Saudi Purge Prompts Higher Prices for Oil, Precious Metals

Midday Monday, the commodity complex (especially gold, silver and WTI crude oil) took off to the upside, and, by the end of the day, had maintained their newfound levels, oil hitting a nearly three-year high.

This dramatic rise in the price of oil coincides with tumultuous incidents in Saudi Arabia, wherein 11 princes, four ministers and several former ministers have been detained. Some prominent businessman have also been placed on a so-called "no fly" list, as Crown Prince Mohammed bin Salman purges his enemies in an overt effort to considerate power in the kingdom.

Oil rising and Saudi unrest are not isolated events, as neither is the incidental visit by President Trump some months ago and the more recent visit by Trump advisor and son-in-law Jared Kushner.

The Saudis have seen their profits collapse as oil has languished under $50 for years, but the political shakeup may have more to do with overall foreign interests, primarily focused on investments in US companies such as Citibank and Twitter, via the kingdom's sovereign wealth fund.

Silver and gold also rising at the same time during the day as oil confirms that there was coordinated buying of commodities in the futures market. The move was far from insignificant and was presaged by a similar move to the downside in the complex on Friday, prior to the Saudi purge, which went public on Sunday.

With President Trump safely traveling in the Pacific, the intrigue is high that something major is afoot globally, recalling Trump's cryptic tweet a few weeks ago, "the calm before the storm."

It seems that the storm has arrived, at least in the middle East. Whether it continues to lash out across Europe and the United States is, at this time, still conjecture.

As has been demonstrated periodically in the past, commodity futures can be highly volatile and can have profound effects further into the supply and demand chain. If oil continues to rise, it may be time to take any number of protective measures, from purchasing a fuel-efficient vehicle, to selling the dollar, to buying precious metal in anticipation of a major - and long overdue - breakout.

While nothing in the interconnected world of finance operates in a vacuum, stocks could also feel some heat, though the markets have more than ample protection on the downside via central bank stealth and overt (Swiss National Bank) purchases.

It is apparent, however, that given the Saudi purge and the rise in the price of oil, something big is happening.

At the Close, Monday, November 6, 2017:
Dow: 23,548.42, +9.23 (+0.04%)
NASDAQ: 6,786.44, +22.00 (+0.33%)
S&P 500: 2,591.13, +3.29 (+0.13%)
NYSE Composite: 12,400.93, +27.87 (+0.23%)

Trump Nominates Jerome Powell As Fed Chair; Goldman Sachs Execs Happy

Some equities responded with favor to President Trump's nomination of ultimate insider, Jerome Powell, to the chairmanship of the Federal Reserve.

Without so much as the batting of a single eyelash, Goldman Sachs (GS), Microsoft (MSFT), McDonald's (MCD), Boeing (BA), and JP Morgan Chase (JPM) led the Dow to yet another record high, mainly upon the notion that Powell would continue to easy money and lax regulatory environment so loved by Wall Street.

It would be easy to point the finger at Mr. Trump for appeasing the status quo, though it might not be an accurate assessment of the situation. The president is smart enough to know that keeping Wall Street happy and profitable has a profound effect on his standing within the business community and promoting a life-long lawyer (not an economist) and financier with multiple ties to various private and public money machines goes a long way toward keeping the Fed on its current track (Powell has not cast a dissenting FOMC vote in his five years as a voting member.

There could be worse environments than the current regime controlling the global economy, though it is difficult to think of one that could compare with the outright rigging and asset-prompting the central banks have engaged in over the past ten years. In case one was not in complete agreement and chose not to engage in one of the longest and best-maintained bull markets in history, the past is prologue and the nomination of Powell ensures a smooth transition to the Fed's top post. More of the same would seem to be the open dialogue of the day.

Keeping the rich rich and the middle and lower classes entertained, while not the optimal policy directive, has served to keep the system afloat, despite its various warts, bruises and open wounds.

Much of finance is done behind closed doors and it's probably a good thing, because were the wicked deals to be generally known by the public, riotous behavior might ensue. Keeping the Fed on an even keel will likely result in ever higher prices for stocks and a more complacent (if that is even possible with the VIX hovering around 10) investment community.

What could go wrong?

At the Close, Thursday, November 2, 2017:
Dow: 23,516.26: +81.25 (+0.35%)
NASDAQ: 6,714.9429, -1.59 (-0.02%)
S&P 500: 2,579.85, +0.49 (+0.02%)
NYSE Composite: 12,372.96, +10.08 (+0.08%)

FOMC Leaves Rates Unchanged; Markets Respond Positively

The Federal Reserve's FOMC issued their policy statement at 2:00 pm ET, after a two-day meeting that was widely anticipated to keep the federal funds rate unchanged at 1.00-1.25%.

What the Fed did change in its statement was a few words which piqued the interest of the bullish crowd on Wall Street, saying that the US economy was displaying "solid" growth over the past few months, a change from their use of the word "moderate" or "moderately" to describe US economic growth.

That was enough for investors to snap up a few more mostly overpriced shares on the first day November, except on the NASDAQ, which was the one index to end the session at a loss.

The Fed is prepared to raise interest rates in December, boosting the federal funds rate to 1.25-1.50%, a level still well below what most economists consider normal and sustainable.

At the Close, Wednesday, November 1, 2017:
Dow: 23,435.01, +57.77 (+0.25%)
NASDAQ: 6,716.53, -11.14 (-0.17%)
S&P 500: 2,579.36, +4.10 (+0.16%)
NYSE Composite: 12,362.88, +21.87 (+0.18%)

Stocks End October on High Note: Fed's FOMC on Deck

With no rate hike expected from the ongoing FOMC meeting this week, investors tacked on small gains as October came to a close.

In what was a sluggish session, the main indices limped higher, awaiting jobs data later in the week and the unveiling of some kind of tax bill from congress.

The Fed will release its policy announcement at 2:00 pm ET on Wednesday, though most analysts insist there will be little to motivate buyers or sellers.

At the Close, Tuesday, October 31, 2017:
Dow: 23,377.24, +28.50 (+0.12%)
NASDAQ: 6,727.67, +28.71 (+0.43%)
S&P 500: 2,575.26, +2.43 (+0.09%)
NYSE Composite: 12,341.01, +21.54 (+0.17%)

Scary Stocks for Halloween, But Apple's Business Model May Be More Frightening

Stocks fell uniformly n Monday, for no apparent reason other than the usual causes, fear, caution, valuation.

With the major indices counting to hover around all-time highs, there's no doubt reason to maintain some degree of caution. In fact, if one were so disposed to selling at a profit, now, as the year winds into its final two months, might not be a bad time to do so, considering the tax angles for 2018.

While stocks are scary on the day before Halloween, perhaps one may really get tingles from Aaple's business model concerning cell phones. Here's a one-off demonstration by an admittedly older fellow:

Apple has a problem with its business model in that they have to keep selling essentially the same product over and over and over again, every two years or so (their imaginary product cycle) to conumers who are probably fiarly content with the model they currently own.

