Stock Rally Stalls with Republican Win; Investment & Finance Thread Nov. 9, 2014

Stock Rally Stalls with Republican Win; Investment & Finance Thread Nov. 9, 2014

A week ago we took inventory of then-current trends and considered which scenarios would lead where. All we knew for sure was that either things would stay their courses or we'd change direction. What happened is we dumped 'business as usual' --as far as trend-lines went-- and we now got signals pointing at "something new". That 'something new' might even be a basing/stage prep for a continued price surge (Stock Indexes In Pause Mode, But That Can Do Uptrend Good). Maybe. Or then again it might be what we got w/ the previous two rallies over the past half year and we're in a top-off.

OK, so we're not saying the Republican win halted the stock rally. One idea is that the election results had already been priced into indexes last week and the current upheaval is nothing more than static --like what we had w/ the 2010 midterms (h/t oblomov) when the uptrend staggered for a few weeks before taking off like gangbusters.

As or metals this past week's been a continuation of the general down turn w/ silver dropping almost 2% and gold down more than 4%.

Markets	yesterday	today
metals	Treading water w/ gold at $1,154 and silver at $15.41	Futures @ 2-1/2 hrs. before opening -0.48%

stocks	OK, so IBD says "Bulls take a Timeout" and declare a distribution for both the S&P and the NASDAQ, and yet both indexes ended up in higher volume.	Futures +0.03%

--and we're topping off the week w/ a busy report stack:

8:30 AM Retail Sales
8:30 AM Retail Sales ex-auto
8:30 AM Export Prices ex-ag.
8:30 AM Import Prices ex-oil
9:55 AM Mich Sentiment
10:00 AM Business Inventories
10:30 AM Natural Gas Inventories

News sampler:

As Long As You're Fearful, This Bull Will Run - John Waggoner, USAT
Beaten Down Stocks Set For 2015 Rebound - Jeff Reeves, MarketWatch
Contemplating the Stock Market Sans QE - Peter Schiff, Euro Pacific
Let's Get to Know the Hard Money Extremists - Nathan Lewis, Forbes
Vladimir Putin Is the Biggest Gold Bug - Leonid Bershidsky, Bloomberg

I pretty much agree with this. QE worked. Now it’s over and it needs to be. The ROW is pouring gasoline on their fires and have structural issues that won’t be solved by more stimulus.

ART CASHIN: Traders Are Passing Around A Hedge Fund Manager’s Warning Of ‘Powerful And Dangerous’ Delusions

The Federal Reserve and its central bank peers around the world unleashed unprecedented amounts of monetary stimulus in an effort to pull the economy out of the financial crisis.

While growth remains anemic, we are no longer in crisis mode. So you could argue that the monetary policy worked.

More recently, the European and Japanese economies have slowed substantially, and the European Central Bank and the Bank of Japan have responded by cranking up stimulus again.

But veteran trader Art Cashin of UBS and his peers worry that not only is this unsustainable, it’s actually destabilizing.

In his morning note Thursday, Cashin takes a page out of hedge fund manager Paul Singer’s letter to investors. Emphasis added:

Best Not To Look Behind That Curtain — As mentioned in earlier Comments, Paul Singer of Elliot Associates put out a recent letter to investors, which is being widely cited and discussed around Wall Street.

Here is a brief but telling paragraph from the letter:

There is a current set of delusions that is powerful and dangerous: that monetary debasement can be infinitely pursued without consequences; that the financial system is now solid and sound; that the low volatility and high prices of stocks, high-end real estate and bonds are real; that bonds are a safe haven; and that large financial institutions which get into trouble in the future can be unwound in a much safer way than they could be in 2008. We have discussed each of these elements in the pages of this report and previous ones in an attempt to reveal the fallacy and unsustainability of such beliefs. But, as stated above, they will only enter the history books as mass delusions if they are unmasked in the future as unjustifiable and erroneous beliefs at the time they were held. We think that test will be met, perhaps soon.

That’s about as eloquent a putdown of central bank policy as I’ve ever seen. Mr. Singer seems quite sure that this will end badly — probably very badly.

To be clear, this is not the consensus.

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