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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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Banking Sector Badly Damaged; February Non-farm Payrolls on Tap; Financial Crisis Looming

Friday, March 10, 2023, 7:57 am ET

Barring any earth-shattering developments, the major indices globally are headed for a disturbingly deep loss for the week as investors await February's Non-farm Payroll report, due out at 8:30 am ET Friday morning.

As of Thursday's closing bell, the Dow Industrials had shed upwards of 1136 points, which is already the worst weekly loss since September, 2022, and futures are indicating that stocks could take another hit to close out the week. In particular, the Dow broke decisively down through 32,514, representing the bottom of its 2000-point range since early November. Psychological support exists at 32,000, though the depths of Thursday's decline, replete with banking crisis overtones, suggests that market participants may require extensive therapy to remain cool and calm.

In other words, price support will be obtained when and if fear subsides, a highly questionable development at the current juncture. All the indices slipped below their respective 200-day moving averages. Getting back above them will require a positive catalyst, though none are expected to appear any time soon. The Dow is down 2.7% year-to-date.

Still in positive territory for the year, the NASDAQ is down 350 points (3.0%) for the week and nearly 900 points since peaking in early February. Gains from January's tech-led short squeeze are being grudgingly distributed down the line, roughly half of 2023's upside already tossed to the wind.

The S&P looks for support in the 3800-3850 range, the levels at which it exited 2022 and entered 2023. Down 127 points (3.15%) for the week, the index remains positive - up 89 points - year-to-date.

The banking sector took some stunning losses in Thursday's session, prompted by the shuttering of Silvergate Bank (SI), the shocking decline of the crypto-friendly depository from a high of 220 in November, 2021, to Thursday's close at $2.84 representing the loss of innocence and money for enthusiasts of blockchain assets.

Concurrently, the demise of SVB Financial Group (SIVB) added to swirling questions surrounding the soundness of banking in general and brought forward fears of a great unwind in fiat finance. SVB's woes may have been the product of poor timing and bad management - heavy investment in all sorts of real estate securitization (MBS, CMBS) - and may not swell outward to the banking community at large, however, the vast majority of bank assets are either held in MBS or Treasury issuance, all of which are deep underwater thanks to the unrelenting pace and scope of the Fed's interest rate increases, historically, the fastest raises ever. SIVB lost a cool 161 points on Thursday, closing at 106 from the previous day's close at 267, a 60% loss. In pre-market trading the stock is indicated lower by a further 45%, down to a share price of 56. This is certainly far from over.

By hiking interest rates from essentially zero to a range of 4.50-4.75% currently the FOMC has issued a rate increase in 10 consecutive meetings, the upcoming March 22nd date on tap for an 11th, getting the top end of the target rate to 5.00% or possibly 5.25%, as the voting members dither over 25 or 50 basis points. The only possibility of a pause in the hiking regimen would be a catastrophic event invovling either a stock market crash, full-blown banking crisis, or both.

Superficially, the banking sector remains less than sanguine, the major interests like JP Morgan Chase (JPM), Wells Fargo (WFC), Bank of America (BAC) and Citigroup (C) each suffering losses of four to six percent on Thursday and down substantially from highs made in late 2021 or January 2022. Given the current interest rate environment and the Fed insistence on further rate hikes in the face of unrelenting inflation, the banking crisis question becomes a matter not of "if" but of "when." Built into the boom-bust mechanics of fractional reserve fiat currencies, these things happen with regularity and are generally quite intense, the last one now 15 years past.

Standard understanding of Fed policy is that the FOMC will continue raising rates... "until something breaks." Things are breaking, but, whether or not the damage is sufficient to stop the Fed in its tracks remains to be seen.

Friday's February Non-farm Payrolls reading may go some distance toward a resolution or at least offer a clue about the immediate future of investments and money.

Overnight, Asian stocks were hard hit. At midday, European shares ar sliding from one to 1.65% and US futures are down, though not as deeply as earlier. As of 7:50 am ET, Dow futures, -107; S&P, -10; NASDAQ, -15.

