One day after the Fed did the unexpected - which really should have been expected, after all, since the Fed is so good at doing nothing - and kept its asset purchase program intact, stocks on Wall Street were shaken, not stirred, with the Dow and S&P posting modest losses and only the NASDAQ ahead at the close.
Since yesterday's post-announcement feeding frenzy was done at such a rapid pace, there was a feeling today that the party was great, but some may have overdone it, so positions were squared in front of tomorrow's quadruple-witching options expiry, locking in profits.
There was also a bit of nastiness coming out of Washington, DC, in the form of forty or so House Republicans promoting a bill that would fund the federal government, but only if a provision to defund the Affordable Care Act (ObamaCare) was included.
While that measure could survive a House vote, and well might, the chances of it making its way through the Senate are a different-striped animal altogether. And the chances of Obama signing it into law are absolutely zero.
If the House Republicans have their way, this stalemate could produce a partial shutdown of the federal government (please save your applause for the end of the performance) on October 1, which is just 12 days hence, so traders may have been taking a few chips off the table in advance of those ugly consequences.
Certain members of the House, known widely as Tea Partiers, would like to find a way to accomplish one of two goals: stopping ObamaCare before it is fully implemented, or, the more popular alternative, stopping the federal government from borrowing the Treasury into debt hell, a course which is already well-trodden. If the government cannot borrow any more, it stops the Federal Reserve's treasury purchases dead in its tracks and generally ends the economy as we know it, which, come to think of it, might be a brilliant idea, since the economy has strayed far from free market economics and is wholly controlled by the Federal Reserve and its vassals, the mega-bank primary dealers. Gains of all kind are generally flowing only to the top 3% or even the top 1% of the wealthiest Americans, with the rest of the populace nothing more than debt slaves.
If the Republicans in the House can stand their ground, force the government to pay its bills without further borrowing (a seeming impossibility), it could be the best thing that's happened in this country since Benny Goodman played Carnegie Hall in 1938, and that's a long time coming.
Sure, there will be dislocations and a massive depression, but on the other side would be prosperity and a more even playing field for entrepreneurs and citizens without the overarching dictates of an out-of-control oligarchy.
Sounds good, doesn't it? Let's see how this plays out, though nobody is betting that the House Tea Partiers could destroy the global economy with just one, grandiose, spectacular move.
Dow 15,636.55, -40.39 (0.26%)
Nasdaq 3,789.38, +5.74 (0.15%)
S&P 500 1,722.34, -3.18 (0.18%)
10-Yr Bond 2.75%, +0.04
NYSE Volume 4,047,428,000
Nasdaq Volume 1,742,718,375
Combined NYSE & NASDAQ Advance - Decline: 2837-3763
Combined NYSE & NASDAQ New highs - New lows: 564-34
WTI crude oil: 106.39, -1.68
Gold: 1,366.20, -3.10
Silver: 23.10, -0.192
Thursday, September 19, 2013
Wednesday, September 18, 2013
Surprise! Fed Ponzi Scheme Not Working, Will Continue
No change in asset (ha, ha, ha, ha) purchases.
The Fed is content to continue buying worthless paper with make-believe money they create out of thin air.
Sending this money mainly to the primary dealers via zero interest rate policy and repo actions, the dealers become free to speculate in whatever assets they believe worth pursuing, driving prices, in the main, higher.
The next magic trick is more difficult. These primary dealers are supposed to lend out their unallocated capital into the market, creating debt, which is, after all, the only goal of fractional reserve bankers.
Essentially, by changing nothing - even though the Fed hinted strongly that asset purchases would be "tapered" and the markets expected as much - the Fed is telling the world that their stimulus programs have not resulted in the expected results. Inflation remains below their desired threshold, unemployment remains stubbornly high and economic growth continues to be muted, the GDP, even with hedonic adjustments and recent additions, failing to achieve three percent annualized in any quarter since the collapse of 2008-09.