In other words, in order to maintain their high level of profitability, Apple has to sell new iPhones to current iPhone users every two years.

I am (well, was, when Steve Jobs ran the company) an ardent fan of Apple. In fact, I'm using a MacBook Pro to connect to the internet and compose this missive. Its from 2011, six years old, and still performs incredibly well, so, why hasn't Apple forced me to upgrade?

Different market, I guess.

Anyhow, not to get too deep into the weeds, the problem I see is that their business model, as currently constructed, is unsustainable. Anybody who thinks they need to upgrade their phone every two years is off their rocker. America was built on products that worked well and lasted a long time. Maytag washers, GE refrigerators, Ford trucks, etc.

If every company adopted Apple's business model of a 2-year product cycle, the average consumer would have been tapped out long ago.

Why don't they just install a kill switch which renders their phones inoperable after 24 months? Admittedly, I am not a big cell phone advocate. I use a 10-year-old flip phone, and very seldom, at that.

The author makes some good points. Apple should be scared about changing consumer preferences and habits, considering their iPhone creation is now ten years into its product cycle and one can only suppose that the original iPhone from 2007 probably still functions, albeit slower and with fewer bells and whistles than the current models.

A day approaches in which cell phones will be maxed out on power and abilities. That's when Apple's business plans hit the wall.

At the Close, Friday, October 30, 2017:
Dow: 23,340.28: -85.45 (-0.40%)
NASDAQ: 6,688.32, -2.30 (-0.19%)
S&P 500: 2,570.72, -8.24 (-0.40%)
NYSE Composite: 12,319.47, -46.97 (-0.39%)

Stocks continue Mostly Higher In Late October

Just a marker for the weekend notes interestingly that all of the huge NASDAQ gain was on Friday and the NYSE Composite actually posted a loss for the week.

This isn't really normal market behavior, but few are paying attention.

At the Close, Friday, October 27, 2017:
Dow: 23,434.19, +33.33 (+0.14%)
NASDAQ: 6,701.26, +144.48 (+2.20%)
S&P 500: 2,581.07, +20.67 (+0.81%)
NYSE Composite: 12,366.4346, +14.01 (+0.11%)

For the week:
Dow: +105.56, (+0.45%)
NASDAQ: +144.49 (+2.20%)
S&P 500: +5.86 (+0.23%)
NYSE Composite: -64.10 (-0.52%)

Stocks Rebound Thursday; 3rd Quarter GDP Increases 3%

Stocks bounced off of Wednesday's decline, with the Dow Industrials again leading the way on Thursday, shrugging off any suggestion that the economy or stock market was about to experience a slowdown.

On Friday morning, the Bureau of Economic Analysis (BEA) released the preliminary estimate of GDP for the third quarter, beating most of the positive projections, coming at at three percent growth.

Highlights of the report included a positive contribution from Personal Consumption Expenditures (PCE), offset by lower residential fixed investment and state and local government spending.

The 3.0% reading follows the second quarter's 3.1% advance, though the figures from the government are always subject to timely revisions (forever).

This should be good news for equity investors. The dollar is strengthening on the news.

Some are skeptical, however, noting that GDP is a very broad measure of economic strength or weakness and the fact that government spending is a component, which, at the federal level, is 40% borrowed money, making a mockery of the statistical importance of the data.

In other words, if a person borrowed $1000 to spend a total of $1800, one would not call that $1800 in spending, but $800 in real spending, plus $1000 in new debt, which, as everyone knows, should be repaid some day. As for the government and its $20 trillion - and growing - mountain of debt, that is probably never going to be repaid.

At the Close, Thursday, October 26, 2017:
Dow: 23,400.86, +71.40 (+0.31%)
NASDAQ: 6,556.77, -7.12 (-0.11%)
S&P 500: 2,560.40, +3.25 (+0.13%)
NYSE Composite: 12,352.43, +15.85 (+0.13%)

Stocks slide as bond yields continue rising

Stocks took a rare turn to the downside after solid gains earlier in the week.

The selling was rather broad as interest rates worldwide began to reach levels that investors might be minimizing risk by tracking from stocks into bonds, particularly the 10-year note which has been rising steadily since mid-September when the Federal Reserve announced the beginning of their asset sales as they seek to trim their balance sheet.

The 10-year settled at 2.44%, a seven-month high. As recently as September 8, prior to the most recent FOMC policy meeting, the yield was 2.06%, representing a 10-month low, dating back to November 8, 2016, on the eve of the national election which put Donald J. Trump into the office of President of the United States.

Thus, yields are testing the buoyancy of the stock market, especially those stocks which produce dividends. While many blue chip-type companies yield similarly to the 10-year, they also carry risk that the US economy may stall and send stocks lower, which would reduce the effective yield and possibly decimate profits.

As the Federal Reserve intends to normalize rates - with another rate hike widely assumed to be coming in December - stocks will naturally come under pressure, though it is far too soon to tell exactly what the Fed will do should the long-winded bull market from 2009 stall.

There is considerable debate over the general health of the US and global economies, which have been aided to a great extent by easy monetary policy and massive stealth purchases by the central banks of Europe and Japan.

A single day of declines should not be taken too seriously, as stock indices have been recently making new highs almost on a daily basis, but, that said, this does not seem to be a time in which investors should throw caution to the wind. As always, the Fed stands ready with fresh injections of fiat or policy adjustments to ameliorate any kind of market detour.

Bull markets do not last forever, however, and there are significant headwinds to growth without the aid of fresh central bank intervention.

At the Close, Wednesday, October 25, 2017:
Dow: 23,329.46, -112.30 (-0.48%)
NASDAQ: 6,563.89, -34.54 (-0.52%)
S&P 500: 2,557.15, -11.98 (-0.47%)
NYSE Composite: 12,336.64, -68.35 (-0.55%)

Dow Soars To New All-Time High, Paced By Caterpillar, 3M

Led by two of its highest-priced components, the Dow Jones Industrial Average blasted to another new high on Tuesday.

Caterpillar (CAT) and 3M (MMM) announced strong third quarter results with the maker of heavy industrial and earth-moving equipment was up nearly five percent, while 3M rose almost six percent on the day.

With those two posting extraordinary gains and the remainder of the Dow 30 rather muted, the blue chip index vastly outpaced the other main indices, putting 24,000 within sight just days after breaking through the 23,000 mark.

The Dow closed above 23,000 for the first time on October 18 and is up nearly 500 points in just one week.

Investors continue to chase returns, and, in the case of Dow components, dividend yield. Both 3M and Caterpillar offer dividend yields rivaling the 10-year treasury bill and are considered by analysts to be among the safest of equities to hold in a portfolio.

The other indices all ended the session with gains, but at much lower percentages than the Dow.

