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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, December 10, 2021, 9:27 am ET
What a week to own dividend-paying stocks!
Well, that's if you like getting a regular check every three months on a 3-5% dividend payout while inflation is running at 6-7%. At least you're ahead of the curve and the useless eaters who can't or aren't smart enough to hedge against rising prices and serial money printers like those at the Federal Reserve.
The Fed controls the lives of hundreds of millions of people, or so they tell themselves in their quieter, more reflective moments, those not galavanting about, preening for the financial press, lisping sound-bites for the markets.
Thursday morning, the Bureau of Labor Statistics (BLS) released the November Consumer Price Index (CPI), showing that prices increased by 0.8% in November, reflecting a 12-month increase of 6.8%, topping October's reading of 6.2%. That's what will be known for a time as the rate of inflation. Overall, taken together, it costs 6.8% more to buy most ordinary goods and services. It's the highest inflation rate since June 1982.
Now, 6.8% may not sound like much, and there are wise shoppers out there who can ameliorate the added costs by clipping coupons, shopping the bargain bins and outlets, cutting back on certain items, being conservative, and other cost-saving mechanisms. All well and good for them, but prices are rising and aren't likely to come down any time soon. Price inflation above five percent has persisted for nearly a year.
Those who don't think this spate of higher prices (incidentally, caused by the Fed's grandiose quantitative easing and other easy money policies) is anything to be alarmed about have not apparently lived though a period of high, extended inflation such as the late 1970's in the United States, when from 1976 to 1982, prices rose by more than 50%, ending in a deep recession.
Our current condition may not be as severe, though, depending upon perspective, it could be far worse. Beef lovers know this, as do used car buyers. Anybody who drives an automobile with an internal combustion engine has felt the pinch of higher prices at the pump. Much higher prices.
By itself, inflation doesn't threaten the American way of life. Americans are uniquely equipped to put up with all kind sof maladies and mishaps. After all, living Americans have put up with a dysfunctional congress for upwards of 40 years now, so a little inflation is probably not going to worry them (a LOT of inflation might).
However, inflation hits the poor and middle classes harder, so expect the government to help those impoverished folks out with more food stamps (they already increased the monthly outlay across the board by 25% in October), COLAs (Cost of Living Adjustments), and other giveaway programs. The problem with these programs is that the increases actually fuel more inflation, by putting more money in people's hands. The answer to inflation, as everybody knows, is austerity, but nobody can be deprived of anything in the new, "woke" American culture, so they won't.
Wall Street's reaction to the high CPI number was predictable. Futures are soaring. Higher prices are all good for the makers of cereals, gasoline, GMO restaurant food, etc. Carry on. Pay more and do not panic. Oh, yeah, and get a booster!
Despite a disorderly, mostly negative day Thursday, by the close, for the week, the Dow was ahead 1174 points, or 3.40%. The NASDAQ was up 432 points (2.86%); the S&P ahead by 129 points (2.84%); and, the NYSE Composite was holding onto a gain of 432 points (2.65%).
It appears that the bulls have won the week. And next week is the Fed's final FOMC meeting of the year, in which they will offer even more of their confusing policy directives. Supposedly, they plan on announcing an acceleration of the tapering of asset purchases (sorry about whatever damage such twisted syntax does to the language). In other words, the Fed has signaled - via some secret code or thumbs up or gang-style fingering - that they're going to double down on the tapering of their spending. Instead of purchasing $15 billion fewer treasury bills, notes, or bonds, they will purchase $30 billion fewer, and $20 billion fewer of mortgage-backed securities.
Eventually, the Fed will be done buying stuff. Their balance sheet had doubled over the past 20 months, now in excess of $8 trillion. The fun comes when they try to unload those assets into the markets. They tried before, after the GFC in '08-09, and failed. Most of the mortgages they purchased during their sub-prime scam are still on their books, while others have been quietly written off as "non-performing."
Basically, the Fed is nothing more than a monopoly money scam on the public. All of their issuance is debt; lots of it never gets repaid, and what does is recycled into new debt, for new suckers. Unfortunately, the new suckers are American citizens, living on plantation America, working for slave wages for their corporate masters, paying taxes to political carpetbaggers and spending inordinate amounts of money to live there.
Inflation exacerbates all of these conditions. Money Daily urges readers to escape the wage and tax slavery system that is the United States, wither by smart financial arrangements (being your own corporation, for instance) and making alternative investments while they are still available. People don't hav to live the way they are in the United States or anywhere, for that matter. Freedom is a matter of choice. Sadly, many people have chosen what looks like freedom, but is, in fact, anything but. Just try telling your boss you want a 10% raise, or that you're changing your hours, or tell the local tax authority you don't want to pay property taxes any longer. See just how free you are then.
