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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.
The Rich Are Different And Maybe Not Better; You Can Be Good And Rich
Friday, February 19, 2021, 7:23 am ET
The week is nearly at an end, and it wasn't a very exciting one, at least not as entertaining as the reddit rabble taking on the elitist Hedge Fund horde. It's too bad, because those peons were getting the better of the rich guys for a change.
What's concerning to all parties is how some really shrewd Wall Street types made bank on the backs of both parties, buying up puts, calls, stock on margin and reaping profits at the top and on the way down. There are players and then there are predators, which is why it's a good idea to keep your investment moves to yourself.
It's probably not a good idea to boast about how many monster boxes of silver eagles you purchased during the silver raid for two reasons: First, they probably haven't been delivered yet, so your enterprising Postal employee or FedEx or UPS delivery driver might get ideas, or somebody may be casing your place now that they know you'll have plenty of shiny; and, second, if you let people know you have valuables, you'll always and forever be concerned about protecting them, and that can be costly, to your wallet and your mental health.
The aforementioned are probably good reasons why people opt for stocks or bonds or storage of precious metals or anything they don't have to keep themselves, but, in a SHTF or TEOTWAWKI scenario, not having access to your personal wealth is a definite downer. If the exchanges shut down or the power goes out, cash and trinkets (ideally made from gold or silver) will be all that matters. How many shares of Apple you own will be largely immaterial. Rich people suffer just like poor ones, and, to boot, they're usually wildly unprepared to take care of themselves.
So, remember, the rich are different. They have servants, armed guards, gardeners, and chefs who will likely turn on them in moments of extreme stress. They're also incapable of planting seeds, slicing anything heartier than brie, scrambling eggs, or hammering nails. Forget about the tricky stuff like bandaging wounds, stopping leaks, or generally weathering the storm, so to speak. In emergencies, the last person you want around is a rich one. The lifeboat scenes from the movie "Titanic" come to mind.
A good number of rich people, because they are rich and you are not, think they are better than you. Honestly, they're probably not. You probably have more useful skills than most rich folks unless they're the self-made kind of business owner who isn't really, really rich, but has a net worth somewhere between $1 and $10 million. There are plenty of those types around.
It's how they made their money that matters when it comes to measuring the utility of rich people.
Rich people who came from modest backgrounds and made it by the sweat of their brow, being very good at something, are generally the most dependable types. Those who got rich quick playing stocks, or worse, playing stocks with other people's money, i.e., hedge fund managers, are further down the moral line, and, at the bottom are those who were born rich.
Inheritors of wealth are probably the most worthless in a pinch. They're used to just paying for anything they need. Ask them to grill a burger or two and they'll either pay somebody to do it or order out or eat something else. Really, that's how useless they are.
So, be kind to your rich friends. They're going to need your help if they become not-so-rich. And, if they remain rich, they can hire you to do things they won't or can't do themselves, which is just about everything. Further, they have to worry about not being rich, which stands in opposition to the desire of most people: to be rich, so you may be able to offer them comfort and consolation just by showing them that not being rich isn't so bad.
Don't belittle yourself because you don't own much in the way of stocks or a big house or a shiny new car. You have skills and you have the opportunity to make of yourself whatever you like. It's been said that getting rich isn't that hard, but staying rich is the real trick. Maybe the definition of what rich is should be examined. Having a good moral background, trustworthy friends, and an optimistic attitude are usually worth more than all the stocks, bonds, gold, and silver in the world.
While it is a worthwhile aspiration to have some of those things, not having much is not a curse nor is having excess amounts a blessing. By no means should acquiring wealth be an all-encompassing endeavor.
Think about it. Which would you rather have around: a fellow who could build a house or one who could buy a house?
Back in the 1960s, a radio station in upstate New York, WSAY, used to have a slogan. They said, "Be Big. Be A Builder." It was always an interesting line, but one which carried a strong message.
Whether it's personal wealth, education, community, a collection, or a shelving unit for your bedroom, just keep on building. The riches will follow.
At the Close, Thursday, February 18, 2021:
Thursday, February 18, 2021, 9:30 am ET
News out of the employment sector was not particularly pleasant Thursday morning.
The Labor Department reported 861,000 initial unemployment claims last week, against 773,000 expected and an upwardly revised 848,000 during the previous week
Continuing claims for the week ended February 6 stood at 4.494 million.
