Jim Cramer

Though many blame the Global Crash of 2015 for the loss of faith in stocks, others say the erosion dated back to at least 2014...

The disappointment on the faces of talking-heads everywhere is writ large as it appears Q1 2014 will be a flat quarter - the worst quarter in a year and a down one for the Dow. After promises of "as goes January" failed, and "it's just the weather", the promise of a magnificent H2 recovery remains firmly in traders' minds in spite of the total collapse in fundamentals during the last few months. Just how bad? Top-down economic data has plunged to its lowest in 19 months and bottom-up earnings forecasts... well, take a look...

The economic growth expectations for the world in 2014 just plunged to fresh lows at a mere 2.78% - that is 15% "less" growth than was expected a year ago. The world's equity markets are up 25% "more" than at the start of 2013. Thus, our dysfunctional dystopian world where 'less' economic growth is 'more' wealth-creating. Long live the central bank utopia...

Presented with little comment aside to ask... if 'weather' can do this much damage to the US economy and 'faith' in the wealth effect-building benefits of the US equity market are this weak, then there are a few uncomfortable truths about to punch some talking heads in the mouth...

Pre-open gold dump, USDJPY pump, check. Opening dump in USDJPY and stocks led by Momos and Biotechs, check. European close marks the bottom, check. EURJPY takes over and ramps stocks back up to highs, check. Fade into close, check. Today was an almost perfect echo of yesterday's market action with blue-chips benefitting from the weakness in Nasdaq and Russell high-beta honeys. Bonds were quite with very modest steepening. Gold and silver bounced off earlier lows but their losses mirror Copper's 1.7% rise on the week. The USD lost ground as Draghi's failed jawboning sparked EUR strength. VIX fell 1 vol to its lowest close in 2 weeks as a late-day VIX -slam failed to get SPX green post-FOMC.

The number of people unemployed for 27 weeks or longer in the US rose by 203,000 in February to 3.8 million. As we noted previously, this is the desperate shadow hanging over the so-called recovery. What is more problematic is the stunning findings of a new study that only 11% of the long-term unemployed in any given month found full-time work a year later.

Despite dismal PMIs from China and USA, stocks managed a miraculous 'pump' into the US open only to be unceremoniously dumped very soon after as MoMos and Biotechs had the rug pulled out. Weakness continued down to Nasdaq's 50DMA (and Biotech's 100DMA) and stabilized into the European close when soon after, via the magic of EURJPY, stock rebounded back to VWAP. Alas, it was not be the day for the bulls as VWAP-selling hit hard in the last hour... until the good fairy 330RAMP CAPITAL came along, and punched VIX in the mouth in a desperate attempt to regain green and get the Dow positive post-FOMC. Unlike many fairy tales though, this one ended sadly ever after. Stocks down, USD down, Gold down, VIX up, Yield Curve down to 2009 levels.

Each time the Fed has lowered the overnight lending rate, the next set of increases have never exceeded the previous peak.  This is due to the fact, that over the last 35 years, economic growth has been on a continued decline. Increases in interest rates are not kind to the markets either.  Each time the Fed has started increasing the overnight lending rates.  Each time has seen either market stagnation, declines, or crashes.  Furthermore, it is currently implied that the Fed funds rate will increase to 3% in the future, yet the current downtrend suggests that an increase to 2% is likely all that can be withstood. According to Jim Cramer last night, he said the idea of rising interest rates shocked the markets, however, in the long-term it's a positive sign. Rates rise as the economy does better. The assumption he makes is that as the economy "catches fire" and corporate profits increase, then it is natural for interest rates to rise also.  If a growing economy is a function of expanding profitability, then what is wrong with the chart below...

Drum roll please... A shift from quantitative thresholds to hand-waving along with lower growth expectations and lower unemployment expectations (and more Fed members seeing rate hikes in 2015) - plenty of confusion in there for everyone... Over to you Janet...

As traders, economists, and TV talking-heads parse every word of Janet Yellen's first FOMC statement for hints at when the punchbowl (if ever) will be removed, there is - as the following chart clearly shows - only one thing that really matters...

US equity markets are up around 2% from Friday's close - extending yesterday's hope-filled gains on the back of Vladimir Putin not nuke-ing the world this morning and lower-than-expected inflation prompting hope for moar free money tomorrow. This jump is a ridiculous deja vu all over again of Putin's first press conference. Bear in mind that the USD is unchanged on the week and Treasury yields are up a mere 1-2bps - so hardly a resounding risk-on conviction. Following yesterday's epic low volume, today was little better. Copper was flat as Oil prices rose back towards $100. Gold and silver were pummeled - just for good measure (gold's biggest 2-day drop in 3 months) - as was VIX (which took over the role of S&P 500 driver from AUDJPY after Europe closed). The afternoon saw VIX diverging (higher ahead of tomorrow's FOMC) from rising stocks. For the week, USD unch, Bonds unch, Stocks +2%, Gold -2%.

"X" continues to mark the spot of the death of global investor rationality...

Presented with little comment aside to ask... just how many lives does a Russian Ruble have?

...but the second half of the year is going to be great... (or 3rd or 4th)

Copper's China-credit-contraction-driven crash continues as the metal drops to fresh 5-year lows today (on par with Lehman and the US downgrade collapses). Japanese stocks are down over 1000 points from their post-Putin highs. Russian stocks are plunging, Germany's (and Swiss) bonds are surging (as is gold) and European equity and credit markets are in free-fall. But apart from that... Finally we saw the world's angst spill into Yen-carry trades (USDJPY was spanked today - almost biggest drop in 6 months). US equities plunged tick-for-tick with USDJPY (S&P's biggest drop in 6 weeks and red for 2014); Treasury yields were crushed 9-10bps from intraday highs (biggest drop in 2 months); credit spreads banged wider; gold jumped to six-month highs; and EUR weakness (post-Draghi) ramped the USD back near unchanged on the week. VIX was a one-way street higher all day (biggest low-to-high run in 6 weeks) to 6-week highs.