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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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Big Banks Post Big Earnings for 3rd Quarter; Stocks Seeking Positive Week Friday, October 12, 2023, 9:22 am ET Kicking off third quarter earnings season in style, JP Morgan Chase (JPM) broke out with a blowout quarter, with revenue up 35% year-over-year. JP Morgan posted earnings for the three months ending in September of $13.15 billion, or $4.33 per share, up 28.9% from the same period last year and firmly ahead of the Street consensus forecast of $3.36 per share. Citigroup (C) reported earnings [pdf] of $1.63 per share that were equal to year-ago numbers. Revenue grew 8.8% to $20.14 billion. Wells Fargo (WFC) reported [pdf] diluted earnings per common share of $1.48, nearly double that of a year ago ($0.86). The company reduced its credit loss provision over the quarter ended September 30. The company noted, "Provision for credit losses in third quarter 2023 included a $333 million increase in the allowance for credit losses primarily for commercial real estate office loans, as well as for higher credit card loan balances, partially offset by a lower allowance for auto loans." Investors Business Daily has a good rundown, focusing on JPM's huge quarter. Despite Thursday's afternoon equity run-down, caused by an ugly 30-year bond auction, stocks are on track for a winning week, with the Dow ahead 223 points, NASDAQ ahead 142, and the S&P up 41 points. Futures are heading higher as the opening bell approaches, though NASDAQ is lagging, up just 15 points. It appears the stock pickers aren't superstitious this Friday the 13th.
At the Close, Thursday, October 12, 2023:
Thursday, October 12, 2023, 9:40 am ET Month after month, Americans of the investor class are treated to the latest inflation figures from the BLS in the form of the Consumer Price Index (CPI). Regular consumers care little about the official numbers. They want to know when the price of bread, milk, and gas are going to come down to more reasonable levels. Out this morning are the September accounts, showing CPI rising by 3.7%, which wouldn't be so bad in normal times, but this news comes at a time at which the number should have a negative value. After all, hasn't the Fed been ratcheting up interest rates for the last 18 months in an effort to slay the inflation beast? At this point, their efforts are being regarded as less than effective. Give them a D, maybe an F, as in failure or F--ed, which is what the US economy is. Meanwhile, the US has sent two carrier groups to the Western Mediterranean in a show of force against any country thinking about getting involved in the upcoming genocide that will be the Israeli offensive into the Gaza Strip. The belligerent Israelis have been talking tough after Hamas operatives committed some of the most offensive acts of terrorism on Israeli citizens. The IDF, Israel's armed forces, has amassed some 300,000 troops in hopes of eradicating much of the Palestinian opposition. They cannot be blamed for being angry, but there's also little room for praising what they're about to undertake. In the larger scheme of world politics, it's just another front to the escalating war footing most nations have adopted over the past few years. The necessity of it all is questionable. In corporate news, Walgreens, the pharmacy chain which helped promote and deliver the covid jobs and related pharma death potions, saw US sales decline by 4.3% in their most recent quarter, helping to miss EPS estimates of 0.69, this morning checking in at 0.67. The company also forecast an annual adjusted profit of $3.20 to $3.50 per share, compared with analysts' average estimate of $3.72 per share. Considering the latest report, they've got a ways to go to even meet those lowered expectations. "Our performance this year has not reflected WBA's strong assets, brand legacy, or our commitment to our customers and patients," Interim CEO Ginger Graham. The company, which boasts 8,689 US locations, plans on closing 150 stores in the US. How many more well-trafficked street corners will become vancant space in the coming year? 300 more? 500? 1000? Considering the recent track record of Walgreens and the ongoing demise of Rite-Aid, the progressing commercial real estate bust appears to be gaining momentum. But, keep buying those stocks, muppets. Wall Street is counting on you becoming the ultimate bag-holders.
