End-of-Year Santa Rally: Is It Real or the Ultimate Head-Fake?

Stocks took off like proverbial holiday bottle rockets on Tuesday, as 2015 winds down and investors (or HFT algos) scramble for the last bits of profit for the year.

All three of the major US indices were up handsomely with just two more trading days left in the year. Equity and bond markets will be open for business as usual on Thursday, the 31st, and closed for New Year's Day on Friday, January 1.

The boost today came right at the open, with all the indices shooting up roughly one percent promptly at 9:30 am ET. The remainder of the session was somewhat on the dull side with low volume, but the speculators didn't seem to mind booking one-day gains.

What little economic data there was turned out to be positive, the Case-Shiller 20-city Index showing a 5.5% gain for October and the Conference Board's measure of consumer confidence came in at 96.5, well above consensus estimates of 92.9. It seems that consumers were sharing in the holiday spirit. MasterCard yesterday reported robust holiday spending, at a pace 7.9% better than last year. the gains were attributed in part to lower gasoline prices making more income disposable for holiday spending sprees.

With data darting in and out from positive to negative over the past few weeks, the question arises whether the end-of-year rally on Wall Street is the real thing or whether it's a Grinch-y fake-out which will all be taken away come the new year.

That's a tough call, though most analysts will gladly opine that the bull market is here to stay, since the Fed's rate increase has gone off without a hitch, consumer spending (which accounts for as much as 70% of the economy, so it is said) is awesome and roaring, and funds are all in on equities.

The other side of the coin, from Main Street, is seeing heavier use of credit for everyday purchases, a job market that on the surface says full employment but at the core is made up of statistics, lies and low-paying jobs, and a middle class that continues to be eviscerated by taxes and inflation.

The glue to either side of the story is oil, the one commodity upon which the global economy spins, which is as cheap as it has been since the crisis of 08-09, and doesn't seem to be going anywhere, despite the outsize gains today (WTI closed up, at 37.35/barrel). Low oil and gas prices are boons to consumers and to business, driving input costs lower and profits higher. The only people not happy with the price of oil are the producers, especially the frackers, who have had to lay off thousands as the price of crude has declined.

What the low price of oil does beyond the gas pumps is provide margins for business production, and there's little downside to that. So, other than stocks approaching nosebleed levels, the US economy is in a strange spot. GDP may actually begin to ramp up to levels the Fed can feel more comfortable about raising rates though stocks will be hard-pressed to continue much higher. The rally is going on seven years, already the second-longest in market history since WWII and earnings have slowed for many companies, though the price of their stock remains high.

That's an unsustainable condition, one which will be worked out by the markets over time, and the general rule at these levels would be to fade any rallies, even ones which come in holiday wrappings with candy canes and sugar plums.

It's what's inside that counts, and market internals like breath and volume are pointing in the wrong direction.

Stocks are likely to rally for the remainder of the week and the year, but all-time highs are looming, and on the Dow and S&P haven't been overcome since May. It's tough to see how these indices can go much higher without significant improvement in the bottom lines of many companies.

Besides, it's never smart to buy high, and these markets have been at extremes for more than six months. There's been plenty of time to switch out of equities, but seriously, where else can money go?

Santa Takes a Little Off the Top

Stocks fell today, first hard, then made a daylong comeback to close near the unchanged mark.

It was rather a random day in the world of high finance. Ten-year and 30-year treasuries each closed off a pip, 2.21 and 2.93, respectively, while the 2-year note budged upward from 0.97 to 0.98, tightening and flattening the spread. It wasn't a monumental move, but noticeable to anyone paying attention. The market didn't really appreciate the boost in the fed funds rate and the displeasure is being voiced by various, subtle means, like the desperation in high yields, and the shut-off of the banking spigot that funded stock buybacks for most of the last five years.

It's probably better, right now, to keep a close eye on the bond market. It may turn out to be the place for volatility and profit in 2016, especially if the Federal Reserve follows through on their plans for three or four more rate hikes by this time next year. That is an unlikely event, though "normalization" is what the Fed continues to say they are aiming for, though a truly normal economy won't likely materialize for three or four more years, if they're lucky.

To have a 10-year treasury yielding 4-5% would be quite an accomplishment by 2019 or 2020, considering all the damage already done by over a decade of fed fund rates at one percent or lower.

Equity markets were decidedly dull, as there are few trades to be made of any importance this late in the game, though the markets are still well below all-time highs reached in May, especially the broad gauge of the S&P, which cannot seem to get out of its own way.

Today was mostly gibberish, as will likely be the case the remainder of the week, and the year. It's hard to draw any conclusions from the last week's trading in a calendar year. The first week of January will be much more insightful.

WTI crude was slapped back down from last week's euphoric and ridiculous closing level, finishing the day at 36.72/barrel. Anyone calling a bottom around here just hasn't considered the slack in the economy and the production glut facing producers. It's a huge problem, but nobody wants to cut production, even at these lower prices, constituting a possible new normal.

S&P 500, 2,056.50, -4.49 (0.22%)
Dow, 17,528.27, -23.90 (0.14%)
NASDAQ, 5,040.99, -7.51 (0.15%)

China Steel Exports To USA Subject To 256% Tariff

Remember, folks, the US Department of Commerce has your backs.

