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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.
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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Friday, October 29, 2021, 9:27 am ET
In financial markets, nothing moves in straight lines. Thus, when Money Daily proclaimed on Thursday that the global recession had arrived, it was natural that stocks would fly right out of the gate, and make new all-time highs by the closing bell. It's just the way it goes. Nobody has ever caught a top or bottom in stocks at the precise "light bulb" moment.
Usually, people who make bold statements or predictions are derided, scorned, ridiculed, and eventually cast aside as charlatans or fools. While there are scores of bad actors making ludicrous claims about everything from the price of gold to the future of Bitcoin, some of those people sounding warning sirens are often right.
Harkening back to the Great Financial Crisis of 2008, those who took the position against the housing market - Michael Burry, Greg Lippman, Steve Eisman, and others of "The Big Short" fame - took gargantuan losses for years before they were eventually proven right and made financial fortunes. The present period is no different. Those people advising thrift, security, and austerity, moving out of financial assets into hard assets, are being laughed at and chided for missing out on big money in stock markets.
Those people advising to buy gold, bitcoin, real estate or just about anything outside the world of stocks may be wrong, or, they may just be early. Nobody can doubt that the evens of the past 18 months haven't be out of the ordinary. The global virus crisis, the 2020 presidential election in America, vaccine mandates, lockdowns, and a grab-bag of government restrictions on the general public have devastated the middle class around the world while enriching the elite one-percenters at the top of the fiat money pile.
Stocks have gone through the roof, making billionaires wealthier while the bottom 90% of the population struggles to pay for basic needs like shelter, food, and now, energy, as inflation wreaks havoc on middle and lower class budgets. Understanding that inflation is not higher prices. Higher prices are the result of inflation. Inflation is an expansion of the money supply, which has been a constant for decades, but really ramped up in 2020-2021. More money was introduced into the system, doled out in stimulus checks, expanded unemployment benefits and other special programs by the government. The Federal Reserve did its part by expanding the money supply and fattening its balance sheet via QE and other various bailout programs.
Inflation is not higher prices. Inflation is the loss of purchasing power as the money supply expands and the currency loses value. You think everything costs more, because it does, but the reality is that your money buys less.
That's why the people at the Fed insist that inflation is transitory. To them, it is, even if it lasts two, three, four years or longer, because their scale is measured not in months and years, but decades and centuries. A few years of anything is nothing to them, but the effects on ordinary people can be devastating. The Fed and the federal government are playing a long game. Unfortunately, the bulk of the world's people are stuck in a short-term trap. Many people work, pay bills, go into debt, pay more, and never get out. It'a a tragedy and a constant in societies ruled by oligarchs and central banks and now, the boot of oppression is falling hard on the people from the government.
On Thursday, stocks advanced sharply in the face of deceleration in GDP, when the Commerce Department reported third quarter GDP grew by a mere 2.0%, the worst reading in more than a year. Normally, stocks would have nose-dived, but markets today don't respond as expected. In fact, they often do the opposite.
On top of the GDP reading, widely described as "very disappointing," pending home sales fell an unexpected 2.3% in September compared with August, according to the National Association of Realtors. Sales were down eight percent from September 2020.
These data drops are not good news. They are not the kinds of numbers that induce stack market rallies, but, the stock market of the 2000s and especially after 2008 is unlike any that came before it. That should be obvious by now. No matter how bad the news is, the stock market just keeps going higher, which is why it is a horrible gauge of real economic conditions.
Relying on the stock market to form an economic understanding and financial game plan is about as useful as talking to a daffodil about about auto mechanics. Look at the data. Look around you. Are businesses thriving? Are more people working? Are wages going up? How's that $38 steak taste?
Those things may be positive where you are, but, the United States is a big place, and the world even bigger. In probably the most general terms possible, people are angry, economies are being held together by stimulus and the lowest interest rates in the history of the world, and governments are tottering, unable to serve the needs of their people, from France to South Africa, America, and Canada and Australia, where the people are locked down and cannot leave the country, and everywhere in between.
That is not progress. That is control and tyranny.
Conditions in the United States are presently not that bad, but the signs that worse is still to come are everywhere, from higher gas prices, higher food prices, supply chain disruptions, shortages, and a federal government unable to produce meaningful legislation to alleviate any of the problems faced by its people.
A recession is coming, if not already in progress. Unless conditions change quickly - an unlikely event - the greatest depression will soon follow.
Brace for impact.
At the Close, Thursday, October 28, 2021:
Thursday, October 28, 2021, 9:10 am ET
Stocks took a violent U-Turn on Wednesday, but that's hardly the issue.
