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Back in the olden days, I pinched a quote from Bill Bonner's Daily Reckoning, to the effect that the script for the future of the US was written in Japanese. It was a lovely turn of phrase; not only was it elegant, but it struck me at the time that it had achieved zero.
That sounds harsh at first reading - but it is actually a compliment, since for those of a Japanese-philosophical bent achieving zero is an objective: zero is "Where the Way has No Power" and is similar to fidochi of the Shinkage school or wu-wei in the Tao.
For me, the meat always lies in shinmyoken ("where the tip of the sword rests/divine sword") or tensetsu ransetsu ("wild slashing"); I like violence too much to aspire to inner clarity.
Anyway - enough of the Iteki's Guide to Heiho Kaden Sho.
hmmmm... what was my point?
Ah yes.
Bonner was right (and I was right to pinch the quote).
Today the Federal Reserve told the world that the US was going to have the same exact experience as Japan (but without savings).
Today the Federal Reserve told the world that the US was going to have zombie banks, just like the Japanese did.
Today the Federal Reserve told the world that the US economy is doomed to a decade of sub-par growth and falling or stagnant asset prices.
Today the Federal Reserve told the world that the future would see quantitative easing (bureaucratic bullshit that actually means "flooding the system with money") and massive fiscal irresponsibility.
Today the Federal Reserve told the world that the US government - like the Japanese government in the 1990s - was going to try and force the market to do things that the market doesn't want to do.
The Federal Reserve did not say these things explicitly - it frothed out the same pablum as it always does. If you were to believe the blatherings of Fedsters, the US was, is, and will always be subject to the perfect monetary policy settings - an economic nirvana.
And the dumb schlubs ate that shit up, as Chris Rock might say.
The Dow had another one of its meltups ... but if you were watching the tape you saw that the thing was being pushed. Every time the thing tried to take a breath, it would fall 70 or 80 points quickly... at which point it would get another half-pound of speed rammed down its throat.
I think that the Fed is wrong - I think the next ten years in the US will be much worse than the 20 years following the end of the Asian miracle.
The lack of savings in the US will couple with the unwillingness of the rest of the world to finance a dying toothless Empire. That will mean that the US has no policy buffer because it will have no means of funding any policy: the global debt market will not shut down, but the US will be like England after WWII... a former power that has to go cap in hand to the people over whom they sought to 'lord it' for decades.
Nobody pays lip service to Portugal anymore; nobody permits Spain to borrow unlimited amounts at rates that imply zero default; nobody lends at zero interest to Athens or Sparta or Alexandria or Rome or Constantinople or Carthage or Nineveh or Karakorom.
The grand sweep of history shows us that every time someone decides they are ordained by the stars to show the world how to live, the costs rapidly exceed the benefits.
That's why since 2000/01 I have constantly banged on about China: notwithstanding 50-odd years of stupidity (from Mao to the death of Deng), the Chinese have a virtually unbroken 5000 year cultural history. They had philosophy and literature when our ancestors were running around with pointy sticks; they have stuff that was written in 1400BC that you don't have to bee a super-scholar to understand - to compare that with the European experience, try reading Chaucer (or even Shakespeare).
The Chinese didn't have a Dark Ages, and they weren't expansionist (they built various walls starting in 600BC, in order to keep invaders out). They sent explorers out into the world, but they didn't usually slaughter the indigenes once they found them.
Now don't get me wrong - Chinese politicians are quite possibly as grasping, venal and parasitic as the faan gwai loh versions that infest western economies. Still, it has to be admitted that for whatever reason the Chinese have been much more amenable to trade than to war. They saw Rome come and go (and traded with Romans). They saw Alexander the Great come and go (and trade with the Macedonians). They saw Genghis Khan come and go, too.
It is perhaps true that a great deal of the world's technological progress (since the Industrial Revolution) has been centred on the West, but that strikes me as being coincidental. It's not clear that a monoculture will necessarily be less innovative than a region in which a bazillion small empires are constantly harassing one another.
The Chinese invented water mills, paper, printing, the magnetic compass, and gunpowder, using the latter for fireworks as well as the usual military application - blowing stuff up. So they weren't exactly sitting on their laurels - they discovered rocketry at the start of the 13th century, and had a device similar to the aeolipile (a primitive steam turbine invented by Heron of Alexandria in the first century AD).