So, everything stays the same. The Fed keeps buying $45 billion of worthless government debt and $40 billion of even more destructive and toxic mortgage debt (toxic because price, or par, is at an excessive, unrealistic level) every month, in hopes that the combined markets which fuel the economy will continue to stumble forward.
Contemporary and classic theories of economics both say this kind of activity can lead to no good. Eventually all assets become overpriced in terms of a depreciating currency to the point at which the currency is no longer accepted in trade. Until the malinestments are purged from the system, normalcy in markets cannot occur, and guess who is holding most of the bad investments.
Central banks, particularly the Bank of England, the European Central Bank (ECB), Bank of Japan (BOJ) and, surpassing them all by levels of magnitude, the US Federal Reserve will end up holding most of the world's assets. Central banks are cornered without escape. They must keep devaluing their currencies in order to service burgeoning debt set against faulty assets. In terms of bubbles, the central banks of the developed nations are the world's greatest bubble and when that pops, there will be true freedom in economies, currencies, prices and price discovery. Not until.
More than anyone else, David Stockman has captured the essence of the current economic climate by use of the word "deformation." The global economy is deformed, distorted, obtuse and opaque. All price discovery mechanisms have been distorted out of recognition by the continuing debasement of currencies.
Even though nothing changed, markets behaved as if something had. Stocks roared to new highs on the Dow and S&P 500, but, here's the kicker: by percentage, hard assets were the most appreciated on the day. Commodities, particularly crude oil, gold and silver all outpaced stocks by multiples. Gold surged 4.5%, silver up 7.5%, crude gained a paltry 2.5%, making the sloppy one percent returns in stocks look like a piker's paradise.
The ramifications of today's Fed (in)action are monumental and trend-setting. So much so, that they cannot be easily disseminated and pursued in a single blog post, though they will have enduring effects, which Money Daily will continue to report upon in the days, weeks and months ahead.
Happy Hunting! Free Houses for Everybody!
Dow 15,676.94, +147.21 (0.95%)
Nasdaq 3,783.64, +37.94 (1.01%)
S&P 500 1,725.52, +20.76 (1.22%)
10-Yr Bond 2.71%, -0.14
NYSE Volume 4,410,661,500
Nasdaq Volume 1,769,496,125
Combined NYSE & NASDAQ Advance - Decline: 5052-1648
Combined NYSE & NASDAQ New highs - New lows: 565-51
WTI crude oil: 108.07, +2.65
Gold: 1,366.40, +58.80
Silver: 23.18, +1.616
The Fed is content to continue buying worthless paper with make-believe money they create out of thin air.
Sending this money mainly to the primary dealers via zero interest rate policy and repo actions, the dealers become free to speculate in whatever assets they believe worth pursuing, driving prices, in the main, higher.
The next magic trick is more difficult. These primary dealers are supposed to lend out their unallocated capital into the market, creating debt, which is, after all, the only goal of fractional reserve bankers.
Essentially, by changing nothing - even though the Fed hinted strongly that asset purchases would be "tapered" and the markets expected as much - the Fed is telling the world that their stimulus programs have not resulted in the expected results. Inflation remains below their desired threshold, unemployment remains stubbornly high and economic growth continues to be muted, the GDP, even with hedonic adjustments and recent additions, failing to achieve three percent annualized in any quarter since the collapse of 2008-09.
So, everything stays the same. The Fed keeps buying $45 billion of worthless government debt and $40 billion of even more destructive and toxic mortgage debt (toxic because price, or par, is at an excessive, unrealistic level) every month, in hopes that the combined markets which fuel the economy will continue to stumble forward.
Contemporary and classic theories of economics both say this kind of activity can lead to no good. Eventually all assets become overpriced in terms of a depreciating currency to the point at which the currency is no longer accepted in trade. Until the malinestments are purged from the system, normalcy in markets cannot occur, and guess who is holding most of the bad investments.
