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12Mar2015 Market Close: Markets Close Up, DOW Up 260, WTI Oil Closes At 47, Gold Headed Lower At 1151, US Dollar Index Moving Higher At 99.26

Written by Gary

The averages have moved sideways trading in a very narrow band on moderate volume. WTI oil fell down to the 46's piercing what we thought was the support, evidently not, as the equities didn't follow, in fact, moved fractionally higher.

The German Vs. Greek spat goes on as Greek PM Tsipras tries to assure the EU partners that they will keep their word. Intel has cut their revenue forecast as desktop demand weakens as Wall Street bounces back in broad rally as bank shares gain. Cold weather is once again blamed for poor U.S. Retails sales, poor job market numbers and despite the continuing commentary that all is well in America, economic growth expectations for Q1 just collapsed to a new cycle low of 2.4%. Tell me again, why are the markets still going up?

By 4 pm the averages closed higher after two session of negative proportions, GS announces new faster HFT algo using 'ethical trades' no longer executing thousands of other blatantly unethical dealings I guess; such is progress.

Todays S&P 500 Chart

It appears equity investors are not going to be concerned until WTI oil reaches the mid 44's. The media has convinced investors that oil isn't going to go much lower than it is totally forgetting about the dire lack of storage facilities that will be filled in several months (weeks), plus the needs of the Saudi's to drive oil even lower to 'hurt' the Russians and Iranians. Some say oil will fall as low as 20 dollars a barrel and the Saudi's would like to see it fall to $10 which isn't very likely.

But, there are presidents for lower prices, much lower in fact. Recently as December 2008, WTI was at $30.28 setting a support of some weight indicating we could see that price before dropping any further. Then in January, 2002, WTI was as low as 19.72, so $20 a barrel is possible, but in December, 1998 oil was selling as low as $11.28 which should scare the pants off of some foreign oil producers should it ever get that low. WTI has been even lower, but I believe it is unrealistic to see oil in the 10's, but then I never expected to see this bull run move so high either.

Our medium term indicators are leaning towards Hold portfolio of non-performers and the session market direction meter (for day traders) is 42 % Bearish. We remain mostly conservatively bullish, but with a bearish slant. I am very concerned any downtrend could get very aggressive in the short-term and any volatility may also promote sudden reversals that will only please the day traders. The SP500 MACD has turned down, but remains below zero at -0.13.

The Market in Perspective

Here are the headlines moving the markets.

The Final Nail In China's Deflationary Coffin: Wages Are Now Dropping

Remember when during the inflation panic of 2011 we reportted that "Wage Inflation is Rampant In China As More Provinces Plan Minimum Salary Hikes." and wrote:

By the end of 2010, 30 provincial-level regions had raised the standard for the minimum wage, with an average increase of 22.8 percent year-on-year., Yin Chengji, spokesman for the Ministry of Human Resources and Social Security (MHRSS), said Tuesday. According to him, 29 provinces have issued the guideline for the minimum wages, and the benchmark line grew about 2 percent. In Shanghai, the local minimum wage was the highest nationwide, totaling 1,120 yuan ($170.2) per month."

And 2011 will be even worse: "Also, according to a China Business News (CBN) report Tuesday, in 2011, many areas would continue to raise the standard. A Xinhua News Agency report Wednesday revealed that northern Chinese city of Tianjin is considering raising the minimum working wage by 16 percent this year amid rising inflationary pressure and labor shortages."

Well, kiss all that goodbye. From Shanghai Daily:

Shanghai remained the top Chinese city for average monthly salary, but major cities saw their salary decline, recruitment portal said in a survey.

Shanghai's average monthly salary was 7,108 yuan (US$1,135) while Beijing was second with 6,585 yuan and Shenzhen with 6,285 yuan came in third, the survey covering job postings on the website after the ...

Daniel Hannan Explains How Democracy Died In Europe

With Greece on the edge of being kicked out of the Eurozone , either voluntarily or otherwise, with an anti-austerity party on the verge of taking over the reins of power in Spain, with Beppe Grillo waiting in the corridors for his chance to pounce in Italy and with Marine le Pen and her nationalist party on the verge of becoming the biggest shocker of Europe over the coming years, here, according to Daniel Hannan, is what killed democracy in Europe. Europe itself.

