By Pam Martens and Russ Martens: August 24, 2015 After an 8.5 percent plunge in China’s Shanghai Composite Index on Monday (bringing its loss for the month to a negative 21 percent), a drop in the U.S. Dollar and the U.S. crude oil benchmark, West Texas Intermediate, slipping below $39 a barrel, futures on the Dow Jones Industrial Average at 8:27 a.m. are flashing an ugly opening in New York, with a potential loss of as much as 648 points. (That could materially change before the market opens at 9:30 a.m.) Mainstream media seem obsessed with what actions the central bank of China might take to stem the rout while also focused on debating if this means a rate hike from the Fed is off the table. The Fed, unfortunately, can only talk about hiking or not hiking since it’s fired all its bullets and has no rate cuts to … Continue reading →

By Pam Martens and Russ Martens: August 21, 2015 U.S. stocks felt their worst selloff in 18 months on Thursday with the Dow Jones Industrial Average losing 358 points and the S&P 500 index shaving off 43.88 points. Of particular concern, the S&P has now broken through its 200-day moving average which suggests to market technicians that more pain is ahead. The stock plunge set off a flight to safety with money flowing into the 10-year U.S. Treasury note, driving down the yield. This morning, the U.S. 10-year paper is sporting a yield of 2.06 percent. Despite persistent talk of a rate hike coming out of the Federal Reserve, the yield on the 10-year has been declining for months, not rising – suggesting that the markets believe the Fed is reading the wrong tea leaves. On the heels of the sea of red in U.S. markets yesterday, China’s stock markets … Continue reading →

By Pam Martens and Russ Martens: August 20, 2015 Judging by the speed at which U.S. billionaires are going unfiltered on the airwaves and in print, the U.S. may soon find itself indelibly defined as a nation of well-heeled meatheads. Yesterday we reported on billionaire Sandy Weill, whose crackpot idea of a financial supermarket and rollback of the Glass Steagall Act resulted in his becoming a billionaire despite the implosion of his creation, Citigroup, in 2008.  Citigroup became the largest banking bailout in U.S. history and a catalyst for the largest U.S. downturn since the Great Depression. Now in their twilight years, Weill and his wife, Joan, have nothing better to do than attempt to gut a dead man’s will in order to chisel Joan’s name into the façade of Paul Smith’s College, a 1,000-student campus in New York’s Adirondack mountains. As the Weill article evolved, reflecting a life-long pattern … Continue reading →

By Pam Martens and Russ Martens: August 19, 2015 Sandy Weill, of Citigroup infamy, and his wife, Joan Weill, have given $10 million over the years to Paul Smith’s College, a small campus of 1,000 students situated on a lake and nestled in the breathtaking Adirondack Mountains of upstate New York. The $10 million resulted in Joan Weill’s name being placed on the school’s library and student union. A month ago, in what now looks like a mean-spirited leveraged-buyout to alumni and faculty, Joan Weill offered to pony up another $20 million but only if the school changed its name to become: Joan Weill-Paul Smith’s College. The name-change requires the involvement of the courts. The 50,000 acres on which the college is located was purchased by the school’s namesake 157 years ago and donated to the college by his son, along with a foundation bequest to build the school. The … Continue reading →

By Pam Martens and Russ Martens: August 18, 2015  According to data from Bloomberg, corporations have issued a stunning $9.3 trillion in bonds since the beginning of 2009. The major beneficiary of this debt binge has been the stock market rather than investment in modernizing the plant, equipment or new hires to make the company more competitive for the future. Bond proceeds frequently ended up buying back shares or boosting dividends, thus elevating the stock market on the back of heavier debt levels on corporate balance sheets. Now, with commodity prices resuming their plunge and currency wars spreading, concerns of financial contagion are back in the markets and spreads on corporate bonds versus safer, more liquid instruments like U.S. Treasury notes, are widening in a fashion similar to the warning signs heading into the 2008 crash. The $2.2 trillion junk bond market (high-yield) as well as the investment grade market have … Continue reading →

