NASDAQ Celebrates 15th Anniversary of All-Time High with Brisk Sell-Off, Closes Down 82 Points

On this day, fifteen years ago, stock speculators were having a field day, thinking the free ride in equities would never end.

Such foolishness has been witnessed before on Wall Street and in markets not as crazed as the dotcom days of the NASDAQ, and, this time, despite protestations from fast-money hucksters everywhere, it would not be different, because, within a few days the NASDAQ fell some 400 points, from its intra-day high of 5,132.52 and close on March 10, 2000 of 5,048.62, to a close of 4,610.00 just 10 days later.

But, the carnage was only beginning. Here are the closing figures for the NASDAQ for selected year 2000 dates:
April 4: 4,148.89
April 14: 3,321.29
December 21: 2,340.12
December 31: 2,470.52

Many of us remember what happened post-2000, as the NASDAQ lost more than half of its value and the portfolios of the tech boom were turned to burnt bits and bytes. Following the explosion and crash of the World Trade Center on September 11, 2001, the US exchanges were shut down for nearly a week. On September 21, five days after resumption of trading, the NASDAQ cratered to a close of 1,423.19, having lost more than two-thirds of its value in just a year-and-a-half.

The road back to euphoria has been long and bumpy, and perhaps it was fitting that today, the NYSE's opening bell would be rung by its biggest bozo booster, the unflappable and egregiously uber-bullish Jim Cramer, he of CNBC and Mad Money fame.

Just after Cramer pushed the magic button, vigorous selling began, taking the NASDAQ down 43 points, the Dow lower by 145 and the S&P off by 17. Before 10:00 am EDT, the NAZ had shed 55, the Dow, 200, the S&P, 21.

At 10:00 am EDT, the market got a whiff of bad news (which, in the perverse parlance of Wall Street, interpreted as good, because any indication of weakness in the US economy might delay the Fed from raising rates) when Wholesale Sales came in at a -3.1% for February, the third straight month-over-month decline, comparing back to March 2009 when the metric registered the last of five straight monthly drops.

The news was barely helpful, however, with European markets struggling, European currencies crashing (the euro was under 1.07 and falling) and US treasuries ripping.

Shortly after noon, the Dow hit new lows, -270; the NASDAQ was off 73 points, the S&P broken through support at 2060, trading at 2050, down 29 points.

Yra Harris, who pens the Notes From Underground blog, may have said it best when speaking with Rick Santelli on CNBC, referencing Simon and Garfunkel, with a message for the Fed, the ECB and central bankers globally, warning, "all my words come back to me in shades of mediocrity..." (see below for video)

Stocks on all indices hugged the bottom of the day's trading range for the remainder of the session. What was surprising to some - though not to all - was the lack of buyers coming to the rescue with the old "buy the dip" response. Selling accelerated into the close.

Maybe because the NASDAQ, in particular, has suffered losses in four of the last six sessions, notably, right on the heels of the index breaching the 5,000 level to the upside on the first trading day of March. There's an old saying that goes along the lines of, "nobody rings a bell at the top,; though that mystical, magical 5,000 handle might have been all the top-thumping some traders felt necessary to unload at a profit.

One could hardly blame anybody bailing out at these lofty levels. Six years and one day ago, on March 9, 2009, the NASDAQ stood at 1,268.64. It has nearly quadrupled since that moment in market history.

Well, Happy Anniversary!

Dow 17,662.94, -332.78 (-1.85%)
S&P 500 2,044.24, -35.19 (-1.69%)
NASDAQ 4,859.79, -82.64 (-1.67%)

Paul Simon and Art Garfunkel Homeward Bound Central Park concert

With the Release of the Apple Watch, Have We Reached a Peak in Stocks and Stupidity?

Well, now, really, we all know the answer to the question posed in the headline, don't we?

Stocks are reaching extreme valuations, and, since the old adage, buy low, sell high always and everywhere prevails, right now might seem like as good a time as any to get the heck out of Dodge and cash in some of those high-fliers, if, that is, you still play the iStocks game on your iMac or iPhone.

Gold Apple watch $10,000 retail

Even id stocks have not reached their peaks, it's simple math and history to know that they will, at some point, and the downtrend will likely be abrupt. Or, the major indices could just meander along in a narrow downward channel over an extended period, like we had in 2000-2001, until the World Trade Center was blown up and collapsed. That's what most around at the time consider a market bottoming event, so, one does not want to be heavily invested when some kind of calamity shuts down the exchanges for a few days, or a week, or longer.

