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Thwarting the Business Cycle One Rate Move at a Time; Dow, S&P Make New Highs, So Does Gold Friday, September 20, 2024, 9:00 am ET Thursday's dramatic response to the prior day's FOMC 50 basis point cut to the federal funds target rate - to 4.75-5.00% - was initially met with surprise and horror, with stocks ending lower on the day as investors wept through Chairman Powell's press conference, but, with unsurprising prescience, the money managers of the world decided that yes, this 1/2 percent move to the downside was indeed the right thing to do, that Powell understood the dynamics of the market and even cutting rates when stocks were close to all-time highs was brilliant and timely and had nothing to do with election-year politics. Or so it appeared when all of the major indices gapped higher on Thursday, trapping shorts in their tracks and forcing sales of stocks they thought would be marked down. The rate move was indeed timely, for those holding long options and futures contracts which expire on Friday, a quad-witching day as the third quarter steams towards its end. Conventional wisdom used to posit that days of heavy options expiry were subject to extreme volatility as investing pros cashed in their long or short positions. Over the past 20 years or so, those expectations have shifted, as any good options trader knows that holding a position to expiration often leads to unexpected losses or, at the margin, gains that are below expectations, unless one actually plans on exercising those options. Thus, traders routinely cash out days or even weeks earlier. The Fed's timing of the rate cuts, just two days before the big expiry, set up near-perfect trades for longs and the declines of late Wednesday afternoon were most likely a result of cautious money cashing out options. Those with greater risk appetite and maybe a better sense of the markets in general held until Thursday, casually banking their profits all day long. All of this begs the question of how markets are supposed to function and what the Federal Reserve, in its infinite wisdom, has managed over the years to subvert normal functioning of markets by inserting itself and its policies directly in the face of short-term investors, of which the market is chock full. So, now that everybody who is anybody on Wall Street has made their monthly looting targets, what's next? Has the Fed convinced the world that stocks can only move in one direction, higher, when it announces an oversized rate cut, or will the skeptics and unbelievers in the primacy of central banking be proven the ultimate second-guessers? Tuomas Malinen's Forecasting Newsletter nails it in yesterday's monumentally insightful post, The Fed Pivots (Panics), available on Substack for free, without subscription at the link provided. In his pithy remarks, Mailinen cites four reasons for the Fed's panicky action, noting that the last time the FOMC cut rates by 50 basis points was just after the collapse of Lehman Brothers, back in 2008:
1. The Fed is racking up massive losses. All of this makes perfect sense, though the cheerleaders at CNBC, FOX Business and CNN won't dare mention any of these obvious factors in the Fed's decision-making process. Simply put, the Fed acts in its own best interest, not in the best interest for the economy, people's lives, or even narrow partisan American regards. They see trouble brewing, though they're shy about speaking the truth plainly, as has been their practice since Alan Greenspan ignored reality and blew the biggest bubble then seen back in the late 1990s, only to see it burst in 2000 and beyond with the dot-com crash. Today's Federal Reserve is at least as deceitful and dangerous as those of Bernanke, Yellen, and even the Maestro himself, as Bob Woodward crowned him back in the early 2000s. There's always a reckoning for excess, just as in physics, for every action there's an equal and opposite reaction. Anybody who pays attention to noisy markets, like yesterday's ballooning catapult which sent the Dow Industrials and S&P 500 to all-time highs, again, may be thinking we're on the cusp of a new era of prosperity, when the actual behind-the-scenes facts speak differently. Stocks can levitate at the whims of the market for long periods of time, but, consider this: besides the obvious Ponzi of bitcoin, the best-performing asset this year has been silver, with a 32% gain year-to-date, followed by gold (+27.29%). The ballyhooed stock market major indices look silly by comparison, with the NASDAQ up 22%, S&P ahead 20.47% and the poor, tired Dow up a mere 11.43%. Those are nice gains for stocks, certainly, but the question that needs asking is why have precious metals outperformed? Somebody smells something rotten in lower Manhattan. Otherwise, stocks would not be trailing real money. The Federal Reserve may want to believe it can control market cycles and the business cycle by raising or lowering interest rates when it actually is controlled by the business cycle itself, a product of a great confluence of individual human actions. For what it's worth, the Federal Reserve and its distortions, its fiat currency debasement, and unaccountability to the public, is really the greatest danger to America and the world. Without them, there would be room for honest money, honest dealing, and heaven forbid, maybe even honest politicians. We can dream, can't we? That said, it's left to the markets to decide. Overnight, Asia was higher, and, as morning dawned in America, European stocks were broadly lower. Stock futures are flat, mixed. And yes, gold made another all-time high, checking in at the COMEX early this Friday morning at $2,640. Money Daily has repeatedly suggested that the last few months of 2024, especially leading up to and after the election, might be just a bit unnerving. The rattling is about to commence.
