Alabama Turns Blue; Yellen's Final Rate Hike In Focus

Late Tuesday night, the nation learned that Democrat Doug Jones defeated embattled Republican Roy Moore in Alabama's special election for the seat formerly occupied by Jeff Sessions, who vacated when he was promoted to Attorney General by President Trump.

What may very well go unlearned is how much the blatant attacks on Roy Moore by women claiming he sexually assaulted him or otherwise acted in immoral ways swung the election to Jones, who will be the first Democrat elected to the senate from Alabama since sitting senator Richard Shelby won as a Democrat in 1986, but changed parties in 1994.

The election of Jones narrows the Republican majority in the senate to 51-49, a slim edge that puts any future Republican-sponsored legislation in serious jeopardy. That's news that Wall Street should cheer because a lame congress is usually good for business, though it's far too early to say what the overall effect will be.

Looking further out, Democrats are bolstered by the upset victory in usually-red Alabama, believing - with good reason - that they have an opportunity to wrest control of the Senate in the 2018 mid-term elections, the campaigns for which will begin heating up shortly after the holidays.

What's also on the minds of investors is the FOMC policy meeting concluding Wednesday afternoon. The Fed is widely expected to vote to increase the federal funds rate another 25 basis points, to 1.25-1.50%.

As has been the case for the past nine years and the slow parade of 0.25% rate hikes which began in December of 2016, it's unlikely to cause much of a stir on Wall Street.

The Fed has plans for three to four more hikes in 2018, which would put the overnight lending rate at something around two percent. While still historically low, some analysts believe the economy isn't nearly durable enough to maintain a positive bent in the face of higher rates.

The Fed makes its policy statement at 2:00 pm ET Wednesday afternoon.

At the Close, Tuesday, December 12, 2017:
Dow: 24,504.80, +118.77 (+0.49%)
NASDAQ: 6,862.32, -12.76 (-0.19%)
S&P 500: 2,664.11, +4.12 (+0.15%)
NYSE Composite: 12,697.78, +29.57 (+0.23%)

More of the Same: Stocks Start Week With Gains; Even Doug Noland Doesn't Know How It Ends

Nothing new about this, except that it's beginning to become obvious to everybody that the relentless ramping of stocks by central banks and their cohorts in the commercial banking sector (think Goldman Sachs, JP Morgan Chase, Bank of America, Citibank, Morgan Stanley) cannot continue uninterrupted.

On the other hand, it's been going on for a lot longer than anyone could have possibly expected...

The big questions are:

1. When does it end?
2. How does it end?

At this point, nobody in the financial world even has a clue, including people as bright and provocative as Doug Noland, who has been authoring the Credit Bubble Bulletin since the late 90s.

His recent interview podcast by Chris Martenson of Peak Prosperity is incredibly prescient and offers insights into the global credit bubble that cannot be found anywhere else.

It is highly recommended listening.

At the Close, Monday, December 11, 2017:
Dow: 24,386.03, +56.87 (+0.23%)
NASDAQ: 6,875.08, +35.00 (+0.51%)
S&P 500: 2,659.99, +8.49 (+0.32%)
NYSE Composite: 12,668.21, +25.15 (+0.20%)

Stocks End Week Higher; Bitcoin Still Bubbly; Gold, Silver Pounded Lower

Stocks got back to rising without worry on Friday following the 238,000 new jobs reported in November, according to the BLS' non-farm payroll data.

The Dow, S&P, and Composite set new all-time high closing marks, the NASDAQ falling short of a record by 74 points, due primarily to the drubbing of the FAANGs late last week and early this week. Highly speculative tech stocks are considered to be benefited least of all companies by the tax bill currently coursing its way through congress, thus, some investors were shunning the sector for that reason. Others were likely taking profits after what is looking like a banner year for the tech leaders.

Bonds ended the week with a quiet session, the curve steepening ever so slightly, with the short-duration issues yielding the same or .01% more, while the 10-year-note yield was bumped a pip higher, to 2.38%.

