There is a serious disturbance in the Farce called the global economy, and it is the role of central bankers who create absurd amounts of fiat currencies, literally out of thin air.
Policies adopted by the financial elite experts who control nearly all currencies worldwide have caused markets to virtually stop functioning. After seven years of base interest rates at near zero - and recently, below zero - endless stimulus programs otherwise known by the catchy name, quantitative easing, and a serious lack of transparency, regulation, and discipline in all markets, global growth is a non-starter for 2016 and the foreseeable future.
Businesses, fed a diet of easy money for nearly a decade (two decades, if one includes the Greenspan "put" years) are loathe to spend on capital improvements, labor or infrastructure. Businesses are, so to speak, "living off the land," by cutting budgets while fattening the salaries and bonuses of crony CEOs and others occupying the executive suites and boards of directors.
It's a horrible condition, with disinflation and outright deflation popping up in pockets like food production, energy, and most hard commodities (see natural gas and copper). Price discovery has become a function less of supply and demand and more driven by derivative bets, options, credit default swaps, and hedging. Over-finacialization of nearly all markets that matter has turned fundamentals on their heads and what once were functional markets into nothing more than trap-laden casinos. The effect has been to alienate a generation of investors (millenials), impoverish another (retirees) and overburden those not yet ready to enter the economy (the youth). In the middle is generation X, condemned to toil away towards an uncertain future.
The argument that fundamental supply and demand is defunct rests largely on the oil market, currently carrying the largest global glut on record, yet pushed to levels indicative of a shortage. Oil was ranging toward $25 per barrel just a month or so ago; today it is approaching $40, mostly a function of short-covering and naked short selling.
Much the same can be said of the markets for precious metals, the price held down by nefarious forces while the demand continues to expand. In many quarters, gold, silver, and gemstones are considered the only investments worth having and holding. They carry no counterparts risk, are relatively easy to transport and can be converted into money or any other asset with relative ease.
As Bill Bonner and his enlightened crew love to postulate, a day of reckoning is coming, though just exactly when that day arrives and how it is manifested are known to exactly nobody.
It's a mess. Better to put money in a mattress or buy canned goods than risk in capital markets, as moribund and compromised as they are. US equity indices peaked in May of 2015. It's nearly a year from the all-time highs without any rally catalysts in sight.
All eyes and ears will be tuned to the ECB tomorrow, when Mario Draghi does what he can only do, signal more easing, more fraud, and more of the relentless can-kicking that has typified the past seven years.
Nobody is holding his or her breath on this coming non-event because there is no longer any air to breathe.
Wednesday's Wackiness:
S&P 500: 1,989.26, +10.00 (0.51%)
Dow: 17,000.36, +36.26 (0.21%)
NASDAQ: 4,674.38, +25.55 (0.55%)
Crude Oil 38.23 +4.74% Gold 1,253.90 -0.71% EUR/USD 1.1001 -0.06% 10-Yr Bond 1.8920 +3.28% Corn 360.25 -0.07% Copper 2.23 +0.54% Silver 15.31 -0.52% Natural Gas 1.76 +2.92% Russell 2000 1,072.77 +0.46% VIX 18.34 -1.77% BATS 1000 20,677.17 0.00% GBP/USD 1.4217 +0.03% USD/JPY 113.3350 +0.60%
Wednesday, March 9, 2016
Tuesday, March 8, 2016
Oil Beaten Down Along With Gold, Silver, Stocks
After yesterday's run-up in crude, the obligatory return to red was the order of the day as WTI crude ended below $37/barrel. Not to be missed were the turn-about in gold and silver, but stocks remain mostly on hold for Mario Draghi and the ECB's rate announcement on Thursday.
This is what happens when the entire world revolves around central bankers: lots of nothing, and all investment vehicles returning essentially zero returns on capital, unless one's timing is extraordinary, you're a professional horse handicapper turned day-trader, or one of the various front-running HFTs.