And of course Wan-Hu was the first man to experiment with rocket-propelled flight: he strapped a bunch of rockets to a chair, sat in it and order some lackeys to light the rockets. When the smoke cleared, he had disappeared... I am guessing he 'disappeared' in the way that military personnel are prone to 'disappear' if they step on an anti-tank mine.
Economic News
The CPI fell by 1.7% - the largest decline since records started being compiled (1947). The 'core' CPI was unchanged as expected.
Housing Starts were abysmal at 625000 (consensus expected 725000); that is the lowest annual rate of housing starts since records began (in 1959).
Building Permits were likewise weaker than expected - the number was 616000 when the market expected 700000.
But the Fed cut by much more than expected (setting a target 'band' of 0 to 0.25%) and said it would buy assets, so the market rallied.
Hmmm... government setting the price of assets... where have we seen that before.
Ah yes. The Union of Soviet Socialist Republics. I forget how that ended... it was very popular for a while.
Headline Indices
The Dow Jones Industrial Average index (DJI) gained 359.61 points (4.2%) to 8924.14 points. The index high for the day was 8957.75 set 3 minutes before the close, while the low was 8565.65 set at the open.
Total volume traded in the 30 components of the index was 1.3bn shares. All 30 Dow components rose. The biggest gainers (percentage-wise) were -
- JPMorganChase (JPM) +3.72 (13%) to $32.35 on volume of 73.35m shares;
- Citigroup (C) +0.83 (11.2%) to $8.23 on volume of 201.04m shares;
- Boeing (BA) +3.16 (8.2%) to $41.9 on volume of 10.62m shares;
- Intel (INTC) +1.05 (7.2%) to $15.64 on volume of 98.15m shares; and
- Bank Of America (BAC) +0.99 (7%) to $15.1 on volume of 176.94m shares.
The S&P500 index (SPX) rose 44.61 points (5.14%) to 913.18 points. Total volume traded in the 500 components of the index was 4.73bn shares. Advancers outpaced decliners by 31.3 to one, with 470 advancers to 15 decliners. Advancing volume exceeded declining volume by 4.43bn to 212.32m shares. The biggest gainers (percentage-wise) were -
- XL Capital (XL) +0.78 (26.9%) to $3.68 on volume of 17.23m shares;
- Genworth Financial Inc. (GNW) +0.69 (24.6%) to $3.49 on volume of 65.2m shares;
- Hartford Financial Svc.Gp. (HIG) +3.31 (23.7%) to $17.28 on volume of 27.75m shares;
- Apartment Investment & Mgmt'A' (AIV) +2.45 (22%) to $13.57 on volume of 5.98m shares; and
- Prudential Financial (PRU) +5.19 (21.1%) to $29.8 on volume of 10.8m shares.
The Nasdaq Composite rose +81.55 points (5.41%) to 1589.89 points and the Nasdaq100 gained +61.62 points (5.21%) to 1243.49 points..
Total volume traded in the 100 components of the index was 1.06bn shares. Advancers outpaced decliners by 23.5 to one, with 94 advancers to 4 decliners. Advancing volume exceeded declining volume by 1.03bn to 35.81m shares. The biggest gainers (percentage-wise) were -
- Cadence Design Systems (CDNS) +0.5 (19.2%) to $3.11 on volume of 9.7m shares;
- Liberty Media (LINTA) +0.38 (15%) to $2.91 on volume of 5.76m shares;
- Ryanair Holdings plc (RYAAY) +3.71 (13.1%) to $31.93 on volume of 1.66m shares;
- Baidu.com (BIDU) +13.91 (11.8%) to $132 on volume of 6.09m shares; and
- Millicom International Cellular (MICC) +4.66 (11.7%) to $44.64 on volume of 1.17m shares.
Volatility
The CBOE Volatility Index dipped 4.39 points (7.73%) to 52.37 points and the CBOE Nasdaq100 Volatility Index dipped 4.49 points (8.21%) to 50.22 points.
Breadth and Internals
[Note - the volume stats for the NYSE are again probably wrong: the AD count and new Highs/Lows are correct]
A total of 3947 issues traded today on the NYSE; today's total volume was 2.33bn shares. A total of 3274 stocks posted gains for the day, and volume in advancing issues totalled 1.7bn shares. Exerting downwards pressure on the index were 604 losers, which accounted for a total declining volume of 0.6bn shares. 28 stocks made new 1-year highs on the NYSE, while 114 shares plumbed new 52-week depths.
