ECB's Draghi Offers No Solution to European Debt Crisis; Markets Tank

After last week's explosive rallies - based entirely upon notions that Fed Chiaman, Ben Bernanke, and ECB president, Mario Draghi, were committed to fixing their ailing economies, this week's reality show fell flat on its face on both continents.

On Wednesday, when the Fed announced the usual no change in federal funds rates, it also added no stimulus for the US economy or even language that would lead investors to believe that another round of QE was son to follow.

Today's speech following the no-event in Brussels, in which the ECB kept interest rates pegged at 0.75%, Draghi's rhetoric could not have been less encouraging, especially after the strong words he uttered just days ago, saying that the ECB would employ all of its tools to keep the Euro strong and the Eurozone of 17 countries that use the common currency, intact.

The lack of follow-through by the two central bankers proved once more that monetary policy is stuck in a morass of debt and delusion, and also, that whatever measures they might employ now or in the future will have little effect upon the general economy.

Essentially, the policies currently in place - near-zero interest rates, massive bond-buying schemes and general criminality amongst the banking crowd - will continue without change or revision, and, thus, will do nothing to disengage the European and US economies from the slow-to-no-growth regimen they have been anchored in for the past three to four years.

With stock players taking their cues from the big-talkers, shares in European indices were smashed down hard, with declines across nearly all the major exchanges of 1.5 - 2.5 percent.

In the US, the losses were lighter, but beginning to accumulate, as fears arise over the size of the jobs number due out Friday morning.

The markets now have become conditioned to reacting immediately to rumors and headlines, a condition not conducive to profitable investing, the general pattern being dead markets when there is little of substance in the news, and wild swings whenever a central banker opens his or her mouth. Ironically, when central bankers do speak, what they say has little actual bearing on the economy, though they and the stock pickers and players like to think it does.

Capital markets have, for some time, been in an overpriced consolidation phase, with confidence waning even among professionals. The retail investor has all but abandoned stocks as a reliable instrument for sound investment, as the entire rigged affair has become too driven by insiders with specific knowledge and too risky for such small returns.

Both the Fed and ECB have managed to paint themselves into their own corners, with seemingly no escape route. All that matters is to keep markets in a manner that makes them look like they're functioning as normal.

While that plan is barely working, the rest of the planet plays dutifully along, waiting for some kind of dramatic event that will alter the investing landscape. Unfortunately for the waiters and current investors, such events usually tend to be of the negative variety.

The continued can-kicking by the authorities hasn't done the trick to this point, so it's folly to believe that even more stimulative efforts by central banks will offer any kind of relief. The trouble with this kick-the-can-down-the-road style of monetary policy is that the road eventually ends and with it, so too the power to create debt out of thin air and pass it along to the taxpayers.

That happens to be about the only glimmer of hope in this sordid chapter of Keynesian economics: that the system itself will eventually fail, prompting a return to sound money and economic principles that do not rely on debt.

Dow 12,878.88, -92.18 (0.71%)
NASDAQ 2,909.77. -10.44 (0.36%)
S&P 500 1,365.00, -10.14 (0.74%)
NYSE Composite 7,765.60, -75.75 (0.97%)
NASDAQ Volume 1,832,069,000
NYSE Volume 4,139,315.750
Combined NYSE & NASDAQ Advance - Decline: 2176-3350
Combined NYSE & NASDAQ New highs - New lows: 130-157
WTI crude oil: 87.13, -1.78
Gold: 1,590.70, -16.60
Silver: 27.00, -0.54

Dead, Rigged Market Can Only Respond As Ordered; Is Worthless, Valueless, Void

The Fed's FOMC announcement today was another snoozer, as expected, more or less, but, now that the nation's central bank has decided not to announce another round of QE, one has to wonder whether last week's euphoria was nothing more than orchestration for a quick profit drive. Probably was.