Speaking of timing, Money Daily editor, Fearless Rick, has called out Dennis Gartman of the Gartman Letter, and his somewhat flimsy assertion that his proprietary fund is up 12.3% year-to-date. Mr. Rick emailed Gartman (see here), and tried to get a subscription to his newsletter, but has heard nothing yet. Money Daily will update with any developments (some interesting information on Mr. Gartman has already been discovered on the internet and a file is being updated... stay tuned)
Today's Mangled Mess:
S&P 500: 1,979.26, -22.50 (1.12%)
Dow: 16,964.10, -109.85 (0.64%)
NASDAQ: 4,648.82, -59.43 (1.26%)
Crude Oil 36.46 -3.80% Gold 1,263.20 -0.06% EUR/USD 1.1006 -0.08% 10-Yr Bond 1.8320 -3.68% Corn 360.75 +0.49% Copper 2.22 -2.89% Silver 15.43 -1.33% Natural Gas 1.72 +1.54% Russell 2000 1,068.18 -2.37% VIX 18.75 +8.07% BATS 1000 20,677.17 0.00% GBP/USD 1.4215 -0.33% USD/JPY 112.6420
This is what happens when the entire world revolves around central bankers: lots of nothing, and all investment vehicles returning essentially zero returns on capital, unless one's timing is extraordinary, you're a professional horse handicapper turned day-trader, or one of the various front-running HFTs.
Speaking of timing, Money Daily editor, Fearless Rick, has called out Dennis Gartman of the Gartman Letter, and his somewhat flimsy assertion that his proprietary fund is up 12.3% year-to-date. Mr. Rick emailed Gartman (see here), and tried to get a subscription to his newsletter, but has heard nothing yet. Money Daily will update with any developments (some interesting information on Mr. Gartman has already been discovered on the internet and a file is being updated... stay tuned)
Today's Mangled Mess:
S&P 500: 1,979.26, -22.50 (1.12%)
Dow: 16,964.10, -109.85 (0.64%)
NASDAQ: 4,648.82, -59.43 (1.26%)
Crude Oil 36.46 -3.80% Gold 1,263.20 -0.06% EUR/USD 1.1006 -0.08% 10-Yr Bond 1.8320 -3.68% Corn 360.75 +0.49% Copper 2.22 -2.89% Silver 15.43 -1.33% Natural Gas 1.72 +1.54% Russell 2000 1,068.18 -2.37% VIX 18.75 +8.07% BATS 1000 20,677.17 0.00% GBP/USD 1.4215 -0.33% USD/JPY 112.6420
US Stock Markets Are Massive Frauds, So Are Banks, How About Investment Advisors?
Thanks to frequent articles on Zero Hedge, Money Daily has been entertained by following the investment "wisdom" of one Dennis Gartman, a regular contributor on CNBC, especially on the show, Fast Money.
Now, not everybody has done well this year, but according to his own words, Mr. Gartman claims to be up 12.3% year-to-date. See below (and the original quote on ZH):
So, after the Erin Andrews $55 million verdict set hair on fire yesterday, editor Fearless Rick sent the following request to liz@thegartmanletter.com:
Awaiting a response, or a subpoena. Maybe a drone strike. Stay tuned.
Now, not everybody has done well this year, but according to his own words, Mr. Gartman claims to be up 12.3% year-to-date. See below (and the original quote on ZH):
For those who wish to follow our progress, we are up 12.3% for the year-to-date, outperforming our International Index rather pleasantly and outperforming the S&P too by 14.4%. We have been quite lucky thus far this year. We are simply hoping that our good fortune thus far obtains through the remainder of the year. If we continue to “Do more of that which is working and less of that which is not”… perhaps our most important Rule of Trading…
So, after the Erin Andrews $55 million verdict set hair on fire yesterday, editor Fearless Rick sent the following request to liz@thegartmanletter.com:
I keep reading that Dennis is up 12.3 to 14% year-to-date, and I would like to know how he’s managed to outperform the markets this year.
Mr. Gartman makes bold statements that affect the thinking of many investors and speculators by his frequent appearances on CNBC.
Essentially, I think he’s a fraud and unless you offer bona fide proof that he’s ahead by what he says he is, I will expose him.
Best regards,
Rick Gagliano
Downtown Magazine
dtmagazine.com
Awaiting a response, or a subpoena. Maybe a drone strike. Stay tuned.
Monday, March 7, 2016
Seven Years Out, The Great Recovery Is Over As Eric Andrews Is Awarded $55 Million She'll Never See
Flash back to March 6, 2009 and what does one find?
