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The US has a history of choosing the Statist horse - Hamilton instead of Jefferson, Keynes instead of Mises, Fisher instead of Mises (again), Friedman instead of Rothbard... serfdom instead of liberty.
They prefer to be washed in a gentle bath of pablum and soma that tells them that they are a beacon of hope, while since Hamilton's presidency their 'representatives' (a fancy word for 'overlord'... if you don't believe me, see what happens if you stop paying your overlord) have been more aggressively expansionist than Imperial Japan.
Government is a shell game - it sells the idea that it can improve economic life by taking money off one group and giving it to another (with 30% of the amount taken being used to pay bureaucrats, of course). It is a Ponzi scheme with a guaranteed loss.
As an aside, I don't like using the term "Ponzi scheme" because I fear that the term does an historic injustice to Carlo Ponzi. Ponzi was closed down by the government before he had ever defaulted on a single investor, and the arbitrage opportunity he was exploiting - pricing differentials between international postal coupons (or some such) - existed.
Ponzi had an interesting early life, and may well have been a crook - but until his company was shut down, it had kept every promise it had made. On that basis Ponzi stands in stark contrast to every government that has ever existed.
Government succeeds in perpetuating its scam because it gives people stuff, and people are dumb enough to think either that the stuff is 'free', or at the very least that other people are paying for it. How many times have you heard "The government is giving people X" or words to that effect?
In fact, the government can't give anybody anything without taking it off someone else. When it gives before it takes, it has to issue debt. Debt accrues interest, so those who pay the bills often wind up paying quite a lot more that the initial debt; there is an intergenerational transfer of wealth both to the recipient of the initial 'gift' from government, plus a further transfer - to bankers.
What people should realise is that no government has ever been able to 'rescue' an ailing economy by either money printing or deficit spending. FDR didn't rescue the US: the New Deal did nothing tangible (at least, it did not divert the US economy from the 'normal' path of recovery in all recession prior to 1929).
The US economy was mired in the aftermath of the 1929 bubble right up until World War II. The European theatre generated massive exports and lending to the Poms... and when it started to look like the Poms had bitten off more than they could chew, the US entered the war to make sure its banks got paid back after the war. Same as WWI.
If monetary policy worked, Weimar Germany, 1980s Argentina, and Zimbabwe would be joint leaders for the 'Best.Economy.Ever' prize. Not so much.
Another question that people never ask themselves is "What legal principle entitles the government to demand my compliance?"
On what basis can they promulgate 'law' and insist that it be obeyed under threat of armed force? If person A demands compliance from person B, a contract must exist between them. Contracts must have terms which must be fixed and understood by each party; those terms cannot be altered unilaterally.
A contract over a person that cannot be exited voluntarily, and the terms of can be changed without consultation: that's slavery. Pure and simple.
The question of the rights that government assumes, is a question has become something of an obsession for your beloved GT recently. I seriously want to know. If the answer is simply "Because they can" then John Howard had better hope that (a) I don't decide one day to impose my own 'law' on him; and (b) if I do, his security detail is better than my plan.
If anybody is aware of the stated legal basis - other than "We've got more guns than you" - on which the government claims literal ownership of its subjects, send it in. (Majority opinion is not satisfactory, by the way: a mob cannot claim rights over an individual simply by weight of numbers).
Economic News
Initial Jobless Claims stayed stubbornly above the 500k mark: the number for the week was 505k - lower than the 520k consensus. Continuing claims - a measure of long-term joblessness - hit a 26-year high.
Factory Orders dropped 5.6%, and within the report the important number - Non-Defence CapEx Excluding Aircraft - was also weak.
The European Central Bank cut official rates by 75 basis points to 2.75 percent; the Bank of England cut by a full percentage point to 2%... that's the lowest official rate in the UK since 1951.
Headline Indices
The Dow Jones Industrial Average fell 215.45 points (2.51%) to 8376.24 points. The index high for the day was 8631.99 at 11 a.m., while the low was 8266.97 - set about 20 minutes before the close. At 3 p.m. the index was more or less unchanged... then all hell broke loose.
The close would have looked a lot worse, except that someone decided to push the Dow up 110 points in 90 seconds between 3:57pm and 3:59pm NY time. You don't buy anything that aggressively unless you're using other people's money.
