Money Daily Financial Money News Week of June 13 - June 19, 2021 Stocks Bonds Commodities Gold Silver Oil Bitcoin

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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.

PRIOR COVERAGE:

6/6-6/12/2021
5/30-6/5/2021
5/23-5/29/2021
5/16-5/22/2021
5/9-5/15/2021
5/2-5/8/2021
4/25-5/1/2021
4/18-4/24/2021
4/11-4/17/2021
4/4-4/10/2021
3/28-4/3/2021
3/21-3/27/2021
3/14-3/20/2021
3/7-3/13/2021
2/28-3/6/2021
2/21-2/27/2021
2/14-2/20/2021
2/7-2/13/2021
1/31-2/6/2021
1/24-1/30/2021
1/17-1/23/2021
1/10-1/16/2021
1/3-1/9/2021
12/27/20-1/2/2021
12/20-12/26/2020
12/13-12/19/2020
12/06-12/12/2020
11/29-12/05/2020
11/22-11/28/2020
11/15-11/21/2020
11/8-11/14/2020
11/1-11/7/2020
10/25-10/31/2020
10/18-10/24/2020
10/11-10/17/2020
10/4-10/10/2020
9/27-10/3/2020
9/20-9/26/2020
9/13-9/19/2020
9/6-9/12/2020
8/30-9/5/2020
8/23-8/29/2020
8/16-8/22/2020
8/9-8/15/2020
8/2-8/8/2020
7/27-8/1/2020
7/20-7/26/2020
7/13-7/19/2020
7/6-7/12/2020
6/29-7/5/2020
6/22-6/28/2020
6/15-6/21/2020
6/8-6/14/2020
6/1-6/7/2020
5/25-5/31/2020
5/18-5/24/2020
5/11-5/17/2020
5/4-5/10/2020
4/27-5/3/2020
4/20-4/26/2020
4/13-4/19/2020
4/6-4/12/2020
3/30-4/5/2020
3/23-3/29/2020
3/16-3/22/2020
March 14, 2020
March 13, 2020
March 12, 2020
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March 10, 2020
March 9, 2020
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Options Expiry, Quad Witching a Prelude to The Big Dump; Gold, Silver Punished Severely

Friday, June 18, 2021, 9:07 am ET

Outside of the runaway NASDAQ, stocks are going to have to put on a pretty significant rally Friday if they're to avoid ending the week in the red.

The NYSE Composite is down 1.70%. The S&P is off for the week by 25 points (0.60%), while the Dow, a loser in all four sessions this week and seven of the last nine, is down 656 points, or 1.90%. Stretching out further, since the May 10 high of 35,091.56 to Thursday's low of 33,626.61 the intraday loss for the 30 blue chips is 1,464.95 points, or, 4.18%.

Judging by the action in futures, there doesn't appear to be much positive sentiment heading into the cash open. Dow futures, as of 8:35 am ET, are down 300 points, with futures of the other indices following suit. Friday could be a hellish day to trade, a potential buying opportunity for optimists, or a preview of the massive crash that should be just ahead for overpriced stocks in US markets.

Of the majors mentioned above, the NASDAQ remains the outlier with a gain for the week of 91 points, which, notably is less than Thursday's 121-point rip. After lagging the market for most of the present year, the tech-laden index has become the new leader for the bulls. The NASDAQ actually made a new all-time closing high on Monday (14,174.14), but suffered declines Tuesday and Wednesday, prior to Thursday's rally that fell short of setting another record close.

In case there's a washout on Friday, all four indices would post losses for the week, the most worrying being the mega-caps of the Dow, which is a departure from the normal cycle wherein weakness usually shows up in smaller caps prior to corrections or bear markets. The Dow closed below its 50-day moving average for the second straight session on Thursday.

End of quarter options expiry is likely to lead the market, whichever direction it takes, though, arguably, that direction appears to have a mind for finding a near-term floor, if any exists. If the S&P and Composite break through their 50-day moving averages, that could inspire a Buy-The-Dip response and it will be important to note whether traders see fit to re-engage as stocks skid lower.

Also on the investment radar are the precious metals, as both gold and silver have been punished severely since the FOMC announcement Wednesday and the subsequent dot-plot desperation that gripped the investment community, eyeing an earlier-than-expected end to the Fed's QE and the possibility of federal funds rate hikes in 2023.

The possibility of tighter economic policy was deemed bad for assets which actually are good stores of value. Silver, which had been hovering right below $28/ounce for weeks, was slammed lower on Wednesday afternoon and further devastated Thursday, closing in New York below $26 for the first time since April.

Gold has treated even worse. Its slide began before the FOMC meeting. It had topped $1900/ounce in late May, but once June commenced, weakness appeared, accelerating on Wednesday and Thursday to send it to a NY close of $1774.00. There's been much made about upcoming Basel III rules to be imposed on European banks come June 30 causing a spike in precious metals' prices, but recent action has dampened the mood of gold bugs and silver adherents.

