Ben Bernanke, Bankers' Friend; QE3 Sends Stocks Screaming Higher, Oil, Gold, Silver Rally

After the German Constitutional Court OK'd the ECB's ESM (love those acronyms!), Thursday was set up for a real bazooka blast of fresh money-printing by Fed Chairman Ben Bernanke.

And, of course, the chairman did not disappoint, announcing an unlimited bond buying scheme, whereby the Federal Reserve would commit to buying $40 billion per month of MBS (Mortgage-Backed Securities) for a time period that the chairman left open-ended.

According to the FOMC statement: "If the outlook for the labor market does not improve substantially, the committee will continue its purchase of agency mortgage-backed securities, undertake additional asset purchases, and employ its other policy tools as appropriate until such improvement is achieved in a context of price stability..."

The FOMC statement also extended ZIRP (Zero Interest Rate Policy) through mid-2015, another easing which mostly benefits banks, which can borrow at 0-1/4%.

The Fed's move was - and will be - huge, providing liquidity and a lifeline to the banks by sopping up their horrendous MBS, which are almost all underwater, spoiled or otherwise non-performing.

A move of such scope cannot be underestimated for its overall effects to the larger economy, not only in the US, but globally. The world is already awash in US dollars, and these policy actions only exacerbate that situation. In response, the Euro has galloped ahead, trading in excess of 1.31 to the dollar.

Markets all popped, with the Dow at its highest level since autumn of 2007 and now within shouting distance of its all time high, along with the S&P.

It is absolutely amazing that stocks can be artificially propped up due to actions from the public sector, but there is a downside to consumers in the form of higher prices, especially in food and fuel. Gasoline at the pump is nearing $4.00 per gallon nationwide. The average price of a gallon of unleaded regular is now $3.87.

The Fed believes that even with their massively-inflationary policies that inflation will remain below two percent. They must be dreaming, because the price of oil, tied directly to gas and home heating fuel, continues to rise and should continue to do so in the months ahead.

That will effect all consumer prices on everything that needs to be shipped, trucked or transported, which is just about everything except food you grow in your own back yard and items you make at home (depending on where you buy raw materials).

Good-bye Mitt Romney; hello second term for Obama. The election, thanks to the Fed, should be a slam-dunk for president Obama and likely will result in congress continuing to be split, with Republicans ruling the House and Democrats the Senate.

Great. More deadlock from the pols, higher prices for everything, more riches for bankers, a weaker dollar (in just the past two weeks, that European vacation rose in price about 10%) and no way to save unless you buy hard assets, gold and silver.

The status quo remains print, print, and print some more. The middle class is being squeezed out of existence. The big hope is that the Fed will sop up so much of the horrid MBS out there that they will bankrupt themselves and someday the US will return to sound money, though that scenario is probably a few years away.

In the meantime, enjoy. Spend. The Fed and the government have your back with unlimited public spending, a new, higher federal debt ceiling (coming soon and monetized by the Fed) and fiat money out the wazoo.

It's the grandest clusterf--k of monetary policy and make-believe debt-funding in the history of the world.

Dow 13,539.86, +206.51 (1.55%)
NASDAQ 3,155.83. +41.51 (1.33%)
S&P 500 1,459.99. +23.43 (1.63%)
NYSE Composite 8,407.03, +139.71 (1.69%)
NASDAQ Volume 1,884,013,625.00
NYSE Volume 4,616,279,500
Combined NYSE & NASDAQ Advance - Decline: 4230-1321
Combined NYSE & NASDAQ New highs - New lows: 598-27 (flashing red light extreme)
WTI crude oil: 98.31, +1.30
Gold: 1,772.10, +38.40
Silver: 34.78, +1.49

Germany Goes All In; Wall St. Waits on the Fed

Today was Europe's turn. Tomorrow will be America's.

Before most Americans were even awake, Europeans were rejoicing the German Constitutional Court's ruling that the ESM (Emergency Stabilization Fund), used to bail out failing sovereign governments was, according to German law, constitutional, and the ECB could go forward with its plans to bail out Greece and Portugal, and, possibly Spain and Italy, if need be.