The S&P 500 was trading at 666.79, which would eventually become known as "the bottom," the intraday low for stocks after the great crash which began in earnest in October of 2008.
As late as September 19, 2008, the S&P had traded as well the mid 1200s, closing, on that date, at 1255.08. Nearing the end of October, the same index was in the 800s (October 27: 848.92), nearly a 33% haircut in just over a month.
Gains that had taken years to produce were dissipated in less than 30 trading sessions. That was only a sideshow. The slide that began in 2007, started from a high point of 1565.15 (the close on October 9, 2007) had taken a full year to gut the S&P, cutting the valuation nearly in half. The rest of the damage would be done in the fall and winter of 2008-09, for a total rout of 57.4%, wiping out the savings of millions of Americans and foreign investors.
Most people aren't aware of the extraordinary measures taken by the Federal Reserve and other central banks around the world to stop the plunge, but perhaps the most instructive - and eventually damaging - measure was taken by the FASB (Federal Accounting Standards Board) on April 2nd, 2009, to suspend rule 157, relieving financial institutions - primarily the too-big-to-fail banks - of the rigors of mark-to-market accounting. The banks would no longer have to value assets at any perceived market value, but at any value they deemed "reasonable" or otherwise flattering to their balance sheets.
At the time, the banks were saddled with billions of dollars worth of nearly-worthless mortgages, which they themselves had originated, or bought, in the bubbly real estate market of the early-to-mid 2000s. The entire bubble they created had burst, assets were impaired, homeowners were walking away from commitments they should never have made on houses they normally could never had qualified to buy.
Eventually, the Fed came in and rescued the banks further, buying up all the toxic paper in various rounds of QE, the last one ending in 2014. By then the markets had recovered, stocks had soared to new, unimaginable heights, and the global economy was pronounced "saved."
But, the FASB has never reinstated rule 157, meaning, in simple terms, that bank assets are still, to this day, based on fictional valuations.
To get an idea just how far down the rabbit hole price discovery has gone, just contemplate for a moment that Erin Andrews has been awarded a judgment of $55 million for being peeped upon in a hotel and having a video of her distributed online. Some models have posed au natural for significantly less.
Seriously, is anybody's body, or their pride, worth $55 million? The hotel she is suing isn't even worth anything close to that amount of money, so, in effect, this jury basically awarded the victim the entire assets of the hotel, and more.
Andrews will never see that money, however. Nobody has all of it. She will get some, her lawyers will get a third or more, of whatever she can recover, but, in essence, Erin Andrews is now a hotel owner.
Yes, she was wronged, but the point is that price discovery was done away with in 2009 with the suspension of rule 157, and nobody can place accurate valuations on anything.
Is gold worth $1200 an ounce, or $600, or $30,000. Is your car worth $35,000? Who knows? It's all relative now.
And relativity, in the sciences at least, is still theoretical.
So is existence. And we're back to where we began. Whoever can set the prices, dictates the terms. For now, the markets - as rigged and manipulated as they are - sets the prices. That's not going to last.
Good night.
S&P 500: 2,001.76, +1.77 (0.09%)
Dow: 17,073.95, +67.18 (0.40%)
NASDAQ: 4,708.25, -8.77 (0.19%)
Crude Oil 37.87 +5.43% Gold 1,268.40 -0.18% EUR/USD 1.1014 -0.0018% 10-Yr Bond 1.9020 +1.01% Corn 359.50 +0.35% Copper 2.28 +0.24% Silver 15.67 -0.15% Natural Gas 1.69 +1.56% Russell 2000 1,094.15 +1.13% VIX 17.35 +2.91% BATS 1000 20,677.17 0.00% GBP/USD 1.4257 -0.04% USD/JPY 113.4160 +0.03%
The S&P 500 was trading at 666.79, which would eventually become known as "the bottom," the intraday low for stocks after the great crash which began in earnest in October of 2008.
As late as September 19, 2008, the S&P had traded as well the mid 1200s, closing, on that date, at 1255.08. Nearing the end of October, the same index was in the 800s (October 27: 848.92), nearly a 33% haircut in just over a month.