The department is recommending that the United States impose a tariff on steel imports from China of 256%, because they feel China has been dumping steel on the market and causing a severe disruption in the price, negatively affecting US steel producers.

Gee, really? What's next, tariffs on electronics, cars, just about anything you buy at Wal-Mart or nearly anywhere in America?

Where's the great Ben Bernanke when you need him? You know, the former Chairman of the Federal Reserve who is an EXPERT on the Great Depression.

Why do we need the Big Bernank now? Because, his expertise would prevail on our glorious government goofballs that protectionism is exactly what made the Great Depression so (not) great.

You take depressed markets overfull of inventory, tack on tariffs and you get exactly what the Fed wants in order to hide its horrible policies: velocity of money at zero, falling wages, layoffs and now, the kicker, goods too expensive for anybody to buy. Pure genius, these guys looking out for all of us little people.

This is just the beginning. Expect to see more trade protectionism going forward and more countries falling into recession. Add it all up and you have Great Depression 2.0.

It's not going to happen all of a sudden, because the Fed is still fighting deflation. But, when the going gets rough, really rough, like when Wall Street (hell) freezes over and commits suicide in a crash of stocks of companies that have been repurchasing their own shares for the past six years and they lay off millions of workers, that's when the government will move in full force with trade restrictions and tariffs so that Americans can't purchase anything from the evil Chinamen.

Maybe somebody should have thought about this before we sent all of our manufacturing base over to the Red Dragons. Then again, maybe they did.

Meanwhile, the Santa Claus rally continues on Wall Street. The S&P gained enough today to show a small profit for the year and the Dow Jones Industrials are closing in on being black for 2015.

Stocks' Santa Rally Based On Nothing In Particular

The word for the day was "oversold," in essence green lighting all the algos on the belief that stocks were still undervalued, despite the S&P 500 average P/E of 22, when the norm is 15.

Whatever sparked the rally du jour must have been a highly-held secret, because nothing much has changed and today's economic news - third GDP revision for the 3rd quarter came in at an even 2%, and existing home sales were down 10.5% month-over-month (the lowest annualized rate since April 2014), and that was before the Fed and the banks hiked interest rates.

As for GDP, the third quarter reading was 0.1% lower than the previous estimate, and down sharply from the second quarter, when the economy supposedly grew at a mind-blowing 3.9%. Adding in the 1st quarter's decline of 0.7%, the fourth quarter will have to have grown by 2.8%, a seemingly reasonable quest, to get the entire year at a 2% growth rate. What a recovery!

Given that retail sales have been sluggish at best and inventories rising, it will be a struggle for the economy to show a gain of that size. However, the brilliant economists at the BLS certainly can massage the numbers enough to wring out nearly 3% growth, somehow.

So, Santa Claus has arrived on Wall Street. There are just two more days of trading this week and six total for the year, and stocks are showing that 2015 will end essentially flat.

Here are closing prices at the end of 2014:
S&P: 2,058.90
Dow: 17,823.07
NASDAQ: 4,736.05

The NAZ looks to have gains in the bag, while the S&P and Dow have some work left to do. Ho, ho, ho.

Today's closing numbers:
S&P 500: 2,038.97, +17.82 (0.88%)
Dow: 17,417.27, +165.65 (0.96%)
NASDAQ: 5,001.11, +32.19 (0.65%)

The Awakening Continues...

I would like to get back to the kind of world that existed when I knew nothing, when I was a kid, in the early 60s, before the MICC (Wilkerson's inclusion of "Congressional" to the standard MIC is essential and poignant) killed JFK.

Yeah, maybe America wasn't innocent and perfect, but it was miles ahead of what we have today. Anecdotally, my neighborhood, suburban Rochester (Irondequoit) was still largely a farming center. There were huge greenhouses just four doors down the street from me. And fruitstands, and kids riding bikes with no helmets, and cars without seatbelts and cops would would "give you a break" instead of "breaking your face."

Gradually, the farms were replaced with apartments, more apartments, stores, new homes, and the local government got bigger, and bigger and bigger. The town today is mostly still middle class, but the folks from the 60s and 70s have moved on. There are many more rentals, the shopping plaza that used to be all white shoppers is now 60-70% minorities, many of them on public assistance. The government is enormous. The school superintendant makes $285,000 a year, with golden pension, super health benefits, etc. The teachers make more money and have better benefits than 80% of the people they "serve."

It's all gone backwards. Our current system must come to an end, either by financial degradation (our best case) or armed conflict of private sector citizens against the "public servants." The government must be reigned in, and we must take our country back, because if we don't, there will be nothing left to salvage. We can start by opposing every school budget proposal and knocking school systems back to 1960s levels.

There will be great pain, so be on the right side. Private industry. Smaller government. Live and act without fear. It is the only way.

Published December 11, 2015, Abby Martin interviews retired U.S. Army Colonel Lawrence Wilkerson, former national security advisor to the Reagan administration, who spent years as an assistant to Secretary of State Colin Powell during both Bush administrations. Today, he is honest about the unfixable corruption inside the establishment and the corporate interests driving foreign policy.

Hear a rare insider's view of what interests are behind U.S. wars, the manipulation of intelligence, the intertwining of the military and corporate world, and why the U.S. Empire is doomed.