US Stocks closed today marginally on the downside, though appearances can be deceiving, as there was outright catastrophe in Japan which spilled over into worried European markets.
With Chinese markets (including the SSE and Hang Seng) the Nikkei took a magnificent beating on Tuesday, losing 918 points, a 5.40% loss on the day, sending the main index of Japan further into bear market territory. Perhaps even more significant, the JCB 10-year note yield fell to a negative number, under ZERO, for the first time in history. This marks Japan and Switzerland as the only countries in the world with negative yields out to ten years, though other countries are rapidly approaching that benchmark, in particular, Germany.
European bourses all finished their session with losses of one percent or more, and, at the open in the US, the situation appeared dire, with Dow futures down more than 150 points. Stocks quickly gained traction, turned positive near midday, flirted with the unchanged line throughout the session until finally giving it up late in the day.
But, the story is not the minor loss the major indices took, but the skew of all manner of metrics toward the negative. Bond yields continued to collapse, with the ten-year down to 1.71%. The spread between the ten and two-year note compressed down to 1.04, something of a danger zone, as the two-year actually rose two bits, to yield 0.67%.
Bank stocks were unhappy spots, with Bank of America (BAC) closing at 12.20, a new 52-week and multi-year low.
Advancers were also far behind declining stocks by a margin of more than 2-to-1. Also of note, the number of new lows (NASDAQ and NYSE combined) dwarfed new highs, 812-70, with only six of those new highs on the Naz. The central planners at the central banks can pin their hats on the day as they successfully halted the manic rallies in silver and gold, for a day, anyway.
Additionally, oil was sent back well below the $30 mark, finishing in New York at $28.38 a barrel.
The VIX is also signaling more turbulence, hanging steadily in the mid-20s range.
The rout in stocks, however, like the gains for the metals, is far from over. Consensus view on Wall Street is still concerned, but not yet panicked. Stocks are still about 5-7% away from official bear market territory, though a few bad days could send the indices reeling in the wrong direction.
In a story by Bernard Condon (AP) about how much money companies have lost doing stock buybacks, we find that the stock buybacks which goosed the market and individual stocks higher over the past six to seven years has been nothing short of a colossal flop and threatens to become an even heavier weight stopped to the stock market.
What stock buybacks did accomplish was to allow executives to boost their companies' earnings without devoting capital to expansion, while at the same time justifying their extraordinary salaries and cashing out their outrageous stock options and/or bonuses.
Investors should be outraged, and righteously so, because these companies should have been either expanding their capital base or market share or distributing dividends to their shareholders. What these stock buyback kings have done is nothing short of a fiduciary failure, which in other industries would be cause for criminal indictments.
Of course, since this all occurred within the cozy regulatory environment that is Wall Street, nothing even close to that will happen. The executives who personally profited from corporate paper profits will walk away with their cash after hollowing out scores of once-healthy companies. It may turn out to be good overall, if a few of the giant multi-nationals like Wal-Mart, Yum Brands and ExxonMobil get cut down to more reasonable sizes and markets open up for more nimble - and honest - competitors.
Tuesday's Cracker-jack pot:
S&P 500: 1,852.21, -1.23 (0.07%)
Dow: 16,014.38, -12.67 (0.08%)
NASDAQ: 4,268.76, -14.99 (0.35%)
Crude Oil 28.38 -4.41% Gold 1,189.20 -0.73% EUR/USD 1.1294 +0.86% 10-Yr Bond 1.7290 -0.35% Corn 360.50 -0.48% Copper 2.04 -2.61% Silver 15.23 -1.30% Natural Gas 2.10 -2.01% Russell 2000 964.17 -0.53% VIX 26.71 +2.73% BATS 1000 20,030.11 -0.07% GBP/USD 1.4468 +0.29% USD/JPY 115.0020 -0.51%
Tuesday, February 9, 2016
Monday, February 8, 2016
Bank Stocks Lead Market Rout as Bond Yields Plummet; Gold, Silver Soar
If anyone critical of the US economy is - as the great and almighty economic genius, President Obama recently posited - "peddling fiction," then why is Wall Street peeling away from equity positions like it's the Tour de France?
Relentless selling was the order of the day, especially in financials, until the final hour, as specs stepped in or shorts covered, cutting losses by 1/3 to 1/2.
While fiction writers may not think the stock markets are the modern day equivalents of "Moby Dick," they do have something of a beached whale quality to them. Germany's DAX is already in a bear market, as is China's SSE and Japan's NIKKEI, and the US markets are catching down somewhat quickly, with all three major indices already in correction territory.
