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Money Daily has been providing business and financial market news, views, and coverage on a nearly continuous basis since 2006. Complete archives are available at moneydaily.blogspot.com.
Money Daily has been providing business and financial market news, views, and coverage on a nearly continuous basis since 2006. Complete archives are available at moneydaily.blogspot.com.
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Thursday, April 14, 2022, 9:28 am ET
Since the financial crisis of 2008, mega-banks like Bank of America, JP Morgan Chase, Citigroup, and Goldman Sachs have crawled and clawed their way back to easy street thanks to government bailouts (TARP), payouts on mortgage rescues, special funding mechanisms from the Federal Reserve, and even administration fees from PPP loans during the pandemic.
Some, particularly Goldman Sachs and Morgan Stanley, have profited greatly from putting together mergers and acquisitions for Wall Street firms.
With the economy supposedly normalizing late in 2021 and into the current year, the landscape for these lending and depository giants has shifted, shown in stark detail by first quarter earnings reports now making their way through the financial press.
JP Morgan (JPM) was the first to report. On Wednesday morning the bank revealed misses on both revenue and earnings per share. Net revenues were $30.7 billion, down 5% year over year. EPS was $2.63, below estimates centered around $2.74. Net income plummeted 42% from the first quarter of 2021, to $8.3 billion, including a credit reserve build of $902 million. The news was met with derision by shareholders, as Wednesday's session produced a decline of 4.24 points (-3.22%). Closing at 127.30, JPM stock is down 21.27% year-to-date.
Thursday morning, Citigroup posted results that were 46% below year-ago numbers. Citi (C) net income fell to $4.30 billion, or $2.02 per share, from $7.94 billion, or $3.62 per share, a year earlier. The company, like JPM, added $1.9 billion to loan loss reserves, while citing a slowdown in deal-making and exposure to Russia as performance scapegoats. Shares are about one percent in the green during pre-market trading. Share of Citigroup are down 20.52% so far this year and off 37.5% from its June, 2021, 52-week high near $80 per share.
Goldman Sachs (GS) saw its profit cut nearly in half from a year ago, but still managed an overall upbeat report Thursday, despite a massive slowdown in mergers and acquisitions, a major component of their business.
Profit applicable to common shareholders fell to $3.83 billion, or $10.76 per share, in the quarter, from $6.71 billion, or $18.60 per share, a year ago. Prior to the opening bell, market response has shares ahead by close to two percent, though year-to-date, GS is down 18.56%, a decline of 73.36 points, closing Wednesday at 321.97.
Wells-Fargo (WFC), the fourth-largest U.S. lender, posted a profit of $3.67 billion, or 88 cents per share in the first quarter, compared with $4.64 billion, or $1.02 per share, a year earlier. Though the results were weak overall, the company beat analyst estimates of 80 cents per share, but total revenue fell 5% to $17.59 billion, compared with estimates of $17.8 billion. Mortgage lending fell by a third from a year ago.
Wells bucked the trend, actually reducing its loan loss provision by $1.1 billion. That contributed nearly a third of the company's profit for the first quarter. Traders are seeing through the report, sending shares down four percent in the pre-market. WFC has been a star performer in the sector, with a decline of just four percent year-to-date, though that is likely to double as Thursday progresses.
Finally, Morgan Stanley managed a positive quarter, beating estimates, though the bank's profit fell to $3.54 billion, ($2.02 per share), from $3.98 billion, or $2.19 per share, a year earlier. As of Wednesday's close, shares of Morgan Stanley were down 16.03% this year.
It's clear that the nation's largest banks are facing a serious period for their businesses, and their condition is likely to worsen if a recession occurs later this year or early in 2023. There are already rumors floating around that first quarter GDP will come in lower than expected and likely blame Russia and inflation for flagging results.
As a whole, the banking sector is not a place most investors want to be in the current tense environment. If consumers continue with weaker retail spending, credit card defaults, and reduced mortgage financing, some of these banks may be in serious trouble. Exposure to Russia, though cited by most, appears also to be understated.
At the Close, Wednesday, April 13, 2022:
Wednesday, April 13, 2022, 8:30 am ET
Peering into the rear-view mirror, let's see what happened on Tuesday
March CPI checks in at 8.5%. Stock futures soar and US indices open strong to the upside. Just before 10:00 am ET the Dow is up 358 points. The S&P 500 is up 58. NASDAQ gains 250.
The rest of the day, stocks trend lower, eventually leading to negatives at session close.
