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Money Daily has been providing business and financial market news, views, and coverage on a nearly continuous basis since 2006. Complete archives are available at moneydaily.blogspot.com.
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10-Year Note Zooms Past 4%; BRICS Currency Possible; Yellen Will Fail in China; June NFP +209,000 Friday, July 7, 2023, 8:55 am ET Just as Western markets were beginning to implode on Thursday (Germany's DAX fell more than three percent), yield on the benchmark 10-year treasury note was exploding. From a relatively benign rate of 3.85% coming out of the extended July 4 holiday, the yield rose throughout the day Wednesday, topping 3.95% by midnight Eastern Daylight time. Just before US equity markets were to open, the rate surged from 3.973% to 4.035% in a flash, eventually topping out at 4.076 around 11:30 am ET. Presently, the 10-year note is beginning to ramp higher again, falling to 4.024% overnight, but pushing forward to 4.069 with Friday's trading on deck. A yield of over four precent on the 10-year note is significant because it is tied to just about everything in the US financial system, but especially to interest-bearing vehicles, from credit cards to home mortgages. The last time the yield was this high was in March, just prior to a trio of mid-sized US banks - Silvergate, Silicon Valley, and Signature Bank - failed. In Switzerland, Credit Suisse went belly-up and was absorbed by UBS. Shortly thereafter, First Republic went bust. Another crisis appears to be brewing and it's probably a European bank, possibly Deutsche Bank, which has been on the ropes for years, though a failure of one of Germany's major banks would surprise nobody and probably would amount to a small problem compared to the looming collapse of Europe's national central banks in Italy, Spain, France, et. al., brought about by the forced policies of the ECB. That's the bigger picture in Europe. Sovereign central banks are tied at the hip to the ECB and its various forced credit programs. The entire European banking system is an incestuous mess, the sovereign central banks locked into lower interest rate fixed income vehicles which need to be refinanced at higher rates, much in the same manner US banks are currently hog-tied. Adding to the current angst, there's rumor of the BRICS unveiling a new currency to compete with the US dollar as a reserve currency at the upcoming summit in Johannesburg, South Africa, August 22-24. Others are of the mind that the summit will be important in the continuing development of cross-border, non-dollar trade between nations friendly to the BRICS, but that an actual currency is not to be rolled out. Regardless of the developments before, after, and during the summit, the notion that the BRICS are now a major economic force in world trade is undeniable. After all, they've now been aligned for 15 years. As equity markets worldwide continue under pressure, Janet Yellen seeks something in her trip to China, though nobody is really sure what. The US economy is contracting and highly dependent on China for trade. China's diplomats and economists are well aware of the situation, and Yellen's trip seems like a "Hail Mary" kind of effort after Secretary of State Antony Blinken's failed visit last month. Yellen would like China to cooperate, even though the US continues to impose trade restrictions, threaten sanctions, and even whisper war. Yellen, equally unqualified and inept at negotiations as Blinken, will either fail in her mission or manage to negotiate a deal that undermines US sovereignty. Whatever Yellen might be offering the Chinese, they're not buying. Meanwhile, back on mainland America, all eyes turned to the June non-farm payroll report rolled out at 8:30 am ET. Asian stocks were down again overnight, European stocks were mixed, with Germany and France up, Spain and England lower. US Futures were down fractionally prior to the jobs data release, but reversed course when the Bureau of Labor Statistics (BLS) reported total non-farm payroll employment increased by 209,000 in June, and the unemployment rate remained at 3.6 percent. Later, futures collapsed to session lows. With markets open in less than half an hour and futures now pointing towards a positive open, Friday's session looks to reverse the deleterious effects of Thursday's deep dive. For the week, the Dow is down 485 points, NASDAQ off 108, and the S&P lower by 38.78 points.
At the Close, Thursday, July 6, 2023:
Thursday, July 6, 2023, 9:05 am ET That little bump on the July 3 short session may have been the end of the cyclical bull run wrapped within the secular bear market that's been the primary trend since November 2021. The peak came a few months later, in January, 2022. For the non-believers in Dow Theory, please note that the last time the Dow closed at a record high was January 4, 2022 (36,799.65), with an intra-day record high of 36,934.84. It was downhill through the first nine months of the year before the bulls had seen enough, closing on September 30 - cynically, the exact date marking the end of the fiscal year for the Federal government - at 28,725.51. Since then, stocks have been on a tear, clawing back most of the losses though failing to attain record levels for the past 18 months. Similar circumstances have befallen the NASDAQ, S&P, and NYSE Composite. The Dow Jones Transportation Average also slid into bear market territory in mid-2022, has recovered somewhat, but still is well below record levels. There's only so much froth the market movers can put on top of the vapor rally, now nearing 10 months in length. Sooner or later, the rug gets pulled and the dizzying spin lower that's been kept in abeyance will begin to re-emerge. Japan's NIKKEI, up nearly 30 percent just this year, dropped 565 points (-1.70%) overnight while Hong Kong's Hang Seng slipped 577 (-3.02%). European markets are reeling. France's CAC is sporting a two percent loss intra-day. Germany's DAX is down nearly 1.60%, and the FTSE has shed 127 points (1.70%). With a little more than 30 minutes to the opening bell, US stock futures are crashing lower. Dow -248; S&P -34; NASDAQ -140. Meanwhile, Treasury Secretary Janet Yellen is over in China trying to schmooze with Xi, who is having none of it. The US government is a disaster. US foreign policy is the laughingstock of the universe. Who's prepared for a crash and who's "swimming naked?" Lots of money on BRICS for the win.
