So many things to talk about today.
None of it really matters as it's the last day of the month and windows have to be dressed and already yesterday's losses are more than reversed with 1% pre-market (low-volume) gains that are taking us back to our weak bounce lines, which remain:
All red is, obviously, not a good sign but we'll be bouncing up to test some of the weak bounces again so we'll reserve judgment until we see what sticks. I already warned our Members not to try to jump in bullish as it's not likely we go much higher than 1.25% and I think we'll be rejected around there (16,200, 1,900, 4,125 (on the 100), 10,100 and 1,090). Those are the bounce levels our 5% Rule™ tells us to expect intra-day. In the bigger picture, the S&P looks like this:
I did a full 2-part rundown on the S&P back on August 13th, so I won't rehash it here but I will reprint my closing statement from that very thorough evaluations post:
So, upon further examination, there is no change to our stance of being short the markets at these levels which, on the Futures this morning, are 17,400 on the Dow (/YM), 2,095 on the S&P (/ES), 4,550 on the Nasdaq (/NQ) and 1,212.50 on the Russell (/TF) and, as usual, we look to short the laggard of the set with tight stops above. We also took on a more aggressive SDS (ultra-short S&P) position yesterday afternoon – as we felt the run-up was nonsense anyway – this post just confirms our gut reaction.
As noted on Monday, our Futures shorts made over $40,000 by that day and well over $50,000 by Monday's close, when we flipped a bit more bullish expecting the bounce we have right now (into the end of the month). Unfortunately, it's too dangerous to flip around and go short again this morning because Yellen is speaking at 2pm but we'll be very happy to short a run-up into the close spurred by nothing more than more Fed BS.
Finally, Goldman Sachs has joined me on the dark side and admitted my targets for the S&P were right all along. Goldman Sachs now expects the S&P 500-stock index to finish in the red in 2015. Chief U.S. equity strategist David Kostin lowered his year-end price target for the S&P 500 to 2,000, from 2,100, "citing slower than anticipated growth from the world's two biggest economies and lower-than-expected oil prices."
Gee - ya think?
Kostin's team lowered its estimate for calendar-year earnings to $109, from $114, which would mark a decline of 3 percent from 2014.
Like me, GS remains long-term bullish - it's just that prices have gotten ahead of themselves and valuations need to normalize. That is a good and healthy thing for markets to do.
On the darker side,
Lord Vader Carl Icahn is warning us that low rates have led corporate managers to employ financial engineering and accounting shenanigans to boost earnings per share - which is something I have been pointing out for a couple of years now - but it's nice to see Carl finally catch on too.
The long form of his video is here and, of course, it's a lot of self-serving BS from a man who just formed his own Political Action Committee that will support candidates who want to cut taxes for Billionaires, cut benefits for the poor and generally allow corporations to rum amok - AMERICA, F-Yeah! He does, however, make some good points.
As I said, he's not wrong, I simply object to him using our problems to push for solutions that will only serve to benefit him. I thought there was going to be a rimshot on the drums when he said we shouldn't quibble over whether corporations pay 15% or 0% on the $2,500,000,000,000 they have hidden overseas in an effort to avoid taxes. How about just pay the 35% they owe Carl?
Repatriating Carl's money from hidden tax havens won't fix what's wrong with this county. US corporations are sitting on $2Tn other dollars at home and they sure aren't using it to produce jobs or increase salaries for their workers or to provide benefits - how will another $2.5Tn help - other than to give them just enough money to take over or crush what few small businesses remain in this country.
Why can't Hillary or Bernie just go on TV with charts like this that CLEARLY explain what's going on in this country? In order to change things, the people have to understand the problem and, thanks to Bush's insane changes in our education system, economics is not even taught in schools anymore - you have to elect to take it in college or some progressive high schools. Politics, philosophy - off the agenda - the last thing the GOP wants is a well-educated voter.
This is not politics folks, this is economics! There are political forces who try to influence the economy in order to get more power - that's how the games work. The Democrats push to make people secure in their health and retirement and well-educated so that there will be enough wealth to SHARE with those who are less fortunate and yes, that's called SOCIALISM. The Republicans want you to fear as many things as possible so you willingly give up your liberty and obey those in authority who hold themselves up as your superiors. Well educated people don't tend to do that.
It's VERY easy to fix our economy. Elect me dictator and I'll have it done in a week. This is a $19Tn economy and all we have to do is place a 25% Value Added Tax (VAT) on all goods and services with no exemptions and we would raise $4.75Tn. The Government currently collects $3.5Tn, which includes Payroll taxes so you would not have to pay one additional penny in tax, other than state taxes, and you would never have to file your tax returns again. The only change would be that there would be a 25% bump on goods and services you buy that is turned over to the Government.
Since our budget is currently a bit under $4Tn, we could use $500Bn to pay off our debts in the next 30 years and we can take $250Bn and give it to the bottom 20% (60M people) for about $4,000 each in aid - more than doubling what they get now per family. That will pretty much eliminate poverty and that $250Bn would flow right back into the system as their lifestyles improve and, as a bonus - it's very likely they would need less health care and save us that much anyway.
If you spend $20,000 a year, you end up paying $5,000 in taxes but my plan gives people earning less than $20,000 at least $4,000 back - very fair. If you buy a private jet or a yacht, however, you pay your 25% taxes instead of the current system where you get a tax break - Carl Icahn and Donald Trump do not like that!
The beauty of a VAT system (and there are over 100 countries in the World using one now) is that corporations can't cheat. That's why the GOP is so against it. I know I pay more than 25% of my income in taxes and so does any honest person or corporation - only the cheaters have an issue with this. Best of all, no company will be able to sell goods or services in the US and hide their profits overseas - taxes are collected at the point of sale and there are no loopholes to hide the money in.
Well, there's my first day as dictator taken care of. On day 2 I'd fix the climate and day 3 would have to be infrastructure - which might bleed into day 4 so hold my calls...