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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:
6/26-7/2/2022
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Stocks Melt Up to Start 3rd Quarter; June Non-Farm Payrolls Posted at 372,000, Well Above Estimates Friday, July 8, 2022, 10:12 am ET The third quarter has started off with a noticable change from the first half of the year. Stocks have put on steady gains since last Friday, when the calendar flipped over from June to July. Led by the NASDAQ, which has posted gains every day of the quarter thus far and is up 493 points (4.43%) on the week, investors have been largely discounting the inflation that plagued the first half though they have yet to fully appreciate the recession, which has already begun. The S&P is up 77 points though Thursday (2.02%), though the broadest measure of common stocks, the NYSE Composite, is up a mere 39 points (0.27%) The Dow has advanced nearly one percent for the week, up 287 points. All foour major indices are looking towards a second straight week of gains, something that happened only two times on the Dow, NASDAQ, and S&P in the first half. Stocks don't have to advance Friday for the indices to end the week in positive territory for the most part. Friday's trade will be highly dependent on the June Non-Farm Payroll report, which came in red hot, at 372,000 new jobs against the consensus estimate range of 250-270,000. Once again, so called Wall Street "experts" were proven to be only human and prone to error. Because the expectations were for payroll numbers to drop, when they didn't, stocks took a turn for the worse. The strong labor market means that the Fed will insist on raising interest rates to slow down the burgeoning economy, despite GDP in what appears to be a long-term decline. It is possible that the reported numbers by the Bureau of Labor Statistics (BLS), or the Commerce Department, or Census Bureau are incorrect. GDP may be even weaker than shown, or stronger. There may be fewer jobs being created, or more. Nobody knows for sure because the federal government has been known to cheat and lie about everything at times, especially over the past decade or two or three... It keeps the regular people on their toes.
At the Close, Thursday, July 7, 2022:
Thursday, July 7, 2022, 8:00 am ET There is something definitely going on behind the scenes. Over the course of the past few days, events are turning away from the radicalized far-left "Great Reset" towards a potential "new normal" that looks a lot like the "old normal." In the Netherlands, farmers - recently being joined by fishermen - are blocking access to government buildings and food distribution centers with tractors, blocking highways, and spraying manure on some entrances in an enormous show of public solidarity against a green government policy to limit nitrogen emissions. Meanwhile, the Associated Press, guard dog of establishment media, is fact-checking recent postings on Twitter and YouTube. On Wednesday, the European Union voted to voted to include natural gas and nuclear in the bloc's list of sustainable activities, angering environmentalists and left-leaning climate change adherents. In what was perhaps the biggest development from the standpoint of imagery and metaphor, the Georgia Guidestones, a symbol of globalism suggesting the Earth's population be reduced to 500 million, were damaged by an explosion, and then bulldozed to the ground. The Guidestones, erected in 1980, consisted of four 19-foot-tall concrete slabs and a centerpiece, with the same message inscribed on them in eight (other reports say 12) different languages. According to various reports, the slab that carried the message in English on one side was purportedly the one that was blown up. The remaining slabs were knocked down over safety concerns. If that wasn't enough of a message that the leftist "Great Reset" agenda is being dismantled, British Prime Minister, Boris Johnson, is expected to resign on Thursday amid scandal and questionable leadership that has damaged the cohesion of British society and the economy. This confluence of events is not likely accidental. As has been demonstrated previously, there are few social, political, or economic circumstances that are not pre-planned. For example: the Supreme Court sends abortion back to the states: protests erupt across the country. Two mass shootings in two weeks, Buffalo, NY, and Uvalde, Texas: Congress passes gun control legislation. Whether the recent string of events are part of an offensive by right-wing forces or misdirection by the deep state is a matter of great speculation. Presently, the right is in a celebratory mood while the left is wringing its hands. Lately, Democrats have been openly questioning