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A
nother day, and yet another 200-point last-hour 'save'. It's getting a tad monotonous, but if the US government is so keen on destroying the long-term economic prosperity of its herd, then who are we to argue?
This is one of the interesting things about These Times. We are witnessing the unravelling of all the economic falderol on which western governments base their 'right' to control their populations. The response by the parasitic political class is the same as it has been since Nero and Caligula: clip the coinage, loot the Treasury, impoverish the people as the last act before collapse.
It turns out that Mises was right - the State can't control economic activity. Central planning doesn't work; it is simply not possible for a bunch of bureaucrats to plan something as complex as a modern economy. (Mises said that in 1920).
What you wind up with, is a huge pot of money - the tax take - that every skeevy parasite in the world knows is there, and they all line up to get their bit. Politicians are bribed (or for those with a taste for a bit of random bum - like Blair and Bush - blackmailed), and tax dollars are diverted to cronies.
The Money Power is likewise abused: again it has been that way since Rome, when Nero started extracting the precious metals content of the denarius and aureus. Between 277BC - when the denarius first appeared - and 60BC (the reign of Julius Caesar) the denarius shed 9% of its silver content (from 66 grains to 60). Not bad - a relatively stable value (per coin) over a period of almost 220 years.
Nero removed 14% more in one year (54 AD), and 200 years later the coin had only 26 grains of silver left in it (that is, its precious metal content had fallen 66% since inception). By the end of the Empire, it was made entirely of base metal.
So currency debasement is nothing new - and nor is inflation (the natural corollary to debasement). Whereas the Romans debased their coin over a period of half a millennium, the US has reduced the precious metals content of its coin in less than a century. (While copper is not a precious metal, the copper penny is a good example. The penny was 100% copper until 1982... now it's 97.5% zinc) .
This is what government brings. It will hide its parasitism for as long as it can, but then along comes someone like John Law (or his intellectual heir - Ben Bernanke) who basically thinks that government can print its way out of trouble - and impose the death penalty on anyone who refuses to accept the debased coin of the realm.
So we have these periods when the economic system - burdened by having to support an ever-increasing cast of government parasites - finally develops some creaks in its bones. At times like these, and after a train of usurpations of right and pelf that becomes unbearable, and which does not provide the benefits which were promised, society has the right to dismiss these parasites and charlatans. To withdraw its consent.
I believe - as Jefferson did - that, even if government pretends that we all 'consent by action' we may withdraw our consent individually at any point, since the period of consent is not specified and since men are free.
Government is the ultimate in organised crime: this is why organisations like the Mafia are definitely not in the anarchy/akraty business: 'genuine' organised crime depends on government; it benefits from the fact that governments always seek to disarm their populations; that governments acquire a monopoly on legal violence (thereby making the population reliant on ineffective police forces); that governments provide a convenient centralised location for payment of bribes to ensure continued operation.
Why do you think that the 'War on Drugs' has been carried on for so long when it is such a dismal failure? The answer: because as with alcohol prohibition, there are a welter of politicians, police, and organised criminals who are making an absolute fucking fortune... and they have no intention that the opportunity ends.
Moving right along...
The long bond market is currently in a full-blown meltup, as a failing hedge fund is trying to exit a pretty large short position taken across the 5-30 year strip; these folks had the right idea, but their timing sucked big-time. From what I'm told, they were short $300m of 30-years at prices under 114, and lost their lines of credit (the things that enable them to leverage up their client's money) just over a week ago. As such, they have had to be unwilling buyers of bonds across the 5-30 years spectrum... once that news became public, nobody on earth wanted to be a seller of bonds.
So at present, the US bond market is broken; it is not furnishing any sort of genuine price discovery. It's not providing useful indications of bond investors' assessments of future inflation: it is inconceivable that holders of 30 year bonds now expect next-to-no inflation for 30 years, at a time when the US government has embarked on a money-printing binge. (If I was the Chinese government I would be using this rally to unload some US Treasuries).