With no real catalyst to move stocks higher, the prognosis is for further losses through the first quarter.
Banks were particularly ugly today, with Deutschebank (DB, -8.00%) teetering on the brink of insolvency, and losses suffered by Bank of America (BAC, -5.25%), Goldman Sachs (GS, -4.61%), Citigroup (C, -5.14), Wells-Fargo (WFC, -2.84%), and JP Morgan Chase (JPM, -2.10%).
At issue, as usual with banks, is interest rates, which soared today, pushing the 10-year note to an 18-month low yield of 1.74%). Credit spreads also continued to narrow, forecasting a recession, if not this quarter (and possibly last quarter), then almost surely in Q2.
Underlying the banking sector are questions of general solvency, quality of collateral, and, the size of their respective derivative books. Deutsche has the largest, estimated to be a total exposure of $75 trillion, with the US banks heavily into the game. Derivatives - CDS and other "bad bets" are what nearly took the entire Western economic system down in 2008, and they haven't gone away. Bank balance sheets are larger now and filled with just as much, if not more, toxic derivative soup.
When the financials lead the market down, it's usually not a good sign. Bank of America, Goldman Sachs and Citi are already in bear markets (down more than 20%), while Wells-Fargo and JPM are within one percent of being in the same sinking vote.
Following the underwhelming jobs report Friday, stocks have done nothing but decline and that trend doesn't look to be about to change anytime soon.
The world may be months - if not weeks - away from complete capitulation in stock markets, the precursor to a global depression.
Another telling sign is the rise of gold and silver, two of the top-performing assets (along with bonds) for 2016. Both were up smartly again today and have broken through strong points of resistance.
The day's damage:
S&P 500: 1,853.44, -26.61 (1.42%)
Dow: 16,027.05, -177.92 (1.10%)
NASDAQ: 4,283.75, -79.39 (1.82%)
Crude Oil 30.11 -2.53% Gold 1,191.40 +2.91% EUR/USD 1.1193 +0.30% 10-Yr Bond 1.74 -6.11% Corn 362.00 -1.03% Copper 2.09 -0.52% Silver 15.35 +3.90% Natural Gas 2.13 +3.30% Russell 2000 969.34 -1.65% VIX 26.00 +11.21% BATS 1000 20,045.01 -1.29% GBP/USD 1.4432 -0.47% USD/JPY 115.8500 -0.93%
Relentless selling was the order of the day, especially in financials, until the final hour, as specs stepped in or shorts covered, cutting losses by 1/3 to 1/2.
While fiction writers may not think the stock markets are the modern day equivalents of "Moby Dick," they do have something of a beached whale quality to them. Germany's DAX is already in a bear market, as is China's SSE and Japan's NIKKEI, and the US markets are catching down somewhat quickly, with all three major indices already in correction territory.
With no real catalyst to move stocks higher, the prognosis is for further losses through the first quarter.
Banks were particularly ugly today, with Deutschebank (DB, -8.00%) teetering on the brink of insolvency, and losses suffered by Bank of America (BAC, -5.25%), Goldman Sachs (GS, -4.61%), Citigroup (C, -5.14), Wells-Fargo (WFC, -2.84%), and JP Morgan Chase (JPM, -2.10%).
At issue, as usual with banks, is interest rates, which soared today, pushing the 10-year note to an 18-month low yield of 1.74%). Credit spreads also continued to narrow, forecasting a recession, if not this quarter (and possibly last quarter), then almost surely in Q2.
Underlying the banking sector are questions of general solvency, quality of collateral, and, the size of their respective derivative books. Deutsche has the largest, estimated to be a total exposure of $75 trillion, with the US banks heavily into the game. Derivatives - CDS and other "bad bets" are what nearly took the entire Western economic system down in 2008, and they haven't gone away. Bank balance sheets are larger now and filled with just as much, if not more, toxic derivative soup.
When the financials lead the market down, it's usually not a good sign. Bank of America, Goldman Sachs and Citi are already in bear markets (down more than 20%), while Wells-Fargo and JPM are within one percent of being in the same sinking vote.
Following the underwhelming jobs report Friday, stocks have done nothing but decline and that trend doesn't look to be about to change anytime soon.
The world may be months - if not weeks - away from complete capitulation in stock markets, the precursor to a global depression.
Another telling sign is the rise of gold and silver, two of the top-performing assets (along with bonds) for 2016. Both were up smartly again today and have broken through strong points of resistance.