Joe Biden's ability to lead and make important policy decisions. The January 6 (J6) hearings in the House of Representatives has been an unmitigated flop, a disaster from a public relations point of view. Biden's approval ratings have been falling precipitously over the past year, reaching another new low Tuesday, with 58 percent of Americans saying they disapprove of the job he's doing. Just over a third of Americans‹36 percent‹approve. Many from the left, right, and center wonder who the 36% are who still cling to the illegitimate leader of the United States. Should the recent string of bad news for the left continue, it could evolve into a watershed moment in global policy, likely culminating in a complete undoing of the Democrats in congress come November. While Biden is not subject to no-confidence votes as in other countries, he is under great pressure to resign, though the presidency would then fall to Vice President Kamala Harris, possibly even less-capable for the job than Biden. Should Biden and Harris be removed, such an action would likely come from outside government, either in the form of a military coup or popular uprising, though neither are on anybody's radar at present. What this all means for markets is a double-edged sword. On the one hand, Wall Street cannot be pleased with the current government policies and would welcome a change to a more rational, measured federal government. Policy shifts of magnitude would be positive for stocks and the economy as a whole, especially if gas prices continue to fall and runaway inflation becomes more contained. On the other side of the coin, Democrats and deep state operatives are entrenched and unlikely to be moved in rapid fashion, despite the recent spate of circumstances suggesting their demise. Should policies remain in place and the media continue to parrot left-leaning ideology as if it were gospel truth, stocks would remain in the current funk. There are too many moving parts at present to offer anything but possibilities and "what ifs," but it certainly appears that the "Great Reset" may at least be temporarily on hold, or worse, for them, being scrapped from the inside. Since the end of the second quarter this past Thursday, stocks have been holding up relatively well with three trading days in the books. So far this week, the Dow and NYSE Composite are sporting losses while the S&P and NASDAQ are holding onto hard-earned gains. Volatility has been flattened out but remains elevated. Oil prices have been collapsing and precious metals have been hammered, with both gold and silver reaching multi-month lows over recent days. Gold closed at 1738.70 Wednesday in New York, the lowest price in more than nine months. Should gold and silver reverse, it would be a sign of a major shift in global policy and governance. Any concessions in Ukraine by the West would also be considered a huge development away from globalist, US dominance. The recent announcement by Russia's President, Vladimir Putin, that the BRICS nations are developing a new reserve currency cannot be underestimated. Such a move would send shock waves throughout the global economy, though it appears that is exactly what is underway.
At the Close, Wednesday, July 6, 2022:
Wednesday, July 6, 2022, 8:17 am ET With the first half of 2022 in the rear-view mirror, an opportunity to look back on what happened and examine the myriad of ways many investors missed signs of a bear market forming. First, it's important to point out that economic expansions and contractions always have bumps and bruises and always begin the moment the other ends. The line, "bear markets start where bull markets end," has been attributed to famous investor, Jesse Livermore, the lead character in "Reminiscences of a Stock Operator," a 1920s best-selling book by Edwin Lefèvre, which outlined the ups and downs of one of the world's boldest speculators. As simple as that sounds, the first hints of a primary trend reversal - in Dow Theory parlance - could have been gleaned as early as the period from September to November, 2021, at the culmination of a massive bull run off the lows from the 2020 virus panic, which turned out to be just a temporary setback in the long bull market that began in March of 2009, at the end of the GFC. Back in 2020, the S&P 500 traded as high as 3,393.52 intraday on February 19th and began a waterfall series of declines, bottoming out at 2191.86 on March 23rd - incidentally, the index ended higher that day. Once the bottom was discerned, it took little time for speculators to buy the mother of all dips, sending the S&P back above 3,000 by June. By the end of 2020, all of the losses from February and March had been recouped, plus some. By the end of the year, the S&P stood at 