Gold:Silver ratio: 91.17

At the Close, Thursday, March 9, 2023:
Dow: 32,254.86, -543.54 (-1.66%)
NASDAQ: 11,338.35, -237.65 (-2.05%)
S&P 500: 3,918.32, -73.69 (-1.85%)
NYSE Composite: 15,140.79, -299.85 (-1.94%)


Look Out Below: Banks About to Go Under; Silver Priced Near $20 with Gold Ratio at 90 Screams Buy!

Thursday, March 9, 2023, 9:26 am ET

Global Western fiat economies are about to implode under unmanageable debt loads with a number of banks either winding down operations or about to seek bankruptcy protection. Central banks have been buying up gold at breakneck pace, anticipating the eventual destruction of the debt-issued, fractional reserve fiat financial system. It is a mathematical certainty that the enormous debt accrued in the US, UK, EU, Japan and South Korea by individuals, corporations, and governments can never be repaid in full, especially denominated at higher interest rates.

In the meantime, use of the US dollar as reserve currency is eroding rapidly. When even Reuters runs stories like this...

India's oil deals with Russia dent decades-old dollar dominance

... citing Russia's top five oil buyers - China, India, Turkey, Italy, United Arab Emirates (UAE) - settling trades in roubles, yuan, or the UAE dirham and the US dollar being used in only 40% of SWIFT transactions, it's becoming crystal clear that America's glorious privilege of having the dollar as the world reserve currency is coming to a swift conclusion.

The United States has done it largely to itself, by forcing Russia's hand against Ukraine and continuing to arm the Russian foe, issuing sanctions like parking tickets, confiscating assets, and imposing an unenforceable price "cap" on Russian oil.

Treasury Secretary Janet Yellen's (another in a long series of clueless government officials) comment at the end of the article is priceless: "I don't think the dollar has any serious competition, and is not likely to for a long time."

Just this morning, promoter of cryptocurrencies, Silvergate Bank, has become the first US bank to shut down since 2020 after ties to Sam Bankman-Fried and his FTX ponzi and other crypto failures were discovered. The bank is voluntarily winding down operations and liquidate. On the news, bitcoin fell to a one-month low below 21,600 after being bid as high as $24,800 on February 20th. Other crypto units are also flagging.

Troubled Swiss bank, Credit Suisse has seen enormous capital outflows over the past week and has postponed publication of its annual report after a call from the US Securities and Exchange Commission (SEC). The company's shares are being traded at an all-time low this morning in European markets.

The second-largest bank in the country, Credit-Suisse has been embroiled in controversy for the past few years over dodgy transactions with a number of failed investors and questionable accounting practices.

This morning, the silver:gold ratio was 90.397, the highest it's been since last fall, and it appears that the ratio may be headed even higher, suggesting either gold will be on the bid or both gold and silver will continue to fall, with silver falling faster. The ratio reached highs above 100 in early 2020. No matter the circumstance, silver is begging to be bought. Money Daily is far from being alone in calling silver the world's most-undervalued asset, though there is ongoing discussion about its role in any new currency regime that may emerge.

There's also consideration that silver may be fairly priced at current levels. Looking at buying gas with silver, one could have purchased roughly five gallons of gas for one ounce of the metal in the early 1960s - when silver was still used in coinage in the US - whereas an ounce of silver today at its current price would afford at least that much and possibly more, depending on location.

Either gas is cheap or silver is expensive. Either way, owning some is a no-brainer at this time.

Everything is related, or, in Einsteinian terms, relative.

At the Close, Wednesday, March 8, 2023:
Dow: 32,798.40, -58.06 (-0.18%)
NASDAQ: 11,576.00, +45.67 (+0.40%)
S&P 500: 3,992.01, +5.64 (+0.14%)
NYSE Composite: 15,440.64, +1.62 (+0.01%)

At the Close, Tuesday, March 7, 2023:
Dow: 32,856.46, -574.98 (-1.72%)
NASDAQ: 11,530.33, -145.41 (-1.25%)
S&P 500: 3,986.37, -62.05 (-1.53%)
NYSE Composite: 15,439.02, -255.32 (-1.63%)


This is Ridiculous: Fed Chairman Moves Lips, Rocks Markets; ADP Says 242,000 Jobs Created in February

Wednesday, March 8, 2023, 9:22 am ET

Speaking before and answering questions from Senators on Capitol Hill on Tuesday, Fed Chairman Jerome Powell could not have been more hawkish. His essential message on interest rates remained unchanged: "higher for longer."