Bitcoin and other cryptos have been slipping lower over the past few days, but Bitcoin in particular has actually showing more resilience than other asset classes.

As the quarter-ending quad witching - expirations of market index futures, options futures, stock options, and stock futures - commences, investors may be caught holding their breath or being wrong-footed, awaiting the drop of the next shoe.

A full recap of the week will be posted Sunday morning in the regular WEEKEND WRAP.

At the Close, Thursday, June 17, 2021:
Dow: 33,823.45, -210.22 (-0.62%)
NASDAQ: 14,161.35, +121.67 (+0.87%)
S&P 500: 4,221.86, -1.84 (-0.04%)
NYSE: 16,411.65, -131.11 (-0.79%)


Fed Tosses Interest Rate Grenade Into Markets, Sprinkles Salt on Wounds; IMF Snubs El Salvador, Bitcoin

Thursday, June 17, 2021, 6:34 am ET

Anybody looking for a reason to take profits or get out of stocks for the near term found it at 2:00 pm ET Wednesday when the FOMC meeting concluded, keeping the federal funds rate at 0.00 to 0.25% but mentioned that interest rate hikes were being considered for the end of 2023.

Upon release of the FOMC statement, stocks were slammed lower. However, it wasn't the headline press release statement that caused the calamity, it was the summary of economic projections [PGF] that did the damage.

Getting right to the point, what moved markets on Wednesday, June 16 is a chart, a dot plot called, "Figure 2. FOMC participants' assessments of appropriate monetary policy: Midpoint of target range or target level for the federal funds rate." Interpreting the reaction from Wall Street the key takeaway is that billions or trillions of dollars are going to move from stocks to bonds based on federal funds rate projections of Fed policy makers who have gotten just about everything wrong for the better part of the past 20 years.

The chart shows that 11 of the 18 participants at the Fed consider the appropriate level for the federal funds rate at 0.5% or higher. Five believe the current rate would still be appropriate. Two believe the rate should be 1.50%. Three think it should be 1.0%. The remainder - eight of them - are stuck between 0.25 and 1.00%, forming a consensus that is not even a majority.

One thing Wall Street tycoons fail to understand is the end note of the summary, a full page titled, "Forecast Uncertainty." In just the first paragraph, it states: "The economic and statistical models and relationships used to help produce economic forecasts are necessarily imperfect descriptions of the real world, and the future path of the economy can be affected by myriad unforeseen developments and events." At least the Fed covers its behind a little bit with such proclamations, a small consolation for being so consistently and persistently wrong.

Thus armed with expert projections of the future, which should bear no resemblance of mystics staring into crystal balls or shamans throwing down chicken bones, Wall Street genius traders sold all at once. Then, some started buying shares back. Then some others sold some more. It was all very confusing. By the end of the day, all the major indices ended up in the red, with the Dow leading the way, closing near the lows of the day and extending the intraday decline from May 10 (35,091.56) to Wednesday's low (33,917.11) to 1,174.45 points, a touch more than three percent and likely lower come Thursday.

With stocks trending lower, Chairman Jerome Powell sought to contain the carnage. During his press conference he added some spin on the dot plot dilemma, saying, "...dots are not a great forecaster of future rate moves," adding that dot plots should be taken with a "big grain of salt." That eased markets a little, lifting them off the lows of the session, but Powell and his pals can soothing markets with smooth talk remains a dubious enterprise.

The speculation on Wall Street is fun to watch, especially when it comes to interest rate increases, because the Fed has tried to raise rates in the recent past, with similarly unpleasant results. In case one's forgotten, the federal funds rate in the summer of 2000 was 6.5%, the Fed having raised it from 4.5% at the end of 1998 to attempt to cool off the overheated NASDAQ which closed on March 10, 2000 at the astounding high of 5,048.62.

Well, it took a while, but they sure popped that bubble. By June of 2000, the fed funds rate was 6.5%, but the NASDAQ had already taken a hit, closing at 3,797.41 on June 15. With stocks imploding, the Fed was forced to reverse course and begin cutting rates, which they did in a series of steps all the way down to 1.0% by November 2003. Even before that, however, the damage had been done. On April 4, 2021, the NASDAQ closed at 1,638.80. Five months later, 9-11 struck, sending the index to 1,423.19 on September 21. With interest rates gradually declining, the NASDAQ finally bottomed out completely on March 11, 2003, at 1,271.47.

In June, 2004, the Fed began another series of hikes, off the 1.0% bottom they had maintained over seven months. With the country on a war footing (Iraq and Afghanistan), the Fed saw fit to hike rates all the back up to 5.25 by July of 2006, a rate they maintained for just over a year. To spur the economy and the stock market, the Fed began reducing rates in a measured manner, with expected results.

On Oct. 9, 2007, the Dow closed at 14,164.53. But, even as the Fed continued to cut rates, investors were worried, selling off the Dow and other stocks. The housing bubble and sub-prime disaster were looming, though Ben Bernanke, then Chairman of the Fed, said sub-prime was "grave but largely contained," on May 17, 2008.