Central banks, particularly the Bank of England, the European Central Bank (ECB), Bank of Japan (BOJ) and, surpassing them all by levels of magnitude, the US Federal Reserve will end up holding most of the world's assets. Central banks are cornered without escape. They must keep devaluing their currencies in order to service burgeoning debt set against faulty assets. In terms of bubbles, the central banks of the developed nations are the world's greatest bubble and when that pops, there will be true freedom in economies, currencies, prices and price discovery. Not until.
More than anyone else, David Stockman has captured the essence of the current economic climate by use of the word "deformation." The global economy is deformed, distorted, obtuse and opaque. All price discovery mechanisms have been distorted out of recognition by the continuing debasement of currencies.
Even though nothing changed, markets behaved as if something had. Stocks roared to new highs on the Dow and S&P 500, but, here's the kicker: by percentage, hard assets were the most appreciated on the day. Commodities, particularly crude oil, gold and silver all outpaced stocks by multiples. Gold surged 4.5%, silver up 7.5%, crude gained a paltry 2.5%, making the sloppy one percent returns in stocks look like a piker's paradise.
The ramifications of today's Fed (in)action are monumental and trend-setting. So much so, that they cannot be easily disseminated and pursued in a single blog post, though they will have enduring effects, which Money Daily will continue to report upon in the days, weeks and months ahead.
Happy Hunting! Free Houses for Everybody!
Dow 15,676.94, +147.21 (0.95%)
Nasdaq 3,783.64, +37.94 (1.01%)
S&P 500 1,725.52, +20.76 (1.22%)
10-Yr Bond 2.71%, -0.14
NYSE Volume 4,410,661,500
Nasdaq Volume 1,769,496,125
Combined NYSE & NASDAQ Advance - Decline: 5052-1648
Combined NYSE & NASDAQ New highs - New lows: 565-51
WTI crude oil: 108.07, +2.65
Gold: 1,366.40, +58.80
Silver: 23.18, +1.616
Tuesday, September 17, 2013
Tick Tock... Waiting on the FOMC to Send the World into the Abyss
We all know what's going on here.
The markets are in virtual limbo, as the world awaits tomorrow's action by the Federal Reserve, due out with an FOMC policy decision (rates won't change) and an announcement that they will begin tapering their bond purchases.
That they'll make an announcement is known. Whether they decide to cut back on Treasuries or MBS is still an open question, though the smart money is on $10-15 billion less in Treasuries, beginning no later than December (possibly October or November).
The mortgage-backed portion of the portfolio will probably not be changed, as the Fed is the first and last buyer of MBS, the market having collapsed in 2008 when Fannie and Freddie went belly-up and the rest of the nasty stuff of the great collapse happened.
Until then, volume has been dead, though there's still plenty of speculation to the upside, in the clustered thinking that any Fed move has already been priced in (ha, ha, ha). How one prices in liquidity compression with stocks at all-time highs and at nosebleed valuations is a matter for market historians to ponder. While we certainly live in interesting times, they are also warped by the interventionist policies of central banks, who are losing their grip on the global economy, their long-standing franchise of greed over the whole of humanity.
The taper will occur, but the next best question is who will succeed Ben Bernanke on the sinking ship that is the global banking cartel. Since Larry Summers pulled his name from consideration to the top money-man post in the world and sharp-tongued politicians have recently decried the relative value of QE and zero-bound interest rates, a sacrificial lamb must be chosen by President Obama, and that choice is likely to be Janet Yellen, sure to be confirmed by the Senate because she is as clueless about economic policy as all of her predecessors and will be unlikely to make independent decisions, since she has never done so heretofore.
We anxiously await the Fed's announcement that the economy is trudging valiantly toward self-sustainability and that monetary stimulus by the Federal Reserve can thus be gradually wound down.
The time is upon us. Our breath may be baited, though the collective thirst has not been sated.