To his credit, Powell pulled no punches nor did he deviate from his clear mandate, dating back to his August 26, 2022 speech at Jackson Hole in which he said, "our responsibility to deliver price stability is unconditional." Taking him at his word, which was good enough to raise the federal funds rate from 2.25 to 2.5 percent at that time to today's 4.50-4.75 percent should not require additional reflection. The Fed has been and will almost certainly continue to be dead serious about containing inflation.

Should they fail in their mission, the United States, and, quite possibly, the rest of advanced Western economies would encounter price appreciation and loss of purchasing power at levels not experienced since the 1970s and possibly beyond that. Visions of Weimar Germany, Zimbabwe, Venezuela are dancing about in the heads of FOMC voters, who will have to decide on a suitable rate increase two weeks from today, at their upcoming meeting which concludes on March 22. Current Wall Street consensus is for 25 basis point hikes at the March, May, and June meetings, though after Tuesday's testimony, odds for a 50 basis point increase have increased dramatically, to a point at which such an increase would not be surprising, bringing the federal funds rate to 5.25-5.75

ADP reported Wednesday morning a positive 242,000 US private sector jobs were added in February. This number presages what will be the final count in the BLS non-farm payroll data due out on Friday. While the two surveys track fiarly well, they are often divergent by orders of magnitude as shown as recently as last month when ADP reported (now revised) 119,000, and NFP came in at a stunning 511,000. In 11 of the past 27 months, ADP has been more than 200,000 less than NFP's estimate. If believable, February non-farm payrolls could easily come in above 300-350,000, figuring public employment (local, state, federal government) had a strong month of jobs filled.

High employment adds to Jerome Powell's dilemma. With more people working, and, ostensibly, spending, the Fed's quest to stop inflation in its tracks and bring it back down to two percent seems daunting, if not impossible. While the US economy isn't exactly growing by leaps and bounds, a contraction in employment would be preferable to the FOMC members as they ponder where exactly interest rates should be headed.

A perplexing aspect of the inflation/economy calculus is the idea that pushing wages and prices lower in the midst of an economic expansion (even though that is a questionable assessment) is nearly impossible without stern provisions on interest rates by the Fed. That's why then-Chairman Paul Volker raised rates as high as 19 percent in the inflation blowup of the late 70s and early 80s. Such extreme measures are hardly expected from today's Fed, though Powell and his fellow committee members may end up not having a choice should inflation remain as stubborn as it now seems to be.

Powell will address and take questions from the House Financial Services Committee today at 10:00 am ET. He is not expected to change his tone, tune, or tenor.

Stocks got whacked as he spoke on Tuesday. A repeat performance could put a serious dent on the equity gains from January. Yesterday's loss on the Dow pushed that index into the negative year-to-date.

What would be amusing if it wasn't so deadly serious is how Wall Street continues to resist reality. Powell has been adamant and fairly consistent in his inflation and interest rate messaging, but a few deviations, such as last month's recitation on "disinflation," have given equity bulls inspiration and hope.

If consistent with yesterday's message, today's testimony could spark another waterfall event through the NFP reading on Friday.

A number to watch is 32,513 on the Dow. That's the low from November, 2022 which could act as a support/resistance pivot point.

At the Close, Tuesday, March 7, 2023:
Dow: 32,856.46, -574.98 (-1.72%)
NASDAQ: 11,530.33, -145.41 (-1.25%)
S&P 500: 3,986.37, -62.05 (-1.53%)
NYSE Composite: 15,439.02, -255.32 (-1.63%)


Stocks Churn; Powell on Hot Seat; Economy Failing

Tuesday, March 7, 2023, 9:23 am ET

As Mondays go, this one was far from noteworthy. Stocks peaked midday and meandered lower throughout the afternoon, ending essentially flat.

