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Bank Earnings (JPM, WFC, C), Horrid December Retail Sales Send Futures Plummeting As Week Closes Prior to MLK Holiday

Friday, January 14, 2022, 9:22 am ET

It's Friday. Time to see where markets stand. Plenty to cover this morning, and not much time to do so before the opening bell.

Following Thursday's major sell-off, indices are staring directly into the abyss in advance of a three-day weekend (MLK). The Dow is off the least, 118 points, so any even slightly positive news could push the Beauty 30 to the plus side for the week and avoid a seventh down week in the last 10.

The NASDAQ is lower by 129 points (0.86%) and -6.48% (-1,025.99 points) YTD and is down 7.8% from its all-time high (16,057.44, November 19, 2021). Any serious further deterioration in the NASDAQ will send it into correction terriroty (-10%), upon which it touched on Monday morning, when it briefly broke through the 200-day moving average. In the nick of time, buyers emerged from the shadows to save the day and boost the NAZ to a positive close. More than likely, the PPT was involved along with cohorts at the NY Fed.

The S&P 500 ended Thursday with a loss of 18 points for the week (0.38%), although, considering the striking bearishness of Thursday's trading - up slightly in the early going, then straight down - the tenor of the day suggests something more frightening may be on the horizon.

Sure enough, with futures flat overnight, upon the release of fourth quarter results from JP Morgan Chase (JPM), Citigroup (C), and Wells-Fargo (WFC), and a somewhat horrifying retail sales figure for December, futures began pointing stright down after 8:00 am.

From the retail sales article linked above:

The value of overall purchases decreased 1.9%, after a revised 0.2% gain a month earlier, Commerce Department figures showed Friday. The figures aren't adjusted for inflation, suggesting price-adjusted receipts were even weaker than the headline number.

Ten of the 13 retail categories showed declines in receipts last month, led by non-store retailers, which includes e-commerce. Those sales plummeted 8.7% from a month earlier.

Department-store receipts decreased 7% after a 5.5% drop in November. Sales at furniture stores, electronics outlets and sporting goods establishments also fell.

It's now apparent that there wasn't much buzz about retail holiday sales after many analysts predicted record numbers in comparison to 2020. There wasn't anything positive to report after Black Friday and Cyber Monday.

In pre-market trading, Wells-Fargo was off a few cents, essentially flat, but Citigroup was down 3.48% and JP Morgan was down more than four percent. JPM's quarter was boosted by a $1.8 billion drawdown in credit loss reserves. The biggest retail banks have been drawing down reserves to advance their EPS and stock prices. Within a few days of fourth quarter results, they'll be able to begin buying back stock, so whatever happens with bank stocks through the early part of next week could easily be reversed by next Friday.

With less than a half-hour before the cash market opens, Dow futures are down 310 points; NASDAQ futures lower by 166, and S&P futures are showing a 45-point drop.

Markets are closed Monday for the Martin Luther King holiday, so the indication is that there may be a host of traders determined not to go into the weekend sporting long positions, especially in tech, which has been battered severely over the past two weeks, and now, banks and retail also feeling a pinch of desperation.

Outside the world of finance, there's plenty going on with which to be concerned, nost notable, the sudden, predictable, and abject failure of the Democrats in congress and the Brandon character currently occupying the White House. On Thursday, the Supreme Court nudged away from the MORONIC narrative, rejecting Biden's Executive Order for OSHA to mandate vaccinations for everybody, nationwide, working at businesses with over 100 employees.

The weasel court did uphold the order for health care workers in facilities accepting Medicare/Medicaid, a decision not likely to be easily taken by some 20 million affected workers.

Also, the failure of the Democrats to change the filibuster rule in the Senate and then go down in flames on their "voting rights" bill was stunning.

Good intelligence says that the National Guard has been activated in all 50 states.

With a huge weekend of NFL football upcoming (six games from Saturday through Monday) acting as a diversion, is the world staring straight at a new Black Friday or Bleak Tuesday?

Stay alertŠ

1142022 = 3

At the Close, Thursday, January 13, 2022:
Dow: 36,113.62, -176.70 (-0.49%)
NASDAQ: 14,806.81, -381.58 (-2.51%)
S&P 500: 4,659.03, -67.32 (-1.42%)
NYSE: 17,259.02, -94.75 (-0.55%)

PPI Prints at 9.7%; Pennies Now Worth 3 Cents; Nickels, 0.065; Bitcoin, Gold, Silver, Oil Rising

Thursday, January 13, 2022, 9:15 am ET

On Wednesday, December CPI showed inflation running at seven percent, a multi-decade high (40 years), which slowed investment activity slightly, as trepidatious plungers bid stocks only slightly higher. There was selling into any strength, indicating an unwillingness for "greater fool" buying at a near top.

