Your editor has been feverishly putting together a couple of boffo posts for later this week... maybe next week, so today is just a place-holder for markets which continue to set new all-time highs.
Yippie! Life can't get any better than this, can it?
Here's to hoping that previous statement isn't true, because there's a sneaking suspicion that, with $13.4 trillion worth of negative-yielding bonds now infecting the global investment landscape, somethng really, really bad is going to pop and there won't be any upside, for anybody.
So, keep wishing.
Monday Muddle:
Dow Jones Industrial Average
18,636.05, +59.58 (0.32%)
NASDAQ
5,262.02, +29.12 (0.56%)
S&P 500
2,190.15, +6.10 (0.28%)
NYSE Composite
10,858.50, +36.08 (0.33)
Monday, August 15, 2016
Friday, August 12, 2016
Stock Market Losses Will Not Be Tolerated
In a world which is prodded, directed, managed, and ultimately controlled by central banks and government authoritarians, the narrative is often more important than the reality of life under the thumb.
A case in point comes today - a day after the NASDAQ, S&P 500, Dow Industrial Average each set new all-time highs - in which actual economic data diverged from the preferred narrative of "everything is peachy-keen."
Two important data sets were released prior to the opening of US equity markets, July PPI and July retail sales. Both were disappointing.
PPI came in at -0.4% and retail sales posted a sluggish 0.0% (zero) growth, with the core - ex-autos - down 0.3%. These figures not only suggest deflation, but are actually indicative of a deflationary environment, the sole condition which can awaken central bankers from sound sleep in cold sweats and is, at the same time, a relief for cash-strapped, income-stagnant workers and consumers.
According to the book of central bank policy, should one actually exist, the wants and needs of the average working Jane or Joe is to be disregarded in such an instance, preference given to fat-cat Wall Street types who do no work, produce nothing of value, but rake in billions of dollars in fees, profits, and commissions for their trading activities in the stock market casino.
So it came to be that since stocks had just made all-time highs, a major setback could not and would not be tolerated. The major indices slumped most of the session, but were boosted higher going into the close, with losses trimmed on the Dow and S&P, the NASDAQ actually closing positive, as deemed appropriate by the masters of the the universe.
The rigging of markets is never going to work out long term. Massive mis-allocation of capital has been taking place since the last financial crisis, setting the global economy up for a colossal, catastrophic, cataclysmic collapse. Maybe it won't be as bad as our alliterative case suggests, if only because ordinary people have had time to adjust and prepare, but, for anyone owning stocks at current altitudes, losses are nearly a certainty. That is, unless the entire world remains in a state of suspended animation, normalcy bias, and cognitive dissonance, and the wild-eyed central bankers of the world are allowed to continue their insane policies of negative interest rates, naked purchasing of equities (already a de facto policy of the BOJ and ECB, still a clandestine operation by the US Fed), stimulus, and maybe, if we're really lucky, helicopter money.
The week ended well for the titans of Wall Street. Have a (few, lots of, keg of) beers, enjoy the weekend, and sleep on it.
Friday's Figures:
Dow Jones Industrial Average
18,576.47, -37.05 (-0.20%)
NASDAQ
5,232.89, +4.50 (0.09%)
S&P 500
2,184.05, -1.74 (-0.08%)
NYSE Composite
10,820.79, -15.26 (-0.14%)
The weekly figures weren't all that impressive, though the NASDAQ recorded its seventh consecutive weekly gain.
For the Week:
Dow: +32.94 (+0.18%)
NASDAQ: +11.77 (+0.23%)
S&P 500: +1.18 (+0.05%)
NYSE Comp.: +37.92 (+0.35%)
A case in point comes today - a day after the NASDAQ, S&P 500, Dow Industrial Average each set new all-time highs - in which actual economic data diverged from the preferred narrative of "everything is peachy-keen."
Two important data sets were released prior to the opening of US equity markets, July PPI and July retail sales. Both were disappointing.
PPI came in at -0.4% and retail sales posted a sluggish 0.0% (zero) growth, with the core - ex-autos - down 0.3%. These figures not only suggest deflation, but are actually indicative of a deflationary environment, the sole condition which can awaken central bankers from sound sleep in cold sweats and is, at the same time, a relief for cash-strapped, income-stagnant workers and consumers.
