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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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Friday, June 10, 2022, 9:05 am ET
Consumers worldwide are being financially boiled like frogs in a pot of water. You all know the story. As the water temperature increases, the frogs remains content, until the heat eventually renders unconscious and then kills the poor little leapers.
Americans in particular are still simmering, but, even now, jumping out of the pot isn't an option. There's no place to go. What can one do with gas prices through the roof, food costs increasing almost as quickly, the economy s[puttering along, and, even for those fortunate enough to have investments, those have been under assault since the start of the year. It's been nearly six months of unrelenting pain for stock investors, Thursday's market action providing yet another example of expanding bearishness in the investing class.
Stocks came under assault yet again, spurred by fears that Friday's CPI will come in hotter than expected by the usual suspects of bank analysts, economists, and university brainiacs who are now feeling the pain as well. Announcement by the ECB that they would join the Fed and other central banks in hiking rates beginning in July and rising unemployment claims managed to catalyze the market from greed to fear, sinking US stocks in an afternoon rout.
Those still of the mind that the US is not already in a recession while holding onto the ridiculous notion that a bear market means the S&P or the Dow has to be down 20% from all-time highs are about to be smacked in the teeth. They're almost certain to get their requisite 20% decline in days ahead, perhaps as soon as next week, when the Fed issues forth another FOMC policy decision to raise the federal funds rate another 1/2 percent, following back-to-back 1/4 percent raises in March and May, which brought the key rate to a range of 0.50-0.75. By Wednesday of next week that range will be 1.00-1.25%, and every credit instrument, from mortgages, to credit cards, to student, auto, and personal loans will be affected, and not in a good way.
For the better part of the past six months, economic data has been routinely dour. There are seemingly no signs that the economic "recovery" is materializing. Following two years of virus-related lockdowns, restrictions, deaths, business closures, and unprecedented stimulus, the combination of inflation and recession has sent the economy into a tailspin unlike anything seen since the last crisis in 2008. In fact, the current condition is likely worse than the 2007-09 experience, albeit in the early stage.
Prices are likely to remain at or beyond nose-bleed levels until recessionary forces take full effect. Job losses, corporate cutbacks, and a severe stock market decline should provide some relief in the form of demand destruction, all the while politicians continue to sit back and watch the American frog boil, interested more in some fantasy narrative about the election of 2020 being on the up-and-up and grabbing as many guns as possible from law-abiding citizens. The cretins occupying the nation's capitol represent nothing but shameless dishonesty and greed, as opposed to their duty to the American people. There has never been a more illegitimate government in the history of the world.
As Spring turns to Summer in a few days, don't expect warmer weather to be of any relief. The combinations of fiscal and monetary policies currently contrived will bring the economic house of cards down in a heap. Politicians may be focused on getting themselves re-elected (or re-selected as the case may be), but Americans of all stripes are wondering if they'll make it to Autumn. The nation is at a breaking point. Sides have been drawn. The proceeding pain is likely to be unbearable for many.
As expected, the Bureau of Labor Statistics' May Consumer Price Index (CPI) rose at an 8.6% annual rate in May, with the headline number an increase of 1.0% month-over-month. Core inflation (excluding food and energy) registered at 6.0%, which is horrible news, meaning that the inflation in fuel - especially gas and diesel - has spilled over into everything else.
Stock futures fell off a cliff. Dow futures, which had been hovering near unchanged, slipped to -260 in the blink of an eye. NASDAQ futures fell from +55 to -180, and the S&P e-mini fell from +2 to -35.
And then it got worse from there. European stocks responded with sharp declines on the news. Spain's IBEX was shown down 2.75%; Germany's DAX was off 1.86%; France's CAC-40 shedding 2.00%; and England's FTSE down 1.70% with trading ongoing.
Expect a full-blown crash at the US open, unless the PPT, or the Fed's trading desk or some other unknown white knight entity steps up and saves the day.
It's not getting any better... but, you already knew that.