Besides trading at somewhat lofty valuations, stocks have also been trading on extremely thin volume for quite some time (this being the sixth anniversary of the 2009 bottom, that would be six years), which is also, generally speaking, a negative signal, though the pumpers at the Fed and central banks around the world have done a bang-up, jolly good job of keeping prices elevated while entire national economies are collapsing.

Some say that the markets reached a climax with the IPO of Alibaba (BABA), a dubious claim and an even more dubious event, now that allegations and proof has emerged that BABA's books were cooked by phony sales and the entirety of their public offering turned out to be nothing but a cash-out for Jack Ma and some of the top executives. We will never learn.

But, maybe it's not too late. Apple (AAPL) just had their big, big product roll-out of the new Apple Watch, an unwelcome and unnecessary accessory to the entire universe of iJunk gadgets floating around, and, beyond the watch's 18-hour battery life (huh? it's a watch, and as far as anyone can tell, there are still 24 hours in a day), price ($349 and up, all the way to the gold-plated $10,000 unit), and general uselessness, the Apple Watch may be just the ticket to grab on your way out of the Wall Street casino.

The Apple Watch does everything your iPhone does, except smaller, and you have to wear it, as a sign that you are a useless moron with excessive amounts of cash on hand with which you know not what to do, much like the major corporations in America, buying back their own stock at nose-bleed prices.

On the day, Apple's stock traded up to 129.57 (buy the rumor) prior to the release event, then fell as low as 125.06 (sell the news) as CEO Tim Cook showed off his company's latest gadget. To be fair, people are not impressed. The stock closed at 127.08, up "officially" 0.48 on the day, but, assuredly, this was not Apple's finest moment (that was 1984 when they brought out the Macintosh (Mac) computer).

Steve Jobs, bless his soul, turned over in his grave, but it's been rumored he did have a good laugh with Al Einstein and Tom Edison when they saw the new Apple Watch.

Peak Apple? Possibly.

Peak stocks? Maybe.

Peak Stupidity? We're already well past that.

Dow Jones 17,995.72, +138.94 (0.78%)
S&P 500 2,079.43, +8.17 (0.39%)
Nasdaq 4,942.44, +15.07 (0.31%)

GOOD=BAD; NFP +295,000, DOW -278.87, NASDAQ -55.44, S&P 500 -29.78

As bizarre as global economics has become, almost nothing compares to the algo-crazed stock markets in the United States, where computers are programmed to interpret diverse news report headlines and respond accordingly.

One of the more perverse actions was visible today, when, after the BLS announced, in their monthly non-farm payroll release, that the US had created (mysteriously, magically) 295,000 net new jobs in the month of February stocks traded sharply to the downside and continued that trend for the remainder of the session.

At issue is the proposed June 0.25% increase (that's right, 25 bips) to the federal funds rate that the Federal reserve has been hinting at for the better part of the past two years. Maybe they've been hinting about this seminal event for longer, but, honestly, one has only so much patience for the garbled issuance of verbiage from the masters of misinformation.

Supposedly, the argument on Wall Street is thus: if the economy is truly improving and gathering steam, then the Fed will raise interest rates, meaning that inside players like the big banks, insurance companies and some hedge funds are going to find it much more difficult to make money, because, when you're borrowing billions of dollars at almost nothing, and investing it in dubious stocks and other investments that might not pan out as you had expected - unless the Fed has your back - and, leveraging up those investments 10, 20, maybe 30 times, any increase in your cost of borrowing might bring on disastrous events.

So, as soon as the bells and whistles went off signaling the opening of trade on the final day of the first week of March, the selling ensued, and did so with resolute alacrity and vigor not seen when the markets were going up (all of the past six years, on low volume).

The whole set-up is patently absurd and it's purely the cause of the Fed, which has kept rates too low for too long, and now must reap what they have sewn, so welcome to the great deflation, part two, which began in 2008, and was interrupted by the Fed and Wall Street in March of 2009. If stocks sell off like this merely on the rumor that the Fed will hike rates a measly 1/4 percent, imagine what kind of carnage will ensue when they actually do it.