According to the book of central bank policy, should one actually exist, the wants and needs of the average working Jane or Joe is to be disregarded in such an instance, preference given to fat-cat Wall Street types who do no work, produce nothing of value, but rake in billions of dollars in fees, profits, and commissions for their trading activities in the stock market casino.
So it came to be that since stocks had just made all-time highs, a major setback could not and would not be tolerated. The major indices slumped most of the session, but were boosted higher going into the close, with losses trimmed on the Dow and S&P, the NASDAQ actually closing positive, as deemed appropriate by the masters of the the universe.
The rigging of markets is never going to work out long term. Massive mis-allocation of capital has been taking place since the last financial crisis, setting the global economy up for a colossal, catastrophic, cataclysmic collapse. Maybe it won't be as bad as our alliterative case suggests, if only because ordinary people have had time to adjust and prepare, but, for anyone owning stocks at current altitudes, losses are nearly a certainty. That is, unless the entire world remains in a state of suspended animation, normalcy bias, and cognitive dissonance, and the wild-eyed central bankers of the world are allowed to continue their insane policies of negative interest rates, naked purchasing of equities (already a de facto policy of the BOJ and ECB, still a clandestine operation by the US Fed), stimulus, and maybe, if we're really lucky, helicopter money.
The week ended well for the titans of Wall Street. Have a (few, lots of, keg of) beers, enjoy the weekend, and sleep on it.
Friday's Figures:
Dow Jones Industrial Average
18,576.47, -37.05 (-0.20%)
NASDAQ
5,232.89, +4.50 (0.09%)
S&P 500
2,184.05, -1.74 (-0.08%)
NYSE Composite
10,820.79, -15.26 (-0.14%)
The weekly figures weren't all that impressive, though the NASDAQ recorded its seventh consecutive weekly gain.
For the Week:
Dow: +32.94 (+0.18%)
NASDAQ: +11.77 (+0.23%)
S&P 500: +1.18 (+0.05%)
NYSE Comp.: +37.92 (+0.35%)
Thursday, August 11, 2016
S&P Rocks To Hew All-Time Highs; Oil Ramps Higher
So much for the doldrums of August.
Stocks soared to some of their highest levels ever, with the S&P 500 index closing at an all-time-high, achieving a new intra-day high (2,188.45) in the process.
There was little in the way of financial data to support the sudden spurt higher, so let it just be said that it was a decidedly rick-on session.
Macy's announced reasonably good quarterly results and pledged to close 100 stores. The stock soared by more than 17% on the day. It's getting so insane on Wall Street that even an expected earnings beat is cause for a massive uptick in share price.
S&P stocks are trading at a trailing P/E of roughly 25, approximately a 65% premium over traditional fair value.
This is truly a market only for the brave, the knave, or the naive.
Thursday's Closing Quotes:
Dow Jones Industrial Average
18,613.52, +117.86 (0.64%)
NASDAQ
5,228.40, +23.81 (0.46%)
S&P 500
2,185.79, +10.30 (0.47%)
NYSE Composite
10,843.10, +68.12 (0.63%)
Stocks soared to some of their highest levels ever, with the S&P 500 index closing at an all-time-high, achieving a new intra-day high (2,188.45) in the process.
There was little in the way of financial data to support the sudden spurt higher, so let it just be said that it was a decidedly rick-on session.
Macy's announced reasonably good quarterly results and pledged to close 100 stores. The stock soared by more than 17% on the day. It's getting so insane on Wall Street that even an expected earnings beat is cause for a massive uptick in share price.
S&P stocks are trading at a trailing P/E of roughly 25, approximately a 65% premium over traditional fair value.
This is truly a market only for the brave, the knave, or the naive.
Thursday's Closing Quotes:
Dow Jones Industrial Average
18,613.52, +117.86 (0.64%)
NASDAQ
5,228.40, +23.81 (0.46%)
S&P 500
2,185.79, +10.30 (0.47%)
NYSE Composite
10,843.10, +68.12 (0.63%)
The Most Dangerous Market Of Your Lifetime
Investors in equities - those imaginary certificates that signify ownership of a portion of a company or corporation - are giddy.
Stocks are near all-time highs with prosperity and class envy writ large on every tick higher.
