Dow, NASDAQ Hammered As Investors Continue Flight, FAANGs Pounded; What a Mess!

How's this for a healthy economy?

Facebook (FB): 196.35, -5.39 (-2.67%)
Amazon (AMZN): 1,663.15, -52.52 (-3.06%)
Apple (AAPL): 182.17, -2.75 (-1.49%)
Netflix (NFLX): 384.48, -26.61 (-6.47%)
Google (Alphabet, GOOG): 1,124.81, -30.67 (-2.65%)

...and, for good measure,

Tesla (TSLA): 333.01, -0.62 (-0.19%)

Tesla gets special consideration because its demise will be swift, painful and awe-inspiring for a variety of reasons. First, the company is run by a person (Elon Musk) who is almost certainly bi-polar, meaning he's brilliant, but eventually a nut-case, like a Pee Wee Herman on steroids. Second, the company has mountains of debt which will not likely be serviced in an orderly manner. Third, the cars keep bursting into flames. Fourth, and possibly most important, the competition in the eVehicle category is fierce and will swallow up the upstart. Everybody from Porsche, to BMW, to Jaguar has invested heavily in battery powered vehicles and these companies have more expertise and money than little Tesla.

Telsa is one of those companies that is wildly overvalued and ripe for a fall. It was spared today because nobody has any nterest in selling it just yet. They're all along for the ride (pardon the pun). When the bugs start getting squashed on the windshield, so to speak, it will be epic. Tesla's EPS is a humorous (if you're not an investor) -13.97 per share. Yep, they're losing money on every car they sell, and they don't make it up on volume. This one's a definite long-term short.

As for the rest of the market, one can only assume that seasoned veterans of the investing business see what's ahead. Trade wars don't help, but they're certainly not the only cause. Stock buybacks will prove to be disastrous once the price drops become permanent (soon, within months or weeks). The FAANGs in particular have been responsible for up to 75% of the recent gains on the NASDAQ, and they're based on nothing more than herd behavior. The stocks were hot, everybody got in. When everybody tries to get out, days like today are the result. Expect more of them over the next 3-5 months.

Lest one needs reminding, the Dow confirmed bear market conditions on April 9, and that HAS NOT CHANGED. Nor will it. Stocks will continue to be out of favor for the foreseeable future. Selected, mostly-defensive stocks will fare better than the recent high-flyers, but most money managers who can are turning aggressively to cash because they see no way out of an end-of-cycle bust scenario.

The market decline, top to bottom, could take another 12 to 18 months, having begun in February of this year and we haven't even hit recession yet, which is likely to occur in the fourth quarter of this year or the Q1 2019, though a third quarter negative read is not yet off the table, though unlikely.

The initial panic phase caused by the February correction on the Dow was only the beginning. The Dow is closing in on a second correction at 23,954. It will have to fall below 21,292 to be officially called a bear market (-20%), but by then, it's probably too late for many, who will be forced to take the ride down to wherever it finally rests. Anybody paying attention has already been on alert and hopefully divesting with profits.

While the next market bear bottom will be substantially lower than where it is today, it is unlikely to be the end of the world, though to many, it will seem like it. The current phase is slower and more grinding, such as witnessed over the past two weeks. The Dow has only seen one close to the upside in the last 10 sessions, and this was the largest decline since May 29 (-391.64), though there have been more than enough triple-digit declines and gains in the interim and surely more to come.

Today's drop on the Dow wiped out all of June's gains and is within 140 points of flushing the gains from April (+50) and May (+252), which would make the second quarter a loser, just like the first, although, with nothing to backstop markets here, still be not equal than the losses experienced in the first quarter. There's only four more trading days left in the quarter and the scramble is underway to shed losers and find safe havens.

Good luck with that.

Next stop for the Dow, on the downside, is somewhere between 22,700 and 23,300. It should get a bounce of maybe 400-600 points from there, but the trend is surely to the downside for the near and long term.

