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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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Bears Seek to Retake Market Control as Short Squeeze Runs Out of Stocks to Pump; Gold, Silver Set Up for Buying Opportunity

Friday, February 17, 2023, 8:50 am ET

For a change, bad news was bad news and stocks spent the entire day posting negative numbers. Major indices fell sharply right out of the gate, recovered somewhat during the midday, but were subjected to an avalanche of selling in the final hour of the session.

In the final hour of trading the NASDAQ lost 155 points and the Dow dropped like a rock, giving up 290 points to close near the lows of the day. The Dow recorded its lowest close since January 23, the catalyst a series of poor economic reports, the most glaring being January PPI, which was up 0.7% from the prior month despite showing the lowest year-over-year figure (+6.0%) since last October. The bad news, that inflation is not slowing as fast as the Fed would prefer, was exacerbated by comments from Cleveland Fed President Loretta Mester, who remarked that she favored a 50 basis point rate hike at the last FOMC meeting, though the consensus of the committee setted on a raise of 0.25%. Later in the day, St. Louis Fed President James Bullard added that he had joined Mester in a push for a 50 basis point hike.

On top of the inflation fight drama was another dull report from the housing sector with housing starts sliding 4.5% in January to an annual rate of 1.31 million units, the lowest since 2020. Permits for new construction were flat. Additionally, the Philadelphia Federal Reserve's monthly manufacturing index plunged to -24.3 this month from -8.9 in January, indicating more weakness in US production.

Thus, stocks finally executed the expected decline on Thursday, in sharp contrast to the options-fueled short squeeze of the past two sessions. Begun in October of 2022 and extended through January of this year, the short term rally has had a rough go of it in February, as any momentum has all but stalled out. More advances may emerge in coming days, but the hedge funds laying down bets at the casino of Wall Street are running out of "most-shorted" candidates to pump higher. Most of their choice squeeze candidates, such as Apple and Amazon, up 22 and 14 percent respectively year-to-date, have already begun to fade.

Thursday's losses left the market with work remaining on Friday to ensure a positive outcome for the week. As of the close Thursday, the Dow was off 172 points, the NASDAQ ahead by 137.71, and the S&P essentially flat, down a mere 0.05 points. The NYSE Composite has strung together three straight losing session, though it's only down 36.91 points for the week.

Incidentally, the Dow has been stuck in a range between 32,600 and 34,700 since early November, creating an ascending pennant, chart-wise. With the lows at a steeper angle than the highs, it's a set-up for a directional move to break out of the range, usually to the downside.

A couple of important earnings reports came to the floor this morning, notably, Deere & Co. (DE), the world's largest farm equipment manufacturer, said it expects higher earnings for the year after reporting a profit of $1.96 billion for fourth quarter of 2022, up from $903 million in the same quarter a year prior. Quarterly earnings rose to $6.55 a share, topping analyst expectations by nearly a dollar a share, according to FactSet. Revenue soared 32% to $12.65 billion, sending shares of the company up more than two percent in pre-market trading.

AMC Entertainment, the meme stock that soared as high as $60 per share during the 2021 Robinhood frenzy, but has fallen on leaner times, should have reported by the time you are reading this. The company operates 900 theaters worldwide and recently announced tiered pricing based on seating, with highest prices in the center rows. Shares closed Thursday at $5.25.

AutoNation (AN) posted record profits and revenue, with adjusted EPS of $6.37 for the fourth quarter on $6.7 billion in revenue. The stock is up more than three percent prior to the opening bell.

Elsewhere, for a few brief moments Thursday, Bitcoin surged past $25,000, but immediately began to retreat, hovering around $23,875 this morning. Most of the recent moved higher have been attributed to institutional money, which is code for Wall Street laundering. Nothing to see in bitcoin or any of the other thousands of crypto offerings other than an extension of the fraud and corruption that pervades US business interests.

On the flip side, real money, gold and silver, have been sliding over he past few weeks and continue heir path lower this morning. Gold, which had been as high as $1960/ounce on January 25th, priced below $1830 overnight, while silver found a near-term bottom at $21.16 after being as high as $24.37 a month ago. Precious metals, often overlooked and under-appreciated, are setting up for further declines as the fiat regime continues to attempt diminution of their ultimate value.