A massive con game was played on retail investors. The big tell was that gold and silver mostly held onto their gains. Bitcoin, which has been tracking the NASDAQ for months (since inception of various bitcoin ETFs) might as well had been used as a siren alarm for the equity markets, getting a boost through 9:00 am ET (futures) and then rapidly selling off, from a high of $40,617 to a low of $39,424 at 4:04 pm ET.
Suspicious? Hardly. It's obvious that traders are using bitcoin as a lure and quite possibly as a advance market indicator. Just like gold and silver have been manipulated for decades on the COMEX via futures trading, bitcoin is suffering a similar fate through the use of ETFs, futures and other mechanisms set up by exchanges and regulated by government authorities.
The main problem - besides the lack of transparency and true price discovery - is that bitcoin manipulation is doomed to fail. There is no possibility of hacking the blockchain, so proxies are employed by the lovers of fiat and haters of crypto. It's been quite apparent for some time that the control freaks of the world don't want bitcoin around. They don't want Russia around either, so getting rid of a decentralized digital currency and a nuclear-armed nation with 11% of the world's land mass at the same time is going to prove difficult.
Father Time has an odd way of sorting out these things; patience is advised. As has been the case with gold and silver, the faithful will consider these times as buying opportunities even though the window may close at any moment. Considering the movement of precious metals of late, that window may soon close.
A train wreck in slow motion may be the most appropriate metaphor for the US economy. Europe's economy seems more like an unnatural disaster, maybe similar to imploding a skyscraper. The EU is coming down faster than anyone anticipated. Geo-politics is driving economies and global finance straight over a cliff.
To wit, the strength of the US dollar versus other major currencies. Last May, the EUR/USD was bouncing around 122. Tuesday, it slumped to 108, a value not seen since the early days of the pandemic, February through June of 2020. Its destiny is parity. I give a Frenchman or Italian $100, he gives me 100 euro. It would make sense then for the pair to fail in unison, being they're separated only by an ocean and the fetid imaginations of bureaucrats turned plutocrats turned technocrats turned kleptocrats.
Channeling a former statesman, "if you like your fiat, you can meep your fiat." Eventually, fiat money returns to its intrinsic value of paper and ink. It will all be worthless.
Before that occurs, however, the fiat bankers will try all manner of tricks and teases to keep the unsuspecting public in tow. Government checks, like those issued in 2020 and 2021 (gimmie da stimmie, bro), are just the beginning. Talk of a digital dollar, digital euro, or what's known in the trade as Central Bank Digital Currency (CBDC) has been rumored to be on the way for at least two years. We, the people, are still waiting this salvation from all things not gold, silver, or bitcoin... and waiting... and waiting. Supposedly, the digital dollar will be unleashed at about the same time inflation rips food right out of our bellies and a 30-year mortgage prices out at 24%. It will be glorious they say. The world will never be the same. And, they're right.
Those of us with a modicum of financial and common sense will be prepared, though not as well as we might believe. While we will be using metals and bitcoins in trade, the rest of the world will still be using some form of fiat money, be it banknotes, CBDCs, or conch shells. Central banks aren't going to just go away. They've thought these things through many years in advance, but they didn't really count on the emergence and popularity of cryptocurrencies. Thus, they put up barricades, pass laws, make regulations, establish price controlling alternative investment vehicles to stop it or at least slow it down. They can't kill it; they can only try to contain it. Eventually, they - depending on which country on the planet you're occupying - will bar it, ban it, confiscate it... if they can, which they probably cannot.
There will be bitcoin martyrs, just as there were soldiers, sailors, and fighters who died for the crown, the country, the just cause. At least bitcoin hodlers can believe they'll die for liberty, because that's what bitcoin and decentralized finance is all about. While the US constitutions bars any entity other than congress to coin money...
Congress shall have power to coin money, regulate the Value thereof, and of foreign coin, and fix the standard of weights and measures. ~ Art. I, sec. 8, cl. 5.
No state shall coin money, emit bills of credit, or make any thing but gold and silver coin a tender in payment of debts. ~ Art. I, sec. 10, cl. 1.
... those horses left the barn long ago and they're not coming back. It doesn't say a thing about bitcoin, or commerce, or the right of individuals to trade freely without a middleman in any currency to which they can agree, and it does allow states to use gold or silver as legal tender.
The moment gold and silver are measured only in troy ounces or grams and bitcoin is measured in gold or silver and not in euros, yen, or dollars is the moment change can occur and free people can trade outside the tyranny of debt-based fiat currencies.