Sure enough, these investors are shrewd operators of finance and business, many having earned their degrees from the highest academic schools in the world, the diplomas proudly displayed on the walls of their hedge fund offices and trading areas.
So, why would they possibly be worried about anything, particularly, the value of their holdings?
Simply put, there just aren't enough of them partaking at the font of wealth pouring out of Wall Street. Making matters more complicated and distressed is that the executives of the companies in which their wealth is concentrated have been buying back their shares at an unprecedented rate, making the shares of stock available smaller and smaller, but also boosting the price of those available, traded shares.
It's an easy supply and demand formula: fewer shares available makes them more valuable. In effect, if companies are inclined to take back their shares at inflated prices (a de-issuance, if you will), those remaining shares have to represent the entire value of the company.
Thus, a company could theoretically buy back all the shares but one, leaving that one share of stock to account for the full value of the company. In the case of an Apple or Google or any of the thousands of billion-dollar market cap companies, that one share would be "valued" at some absurd number, like $285 billion.
In such a hypothetical case, the problem arises when the owner of that $285 billion share of stock wished to unload it, convert it to cash or some other assets. Who would be the buyer? And would they actually pay the offered price (the ask) in such an illiquid market?
Obviously, the seller of that massive share of stock might have to offer a discount, and a big one. Instead of $285 billion, the seller might be forced to accept $140 billion, or less, in event of a liquidity crisis, which, incidentally, is what stock buybacks are creating. Since there hasn't been adequate demand for shares since the financial crisis of 2008-09, companies have resorted to buybacks just to keep their companies afloat, many of them becoming less and less profitable over time, making the price of their stock even more ridiculously valued.
When the rush for the exits begins in earnest, the big-time hedgies and fund managers will be bidding directly against each other, each with the same goal, to dump corporate paper assets in exchange for something more sturdy, ostensibly government bonds or hard, cold cash.
The markdowns, margin calls and defaults will be spectacular and this market, this unsustainable fantasy created by zero and negative interest rates, central bank stimulus, and government dumbness and numbness will be exposed to real supply and demand economics in a swan song for greed, manipulation, and wealth concentration.
That this will occur is unmistakable. Everything does not go up in price all the time, forever. The business cycle has not been abolished, neither here in the US, nor in Japan, China, the Eurozone or anywhere else.
Central banks are currently backstopping the entire Ponzi scheme of the stock market with interest rate swaps, repos, direct investment, and options manipulation.
It can't continue forever, though it can continue for a long time. It's a deadly and dangerous game, putting at risk the entire economy of the planet, or, at least that portion of the planet that wants to play along.
Increasingly, the as the musical chairs are being removed one by one, players are opting out and moving elsewhere. Largely, the lower and middle classes aren't playing at all. They're invested in necessities, cash, maybe collectibles, precious metals, and real estate.
Eventually, the sheer volume of trade by the 99% not in the stock market and incensed by government policies which seek to impoverish them further, will outweigh the phony prices for stocks listed on the NYSE and NASDAQ.
The stock market will suffer a severe breakdown at some point. The trick is not to know when that breakdown will occur, but to continue to prepare for its inevitability.
Most will not be prepared. Those who have prepared may or may not proper at the expense of everyone else, because the chaos - political, economic, social - will be astonishing.
The Boy Scouts of America issued their motto many years ago and it applies today: Be Prepared.
Be a Boy Scout.
Wednesday's Washout:
Dow Jones Industrial Average
18,495.66, -37.39 (-0.20%)
NASDAQ
5,204.58, -20.90 (-0.40%)
S&P 500
2,175.49, -6.25 (-0.29%)
NYSE Composite
10,774.98, -29.53 (-0.27%)
Stocks are near all-time highs with prosperity and class envy writ large on every tick higher.
Sure enough, these investors are shrewd operators of finance and business, many having earned their degrees from the highest academic schools in the world, the diplomas proudly displayed on the walls of their hedge fund offices and trading areas.
So, why would they possibly be worried about anything, particularly, the value of their holdings?
Simply put, there just aren't enough of them partaking at the font of wealth pouring out of Wall Street. Making matters more complicated and distressed is that the executives of the companies in which their wealth is concentrated have been buying back their shares at an unprecedented rate, making the shares of stock available smaller and smaller, but also boosting the price of those available, traded shares.
