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04Jan2018 Market Close: Wall Street's Major Indexes Have Notched Record Closing Highs To Kick Off 2018, President Sets Sights On Dow 30,000 And Says Bannon ‘changed His Tune'

Written by Gary

All three major benchmarks achieved record closing highs today (SPY +0.4%). The 30-stock index climbed 152 points, with General Electric, DowDuPont and IBM rising about 2 percent.

Todays S&P 500 Chart

The Market in Perspective

Here are the headlines moving the markets.

Dow breaks 25,000 as U.S., global growth hopes remain strong

NEW YORK (Reuters) - The Dow Jones industrial average rose above the 25,000 level for the first time on Thursday and other major indexes scaled new records, propelled by strong economic data both in the United States and abroad.

Sears Holdings to close 103 Kmart and Sears stores

CHICAGO (Reuters) - Sears Holdings Corp said on Thursday it was shuttering 103 unprofitable Kmart and Sears stores as it continues to assess the viability of its operations.

Federal Reserve seeks to clarify big bank risk management expectations

WASHINGTON (Reuters) - The Federal Reserve proposed new guidance Thursday that would clarify the regulator's expectations for how senior managers at large banks handle risk at their respective institutions.

Tesla Model 3 delay raises cashflow risks, but analysts upbeat

(Reuters) - Tesla Inc shares recouped some of their losses on Thursday after falling as much as 3.6 percent, a day after it pushed back a production target for its much-anticipated Model 3 sedan yet again.

Brookfield Business Partners to buy Westinghouse for $4.6 billion

(Reuters) - A subsidiary of Canada's Brookfield Asset Management Inc plans to acquire Westinghouse Electric Co LLC, the bankrupt nuclear services company owned by Toshiba Corp , for $4.6 billion.

Intel falls as investors worry about costs of fixing chip bug

(Reuters) - Intel Corp shares fell nearly 3 percent on Thursday as investors worried that newly disclosed bugs in the company's widely used computer microprocessors could be costly to mitigate.

SEC warns bitcoin, cryptocurrency investors at risk

WASHINGTON (Reuters) - The U.S. Securities and Exchange Commission warned Thursday that investors should "exercise caution" with cryptocurrencies like bitcoin, noting state and federal regulators may not be able to recoup any lost investments from illegal actors.

U.S. private payrolls growth accelerates; jobless claims up

WASHINGTON (Reuters) - U.S. private employers stepped up hiring in December and planned layoffs by American-based companies fell sharply, pointing to sustained labor market strength that likely keeps the Federal Reserve on course to increase interest rates in March.

Oil at highest since 2015 on inventory drawdown, Iran unrest

NEW YORK (Reuters) - Oil rose on Thursday to its highest since May 2015, on concern about supply risks due to unrest in Iran and another decline in U.S. inventories as refining activity hit a 12-year high.

Dow Tops 25k As Gold Surges To All-Time Record Win Streak

"Life's a bit of shit, when you look at it..."

The Dow reached 25,000 for the first time today.

The move from 24,000 on 11/1 was the fastest (in terms of calendar days) ever for a 1000-point move...

Source: WSJ

But adjusted for the percentage difference that 1000-point gain is at 24k vs 10k etc, this latest move is the 4th fastest gain ever with the 1999 surge from 10k to 11k (at 0.4% per day) as the most aggressive buying ever...

Source: WSJ

Perhaps even more shocking is the fact that the in less than a year, The Dow went from 20k to 25k with only 5 stocks responsible for half of those 5000 points.

Jeremy Grantham's Strongest "Bubble Burst" Alarm Just Went Off

In his latest letter to clients, which we discussed yesterday, GMO's Jeremy Grantham found himself defending two irreconcilable contradictions: ever the value investor, Grantham readily admitted that the market has never been more overvalued and thus hardly an attractive investing proposition; at the same time, the investing legend also conceded that stocks are on the verge of a "late bubble surge" melt-up, and as a result the upside from here before the next crash could be as much as 60% during the final phase of the current bubble.

Of course, for someone who is actively and professionally managing money, Grantham - like so many of his peers - had no choice but to admit the gaping cognitive dissonance that results from investing in the current "market", where one can avoid participating and see their AUM withdrawan promptly, or one can, in the immortal words of Chuck Prince, continue dancing as long as the music plays.

But how to determine if, after nearly nine years of constant market levitation, the music is finally dying down? Conveniently, Grantham also presented his favorite indicator which allows him to determine if "market momentum is increasing to a frenzy" - the acceleration of price, or said otherwise, the non-stop surge that accompanies the final melt-up.

This is how Grantham laid it out:

On the topic of classic bubbles, I have long shown Exhibits 1 and 2. They recognize the importance of a true psychological event of momentum increasing to a frenzy. That is to say, acceleration of price.

Tesla Bonds Tumble - Now 'Riskier' Than Indonesia

After missing expectations for Model 3 deliveries (by 50%), delaying production goals once again, it appears the bond market is starting to give up on Elon Musk's dreams for Tesla's future.

While stocks are rebounding, bonds are not...

In fact, Tesla's 2025 bond - now dramatically below par - suffered its biggest drop yet today, heading back to lows on price...

And for those who see Tesla's juicy 6.13% yield and feel like "reaching" for it... may we suggest Indonesia instead...

How long before Musk starts to discuss "Blockchain" implementations in Tesla's product plan?

The Debt Beneath

Authored by Sven Henrich via NorthmanTrader.com,

Debt is irrelevant and matters not. It's different this time. That's the message from politicians, markets and participants. Tax cuts pay for themselves (they do not), leverage doesn't matter (it does) and the increased costs of servicing the debt as a result of rising rates will be offset by imaginary real wage growth to come (they won't).

But the calmest market waters in history continue to keep these illusions alive as asset prices keep levitating from record to record.

Debt does matter and it was ironically left to Janet Yellen to voice any remnant concerns about the sustainability of debt to GDP: "It's the type of thing that should keep people awake at night" she said.

With good reason:

Bitcoin Isn't a Currency, It's a Commodity---Price It That Way

Bitcoin enthusiasts call it a currency, but it has a lot in common with gold. And if bitcoin is a digital precious metal, investors should start pricing it that way, by watching the fundamentals.

Tesla's Model 3 Story Is Getting Old

The company's news on delivery of its Model 3 sedans in the fourth quarter badly missed the mark and continued a history of company forecasts poor enough to be construed as misleading.

Dominion Pounces on Scana's Nuclear Woes

Dominion Energy's bid for Scana comes partly at the expense of ratepayers and shareholders stung by a nuclear plant debacle.

Bond Report: Treasury yields edge higher as investors focus on jobs data

Treasury yields edge up as investors digest private-sector payrolls and weekly jobless claims data a day ahead of the official December jobs report.

Trump Today: Trump Today: President sets sights on Dow 30,000 and says Bannon 'changed his tune'

President Donald Trump suggested the next milestone for the Dow Jones Industrial Average on Thursday, said his former chief strategist Steve Bannon had "changed his tune" after making critical comments, and agreed with South Korea's president to postpone a joint military exercise.

Key Words: Head of largest hedge fund says economic downturn could leave U.S. 'at each other's throats'

Ray Dalio worries that an economic recession could foment unrest in a polarized America, resulting in segments of the population feeling marginalized in the face of stagnant wages and tax cuts for the wealthy.

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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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