The Fed is partly to blame - people have got it into their heads that the Fed has the option of "buying the curve" as a means of influencing interest rates once it cuts the Fed Funds rate to zero. If they were ever actually forced to do so, it would be an indication that all its prior monetary easing had failed.
All of this is annoying, since we are short bonds from the mid-127 region: that play is sucking ass, but it's one of the things that make contrarianism exciting (and difficult). Put simply, a sensible contrarian waits until a market is overloaded in one direction, and bets against it. What that means is that you will never ever be the idiot that bought the high, and you will never ever be the idiot that sold the low. The only time that you'll get permanently hurt is if you keep entering in one direction when the underlying trend changes; then you can wind up having shorted an interim high that subsequently gets swamped.
That's not the case with our bond short: there is no nascent bull market in the offing. There is a dislocation that has been brought about by one (or two) firms who shorted an interim low. Their economic rationale was sound, but the execution was non-contrarian: they obviously entered on a break below a given price level (since prices below 114 were only present during the recent swing low). Today saw the confirmation (for a second day running) of a CCI divergence on daily charts, so - if you're not short already - get short 30-years (the contract is ZB, but you can also use CFDSs now which have lower margin requirements). I can't claim this one later on, given that we're already short from 127-odd.
Economic News
The BLS released the revision to the Q3 report on Labour Productivity - and everyone started babbling about how 1.3% was better than expected (consensus was for 1% flat). Yet more evidence that 'market economists' have no idea what they are talking about when analysing data.
Productivity rose because output fell more slowly than aggregate labour hours - which is precisely what you would expect if firms are laying off workers (you lay off your least productive labour first, if you can get away with it). So, far from being a vindication of some miraculous ability of the US to utilise capital, it was a vindication of a very basic economic principle: increases the capital-labour ratio will raise productivity per hour worked. Anyone who doesn't get that, should not be allowed to pontificate on economic statistics.
Also within the report, labour's lack of bargaining power was reinforced: unit labour costs have not risen in line with productivity. Again, in an environment of declining labour use, the pressure on wages will be downward, not upward, despite the increase in 'productivity'.
The ISM Services Index reported its worst number on record; at 37.3, it was well below the consensus estimate of 42.
The ADP Employer Services survey indicated that the firms it surveyed shed 250,000 jobs in November, a sharp increase from the 179,000 fall in October and well above the consensus estimate of -205,000.
And finally - as if we need to be lectured about economic weakness by the bunch of frothy old crabbers who never saw it coming - the Fed Beige Book was released. If you're a decent analyst it is about as useful as "Green Eggs and Ham". The one released to day indicated that the aforementioned frothy old crabbers discovered that the economy weakened in all Fed districts. Fabulous.
Headline Indices
The Dow Jones Industrial Average rose 172.60 points (2.05%) to 8591.69 points. The index high for the day was 8624.19 set just prior to the close, while the low was 8234.15 - set at 10 a.m. (half an hour after the open).
Total volume traded in the 30 components of the index was 1.45bn shares. Advancers outpaced decliners by 6.5 to one, with 26 advancers to 4 decliners. Advancing volume exceeded declining volume by 1.38bn to 64.95m shares The biggest gainers (percentage-wise) were -
- Citigroup (C) +0.6 (8.3%) to $7.82 on volume of 313.64m shares;
- AIG (AIG) +0.14 (7.5%) to $2.01 on volume of 96.61m shares;
- Bank Of America (BAC) +1 (7.1%) to $15.05 on volume of 128.05m shares;
- JPMorganChase (JPM) +1.72 (6%) to $30.25 on volume of 64.8m shares; and
- American Express (AXP) +1.11 (5.3%) to $21.87 on volume of 14.32m shares.