On the Nasdaq 3058 tickers traded today; total Nasdaq volume was 2.18bn shares. A total of 2278 stocks posted gains for the day, with aggregate volume of 2.03bn shares changing hands in the day's winners. The red zone of the Nasdaq exchange comprised 660 losers, and total declining volume was 0.14bn shares. 3 Nasdaq-listed stocks hit new 52-week highs, while 99 shares dipped to new 1-year lows.
| Major Market Statistics | |||
| Index | Close | Gain(Loss) | % |
| Dow Jones Industrial Average | 8924.14 | +359.61 | 4.2% |
| S&P500 Index | 913.18 | +44.61 | 5.14% |
| Nasdaq Composite | 1589.89 | +81.55 | 5.41% |
| Nasdaq100 | 1243.49 | +61.62 | 5.21% |
| CBOE Volatility Index | 52.37 | -4.39 | -7.73% |
| CBOE Nasdaq100 Volatility Index | 50.22 | -4.49 | -8.21% |
Dow Darlings
- JPMorganChase (JPM) +3.72 (13%) to $32.35 on volume of 73.3m units
- Citigroup (C) +0.83 (11.2%) to $8.23 on volume of 201m units
- Boeing (BA) +3.16 (8.2%) to $41.9 on volume of 10.6m units
- Intel (INTC) +1.05 (7.2%) to $15.64 on volume of 98.2m units
- Bank Of America (BAC) +0.99 (7%) to $15.1 on volume of 176.9m units
Dow Duds: none
Most Traded Dow stocks:
- Citigroup (C) +0.83 (11.2%) to $8.23 on volume of 201m units
- Bank Of America (BAC) +0.99 (7%) to $15.1 on volume of 176.9m units
- General Electric (GE) +0.97 (5.7%) to $17.92 on volume of 116.5m units
- Intel (INTC) +1.05 (7.2%) to $15.64 on volume of 98.2m units
- Microsoft (MSFT) +1.07 (5.6%) to $20.11 on volume of 94m units
Precious Metals
Precious metals futures advanced nicely - I said some time ago that Gold and the USDX had made their low, and high, respectively.
| Precious Metals Futures | |||
| Index | Close | Gain(Loss) | % |
| Gold | 860.7 | 24.2 | 2.89 |
| Silver | 11.16 | 0.54 | 5.08 |
| Palladium | 181.9 | 4.4 | 2.48 |
| Platinum | 866 | 26.8 | 3.19 |
The Gold Bugs index (XAU) gained 8.21 points (7.29%) to 120.83 points. Total volume traded in the 16 components of the index was 165.71m shares. All 16 index components rose. The biggest gainers (percentage-wise) were -
- Silver Wheaton (SLW) +0.85 (16.8%) to $5.92 on volume of 14.21m shares;
- Pan-American Silver (PAAS) +2.03 (13.7%) to $16.88 on volume of 2.55m shares;
- Coeur d'Alene (CDE) +0.09 (12.9%) to $0.79 on volume of 14.78m shares;
- Silver Stand Resources (SSRI) +1.55 (12.3%) to $14.14 on volume of 1.42m shares; and
- Freeport McMoran (FCX) +2.38 (10.6%) to $24.89 on volume of 21.77m shares.
Energy Complex
Energy futures were slightly soft (note - the table below shows the Feb09 contract now, which is why it differs markedly from spot... the Crude market is strongly backwarded) -
| Energy Futures | |||
| Commodity | Close | Gain(Loss) | % |
| Crude Oil | 43.58 | -0.93 | -2.09 |
| Heating Oil | 1.472 | 0.0119 | 0.82 |
| Natural Gas | 5.806 | 0.161 | 2.85 |
| Gasoline RBOB | 1.0428 | 0.0059 | 0.57 |
| Ethanol | 1.587 | 0.04 | 2.59 |
The Oil Services index (OSX) added 3.46 points (2.79%) to 127.62 points. Total volume traded in the 15 components of the index was 105.46m shares. Advancers outpaced decliners by 6.5 to one, with 13 advancers to 2 decliners. Advancing volume exceeded declining volume by 89.47m to 16m shares The biggest gainers (percentage-wise) were -
- Oceaneering International (OII) +1.93 (7.6%) to $27.41 on volume of 1.02m shares;
- Halliburton (HAL) +1.17 (6.8%) to $18.43 on volume of 18.89m shares;
- Tidewater (TDW) +2.42 (6.3%) to $40.61 on volume of 0.73m shares;
- Weatherford International (WFT) +0.55 (5.3%) to $10.86 on volume of 14.42m shares; and
- BJ Services (BJS) +0.57 (5.1%) to $11.83 on volume of 6.31m shares.