Money Daily is reasonable sure that the majority of its readers aren't billionaires, or even millionaires. Granted, a million dollars isn't what it used to be. America isn't what it used to be either.
Americans allowed themselves to be bamboozled by Dr. Fauci, lied to repeatedly by other "leaders" who told us COVID-19 was the scourge of the planet. It wasn't. It isn't. It is still largely a fantasy.
Americans watched as the 2020 presidential elections were overturned, ousting Donald Trump, installing Joe Biden. Mostly, Americans did nothing to stop this. Some did, but their efforts were futile. A coup had occurred. It didn't happen overnight. The deep state operative, mostly in the CIA, FBI, and other government agencies had been working on destroying our Republic for years, decades. When Joe Biden was falsely sworn in as president, they claimed victory and since then have been relentlessly tearing away the fabric of society, allowing the Southern border to be a free access point into the United States for more than a million illegal immigrants, canceling the Keystone Pipeline, causing disruptions to a vital East coast pipeline, leaving $85 billion worth of weapons and hundreds of Americans stranded in Afghanistan as the US military left with their tails between their legs.
Mainstream media determines what you will know. Social media censors the rest. You are not allowed to stray from the narrative. Your body isn't your own. You are mandated to be innoculated with experimental drugs or you lose your job. Eventually, even your thoughts will not be your own. You. Will. Obey.
This is only the beginning. Inflation is raging, but that's only part of the story. Soon, there won't be enough food to go around. Or enough fuel. This winter, you'll be lucky to not starve or freeze to death.
Just for a kicker, US GDP fell to 2.0% in the third quarter. That will certainly be revised lower and the fourth quarter will more than likely show contraction of 2-3%. The global recession has arrived.
Here's Tucker Carlson, explaining how bad it is.
And here's Chris Martenson, piling on:
At the Close, Wednesday, October 27, 2021:
Wednesday, October 27, 2021, 8:38 am ET
Since September 30, a span of just 19 trading sessions, the Dow Jones Transportation Average has outperformed all other major indices, rising from 14,002.42 to 15,936.69 on Tuesday's close, just seven points short of its all-time high of 15,943.30 (May 7, 2021). In percentage terms, that's a 13.8% gain in less than a month's time.
Money Daily has been closely following the Transportation Average for the past few months, after it fell into correction territory back in July, breaking the primary trend from bullish to bearish at that time. While the Transports led the other indices lower in September, it was very much a delayed reaction. The S&P 500, NASDAQ and Dow Industrials each set record highs before dipping in September, making the correlation somewhat suspect.
As all of the indices have risen markedly in October, none have gained at pace close to that of the Transports, mostly because none of those had fallen by as much as six percent in September. For October, the Dow, S&P, and NASDAQ are all ahead by smaller percentages, the laggard being the Dow Industrials, up 5.7% in October.
Made up of just 20 component companies, the Dow Transports have been led higher by one stock in particular, Avis, the car rental company with the symbol CAR. It has risen from 116.51 on September 30 to a closing price of 176.65 on Monday, October 25, a gain of 51.6%. Shares were down 6.69 on Tuesday. Looking back further, it's even more incredible. As late as mid-May, 2020, at the depths of the virus crisis, CAR was trading in the teens, hovering between $10 and $17 per share. Buyers began to step up after that, sending prices to the mid-30s by the end of 2020, but it wasn't until 2021 that the stock began really moving.
Apparently, the cause for the stock's rocket-like gains over the past month (and even the past 18 months) has been management's extraordinary ability to utterly bury earnings estimates. In the first quarter Avis was supposed to lose 2.16 per share, but instead lost only 0.46.
The second quarter, however, was what sparked the enormous rally. Estimates were for a loss of 1.21 per share, but the company posted an enormous beat of 4.69, by earning 5.90 per share from April through June. Third quarter results are due out November 1, calling for an estimated profit of 6.50 per share. Apparently, the analysts have caught onto Avis' business practices after being horribly wrong for at least the last six months.
So, what did Avis do during the crushing virus crisis that turned the tide? Not much. With Hertz out of the way, they had a virtual monopoly at airports and elsewhere, so they hiked their rates, cut some staff and costs and rode the gravy train to profitability in 2021.
The company apparently sold about a third of its fleet inventory, much like Hertz, which filed for bankruptcy and then was taken on by the reddit crowd known as r/WallStreetBets, and saw its share skyrocket. Apparently, that's what heppened with Avis (CAR) as well.
