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Money Daily has been providing business and financial market news, views, and coverage on a nearly continuous basis since 2006. Complete archives are available at moneydaily.blogspot.com.

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Stocks Under Pressure From Fixed-Income, Geopolitics, Inflation, Ukraine, Dollar Ascendancy and Assorted Headwinds

Friday, October 21, 2022, 9:03 am ET

Is this a rally or is the stock market getting ready to roll over again, this time smack in the middle of earnings season?

Either view can be obtained from charts and the inordinate amount of noise from outside sources, like the catastrophe of British politics, ongoing conflicts in Ukraine, Syria, Yemen, and elsewhere, the US midterms in a little more than two weeks with polls now suggesting a massive Democrat bloodbath, or the incessant inflation in the US and Europe.

Any rally can come to an end quickly these days. The one that began last Thursday probably was ignited by inside players, making it particularly vulnerable to shifts in sentiment, or, as the case may be, continuation of current trends. Investors are spooked, not just by earnings calls like those of Snapchat (SNAP), which reported reasonable third quarter earnings but warned of further deterioration in the fourth quarter and is being savaged in the pre-market, down as much as 28% from Thursday's close.

The company's shares hit an all-time high of $83.11 (Sept. 24, 2021), but is now down 83% year-to-date and is showing a one-year performance of -89%. Analysts are split over whether SNAP's decline is the result of internal changes or a broader macro picture that sees advertising - SNAP's main profit center - heading south. For that, a clearer picture should emerge when META (Formerly Facebook) and Google report, especially the latter, as the leading platform for online advertising.

In recessions, advertising is usually among the first budget items to get the axe as companies try to streamline operations by cutting costs. Executives usually determine that pushing one's brand is not helpful when the entire economy is slowing. That's just been the practice for decades, despite arguments to the contrary.

So, if SNAP is somehow the canary in the coal mine when it comes to gauging the general economy, META and Google will shed further light on the subject. Signs are everywhere that the US economy is not firing on all cylinders. Housing data has been weak for six months, stocks obviously have been beaten down, and forward guidance by companies reporting results have been mixed to negative for the near term.

More than a few economists and analysts are calling for a recession in the first quarter of 2023, despite widespread belief that the US is already in one, having produced negative GDP in both the first and second quarters of the current year. The first estimate of third quarter GDP will be reported Thursday of next week (10/27).

Arguably the most accurate of GDP forecasting tools, Atlanta Fed's GDPNow is currently pegging third quarter GDP at a positive 2.9%, which, if it holds true, would more than offset the first and second quarters readings of -1.6% and -0.6, respectively, and put 2022 GDP on a positive footing for the final quarter. The best one could hope for is GDP growth of around two percent for the year, not exactly a strong showing for the world's leading economy. Reality suggests that GDP will be less than one percent for the year, and, if any growth has occurred at all, it was largely due simply to higher prices caused by general price inflation.

As markets prepare for the end of the week and an options crescendo this third Friday of the month, things are looking good for the major indices to produce a win for the week. Through Thursday's close, Dow Industrials are up nearly 700 points; NASDAQ is higher by 293; S&P 500 up 82 points, and the NYSE Composite holding a gain of 233.

Those numbers appear safe for the bulls, though big daily swings have become the norm this year, and futures are suggesting a rough pull ahead. Adding to the trepidatious mood on the street, treasuries have spooked the markets of late, as the yield on the 10-year note has exploded higher, reaching 4.26% on Thursday. What's worse for stocks is the combination of high inflation, a stumbling stock market and soaring interest rates, with the treasury curve currently higher than four percent from 3-month bills all the way out to 30-years, with the highest returns promised on one-year and three-year maturities, at 4.66%.

Investors now have the dubious choice of losing a little to inflation via fixed income or possibly losing a lot more with equities. The so-called "flight to safety" may turn into a full-fledged migration as the Fed keeps the pressure up in its war on inflation with higher rates for longer. If the near term appears risky for stocks, the longer term seems obvious. Bond yields will offer better returns than passive stock holdings until a market bottom is found, which could be months or even as long as years from now.