The day's damage:
S&P 500: 1,853.44, -26.61 (1.42%)
Dow: 16,027.05, -177.92 (1.10%)
NASDAQ: 4,283.75, -79.39 (1.82%)
Crude Oil 30.11 -2.53% Gold 1,191.40 +2.91% EUR/USD 1.1193 +0.30% 10-Yr Bond 1.74 -6.11% Corn 362.00 -1.03% Copper 2.09 -0.52% Silver 15.35 +3.90% Natural Gas 2.13 +3.30% Russell 2000 969.34 -1.65% VIX 26.00 +11.21% BATS 1000 20,045.01 -1.29% GBP/USD 1.4432 -0.47% USD/JPY 115.8500 -0.93%
Friday, February 5, 2016
Jobs Number Baffles Market, But, The Market Is Saying SELL, SELL, SELL
With a January jobs number that was well short of expectations, at 151,000, the reaction from Wall Street was truly a puzzler. One could have easily gone with the "bad news is good news" meme, because if the economy is deteriorating (hint: it is) and layoffs are rampant (they are), then the Fed may not be able to justify any more increases in the federal funds rate this year.
That would be undeniably good for stocks.
It wasn't.
All the major indices took a nosedive right out of the gate, correctly predicted by the futures trading, which collapsed as soon as the number came out, an hour prior to the open.
So, what were the market mavens reading into the garbled mess that was the January Non-farm payrolls report?
Perhaps they looked at the wage growth, which was impressive, up a solid 1/2 percent, an unusually large jump, but probably the result of new legislation in a number of states which mandated higher minimum wages, which were where all the new jobs are - at the low end.
Or, the market might have reacted to the 4.9% unemployment rate, an unbelievable number, and again, a sign of a strengthening economy, which gives the Fed some latitude in raising rates. In any case, the odds of a rate increase later this year jumped on the news, sending stocks down the drain.
What traders see in the numbers may be far removed from what the numbers actually revealed, and the numbers themselves may not be very believable. After all, who actually believes that of those 151,000 jobs created, 58,000 of them were in retail? Remember, this was January, when retailers are normally laying people off after the holiday season. And this was no normal January either. Big chains, from Wal-Mart to Macy's to Sears were closing stores and letting people go. So, just who was hiring all these retail employees?
Then there were the 47,000 jobs created in the food service industry. Really? McDonald's, Applebee's, et. al., were hiring in January? The report also included a manufacturing sector increase of 29,000 jobs, which runs contrary to the recent ISM and PMI manufacturing jobs outlooks.
Money Daily warned yesterday that the BLS is famous for convoluted schemes to concoct bad figures and massive revisions, making the initial releases almost comical, and this one certainly fit the bill.
November and December were revised in opposite directions. The change in total nonfarm payroll employment for November was revised from +252,000 to +280,000, and the change for December was revised from +292,000 to
+262,000, for a net loss of 2,000.
We also noted that the number would not be influential to markets unless it was a big overshoot or a big miss. It was a big miss, with the consensus estimate at 190,000. Besides being down more than 100,000 from December - even after the revision - it's a massive miss, and one that the market apparently could not readily overlook.
Overall, the damage to equity markets was pretty severe. The NASDAQ closed at its lowest level since October, 2014, some 17 months hence.
For the week:
S&P 500: -60.19 (-3.10%)
Dow: -261.33 (-1.59%)
NASDAQ: -250.81 (-5.44%)
The day's rout:
S&P 500: 1,880.05, -35.40 (1.85%)
Dow: 16,204.97, -211.61 (1.29%)
NASDAQ: 4,363.14, -146.42 (3.25%)
Crude Oil 31.02 -2.21% Gold 1,173.70 +1.40% EUR/USD 1.1162 -0.34% 10-Yr Bond 1.85 -0.86% Corn 366.50 -0.54% Copper 2.09 -1.88% Silver 15.02 +1.14% Natural Gas 2.07 +4.72% Russell 2000 985.62 -2.87% VIX 23.38 +7.05% BATS 1000 20,306.40 -1.64% GBP/USD 1.4503 -0.50% USD/JPY 116.8300 -0.05%
That would be undeniably good for stocks.
It wasn't.
All the major indices took a nosedive right out of the gate, correctly predicted by the futures trading, which collapsed as soon as the number came out, an hour prior to the open.
So, what were the market mavens reading into the garbled mess that was the January Non-farm payrolls report?