The curve is still quite flat, with the spread between 2s and 30s only 98 basis points (0.98%). In other words, investors are flocking to short terms, which spells long-term trouble. In more normal times, a 30-year treasury bond would be yielding five from seven percent, but, even with the economy growing - albeit sluggishly - long-dated commitments are out of fashion. Lending the government money for a long period of time will only produce a return of 2.75%, hardly anything upon which one would hang a retirement fund. The federal government, if one believes in free market economics, is not a worthy bet from more than a few years.

Difficult to believe, but would you put your money at risk for an additional 20 years for an extra 0.37% return (the difference between the ten-year and the 30 year)? Probably not, and expert bond traders apparently agree.

No report would be complete without mentioning Bitcoin, which galloped above $17,000 on Thursday, but dropped back to just under $16,000 Friday, capping a week which it began just below $12,000 per coin.

On the flip side (pun intended), gold and silver were beaten down all week, sending silver to a loss year-to-date. Looks like a buying opportunity in the physical mining and bullion sector which has been the poster children for underperformance the past four years.

At the Close, Friday, December 8, 2017:
Dow: 24,329.16, +117.68 (+0.49%)
NASDAQ: 6,840.08, +27.24 (+0.40%)
S&P 500: 2,651.50, +14.52 (+0.55%)
NYSE Composite: 12,643.06, +74.08 (+0.59%)

Gold: 1,245.90, -3.90 (-0.31%)
Silver: 15.73, +0.01 (+0.06%)

For the week:
Dow: +97.57 (+0.40%)
NASDAQ: -7.51 (-0.11%)
S&P 500: +9.28 (+0.35%)
NYSE Composite: +28.50 (+0.23%)

Stocks Bid as Congress Avoids Government Shutdown; NFP Grows by 228,000

On Thursday, with the House and Senate agreeing to keep the federal government open for business via a two-week continuing resolution, investors took that relief as reason to rally stocks, erasing some of the losses of the previous week.

As Friday morning advanced toward the opening bell, the Commerce Department's Bureau of Labor Statistics released their most recent data on employment in the November non-farm payroll (NFP) report.

Coming in better-than-expected, the department reported an increase of 228,000 net new jobs in the month of November, adding more evidence that the economy, under the guidance of President Donald J. Trump, continues to expand. The unemployment rate remained at decades-low, 4.1%.

Futures pointed to a strong positive open for Friday's week-ending session.

At the Close, Thursday, December 7, 2017:
Dow: 24,211.48, +70.57 (+0.29%)
NASDAQ: 6,812.84, +36.47 (+0.54%)
S&P 500: 2,636.98, +7.71 (+0.29%)
NYSE Composite: 12,568.98, +36.55 (+0.29%)

Stocks Continue to Stall While Crypto Goes Wild; Silver Down for 2017

Stocks continued to plan through the early days of December, giving up early gains to close mixed to down on the day.

Overnight, Bitcoin careened through $13,000, $14,000, and $15,000 per coin to set all-time highs in an unprecedented move.

While the cryptocurrencies may have Wall Street and central banks on the ropes, it hasn't presented the chief manipulators of precious metals from pounding down gold and silver, the latter of which dropped below $16 per ounce, leaving it down for the year.

Bonds were bid, dropping yields, though the curve remained stubbornly flat. With the FOMC meeting less than a week ahead, declining bond yields may give the Fed reason to pause on their planned federal funds rate increase.

Meanwhile, Washington, DC is working out an emergency continuing resolution, designed to keep the government running for at least a few more weeks.

Amid all the political and monetary madness, stocks remain resilient, though the recent lag may be a sign that gains for the year may be already locked in to many portfolios.

Other than Bitcoin, which has entered either a bubble or mania stage, and precious metals, which are a screaming buy, there doesn't seem to be much to tantalize the usual stock purchasers. Valuations have been stretched, and, with Novemebr non-farm payroll data due out Friday morning, Thursday is setting up to be another day of divestiture and consolidation.

At the Close, Wednesday, December 6, 2017:
Dow: 24,140.91, -39.73 (-0.16%)
NASDAQ: 6,776.38, +14.16 (+0.21%)
S&P 500: 2,629.27, -0.30 (-0.01%)
NYSE Composite: 12,532.43, -34.73 (-0.28%)