Selling off a third of their fleet for roughly $600 million, Avis execs put that money to work paying off some of its massive $13 billion in debt. It was a drop in the bucket and had no material effect on its share price. Like most companies in the transportation space, Avis suffered through a serious downturn in business for most of 2020 and 2021.
However, having little to no competition, Avis was able to basically gouge those few customers actually arriving at airports around the country. A three-day rental could go for as much as $500 or more, depending on the type of vehicle. Avis could claim tight availability, since it had sold off much of its inventory, and, apparently, they did.
The company has done little else to counteract the sluggish business environment, giving rise to the conclusion that the gains this year have been partly due to a short squeeze, medium-term luck, and some tricky accounting maneuvers. Third quarter earnings may be a gigantic number, but a miss could cause the stock to take a hit.
Bear in mind that the Transportation Average is populated by the airlines (DAL, UAL, JBLU, LUV), which were hit hard the past 18 months, and companies like FedEx (FDX), which missed earnings badly in the third quarter but is up since. Railroads have also contributed smartly to the rise in the Transportation Average. CSX (CSX), Kansas City Southern (KSU), Norfolk Southern (NSC), and Union Pacific (UNP) each were at or near near-term lows on September 30 and have been gaining rapidly since then.
It's uncommon for so many of the components of the same index to gain precisely at the same time, especially since there's little evidence to suggest that all of them are going to be great profit-makers in the short term. Even more odd, the airlines - JetBlue (JBLU), American Airlines (AAL), Delta (DAL), United (UAL), and Southwest (LUV) - haven't participated in the recent rally and are all flat or lower for October.
So, are more people traveling by train rather than air? That doesn't seem to be the case. Railroads are being used to ship goods all across the country, though that's been a standard for many years. One might be tempted to call the rise of the transports a coordinated action, possibly collusion, but nobody wants to take the conspiracy theory track because so many have been shown to be wrong so often...
At the Close, Tuesday, October 26, 2021:
Tuesday, October 26, 2021, 9:26 am ET
Here's the most unsurprising story of the week: Stocks traded higher.
If the same thing happened over and over again, like in the movie "Groundhog Day," there would be no need for newspapers, TV news, radio news slots, etc. The stories would write themselves, and that's exactly what the stock market is doing. Stocks are up because people are buying them, and they are buying them because they are going up.
Talk about a self-reinforcing narrative, this is one of the finest. Regardless of the true value of the underlying company, the securities are fetching big money. Look at Tesla (TSLA). On the news that Hertz planned to order 100,000 electric vehicles from Tesla through the end of 2022, the share price rose to an all-time high, at the closing bell, of 1024.86. The price gained 115.18 points on the day, or +12.66%.
The move put Tesla's market cap at $1.029 trillion, joining a small - but growing - list of companies with market capitalizations over the magic $1 trillion mark which includes Amazon (AMZN), Microsoft (MSFT), Alphabet (Google, GOOG), and Apple (AAPL).
Never mind that Tesla doesn't pay a dividend or that its price earnings ratio is over 300. It's in the trillion dollar club, so it's all good, right?
Well, maybe. Surely founder and CEO, Elon Musk, isn't complaining. He took to Twitter on Monday to express a little bit of his joy. Musk has opened up what was, just a few weeks ago, a close race with Jeff Bezos (Amazon) and Bernard Arnault of LVMH Moet Hennessy Louis Vuitton for richest person in the world. With Monday's kick higher, Musk has opened up a nearly $100 billion lead on his two pursuers and looks to be headed to be the first trillion dollar person in the world.
Not to be dissuaded by Elon Musk's mammoth wealth or that of any of the other billionaires running the world's largest companies, while holding incredible numbers of shares are making these guys rich, should they be in the portfolios of the rest of us, the retail investors?
It's a mixed bag. While Tesla surely looks like a genius play here as it was a mere $85 per share at the bottom of the virus crisis in March, 2020, and was $580 as late as May of this year, it does go for a pretty pricey $1024 presently. A grand a share is not something the average investor seeks.
Apple may be a better value proposition. Despite closing in on its all-time high of 154.30 (10/30/21), its market cap is more than twice that of Tesla's, offers a dividend, albeit a paltry one, of 0.88 (0.59% yield), the price of a single share is pretty reasonable by comparison. Apple's been around a lot longer than Tesla, they have tons of money in the bank and their CEO, Tim Cook, doesn't even make Bloomberg's 500 list.
That shouldn't be held against Mr. Cook, nor the company. Cook wasn't a founder and maybe money isn't everything to the Apple CEO. Maybe quality electronics are his bag, and Apple makes plenty of those. So, yeah, put Apple on the list.