When Bear Stearns went bust in March, 2008, the Dow had already declined to 11,893.69 on March 7 and continued to tread water, reaching a near-term bottom of 11,188.23 on September 4, but it was about to get worse, a lot worse.

The Dow ended the month of September at 10,850.66, but after Lehman Brothers went bust, the index fell to a closing price of 8,175.77 on October 27. By Mar. 9, 2009, it had finally bottomed at 6,547.05, the effective federal funds rate reduced all the way down to 0.18%.

Staying at the zero-bound for the next six years, the Fed finally saw fit to begin raising the rate and they did so, in a series of 25 basis point raises, up to 2.40%, maintaining that level from January through June of 2019.

But, as the Fed was attempting to achieve what they called "normalization" by continuing rate hikes, the stock market was having hissy fits. From October 3rd to December 24, 2018, the Dow fell from 26,828.39 to 21,792.20. Then-Secretary of the Treasury Steven Mnuchin "made a few phone calls" around Christmas to stop the bleeding, as President Trump urged the Fed to halt the rate hikes. They didn't listen and stocks stagnated until they began cutting again in August 2019. The Dow gained steadily from 25,479.42 (August 14, 2019) to a high of 29,551.42 on February 12, 2020, the top prior to the Covid crisis.

In essence, as demonstrated above, the Fed can raise rates, but not by much and not for too long. The economy is too weak and too addicted to cheap money. Since 2000, each successive rate hike has been lower, 6.5% in 2000, 5.25% in 2007, and 2.40% in 2019. The last attempt lasted just seven months before the stock market dictated otherwise.

With the damage now done, stock futures are trending to the downside ahead of Thursday's open and Friday's quad witching.

Unrelated and unsurprisingly, various news outlets are reporting that the World Bank and IMF have refused El Salvador's request for technical assistance with the implementation of Bitcoin as legal tender, citing environmental and transparency concerns.

It looks like President Bukele will have to get help from private sources, which is what Bitcoin is all about, anyway. The IMF distancing itself from Bitcoin and El Salvador in general was expected. After all, they're in the fiat, fractional reserve business, and, as Anthony Pompliano tweeted in response to the news, the "World Bank hasn't figured out how to make money off Bitcoin."

This development puts the Bitcoin vs. fiat argument in perspective. The battle over the future of money is further engaged. El Salvador should prove to be a difficult, yet instructive, testing ground for digital money.

At the Close, Wednesday, June 16, 2020:
Dow: 34,033.67, -265.63 (-0.77%)
NASDAQ: 14,039.68, -33.22 (-0.24%)
S&P 500: 4,223.70, -22.89 (-0.54%)
NYSE: 16,542.76, -113.04 (-0.68%)


Biden-Putin and FOMC: Big Duds Will Lead to Stock Market Catastrophe

Wednesday, June 16, 2021, 9:00 am ET

Stocks took a bit of a trashing on Tuesday, but, as has become the norm, the indices were much lower intraday, making fresh bottoms in the process.

The Dow Jones Industrial Average, which hasn't made a new closing high since May 7, touched bottom at 34,199.16, its lowest low since May 21st (34,121.91). Recent action in stocks is beginning to look suspiciously like the beginning of a corrective phase despite the all-time closing highs set by the S&P 500 three days in succession (Thursday, Friday and Monday) and the NASDAQ exploding 1100 points higher since May 12, from 13,031.68 to a record close at 14,174.14 Monday, which was hardly noticed.

Over the past 30 years or so, big declines have been set off by various sectors. In 2000, it was tech stocks which sent the NASDAQ down the drain. In 2008, it was more or less everything, but the financial sector led the way down.

What's alarming about the current set-up is that the indisutrials are the ones hit hardest. The dividend-paying, reliable, rock-solid Dow 30 are leading the negative charge.

Presently, it's nothing. On a closing basis, the Dow is down less than two percent from its all-time high. It gets a little more worrisome looking at the intraday, where the Dow peaked at 35,091.56 the Monday following the May 7 ATH, only to finish with a loss in a massive turn-about. From 35,091.56 to yesterday's intraday low of 34,199.16 is closing in on three percent (2.55%, actually). Still nothing to cause concern, yet.

Today's double feature of the Biden-Putin meeting and the conclusion of the Fed's two-day FOMC policy snooze-fest will probably not provide any kind of positive catalyst for stocks. Neither the current White House occupant nor the Fed governors want to rock the boat that seems to be sailing along just fine, recovery in progress, economy on the mend, inflation transitory. What could go wrong?

If the Fed even mentions tightening or thoughts of tightening in their press release or Powell makes a boneheaded statement about raising interest rates, that could tip the scales in favor of the bears. Never mind what comes out of the Biden-Putin talk, the press will make sure that it sounds like Biden has Putin and Russia all locked down and under control. Biden needs to be made to look like a strong leader as the reality is that he's anything but.