3,756.07, well beyond the February highs. Gains were tacked on through most of 2021, until September, when the S&P pulled back to from a closing high of 4,536.95 on September 2nd, to 4300.06 on October 4th, a decline of just 5.22%, but the first sign that the bulls legs were getting tired. Stocks quickly regained momentum, peaking at 4,171.70 on November 8. After another dip to 4,513.04 on December 1, the bull finally peaked on the first trading day of 2022, January 3rd, at 4,796.56. By January 27, the index had fallen to 4,426.51, a 370-point drop, or 7.71%, falling below both the 50 and 200-day moving averages. This was the first real signal that the bear market had commenced. The S&P didn't have to fall by more than 10% to be considered in a "correction." Those who rely on round numbers thrown at them by financial pundits and purveyors of half-truths about markets and the economy were doomed to have missed this significant signal and many more that followed. Stocks rallied in February, but the S&P never made it back above its 50-day moving average, which has begun sloping downward in mid-January. The index fell back below its 200-day moving average by mid-February and never exceeded it, making a new low of 4,170.70 on March 8, a 13.5% decline from the January 3rd high. On March 14, the 50-day moving average crossed below the 200-day, a signal often referred to as a "death cross," denoting a serious market condition of impending bearishness. Wall Street and the media fed the public copious amounts of "hopium" as the Russian invasion of Ukraine had begun in late February. Stocks rallied to 4,631.60 on March 29, but, despite the "death cross," defying some of the loudest warnings from the bearish crowd. By this juncture, inflation was raging and the Fed had made its first rate hike of what they promised would be a steady stream of federal funds raises. If that wasn't enough, April would provide enough signals to get out of the market to send most bulls finally back to the barn. All of the March gains vanished by April 29, when the 200-day moving average flattened out and began to decline, joining the 50-day in the trend. When both the 50 and 200-day moving averages are pointing down, it's time to pack up and go. Many were still holding, either by choice or, as in the case of many pensioners or 401k investors, by regulatory capture, stuck between early withdrawal penalties, taxes, and outright losses. When the S&P closed on April 29 at 4,131.93, a 13.86% drop from January 3rd, the new chorus was "it's not a bear market until the index drops 20%." Once again, the fallacy of round numbers was forced upon retail investors. The bear market was already well underway, with four months of data and signals on full display. The anal-retentive, round-number enthusiasts finally got their wish on Monday, June 13, when the S&P fell 150 points, its fourth straight decline, closing at 3,749.63, finally down 21.83%. Break out the band. The bear market has arrived, wiping out a good portion of portfolios, especially those weighted towards tech, consumers, or finance, three of the more battered sectors. The S&P and other indices have fallen more since, but the beginning of the third quarter has the perma-bulls squawking all over again how stocks have reached a bottom and should perform better in the second half. In fact, they attest to the S&P sporting gains the first two trading days of July, the start of the second half and thrid quarter and is well above that nasty low of June 16, 3,666.77 (devil worshipers will be hanging their hats on that one). Well, OK, but Tuesday's close still leaves the S&P down 20.12% year-to-date. Gas prices are coming down, so is oil. Not food, though. The Fed may only increase by 50 basis points later this month. Russia might crawl back to Moscow and the BRICS will struggle to create a new world reserve currency. Your job is safe and there is no sign of recession (despite first quarter GDP plugging -1.6% and the second quarter tracking towards -2.1%). House prices and stocks can only go up from here, according to the usual suspects from CNBC, Fox Business, JP Morgan, Goldman Sachs, Deutsche Bank, et. al. Bull markets begin when bear markets end. Hope springs eternal.
At the Close, Tuesday, July 5, 2022:
Sunday, July 3, 2022, 11:58 am ET
When you come to a fork in the road, take it.
The week just past marked the end of the second quarter, the first half of 2022 and the start of the third quarter and second half of the year. This change of economic season may not quite be the fork Yogi suggests taking, however. The second half could resemble the first half in a myriad of ways, especially in the stock market where perceived overvaluation and lack of price discovery continue to be powerful forces.