At the Close, Thursday, September 19, 2024:
Thursday, September 19, 2024, 9:20 am ET George Soros, a man hated by lierals and conservatives alike, happens to have made a lot of money, notably by shorting the British pound into near non-existence among other forays into deep markets. His approach to investing, as mendacious and mercenary as it is crafty and straight-forward is a simple one: find a trend whose premise is false and bet against it. With Wednesday's bowing to the will of political and economic forces by the Fed's lowering of the federal funds rate by 0.50 percent, Soros and his acolytes should be smiling, as they have before them an appropriate target, that the risk of inflation has been balanced by the risk of rising unemployment. That is what Fed Chairman Jerome Powell expressed at the press conference following the rate policy announcement yesterday afternoon. Is the lowering of interest rates a trend - because surely the Fed isn't going to stop at just one 50 basis point decrease, more will follow as certainly as night follows day - whose premise is false? Will lowering the cost of borrowing prevent job losses while also keeping inflation in check? On the first part of the equation, employment, maybe. On the second, inflation, not a snowball's chance in hell. Inflation, according to Milton Friedman, is "everywhere and always a monetary phenomenon." While there's little argument against Friedman's genius, he probably is capturing the zeitgeist of a prior era, his, back in the 1950s and 60s. But, to the point, if you're looking for a monetary policy that encourages inflation, the Fed has readily supplied one and will continue to reinforce it as it steps down rates over the coming months. Here in the 21st century, however, there are some other factors to consider beyond the obvious cheapening of credit. In one and the same breath, the Fed lowered the interest rate and said they would "continue reducing its holdings of Treasury securities and agency debt and agency mortgage?backed securities." Thus, as one hand giveth by lowering the federal funds target rate, the other taketh, by continuing to de-lever its balance sheet, a mitigating factor. The devil, as we know, is always in the details. Prior to June of this year, the Fed was reducing its balance sheet holdings of treasuries and MBS at $95 billion per month. Since then, it's been $60 billion, so, they've slowed the rate at which they're reducing their balance sheet, in effect, not exactly dousing the inflation fire with the same rigor.
The Fed's balance sheet. Beyond the Federal Reserve and its iron-grip control of the money supply are other factors, which include corporate greed, competition, and massive government spending (this year's federal deficit is already in excess of $2 trillion). Those cross-currents are likely to be positive for inflation and, at best, neutral toward employment/unemployment. So, is the idea that lowering the federal funds rate will balance out inflation and unemployment risks a "trend whose premise is false"? Possibly, leaning toward probably. As with all speculation, the future is unknown, but chances are good that inflation will continue to trend above two percent, the Fed's preferred level, and unemployment will increase. If one were to follow the Soros procedure, the candidates for trends that may have false premises are plenty:
Obviously, there are a plethora of means by which to bet against any of these possibly false premises, but one which covers the waterfront, so to speak: buying gold and silver, or commodities and hard assets in general. Gold and silver shot up like SpaceX rockets at the release of the Fed decision, but were mysteriously spanked down during Powell's presser. That's likely a temporary setback due to the continuing trading fiasco that is the COMEX futures market. Gold was recovering nicely this morning, hitting $2,619, until just minutes ago, sent packing back to $2,599. Stock futures are soaring a half hour prior to the opening bell. That's to be expected, just as the price of gold falling (counter-intuitive), but, futures are very much reflective of opinion, not fact. Give it a few days, maybe even weeks. Stocks will behave according to the present narrative, which is that the Fed's 50 basis point decrease was not panicky or indicative of a coming recession, but rather, balanced and proper. Good luck with that.