As the currency crisis (otherwise known as inflation, actually masquerading currency debasement) accelerates, gold and silver will become more valuable and will likely slingshot to higher levels as the Russia-China-BRICs combination eventually seals the fate of all fiat currencies. Renowned expert, Alasdair Macleod has written extensively on the topic. His latest essay, Gold's return as money, explains in some detail the ongoing shift from uni-polar to multi-polar currency regimes.

An hour to the opening bell, stock futures are bleeding red and European bourses are lower across the board.

At the Close, Thursday, February 16, 2023:
Dow: 33,696.85, -431.20 (-1.26%)
NASDAQ: 11,855.83, -214.76 (-1.78%)
S&P 500: 4,090.41, -57.19 (-1.38%)
NYSE Composite: 15,873.78, -142.31 (-0.89%)


Another Scary Open for Stock Traders as PPI Comes in Red Hot, But, Will It Last?

Thursday, February 16, 2023, 9:23 am ET

On Wednesday, stocks did what they usually do when bad news hits. They dithered and gained.

On the heels of discouraging CPI data and hot retail sales, the major indices opened in the red, but advanced throughout the session, closing with a strong rush to the upside. It's simply more pump, dump, rinse, repeat antics by the day-trading goons on Wall Street, mostly led by what's become known as zero-day-to-expiration options (0DTE), essentially gambling, currently in the throes of a vicious short squeeze on the stocks that were most-hated in 2022.

In such an environment, regular investors are left agape, tenuously holding whatever positions they've established. Institutional confidence has been shattered by insider antics, hedge fund monstrosities, and a general malaise in what used to be reasonably stable markets.

All of the good markets used to produce has been replaced by greed, gaming, and the search for immediate gratification and day-to-day profitability. Fundamental analysis is a forgotten relic of bygone days. Everything is immediate, driven by headline-reading algorithms and traders who are only able to hit the buy button, regardless of market conditions. Selling comes in herd fashion as may be the case some day, possibly today, Thursday, after markets digest the latest government number, the PPI for January.

Producer Price Index (PPI) came in hotter than expected, up 0.7% month-over-month, but the year-over-year figure was a modest +6.0%, down from +6.5% in December.

Oddly enough, the monthly number is the largest since June, 2022, while the year-on-year figure is the lowest since March 2021. The index for final demand goods was ratcheted up 1.2% in January, the largest increase since an increase of 2.1% in June, 2022.

Along with a rising number of continuing unemployment claims and disappointing figures for January housing starts and building permits, stock futures are reeling, with Dow futures off more than 280 points, NASDAQ futures off 180 and S&P futures down 46 points.

With tomorrow being the third Friday of the month, there's likely to be a huge options unwind in what may be the elusive downside push the bears have been insisting must occur.

Stocks have largely defied logic this week, so trading today and Friday may set a slightly different tone.

At the Close, Wednesday, February 15, 2023:
Dow: 34,128.05, +38.78 (+0.11%)
NASDAQ: 12,070.59, +110.45 (+0.92%)
S&P 500: 4,147.60 +11.47 (+0.28%)
NYSE: 16,016.09, -9.02 (-0.06%)


The US Economy is Weak, Debt and Inflation Making It Worse

Wednesday, February 15, 2023, 9:15 am ET

Happy Wednesday!

Two items come to mind this morning that should not be overlooked.

First, not that it matters very much to anybody important, but the US economy is in the toilet, circling the drain.

Second, inflation - as measured by the CPI - at 6.5% is very, very bad for standards of living.

These are not entirely speculative statements. There are some metrics which can be applied to prove the point in the first instance and rudimentary mathematics to back up the second.

On the heels of Tuesday's ridiculous session, which failed to even decimate the gains just from Monday, stocks remain at levels inconsistent with reality. The US economy, based on calculations performed by academics whose main purpose in life is to keep their jobs until they can collect their absurdly-high pensions, is a fallacy of logic and purposely designed to make conditions appear better than they are.

