Stcks soar on No News; Michael Hudson's Scathing Remarks on Wealth Inequality

On a day in which there was an absolute vacuum of substantial news concerning the economy or stocks in general, markets did what they have become used to doing on such days in the era of ZIRP and QE. Stocks went straight up at the open and added to gains throughout the day.

It is specifically on days like today that the banks and brokerages make their best money, capturing the gains right at the opening bell, without interference from retail riff-raff, and holding them up with small trades during the session. Anybody even thinking about shorting or playing puts against the small tide of buyers gets what's come to be known as having one's face ripped off.

As gruesome as it sounds, the reality of losing money because one is not a member of the 1% tribe and does not believe stocks should be trading at astronomical levels, is painful to the pocket and a cause for many small-time investors and traders to throw in the towel completely.

Such is the nature of markets completely under the control of the biggest and most well-heeled players, complete with front-running HTF computer algos that are able to nab 20% or more of any gains simply by being there a millisecond ahead of any order. while that fact may not be disturbing to some, it should be a concern to anybody who feels that wealth inequality is consistently changing the nature of society, markets and money, and not in any good way.

To that effect, professor Michael Hudson recently provided a glimpse into the new world of finance - unregulated, unbalanced and utterly destructive - in an article published at Counterpunch called Quantitative Easing for Whom?

Hudson, a distinguished research professor of economics at the University of Missouri-Kansas City, was interviewed by SHARMINI PERIES, and his commentary spells out in detail how zero interest rates and quantitative easing has helped the elite to the detriment of the rest of society.

It's quite a read and elegant in its straightforward honesty and truthful simplicity. Perhaps the most poignant phrase is the following:

Banks lend money mainly to transfer ownership of real estate. They also lend money to corporate raiders. They lend money to buy assets. But they don’t lend money for companies to invest in equipment and hire more workers. Just the opposite. When they lend money to corporate raiders to take over companies, the new buyers outsource labor, downsize the work force, and try to squeeze out more work. They also try to grab the pensions.

or this:

...when hedge funds and the big banks – Goldman Sachs, Citibank – see a pension fund manager coming through the door, they think, “How can I take what’s in his pocket and put it in mine?” So they rip them off. That is why there are so many big lawsuits against Wall Street for mismanaging pension fund money.

It's a very good read for such a short article, and points up just how enslaved the middle class (what's left of it) has become and how government and the Fed have completely distorted the economy to the exclusive benefit of a small handful of very, very wealthy families.

The condition of the world is sad and true.

Dow 17,977.42, +228.11 (1.29%)
S&P 500, 2,081.19, +27.79 (1.35%)
NASDAQ 4,929.51, +57.75 (1.19%)

Week Ends Poorly for Stocks, as PPI Indicates Deflation, Euro Falls, Dollar Rallies

Since stocks are close to all-time highs, there isn't much in the way of analysis to explain marginal moves in one direction or another, except along the lines of anticipatory buying/selling in the face of a potential Fed rate hike in June... or September... or never.

That's why it was a little surprising to see stocks fall on news that the PPI registered an outsize negative number this morning, indicative of outright deflation, the one thing of which the Fed and the government are deathly afraid.

PPI had dropped 0.8 percent in January. In the 12 months through February, producer prices fell 0.6 percent, the first decline since the series was revamped in 2009. February PPI, measured on a month-t-month basis, fell 0.5 percent.

Falling prices mean less spending, and less spending begets lower prices in a competitive environment (according to economics 101) and lower prices, as part of the spiral, means lower wages, or, at least no raises in wages, but it's what has been occurring, more or less, since the last financial crisis in 2008-09. One need only know where to look for deals and bargains; they are out there.

But, lower prices cause all kinds of problems for the Fed, already at the zero-bound on rates, because the have no tools to fight deflation, since the entire banking regimen depends on at least some inflation, all the time and everywhere.

Lower oil prices were just the first symptom of the deflation problem, or, maybe the second, following stagnant wages and a lack of job growth (forget the unemployment figures - they're a sham) and now the decline in the price around which everything else revolves has gotten the vicious cycle working overtime. The dollar rising is another ancillary symptom of a moribund economy, one which is about to keel over and die for good, something it should have done in 2009. The other shoe is dropping, and the Fed isn't going to be able to catch this one before it hits the floor with an awful thud. Imports are becoming cheaper, due to just about all our trading partners desperately devaluing their currencies.

The Dollar Index shot up over 100 today, closing at 99.41, a twelve-year high. The euro dipped below 1.05 again. It is rapidly approaching parity with the dollar, and will likely be worth less than a greenback within mere months.

Without inflation, people save instead of spend, pay down debt instead of incurring more, and generally speaking, life gets better for the average Joe or Jane consumer. The honest truth is that banks - at the heart of our global economic malaise - don't want people out of debt, they want them deeper and deeper in debt.