At the Close, Wednesday, September 18, 2024:
Wednesday, September 18, 2024, 8:38 am ET Editor's Note: Sure enough, as Murphy's Law dictates, on the day of the one event the market has been breathlessly awaiting for months, our site, dtmagazine.com is off line. Not only our site, but apparently possibly thousands of others are kaput for now, as our hosting provider, Total Choice Hosting is suffering an outage. They're based in Detroit, but we've found no information indicating any kind of disruption. In any case, we're publishing here on Blogger, which once was our home. Sorry for any inconvenience, but, on our end, this is a rather serious issue. Stay tuned and good luck. --FR Editor's Note 2: As it turns out, my site was not down, it was all the fault of my ISP, who fixed it once he became aware of the issue, but it took all damn day. Ain't the internet fun? - FR Imagine a sign that says, "Stupid People Line Up Here," and there you saw Fed Chairman Jerome Powell, Kamala Harris and Joe Biden, former president Donald Trump, Nobel economist Paul Krugman, JP Morgan CEO Jamie Dimon, and other fine, upstanding, well-known politicians and business leaders. One would be inclined to ignore the message and just follow those dignified folks. Or, maybe not. The ones who get a pass on this intelligence test are all dead, like Paul Volker, long-ago Fed Chairman who courageously fought off inflation by raising the federal funds rate to 19 percent. So, as the line is forming, you see, one by one, each of these dignitaries get a card that gives them either 0.25% or 0.50% discount on their credit card interest and then step forward and fall off a cliff. You might want to reconsider your choice, but, there's a security guard there checking Facebook and X posts telling you that it's too late. You cannot change lines. Of course, it would be impossible anyway. There's only one line. Dytopian? Yes. Orwellian. Certainly. Kafka-esce? No doubt about it, but, that's where the current brain-dead, lemming-like (giving lemmings a bad rap, BTW) "leadership" and financial consenus has taken the entire world. Finally, when you get to the front of the line, get your card (lucky you, it's a 0.50% card), step off the cliff into the abyss, you see other people descending at various rates of fall: Ursula von der Leyen, Christine Lagarde, Emmanuel Macron, Michael Bloomberg, you even drift near to Volodymyr Zelenskyy, who, oddly enough, is being suspended by a parachute, drifting graciously down, down, down. At the bottom of the abyss is an enormous placard that says, "Approved by Aldous Huxley. ENJOY!" As you're falling, you realize that the sign at the bottom isn't getting any closer. It seems to be moving lower in tandem with your descent. Along the way are various fast food outlets, and, getting hungry on your trip to who knows where, you think you might grab a burger and some fries, but every time you get close to a McDonald's or Burger King or Wendy's or Taco Bell, the price goes up and you have less money in your wallet than the last time you checked. Eventually, you realize that the money you possess doesn't buy as much as it did just moments before, so, a cold drink is off the menu because you can no longer afford it, and then, a burger and fries costs more than you can afford, and you're getting hungrier and hungrier... Eventually, you decide on just small fries, because that's all you can afford. You get the fries from the friendly ghoul at the drive-through and he asks, "would you like ketchup with that?" When you answer affirmatively, you're told ketchup will be extra, and forget about getting a spork or a floon. You have to eat it by hand. So, there you are, falling, falling, falling, eating your fries, hand to mouth, wondering if you're dreaming, when Jerome Powell himself comes by and pinches you, saying, "this is not a dream. This is the actual nightmare of fiat currency and fractional reserve banking."