Total volume traded in the 30 components of the index was 1.29bn shares. Decliners outpaced gainers by 5 to one, with 25 decliners to 5 advancers. Declining volume was greater than advancing volume by 1.12bn to 169.47m shares. The main decliners (in percentage terms) were -
- General Motors (GM) -0.79 (16.1%) to $4.11 on volume of 47.11m shares;
- Alcoa (AA) -1.23 (13.2%) to $8.06 on volume of 35.14m shares;
- AIG (AIG) -0.17 (8.5%) to $1.84 on volume of 51.08m shares;
- Intel (INTC) -0.89 (6.5%) to $12.77 on volume of 77.13m shares; and
- Merck (MRK) -1.46 (5.5%) to $25 on volume of 20.05m shares.
The S&P500 Index dropped 25.52 points (2.93%) to 845.22 points. Total volume traded in the 500 components of the index was 4.71bn shares. Decliners outpaced gainers by 4.3 to one, with 394 decliners to 91 advancers. Declining volume was greater than advancing volume by 3.69bn to 956.21m shares. The main decliners (in percentage terms) were -
- Range Resources Corp. (RRC) -6.78 (17.6%) to $31.65 on volume of 5.97m shares;
- Peabody Energy (BTU) -3.85 (17.5%) to $18.13 on volume of 9.83m shares;
- General Motors (GM) -0.79 (16.1%) to $4.11 on volume of 47.11m shares;
- Chesapeake Energy (CHK) -2.26 (16%) to $11.84 on volume of 42.8m shares; and
- Southwestern Energy (SWN) -4.8 (15.4%) to $26.34 on volume of 8.63m shares.
The Nasdaq Composite dropped 46.82 points (3.14%) to 1445.56 points and the Nasdaq100 dipped 38.45 points (3.3%) to 1127.75 points. Total volume traded in the 100 components of the Nasdaq100 index was 963.47m shares. Decliners outpaced gainers by 5.1 to one, with 82 decliners to 16 advancers. Declining volume was greater than advancing volume by 837.59m to 125.88m shares. The main decliners (in percentage terms) were -
- Cognizant Technology Solutions (CTSH) -2.88 (15.3%) to $15.89 on volume of 8.6m shares;
- Joy Global (JOYG) -2.77 (13.7%) to $17.46 on volume of 5.05m shares;
- Focus Media Holding (FMCN) -0.84 (10.8%) to $6.95 on volume of 3.01m shares;
- Foster Wheeler (FWLT) -2.45 (10.6%) to $20.71 on volume of 6.47m shares; and
- SanDisk (SNDK) -0.94 (10.4%) to $8.08 on volume of 16.58m shares.
Volatility
The CBOE Volatility Index advanced +3.03 points (4.99%) to 63.75 points and the CBOE Nasdaq100 Volatility Index added +0.91 points (1.47%) to 62.65 points..
Breadth and Internals
A total of 3910 issues traded today on the NYSE; today's total volume was 2.3bn shares. A total of 1059 stocks posted gains for the day, and volume in advancing issues totalled 1.55bn shares. Exerting downwards pressure on the index were 2775 losers, which accounted for a total declining volume of 740m shares. 28 stocks made new 1-year highs on the NYSE, while 206 shares plumbed new 52-week depths.
On the Nasdaq 2989 tickers traded today; total Nasdaq volume was 2.02bn shares. A total of 855 stocks posted gains for the day, with aggregate volume of 330m shares changing hands in the day's winners. The red zone of the Nasdaq exchange comprised 2017 losers, and total declining volume was 1.67bn shares. 3 Nasdaq-listed stocks hit new 52-week highs, while 134 shares dipped to new 1-year lows.
