Sweden Done With Negative Rates; How Does The World Reverse Course?

From the land that gave us the Volvo and Greta Thunberg, comes news that the nation of Sweden has abandoned its five-year-long experiment with negative interest rates.

The news is actually about a week old, but, being that there was so much going on between the impeachment of President Trump, the China trade deal, and the public's general disinterest with anything not related to either the NFL or Christmas, that the Riksbank raising its overnight repo interest rate from -0.25% to 0.0% hardly warranted notice.

Nonetheless, the global response was as expected from the groupthink of the central bank community. Rates instantly rose, and a chorus of seemingly smart-sounding people recited verses calling for fiscal measures to be undertaken immediately, to counteract the anti-stimulative effect of cancelling out the negative rates that are, in turn, cancelling out currencies around the globe.

According to the central banking community, debt and spending must be promoted by governments as the bankers have done all they could do to alter the flow of goods and services and money in a positive direction. The Swedes have failed, and with that, so too the central banks of the Europe Union nations, Japan, Denmark, Hungary, and Switzerland.

What comes now is general consensus on the direction of economies and globalized financial repression. More spending must be undertaken by governments, on infrastructure, military hardware, green initiatives, social programs and anything else the politicians can get behind and garner more votes for themselves, virtue-signaling that they are the saviors of the free and not-so-free world.

Such a plan could not be concocted by a more smarmy gaggle of decrepit geezers and their enabling political hacks. The worldwide crackdown on savings was not efficient enough to erase decades of excess and misanthropic misadventures into economic dystopia. Now the banking and political community will expose the world to even more egregious profligate spending that will no doubt benefit few, mostly politicians and bankers.

While the Riksbank ponders life in the frozen wasteland formerly recognizable as a stable nation, the rest of the world trudges dangerously close to the financial abyss that negative interest rates have created. Reversing interest rates to a standard resembling something almost normal might prove a costly enterprise. After all, most corporations have been feasting upon low rates for so long, buying back their own stock and artificially raising equity share prices by a process of market starvation, a change that will ultimately cost more could very likely corrupt the process and actually foment a global recession.

Not to worry. The central bankers will no doubt have a solution for that as well while pointing their gnarly fingers the way of their political cronies as world economies lurch from bad policies to worse. With Christine Lagarde recently replacing Mario Draghi as president of the ECB, there's little doubt that the failed policies of her predecessor will be enhanced by more high-sounding rhetorical nonsense that will help speed the spiraling down of society into an inescapable morass.

Well, how about that. It's Christmas!

At the Close, Monday, December 23, 2019:
Dow Jones Industrial Average: 28,551.53, +96.44 (+0.34%)
NASDAQ: 8,945.65, +20.69 (+0.23%)
S&P 500: 3,224.01, +2.79 (+0.09%)
NYSE Composite: 13,899.99, +10.74 (+0.08%)

WEEKEND WRAP: The World Might End, But Nobody Would Care

There were two major events this week, but hardly anyone cared about them.

First, President Trump was impeached. Well, at least that's what the House Democrats and Nancy Pelosi like to think, though they haven't actually sent the articles of impeachment over to the Senate for a trial.

Second, all of the major indices in the US reached new all-time highs. Not only did most people not care - it's become a foregone conclusion that stocks will always go higher, just like house prices in 2004-2007 - most didn't even notice. After all, it's close to Christmas and everybody is busy shopping, cooking, preparing to give people things they don't need, purchased with money they shouldn't be spending.

As laid back as the week was, the heat went down here at Money Daily and we didn't publish on Thursday. It was chilly and we were preoccupied with getting our trusty backup propane heater up and running. We did, it's warmer now, but the main heating unit is shot and needs to be replaced. That is supposed to happen Monday.

Another item not making any headlines was the spiking of the treasury yield curve. During the week it steepened, with the 10-year note striking a yield of 1.92% on Wednesday and holding there through Friday. The short end of the curve is a bit inverted, with one-year bills yielding more than shorter durations, though not by much. The Fed probably has all of this under control. No need to elaborate or give a darn.

If you're reading this and don't care, not to worry. Nobody else gives a hoot either, apparently.

Probably, this is what happens when markets are rigged, the media lies constantly, and politicians act like a crazed bunch of monkeys released from the local zoo. People get used to things being FUBAR and just tune out.

An asteroid could whack the earth and throw it off its axis, destroying most life on the planet and nobody would think twice about how horrible an end that would be. The remaining people would probably try to go to work the next day or turn on the TV and watch a blank screen, thinking that it's improved over what used to be broadcast.

And stocks would be up.

At the Close, Friday, December 20, 2019:
Dow Jones Industrial Average: 28,455.09, +78.13 (+0.28%)
NASDAQ: 8,924.96, +37.74 (+0.42%)
S&P 500: 3,221.22, +15.85 (+0.49%)
NYSE Composite: 13,889.25, +57.58 (+0.42%)

For the Week:
Dow: +319.71 (+1.14%)
NASDAQ: +190.08 (+2.18%)
S&P 500: +52.42 (+1.65%)
NYSE Composite: +191.91 (+1.40%)

Despicable Democrats Impeach President Trump, Who Will Be Cleared By The Senate

Well, they've gone and done it.

The Democrat-controlled House of Representatives has voted - completely along party lines - to approve articles of impeachment, which at some point will go to the Senate, where President Donald J. Trump will almost certainly be acquitted in what figures to be a very short trial, with few witnesses, if any.

