Fundamentals are always important over the long term. That said, it has become quite clear that company financials are not what’s moving this market. If fundamentals mattered then the words and decisions of central bankers wouldn’t be the most important headlines. Simply put, the economic fundamentals do not support stock prices. Is this the top? There’s no way to tell. Do some areas of the market look like past bubbles once did? Without a doubt. The last step up before the fall is often characterized by a feeling that the market is invincible. Despite the S&P’s incredible run, it cannot continue to rally forever. Eventually, economic fundamentals will matter again and when that happens it’s likely that the market will sell off.
The mainstream recovery narrative has an astounding “recency bias”. According to all the CNBC talking heads, the 192,000 NFP jobs gain reported on Friday constituted another “strong” report card. Well, let’s see. Approximately 75 months ago (December 2007) at the cyclical peak before the so-called Great Recession, the BLS reported 138.4 million NFP jobs. When the hosanna chorus broke into song last Friday, the reported figure was 137.9 million NFP jobs. By the lights of old-fashioned subtraction, therefore, we are still 500k jobs short—notwithstanding $3.5 trillion of money printing in the interim. The truth is, all the ballyhooed “new jobs” celebrated on bubblevision month-after-month have actually been “born again” jobs. That is, jobs which were created during the Fed’s 2002-2007 bubble inflation; lost in the aftermath of the September 2008 meltdown; and then “recovered” during the renewed bubble inflation now underway.
For the first time ever in the history of US-Russian relations we are seeing a public debate about a threat of economic sanctions that may have a long-range negative effect on global energy security. The Obama administration acts as if it is guided by a chapter out of an old Soviet textbook on political economy. At the moment, apparently, the sacred dogma of the free market, from Samuelson to Friedman, can be conveniently overlooked for the sake of punishing a sovereign nation. When the head of the most influential state in the world talks about manipulating market prices to punish recalcitrant players, what kind of “global free market” and fair play are we really talking about? After a series of headline-grabbing statements about the possibility of “switching” European consumers over to American gas, the US media hastened to announce the launch of Obama’s oil and gas offensive against Russia. In reality the EU is not currently prepared, neither technically nor in terms of price, to buy its energy resources from the US. It would take at least ten years to adapt even the technically advanced German energy system to work with American gas supply. In a crisis, when it is particularly urgent to see a quick return on an investment, such projects are unrealistic.
Most Buy Side managers have no idea about the disparate business models of the four largest US banks by assets.
Corporations continue to push the boundaries of wage and employment suppression, productivity increases and accounting gimmickry to support elevated profit margins. All of these functions are finite in nature, and despite much hope to the contrary, the current set of fundamental variables are more usually witnessed at the end of cyclical expansions rather than the beginning. With corporate profits being driven primarily by "accounting magic" rather than strongly rising revenue, the sustainability of the current level of corporate profits is in question. Fed actions leave a void in the future that must eventually be filled by organic economic growth. The problem comes when such growth doesn't appear.
We live in a pretend economy. It is important to recognize this condition, especially if you are an investor. Current market behavior is concerning. Bonds and stocks remain volatile and near record levels. Markets ignore the continuing stagnation in the pretend economy, buoyed apparently by government liquidity injections. To justify investing today in these markets, one must anticipate one or both of the following: economic growth is about to surge; and/or market values can continue to rise from here, potentially further widening the already large gap between valuations and fundamental economics. No reading of the economic tea leaves suggests a surge in economic growth is coming. Indeed, a critical analysis of the data makes one question whether there has been a recovery at all. Certainly any recovery has to be labeled as abnormal. Playing these markets in any conventional manner is akin to writing insurance policies for suicide bombers.
We believe ourselves to be credible and intelligent, even though nearly all our working capital, our knowledge, is corrupt and seriously tainted.
The real truth the bankers wish to conceal from the public is that they use HFT programs to suppress gold and silver prices.
The level of employment in the United States has been declining since the year 2000. There have been moments when things have appeared to have been getting better for a short period of time, and then the decline has resumed. Thanks to the offshoring of millions of jobs, the replacement of millions of workers with technology and the overall weakness of the U.S. economy, the percentage of Americans that are actually working is significantly lower than it was when this century began. And even though things have stabilized at a reduced level over the past few years, it is only a matter of time until the next major wave of the economic collapse strikes and the employment level goes even lower. And the truth is that more good jobs are being lost every single day in America.
Investors are shocked at the current sell-off as hope/hype growth expectations fade rapidly, momentum junkies question their guru-ness, and earnings all of a sudden matter. In the hopes of shining a little light on that "reality" we suspect the the following chart - ahead of Q1 earnings data - will clarify just how much hope is out there.
The fragility of our debt financed oil dependent just in time global supply chain system is beyond the comprehension of the average zombie American. They are too distracted by mass consuming the products dependent on that very same fragile scheme. They are clueless zombie-like dupes who believe $20 bills magically appear in ATMs, Funyuns and Cheetos miraculously materialize on Wal-Mart shelves, gasoline endlessly bubbles up from the ground into the hose they stick in their $40,000 monster SUVs “bought” with a 0% seven year loan from Ally Financial, and that enchanted plastic card with a magnetic strip empowers them to fulfill every craving like a zombie feeding on a dead carcass. However, the cracks in this delusionary foundation are visible for all to see.
Early hope faded into middle-of-the-day-despair which was rescued (briefly) on a sea of JPY carry (which dragged the S&P all the way to VWAP) then crashed and burned on the shores of dismal reality into the close. USDJPY was in charge and 103 was the magic number that kept the S&P 500 from breaking its 50DMA (for now). The Nasdaq and Russell were ugly as Biotechs' early ripfest gave way. This is the biggest 2-day swing lower in the Nasdaq since Oct2011. Treasuries rallied modestly on the day (-2bps) as the USD weakened 0.25% led by EUR strength. Copper rallied from an overnight dump low but gold (~$1300), silver (~$20), and oil (~$100) all clustered around -0.5%. VIX tested up to 16 intraday but was rammed lower as the 330 ramp too early to hold and merely enabled VWAP sellers out... and we closed near the lows...
Guess what? There is none. Rather, the Federal Reserve practice of Delphically divulging its intentions ought to be understood as the master pretense of US economic life — the delusion that wise persons are actually in control of anything. The result of this guidance continues to be the mis-pricing of everything, especially the cost of money as represented in the operations of debt, and hence the value of everything denominated in money. One thing we really do know, as good old Herb Stein put it, is that things go on until they can’t, and then they don’t.
Hot Air Hisses Out Of Housing Bubble 2.0: Even Two Middle-Class Incomes Aren’t Enough Anymore To Buy A Median HomeSubmitted by testosteronepit on 04/07/2014 12:35 -0400
“There was a moment when it made sense,” said Blackstone Group, largest home buyer in the US. But not anymore.
Employment is a function of demand by customers on businesses. As opposed to many economists and politicians, businesses do not hire employees to be "good samaritans." While such a utopian concept is fine in theory, the reality is that businesses operate from a "profit motive." The problem is quite clear. With the consumer heavily leveraged, the inability to "spend and borrow" is reducing aggregate demand. As stated, the current level of aggregate demand simply isn't strong enough to offset the rising costs of taxes, benefits and healthcare (a significant consideration due to the onset of the Affordable Care Act) associated with hiring full-time employees. Therefore, businesses initially opt for cost efficient productivity increases, and only hire as necessary to meet marginal increases in customer demand which has come from population growth.