Dow 15,529.73, +34.95 (0.23%)
Nasdaq 3,745.70, +27.85 (0.75%)
S&P 500 1,704.76, +7.16 (0.42%)
10-Yr Bond 2.85%, -0.02
NYSE Volume 2,971,334,750
Nasdaq Volume 1,480,300,875
Combined NYSE & NASDAQ Advance - Decline: 4406-2182 (2:1)
Combined NYSE & NASDAQ New highs - New lows: 286-50
WTI crude oil: 105.42, -1.17
Gold: 1,309.40, -8.40
Silver: 21.78, -0.225
The markets are in virtual limbo, as the world awaits tomorrow's action by the Federal Reserve, due out with an FOMC policy decision (rates won't change) and an announcement that they will begin tapering their bond purchases.
That they'll make an announcement is known. Whether they decide to cut back on Treasuries or MBS is still an open question, though the smart money is on $10-15 billion less in Treasuries, beginning no later than December (possibly October or November).
The mortgage-backed portion of the portfolio will probably not be changed, as the Fed is the first and last buyer of MBS, the market having collapsed in 2008 when Fannie and Freddie went belly-up and the rest of the nasty stuff of the great collapse happened.
Until then, volume has been dead, though there's still plenty of speculation to the upside, in the clustered thinking that any Fed move has already been priced in (ha, ha, ha). How one prices in liquidity compression with stocks at all-time highs and at nosebleed valuations is a matter for market historians to ponder. While we certainly live in interesting times, they are also warped by the interventionist policies of central banks, who are losing their grip on the global economy, their long-standing franchise of greed over the whole of humanity.
The taper will occur, but the next best question is who will succeed Ben Bernanke on the sinking ship that is the global banking cartel. Since Larry Summers pulled his name from consideration to the top money-man post in the world and sharp-tongued politicians have recently decried the relative value of QE and zero-bound interest rates, a sacrificial lamb must be chosen by President Obama, and that choice is likely to be Janet Yellen, sure to be confirmed by the Senate because she is as clueless about economic policy as all of her predecessors and will be unlikely to make independent decisions, since she has never done so heretofore.
We anxiously await the Fed's announcement that the economy is trudging valiantly toward self-sustainability and that monetary stimulus by the Federal Reserve can thus be gradually wound down.
The time is upon us. Our breath may be baited, though the collective thirst has not been sated.
Dow 15,529.73, +34.95 (0.23%)
Nasdaq 3,745.70, +27.85 (0.75%)
S&P 500 1,704.76, +7.16 (0.42%)
10-Yr Bond 2.85%, -0.02
NYSE Volume 2,971,334,750
Nasdaq Volume 1,480,300,875
Combined NYSE & NASDAQ Advance - Decline: 4406-2182 (2:1)
Combined NYSE & NASDAQ New highs - New lows: 286-50
WTI crude oil: 105.42, -1.17
Gold: 1,309.40, -8.40
Silver: 21.78, -0.225
Monday, September 16, 2013
Larry Summers Departs Fed Chairmanship Sweepstakes; Markets Jubilant
You'd never think that a man turning down chairmanship of the Federal Reserve could be such a positive development, but that's exactly what sent stocks soaring today, as Larry Summers announced - in a letter to the president - that he was withdrawing his name for consideration.
It's actually another bit of pretzel logic at play, because while Mr. Summers is the ultimate insider, some folks on the inside also thought he is a hawkish sort in terms of economic policy (how misguided!), and would be likely to pull back QE quicker than most other nominees to succeed chairman Ben Bernanke.
Thus, with fear of the economic spigot being turned off being muted by his withdrawal from consideration, for now, at least, the punchbowl that the Fed so lavishly entertains its Wall Street patrons has been kept in placed and fully spiked.