Otherwise, the market is absolutely a dead zone, with some action in specific stocks, though the overall trend is pretty morose. Anybody who has even a cursory knowledge of economics or finance realizes that the markets are highly rigged in favor of a nefarious group of insiders, whose main goal is to profit at the expense of others, even their own clients.

Further, everyone is aware of the headwinds facing the global economies and associated markets. Those are not and will not go away.

The few data points released today were not particularly encouraging, though the veracity of the releases and the methodologies employed in reaching conclusive evidence are also quite questionable.

ADP's monthly survey of private sector employment recorded a gain of 163,000 jobs in July, after posting a gain of 179,000 in June. The numbers provided by ADP are somewhat of a mystery, as they always differ widely from the "official" government non-farm payroll figures, due out Friday, and upon which everyone with skin in this market is awaiting.

The July ISM Index posted its second straight reading showing contraction, at 49.8 for the month, after June's 49.7. Contraction in manufacturing is for two consecutive months, even though it is slight, is not an encouraging sign for the future, as these kinds of negative readings often lead to nasty occurrences like recessions, layoffs and general malaise, sluggishness, business failures and assorted blight.

What may be even more surprising is that the market hasn't fallen more, now that the Fed is officially not going to do anything (which doesn't matter anyhow, because what they've done thus far hasn't really worked for anyone other than Wall Street types).

Tomorrow's ECB meeting - getting to be a nearly regular monthly voyage into the land of make believe - is almost certain to satisfy nobody, like some people we know, though, like those people, the leaders of the various nations might be sufficiently entertained by their fantasies to believe they're actually doing the world some good, when in fact they are only making life more miserable for more people and jeopardizing their own futures at the same time.

One gets the idea that these types just don't care about anything other than their own sorry existences, which, being the "leaders" that they are, complicates matters for the unchosen followers, the bulk of mankind.

Best possibly to ignore them completely, as their machinations now have little to do with reality. As the global Ponzi scheme draws inevitably closer to its fitting, fateful end, self-sufficiency and resourcefulness of individuals will become more and more a prized asset. The best time to start along of path of separation from the status quo and into a more sustainable existence of one's own would probably have been yesterday, though the globalists appear determined to stretch out their dying days as long as possible, giving a leg up to late starters.

For the rest, especially those defined by the elite as "worthless eaters," life continues to gradually erode into dependency upon the state, many of which are on life support and beyond the point where they can actually meet all of their obligations, an unenviable condition sure to result in great pain and suffering for many.

When even a rigged market is dead and lifeless, what hope for a future of sound economy can anyone honestly hold?

Dow 12,976.13, -32.55 (0.25%)
NASDAQ 2,920.21, -19.31 (0.66%)
S&P 500 1,375.32, -4.00 (0.29%)
NYSE Composite 7,848.60, -15.34 (0.20%)
NASDAQ Volume 1,691,360,500.00
NYSE Volume 4,014,368,000
Combined NYSE & NASDAQ Advance - Decline: 1791-3727
Combined NYSE & NASDAQ New highs - New lows: 257-114
WTI crude oil: 88.91, +0.85
Gold: 1,603.70, -6.80
Silver: 27.54, -0.38

Stocks Stumble As Fed Action Seems Less Likely; Markets Resembling Aging Divorcees

Thanks to a number of relatively positive economic reports, the possibility that the Fed will announce a new round of QE at the conclusion of its FOMC policy meeting on Wednesday was seen as a bit less definite.

As convoluted as the machinations of Wall Street have become, good news is now seen as bad, given that the Fed is less likely to move if the economy appears, at least, stable and not about to fall over a cliff.

In a raft of data releases this morning, it was seen that personal spending was flat, though personal income rose 0.5% in June.

The two-month-old Case-Shiller 20-city index, a widely-disregarded metric due to its flawed methodology, fell less than expected in May, dipping 0.7% on expectations of a drop of 1.8%. Though the message remains that the bottom has not been plumbed in housing, the upshot was that the number beat expectations.