The court did add one stipulation, however, that the German portion of the funding would have to be approved by parliament if there wer any increases to the size of the fund.

Thus, Europe and the Euro were saved, once again, by the alchemy of Ponzi-economics, for now.

The ESM, along with other emergency funding mechanisms from the ECB, should "stabilize" the Eurozone for another year to 18 months. Then, well, who knows?

Hurrah.

In the US, markets hung close to the flat line in anticipation of the FOMC interest rate policy announcement, where the Federal Reserve may or may not announce another round of Quantitative Easing, better known as QE, and, in this case, since it would be the third (or fourth, if you count operation twist) round of easing, QE3.

Three cheers.

The announcement will be delivered around 2:15 pm EDT on Thursday, unless, of course, like the German court ruling, it is leaked to the press first.

Some day, investors will want to know about individual stocks, but not these days.

Dow 13,333.35, +9.99(0.07%)
NASDAQ 3,114.31, +9.78(0.32%)
S&P 500 1,436.56, +3.00(0.21%)
NYSE Composite 8,267.16, +21.01(0.25%)
NASDAQ Volume 1,680,020,000
NYSE Volume 3,555,939,250
Combined NYSE & NASDAQ Advance - Decline: 3429-2094
Combined NYSE & NASDAQ New highs - New lows: 336-30
WTI crude oil: 97.01, -0.16
Gold: 1,733.70, -1.20
Silver: 33.29, 10.27

Wait for the Fed Again (Tired Refrain)

For whatever reason, stocks were broadly higher the day before two major events: the German Constitutional court ruling on the legality of the ESF and funding of various debtor nations, and the FOMC policy announcement which will be announced around 2:00 pm EDT on Wednesday. At the conclusion of the meeting, Fed chairman Ben Bernanke will either announce a new round of QE or he won't, thus ending all speculation.

The chances are good that the German high court will rule the ESF constitutional (since it has already been widely leaked that they will do so), though skepticism remains on Bernanke's move. Market reaction will be swift and severe, either way, so it's a somewhat fruitless endeavor to speculate so close to the event.

Sadly, but truly, this is what 21st century investing has become: betting on policy actions by central banks and high courts. One longs for the days when fundamental analysis actually could result in the success or failure of a trade.

That's what German pragmatism and socialist central planning will get you. A mixed bag in a crooked, convoluted, highly controlled and coordinated market system on a road to nowhere.

Yuck. (It seems one hears that opinion more and more these days.)

Dow 13,323.36, +69.07(0.52%)
NASDAQ 3,104.53, +0.50(0.02%)
S&P 500 1,433.56, +4.48(0.31%)
NYSE Composite 8,246.15, +53.75(0.66%)
NASDAQ Volume 1,596,002,750
NYSE Volume 3,518,323,250
Combined NYSE & NASDAQ Advance - Decline: 3530-1983
Combined NYSE & NASDAQ New highs - New lows: 290-38
WTI crude oil: 97.17, +0.63
Gold: 1,734.90, +3.10
Silver: 33.57, -0.07

Stocks Drop on Fears of NO QE by Fed

Nothing but headlines and rumors are moving the markets these days - and, incidentally, it's Monday, so stocks must go down - and, since Europe's already been sated by ECB president Mario Draghi's new proposal to bail out all sovereign nations in need by purchasing one, two and three year bond issues in exchange for said nations' acceptance of "conditions," all eyes have turned to the two-day FOMC meeting at which Chairman Ben Bernanke is supposed to announce his own version of bond-buying (AKA, QE3).

But, as with all things Ponzi-oriented and subject to whims, official data and sentiment - to say nothing of the upcoming presidential election - speculators, insiders, hedge fund managers and other market participants are a little nervous about what's to come on Wednesday afternoon, when the FOMC will surely announce no chance in policy, keeping rates at zero, and after that...