At the Close, Wednesday, July 5, 2023:
Wednesday, July 5, 2023, 9:18 am ET Quick note on Monday's half-session (closed 1:00 pm ET): Nothing of substance occurred other than churning. Slight positive close on all the major indices was realized.
At the Close, Monday, July 3, 2023: Moving into Wednesday's back-to-work session, there appears to be something seriously disturbing about data out of China as the Caixin/S&P Global services purchasing managers' index (PMI) fell to 53.9 in June from a reading og 57.1 in May, a five-month low. The China "re-opening" narrative that boosted US stocks, the price of oil, and other so-called recovery-related themes never really materialized. It's becoming ever more clear that the planet is waist deep in the throes of war, propaganda, and government malfeasance. A severe global recession is underway, even though Wall Street pundits, media mouthpieces, and government satraps remain in a state of suspended animation, continuing to promote obvious lies like winning in Ukraine and "Build Back Better." Eating cockroaches stewed in slime would be closer to the truth of what the elitist WEF crowd has planned. That said, the US open approaches with gold up, silver flat, Asian markets down overnight, Europe struggling against waves of selling, and stock futures in the US looking as though somebody beat them down with a sledgehammer. The first true session of the third quarter and second half of the year is looking like it could be a real stinker, presaging the coming recession and eventual collapse of Western developed economies. Of note: WTI crude is higher this morning, above $71/barrel. Just another head fake as the global glut worsens. WTI should fall to the low 60s by August. Whoopie?
Sunday, July 2, 2023, 10:54 am ET In the face of geo-political tensions, government malfeasance on a global scale, shrinking economies in Western countries, rising interest rates, persistent inflation, and simmering unrest worldwide, US equity investors had smashing success in the first half of the year. Putting the failures of 2022 aside, major indices in the US and Europe produced stunning results, with NASDAQ the clear winner, posting a first half gain of 31.73%. The S&P 500 advanced 15.91% this year, while the Dow Jones Industrial Average scored a mere 3.80% gain, perhaps the victim of higher short term interest rates that outpaced the dividend yield on most of the blue chips. With most of the country off on a four-day weekend (July 4 is Tuesday, a holiday; markets are only open until 1:00 pm ET Monday), time is probably better spent chomping on ribs and fried chicken than perusing stock charts. Money Daily wishes everybody a happy Independence Day.
Led by AI-darling Nvidia (NVID) and a 179.3% gain over the first half of 2023, the top ten best-performing stocks in the S&P 500 included Meta Platforms (META), up 134.0%, Carnival (CCL, +112.9%), and Tesla (TSLA, +1.09%). While most players were unable to more than double their money in the first six months of 2023, a short-term buy-and-hold strategy worked out well for the fortunate few. Among the biggest losers were US Bancorp (USB), with a 25.07% loss, Truist Financial (TFC), dropping 26.89%, CVS Health (CVS, -27.11%), Moderna (MRNA, -28.08%), Citizens Financial (CFG, 31.04%), Dollar General (DG-33.40%), and Charles Schwab (SCHW), down 33.61%. Even worse were bank stocks, Zions Bancorp (ZION), down 40.92%, KeyCorp. (KEY, -43.61%), and auto parts retailer, Advance Auto Parts (AAP), losing 54.32% in the six months through June. Most of the loss for AAP occurred after their May 31 announcement to slash its quarterly dividend from $1.50 per share to $0.25, an 83.3% decrease, to, according to the company, "achieve higher financial flexibility." If flexibility is measured by share price, it sure didn't work out well for the company as the stock fell from 112 on May 30 to 68 on June 1. AAP's market cap fell by roughly $4 billion, a grand theft from shareholders by corporate execs who should all be tried and jailed for this outrageous crime. No stockholder lawsuits as yet, and no action by the SEC, which is not a surprise. With creative accounting run wild, investors had best perform serious due diligence heading into what looks to be a tumultuous second half. Winners may have outnumbered losers from January through June, but overall, market breadth has been an issue, though it's not as simple as the advance-decline line might suggest. Large-cap (mostly tech) stocks led the barrage of gains for the first half. There are good possibilities on either side of the bull/bear coin flip. The rest of the market may play catch-up to the big names or those leaders could follow - or lead - the losers even lower in the second half. There are an equal number of indicators and opinions for a continued market rally or a sharp reversal. Even super skeptical cynics who believe the market is rigged are split on the future. Can the rally continue with higher interest rates or are investors whistling past their own graves? The onging hunt for yield has become something of a wild goose chase.
