millions of baby boomers retiring, the money will not be there for anybody under the ago of say, 60, right now.
Americans are awakening to the nightmare that is a leaderless, stagnating economy, brought about by the biggest fraud ever perpetrated on any nation, that of the sub-prime mortgage and consequent banking crisis of 2008. It took years for the criminals on Wall Street to skewer the American public and not a one has been prosecuted. Getting back to Mr Dimon, the most perverse, sociopathic criminal there is - who smiles at you while slowly jutting a knife between your ribs - while some of his subordinates have taken the axe for the $2 billion "London Whale" blunder, he's still CEO and in charge. Seriously, in another, saner place and time, he'd already have met his maker.
In the visage of Mr. Dimon lies much of the problem. The aristocratic, oligarchical mindset shared by the Wall Steet masters of the universe and their lackeys in the capitol, provides them with an aura of invincibility, inevitability and smug self-assuredness, while the truth is that most of them have never worked an honest day's work, steal and murder with impunity by their various market actions and bear no responsibility, guilt or shame.
Meanwhile, the bulk of the world's population lives day-to-day, wondering what miracles of stupidity these monsters will bring down upon them. Income disparity has never been higher in America; it gets worse by the day and the oligarchs, from their thrones of power on Wall Street and in Washington could give a damn. All they care about is their money and their power. The power to tax, to control, to cheat, to set prices, to ruin smaller competitors, to lie bold-faced to the American public and to have either the unmitigated gall to retain their positions or, worse yet, to run for election or re-election.
Nearly four years into this global crisis (that's what the IMF is now calling it), conditions are not getting any better. The empirical data says it is getting worse and will get even more dire as the year progresses. Unskilled and low-skilled workers cannot find reliable jobs. The self-employed must fight every day just to keep the doors open or the wheels spinning. Never has just getting by been so difficult for so many in the private sector.
I've said for years that the only things keeping this economy going are the government transfers: welfare checks, food stamps, disability payments, retirement checks, medicare payments and the like. There is no growth in the general economy, while in the public sector, despite some layoffs, employees are receiving their annual pay increases without a hitch as the government casually takes a portion of their pay and says it's going into their retirement funds, when, in fact, these funds are underfunded and will fail like the rest of the programmed, social-based government economy. Many of these public sector employees who expect benefits will get less than they paid in. Eventually, all will get nothing.
Europe is a complete basket case. The Euro is dead as a currency, an idea the supra-governmental EU magistrates are only now beginning to comprehend. When Greece departs, Spain, Italy, Portugal, Ireland, and probably Belgiu will depart in short order. The world's economy will be smashed to pieces, governments have fallen and will continue to fall, eventually reaching the United States, the final battleground for fairness, decency, honesty and civil rights. It will come sooner than most expect, and the majority of people will be unprepared, just as they were unprepared for the current setbacks delivered by the centrally-planned failure machine in Washington and on Wall Street.
Realistically, there's little hope for the immediate future except complete destruction of the economy and a reset of priorities from the bottom up. In time, people will no longer look to government, to Washington, to solve their problems. Matters must and will be taken into one's own hands and out of those of the corrupt conspiracy of criminality that extends from Beijing to London to Washington and to Berlin.
The end is not here. Not yet. But it certainly is coming and it's going to be brutal for many. Prices have begun to fall on all manner of commodities. Deflation, the one, true, unstoppable market force, will prove to be the end of the Federal Reserve and the all banking nightmares and false facades. The American public, and the general public of the rest of the world, cannot afford to have its wealth stolen by feudalistic lords disguised as nice guys like Barack Obama or Mitt Romney, just to name a few.
Today's headlines were rife with departures of top executives, scandals and defections. The icons are beginning to tumble at a more rapid pace. The rats are jumping off the ship, not one by one, but in bunches now, as collapse - in the inner power circles - is seen as inevitable.
The emperors of the power and political structures have no clothes and nowhere to hide.
When the history books are written, they will note that the second Great Depression began in 2008, and, through various means of both government intervention and inaction, worsened in 2012.
There is now no doubt.
Dow 12,695.35, -125.25 (0.98%)
NASDAQ 2,902.58, -31.24 (1.06%)
S&P 500 1,338.35, -15.04 (1.11%)
NYSE Composite 7,705.45, -110.44 (1.41%)
NASDAQ Volume 1,691,608,250
NYSE Volume 3,688,124,000
Combined NYSE & NASDAQ Advance - Decline: 1105-4571
Combined NYSE & NASDAQ New highs - New lows: 65-204 (WOW! Screaming red!)
WTI crude oil: 94.78, -1.35
Gold: 1,561.00, -23.00
Silver: 28.35, -0.54
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