Buy Gold, Silver, Bitcoin.
At the Close, Thursday, December 9, 2021:
Thursday, December 9, 2021, 9:20 am ET
US stock indices rallied to within 1-2% of all-time highs on Wednesday, but the mood seemed to shift as the dip from prior weeks has been fully bought and a catalyst is needed to boost stocks to even higher, more extreme valuations.
Not that stocks couldn't see more appreciation as the holiday season rolls on; there are only two weeks left before the magical holiday of Christmas, though Santa appears to have arrived prematurely for Wall Street bankers.
More evidence that the US is at full employment was presented Thursday morning as only 184,000 Americans applied for unemployment, the lowest level since 1969. It is also evidence that the US workforce continues to decline. The labor force participation rate is hovering around 61%, meaning that, of people qualified to work, fewer than 2/3rds are actually doing so.
As with everything else in the new world order, the numbers make little sense in relation to economic realities. The US has long ago become a welfare nation, dependent on government hand-outs to millions. Welfare, disability, and social security payments are keeping the economy alive, even though the productive part has been shrinking for decades.
We've seen the beginning of the end of profligate spending in 2008-09. What comes next will be a magnificent surprise.
Meanwhile, bitcoin, gold, silver and other hard assets seem to be impervious to runaway inflation. They are all on sale at bargain basement prices.
At the Close, Wednesday, December 8, 2021:
Wednesday, December 8, 2021, 9:10 am ET
The Wall Street Journal is reporting that Evergrande, the largest real estate developer in China, according to Forbes, missed making a $82.5 million interest payments on Monday (12/6) originally due November 6 on two sets of dollar bonds by the end of a 30-day grace period.
Over the weekend, China's official media had circulated a story via the official Xinhua news agency and People's Daily, the Chinese Communist Party's flagship media outlet, that suggested Evergrande's problems were being resolved through a restructuring and that the company would continue operations.
While the restructuring is likely to result in massive write-downs for bond holders and have ripple effects through China's economy and beyond, there remain 1.4 million unfinished apartments that Evergrande pre-sold. Details on how the company plans to finance construction on such a massive scale when it is essentially bankrupt have yet to emerge.
Beyond the unfinished - and paid for - apartments are the various "ghost cities" that China built over the past 20 years that are now crumbling ruins or already destroyed. The level of malinvestment in China's real estate market over decades is staggering. Other real estate developers are suffering as China's bold real estate forays turn horribly sour.
Kaisa, the second-largest holder of offshore bonds reportedly was unlikely to meet a dollar bond repayment of $400m by the deadline of Tuesday night in the US, Reuters said. Trading of the company's shares was suspended Wednesday in Hong Kong.
What's apparent, even behind China's iron curtain media, is that the CCP is taking control of companies like Evergrande and quietly bailing them out, much like the US did openly via bank mergers during the GFC of 2008-09. On the underside of China's collapsing real estate market are millions of disenfranchised, would be home-owners who were systematically swindled out of life savings by a combination of over-leverage, dishonesty, shoddy materials and unkept promises from developers and officials.
China's ghost cites are modern-day monuments to what used to be called malinvestment. Today, terms such as "policy error" or "marketing mishap" substitute for too much dumb money chasing chimera-like get-rich schemes. Everybody in China was convinced that buying homes in these magical new cities would bring individual and national prosperity. The reality is slowly being revealed to be the absolute opposite, not unlike the sub-prime defaults in the US a decade ago, when the uncommon knowledge was that real estate prices never come down. They do, and, they did.
The Evergrande saga may be swept under the rug by China's fake media machine, but the reality of billions in US$ losses and Chinese yuan on a gigantic scale cannot be underestimated. While the US and Euro nations have been widely accused of printing too much money out of thin air to keep their economies above ground, China is showing that it is not a stranger to such moral hazard.
A global liquidity pinch is soon to arrive, which is likely to be followed by a collapse in confidence. Fiat currencies, backed by faith and nothing else, continue to be eroded of value.
There's a rumor circulating that Evergrande's bond blow-up is tied somehow to Bitcoin, supposedly leveraged through Tether, and that is causing the continuing decline or sluggishness in Bitcoin. There's no concrete proof of this occuring, though it would come as no surprise if true.