The S&P500 Index added 21.93 points (2.58%) to 870.74 points. Total volume traded in the 500 components of the index was 5.12bn shares. Advancers outpaced decliners by 4.4 to one, with 395 advancers to 90 decliners. Advancing volume exceeded declining volume by 4.33bn to 706.19m shares. The biggest gainers (percentage-wise) were -
- Genl Growth Properties (GGP) +0.41 (43.6%) to $1.35 on volume of 20.22m shares;
- SanDisk Corporation (SNDK) +1.81 (25.1%) to $9.02 on volume of 19.85m shares;
- CIT Group (CIT) +0.81 (23.5%) to $4.26 on volume of 17.2m shares;
- LSI Corporation (LSI) +0.53 (20.6%) to $3.1 on volume of 10.71m shares; and
- XL Capital (XL) +0.89 (18.8%) to $5.63 on volume of 7.35m shares.
The Nasdaq Composite advanced 42.58 points (2.94%) to 1492.38 points and the Nasdaq100 rose 36.20 points (3.2%) to 1166.20 points. Total volume traded in the 100 components of the Nasdaq100 index was 1.09bn shares. Advancers outpaced decliners by 5.9 to one, with 82 advancers to 14 decliners. Advancing volume exceeded declining volume by 926.93m to 131.67m shares. The biggest gainers (percentage-wise) were -
- SanDisk (SNDK) +1.81 (25.1%) to $9.02 on volume of 19.85m shares;
- Marvell Technology Group (MRVL) +1.04 (20.4%) to $6.13 on volume of 26.95m shares;
- Bed Bath & Beyond (BBBY) +2.82 (14.3%) to $22.49 on volume of 13.52m shares;
- Amylin Pharmaceuticals (AMLN) +0.89 (14.2%) to $7.14 on volume of 2.36m shares; and
- Intuitive Surgical (ISRG) +15.12 (12.8%) to $133.07 on volume of 2.2m shares.
Volatility
The CBOE Volatility Index fell 2.27 points (3.6%) to 60.71 points and the CBOE Nasdaq100 Volatility Index dropped 0.79 points (1.26%) to 61.69 points.
Breadth and Internals
A total of 3931 issues traded today on the NYSE; today's total volume was 2.87bn shares. A total of 2548 stocks posted gains for the day, and volume in advancing issues totalled 1.16bn shares. Exerting downwards pressure on the index were 1297 losers, which accounted for a total declining volume of 1.68bn shares. 30 stocks made new 1-year highs on the NYSE, while 165 shares plumbed new 52-week depths.
On the Nasdaq 2982 tickers traded today; total Nasdaq volume was 2.24bn shares. A total of 1736 stocks posted gains for the day, with aggregate volume of 1.77bn shares changing hands in the day's winners. The red zone of the Nasdaq exchange comprised 1112 losers, and total declining volume was 0.42bn shares. 6 Nasdaq-listed stocks hit new 52-week highs, while 108 shares dipped to new 1-year lows.
| Major Market Statistics | |||
| Index | Close | Gain(Loss) | % |
| Dow Jones Industrial Average | 8591.69 | +172.60 | 2.05% |
| S&P500 Index | 870.74 | +21.93 | 2.58% |
| Nasdaq Composite | 1492.38 | +42.58 | 2.94% |
| Nasdaq100 | 1166.20 | +36.20 | 3.2% |
| CBOE Volatility Index | 60.71 | -2.27 | -3.6% |
| CBOE Nasdaq100 Volatility Index | 61.69 | -0.79 | -1.26% |
Dow Darlings
- Citigroup (C) +0.6 (8.3%) to $7.82 on volume of 313.7m units
- Bank Of America (BAC) +1 (7.1%) to $15.05 on volume of 128.1m units
- JPMorganChase (JPM) +1.72 (6%) to $30.25 on volume of 64.8m units
- American Express (AXP) +1.11 (5.3%) to $21.87 on volume of 14.3m units
- Coca-Cola (KO) +2.21 (5%) to $46.14 on volume of 19.9m units
Dow Duds:
- Alcoa (AA) -0.47 (4.8%) to $9.29 on volume of 25.4m units
- Chevron (CVX) -0.8 (1.1%) to $74.74 on volume of 22.6m units
- Boeing (BA) -0.23 (0.6%) to $40.47 on volume of 8m units
- 3M Co (MMM) -0.15 (0.2%) to $60.71 on volume of 9m units
Most Traded Dow stocks:
- Citigroup (C) +0.6 (8.3%) to $7.82 on volume of 313.7m units
- General Electric (GE) +0.52 (3%) to $18.13 on volume of 157.1m units
- Bank Of America (BAC) +1 (7.1%) to $15.05 on volume of 128.1m units
- Microsoft (MSFT) +0.72 (3.8%) to $19.87 on volume of 80.9m units
- Intel (INTC) +0.38 (2.9%) to $13.66 on volume of 77.1m units
Precious Metals
Precious metals futures were unspectacular, although Gold continues to suffer from a recent bout of strange shorting on the COMEX.
