Market Cracks…(!)

by Chris

Tons going on today.

I’ll get to as much as I can over time.  Here’s a quick synopsis:

First, the US equity markets had another bad day after several quite valiant rescue attempts.  The Dow finished down -660 points, the S&P 500 was -62 points.

I sincerely hope that the various entities that combine to whip these markets by hundreds of Dow points over a matter of minutes are completely happy with their purchases.

That includes the Cantons of Switzerland, I would suspect, as well as the shareholders of major corporations whose automatic share repurchase programs were put to less-than-automatic use at critical moments by the prop desks of the major banks “helping” them with their share buyback programs.

The news, of course, was that Apple had some bad news on all fronts – revenue and profits – which is another nail in the growth coffin.

Oops.  Who knew that subjecting your customers to abusive pricing practices and being caught doing such things as pushing unwanted phone system upgrades on the users of older phones that intentionally ‘bricked’ them or made them run tons slower, effectively bricking them?  Who knew?

Or the fact that Apple has tons of cash but isn’t using any of it to figure out how to unbollox their insanely bad iCloud system that rather cryptically saves, say, your photos in multiple spots (which it then syncs) greatly complicating the very simple task of deleting photos to clear up space.

“Wait, I just spent thirty minutes deleting all those photos, but they just synced back up with…uh…where are those kept?  Well, crap, here they all are again.  Wait, what do you mean I am out of iCloud space and need to purchase more?”

I just went though this very frustrating process with someone I am close to who couldn’t back up an old phone to a new phone without either buying more space on iCloud or deleting items stored there.  We literally spent an hour and could not figure out how to delete them without them showing up again.  A detailed article in Wired magazine by an expert also came to the same conclusion:  All of this is entirely too hard and consumer unfriendly, to say the least.

So apple is not some paragon of awesome design and great corporate values, it is a lousy company that over-chargers and seems to spend most of its time trying to figure out how to shaft you into buying their next version of iPhone…or more iCloud space.

It’s a corrosive, predatory model that simply has no place in a world that cares about its future.  If Apple cared about the future they’d be figuring out how to help you nurse your phone for as long as possible, not the opposite.

I feel that this level of dollar-chasing abuse is endemic to Silicon Valley, and the entire place could use a good, hard washing out.  It’s elevated several of the 7 deadly sins to cultural values, and those need some sort of brimstone event to get everybody back to some sort of sanity.

Well, that sanity is now returning, good and hard, to the equity markets, and that trend will continue – until and unless– the central banks give up and start more printing.

The US Federal Reserve half gave up today, floating a few trial balloons to test the markets patience and appetite for the Fed backing off a bit:

The president of the Dallas Fed says central bank should pause rate hikes amid turmoil in markets

Jan 3, 2019

The Federal Reserve ought to stop raising interest rates until it gets a clearer picture of where the economy is headed, Robert Kaplan, president of the central bank’s Dallas district, said in an interview Thursday.

“My own view is we shouldn’t take any further action on interest rates until these issues are resolved for better or for worse,” Kaplan said. “So I would be an advocate of taking no action, for example, in the first couple of quarters of this year.”

In addition to his comments Thursday on rates, Kaplan said the Fed may want to rethink its balance sheet reduction. In an operation that started in October 2016, the central bank has been allowing a set level of proceeds — currently at $50 billion — from its bond portfolio to run off each month. That has reduced the Fed’s role in the bond market and has sparked liquidity concerns.

So the Fed trotted out a non-voting member from the Dallas Fed to try out a couple of ideas.  Stop hiking and stop reducing the Fed’s balance sheet.

What did the markets think?  They popped for a few minutes and then crushed the rest of the day to lower levels, closing out on high volume at the lows of the day.

In other words, “not so much!”

The Fed would have to do more.  Pausing here isn’t going to cut it.

Again, until and unless.  Nothing less will do.  The ““markets”” want MORE!  More QE.  More money printed and effectively handed directly to the big banks and their best clients, and the already super wealthy.

Meanwhile the ECB quietly, as far as these things go, took over an Italian bank  (Banca Carige) to prevent a cascading dominoes failure from spreading across the European banking sector.;

FRANKFURT — The European Central Bank took control of a troubled Italian bank Wednesday, an unprecedented step that spotlighted the risks to the eurozone’s financial system from political chaos in Rome and a sputtering economy.

While the bank, Banca Carige, is a midsize lender, its fate has the potential to reverberate broadly.Among policymakers and economists looking for signs of the next crisis, Italy and its heavily indebted banks have been a source of concern for years. And the policies and statements of the populist government in Rome have recently added to the woes of Italy’s banks, and by extension, the whole economy.

“It’s not a bank large enough to cause systemic crisis,” said Lorenzo Codogno, a former chief economist at Italy’s treasury who operates LC Macro Advisors, a consultancy in London. “But,” he added, “we have seen that even small banks can cause huge problems.”

(Source – NY Times)

Nothing to see here!  Move along!  Just a meaningless, mid-sized bank too small to cause a crisis being taken over by the ECB in an unprecedented move.

In other news, nothing is ever official until it’s denied.

Then, to really make the day special, the chairman of the White House Council of Economic Advisers, Kevin Hassett,  speaking about the trade war with China said, right on TV (CNN):

“It’s not going to be just Apple, there are a heck of a lot of U.S. companies that have sales in China that are going to be watching their earnings being downgraded next year until we get a deal with China.”

Well, isn’t that special.

Oops.

I have a ton more data too, this is all unraveling very quickly.  The odds a crash are now very high, boosted by the revelation that even gigantic, enormous sovereign currency pairs can be flash crashed by the malignant ecosystem of high frequency trading systems now running amok.

More on that soon…