Here are the punchlines, which are all based documented fact:

We were told the Euro would be an antidote to extremism, that it would make countries get on better, and make moderate politics more mainstream. Well, how's that working out for you. Look at the elections in Greece - a Trotskyist party came first, a Nazi party came third. And as for the national animosities read the way the German newspaper now refer to the Greeks and vice versa. Would you say this is soothing or stoking national rivalries in Europe?

But worst of all is the impact on democratic accountability. After the Greek election results came in, the German finance minister said "elections change nothing." He was talking specifically about Greece but this could be a watchword describing the entire Brussels racket. As Jean Claude Juncker put it the next day, "there can be no democratic choice against the European treaties." This is the same European Commission that in late 2011 in Italy and Greece engaged in practice in civilian coups, toppling elected prime ministers and replacing them with former technocrats.

As the former president of the European Commission Barroso puts it, "democratic governments ar ...

Tsipras promises Greece will keep its word amid German spat

PARIS/ATHENS (Reuters) - Prime Minister Alexis Tsipras tried to reassure euro zone partners on Thursday that Greece would stick to an extended bailout agreement with its international creditors even as a war of words rumbled on between Athens and Berlin.

Intel cuts revenue forecast as desktop demand weakens

(Reuters) - Intel Corp slashed nearly $1 billion from its first-quarter revenue forecast as small businesses put off upgrading their personal computers, sending the chipmaker's shares down more than 5 percent.
< ...

Bits Blog: Zuckerberg Lawsuit Documents Show Animosity With Would-Be Neighbor

Documents filed Wednesday accuse the Facebook chief executive of reneging on a promise to introduce a would-be neighbor to powerful Silicon Valley friends.

Lumber Liquidators Offers Customers Free Air Tests for Formaldehyde

The air quality testing follows a news report that the retailer sold laminate flooring from China that violated safety limits.

3 Things: Strong Dollar, Oil, Missed Employment

Submitted by Lance Roberts of STA Wealth Management,

In a recent Reuter's article, Dr. Richard Fisher of the Dallas Federal Reserve stated:

"Sharp gains in the U.S. dollar are good for the U.S. labor market."

This is not actually the case as I will discuss in all three parts of today's "3 Things."

A Strong Dollar Is Not Good For Exports

In today's globally interconnected world exports have become a critical component of both corporate profitability and economic growth. Increases in the labor market are a by-product of stronger economic growth and corporate profitability.

The chart below shows the US Dollar as compared to the annual percentage change in exports on a quarterly basis. I have inverted the scale of exports to more clearly show the correlation between a rising dollar and weaker exports.


Importantly, a strongly rising dollar has also been witnessed just prior to the onset of an economic recession.

Companies tend NOT to aggress ...

What Americans Think Is The #1 US Problem

... it's government.

Gallup adds:

While dissatisfaction with government is by no means a new issue to the American people, it has not in recent months been as clearly the leading problem as it is now, given that fewer Americans mention the economy.

Meanwhile, satisfaction with the direction of the U.S. remains relatively upbeat compared with figures from recent years, but two-thirds of Americans continue to be dissatisfied.

Citigroup cannot process some Argentina bond payments: U.S. judge

NEW YORK (Reuters) - A federal judge on Thursday said Citigroup Inc cannot process interest payments by Argentina on some bonds issued under that country's law, a defeat for the cash-strapped nation as it tries to reenter international debt markets.

Wall St. bounces back in broad rally; bank shares gain

NEW YORK (Reuters) - U.S. stocks rose in a broad rally on Thursday, bouncing back from two straight days of losses, helped by a weaker dollar and a rally in banking shares.

Who Wants To Be A Penny Stock Millionaire?

Want to be a millionaire? That's easy. All you need to do is find a failing company whose shares trade with some semblance of liquidity, offer to loan said company money, then make sure the fine print on the deal allows you to convert the note into equity at a guaranteed discount to where the stock trades.

You literally can't lose unless of course you can't find any buyers, but if the five or so people you hired to scout prospects did their job and chose companies whose shares actually trade, that shouldn't be a problem.

That, apparently, is how one Joshua Sason has managed to make a fortune in penny stocks and while it's not technically illegal, it most assuredly raises eyebrows. Here's more, via Bloomberg:

What Sason discovered is a way to get shares in desperate and broke companies at big discounts by lending them money. Magna has done deals with at least 80 companies. Of those, the stocks of 71 have gone down since the investment. He can still turn a profit, because the terms of the deals allow him to turn debt into equity at a fixed discount. No matter where the stock is trading, he gets it for less.

