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19Mar2015 Market Close: Falling Oil, Rising U.S. Dollar Trim Big Market Gains As Investors Signal Caution

Written by Gary

Another drop in oil prices dragged on energy companies, and investors were less cheery after big gains following the Fed announcement yesterday.

The US Dollar rally dollar, falling oil and other commodity prices along with energy and materials sectors shares tempered U.S. Stocks leading the market lower and is the biggest issue facing the World financial system.

By 4 pm the markets closed mixed with the large caps in the red and the small caps in the green. The DOW is off triple digits and the NASDAQ is up fractionally on low to moderate volume. Obviously, investors are cautiously holding back to observe the Greek drama tomorrow. Will the 'Fat Lady' sing tomorrow?

Todays S&P 500 Chart

Euro zone leaders told Greece on today that its leftist-led government must implement agreed reforms to avert a looming cash crunch that could force it out of the single currency.

The Greek 'issue' is only a part of the issues we face whether the 'Fat Lady' sings or not. Does anyone else have the feeling that things are not just unraveling, but that the unraveling is gathering speed? I think we can look at the ongoing debt crisis in Greece as an example of this acceleration of events.

We can discern the same diminishing returns in Federal Reserve/central bank interventions, as the initial rounds of quantitative easing pushed stock and bond markets higher for years at a time, while the following interventions generated lower returns.

That is not all as World tensions are kicked up a notch as US forces are moving into Poland, Russian "rapid-response" drills underway, and navy exercises in the Baltic Sea, the idea of "saber-rattling" now seems obvious. However, as NATO closes in on its borders, the Russian Navy's commander, Admiral Chirkov, stated that the intensity of Russian submarines' combat patrol missions has been up 50% since the beginning of 2014.

The Market in Perspective

Here are the headlines moving the markets.

EU tells Greece time, patience running out

BRUSSELS/BERLIN (Reuters) - Euro zone leaders told Greece on Thursday its leftist-led government must implement agreed reforms to avert a looming cash crunch that could force it out of the single currency.

Russian Submarine Activity Surges 50% Since 2014, Admiral Claims "Not Saber-Rattling"

With US forces moving into Poland, Russian "rapid-response" drills underway, and navy exercises in the Baltic Sea, the idea of "saber-rattling" now seems obvious. However, as NATO closes in on its borders, the Russian Navy's commander, Admiral Chirkov, stated that the intensity of Russian submarines' combat patrol missions has been up 50% since the beginning of 2014. As the nation celebrates "Submariner Day", Chirkov explained, "we do not indulge in saber rattling... this is necessary and natural for guaranteed security of the state."

As TASS reports,

The intensity of Russian submarines' combat patrol missions has been up 50% since the beginning of 2014, the Russian Navy's commander, Admiral Chirkov, said on the occasion of Submariner Day.

"I can say that the intensity of combat patrol missions by strategic and multi-role nuclear-powered submarines in the World Ocean is maintained at a level that guarantees the security of our country.

Moreover, I should say that in January 2014 through March 2015 th ...

Obama Orders Cuts in Federal Greenhouse Gas Emissions

The executive order represents the latest use of presidential power to address climate change as Congress resists passing legislation.

Paul Tudor Jones Warns This "Disastrous Market Mania" Will End "By Revolution, Taxes, Or War"

"This gap between the 1% and the rest of America, and between the US and the rest of the world, cannot and will not persist," warns renowned trader Paul Tudor Jones during his recent TED Talks speech, as he addressed the question - can capital be just? Hoping to expand the "narrow definitions of capitalism," that threaten the underpinnings of society, Tudor Jones exclaims, "we're in the middle of a disastrous market mania," adding "one of worst of my life." Perhaps most ominously, he concludes, historically this ends "by revolution, higher taxes or wars. None are on my bucket list."

As TED blog reports,

Can capital be just? As a firm believer in capitalism and the free market, Paul Tudor Jones II believes that it can be. Tudor is the founder of the Tudor Investment Corporation and the Tudor Group, which trade in the fixed-income, equity, currency and commodity markets. He thinks it is time to expand the "narrow definitions of capitalism" that threaten the underpinnings of our society and develop a new model for corporate profit that includes justness and responsibility.

It's a good time for companies: in the US, corporate revenues are at their highest point in 40 years. The problem, Tudor points out, is that as profit margins grow, so does income inequality. And income inequality is closely linked to lower life expectancy, literacy and math proficiency, infant mortality, h ...