Stocks The week just past speaks for itself (numbers at bottom of this post), with the major indices down for another week. The first half of 2022 was one of the worst on record. As a matter of fact, the first six months of 2022 were the worst ever on the NASDAQ, with a loss of 29.72%. The S&P closed out the first half down 20.25%. Dow Industrials were off an even 15.00%, and the Russell 2000, now known kiddingly as the Russell 1727 is down 23.97%. The Dow Jones Transportation Average, which hit a record high on November 1, 2021 (17039.38) is down 22.01%. The NYSE Composite peaked on November 8 of last year at 17,310.51, is off 15.45%. It was just not a good half for stock pickers, day traders (unless agile and mostly short-selling) or long term investors. Judging by the levels of the major indices, the bear market is not nearly complete. The Dow, NYSE Composite, Transportation Average, the S&P are just at what looks to be the midpoint. All the majors are at levels above those of early February, 2020, prior to the virus panic. Economic conditions were not great then, and they are certainly worse now. The market is in its usual state of denial, as are many investors. Inflation is not going away soon, though it is likely to moderate. Already in a recession, the US has not even begun to feel the effects of disinflation, job losses, mortgage interest rates and more Fed fun and games with rate hikes on the table for the remainder of the year. Rallies have been sold into for much of the first half. The same is likely to happen in the second half. The federal government continues to bring wreckage to the economy in myriad ways and that's not going to stop. There are more than just a few indicators pointing to continued suffering. The Atlanta Fed's GDPNow is currently pointing to second quarter GDP of -2.1%, on top of the -1.6% from the first quarter, which fits the old mold of a recession, the one by which most people measure. The NBER, which makes the official call on recessions, won't do so until months have passed and a recovery is underway. Such is their particular brand of madness. The official first estimate of second quarter GDP will be announced on July 28, preceded by another FOMC rate hike. July may offer a bit of a respite, or it may not. No matter the case, August and September look to be excessively bloody. Treasury Yield Curve Rates
As the tables above indicate, the Fed is now fully engaged in its version of Japanese Yield Curve Control (YCC), keeping a lid on benchmark rates, particularly the 10-year note, as the yield fell to its lowest level in a month (2.85%, 5/31/22). June was seriously bifurcated, as the 10-year yielded a high of 3.49 on the 14th and then commenced upon a rapid decline to 2.98 on June 30, with a climax drop of 10 basis points on the 1st of July. Not only have longer-dated maturities seen yields punched lower, but the shortest-dated (30 and 60-day) have rocked higher, up an identical eight basis points from the week prior. Being the buyer of last resort, the Fed kept busy buying up 2s, 3s, 5s, 7s, and 10s over the past two weeks, keeping the entire debt market from a massive implosion. How long they can continue to exert control over the fixed income markets is nothing more than their willingness to do so. The Bank of Japan has been lording over its treasury for decades, buying Japan Government Bonds (JGBs) with regularity and considerable aplomb, to a point at which the BOJ is the market and has been for some time. The Fed is on a similar path. In the minds of Fed presidents, governors and chairs past and present, they can rule over the treasury market for many, many years. It is advisable to keep an eye on and money out of treasuries, lest one wishes to soon depart with their cash and savings. It would be equally unwise to short the treasury market as it would with any market wherein one entity exerts so much control as the Fed does there. For the time being, the short end of the curve will align with the current federal funds rate (1.50% to 1.75%) as much as possible, with the inflection point between six-month bills and one year notes. Over the week just past, the former dropped one basis point, the latter gained four. While yields on 30 and 60-day bills are not quite to the level of the federal funds rate, they are closing in on it. It's useful to remind oneself that as of May 24, prior to the June FOMC meeting at which the FF rate was boosted 75 basis points yields on those bills were at 0.55% and 0.88%. 30-day bill yields have more than doubled since then, 60-day, nearly doubling. Withe the FOMC ready to hike another 50 to 75 basis points in July and again by a similar amount in September, these short term rates will be forced much higher, to a point at which the curve will approach true flatness. The Fed can exert as much YCC as it likes, but facts are facts. 2s-10s are separated by a mere four basis points, while 5s and 7s have inverted over 10s. 2s-30s stand at 27 basis points, but got as low as even on June 14, as the table below attests to the stinking mess that prompted swift and decisive Fed action.