That, and a severe lack of volume (again, old story), led stocks to gallop out of the gate on Monday, drifting a bit to the downside in the afternoon, with the NASDAQ being pulled down by Apple (AAPL), whose shine has lost much of its luster since the untimely death of founder Steve Jobs. Apple is no longer innovative, forward-thinking or focused on individuality; it is becoming just another greedy corporate factory, outsourcing jobs to China while reaping huge profits here in the USA. The best days of Apple as a company are long past.
Otherwise, the shootings in Washington, DC, did little to stem the orderly flow, though one might be somewhat suspect of the rally continuing, with a FOMC announcement on Wednesday and economic data floundering.
The Empire Manufacturing Index (New York) fell to 6.3 for September after posting a downwardly-revised 8.2 in August, and industrial production missed expectations for the fifth straight month, registering a flaccid increase of jut 0.4%, though even that ws better than the July reading of 0.0%. August Capacity Utilization remained fairly stagnant at 77.8%. It was 77.6% in July.
With Summers and Syria off the front pages, the market can now go back to handicapping the size of the Fed taper to be announced on Wednesday; most estimates are for the Fed to reduce bond purchases by $10 billion a month, mostly in treasuries. They have little choice but to taper, as they are gobbling up more than a third of all issuance by Treasury, and, despite rumors to the contrary, the US Treasury cannot continue borrowing ad infinitum.
Well, maybe not. Infinity is, actually, a long way off.
Dow 15,494.78, -118.72 (0.77%)
Nasdaq 3,717.85, -4.34 (0.12%)
S&P 500 1,697.60, +9.61 (0.57%)
10-Yr Bond 2.87%, -0.02
NYSE Volume 3,344,441,000
Nasdaq Volume 1,476,599,875
Combined NYSE & NASDAQ Advance - Decline: 4173-2429
Combined NYSE & NASDAQ New highs - New lows: 430-38 (imbalance)
WTI crude oil: 106.59, -1.62
Gold: 1,317.80, +9.20
Silver: 22.01, +0.289
It's actually another bit of pretzel logic at play, because while Mr. Summers is the ultimate insider, some folks on the inside also thought he is a hawkish sort in terms of economic policy (how misguided!), and would be likely to pull back QE quicker than most other nominees to succeed chairman Ben Bernanke.
Thus, with fear of the economic spigot being turned off being muted by his withdrawal from consideration, for now, at least, the punchbowl that the Fed so lavishly entertains its Wall Street patrons has been kept in placed and fully spiked.
That, and a severe lack of volume (again, old story), led stocks to gallop out of the gate on Monday, drifting a bit to the downside in the afternoon, with the NASDAQ being pulled down by Apple (AAPL), whose shine has lost much of its luster since the untimely death of founder Steve Jobs. Apple is no longer innovative, forward-thinking or focused on individuality; it is becoming just another greedy corporate factory, outsourcing jobs to China while reaping huge profits here in the USA. The best days of Apple as a company are long past.
Otherwise, the shootings in Washington, DC, did little to stem the orderly flow, though one might be somewhat suspect of the rally continuing, with a FOMC announcement on Wednesday and economic data floundering.
The Empire Manufacturing Index (New York) fell to 6.3 for September after posting a downwardly-revised 8.2 in August, and industrial production missed expectations for the fifth straight month, registering a flaccid increase of jut 0.4%, though even that ws better than the July reading of 0.0%. August Capacity Utilization remained fairly stagnant at 77.8%. It was 77.6% in July.
With Summers and Syria off the front pages, the market can now go back to handicapping the size of the Fed taper to be announced on Wednesday; most estimates are for the Fed to reduce bond purchases by $10 billion a month, mostly in treasuries. They have little choice but to taper, as they are gobbling up more than a third of all issuance by Treasury, and, despite rumors to the contrary, the US Treasury cannot continue borrowing ad infinitum.
Well, maybe not. Infinity is, actually, a long way off.