Just as the G7 communique was a colossal flop, attempting to paint China as a human rights abuser and countering its Belt and Road Initiative (BRI) seven years too late with a pansy-waisted Build Back Better World (B3W) theme promising infrastructure to developing nations with no real plan in place, so too will the bluster and bravado of the big summit be a dud.

Joe Biden can barely navigate his way to the bathroom on a good day. How his handlers plan to keep him cogent for what's supposed to be four to five hours of talks with a real world leader is a real concern. Somewhere in there, sleepy Joe is going to need a nap. If they're lucky, Putin won't laugh Biden out of the room. The only good that can come from the summit is if somehow it's cancelled. A meeting with a sharp, poised, national icon like Putin could turn out to be a disaster with the somnambulant holographic Biden at the center of it, making the odds for a market sell-off much greater than those favoring a rally or even an unchanged close. Jen Psaki will be sure to circle back and retreat from an enormous list of Biden gaffes from the past week.

Just like the last election, everybody knows the economy, government, and the US currency is all fake. For the 12 years following the GFC, the Fed has been pumping money into the Wall Street casino at a frantic pace, one that was kicked up by orders of magnitude during the pandemic. On top of that, the US economy needed three rounds of stimulus checks, extended moratoria on rent and mortgage payments, and super-sized unemployment benefits just to keep from tipping over completely.

In its statement, the Fed will commit to continuation of its massive QE policy of $80 billion a month in treasuries and another $40 billion a month in MBS until the moon crashes into the earth or hell freezes over, whichever comes last. Anything short of complete assurance that wads and wads of free counterfeit Federal Reserve Notes will continue flowing into the coffers of the biggest banks and corporations will cause an immediate and violent contraction in stocks.

Many economists and would-be smarties have commented that the Fed has painted themselves into a corner, positing that they cannot suspend the endless brrrrr of the printing press lest the beloved stock market take a kick to the groin. Making matters worse is that their agent danger, Janet Yellen, has been pursuing the same kind of spendthrift policies at the Treasury, further bankrupting the government which already had bills they could never pay before she was cowardly confirmed by a morally-tainted senate.

Somehow, nearly everybody seems convinced that stocks are the place to be. That the Fed and the government will figure a way out of the mess they've gotten the country into. Unfortunately, nothing lasts forever. Not bull markets, bear markets, fraud markets, free money, debased, unbacked currencies, even reserve ones. None of it.

Since February of 2020, America has been nothing more than a gigantic clown show and that show is now coming to an end. The people have seen enough and are tired of it. When the Fed and other mouthpieces say that inflation is transitory, they're not kidding. Price inflation, originated by excessive credit and loose monetary policy needs a healthy economy in which to thrive. The US economy is anything but healthy and it has reached the beginning of the end of the easy times.

The correction and eventual crash of the stock market may not begin today, tomorrow or happen overnight. The Fed has too much control over all of it to allow anything severe... unless they're desirous of it. Stocks will likely be eased lower initially. They may even pump them to new highs with the help of some glowing press and algorithms that read headlines as buying opportunities. There may be a pause, some sideways trading for a while, but realistically, it's beginning to look like it's all downhill from here.

At the Close, Tuesday, June 15, 2021:
Dow: 34,299.33, -94.42 (-0.27%)
NASDAQ: 14,072.86, -101.29 (-0.71%)
S&P 500: 4,246.59, -8.56 (-0.20%)
NYSE: 16,655.81, -6.61 (-0.04%)


Epic Failing and Fakery At the Top; Maricopa County Audit Completes Hand Count; Musk Pumps Bitcoin (again)

Tuesday, June 15, 2021, 9:36 am ET

If you're like 80-90% of the people in the USA, don't bother reading this post. You'll deny it, ignore it, try to shield yourself, your spouse, and your kids from it.

The sad facts and speculations over the state of affairs in the United State of America should cause concern, worry, and maybe even some action on the part of patriotic citizens.

We lost. The American people, that is. We lost control of the federal government some time between 1788 and today. Sure, that's a long time, but, depending on what levels of skepticism and cynicism you assign, the federal government may have been taken over by rogue elements as early as months after the ratification of the US Constitution in 1788, when New Hampshire became the 9th state to ratify the document and make it the official law of the original 13 colonies, to as late as last November or anywhere in between.

Others point to the Civil War as a seminal event, wherein President Abraham Lincoln suspended the writ of habeus corpus in 1861, silencing critics of the Union's policies concerning the separatist Confederate states and then proceeded to shred other portions of the constitution in order to "preserve the union."

1913 also ranks high on the list, for that is the year the Federal Reserve System - a private bank - was installed as the Central Bank of the United States, changing the standard for US currency in opposition to the dictates of the Constitution.