Through the end of Wall Street's cash session and into the overnight, oil, gold, silver, and Bitcoin held gains and moved higher, though WTI crude oil, which crested over $82/bbl. Wednesday, is giving up some of those gains in pre-market trading.

Nickel hit a new high, as demand for car batteries continues to rage. At $10.1159/pound, the melt value of an American nickel (1946-2014) is now higher than its face value ($0.0652942), according to coinflation.com. Notably, the melt value of a common penny (1909-1982, 95% copper) has hit the triple-to-face mark at $0.0300367. Who knew those jars of pennies in your basement or attic would triple in value? If base metals are being priced out as such, commodities must be the place to be.

With a run on metals underway in the current environment, it's highly probable that gold and silver are set to catch bids. Prices have been suppressed for decades and depressed for the better part of the last 18 months. There's a solid chance that gold will make new highs later this year or at least rival levels last seen in 2020 (above $2,100). Silver should be on your buying list at anything under $30/ounce in refined product. Spot prices are expected to reach at least that level by mid-2022.

This morning the BLS laid more timber to the bonfire of economic indicators.

The Producer Price Index for final demand increased 0.2 percent in December, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This rise followed advances of 1.0 percent in November and 0.6 percent in October. On an unadjusted basis, final demand prices moved up 9.7 percent in 2021, the largest calendar-year increase since data were first calculated in 2010.

Producer Price Index for December showed wholesale prices moving up by more than five percent for the ninth consecutive month. PPI has registered positive for 20 straight months, dating back to May of 2020. The present 9.7 percent figure pairs up with the 9.8 percent rise in November, an indication that wholesale prices increases are not slowing, and probably will increase in January and February at the least.

While the Fed dithers on asset purchase tapering and hikes to the federal funds rate, probably commencing in March with a modest 0.25% boost, their efforts are likely to fall short of reducing the impact of general price inflation, near term. Expect inflation to remain well above normal levels for at least the next six to nine months, putting a strain on middle and lower class households and individuals.

Small business will also be caught up in the inflation vortex. Having little margin with which to work, small operations will have no choice but to raise prices, adding more fuel to the raging inflation blaze.

As mentioned in Wednesday's post, inflation - otherwise known as reduced purchasing power or debasing of the US$ - is crypto's best friend. As the value of the dollar declines, alternatives will be increasingly sought. Bitcoin, which has bounced off lows from early in the week, is currently pricing at $43,929.88

The dollar index, which stood at 96.55 a month ago, has been trending lower for the past week, now standing at 94.79.

This appears to be the beginning of what could become a significant trend.

Hedge accordingly.

1132022 = 11

At the Close, Wednesday, January 12, 2022:
Dow: 36,290.32, +38.30 (+0.11%)
NASDAQ: 15,188.39, +34.94 (+0.23%)
S&P 500: 4,726.35, +13.28 (+0.28%)
NYSE: 17,353.76, +59.22 (+0.34%)

CPI Up 7% Year-Over-Year, But Only 0.5% Higher in December; Stocks, Bitcoin Poised for Gains

Wednesday, January 12, 2022, 9:40 am ET

CPI trips in at 7.0% year-over-year and equity markets are pointing to a higher open because, month-over-month is what matters to the market. It's a risk on print.

"The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.5 percent in December on a seasonally adjusted basis after rising 0.8 percent in November, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 7.0 percent before seasonal adjustment." -- Bureau of Labor Statistics

The first sentence of that statement is the money shot. Inflation is increasing at a slower rate. One-month percent change in CPI for All Urban Consumers (CPI-U), seasonally adjusted was 0.9% in October, 0.8% in November, and 0.5% in December.

From the BLS:

"Increases in the indexes for shelter and for used cars and trucks were the largest contributors to the seasonally adjusted all items increase.

The food index also contributed, although it increased less than in recent months, rising 0.5 percent in December.

The energy index declined in December, ending a long series of increases; it fell 0.4 percent as the indexes for gasoline and natural gas both decreased.

The index for all items less food and energy rose 0.6 percent in December following a 0.5-percent increase in November. This was the sixth time in the last 9 months it has increased at least 0.5 percent.

The all items index rose 7.0 percent for the 12 months ending December, the largest 12-month increase since the period ending June 1982.