It's just a plain fact. Reported unemployment numbers don't include people living in tents or hovels on the edge of existence in cities across America. GDP calculations include government expenditures, including salaries of millions of local, state, and federal leeches who produce nothing or may actually contribute to the decline of civilization, like teachers who promote "woke" ideologies, CRT, and gender dysphoria, cops, ranking military officials who promote war, slews of analysts, accountants, regulators, the IRS, and piles of human trash otherwise known as bureaucrats.

Government employees, and their salaries, actually should be subtracted from the GDP calculation, because, overall, they make life more difficult for working people and are an unnecessary burden on businesses, but, there they are, feeding at the trough, making the fake standard of living look a little bit better when it really is not.

This is the commonly used calculation for GDP.

GDP = C + G + I + NX

C = consumption or all private consumer spending within a country's economy, including, durable goods (items with a lifespan greater than three years), non-durable goods (food & clothing), and services.

G = total government expenditures, including salaries of government employees, road construction/repair, public schools, and military expenditure.

I = sum of a country's investments spent on capital equipment, inventories, and housing.

NX = net exports or a country's total exports less total imports.

About that consumer spending... people spend the most on food, energy, and shelter, making GDP to a large extent, just a measure of staying alive in a reasonably good fashion.

Exports? The US has been running a negative trade balance every year since 1976.

GDP is a very sloppy measure of a nation's economic strength. A better rule might be assets versus liabilities, which would look pretty poor, beginning with the federal government, in debt to the tune of $31 trillion, followed by businesses, and then families and individuals. As a nation, the United States is in debt up to its eyeballs.

So, is the economy really kicking butt and taking names, or as Brandon put it last week at the State of the Unions address, "the state of our union is strong." What a bunch of bunk. The borders are wide open, some states are on the verge of secession, the cities are crime-ridden hell-holes and the infrastructure has been breaking down without being maintained for the past 50 years.

Whatever. It's a moving target. Hope you do well.

The second major issue, inflation, is much simpler. Top dogs at the Federal Reserve want to get inflation down to two percent. Sounds good, doesn't it? At two percent annual inflation, the price of everything doubles about every 35 years, so that during the course of an average life (about 70 years, more nowadays) the price of everything will double twice. A $200 a month apartment in 1953 would be $800 today. If only two percent was the real rate.

The latest inflation figure pegged CPI at 6.4%. Using the simplistic Rule of 72, at 6.4% inflation, the price of most goods and services will double in 11.25 years. So, that box of Cheerios you bought last week for $4.49 (already overpriced due to inflation from 1964 onwards), will cost $8.98 by May of 2034. The $40,000 car will be $80,000, and so on, should one live that long.

An over-indebted populace in a high inflation environment isn't a good place to be, but here we are.

Just released this morning, retail sales leapt 3.0% on a monthly basis in January, the biggest move since March 2021, putting the annual rate at +6.4%. As ridiculous as that sounds, remember, these numbers are unadjusted for inflation, which means, in reality, retail sales were at best flat over the past year.

Stock futures nosedived on the release, but are rebounding, though still in the red with a half hour to the US opening bell.

After Tuesday's fiasco, will Wednesday see a similar pattern of pump, dump, re-pump, or will stocks begin the descent to where they belong, 35-50% lower than they are today?

That will likely be the topic for tomorrow.

At the Close, Tuesday, February 14, 2023:
Dow: 34,089.27, -156.66 (-0.46%)
NASDAQ: 11,960.15, +68.36 (+0.57%)
S&P 500: 4,136.13, -1.16 (-0.03%)
NYSE Composite: 16,025.11, -27.13 (-0.17%)


January YOY CPI at 6.4% Glaringly Bearish; Pressure on Insiders to Keep Sentiment from Crashing

Tuesday, February 14, 2023, 9:21 am ET

Other than the NASDAQ, Monday's rally in equities took out all of last week's losses on the major exchanges.

There being no particular reason or rationale for stocks to zoom higher, Monday's bump can best be attributed to pricing in a positive January CPI report or because stocks always go up, just like everything else, like food prices, housing, car prices, gas, rent, utilities... oh, wait.

The usual disconnect between reality and price levels of US stocks is well anchored. It's been in place since president Ronald Reagan signed Executive Order 12631, on March 18, 1988, creating the Working Group on Financial Markets, more commonly known as the "Plunge Protection Team" or simply the PPT.

