Let the Taper Begin

Monday, stocks in Asia fell 0.5%. Stocks rallied 1.3% in Europe and 0.8% in the U.S. on low volume. The VXO dropped almost 5% to close at 15.01. Here’s a good article that pinpoints the distortions caused by artificial low interest rates and here’s a link that document’s the infamous 100th anniversary of the illegal establishment of the Federal Reserve. Tuesday, stocks in Asia rose 0.4% but fell in Europe twice that amount. In the U.S., stocks fell 0.4% on low volume.

Wednesday was the day the Politboro spoke. Stocks in Asia rose 0.7% and 0.9% in Europe as investors presumably anticipated another stock-friendly decision. Stocks drifted lower in the U.S. dragging the NASDAQ below the 4000 level before the FOMC announcement. After it was made stocks roared perversely higher, bringing all three major indices well above those round-number levels again. What cheered stocks from the announcement? They said they would start tapering the bond buying program  by reducing the monthly purchases from $85 billion to $75 billion starting in January. Stocks rose 1.7% and the VXO plummeted more than 15% to close at 12.80. Bonds reacted in a much more sane fashion.

Thursday, stocks in Asia closed flat but in Europe they blasted 1.8% higher. Precious metals languished as gold dropped below $1200 an ounce before recovering as silver continued below $20 an ounce.  In the U.S., stocks closed flat, but the 10-Year U.S. Treasury Bond yield rose 1.4% to close at 2.92%.

Friday, stocks in Asia closed nearly flat, while in Europe they rose 0.5% in the U.S. 0.4% on high volume in response to quadruple witching. The VXO plummeted over 7% to close the week at the unsustainable 11.80 level. Precious metals recovered a bit with gold managing a close just above $1200 an ounce. For the week, stocks gained over 2% while precious metals lost about 2%, but the VXO collapsed 25%.

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