Dow Jones Industrial Average
Janet Yellen is very alarmed that some members of Congress want to conduct a comprehensive audit of the Federal Reserve for the first time since it was created. During testimony this week, she made “central bank independence” sound like it was the holy grail. Even though every other government function is debated politically in this country, Janet Yellen insists that what the Federal Reserve does is “too important” to be influenced by the American people. Does any other government agency ever dare to make that claim? If the Fed is doing everything correctly, why should Yellen be alarmed? What does she have to hide?
The fact that there is a debate about a quarter-point rate hike tells us that extraordinarily low interest rates have mostly failed to deliver a robust recovery. That people opposed to even the tiniest increase in rates are resorting to hyperbole tells us that they too know this. The thinking seems to be that six years into near-zero policy, the only reason it hasn’t worked is because it hasn’t been tried long enough. Meanwhile, the dangerous side effects of year after year of artificially low rates continue to grow.
The urgency to put your savings to work is understandable, but patience is a virtue. Sometimes the hardest thing to do is to wait for the right opportunity to come along... The math is pretty simple.
The Dow Jones Industrial Average closed today at 17,824... exactly 1 point higher than the close at the end of 2014 thanks to a sudden urgent need to sell VIX protection (because with tensions between EU and Greece at its highs, who would want any hedges into the weekend?) and bid the Dow straight up 20 points in the last minute... here's why..
There is intense debate going on in the worlds of economics, politics, and finance as to whether we will, in 2015, experience the mother of all stock market crashes or whether, instead, we will float along ever higher on the happy cloud that has been making at least some people rich over the last few years (or whether, for a third possibility, we will just muddle along somewhere in the middle). Beyond the diatribes from the punditocracy, there is a mood – maybe it is idiosyncratic – but there’s the feeling that something dramatic is about to happen. I mean, a snowstorm hits and the local supermarket runs out of bread?! Are we all rehearsing for something here?
As if they did not already have their tentacles in everything else already, TBTF, and depositor-insured hedge fund Goldman Sachs is about to become the most heavily-weighted component of the Dow Jones "Industrial" Average. Following Visa's moments ago announced 4:1 stock split, Goldman will now represent just shy of 7.00% of the DJIA.
This time the global slowdown has fewer places to hide. Perhaps we can “thank” monetary policy for that, highlighting deficiency wherever “extraordinary” policies have been proclaimed as highly “necessary.” In other words, the very fact that a central bank has “had” to institute something as disruptive as QE is not much of a solution but rather a marker of everything wrong. Nowhere is this reality more evident than in the evolution of at least credit market thinking on the subject, viewing the decrepit state of the actual economy now more appropriately; moving in the “wrong” direction. There is, again, perhaps something to that sharp bearish turn in December.
The old joke is "In America, you correct newspaper, but in Soviet Union, newspaper corrects you.” Switzerland is now experiencing the bond market equivalent.
What we see now is the recovery of price discovery, and therefore the functioning economy, and it shouldn’t be a big surprise that it doesn’t come in a smooth transition. Six years is a long time. Moreover, it was never just QE that distorted the markets, there was – and is – the ultra-low interest rate policy developed nations’ central banks adhere to like it was the gospel, and there’s always been the narrative of economic recovery just around the corner that the politico/media system incessantly drowned the world in. That the QE madness ended with the decapitation of the price of oil seems only fitting.
Alcoa delivers the daily lesson on how to full everyone with non-GAAP BS all the time.
History literally appears to be repeating. The mainstream media and our politicians are promising Americans that everything is going to be okay somehow, and that seems to be good enough for most people. But the signs that another massive financial crisis is on the horizon are everywhere.
"Some folks are selling stocks..." and, according to The White House, President Obama is closely monitoring it. As The Hill reports, despite the meme that lower-oil-prices-are-unequivocally-good-news-for-Americans, the Obama administration is monitoring whether the fall in oil prices is affecting the US stock market. Just over 5 years ago, President Obama explained to the American public that "profit and earning ratios are starting to get to the point where buying stocks is a potentially good deal," so we can rest assured that our leaders are (for now) "hesitant" to say whether the fall of the stock market, which came as crude oil trades briefly dipped below $50, was related to oil prices.. so blamed Europe.
2014 may go down as the year when gold and silver conspiracy “theories” became conspiracy “facts” as banks globally were found to have conspired to rig the prices of gold, silver, currency and many other markets.
Having added further confusion to the markets by keeping "considerable" and adding "patient", suffered 3 dissents (1 dove, 2 hawks), and explaining that the energy price drop is "transitory", we suspect Fed Chair Janet Yellen will have some 'splainin' to do during today's press conference. Is "patient" longer than "considerable time" and just what (Dow Jones Industrial Average) data is the Fed dependent on now?
Another day, another record for the Dow Jones Industrial Average, Main Street’s favorite measure of Wall Street stock performance. How did we get here? The answer sits in a comfortable blend of good returns from a range of industry sectors. Seven of the Dow 30 names have added over 100 points to the total 1,303 point gain for the Average this year: Visa (251 points), UnitedHealth (185), Nike (136), 3M (129), Disney (116), Johnson & Johnson (111) and Home Depot (106). By contrast, there is just one 100 point loser: IBM (negative 137 points). The collapse in energy stocks hasn’t hurt the Dow very much – just 113 points year to date related to declines in ExxonMobil and Chevron. And to satisfy the most common “What if” scenarios we hear: adding Apple on its split day this June would have added an estimated 166 points, and Facebook’s whole-year 2014 performance would have pushed the Average higher by 162 points.