More importantly, Chicago PMI posted a gain to 53.7, after printing at 52.9 in May and consumer confidence rose to 65.9, a healthy gain and a multi-month high after checking in at 62.7 in June.

All tolled, the numbers offer a murky picture of the US economy, though certainly not one that could be lauded as either expansionary nor receding. Thus, the valiant traders hoping for another QE round seemed less certain, selling stocks in advance of what they assume will be another ho-hum, no change announcement from the Fed.

Stocks traded in a narrow range, as they did on Monday, with the S&P and NASDAQ hovering around the unchanged mark while the Dow and Composite Index spent the entire day in the red. Volume was minimalist and declining issues outpaced advancers slightly.

Conditions in the US and Europe appear to be unchanged since last week, which is more than likely an overall negative looking ahead, but, without some drama, market participants appeared reluctant to make any bold moves ahead of the FOMC announcement, EBC meeting on Thursday or the non-farm payroll data Friday, which could, in fact, be the most important number of the week.

Being the last calendar and trading day of July, there was little "window dressing" to note as stocks tailed off badly in the final half hour, closing at or near their lows of the day.

If anything, traders (because there are so few real investors) have embraced an attitude of couched pessimism and flagging hope. Since there will be no resolution to any major issues in the US until after the elections in November and the EU and ECB seem so deft at using the microphone to their advantage while proposing no concrete solutions (mostly because the actual fixes involve massive write-downs, pain and suffering to the wealthiest), the general tone is sleepy and non-committal, a condition not unlike many divorced women in their 50s.

Plenty of rest and an uninspiring, dull lifestyle of muddling along seems to be the preferable treatment for whatever perceived and imagined ailments with which they are afflicted.

The go-slow approach is one step removed from the all-inclusive silent treatment, a silly game that the media appears ready to play unless there is a catalyst to prompt attentiveness and a modicum of pleasure.

Even then, periods of exhilaration are bogged down by a general state of disabuse and misplaced emotions. As such, the capital markets have become technological zombies and drug-addled followers of incorrect assumptions.

Men and women get old, as do markets. The remedy is a fresh attitude or new regimen, which, as in the case of aging biddies, is virtually impossible in the current political and economic climate, the comfort of the status quo providing an easy escape from actually dealing with issues at hand.

Please send all hate mail for the above metaphorical escapade above to dontcare@whogivesadamn.com

Dow 13,008.75, -64.26 (0.49%)
NASDAQ 2,939.52, -6.32 (0.21%)
S&P 500 1,379.33, -5.97 (0.43%)
NYSE Composite 7,870.56, -40.49 (0.51%)
NASDAQ Volume 1,730,655,000
NYSE Volume 3,413,254,000
Combined NYSE & NASDAQ Advance - Decline: 2276-3269
Combined NYSE & NASDAQ New highs - New lows: 219-70
WTI crude oil: 88.06, -1.72
Gold: 1,610.50, -9.20
Silver: 27.91, -0.12

Markets Flat Ahead of Fed, ECB, Jobs Data

Following the two-day, euro-induced-free-money rally that closed out last week, stocks to a breather on low volume Monday, ahead of three key events later in the week.

On Wednesday, following the Fed's FOMC policy meeting, it is widely expected that Bernanke and friends will have found sufficient weakness in the US economy to promote another round of QE, which will probably take the form of a furtherance of Operation Twist, plus continued handouts of low interest rate money to the major banks to keep the carry trade going.

While the anticipated Fed action has already been widely lauded and traded upon on Wall Street, their efforts up to this point have done nothing to repair the damaged economy. Rather, it's created a kind of non-virtuous cycle wherein banks get money, don't lend it and the main street economy continues to suffer.

Evidence was seen in Friday's announcement that the economy grew at a rate of just 1.5% in the second quarter and continued weakness in the jobs and real estate markets.