At the Close, Tuesday, October 24, 2017:
Dow: 23,448.20, +174.24 (+0.75%)
NASDAQ: 6,597.09, +10.26 (+0.16%)
S&P 500: 2,567.98, +3.00 (+0.12%)
NYSE Composite: 12,405.13, +20.70 (+0.17%)

Don't Count on a Market Correction in this Environment

For a change, stocks took a little dip to open the week, but it was certainly nothing by which anybody was rattled or otherwise deterred from buying ever more expensive stocks.

Since the Great Financial Crisis of 2007-2009, the favorite acronym of traders has been BTD, otherwise known as Buy The Dip, which is exactly what is to be expected when markets open on Tuesday.

Almost without fail - actually, fully without fail - US equity indices, since March of 2009, have never fallen much more than a few percentage points before ramping back to new all-time highs. While there have been occasions in which the dip in stocks has persisted over a period of weeks or months, there has been no failure to recover in recent years.

Anybody invested on more than a casual basis is aware that central bank largesse and stock buybacks have been the primary drivers of stock market prosperity, and even with the Federal Reserve beginning to engage in the process of unwinding its balance sheet - selling off much of its horde of $4.5 million in bonds and other sketchy assets - there seems to be little to scare investors away from he equity bandwagon.

It's largely a controlled environment, nothing like the heydays of the 50s and 60s, when America was a growing concern and didn't need monetary boosts to fuel investment markets. Today's markets and investors are completely synthetic, consisting mainly of larger brokerages and funds of all types, from sovereign wealth types to hedges to mutuals to pensions. The general public and governments are so heavily invested in stocks that a collapse in markets would likely trigger catastrophic consequences to all parties. Private individuals would be harmed by pension promises unable to be met, while the large funds would face liquidation, bankruptcy or dissolution. Governments, likewise would be under attack for making pledges to the populace that could not be manifested over time, such as social security and other entitlements.

It is for those reasons, and the overall interconnectedness and fragility of markets that corrections do not occur. People in power would be without and instead of order, there would be chaos, and that is something that central bankers and their cohorts in the government realm simply cannot stomach.

At the Close, Monday, October 23, 2017:
Dow: 23,273.96, -54.67 (-0.23%)
NASDAQ: 6,586.83, -42.23 (-0.64%)
S&P 500: 2,564.98, -10.23 (-0.40%)
NYSE Composite: 12,384.42, -46.10 (-0.37%)

30 Years After the Crash: New All-Time High for Dow Industrials

Get your party hats out?

Dow 24,000 here we come!

At the Close, Thursday, October 19, 2017:
Dow: 23,163.04, +5.44 (+0.02%)
NASDAQ: 6,605.07, -19.15 (-0.29%)
S&P 500: 2,562.10, +0.84 (+0.03%)
NYSE Composite: 12,380.32, +9.30 (+0.08%)

30 Years Later, Is the New Reality Sustainable?

Thirty years ago today, US equity markets were rocked by the biggest one-day collapse in stocks, when on October 19, 1987, the Dow Jones Industrial Average fell 22%.

With suitable hindsight, investors and analysts now say the Black Monday crash of '87 was fueled by what was then called program trading, in which computers were keyed to buy or sell when stocks hit certain, predetermined levels.

Much more sophisticated today, computers do the bulk of all trading on Wall Street, using algorithms which accomplish much the same effect as old-fashioned limit orders.

The Dow and other indices have been soaring to fresh all-time highs on a near-daily basis and the fear is that what has fueled the rally of the past eight years is running close to empty.

Freshly-minted money from the world's central banks and stock buybacks from some of the most unstable and overpriced listed companies (see McDonald's (MCD), for instance) have driven stocks to unfathomable levels. A pullback is inevitable, the trick primarily laying in the timing of such an event.

For now, Wall Street wallows in its great, contrived success.

At the Close, Wednesday, October 18, 2017):
Dow: 23,157.60, +160.16 (+0.70%)
NASDAQ: 6,624.22, +0.56 (+0.01%)
S&P 500: 2,561.26, +1.90 (+0.07%)
NYSE Composite: 12,371.02, +21.05 (+0.17%)

Stocks Keep Rising...

Are we entertained?

At the Close, Tuesday, October 17, 2017:
Dow: 22,997.44, +40.48 (+0.18%)
NASDAQ: 6,623.66, -0.35 (-0.01%)
S&P 500: 2,559.36, +1.72 (+0.07%)
NYSE Composite: 12,349.97, -9.55 (-0.08%)

Stocks Continue to Soar; Dow Closing in on 23,000

Maybe, in some strange, new world not yet discovered, the spectacular gains in pieces of paper known as stocks is considered awesome and grand.

Oh, wait, that's this world.

The Dow Jones Industrial Average crossed the 22,000 mark just over a month ago on September 11. Since then, there have been 18 sessions in which the Dow finished higher, as opposed to just seven in which it closed lower. Additionally, the down days were much smaller, percentage-wise, than the up days.

Party on!

At the Close, Monday, October 16, 2017:
Dow: 22,956.96, +85.24 (+0.37%)
NASDAQ: 6,624.00, +18.20 (+0.28%)
S&P 500: 2,557.64, +4.47 (+0.18%)
NYSE Composite: 12,359.52, +7.52 (+0.06%)

Markets Finish Week On Positive Note

Stocks shrugged off Thursday's minor descent with a ho-hum advance in Friday's session, the Dow ending the week at record highs and its fifth straight week of gains.

After PPI and CPI data showed inflation on the rise, market participants were content to trade upwards, as inflation expectations are supposedly a key to the Fed keeping their promise to raise interest rates again this year, purportedly by 25 basis points in December.

The Fed has been desperately seeking consumer inflation, targeting two percent, but prices have remained stubbornly low according to the widely-used government data.

So long as inflation continues to rise and unemployment remains at historically-low levels, the Fed sees a path to higher interest rates and a cushion against any economic headwinds.

Of course, the Fed needs to continue their narrative for normalization of interest rates, which have been one percent or lower for almost all of the 21st century and have been in that range continuously since the crash of 2008.

All of the major indices ended the week with gains, albeit small ones of less than 1/2 percent.

The level of complacency in the financial community is mind-boggling.

At the Close, Friday, October 13, 2017:
Dow: 22,871.72, +30.71 (+0.13%)
NASDAQ: 6,605.80, +14.29 (+0.22%)
S&P 500: 2,553.17, +2.24 (+0.09%)
NYSE Composite: 12,352.00, +13.26 (+0.11%)

For the week:
Dow: +98.05 (+0.43%)
NASDAQ: +15.62 (+0.24%)
S&P 500: +3.84 (+0.15%)
NYSE Composite: +34.31 (+0.28)

Stocks Take a Breather

Stocks did not close at record highs Thursday.

Shocking!