| Major Market Statistics | |||
| Index | Close | Gain(Loss) | % |
| Dow Jones Industrial Average | 8376.24 | -215.45 | -2.51% |
| S&P500 Index | 845.22 | -25.52 | -2.93% |
| Nasdaq Composite | 1445.56 | -46.82 | -3.14% |
| Nasdaq100 | 1127.75 | -38.45 | -3.3% |
| CBOE Volatility Index | 63.75 | +3.03 | 4.99% |
| CBOE Nasdaq100 Volatility Index | 62.65 | +0.91 | 1.47% |
Dow Darlings
- JPMorganChase (JPM) +0.83 (2.7%) to $31.08 on volume of 79.5m units
- McDonalds (MCD) +1.29 (2.2%) to $60.84 on volume of 16.6m units
- Home Depot (HD) +0.46 (2%) to $23.22 on volume of 29.6m units
- Wal-Mart (WMT) +0.73 (1.3%) to $55.11 on volume of 28.2m units
- Du Pont (DD) +0.08 (0.3%) to $23.69 on volume of 15.6m units
Dow Duds:
- General Motors (GM) -0.79 (16.1%) to $4.11 on volume of 47.1m units
- Alcoa (AA) -1.23 (13.2%) to $8.06 on volume of 35.1m units
- Intel (INTC) -0.89 (6.5%) to $12.77 on volume of 77.3m units
- Merck (MRK) -1.46 (5.5%) to $25 on volume of 20.1m units
- Caterpillar (CAT) -2.13 (5.4%) to $37.52 on volume of 11.1m units
Most Traded Dow stocks:
- Citigroup (C) --0.42 (5.4%) to $7.4 on volume of 257.7m units
- General Electric (GE) --0.58 (3.2%) to $17.55 on volume of 110.4m units
- Bank Of America (BAC) --0.71 (4.7%) to $14.34 on volume of 105.9m units
- JPMorganChase (JPM) +0.83 (2.7%) to $31.08 on volume of 79.5m units
- Intel (INTC) --0.89 (6.5%) to $12.77 on volume of 77.3m units
Precious Metals
Precious metals futures weakened across the board -
| Precious Metals Futures | |||
| Index | Close | Gain(Loss) | % |
| Gold | 765.4 | -5.1 | -0.66 |
| Silver | 9.45 | -0.14 | -1.46 |
| Palladium | 171.95 | -1.05 | -0.61 |
| Platinum | 796.8 | -8.3 | -1.03 |
The Gold Bugs index (XAU) lost -2.77 points (3.06%) to 87.7 points. Total volume traded in the 16 components of the index was 127.32m shares. Decliners outpaced gainers by 7 to one, with 14 decliners to 2 advancers. Declining volume was greater than advancing volume by 116.41m to 10.9m shares. The main decliners (in percentage terms) were -
- Silver Wheaton (SLW) -0.29 (8.2%) to $3.24 on volume of 9.43m shares;
- Gold Fields Ltd (GFI) -0.57 (7.3%) to $7.23 on volume of 7.07m shares;
- Pan-American Silver (PAAS) -0.66 (5.9%) to $10.6 on volume of 0.97m shares;
- Silver Stand Resources (SSRI) -0.51 (5.8%) to $8.35 on volume of 0.62m shares; and
- Kinroos Gold (KGC) -0.81 (5.7%) to $13.51 on volume of 10.34m shares.
Energy Complex
Energy futures got caned - yesterday's buy OIl call is premature (don't fret - it's going to be fine).-
| Energy Futures | |||
| Commodity | Close | Gain(Loss) | % |
| Crude Oil | 43.62 | -3.17 | -6.77 |
| Heating Oil | 1.509 | -0.075 | -4.73 |
| Natural Gas | 6.004 | -0.343 | -5.4 |
| Gasoline RBOB | 0.969 | -0.0725 | -6.96 |
| Ethanol | 1.57 | 0 | 0 |
The Oil Services index (OSX) lost -11.06 points (9.6%) to 104.14 points. Total volume traded in the 15 components of the index was 138.83m shares. All 15 index components fell. The main decliners (in percentage terms) were -
- Global Industries (GLBL) -0.48 (18%) to $2.18 on volume of 2.5m shares;
- Weatherford International (WFT) -1.47 (14.5%) to $8.68 on volume of 25.22m shares;
- Rowan Co (RDC) -2.09 (13.2%) to $13.69 on volume of 5.02m shares;
- Oceaneering International (OII) -2.89 (12.8%) to $19.74 on volume of 0.81m shares; and
- National Oilwell Varco (NOV) -2.77 (12.3%) to $19.76 on volume of 14.69m shares.