Where the absurdity begins is difficult to ascertain, though the Fed, through their continued press releases after FOMC meetings, has linguistically backed themselves into a corner. They've repeatedly maintained that they will raise interest rates on a data-driven, unspecific schedule, and the data released today by the BLS was undeniably good, showing strong job growth and an unemployment rate at the lowest point in nearly a decade, at 5.5%, which, to almost anybody's eyes, is pretty much full employment.

There's one little problem with the figures the BLS releases the first Friday of every month: they're BULLS--T, garbage, manipulated, massaged, goal-sought, and thoroughly distort the true nature of the labor market. In other words, there's almost no way there were 295,000 new jobs created in the US last month, and the figures for the past year, and the year before that and before that, etc., are even more misleading. The US economy has been hollowed out, and, while it may be better here than it has been in years, it is not much better.

Now, the Fed knows these figures are made from pure cloth, but they are tied to them. Call today a test of the algorithms, a dry run for the main event, which should occur around the middle of June or by early July. The Fed and the government have to continue to spread the lie that the US economy is strong, vibrant and growing, and, because of that, while most other countries in the world are lowering interest rates (because they honestly know their economies stink), the US is prepared to embark upon one of the more ludicrous propaganda and financial experiments in the history of mankind.

The Federal Reserve, should they go through with their supposed plan to begin raising interest rates in June 2015, will be attempting the impossible, and doing a most dangerous thing: they will be trying to slow down an economy they proclaim - and would like everyone to believe - is growing, which in reality is contracting and deflating.

Our money is heavily on the side of reality winning that argument.

Related trades today concerned all US treasuries, which sold off, sending yields higher. Oil, gold and silver were all lower.

Dow Jones 17,856.85, -278.87 (-1.54%)
S&P 500 2,071.26, -29.78 (-1.42%)
Nasdaq 4,927.37, -55.44 (-1.11%)

Ironic notes: Today was Alan Greenspan's 89th birthday; Apple will replace AT&T in the Dow Jones Industrials on March 18 (just in the nick of time?)

Mario Draghi's Bold QE, Bank Stress Tests and February Payrolls

Thursday was a fascinating day for the world of finance ad markets (what's left of them), kicked off by the ECB rate announcement and finished up by US bank stress tests, released, cynically, after the close of equity markets.

And, the markets were largely unresponsive to what was happening in Europe because of their anticipatory stance toward the February Non-farm Payroll data due out on Friday.

Consequently, there were no major catalysts to propel markets in either direction generally, though, if one were to believe in the gospel according to Draghi (Mario Draghi, head of the ECB), al of Europe should be celebrating the prospect of EQE (European Quantitative Easing), because Draghi ad his cohorts see inflation rising by 1.5% in 2016 and GDP in the eurozone galloping ahead once the bond flow gets eaten entirely by the ECB.

This view is highly ignorant of facts, despite Draghi and the ECB having access to the best data in the world outside the Federal Reserve. First, the ECB should be well aware that QE has not driven either growth or inflation either in the United States or Japan (where they've been QE-ing it up for 20 years). Second, the amount of issuance of sovereign debt that the ECB proposes to purchase from the various government comprising the Eurozone might cause some significant crowding out of legitimate buyers of such debt.

QE is nothing more than a classic Ponzi scheme, with some big, fat-cat organization - be it the Fed, the BOJ or the ECB - striding atop government cash calls (bonds=debt). The central banks distribute the proceeds back into the system in whatever haphazard ways they can, the usual transmission mechanism being repos and open market "operations" directly to primary dealers (TBTF banks) that ends up in equity markets.

Presto! Government expands, stocks soar, while the general economy flummoxes, falters and fails. As is the usual case with all Ponzi schemes, everywhere and always, the last "investors" are left holding the bags of worthless paper. With the massive bond-buying monetization of government debt, the eventual losers will be regular people, whose pensions will be raided, whose cost of living will be untenable, whose lifestyles will be unstable, whose bank accounts will be bailed-in, whose futures will be null and void.

So, pay close attention to what's happening in Europe and Japan, because it eventually will find its way across both big ponds to the shores of North America. There is no doubt that QE and its after-effects will be crushing to ordinary people. The worst part of the story is that there will be nowhere on the planet to hide.

Well beyond the close of the moribund US equity markets, the Federal Reserve unleashed the current round of stress tests for the significant financial institutions.

All 31 banks passed. Halelujah!