At the Close, Thursday, October 12, 2017:
Dow: 22,841.01, -31.88 (-0.14%)
NASDAQ: 6,591.51, -12.04 (-0.18%)
S&P 500 2,550.93, -4.31 (-0.17%)
NYSE Composite: 12,338.74, -23.32 (-0.19%)

Adam Smith, Grains, Silver, the PPI, and Deflation

For months, if not years, Federal Reserve officials have been harping on the absence of inflation during their era of unrelenting quantitative easing (money printing). This phenomenon has baffled the pointed heads of the Fed, since it would be only natural for prices to rise with the advent of scads of fresh money hitting the market.

The problem for the Fed is simple. Their transmission lines have been blunted for the past eight years, with their easy money stopped at the bank level, never actually reaching commercial or consumer participants in the general economy. Thus, stocks, bonds and various currencies have experienced outsize gains - those assets experiencing above average appreciation, i.e., inflation - while the more mundane elements of the vast economic landscape have wallowed in a regime of low inflation, disinflation or outright deflation.

As the Fed prepares to sell off assets from its enormous ($4.4 trillion) balance sheet, the matter of price inflation has once again become a major concern. Fed officials disingenuously mutter on and about wage growth, seeking to convey the impression that they are somehow concerned for the welfare of workers (labor). Wage growth, which has stagnated since the year 1999 if not earlier, is a false argument for inflation. what the Fed wants is price inflation for everyday goods, commercial mid-production products, and base goods.

It's not happening.

In his magnificent tome, "The Wealth of Nations," author Adam Smith takes pains - and many pages - in discussion of nominal prices, concerning himself in his writings with the price of corn. Scholars rightfully insist that Smaith's intention was to show how prices in base goods are more important a measurement of economic health than pricing in currency.

With that knowledge, variations in currencies and base grains - wheat, corn, rice - can serve as an impressive measurement of real inflation, since the cost of producing marketable grain from hectares of farm land is somewhat non-variable, considering that the labor and fuel costs are relatively static.

In other words, since farmers are paying their hired hands roughly the same wage and the cost of operating the machinery to harvest the grains is also somewhat static, the price of finished grain in terms of currencies of choice - in his case, silver, can determine whether the environment is inflationary, deflationary, or neutral.

This morning's release of PPI data showed an increase of 0.4% month-over-month and a rate of 2.6% year-over-year. The increase puts the PPI at a level last seen in 2012. CPI (Consumer Price Index) remains mired in mediocrity, at a rate of 1.9% annually. That is the final inflation number, though it is hardly a reliable one.

Since the US economy is so vast and dynamic, it's difficult to get a grip on the overall flow of anything, though it's fairly certain that the inflation rate is higher than what the government is reporting.

On the other hand, taking into account Adam Smith's famous measurements, grains - the basis for much of what Americans and animals of husbandry eat - have crashed in recent weeks and months, along with silver, which has been rangebound for the past four years and is thus a benign measurement, useful in actual discussions of nominal prices.

On that basis, the Fed is likely to be disappointed in their inflation expectations. Since their data is so badly maligned, it cannot be trusted, while Adam Smith's has stood the tests of time.

It's deflation, as far as the eye can see, no matter what the Federal Reserve officials - who have proven, time and again, to be nothing more than dunces with degrees - try to squeeze out of the economy. The deflation is especially evident considering the levels of price suppression in silver. Were silver to rise to somewhat more realistic levels, the cost of buying a bushel or wheat or corn or rice would fall substantially.

Stocks made new all-time highs on Wednesday, but are pulling back in early trading Thursday morning.

Economics - and Nobel Prizes - Aren't What They Used To Be

In 1946, with the world recovering from the devastation of a global war, Henry Hazlitt wrote Economics in One Lesson. It's become a classic of Austrian Economics.

There's a free PDF HERE, that would be a good place for the 98% (probably more) of the population that has either never even heard of Henry Hazlitt nor read any of his material.

Since then, the study and application of economics has taken a path which mirrors that of the value of the US dollar. In other words, it's taken a fairly precipitous decline.

So it is that this year's winner of the Nobel Prize for economics is one Richard Thaler, a pop psychologist masquerading as an intelligent person. Thaler's prize-winning contribution to the field stems from a 2015 book he had published, called Misbehaving. Thaler's enormous discovery was that people don't always react to economic conditions in the ways Keynesian economists expect.

That revelation is so deep (sarcasm) that Thaler is being mocked in the comments section of an article in that bastion of higher learning, Yahoo! Finance.

It's not necessary to go into how insipid and uninspiring Thaler's work is. All that is necessary to understand the superficial nature of his "scholarship" is that he has been bestowed with the title of father of behavioral economics, whatever that's supposed to mean.

Now wonder central banks control the world. The rest of us are stupid.

At the Close, Monday, October 9, 2017:
Dow: 22,761.07, -12.60 (-0.06%)
NASDAQ: 6,579.73, -10.45 (-0.16%)
S&P 500: 2,544.73, -4.60 (-0.18%)
NYSE Composite: 12,293.95, -23.74 (-0.19%)

Payroll Loss Means Nothing As Stocks Recover to Close Friday Flat

Weekend Wrap: Even a horrible September jobs report couldn't slow down the runaway freight train that is the US stock market.

After the BLS reported on Friday a net loss of 33,000 jobs in the month, stocks were lower for most of the session, though investors shrugged off the data as the result of hurricane that hit Texas and Florida and continued to buy as the afternoon wore towards the closing bell.

The late-day surge left the markets mostly flat for the session, with the NASDAQ the only major index to post a gain.

For the week, however, stocks put in one of their best performances of the year, led by the Dow Industrials, which ramped up 1.65%. The laggard was the broad-based NYSE Composite, which posted a gain of just under one percent.

The non-farm payroll report for September was the first since 2010 to show a loss in employment. Despite the three-month average declining sharply to 91,000 from 172,000, stocks were still the place to be.

As stated previously here at Money Daily many times, there is nothing to impede stocks from careening higher for what looks to be the remainder of 2017. with the Fed on hold until December conceding rate increases, and the Bank of Japan and the ECB buying stocks with both fists, passive investors need do nothing besides sitting back and waiting for their quarterly statements.

Making money has never been so easy.

At the Close, Friday, October 6, 2017:
Dow: 22,773.67, -1.72 (-0.01%)
NASDAQ: 6,590.18, +4.82 (+0.07%)
S&P 500: 2,549.33, -2.74 (-0.11%)
NYSE Composite: 12,317.69, -21.24 (-0.17%)

For the Week:
Dow: +368.58 (+1.65%)
NASDAQ: +94.22 (+1.45%)
S&P 500: +29.97 (+1.15%)
NYSE Composite: +108.53 (+0.89%)

Easy Money Fosters a World of Fatties, Free-Spending, and Fallacies

Easy Street.

It's where we all reside these days, as stocks reach new all-time highs on a regular basis, quarterly fund notices are eagerly awaited for the good news, and no calamity, disaster, data, or dictator can hope to stem the flow of money into the pockets of Wall Street brokers and their eager investors.