Currency Futures
Currency futures started to reflect our 'USDX to weaken' hypothesis, but not dramatically. Not yet.
| Currency Futures | |||
| Index | Close | Gain(Loss) | % |
| U.S. Dollar Index | 86.715 | -0.45 | -0.52 |
| Euro FX | 1.2789 | 0.0139 | 1.1 |
| Soybeans | 811 | -19 | -2.29 |
| Swiss Franc | 0.8364 | 0.0121 | 1.47 |
| Australian Dollar | 0.6449 | 0.003 | 0.47 |
| Canadian Dollar | 0.7824 | -0.0106 | -1.34 |
| Japanese Yen | 1.0823 | 0.0075 | 0.7 |
| New Zealand Dollar | 0.5328 | 0.0064 | 1.22 |
Bellwethers
The nine-stock group that makes up the Rant bellwethers declined on average by 1.4%. The fallout occurred as follows:
- General Electric (GE) -0.58 (3.2%) to $17.55 on volume of 110.44m units.
- Citigroup (C) -0.42 (5.37%) to $7.40 on volume of 257.67m units.
- Wal-Mart (WMT) +0.73 (1.34%) to $55.11 on volume of 28.25m units.
- IBM (IBM) -3.23 (4%) to $77.44 on volume of 10.49m units.
- Intel (INTC) -0.89 (6.52%) to $12.77 on volume of 77.34m units.
- Cisco Systems (CSCO) -0.68 (4.25%) to $15.33 on volume of 58.38m units.
- Google (GOOG) -5.09 (1.82%) to $274.34 on volume of 4.85m units.
- Fannie Mae (FNM) +0.03 (3.57%) to $0.87 on volume of 38.39m units.
- Freddie Mac (FRE) +0.06 (7.32%) to $0.88 on volume of 21.74m units.
Other Indices of Interest...
The Banks index (BKX) fell -0.59 points (1.31%) to 44.34 points. Total volume traded in the 24 components of the index was 687.54m shares. Decliners outpaced gainers by 2.3 to one, with 16 decliners to 7 advancers. Declining volume was greater than advancing volume by 577.54m to 110m shares. The main decliners (in percentage terms) were -
- People's United (PBCT) -1.19 (6.4%) to $17.44 on volume of 6.42m shares;
- Citigroup Inc (C) -0.42 (5.4%) to $7.4 on volume of 257.11m shares;
- Bank Of America (BAC) -0.71 (4.7%) to $14.34 on volume of 105.89m shares;
- Fifth Third Bancorp (FITB) -0.29 (3.7%) to $7.61 on volume of 9.31m shares; and
- US Bancorp (USB) -1.02 (3.7%) to $26.89 on volume of 19.66m shares.
The Semiconductor index (SOX) dropped -11.43 points (5.77%) to 186.64 points. Total volume traded in the 18 components of the index was 289.84m shares. Decliners outpaced gainers by 8 to one, with 16 decliners to 2 advancers. Declining volume was greater than advancing volume by 257.24m to 32.6m shares. The main decliners (in percentage terms) were -
- Sandisk (SNDK) -0.94 (10.4%) to $8.08 on volume of 16.58m shares;
- Altera (ALTR) -1.42 (9.2%) to $14.04 on volume of 11.48m shares;
- Micron Technology (MU) -0.18 (9%) to $1.81 on volume of 31.74m shares;
- National Semiconductor (NSM) -0.9 (8.1%) to $10.15 on volume of 5.27m shares; and
- Xilinx (XLNX) -1.33 (7.9%) to $15.44 on volume of 9.46m shares.
The ChildKiller ("Defence") index (DFX) lost -8.55 points (3.5%) to 235.6 points. Total volume traded in the 17 components of the index was 149.22m shares. Decliners outpaced gainers by 7 to one, with 14 decliners to 2 advancers. Declining volume was greater than advancing volume by 144.43m to 4.73m shares. The main decliners (in percentage terms) were -
- Gencorp (GY) -0.19 (7%) to $2.53 on volume of 0.24m shares;
- FLIRr Systems (FLIR) -1.92 (6.7%) to $26.55 on volume of 2.22m shares;
- Teledyne Tech (TDY) -2.05 (5.3%) to $36.68 on volume of 0.26m shares;
- Raytheon (RTN) -2.34 (4.6%) to $48.28 on volume of 3.86m shares; and
- Esterline Tech (ESL) -1.5 (4.4%) to $32.8 on volume of 0.21m shares.