By Pam Martens and Russ Martens: August 17, 2015 After overnight chaos in emerging market currencies, which are still reeling from China’s devaluation of its Yuan, the New York Fed further rattled markets at 8:30 a.m. this morning with a stunning manufacturing report showing that business conditions in New York fell off a cliff in its latest survey. The New York Fed writes: “The August 2015 Empire State Manufacturing Survey indicates that business activity declined for New York manufacturers. The headline general business conditions index tumbled nineteen points to -14.9, its lowest level since 2009. The new orders and shipments indexes also fell sharply, to -15.7 and -13.8 respectively, pointing to a marked decline in both orders and shipments. The inventories index dropped to -17.3, signaling that inventory levels were lower.” Adding to market angst this morning, the U.S. benchmark crude oil, West Texas Intermediate, was trading below $42 a … Continue reading →

By Pam Martens and Russ Martens: August 13, 2015  The quirky U.S. consumer has apparently decided to load up on building supplies, eat and drink at restaurants, forego filling the refrigerator, and snub Macy’s. The Commerce Department reported this morning that retail sales edged up 0.6 percent in July with food services and drinking places growing at 0.7 percent; building materials and garden supply dealers ratcheting 0.7 percent; while grocery store sales were flat and clothing and clothing accessories stores edged up just 0.4 percent. Department store sales were negative at -0.8. Yesterday, Macy’s reported that its second quarter earnings came in at 64 cents per share, a sharp drop from the 80 cents per share it earned in the second quarter of 2014. Revenue was also off, declining to $6.1 billion from $6.27 billion year over year. Macy’s stock dropped 5.06 percent by the close of trading yesterday, despite … Continue reading →

By Pam Martens and Russ Martens: August 12, 2015  The Standard & Poor’s 500 stock index was down a meager -0.96 percent at the close yesterday on the news of China’s devaluation of its currency, the Yuan, but some noteworthy individual stocks took a more dramatic pounding. Apple lost 5.20 percent; Micron Technology was in the red by 4.99 percent; Yum! Brands closed down 4.87 percent while General Motors lost 3.48 percent. All of these companies rely on China as a major export market.  According to a March report from FactSet, “companies in the S&P 500 in aggregate generate about 10 percent of sales from the Asia Pacific region, most of which comes from China and Japan.” Some U.S. companies, however, derive a far greater percentage of their sales from China. According to Sue Chang, a MarketWatch reporter using data from FactSet, 52 percent of Yum! Brands sales come from … Continue reading →

By Pam Martens and Russ Martens: August 11, 2015  Markets received a seismic jolt from China on Tuesday as it devalued its currency, the Yuan, by the most in two decades, cutting its daily reference rate by 1.9 percent. The move sparked instant selloffs in stocks, commodities, and emerging market currencies as well as a drop in the yield of the 10-year U.S. Treasury Note, which is trading early this morning at a yield of 2.16 percent. The devaluation was interpreted in the markets as a sign of capitulation by China to forego a stable currency policy in a last-ditch effort to revitalize sluggish export growth. On Friday, China reported that its exports had plunged by 8.3 percent overall in July with dramatic declines of 12.3 percent to the European Union and 13 percent to Japan. Exports to the United States fell by 1.3 percent. While China announced that the … Continue reading →

By Pam and Russ Martens: August 10, 2015  Last Friday’s nonfarm payrolls report of 215,000 new jobs in July with its attendant announcement of an unemployment rate of 5.3 percent drew mostly yawns from the media. That wasn’t the case on February 3 of this year when Jim Clifton, CEO of the polling company, Gallup, wrote a stunning opinion piece on the company’s web site calling the U.S. unemployment rate “The Big Lie.” Clifton raised more media frenzy the next day when he appeared on CNBC and suggested he might “disappear” for questioning the government’s unemployment rate. Back then, the official unemployment rate was 5.6 percent. Today it’s 5.3 percent – a very healthy looking rate for an economy that is supposedly on the rebound. One of the bogus aspects raised by Clifton in his opinion piece about how the U.S. government calculates the unemployment rate was this: “Say you’re … Continue reading →