Others will cite September 11, 2001 as a day of infamy, and still more point to the most recent presidential election, on November 3, 2020, as the ultimate betrayal of the US public, when voters saw substantial leads in key states - Nevada, Arizona, Georgia, Michigan, Pennsylvania, Wisconsin - by President Donald J. Trump eroded overnight as vote counts for Joe Biden, a candidate that spent most of the campaign in his basement and attracted sparse crowds at the few rallies he held, swelled, eventually boosting his Electoral College votes beyond the winning threshold.

Less than three weeks after the election, nearly 50% of the voting public believed the Democrats cheated to steal the election from Trump, in favor of Biden. Those numbers have likely increased in the ensuing months, though pollsters and the mainstream media have long ago abandoned the story.

Events in Maricopa County, Arizona may begin to change the official narrative in coming days. An audit of the votes in Arizona's largest county, with a population of 4,485,414 as of 2019, making it the state's most populous county, and the fourth-most populous in the United States, containing about 62% of Arizona's population, has been turning heads and becoming the source of considerable controversy over the past few months.

A hand count of the 2.1 million votes in the county was completed Monday, but Ken Bennett, state Senate audit liaison, has said the end of the hand count wouldn't immediately signal a final audit report. The auditors are looking into other possible methods of voter fraud, including examination of mail-in ballots. A full report could be days away, but more likely won't be final until early July.

Representatives from other states have visited the Maricopa County audit, including legislators from Pennsylvania, Georgia, Colorado, Alaska, Virginia and Nevada. Many more, even from states President Trump carried, are scheduled or already have visited the Arizona audit site in person. The reason is fundamental. If any state conducts an audit that proves fraud, all states must audit their results. In the interim, there would be no actual president. The US military would take over the functions of the federal government, which may have already been the case, as 50,000 members of the National Guard had barricaded and patrolled the Capitol before and after the farcical January 20 inauguration of Joe Biden. Most of the troops have since departed, but the barricades and fences remain. The US Capitol grounds still appears to be an armed encampment.

While the Arizona audit approaches a conclusion, other states are gearing up for their own audits. The drama is largely ignored by the mainstream media, itself corrupted and co-opted by the forces which have ostensibly taken over the reins of the federal government.

People with understanding and knowledge - their eyes and ears wide open - believe an entity known as the Deep State - a clandestine group representing the aims and goals of the world's elite - are in control of the government. Elements of the Deep State may include the intelligence agencies, Department of Justice, FBI, various billionaires and CEOs of social media companies and other oligarchs, spooks, and rogue operators.

Mainstream media dismisses all of this as "conspiracy theories," denying the existence of a shadow government that has taken control of government from the people.

Whatever one's beliefs or political leanings, there's enough circumstantial evidence surrounding not just the election of 2020, but the entire COVID crisis and other oddities over the past 18 months (BLM riots, mass shootings, stimulus checks, extended supplemental unemployment benefits, mortgage and rent moratoria, the origin of the mystery virus, masking, social distancing, lockdowns) to at least raise suspicions that the true nature and operation of the federal government is not exactly what the media is portraying.

This story continues to develop as the nation devolves into third-world status at the behest of the Federal Reserve, which has one of its operatives, Janet Yellen, installed as Secretary of the Treasury, wherein she controls the purse of the federal government. Unbeknownst to most people, 15 Senators opposed her confirmation, though she was confirmed by a majority of 84-15 with one abstention.

Months will likely pass before the truth is known, though to many, the phrase, "Trump Won. Everybody Knows It." has been heard far and wide. On the surface, American life is returning to some degree of its former normal state. Below the superficial portrait painted by the co-opted mainstream media, there is much more than meets the eye.

While this all plays out, stocks managed to avoid meltdown on Monday, with the major averages getting a solid boost in the final hours of trading. The Dow Jones Industrial Average finished lower by just 85 points, though it was down by more than 250 during the cash session. Gold and silver were blunted once more on the COMEX, purposely being held below their breakout levels, which are $29.15 for silver, and $1900 for gold.

Bitcoin continues to trend higher, pushed from the mid-30s to over $40,000 after Elon Musk, self-appointed Emperor of Mars (or something like that), tweeted that his company, Tesla, may reconsider its currently-negative stance on cryptocurrencies and eventually allow purchases of its vehicles in Bitcoin.

Admittedly, covering the economic, political, and social news and attempting to prepare for unknown, upcoming events is akin to herding cats in a thunderstorm during an earthquake.

Good luck.

At the Close, Monday, June 14, 2021:
Dow: 34,393.75, -85.85 (-0.25%)
NASDAQ: 14,174.14, +104.72 (+0.74%)
S&P 500: 4,255.15, +7.71 (+0.18%)
NYSE: 16,662.42, -32.51 (-0.19%)


WEEKEND WRAP: World of Confusion: CPI Rises, Bonds Rip; NASDAQ Emerges; Bitcoin Legal In El Salvador; G7 Fights China With Press Release

Sunday, June 13, 2021, 11:00 am ET

Over the past week, US equity markets witnessed a reversal of fortunes, as the NASDAQ took back its role as the leading market, the S&P 500 struggled to fresh all-time highs, and the Dow Jones Industrial Average took one for the team with a decline of nearly one percent.

