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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, November 19, 2021, 8:44 am ET
Well, it's Friday, so we can check to see what stocks need to do for positive or negative returns on the week. It's also the third Friday of the month, with loads of options expiry taking place, which will cause heightened volatility in stocks.
So far, the week has not been kind to holders of large caps. Through Thursday, the Dow has retreated some 229 points (-0.64%). Any moderate rally could erase those losses, though at this point, about an hour before the opening bell, Dow futures are down about 250 points.
Tech has outperformed on the week, with the NASDAQ ahead by 133 points (+0.84%). The S&P is up 21.69 (+0.46%) and the NYSE Composite is down 180 points (-1.04%). It's a pretty fractured picture, appropriate for fractured markets.
The latest crypto mystery continues to unfold, as Bitcoin fell to $55,625 overnight, now down nearly 20 percent since making a new all-time high of $69,000 less than ten days ago, on November 10. The move is said to ab about new tax provisions imposed by the IRS via the just-passed Infrastructure bill, which characterizes cryptocurrencies the same as cash for purposes of reporting large receipts (over $10,000).
Those cynical of the nature of taxation and the IRS in general point out that profits made in cryptos are classified as "assets," but when the government wants to make some kind of example of domestic terror threats, bitcoin magically becomes cash.
It's a very sad day in America when government is allowed to have their way even conflicting themselves in the process. The good news is that while some banks and financial institutions are exempt, the peer-to-peer anonymous nature of crypto assures senders and recipients of anonymity, so only those fearfull of the law will fill out the stupid paperwork required by the IRS.
The rest of the people will offer a middle finger salute and be done with it. After all, it's none of their business.
At the Close, Thursday, November 18, 2021:
Thursday, November 18, 2021, 8:57 am ET
Just in case people think the rest of the year 2021 is going to be smooth sailing to new all-time highs in stocks, bear in mind that there are some serious headwinds beyond the fact that stocks are priced at the most ridiculous levels ever, more so than in 1929 or 2000, before the respective crashes.
Before we all make it to the hallowed land of the holidays, the most dysfunctional congregation in the history of mankind, the current US congress, has to somehow find a way to fund the government for another week, or month, or heaven forbid, a year, and at the same time pass legislation to raise the debt ceiling, lest the US fail to pay its bills on time (ever been late with a payment? Not such a bad thing.).
Those are only the actualities facing the unofficial government (it's mostly fake since last November). In the real economy, there is this runaway inflation causing panic and angst amongst the general population, adding to the already present panic and angst from the supposed virus dilemma of vaccinating or not, living and dying, and other mundane topics.
In Australia, Austria, and soon, Germany (and possibly Italy and the Czeck Republic), the authorities have begun to impose serious restrictions on unvaccinated people. Mostly, they cannot leave their homes except for "essential" functions, like foraging for food in local markets, having teeth pulled or other medical operations. These new-age lepers are not allowed in restaurants, theaters, or many other public places. They are being segregated and persecuted, which brings up a couple of salient questions, like, "when do the internment camps open?", "when do the trains start rolling?"
It's pretty sad. Those who do not study history are doomed to repeat it. That's in play.
All the while, the government and media send up false flags, report only news that fits its narrative, and they often make it up as they go along. Things are not normal, so one should not expect this holiday season to resemble anything like past ones. Biden's promised a "dark winter." We're probably going to have one, especially since an unelected president and his unelected staff are seeking solutions to higher energy prices, general inflation, and a host of thoer issues. They've failed at everything and should continue to do so.
Therefore, if you think stocks are primed to go higher in such an environment, keep buying stocks. If you believe that employment figures from the government matter one single bit, consider that 4.6% unemployment, or whatever it's supposed to be, has always equated with full employment. The truth is that employers cannot find quality hires and many people don't want to work anymore, tired of being a tax slave for oligarchs and the government.
There are, of course, alternatives.
At the Close, Wednesday, November 17, 2021:
Wednesday, November 17, 2021, 7:26 am ET
Heading into Wednesday, US stocks appear weakened as Tuesday's rally was cut short, mid-afternoon. There exist too many headwinds to propel stocks back to record territory, most of which is being fomented by rampant price inflation both at the producer and consumer levels.
Asian and European stocks are trading mixed, futures are dampened, flat, with the Dow Industrials showing the most weakness.
The slump in cryptos has extended into a third day, with Bitcoin falling below $60,000 overnight, though it has recovered that level and appears to be stabilizing.
Stocks to watch are Target (TGT) and Lowes (LOW), both of which reported earnings before the opening bell.
At the Close, Tuesday, November 16, 2021:
Tuesday, November 16, 2021, 9:45 am ET
How did it happen that all four of the major indices managed to close within 0.07% of unchanged on the same day?
That question is more rhetorical than answerable. There really is no logical explanation for it, except two: 1) investors, universally, have no catalyst to move in either direction, or; 2) there is manipulation at work.
Since the latter would brand one as a tin-foil-hat conspiracy theorist whack-job, let's try out #1. There is ample evidence that markets are confused. On the one hand, stocks are at historic high levels. All of the indices are within 1.5% of all-time highs. The S&P and NYSE Composite considerably closer than that.