That's essentially what's going to happen, starting just seconds after 2:00 pm ET, when the FOMC of the Federal Reserve announced their rate policy decision. Nobody will really notice and great changes right away. They'll all just, one by one, start heading for that STUPID PEOPLE LINE UP HERE queue. As time progresses like it always does, over the cliff they'll go, one by one, then in small groups, and finally the entire edifice collapses and everybody goes down. While you're being drawn inexorably toward the line - because there is only one line - you think about saving yourself and your family. You buy a gun, canned goods, some gold and silver. While none of these will ensure that you don't get in the line and go over the cliff, they may provide some relief: others will cut in front of you, mostly people with large credit card bills, stock portfolios, and mortgages, and; you may find salvation on a crag of rock or a ledge on your way down, never descending all the way to the bottom of what is, essentially, a bottomless pit. Perhaps you're skeptical about this little story. You may think - like Jamie Dimon - that a 25 or 50 basis point cut to the federal funds rate isn't a big deal. Meybe it's not, but check back in three months, six months, a year, two years, five years and see where you are. Within two years and possibly sooner, the federal funds rate will once again be approaching zero, maybe about 2.5% or so, and while mortgage and credit card payments are a little easier, you probably won't have gotten a raise (if you even still have a job and/or some form of income) and the price of everything will be higher or lower, depending on what it is, where it came from and where you live. What will occur today when the Fed makes its momentous announcement is just the beginning, or maybe closer to the middle, of the Greater Depression, which will be followed by war, and then, well, you get the picture. Now, get in line.
At the Close, Tuesday, September 17, 2024:
Tuesday, September 17, 2024, 8:53 am ET The degree of anticipation surrounding the "most momentous Fed decision in years" is truly breathtaking and utterly stupid. It's almost a bad as the level of hype and media droning about the upcoming presidential election. To think that a group of overrated academics are qualified to determine the fate of the U.S. economy, and, to a large extent, that of the entire world, goes far beyond the normal outlines of pure economics. The decision to lower the federal funds target rate either by 25 or 50 basis points has taken on qualities previously reserved for Delphic oracles, magicians, and gypsy fortune-tellers. It's as though the entire world will suddenly become better or worse just because of the decision made by 12 eggheads sitting around a mahogany table. Here's a news flash: very little in the lives of billions of people will change dramatically whatever the FOMC decides of Wednesday. Most people will be more affected by what their kids or close relatives do, their job performance, their health, or the relative functionality of the cars they drive. Even presidential elections have little to do with everyday operations. In a lifetime that began in, say, the 1960s, what enormous differences were there in most people's lives whether the president was Ronald Reagan, Jimmy Carter, George W. Bush, or Barack Obama? Not a heck of a lot. Prices for everything went up during each of their administrations, the U.S. waged war or had conflicts against various other countries, some people worked, others didn't, kids went to school, technology advanced. Nothing was so vastly different under different presidents or Federal Reserve chairmen so as to cause violent, surprising, or dramatic changes in the lifestyles of Americans, and, to a large degree, those of billions of people living around the world. Sure, changes made by presidents and FOMC voters have had some subtle effects. Inflation ran hotter or cooler at various junctures. The threat of war was higher or lower. There was higher or lower unemployment, but overall, presidents and economists don't change the world. People do. Individuals doing what they desire, engaged in activities decided by themselves have collectively more impact on the overall world construction than anything any president, or congressman, or economist, or unelected bureaucrat might conjure up out of the miasma of sympathies, theories, suggestions, and possibilities floating about in the ecosphere of ideas. Little things add up and the collective interests of homo sapiens matter more than the delusional proclamations of kings, rulers, soothsayers, and analysts. Technological breakthroughs and advancements in science are usually more profound and create longer-lasting effects on larger populations. There are times when leaders, usually dictators or democratically-elected persons blunder into earth-shattering conditions, like Hitler or Hirohito in World War II, or Lyndon Johnson in the Vietnam era, but, even then, for the most part, the lives of millions of individuals are hardly affected. In the lead-up to World War II, while war raged at various locales in Europe for many years, Americans enjoyed peace at home prior to entering the conflict. Change was sudden after Pearl Harbor, but it was individual American men and women who made choices: to fight or not, to work within the war machine or avoid it, to support America's role or not. With Vietnam, it was the actions and voices of the masses that changed the direction of the war, as campus protests and significant rallies in opposition to America's engagement that eventually swayed public opinion - and that of the leading actors in Washington - to forestall and eventually end the conflict. So, what the Fed does on Wednesday, September 18, 2024, will not forever go down in he annals of history as an epochal event. Rather, it will be considered to be either wise or devoid of reason, depending on the eventual outcome of the future and other policies and decisions from other, unrelated quarters. There's little chance that whatever is decided tomorrow will be consequential. The path of financial destruction and debasing of the currency is well trod upon and likely irreversible. The same will be true of the presidential choice and decisions made and policies pursued by either Donald Trump or Kamala Harris. The road upon which we all travel has a distinct destination and the only question is how quickly or slowly the world lurches towards it. In the meantime, individuals will either prepare or not. Politicians and bureaucrats may try to - and often do - influence the actions of people far beyond their immediate circles, but, in the end, it is people, individually and collectively, who foster lasting change.
