Stocks and bonds have gotten to a point which indicate there won't be a rate increase to the Federal Reserve's most basic federal funds rate until at least September of this year and quite probably, beyond that.
Dependent upon data flows to determine whether the economy (or more specifically, the stock market and the 1% of the population that owns them) is strong and durable enough to withstand raising rates from the zero-bound to something higher, say, 0.25 percent or, as some have cynically put forth, 0.125 percent.
Data has been daunting to the Fed. Industrial production, durable goods and advance figures on first quarter GDP have all been short of expectations, adding to the pain which last week's March non-farm payroll figures presented. Of course, stocks, which have become the only game in town, loved the weak numbers, because it puts any thought of a rate increase on a semi-permanent hold, meaning free-or-nearly-free money and credit, with which it is an easy task to invest and make money.
So, we have the twisted dynamic of bad news on the economy being nothing but champagne and rose for players of stocks, and that was well reflected in this week's trading, with all the indices heading back toward all-time highs. This followed a brief respite in March, as speculators nervously sold out of equities, thinking that the Fed might increase rates in June.
The NFP data crushed that line of thinking, and sent stocks off like rockets this week, concluding with Friday's nifty rise, sending the Dow back over 18,000 once again and the NASDAQ within shouting distance of the magical 5,000 mark. The final day of trading for the week was bolstered by an announcement from General Electric (GE), stating that the company would sell nearly all of its GE Capital financing unit and real estate holdings (about $23 billion) to Blackstone and Wells-Fargo, two companies, which over the past seven years since the housing bust, have become the nation's new landlords. GE put forward a plan to repurchase some $50 billion worth of its own shares over the next three years.
Timing of the deal isn't very curious at all. GE has been stock in a range for the past fifteen years, and, with interest rates such a challenge by which to make profits, CEO Jeff Imelt and his executive team probably felt it was due time to return to its industrial roots. It does set precedent, however, by selling such a large chunk of real estate and real estate financing assets to companies that are already heavily entrenched in the sector, putting an exclamation point at the end of the boom-gone-bust that is damning to capitalism and competition.
GE's buyback provisions will not be put to scrutiny. Wall Street loves dilution, making shares more valuable to the fewer who hold them. With a market cap of nearly $298 billion, GE had room to maneuver, but the key question remains, by lopping off more than a quarter of its asset base, is the company going to generate better returns?
It's already at nosebleed levels, with a P/E of 19 and an annual divided of 0.92, meaning it will take the plunger who invests in the stock today nearly 31 years to double his/her money on the dividend alone. That's a long time, and, with arduous risk implanted.
Nonetheless, stock junkies loved the deal, boosting shares of GE by nearly 11% on the day and making the Dow the percentage winner among major indices.
For the week the Dow Industrials jumped 294.41 points (1.66%); the S&P added 35.10 (1.70%) and the NASDAQ was the big winner for the week, gaining 109.04 points (2.23%).
On the day:
Dow 18,057.65, +98.92 (0.55%)
S&P 500 2,102.06, +10.88 (0.52%)
NASDAQ 4,995.98, +21.41 (0.43%)
Editor's note: Due to unforeseen circumstances and largely, common sense, Money Daily will soon be converting to a weekly format - with the occasional daily post thrown in on major news developments - to present a more robust and well-reasoned approach to our readers. The daily noise and rigid schedule has made it difficult to offer a cogent, thought-provoking view, which is our purpose. In coming weeks, readers should be advised to seek out the weekly recaps, published on Friday evenings, or, more likely, Saturday afternoons.
Friday, April 10, 2015
Tuesday, April 7, 2015
Turnaround Tuesday Displays Classic Bear Market Pattern
Up strong at the open and down on the day was how all the major indices took in Tuesday, a massive reversal beginning around 2:45 sent the Dow, NASDAQ and S&P into negative territory, calling into play one of the more obvious chart patterns, based mostly on rumors and fear.
The idea that WTI crude can continue to levitate above $50 per barrel for long is a rigger's pipe-dream and the kind of speculative plays that have been in play on the crude front seem ill-advised and doomed for failure.