The NASDAQ proved the place to be in what was otherwise a dull week, rising 254.93 points (+1.85%), leaving the other indices in its wake. Tech stocks and the NASDAQ in particular have been under pressure recently, lagging the others, but this week's reversal may be just the kind of wake-up call the markets needed heading into the next week, which includes an FOMC policy meeting of the Fed and a quad witching event on Friday.

Overall, trading was subdued as participants girded themselves for more heady days ahead.

Treasuries were the place to be, as a rally that began in earnest on May 20 - when the 10-year note and 30-year bond began pricing higher and sending yields lower - took flight, pushing yields from June 3rd through June 11 on the 10-year from 1.63% to 1.47%, and the 30-year from 2.30% to 2.15%, all done in the face of a CPI print of 5.0% on an annualized basis.

Whatever mechanism the Fed is employing to make bonds behave like non-inflationary toadies, it's working, as yields on long-dated maturities have declined significantly since ramping higher from January through April. May saw moderation in the price and yields, but June is turning out to be a more dramatic rally as a forward-looking market senses that he Fed may actually be right about price inflation being transitory and limited to certain sectors which experienced supply chain disruptions.

Lumber price hikes are by now well-known and beginning to decline as mills get back on line and transportation issues are resolved. Given the spike in lumber prices over the past year, even as supplies were plentiful, companies like Home Depot, Lowe's, Georgia Pacific, and Weyerhauser may have taken advantage of the logjam (no pun intended) in supply chain mechanics, gouging customers at retail and running with the narrative. If the US government actually had a competent, operative Department of Justice or FBI, these companies would be under investigation for price-rigging and profiteering. Alas, no such probes will be forthcoming.

While the CPI is roundly criticized for its methodology, grossly understating real price inflation and ignoring widespread "shinkflation" (the industry practice of dowsizing products, especially packaged food items, while maintaining the price), the overall impact of inflation has been evident mostly in the housing market, used car prices, and building materials. At the retail level, grocery and staple goods have not increased dramatically and are regionally biased. Shopper preferences and discretion can ameliorate most price dysfunctions. Beyond the Kroger's and Wegman's of the world, there are plenty of food discounters, from dollar stores to Sav-A-Lot to Grocery Outlets, which continue to provide bargain-conscious shoppers a level of reasonableness.

Further, current inflation, being a monetary event at its origin, can be literally tied to government stimulus over the past 14 months, including increased benefits to millions of unemployed workers and direct checks to millions more earning less than $80,000 a year, to say nothing of the effect of rent and mortgage forbearance. The last round of stimulus checks was in April with no new proposals on the government's table. Many states have refused the additional unemployment benefits from the federal government, ending the program prematurely. The entire assistance program will expire in September.

Without government supplying most of the liquidity at the consumer level, the inflation spike was real, though not sustainable. Just like the Fed occasionally pulls away the punchbowl of cheap money for Wall Street, the federal government seems to be intent on at least limiting the level of free-spending into the second half of 2021. Without a steady flow of handouts and give-aways, there is no support for continued inflation and the high CPI numbers recently encountered may soon begin to recede to normal levels. Not to say that two or three percent inflation is in any way a positive, what's occurred recently has been an anomaly driven by policy rather than economy.

One contributing factor to the inflation surge has been rising fuel prices, especially at the pump, where retail gas prices hit a seven-year high, averaging $3.08 a gallon across the United States. The pain has been widespread, as prices accelerated off the 2020 low of $1.74 and are 50% higher than at this time a year ago.

As usual, oil companies are taking advantage of the situation, which is a return to normalcy for most Americans after a year of shutdowns, lockdowns, restrictions on travel and business closures. The reopening of the economy had little to do with supply-demand dynamics, as a glut of oil on world markets continues to persist. The run-up in gas prices only happened because there is widespread collusion and price-rigging among oil producers and refiners, seeking maximum profitability. When ExxonMobil (XOM), Chevron (CVX) and other major producers report second quarter earnings in July, expect their profits to have soared. Investors have been ahead of the curve on the two major oil giants, pushing both to 16-month highs recently after profitability returned in a big way through the first quarter of 2021.

Prices for WTI crude continues to climb, reaching $70.91 as of Friday's close, the highest since October, 2018. This level of pricing is unsustainable given current economic conditions, a view held by traders in oil futures, which are in backwardation, with spot prices higher than price for the same product in the future. In real terms, the one thing that can stop any kind of economic recovery or rally in its tracks is an explosion of energy prices. As the US - and largely the rest of the world - emerges from the most recent crisis, economies in developed nations are weak, the recovery tepid at best. While the comparisons to 2020 GDP will be hailed as historic and indicative of newfound prosperity, oil futures are singing a different tune. As with inflation, the headline hides the underlying reality of core weakness, a condition that's been endemic since the GFC of 2007-09.