At the Close, Thursday, June 9, 2022:
Thursday, June 9, 2022, 9:05 am ET
Stocks took a breather on Wednesday, ending about where they began the week, which thus far has appeared to be one of the least volatile in recent memory. More than likely, everybody is awaiting the May CPI data that is due for release on Friday. Until that key number becomes available, many professionals are loathe to entertain new positions.
As the opening bell approaches for US stocks, Europe is experiencing across-the-board declines on the heels of the ECB's Governing Council statement confirming an end to QE and the beginning of rate hikes, similar to the US Fed's recent actions.
While the the Eurozone's central bank plans to pump interest rates higher in the face of rising inflation (8.1%, according to current sources), the ECB said it would end its Asset Purchase Programme, its main stimulus tool since the debt crisis, and said it would raise rates by 25 basis points in July, then move rates again in September, possibly by a larger amount. The current level of the ECB's Deposit Rate, similar to the US federal funds rate, stands at -0.5%. The central bank has its work cut out for it in its effort to put a end to the inflation problem.
Even though the ECB's action was highly anticipated, stocks still declined on the announcement. No plans for balance sheet reduction were announced. Asian stocks were marginally lower prior to the news.
In the US, futures were higher, but declined significantly after the announcement, sending them into negative territory.
At 8:30 am ET, initial unemployment claims rose 27,000 to a seasonally adjusted 229,000 for the week ended June 4, the Labor Department said. Economists polled by Reuters had forecast 210,000 applications for the latest week. The announcement of higher claims for unemployment benefits did not lift spirits on Wall Street as futures remained negative and deepening with just a half hour to the opening bell.
Nothing in the early morning news had any positives for stock markets. Equally troubling are recent moves in the treasury complex, where the 10-year note is once more yielding above three percent (3.03% as of Thursday's close) and the long end of the curve flattening out. 2s-10s are at 25 basis points, (2.78%-3.03%) and the 2s-30s spread a mere 40 basis points (2.78%-3.18%).
With a large portion of the market awaiting the CPI figure on Friday, Thursday's set-up may leave some participants quite wrong-footed.
At the Close, Wednesday, June 8, 2022:
Wednesday, June 8, 2022, 9:27 am ET
Despite all the troubles in the United States, Europe and whatever's left of the rest of Western culture, equity investors refuse to capitulate. Besides the NASDAQ, the major US indices remain in a range 10-18% below all-time highs. Wall Street is well-known for dismissing the obvious and being ensconced in a separate reality from what businesses on Main Street experiences.
However, the latest bumps and grinds of the various indices - Dow, Russell, S&P, Transports - seem to indicate that the current investor class has bought into the narrative that the Fed can fix high inflation and eroding profit margins in a diverse number of sectors, that raising interest rates into what is actually a recession is a proper policy, and that having a president hell-bent on destroying not just the oil and gas industry in the United States, but most other business enterprises.
For what it's worth, nobody can be that blind, stupid, or ignorant of current conditions and still make money on Wall Street.
All of this brings up the question of whether or not the Federal Reserve is actively buying stocks in the open market, propping up what appears to be an economic system in terminal decline.
There's plenty of indicators that suggest they are.
It's common knowledge that the central bank of Japan, the BOJ, is a major shareholder in many listed equities. This article, from 2018, posits that the BOJ is top-10 shareholder in 40% of Japan's listed companies. There's a central bank buying equities in broad daylight. If the Federal Reserve was doing the same, would anybody be surprised?
But, maybe it's not the Fed. After all, in late 2019, according to 13F data from the SEC the Swiss National Bank (SNB) has total holdings in U.S. stocks valued at US$ 94.1 billion. They likely are still participants in the stock markets to a very large degree.
What about the ECB? In yet another article from late 2019, "ECB policy maker Madis Muller, the governor of the Bank of Estonia, who essentially hinted that the ECB could very well buy stocks during the next recession, saying that the central bank could broadened its asset-purchase program, if the economic situation in the euro area deteriorates significantly."