At the Close, Monday, September 16, 2024:
Sunday, September 15, 2024, 12:42 pm ET Symmetry. So often it is unseen, especially in markets, but it showed up the past two weeks in stocks, when all the major indices sold off the week ending September 6, and gained it all back the week ending September 13. Have a look, and pay special attention to the NASDAQ and S&P 500.
Week Ending 9/6:
Week Ending 9/13: The declines and subsequent gains on the S&P and NASDAQ were almost perfectly coordinated. Why did this sudden fall and rebirth happen? For the same reason stocks have been getting hammered down and rising back up for the past 15 years, the myth of "buying the dip." Wall Street, in its infinite wisdom, has convinced the entire planet that stocks only go up, and when they do go down, it's a buying opportunity. By almost any measure, it appears they're right, but, how high stocks can proceed is becoming a grotesque monstrosity, on the level of prior highs achieved in 1929, 1999-2000, 2008, or 2021. The Shiller P/E, or CAPE, which is often quoted here at Money Daily, is at its third highest level ever, 36.21, and it is very possible that it is soon going to go even higher. Given the Federal Reserve's FOMC members have telegraphed, at the minimum, a 25 basis point cut to the federal funds rate on Wednesday of the coming week, and easy money, weak dollar cheerleaders are urging them to go 50 basis points, stocks should react positively at the event horizon. Who's selling, and who's buying remain mysteries, though there are skeptics, cynics, conspiracy theorists, and lunatics who believe the perpetrators are one and the same, high level, deep insider traders at the world's largest financial cartels, BlackRock, Vanguard, and State Street, mammoth entities that control the vast majority of all major stocks. There's at least a scintilla of truth to those far-fetched claims of market rigging. More, none will know. The inner workings of high finance financial matters are not a suitable topic of discussion for muppets, or serfs, or smurfs, or even muggles of Harry Potter fame, so, speculation remains muted. As is often the case with all markets, they sometimes get ahead of themselves. Was the drop in week ending 9/6 an early warning manifestation of "buy the rumor, sell the news" or was it simply aberrant behavior by non-believers in the infallibility of markets and the U.S. financial machine? Or, was last week's rise of the Phoenix portentous of things to come. When the Fed lowers the magic rate, will the world suddenly become richer, more pleasant, and full of opportunity? Probably not. We all will just have to wait and see. Stocks Stocks go up. That was the message delivered resoundingly last week. See above. What happens in the aftermath of the Fed's first rate cut since March 2020 is anybody's guess, but most of the betting seems to be leaning toward higher stocks and lower yields on treasuries and other fixed-income vehicles.