The all items less food and energy index rose 5.5 percent, the largest 12-month change since the period ending February 1991. The energy index rose 29.3 percent over the last year, and the food index increased 6.3 percent."

Overall, the release this morning was positive, indicating that inflation is not going to get completely out of hand. Supply chain disruptions will contribute to inflation in particular items, especially imports, for the next six months ot a year, but, considering the Fed's commitment to raising interest rates, and, more recently, rumoring on reducing their balance sheet, food and energy prices should not proceed into the hyper-inflation regime many were fearing.

The threat of generally excessive inflation over a period of longer than two years is minimal, but, this period of high inflation is probably the best thing that could ever happen for Bitcoin, which just hit $44k on the upswing. Loss of US$ purchasing power creates great incentive to own Bitcoin.

Thank Jerome Powell at the Fed and Janet Yellen at Treasury for all the backstopping and stimulus in 2020 and 2021 that caused higher prices, and with it, full employment.

The sorry point is that REAL wages (inflation-adjusted) fell for the ninth straight month. So, if you got anything less than a five to seven percent raise, you're actually falling behind.

The uptake on the continuing inflation story is to carefully monitor your spending. Looking for specials at the grocery store and deals online can significantly reduce the impact of generalized inflation in the short term.

Happy Hunting. 1122022 = 1

At the Close, Tuesday, January 11, 2022:
Dow: 36,252.02, +183.12 (+0.51%)
NASDAQ: 15,153.45, +210.65 (+1.41%)
S&P 500: 4,713.07, +42.78 (+0.92%)
NYS: 17,294.54, +174.94 (+1.02%)

NASDAQ, Dow Erase 400-Point Losses in "New Normal" Welfare State Financial Markets

Tuesday, January 11, 2022, 8:54 am ET

There isn't much to say about the trading activity in US markets on Monday other than that it was remarkably volatile.

Pundits of the financial news culture have increasingly equated volatility with decline, a conceit exposing their financial understanding vacuity. Volatility, in fact, is neutral when it comes to advances or declines. Its meaning, as described by the Mirriam-Webster Dictionary is "a tendency to change quickly and unpredictably," a condition which was manifest in all US markets Monday.

As the Dow Industrials sank from Friday's close at 36,231.66 all the way down to 35,647.82, a decline of 583 points, the NASDAQ fell more than 400 points and the S&P lost 84 points all before 11:00 am ET, less than an hour-and-a-half past the opening bell. Just in case that didn't register as volatile enough, stocks spent the rest of the session bounding higher and lower (mostly higher) until a final ramping in the final hour brought the averages back to nearly unchanged territory.

The NASDAQ magically finished positive by almost seven points, the S&P ended with a similar loss, and the Dow managed to knock more than 400 points off its losses.

What passes for free and fair markets are in fact controlled by computer algorithms, which are programmed by humans, to benefit, mostly, the investing class. While that includes people with 401k plans or retirement accounts, the bulk of the winnings belong to the super-rich and the brokerages on Wall Street, which almost never sustain losses.

Plenty of people think that underpinning stocks with artificial constructs like the "Fed put" or the PPT is a great idea, keeping stocks on the up, though not necessarily on the "up-and-up." Stock markets around the globe have been systematically aligned to funnel wealth to the wealthy, whose gains are then distributed to the lower castes or classes via taxation. This is the welfare state in action. Since the Fed has embarked on a new austerity recently, expect more of the kind of default boosting of share prices evidenced on Monday.

Since redistribution of wealth can no longer be relied upon via QE, money printing, or whatever else one wishes to call counterfeiting and reducing the purchasing power of the US currency by the Federal Reserve, it falls to market manipulators to pump up prices in stocks, then have the government tax the gains and send out the welfare, disability, and pension checks to keep the plebeians content. It's exactly why Joe Biden and Democrats in high places wanted to raise the capital gains tax to some ungodly number as they even toyed with the idea of taxing unrealized gains so as to entrap the unsold profits from the likes of Elon Musk, Jeff Bezos, Bill Gates, et. al.

The Fed isn't going to monetize much more debt for a while. In the meantime, then, stocks have to shoulder the burden of the US - and, largely, global - welfare state.

Stand by for higher highs, and maybe another round of stimulus checks later this year. After all, there's another big election coming up in November and the parties of impurity may need to buy some votes.