In the dim afterglow of Friday's non-farm payroll disaster and the general under-performance of macro data for most of the year so far, stocks aren't looking exactly like the sure bet they've been the past six years running. The pattern, seen today, of a high rise at the open only to be finished off with unbridled selling pressure into the close would lead even the most bullish players searching for answers.
If the US economy is really on its knees - a view taking on more and more supporters - there is no turning back for most of the gamblers and speculators who have driven equities close to all-time highs. What may be even more puzzling, or troubling, is the fact that the major indices have fallen and flat-lined since their record closes in late February, and April hasn't provided any catalysts to send stocks back to those lofty levels.
That there is a creeping sentiment of FUD (fear, uncertainty, doubt) in the market should not come as a surprise. Most of the S&P 500 has been treading water in terms of real earnings, their EPS growth fueled by massive buybacks instead of capital investments, growth and taking market share, except in exceptional circumstances.
Today's action could be nothing more than advanced day-trading by pure speculators. Then again, we've been saying something is seriously wrong for months now, and yet, the markets have maintained an aura of invincibility.
The idea that WTI crude can continue to levitate above $50 per barrel for long is a rigger's pipe-dream and the kind of speculative plays that have been in play on the crude front seem ill-advised and doomed for failure.
In the dim afterglow of Friday's non-farm payroll disaster and the general under-performance of macro data for most of the year so far, stocks aren't looking exactly like the sure bet they've been the past six years running. The pattern, seen today, of a high rise at the open only to be finished off with unbridled selling pressure into the close would lead even the most bullish players searching for answers.
If the US economy is really on its knees - a view taking on more and more supporters - there is no turning back for most of the gamblers and speculators who have driven equities close to all-time highs. What may be even more puzzling, or troubling, is the fact that the major indices have fallen and flat-lined since their record closes in late February, and April hasn't provided any catalysts to send stocks back to those lofty levels.
That there is a creeping sentiment of FUD (fear, uncertainty, doubt) in the market should not come as a surprise. Most of the S&P 500 has been treading water in terms of real earnings, their EPS growth fueled by massive buybacks instead of capital investments, growth and taking market share, except in exceptional circumstances.
Today's action could be nothing more than advanced day-trading by pure speculators. Then again, we've been saying something is seriously wrong for months now, and yet, the markets have maintained an aura of invincibility.
Monday, April 6, 2015
Exceedingly Poor Jobs Data Sends Stocks Soaring (the new normal)
Sometimes, it's just all too predictable.
When I saw the March jobs number on Friday, and the futures plunging, because, you know, 135,000 net new jobs in the US was about half of what was expected from the goal-seeking BLS.
Revisions to January and February cast an even more dismal pallor over the market, which, gratefully, was closed on Friday.
By Monday morning, stock futures were still in the doldrums and the Dow opened to an immediate loss of over 100 points, but the decline was soon to be erased by the "bad news is good news" crowd and voices from the Fed singing in united, dovish tones, to the tune of ZIRP 4 EVA.
Yep, like I had thought on Friday, a winning day for stocks. Meanwhile the US economy collapses like a house of cards in a wind storm.
Is there no end to this nightmare of a centrally-planned global economy? (Please, don't answer that.)
Dow 17,880.85, +117.61 (0.66%)
S&P 500 2,080.62, +13.66 (0.66%)
NASDAQ 4,917.32, +30.38 (0.62%)
When I saw the March jobs number on Friday, and the futures plunging, because, you know, 135,000 net new jobs in the US was about half of what was expected from the goal-seeking BLS.
Revisions to January and February cast an even more dismal pallor over the market, which, gratefully, was closed on Friday.
By Monday morning, stock futures were still in the doldrums and the Dow opened to an immediate loss of over 100 points, but the decline was soon to be erased by the "bad news is good news" crowd and voices from the Fed singing in united, dovish tones, to the tune of ZIRP 4 EVA.
Yep, like I had thought on Friday, a winning day for stocks. Meanwhile the US economy collapses like a house of cards in a wind storm.
