Stocks unravel after factory report; Dow sinks 300-plus points … U.S. stocks were hammered on Monday, with benchmark indexes falling through key support levels after a gauge of factory activity disappointed, heightening concern about the economy before Friday's monthly jobs report. – CNBC
Dominant Social Theme: The Dow goes up until it doesn't.
Free-Market Analysis: Once more the Dow has plunged, this time some 300 points amidst another global selloff. But let us grapple with the reality of these numbers.
In some ways they mean little or nothing.
REAL numbers are a good deal worse than the phony stats trotted out every quarter. Price inflation is a good deal higher than suggested. Manufacturing – despite the reports we featured yesterday – is a good deal worse. The US is basically in a depression. So is Southern Europe. Germany is not very healthy. China is on the way down.
The world's economy is basically in depression or verging on it. And yet, stock markets around the world are responding to each US numerical twitch as if they were some kind of revelation.
Let's be clear … ShadowStats put unemployment around 20 percent, but recently we have reported on professional projections placing unemployment in the US at over 35 percent. Spanish unemployment when it comes to young people is closer to 50 percent. Youth unemployment throughout the West is a big problem.
So these sorts of articles don't make too much sense to us. What markets must be reacting to are indications of money printing, not underlying realities, because the underlying realities have continued to be grim.
Stocks had wavered ahead of the report that had U.S. manufacturing expanding at a substantially slower pace in January, driving overall factory activity to an eight-month low. "A report like this scares people ahead of the payroll number on Friday," said Andres Garcia-Amaya, global market strategist at J.P. Morgan Funds, who added the report's soft new orders component was of particular concern.
"We had such a strong year last year there was complacency among investors," who questioned whether they should take some profits or see if there were further reasons to invest in the U.S., with the trouble in emerging markets proving to be the initial catalyst for the steep selling in recent sessions
Monday's selling accelerated once stocks broke through support levels, which in the case of the S&P 500, was 1,770, wrote Bruce Bittles, chief investment strategist at RW Baird. The S&P's next support is 1,708, said Bittles … "The significance of the ISM report is not lost on the markets that are unsure how the new Fed Chair will respond. Janet Yellen comes before Congress on Feb. 11," he added.
This sounds very professional and analytical, but who can believe it? "US manufacturing expanded[ed] at a substantially slower pace." Really? When did it pick up? Perhaps we didn't notice.
The other day we wrote that any US economic upturn was either the result of: 1) multinationals expanding offshore operations, 2 fracking operations expanding oil production or 3) central bank money printing expanding assert bubbles.
So much for "expansion."
Even if one can justify the statistics being broadcast, that doesn't mean they have anything to do with a recovery. Nonetheless, the narrative itself is to be regularly buttressed. This phony "recovery" is to be elaborated on by analysts who chart every dip and turn as if market averages were either logical or accurate.
Here's part of another recent article appearing at CNBC:
A 'high-quality' buying opportunity … Bank of America pro … Savita Subramanian, BofA Merrill Lynch head of U.S. equity & quantitative strategy, and Barry Knapp, Barclays head of U.S. equity portfolio strategy, discuss the Fed's role in the market correction, and the buying opportunity this volatility is providing.
Investors should not only treat Monday's selloff in U.S. equities as a "natural phenomenon," but also as a chance to grab some big-name stocks, said Bank of America Merrill Lynch's head U.S. equity strategist.
In an interview with CNBC on Monday, amid a heavy, triple-digit selloff on Wall Street, Bank of America's Savita Subramanian said some marquee names with global diversification look cheap after several days of losses.
Her comments come as market observers wonder whether the recent stock market correction in Japan could happen in the U.S. "I do see this as a great buying opportunity for some of the higher-quality names in the S&P 500 that have sold off on emerging market exposure," Subramanian said on "Squawk on the Street." "Or have sold off just because they had a whiff of exposure in these regions that are flashing some dangerous signals."
The entire scenario seems questionable to us. We know the numbers are phony and therefore are left to wonder (as many times before) how "markets" respond rationally to these irrational numbers.
Reality informs us of two possibilities. Either the numbers being cooked are actually accurate or the largest market players are making bets to purposefully buttress a dishonest narrative.
We opt for the latter, keeping in mind that one does not have to believe in a conspiracy to follow the dictum that "the trend is your friend." After all, if markets are going up – no matter whether the fundamentals are accurate or not – there are plenty who will buy on the "good news."
It is for this reason that we believe that a "Wall Street Party" is going to occur as predicted. The party is based on various indices that are in turn supported by central bank money printing.
The asset bubbles swelling now will support significant equity advances. Reports will de-emphasize the continued money printing and emphasize instead a variety of industrial "fundamentals."
To some degree these will be justified, as the asset bubbles themselves will fuel additional consumer spending. But ultimately, the entire scenario is based on funny money, endless inflation and aggressive "investing" by the biggest players.
There will be ups and downs, of course – with the downs being characterized as buying opportunities.
For a while they will be … And some may make money regardless …