Gains that had taken years to produce were dissipated in less than 30 trading sessions. That was only a sideshow. The slide that began in 2007, started from a high point of 1565.15 (the close on October 9, 2007) had taken a full year to gut the S&P, cutting the valuation nearly in half. The rest of the damage would be done in the fall and winter of 2008-09, for a total rout of 57.4%, wiping out the savings of millions of Americans and foreign investors.
Most people aren't aware of the extraordinary measures taken by the Federal Reserve and other central banks around the world to stop the plunge, but perhaps the most instructive - and eventually damaging - measure was taken by the FASB (Federal Accounting Standards Board) on April 2nd, 2009, to suspend rule 157, relieving financial institutions - primarily the too-big-to-fail banks - of the rigors of mark-to-market accounting. The banks would no longer have to value assets at any perceived market value, but at any value they deemed "reasonable" or otherwise flattering to their balance sheets.
At the time, the banks were saddled with billions of dollars worth of nearly-worthless mortgages, which they themselves had originated, or bought, in the bubbly real estate market of the early-to-mid 2000s. The entire bubble they created had burst, assets were impaired, homeowners were walking away from commitments they should never have made on houses they normally could never had qualified to buy.
Eventually, the Fed came in and rescued the banks further, buying up all the toxic paper in various rounds of QE, the last one ending in 2014. By then the markets had recovered, stocks had soared to new, unimaginable heights, and the global economy was pronounced "saved."
But, the FASB has never reinstated rule 157, meaning, in simple terms, that bank assets are still, to this day, based on fictional valuations.
To get an idea just how far down the rabbit hole price discovery has gone, just contemplate for a moment that Erin Andrews has been awarded a judgment of $55 million for being peeped upon in a hotel and having a video of her distributed online. Some models have posed au natural for significantly less.
Seriously, is anybody's body, or their pride, worth $55 million? The hotel she is suing isn't even worth anything close to that amount of money, so, in effect, this jury basically awarded the victim the entire assets of the hotel, and more.
Andrews will never see that money, however. Nobody has all of it. She will get some, her lawyers will get a third or more, of whatever she can recover, but, in essence, Erin Andrews is now a hotel owner.
Yes, she was wronged, but the point is that price discovery was done away with in 2009 with the suspension of rule 157, and nobody can place accurate valuations on anything.
Is gold worth $1200 an ounce, or $600, or $30,000. Is your car worth $35,000? Who knows? It's all relative now.
And relativity, in the sciences at least, is still theoretical.
So is existence. And we're back to where we began. Whoever can set the prices, dictates the terms. For now, the markets - as rigged and manipulated as they are - sets the prices. That's not going to last.
Good night.
S&P 500: 2,001.76, +1.77 (0.09%)
Dow: 17,073.95, +67.18 (0.40%)
NASDAQ: 4,708.25, -8.77 (0.19%)
Crude Oil 37.87 +5.43% Gold 1,268.40 -0.18% EUR/USD 1.1014 -0.0018% 10-Yr Bond 1.9020 +1.01% Corn 359.50 +0.35% Copper 2.28 +0.24% Silver 15.67 -0.15% Natural Gas 1.69 +1.56% Russell 2000 1,094.15 +1.13% VIX 17.35 +2.91% BATS 1000 20,677.17 0.00% GBP/USD 1.4257 -0.04% USD/JPY 113.4160 +0.03%
Thursday, March 3, 2016
All Eyes on Non-Farm Payrolls, But ECB and FOMC Hold More Intrigue for Stocks
Following Wednesday's low-volume advances (lowest of the year), stocks followed a similar pattern in Thursday's trading regimen, slumping at the open, only to rise through the day and close modestly green.
While the talking heads on Bloomberg and CNBC are hyperventilating over the February non-farm payroll report due out tomorrow morning, the true market-moving events concern central banks and they don't occur until next week and the following, beginning with the ECB policy announcement on March 10, and the FOMC meeting March 15-16.
After ADP's February private sector number coming in at 214,000 Wednesday morning, the market is expecting something in that range from the BLS, with consensus just a shade below 200,000.