Easy Money.

That's the ticket to lifestyles of the rich and famous. What's known widely as the "wealth effect," has everybody giddy with the possibilities of bigger homes, faster cars, more lavish lifestyles. Why would anybody claim that these manufactured dreams are not for the best?

Because they're dreams, fallacies, shadow plays on the collective psyche of investors, which these days happens to include anybody with a decent job and a 401k retirement plan. TV ads show healthy retirees working on sports cars, opening wineries, bicycling along the shore of some deserted beach.

It's a facade for the real lives people live. More than a fair share of people are either in poor health, somewhat destitute, unable to decide between paying for medication or food, and the rents or mortgages on those "bigger homes" are increasing at an unsustainable rate.

Everything, from pickle relish to cell phone plans, is massively overpriced and planning on going higher. The very priests and priestesses of high finance = the governors of the Federal Reserve - tell us that they would like to see more inflation. Seriously. Higher prices... for everything.

Walk through any upscale supermarket and witnessed the blank stares of shoppers strolling and trolling the aisles, mesmerized by colorful labels and delicious deals. It's enough to make the whole country obese.

And it is. Nobody in the financial realm will admit it, but easy money is a leading cause of obesity. It's also a leading cause of mass stupidity. It takes no financial discipline nor anything more than basic math skills to suck up the profits from the font of Wall Street. It's intellectually dishonest and mentally disarming. It results in being massively unprepared for the present and especially, the future.

Easy money fuels the general degradation of society because of it's essential falsity. The money is conjured out of thin air - with a dabble of debt added for good measure - to buy minuscule portions of companies at prices one would have sneered at 20 years ago. Most people with investments don't even know which companies they own, how many shares of such or what the price to earnings ratio is of the underlying securities.

Is this rational? People have so much trust in money-changers that they don't even know what they own, or why. That's what's troubling. American investors have entrusted their futures to the same group of people who brought us the dotcom disaster, the sub-prime mortgage bubble and the Great Financial Crisis (GFC) of 2008-09. It's lunacy of a high order.

There's an old adage that goes, "you get what you pay for." Besides being an example of poor grammar (another sign of the times), there is the ring of truth to the expression. What people have paid for their stocks, their perceived riches, their assumed wealth, is small, yet they expect the returns to be great.

After fees, taxes and the great wealth destroyer of inflation, they're not likely to be very pleased when they cash out.

At the close, Thursday, October 5, 2017: (all record closing highs)
Dow: 22,775.39, +113.75 (+0.50%)
NASDAQ: 6,585.36, +50.73 (+0.78%)
S&P 500: 2,552.07, +14.33 (+0.56%)
NYSE Composite: 12,338.93, +34.26 (+0.28%)

With September Non-Farm Payroll Data On Deck, Stocks Post Record Highs

Even though ADP reported the weakest jobs numbers in 11 months Wednesday, investors shrugged off the data and limped higher, with all major indices closing at fresh all-time highs.

ADP private employment figures for September showed a gain of 135,000 jobs, with the most damage done to firms with less than 20 employees, which registered a loss of 11,000 jobs. The firm, which tracks private payrolls, was quick to point out that hurricanes Harvey and Irma accounted for 50-60,000 fewer jobs created, noting that many mom-and-pop-like outfits were forced to close during and after the disasters that covered much of Florida and the Houston metropolitan area.

Without doing the requisite math, October's figures are likely to be higher by an order of magnitude, unless Mother Nature unleashes more of her wrath on America's southern states.

The data which ADP provides usually presages the Bureau of Labor Statistics (BLS) Non-farm Payroll release, due out on Friday, October 6.

Wall Street will likely remain unfazed with a low NFP number, taking the easy way out by blaming storms and natural disasters for the poor showing.

Life goes on, new jobs or not.

At the Close, Wednesday, October 4, 2017:
Dow: 22,661.64, +19.97 (+0.09%)
NASDAQ: 6,534.63, +2.91 (+0.04%)
S&P 500: 2,537.74, +3.16 (+0.12%)
NYSE Composite: 12,304.67, +1.79 (+0.01%)

Stocks Race to All-Time Highs... Again

It's getting to be like a broken record. All of the major indices leapt to all-time closing highs on Tuesday.

Presented without comment, because, really, what is one to say?

At the Close, Tuesday, October 3, 2017:
Dow: 22,641.67, +84.07 (+0.37%)
NASDAQ: 6,531.71, +15.00 (+0.23%)
S&P 500: 2,534.58, +5.46 (+0.22%)
NYSE Composite: 12,302.88, +38.21 (+0.31%)

Stocks Start Fourth Quarter Off Like Rocket Launch

Borrowing a phrase from Buzz Lightyear from the Pixar movie, Toy Story, US equity markets are on a trajectory to "infinity and beyond," blasting off the fourth quarter with massive gains based entirely on the notion that it's the beginning of a new quarter.

That mindset alone - that there's always a good reason to follow the herd and buy, buy, buy, has propelled stocks for the better part of the last nine years. While that has been a boon to monied investors and the big brokerages, it's also been a gentle salve to the collective psyches of pensioners, at least those of the present and future beneficiary class.

This is a familiar cry during manias, booms, and bubbles which eventually become scorned, busted and bursted. The laws of physics and the loose interpretations of economics cannot be unilaterally undone by the stock markets, no matter how much help is - or has been - given by the Fed and other central banks.

Increases in the prices of stocks at the tail end of a long bull market - and this is the second longest in history - need to rationale. To a large degree, they are driven by their own momentum and the rush to "get in" or "get more" by the captains of fantasy known widely as investment advisors.

At this juncture, prices will probably continue to rise until something finally snaps. What the snap will be, or when it will occur, is the great unknown. For the time being, there still seems to be nothing to derail the freight train to wealth and riches that is the US stock market.

Nothing.

At the Close, Monday, October 2, 2017:
Dow: 22,557.60, +152.51 (+0.68%)
NASDAQ: 6,516.72, +20.76 (+0.32%)
S&P 500: 2,529.12, +9.76 (+0.39%)
NYSE Composite: 12,264.84, +55.68 (+0.46%)

Stocks End Third Quarter with Solid Week

Stocks were up nicely for the final week of the third quarter, posting solid gains for the period from July through September.

At the Close, Friday, September 29:
Dow: 22,405.09, +23.89 (+0.11%)
NASDAQ: 6,495.96, +42.51 (+0.66%)
S&P 500: 2,519.36, +9.30 (+0.37%)
NYSE Composite: 12,209.16, +29.85 (+0.25%)

For the week:
Dow: +55.50 (+0.25%)
NASDAQ: +69.04 (+1.07%)
S&P 500: +17.14 (+0.68%)
NYSE Composite: +57.37 (+90.47%)

Has the United States Been in a Depression Since 2007?