These "tests" are nothing more than job security for CFOs and other executive who hang out in cushy corner offices. They are completely meaningless, especially since bank balance sheets are so opaque nothing of substance can be seen.

As far as the February, 2015 Non-farm Payrolls (due out at 8:30 am on Friday) are concerned, they'll contian the usual lies nd obfuscations that the BLS has become so famous for over the years. Ideally, the US will be shown to have created a couple zillion new jobs, but everybody will know that the numbers are wholly fiction and the economy is on its last legs. Wall Streeters will rejoice and send the major indices into the stratosphere, so that Fed Chair Janet Yellen can echo Greenspan and Bernanke by proclaiming the goodness of the "wealth effect."

Of course, most Americans will hardly notice said effect, as they struggle to make car and tuition payments.

Dow Jones 18,135.72, +38.82 (0.21%)
S&P 500 2,101.04, +2.51 (0.12%)
Nasdaq, 4,982.81, +15.67 (0.32%)

Deflation, Followed by More Deflation

In its simplest terms, deflation is defined as a decline in the money supply, but, because of central bank meddling such as QE and ZIRP (Zero Interest Rate Policy), money supply isn't really an issue, but, where the money is going turns out to be the bogey.

For all the pumping the Fed and other central banks have done since the Lehman crash in 2008, inflation and growth have failed to materialize because the money is stuck in transmission lines between the central banks and the TBTF banks, who don't want to take the risk of loaning money to real people, preferring instead to speculate in stocks and reward their cronies with fat bounties, otherwise known as bonuses.

The three trillion dollars by which the Fed has expanded its balance sheet since 2008 hasn't found its way into the real economy. Meanwhile, governments, from municipalities on up to the federal level, have done their best to over-regulate and over-tax working people, causing further strain on the bulk of consumers. So, if money, on one hand, is stuck in transmission, and taxes and fees are going up on the other hand, with incomes stagnant or falling, people have less to spend, and make their spending choices with just a little bit more prudence.

Depending on your age and circumstances, you may or may not be experiencing a bout of deflation this winter.

It really depends on what you spend your money on, where you live, where you shop, and what you do for a living.

Obviously, despite the best efforts of oil price manipulators to keep prices above $50 per barrel, the price of a gallon of gas has fallen precipitously over the past six months. That's a plus, as is the low price of natural gas. Consumers in the Northeast, experiencing one of the coldest winters in history, haven't had it too bad, because the cost of heating a home has dropped like a rock. It would be even better if Al Gore had actually been right about Global Warming. (Well, he did invent the internet, so you can't expect him to be perfect.)

Food prices have moderated, and, because fewer and fewer consumers are dining out, restaurants have been offering more specials. Food is one of those things that you really can't manipulate much, as it does have limited fresh shelf life. A decent summer growing season has kept a lid on food prices.

However, if you've got kids at all, and especially kids in college, you're likely feeling the pinch of higher tuitions and cost for college text books. Health care costs haven't moderated as much as the government would like you to think, either, so, if you have health insurance (Doesn't everybody? It's the LAW!), you're paying more.

Housing prices have moderated a bit, and bargains ca be found, especially in the Northeast and in rural areas. Farmland prices are coming down dramatically.

Behind all of this is the strong dollar, helped by the rest of the world, which is cutting interest rates and debasing currencies at a furious pace.

Thanks to Zero Hegde for the complete list of 21 central bank rate cuts so far in 2015:

1. Jan. 1 UZBEKISTAN
Uzbekistan's central bank cuts refi rate to 9% from 10%.

2. Jan. 7/Feb. 4 ROMANIA
Romania's central bank cuts its key interest rate by a total of 50 basis points, taking it to a new record low of 2.25%.

3. Jan. 15 SWITZERLAND
The Swiss National Bank stuns markets by discarding the franc's exchange rate cap to the euro. The tightening, however, is in part offset by a cut in the interest rate on certain deposit account balances by 0.5 percentage points to -0.75 percent.

4. Jan. 15 EGYPT
Egypt's central bank makes a surprise 50 basis point cut in its main interest rates, reducing the overnight deposit and lending rates to 8.75 and 9.75 percent, respectively.

5. Jan. 16 PERU
Peru's central bank surprises the market with a cut in its benchmark interest rate to 3.25 percent from 3.5 percent after the country posts its worst monthly economic expansion since 2009.