In July, 2019, none other than Larry Fink, CEO of BlackRock, the world's largest investment firm, suggested that the ECB should buy stocks to prop up the market and with it the economies of the EU and the rest of the world.
BlackRock, along with Vanguard, are major shareholders in the vast majority of the S&P 500, Dow stocks and most of the biggest names on the NASDAQ. Other companies, like State Street and Warren Buffett's Berkshire Hathaway are also major shareholders in a panoply of big companies.
Accordingly, the Fed, despite having a trading desk tied to the NY Fed, doesn't have to buy any stocks. They can be bought by their friends in high places. Even the usually discrete Bloomberg calls BlackRock "The fourth branch of government," because it is one of the few private agencies that works closely with central banks.
There doesn't need to be a discussion of whether or not the world's largest central bank should be intervening in markets. They already are, in particular, the treasury market, where, as of the end of 2021, they issued a report revealing that the New York Fed's trading operation (officially called the System Open Market Account or SOMA) currently owns 38 percent of all outstanding U.S. Treasury Securities with 10 to 30 years remaining until maturity.
Essentially, they are operating a near-monopoly in long-dated US Treasury issuance. Buying stocks to keep the widely-watched equity markets afloat through a very rough patch may be nothing more than an afterthought to those high and mighty Fed presidents, governors and worker bees.
Whether the Fed is buying stocks in the open market isn't really an issue. Whether they are doing it themselves or are colluding with operators with valuations and assets in the trillions of dollars or even with their shareholders (major US banks, like JP Morgan Chase, Bank of America, Citibank, and many others), recent movements (and more than a few not-so-recent ones) in stocks suggest that the Wall Street casino is largely a plaything of the rich and not-so-famous.
As the West slowly fades from its position of prominence in the global economy, US markets are a facade for America's version of oligarchy, owned and controlled by people and institutions well beyond the reach of ordinary investors.
If the stock market is rigged to stay high and just continue to go higher, then maybe we should all just shut up and do what WEF's Klaus Schwab tells us, "own nothing and be happy."
The decline and desperation is palpable in just about everything these days, from the media fix on news to the falsity of elections, to prices at the pump and on grocery shelves, to the stock and bond markets themselves.
At the Close, Tuesday, June 7, 2022:
Tuesday, June 7, 2022, 8:54 am ET
Headlines practically write themselves these days. Gas prices are higher every single day. Why is that? Could it all be part of a plan?
If there's a plan to wreck the United States and most of the Western world, it's working, thanks to Klaus Schawb and his nasty nazi sympathizers at the WEF. Europe has been mostly neutered as Ukraine drags on and on...
Odd thing - often overlooked by would-be freedom oppressors - about humans in general and Americans in particular. They like being left alone and they are resourceful little devils. People will do quite a bit in terms of surviving if they feel threatened. Some of them will actually strike back at their opponents.
Anecdotally, the anti-Great Reset plan being employed by a growing number of people goes something like this:
It will take time, but eventually the list will grow to include not paying federal taxes and being sufficiently armed against liberty-deprivers, home invaders, crazed starving lunatics. Gun control is only popular in certain parts of Washington, DC, where, oddly enough, no mass shootings ever take place.
The latest laugh at corporate America is another warning by retailer, Target (TGT), that they have too much inventory. Now, that is rich. Six months ago, they were complaining about supply chain issues and high costs for shipping. Or was that three weeks ago? In any case, the totally WOKE company warned that second quarter profits would be materially lower. The stock is being decimated pre-market, again (147.70 -11.97 (-7.50%), Pre-Market: 8:16AM EDT).
Well, it serves them right for caving to the 0.001% of people with LGBTQ demands, allowing men in the ladies' room and such. Speaking of Pride month, well, forget it. Most people with brains, kids, or spouses, don't roll that way.
Like it or not, many Americans need to learn how to cook. Here's a suggestion recipe for borscht, a staple of Ukrainians, no matter where you stand on freedom. It's nutritious, delicious, and not hard to make. Americans are generally good at following directions. Look at how well they did with lockdowns. [sarc]
Just in case you missed Sunday's WEEKEND WRAP, just scroll down the page to read all about the fallacies of modern journalism that would have you believe that bear markets only exist when major indices are down 20% or that a recession is two consecutive quarters of contracting GDP (both are incorrect).