Eventually, debts are either repaid or they aren't and the latter appears to be the current direction throughout the global economy. Bond holders seeking return on capital are increasingly questioning return of capital on their investments. In cases such as Evegrande, Chinese real estate bonds as a whole, and many other credit derivative investments, the holders will find themselves chasing shadows.
For now, Evergande and plenty of other potential market-moving actualities are being ignored by the whiz-bang investors dotting the landscape of lower Manhattan. With stocks nearing all-time highs again on the main indices and valuations beyond those of the periods prior to the 1929 crash or the 2000 dotcom implosion, investors have turned a blind eye to risk, courtesy of corporate stock buybacks and the Brrrrrr of the Federal Reserve's money-printing mechanisms.
While the holiday season glosses over with glad tidings, hope, and cheer, beneath the surface, the global economy is eroding at an ever-faster pace. Stocks may surpass prior highs in coming days, but Friday's CPI figures - due out before the opening bell - will likely be cause for a little less celebration and a little more due diligence.
And China can't hide Evergrande forever.
At the Close, Tuesday, December 7, 2021:
Tuesday, December 7, 2021, 9:26 am ET
Things have changed on Wall Street.
All of a sudden, with the omicron variant deemed non-lethal and a non-issue, it's safe and smart to buy stocks again. That seemed to be Monday's message, and investors gobbled up stocks like turkey on Thanksgiving.
They bought last week's dip and, if the futures hold any promise, Tuesday looks to be even better. A moon shot in the making.
Equity investors appear to have a holiday mentality and short memory. They've forgotten that the Fed is looking to taper faster than originally announced and that inflation (with the CPI out tomorrow) is still running very hot. They've conveniently disregarded the debt ceiling debacle and the four Bs: Biden's Build Back Better plan is still stalled in congress.
All that apparently can be put aside as long as some flu-like symptoms from a suspicious air-borne virus doesn't give everybody the sniffles.
Equity investors also don't seem to pay much attention to bonds. The treasury complex steepened out to the long end, but the gap between the 7-year and 10-year note yield is down to a measly five basis points (1.38% to 1.43%). Also, lending the government your hard-earned dollars for 30-years only gets an additional 0.32% interest (1.43% to 1.75%). It just doesn't appear to be such a good deal.
Elsewhere, Bitcoin has recovered from its most recent near death experience to $51,000. Naturally, gold and silver are moribund, slapped down this morning, but recovering.
Welcome to our brave new world, comrades.
At the Close, Monday, December 6, 2021:
Sunday, December 5, 2021, 10:54 am ET
On Wednesday, December 1, Money Daily posted "It's All Downhill From Here," warning that stocks may not continue to be the great investment they've been since the GFC of 2008-09.
Prescience is an aim in finance. Being either early or late to spot a trend can be fatal to the top line, bottom line or any line that measures profit and loss. Being convinced that gold, silver, bitcoin and other alternative assets are necessary to escape the coming collapse and the tyranny of US tax laws, Wednesday's warning may have been a trifle on the late side, but still in plenty of time to save the longer term.
As the week ended on the sour note of November non-farm payrolls coming in well short of expectations (210,000 vs. 550,000), stocks were unable to find any support other than at lower levels. Friday's losses were minimized by a last-hour rally that sent the Dow up from the depths by some 300 points, while the S&P knocked off half of its losses (down more than 80 points at 3:00 pm ET). The NASDAQ was down an additional 145 points from its closing price.
The late-day rally is typical of the short-covering, tape-painting antics of the broker class, seeking to hide the overall damage. Clueless morons with their 401k nest eggs see the final numbers on CNBC or other MSM news channels and are reassured that everything is just peachy.
Friday's stock dump was paired with a wicked rally in bonds, mostly long-dated. Yield on the 30-year fell from 1.76% to 1.69%, while the benchmark 10-year yield nearly dropped a dime, falling from 1.44% to 1.35% on the day.
The two-year note was bounced like a beach ball, rising from 0.50% to 0.63% on Thursday, before dropping back to 0.60% on Friday. That left the curve flattened, with 2s-10s at 0.75%, a massive move of 26 basis points from Monday's 1.01%. This flattening, in addition to the -8 basis point inversion between the 20-year (1.77%) and 30-year (1.69%), bodes ill for the immediate future.
The 30-year is offering the lowest yield in 11 months, while the two-year has gone ballistic over the past year, as the yield rose from 0.11% on December 12, 2020 to its present day 0.60%.