Led by the Secretary of the Treasury, the group includes the chairpersons of the Board of Governors of the Federal Reserve System, the Securities and Exchange Commission (SEC), and the Commodity Futures Trading Commission (CFTC), or their designees or representatives, the "Working Group" was originally established to examine the conditions that led to the 22.6% crash of the Dow Jones Industrial Average on October 19, 1987, but more importantly, towards "enhancing the integrity, efficiency, orderliness, and competitiveness of our Nation's financial markets and maintaining investor confidence..."

Since then, the PPT has met at various times, though their meeting are neither recorded nor made public, reporting only to the president. For some time, the group's existence was considered an urban myth until it was exposed by journalists working at the Washington Post and New York Post. Since around 2003 and thereafter, the workings of the PPT has become commonly accepted and often referred to during turbulent financial times, though substantiated proof of the group intervening in markets has never been established.

More recently, people reference the New York Fed's trading desk, as the major operator for market price rigging and still others point to the near-monopolistic ownership of major publicly-traded corporations by Vanguard and BlackRock as a major force in keeping the indices and individual stocks at prices unsupported by usual metrics.

There's no secret that investors will buy stocks they already own on declines or engage in "buying the dip" on their preferred equities in a practice known as "supporting the stock." To think that such a practice - which is perfectly legal and does make sense in some instances - has been somehow abandoned or thrown off as "old fashioned" is to be somewhat naive concerning the ways and means of the global financial system.

Since many Americans and international investors own stocks through mutual funds, ETFs, IRAs 401k plans, or other investment vehicles, keeping the stock market at a level that induces confidence and a willingness to keep investing is in the best interests of all shareholders, but more readily influenced by the largest ones. Board members of the biggest corporations sit on the boards of the others, making casual conversation between them tantalizingly close to collusion via interlocking directorates, a practice laughinlgy outlawed by anti-trust legislation, a body of work that hasn't been enforced with regularity since the 1990s.

Even though there are a few anti-trust lawsuits pending against Alphabet, parent company of Google, these merely scratch the surface of the kind of crony capitalism that pervades Wall Street's corporate culture. Little to nothing is being done to stem a variety of dubious practices by legislators or regulators who often are accused of being in various corporations' back pockets. The concept of free, fair, open, transparent markets seems to have been relegated to roughly the same consideration as elections in the United States as well as in other Western developed nations. Third world practices appear to have taken deep root in first world economies and governments.

There isn't much any single individual or group of people can do about such slanted market practices other than to roll with the punches or stay out of the game.

With that as a background, watch what happens as the markets digest the latest release from the Bureau of Labor Statistics (BLS):

The Consumer Price Index for All Urban Consumers (CPI-U) rose 0.5 percent in January on a seasonally adjusted basis, after increasing 0.1 percent in December, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 6.4 percent before seasonal adjustment.

This is absolutely bad news for those believing inflation has been brought under control and the Fed will ease off their rate increases, which just so happens to be the current stance of the Wall Street majority. It's almost the same as the prior year-over-year reading of 6.5% from December, indicating that inflationary forces are still working their voodoo magic on the world's largest economy.

With this data and upward revisions of the past 12 months, stocks should head decisively lower. Whether that happens to be in the interests of the larest investors remains to be seen. A majority of firms and analysts offering expectations were in the range of YOY of 6.0-6.2%, some even lower. With inflation remaining relatively high and a threat to the well-being of American consumers, there's adequate reason to believe the Fed may shift back to a rate increase of 50 basis points (0.50%) at its next FOMC meeting, March 22.

At the release of the announcement, equity futures gyrated like the hips of a pole dancer in heat, initially falling, then rising, as if the CPI number - which, despite being worse than expectations was still the lowest in a year's time - was somewhat inconsequential. Eventually, within minutes, futures fell out of bed, ratcheting lower heading into the cash open.

This is not a good sign for the economy, for food prices, rents, energy prices or any of the myriad components comprising the figures. While the BLS may want to point that the numbers indicate a slowing of inflation, they overlook the obvious implications that inflation is not slowing at anything close to a reasonable or expected pace. This is now the 32nd straight month of rising core CPI, which excludes food and energy, a sign that inflation has gone well beyond any containment measures.