Perhaps they looked at the wage growth, which was impressive, up a solid 1/2 percent, an unusually large jump, but probably the result of new legislation in a number of states which mandated higher minimum wages, which were where all the new jobs are - at the low end.
Or, the market might have reacted to the 4.9% unemployment rate, an unbelievable number, and again, a sign of a strengthening economy, which gives the Fed some latitude in raising rates. In any case, the odds of a rate increase later this year jumped on the news, sending stocks down the drain.
What traders see in the numbers may be far removed from what the numbers actually revealed, and the numbers themselves may not be very believable. After all, who actually believes that of those 151,000 jobs created, 58,000 of them were in retail? Remember, this was January, when retailers are normally laying people off after the holiday season. And this was no normal January either. Big chains, from Wal-Mart to Macy's to Sears were closing stores and letting people go. So, just who was hiring all these retail employees?
Then there were the 47,000 jobs created in the food service industry. Really? McDonald's, Applebee's, et. al., were hiring in January? The report also included a manufacturing sector increase of 29,000 jobs, which runs contrary to the recent ISM and PMI manufacturing jobs outlooks.
Money Daily warned yesterday that the BLS is famous for convoluted schemes to concoct bad figures and massive revisions, making the initial releases almost comical, and this one certainly fit the bill.
November and December were revised in opposite directions. The change in total nonfarm payroll employment for November was revised from +252,000 to +280,000, and the change for December was revised from +292,000 to
+262,000, for a net loss of 2,000.
We also noted that the number would not be influential to markets unless it was a big overshoot or a big miss. It was a big miss, with the consensus estimate at 190,000. Besides being down more than 100,000 from December - even after the revision - it's a massive miss, and one that the market apparently could not readily overlook.
Overall, the damage to equity markets was pretty severe. The NASDAQ closed at its lowest level since October, 2014, some 17 months hence.
For the week:
S&P 500: -60.19 (-3.10%)
Dow: -261.33 (-1.59%)
NASDAQ: -250.81 (-5.44%)
The day's rout:
S&P 500: 1,880.05, -35.40 (1.85%)
Dow: 16,204.97, -211.61 (1.29%)
NASDAQ: 4,363.14, -146.42 (3.25%)
Crude Oil 31.02 -2.21% Gold 1,173.70 +1.40% EUR/USD 1.1162 -0.34% 10-Yr Bond 1.85 -0.86% Corn 366.50 -0.54% Copper 2.09 -1.88% Silver 15.02 +1.14% Natural Gas 2.07 +4.72% Russell 2000 985.62 -2.87% VIX 23.38 +7.05% BATS 1000 20,306.40 -1.64% GBP/USD 1.4503 -0.50% USD/JPY 116.8300 -0.05%
Thursday, February 4, 2016
BTO: Bespoke Tranche Opportunities; Look Out Below
Global economies are blowing up, led by BTOs, AKA Bespoke Tranche Opportunity.
Yahoo, as predicted here years ago, is kaput. One of the worst investments ever, and especially since the Gal from Google took over as CEO.
IRS hardware failure. Probably the best news of the day. Unless you are a sheeple. With a pension. And health care ripped from your paycheck. You. Are. Screwed.
The global economy is unraveling right in front of your eyes and you don't see it.
Don't forget to smell the roses and see the forest through the trees.
Maybe the worst condition is not knowing what a hard asset is. Maybe worse is spell-checking on blogger.
Keep prepping. If you're in a city, move.
Yahoo, as predicted here years ago, is kaput. One of the worst investments ever, and especially since the Gal from Google took over as CEO.
IRS hardware failure. Probably the best news of the day. Unless you are a sheeple. With a pension. And health care ripped from your paycheck. You. Are. Screwed.
The global economy is unraveling right in front of your eyes and you don't see it.
Don't forget to smell the roses and see the forest through the trees.
Maybe the worst condition is not knowing what a hard asset is. Maybe worse is spell-checking on blogger.
Keep prepping. If you're in a city, move.
There Are Still Stock Buyers, But They're Few and They're Wrong
Stocks in the US staged a half-hearted rally on Thursday, with virtually no news - good, bad or otherwise - to support the move, so, as they say in whispered tones, the market is trading on vapors.
Tomorrow's expected 185-195,000 January NFP may not have as much significance as previous iterations of the market's most-massaged number. There are other issues pressuring stocks that are of more importance. Also, with unemployment - according to "official" sources - very tame, only a huge beat or a huge miss could be cause for stocks to respond going into the weekend.