As for Google, or Alphabet (nobody has yet explained why chaning the name was somehow good for business), with a share price of 2,775.46, it's just priced out. Only people with seriously mad, stupid money would venture in there.
Microsoft, with a share price of around $308 and a dividend of $2.48 (0.80% yield) would be a reasonable stock to own, especially should one look at its five year chart, which is a diagonal line from the lower left to the uppe right. Plus, Bill Gates owns lots of shares. What's not to like?
The rich get richer. May as well play along.
At the Close, Monday, October 25, 2021:
Sunday, October 24, 2021, 9:56 am ET
US indices completed their third straight week of gains, as October has turned into a bonanza for equity investors, erasing the losses from September and sending the Dow Industrials, S&P 500, and the NYSE Composite Index to record highs. Only the NASDAQ failed to post new all-time highs this week, and the tech-heavy index received some unwelcome news late in the week from Apple (AAPL) and the supply chain miasma, oddly enough.
The distressing news spread quickly through the social media space, with advertising-dependent companies such as Facebook (FB, -17.27 (-5.05%)), Twitter (TWTR, -3.16 (-4.83%)), and Google (Alphabet) (GOOG, -83.11 (-2.91%)) also losing ground in sympathy.
While the Apple issues are likely to be either resolved or extended to other platforms longer term, the supply chain problems are going to have serious implications for the fourth quarter, especially related to holiday retailing. If companies cannot get their products from the ships moored off the California coast and into stores or distribution centers in time for the Christmas season, they're certainly not going to be focused on advertising them, thus affecting all of the social media, search, and publisher platforms that depend on advertising for primary revenue.
It's a pretty big deal for the current quarter and the general economic recovery. Investors are smelling trouble and it's likely that having products stuck in containers rather than on store shelves will lead to knock-on effects throughout the economy. Advertising losses lead to retail losses and to distributor losses and so on down the chain. Like everything else in the interconnected world in which we live, a disruption at any point can lead to disaster somewhere else. Another area affected is the auto industry, which has been having problems sourcing parts for manufacturing for months.
Sales for September by Honda, Ford and others have shown sherp declines from year-ago data, and the shortages - especially in computer chips - are not going to be resolved quickly. Thus, with stocks ending the week significantly positive, there may be more potholes and negative surprises ahead as third quarter earnings reports roll out.
Some of the better-known names reporting this coming week include Facebook (FB), UPS (UPS), Alphabet (GOOG), AMD (AMD), Microsoft (MSFT), Twitter (YWTR), General Motors (DM), McDonald's (MCD), Coca-Cola (KO), Boeing (BA), eBay (EBAY), Ford (F), Caterpillar (CAT), Merck (MRK), Apple (AAPL), Amazon (AMZN), Chevron (CVX), and ExxonMobil (XOM). It's a full plate, likely to elicit heavy trading volumes all week long.
While the week was swell for equity investors, those in fixed income found more reasons to worry about inflation, sending the 10-year note yield as high as 1.68% and the 30-year up as high as 2.13%. That 10-year yield (Thursday) is the highest since mid-May, and likely had influence in Fed Chairman Jerome Powell's Friday statement that the Fed should begin reducing its asset purchases soon, but should not yet raise interest rates. Bond traders were only partially satisfied, sending bonds marginally higher (yields lower) as trading closed out the week.
Coming less than two weeks before the next FOMC meeting (November 2-3), Powell send a sure signal to markets that an official announcement on tapering asset purchases was all but certain, a move which, even in the absence of rate hikes, will tighten business and lending conditions, more information with which the investment community is uncomfortable.
Prior to Powell's message to markets, the big winners of the week were Donald Trump and Bitcoin. The President saw shares of his yet-to-be-released social media site, Trust Social, via the SPAC, Digital Worldwide Acquisition Corp. (DWAC) rocket out of the gate, as trading opened without much prior warning on Thursday. On its first day, the price soared from the prior day's 9.96 to 45.50 at the clese. Friday saw similar gains truncated before noon, with shares trading for as much as 166.64 before settling back to 94.20 at the close.
The company plans to compete in the same space as the likes of Facebook, Twitter, and Google, companies which censored and barred Trump from posting at the height of the 2020 presidential election, helping lead to his defeat. While critics argue that Mr. Trump may be seeking retribution, other, more circumspect, opinion makers believe that the President's wishes for a more open internet platform are shared by millions, upset with the continuing censorship, news blackouts, and heavy-handedness of the social media giants.