WTI crude oil closed out the week at $108.46 a barell, a gain of less than a dollar from the prior week ($107.62, 6/24), continuing the farily obvious decline since June 8, when a barrel was going for $122.11. This odd behavior leading up to a major holiday weekend, is not without precedent, though the normal pattern is for crude to gain leading up to Independence Day (July 4) in the US. A number of factors have led to the unusually-bearish pricing of recent weeks. OPEC+ confirmed increasing production quotas by August, despite widespread belief that the reserves of the Saudis and United Arab Emirates (UAE) are all but depleted. Shale drilling has ramped up in the US along with the active rig count increasing from 407 to 753 over the past year. Russian natural gas and oil continues to flow to Europe despite sanctions, proven to be largely ineffective. An unofficial tri-lateral trade has been established between Russia, India, and Europe. Russia has been selling oil and gas to India and China and others at roughly a $30 discount per barrel and India, according to rumors, is marking up the oil and selling it into Europe at a profit. Europeans, led by the US, have become their people's own worst enemy, making everything more expensive. In the USA, Biden continues to preach the lie that all inflation has been caused by Putin and Russia, when it's apparent that prices for just about everything began rising the moment he was (falsely) inaugurated on January 20, 2021. Charts and data bear this out. Draining the SPR at a record pace has helped push the price of oil down, but not necessarily gas at the pump, as refining capacity remains throttled. Also adding to the current decline are the changing habits of American motorists, who have switched to more conservative methods of combining and shortening trips, cancelling vacations, and generally being smarter about driving. At $4.50-$6.50 a gallon who can blame them? Gas prices have come down a bit, but not by much. According to gasbuddy.com, the average price in the US for a gallon of unleaded regular, 10% ethanol is $4.81, down from a week ago, when it was $4.89. Prices in the Western states are severe, with the average in California at a ridiculous $6.23, and Washington, Oregon, Idaho, Nevada, Utah, and Arizona all averaging well above $5.00. On the low end are conservative sensible Southern states, which, with the exception of Florida, are all averaging below $4.50, the lowest being South Carolina, at $4.28. None of this should be surprising. Prices of oil and gas are at or near record highs, which, as any qualified statistician or mathematician knows, will not be maintained for long. That's why records are records. Highs and lows are pivot points. Despite overwhelming fear-mongering by Wall Street, the government, and mainstream media, record prices and record rates of inflation have been achieved for the time being and, as the economy contracts, so will prices. Drillers and refineries are running at capacity, cashing in on the high price levels, but they will soon enough meet demand and eventually end up with a glut. It's as predictable as night and day. How long prices will decline and stay at lower levels - think $80 oil and $3.25 gas at the pump - rests largely in the hands of the federal government, which seemingly has gone out of its way to wreck the US and global economy. Thus far, their efforts have been rousing successes in Europe, the US, Japan, and Commonwealth nations, but have failed spectacularly in Russia, China, and much of the rest of the world. The United States and Western Europe, not to mention England, Canada, and Australia, are governed by ill-mannered, intellectually void dunces. It bears repeating: The United States and Western Europe, not to mention England, Canada, and Australia, are governed by ill-mannered, intellectually void dunces. It's time for people to awaken and throw off the chains by which they are bound. It's a slow process, but "wokeism" is being replaced by honest people who have actually awakened to the excesses of their governments and money moguls.