Is there no end to this nightmare of a centrally-planned global economy? (Please, don't answer that.)
Dow 17,880.85, +117.61 (0.66%)
S&P 500 2,080.62, +13.66 (0.66%)
NASDAQ 4,917.32, +30.38 (0.62%)
Thursday, April 2, 2015
Stock Indices Displaying the New Minimalism
If not for the power of levitating algos, stocks would have ended the week with losses.
As it is, the major indices end the week (markets closed on Good Friday) with minuscule gains on puny volume, except for the NASDAQ, which actually finished negative for the fourth week in the past five.
Here's how the week shook out:
Dow Ind. +50.58 (0.29)
S&P 500 +5.94 (0.29)
NASDAQ -4.28 (0.09)
... and on the day:
Dow 17,763.24. +65.06 (0.37%)
S&P 500 2,066.96, +7.27 (0.35%)
NASDAQ 4,886.94, +6.71 (0.14%)
For this, we need not one (CNBC), not two (Bloomberg TV), but three (Fox Business) cable networks devoted to stocks?
It would be worthwhile, one supposes, if even one of them told the truth about Wall Street half the time.
These public markets and the networks devoted to coverage of them, are epic fails. The world is rapidly moving beyond their facile facades of importance and heft. Most of the world's population does not own stocks and has no use for massive, unfair, unfeeling corporations and their oligarch-like executives.
Indeed, would half of the Fortune 500 companies in the world fail, markets would clear and more entrepreneurs would take up the slack, having the chance to make an honest living.
Corporations, like the governments which support them, are leeches which prey upon the blood of individuals and communities. The sooner people wake up to the fact that they are strip-mining operations of productive capacity, the better.
Peace. Out.
As it is, the major indices end the week (markets closed on Good Friday) with minuscule gains on puny volume, except for the NASDAQ, which actually finished negative for the fourth week in the past five.
Here's how the week shook out:
Dow Ind. +50.58 (0.29)
S&P 500 +5.94 (0.29)
NASDAQ -4.28 (0.09)
... and on the day:
Dow 17,763.24. +65.06 (0.37%)
S&P 500 2,066.96, +7.27 (0.35%)
NASDAQ 4,886.94, +6.71 (0.14%)
For this, we need not one (CNBC), not two (Bloomberg TV), but three (Fox Business) cable networks devoted to stocks?
It would be worthwhile, one supposes, if even one of them told the truth about Wall Street half the time.
These public markets and the networks devoted to coverage of them, are epic fails. The world is rapidly moving beyond their facile facades of importance and heft. Most of the world's population does not own stocks and has no use for massive, unfair, unfeeling corporations and their oligarch-like executives.
Indeed, would half of the Fortune 500 companies in the world fail, markets would clear and more entrepreneurs would take up the slack, having the chance to make an honest living.
Corporations, like the governments which support them, are leeches which prey upon the blood of individuals and communities. The sooner people wake up to the fact that they are strip-mining operations of productive capacity, the better.
Peace. Out.
Wednesday, April 1, 2015
April's Fools: Stocks Continue Slide
As noted yesterday, something is not quite right about the US equity markets, and, whatever it is, it's starting to get the attention of the investor class, or, at least the computer algos that make the trades for the investor class.
Stocks continued the slide begun on Tuesday, which already sent the Dow Industrials to negative on the year and is threateneing to do the same for the NASDAQ and S&P 500.
Main among culprits leading to displeasure with stocks is the disconnect between the real economy and the Wall Street economy. In the real economy, people have to make choices, every day, hour by hour, minute by minute, and those choices, magnified by the 300+ million Americans become what are known as statistics. These statistics are not, and have not, jibed with the "recovery" mantra so popular with the government and Wall Street crowd, the one which claims everybody is working and nobody is hurting, when in fact, major segments of the population are suffering from the strains of a controlled and contrived economy that favors only a small slice of very wealthy individuals.