That time has not yet come, but it will, soon enough. Governments make laws. People make change.
Let's face it. If you do nothing, your net worth in dollars, euros, yen is going to be higher, but its net value will be constantly in decline. It doesn't have to be that way. That's why some people are divesting of their fiat currencies and whole nations are de-dollarizing.
We're on our way to a better world of honest money and smaller government. Policians, bureaucrats, and the 16,578 various overlapping federal, state, and local regulatory agencies and enforcement goons actually do hate us for our freedoms. They're constantly trying to limit them, diminish them, eviscerate them. We can't let that happen.
Gold. Silver. Bitcoin. Liberty. Freedom.
Hey, kids, here's your inspiration:
At the Close, Tuesday, April 12, 2022:
Tuesday, April 12, 2022, 9:12 am ET
Straight from the Truth is Stranger than Fiction Department, while all the other major indices were taking one for the team on Monday, the worst-affected over the past two weeks actually gained ground.
The Dow Jones Transportation Average rose some 56.48 (+0.39%) points on the day just as trucking firms are fearful that an endemic decline in goods heading to market will idle some regular routes, keeping profits on the downside. That's been the primary driver of the selloff that sent the trannies lower seven of the prior eight sessions. Speculators may have concluded that the decline below both the 50-day and 200-day moving averages had run its course, putting the 20-component average in an oversold condition.
In any case, stanching the drop on the transports had nil effect on the rest of the market, which was dashed throughout the session, though mostly in the afternoon, as Tuesday morning's March CPI reading is released at 8:30 am ET, prior to the open bell. Plenty of shaky hands were off-loading stocks in anticipation of the event with an expected inflation increase of 8.4% year-over-year.
Nervous as markets are over geo-political and economic events, consumers don't have to look far to see the ravages of inflation. Gas prices are more than a dollar higher at the pump than a year ago and the horrifying food price increases have people suffering from sticker shock over meats, cereals, and especially, processed foods. Worry that food prices may not have reached their zeniths has many shoppers stocking up on non-perishable essentials before an expected shortage this summer in everything from flour to milk to candy bars.
Following a rally at the end of the first quarter, stocks have given back plenty of the gains. The S&P has coughed up roughly half of the rally from March 14 to March 29, along with the NASDAQ, while the Dow has only dropped a third. Still, Monday's trading left the NASDAQ down 15 percent, the S&P down eight percent and the Dow off six percent on a year-to-date basis.
As the CPI figures came in a little hotter than expected on Tuesday at 8.5 percent, stock futures actually gained momentum, which had been building since overnight lows. As befits Wall Street plungers generally, there is no data point that the market won't digest and spit back out as some kind of positive development, though any misplaced euphoria over the continuation of runaway inflation that began early in 2021 is not likely to have any lasting force.
Prices, as they say in some locales and political campaigns, are just too damn high and are likely to remain so for an extended period, probably through summer and into fall. There may be some relief at the pump as oil prices have actually fallen over the past few weeks, but food is even more essential than energy. Shortages of basics are already appearing in the poorest places, sub-Sahara Africa and Southeast Asia, for instance. Developed nations have more capacity to manage shortfalls, though analysts are fearing an acute decline in food production this year thanks to a shortage and high price of fertilizer in the main.
What's lacking in places like Europe and the US is the political will to better manage the economy. Neither Republicans nor Democrats in the US congress appear ready to tackle any tough issues, more inclined to pander to voters in advance of mid-term elections in November. As the White House stumbles through its second year of mismanaging everything, the sense that government is more the cause rather than the solution to what ails the country is becoming pervasive.
Just a half hour prior to the opening bell, US stock futures have rocketed higher and European markets have trimmed earlier losses. Because higher energy costs (+18.3 percent in March) were the major contributor to the high CPI number this month, Wall Street is doing its level best to look beyond the numbers, figuring that April's inflation gauge will be lower as oil and gas prices have come down.
Leave it to the masters of the universe to unearth a positive spin from even the most dreadful news. Oddly enough, gold, silver, oil, and bitcoin are also on the rise while the 10-year note yield collapses from 2.83% to 2.70 and the dollar index slams lower.
At the Close, Monday, April 12, 2022:
Sunday, April 10, 2022, 9:12 am ET
While you were sleeping...
Over the last eight sessions, from March 29, the Dow Jones Transportation Index fell a whopping 13.45 percent.