Meanwhile over in Euro-land, the finance crowd awaits some kind of firm action by the ECB when the leaders meet on Thursday. At issue is setting up a credit facility large enough to recapitalize Spain's ailing banking sector, most of which is already insolvent and nearing an illiquid state.

As in the US, central bank debt schemes have been largely insufficient to boost the economies of Europe; all these can-kicking efforts seem to be doing is forestalling the inevitable collapse of the Euro, which fell to $1.2258, retreating from a three-week high of $1.2390 made on Friday against the US dollar on Monday.

News out today suggests that Thursday's meeting will be more style than substance and that any bold action may be as many as five weeks away. A formal request for a bailout by Spain, in addition to the already-proposed bailout of their insolvent banks, and approval on technical issues by a German high court are still issues that will not have been resolved by the end of this week.

On Friday, the BLS reports non-farm payroll data for July, which also could throw sand on the perma-bullish fire of the central bankers.

Considering last week's big run-up, there may be a bit of "sell the news" sentiment afoot, regardless of what decisions and announcements are made by the Fed and the ECB.

Dow 13,073.01, -2.65 (0.02%)
NASDAQ 2,945.84, -12.25 (0.41%)
S&P 500 1,385.30, -0.67 (0.05%)
NYSE Composite 7,911.04, -1.13 (0.01%)
NASDAQ Volume 1,482,648,250
NYSE Volume 3,197,376,750
Combined NYSE & NASDAQ Advance - Decline: 2384-3161
Combined NYSE & NASDAQ New highs - New lows: 262-65
WTI crude oil: 89.78, -0.35
Gold: 1,619.70, +1.70
Silver: 28.03, +0.54

Why Nothing Matters Any More

We've all heard the phrase, "this is going to end badly," before, and, like a failed love affair, so too the centrally-planned economies masquerading as free markets will also surely end in tears, tatters, remorse and recrimination.

Following in the footsteps (or, as the case may be, the mouthpiece) of ECB president Mario Draghi, today, German Chancellor Angela Merkel and French President Francois Hollande issued a joint statement after a teleconference, saying they their government would "do everything to protect" the Euro.

And, with that, the markets were once again off to the races, continuing a rally that is based upon nothing more than promises to pile more debt upon the mountainous pile of unpayable sovereign obligations already in existence, create more deteriorating fiat money, continue bailing out failed financial institutions and keeping interest rates at artificially low yields.

Nothing good has come from any of these efforts thus far, except to perpetuate the status quo of financial fraud run amok without penalties for wrongdoers and the funding of political campaigns by the very same transgressors and beneficiaries of central bank largesse.

Today, the US government announced first quarter GDP grew at a rate of 1.5%, which, in normal times, would be fairly disturbing news, but, couched in the belief that the slowing economy will encourage the Federal Reserve to engender another round of quantitative easing (QE) at its meeting next week of the FOMC, the market soared like an eagle catching a thermal updraft.

The effects of all this money printing and free flow of capital into and out of banks and into government coffers to spend freely beyond their means has been effectively maintained by ultra-low interest rates offered to the world's biggest banks, the ones that were bailed out in 2008, and continue to go to the discount window for Federal Funds at 10 to 16 basis points, invest in longer-term notes and pocket the difference, known as the carry trade. It's easy street for the TBTF banks, which continue to borrow and no loan money, except, of course, to the worst creditors of them all, governments, which haven't balanced their books in decades.

Were the banks and foreign central banks to suspend lending to the US and European entities - an occurrence which has a 100% likelihood to happen at some point - the economic calamity would be unthinkable, thus, the game continues. At certain points, casualties occur, but they are patched over by bailouts or simply shoved aside, as in cases such as Madoff, MG Global and previously, Lehman Bros., Countrywide Financial, Bear Stearns or Merrill Lynch.