The market got what it wanted as the highs were made on November 5 for all indices: a robust-looking unemployment report on the back of the Fed's non-tapering taper announcement that set up bond and MBS purchases parameters for November and December, but no further.
Perhaps it is the Fed's lack of commitment to a longer-term policy that has investors stuck in their tracks. Or the incompetence displayed by the White House in dealing with inflation, supply-chain issues, border security or a host of other potential pitfalls facing the nation. Last week's PPI and CPI readings for October certainly gave equity punters pause, sending the indices to the first losing week in the last four.
So, where do markets go from here?
Just announced Tuesday morning, October retail sales jumped an estimated 1.7% from the prior month and were up 16.3% from October, 2020. September was revised higher, from +0.7% to +0.8%. The estimates are in nominal terms, so inflationary forces could have boosted the figures by 0.3 to 0.6%, and almost certainly did. With inflation running hot, at more than six percent annually, a 0.5% increase over a month is a given.
While the retail sales figures support a sentiment toward higher asset prices, the inflation ingredient is likely an even larger contributing factor. If a stock is trading for $100 a share today, it should be at least $106 a year from now, unless management is lacking or there's some other fundamental issue facing the company.
The path of least resistance in stocks is to the upside, though that's not to say that an adjustment lower is off the table.
Looking further into the depths of the financial markets, throughout Monday and overnight, cryptos globally were trashed, with Bitcoin leading the way lower, falling from a Monday high just below $66,000, to a low of $58,638, the lowest level of the month and just above the October 27 low of $57,653. It was less than a week ago (November 10) that Bitcoin topped out at $69,000.
Ethereum also was well off, falling from $4,724 to $4,240 in the past 24 hours. There was no immediate cause assigned to the sudden drop across the crypto universe, though some suspect that it may have something to do with the infrastructure bill recently passed through congress and signed into law (maybe? because he's not the real president?) by Joe Biden on Monday.
The legislation included a small re-wording of section 6050I of the Internal Revenue Code (IRC). That's the provision that "requires that any person engaged in a trade or business that receives cash in excess of $10,000 in a single transaction or in related transactions must file Form 8300 [PDF], Report of Cash Payments Over $10,000 Received in a Trade or Business.
The new wording includes "any digital asset" as a cash transaction, which is amusing, since the very same IRS categorizes cryptocurrencies as financial assets, not currency, and taxes it via the capital gains tax. For the government and IRS, it's heads I win, tails you lose.
On its face, the requirement is blatant financial repression and a violation of the fourth amendment. Since congress has long ago abandoned adherence to the Constitution, nothing has changed since this requirement was implemented on January 1, 1985, except that in the infrastructure bill, cryptocurrency was added to the list of cash transactions, which include U.S. currency, Foreign currency, Cashier's check(s), Money order(s), Bank draft(s), and Traveler's check(s).
Given the peer-to-=peer nature and inherent privacy protections built into blockchain and cryptos, the form would likely be impossible to complete for many transactions, since the paying party is anonymous. Banks and other financial institutions are exempt because they are allowed to engage in money laundering and the drug trade as recipients, though shold a bank or financial institution (Coinbase, Binance?) pay out $10,000 or more in Bitcoin, Ether, LiteCoin or any of the thousands of other coins and tokens (and NFTs), the recipient is required to pony up the information, along with the bank.
While there's no proof that including cryptos on the felonious list caused the mini-crash in cryptos, there's probably more than just a few "whales" pondering the potential of being cast into a cell for an extended period of time just for making honest money.
As the crackdown on just about all civil liberties commences apace, make no doubt that financial repression and violation of one's privacy is top of the mind for the tyrants hard at work at the throats of the public.
At the Close, Monday, November 15, 2021:
Sunday, November 14, 2021, 11:15 am ET
Despite across-the-board gains on Friday, three of four US indices finished the week lower, with the NYSE Composite the upside outlier.
There was nothing to suggest any kind of trend or sentiment change, other than the readings for PPI and CPI which were largely responsible for the slightly dour mood amongst equity participants.
On Tuesday, the U.S. Bureau of Labor Statistics reported the Producer Price Index (PPI) for final demand increased 0.6 percent in October, seasonally adjusted. Final demand prices were up 0.5 percent in September and 0.7 percent in August. On an unadjusted basis, the final demand index rose 8.6 percent for the 12 months ended in October.
Wednesday's Consumer Price Index for All Urban Consumers (CPI-U) showed an increase of 0.9 percent in October on a seasonally adjusted basis after rising 0.4 percent in September. Over the last 12 months, the all items index increased 6.2 percent, unadjusted.
While stocks were lower on Thursday, following the PPI readings, Wednesday's declines were the worst of the week, as consumer prices appeared to be advancing at an untenable rate. Led largely by energy, housing, and food, the core items in the CPI breadbasket and those of most lower and middle class Americans, higher prices for the basics of living prompted selling in cyclical and consumer stocks. Losses were kept to a minimum on continued jawboning from the Federal Reserve that inflation was still "transitory," though, even by their own admission, a little more pronounced and longer-lasting than originally assumed.