At the Close, Monday, January 10, 2022:
Dow: 36,068.87, -162.79 (-0.45%)
NASDAQ: 14,942.83, +6.93 (+0.05%)
S&P 500: 4,670.29, -6.74 (-0.14%)
NYSE: 17,119.56, -46.72 (-0.27%)

WEEKEND WRAP: 2022 Off to Rough Start; NASDAQ Down 4.53%; Bonds Battered; Gold, Silver, Cryptos Crushed

Sunday, January 9, 2022, 9:58 am ET

Judging by just about any financial market, 2021 may have been the calm before the storm that 2022 is shaping up to be.

Stocks, especially the techy, overvalued NASDAQ kind, got thrashed pretty well in the first week of the new year. Not only did the NASDAQ lose ground in all but the first session of the week, it was down the final four of 2021, making it a losing proposition in eight of the last nine sessions, sending it down 4.53% in just one week and leaving it presently seven percent off the all-time high (16,057.44, 11/19/21).

The NASDAQ index was far and away the worst of the majors. Only the S%P 500 came remotely close (-1.87%) to matching its downside domination. The Dow was off by just 106 points, or -0.29%, while the NYSE Composite actually gained two points, hardly a consolation to the speculators, day-traders, and punters.

Two major releases dominated the week. Wednesday's reading of the December FOMC minutes sent stocks into a dizzying tailspin, the worst decline of the week overall. Friday's disappointing non-farm payroll for December of a mere 199,000 new jobs didn't excite anybody despite the unemployment rate falling to 3.9%, but also didn't ignite another heavy round of selling, except on the NASDAQ, which appears to be marching to the beat of a different drummer at this juncture.

With the unemployment rate currently at a level normally considered full employment, the general fear is that the Fed will give itself a green light for an increase to the federal funds rate as early as March, as it completes the wind-down of its asset purchasing. More than a few analysts suggest the Fed about to commit a major policy error, while skeptics infer that the onset of a recession falls neatly into the Fed's overarching plan to deconstruct the economy during the "Great Reset."

No matter who's right, the Fed's herky-jerky actions under Jay Powell have raised eyebrows throughout the financial community. As inflation raged over the past year, the abrupt change in policy over the past two months may be seen by some old-school economists as "slamming on the brakes," a reference to raising rates at a pace more hurried than necessary in the old days. In the current frenetic environment, the Fed's dramatic turn might be seen as a Tesla crash conflagration, blowing up everything at once. Such thinking would surely explain the flight from risky tech stocks currently the rage.

Bemoaning the fate of equities was lost on bond markets, where treasuries saw yields exploding and prices falling. As demonstrated in Friday's post, treasuries took the calendar change from 2021 to 2022 with an alarming trend toward tightening. Here are the updated figures:

At year's end, 2021:
2-year: 0.73; 3-year: 0.97; 5-year: 1.26
7-year: 1.44; 10-year: 1.52; 30-year: 1.90

As of Friday:
2-year: 0.87; 3-year: 1.17; 5-year: 1.50
7-year: 1.69; 10-year: 1.76; 30-year: 2.11.

Of particular interest is the yield on the 10-year note, which happens to be at a "pre-pandemic" level. The last time the 10-year was at such a place was January, 2020, prior to all the virus action that sent the world closer to what's commonly referred to as "full retard clown world" in some circles. Two years with little to show in terms of human progress seems a small price to pay for lockdowns, mask-ups, and general stupidity.

In any case, rising yields on all of the longer maturities indicate that conditions are tightening and the vaunted, "V-covery" is V-over. Positioning may be a lost art in the upcoming environment, where there may be no place to hide, no asset class impervious to the commencing crushing price re-alignment.

To wit, cryptocurrencies offered little solace to the loss-weary of the week. Bitcoin was whacked lower by more than 12% over the course of the week. It must seem like a bad dream to hodlers to see their crypto darling fall from above $47,000 to a low of $40.505 in less than seven days. Surely, this is not the happy new year most crypto supporters expected, though, as an opponent of fiat currency, there should be at least partial understanding that, priced in dollars, when the fall of fiat commences, Bitcoin is going to reprice right alongside it. In other words, in a currency collapse - which appears where all this is heading - everything loses in dollar terms. It's only after the fact that those swimming naked are exposed and the true victors emerge, tanned, gleaming, and dressed (the analogous coincidence that El Salvador's Pacific coast is a world-class surfing paradise is intentional).

While Bitcoin suffered less seriously than other cryptos and alt-coins makes the case that Bitcoin, the original crypto, still holds sway as an alternative to fiat and suggests that other coins may be nothing more than imitators without value or blockchain discipline. Especially hard hit was Ethereum, which fell close to the $3,000 mark but never quite got there. Whatever becomes of Ether, it's always going to be playing second trumpet to the blare of Bitcoin, which has partially recovered to around $41,500 as of Sunday morning.