And, if wages stagnate or decline, and people get laid off, the government collects less in taxes and - boo-hoo - they can't service the debt (they can't anyhow, that's proven by our $18 trillion national debt, but that's another story) or provide needed (or unneeded) services.

So, rock, meet hard place. And that's why even if a stinking bad economy keeps Wall Street flush with fresh money from the Fed printing press, it's still a bad economy that is, in the end, unsustainable.

That is about the best guess as to why stocks sold off today, even on BAD news, which was supposed to be GOOD.

Stocks were also down for the week. The Dow fell 107.47 (-0.60%); the S&P shed 17.86 (-0.86%) and the NASDAQ led the downside move, losing 55.61 (-1.13%). It was the second straight weekly loss for the NASDAQ and the Dow, the third in a row for the S&P.

Closing Prices (3/13):
Dow Jones 17,749.31, -145.91 (-0.82%)
S&P 500 2,053.40, -12.55 (-0.61%)
NASDAQ 4,871.76, -21.53 (-0.44%)

Stocks Gain Wildly On Weak Retail Sales, Bank Buyback Plans

Part of the reason Money Daily ceased publishing on a daily basis last year was because of the total ad complete idiocy of markets which have given up control to the Federal Reserve.

Today was another shining example of the absurdity of that proposition, but, fear not, Money Daily will be here tomorrow, next week and on into the future, boldly going where no central banker has gone before.

Prior to the opening bell, the government announced retail sales for the month of February, which came in at a -0.6%, marking the third straight month of declines in retail sales, the worst such string of misses and losses since the collapse of Lehman Brothres back in 2008.

Add to that, on the back of the government's stress tests on capital formation for the largest financial institutions, these big money centers announced upwards of $55 billion in share repurchase plans, led by Morgan Stanley, which announced a repurchase plan of $3.1 billion of it own stock. Remember, stock buybacks serve one purpose: to decrease the number of shares outstanding, which makes the EPS look better by comparison to either the prior quarter or the prior year. Beyond that, there is only a little - questionable - reasoning for such moves in a business sense.

The response to what can only be described as negative news, was a galloping rally right out of the gate for all indices and just about every momentum stock, income stock, growth stock, tech stock, tick tock and sock puppet.

There's no bubble. Uh-uh.

The whole concept here is that if the economy is weak, then the Fed may delay raising interest rates, with the Federal funds rate currently - and for the last six years - sitting at ZERO. The Fed has hinted that they'll raise rates in June, probably by 25 basis points.

That's what has Wall Street all riled up and excited. Imagine if we actually had a functioning economy.

Dow 17,895.22, +259.83 (1.47%)
S&P 500 2,065.95, +25.71 (1.26%)
NASDAQ 4,893.29, +43.35 (0.89%)

Stocks Try Rally, Fade Late; 28 of 31 Financial Institutions Clear Stress Tests

After yesterday's huge downbeat, investors and speculators were hopeful for some upside momentum, or, at least, a dead cat bounce.

Well, the cat bounced, but it turns out it was made of glass, as the major indices could not maintain gains, even though Europe was ecstatic over the second round of QE-Euro, with the ECB scooping up whatever dribs and drabs of debt they could find (liquidity is an issue).

One of the dullest sessions of recent memory was punctuated by bank stocks, which were mostly higher by one or two percent, in advance of the second round of Fed-mandated stress tests, which would determine the readiness of the TBTF banks to offer dividends and return to shareholders.

The results of the tests, released at 4:30 pm EDT, showed that 28 of 31 of the major financial institutions subjected to the Fed's nanny-ism, submitted capital plans that passed muster. The three which failed, were Santander, Deutsche Bank and Bank of America, the last of which must re-submit its plan by the end of the third quarter.

Largely, the tests allowed those which passed to increase dividends and engage in the latest Wall Street scam, repurchasing of shares. To that point, Morgan Stanley (MS) will repurchase $3.1 billion of its own shares; other banks had similar ratios.

Beyond the moribund inter-workings of major financial institutions, what moved markets on the day were dollar strength and euro and yen weakness. The dollar is at its strongest valuation against other currencies in over a decade, while the Yen and Euro are hitting 12-year lows against the greenback. The euro is approaching parity with the dollar, trading in the 1.05 range.

Also of note was the first quarterly report of Wall Street darling Shake Shack, which is trading at some ungodly valuation like $700 million per store. The SHAK returned a five cent loss per share for its most recent quarter. Shake that.

Dow 17,635.39, -27.55 (-0.16%)
S&P 500 2,040.24, -3.92 (-0.19%)
NASDAQ 4,849.94, -9.85 (-0.20%)

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