The treasury yield curve flattened just a touch on the day, with two particularly interesting flavors. The 5s-10s spread is now a measly 12 basis points (2.75%, 2.87%). That's not much of a premium on the benchmark 10-year note over the five. Why wait an additional five years to get your money back at basically the same rate? The 10s-30s spread is only 16 bips (3.02%). That's flat. As a pancake. If the 5s-10s invert, all hell breaks loose, and it's not out of the question that it could happen, soon, possibly within weeks.

Anybody holding gold or silver should be selling if not altogether out by now. The PMs have been a poor choice since 2012, but the silver lining is that they will be even cheaper in coming months. The metals, through the magic of rampant manipulation by central banks, are mirroring stocks presently, and, as they did during the GFC of 2008-09, will be ripped lower on redemptions and hustles for cash, but will likely be the first to recover.

It's advisable to sell out of PMs now and buy them back at a lower price come later this year. Gold may hit $950, and silver $13.50 before any bounce.

Invest wisely. Drink Kambucha. Drive a Porsche.

Dow Jones Industrial Average June Scorecard:

Date	Close	Gain/Loss	Cum. G/L
6/1/18	24,635.21	+219.37	+219.37
6/4/18	24,813.69	+178.48	+397.85
6/5/18	24,799.98	-13.71	+384.14
6/6/18	25,146.39	+346.41	+730.55
6/7/18	25,241.41	+95.02	+825.57
6/8/18	25,316.53	+75.12	+900.69
6/11/18	25,322.31	+5.78	+906.47
6/12/18	25,320.73	-1.58	+904.89
6/13/18	25,201.20	-119.53	+785.36
6/14/18	25,175.31	-25.89	+759.47
6/15/18	25,090.48	-84.83	+674.64
6/18/18	24,987.47	-103.01	+571.63
6/19/18	24,700.21	-287.26	+284.37
6/20/18	24,657.80	-42.41	+241.96
6/21/18	24,461.70	-196.10	+45.86
6/22/18	24,580.89	+119.19	+165.05
6/25/18	24,252.80	-328.09	-163.04

At the Close, Monday, June 25, 2018:
Dow Jones Industrial Average: 24,252.80, -328.09 (-1.33%)
NASDAQ: 7,532.01, -160.81 (-2.09%)
S&P 500: 2,717.07, -37.81 (-1.37%)
NYSE Composite: 12,481.60, -157.97 (-1.25%)

Weekend Wrap: Dow Ends Losing Streak at 8, Week Was Rough For Stocks

In what could easily bee seen as a week of transition - either from fantasy to reality or speculation to fundamental investing - all of the major averages lost value, led by the Dow Industrials, which suffered its worst weekly loss (-2.03%) since mid-March.

Since the day before the Fed raised rates on June 13, the Dow had been in a free-fall, losing 860 points over a span of eight trading sessions, before receiving on Friday to post a somewhat insignificant, symbolic gain. It was almost as though the Dow Industrials were collectively saying, "we're OK, we're still here, don't worry," while all along the smart money was leaving in droves for either safety in bonds, higher yields in the risky NASDAQ, or the venerable hideout in the Hamptons for the summer. In some cases, all three avenues of escape were likely employed.

Not that any of them did anybody any good, as the NASDAQ took its first weekly spill in the past five and bonds vacillated around the unchanged mark for the week. The 10-year-note closed out the week at 2.90%, well below any expectations from the runaway inflation and "solid" economy promoted by the Federal Reserve. If inflation and the economy were truly getting away, bonds would surely reflect the condition, but they are instead contracting, with the yield curve continuing to point toward inversion, and, if not a complete recession within the next 6 months to two years, at least a slowdown or moderation.

Neither result would be particularly beneficial to the interests of the Fed, which has to try to keep a straight face while propagandizing the condition of the economy. Spreads on the 2s-30s contracted one basis point on the week, to 48; the 2s-10s dropped two basis points to 34, while the 5s-30s expanded from 25 to 27 basis points.

After last Friday's smackdown, precious metals saw little change over the course of the week, though silver (16.45) fared better than gold (1271.10). Persistent calls for a breakout among the prominent "bug" pundits have produced nothing but a series of short-term run-ups followed by timely price busts.

