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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:
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Friday, June 14, 2024, 9:11 am ET Courts Don't Matter. At least that what shareholders of Tesla stock expressed on Thursday, voting overwhelmingly to re-instate CEO Elon Musk's $56 billion pay package that was voided by a Delaware judge earlier this year. Awarded in 2018, the compensation package is currently valued at $48 billion. 77% of shareholders voted in favor of the measure. 84% of voters also approved re-incorporating the company in Texas. the company's headquarters is in Austin. The vote was yet another slap in the face of U.S. governance and its the weaponization of the judicial system via lawfare. Court verdicts have been increasing overturned on appeals this year, but this is a major milestone, as equity participants just told the courts to pound sand. It's a huge victory for Musk and possibly an even bigger one for American justice, old-school style. It's obvious that people have had enough of the lies, misinformation and propaganda coming from the left and are readily taking matters into their own hands. Delaware, where most publicly-held corporations are incorporated, coincidentally happens to be the state from where fake president Joe Biden hails and served as a senator for far too many years. Huzzah! As for the ridiculously-valued stock market, futures are suggesting that Friday may be the day for the "dump" part of the pump and dump scheme that has kept Wall Street bankers and traders well-rewarded in 2024. Stocks are up wildly less than six months into the year. The NASDAQ leads the euphoria, ahead by 19.64% so far this year, while the S&P 500 is up some 14.67%. The Dow Industrials are the laggards, as two to three percent dividend yields are particularly attractive with true inflation running well above the 3.4% the CPI is projecting and short-term treasury bills and certificates of deposit paying in excess of 4.50-5.00%. The Dow is barely hanging on to gains this year, up by only 2.48%. So far this week, stocks have done well, with the NASDAQ up by 534 points (3.14%) and the S&P index ahead by 86.75 points. The Dow is down 151 points with Friday looking to wash out even more dead money. At 8:30 am ET, stock futures were deep red, with Dow futures off 260 points, S&P futures down 20, and NASDAQ futures off 35. While the tech-laden NASDAQ has been nothing short of an AI-driven miracle this year, dragging the S&P upwards along with it, aging Dow stocks aren't cutting the mustard. To get an idea of how well the NASDAQ has performed, if the index closes higher this week, a near-certainty unless some disaster strikes, it will be the seventh weekly gain in the last eight weeks, accounting for a gain of more than 2400 points on the index since late April. Rumors circulating that the Dow may be looking to change its roster to better boost the average and make things appear to be going swimmingly, may be for real. Since closing just above 40,000 on May 16, the 30 blue chips have lost nearly 1400 points, though the pace of declines has recently leveled off via widespread tape-painting by insiders. Without institutional bolstering, the Dow would likely be showing a three to five percent loss this year. Among companies that may be axed to safe the Dow's bacon are Intel (INTC), down 36%, Boeing (BA), down 28% this year, Salesforce (CRM) down 10%, and possibly Johnson & Johnson, a nine percent loser this year. Replacements would likely be among the bigger tech names, like Google parent Alphabet (GOOG), or maybe even Nvidia (NVDA), now that its 10-for-1 stock split has made the name more available to suckers, er, the general public. It's a game and Wall Street is always supposed to win.
At the Close, Thursday, June 13, 2024:
Thursday, June 13, 2024, 9:19 am ET On Wednesday, the FOMC of the Fed left the federal funds target rate unchanged at its June meeting, leaving the rate at 5.25-5.50%. Barring unforeseen events, that means the Fed will have held at this level for a full year and probably for longer, as they are not expected to raise or cut the rate at their July 30-31 meeting. Here's the full FOMC statement:
Recent indicators suggest that economic activity has continued to expand at a solid pace. Job gains have remained strong, and the unemployment rate has remained low. Inflation has eased over the past year but remains elevated. In recent months, there has been modest further progress toward the Committee's 2 percent inflation objective. Preceded by release of a perceived soft May CPI reading, the policy decision didn't have great appeal for the market. Gains made earlier in the day were reduced after the 2:00 pm announcement and subsequent press conference by Chairman Jerome Powell. A good deal of attention was paid to the Fed's economic projections, particularly, the dot-plot, which showed members anticipating one rate cut in 2024, with a very slight possibility of two. The Dow was the loser on the day. Up more than 390 points just after the opening bell, the 30 blue chips gave back all of those gains and then some. It was the only major index to end the session negative. The NASDAQ and S&P 500 both closed at all-time highs. Thursday appears set to continue the party. Stock futures are ripping higher. Gold, silver are lower, along with bond yields. The 10-year note is yielding 4.27% at 9:00 am ET, down more than 12 basis points from Tuesday's levels and well off recent highs. May PPI came in at a soft -0.2% on a monthly basis and is pacing at 2.2% annually, though that annual rate is still close to the highest in over a year. The party continues...