Dow 15,494.78, -118.72 (0.77%)
Nasdaq 3,717.85, -4.34 (0.12%)
S&P 500 1,697.60, +9.61 (0.57%)
10-Yr Bond 2.87%, -0.02
NYSE Volume 3,344,441,000
Nasdaq Volume 1,476,599,875
Combined NYSE & NASDAQ Advance - Decline: 4173-2429
Combined NYSE & NASDAQ New highs - New lows: 430-38 (imbalance)
WTI crude oil: 106.59, -1.62
Gold: 1,317.80, +9.20
Silver: 22.01, +0.289
Friday, September 13, 2013
Retail Sales Miss, Consumer Sentiment Negative, Stocks Move Higher
Well, that's what happens when computers are doing 80% of the trading, of which there isn't much, anyway.
Prior to the market open - giving the insiders plenty of time torig set their positions, retail sales for August were reported to have risen 0.2% (in some alternate universe) on expectations of a gain of 0.5% (in an even more bizarre universe).
Stocks took a bit of a dip at the open, but were revived when University of Michigan's September consumer sentiment registered a 76.8, on expectations of 81, after showing 82.1 in August. It was the biggest miss in the history of the survey and the lowest reading in five months.
Naturally, stocks recovered and the Dow quickly shot up to about a 70-point gain and stayed their the rest of the session.
It was one of the best weeks of recent memory for the indices. The Dow gained 453 points for the week, while the S&P was up almost two percent, posting a gain of 32.82 points. The NASDAQ was the laggard, up 62.17 or 1.70%.
All of this makes perfect sense when one understands that the average stock position is held for something like seven seconds and that volume was so low today that it scarcely registered.
Then again, Twitter tweeted that it had filed papers for an IPO. The initial valuation is rumored to be around $10 billion, but, Twitter, as far as can be surmised, is not a profitable enterprise. Shades of the dotcom bubble.
Seems there's still some summer remaining at the Hamptons.
Dow 15,376.06, +75.42 (0.49%)
Nasdaq 3,722.18, +6.22 (0.17%)
S&P 500 1,687.99, +4.57 (0.27%)
10-Yr Bond 2.90%, -0.01
NYSE Volume 2,931,141,750
Nasdaq Volume 1,421,610,875
Combined NYSE & NASDAQ Advance - Decline: 3975-2516
Combined NYSE & NASDAQ New highs - New lows: 175-75
WTI crude oil: 108.21, -0.39
Gold: 1,308.60, -22.00
Silver: 21.72, 0.429
Prior to the market open - giving the insiders plenty of time to
Stocks took a bit of a dip at the open, but were revived when University of Michigan's September consumer sentiment registered a 76.8, on expectations of 81, after showing 82.1 in August. It was the biggest miss in the history of the survey and the lowest reading in five months.
Naturally, stocks recovered and the Dow quickly shot up to about a 70-point gain and stayed their the rest of the session.
It was one of the best weeks of recent memory for the indices. The Dow gained 453 points for the week, while the S&P was up almost two percent, posting a gain of 32.82 points. The NASDAQ was the laggard, up 62.17 or 1.70%.
All of this makes perfect sense when one understands that the average stock position is held for something like seven seconds and that volume was so low today that it scarcely registered.
Then again, Twitter tweeted that it had filed papers for an IPO. The initial valuation is rumored to be around $10 billion, but, Twitter, as far as can be surmised, is not a profitable enterprise. Shades of the dotcom bubble.
Seems there's still some summer remaining at the Hamptons.
Dow 15,376.06, +75.42 (0.49%)
Nasdaq 3,722.18, +6.22 (0.17%)
S&P 500 1,687.99, +4.57 (0.27%)
10-Yr Bond 2.90%, -0.01
NYSE Volume 2,931,141,750
Nasdaq Volume 1,421,610,875
Combined NYSE & NASDAQ Advance - Decline: 3975-2516
Combined NYSE & NASDAQ New highs - New lows: 175-75
WTI crude oil: 108.21, -0.39
Gold: 1,308.60, -22.00
Silver: 21.72, 0.429
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