The narrative will flip in the second half of the year. Following a summer of hope and giddiness, the third and fourth quarters of the year are very likely to reveal systemic faults in the economy. Unemployment is still stubbornly high, understated by the mainstream media, and damaging to the general well-being. America is not the economic powerhouse of the 50s and 60s. Rather it is a house of cards, built on debt and easy money the past 20 years. Productivity has been in decline for decades, taxes are ruinous, and government overreach is at levels not seen since possibly 1775. Freedoms have been eroded and wages have stagnated. Wealth inequality is at record levels. The United States produces mostly debt, dunces, and, soon enough, deflation of a kind not experienced since the 1930s.

With the Fed and federal government on a collision course with a currency crisis, the biggest story of the week was the resolution by the government of tiny El Salvador to make Bitcoin legal tender alongside the US dollar. Mainstream media downplayed the event, the first of its kind in the world, but the crypto universe was encouraged by the development. Bitcoin bounced off $31,000 to as high as beyond $38,000 on Wednesday, drifting back to the $35-36,000 Thursday and into the weekend.

As soon as the news was announced, the central banks responded through their main mouthpiece at the IMF.

Roll the FUD:

It is a bad idea for El Salvador to accept Bitcoin as legal currency, IMF warns

IMF sees legal, economic issues with El Salvador bitcoin move

IMF warns of risks after El Salvador adopts bitcoin

El Salvador's Bitcoin Bill Raises 'Issues': IMF Spokesperson

Each of the aforementioned articles contain some, if not all, of the following message:

"The adoption of Bitcoin as legal tender raises a series of macroeconomic, financial and legal problems that require very careful analysis , " said Gerry Rice , IMF spokesman at a press conference on Thursday.

"We are closely monitoring progress on this issue and will continue our consultation with the authorities," Rice added before confirming that they would hold a meeting with President Bukele to discuss the issue.

"What we have said in the past, in general, is that cryptocurrency assets can pose significant risks, and effective regulatory measures are very important in addressing them," the IMF spokesperson commented.

Note that IMF spokesman, Rice, never expands the narrative to specifics. In a purely fear-mongering tactical approach, the world's money watchdog falls back upon its own self-appointed authority with the bogus, "series of macroeconomic, financial and legal problems that require very careful analysis" and "cryptocurrency assets can pose significant risks" approach. None of these risks are identified, because the truth is that Bitcoin - like gold and/or silver - poses an existential threat to all fiat currencies in use throughout the world.

There is not a single currency on the planet backed by anything other than "full faith and credit" of a government and the magical process of creating money out of thin air by central banks. Bitcoin has proven its resilience time and again as an inducement to economic freedom for rich and poor. Central banks are no doubt panicked over its continued growth and acceptance and all they have left to fight it with are words and threats of regulation.

Eventually, Bitcoin will be recognized as currency by more nations, not just El Salvador, as the fiat regime collapses under mountains of debt, corruption, and fraud.

The podcast of Episode 31 of Season 3 of The Scoop was recorded remotely with The Block's Frank Chaparro and Human Rights Foundation's Alex Gladstein, and provides some clarity on El Salvador's condition and what may lie ahead for cryptocurrencies.

Given the volatility in Bitcoin, a comparison with the Fed's balance sheet might be instructive.

Since September, 2008, the Fed's balance sheet - the assets held on their books (as far as we are allowed to know since the Fed never gets audited) have grown eight-fold, from under $1 trillion just prior to the Lehman blow up, through to the post-repo market trauma, post-stolen election and post-pandemic current $7.95 trillion.

Committed to buying $120 billion of assets every month since March of 2020, the Fed is on track to surpass the $8 trillion mark by October, if not sooner, with no real end in sight. Most of the nearly $8 trillion owned by the Fed consists of US Treasury bills, notes and bonds, and mortgage-backed securities (MBS), which they have been buying sporadically - but quite consistently - since the 2008 crash and recently at a rate of $40 billion per month.

Essentially, the Federal Reserve System - a private bank - owns the US government and the US housing market. Chew on that while wondering if Bitcoin is overvalued at $36,000 per coin, of which only 21 million will ever be mined.

When it comes to valuation and purchasing power, Bitcoin is giving the world's most grandiose central banking institution a real run for its money. (Sorry for another unintended pun. It just fits so well.)

For the sake of pathos, comedy, tragedy, and irony, the G7 meeting this weekend produced the following headline:

G7 rivals China with grand infrastructure plan

This is both hilarious and disconsolate on a number of levels. Bear in mind that the G7 is comprised of the world's most-indebted developed economies: France, Germany, United States, Great Britain, Italy, Japan, and Canada.

First, there is no plan. Seriously, there is no plan. The G7 nations could only agree on a headline to push back against the actual infrastructure investments made by China over the past eight year. China actually has a plan, called the Belt and Road Initiative (BRI), which has actually built roads, bridges, railways, water systems, buildings, and other essential infrastructure in countries across Asia, Europe, and Africa.