Oil was the place to be on Friday, when OPEC failed to announce expected production increases. On Saturday, however, with markets closed, OPEC and a number of oil-producing countries such as Russia, Mexico and Kazakhstan, agreed to share an increase of a million barrels per day.

How the increases would be shared was not immediately disclosed, but, the Saturday announcement is sure to snap back against the 3.74 (+5.71%) gain on Friday that pushed the price of WTI crude oil to $69.28 per barrel.

With summer officially arriving on Thursday (June 21), the pessimistic view of stocks could begin to prevail, as the adage of "sell in May" might more aptly be applied as "swoon in June."

The Dow slipped back to a point where it is more than 2000 points below the January high (26,616.71, January 26), and prospects going forward - as a drop-off in earnings is expected over the next three quarters - are not yet dire, though they may be characterized as "challenging."

A powerful (and very long) article on fiat money, gold, silver, and cryptocurrencies by former member of the US House of Representatives and candidate for president, Ron Paul, is on the Mises Institute website, here.

Dow Jones Industrial Average June Scorecard:

Date	Close	Gain/Loss	Cum. G/L
6/1/18	24,635.21	+219.37	+219.37
6/4/18	24,813.69	+178.48	+397.85
6/5/18	24,799.98	-13.71	+384.14
6/6/18	25,146.39	+346.41	+730.55
6/7/18	25,241.41	+95.02	+825.57
6/8/18	25,316.53	+75.12	+900.69
6/11/18	25,322.31	+5.78	+906.47
6/12/18	25,320.73	-1.58	+904.89
6/13/18	25,201.20	-119.53	+785.36
6/14/18	25,175.31	-25.89	+759.47
6/15/18	25,090.48	-84.83	+674.64
6/18/18	24,987.47	-103.01	+571.63
6/19/18	24,700.21	-287.26	+284.37
6/20/18	24,657.80	-42.41	+241.96
6/21/18	24,461.70	-196.10	+45.86
6/22/18	24,580.89	+119.19	+165.05

At the Close, Friday, June 22, 2018:
Dow Jones Industrial Average: 24,580.89, +119.19 (+0.49%)
NASDAQ: 7,692.82, -20.14 (-0.26%)
S&P 500: 2,754.88, +5.12 (+0.19%)
NYSE Composite: 12,639.57, +79.34 (+0.63%)

For the Week:
Dow: -509.59 (-2.03%)
NASDAQ: -53.56 (-0.69%)
S&P 500: -24.78 (-0.89%)
NYSE Composite: -95.07 (-0.75%)

Dow Industrials Down 8th Straight Day, Damage Spreading

Well, there goes (almost) all of the gains made on the Dow between June 1 and June 11. Eight-day losing streaks (as any addicted gambler will tell you) can do nasty things to your bottom line. In this case, it's looking squarely at end-of-quarter results, which, at this exact juncture, is a small gain. April was +50.81, May +252.59, June +45.86, for a whopping grand total of 349.26, a little short of 1 1/2 percent gain.

While there are still six trading days left in June and in the quarter, there's the distinct possibility that the Dow, already in a confirmed bear market since April 9, is heading still lower, looking at the recent (March 23) bottom of 23,533.20 for any kind of support.

As the Dow continues the longest consecutive daily slide in the past 40 years, dating back to 1978, the recent losses have wiped out all gains for the year, leaving the Dow down one percent YTD. The record for longest daily losing Dow streak is 11 days, that level of pain occurring in 1971 (Nixon closes the gold window) and 1973 (OPEC?).

All is not gloom and doom, however. The NASDAQ is still 12% higher for the year and the S&P 500 is holding onto about a three percent gain for the year.

Losses are beginning to spread. The S&P has lost 37 points since June 12, and the NASDAQ was down 68 points just today. Whether these losses will stick and markets begin to behave more rationally, like the Dow, is a matter for the future. Since the February correction, analysts have warned investors that this is a stock pickers' market, noting that the easy days of just buying an index fund or playing the widely held stocks has come to an end. It's more about being adroit and making in-and-out moves, much like a day-trader. It's really nowhere for long term investors to be playing, as many stocks are still near all-time highs and are still carrying overpriced valuations, many based on earnings that have been manipulated higher by buyback sleight-of-hand.