By age group, it goes something like this: teens and college-age individuals can't find decent jobs in many places, and, while college students, generally, as a group, are not working, teens and those in their early 20s are finding the pickings pretty slim and opportunity for advancement a challenge. Wages are low, the work is monotonous or dreary, the bosses are boot-licking jack-asses and the fringe benefits are - in general terms - nil, as in, NONE.
College students, once they graduate, if they are fortunate enough to find gainful employment, are often up to their ears in student loan debt, the average being $27,000 for a four-year degree. Many are not finding work that pays well enough to pay off the loans, rent an apartment and live like a normal human, so many of these twenty-somethings are habitating in parents' basements, smoking herb and playing video games in between their postings on insta-chat or twitter-face or whatever the app du jour happens to be.
Then there are those who used to be known as middle class, the folks in their 30s, 40s and early 50s, with or without kids at home or away or actually grown, drowned in debt from auto loans, living in underwater homes they cannot sell, and denied any upward mobility because they are linked to the national ball-and-chain known as a credit score. Some are doing OK, but the hours are long, the taxes never stop and keep going higher, and maintaining an outward appearance of peace and civility is becoming harder and harder.
Following after them are the soon-to-be-retired baby boomers, who hope that the stock market doesn't crash, who long to be soon done with working seemingly forever for less then they're worth, who are told to spend rather than save, and who don't see the point of saving since interest rates are so low, it's simply not worth the effort. Every day, something else annoys them a little bit. A higher price for a staple item, or, what's even more common, less of the same item for the same price. Or a new tax, a new law, some absurd thing like "freedom of religion" or "anti-this-or-that" legislation.
Seniors, those above and beyond the age of 65, are trying to hang on, if at all, with social security and a medical plan they neither appreciate nor understand. Co-pays keep rising, the quality of care declines. Their savings are stuck in neutral, thanks to the Fed's wisdom of keeping interest rates at zero for the past seven years. They're slowly bleeding to death from places they didn't know they had.
Amidst all of the age groups are sub-groups, like small business owners, buried under government paperwork and besiged by regulations and onerous taxes, and, what's become known as the FSA (Free S--t Army), the legions of welfare and disability sufferers who live beneath the general strata of society, seeking nothing more than a monthly rent check, food stamps, an Obamaphone and free health care. Those, and a flat-screen TV covers the extent of their pretty-much worthless lives.
Of course, we have the useful idiots who work for government and its myriad levels: teachers, police, paper-shufflers or all kinds, getting fat on the public expense account, oblivious to the plight of their fellow citizens in the real world economy. These types retire after 20 or 30 years of wasteful spending of taxpayer money, just to waste even more with their lavish pensions.
Striding atop all of these folks are the politicians and financiers of Washington and Wall Street, and state capitols and in municipal government positions.
And they're no longer laughing. At least some of them aren't. They know, that but for the grace of these hordes of individuals suffering under tax slavery and monetary repression, they and their ilk would be hung, burned or somehow disenfranchised. They can only hope to keep the game going another day, another week, another year, another election, because when it ends, they have no skills by which they could fend for themselves. They would be set adrift into a seas of unhappiness and misery, like the rest of the population.
If they're not worried, they should be, because this system is ripping and tearing at the seams, because it is unsustainable. There's only so much fraud and so much money out of thin air that can cover up the obvious defects.
But, give the oligarchs, politicians and financial whiz-kids their due. They've kept the system alive longer than anyone could have expected them to, all the time since March of 2009. Six years is not a long time, but 10 is, and 15 is longer, and there's little doubt there will be changes - for which we all are mutually unprepared - to come.
Dow 17,698.18, -77.94 (-0.44%)
S&P 500 2,059.69, -8.20 (-0.40%)
NASDAQ 4,880.23, -20.66 (-0.42%)
Stocks continued the slide begun on Tuesday, which already sent the Dow Industrials to negative on the year and is threateneing to do the same for the NASDAQ and S&P 500.