Following a session which saw some of the most pronounced declines win weeks - only to miraculously finish nearly unchanged - futures are pointing to a negative open in the major indices.
On Wednesday, the Dow was down nearly 200 points in early going, the NASDAQ dipped more than 240 points before rallying to erase 2/3rds of the losses.
Yield on the 10-year note fell back to 1.26 during the session, but finished off just one basis point, at 1.29%, a position of considerable anxiety for equity traders.
Approaching the opening bell, European stocks were lower, oil higher.
America and the world lost a bit of its treasure last night, as Rush Limbaugh passed away. He was 70.
At the Close, Wednesday, February 17, 2021:
Wednesday, February 17, 2021, 9:21 am ET
Every time I plant a seed, they say 'kill it before it grows'
-- Bob Marley and the Wailers, "I Shot the Sheriff"
Thank goodness for three-day weekends... and four-day work weeks.
Money doesn't take any days off. While humans rest, or work, or recreate, money (or, currency, as it should be called in the age of fiat) continues to flow. From one hand to another. From one account to others. From the few to the many, from the many to the few. Like rust, it never sleeps.
And so it is that on Friday, February 12, Bitcoin was priced at about $47,500 and on Tuesday it popped briefly above $50,000 for the first time ever, and this morning roared past $51,000. Money never rests and money going into bitcoin has turned from a trickle to a steady stream and will soon become a torrent. Considering that bitcoin has tripled since November, $100,000 is not some far away, distant price. It is likely to exceed that number before September, possibly before June.
In a similar vein, the rush into silver wasn't just about some kooky Reddit group going by the name r/wallstreetbets. Silver has been sought by investors and industrial users for thousands of years. Not since 2009, as with bitcoin, and not since 1913, as is the case with Federal Reserve Notes, those greenish printed pieces of paper we carry around in our wallets.
No, silver has a certain millennial quality to it. Silver coins are possibly the oldest mass-produced form of coinage. Silver has been used as a coinage metal since the times of the Greeks; their silver drachmas were popular trade coins. The ancient Persians used silver coins between 612-330 BC. Silver has been money, real money, for nearly 3000 years.
But, some may point out, if silver is so valuable, why is the price of it so low? It's hovering around $27 an ounce on the COMEX. While that may be true, why then are all dealers worldwide virtually out of stock? Why is the US Mint out of stock? All of their silver pieces are either on an out of stock, or pre-order basis with weeks to wait for delivery.
The only place that silver can be purchased for immediate delivery is on eBay, and on Sunday, Money Daily pegged the Single Ounce Silver Market Price Benchmark (SOSMPB) at $42.99, which was up from $41.22 the prior Sunday, and that's probably already too low.
Dealers will need weeks to replenish their stock, if they are able to do so. There's huge demand and supply has been crimped as was the case last March, when silver dumped below $12 an ounce on the COMEX and the rush to buy was unprecedented... until now. The longer the crowd at the COMEX keeps a lid on the price for their 5,000 ounce contracts paper silver, the longer the delays on shipping from dealers, and the higher the price in the retail market for 1, 5, and 10-ounce products.
I shot the sherrif, but I say it was in self defense.
Which gets to the point of the 10-year note, which rocketed Tuesday, from a yield of 1.20% to 1.30%. That's huge. That's an eight percent move in one day in one of the largest, most steady markets in the world. The US treasury market is upwards of an $18 trillion market and it affects everything from credit card interest rates to mortgages to the price of corn... and wheat... and silver and gold and the purchasing power of those FRNs in your pocket. By comparison, bitcoin is still under a $1 trillion market cap.
Silver's market cap is around $5 trillion. Gold's is $12 to $15 trillion, so it's easy to see why the central banks are trying so hard to keep the "official" prices of gold, silver, platinum and crude oil down via the futures markets. Because if they go up too much, the US dollar - and with it the yen, yuan, euro, pound and every other fiat currency in the world (all of them) - all go to fiat money hell. They become worthless.
The huge move in the 10-year note has a purpose. It's to deflect interest away from silver and gold and the plight of the dollar. Already this morning it's 1.314%, reflecting the unusually large level of distress in the financial system. It's very much worth keeping a tight eye upon, because if it goes much higher, stocks will be under pressure. The situation is such that there are so many different stress points presently, any one of them could cause massive dislocations, a bank failure here or there, derivative unwinding, severe damage to your retirement fund, and other nasty stuff that could make a trip to the grocery store resemble a trip to Wall Street, complete with beggars, liars, thieves, and snake oil salesmen.