At the Close, Wednesday, June 12, 2024:
Wednesday, June 12, 2024, 9:22 am ET May CPI, as reported by the ever-so-reliable-and-believable Bureau of Labor Statistics (BLS) was seen Wednesday morning as unchanged in May (+0.3%) on a seasonally adjusted basis, after rising 0.3 percent in April. Over the last 12 months, the all items index increased 3.3 percent before seasonal adjustment, down 0.1% from April. In April, the Consumer Price Index for All Urban Consumers increased 0.3 percent, seasonally adjusted, and rose 3.4 percent over the prior 12 months, not seasonally adjusted. May's CPI on an annualized basis dropped 0.1%, an almost meaningless decline. Overall food prices were up 0.1% for the month, though food away from home (at restaurants or fast food outlets) rose 0.4%. Core inflation (all items less food and energy) rose 0.2 percent and is up 3.4% year-over-year. This report shouldn't actually help to advance the "rate cut" calculations, as inflation seems to remain well above the Fed's target of two percent. While the Fed has this data in hand, the report doesn't really move the needle of the earliest rate cut coming in September. To a good number of companies unable to service even the interest on outstanding debt, known colloquially as "zombies", the CPI numbers can't come down soon enough. An estimated 20% of all U.S. publicly-traded companies fall into the zombie category. These companies have been unable to generate enough profit to finance their operations and may soon face bankruptcy. Some are so poorly managed or have spent copious amounts of borrowed money to enrich executives that lower interest rates won't actually matter at all to them. Even with an expected 25 basis point cut in September, the number of companies in deep trouble has reached levels seen during recessions, which is likely where the U.S. and most of Europe is headed either later this year or early in 2025. Corporate bankruptcies in the U.S. are at a 14-year high. Canada, the U.K., France, and Spain are also experiencing multi-year highs in the number of corporate bankruptcies. Elsewhere, companies that are trading below $1 per share are also on the rise. As of Dec. 8, 2023, 557 companies listed on various U.S. exchanges were trading below $1 per share, up from fewer than a dozen in early 2021, according to Dow Jones market data. Of these companies, 464 were listed on the NASDAQ stock exchange and subject to possible delisting. Nasdaq allows 180 calendar days to regain compliance by maintaining a $1 closing bid price for a minimum of 10 consecutive days during the 180-day period. Most of these companies have already received notice from NASDAQ. It's only a matter of time before they are delisted and either head to a U.S. bankruptcy court for protection or lay off hundreds, if not thousands, of employees, or both. There's only so much the Federal Reserve can do to help out ailing businesses, including a large number of regional or local banks that are suffering losses due to poor debt and asset management, holding notes and bonds at interest rates well below prevailing rates and/or holding commercial real estate loans that are increasingly risky and in danger of defaulting. Another worry for the Fed is the potential for a recession no matter what they do or when they do it. The general economy is not as strong as some might be led to believe. In addition to the large number of public companies in deep water, small businesses are feeling the pinch of inflation from higher input prices, higher service costs for insurance, electricity, and rents, and increasing wage pressure. GDP for the first quarter of 2024 was revised lower, from 1.6% to 1.3% in the second estimate two weeks ago. Factoring in inflation, the U.S. economy is at a virtual standstill. Consumers are increasingly strapped, tapping into savings or going deeper into credit card debt in order to maintain a modicum of middle class lifestyles. Interest rates on credit cards are at record levels, with interest on the average credit card at 20.68%, according to Bankrate. Later today, the FOMC will announce their policy decision, which is expected to keep the federal funds target rate at the current 5.25-5.50, which has not changed in nearly a year, since July of 2023. Today's CPI reading will not change the Fed's current perspective, though Wall Street will be looking for language changes in the press release and any changes in the highly inaccurate and over-rated dot-plots for clues as to the Fed's thinking and planning. Any indication of interest rates coming down sooner than currently expected or faster than anticipated will be bullish for stocks. Today's CPI didn't change much of anything other than to aggravate those who believe the Fed should not have stopped raising rates nearly a year ago, as inflation seems to have leveled off around 3.4-3.5% on an annual basis. However, with Wall Street seemingly immune from inflation, stock futures shot straight up as the CPI report was issued, with Dow futures up more than 265 points, NASDAQ futures up 190, and S&P futures up 42 points. While Wall Street appears geared up for another record-breaking session, commodities took off as well, with oil pricing at its highest in two weeks ($78.67). Gold and silver see persistent inflation and/or chances for the Fed to cut rates despite crosswinds. After the CPI was issued, gold ramped up more than $22, to $2,348.80. Silver was also bid, rising more than 50 cents, to $30.01 on the COMEX.