We're going to dispense with the usual stock market blather today and promote an article posted on Zero Hedge titled, "We Are Already In Depression (If Borrowing Money Is Not Income) written by Baker & Company Advisory Group (Tim Baker).

The article is available HERE.

At the Close, Thursday, September 28, 2017:
Dow: 22,381.20, +40.49 (+0.18%)
NASDAQ: 6,453.45, +0.19 (0.00%)
S&P 500: 2,510.06, +3.02 (+0.12%)
NYSE Composite: 12,179.33, +21.68 (+0.18%)

Stocks Are Up Because... Trump's Tax Plan? Maybe, But for all the Wrong Reasons

Every day the market is open, especially since the advent of financial news networks like CNBC, there always has to be a reason for stocks to go up, down, or sideways.

Usually, the reason is a political event - like Wednesday's release of the Trump tax plan - or a weather event, or, for heaven's sake, an actual financial event, like the Fed hiking or lowering the federal funds rate.

Generally speaking, however, the reasoning for general market advances or declines is just a cover story, and usually nonsense. Stocks go up because some greater fool is willing to pay more for shares than the previous fool. They go lower when there are the fools are selling, usually to people wishing to catch falling knives, buy the dip or any of a number of cliche rationales.

So, with Wednesday's broad advance, the financial media was giddy over the prospects for an overhaul to the federal income tax regime. That's the story, and the talking heads are sticking to it.

What belies their fabulous innuendo is the reality that the tax plan was only released as an outline and is sure to undergo great debate (if congress can be said to do anything "great") and numerous revisions before it ever comes out of committees, onto the floors of the dual chambers and sent to the president for his final signature.

The plan released on Wednesday was the result of months of wrangling and preparing by the so-called "Big Six," which includes House Majority Leader Paul Ryan, House Ways and Means Chairman Kevin Brady, Senate Majority Leader Mitch McConnell, Senate Finance Chairman Orrin Hatch, National Economic Council Director Gary Cohn and Treasury Secretary Steven Mnuchin, all Republicans.

The plan may have sounded good on the surface, but only to the ultra-heathy in the top tax bracket, who get a reduction in their rate, from 39.6% to 35%. While the plan reduces the number of brackets from seven to three, the lowest rate goes from 10% to 12%, which is supposedly going to be offset by a near doubling of the standard deduction and an increase in the child tax credit. The devil is in the details, however. The higher standard deduction is attained by taking away the personal exemption. It's a swap-out, and a swindle that's not being properly reported.

The other windfall for the upper crust is a reduction in the corporate tax rate, from the current 35% to 20%. Superficially, that's a big cut, but it is also widely understood that very few, if any, corporations actually pay at that level, thanks to an assortment of loopholes and very loose policies on deductions and amortizations.

One of the more controversial parts of the plan is the scrapping of almost every deduction at the personal level, except those for mortgage interest and charitable contributions, an odd combination, since people who have mortgages often don't have much left over to help out others in need. Additionally, the plan caps the deduction for state taxes, which will largely affect people who live in high state income tax states like New York, New Jersey, and California.

So, for the lower and what's left of the middle class, the changes don't really add up to much, except that if you're really on the lowest rung of the income ladder, you may not have to file at all, though the government will make sure to deduct 15-18% of your earnings every pay period in order to fund the failing entitlements of Social Security and Medicaid/Medicare. Of course, most people won't see that much deducted, as their employers pay half. Still, the government is already in the people's pockets before they get to cash their paltry checks.

The winning side is obvious in this case. People making over $250,000 or whatever the low end of the top tax rate will be, are going to save bundles of cash under the new rates. An individual or couple earning $500,000, will see a 4.6% reduction in their tax, or $23,000. That's an entire year's earnings for somebody at or near the bottom.

That poor schlub, will pay 12% on $11,000, instead of 10%, or $1320 instead of $1100. How paying another $220 in taxes exactly helps out the lower class is a mystery.

With tax reform like this, it's a wonder more people don't simply incorporate themselves. The tax rate is lower, the deductions greater and more liberal, and there are more ways to save and hold profits and losses over years than those offered to the simple plebeians.

Without a doubt, the plan as rolled out benefits only people in upper income brackets and the rhetoric from President Trump about creating more jobs and helping out the middle class is shameful, to say the least.

More of the same. Americans can change their president every four years, but loosening the tax noose around their collective throats is obviously a tougher proposition, one which the president's advisors and the plotters and planners in congress want to keep as tight as possible around the necks of the lower and middle classes.

At the Close, Wednesday, September 27, 2017:
Dow: 22,340.71, +56.39 (+0.25%)
NASDAQ: 6,453.26, +73.10 (+1.15%)
S&P 500: 2,507.04, +10.20 (+0.41%)
NYSE Composite: 12,157.65, +29.73 (+0.25%)

Janet Yellen Admits She May Not Know What She's Talking About

As Janet Yellen dispensed more gibberish about labor markets and inflation in a speech at the annual conference of the National Association for Business Economics, stocks drifted aimlessly, seeking some sense of direction from congress, the president, the Fed Chair, anybody.

The problem for the markets is that there isn't any other direction but down. In just the past few weeks, Houston, Florida and Puerto Rico and the Virgin Islands have been wracked by hurricanes, NFL protests became more important than the games themselves, Kim Jong-un and President Trump continue to trade insults. These are not exactly headlines or stories that make people confident about buying stocks, mutual funds, ETFs or any of the other wealth-enhancing products offered by the Wall Street swindle machine.

In fact, since the FOMC meeting came to a close last Wednesday, stocks have done nothing but go lower. The Dow Jones Industrial Average is down four straight days since the Fed confirmed that it would begin shrinking its balance sheet in October. Though the losses have not been great, they have been consistent. The blue chip index is off 128 points since closing at a record high of 22,412.59 on September 20.

The S&P 500 snapped a three-day losing streak, but only by 18 cents, finishing green for the first time since the Fed announcement. The NYSE Composite bucked the trend by making new highs on Friday, but has posted losses both days this week, and the NASDAQ finished higher on Tuesday, but is still down 42 points from FOMC day.

Yellen's remarks aren't of any help to markets seeking guidance. In here address today, she said the following:

"My colleagues and I may have misjudged the strength of the labor market, the degree to which longer-run inflation expectations are consistent with our inflation objective or even the fundamental forces driving inflation."

Essentially, statements like those are not going to inspire much confidence. Parsing the quote, she's basically saying all of the Fed's assumptions about the labor market, inflation and even the fundamentals of the economy itself may be wrong.

Wow. Just wow. And people actually listen to this witch doctor of finance for guidance and direction?

What's amusing, or scary, depending on your point of view, is the current madness is just the warm-up act to the Fed's actual sales of MBS and treasury bonds in upcoming months, a global garage sale that will commence over at least three to five years. Anything less would rapidly throw markets into a death spiral because of the number of assets, the size ($4.4 trillion) of the balance sheet and the lack of quality in the offerings.