The United States is in the middle of a severe recession and stocks are in a bear market. Rising interest rates will destroy what's left of the economy, including the bubblicious bond market. That's it for today.
Enjoy the decline!
At the Close, Monday, June 6, 2022:
Sunday, June 5, 2022, 10:25 am ET
Stocks returned to the general theme of 2022 by losing value over the course of the trading week, shortened by a day due to the Memorial Day holiday.
There's no comfort to retail investors in the knowledge that inflation is reducing their purchasing power by eight to 10 percent annually while their assets are also declining in value by a similar or larger percentage. At the current trajectory, by the end of the year a person earning $50,000 with a equity investments of 100,000 at the start of the year, might be reasonably looking at - depending on state of residence - a lot less.
Including deductions for the usual entitlement programs, that $50,000 income is likely to be taxed at around 30%, putting the take-home total closer to $35,000, minus, conservatively, another 10% for inflation, making that dead-end career job only worth about $30,000 in real terms. Since having the government take a huge portion of your earnings via taxation (all the while overspending their own budget) isn't enough of a slap in the face, the controlled demolition of the stock market is likely to reduce your "assets" by 20%, making that cozy nest egg of $100,000 only worth about $80,000, which also will be taxable income when you decide to pull it.
Rest easy. You and millions of other small investors have managed to make people with more important functions, like JP Morgan's CEO, Jamie Dimon, and LA Laker power forward, LeBron James, billionaires. Respectively, the jobs of these two towering titans are fleecing muppets and dribbling a basketball. You all should be so proud.
Nearly half way through 2022, stocks haven't done very well, as all the major indices are down substantially. Dow Industrials are down the least, at -10.07%. The NASDAQ takes the prize with a year-to-date loss of 24.13%, while the S&P has dipped 14.34%, and the NYSE Composite is down 8.30%.
While those figures may not be cause for alarm, it's likely that a few months down the road, they will be substantially worse, as the Federal Reserve embarks upon another grand experiment with your paper currency. Their plan to raise the federal funds rate 50 basis points at each of the next two meetings while reducing their balance sheet by roughly $95 billion a month flies in the face of current economic conditions. Notably, the Fed actually increased their balance sheet on June 1, by nearly one billion dollars.
First quarter 2022 GDP was -1.5% and the Atlanta Fed's GDPNow measurement of second quarter GDP was just this week (June 1) reduced to 1.3 percent, down from 1.9 percent on May 27, the kicker being that the initial estimate for second quarter GDP won't be official until July 28, after both June and July FOMC meetings.
If 2Q GDP comes in at a negative number, that would be the old textbook recession (two consecutive quarters of GDP contraction). Since that definition was conveniently discarded by the National Bureau of Economic Research (NBER) in 2008 and replaced with a more malleable one:
A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.
Thus, a recession could be as short as a couple of months, like the infamous 2020 pandemic recession of February-April two month wonder (the shortest recession in the history of the survey (dating back to 1854), or as long or longer than 43 months, like at the start of the Great Depression (August, 1929 through March, 1933).
Using the NBER's own revised definition, it's safe to say the US entered a recession in either December, 2021 or January, 2022, even though the NBER is loathe to make the call, as it would go against the grain of the current "everything is awesome" narrative. January 2022 happens to be six months ago; for what are these economic scholars waiting? There's a good chance they'll make some sort of announcement in July or August that the economy was in recession earlier, but since has rebounded, which will keep all the muppets and slaves from rioting and the masters industry laughing, literally, all the way to the bank as they alternatively buy up and short stocks into an abyss.
Just taking the NBER at their word, using their metrics, the US currently has real GDP (down), real income (down significantly thanks to inflation), employment (flat), industrial production (down), and wholesale-retail sales (flat to slightly rising, at best).