Magna functions as a pawnshop for penny stocksâ€"shares of obscure ventures that change hands far from the rules of the New York Stock Exchange. His customers have included a would-be Chilean copper miner, an inventor of thought-controlled phones, and at least two executives later busted for fraud. They come to Sason to trade a lot of their stock for a little bit of money. Often they're aware the deal is likely to be bad for their shareholders.

If the share price goes low ...

Iceland Drops Bid For EU Membership

Having thought long and hard (since 2009) about the benefits of becoming a member of the European Union, Iceland has decided to withdraw its application...


The 2013-elected (euroskeptic) coalition government had scrapped talks, so this is not entirely surprising, as it sought more trade accords.

Foreign Minister Gunnar Bragi Sveinsson formally withdrew bid for European Union membership in a letter presented to Latvia's Foreign Minister Edgars Rinkevics, according to an e-mailed statement from the Foreign Ministry in Reykjavik.

As Sputnik News reports,

According to Agence France-Presse, Iceland is reportedly dropping its bid for membership in the European Union.

Iceland applied for EU membership in 2009, but earlier this year, the Icelandic prime minister said that his country would withdraw its application.

* * *

Lyft Raises $530 Million

The investment was led by Rakuten, the Japanese e-commerce giant, and it valued the start-up at $2.5 billion.

Oil down as supply woes offset dollar, Brent-U.S. spread near week high

NEW YORK (Reuters) - Global oil prices fell on Thursday, with traders pricing the market lower before the expiry of the front-month contract in benchmark Brent, and after estimates showing another big supply build at the delivery point for U.S. crude.

Cold weather chills U.S. retail sales; jobs market firming

WASHINGTON (Reuters) - U.S. retail sales unexpectedly fell in February as harsh weather kept consumers from auto showrooms and shopping malls, tempering the outlook for first-quarter growth and a June interest rate increase by the Federal Reserve.

O.E.C.D. Will Advise Greece on Economic Overhauls

Prime Minister Alexis Tsipras says the Organization for Economic Cooperation and Development will help Greece create jobs and cut bureaucracy.

The Richest Have Never Been Richer: US Household Assets Rise To Record $97 Trillion (As The Poor Get Poorer)

In the quarter ended September 30, 2014, household net worth did something it hasn't done since 2011: it declined, as a result of the dip in the stock market which pushed financial assets lower by $200 billion. Well, since then ECB announced and then launched Q€, not to mention the expanded BOJ QE in November, and predictably financial assets rose.

Which means that in the fourth quarter, US household net worth jumped by $1.5 trillion to $82.9 trillion, driven by a rise in total assets to $97.1 trillion, even as the long awaited increase in "good debt", that of mortgage debt, remains elusive and Mortgage debt hasn't budged from $9.4 trillion in 8 quarters! This, even as the total US housing market is said to have kept rising, which can only mean one thing (a thing we have explained many times in the past): the bulk of home purchases in the US take place "all cash" with zero incremental leverage (whether because the potential buyers don't want to incur the debt, or don't quality).

Ironically, even as household liabilities remained flat for the second year in a row, real estate assets rose from $23.2 trillion to $23.5 trillion as America's ultra-luxury segment (which is now the New Paranormal's "secret Swiss account") continues to drive housing higher while every other segment is contracting.

But the biggest jump in Q4 assets was once again in financial assets, driven by a $492 billion increase in Corporate Equities as well as $323 billion added from Pension Funds. And as usual, financial assets remained at precisely 70% of total assets (a curious ceiling which we will discuss shortly).

In short: almost $100 trillion in household assets, with the vast bulk of these belonging to America's "1%".

Q1 GDP Expectations Are Crashing

Despite the continuing commentary that all is well in America, economic growth expectations for Q1 just collapsed to a new cycle low. From just 4 months ago, growth expectations have been cut 20% to 2.4%... but that is still four times The Atlanta Fed's dismal 0.6% forecast...

The Atlanta Fed forecasts Q1 growth of just 0.6%...

The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2015 was 0.6 percent on March 12, down from 1.2 percent on March 6. The nowcast for first-quarter real consumption growth fell from 2.9 percent to 2.2 percent following this morning's retail sales release from the U.S. Census Bureau.