There was little to trade upon, as data was light and earnings season all but over, less a few stragglers. The most prominent release was factory orders (-1.6%) and the final durable goods print (-4.5%) for February, both posting declines the weakest since 2018, barring pandemic readings from 2020-21.

Traders remain optimistic as is the usual case for the blinkered Wall Street crowd. Meanwhile, news is anything but good, with crime, murders, falling real incomes, dollar and euro debasement, and the East-West schism taking most of the wind out to sea.

The result is churning stocks without direction in a very bearish setup, the major indices rangebound since early November, despite the "feel good" rally in January. Year-to-date the Dow is up less than one percent, the S&P and NASDAQ higher, though all of the indices are down significantly since peaking in early January 2022.

Tuesday and Wednesday of this week will be focused on Fed Chair Jerome Powell's semi-annual testimony before congress. Today, Powell will offer words to the Senate Banking Committee; tomorrow, he sits before the House Financial Services Committee.

Much will be spoken, little of it of any consequence, though the TV talking finance heads will hang on his every word. It's a monumental charade.

A half-hour to the opening bell, futures are basically flat, all slightly positive. Gold and silver are taking another of their unscheduled beatings this morning, with gold off $14 to $1840 and silver down 31 cents to $20.83.

WTI crude oil ripped above $80 on Monday, but it's unlikely to remain there. Already today it is down about half a buck.

There's nothing especially tantalizing about anything in stocks, but treasuries remain on suicide watch. The 10-year note remains elevated at 3.98%, while six-month bills hit 5.22%, the highest yield since July, 2006.

Bonds and fixed income yields are set to soar, which is likely bad for everything and everybody, but especially harmful to stocks. Traders and investors have yet to come to the realization that two decades of the "Fed Put" were unceremoniously tossed to the trash heap early last year. Promoters of "pivot" and "normalization" are dead off center. Economic conditions are about as bad as they have been since the depths of the GFC.

Making matters worse, they're nowhere near any hint of improving.

At the Close, Monday, March 5, 2023:
Dow: 33,431.44, +40.47 (+0.12%)
NASDAQ: 11,675.74, -13.27 (-0.11%)
S&P 500: 4,048.42, +2.78 (+0.07%)
NYSE: 15,694.34, -26.73 (-0.17%)


WEEKEND WRAP: Gold, Silver, Stocks, Bonds, Oil All Gain in Mid-Week Turn-Around; Fed Chair Testimony, NFP Jobs Data Upcoming

Sunday, March 5, 2023, 9:36 am ET

Our greatest joys having been fulfilled, our greatest fears will soon be realized.

Expressed in the vulgar tone of contemporary parlance, "You've had your fun, now get ready for the big suck."

Regardless of whether you fall into the ring with the bulls, bearishly tramp through the woods, or simply don't care, there's ample evidence that the reality most people in developed nations of the West experienced 20, 30, 40 years ago no longer exists. Freedom has eroded and rights have been violated. Standards of living are falling as fiat currencies crash upon the shoals of higher interest rates and destructive economic policies.

Understand one thing. The Fed can either save the currency or the economy. They can't save both, but they're certainly going to try. Eventually, they're likely to lose on both accounts. As it currently stands, the currency has lost 98% of its value since the founding of the Federal Reserve in 1913, and the economy, contrary to what Resident Brandon imagines, is on the ropes.

Stocks

Prior to the events of the most recent week, the NYSE Composite, the S&P 500 had been falling for three weeks, the NASDAQ had fallen in two of the past three, the decline interrupted by an insignificant gain of fewer than 70 points from February 10-17. The Dow Industrials had suffered losses the past four weeks and to date in 2023 has finished with weekly losses in five of nine weeks.

The week had two distinct parts, separated by Wednesday (March 1) afternoon and Thursday (March 2) morning. On Wednesday afternoon, the Dow was down some 495 points for the week. On Thursday morning, the NASDAQ was down 219, the S&P, off 72, and the NYSE Composite down 83 points.