For now, markets are taking it in stride, slowly adjusting to the new paradigm of rising interest rates in an environment of low inflation, slack wage demand and slow to no growth in GDP, globally.

If anything, the officials at the Fed should trade in their accountant vizors for dunce caps because they're sending the economy down a black hole with experimental policies and solutions to problems that don't already exist. Judging by past performance, the Fed will find a way to assure the business cycle is complete by plunging the economy into recession.

You can almost count on it.

At the Close, Tuesday, September 26, 2017:
Dow: 22,284.32, -11.77 (-0.05%)
NASDAQ: 6,380.16, +9.57 (+0.15%)
S&P 500: 2,496.84, +0.18 (+0.01%)
NYSE Composite: 12,127.93, -13.64 (-0.11%)

Stocks Drop, Gold, Silver Soar, NFL Ratings Tank

Less than a week after the Fed committed to selling off their hoard of toxic and subprime bond "assets," stocks are down, gold and silver are up and the NFL is imploding.

None of this is coincidence. The market rally has run its course, as phony as it always was. US dominance in global currency markets - as the reserve currency - is waning. Gold and silver and hard assets will become more and more valued as economies adjust to the new realities of a bi-polar (East vs. West) global economic paradigm.

There is no stopping the forces that have been at work for a long time. The United States has squandered its treasure, the US government is ineffective, emasculated, and impotent. The rest of the world has tired of US domination, just like sports fans have tired of boring games complete with bold-faced, meaningless protests by millionaires on the sidelines and on the field.

A great reset is coming because working Americans are not happy. They toil and cannot save. They work only to see their paychecks taxed and exploited by government programs - from horrible attempts at education to crumbling infrastructure - and they are told to shut up and pay up, so now they are fed up.

If you're one of the millions of Americans who have had their pay stagnate, their credit cards and social security numbers left unprotected and hacked, and who have seen their money pay for social welfare programs that are designed only to enrich the status quo and keep the recipients on the dole, then you know the score.

It's why Donald J. Trump won the presidency. It's why Hillary Clinton is a whiner and sore loser. It's why the left is fighting so hard to continue their wasteful policies, but there's no going back. Change is in the wind.

Get used to days like this one in the stock market. This is only the beginning.

At the close, Monday, September 25, 2017:
Dow: 22,296.09, -53.50 (-0.24%)
NASDAQ: 6,370.59, -56.33 (-0.88%)
S&P 500: 2,496.66, -5.56 (-0.22%)
NYSE Composite: 12,141.60, -10.23 (-0.08%)

Weekend Wrap: Stocks Pop and Stop After FOMC Meeting

With the Fed's $4.4 trillion balance sheet overhanging the global economy, US stocks spent Thursday and Friday treading water as investors try to figure out just how the added weight from tranches of MBS and various maturities of treasury bonds will affect liquidity and markets in the coming months and years.

While the Fed's stated goal is to reduce the size of its balance sheet alongside an attempt to normalize interest rates, the structure of their policies leaves open many questions and uncertainties, chief among them being just wo is supposed to sop up all of the excess the Fed will be releasing into markets.

More than likely it will be the usual suspects, money center banks, hedge funds, and possibly sovereign wealth funds, which may consider buying up bonds on the cheap a strategy for preserving wealth rather than increasing it.

Equity markets being particularly overvalued by nearly any metric, large players should be more cautious than they have been during eight years of unprecedented gains in US markets.

How it all plays out may turn out to be an exercise in futility from the sidelines because the Fed and their inner workings are not generally what one would call transparent.

Effects from the whirlwind of bond offerings in private settings will probably only be felt after the fact and in widely-varied segments of the economy. One thing is certain: the Fed is intent on unloading some highly toxic assets in the case of the mortgage-backed securities, something that could lead to unforeseen circumstances with homeowners and real estate speculators possibly exposed to long-standing, but previously hidden, claims.

With uncertainty as a backdrop following Wednesday's FOMC announcement, the record highs from Monday and Tuesday were not built upon, US equity indices generally taking a wait-and-see attitude into the weekend.

At the Close, Friday, September 22, 2017:
Dow: 22,349.59, -9.64 (-0.04%)
NASDAQ: 6,426.92, +4.23 (+0.07%)
S&P 500: 2,502.22, +1.62 (+0.06%)
NYSE Composite: 12,151.79, +18.17 (+0.15%)

For the week:
DOW: +81.25 (+0.36%)
NASDAQ: -21.55 (-0.33%)
S&P 500: +1.99 (+0.08%)
NYSE Composite: +71.66 (+0.59%)

Witch Doctors at the Fed Brewing Something Wicked?

Eventually, everything matters.

Whether it's a hurricane ravaging Houston, Miami, or Puerto Rico, Toys 'R Us going chapter 11, or JP Morgan Chase CEO Jamie Dimon bashing cryptocurrencies in general and Bitcoin in the specific, all actions have consequences. It's the butterfly flapping its wings in Africa resulting in the subtropical windstorm, pure physics, action, reaction, cause and effect.

Thus it is consequential that the Fed's announcement in June indicating that it would begin to sell off it's hefty bag of assets - confirmed just yesterday - beginning in October (a scant ten days from now) should have some noticeable effect.

Market reaction to the announcement three months ago was muted. It was more serious yesterday and took on a gloomy tone today as all of the major indices retreated from all-time highs, the hardest hit being the speculative NASDAQ index, though one could posit that the knee-jerk nature of the selling today was nothing more than casual.

Suppose it is more than that.

Wouldn't the biggest players in the investing universe be monitoring market movements closely, making incremental moves, buying insurance? Of course. None of them want to tip their hand, but, they are concerned that the Federal Reserve has lost control of the monetary side of the equation. After all, ZIRP (zero interest rate policy) didn't work, nor did quantitative easing (QE). With all of their bullets spent, the Fed has nonchalantly called the financial crisis over and done and signaled to the market that they are going to raise interest rates, sell off the assets they've been hoarding for some six, seven, or eight years and the economy of the United States - and the world - will suddenly and magically be wonderful again.

As Dana Carvey playing the "Church Lady" might say, "how convenient!"

The Fed is at a loss and has been for eight or nine years running (some may say longer), because they cannot control distant event, geological occurrences, sunrises, or the whims of people with money. They are what Ayn Rand and Rollo May might have called witch doctors whose power is derived from people's belief in their so-called powers.

When the Fed begins selling their cache of securities (mostly treasury bonds and mortgage-backed securities) expect some degree of howling from various quarters, notably those who have been calling the central bank's attempts to control global markets a scam, sham, or film-flam from the start.

Especially when it comes to the mortgage-backed securities (MBS) there will be great gnashing of teeth, especially deep inside the bowels of the Eccles Building, where it cannot be heard, as Fed governors (a number of them already jumping ship) bemoan their dissatisfaction over the task at hand.