At the Close, Wednesday, October 11, 2023:
Wednesday, October 11, 2023, 12:00 pm ET Today's report is a little late because of ongoing issues that are too diverse and of too high a number for anybody to make rational sense. In other words, for a change, Money Daily is rather clueless, just like the people in the White House, Eccles Building (FED), on Wall Street, those writing on Bloomberg, and on CNBC and FOX Business airwaves. Anybody claiming to have a cogent thought about market direction for stocks, interest rates, the economy, or ongoing conflicts is probably talking through his or her hat, shielding their expressions of shock, disbelief, angst, and anger. Thus, this missive may be quite a bit short on substance, but long on inquiry. We seek answers, but all there seems to be is a fog of war, clouding any and every decision. There are simply too many moving parts in the geo-political equation to make any sense for or about financial implications. Over the past three days, stocks have gone up, interest rates have declined. The opposite of that was the norm since the end of July, so there might be a nascent rally arising, but one would not be advised to put any money on it. On the other hand, the Houston Astros look like a sure thing to close out their best-of-five series with the Minnesota Twins with a win on Wednesday. Prior to Saturday's events in Israel, questions were being raised about whether Jim Jordan or Steve Scalise - candidates for the vacated House Speakership - supported more financial and military aid to Ukraine. That's now a moot point, since the US is rapidly shipping arms and supplies to Israel. The finalization of the conflict in Ukraine may be one of the few silver linings from the ongoing malaise that is global restructuring. Russia has won, though nobody in the Western elite will be willing to admit that. As for Scalise or Jordan taking the reigns of a runaway congress, most could care less. Neither of them will have any support against sending massive military aid to Israel, promoting more killing, heightening tensions in a region already bloodied and scarred, and escalating the prospect of an attack on Iran, which would be another mistake, on par with the folly of the Ukraine escapade, poking the Russian bear until it was forced to act. Iran is an ally of Russia, and of China. Any assault on Iranian assets will be looked upon as acts of war by both of the Eastern superpowers. While both have demonstrated great restraint in responding to US and European aggression, a direct attack on one of their new BRICS members might not be treated with such circumspection. While either could conceivably drop a few missiles on France or Italy in retaliation, nobody can completely rule out sabotage to US infrastructure or worse outcomes. If the US and/or Israel attacks Iran, all bets are off, World War III will be officially begun, soon to be followed by shortages, rationing, and a resumption of forced conscription, i.e., a draft. Is that what Americans want for their youth, for their future? A generation of young men and woman with arms and legs blown off, scattered brains and shattered dreams. Maybe that's what the open border policy was all about. Maybe the government will conscript all the illegally-entered men between 18 and 45 into the conflict. Welcome to America. Here's your gun. An article by Jim Lebowitz at Real Investment Advice, Janet Yellen Suggests Much Lower For Much Longer, is worthy of attention, if only for the implications for the Federal Reserve being forced to lower interest rates before the US Treasury is blown to bits with interest payments on more than $33.5 trillion in debt that will total well beyond $1.2 trillion in the current fiscal year. If the Fed's hand is forced to cut the Federal Funds target rate at a pace equivalent to that at which they advanced it since March, 2022, the result is likely to be another brutal round of inflation, on par with the double banger that Paul Volker had to deal with in the 1970s. In congress and the White House, little care is given to keeping the economy on an even keel. All indications are such that they prefer unevenness to stability, panic to logic, and scare tactics to prudent governance. On November 1, the FOMC will announce the Fed's policy decision, which is looking more and more like another round of sitting on hands, pausing again, keeping the world in suspense. Meanwhile, signs of inflation rising again are beginning to pop up like tulips in Spring. The largest contributors to September's Producer Price Index (PPI) were food (+0.9%) and fuel (+3.3%), the two elements the bean counters conveniently keep out of the "core" inflation readings. Sadly, government agents are retarded. There's nothing non-core about food and energy. They are more "core" than anything else, except maybe shelter. And, maybe that's the next move. Take housing out of core inflation, make it non-core. After all, nobody pays rent or a mortgage anymore. That's so 2005. On Friday, JP Morgan Chase (JPM), Citigroup (C), and Wells Fargo (WFC) report third quarter earnings. Be on the lookout (BOLO) for increases in loan loss reserves, which would put a dent in margins, EPS, and overall profitability for three of the largest lenders. All report before the opening bell. The conference calls might get a little bit testy, especially if any of the analysts mentions all of those one-and-two-percent treasury and MBS certificates supposedly being held to maturity at a time the genius bankers could be raking in four and five percent, which is, after all, what they're paying some depositors. As usual, banks are off the reservation. It isn't just regional banks with exposure to commercial real estate and upside down on their funding choices. These are not victimless crimes. Bank of America (BAC) accounted for 34% of all unrealized losses on Held to Maturity (HTM) securities, a whipping $106 billion. The other big banks have other big bank problems. 85.5% of Citibank's deposits are not FDIC insured, and five-time felon JP Morgan - which somehow manages to keep its banking license - was just hired by Janet Yellen's treasury department to - wait for it - look for fraud.
Tuesday, October 10, 2023, 8:50 am ET By now, just about everybody has heard of The Fourth Turning, [PDF, free download] the controversial book by William Strauss and Neil Howe that theorizes how generational cycles, observed throughout history, occur in four distinct phases, much like nature's seasons of Spring, Summer, Fall, and Winter.