Currency Futures
Currency futures just did the business like you would not believe... our long AUD (AD) and Euro (EC) positions are now massively profitable (to the tune of $12k per contract for the Euro, and $7k per contract for the Aussie) -
| Currency Futures | |||
| Index | Close | Gain(Loss) | % |
| U.S. Dollar Index | 80.9 | -2.185 | -2.63 |
| Euro FX | 1.3944 | 0.0308 | 2.26 |
| Swiss Franc | 0.8897 | 0.0252 | 2.91 |
| Australian Dollar | 0.6879 | 0.027 | 4.09 |
| Canadian Dollar | 0.8243 | 0.017 | 2.11 |
| Japanese Yen | 1.1208 | 0.0148 | 1.34 |
| New Zealand Dollar | 0.5677 | 0.0211 | 3.86 |
Bellwethers
The nine-stock group that makes up the Rant bellwethers advanced on average by 4.5%. The fallout occurred as follows:
- General Electric (GE) +0.97 (5.72%) to $17.92 on volume of 116.45m units.
- Citigroup (C) +0.83 (11.22%) to $8.23 on volume of 201.04m units.
- Wal-Mart (WMT) +0.53 (0.97%) to $55.24 on volume of 22.32m units.
- IBM (IBM) +3.63 (4.39%) to $86.40 on volume of 11.05m units.
- Intel (INTC) +1.05 (7.2%) to $15.64 on volume of 98.15m units.
- Cisco Systems (CSCO) +0.58 (3.44%) to $17.42 on volume of 73.88m units.
- Google (GOOG) +14.61 (4.7%) to $325.28 on volume of 6.93m units.
- Fannie Mae (FNM) +0.01 (1.39%) to $0.73 on volume of 25.49m units.
- Freddie Mac (FRE) +0.01 (1.39%) to $0.73 on volume of 12.67m units.
Other Indices of Interest...
The Banks index (BKX) rose 4.3 points (10.38%) to 45.73 points. Total volume traded in the 24 components of the index was 722.73m shares and all index components posted a gain. The biggest gainers (percentage-wise) were -
- Wachovia (WB) +0.79 (15.5%) to $5.9 on volume of 42.38m shares;
- Wells Fargo (WFC) +3.71 (14.2%) to $29.78 on volume of 62.71m shares;
- Huntington Bancshares (HBAN) +0.94 (13.5%) to $7.91 on volume of 4.91m shares;
- JPMorganChase (JPM) +3.72 (13%) to $32.35 on volume of 73.35m shares; and
- Capital One Financial (COF) +3.35 (12.8%) to $29.46 on volume of 8.39m shares.
The Semiconductor index (SOX) rose 12.29 points (5.87%) to 221.51 points. Total volume traded in the 18 components of the index - every single one of which rose - was 288.52m shares. The biggest gainers (percentage-wise) were -
- Infineon Tech (IFX) +0.1 (11.4%) to $0.98 on volume of 2.19m shares;
- Marvell Technology (MRVL) +0.65 (9.8%) to $7.29 on volume of 22.7m shares;
- Taiwan Semiconductor (TSM) +0.72 (9.4%) to $8.39 on volume of 24.57m shares;
- ST Microelectronic (STM) +0.5 (7.4%) to $7.27 on volume of 1.71m shares; and
- KLA-Tencor Cp (KLAC) +1.48 (7.2%) to $21.97 on volume of 4.29m shares.
The ChildKiller ("Defence") index (DFX) rose 14.56 points (5.97%) to 258.6 points. Total volume traded in the 17 components of the index was 156.82m shares. Every stock in the index rose, with the biggest gainers (percentage-wise) being -
- Gencorp (GY) +0.37 (12.8%) to $3.25 on volume of 0.55m shares;
- Teledyne Tech (TDY) +3.75 (9.8%) to $41.99 on volume of 0.36m shares;
- ITT Corporation (ITT) +3.76 (8.9%) to $46.11 on volume of 2.63m shares;
- Esterline Tech (ESL) +2.87 (8.2%) to $37.83 on volume of 0.25m shares; and
- Boeing (BA) +3.16 (8.2%) to $41.9 on volume of 10.62m shares.