| Precious Metals Futures | |||
| Index | Close | Gain(Loss) | % |
| Gold | 773.7 | -9.6 | -1.23 |
| Silver | 9.65 | 0.035 | 0.36 |
| Palladium | 172.6 | 0.15 | 0.09 |
| Platinum | 807.6 | 0.3 | 0.04 |
The Gold Bugs index (XAU) dipped -4.44 points (4.68%) to 90.47 points. Total volume traded in the 16 components of the index was 160.81m shares. Decliners outpaced gainers by 2.2 to one, with 11 decliners to 5 advancers. Declining volume was greater than advancing volume by 130.44m to 30.37m shares. The main decliners (in percentage terms) were -
- Freeport McMoran (FCX) -3.77 (17.3%) to $18.05 on volume of 50.97m shares;
- Newmnt Mining (NEM) -2.82 (8.8%) to $29.34 on volume of 10.27m shares;
- Pan-American Silver (PAAS) -0.78 (6.5%) to $11.26 on volume of 1.43m shares;
- GoldCorp (GG) -1.55 (6.2%) to $23.27 on volume of 14.82m shares; and
- Agnico Eagle Mines (AEM) -1.95 (6%) to $30.65 on volume of 4.43m shares.
Energy Complex
Energy futures have bottomed. If you don't buy Crude or Natural Gas today, you will be a very sad bunny when I crow about it later.
| Energy Futures | |||
| Commodity | Close | Gain(Loss) | % |
| Crude Oil | 46.91 | -0.05 | -0.11 |
| Heating Oil | 1.587 | 0.0038 | 0.24 |
| Natural Gas | 6.372 | -0.052 | -0.81 |
| Gasoline RBOB | 1.0425 | -0.0158 | -1.49 |
| Ethanol | 1.57 | 0 | 0 |
The Oil Services index (OSX) lost -2.35 points (2%) to 115.2 points. Total volume traded in the 15 components of the index was 130.39m shares. Decliners outpaced gainers by 2 to one, with 10 decliners to 5 advancers. Declining volume was greater than advancing volume by 103.63m to 26.76m shares. The main decliners (in percentage terms) were -
- Smith International (SII) -2.39 (10%) to $21.54 on volume of 8.21m shares;
- Baker Hughes (BHI) -1 (3.4%) to $28.42 on volume of 7.03m shares;
- Schlumberger (SLB) -1.39 (3.2%) to $42.53 on volume of 19.78m shares;
- National Oilwell Varco (NOV) -0.73 (3.1%) to $22.53 on volume of 11.58m shares; and
- Oceaneering International (OII) -0.71 (3%) to $22.63 on volume of 0.94m shares.
Currency Futures
Currency futures continue to work sideways - it's almost as if there are people who think that the next move in the USDX will be UP. US has peaked from its repatriation-induced bounce, and its decline will accelerate in coming weeks.
| Currency Futures | |||
| Index | Close | Gain(Loss) | % |
| U.S. Dollar Index | 86.915 | 0.095 | 0.11 |
| Euro FX | 1.265 | -0.0046 | -0.36 |
| Soybeans | 830 | 3 | 0.36 |
| Swiss Franc | 0.8243 | -0.005 | -0.6 |
| Australian Dollar | 0.6419 | 0.0034 | 0.53 |
| Canadian Dollar | 0.793 | -0.0044 | -0.55 |
| Japanese Yen | 1.0748 | 0.0016 | 0.15 |
| New Zealand Dollar | 0.5264 | -0.0022 | -0.42 |
Bellwethers
The nine-stock group that makes up the Rant bellwethers advanced on average by 3.5%. The fallout occurred as follows:
- General Electric (GE) +0.52 (2.95%) to $18.13 on volume of 157.13m units.