Bank Of Japan's Plunge Protection Desperation: "May Buy Individual Stocks"

Earlier this month, the BoJ surveyed 40 dealers and discovered something shocking: buying the entirety of JGB gross issuance has had a rather dramatic effect on liquidity. In fact, two thirds of the firms who participated reported having "some or a lot" of problems and described bid-asks as "not very tight." Today, an internal report from the central bank indicates officials are slowly coming to accept the fact that their actions have consequences although as you can see from the following, the fact that the BoJ is literally buying all of the bonds is still low on the list of factors the central bank figures might be negatively affecting liquidity...

Via Bloomberg:

Impact on market prices from a single trade or breadth of orders in futures and rates on repurchase agreements are among indicators suggesting liquidity has fallen since the autumn of 2014: BOJ report

Liquidity may have been affected by sharp drop in long-term yields; short- and medium-term yields becoming negative at about the same time; structural changes in markets; BOJ bond buying; and change in financial regulations, according to BOJ report.

We also recently noted that Japan isn't particularly enamored with the idea that stock prices can sometimes decline and so in order to correct the problem, the BoJ has stepped in two thirds of the time equity markets open lower and brought its balance sheet to bear on any sign of selling pressure thus underwriting an equity rally:

U.S. Jobless Claims Rise SLightly

The Labor Department said on Thursday that weekly applications for unemployment aid rose slightly, by 1,000, to a seasonally adjusted 291,000.

Oil falls back on dollar, Kuwait stance that OPEC won't slow output

NEW YORK (Reuters) - Oil prices fell on Thursday as a rebounding dollar and Kuwait's stance that OPEC had no choice but to keep producing in an oversupplied market undercut a rally from the previous day.

The Financial Folly Lurking Beneath Yellen's Patient Lack Of Impatience

Submitted by David Stockman via Contra Corner blog,

Janet's Yellen's pettifogging today about her patient lack of impatience was downright pathetic. Her verbal hair-splitting is starting to make medieval ritual incantations sound coherent by comparison.

But unlike the financial media's dopey dithering about "dot plots", Yellen at least has something to hide behind all the gibberish. Namely, she and her merry band of money printers are becoming more petrified each month that they will trigger a thundering Wall Street hissy fit if they move to "normalize" interest rates—-even as they are slowly beginning to realize that continuance of ZIRP much longer will only intensify the market's addiction to rampant speculation, free money carry trades and the associated risks to financial stability.

But the Fed's new found worry that it's tsunami of liquidity might have untoward effects doesn't even rank as a death bed conversion. It's way too late to worry about a financial bubble that has become epic in scope and danger; and its especially too late to think that it can be weasel-worded down from its Brobdingnagian heights.

The reason the Fed is impaled in a monster trap is that history is closing in on it. We have now had upwards of three decades of increasingly aggressive monetary inflation—-a corrosive trend culminating in what will be 80 months of zero money market rates and a massive monetization of debt claims that originally funded the consumption of real labor and capital resources.

Needless to say, that has generated a dangerous and ever widening disconnect between the real main street economy and the nominal val ...

Wall St. pulls back as Fed rally reverses

NEW YORK (Reuters) - U.S. stocks fell on Thursday as a stronger dollar weighed on oil and other commodity prices, with energy and materials sectors shares leading the market lower.

The Central Banks Will Not Be Able to Control This

The biggest issue facing the finacial system today is the US Dollar rally.

The Fed and other Central Banks are trying to maintain the illusion that they have everything in control by talking about interest rates, but the reality is that the US Dollar carry trade is ABOVE $9 trillion in size. That is almost as big as ALL of the money printing that occurred between 2009 and 2013.

And it's imploding as we write this.

Globally, the world is awash in borrowed money... most of it in US Dollars. The US Dollar carry trade is north of $9 trillion... literally than the economies of Germany and Japan COMBINED.

When you BORROW in US Dollars you are effectively SHORTING the US Dollar. So when the US Dollar rallies... you have to cover your SHORT or you blow up.

And the US Dollar has been rallying... HARD. Indeed, the move that began in July 2014 is already larger par in scope with that which occurred during the 2008 meltdown.

Moreover, this move has occurred with little to no rest. The US Dollar barely corrected 2% after rallying a stunning 16+% in a matter of months before beginning its next leg up.

You only get these sorts of moves when the stuff hits the fan. CNBC and the others are babbling about the Fed's FOMC changes, but all of that is just a distraction from the fact that a $9+ trillion carry trade, arguably the largest carry trade in history, has begun to blow up.

Rate hikes, QE, all of this stuff is minor ...

The Workologist: Loosening a Founder's Iron Grip

A writer working for a company started by someone who is nearing 80 asks how to tell his boss that it may be time to let go of some responsibilities.