Heading into the opening bell, futures are tumbling and European indices are all down between one and two percent. Overnight, Asian stocks were mixed but mostly lower. Japan's NIKKEI continues to weaken as the yen surpassed 150 to the dollar on Thursday and is currently soaring towards 152. Japan's currency is being destroyed. (Not so) Great Britain's pound is next, with the euro clearly in the sights of the US dollar's relentless rise.

Gold and silver are lower, with silver looking to test $18.00 an ounce and gold chasing down to $1600. If nothing else, weakness in precious metals is a near-certain sign that equities are being pressured.

Even Bitcoin, which has held steady around $19,000, is falling this morning, currently at $18,789 with a half hour to the opening bell.

There are no guarantees at this stage of the game, only guesses, instincts, and luck.

The show must go on.

At the Close, Thursday, October 20, 2022:
Dow: 30,333.59, -90.22 (-0.30%)
NASDAQ: 10,614.84, -65.66 (-0.61%)
S&P 500: 3,665.78, -29.38 (-0.80%)
NYSE: 13,840.47, -106.79 (-0.77%)


The Problem Isn't Inflation or the Federal Reserve Raising Rates, It's the Government Refusing to Put Brakes on Spending

Thursday, October 20, 2022, 8:30 am ET

As most of the betting investing public remains focused on stocks, on Wednesday, the US Treasury elevated to "benchmark" status the 14-week (3 month) bill with a yield of 4.32%. The bill has been issued regularly by Treasury since April 2020 as a cash management tool as it doled out billions of dollars from the $1.7 trillion CARES act.

A white paper [PDF] from the Treasury Borrowing Advisory Committee (TBAC) outlined the usefulness of the bill and the necessity of making it a benchmark bill as the Treasury envisions budget deficits of over a trillion dollars through 2030, peaking on the endpoint at $1.7 trillion.

This is Janet Yellen's prescription for successfully funding the behemoth known as the US federal government. While the 76-year-old Mrs. Yellen may be giddy over prospects for growing government, she's apparently not devoted much time to considering the impact of interest rates on government debt which will only grow larger in accordance with her plans.

The Brandon administration took a shot at calculating interest payments on the debt when it released its 2022 budget recommendations in the first half of 2021, putting out a table pegging it at $305 billion. It turned out to be higher than that, closer to $500 billion. With interest rates now averaging over four percent across the yield curve, the chart predicting a 10-year rate yielding 2.1% to 2.8% over the span from 2024 to 2031 has been already relegated to bad joke status.

Don't confuse the Federal Reserve with the federal government's Treasury Department. The Federal Reserve is a private bank, the facilitator of reckless spending policies of the US congress and the White House. The Treasury issues the debt.

Inflation and the economy may be major issues facing the American public, but there's no doubt that much of the inflation being suffered through today was caused by congress and the US Treasury issuing trillions of dollars of debt to finance the Covid relief stimulus in 2020 and 2021, along with various other bills, such as the infrastructure bill (graft, money laundering) and the ironically-named Inflation Reduction Act of 2022 (more graft, more money laundering).

The growth of the federal government and constant deficits for more than 40 years running is the real problem. At least the Federal Reserve, by raising interest rates, is attempting to choke off government spending, though the politicians aren't exactly getting the memo. Nothing has been done to reduce the size of government or reign in deficits, and nothing will, until the entire economy collapses under the weight of odious debt, the interest on which alone will stoke inflation and contribute to reduced standards of living.

And it's not just at the federal level. States and municipalities also seem to like to spend money that's not theirs, at ever-increasing rates. America has an epidemic of politicians who can't or refuse to balance a checkbook. With the Fed intent on hiking rates to tame inflation, the situation is only going to get worse.

Americans (along with Europeans, Chinese, Japanese, Australians, Britons, and Canadians) have been too complacent the last forty years, as governments - by running massive deficits and constantly swelling their ranks - have been at the core of just about every economic problem. Until governments are reined in, people and small businesses will find it increasingly difficult to survive, their prosperity stolen from them by the out-of-control governments they themselves elected.

