Much Ado About Nothing As War Rhetoric Fades

Could anything less have been expected?

Since we have fake news, fake boobs, fake money, fake legislators making fake laws, and fake outrage, why not have a fake war?

North Korea's Kim Jong-un recent bombast directed at the United States was remarkable only in the way world markets reacted to it. The tin-horn, third world dictator has been test-firing missiles and boasting about bringing Western civilization to its knees for months, but only this week did his war-mongering behavior result in stock market losses, which, in the grand scheme of things, were minor.

While vacationing President Donald Trump made headlines with his responses, the markets did an abrupt about-face midweek, ending a streak of ten straight positive closes on the Dow Tuesday with a small skid to the red, followed Wednesday by a more broad decline and Thursday with a cascading sell-off, which sent the major indices down the most in three months or longer.

The Dow didn't suffer much damage, though it was the worst week in the past 12, but the narrow, 30-stock Dow Industrials are still up almost 10% on the year. Where the impact was greatest was on the broader measures, specifically, the NYSE Composite, which fell nearly two percent. By comparison, the Dow was off just more than one percent for the week.

With the finger-pointing and threatening behavior by various world leaders dropping off to background noise as the weekend approached, stocks in the US rebounded slightly, as expected, since few astute geo-political minds actually believe we're anywhere closer to war with North Korea than we have been for the past sixty years.

Thus, it is likely to be back to business as usual for the markets on Monday, though one side effect during the recent tantrum has been the rise of gold and silver as safety bets and the fall of the price of oil, as the global glut continues. Gold reached its highest point since June, closing out the week about ten dollars below $1300. Silver managed to stay above $17 for the first time in two months, but crude oil ended below $49 per barrel, a price seen by many as still too high considering the global oversupply.

At the Close, 8/11/17:
Dow: 21,858.32, +14.31 (0.07%)
NASDAQ: 6,256.56, +39.68 (0.64%)
S&P 500: 2,441.32, +3.11 (0.13%)
NYSE Composite: 11,763.21, -8.39 (-0.07%)

For the Week:
Dow: -234.49 (-1.06%)
NASDAQ: -95.01 (-1.50%)
S&P 500: -35.51 (-1.43%)
NYSE Composite: -221.68 (-1.85%)

Stocks Extend Slide Amid Noth Korea, US Bombast, But It's Not Serious

Just in case there needs to be an excuse to sell overpriced stocks, there's always North Korea and the nit-wit leader Kim Jong-un.

A bone fide nutjob, the second child of Kim Jong-il, 33-year-old Jong-un has, in his brief stint as self-appointed supreme leader of North Korea, managed to elevate himself and his gulag of a nation onto the global stage and capture the spotlight with various treats, missile launches, nuclear ambitions and plenty of help from international media seeking sensationalism with which to scare an unsuspecting public.

With bombastic President Trump entering the fray earlier this year, Jong-un has found the perfect Dean Martin straight man for his Jerry Lewis-like antics. A master of the tweet-storm, Trump takes Jong-un seriously, which helps amp up the rhetoric with bold statements and unveiled threats in response to Jong-un's madness. The two could make a fortune on the stages of Las Vegas, if only the State Department would allow Jong-un entry to the US mainland.

What the international war of words has to do with stocks is roughly nothing. Until actual bombs start raining down, the prattling between the leaders of the United States and North Korea is more about television and radio ratings than the prices of Apple, Alphabet, or Alcoa.

However, as stated at the top of this missive, Wall Street specialists are taking the opportunity to dump out of high-flying stocks with near-reckless abandon, sending the major indices to their biggest losses in six months on Thursday, extending the minor losses from Wednesday into something worth noticing.

The selling has also not been limited to just US stocks. As the talk has become more bellicose, the drops on major foreign markets in Europe, Asia, and the Americas have been extended. As of Friday morning in the US, most of Asia and Europe are suffering losses of between one and two percent, though the Nikkei 225 is bucking the trend, down only slightly, nearly flat on the day.

That brings up an interesting topic: if Japan's major market isn't taking this "international nuclear stand-off" with the requisite seriousness, should anybody else?

Probably not, but, this is as good a time as any to take profits. The congress and the president are pretty much on vacation until after Labor Day, but, when they get back to pretending they're doing something constructive, they'll be tackling the ticklish issues of the debt ceiling (along with the attendant threats of shutting down the government - yeah!) and coming up with something resembling a federal budget.