Bitcoin spent the week being whipsawed between $18,735 and $21,500, just this Sunday morning flash-crashing some $400 to $18,817, currently content to hover right around $19,000. While Money Daily has been calling Bitcoin "dead money" for weeks, there continues to be enough interest in the leading cryptocurrency to keep it from complete implosion and failure. News this week that the Central African Republic (CAR) announced plans to introduce Bitcoin as legal tender by the end of 2022 attests to crypto being not fully dead and in fact possibly emerging from the bear market that has gripped it since November, 2021. It still may be premature to jump into the space as the global economy is just entering what could be a major recession, which would affect cryptos negatively, but the price is getting low enough to attract more than a few speculators. The CAR a nation roughly on par with El Salvador, the only sovereign nation to have declared Bitcoin legal tender, with a population of just under five million, though by land mass it dwarfs the Central American nation, at 240,535 square miles El Salvador, the smallest country on the American Continent is 8,124 square miles, with an estimated population of 6.8 million, which would make the CAR the choice for rugged rural adventurists. El Salvador just bought another 80 bitcoins, bringing its total to 2381, or about $45 million US at prevailing rates. There's going to be considerable speculation in this area for a number of reasons, primarily, "whales" with a vested interest in keeping the price at a reasonable level and not crashing and further adoption or at least speculation by smaller emerging market countries similar to El Salavador and CAR, located in South America, Africa and Southern Asia. As the dollar, euro, yen, and pound continue their pathway to disintegration and complete loss of purchasing power, other currencies will rise, bitcoin among them. All other cryptos are garbage. Only bitcoin offers any hope of value, but it still may be too early to buy into it. Dollar cost averaging seems a likely path forward for anybody seeking refuge in crypto.
Gold price 06/03: $1,853.90
Silver price 06/03: $21.94 Silver fell to a closing price on Friday of $19.86, the lowest closing price in nearly two years. In July, 2020, the price of silver was rising quickly from the forced pandemic bottom in March of $12.39 (weekly close, 3/15/20), the intraday price fell below $12.00 briefly at that time, but silver (and gold) recovered rapidly from there forward. By August, silver's price had more than doubled, nearly reaching $30/ounce. At present, silver is moving in the opposite direction. The price has been declining steadily since bounding over $26/ounce in March ($26.90, 3/8/22). This week, the closing price was lower every day. Silver may be approaching a bottom, but it appears that the engineered selling on the COMEX and daily price fix by the LBMA are not quite finishd. Friday's LBMA price fix was $19.725. While stocks have careened lower over the first six months of 2022, logic would normally dictate that gold and silver would appreciate, though the opposite has occurred, leading many followers of precious metals to belive that indeed, this time is different. Retailers and ebay sellers, many of which are large retail bullion dealers, see things in a different light, with premiums continuing to stretch higher. Prices for numismatics and coins and bars of supposedly collectible quality are off the charts. The LBMA and COMEX market makers are doing the level best to keep a lid on precious metal prices, but investors small and large are not being fooled by their price suppression schemes. A sense that there are incredible changes occurring in financial markets and general economics is palpable among precious metal buyers at retail. Sellers are less inclined to depart from spot prices, but pressure is building up within the space, with demand ramping up, stressing supply. Those who view gold and silver as more than mere trinkets and as real money are not at all dissuaded. Buying is approaching a frenzy. 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) was fairly stable again for the week, falling slightly, to $37.19, a decline of just 13 cents from the June 26 price of $37.32.
It being Independence Day Monday, all US markets are closed and Americans get a welcome day off. The rest of the world will just have to trundle on without us. With the federal government looking to impose as many restrictions on freedom and liberty as they can dream up, Monday's celebrations should not overlook that the enemy is within our own borders. Government overreach has obtained distressing proportions and the blowback - already underway - is likely to be epic, culminating in a complete repudiation of government policies, "woke" socialism and the Democrat party come November's midterm elections.
At the Close, Friday, July 1, 2022:
For the Week:
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