Perhaps the most frightening part of the stock market - besides bears being routinely slaughtered for sport - is the concentration of money. Stocks outperforming the S&P 500, as of July, was at an all-time low of 16.1%. Every last dime is going into Magnificent 7 stocks, tech, and financials, the rest of the world be damned. With last week's flare-up in stocks, that concentration is likely even greater. Trades as crowded as what's currently taking place seldom turn out well. Everybody may feel rich at some point, but, as has happened every time in the past, in 2000, 2008, 2020, when the tide goes out, leverage is stretched to a breaking point, margin calls commence and vast pools of speculators are revealed to have been swimming naked. In terms of positioning, doing nothing, making no investments from now until February, or trimming positions might make sense. At current extremely leveraged conditions, the market could go haywire at any time from the Fed announcement on Wednesday through the inauguration on January 20, 2025. Knowing that it's often difficult to stand pat for extended market periods - especially when the odds favor an expanding bubble crack-up boom - is the message sent from commodities, especially gold and silver over year and particularly the past week.
Yields on all treasury issuance dropped significantly last week, preparing for the Fed's rate cut announcement on Wednesday, September 18. Short duration one-month bills fell by 13 basis points, three-month bills dropped 16 basis points. The 2s-10s spread normalized further, to +9 basis points, but yields on 3s, 5s, and 7s are all still below both the 2-year and 10-year note yields. FULL SPECTRUM SPREAD steepened to -117, a six-week high. The entire treasury complex is anticipating lower interest rates, easier money across the entire lending spectrum, a place where money, in a historical context, is already very easy. Perspective was provided this week in the Federal Reserve's second quarter Z.1 "flow of funds" report. Two phrases from Doug Noland's Credit Bubble Bulletin stand out:
From the Bubble perspective, there's a lot to see that is, if you're looking in the right places. Unrelenting growth in government debt, intermediated through "repos," the money market fund complex, the Securities Broker/Dealers, and the Rest of World (ROW). Unprecedented speculative leverage that creates both demand for securities and liquidity for asset inflation and history's greatest Bubble. A historic Bubble in government debt issuance that has fueled asset Bubbles and resulting massive inflation in perceived household wealth, along with ongoing elevated incomes and spending. ... and finally,
It's a precarious backdrop for the Fed to begin aggressively slashing rates. The bond market is demonstrating speculative melt-up dynamics, surely fueled by rapid expansion of "basis trade" and "carry trade" leverage. At the same time, it's not unreasonable that the Fed would prefer to get out ahead of mounting financial instability. The dollar/yen closed the week at 140.85, as the yen rally surpassed August 5th levels. Yen "carry trade" vulnerability persists, while the AI/tech Bubble teeters. Spreads:
2s-10s
Full Spectrum (30-days - 30-years) Oil/Gas Nothing speaks bubble louder than oil price inflation. Closing Friday in New York at $68.29, up a whole 13 cents from $68.16 the prior Friday, the price hit a high of $69.29 on Friday before longs got taken to the cleaners, still wearing their shirts. As it turned out, that scary hurricane in the Gulf of Mexico only scared traders and nobody else. There was a minor disruption as some rigs were shut down, but no damage and certainly no slowing for production. Expect crude oil prices to continue falling in the weeks ahead. Gas will also be lower priced due to the switch over from more expensive summer blends to winter fuels, and, of course, rudimentary election dynamics. WTI crude oil should continue falling into the mid-to-low 60s. Gas prices will continue to tumble, at least until the end of October. Gasbuddy.com reports the national average for a gallon of unleaded regular gas at the pump at $3.14 a gallon, dropping a dime from the prior week. California remains the home to the highest gas prices, at $4.67 a gallon, amazingly up another three cents from last week. Apparently, the Biden-Harris team figures the Golden State to be a shoo-in, gas prices not withstanding. In Pennsylvania, where early voting officially begins on Monday, prices were down eight cents, to $3.34, with the Keystone State remaining the price leader in the Northeast, albeit at the lowest level in 18 months. New York followed suit, down to $3.32. Other Northeast states saw similar declines