Under normal circumstances, stocks would take a deep dive on this news. Without a doubt serious bids are being put in place by the vested interests in an attempt to establish a "floor" under stocks. Without intervention by whatever parties are participating, be they government, establishment, or a combination of those, stocks should descend at the open, though, with the background discussed above, the actual effects may not materialize until later in the session or even later this week.

With less than 30 minutes until the opening bell, futures are muted and, in fact, positive. European stock indices are also under light pressure. The upcoming narrative may be that this isn't so bad at all and people are over-reacting. On the other hand, considering that there's nothing "normal" about anything these days, only two questions seem relevant:

Do you own precious metals? How much?

At the Close, Monday, February 13, 2023:
Dow: 34,245.93, +376.66 (+1.11%)
NASDAQ: 11,891.79, +173.67 (+1.48%)
S&P 500: 4,137.29, +46.83 (+1.14%)
NYSE Composite: 16,052.25, +141.55 (+0.89%)


WEEKEND WRAP: Balloons, Stocks Shot Down; Five Percent Yields On the Horizon; CPI Upcoming; Gold:Silver Ratio 85.25

Sunday, February 12, 2023, 9:34 am ET

From a limited perspective, about the only things falling are objects from the edges of inner space and those have been shot down at costs exceeding hundreds of thousands of dollars.

This is just one way resources and money are wasted in the name of national defense. With the Air Force and Navy blowing up things high in the sky, was it any wonder that stocks took a turn lower? In the Americas and indeed, internationally, people are beginning to catch on to the concept that there are better things to spend money on than shares of companies which may fall from grace of their own accord or be shot down by the long-range forces of hedge funds and sneaky financial intermediaries.

Stocks

After rallying straight through January, the short-squeeze fueled rally ran out of steam this week. Inflation and recession fears, plus disappointing earnings reports led to a bleeding out of overpriced assets, most notably on the NASDAQ.

The Dow's loss was the second weekly decline in a row, third in the past four weeks and third this year out of six weeks total. The S&P and NYSE Composite lost for the second time this year, while the NASDAQ recorded its first weekly loss of 2023 after five straight wins. Weekly losses on the S&P and NASDAQ were the worst since December and portend for another possible drift lower.

Other than earnings, there wasn't much in the way of catalysts for stocks during the week. The wild swings during and after Fed Chair Powell's Tuesday speech at the Economic Club of Washington, DC, was a bit of theater and a sad display of pumping and dumping by market heavyweights, the likes of which should never occur on free, open markets, which the US exchanges proved to be definitely not. It was a national disgrace.

Upcoming is an important week, the highlight of which will no doubt be the CPI reading for January, released prior to the market open this Tuesday, stocks are wavering after a quick run-up through January which unfortunately ran dry and may have changed course for the worse. Squeezing the most-shorted stocks for five straight weeks isn't exactly an investment strategy for the long term. Having breached key levels, the direction may be lower, for longer.

Marketeers are seeking a CPI number around 6.0%, another improvement lower from December's 6.5% year-over-year report, and the level of angst is high enough that anything above 6.1% or 6.2% might foment a bit of mouth vomit and panic from some sectors, most prominently, tech and consumer discretionary. A reading of 6.0% or even 5.9% (maybe even lower?) would send stocks roaring higher, but he general understanding is that inflation has not left the building yet and the Fed will keep pumping the accelerator on interest rates. With the next FOMC meeting not until March 23, Fed officials will have January and February CPI numbers to crunch, making this week's measure maybe not as important as the hysterical financial media would have one believe.

An important element to any sustained directional movement is corporate earnings, which have been underperforming in reports for fourth quarter and full year 2022 to date. The number of firms reporting this coming week is fewer than last and the names are not profoundly household ones.