At the Close, Wednesday, October 19, 2022:
Dow: 30,423.81, -99.99 (-0.33%)
NASDAQ: 10,680.51, -91.89 (-0.85%)
S&P 500: 3,695.16, -24.82 (-0.67%)
NYSE: 13,947.26, -141.94 (-1.01%)


The Plot Thickens... Davos vs. the Fed

Wednesday, October 19, 2022, 9:17 am ET

Stocks advanced on Tuesday, extending the overextended rally that began last Thursday on the CPI data reversal. Apparently, the money pushers had made enough so that they could begin trimming early in Tuesday's session, with the S&P and the Dow cut back by nearly half on the day. Highs of the day were made just after the open. The rest was easy sailing for Vanguard and BlackRock, selling into the imaginary strength built over the prior three sessions.

The NASDAQ was shaved by 2/3rds, up nearly 300 points in the opening minutes, it closed with a gain of less than 100 points. Might as well call a spade a spade and declare this mini-rally over.

As much as Money Daily would like to toot its own horn, it's intriguing to note the S&P topped out at 3,762.79 intra-day, early on, so blow the bugle for Fibonacci, which is seldom far from the mark, in this case the 23.6% retrace.

For reference:

Fibonacci ratios encompassing the most recent substantial movement for the S&P are as follows:

S&P 500
August 16: 4,305.20
September 30: 3,585.62
Total decline: 719.58

Fibonacci ratios: 100%, 61.8%, 50%, 38.2%, 23.6%

Retraces:
23.6%... 169.82... 3,755.44
38.2%... 274.88... 3,860.50
50.0%... 359.79... 3,945.41
61.8%... 444.70... 4,030.32

Approaching the open in New York, equity futures are sliding deep into the red zone. Overnight, Asian stocks were mostly lower or flat. European bourses are not showing much vigor, sliding at midday.

On the earnings front, Proctor & Gamble (PG) said core earnings for the three months ending in September, the group's fiscal first quarter, came in at $1.57 per share, a 2.5% decrease from the same period last year but two cents ahead of consensus forecast. Much of their top line success was linked to inflation, as prices drove higher, not increased sales volume.

Closing out this brief hump day note, you are encouraged to take in the latest from Tom Luongo, Fed Watch: When They Call For the Bailiff You Know You're Winning in which he espouses the belief that the Fed is fighting the Democrat party and Davos, not inflation.

It's a fairly dense reading and Luongo's rhetoric can be a bit thick and unwieldy at times, but well worth the time.

Take particular note to the Fed's positioning. They're not going to pivot or back off on rate increases. They're fighting to save the dollar and eventually restore some semblance of sanity to markets after two decades of illusory low interest rates which savaged savers and turned Wall Street millionaires into billionaires.

Some banks (very few, but a growing number) are offering interest on savings account of 2-2.5%. Given time, when the yield curve eventually normalizes with a fed funds rate around 3.5% a 10-year note yielding 5-6%, savers might actually be able to get 5% on an old-fashioned passbook savings account.

Wouldn't that be something?

Happy Hunting!

At the Close, Tuesday, October 18, 2022:
Dow: 30,523.80, +337.98 (+1.12%)
NASDAQ: 10,772.40, +96.60 (+0.90%)
S&P 500: 3,719.98, +42.03 (+1.14%)
NYSE: 14,089.20, +165.99 (+1.19%)


Stocks Like Goldman Sachs Continue to "Beat the Street" on Lowered Expectations, Despite YOY Declines

Tuesday, October 18, 2022, 9:25 am ET

Stocks put on quite the show Monday, with the NASDAQ the leading actor, up 3.43% on the session.

This is all part of a massive shift of central planning, as inside influences overwhelm the pessimism of the Federal Reserve, itself intent on raising interest rates for the remainder of 2022, and possibly into 2023.

What is happening is the result of scant oversight by regulators and the absence of public policy in the nation's capitol. The United States, having entered a phase of complete corruption and disregard for the rule of law as applied to the privileged class of politicians, bankers, Wall Street, and corporate executives, has devolved into what can readily be described as a cesspool of graft, corruption, collusion, bribery, false narratives, and lies.