On the latter, hashing out a budget between the Trump administration and the overwhelmingly free-spending congress ought to be some serious comedy. Trump would love to balance the federal budget, but congress intends to drown the nation in even more debt. In case anybody is still keeping score, the federal debt burden stands at close to $20 billion, but, according to the US Debt Clock, it's been stuck there for a few months due to extraordinary measures taken by Treasury and some unforeseen savings on the administration's end.

The congress is not happy about this and will make sure to pile up more debt in the months ahead, making the budget process the go-to, must see entertainment venue for the fall TV season.

So, unless the bottom falls out of the market on Friday, August 11, this is nothing more than profit-taking by people who actually know what they're doing and don't respond in knee-jerk fashion to the pronouncements of madmen and the tweets of presidents.

Meantime, the recent news frame has been good for bonds, gold and silver, all of which have had three straight sessions of unimpeded gains. Gold is approaching $1300 an ounce, the 10-year note is yielding 2.21% and silver broke through $17 per ounce on Thursday. What is not working, still, is oil, which appears unable to pierce the $50/barrel level, which shouldn't be an issue. There remains a massive glut, oversupply, slack demand due to slow economic growth globally and no pricing power anywhere from Riyadh to Russia. Oil should be less than $40 per barrel, though resistance is great, led by the global energy cartel with the help from central bankers who simply cannot stomach any more deflation in anything.

With that, stocks in the US are setting up for another scary open to the downside, but it's probably nothing more than a bump in the road. The real action is still a month away, and even then, the Fed has Wall Street's back. Unless something really serious occurs, there's likely not to be any major turn in the stock markets, though the same cannot be assumed about commodities, bonds, precious metals, or even crypto-currencies like Bitcoin.

At the Close, 8/10/17:
Dow: 21,844.01, -204.69 (-0.93%)
NASDAQ: 6,216.87, -135.46 (-2.13%)
S&P 500: 2,438.21, -35.81 (-1.45%)
NYSE Composite: 11,771.60, -157.87 (-1.32%)

Stocks in Limited Slide on North Korea Threats, Trump's "Fire and Fury" Response

This is more kabuki theatre.

Trump cannot declare war on North Korea. According to the constitution (remember that?) only congress can declare war.

So forget it. The entire North Korea scenario is probably more deep state phoniness. The markets didn't seem to notice much, if at all.

Boorish, is what it all is.

At the Close, 8/9/17:
Dow: 22,048.70, -36.64 (-0.17%)
NASDAQ: 6,352.33, -18.13 (-0.28%)
S&P 500: 2,474.02, -0.90 (-0.04%)
NYSE Composite: 11,929.46, -20.50 (-0.17%)

10-Day Winning Streak on the Dow Industrials Ends With Whimper

With closing highs in the past ten straight sessions, the Dow Jones Industrial Average could well be expected to take a bit of a hit at some point, that point coming on Tuesday, though the hit was not substantial, as the Dow shed just 33 points.

Putting the past ten sessions in perspective, the Dow's winning streak began at just above 21,500, and, before retreating into the close, topped out at nearly 22,200, overall, a gain of almost 700 points, or 3.25%. Annualizing the results, if the Dow were to move in the same direction for a full year, the gain would be more than 33,000 points, resulting in a gain of more than 150%.

With those kinds of numbers nobody in their right mind with more than $40,000 of investible income would bother to work.

These mental gymnastics are brought to you by the Federal Reserve Bank, the Bank of Japan, the European Central Bank and the Swiss National Bank. All of these central banks other than the US Fed, have been and will continue to be openly investing in US equities and those in other developed nations.

There's a certain folly in expecting the central banks to continue supplying extraordinary gains in stocks, so distorted already are the equity - and many other - markets.

At the Close, 8/8/17:
Dow: 22,085.34, -33.08 (-0.15%)
NASDAQ: 6,370.46, -13.31 (-0.21%)
S&P 500: 2,474.92, -5.99 (-0.24%)
NYSE Composite: 11,949.98, -37.79 (-0.32%)

Another Day, Another Dow Record Close

Borrowing a line from "Seinfeld," serenity now, insanity later.

At the Close, 8/7/17:
Dow: 22,118.42, +25.61 (0.12%)
NASDAQ: 6,383.77, +32.21 (0.51%)
S&P 500: 2,480.91, +4.08 (0.16%)
NYSE Composite: 11,987.77, +2.89 (0.02%)