At the Close, Tuesday, June 11, 2024:
Tuesday, June 11, 2024, 10:00 am (revised from 8:54 am) ET Editor's Note: Many thanks to the morons hosing my site for doing maintenance on a Tuesday morning without prior notice. WTF? They caused this delay in posting. My apologies for for working with idiots who perform server maintenance on weekday mornings. - FR
The world economy will see another downturn - that much is certain. The widespread use of AI could turn an ordinary downturn into a deep and prolonged economic crisis by causing large-scale disruptions in labor markets, in financial markets, and in supply chains. - International Monetary Fund (IMF) deputy managing director Gita Gopinath How is it that an top executive at the IMF believes that the "world economy will see another downturn" and places the blame on AI? Is that just hubris or scapegoating, and, central to the question, how is Ms. Gopinath so certain? Better still, if she's right, when, and how severe will this "downturn" be and how do people and businesses prepare? First, and most importantly, there's no guarantee that she's right. Experts have been known to be wrong, often. Economic conditions could just as easily improve than deteriorate and all areas would not necessarily be affected equally. There might be depression in Europe and a boom in Africa, or a recession in China and smooth sailing in the North American countries. As far as AI is concerned, isn't this whiz-bang technology supposed to make everything better, faster, more efficient? The nerve of this IMF busybody speaking heresy! Financial security, above all, depends largely on individual preferences, goals, and allocations. Not so long ago, retirees were routinely advised to seek safety in bonds, utilities, and defensive stocks. Not long before that, hard assets, like gold and real estate were the preference of seniors and their investment managers. These days, in markets that are volatile and susceptible to sudden directional changes from algorithms, AI, and sentiment. ETFs and 0DTE options further distort underlying market conditions for individual stocks and entire indices. So, there's probably still some safety in utilities, commodities, real estate and precious metals. The electricity isn't likely to suddenly go out, so stocks that provide power to homes and businesses will survive any downturn better than others. Prices for grains, livestock, oil, and other raw materials don't seem to be getting any cheaper. Gold and silver are always good bets for long-term wealth preservation. The risk is paramount in real estate, however. Most Americans have much of their net worth tied to their homes, which are, at present, overvalued, overtaxed, and high in maintenance costs. Commercial real estate - notably office buildings in major urban areas - is already buckling, threatening regional banks. The unwinding of these investments has only recently begun and it will spread to residential real estate to varying degrees. The problem with so much money tied to housing as a financial asset is that it's not very liquid. Sure enough, home equity loans and lines of credit may cushion the blow and provide short-term stabilizing, but it's expensive (high interest rates) and risky. Putting the value of one's residence on the line in the face of declining property values and possible disintegration of entire markets isn't exactly sound financial planning. Better to invest in gravestones and burial plots than risk homelessness. The IMF may be right about a downturn. Knowing which assets are going to hit the skids becomes of paramount importance. Usually, it's stocks, but also real estate. When the house you bought in 2010 for $200,000 is now appraised at $450,000, it might just be time to cash out or at least diversify. When the commercial real estate tsunami of soured loans that's been building for the last four years comes to the forefront later this year, it's certain to pull down already fragile banks and residential housing with it. When conditions reach crisis levels in the next three to six months, the Fed will do what they always do in the face of a rough patch and lower interest rates, quickly. Expect those rate cuts that have been promised in one way or another to be forced down the throats of homeowners and small businesses. Anybody with loans and/or mortgages at higher recent rates will then become upside-down. Further, as the value of real estate erodes, prices will correct, also, fairly quickly. That $450,000 house may be just another $300,000 McMansion on the auction block, looking for home buyers who don't have enough for a 10% down payment, let alone the usual 20%. There will be programs for "first-time" homeowners, and the usual array of refinancings, moratoriums, extensions, and, of course, deliquencies. The Fed will do its level best to keep everything from completely falling apart, and they will likely be somewhat successful at doing so. How far will stocks drop? While almost everybody can endure a 10% correction, fewer will survive a bear market of 20-30-40% down and many will bail. There's always a downturn, as the IMF suggests. The severity, duration, and macro spread are unknowns, but, what is certain, and widely known, is that assets that are already at nosebleed levels, those being real estate, banking, and certain stocks (tech, consumer discretionary, mega-caps), are going to seek more sane levels. Right now, with the double-whammy of May CPI and an FOMC policy decision on Wednesday, stocks, just as the NASDAQ and S&P reached new highs on Monday, Tuesday's futures are signaling restraint. Dow futures are off 145 points, NASDAQ futures down around 55 and S&P futures are sliding 15 points. Whether or not those translate into the cash market is uncertain, but, there's growing concern that the rally that's been in place for seven months is running on fumes. At these uncertain times, owning a residence free and clear, some cash, gold and silver in a safe on premises looks pretty smart.