The United States is close to entering a phase of terminal decline. Actions by countries not perfectly aligned with the Western nations may just tip the balance, as they have been leveraging away from global US-Euro hegemony and continue to move away from the dollar, the euro, pound and yen.

Anything can be used as an explanation to move stocks in one way or another. With the absence of any mechanism for price discovery, people in positions of power can luxuriate in the afterglow of billions of dollars pumped into equities by an assortment of well-heeled investors as diverse as the Swiss National Bank, Berkshire Hathaway, the New York Fed trading desk, PPT, and the likes of Vanguard, State Street, and BlackRock, major shareholders of every important publicly-listed company in the world.

When they buy, they all buy. When they sell, they all sell. In volume.

Collusion of these diverse forces is plain to see. All indices - worldwide - move in the same direction, usually with a lead set by US indices. This was particularly obvious last Thursday (October 13), when September CPI read out at 8.2%, an indication that inflation was still not contained, and an incentive for a knee-jerk sell reaction.

On that morning, Dow futures had been as high as 300 points to the good, but rapidly fell to below -500 on the CPI release. Stocks opened the cash session predictably lower, but then, something strange happened. All the indices, including European exchanges, which fell midday on the inflation news, began to rise, and the buying didn't let up until near the close of trading in Europe and then, in New York.

Dow Industrials were as low as 28,660.94 in the morning, rising as high as 30,168.54 intra-day, before settling in to close at 30,038.72. The swing, low to high, was good for just more than 1,500 points, based on absolutely nothing, on a day that started out seeking new two-year lows.

Various analysts and financial news commentators tried desperately to explain what had happened, the best strained account being that investors were "well-positioned" for the drop at the start of the day and added to positions, closing out hedges along the way.

Naturally, 97% of the public is supposed to believe such utter hogwash. The few remaining humans with brain functions are still scratching their heads. Loads of small-time individual traders saw winning short positions evaporate and turn into losses. The powerhouses running the game were happy campers at the end of the day. What's confounding about market mayhem such as this, beyond the fact that its been going on for years, even decades, is that it remains fully functional and is now even becoming endemic. The few traders left in the game are all on the same pages. Fundamental and technical analysis has been shoved to the curb. Trading is dominated by the wealthiest managers of assets. Hedge funds, pension funds, and private offices have only to follow the leaders to achieve solid returns whether the market is up or down. Money is made in both directions.

It leaves the small investor in front of a home computer with a combination of anguish and regrets. The skills required to make profits in stocks back in the day no longer apply. Instead, momentum-chasing and luck are the main ingredients towards making money in stocks.

It's a crying shame.

Anything can be used as a catalyst to move stocks in any direction. Bombs hitting Kiev, bombs not hitting Kiev, industrial production up, industrial production down, either action can be spun as positive or negative, matching the stock market results. It's just a game with your money, which isn't really your money, it's just paper or electrons populating a computer screen. There's almost nothing real about the casino which used to be called the stock market.

Every day there is more and more evidence that the public is being played for fools, largely because they've conditioned themselves to act that way. On Monday, Bank of America's third quarter results were hailed as a victory because the company beat earnings estimates. Too bad they were down from the same period a year ago and the bank - as most banks did this quarter - raised credit loss reserves. They "beat the street" and that's all that mattered, the one-stock narrative leading to another day of massive gains, broadly.

This morning it's Goldman Sachs' turn at the wheel.

Profit for the third quarter fell 43% to $3.07 billion or $8.25 a share on lowered expectations of $7.75. EPS for the same period a year ago was $14.93. Revenue fell 12% to $11.98 billion, down 21% year over year.

Guess what? The stock is trading higher, at 317.80 +11.09 (+3.62%) in the pre-market. Because they beat the street. by 50 cents.

With stocks looking to extend gains today, now might be a good time to reconsider some positions or even cash out, but, but, the perma-bulls plead, it might go even higher. Probably. And then, when everybody sells?

Is betting on faith or some nefarious insiders saving your bacon any way to save for or live through retirement?