Whatever the number, it should weigh on any rate decision the Fed has planned or is considering. Another 25 basis point hike in the federal funds rate at this meeting has been largely discounted by the market, meaning, that if the Fed stands pat on rates, then it is tacit understanding that their goal of four more hikes by the end of the year is very much being scrapped.
There are simply too many negative forces pulling at the Fed for them to do another rate hike. Everything from the fragile US economy to the cratering Yuan and Chinese GDP growth to the nut-case presidential primaries are under consideration by the most politically-motivated central bank in the known universe.
That is to say nothing of the 1500-point hissy fit thrown by the DJIA after the most recent rate increase, in December of last year.
Stocks continue to keep to the script here, with the S&P within hailing distance of 2000, and the Dow closing in fast on 17,000. Both are admirable short-term goals, but they will hardly prove to be persistent. Stocks are becoming severely overbought and overvalued, and charts show all kinds of evidence that the bull run from 2009 has ended. Besides, there's growing fears of a recession looming, especially after the poor performance not only of the past two quarters, but of the general seven-year-long recovery.
The key level is 17,200 for the Dow, a point at which there is a significant patch of heavily-fortified resistance.
The Bureau of Labor Statistics (BLS) will release the February non-farm payroll report at 8:30 am ET, Friday.
S&P 500: 1,993.40, +6.95 (0.35%)
Dow: 16,943.90, +44.58 (0.26%)
NASDAQ: 4,707.42, +4.00 (0.09%)
Crude Oil 34.60 -0.17% Gold 1,262.10 +1.63% EUR/USD 1.0963 +0.89% 10-Yr Bond 1.83 -0.97% Corn 355.50 -0.21% Copper 2.21 +1.26% Silver 15.23 +1.38% Natural Gas 1.64 -2.09% Russell 2000 1,076.05 +0.97% VIX 16.70 -2.28% BATS 1000 20,677.17 0.00% GBP/USD 1.4178 +0.71% USD/JPY 113.65
While the talking heads on Bloomberg and CNBC are hyperventilating over the February non-farm payroll report due out tomorrow morning, the true market-moving events concern central banks and they don't occur until next week and the following, beginning with the ECB policy announcement on March 10, and the FOMC meeting March 15-16.
After ADP's February private sector number coming in at 214,000 Wednesday morning, the market is expecting something in that range from the BLS, with consensus just a shade below 200,000.
Whatever the number, it should weigh on any rate decision the Fed has planned or is considering. Another 25 basis point hike in the federal funds rate at this meeting has been largely discounted by the market, meaning, that if the Fed stands pat on rates, then it is tacit understanding that their goal of four more hikes by the end of the year is very much being scrapped.
There are simply too many negative forces pulling at the Fed for them to do another rate hike. Everything from the fragile US economy to the cratering Yuan and Chinese GDP growth to the nut-case presidential primaries are under consideration by the most politically-motivated central bank in the known universe.
That is to say nothing of the 1500-point hissy fit thrown by the DJIA after the most recent rate increase, in December of last year.
Stocks continue to keep to the script here, with the S&P within hailing distance of 2000, and the Dow closing in fast on 17,000. Both are admirable short-term goals, but they will hardly prove to be persistent. Stocks are becoming severely overbought and overvalued, and charts show all kinds of evidence that the bull run from 2009 has ended. Besides, there's growing fears of a recession looming, especially after the poor performance not only of the past two quarters, but of the general seven-year-long recovery.
The key level is 17,200 for the Dow, a point at which there is a significant patch of heavily-fortified resistance.
The Bureau of Labor Statistics (BLS) will release the February non-farm payroll report at 8:30 am ET, Friday.
S&P 500: 1,993.40, +6.95 (0.35%)
Dow: 16,943.90, +44.58 (0.26%)
NASDAQ: 4,707.42, +4.00 (0.09%)
Crude Oil 34.60 -0.17% Gold 1,262.10 +1.63% EUR/USD 1.0963 +0.89% 10-Yr Bond 1.83 -0.97% Corn 355.50 -0.21% Copper 2.21 +1.26% Silver 15.23 +1.38% Natural Gas 1.64 -2.09% Russell 2000 1,076.05 +0.97% VIX 16.70 -2.28% BATS 1000 20,677.17 0.00% GBP/USD 1.4178 +0.71% USD/JPY 113.65
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