Stocks taking October in stride while whistling past the grave yard

As the first week of October slips by, global stock trading show no signs of whistling past the grave yard.

Daily records in the US have become an inside joke in newsrooms. Continue reading

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Yellen's lost her ability to jawbone markets

What do I take away from Fed chief Janet Yellen’s press conference on Wednesday?

I believe she has thrown up her hands in utter defeat to the markets. Gone are the days where a Fed chair can jawbone the markets.

She has tried to talk the market into believing there will be a rate hike this year, but the bond pits have told her to take a hike instead.

How did the Fed lose its ability to move markets with a comment?

Its move to transparency took the mystery out of the equation. Since the 2008 crisis every Fed president is allowed to speak their thoughts, markets can see the divide in the FOMC and move accordingly.

Gone are the days a gauging how much paperwork was in former Fed chief Alan Greenspan’s brief case to figure on a rate hike. Now you just have to ask.

Oh, and one other thing hurting Yellen’s ability to reign in the markets, the economy sucks.


In a little less than a month bitcoin has soared $300 to trade Thursday in the $740 range.

I’m not convinced this is a result of the Brexit panic, which has perverted stock and bond prices over the last week or so.

The reason I’m skeptical is the fact that bitcoin users seem to be more of a tech-oriented crowd, which are less likely to have a currency play on their radar.

Some early adopters point to the Chinese as being the driver for this move. As the Chinese government cheapens its currency to stem slowing growth.

I would venture that the Japanese are also dabbling in bitcoin as a way of hedging the yen. However when I say Asian investors are looking at — and perhaps investing in — bitcoin, it is the smallest of portion of the population. Bitcoin in no way has even approached being known — never mind accepted — by most people.

While we have the price movement that we can chart,  I cannot find a volume chart to show how robust the market is. This would be a very valuable tool to gauge the depth of the market.

Fed chiefs gather for Yellen pep rally

Federal Reserve Chairwoman Janet Yellen participated in a roundtable with three of her predecessors: Ben Bernanke, Alan Greenspan and Paul Volcker, Thursday in Manhattan.

To begin with there was no disagreement between the four Fed chiefs, which represented 37 years of Fed leadership, which is 1/3rd of the history of the private institution.

The one glaring aspect that most of the panelist agreed upon: Strong dollar does not equal strong US economy.

While history shows that US Treasury secretaries are the ones to defend the strong dollar, it appears the Fed chiefs believe a strong dollar is detrimental to the global economy, which then weakens the US economy.

Bernanke said the benefits of the US dollar being a the global reserve currency are generally overblown and that there are costs that go along with that status.

Yes, but being the global reserve currency allowed the Fed to increase its balance sheet by $3 trillion during the crisis. Some of the costs associated with King Dollar is the amount of money used to bail out European and Asian banks during post-crisis, that is now put on the backs of US taxpayers.

Most of the conversation involved theory, but the theories they brought up don’t seem to be working anymore, except for one they did not mention.

In a debt-ridden economy, more debt will not spur growth. That is an axiom that no one on the panel would talk about.

Yellen spoke about if the US is growing, then the global economy should be doing better. We can’t drive growth, since we can only achieve anemic growth ourselves.

“When the U.S. is doing well, it tends to be a plus for the global economy,” Yellen said.

No one on the panel thought the US was on the cusp of a recession, despite calls of that on the campaign trail from both Republican candidate Donald Trump and Democratic contender Bernie Sanders.

“I don’t see any particular reason to believe a recession is any more likely in 2016 than it was in 2015 or 2014,” Bernanke said.

Chair Yellen said, “We certainly don’t see those imbalances,” in comments on expansion of private sector debt.

Perhaps she is missing the equity market run up on the back of companies borrowing money to fund stock buybacks?

All in all it was an otherwise historic event bringing the panel together, but the discussion seem to be more pep rally for Yellen’s policies than constructive talk.

 

The middle (class) won't hold

So Friday we get 2nd revision of Q1 GDP and it will be interesting how low it goes.

Remember the Commerce Dept. has said it will readjust the seasonal adjustments made on Q1 number of 0.2% “growth” because it skewed it lower than it should.

But Q1 in 2014 was low as well so when Commerce and Treasury chief Jack Lew say this year was a one-off, it is not.

Look if retail sales have been lower on a month-over-month basis since Nov. of 14, and that accounts for roughly 70% of the spending, then you are moving into recessionary levels.

Don’t change the rules because you don’t like the score. Do something to change the outcome.

I believe the revised number Friday will be -0.7 percent. This will be attributed to strong dollar and West Coast port strike as knocking back exports.

This will be another excuse as to why we have anemic growth despite $4 trillion in excess liquidity on the Fed’s balance sheet.

I’m not a fan of being down on the US economy, but someone needs to combat the cheerleading going on in the press that growth is around the next quarter.

No one feels good about this 5-year “recovery”. There is no security in jobs or income growth for the dwindling middle class.

How long before the middle does not hold. Tax them on health care and then raise the premiums. Give them nothing on their savings, demand through the Fed’s actions that they must put money in the stock market, which they are loath to do because the 2008 crash is still in their minds.

This is why we have the recovery we deserve. There’s no leadership. We have a White House running out the clock. We have a Treasury Secretary who is a mime, no words come from that office to jawbone a new direction or policy. Capitol Hill is a joke. No tax policy or any other growth program is even hinted at.

That leaves us with a Fed chair who has no presence and little charisma.

To be fair the Federal Reserve should not be setting national policy. It should react with rates that provide growth for a stated policy, but that situation changed so many years ago when Alan Greenspan came into office.

Anyway, I’ll get off the soapbox for now and I’ll post soon after 8:30 on Friday with my reaction to the GDP number. Till then.

 

Nasdaq highs and economy lows

Pundits say it’s different this time. The Nasdaq is not levered up with high-flying tech stocks with no promise of profit.

But as the Nazzies break through the 5K mark — 40 points shy of its all-time record, could it be a sign of the new top?

Sure there are no sock puppets touting Pets.com, and Steve Case and Gerald Levin are not high-fiving themselves on the Time Inc./AOL merger, but we have a recession.

It is a global recession, where central bankers try to jawbone a recovery, while printing piles of money to foster growth.

Sure US equities soared Monday, but why? Meaningful data showed that Fed is off base in thinking it can raise rates anytime soon.

They can talk it up, but when consumer spending is falling — during and after Christmas — and the greenback is soaring, the market knows its easy money for as long as the eye can see.

We don’t need hype about the new business leaders of the economy all ending their name in dot-com, like 15 years ago. That was that bubble, blame it on Fed head Alan Greenspan and his easy money policy. Given him this, Greenspan allowed that money to have velocity. He circulated his printing so that wages could rise.

This easy money policy of Ben Bernanke and Janet Yellen to follow ring-fence the cash by restricting lending and quashing wage growth for fear that the $4T+ the Fed put in “circulation” will create runaway inflation. It should if the Fed did not have so many strings attached to it.

How else do you print $4T+ and get a Nasdaq 5,000 with the Dow Jones and S&P at record highs and still have so many Americans underemployed in two or three part-time jobs making minimum wage?

So maybe this time we have President Obama proclaiming America has turned the corner and prosperity is near citing the stock market highs. But just remember how well that Time/AOL deal went?

Case and his investors made out well, but we got nailed.