Non-believers in the Dow Theory, which confirmed a primary trend change from a bull to a bear market on April 9, may be getting a bit nervous, though the recent bidding on the NASDAQ and Russell 2000 would suggest otherwise.

Once the floodgates are fully open, a condition which feels very much like all of this week, there will be no place to run to, nowhere to hide, except, maybe bonds, which have been stubborn but steady, the 10-year-note holding at 2.90% as of today, though there are indications the yield could go lower, given the number of investors seeking a safe place for their money.

So much for the Fed's grand plan to hike interest rates and unload their massive balance sheet into the public sphere. Since they play with make-believe money which they themselves conjured out of thin air, losses don't really matter to them, since they can make it all up with a few kind keystrokes on their magical money-printing computers.

As usual, it's the serfs that will get forty lashes in the form of lower stock prices and higher consumer prices... so, make that 80 lashes.

Dow Jones Industrial Average June Scorecard:

Date	Close	Gain/Loss	Cum. G/L
6/1/18	24,635.21	+219.37	+219.37
6/4/18	24,813.69	+178.48	+397.85
6/5/18	24,799.98	-13.71	+384.14
6/6/18	25,146.39	+346.41	+730.55
6/7/18	25,241.41	+95.02	+825.57
6/8/18	25,316.53	+75.12	+900.69
6/11/18	25,322.31	+5.78	+906.47
6/12/18	25,320.73	-1.58	+904.89
6/13/18	25,201.20	-119.53	+785.36
6/14/18	25,175.31	-25.89	+759.47
6/15/18	25,090.48	-84.83	+674.64
6/18/18	24,987.47	-103.01	+571.63
6/19/18	24,700.21	-287.26	+284.37
6/20/18	24,657.80	-42.41	+241.96
6/21/18	24,461.70	-196.10	+45.86

At the Close, Thursday, June 21, 2018:
Dow Jones Industrial Average: 24,461.70, -196.10 (-0.80%)
NASDAQ: 7,712.95, -68.56 (-0.88%)
S&P 500: 2,749.76, -17.56 (-0.63%)
NYSE Composite: 12,560.24, -88.50 (-0.70%)

Dow Losing Streak Reaches Seven Days; Walgreens To Replace GE In Dow Index

No analysis needed to spot the recurring pattern of trading prominent on Wednesday. The Dow suffered its seventh straight losing session while the NASDAQ powered to new highs, mostly on the backs of the beloved tech stocks known as the FAANGs.

In the news, Walgreens Boots Alliance (WBA) is set to replace General Electric (GE) in the Dow Jones Industrial Average, effective prior to the open of trading on June 26. Walgreens is trading for 64.61, down from its all-time high of 86.55, June of 2015.

General Electric, which has been under pressure since near the end of last year, has lost nearly two thirds of its value in the past eight months. Shares have fallen from 31.60 per share in October, 2016, to the current per share price of 12.96. The company has lost over 80 percent of its value since 2000.

General Electric was an original member of the Dow when it was formed by Charles Dow in 1896 and a continuous member since 1907.

Since Walgreens is trading at five times the value of GE, an adjustment will be made to the Dow divisor, lest the index experience a rapid upside explosion due to the change. This is exactly how the Dow works, replacing weaker companies with stronger ones.

The is the 15th change in the structure of the Dow since 2004. Some of the companies formerly a part of the index but since removed in the 21st century include Eastman Kodak, International Paper, AT&T, AIG, Citigroup, Bank of America, General Motors, and Honeywell.