Mainstream media has tried to ignore the birthing of Trump's latest business venture or downplay its significance, but, based on the interest being shown by conservatives, shares of the company could continue to rise, giving the firm more than enough money with which to compete. Plans are for a complete rollout of the platform by the first quarter of 2021. Stay tuned. This one is worth watching, as it has politics, media, constitutional rights, and billions at stake.
The same may be said of Bitcoin, which completed its return to all-time highs, pricing at $66,999 on Wednesday (10/20) before being walked down in a series of step-like moves, to a level hovering between $59,600 and $60,500 asd of Sunday morning. Bitcoin's previous high was achieved in April, after which it tumbled to just below $30,000, bottoming out on July 20. Prospects for the world's most-widely held cryptocurrency appear to have brightened since adoption by El Salvador as legal tender and the actions of the SEC this week, green-lighting a pair of ETFs aligned with Bitcoin futures.
The ProShares Bitcoin Strategy ETF (BITO), which tracks CME bitcoin futures, launched on Tuesday and quickly pulled in $1 billion in assets under management. Valkyrie's Bitcoin Strategy ETF (BTF) began trading Friday and asset management firm VanEck's Bitcoin Strategy ETF looks set to debut next week, expected to traded under the symbol XBTF.
While the ETF parade is far from perfect, their appearance on the stock exchanges is yet another feather in Bitcoin's growing acceptance cap and further displacement from potentially crushing legislation. The more Bitcoin becomes engrained in the mainstream economy, either through the stock market or adoption by companies or entire countries, the more difficult it will be for governments to control it. Bitcoin has become a leading currency in many North African nations, especially Nigeria, where the government's continued attempts to ban it resulted in even more rapid adoption by the population, frustrated with old world, fiat currencies which only serve to impoverish the population.
Oil continued to advance, with WTI crude closing at a high of $84.03 Friday on the NYMEX. The average price of a gallon of unleaded gas in the United States rose again, to $3.38 a gallon. Gains in the oil price are occurring on the supply side, which is still constrained by OPEC production quotas. As economies have re-opened following the lockdowns and restrictions of the past 18 months, demand has been slowly returning, though the price, which has more than doubled since November, seems to be running quite a bit ahead. Elevated energy prices are yet another troubling element in an economy seeking solid footing. High energy prices, along with inflation, act as a tax on everybody, but especially the middle and lower classes, where the percentage use related to income is higher than in the top 10% of earners.
Precious metals had an unusually strong week, with gold up $24.80 a troy ounce, and silver gaining a full dollar per troy ounce to $24.30, a one-month high. The metals have been beaten down badly in recent weeks, though the past three weeks have shown improvement, as silver, especially, appears poised for a breakout. Prices for single-ounce to 10-ounce items on eBay and via online dealers have held steady or advanced recently in both metals.
Gold price 10/15: $1,767.40
Silver price 10/15: $23.30
Here are the latest prices for common one ounce gold and silver items sold on eBay (numismatics excluded, shipping - often free - included):
Item: Low / High / Average / Median
The Single Ounce Silver Market Price Benchmark (SOSMPB) settled at $38.46, a gain of just 13 cents from last week's price of $38.33.
Promising to be quite noisy with many companies reporting third quarter results, the coming week might be best to view with some step-back perspective. All the usual blabbering will be about specific stocks, analysis will be spotty and most of it challenged. With an FOMC meeting and October non-farm payroll data due out the following week, the last week of October figures ot be a roller coaster with significant upside potential.
One would figure that the height of earnings season would cause the three-week rally to extend, and possibly extend into the holiday season beyond Thanksgiving. While there are places at which the rally could stumble and fall, this market - love it or loathe it - has had an uncanny knack at ignoring the obvious and plowing ahead. It's probably due to the intense concentration of wealth in the equity markets. Your 401k or retirement account may look swell to you and provide sleeping comfort during these heady days, but it amounts to almost nothing in comparison to the massive wealth of companies like Apple, Google, Blackrock, Vanguard, and others which largely control the ups and downs of the markets. These companies, together with the largest banking interests have the ability to move entire markets in any direction they choose. Thankfully, for many people, they have chosen the upside, even though their partners in the central banking and government spaces have created policies designed to gradually strip away all the wealth in the world via interest rates, inflation and taxation.
It's an uneven, unfair playground in which there are sizable bullies afoot. When they act in a unified manner, the result may not be apparent just by looking at current stock prices. The underlying currents in a fiat money regime call for protection from the hidden theft of inflation, which has only just begun to become an existential threat. Whether it be hyperinflation or depression, the hydra sitting atop the global financial system will benefit, to the detriment of all below.
Trade and hedge accordingly.
At the Close, Friday, October 22, 2021:
For the Week:
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