They are about to become scorned, and with good reason. They've mismanaged other people's money (practically everybody's) to their own profit. Bernie Madoff would look like a saint compared to the crimes the people at the Fed have committed. Those crimes continue, and they will be manifest in the "great unwind."

As the case may be, all of these high priests and witch doctors of finance will claim they didn't see the carnage coming, but come it will. There's a place for people who use deceit and obfuscation to achieve their ends, and it's certainly not in heaven.

Keep a close eye on three things: the price of silver, the price of corn and wheat, and the performance of the major stock indices. If suspicions play out, all three (or two of three, with the only gainer being silver) will decline for months before there's true confirmation that, in the long scheme of things, the Fed officials, from Greenspan to Bernanke to Yellen, knew exactly what they were doing but did it anyway.

Today's position: Fetal.

At the Close, Thursday, September 21, 2017:
Dow: 22,359.23, -53.36 (-0.24%)
NASDAQ: 6,422.69, -33.35 (-0.52%)
S&P 500: 2,500.60, -7.64 (-0.30%)
NYSE Composite: 12,133.62, -13.88 (-0.11%)

Counterfeiting and Money Laundering At Its Finest: Fed To Begin Balance Sheet Unwind

If there's one thing everybody can be sure of after today's FOMC rate announcement (spoiler alert: fed funds remain unchanged), it's that the officials at the Federal Reserve will continue to tell everybody that everything is under control, until it's obvious that nothing is under control.

What the Fed will embark upon beginning in October is selling off the assets it purchased during and after the Great Financial Collapse (GFC), thos being primarily mortgage backed securities (MBS, AKA, toxic bond waste) and Treasury bills, notes, and bonds.

Of the two, the treasury issuance will be much less of a problem unloading than the MBS, since treasuries come with an implied guarantee that they're as good as the federal government's full faith and credit promise to repay... with interest and return of principal.

Those toxic mortgage backed securities, which the Fed likely purchased at or near par (100% of value), will be more of a challenge, but, being the central banker to the world, the Fed has nothing about which to worry.
Many of these MBS contain tranches of mortgages minted during the sub-prime crisis. Many of them are worthless. Many more are worth less than half of par value.

But, that does not worry the Federal Reserve, because, since they want to shrink their balance sheet, they can just sell them at whatever price they can get, because they - unlike just about any other entity in the known universe - can just print more money if they need it.

So, $4.4 trillion is going to be wound down to probably under $1 trillion over the course of six to ten years. Some of the mortgage backed securities are performing, many are not. They're in default. Somebody will buy them, ostensibly, because if not, they remain on the Fed's balance sheet - at par value.

It's ludicrous. The Fed will, let's say, sell what they consider to be $500 billion of MBS which is in fact worth maybe, $100 billion. They'll write the $400 billion off their books, in effect, taking a loss. It won't matter. It's gone. It's all just accounting, and, since the Fed doesn't report to the IRS, IMF, BIS, or anybody for that matter, they'll just whistle past the grave of homes lost or stolen by vicious, unscrupulous bankers, who, by the way, will probably be the ones repurchasing - at pennies on the dollar - the very same MBS they unloaded onto the Fed.

And, just for good measure, those very same banks will try to enforce their rights on those bonds, triggering another round of financial shenanigans, this time going after people who thought they bought properties with good title, only to learn that there are claims on them, claims that were hidden in the bowels of the Fed's books for five, six, seven or eight years.

It's the best counterfeiting and money laundering operation that's ever been hatched, and it will all be done out in the open because 99% of the people in the world don't actually understand how it all works.

In the long run, it's all flimflammery of the flimsiest variety, but our glorious central counterfeiters and money launderers just do business that way.

As they say in investing, gambling, and, supposedly, now, banking, "easy come, easy go."

At the close, Wednesday, September 20, 2017:
Dow: 22,412.59, +41.79 (+0.19%)
NASDAQ: 6,456.04, -5.28 (-0.08%)
S&P 500: 2,508.24, +1.59 (+0.06%)
NYSE Composite: 12,147.50, +15.77 (+0.13%)

Stocks at All-Time Highs Awaiting Fed Unwind

In what could be a truly historic day for equity investors, stocks sit at all-time highs prior to Wednesday's FOMC rate policy announcement, which is also expected to include a definitive start date of the Federal Reserve's asset disposal program, as the central bank begins to unload up to $4 trillion of assets into the market.

All of the major indices closed at record levels on Tuesday, setting up the FOMC announcement as the ultimate "bell ringer" at the tippy-top of the year-year-plus bull market, the second longest in history.

While it is improbable to call the closing quotes of September 19 the absolute top, it may make some sense to keep stops close, just in case the market has telegraphed the turn.

A turn in markets is usually more subtle, most often without warning, but, considering the fantastical nature of finances in the days of general central bank control, this may be as good a time as any to sit on the sidelines or dispose ones portfolio of risky equity assets.

A complete report will be posted after the close today. The FOMC rate decision is scheduled for 2:00 pm ET.

At the Close, Tuesday, September 19, 2017:
Dow: 22,370.80, +39.45 (+0.18%)
NASDAQ: 6,461.32, +6.68 (+0.10%)
S&P 500: 2,506.65, +2.78 (+0.11%)
NYSE Composite: 12,131.73, +20.28 (+0.17%)

Dow Jones Industrials, S&P 500 Mark New All-Time Highs; Fed To Unwind Massive Fake Balance Sheet

All is well!

At the Close, Monday, September 18, 2017:
Dow: 22,331.35, +63.01 (+0.28%)
NASDAQ: 6,454.64, +6.17 (+0.10%)
S&P 500 :2,503.87, +3.64 (+0.15%)
NYSE Composite: 12,111.45, +31.31 (+0.26%)

Following a truly boffo week past, the mid-point of September brings more record-breaking on the stock exchanges.

Just ahead is a roadblock to progress, as the FOMC begins a meeting on Tuesday, concluding Wednesday with what should be a statement covering plans to begin unwinding its $4.5 trillion portfolio of Treasuries and mortgage backed securities.

Remember, many of those mortgage-backed securities which the Fed holds (lots of them 20 or 30 years in length) are largely worthless, and, since the Fed purchased them at par (ha, ha), they'll be selling at a loss.

Of course, it's all just worthless paper in any case, so, if the Federal Reserve paid $100 million for mortgage toilet paper X, and they sell it for $30 million, the result is a 70% loss, or a cool $70 million. Multiply that into the billions which the Fed held and that balance sheet will erode pretty quickly.

The effort is going to be largely deflationary, as opposed to what many analysts believe will be an inflationary tsunami driving interest rates sky high.

There's also the question of just who will be buying the mortgage toilet paper. Will it be the very same banks which issued it in the first place back in 2006-2009? That is a somewhat likely outcome, or, as karma dictates, what goes around, comes around.

Couldn't happen to a better bunch of banker crooks.

Have a happy.