It's an easy supply and demand formula: fewer shares available makes them more valuable. In effect, if companies are inclined to take back their shares at inflated prices (a de-issuance, if you will), those remaining shares have to represent the entire value of the company.
Thus, a company could theoretically buy back all the shares but one, leaving that one share of stock to account for the full value of the company. In the case of an Apple or Google or any of the thousands of billion-dollar market cap companies, that one share would be "valued" at some absurd number, like $285 billion.
In such a hypothetical case, the problem arises when the owner of that $285 billion share of stock wished to unload it, convert it to cash or some other assets. Who would be the buyer? And would they actually pay the offered price (the ask) in such an illiquid market?
Obviously, the seller of that massive share of stock might have to offer a discount, and a big one. Instead of $285 billion, the seller might be forced to accept $140 billion, or less, in event of a liquidity crisis, which, incidentally, is what stock buybacks are creating. Since there hasn't been adequate demand for shares since the financial crisis of 2008-09, companies have resorted to buybacks just to keep their companies afloat, many of them becoming less and less profitable over time, making the price of their stock even more ridiculously valued.
When the rush for the exits begins in earnest, the big-time hedgies and fund managers will be bidding directly against each other, each with the same goal, to dump corporate paper assets in exchange for something more sturdy, ostensibly government bonds or hard, cold cash.
The markdowns, margin calls and defaults will be spectacular and this market, this unsustainable fantasy created by zero and negative interest rates, central bank stimulus, and government dumbness and numbness will be exposed to real supply and demand economics in a swan song for greed, manipulation, and wealth concentration.
That this will occur is unmistakable. Everything does not go up in price all the time, forever. The business cycle has not been abolished, neither here in the US, nor in Japan, China, the Eurozone or anywhere else.
Central banks are currently backstopping the entire Ponzi scheme of the stock market with interest rate swaps, repos, direct investment, and options manipulation.
It can't continue forever, though it can continue for a long time. It's a deadly and dangerous game, putting at risk the entire economy of the planet, or, at least that portion of the planet that wants to play along.
Increasingly, the as the musical chairs are being removed one by one, players are opting out and moving elsewhere. Largely, the lower and middle classes aren't playing at all. They're invested in necessities, cash, maybe collectibles, precious metals, and real estate.
Eventually, the sheer volume of trade by the 99% not in the stock market and incensed by government policies which seek to impoverish them further, will outweigh the phony prices for stocks listed on the NYSE and NASDAQ.
The stock market will suffer a severe breakdown at some point. The trick is not to know when that breakdown will occur, but to continue to prepare for its inevitability.
Most will not be prepared. Those who have prepared may or may not proper at the expense of everyone else, because the chaos - political, economic, social - will be astonishing.
The Boy Scouts of America issued their motto many years ago and it applies today: Be Prepared.
Be a Boy Scout.
Wednesday's Washout:
Dow Jones Industrial Average
18,495.66, -37.39 (-0.20%)
NASDAQ
5,204.58, -20.90 (-0.40%)
S&P 500
2,175.49, -6.25 (-0.29%)
NYSE Composite
10,774.98, -29.53 (-0.27%)
Tuesday, August 9, 2016
Stocks Ramp, Then Cramp In Late Selling
Looks like the consolidation continues. Anybody buying at these levels must be extremely selective or terminally insane.
The Day's Tally:
Dow Jones Industrial Average
18,533.05, +3.76 (0.02%)
NASDAQ
5,225.48, +12.34 (0.24%)
S&P 500
2,181.74, +0.85 (0.04%)
NYSE Composite
10,804.51, +16.50 (0.15%)
That's two slow trading days in a row. Get used to it unless there's some unseen catalyst developing to upset the slow moving wagon train of declining profits and higher prices.
Not a pretty sight (unless you're a central banker).
The Day's Tally:
Dow Jones Industrial Average
18,533.05, +3.76 (0.02%)
NASDAQ
5,225.48, +12.34 (0.24%)
S&P 500
2,181.74, +0.85 (0.04%)
NYSE Composite
10,804.51, +16.50 (0.15%)
That's two slow trading days in a row. Get used to it unless there's some unseen catalyst developing to upset the slow moving wagon train of declining profits and higher prices.
Not a pretty sight (unless you're a central banker).
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