Down goes the Dow

Oh, that’s the story. What they don’t tell you, that is a first. Never before. Never. That's a long time. We’ll see how that story plays out.

Fed Bank Stress Trst:

“The Federal Reserve’s 2020 severely adverse scenario was designed in late 2019 and published in early February 2020, before the COVID event had significantly affected the U.S. economy. The 2020 severely adverse scenario features a severe global recession, a rise in the unemployment rate to 10 percent, a 50 percent decline in broad equity prices, a roughly 25 percent decline in residential house prices, and heightened stresses in corporate debt markets and commercial real estate.

By mid-March, it became clear that the COVID event was disrupting U.S. economic activity and that even more extreme downside outcomes than the 2020 severely adverse scenario were plausible, especially for near-term unemployment and gross domestic product (GDP). As a result, the Federal Reserve conducted sensitivity analysis using three alternative downside scenarios and made targeted adjustments to the supervisory stress test framework to credibly reflect even more stressful situations than were implied by current economic and banking conditions.”

“The truth is, in an economy encumbered with nearly $78 trillion of debt already—including $16.2 trillion on households, $16.8 trillion on business, $23 trillion on governments—the last thing we need is even lower interest rates and even bigger incentives to take on debt and leverage.

In fact, in a debt-saturated system, the Fed’s massive bond purchases never transmit anything outside the canyons of Wall Street. This money-printing madness only drives bond prices higher and cap rates lower—meaning relentless and systematic inflation of financial assets’ prices.

As a practical matter, of course, the bottom 90% don’t own enough stock or even inflated government and corporate bonds to shake a stick at. Instead, what meager savings they have accumulated languish in bank deposits, CDs or money market funds earning exactly what the Fed has decreed—nothing!

So, when Powell says he’s only trying to help the average American, you have to wonder whether he is just stupid or the greatest lying fraud yet to occupy the big chair at the Fed.

Then again, it doesn’t really matter why.

The Fed is now a completely rogue institution that is a clear and present danger to the future of prosperity and liberty in America. The tragedy is that the clueless speculators on Wall Street and politicians in Washington don’t even get the joke.“

—David Stockman

Dusting off David Stockman? These really are special times!

Just for you Detector Dude:

https://twitter.com/sentimentrader/status/1276907092226555905

What do we think for this week, does SP 500 stay above 3000? I’ve got pride on the line in a forecasting contest.

Speaking of pride, the spouse and I did a virtual Pride run this morning, which was the first nearly race-like effort for me in four years. I managed 20:04ish for 5k, roughly a 75% age-graded result. Well off my best, both as raw and age-graded (my best results as a young master were about 87%), but way better than I thought I could ever manage. Felt AWFUL though... :-)

Good job. My best age graded effort as a master was about 86% in my mid to late 50s. Recently age grading similar to your effort. Thankful I can still do it.

SPX now below 200 day moving average.

Often the market will go a couple percent below that line and then rocket back up.

Certainly it will cause some traders to move in and out.

Seems silly market going up with Covid 19 outbreaks and falling economy. There appears to be no V-shape recovery.

Ghost of Igloi wrote:

Blackstone is big in private equity, to just walk away is what is surprising

Also in the CNBC story:

“Some 37% of renters and 26% of homeowners are at least somewhat worried that they will face eviction or foreclosure in the next six months, Apartment List reports. Columbia University researchers estimate that homelessness could increase by between 40% and 45% this year over where it was in January 2019.

Some legal experts expect “at least” 50,000 eviction filings in New York City alone when the state’s blanket eviction moratorium lifts June 20, most for nonpayment of rent. (A more restricted eviction ban is in place in the state until August 20.) “

Hyper skeptical on this. No one in their right mind would evict unless the tenant can't even meet a fraction of the obligation. Who wants to evict right now? It's not like credit scores and demand to move to an apartment in the city is going up. Pretty much every bank has offered to just pause mortgage payments and tack it onto the back of the loan anyways and I doubt courts will be particularly kind to greedy landlords right now.

Ghost of Igloi wrote:

Seems silly market going up with Covid 19 outbreaks and falling economy. There appears to be no V-shape recovery.

I have to agree with Racket here. Inner city housing demand has been negatively affected by Covid. Work-at-home situations that may become more permanent are going to increase demands for housing in the suburbs at the expense of the cities. As an example, I know one family who recently moved out of their Manhattan apartment. Their former landlord posted their former apartment for hundreds of dollars less per month than they had been paying.

J. Hardy wrote:I know one family who recently moved out of their Manhattan apartment. Their former landlord posted their former apartment for hundreds of dollars less per month than they had been paying.

We've got two places we are renting out while we live abroad. In both cases, I would worry about losing good tenants because the rental market is at least temporarily depressed. Neither of our tenants has asked for a break or missed the rent, but if either asked for relief I'd be inclined to give it, to offset the work we'd have to do to find decent tenants at a probable loss over the longer term.

No doubt some (perhaps many) people will be evicted, but I imagine it will be less than the doomsayers think. It's very difficult to predict human behaviour, even average behaviour, under unusual situations. I was just looking back at news from March, and more than one article was forecasting most US airlines would be bankrupt by now. Have any of them declared yet?

Good say for Tesla and my airline stocks.

Tesla has really paid off.

One airline stock has been quite good, two rather bad

All eight indexes on our world watch list posted losses through June 29, 2020. The top performer is China's Shanghai with a loss of 2.90%. Our own S&P 500 is in second with a loss of 5.50% and in third is Tokyo's Nikkei 225 with a loss of 7.02%. Coming in last is London's FTSE 100 with a loss of 17.46%.

https://www.advisorperspectives.com/dshort/updates/2020/06/29/world-markets-update-june-29-2020?bt_ee=Z1qjUivvv%2F08WGhFsvqSHNh6J56HQZiJdV5sGn%2FAJAj7SqtUiLS1lG%2FWdof4mZQN&bt_ts=1593519837514

Portia wrote:

All eight indexes on our world watch list posted losses through June 29, 2020. The top performer is China's Shanghai with a loss of 2.90%. Our own S&P 500 is in second with a loss of 5.50% and in third is Tokyo's Nikkei 225 with a loss of 7.02%. Coming in last is London's FTSE 100 with a loss of 17.46%.

https://www.advisorperspectives.com/dshort/updates/2020/06/29/world-markets-update-june-29-2020?bt_ee=Z1qjUivvv%2F08WGhFsvqSHNh6J56HQZiJdV5sGn%2FAJAj7SqtUiLS1lG%2FWdof4mZQN&bt_ts=1593519837514

The S&P 500 has a return of just over 4.5% for the last year, thank you very much. I'll take that. But get a load of the Nasdaq, up almost 25% since this time last year!

seattle prattle wrote:... get a load of the Nasdaq, up almost 25% since this time last year!

It's also up 9.5% on the year... way ahead of the major indices.

It is, of course, dominated by a handful of mega-cap stocks, so the house of cards will collapse if one or more of those crater...

Can't see how any of the recent news is good for Facebook and Amazon is being sued in the EU for massive breaches of anti-trust law. Then again, they're both up 1-2% today

Thank God for Tesla.

Bought at 590 a few months back.

Up nearly 500 points.