The last time the Fed tried to raise interest rates was from December of 2016 through nearly the end of 2018, by raising the federal funds rate from 0.50% to 2.50%, via a series of well-timed, well-publicized 25 basis point hikes. What happened to stocks?
Initially, stocks shrugged off the rate increases. But, as the Fed persisted, by January, 2018, stocks began to slip, and then, in October, and again in December, 2018, stocks fell out of bed, to the point at which the Fed had to reverse course and start lowering rates again.
That was then, and that was the overnight lending rate between banks, not the 10-year note, which is the world benchmark for anything that matters. If the overnight rate at 2.50% caused a run on stocks, how high does the 10-year have to climb before investors take flight from equities to fixed income? Three percent? Five? It could go there, but tighter money works against everything the Fed has been working towards: loose monetary policy, free cash flow to Wall Street, enormous government debt. Reversing course here is a pathway to nightmare scenarios, especially for the government, who will be servicing the monstrous $27.8 trillion debt at higher and higher rates in such an outcome. It's devastatingly deadly.
Don't take our word for it. Listen to Ed Steer discuss the silver squeeze and its implictions. He's an expert and it's a safe bet he didn't shoot the sheriff, or the deputy.
Every day the bucket goes to the well. One day, the bottom will fall out.
At the Close, Tuesday, February 16, 2021:
Sunday, February 14, 2021, 9:21 am ET
On Saturday, the Senate voted to acquit former President Trump on the sole article of impeachment in their show trial, allowing both houses of congress and the Biden administration to move forward with their objective goal of spending another $1.9 trillion that they don't have on another COVID-19 relief bill.
Stocks spent the week more or less in a holding pattern, making a move higher on Monday, but flattening out as the week progressed, especially Tuesday through Thursday. With the political focus now shifting to the relief bill in congress, stocks should rise and fall with the narrative from Capitol Hill. If the legislation appears likely to sail through congress intact, expect stocks to continue the corona rally that began in late March of last year. Any delays or roadblocks to full passage of the bill will be seen as negative for stocks and the economy overall.
Along with Republican defectors in the Senate, Democrats holding a majority in both houses should be able to breeze the bill through and onto Biden's desk in short order. While news outlets are calling for passage of the bill by March, judging by how expediently the Senate whipped through the sham impeachment, there is little doubt that a boost to the economy is an urgent priority for the free-spenders in congress.
Despite all the rhetoric addressed toward the "green" economy, the price of oil continued to mark higher during the week. WTI crude, closing out at $59.73 Friday on the NYMEX, is at its highest price since the last peak at the end of 2019. In the week ending December 23, 2019, WTI priced at $61.72. A move beyond the mid-60s would put the current price at levels not seen since 2018, when Oil reach the mid-70s.
What's driving the price of crude is the slowing of COVID-19 cases, hospitalizations, and deaths, a narrative which is going to become pre-eminent as Spring arrives, with mass vaccination emerging as the hero. As usual, the mainstream media will shield the public from the ultimate truths regarding the entirety of the corona-crisis, but the effect will be a return to more normal lifestyles, with mask mandates and lockdowns out of the picture. The new powers-that-be need a robust recovery to cement their mental hold on the unsuspecting American public and nothing could be more poignant than an end to the scourge of the pandemic, for which Dr. Fauci and no doubt many legislators in Washington, DC and beyond will claim credit.
Whatever the scenario, putting the coronavirus episode behind will be a great relief to the general public, which only wishes to get on with living without overhearing government restrictions and dictates. Such an outcome would increase demand for oil and derivatives, especially heating oil and gas at the pump.
Bitcoin is on the verge of surpassing $50,000 as of this writing, topping out at $49,700 - a new all-time high - overnight Sunday. There's a very real possibility that $50,000 bitcoin could be a reality at the opening of US markets on Monday.
Treasuries continued to be under pressure, as the yield on the 10-year note exceeded a one-year high again, posting 1.20% on Friday. In affirmation, the 30-year bond yield rose to 2.01%, also a one-year high. Putting those numbers into perspective, all maturities have negative real yields, meaning holders are losing money against inflation. A five-year note loses 1.85% of value, while the 10-year is marginally better, losing only 1.01 in real, inflation-adjusted terms. the 30-year, at current valuation, loses only 0.16% annually.