Branson says Virgin working on electric cars: Bloomberg TV

DETROIT (Reuters) - Billionaire entrepreneur Richard Branson's Virgin Group may take on Tesla Motors Inc and other companies in developing electric cars, Bloomberg reported on Thursday.

U.S. judge dismisses lawsuit over $13 billion JPMorgan Chase settlement

WASHINGTON (Reuters) - A U.S. federal judge tossed out a lawsuit brought by non-profit group Better Markets that sought to block a $13 billion settlement JPMorgan Chase & Co reached with the U.S. Justice Department over shoddy mortgage loans sold to investors before the financial crisis.

Morgan Stanley shuffles wealth and securities executives -memo

NEW YORK (Reuters) - Morgan Stanley has moved three executives into new roles in wealth management and institutional securities as part of its effort to get those two businesses to produce more revenue by collaborating, according to an internal memo viewed by Reuters.

The Unraveling Is Gathering Speed

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

Debt saturation and debt fatigue = diminishing returns on central bank tricks.

Does anyone else have the feeling that things are not just unraveling, but that the unraveling is gathering speed? Though quantifying this perception is more interpretative than statistical, I think we can look at the ongoing debt crisis in Greece as an example of this acceleration of events. The Greek debt crisis began in 2011 and reached a peak in 2012. The crisis was quelled by new Eurozone/IMF loans to Greece, and European Central Bank chief Mario Draghi's famous "whatever it takes speech" in late July, 2012. The Greek debt crisis quickly went from "boil" to "simmer," where it stayed for almost two-and-a-half years. But no one with any knowledge of the gravity and precariousness of the situation expects the latest "extend and pretend" deal to patch everything together for another two years. Current deals are more likely to last a matter of months, not years. We can discern the same diminishing returns in Federal Reserve/central bank interventions, as the initial rounds of quantitative easing pushed stock and bond markets higher for years at a time, while the following interventions generated lower returns. What factors are reducing the positive effects of intervention and causing increased volatility? Let's start with the engine behind every central bank/state intervention and every "save" of the status quo: debt.

The Seven Reasons Behind The Record Surge In Chinese Stocks

While the US stock market has gone largely nowhere in 2015 despite Janet Yellen's most impatient desire to push the Nasdaq solidly over 5,000 in hopes that "this is the missing catalyst that will finally unleash the 7 years delayed wage growth "trickle down" Keynesian success story, others are focusing on European stocks, where earnings continue to decline but hope springs infernal that P/E multiples at record highs due to money printing are perfectly justified.

What most are ignoring, however, is that when converted into USD terms, European stock gains promptly evaporate courtesy of the imploding Euro. In fact, the only market year to date that has shown truly impressive gains in both local currency and USD terms, is also the best performing market of 2014 - China, which is now up almost 100% in less than a year!

But why? As we showed previously the collapse of China's shadow banking system, which directly leading to a collapse in China's GDP, has been instrumental in the mouthwater ramp in the SHCOMP over the past 8 months.

However, there are other factors as well. Here, with the full list of what may be causing China's relentless stock market surge, is UBS' Tao Wong.

With no significant change in China's macro or corporate fundamentals, the visible rebound in China's A-share market since November appears to have been larg ...

How Many Shale Oil Plays Make Money At $37 Per Barrel? (Spoiler Alert: None)

Submitted by Jim Quinn via The Burning Platform blog,

I'm tossing you a softball. Now think carefully. The choices are:

A. Zero

B. Zero

C. Zero

D. Zero

I know Americans are math challenged and need a calculator to subtract 10 from 20, but I think even a CNBC bimbo or Princeton economic professor could get this one right.

Last year there was much banter from the Wall Street shysters and Bakkan shale oil experts about the true breakeven price for shale oil not being $80 (which is the truth) but actually being as low as $58 a barrel. They were spreading this lie in order to keep idiot investors buying the stocks and bonds of these fly by night shale oil companies.

Well, we are now six months further down the line and Bakkan shale oil this morning is selling for $37 per barrel. Where are the babbling baboons of bullshit with storylines of shale oil breakeven prices of $30? I guess even corrupt lying scum can't work up the gumption to try and convince the ignorant masses of that doozy.

Think about this for a minute. What business in their right mind would start a project that is guaranteed to lose $43 per barrel produced? How long will these small shale oil companies with gobs of junk bond debt last at these prices? The answer is easy. Not long. The bankruptcies have begun. The rig counts are collapsing at the fastest pace in history. And the number of layoffs is ...

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To contact me with questions, comments or constructive criticism is always encouraged and appreciated:

gary@econintersect.com

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