Dow Jones Industrial Average June Scorecard:

Date	Close	Gain/Loss	Cum. G/L
6/1/18	24,635.21	+219.37	+219.37
6/4/18	24,813.69	+178.48	+397.85
6/5/18	24,799.98	-13.71	+384.14
6/6/18	25,146.39	+346.41	+730.55
6/7/18	25,241.41	+95.02	+825.57
6/8/18	25,316.53	+75.12	+900.69
6/11/18	25,322.31	+5.78	+906.47
6/12/18	25,320.73	-1.58	+904.89
6/13/18	25,201.20	-119.53	+785.36
6/14/18	25,175.31	-25.89	+759.47
6/15/18	25,090.48	-84.83	+674.64
6/18/18	24,987.47	-103.01	+571.63
6/19/18	24,700.21	-287.26	+284.37
6/20/18	24,657.80	-42.41	+241.96

At the Close, Wednesday, June 20, 2018:
Dow Jones Industrial Average: 24,657.80, -42.41 (-0.17%)
NASDAQ: 7,781.51, +55.93 (+0.72%)
S&P 500: 2,767.32, +4.73 (+0.17%)
NYSE Composite: 12,648.74, +9.76 (+0.08%)

Stocks Clobbered As US-China Trade War Heats Up

Today's tired showing by stocks, globally, demonstrated just how fragile the world's economic system is and how easily the best laid investment plans can go awry.

After President Trump announced plans for $50 billion in tariffs on Chinese imports and the Chinese countered with $50 billion of their own on US goods, Trump upped the ante by calling on his main trade representative to prepare another $200 billion in Chinese goods to be tariffed, should the Chinese actually go through with their retaliation.

As usual, the Dow Jones Industrial Average took the brunt of the day's carnage, shedding more than one percent, while the NASDAQ and S&P showed smaller percentage losses. The decline was the sixth straight for the mighty Dow, which has been under pressure since February of this year and is now even for the year (-19 points).

The other averages have fared better, but 2018 is not shaping up to be a year of excessive profit for equity investors.

Amid the chaos, bond yields continued to fall. The rush to safety is accelerating as the yield curve flattened even more through the day. The spread on the 2s-10s is now just 35 basis points, 5s-30s held steady at 25, 2s-30s are at 48, down one more basis point, the tightening spread making it more and more difficult for financial institutions to generate alpha, or profit, but the herd is heading in one direction and it's toward a recession.

As far as President Trump's intentions are concerned, "the Donald" is perfectly aware of what he's doing. By imposing steep tariffs on foreign goods he will bring most of the planet to its knees and likely cause a recession, though the timing couldn't be more perfect in political terms.

If a recession occurs within the next six to nine months, it would likely be over well before the next presidential race heats up in 2020. Figuring on a recession beginning in January or February of 2019 and running the average of 16 months, the economy would be on the upswing by July or August 2020, giving the president plenty of time to explain how some pain was necessary to restore vibrancy and a level playing field to the US economy.

It's not balderdash. It's the art of the deal.

And thus, with today's losses, more than two thirds of the gains made earlier in the month have been eviscerated.

It's only money.

Dow Jones Industrial Average June Scorecard:

Date	Close	Gain/Loss	Cum. G/L
6/1/18	24,635.21	+219.37	+219.37
6/4/18	24,813.69	+178.48	+397.85
6/5/18	24,799.98	-13.71	+384.14
6/6/18	25,146.39	+346.41	+730.55
6/7/18	25,241.41	+95.02	+825.57
6/8/18	25,316.53	+75.12	+900.69
6/11/18	25,322.31	+5.78	+906.47
6/12/18	25,320.73	-1.58	+904.89
6/13/18	25,201.20	-119.53	+785.36
6/14/18	25,175.31	-25.89	+759.47
6/15/18	25,090.48	-84.83	+674.64
6/18/18	24,987.47	-103.01	+571.63
6/19/18	24,700.21	-287.26	+284.37

At the Close, Tuesday, June 19, 2018:
Dow Jones Industrial Average: 24,700.21, -287.26 (-1.15%)
NASDAQ: 7,725.58, -21.44 (-0.28%)
S&P 500: 2,762.57, -11.18 (-0.40%)
NYSE Composite: 12,637.23, -71.40 (-0.56%)