First comes a High, a period of confident expansion. Next comes an Awakening, a time of spiritual exploration and rebellion. Then comes an Unraveling, in which individualism triumphs over crumbling institutions. Last comes a Crisis - the Fourth Turning - when society passes through a great and perilous gate in history. While the theory is lacking in scientific terms, there does seem to be some sense to the authors' proposals, especially against the backdrop of recent events, from 9-11 to the Great Financial Crisis, to the stolen election of 2020, and finally, to the offensive Ukraine situation about to be superseded by Middle East war. There is virtually no trust in government presently in Western societies. Biden in the US, Trudeau in Canada, Macron in France were all "elected" under dubious conditions, the frauds being exposed now on a regular schedule. Their leadership - if one can even call it that - has led to disastrous outcomes in terms of society and finance. Racism has exploded, inflation is raging, employment is perilous. The West is threatening the East, with the United States constantly beating war drums against Russia and China. If this isn't the winter that Strauss and Howe predict - the fourth turning - it sure feels like it. The enemies of the US, UK, and EU are not Russia and China. The enemies of the West are their very own governments, complete with rapacious taxation structures, controlled media, and Soviet-style top-down orthodoxy. The promises of democracy and freedom are routinely shot down by regulations and ridiculed in the halls of congress and parliaments. Western society is doomed. More than just politicians are rooted in this destructive phase. Institutions are indeed crumbling. Network television, which produces nothing but sports and game shows, is being replaced by on-demand, online entities like youtube, Netflix, Amazon Prime, et. al.. Even youtube, a Google subsidiary, is under assault for its censorious policies and is being replaced gradually by Rumble, BitChute, and others. Markets are rigged and rather useless. CNBC is a joke. Getting a seven percent return on investments - something of increasing impossibility of late - in a currency depreciating at 10 percent is a net loss. Big corporations are the bane of prosperous existence. In collusion with government, they limit competition, resulting in overpriced products and services of dubious value, and mostly enrich company executives and elitists. Investments in stocks and fixed income, as profits are taxed over and over again, are fast becoming losing propositions. Investments in land, precious metals (insurance against depreciating fiat currencies), productive assets, and one's own well-being are on the rise. If this is a fourth turning, the future does not belong to followers of convention, slaves to money and government, but to innovators and free-thinkers unafraid to ditch the mistakes of the past and forge a new, self-sufficient, self-reliant future based on cooperation over competition, co-existence over war, pleasure over struggle. That is the promise of the BRICS+ nations, their ideology contested by the former superpowers, war promoters and global hegemonies. A global divorce from the structures of the past is underway. Tread lightly in capital markets. Nothing can be be trusted, but everything will be taxed.
At the Close, Monday, October 9, 2023:
Sunday, October 8, 2023, 9:15 am ET All of a sudden, war broke out in Israel Saturday. Cynics will point to the timing of the aggression, precisely at a time Western allies are seeking a way out of Ukraine. Western politics is a mixed bag of innuendo and gamesmanship, at which the leaders of the US, UK, and the leading European nations are failing badly. Conspiracy theory or not, it has become apparent to just about anybody with open eyes that Russia is having its way with Ukraine and the world. Western economies are practically on their knees. Stocks This week was the third straight negative for the Dow and the fourth down week in the last five. Even with the partial reprieve on Friday, the Dow closed well below its 200-day moving average. Ditto the NYSE Composite. S&P and NASDAQ both ended higher, thanks to Friday's bogus booth on the heels of the equally fake September non-farm payrolls, what should have been a net negative for stocks. Markets, or, what remains of them after the HFTs, 0DTE options and computer algorithms are through, are a complete joke. Most importantly, the Dow Jones Transportation Average finished lower for the eighth time in the last 10 weeks. The US economy is about to implode.
Long duration securities continue to be devastated. Over the course of the past month alone, 30-year yields have gone from 4.33% to 4.95%, while yield on the 10-year note ran up 60 basis points. These are historic anomalies, but point to severe conditions for global finance. With US hegemony under increasing assault from entities as far-ranging as Russia, China, South America, and Africa, the desire to hold long-term obligations of a deeply-indebted nation are waning. Investors are demanding a premium for assuming such risk, pondering return OF capital, beyond return ON capital. With the devastation on the long end, the yield curve is rapidly dis-inverting, or, in more modest terms, normalizing. In fact, 5s-10s dis-inverted this week, though only to a slight degree, the week ending with the five-year yield three basis points below that of the 10-year. The pace towards normalization has increased. Spreads are diminishing. 2s-10s closed out the week at -30, up from -44 last week, while full spectrum (30-days out to 30-years) rose to -64, from -82, rather remarkable in the span of just one week. For reference, full spectrum was -99 basis points two weeks ago, -109 three weeks back, and -119 a month ago. 2s-10s were -66 two weeks ago, -69 the week before that, and -72 a month ago. 7s-10s are close to normalizing as well. Like just about anything that takes time and patience, the last 30 to 40 basis points towards normalization in the curve will probably take several months, not weeks, though the rate of change recently is startling.