Here's how they ended the week:

Dow: +574.05 (+1.75%)
NASDAQ: +294.06 (+2.58%)
S&P 500: +75.60 (+1.90%)
NYSE Composite: +256.60 (+1.66%)

As poorly as stocks performed over the first three days of the week, they were engulfed by the gains Thursday and Friday. Superficially, a 107-point move in the S&P 500 index over a day and a half had to have some catalyst and raise some eyebrows, but there was nothing more than a few words out of the mouth of Atlanta Fed president Bostic assigned to the rapid appreciation of all stock indices in the US, and to a great extent, around the world. International indices, from Germany's DAX to France's CAC-40 to Japan's NIKKEI all posted solid gains the last two days of the week.

Nothing substantially changed in the world. Stocks just went for a joyride. That's life in the casino.

Fact of the matter is that equities remain in a bear market inside a bubble. More specifically, the gains of the past week do not alter the dynamics for the major indices, all of which remain well-entrenched in a negative channel.

In case anybody is actually interested, the coming week's highlights:

Fed Chairman Jerome Powell will give the Semiannual Monetary Policy Report to the Senate on Tuesday, March 7 and will appear before the House Financial Services Committee on Wednesday, March 8. Both sessions are slated to begin at 10:00 am ET.

ADP's Private Employment report for February is due out early Wednesday morning, prior to the opening bell. The week closes with the delayed February Non-Farm Payroll report at 8:30 am ET Friday, March 10. Estimates are for a gain of 210,000 jobs after January's blowout 517,000.


Treasury Yield Curve Rates

Date 1 Mo 2 Mo 3 Mo 4 Mo 6 Mo 1 Yr
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
02/17/2023 4.64 4.81 4.84 4.95 4.99 5.00
02/24/2023 4.68 4.83 4.86 5.02 5.06 5.05
03/03/2023 4.75 4.79 4.91 5.01 5.18 5.03

Date 2 Yr 3 Yr 5 Yr 7 Yr 10 Yr 20 Yr 30 Yr
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
02/17/2023 4.60 4.33 4.03 3.95 3.82 4.01 3.88
02/24/2023 4.78 4.52 4.19 4.10 3.95 4.11 3.93
03/03/2023 4.86 4.60 4.26 4.15 3.97 4.12 3.90

Interest rates moved in the same lockstep trajectory as stocks (gee, Wally, I wonder if they're related?), selling off early in the week (yields rising), and being bought later (yields falling), with pivots points Wednesday into Thursday. Since the Fed is both the buyer and seller of massive amounts of treasures, controlling as much as 25-40% of the market in notes and bonds, they are more than participants or market makers, they are the market.

Once again, six-month bills took home top honors, ending the week at 5.18%. Ten-year notes and 30-year bonds both yielded more than four percent for the first time since November 14, 2022 before pulling back Friday. Yields are without a doubt heating up, this week's door-slam not withstanding. Interest rates are going inexorably higher. Since February 1, 10-year and 30-year yields are up 58 and 35 basis points, from 3.39% and 3.55%, respectively.

The 30-year fixed rate on jumbo mortgages hit 7.17% this week, according to Bankrate. Freddie Mac's 30-year fixed rate was 6.74%.

Of note, Austan Goolsbee became president of the Federal Reserve Bank of Chicago a month ago. The man has about as much economic sense as a wood chip. He's the ultimate "yes man", his appointment earned through decades of head nodding and being vague about everything. Goolsbee is yet another stark reminder that it's not what you know, it's who you know, or, the word is run by idiots and madmen. Being appointed to a regional Fed presidency is a reward for prior service. Fed presidents get lots of free time, fat salaries, mammoth pensions, and the best seats at the dog and pony shows.

Oil/Gas

WTI crude finished the week at the high end of its range, at $79.85 per barrel, up from last week's closing price of $76.45. Crude has traded in a range between $71 and $81 since mid-November, 2022. Every time it looks to be near a break-out into the mid-80s, it drops off and retraces.

The national average price of gas at the pump rose this week for the first time in about a month. Gasbuddy.com reports the national average at $3.38, up five cents from last week. The Southeast retained the lowest prices with Texas averaging $2.94, up seven cents this week. Other Southeastern sates followed the flow higher as well. Mississippi is at $2.93. Oklahoma and Arkansas are next at $2.98. South Carolina is at $3.01, Tennessee and Kentucky, $3.04. Louisiana and Alabama are right at $3.00. Georgia, $3.10; North Carolina, $3.13. Florida fuel is $3.19.