The 20 companies that comprise the index are heavily involved in moving people and products by air, rail or highways. To get an idea of how deeply buried this news is, consider that the above-linked article on Yahoo! Finance posted on April 7, has no comments. It was barely noticed and hasn't been widely reported by the main finance propagandists, Bloomberg, CNBC, Fox Business, et. al.
On Friday, April 1, the index closed down nearly five percent, racking a loss of 771 points.
Investors were paying attention not only to the recent rise of fuel prices, but to demand destruction at the front end, particularly affecting mainline trucking concerns such as JB Hunt (JBHT), having fallen from a high of 218 to a close on the 8th of April at 173.
Rail line operator, Norfolk Southern (NSC), dropped from 291 to 258. Landstar Systems (LSTR) hit a 15-month low, at 143.50. Old Dominion Freight Line (ODFL), which made a high of 373 in December of 2021, closed Friday just below 260.
Airline stocks - United Air Lines (UAL), Delta Air Lines (DAL) - were least affected in the recent downturn. They were devastated at the end of February and early March, and had recovered more than half of their losses, but they are still underwater since the pandemic. At some point in the not-to-distant future, they'll need another government bailout. It's just how they fly.
With the transports joining the NASDAQ in correction country, two mainstream sectors of huge importance to the general economy - transportation and tech - have been devastated, leaving the rest of the market to wonder what comes next. All of the major averages were down this week, putting an abrupt end to the bear market rally of the past few weeks.
Treasuries were blown out across the board, reflective of the Fed's hawkish tones:
Damage was worst at the long end of the curve, which remained violently inverted and a complete mess. Yield on the 10-year note jumped 33 basis points. The 20-year bond shook higher by 0.34%, the 30-year yield jumped 32 basis points. 3s, 5s, 7s, 10s, 20s, and 30s are all fast approaching three percent, a level that could be breached before the next FOMC meeting on May 3-4 as the global economies transition from fiat financialized collateral to one more centered on commodities and energy products thanks to Russia, China, Brazil, India and Middle East nations.
WTI crude fell below $100/barrel for the second Friday in a row, closing at $97.90, after a brief rise off the April 1 close of $99.27.
Gas at the pump averaged $4.115 /gallon in the United States, down 6.4 cents from a week ago and 23.5 cents from a month out.
Bitcoin languished along with the entire crypto sector, settling this Sunday around $42,590.70, down nearly eight percent on the week. Since the release of tracking ETFs in the mainstream markets last year, cryptos have suffered much the same fate as gold and silver have experienced the past decades. while their popularity and acceptance continues to grow, regulations and general disinformation from government and media sources have kept the sector from advancing in a positive manner.
Gold price 03/27: $1,957.60
Silver price 03/27: $25.73
Gold and silver rallied on the back of Russia setting a temporary floor on gold tied to the ruble. The Russian Central Bank (RCB) has most recently indicated that it would begin buying gold at a negotiated price as of April 8 after fixing its buying at 5000 rubles per gram.
Since the initial announcement of a Russian gold "fix," the ruble has rebounded back to where it was prior to military action in Ukraine. Investors, the LBMA and COMEX futures markets have taken note.
Here are the latest prices for common one ounce gold and silver items sold on eBay (numismatics excluded, shipping - often free - included):
The Single Ounce Silver Market Price Benchmark (SOSMPB) dropped over the course of the week, to $39.77, a drawdown of $0.97 from the April 3 price of $40.74. The price fell below $40.00 for the first time in four weeks.
Judging by prices on eBay and offerings from a small sampling of online dealers, one ounce gold pieces are only obtainable above $2000 US and soon may not be offered for under $2100. With gold rapidly becoming out of reach for most of the world's population, expect silver to gain attraction from the masses as a reasonable alternative to fiat or crypto. Silver has been currency for centuries in the past, is still widely held and transferred and will be recognized as legitimate currency in the not-so-distant future.
With the focus clearly on gold in all forms, silver may be left a little behind as geo-political events continue to frame prices, though it remains the single most-undervalued commodity on the planet, its true value likely magnitudes higher than current quoted prices. Once the frauds of the LBMA and COMEX are fully exposed and defeated, gold and silver will be green-lighted to much higher levels.
As the world transitions away from fiat, to what Zoltan Poszar calls "Bretton Woods III," keeping up with current world financial conditions has become a mandatory task for anyone seeking to gain or preserve wealth over the coming months and years.
The transition has already begun, outlined smartly by goldmoney.com's Alisdair Macleod's recent essay, "The Commodity Currency Revolution."
That's a WEEKEND WRAP.
At the Close, Friday, April 8, 2022:
For the Week:
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