April WTI Crude Futures Plunge To $46 Handle As Contango Soars

Front-month crude oil futures just plunged to new 6-week lows and a $46 handle. The April-May (J-K) spread has soared... no immediate catalyst for this move so we suspect it is Oil ETF and futures-roll-driven flow.

WTI hit 6-week lows...

And contango is soaring...

Charts: Bloomberg

Wall Street Firm Unleashes New High-Frequency Impropriety Algo

Fact... Or Fiction...

Calling it a major breakthrough that will significantly expedite and streamline its daily operations, Wall Street financial firm Goldman Sachs revealed Thursday it has developed a new high-speed algorithm that is capable of performing more than 10,000 ethical violations per second.

"With this new automated program, we'll be able to systematically deceive investors, engage in conflicts of interest, and execute thousands of other blatantly unethical dealings in the time it takes to press a button," said John Waldron, co-head of Goldman Sachs' investment banking division, who added that the high-frequency impropriety system will be able to break more rules in a minute than an entire floor of morally suspect securities traders, financial analysts, and portfolio managers could over the course of a week.

"In the past, if one of our brokers wanted to exploit a questionably legal regulatory loophole or breach the covenant of good faith with an investment client, that would require hours of manually contravening the basic principles of professional integrity. But this innovative system will allow millions of such transgressions to go through every single day. Going forward, I expect this revolutionary program to be the cornerstone of our business."

Upon learning of the advanced new unethical algorithm, investors initiated a buying frenzy on Goldman Sachs stock, sending share prices surging more than 30 percent to $245.46.

Source: The Onion

Greece Passes Law To Plunder Pension Funds

Having previously hinted that they might 'dip' into public pensions funds for some short-term cash to payback The IMF, and then confirming that the plan is to repo that cash from pension cash reserves (raising concerns about how they will unwind the repo - i.e. pay it back); the Greek government finally signed the bill today that enables them to plunder the Greek people's pension funds (for their own good).The massive irony of this bill is the bill enables greek deposits to be fully invested in Greek sovereign bonds... which Tsipras and Varoufakis both admitted today is "unsustainable" and "will never be repaid."


As Bloomberg reports,

Cash reserves of pension funds and other public entities kept in Bank of Greece deposit accounts can be fully invested in Greek sovereign notes, according to amendment to be submitted in parliament, country's finance ministry says in e-mailed statement.

Cash reserves can be used for repos, reverse repos, buy and sell-back, sell and buy-back transactions

Pension funds, public entities will be able to claim damages from Greek state in case of overdue repayment, partial repayment

Pension funds are not obliged to transfer their reserves to the Bank of Greece, according to finance ministry statement

F.C.C. Releases Net Neutrality Rules

The agency said it would decide on what was acceptable on a case-by-case basis, taking on a more prominent role in the high-speed Internet arena.

Wheels: The Red-Light Camera Debate Is a Stew of Anger, Revenue and Safety

Many drivers say the systems are unfair, but communities say they make money and reduce accidents.

Albert Edwards' "WOW!" Chart, Or Why "Draghi Makes Greenspan Look Like A Rank Amateur"

Back in January, when European stocks were only starting their unprecedented QE ramp, we presented the "Driver Behind The European Stock Surge" in which we showed that ever since Mario Draghi's "whatever it takes" speech in July 2012, European equity prices were up 50% (even higher now) even as corporate earnings had actually declined by 7%.

It is a take on the chart above that has sent Albert Edwards over the edge once again, and in his latest letter he presents another way of visualizing the data above, with the help of what he dubs the "WOW!" chart.

Edwards begins with the standard, and well-deserved, rant against central bankers who now merely need - and create - ever greater bubbles in hopes of preserving a system, which can no longer function away from a "bubble" state.

We have long fulminated against strategists who are unwilling to predict sharp market moves. The violent downmove in the euro over the last few weeks is a case in point. Mario Draghi and the ECB's manipulation of asset prices makes Greenspan's Fed look like a rank amateur. More shocking though than the plunge in the euro, and more shocking even that 25% of sovereign eurozone bonds now trade in negative territory, is what has happened to eurozone equity valuations. For, as we approach the sixth anniversary of the US cyclical bull market (a post-war record), the PE expansion of eurozone equities is simply off ...

Commerzbank Pays Nearly $1.5 Billion to Settle U.S. Investigations

The settlement covers the bank's role in enabling a huge accounting scheme and other illicit transactions, state and federal authorities announced.

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