The unmistakable fact is that the Federal Reserve committed what amounts to a most grave policy error when it raised the federal funds rate in March from 0.00-0.25% to 0.25-0.50%, 25 basis points) and again in May (from 0.25-0.50 to 0.75 to 1.00%, 50 basis points) during what looks, smalls, and feels like a recession. Within two more months time, the federal funds rate will likely be 1.75-2.00%, which will decimate the mortgage and housing markets and ramp up interest rates on personal loans, auto loans, and credit cards. The Fed is certainly fallible, but it's difficult to resist the thought that their actions are by design and not in error.
For what it's worth, treasury yields were bumped higher across the board. With the one-month yield leaping from 0.69 on May 27 to 0.87 as of Friday, June 3 a move of 18 basis points in just four trading sessions bills were outdone by notes. Yields on the 2, 3, 5, 7, and 10-year notes rose 19, 23, 24, 23, and 22 basis points, respectively.
If the Fed actually does begin reducing its balance sheet by throwing Treasuries and MBS to the wolves and does not roll over maturing issues as usual, expect rates to rise dramatically over the next 60 days, spurred on by the dual 50 basis point hikes to the federal funds rate in June and July. This sets up a completely untenable condition for the American consumer, as food and energy inflation continues to rage while interest on all manner of adjustable credit balloons as well. The things necessary for survival will continue to increase in price, all the while the cost of currency credit ramps higher. OUCH!
WTI crude, $120.26/barrel, up from $115.07 a week ago and $20.50 higher from May 10 ($99.76). Executives at ExxonMobil, Chevron and Devon Energy thank the government and captured American public for lining their pockets with freshly-minted US currency. Middle Eastern sheiks and the Russian people also applaud Joe Brandon and the US congress for outright stupid foreign policies. The US federal government is on a mission to destroy the economy, and they're executing the plan at breakneck speed (midterm elections - likely to be stolen in many congressional districts - just five months ahead).
Unleaded regular gas, national average, has reached yet another all-time high, of $4.85/gallon, accoring to gasbuddy.com. That's up 25 cents from last week, 58 cents from a month ago, and $1.80 higher than at this time a year ago.
Gas prices are highest in California, $6.30; lowest, Georgia, $4.26. Notably, the $5.00+ club now emcompasses seven states, with Michigan ($5.03) and Illinois ($5.40), joining California, Oregon ($5.38), Washington ($5.35), Nevada ($5.44), and Arizona ($5.12). All of the Northeastern states, from New Jersey to Maine, are just pennies away from $5.00 a gallon auto fuel. Meanwhile, congress continues to sit on its collective thumbs, optioning toward gun control legislation over anything else that might benefit the country. A more useless gaggle of useless idiots has ever been assembled in the history of what's left of civilization.
Bitcoin still looks like dead money. Last Sunday: $29,698.40; this Sunday: $29,680.20.
Contrary to listed prices, alt-coins like Ethereum ($1788.34), Cardano ($0.56), and XRP ($0.39) are actually worthless.
Gold price 05/08: $1,882.80
Silver price 05/08: $22.37
Gold was up $3.30 on the week, as silver slumped by 20 cents per ounce. Silver continues to be the most underpriced commodity on the planet with gold a distant second. Retailers continue to sport high premiums, though some are cutting back, closer to spot prices.
Here are the latest prices for common one ounce gold and silver items sold on eBay (numismatics excluded, free shipping included):
The Single Ounce Silver Market Price Benchmark (SOSMPB) declined over the course of the week, to $37.01, losing 70 cents from the May 29 price of $37.71.
WEEKEND WRAP short take: Economic conditions continue to deteriorate. At the same time, the federal government, via elected representatives in congress and the illegitimate, brain-dead president Brandon administration want to take away your guns, your rights, your right to own guns, free speech, the rule of law, and the rest of the Bill of Rights.
Make sure to comprehend the meaning and intent of the 10th amendment:
The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.
At the Close, Friday, June 3, 2022:
For the Week:
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