At the Close, Monday, June 10, 2024:
Sunday, June 9, 2024, 11:55 am ET With the release of the May Non-farm Payrolls report by the BLS on Friday, markets faced a stern test, the choice being either acceptance of a burgeoning U.S. economy that created 272,000 jobs in the month or discounting the flawed, seasonally-adjusted jobs estimate (pointing at unemployment ticking up to 4.0% for the first time since February 2022) in favor of the hope for future cuts in the federal funds target rate by the Fed. Depending upon where one looked, the response was to take one side or the other, both, or neither. It was obvious that the big jobs number had a deliciously ill intention in precious metals markets and bond prices, but stocks seemed to hang onto the rate cut narrative, suffering only flesh wound losses on Friday and mostly remaining positive for the week. No matter on which side the bread was buttered, markets ended the week in chaos with an eye towards Wednesday of the coming week, which will reveal CPI for May before the open and a 2:00 pm ET FOMC policy decision, complete with press conference and the comical dot-plot diagrammatic economic projections.
An Nvidia hangover is due soon, as the stock has not stopped rising thanks to relentless, robot-like momentum chasing on the AI protocol. The intent of big tech companies embracing AI is to upgrade servers and systems to faster processing and more powerful applications. It's a big capital expense bandwagon, hoping for a result in even more monstrous market capitalization for the likes of Apple, Google, Microsoft, Amazon, and smaller suppliers and tech users. With anything possible in the equity universe, NVDA could ramp even higher, though there is suspicion that the one-year return of 211% is a tad overdone. But, stocks go up, because that's what they do. The rally that began in late October 2023 still seems to have legs, even if they're artificial, like the intelligence guiding stocks to extremes. The Shiller CAPE measurement of the S&P stands at 34.82, creeping closer to the previous two higher peaks, October, 2021 (38.58) and October 1999 (43.21). All three are higher than that of July 1929 (31.48), the kick-off of the Great Depression. Any assumption for a correction in the works might have to wait until later on since the Federal Reserve maintains that it is apolitical, and, oh, yes, there's an election in November. Nobody is openly cynical about this reality. Cynicism is buried deep within the root of the system. The Dow Jones Transportation Average fell to its lowest closing level this week since November of last year. Other than that sore thumb in the eye of market players, and the NYSE Composite index falling for the third straight week, everything else in eye-candy-land was just hunky-dory or easy-peasy without any hanky-panky. For the week, the Dow managed to close up for the first time in the last three, the S&P finished ahead for the sixth week in the last seven and closed at an all-time high on Wednesday, prior to the brief week-ending pullback. The NASDAQ was, once again, simply magnificent, gaining 2.38% at an even better trajectory than the S&P, also making a record close Wednesday. Earnings announcements in the coming week are few and far between, with non-notables such as Yext (YEXT) and FuelCell Energy (FCEL) on Monday; Tuesday sees Oracle (ORCL), Academy Sports & Outdoor (ASO), PetMeds (PETS) and Casey's General Stores (CASY). Broadcom (AVGO). Vera Bradley (VRO) and Dave & Buster's Entertainment (PLAY) report Wednesday. Signet Jewelers (SIG), Ammo Inc. (POWW) and Adobe (ADBE) issue Thursday. Treasury Yield Curve Rates
Friday's jobs festivities caused a significant melt-up in long-dated maturities, but nothing extreme. While 2-year and 10-year yields each rose a resonant 15 basis points on Friday alone, they were, after all, well down-beaten, leaving their yields below the close last week and even weeks prior to that. The Fed and their policy-makers and fakers have managed to keep everybody on their respective toes as the grind to November proceeds. Now, is it a booming economy driving stocks and distressing bonds or does the Fed have in mind some cutting to the short end, and an end to the inverted curve distortions? It appears to be both, as there's butter on both sides of the biscuit concurrently. A significant departure from the inverted curve status quo appears to be a future desire, after political considerations - with which the Fed is not concerned - are managed, or mangled, or mistaken. Spreads remain in the comfort zone - for stocks - for now. Spreads:
2s-10s
Full Spectrum (30-days - 30-years)
WTI crude oil ended the week at $75.38, down nearly $2.00 from last Friday's $$77.18, but the week's close was a significant improvement from Tuesday's bottom of $72.61. Friday's jobs report got the price up above $76 briefly, though it was unable to hold, given current global dynamics. The oil market is still trying to determine if the economic porridge is too hot, too cold, or just right. Getting the correct global feel is more art than science given the massive number of producers and consumers involved. Analysts might as well employ numerology or consult with the Oracle of Delphi. Gas prices fell by a dime nationally according to Gasbuddy.com, which reports the national average for a gallon of unleaded regular gas at the pump at $3.42 a gallon, the lowest since last November. California retains the top spot for another week, a gallon of unleaded regular running $4.89 on Sunday, the lowest price in more than six months. Prices in Pennsylvania eased down another six cents, to $3.67, the leader in the Northeast. New York ranks second at $3.59, with Connecticut at $3.56. Prices are slashed in Illinois, with a gallon fetching a mere $3.77. Oklahoma has the lowest prices in the country, checking in on Sunday at $2.89, followed by Mississippi ($2.90) and Texas ($2.91). Tennessee is $3.00 even. Arkansas ($2.93) and Louisiana ($2.97) round out the sub-$3.00 states. Georgia ($3.26), and Florida ($3.27) are the highest in the Southeast. The Midwest ranges between lows in Kansas ($3.04) and Missouri ($3.11) to highs of $3.40 in both Michigan and Montana. Arizona dropped another nine cents and remained below $4.00 for a fifth straight week ($3.69), leaving California, Washington ($4.40), Oregon ($4.14), and Nevada ($4.08) - all lower - a gang of four comprising the $4+ club. Utah ($3.41) and Idaho ($3.60) continue to see prices come down.
This week: $69,477.70 Bitcoin remains below the March 13 high ($73,096). The trend has turned neutral after bouncing over $71,000 mid-week.
Gold:Silver Ratio: 78.96; last week: 76.82 Per COMEX continuous contracts:
Gold price 5/10: $2,366.90
Silver price 5/10: $28.40 Whether by design or circumstance, Friday's non-farm payroll report did a number on gold and silver traders, sending both metals to roughly four week lows. Adding to the PM price drop was news that the PBOC had leveled off their gold buying in May. The horror! This most recent gift to johnny-come-latelies to the precious metal party won't last. Controlling interests are losing control and the Fed is going to either have to print trillions more of their confetti paper currency or crash the entire economy to keep the competition (gold and silver) from a run of such rapid ascent to make Elon Musk and his SpaceX craft jealous. Despite the drubbing on the COMEX, year-to-date, gold is up 12.13%, silver, 22.92%. The reality of de-dollarization and continued heavy central bank buying is contributing to a renewed appreciation of precious metals. Expectations for higher prices - $2500 gold and $35 silver - continue to be held in the far and wide reaches of the real money universe. Here are the most recent prices for common one ounce gold and silver items sold on eBay (numismatics excluded, free shipping):
The Single Ounce Silver Market Price Benchmark (SOSMPB) fell for the week, to $39.58, losing 68 cents from the June 2nd price of $40.26 per troy ounce, breaking the string of weekly prices above $40.00 at four straight.
In anybody's final analysis, nobody can have things both ways. One either eats the cake or shares the pie. The Fed can't have lower rates and less inflation. Stock junkies can't make gains in an essentially hollowed-out economy. Gold can't go up when the economy is booming, nor when it is failing, though currency debasing eventually will take a final toll. Other than taxes on the poor and middle classes, something has to give and that usually means war, turmoil, unrest and revolutions. A reckoning is coming, but for whom has yet to be determined. Those who fail to heed the warning signs will suffer the most severely. When host governments treat their citizens in a manner befitting a King George III or Louis XVI, heads, after being separated from their moorings, tend to roll. Unless one is in a position of wealth or power, nothing good comes this way and even for the rich, strident, or famous, conditions may become a bit more untidy. History has a remarkably good memory.
For the Week:
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