The most prominent among those reporting will be:
Tuesday: Coca-Cola (KO), Marriott (MAR), Devon Energy (DVN), Airbnb(ABhb)
Wednesday: Roblox (RBLX), Barrick Gold (GOLD), Kraft-Heinz (BHC), Analog Devices (ADI), Shopify (SHOP), Roku (ROKU), Cisco (CSCO)
Thursday: Paramount (PARA), Hyatt (H), DraftKings (DKNG), Door Dash (DASH)
Friday: AMC Entertainment (AMC), AutoNation (AN), John Deere (DE)

Treasury Yield Curve Rates

Date 1 Mo 2 Mo 3 Mo 4 Mo 6 Mo 1 Yr
01/13/2023 4.58 4.59 4.67 4.73 4.77 4.69
01/20/2023 4.69 4.64 4.72 4.75 4.80 4.68
01/27/2023 4.61 4.64 4.73 4.76 4.81 4.68
02/03/2023 4.61 4.67 4.70 4.80 4.82 4.79
02/10/2023 4.66 4.77 4.79 4.89 4.89 4.89

Date 2 Yr 3 Yr 5 Yr 7 Yr 10 Yr 20 Yr 30 Yr
01/13/2023 4.22 3.88 3.60 3.55 3.49 3.79 3.61
01/20/2023 4.14 3.83 3.56 3.51 3.48 3.77 3.66
01/27/2023 4.19 3.90 3.62 3.58 3.52 3.77 3.64
02/03/2023 4.30 3.96 3.67 3.61 3.53 3.77 3.63
02/10/2023 4.50 4.19 3.93 3.86 3.74 3.96 3.83

Yields blew out over the course of the week on the long end, in the main, with 30-year bonds up a massive 20 basis points to 3.83%, the highest since January 3rd, and the 10-year note rising from 3.53% to 3.74%, also a high point since the start of the year.

The entire curve was elevated, though the smallest yield rise was at the shortest maturity, as one-month bills gained a mere five basis points, followed by six-month yields, which were up seven. Four-month, six-month and one-year yields equalized at 4.89%, the surest sign yet that inflation and the cost of credit are alive and well in America.

The last time any yield of any maturity reached these levels was long ago. Back on August 22, 2007, when the 20-year bond topped out at 5.01%, was the last time a five handle was seen anywhere on the treasury yield curve. It's a near-certainty that five will be represented as a feature of the curve as early as the next FOMC meeting on March 23, and a distinct possibility of seeing that number sooner.

Anybody not expecting yields to rise as the Fed continues hiking the federal funds target rate was either in the completely discredited "pivot" camp or just not attuned to the directional slant of bonds in general. With the costs of goods and services continuing to rise - despite the apparent "slowdown" in the CPI figures - the cost of money, which is, in reality, at the root of all prices, was not going to recede any time soon.

A brief respite was possibly in the cards, but the recent pullback in yields was not in any way sustainable or of any permanence. The path to hyper-inflation is fairly obvious by now and the cost of doing business should continue to increase, especially as congress dithers over raising the US debt ceiling. Every day that passes without resolution to that self-imposed problem increases pressure on borrowing costs.

Perhaps it was coincidence, but, at this juncture, nearly everybody is a conspiracy theorist or at least is questioning the narrative that comes out of mainstream media, Washington, and Wall Street. The debt ceiling debate rears up every four years or so and it has always been raised, but eventually, there will come a time, either emerging out of incompetence or political malfeasance, at which the ceiling will not be lifted to new heights, when the United States government will begin to default on portions of its debt, and that time may be coming shortly, due to a confluence of events mostly concerning Russia and China, but especially China.

It's no secret that China has been dumping US treasuries and is looking to "de-dollarize" itself, shedding its central bank reserves of dollars to encourage trading in its own currency, yuan, or renminbi, or other currencies with friendlier nations like Russia, India, and its Pacific Rim and Middle East partners.

Considering how the US weaponized the dollar against Russia in the immediacy of the Ukraine invasion nearly two years ago, the timing of a strategic debt default or restructuring may not be the stuff of fanaticism, but rather, anchored in an un-winnable condition of higher interest rates on debt service that has been and will continue to roll over at higher rates.

America's full embrace of debt currency issued from the Federal Reserve to the coffers of the Treasury department has reached crisis proportions, with the current limit of $31.4 trillion not enough to satisfy the voracious appetites of the Washington elite nor stem the tide of rising costs to service such issuance. Supposedly, it's all got to be paid back, but nowhere is an effort underway to even reduce deficits except in the newly-elected, Republican majority congress, which seeks concessions from the White House, but has been met with blockage, stubbornness and recrimination, the unelected Biden administration calling members of the House pushing for reform "unAmerican" and domestic terrorists.