At the Close, Monday, October 17, 2022:
Dow: 30,185.82, +550.99 (+1.86%)
NASDAQ: 10,675.80, +354.41 (+3.43%)
S&P 500: 3,677.95, +94.88 (+2.65%)
NYSE: 13,923.21, +315.91 (+2.32%)


WEEKEND WRAP: Stocks Continue Death Spiral; Treasury Yields Spike; Gold, Silver Hammered Lower; Earnings, Midterms on Tap

Sunday, October 16, 2022, 12:25 pm ET

"Nobody's right if everybody's wrong."

-- For What It's Worth : Stephen Stills, Buffalo Springfield, 1966

At the end of 2021, nobody predicted that stocks would fall off the cliff by 20-30% or more in 2022, yet, that's exactly what has happened. So much for expert advice from the usual suspects at the Wall Street casino.

The current fad is to expect something to "break", like the UK gilts market, a massive default by Credit Suisse, the entire derivative complex, or some other contagion-like occurrence similar to the sub-prime breakdown in 2008.

There's an old adage among mostly contrarian analysts or anybody who's ever seen a 3:5 favorite finish off the board at a horse track, that goes something like this:

If everybody's predicting something, don't expect it to happen.

That could be sound advice within the current environment. With stocks down as much as they are, sentiment is decidedly bearish, and, while stocks obviously have further to fall if only because valuations are still stubbornly high, it does not imply that a breakage of the system, a Fed failure, or some other catastrophic event is on the immediate horizon.

The Fed's "got this." They're unlikely to let things get completely out of control, like in 2008 (GFC), or during the S&L crisis of the 80s and 90s, the Asian meltdown in 1997-98, or the Mexican Tequila Crisis of 1994. These kinds of things happen with alarming regularity, which should come as no surprise when the world's money is being mismanaged by academics at central banks around the world. They generally can't agree on anything other than their inability to predict crises. Fortunately, they're much better at coordinating strategies to mitigate contagion and a complete meltdown of the entire financial structure, which, accordingly, will eventually collapse.

Such an event as a complete worldwide financial crisis and utter debasement of fiat currencies is bound to happen at some point, though the timeline is more stretched out than most people imagine. A global financial structure doesn't just vanish overnight or even over a weekend. Rather, devaluations and distortions occur over longer periods of time. Witness the slow erosion of the euro and European economies. The euro's been in decline since 2008, when it stood at nearly 1.60 to the dollar. Today it stands at 0.9721, but the drop has been more consistent and dramatic since May of 2021, when it topped out around 1.22.

Unless the euro-crats at the ECB run out of patches, schemes, and swap lines from the Fed, it's likely to take another few years for a complete breakdown. Similar instances of currency instability and debasement are underway in Japan (yen) and England (pound).

The Swiss Franc is in a unique condition. It's been bouncing around parity to the USD for most of the last 10 years, but more so recently after scrapping its peg to the euro on January 15, 2015. Whether the Swiss National Bank was right about the euro being unsustainable or not, its following a similar path, falling below parity to the US dollar again this week, the CHF/USD pair currently trading at 0.9937.

This so-called "race to the bottom" has been going on for some time, which is why the US dollar has been soaring against other currencies this year, up from 96.21 to 113.30 as of Friday's close. Being the world's reserve currency, the dollar was always going to be "last man standing" as other currencies devalue, but the process is not sudden. The global economy is like a giant oil tanker. It moves very slowly, though lately it's been making a sustained, sweeping turn that hasn't nearly ended. Before the dollar starts to fall from its high perch, prices will have to fall on imported goods, which, judging by consumer prices (September CPI was 8.2%), has yet to happen.

US inflation makes sense in that food, much of which is produced domestically, has been rising, while energy, mostly imported, has begun to fall and may well level off. Once again, why experts haven't grasped this concept is baffling. Goldman Sachs analysts were talking about $350/barrel oil early in 2022, and recently downgraded their forecast to a humorous $135. They're simply wrong because crude at $135/barrel would put unleaded regular gas at seven or eight bucks a gallon, which would absolutely wreck the US economy. It's not going to happen. Europe first and the US maybe never, because the US has capacity to produced much more oil, though its being held back by the policies of the Brandon administration.