California ($4.83), Nevada ($4.25), and Washington ($4.17) are the only states averaging above $4.00. Colorado dropped back to $3.97. In the Northeast, Pennsylvania continues the region's highest, at $3.60, down two cents from the prior week.


Bitcoin

Anybody's guess as to where this is headed. Bear in mind the FTX case hasn't reached trial stage yet and just this week Silvergate, a Federally Insured Bank, Just Blew Up from Ties to Crypto and four publicly-traded, crypto-friendly banks are being bailed out by Federal Home Loan Banks.

This week: $22,404.30
Last week: $23,182.10
2 weeks ago: $24,680.90
6 months ago: $19,835.40
One year ago: $38,408.00


Precious Metals

Gold:Silver Ratio: 87.08; last week: 88.11

Gold price 02/03: $1,877.70
Gold price 02/10: $1,876.40
Gold price 02/17: $1,851.30
Gold price 02/24: $1,818.00
Gold price 03/03: $1,862.80

Silver price 02/03: $22.40
Silver price 02/10: $22.01
Silver price 02/17: $21.88
Silver price 02/24: $20.87
Silver price 03/03: $21.39

Gold and silver each rebounded this week, possibly signaling a near-term bottom but by no means offering evidence in a change of direction. Using London fix data, gold peaked in August 2020 at a record high of $2,067.15, then recorded another high of $2,039.05 in March 2022. The most recent run had gold up to $1,932.45 this January.

Silver topped out at $28.88 in September, 2020, rallied again to $29.59 in February of 2021, then $26.18 in March of last year. The last high point for silver was $24.44 on February 2nd.

The highs are lower than the prior highs, a pattern as unmistakable as the sun rising in the East. A short-term bounce cold be in the cards over then next 60-180 days, but there's absolutely no guarantee that precious metals will do little more than vacillate between recent highs and fresh, lower lows for the foreseeable future.

Anybody buying silver or gold for price appreciation doesn't really understand the dynamics of precious metals and the reasons for owning copious amounts of them, measured in ounces rather than prices dictated by fiat authority currencies. Precious metals are anti-matter to fiat currencies. They are real money. There are no substitutes.

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: 28.99 51.00 36.80 36.30
1 oz silver bar: 29.00 46.55 34.31 33.50
1 oz gold coin: 1,954.69 2,004.08 1,979.12 1,984.49
1 oz gold bar: 1,931.20 1,971.90 1,947.62 1,944.22

The Single Ounce Silver Market Price Benchmark (SOSMPB) recovered from last week's crash, gaining to $35.23, an improvement of $2.22 from the February 26 level of $33.01.


WEEKEND WRAP

The past week exposed more unassailable evidence that the Federal Reserve, major trading houses of the mega-banks and other high net-worth institutions control markets. The only question is the desired price levels for various assets and they're not revealing that information. If anything, the advances in stocks and bonds late last week bought some time before further Fed rate increases and largely ignored economic data. Belief in true, fair, free markets was shattered into thousands of pieces in 2001, 2008 and again in 2020.

Investors have options. Assets that can rise and fall on the word of one or a few people may not be in the best interest of the average American, European, or those of any other nationality. For long-term savings and store of value, hedging inflation (loss of purchasing power) of fiat currencies, hard money is available and offers the added benefits of being largely untraceable and untaxable.

Regardless of what you were taught in school, currencies are money substitutes.

Gold and silver are money.

At the Close, Friday, March 3, 2023:
Dow: 33,390.97, +387.40 (+1.17%)
NASDAQ: 11,689.01, +226.02 (+1.97%)
S&P 500: 4,045.64, +64.29 (+1.61%)
NYSE Composite: 15,721.06, +196.54 (+1.27%)

For the Week:
Dow: +574.05 (+1.75%)
NASDAQ: +294.06 (+2.58%)
S&P 500: +75.60 (+1.90%)
NYSE Composite: +256.60 (+1.66%)


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