Truth of the matter is that debt service will cost the government as much as $1 trillion ($1,000,000,000) or more this year, beginning to crowd out other essential funding. Higher interest rates are a death sentence to the federal government, currently facing the prospect of adding more debt at a higher cost, renegotiating current obligations, or defaulting on some or all of its debts. The matter is one of such seriousness that a debt default is being discussed openly in the media by high-ranking officials and powerful businesspeople.

On Sunday, February 5, Managing Director of the IMF, Kristalina Georgieva was interviewed by Leslie Stahl on the CBS show, 60 Minutes, and spoke to the ramifications of a US debt default.

The following day, February 6, Bank of America CEO, Brian Moynihan, said his bank was preparing for a US debt default.

It could all be nothing. Congress could raise the debt ceiling as they usually do, at the last minute, drama queens that they are and the USA will live to fight and spend another day, another year. Or, something goes bust between now and the end of June. Place your wagers.


Oil/Gas

Jumping by more than $6 during the week, from $73.23 last Friday (2/3) to $79.76 at the New York close this past Friday (2/10), crude prices got a significant boost from Russia's announcement on Friday that it would cut production by 500,000 barrels starting in March, briefly rising past $80/barrel, though prices had been trending higher all week long.

Russia's production slowdown was predicated as a response to the bone-headed "price cap" imposed by the US and allies, which has to date had zero effect on the price of oil anywhere in the world, except possibly to keep the price of oil in Europe and North America at higher levels than they should be. Slowing production as Spring approaches probably has more to do with an estimation by Russia of full up supplies globally. They have a solid grasp on the needs of China, India and other major and minor countries in Asia and Africa and likely envision an oil glut dead ahead.

The price of crude should come down if that's the case. Because markets are slightly more attuned to insider gambits than actually supply/demand dynamics, it may elevate somewhat, but not to the extent called for by analysts at Goldman Sachs, who always see a crisis in the oil patch behind every pumping station. The price of crude could easily moderate or head lower. There are no shortages anywhere, worldwide.

Prices at the pump continued to fall ever so slightly this week. Gasbuddy.com reports the national average at $3.41, down four cents from last week and nine cents from two weeks ago ($3.50/gallon). Nevada ($4.08) joined California ($4.61) and Washington ($4.08) as the only states averaging above $4.00. In the Northeast, Pennsylvania rules the region at $3.72.

The Southeast continues to enjoy the lowest prices, led once again by Texas, down to $2.96 and the only state averaging under $3.00. Close to the mark are Oklahoma ($3.00), Mississippi ($3.06), Arkansas ($3.06), and South Carolina ($3.07)


Bitcoin

It may be worthwhile to observe recent movements in Bitcoin and the entire crypto universe, which emerged out of the rubble of the 2008 crash in early 2009. That timing may or may not be coincidental, but it certainly is unique. At a time at which the entire global economic structure was under severe stress, the most speculative derivative instrument of all time was launched.

Capable of sopping up excess liquidity and hide it outside the system, bitcoin and future blockchain spawns encouraged all manner of wild speculation and nefarious activities like money laundering, drug trade, and probably worse things of which people are generally unaware. As it unwinds, speculators must be reminded that cryptos are probably the dumbest of any recent speculation, being that it's backed entirely by the promise of an alternative currency regime which resides almost completely in the gospels according to the likes Michael Saylor, Raoul Pal, and Max Keiser in a completely unparalleled imaginary universe.

Sure, everybody from the shoeshine boy to Paul Tudor Jones were swept up in the mania as gains reached spectacular levels. Equally, nobody wanted to look at the fundamental truth that bitcoin and all of the thousands of crypto/blockchain offspring represented nothing mroe than promises and were backed by nothing at all.

At this juncture, anybody who's played and won, or lost, needs a gentle tap on the shoulder or maybe a two by four to the skull, to remind them that if all one desires is fast and loose speculation, at least employ a vehicle that has some intrinsic value. When an asset begins its descent toward zero, it would be preferable to have something at the end of the day or the end of time, like a few shares of stock, a comic book, baseball card, hunk of land, or a string of copper wire. Anything.