As both CPI and PPI have been advancing since March of this year, more people are coming to the conclusion that inflation is here to stay, the Fed doing more damage than good by not raising interest rates, instead insisting that the economy is "recovering," albeit at an anemic pace. Indications that the US and global economies are showing equal or greater signs of losing momentum as opposed to gaining strength are eroding sentiment, as Friday's University of Michigan Consumer Sentiment Index plunged to 66.8 in November from October's final reading of 71.7, the lowest level since November 2011.
Bond traders were having none of the Fed's rhetoric, as all treasuries of two years or longer maturity were sold off, sending yields screaming higher in the week truncated by Thursday's closure for Veteran's Day.
The 2-year note yield rose from 0.39% to 0.53%; the three-year yield rose 19 basis points, from 0.66% to 0.85%. The most affected was the 5-year note, yielding 1.24% after closing out last week at 1.04%.
The 10-year note yielded 1.58%, up 13 basis points from the prior Friday, and the yield on the 30-year rose the least, from 1.87% to 1.95%. The 30-year bond continues to yield less than the 20-year, which closed out the week at 1.99%. This long-end inversion is a recent feature to the treasury complex, first occurring on October 28, when the 20-year yield was 1.98% and the 30-year pegged at 1.96%.
An inverted curve normally occurs at the middle to lower portion of the curve, somewhere between 2s and 10s. This long-dated inversion has analysts puzzled over exactly what it means, taking into account that 20-year bonds were discontinued from January 1, 1987 through September 30, 1993.
Overall the curve has been flattening since March of this year, coincident with the rise of inflation, via the CPI and PPI reports. On March 19, the 2s-10s spread was 1.58% with the 2 year yielding 0.16% and the 10-year at 1.74. Today, that spread is 1.05%, with 2s at 0.53% and 10s at 1.58%, the flattening curve indicative of tighter economic conditions. Add inflation to the mix and the entire complex is elevated, though not to the point of inflation, making real yields negative to a frightening degree. If inflation persists above five percent, the real yield for the 2-year note is something on the level of -4.50%. While it is less severe presently for the 10-year, the fear is that inflation runs hot or out of control, inducing real negative yields for longer.
These factors and others are leading economists to predict a recession some time in 2022. The general consensus is for the second quarter, though it could begin as soon as this quarter after third quarter expectations were far rosier than the actual reading of 2.0%. Having moved beyond comparisons to the aberrant quarterly GDP figures of 2020, the trend may be reverting back to long-term stagnation in the 1.5-3.0% range. Putting inflation into the mix would produce negative real GDP, as was the case for the 2nd, 3rd, and 4th quarters of 2020.
Some good news came in the form of stabilizing oil prices. The price for a barrel of WTI crude oil has been trending gradually lower, finishing the week at $80.69. Prices at the pump for a gallon of unleaded regular gas were up less than a penny for the national average, posting Sunday at 3.421.
Bitcoin rose to a new high of $69,000 on Wednesday (11/10), though coinbase.com has recorded the high at $68,778.48. The current level is right around $64,200, which is down less than one percent for the week in real time.
Ethereum hit a record $4867.81, and has backed off towards $4,591 on the weekend.
Continued upside momentum cheered holders of precious metals, now looking for a third straight week of gains. Gold seems hellbent on recapturing the $2,000 level though silver is still languishing near the lower levels of the year. Silver's recent action has hopes of reaching back towards the $26-27.50 range, and a breakout above $30 is being promoted by some of the more bullish players in the sector for early 2022.
Of course, the long-held view that gold and silver are most excellent hedges against inflation is making the rounds. It is largely true, though one might not surmise that from long-standing actions to suppress both metals on the COMEX market. January 1, 2022 may mark a turing point for the metals, however, as goldmoney.com's Alasdair Macleod points up in his most recent entry, The futility of central bank policy. New BIS rules regarding allocated and unallocated positions take effect at the start of the new year.
Gold price 11/05: $1,818.00
Silver price 11/05: $24.15
Here are the latest prices for common one ounce gold and silver items sold on eBay (numismatics excluded, shipping - often free - included):
The Single Ounce Silver Market Price Benchmark (SOSMPB) rose, pricing at $37.90, a gain of 40 cents from last week's price of $37.50.
For a change, the alternatives to stocks: gold, silver, crypto, had the upper hand for the week, though investing is not a matter of scoreboard-keeping, pitting asset classes against each other. A lively mix smoothes out rough edges and guards against crashes. Being diversified not only in stocks, but in asset classes is more important than ever, given the geo-political challenges present worldwide.
Movement away from dollar-denominated assets is gaining momentum and has been for the better part of the century. A new era is dawning, and it is difficult to see a dominant position for fiat currencies remaining in place for much longer than the next six to ten years. Currency debasement and change generally are slow processes, though it's been proven time and again that central bankers can make dramatic policy movs at the drop of a hat, or an asset.
At the Close, Friday, November 12, 2021:
For the Week:
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