More instructive, perhaps, are the yields from just before the market crash in February, 2020, which correctly foretold of the incipient collapse. On February 10, 2020, the 1-month, 2-month, 3-month, and six-month yields all stood at 1.58%, all of those higher than the 1, 2, 3, 5 and 10-year yields. The 1-year was 1.45%, the 2-year, 1.37%, the 10-year, 1.56%. The bond market was broken, with inversion at the short end and between the one and two year.
It wasn't until the Federal Reserve stepped in with emergency rate cuts and other extraordinary measures through March that tamped the one-year yield all the way down to 0.01 on March 23rd that the treasury complex returned to some semblance of normalcy and a steady, graduated curve.
With that history in mind, the Fed's most recent hawkish posture, with Jerome Powell calling for a quicker taper of its asset purchases in an effort to control inflation, is almost certain to backfire and foment a serious recession, most likely beginning late in the first or early in the second quarter of 2022. Interest rates are already approaching another inversion below the current 20s-30s, most likely to occur at the 7s-10s (currently 7 basis points) and proceed down the belly to the 5s, 3s, and 2s. The devastation of a curve inversion and bond market flight to short maturities will crush the stock market.
What maks this time different from the early months of 2020 is that the Fed has no room to cut rates. They're already at zero on the short end and have nowhere to go but up, all the way through to the 2-year notes. Essentially, the bond market is signaling to equity investors that the top is already in place.
To that point, keep in mind the all-time highs made in stocks within the past month:
Will Santa come through with a late-year rally? That might be wishful thinking, especially as the US congress plots to raise capital gains taxes by year's end. That could cause a severe run from equites as investors prepare for the tax man just months hence. There's always the chance that the congress might put off the capital gains rip until next year, though there's been no discussion of that on the Democrat side, which has, over the years, morphed from policies of Tax and Spend, to Spend, Borrow, and Tax. They're giving us the worst of all worlds.
While stocks were getting wiped out, the price of oil continued to drop precipitously, from a high of $84.65 on October 26 to Friday's close at $66.26 for a barrel of WTI crude, slamming the oil price into a bear market with a 21.7% decline.
Prices for gas at the pump have not yet caught the full effect, though the national average is down slightly, from $3.41 a month ago, to $3.37. A 20% drop, which is likely to not occur until after the holidays, would have the national average at roughly $2.72 and likely closer to $2.25 in the Southeast. All of America is waiting on that.
Bitcoin and other cryptos got ravaged over the course of the week, the majority of the damage coming in the final half hour of Friday night (Dec. 3rd), as the price of Bitcoin fell nearly $10,000, from $52,315 at 11:30 pm to $42,333 as of midnight, ET. Bitcoin had been as high as $59,249 earlier in the week and had been slowly declining. The midnight drop was the final surge lower. It's currently recovered to a range between $48,000 and $49,700.
Silver price 11/26: $23.09
Gold and silver continued to be under pressure, especially silver. If you're not buying silver at this price, you likely never will, though there ar some of the mind that another economic downturn could force silver to $17 an ounce, or even lower.
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 over the week, to $38.27, a gain of 75 cents from last week's price of $37.52.
Considering the current disparate conditions in financial markets and the overarching uncertainty in political and social realms, the next few months promise to be helacious and downright frightening. With the holiday season threatened by everything from virus to inflation to smash-and-grab robberies in broad daylight, it's almost a lock that retailers will suffer from sagging sales and lack of interest. Data from Black Friday weekend and Cyber Tuesday already show that consumers aren't all that keen on buying gifts, given they're already stunned by food prices over the past few months.
Inflation and supply chain issues haven't even peaked and already there are signs of a slowing economy. Faking presidential elections comes with considerable consequences, not the least of which are tens of millions of extremely disappointed and angry American citizens itching for reprisal.
People ask, "how much abuse can the public take?"
Evidently, there's no limit, though mostly the Lower Midwest and Southeastern states are exhibiting considerable resistance to all manner of mandates, restrictions, and violations of the Constitution. Should the current occupants of Washington, DC, and their counterparts in state capitols persist in the kind of repressive control that's been their trademark since nearly two years, the backlash is likely to be violent, though sporadic.
Plunging the nation into a severe recession early in 2022 might just be the final straw. Then again, there are millions of cowardly, cowering people in America's cities practically ready to surrender their liberty for food or security or just food security.
With that in mind, we wrap the weekend with the wisdom of Founding Father, Benjamin Franklin:
Those who would give up essential Liberty, to purchase a little temporary Safety, deserve neither Liberty nor Safety.
At the Close, Friday, December 3, 2021:
For the Week:
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