Most, if not all of the thousands of cryptos available for investment or speculation are flawed in ways Bitcoin is not. There's a very strong likelihood that many alt-coins and tokens will be taken out behind the mythical walls of Bitcoin City and executed. Investing in stocks may be risky, but speculation in crypto may become downright dangerous.

Oil was about the only asset rising in price, heading higher from $76.08, to $78.94 at the close of trading Friday on the NYMEX, a week-over-week gain of $2.86, roughly four percent. The persistently-high price of crude oil contributed largely to the stickiness of gas at the pump prices, which were actually 4.3 cents higher than a week prior, according to GasBuddy.com. At a national average of $3.31 in the United States, prices are probably reflective of returning holiday travelers, who are routinely gouged on interstates this time of year.

With people trying to get back to some semblance of a deep-memory "normal," oil companies continue piling up the profits. Oil prices, despite OPEC+ returns to regular production levels, seem to be intent on remaining close to the higher levels of recent pricing. Cold temperatures across the bulk of the United States should keep prices at or above current levels through the end of February at least. Price appears to be discounting any suggestion of poor performance in the general economy for now, though the pricing of the world's primary energy source could change on a whim, as has been the case in almost all other asset classes. The general trend remains that of stable to higher prices for the things consumers need - food, energy - and lower for the things they only desire.

Precious Metals:

Gold price 01/02: $1,829.80
Gold price 01/09: $1,797.00

Silver price 01/02: $23.30
Silver price 01/09: $22.36

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

ITEM/PRICE Low High Average Median
1 oz silver coin: 35.02 43.89 38.65 37.88
1 oz silver bar: 27.86 43.99 36.34 36.09
1 oz gold coin: 1,919.24 1,953.85 1,931.84 1,927.64
1 oz gold bar: 1,878.00 1,905.00 1,892.37 1,891.93

The Single Ounce Silver Market Price Benchmark (SOSMPB) fell sharply over the course of the week, at $37.24, a significant loss of $2.15 from the January 2nd price of $39.39.

A noticeable trend on the weekly eBay survey is for silver prices to be in a much wider range than those for gold. COMEX and LBMA spot prices, down for the week, had some chilling effect on single ounce buyers and sellers, though not as generalized as might be assumed. Buyers intentions remained strong while evidence of a supply slump - especially for gold - remained on the back burner.

Evidence continues to mount that the planet is being divvied up by nation-states, oligarchs and megalomaniacal monsters. Events in the Asian state of Kazakhstan remain highly volatile and may be indirectly tied to the upcoming summit in Geneva between Russia and the US which begin Monday.

Nation-states continue to lurch closer to full-blown authoritarianism, as seen in Australia and Canada. The US remains somewhat of a holdout and resistant to government overreach, especially in the southern and other so-called "red" states. The decision by the Supreme Court on government vaccine mandates, which may come as early as Monday, are an important development requiring close scrutiny. A ruling by the court allowing the mandates could foment even more anger directed at the federal government, which is already out of favor with large swaths of the public.

Political events may take a larger role in monetary and economic matters going forward.

So much for the macro view. On the micro side, like real estate, it's all about location, location, location. The cultural differences between urban and rural are fast becoming more pronounced and severe. In large cities, testing, masking, and vaxxing are matters of routine, whereas in rural enclaves, duteous adherence to the dictates of authoritarians is far more relaxed, almost to the point of outright refusal.

Local customs can make for huge attitude differences. If everybody around you is wracked with fear, doubt, uncertainty and general insecurity, it's likely that you will be affected negatively. On the other hand, people carrying on in normal and routine human activities would certainly convey a more relaxed and convivial atmosphere. A lot of what passes for customs and culture is guided today by lies, exaggerations, and suggestions passed through the media and government officials. Over-the-fence standards, such as those encountered in rural America, are grounded more in reality and native understanding.

Taking advisement from the past, Teddy Roosevelt offered, "Speak softly and carry a big stick; you will go far."

At the Close, Friday, January 7, 2022:
Dow: 36,231.66, -4.81 (-0.01%)
NASDAQ: 14,935.90, -144.96 (-0.96%)
S&P 500: 4,677.03, -19.02 (-0.41%)
NYSE: 17,166.28, +9.76 (+0.06%)

For the Week:
Dow: -106.64 (-0.29%)
NASDAQ: -709.07 (-4.53%)
S&P 500: -89.15 (-1.87%)
NYSE: +2.15 (-0.01%)

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