Making sense of the treasury yield curve takes some imagination. Essentially, what has developed is an upside-down condition, where it costs more to borrow short-term than for longer durations. Now, a percentage point here and there may not seem like much to many people, but when you're talking about $32.3 trillion, the current national debt of the federal government (no, you do not owe that, the politicians, bankers and others who have stolen the nation's wealth do), it adds up rather rapidly. A few things can be discerned from the yield curve in its current iteration. First, consumer rates for credit cards, personal loans, car loans and any borrowing shorter than three years, has exploded. Most credit cards have a 20% interest rate attached, if one is so lucky. Forget FICO scores. Even a 720 score pays 15% on credit cards. It's usury with a capital "U". Next, that federal debt is becoming a real problem with the blended interest rate approaching four percent. The federal government, which has been largely unable to balance its books for the past 50 or 60 years, has initiated the countdown to insolvency as interest on the debt will approach or exceed $1 trillion and become the largest single item on the government (un)balance sheet. Politicians have been selling snake oil to the people and the masses have lapped it up, to the point of taxes eating up roughly half of everybody's earnings. That can't go on for much longer. Finally, with the inverted nature of the curve, residential mortgages are in a state of suspended animation. Whatever the Federal Reserve honchos are doing to keep the 10-year note and 30-year bond below four percent, they're simultaneously holding mortgage rates - for the most part - under seven percent. How this all works out, with the 2s-10s spread rising from 81 basis points a month ago to 106 as of June 30, and the full spread from 1-month out to 30-years at 139, is anybody's guess, but it certainly doesn't appear to be a painless experience. God help us all. Stop the madness. End the Fed.
WTI crude oil closed out the week at $70.45 a barrel, almost half a buck lower than last week's close of $70.94, and nearly a dollar lower than $71.44, two weeks back. Oil continues to bounce around the $70 level, one that appears to be in a comfort zone for both producers and consumers. Since there's not a need to use up all of the oil under the earth's crust at once, prices are reflecting this balance, at least until some government or speculator goes off the deep end. This week's national average for a gallon of unleaded regular gas is $3.52, which is surprisingly (because it's a long holiday weekend) lower than last week's $3.56 per gallon. The Southeast has the lowest prices overall. For the sixth week running, Mississippi remains the only state averaging under $3.00. At $2.93, the price dropped a nickel from last week. Louisiana ($3.04), Tennessee ($3.06), Alabama ($3.06) and Arkansas ($3.09) all saw declining prices through the week. Texas and Oklahoma are at $3.13 and $3.14, respectively. There's a new leader in the West is led by as Washington ($4.95) took the top spot from California, at $4.82, last week (apologies for now catching that). Oregon ($4.61), where prices are up 38 cents over the past month, is next. Nevada ($4.20) completes the $4+ club, now down to just four states as Arizona ($3.82) and Utah ($3.95) have recently dropped out. Prices in Illinois are still elevated at $3.89, but down from $3.98 last week. Outside of Illinois, prices in the Northeast/Midwest region range between Kansas ($3.23) and New York ($3.65).
This week: $30,548.00 Bitcoin was more up than down throughout the first half, finally rising above $30,000 the last week of June. Gains of more than 80% offer proof that there is still too much liquidity in the financial system overall.
Silver:Gold Ratio: 83.85; last week: 85.98 Per COMEX continuous contracts:
Gold price 06/02: $1,964.30
Silver price 06/02: $23.69 Leveling out the gains and losses from the past six months, precious metals were remarkably stable. Gold is up four percent on the year, silver down five percent. This is the kind of performance that encourages stackers and holders, and turns casual investors into long-term advocates. Those who argue that the price of gold and/or silver is too low, manipulated by the COMEX and LBMA cabal ignore the fact that one can still buy the same weight of gold or silver with increasingly devalued dollars, euros, yen, or pounds. A stable price within an inflationary environment indicates that the value remains in the purchase. Measured from one year ago (an arbitrary point no matter the date), gold is up nearly 10 percent, silver up more than 20. The question then becomes how much food or gas or any other consumer product casts 10 or 20 percent more than a year ago. The answers are equally arbitrary with plenty of examplars. Precious metals, whether the environment is inflationary, deflationary, or neutral, remains the most solid of investments and insurance against government meddling, economic catastrophe, and central bank fiat currency collapse. Since July, 2003 (20 years), gold is up 545% (354.00 - 1,927.80), silver, up 450% (5.11 - 22.99). Not bad for shiny rocks you can keep in a sock drawer, safe, or vault, depending on your level of commitment. Here are the most recent 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) remained in a declining posture, falling to $37.06, a 34 cent drop from the June 25 price of $37.40 per troy ounce.
Sparing the Independence Day rhetoric, here's the Star Spangled Banner. Despite its many flaws, America is still a great country. Let's work to restore its dignity.
For the Week:
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