Chairman Bernanke may well hint at new stimulative measures or actually set a date for a plan to proceed, or, he may weigh all the factors, including Friday's uninspired non-farm payroll data, and do nothing (which would be, historically speaking, the correct path).

If that's the case - and that's what had investors worried in the final hour of trade today - then expect a sharp pull-back from the currently-inflated levels on the major indices. Additionally, the German high court is set to rule, earlier in the day on Wednesday, on the constitutionality of the ESM, and that could be an even bigger deal.

Some 70% or more of the German populace is opposed to the ESM, the funding mechanism that is supposed to - just like all other failed plans - save the Euro, because the bulk of the fund would be bourn by Germany and the good people of that country who pay taxes, which are already viewed as too high. The thought of more taxation in Germany, one of the highest-taxed nations in the world, is unpalatable to most, but taxpayers, alas, do not have a vote. The ruling will come at about the time markets open in the US, setting up for what could be a wicked roller coaster ride.

Thus, there's enough nervousness on Wall Street to make even the coolest of operators break into a cold sweat these days, as uncertainty exists at all levels of economies globally and in the political world.

Today's double digit losses on the major exchanges could be nothing more than profit-taking, or a precursor to some terrible future without government stimulus on both the European and American continents.

How sad. Brokers and dealers might actually have to do some fundamental analysis for a change instead of depending on round after round of money printing to keep the stock markets at nose-bleed levels. Time will tell, and the time is nigh.

Dow 13,254.29, -52.35 (0.39%)
NASDAQ 3,104.02, -32.40 (1.03%)
S&P 500 1,429.08, -8.84 (0.61%)
NYSE Composite 8,192.40, -42.11 (0.51%)
NASDAQ Volume 1,578,686,000
NYSE Volume 3,213,290,000
Combined NYSE & NASDAQ Advance - Decline: 2228-3284
Combined NYSE & NASDAQ New highs - New lows: 332-38
WTI crude oil: 96.54, +0.12
Gold: 1,731.80, -8.70
Silver: 33.63, -0.06

August Non-Farm Payrolls Miss Flatlines Stocks

The US economy showed another sign of sluggishness, as August Non-farm Payrolls rose less than expected, gaining 96,000 net new jobs for the month, well below consensus estimates of 125,000.

Additionally, June and July data sets were revised downward by a combined 41,000. June payrolls were just 45,000, while the number in July was revised down to 141,000.

The official jobless rate fell from 8.3% to 8.1%, as labor force participation fell to its lowest level in decades, at 63.5%.

The poor showing for the labor market was seen as a blow to president Obama's re-election bid, and also as cause for the Fed supplying more stimulus when the FOMC meets next week.

Volume more or less returned to the doldrums, following the massive ramp-up Thursday, following the unveiling of the ECB's new bond purchase program.

Stocks tended to just meander around the flat line, with the odd exception of the NYSE Composite, which gapped up at the open and stayed in a tight range all session long.

It's somewhat a sad commentary on markets that they are so well-coordinated in response to news, specifically that this or that central bank is making money easier for bankers to borrow at little to no interest, all the while the general public scratching out a living without any mechanism for saving.

Outward appearances may be deceiving. This kind of controlled economics seldom works out well in the long run.

Precious metals may be telling the markets something. Gold and silver soared again today and are at multi-month highs, generally a sign that economic or geopolitical conditions are strained and risk assets not to be trusted, though one could hardly suspect that anything evil may come the way for stocks, as well as they have performed this year.

Dow 13,306.64, +14.64(0.11%)
Nasdaq 3,136.42, +0.61(0.02%)
S&P 500 1,437.92, +5.80(0.40%)
NYSE Composite 8,233.98, +73.42(0.90%)
NYSE Volume 3,627,325,750
Nasdaq Volume 1,694,756,120
Combined NYSE & NASDAQ Advance - Decline: 3490-1997
Combined NYSE & NASDAQ New highs - New lows: 449-40 (extreme)
WTI crude oil: 96.42, +0.89
Gold: 1,740.50, +34.90
Silver: 33.69, +1.02