Second, the G7 has what they are calling the (OK, hold on, because this is hilarious) Build Back Better World (B3W) initiative. The term Build Back Better was spawned by the globalist World Economic Forum's Klaus Schwaub, as an adjunct to the "Great Reset" false narrative solution to the engineered and well-promoted Covid Crisis.

Third, while China actually has singed agreements with 138 countries on a plethora of projects, the G7 issues vainglorious press releases touting their supposed unified power. It's plain to see that the G7 consists largely of post-colonial powers teetering on the brink of insolvency. Their usual modus operandi is to sign agreements with poorer nations and then strip them of their natural resources. This is what they consider "good business." The USA has been particularly adept at this practice, using their proxies in the oil and banking industries as conduits for American largesse via foreign aid (aka, graft).

In the 19th century, England was the big colonizer, since downsized to an isolated former world power. At least Italy, Germany and Japan were more honst about their intentions back in the 1940s. Instead of making up stories to convince other countries to partner with them, shielding their intentions of economic pillage, they invaded with armies, navies and air forces, taking over neighboring countries by force, shooting or blowing up anything or anybody standing in their ways. For France, the convenient route was to surrender to Germany.

As for Canada, well, they sold all their gold in 2016, but they're really good at hockey, eh?

The G7 is old news, old power, old ideas that are out of step with the 21st century. China has stolen their thunder by becoming the world's leading manufacturing center, partnering with other nations tired of the tyranny of US dollar hegemony, building out their trade routes and promoting the yuan as a viable alternative reserve currency to the dollar, especially in less-developed nations.

The G7 and other organizations such as the United Nations, NATO, the World Bank, and IMF are relics of the post-industrial age, unfit to compete in a digital world. Like the IMF in its response to El Salvador, the G7's pandering against the real progress by China is nothing more than idle banter by clueless diplomats and government trolls. Citizen trust of sovereign countries has been eroded badly over the past 40 years, to a point at which a growing segment of the population in many developed nations are at odds with their "leaders" and at the verge of withdrawing consent to be governed by megalomaniacs and corrupt politicians who serve only their own needs and not those of the people.

Moving forward, gold and silver suffered further suppression as the end of June and imposition on new Basel III rules approaches. The bullion banks, LBMA, and COMEX traders are attempting to keep a unified disposition in the face of potential ruination. As such, the prices for gold and silver continue to be beaten down on a macro level as supplies dry up and retail demand continues at a frenetic pace. Officially, COMEX had gold decline from $1892.00 per ounce to $1,879.50 with silver actually gaining from $27.90 to close out the week at $28.05.

With the gold:silver ratio maintaining a ridiculous level of 66, silver shortages have been sporadically popping up in retail, despite the obvious attempts by the LBMA to keep a lid on the price. Retail tells a different story, with premiums remaining at extended levels.

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

Item: Low / High / Average / Median
1 oz silver coin: 34.00 / 55.00 / 42.40 / 41.57
1 oz silver bar: 35.10 / 49.88 / 40.78 / 41.95
1 oz gold coin: 2,004.19 / 2,085.59 / 2,041.33 / 2,041.13
1 oz gold bar: 1,926.00 / 1,984.29 / 1,967.38 / 1,967.99

As the governments of the world flail about, tilting at windmills, and central banks continue devaluing their currencies at an accelerated pace, gold and silver (and Bitcoin) have become obvious choices for those seeking security and purchasing power in a world that is neither forthright nor stable.

Gold coins of any denomination are highly desirable for protection against any kind of threat, be it inflation, deflation, war, pestilence, or political strife. Likewise, silver provides an exchangable medium and store of value for more common citizenry.

The Single Ounce Silver Market Price Benchmark (SOSMBP) was stable at $41.68, slightly higher than last week's standard of $41.50.

The coming week will be dominated by the Fed's FOMC meeting Tuesday and Wednesday and quad witching on Friday. Expectations for considerable volatility are not to be taken lightly.

That's a WEEKEND WRAP.

At the Close, Friday, June 11, 2021:
Dow: 34,479.60, +13.36 (+0.04%)
NASDAQ: 14,069.42, +49.09 (+0.35%)
S&P 500: 4,247.44, +8.26 (+0.19%)
NYSE: 16,694.93, +43.50 (+0.26%)

For the Week:
Dow: -276.79 (-0.80%)
NASDAQ: +254.93 (+1.85%)
S&P 500: +17.55 (+0.41%)
NYSE: -13.81 (-0.08%)


Disclaimer: Information disseminated on this site should not be construed as investment advice. Downtown Magazine, Money Daily and it's owners, affiliates and/or employees are not investment advisors and do not offer specific investment advice. All investments have risk. You should consult a professional investment advisor or stock broker or use your individual judgement when making investment decisions. By viewing this site, you hold harmless Downtown Magazine, Money Daily, its owners, affiliates and employees against any and all liability.

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