The money would be on "big miss," as Challenger, Gray and Christmas, the firm that monitors job layoff announcements in the US (and is a fairly reliable source), saw a 218% jump in announced job cuts in January, as employers issued more than 75,000 pink slips during the month.
Those figures aren't likely to be well-represented in the BLS figures on Friday, as the Labor Department has, over the years, garnered quite a reputation for seasonal adjustments and massive post hoc revisions, due, in the main, to the convoluted manner in which they arrive at their contrived conclusions.
In other words, the January non-farm payroll figures should be faded, no matter what they announce at 8:30 am tomorrow.
Gold and silver continued to rally strongly on Thursday, with gold crossing the $1150 rubicon and silver streaking toward $15/ounce, which, by the way, is still the bargain of the century (buy low, sell high, remember?)
Part of the reason for the metals to be heading higher is the decline in the dollar, which is down 4% on the week against competing currencies.
With the Super Bowl just a few days off, traders may tread lightly on Friday, with more interested in covering the spread then covering their clients' losses.
With the tiny uptick today, there's evidence of some level of buying interest, though it seems pretty non-committal and sparse, likely due to the fact that the Dow is still a solid 2000 points from all-time highs and those were set in May, 2015, which happens to be nine months ago.
If it looks like a bear, smells like a bear, it just could be a bear. Most people don't taunt bears. People on Wall Street may appear brave, but there's surely no shortage of stupidity.
Today's hopeful mess:
S&P 500: 1,915.45, +2.92 (0.15%)
Dow: 16,416.58, +79.92 (0.49%)
NASDAQ: 4,509.56, +5.32 (0.12%)
Crude Oil 31.68 -1.86% Gold 1,156.30 +1.31% EUR/USD 1.1215 +1.16% 10-Yr Bond 1.8640 -0.90% Corn 369.00 -0.54% Copper 2.12 +1.26% Silver 14.90 +1.16% Natural Gas 1.97 -3.14% Russell 2000 1,014.79 +0.44% VIX 21.84 +0.88% BATS 1000 20,644.48 +0.45% GBP/USD 1.4589 +0.0041% USD/JPY 116.7550 -1.09%
Tomorrow's expected 185-195,000 January NFP may not have as much significance as previous iterations of the market's most-massaged number. There are other issues pressuring stocks that are of more importance. Also, with unemployment - according to "official" sources - very tame, only a huge beat or a huge miss could be cause for stocks to respond going into the weekend.
The money would be on "big miss," as Challenger, Gray and Christmas, the firm that monitors job layoff announcements in the US (and is a fairly reliable source), saw a 218% jump in announced job cuts in January, as employers issued more than 75,000 pink slips during the month.
Those figures aren't likely to be well-represented in the BLS figures on Friday, as the Labor Department has, over the years, garnered quite a reputation for seasonal adjustments and massive post hoc revisions, due, in the main, to the convoluted manner in which they arrive at their contrived conclusions.
In other words, the January non-farm payroll figures should be faded, no matter what they announce at 8:30 am tomorrow.
Gold and silver continued to rally strongly on Thursday, with gold crossing the $1150 rubicon and silver streaking toward $15/ounce, which, by the way, is still the bargain of the century (buy low, sell high, remember?)
Part of the reason for the metals to be heading higher is the decline in the dollar, which is down 4% on the week against competing currencies.
With the Super Bowl just a few days off, traders may tread lightly on Friday, with more interested in covering the spread then covering their clients' losses.
With the tiny uptick today, there's evidence of some level of buying interest, though it seems pretty non-committal and sparse, likely due to the fact that the Dow is still a solid 2000 points from all-time highs and those were set in May, 2015, which happens to be nine months ago.
If it looks like a bear, smells like a bear, it just could be a bear. Most people don't taunt bears. People on Wall Street may appear brave, but there's surely no shortage of stupidity.
Today's hopeful mess:
S&P 500: 1,915.45, +2.92 (0.15%)
Dow: 16,416.58, +79.92 (0.49%)
NASDAQ: 4,509.56, +5.32 (0.12%)
Crude Oil 31.68 -1.86% Gold 1,156.30 +1.31% EUR/USD 1.1215 +1.16% 10-Yr Bond 1.8640 -0.90% Corn 369.00 -0.54% Copper 2.12 +1.26% Silver 14.90 +1.16% Natural Gas 1.97 -3.14% Russell 2000 1,014.79 +0.44% VIX 21.84 +0.88% BATS 1000 20,644.48 +0.45% GBP/USD 1.4589 +0.0041% USD/JPY 116.7550 -1.09%
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