What may "break" is the Swiss franc, or the yen, which has been hammered, the USD/JPY pair skyrocketing from 114.38 at the start of the year to 148.785 as of Friday. Currencies have only just begun their terminal declines. It's going to take another year or two to completely demolish their value, which seems to be the common aim.

So, sit back, watch your portfolio shrink and don't worry. The world isn't going to meet Armageddon, these aren't the Biblical last days, and the Dodgers aren't going to win the World Series (eliminated by San Diego Saturday night)


Stocks

With the S&P making fresh lows below the September 30 close (3,585.62) on Wednesday (3,577.03) and again Friday (3,583.07), it appears the decline which restarted in earnest on August 17 is not yet finished, thus, the following figures below, a presentation from two weeks ago, will have to be recalibrated when the next near-term bottom is found. Either that or those three closes nearby are representing a triple bottom off which stocks can rise, though that seems doubtful.

Fibonacci ratios encompassing the most recent substantial movement for the S&P are as follows:

S&P 500
August 16: 4,305.20
September 30: 3,585.62
Total decline: 719.58

Fibonacci ratios: 100%, 61.8%, 50%, 38.2%, 23.6%

Retraces:
23.6%... 169.82... 3,755.44
38.2%... 274.88... 3,860.50
50.0%... 359.79... 3,945.41
61.8%... 444.70... 4,030.32

For the week, only the Dow finished positive, with a slender 1.15% gain (+338.04). Here's the ugly truth:

For the Week:
Dow: +338.04 (+1.15%)
NASDAQ: -331.02 (-3.11%)
S&P 500: -56.59 (-1.55%)
NYSE: -190.95 (-1.38%)

Year to date, the Dow is down 19.00%, the S&P off by 25.30%, the NASDAQ lower to the tune of 34.81%, and the NYSE Composite dropping 21.01%.

Equity investors have been getting skewered all year, but this bear market is hardly over. There's another 20-40% downside before any meaningful bottom is to be found, depending on the index, and it could be even worse than that. The last two big market meltdowns were in the dot-com crash of 2000-2001 and the 2008-09 GFC. Having not fixed many of the inherent problems from either of those events (rampant speculation, money from thin air, derivatives), US markets - and by association, most other major national exchanges - are due for another big drawdown.

Bear in mind (sorry about the unintended pun), that the NASDAQ lost 78% of its value from 5,048.62 on March 10, 2000, to its bottom on October 9, 2002, at 1,114.

From October 2007 to March 9, 2009, the GFC decimated all the indices, with the Dow losing 53.8%, the S&P down 56.8% and the NASDAQ shedding 55.6%. The current climate suggests a similar outcome, or worse.

Earnings will provide headlines this week and through most of November, with a bevy of companies reporting for the third quarter. Already, bank stocks which reported on Friday were a very disappointing group, with Bank of America up Monday and Goldman Sachs, Tuesday, remaining.

Other stocks that will provoke interest this week with reports include some biggies such as Netflix (NFLX), Bank of New York Mellon (BNY), Johnson & Johnson (JNJ), Tesla (TSLA), Proctor & Gamble (PG), IBM (IBM), United Airlines (UAL), American Express (AXP), Verizon (VZ), AT&T (T) and many significant others. Check your earnings calendars for exact dates and times.

Treasury Yield Curve Rates

Date 1 Mo 2 Mo 3 Mo 6 Mo 1 Yr
09/16/2022 2.68 3.01 3.20 3.77 3.96
09/23/2022 2.67 3.07 3.24 3.85 4.15
09/30/2022 2.79 3.20 3.33 3.92 4.05
10/07/2022 3.03 3.34 3.45 4.09 4.24
10/14/2022 3.30 3.61 3.81 4.31 4.50

Date 2 Yr 3 Yr 5 Yr 7 Yr 10 Yr 20 Yr 30 Yr
09/16/2022 3.85 3.81 3.62 3.56 3.45 3.79 3.52
09/23/2022 4.20 4.21 3.96 3.85 3.69 3.87 3.61
09/30/2022 4.22 4.25 4.06 3.97 3.83 4.08 3.79
10/07/2022 4.30 4.33 4.14 4.03 3.89 4.13 3.86
10/14/2022 4.48 4.47 4.25 4.15 4.00 4.26 3.99

Treasury yields blew out this week, despite the market being open only four days (closed on Monday, Columbus Day), lifting rates across the curve. The 10-year note yield ended the week at 4.00% for the first time since June, 2008, fourteen years ago. The 10-year had been at 4.00% or higher for long periods of time prior to that.

