Stocks May Be Near Peak; Fed Plans Going Up in Flames

It's been a troublesome two weeks for stock jockeys. Even as the Dow and S&P have rocketed to new highs, the shakeout on the NASDAQ last Friday may have been a harbinger of things to come and the die came up snake-eyes on Tuesday as all of the major indices took losses which accelerated into the closing bell.

On the surface, everything seems to be going according to plan. The Fed continues to lie to themselves - and everybody else - that the solvency trap of the GFC of 2007-09 has been permanently put in the rear view mirror and the future offers nothing less than roses and unicorns, otherwise termed "normalcy." Real people know better. While the official unemployment figures approach fantasy levels of sub-four percent, those in and out of the workforce haven't had sustained economic prosperity since prior to 2000. Wages have been absolutely stagnant for the better part of 20 years, not only in the United States, but in established economies around the world.

Since debt had reached unsustainable (read: unpayable) levels during the housing crisis period, all the central bank could do was double down with easy money to banks and connected investors and financiers via QE and ZIRP while the bulk of the population got dosed with 22% interest rates on credit cards, ballooning college tuition costs and, the ultimate teaser, cheap credit on new car loans and leases.

Well, the carousel is slowing to a stop as the world demographic ages not-so-gracefully into their 50s, 60s and 70s, an age at which one does less of everything, including driving, eating, buying, spending, racking up credit card debt and buying bigger houses. This simple fact is probably not lost on the central bankers, but, being mired into last-century Keynesian economic theories and practices, there's little they could do except what they did last week, a desperate attempt to buy more time via higher federal funds rates, a plan that allows a small comfort zone to ease into the next recession, which seems to be gathering momentum daily.

Stocks have never told the entire story of a nation's economy and they won't this time either. While the power elite jiggle their algos to capture the little gains that remain, real estate prices have peaked and are heading lower in many locales, gold, silver, and especially, oil are displaying tendencies one would normally associate with a deflationary economy, which, actually is what has been the experience for much of the past eight years.

Tech stocks have outperformed and rightfully so, but what tech has proven to do time and again is lower costs and prices via efficiencies of scale and market. This time is no different, the recent acquisition of Whole Foods by internet giant, Amazon, offers yet another chilling reminder that the past is pretense and the future will be won by the fastest and most agile companies, individuals and, yes, governments.

The Federal reserve and their crony central bankers across the globe have painted themselves - and everyone else - into a no-win situation, thinking that inflation equals salvation, when, in fact, it is nothing more than gloss. Making matters even more untenable is the idea that the Fed has been trying to induce inflation for the past eight years, without success. They've pumped trillions into the global economy with nil effect because the two things most important to free, functioning markets - price discovery and an honest discounting mechanism - have been missing due to their constant fiddling and control fraud.

Thus, the world approaches another financial Waterloo, more serious than the last, as global credit creation has stalled with growth being nothing more today than amalgamated numbers which are fictitious in the main. The overhang of government debt, pension shortfalls and corporate insouciance have created the perfect scenario for calamity.

If the Fed, ECB, BOJ and other central banks are in search of drama, this summer is likely to be a grand provider of entertainment for all. With stocks overvalued close to the point of absurdity, the assets to be hoarded - if one is in a position to exit the Wall Street casino - are real estate, currencies, gold, silver, tools and machinery.

Since June 9, the NASDAQ has closed negatively six of eight sessions. The Fed finalized their rate hike on the 14th after weeks, if not months, of telegraphing their move. The weakness in the NASDAQ is not a coincidence, but rather, a distinct message from the market.

At The Close, 6/19/17:
Dow: 21,467.14, -61.85 (-0.29%)
NASDAQ: 6,188.03, -50.98 (-0.82%)
S&P 500 2,437.03, -16.43 (-0.67%)
NYSE Composite: 11,738.95, -94.39 (-0.80%)

Dow Sets New Record; NASDAQ Rebounds

Well, it's Monday, so stocks have to go up. It's some kind of rule.

There's no need for any comment on this. It's just part of the current theme.

At the Close, 6/19/17:
Dow: 21,528.99, +144.71 (0.68%)
NASDAQ 6,239.01, +87.25 (1.42%)
S&P 500: 2,453.46, +20.31 (0.83%)
NYSE Composite: 11,833.34, +61.32 (0.52%)

Stocks End Week Mixed, But Damage Has Been Done

While the Dow, S&P and NYSE Composite all gained slightly on the week, the NASDAQ, which ended lower Friday, registered its second straight week of losses.

The NASDAQ has finished in the red three straight sessions and five of the last six, beginning with last Friday's washout of the FAANG stocks (Facebook, Amazon, Apple, Netflix, Google, aka Alphabet).

While the NASDAQ may have hit a pocket of support for the time being, the intraday high of 6341.70 is now nearly 200 points off in the distance. Not that the venerable algos, computers and few human hands operating the machinery at the NAZ couldn't pull the index up and beyond that level in a matter of days, there still remains to be a reason for such a move.

With the calendar showing the middle of June, there may not be much in the way of stock-inspiring news until second quarter earnings begin being trotted out the second week of July. The Fed's rate hike is out of the way for now, and it's anticipated that the Fed won't make any significant moves until September at the earliest, and more likely December, if at all.

All markets remain bloated, just like government salary and benefit packages, while real Americans struggle to find and keep good jobs, pay bills and possibly save something for the future, be that retirement or college of kids.