over the course of the past week, with Connecticut down nine cents ($3.17), Massachusetts ($3.17) off another eight cents, and Maryland prices falling 12 cents to $3.07 per gallon. Prices in the Midwest continue to decline, with Illinois down sharply this week, just above $4.00 six weeks ago to $3.41 on Sunday. The fight for the lowest gas prices in the nation intensified this week, with Texas, of all places, taking top honor at $2.68, followed by Mississippi ($2.69), Tennessee, and South Carolina, both at $2.70. Alabama and Oklahoma both check in at $2.74, with Louisiana at $2.77. Georgia broke through the $3.00 barrier at $2.94. Florida ($3.09) remains the oulier in the South. Sub-$3.00 gas can now be found in 18 U.S. states, everywhere from Arkansas and Kentucky ($2.81) to North Carolina and Missouri ($2.91). Ohio ($2.92), Kansas ($2.93), Iowa ($2.98), Wisconsin ($2.98), Delaware ($2.99), and Nebraska ($2.99) joined the party. Within the next few weeks, the number of states with gas under $3.00 will exceed half the total. Maryland, Virginia, West Virginia, Rhode Island, Indiana, South Dakota, New Mexico, and even New Jersey and Florida are prime candidates for pre-election gas-pandering. Arizona, at $3.38, remained below $4.00 for a 19th straight week, leaving only California and Washington ($4.02) just barely above the $4.00 level. Oregon is at $3.68 and Nevada at $3.92. Utah ($3.58) and Idaho ($3.56) continue to stabilize at elevated levels but remain well off summer highs.
This week: $60,225.70 Borrowing logic known only to Dennis Gartman of CNBC's "Fast Money" fame, bitcoin is expressing bubble economics in crypto terms, kicking higher, along with the stock market and just about every other asset class.
Gold:Silver Ratio: 83.88; last week: 89.38 Per COMEX continuous contracts:
Gold price 8/16: $2,546.20
Silver price 8/16: $29.50 Gold and silver laid bare the bubble conditions that will lead to the ultimate policy error by the Federal Reserve next week, rising dramatically, culminating in massive gains to close out the week. Gold, on the week, was up $79.60; silver up a smashing $2.80, essentially a 10% gain. Silver's meteoric rise not only kept the gold:silver ratio from breaking above 90, it smashed it down to its lowest level in months. Should both metals continue higher, which would be expected, especially if the Fed goes for the 50 basis point drop instead of 25, silver looks to out-perform, as it has been suppressed in a much deeper fashion than its richer cousin. Silver has a long way to go. If the gold:silver ratio was to fall to around 65, a level recorded as recently as February, 2021, it would already be $40 per ounce. A rapid run-up in silver cannot be ruled out over the short term. Year-to-date, gold is up 25.70%. Silver is ahead by 29.71%. 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) was slightly lower over the week, dipping to $39.19, a loss of 19 cents from the September 8 price of $39.38 per troy ounce. Premiums on silver have been coming off for weeks despite rumors of supply shortages. Gold premiums remain in place at about $110 for one-ounce coins and $80 for one-ounce bars WEEKEND WRAP At 2:00 pm ET Wednesday afternoon, the entire world will be made clear as to the Fed's thinking on current rates and get an idea of what is planned for the next six months. With the first of what is expected to be a series of rate cuts, the Fed will effectively change course from fighting inflation to fighting for its life. It's likely to lose both, though the timing will be difficult to pinpoint. At the very least, once the Fed decides on direction, it follows through, which is likely to bring the federal funds rate to a level around 3.50-3.75% a year from now, unless, of course, that Bad Orange Man wins the election or Biden decides its time for Ukraine to rain missiles down on Moscow. No matter the present conditions or those of the near future, the United States' status as a superpower is waning and has been for some time. The rise from merely being a world class country to full-blown empire took about 80 years, from around 1900 to a peak in the 1980s. It's been going downhill ever since, so, if the elevator ride up was 80 years, the downside, from empire to just another country, should commence along a similar timeline. By most models, we're about halfway home. The present and future generations from which the U.S. government has been borrowing the last 50 years are going to suffer in ways previously unimagined as international outrage lays waste to the remnants of Bretton Woods and the U.S. dollar. Symmetry.
At the Close, Friday, September 13, 2024:
For the Week:
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