In fact, four percent would have been considered rather low for the 10-year. From July 1967 through August 1998 - a period of more than 30 years - yield on the 10-year note was never lower than five percent! America survived. Conditions are much different now, though. In July 2020, the 10-year yield bottomed out at 0.64%, but among other factors, inflation and abandonment of ZIRP (Zero Interest Rate Policy) has forced the rise to current levels.

For the week, yield on the 10-year leapt 11 basis points, but that was easily the smallest advance of any maturity. On the short end, one-month and two-month bills each rose 27 basis points, from 3.03% to 3.30%, and from 3.34% to 3.61%, respectively. Three-month bills advanced a whopping 36 basis points, to 3.81%. A one-year note now yields 4.50%, a 26 basis point advance over the prior week.

On longer-dated notes, the two-year note moved higher by 18 basis points, to 4.48%. 2s-10s are inverted by nearly a half percent 48 bp, 2s-30s by 47, with the 30-year at 3.99%

What makes this ongoing crisis more dangerous is the inflation fight. The Fed is neither going to "pivot" nor slow the pace of its rate hikes, which puts extreme pressure both on stocks and the general economy. Fixed income (bills, notes, bonds, credit in general) compares well to recent stock returns while businesses are expected to pay much higher borrowing rates and consumers are hit with the double-whammy of higher interest on credit cards and mortgages. Unlike the sub-prime crisis, most mortgage borrowers today are not holding adjustable rates instruments, though there are some, but credit cards are tied either to LIBOR, or the federal funds rate, or the prime rate, all of which are up sharply this year.

With September CPI showing a year-on-year gain of 8.2%, following July's 8.5% and August's 8.3% gains, it's very clear that inflation is not moderating, despite the federal funds rate increasing from 0.25-0.5 percent to 3-3.25 percent from March through September. The Fed may have little to say about slowing down inflation significantly in the near term. They're going to have to continue hiking, and keeping rates elevated for longer than even they suspect. With a terminal rate somewhere between 4.25% and 4.75%, look for the Fed to hike 75 basis points at the November 1-2 FOMC meeting and 50 basis points at the December 13-14 meeting, putting the implied rate at 4.25-4.75%.

After that, the next FOMC meeting isn't until January 31-February 1, 2023. so they'll get a look at December PPI and CPI, along with various other metrics before deciding to either pause or continue with the first policy statement of 2023.

Make no doubt about it, rates are going higher. A 30-year mortgage is now at an average rate of 7.04%. People with below par credit scores can expect points added and/or a mortgage rate above eight percent. The average credit card user is now paying 20% interest on outstanding balances, and these numbers are certain to go higher in coming months.


Oil/Gas

WTI crude oil closed out the week ending September 23 at $79.43/barrel and September 30 at $79.74, but the first week of October told a different tale, with the price hitting $93.20 at the close on Friday, October 7.

This week, WTI was up and down, falling from $92.64 mid-week all the way to $85.55 by Friday. There's still plenty of oil out there. The recently-announced OPEC+ production cuts won't kick in for a few more weeks, but are likely to not have a huge effect as most member nations in the oil-producer cartel are already pumping at well-below capacity. If anything, there may be a glut, as Western economies continue to contract and governments begin to promote austerity measures and subsidies to consumers.

In the US, the national average for a gallon of regular 87 octane gas was up pennies from a week ago, at $3.91. Only Washington ($5.30), Oregon ($5.39) and California ($6.14) are over $5.00/gallon. The cheapest gas can be found in Georgia, with pumps averaging $3.23. The Southeastern states continue to trend well under $4.00 per gallon.