The price of oil fell sharply this week. WTU crude ended the week at $82.81 (-8.77%), down from $90.77 the week prior. While Russia and Saudi Arabia pledged to continue their self-imposed, lowered production quotas, they may not have figured in the effect of demand destruction in Europe and the US - also somewhat self-imposed, though not intentionally - or didn't expect it to happen so quickly and abruptly. If there's any rationale for seasonality, it has historical precedent. Oil prices fell into December in 2018, 2021, and 2022. In 2019, the price was stable just under $60/barrel, and in 2020, oil was recovering from the steep decline due to lockdowns earlier in the year that had sent prices into negative numbers. Weighing on oil is what is shaping up to be a serious recession on a nearly global basis, as the multi-polar world takes shape and de-dollarization accelerates. Along with the West, China also faces economic headwinds from its developing housing bust. A predicted el nino winter may also contribute to keeping prices in check, lowering the cost of home heating oil. The US national average for a gallon of unleaded regular gasoline fell by a full dime over the week, from $3.80 to $3.70. Inventories of gas and other distillates have been building up recently on slack demand. According to gasbuddy.com, Georgia dropped seven cents, making it the state with the cheapest gas in America, at $3.13. Mississippi continued the trend lower to $3.14, down six cents from last week. Next were South Carolina ($3.17), Louisiana, Texas ($3.20), and Alabama ($3.21). Florida remained at South's outlier, at $3.45, matching last week. Prices have soared in California, but the West got some relief last week. The Golden State average fell to $5.83, down from $6.07 last week. Prices eased elsewhere, with Washington ($5.03) the only other state above $5.00. Nevada fell to $4.93, down 17 cents. Oregon ($4.65) and Arizona ($4.51) were lower over the week, with Utah and Idaho both at $4.03, also lower. Prices remain high in Montana, though down another nine cents, to $4.00 this week. Those eight Western states comprise the $4.00+ club. In the Northeast the highest gas prices remain in Pennsylvania ($3.82) and New York ($3.81). The lowest prices in the region are to be found in Ohio ($3.28) and Kentucky ($3.30). North Dakota ($3.71) tops the Midwest, with Illinois a close second ($3.67). Minnesota, South Dakota and Nebraska are level at $3.62. Michigan fell 14 cents, to $3.59.
This week: $27,856.60 Bitcoin remained in steady state, near the middle of its recent range.
Gold:Silver Ratio: 89.27; last week: 83.28 Per COMEX continuous contracts:
Gold price 09/08: $1,942.60
Silver price 09/08: $23.19 Gold and silver price slashing continued through the week, though Friday brought some overdue relief. Bottoms are likely not already in place. From a chart perspective, the recent trend lower could persist for some duration, especially if recession becomes reality in more than just Europe. There's some support for gold around $1700, and for silver near $20, but there are also voids lower, suggesting that further price erosion could produce a vicious cycle, sending prices into a tailspin. Naturally, nothing would please the central bank cartel more. Pricing gold and silver in fiat currencies is something of a lark, anyway. No matter what, gold and silver will always retain some value as money, both as a store of value and means of exchange. If inflation (reduced purchasing power) remains high, but precious metals drift lower, all the better for the long term. Think in terms of ounces or tonnes, rather than dollars, euros, yen, or yuan. With the gold:silver ratio exploding higher this week, silver appears to be leading prices even lower. Investors may want to begin scaling into silver. Here are the most recent prices for common one ounce gold and silver items sold on eBay (numismatics excluded, free shipping included):
The Single Ounce Silver Market Price Benchmark (SOSMPB) fell sharply again this week, down $1.41, to $34.27, from the October 1 price of $$35.68 per troy ounce.
Conditions in the US and Europe are nearing crisis proportions. When the 2s-10s on the yield curve finally dis-invert (return to normal), that should signal the beginning of a very long, deep recession.
At the Close, Friday, October 6, 2023:
For the Week:
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