With crypto, you end up with vapor. That said, one bitcoin priced this morning at $21,797.10, which is quite a way down from the recent high of nearly $24,000, less than two weeks hence. For all anyone knows, bitcoin could rally all the way to $45,000, though the more likely - and logical - move would be towards $10,000, followed by a long, painful descent to intrinsic value, which is zero.


Precious Metals

Gold:Silver Ratio: 85.25; last week: 83.83

Gold price 01/13: $1,923.00
Gold price 01/20: $1,944.50
Gold price 01/27: $1,943.90
Gold price 02/03: $1,877.70
Gold price 02/10: $1,876.40

Silver price 01/13: $24.42
Silver price 01/20: $24.06
Silver price 01/27: $23.73
Silver price 02/03: $22.40
Silver price 02/10: $22.01

The gold:silver ratio bumped higher this week, inexorably heading toward 90 as the gold price stagnated while silver declined yet again, the fourth straight weekly drop in the price of silver. A ratio of 90 in the foreseeable future would require either gold to remain roughly at current levels while silver falls to a range around $20.75, or a speculative take-off in gold with silver lagging, as has been the case since silver "jumped the shark" from a low of $17.67 (September 1, 2022) to a high of $24.42 on January 13. Meanwhile, gold wasn't exactly playing along, rising only marginally while silver soared.

Gold actually was falling in price until early November of last year and has outperformed silver this year by a wide margin. Year-to-date, even with the recent pullback, gold is up 1.54%, while silver has been knocked down 8.71%. Another way for the ratio to register 90 would be for gold to rally up to 1980 with silver standing still. Such a a set-up seems rather unlikely, though as the calendar turns toward warmer months in the Northern Hemisphere, there is a bias toward higher prices for both metals. The most recent rally began late in the year, an unusual development, which bodes well for higher prices and the possibility of an explosive move to new highs in gold and a price above $26 for silver later this year.

Gold's rise beyond the $2000 price level occurred most recently in August 2000 and again in March 2022. It may split the difference and pop this time in June. The timing, aligned with the exhaustion of extraordinary measures by the Treasury Department to avoid a US credit default and heavier conflict in Ukraine may precipitate a rush into gold, leaving silver lagging. Current price levels suggest buying both, with the usual lean toward the more undervalued asset, silver.

Demand for both metals remains elevated, as do premiums. Given the unusual confluence of geopolitical events and mystifying monetary mischief around the world that's not surprising at all. What is surprising is how long prices have managed to stay at such reasonable levels, a condition unlikely to last very much longer. US investors must bear in mind that gold and silver reached record high levels in currencies other than the US dollar over the past year, especially when the dollar appreciated rapidly in the first three quarters of 2022, to the detriment of the yen, euro, franc, pound and other various fiat currencies.

As economic conditions continue to deteriorate globally, gold and silver will eventually be regarded again as money, and everything else as credit, as it should be.

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

Item/Price Low High Average Median
1 oz silver coin: 32.18 48.89 37.65 36.00
1 oz silver bar: 31.30 39.95 35.58 35.48
1 oz gold coin: 1,963.99 2,009.69 1,983.67 1,979.48
1 oz gold bar: 1,946.49 1,985.74 1,957.76 1,952.97


The Single Ounce Silver Market Price Benchmark (SOSMPB) took a bit of a drop, diving to $36.18, a decline of 92 cents from the February 5 level of $37.10.


WEEKEND WRAP

There isn't much left to say after this uneventful week except, beware of falling objects, including, but not limited to, people, drinks, and platters at Super Bowl parties, high-altitude objects shot down by the USAF, and overvalued stocks.

At the Close, Friday, February 10, 2023:
Dow: 33,869.27, +169.39 (+0.50%)
NASDAQ: 11,718.12, -71.46 (-0.61%)
S&P 500: 4,090.46, +8.96 (+0.22%)
NYSE: 15,910.69, +82.09 (+0.52%)

For the Week:
Dow: -56.74 (-0.17%)
NASDAQ: -288.83 (-2.41%)
S&P 500: -46.02 (-1.11%)
NYSE Composite: -88.71 (-0.55%)


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idleguy.com July 2024
IdleGuy.com July 2024, Vol. 1 #6