NEW YORK (AP) — Stocks are closing lower following two days of gains that brought the market close to a record high. Vornado Realty Trust slumped 4 percent Tuesday after reporting results that fell short of analysts' forecasts. Estee Lauder jumped 4 percent after its results beat estimates. The Standard & Poor's 500 index fell 25 points, or 1.2 percent, to 2,089. The Dow Jones industrial average lost 142 points, or 0.8 percent, to 17,928. The Nasdaq composite fell 77 points, or 1.6 percent, to 4,939. The price of oil closed above $60 a barrel for the first time since December. That helped send energy stocks higher. Oil has risen 20 percent in the last month.
CINCINNATI (MarketWatch) — Technically speaking, the U.S. markets' bull trend is intact despite a rotational early-May whipsaw.
Consider that the S&P 500 Index has reclaimed well-defined support, placing it within striking distance of uncharted territory. The charts below add color:
Before detailing the U.S. markets' wider view, the S&P 500's hourly chart highlights the past two weeks.
As illustrated, the S&P has rallied from two-week lows, rising within view of record territory. The S&P's all-time closing high rests at 2,117.69, and is closely followed by its absolute record peak of 2,125.92.
ATHENS/BRUSSELS (Reuters) - Greece blew hot and cold with its euro zone partners on Tuesday as it struggled to avert a potentially catastrophic funding crunch this month, when it must make a big debt repayment to the IMF as cash reserves dry up.
Submitted by Charles Hugh-Smith of OfTwoMinds blog,
Collaboration, innovation and risk are all intrinsic to adaptation. Without adaptation, every system eventually perishes once conditions change.
One feature of capitalism that is rarely discussed is the premium placed on cooperation and collaboration. The Darwinian aspect of competition is widely accepted (and rued) as capitalism's dominant force, but cooperation and collaboration are just as intrinsic to capitalism as competition. Subcontractors must cooperate to assemble a product, suppliers must cooperate to deliver the various components, distributors must cooperate to get the products to retail outlets, employees and managers must cooperate to reach the goals of the organization, and local governments and communities must cooperate with enterprises to maintain the local economy.' Darwin's understanding of natural selection is often misapplied. In its basic form, natural selection simply means that the world is constantly changing, and organisms must adapt or they will expire. The same is true of individuals, enterprises, governments, cultures and economies. Darwin wrote:"It is not the strongest of the species that survives, or the most intelligent, but the ones most adaptable to change." Ideas, techniques and processes which are better and more productive than previous versions will spread quickly; those who refuse to adapt them will be overtaken by those who do. These new ideas, techniques and processes trigger changes in society and the economy that are often difficult to predict. This creates a dilemma: we want more prosperity and ...
Last week we commented on the latest travesty in the legal system when Deutsche Bank paid $2.5 billion to settle charges that it had manipulated LIBOR, EURIBOR and various other -BORs. As usual in situations such as this one, not a single banker went to prison, but there was some hope that Deutsche Bank's gross criminal conduct would at least land it on the SEC's "bad actors" list, which is like the Dodd-Frank equivalent of â€'time out' and restricts the offender from participating in exempt securities offerings.
Not to worry: as we reported as part of its settlement, Deutsche Bank, as well as every other criminal financial institution, had - deep in the fine print - inserted language that exempted the offender from such stigma. As the WSJ noted, "the language allows the banks to avoid asking the SEC for a waiverâ€"a process that has become fraught with uncertainty amid commissioner disagreements over whether to allow financial firms to avoid a "bad actor" banâ€¦"
We concluded that "It's good to be TBTF" because clearly no matter how many laws are violated and how much money is stolen (LIBOR was the reference security for nearly $1 quadrillion in global rate-sensitive derivatives), i) nobody ever goes to prison, ii) there are absolutely no negative consequences, and iii) the cost of running a criminal organization is tiny - the settlement usually amounts to far less than 1% of the gains reaped from years of illegal activities.
Frankly, at this point one should just sit back and watch in amusement, because until the ...
Don't look now, but first-quarter earnings have swung to year-over-year growth, dismissing initial fears of recession-like declines.
With 397, or 79% of the S&P 500 companies having reported results, aggregate blended earning-per-share growth, which includes reported EPS and estimates of companies that haven't yet reported, was 0.15% through midday Tuesday, according to FactSet.
That is a marked improvement from an average estimate for a decline of 4.7%, which would have been the biggest decline since the third-quarter of 2009.
Venezuela's recent experience is instructive. The Chavez regime had moved away from the fiat US dollar and had the bulk of its reserves in gold. Last month, Venezuela's reserves had been drawn down to about $19 bln, of which $14 bln was thought to be gold.