Crypto

Bitcoin remains stuck in a range around $19,000, this morning trending around $19,156.80. Nothing significant to see in the crypto space, thus the dead weight bitcoin.


Precious Metals

Gold/Silver Ratio: 90.67

Gold price 09/16: $1,684.50
Gold price 09/23: $1,651.70
Gold price 09/30: $1,668.30
Gold price 10/07: $1,701.80
Gold price 10/14: $1,650.20

Silver price 09/16: $19.62
Silver price 09/23: $18.84
Silver price 09/30: $19.01
Silver price 10/07: $20.16
Silver price 10/14: $18.20

Precious metals were savaged this week, with gold down more than $50 on the COMEX, and silver losing nearly 10%, or $2.00 per ounce. The jerk lower hardly fazed retail, as the weekly survey below can attest. Prices for smaller purchases of finished products carry high premiums over spot as has been the case for years. Still, these are historically low prices in current parlance and are obviously considered buying opportunities by stackers and savers.

Finding silver for under $30/ounce in increments of less than five ounces is becoming quite difficult, though some bargains are available on eBay and at online dealers in bars and coins of 10 ounces or greater.

Here are the most recent prices for common one ounce gold and silver items sold on eBay (numismatics excluded, free shipping included):

Item/Price Low High Average Median
1 oz silver coin: 29.87 43.95 36.92 36.67
1 oz silver bar: 29.94 42.99 35.26 33.98
1 oz gold coin: 1,761.99 1,874.91 1,810.05 1,795.61
1 oz gold bar: 1,751.74 1,796.76 1,770.55 1,770.92

The Single Ounce Silver Market Price Benchmark (SOSMPB) was down slightly this week, to $35.70, losing 19 cents from the October 9 price of $35.89.


WEEKEND WRAP

The wild ride continues in stocks and fixed income, now becoming a full-fledged tug-of-war between high yield and dividend stocks. The pullback in equities, despite the best efforts of the powers that be (NY Fed, PPT, Vanguard, BlackRock, State Street) to spur rallies, like Thursday's "miracle" 1300-point swing on the Dow after CPI data sent futures plummeting.

This consortium of overbearing asset managers has been at this for years, decades, even. They prevent crashes and pump rallies, and they don't really care much about share price since they hold significant percentages of shares outstanding and have representation on most of the boards of major corporations worldwide. To them, share price is a secondary consideration to control, their wealth is so vast.

Stocks are in a severe down cycle which shows no signs of letting up any time soon. That said, geo-politics could upend the apple cart at any moment, rendering all the Wall Street and technical analysis null and void. Escalation in Ukraine, midterm elections, criminal referral of former President Trump could make any predictions worthy of the trash bin.

As the world seems to be slowly devolving along with standards of living it pays to keep things in perspective and avail oneself of resources available to mitigate personal and business financial damage. US midterm elections, now just three weeks off, figure to be either a major turning point if Republicans retake the House, or more and worse should Democrats retain control.

Corporate third quarter earnings will also play a huge role through the first two weeks of November.

The wild ride of 2022 is about to get a little bit wilder.

At the Close, Friday, October 14, 2022:
Dow: 29,634.83, -403.89 (-1.34%)
NASDAQ: 10,321.39, -327.76 (-3.08%)
S&P 500: 3,583.07, -86.84 (-2.37%)
NYSE: 13,607.31, -281.66 (-2.03%)

For the Week:
Dow: +338.04 (+1.15%)
NASDAQ: -331.02 (-3.11%)
S&P 500: -56.59 (-1.55%)
NYSE: -190.95 (-1.38%)


Disclaimer: Information disseminated on this site should not be construed as investment advice. Downtown Magazine Inc., Money Daily and it's owners, affiliates and/or employees are not investment advisors and do not offer specific investment advice. All investments have risk. You should consult a professional investment advisor or stock broker or use your individual judgement when making investment decisions. By viewing this site, you hold harmless Downtown Magazine Inc., Money Daily, its owners, affiliates and employees against any and all liability. Copyright 2022, Downtown Magazine Inc., all rights reserved.

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