The reason the trial will be of small duration is because the Democrats, via Adam Schiff's Intelligence Committee, and Jerry Nadler's Judiciary Committee, have already ginned up enough "evidence" of Mr. Trump's supposed "Abuse of Power" and "Obstruction of Congress," that the senators don't really need to see or hear anything else. What they have before them is so flimsy, devoid of substance, and charges the president with actions that are not even crimes, that they will hopefully turn the matter out in a few days. Anything longer-lasting will be just more mud-slinging at a president who has done nothing wrong, certainly nothing even remotely impeachable.

Wednesday, December 18, 2019, was a sad day for the rule of law in the United States of America. The Democrats, led by Speaker of the House Nancy Pelosi, have foisted upon the public a shameless exercise in partisan witch-baiting. The mainstream media deserves just as much public rancor as the House Democrats for not calling these partisan hacks out on their theatrics. This impeachment exercise has been and will continue to be a complete and utter waste of everybody's time. It will accomplish nothing, except possibly to finally rid the lower chamber of congress of the Democrat majority. In that regard, December 18 may end up going down in the history books of a glorious great day of change and retribution, dashing the Democrats into the dustbin of history.

Whatever one's politics, this impeachment fiasco never rose near to seriousness. It was always a goose-chase, a farcical enterprise foisted upon the public by rank amateurs who had nothing better to do with their times in office than to take out their frustrations in a most despicable manner. The Democrats may want to brand Republican supporters as "deplorables," but these cretins masquerading as respectable representatives of the public weal, are truly disgraceful. The sooner this all gets behind the American public, the better.

As far as a market reaction, there wasn't one, as the tiresome "debate" raged on in the House until after markets were closed for the day, though there might be some hint of derision come Thursday after the bell.

Trading has been sluggish, which it usually is in the "lull" week before Christmas, which took a back seat to politics this year. There isn't much with which to move markets. Everybody seems to want to head out of town for the holidays, sooner, rather than later, and who can blame them?

At the Close, Wednesday, December 18, 2019:
Dow Jones Industrial Average: 28,239.28, -27.88 (-0.10%)
NASDAQ: 8,827.73, +4.38 (+0.05%)
S&P 500: 3,191.14, -1.38 (-0.04%)
NYSE Composite: 13,799.21, +3.86 (+0.03%)

Stocks Pause But Are Likely To Go Higher Soon

Markets took a breather on Tuesday, possibly in anticipation of the impeachment vote in the House of Representatives coming on Wednesday, but also not discounting the fact that stocks are once again hitting new record highs.

An appreciation that stocks may have reached untenably high valuations would likely slow down or reverse trends in most markets, but stocks in the era of free Fed money are far removed from anything approaching normalcy. This slow trading will likely last only a day or two at best, for there is money to be made in finding the greater fool, upon whom one can dispose of overpriced assets.

As far as measures of valuation are concerned, one of the best is Robert Shiller's CAPE (Cyclically Adjusted P/E) ratio, which takes the average P/E ratio of a stock over the past ten years, not just the past year or forward year as the simple P/E ratio does. It stands today at 30.60, a level above that of Black Tuesday, the fateful day in 1929 which kicked off the Great Depression.

Shiller's CAPE level, while accurately delineating the high valuation of stocks being bought and sold in today's marketplace, should also not alarm. They've been at, above or near that same level for some time. It might be instructive to note that the highest CAPE reading ever was in 2000, at the peak of the NASDAQ bubble, when the ratio stood at nearly 45.

This one-day bout of sleepiness is probably an outgrowth of being a little bit overextended in some people's minds. They are likely to be changed soon. There still appears to be plenty of room to run.

At the Close, Tuesday, December 17, 2019:
Dow Jones Industrial Average: 28,267.16, +31.27 (+0.11%)
NASDAQ: 8,823.36, +9.13 (+0.10%)
S&P 500: 3,192.52, +1.07 (+0.03%)
NYSE Composite: 13,795.35, +0.20 (+0.00%)

Trade Deal Sparks Rally, Enough for New All-Time Highs

Approaching year end, Monday's trading was like a toast to prosperity.

"New highs all around," was the buzz, even though stocks had taken back half of the morning's gains by the closing bell. Still, it was enough to entertain thoughts of bigger Christmas presents, newer cars, more trinkets and shiny toys for the kids and assorted other trivialities.

Phase one of the US-China trade deal was delivered, with tariffs postponed or to be curtailed by both parties to the agreement and plenty of the details still to be worked out on either side of the Pacific.

The general consensus seemed to be a relief that something concrete was finally emerging from nearly eighteen months of haranguing, harassing, arguing, pointing, posturing and persuading.

China has apparently agreed to double its import of commodities from the US, among other conditions.

Markets were pleased, but not overjoyed. Tuesday, it's back to the grind of watching the Fed and its REPO operations for the year-end "turn," a situation that has more than enough nuance to spark off volatility in either direction. There's definitely a liquidity problem somewhere, maybe everywhere, but most of the participants - the central banks, commercial banks, and primary dealers, have chosen to be pretty much mum on the details.

The Fed will just continue with extraordinary measures with daily injections via purchases and loans through the end of the year and into the next, with announced activities extending through mid-January. How much of this freshly-minted capital gets put to use in stocks is still unknown. There are funding needs and tax payments to be made, but the overall appearance is that the Fed has a handle on it and will continue to monitor it until their overnight and longer term monetary assistance is no longer needed.

And there's the rub. After these auctions, purchases, loans, and repurchases are complete and we're into 2020, will the Fed be able to turn down the spigot to more reasonable levels and eventually turn it off altogether?

That's a query for the future, unanswerable in the present.

At the Close, Monday, December 16, 2019:
Dow Jones Industrial Average: 28,235.89, +100.51 (+0.36%)
NASDAQ: 8,814.23, +79.35 (+0.91%)
S&P 500: 3,191.45, +22.65 (+0.71%)
NYSE Composite: 13,795.15, +97.81 (+0.71%)