Venezuela has found out the hard way that dollars are better than gold. At the end of last month, it swapped 1.4 mln troy ounces of gold for $1 bln with a large US bank.
Venezuela's gold was discounted by a little more than 40% and it will pay interest on the dollars it receives. The swap is four years in duration, and at the end of it, Venezuela has the first right to buy the gold back.
It is true that Venezuela has a relative extreme macro economic situation. The IMF expects the economy to contract 7% this year after 4% contraction in 2014. Inflation is projected to be well over 100% and the fiscal deficit may be 20% of GDP. The black market rate for the bolivar has depreciated by nearly 50% so far this year. We suspect that when push comes to shove, and it will, Venezuela is more likely to officially devalue than default on its local debt.
One of the advantages for Venezuela of the gold swap is that by some accounting it may still count the gold as part of its reserves. This underscores that central bank reserves many not always be what they seem. Central banks have used a number of ploys to hide the extent of their intervention, like operating in the forward market or conducting off-balance sheet operations, like Brazil's currency swaps. Similarly, Russia had included its sovereign wealth funds in its reserve calculations, but they are not liquid or available.
The dollar's status as the primary reserve assets is partly a function the liquidity and depth of the US capital markets. Gold is not a particular liquid or deep market. Countries cannot ...
Just as there is a consequence to every action or two sides to every story, there are contrasting repercussions due to the precipitous oil price drop in the last year. This post takes a look at some such flip sides to see who is benefiting from the recent rout...and who is not.
The below image shows how the US is seeing a varying benefit from low oil prices across the country. Low oil prices are negative for employment in eight states such as Texas, Oklahoma, and North Dakota - where energy-related employment is strong - but positive elsewhere. Low oil prices are also a boost to the broader economy - through the medium of greater consumer disposable income, decreasing energy costs for firms, and higher capital investment and hiring, among other factors.
On the flip side, oil and gas companies unsurprisingly feel the pinch the most as capital expenditures are slashed to limit bloodletting, while material job losses in the oil and gas sector provide a drag on the economy. In summary, lower oil prices are a net-positive - but unevenly distributed - benefit for the US.
The flip-flop of fortunes is also illustrated to great effect
BRUSSELS (Reuters) - The European Union will announce a wide-ranging probe on Wednesday into how big technology companies such as Google , Amazon and Facebook use their market power as it considers whether to regulate them more tightly.
"What's even more dangerous than the actual stock market is the high yield market," Carl Icahn (who is perhaps talking his book) recently warned, before saying he "feels sorry" for all of those throwing their money into junk bonds in a desperate search for yield. We have of course long warned that a half decade of easy money policies have had the unfortunate side effect of allowing otherwise insolvent companies (most notably energy producers) to stay afloat by keeping rates artificially low, thus creating demand for HY debt while simultaneously ensuring that borrowing costs for issuers remain (very) favorable. Indeed, HY issuance is quite clearly correlated with successive rounds of QE as the following charts show:
More specifically, UBS notes that "the picture is crystal clear: In both periods, issuance was $130bn more than average, or about 50% greater than the average amount expected, over an 11 month period. The main drivers were lower yields, sharp drops in yields (we find that the speed of yield changes plays a significant role in impacting issuance), and strong inflows."
Over time, this has had the effect of, in Citi's words, destroying creative destruction by creating a legion of zombie companies which have continued to produce when they likely should have been long buried, contributing to a global supply glut and ultimately, to
Submitted by David Stockman via Contra Corner blog,
Ben Bernanke's skin is as thin, apparently, as is his comprehension of honest economics. The emphasis is on the "honest" part because he is a fount of the kind of Keynesian drivel that passes for economics in the financially deformed world that the Bernank did so much to bring about.
Just recall that he first joined the Fed way back on 2002 after an academic career of scribbling historically superficial and blatantly misleading monographs about the 1930s. These were essentially zeroxed from Milton Friedman's monumental error about the cause of the Great Depression. In a word, Friedman and Bernanke pilloried the Fed for not going on a bond buying spree during 1930-1932 and thereby stopping the shrinkage of money and credit.
In fact, excess reserves in the banking system soared by 12X during those four years, interest rates were at rock bottom and the US economy was saturated with idle cash. So there was no financial stringency——not the remotest aspect of a great monetary policy error.
Instead, what actually happened was that the US banking system was massively insolvent after a 12-year credit boom fueled by the Fed's printing presses. This first great credit bubble arose initially from the Fed's maneuvers to fund the massive war production surge of 1915-1919 and then from its fostering of a vast domestic and international credit bubble during the Roaring Twenties.
Alas, none of the Fed governors during the 1930-1932 credit contraction had graced the lecture halls of Princeton. But to nearly a man they knew you can't push on a string, and that a healthy economy requires that busted loans and soured spe ...
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