Main among culprits leading to displeasure with stocks is the disconnect between the real economy and the Wall Street economy. In the real economy, people have to make choices, every day, hour by hour, minute by minute, and those choices, magnified by the 300+ million Americans become what are known as statistics. These statistics are not, and have not, jibed with the "recovery" mantra so popular with the government and Wall Street crowd, the one which claims everybody is working and nobody is hurting, when in fact, major segments of the population are suffering from the strains of a controlled and contrived economy that favors only a small slice of very wealthy individuals.
By age group, it goes something like this: teens and college-age individuals can't find decent jobs in many places, and, while college students, generally, as a group, are not working, teens and those in their early 20s are finding the pickings pretty slim and opportunity for advancement a challenge. Wages are low, the work is monotonous or dreary, the bosses are boot-licking jack-asses and the fringe benefits are - in general terms - nil, as in, NONE.
College students, once they graduate, if they are fortunate enough to find gainful employment, are often up to their ears in student loan debt, the average being $27,000 for a four-year degree. Many are not finding work that pays well enough to pay off the loans, rent an apartment and live like a normal human, so many of these twenty-somethings are habitating in parents' basements, smoking herb and playing video games in between their postings on insta-chat or twitter-face or whatever the app du jour happens to be.
Then there are those who used to be known as middle class, the folks in their 30s, 40s and early 50s, with or without kids at home or away or actually grown, drowned in debt from auto loans, living in underwater homes they cannot sell, and denied any upward mobility because they are linked to the national ball-and-chain known as a credit score. Some are doing OK, but the hours are long, the taxes never stop and keep going higher, and maintaining an outward appearance of peace and civility is becoming harder and harder.
Following after them are the soon-to-be-retired baby boomers, who hope that the stock market doesn't crash, who long to be soon done with working seemingly forever for less then they're worth, who are told to spend rather than save, and who don't see the point of saving since interest rates are so low, it's simply not worth the effort. Every day, something else annoys them a little bit. A higher price for a staple item, or, what's even more common, less of the same item for the same price. Or a new tax, a new law, some absurd thing like "freedom of religion" or "anti-this-or-that" legislation.
Seniors, those above and beyond the age of 65, are trying to hang on, if at all, with social security and a medical plan they neither appreciate nor understand. Co-pays keep rising, the quality of care declines. Their savings are stuck in neutral, thanks to the Fed's wisdom of keeping interest rates at zero for the past seven years. They're slowly bleeding to death from places they didn't know they had.
Amidst all of the age groups are sub-groups, like small business owners, buried under government paperwork and besiged by regulations and onerous taxes, and, what's become known as the FSA (Free S--t Army), the legions of welfare and disability sufferers who live beneath the general strata of society, seeking nothing more than a monthly rent check, food stamps, an Obamaphone and free health care. Those, and a flat-screen TV covers the extent of their pretty-much worthless lives.
Of course, we have the useful idiots who work for government and its myriad levels: teachers, police, paper-shufflers or all kinds, getting fat on the public expense account, oblivious to the plight of their fellow citizens in the real world economy. These types retire after 20 or 30 years of wasteful spending of taxpayer money, just to waste even more with their lavish pensions.
Striding atop all of these folks are the politicians and financiers of Washington and Wall Street, and state capitols and in municipal government positions.
And they're no longer laughing. At least some of them aren't. They know, that but for the grace of these hordes of individuals suffering under tax slavery and monetary repression, they and their ilk would be hung, burned or somehow disenfranchised. They can only hope to keep the game going another day, another week, another year, another election, because when it ends, they have no skills by which they could fend for themselves. They would be set adrift into a seas of unhappiness and misery, like the rest of the population.
If they're not worried, they should be, because this system is ripping and tearing at the seams, because it is unsustainable. There's only so much fraud and so much money out of thin air that can cover up the obvious defects.
But, give the oligarchs, politicians and financial whiz-kids their due. They've kept the system alive longer than anyone could have expected them to, all the time since March of 2009. Six years is not a long time, but 10 is, and 15 is longer, and there's little doubt there will be changes - for which we all are mutually unprepared - to come.
Dow 17,698.18, -77.94 (-0.44%)
S&P 500 2,059.69, -8.20 (-0.40%)
NASDAQ 4,880.23, -20.66 (-0.42%)
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