The world's financial markets continue to be prodded and plotted by central bankers, which means there will be no abrupt collapse on their watch, or until they deem it advisable to crash the stock market by means of tight money or other policy initiatives.

Meanwhile, the NASDAQ bears watching, if anybody in the world still believes in technical analysis, because further weakness could portend a finish to the third longest bull run in market history, albeit with the lowest growth rate (2.0%). Those two historic marks are at opposition, and it will be interesting to see how long the fiat parade can continue without significant reckoning of reality.

At the Close, 6/16/17:
Dow: 21,384.28, +24.38 (0.11%)
NASDAQ: 6,151.76, -13.74 (-0.22%)
S&P 500: 2,433.15, +0.69 (0.03%)
NYSE Composite: 11,772.02, +31.50 (0.27%)

For the Week:
Dow: +112.31 (0.53%)
NASDAQ: -56.16 (0.90%)
S&P 500: +1.38 (0.06%)
NYSE Composite: +27.29 (0.23%)

Stocks Collapse, Regain on Thursday, Post-Rate Hike by Fed

All indices finished lower on Thursday and the declines continued into Friday morning with all the majors down shortly after the open.

The continuing weakness in stocks was exacerbated by the FOMC raising the federal funds rate 25 basis points, to 1.00-1.25%. This tiny move seems to be too much for market participants to bear, given that this is the third increase in the past seven months.

The Fed appears intent - for now - to hold rates at this level, but also mentioned - in its press release and news conference following the rate decision - that they would begin addressing the balance sheet of nearly $4.5 trillion, by rolling off up to $10 billion a month in Treasury, agency, and mortgage-backed securities, a plan that would take roughly 30 years to complete.

While the media hasn't even taken up a position on the Fed's plans because no on-air personality even understands what it means and only one percent - being generous - of the general population has any idea of what the Federal Reserve actually does.

In essence, the rape of the global economy by central banks will continue until either the system implodes or the entire planet is enslaved by money-changers.

That's all for now. Make sure to check back over the weekend for the Money Daily weekly wrap-up.

Fed Raises Rates, Sets Out Asset Disposal Plan

As was widely anticipated, the FOMC of the Federal Reserve voted 8-1 to raise the federal funds overnight lending rate 25 basis points, from 0.75-1.00% to 100-1.25%. Minneapolis Fed President Neel Kashkari was the lone member to vote to leave the rate unchanged. The Fed also raised the prime rate - to which many credit cards, car and mortgage loans are indexed - by 1/4%. The prime - or Primary, in fed-speak - rate now stands at 1.75%.

While the move was telegraphed to the market well in advance, the Fed's decision to release some details of its plan to unwind its enormous balance sheet of over $4.5 trillion, came as something of a shock to investors, characterized by the sullen market reaction.

About the only assets that didn't go down following the Fed's release were Dow and the dollar, the DJIA saved by the usual antics of the altos or the PPT, with the traditional hockey stick save in the last half hour, which also lifted the S&P, the Comp., and NASDAQ from deeper losses.

The dollar index rallied from 96.36 - a seven-month low - earlier in the day, to close at 96.918, a closing loss of just 0.06%. As usual, precious metals were sold down the river in the heavily-rigged futures market. WTI crude oil closed in New York at 44.69, -1.77 (-3.81%). The price is a massive surprise, considering the "summer driving season" has begun. However, the glut of crude on world markets continues to depress prices. Consumers have not yet seen the result at the gas pump, where prices have been relatively stable, despite oil's recent fall from about $52 to the mid-40s.

As usual, the day following the Fed rate decision will offer more clarity on stock direction.

The Fed laid out plans to wind down its multi-trillion-dollar balance sheet, gradually reducing its holdings of Treasuries and agency securities, by decreasing the Fed’s reinvestment of principal payments. Payments will only be reinvested when they exceed preset and self-administered caps, which start out at $6 billion per month for Treasuries and $4 billion per month for agency and mortgage-backed securities.

Since the Fed sopped up literally trillions worth of garbage MBS and dodgy treasuries during the aftermath of the GFC, the effect of their balance sheet unwind will be an attempt to allow market normalization with the Fed out of the way. While this tactic has been the subject of great scrutiny, without a "buyer of last resort" such as the Federal Reserve, the concern is that interest rates will spiral out of control with inadequate buying interest depressing prices and thus, raising yields beyond reasonable levels.

At present, this has not occurred, In fact, the benchmark 10-year note was exceptionally depressed, closing at a yield of 2.138, but, the Fed hasn't actually begun its unwinding, only mentioned how they plan to achieve their goals.

In an addendum to its statement, the Fed stated,

“The Committee currently anticipates reducing the quantity of supply of reserve balances, over time, to a level appreciably below that seen in recent years but larger than before the financial crisis; the level will reflect the banking system’s demand for reserve balances.”

As the ultimate arbiter of rates and ostensibly in control of all things financial, the Fed is hopeful that the rest of the world will go along with their grand plan.

According to the caps the Fed has just announced, it's going to be a long time before their balance sheet regains some semblance of normalcy. At a rate of $10 billion a month, the Fed will only be able to reduce the bloat by $120 billion a year. At that rate, getting their carried balance down to $2.5 billion would take roughly 20 years.

We can hardly wait.

At the Close, 6/14/17:
Dow: 21,374.56, +46.09 (0.22%)
NASDAQ: 6,194.89, -25.48 (-0.41%)
S&P 500: 2,437.92, -2.43 (-0.10%)
NYSE Composite: 11,779.81, -16.98 (-0.14%)