The losses are socialized, or, passed onto the taxpayer as it were, though if taxes were at rates commensurate to meet all government obligations and pay off the burgeoning debt load, the average paycheck would be 80-90% taxes and 10-20% take home. It would be likely that most people would stop working for companies, go into a side business of their own and not pay taxes, while larger businesses would suffer from a lack of qualified, willing labor and the whole super-structure of the global economy would grind quickly to a complete halt.

In some sense, that is already happening, and it will continue to worsen, everywhere there are unpayable debt burdens placed upon the citizenry. In Europe, the German people are already braying at the notion of higher and higher tax rates to pay for bailing out the southern states of Greece, Portugal and soon, Spain and Italy.

While the Germans have profited and prospered from fiscal and monetary discipline, the regime of Angela Merkel is rapidly fostering a growing debt burden that will force taxes higher and eventually cripple their own economy. While most of southern Europe is already in a recession and Greece, at least, a depression, Germany, being the lender of last resort, so to speak, is nearing a political breaking point, where the populace is about ready to take a stand against the free-spending policies of their government.

Merkel is tip-toeing on a high wire (a horrifying mental image), balancing her own political future against the success or failure of the Euro. Germany benefits from the declining euro because of its huge export base, so abandoning it and returning to the Deutschemark is out of the question, as the new currency would be among the strongest in the world, making German products prohibitively expense in other countries.

France, which behind Germany is the second largest economy in Europe, seems content to tax and spend to promote their socialist agenda of government handouts to everyone, shorter working hours and large, public pensions. The French people are notorious protesters, who will take to the street at even the slightest hint that any kind of public benefit will be cut, and, as they showed former president Sarkozy the door this past Spring, they will vote against any mention of austerity, a dirty word in the Gallic nation.

In America, it's the culling of the middle class that proceeds apace. Wages have been stagnant, new job creation sparse and sporadic, but price increases in food and energy, along with threats of higher taxes have all but eliminated discretionary spending and saving for growing numbers. The middle class has become a huge class of debt slaves, content to keep paying and playing along until the pensions and social security and health care monies are exhausted.

The rest of the world has other problems, though even growth countries like China, India, Brazil (together with Russia, making up the BRICs nations) are slowing down as the speculative economies strip out all wealth to the top one percent of earners and actual productive growth falters.

There is a tipping point somewhere down the road, and it's a wonder that the whole global mess hasn't completely fallen apart by now, but it does appear that those in charge of "managing" the economy can keep the plates spinning for a while longer, maybe as much as three to five years. By then, these central planners hope that entrepreneurs will have bolstered the fragile, stagnant economy back to life and that a more normalized functioning will have emerged.

It's a pipe dream built on the faulty assumption that expanded liquidity can supplant insolvency. It never has, and it won't. The end game comes from a deflationary spiral in which too little money is chasing too many goods, even in an era of expansionary monetary supply (inflation). The problem is that the money is going into the wrong hands, to those of the bankers, who hoard their cash for liquidity and speculation, as seen repeatedly in the stock market, while the middle and lower classes go begging for credit (at usurious rates), jobs, and eventually, food.

In every instance in which a reserve currency such as the US dollar was not backed by gold, silver or both, or other tangible assets as collateral for debt creation, that currency has failed and been replaced. Every time.

And this time is not different. It's just taking longer than expected.

Dow 13,075.66, +187.73 (1.46%)
NASDAQ 2,958.09, +64.84 (2.24%)
S&P 500 1,385.97, +25.95 (1.91%)
NYSE Composite 7,912.16, +157.65 (2.03%)
NASDAQ Volume 2,085,560,250
NYSE Volume 4,290,734,500
Combined NYSE & NASDAQ Advance - Decline: 4511-1073
Combined NYSE & NASDAQ New highs - New lows: 343-86
WTI crude oil: 90.13, +0.74
Gold: 1,618.00, +2.90
Silver: 27.50, +0.05