- Citigroup (C) +0.60 (8.31%) to $7.82 on volume of 313.72m units.
- Wal-Mart (WMT) +0.93 (1.74%) to $54.38 on volume of 25.18m units.
- IBM (IBM) +0.83 (1.04%) to $80.67 on volume of 9.74m units.
- Intel (INTC) +0.38 (2.86%) to $13.66 on volume of 77.06m units.
- Cisco Systems (CSCO) +0.69 (4.5%) to $16.01 on volume of 69.53m units.
- Google (GOOG) +4.32 (1.57%) to $279.43 on volume of 5.9m units.
- Fannie Mae (FNM) +0.02 (2.44%) to $0.84 on volume of 50.32m units.
- Freddie Mac (FRE) +0.05 (6.49%) to $0.82 on volume of 23.84m units.
Other Indices of Interest...
The Banks index (BKX) rose 2.3 points (5.4%) to 44.93 points. Total volume traded in the 24 components of the index was 805.77m shares. Advancers outpaced decliners by 6.7 to one, with 20 advancers to 3 decliners. Advancing volume exceeded declining volume by 779.48m to 26.28m shares The biggest gainers (percentage-wise) were -
- Bank Of NY Mellon (BK) +2.45 (9%) to $29.59 on volume of 11.55m shares;
- Wachovia (WB) +0.45 (9%) to $5.44 on volume of 45.6m shares;
- Huntington Bancshares (HBAN) +0.63 (9%) to $7.65 on volume of 6.08m shares;
- PNC Financial (PNC) +3.72 (8.6%) to $46.98 on volume of 8.37m shares; and
- Wells Fargo (WFC) +2.21 (8.5%) to $28.1 on volume of 72.85m shares.
The Semiconductor index (SOX) advanced 12.38 points (6.67%) to 198.07 points. Total volume traded in the 18 components of the index was 324.64m shares. Advancers outpaced decliners by 8 to one, with 16 advancers to 2 decliners. Advancing volume exceeded declining volume by 264.45m to 60.19m shares The biggest gainers (percentage-wise) were -
- Sandisk (SNDK) +1.81 (25.1%) to $9.02 on volume of 19.85m shares;
- Marvell Technology (MRVL) +1.04 (20.4%) to $6.13 on volume of 26.95m shares;
- Xilinx (XLNX) +1.46 (9.5%) to $16.77 on volume of 11.96m shares;
- Teradyne (TER) +0.32 (9.3%) to $3.75 on volume of 4.39m shares; and
- Broadcom (BRCM) +1.27 (8.9%) to $15.51 on volume of 12.6m shares.
The ChildKiller ("Defence") index (DFX) gained 3.65 points (1.52%) to 244.15 points. Total volume traded in the 17 components of the index was 206.19m shares. Advancers outpaced decliners by 3 to one, with 12 advancers to 4 decliners. Advancing volume exceeded declining volume by 187.21m to 18.93m shares The biggest gainers (percentage-wise) were -
- Northrop Grummanl (NOC) +1.79 (4.6%) to $41 on volume of 3.24m shares;
- Lockheed Martin (LMT) +3.28 (4.5%) to $76.91 on volume of 3.97m shares;
- Esterline Tech (ESL) +1.43 (4.4%) to $34.3 on volume of 0.27m shares;
- ITT Corporation (ITT) +1.45 (3.6%) to $41.3 on volume of 3.05m shares; and
- Raytheon (RTN) +1.72 (3.5%) to $50.62 on volume of 4.58m shares.