6. Jan. 20 TURKEY
Turkey's central bank lowers its main interest rate, but draws heavy criticism from government ministers who say the 50 basis point cut, five months before a parliamentary election, is not enough to support growth.

7. Jan. 21 CANADA
The Bank of Canada shocks markets by cutting interest rates to 0.75 percent from 1 percent, where it had been since September 2010, ending the longest period of unchanged rates in Canada since 1950.

8. Jan. 22 EUROPEAN CENTRAL BANK
The ECB launches a government bond-buying programme which will pump over a trillion euros into a sagging economy starting in March and running through to September, 2016, and perhaps beyond.

9. Jan. 24 PAKISTAN
Pakistan's central bank cuts its key discount rate to 8.5 percent from 9.5 percent, citing lower inflationary pressure due to falling global oil prices.

10. Jan. 28 SINGAPORE
The Monetary Authority of Singapore unexpectedly eases policy because the inflation outlook has "shifted significantly" since its last review in October 2014.

11. Jan. 28 ALBANIA
Albania's central bank cuts its benchmark interest rate to a record low 2%. This follows three rate cuts last year, the most recent in November.

12. Jan. 30 RUSSIA
Russia's central bank cuts its one-week minimum auction repo rate by two percentage points to 15 percent, a little over a month after raising it by 6.5 points to 17 percent, as fears of recession mount.

13. Feb. 3 AUSTRALIA
The Reserve Bank of Australia cuts its cash rate to an all-time low of 2.25%, seeking to spur a sluggish economy while keeping downward pressure on the local dollar.

14. Feb. 4/28 CHINA
China's central bank makes a system-wide cut to bank reserve requirements -- its first in more than two years -- to unleash a flood of liquidity to fight off economic slowdown and looming deflation. On Feb. 28, the People's Bank of China cut its interest rate by 25 bps, when it lowered its one-year lending rate to 5.35% from 5.6% and its one-year deposit rate to 2.5% from 2.75%. It also said it would raise the maximum interest rate on bank deposits to 130% of the benchmark rate from 120%.

15. Jan. 19/22/29/Feb. 5 DENMARK
Incredibly, the Danish central bank cuts interest rates four times in less than three weeks, and intervenes regularly in the currency market to keep the crown within the narrow range of its peg to the euro. (The won't last. See Switzerland.)

16. Feb. 13 SWEDEN
Sweden's central bank cut its key repo rate to -0.1 percent from zero where it had been since October, and said it would buy 10 billion Swedish crowns worth of bonds.

17. February 17, INDONESIA
Indonesia’s central bank unexpectedly cut its main interest rate for the first time in three years.

18. February 18, BOTSWANA
The Bank of Botswana reduced its benchmark interest rate for the first time in more than a year to help support the economy as inflation pressures ease. The rate was cut by 1 percentage point to 6.5%, the first change since Oct. 2013.

19. February 23, ISRAEL
The Bank of Israel reduced its interest rate by 0.15%, to 0.10% in order to stimulate a return of the inflation rate to within the price stability target of 1–3% a year over the next twelve months, and to support growth while maintaining financial stability.

20. Jan. 15, March 3, INDIA
The Reserve Bank of India surprises markets with a 25 basis point cut in rates to 7.75% and signals it could lower them further (they did, yesterday, to 7.50%), amid signs of cooling inflation and growth struggling to recover from its weakest levels since the 1980s.

21. Mar. 4, POLAND
The Monetary Policy Council lowered its benchmark seven-day reference rate by 50 basis points to 1.5%.

There will be more rate cuts and currency debasement, especially once the ECB gets its own QE program going. Note that all of these countries want to reflate, inflate or otherwise spur demand. The problem, as discussed above, is that people just aren't buying it, and they aren't buying. People have been paying down debt and saving, because, in an era of unprecedented central bank intervention and government regulation, the average Joe and Jane is uncertain about the future. It's a social phenomenon the economists can't compute.

Perhaps, in a free market without central bank meddling and government intervention into every aspect of one's life, capitalist economies might just have a chance.

Who knew?

Bottom line, central banks hate deflation, because it causes debt-driven economies to seize up and die, which is exactly why consumers should appreciate it.

Dow 18,096.90, -106.47 (-0.58%)
S&P 500 2,098.53, -9.25 (-0.44%)
Nasdaq 4,967.14, -12.76 (-0.26%)