Regardless on risk profile, investors must take note of this trend, which has been gathering momentum over the past year. As inflation expectations rise, and real price inflation in goods and services materializes, fixed income vehicles will struggle to keep pace via higher yields. With the treasury complex at the base, investors will be less inclined to hold these money-losing assets, leading to a vicious cycle of escalating rates and advancing inflation.
A meltdown in the bond market is an event multiple times more significant than a stock market rout and should be at the top of every astute investor's watch list. Money has been fleeing fixed income in search of higher returns, but that condition becomes exacerbated when price inflation becomes endemic. With the Federal Reserve turning its money-printing marathon into a sprint, the likelihood of a bust in treasuries poses a serious present danger to overall financial stability.
Precious metals continued to be supressed to a maximum degree, though signs of breakage in COMEX silver are beginning to emerge. Gold bounced higher midweek, jumping from the close on Friday, 2/5, of $1810.80, as high as $1843.40 before closing the week at $1,822.43, a far cry from the all-time high of $2063.68 this past August.
Silver took an alternate path, rising from $26.90 to $27.36 over the course of the week, most of the gains occurring on Monday and Friday, while slumping midweek. This particular pattern between gold and silver is remarkable, given the events for the prior two weeks. It suggests that not only has the COMEX and spot price regimes decoupled from the market price, but also from silver's counterpart in the gold COMEX complex.
If so, this could be a startling development, signaling a return of silver to a more reasonable and historically-relevant price in relation to gold. With the current gold:silver ratio at 66.66, it is still a good distance away from historical measures of 16:1, 12:1, or even the global mining ratio, currently estimated by First Majestic CEO Keith Neumeyer at 8:1. Movements in the GSR (gold:silver ratio) are often tiny and barely perceptible, but they may have larger impacts on the general economy than given credit.
Here are the most recent prices for common gold and silver items sold on eBay (numismatics excluded, shipping - often free - included):
Item: Low / High / Average / Median
According to established methodology, these figures put the new Single Ounce Silver Market Price Benchmark (SOSMPB) at $42.99, another increase, surging past last week's benchmark of $41.22.
What the eBay sales are broadcasting is that demand for all manner of gold and silver is reaching manic levels. Contributing to the runaway price of silver are the restrictions on volume purchases and shipping delays at online retailers. Many are still nearly out of stock, and certainly out of stock on the most popular items.
Further indication of the disconnect from COMEX spot price and real world market pricing is the silver dollar offerings from the US Mint, wherein ALL of their one ounce inventory is either unavailable, limited, or pre-order. The takeaway is that even at inflated prices - the lowest-cost one-ounce silver dollar is $67.00 (the currently unavailable West Point Silver Eagle) - Eagles and other silver dollar products from the mint are not to be had.
On eBay, sellers are bound by common practice to deliver within reasonable time frames, unencumbered by mass pricing which restricts dealer inventories and induces shipping delays. With that in mind, it is not inconceivable to believe that some dealers will begin adding premia to market prices for immediate delivery, should demand persist and supply remain slow-paced. If demand for 1,000-ounce silver bars, which are commonly used by COMEX, the LBMA, and industrial users increases substantially, one would normally expect a massive spike on the COMEX, though the rigging in that market has become so extreme as to necessitate purposeful mispricing, i.e., lying.
According to the Silver Institute, global demand is set for an eight-year high of 1.025 billion ounces in 2021.Given that this estimate is extremely conservative, $100 an ounce market price for finished one-ounce silver products by year's end is surely not out of the question.
All of the week-long activity in global markets leads to an unmistakable conclusion: that the world currency markets are closing fast on a global resturcturing, one that may already be underway and being taken advantage of by the best clandestine minds and investment houses, making the following quotation particularly prescient.
Gold is the world's only monetary asset that has no counter-party risk, and is the only cross-nation, cross-language, cross-ethnicity, cross-religion and cross-culture globally recognized monetary asset.
-- Song Xin, Party Secretary and President of the China Gold Association, "Gold will Support Renminbi as it Moves to Join World," 2014. (Link is in Mandarin.)
It's easy to extrapolate the above statement to include silver and Bitcoin, making a triumvirate of monetary assets available to everybody on the planet as global fiat currencies such as the $US, euro, yen, pound, yuan, and franc continue to lose purchasing power at accelerating rates.
At the Close, Friday, Febraury 12, 2021:
For the Week:
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