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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:
9/19-9/26/2021
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Stocks Slide as Market Goes Haywire; Crisis Deepens, Dow, NASDAQ Set for Worst Week Since June Friday, October 1, 2021, 9:22 am ET Something broke on Thursday, and nobody seems to know what it was, or, at least, those who do know don't want to talk about it. Using the Dow as a proxy for what went haywire on the stock market yesterday, the Industrials fell 410 points from roughly 11:15 am to 12:30 and another 310 points from 3:15 pm to the closing bell. The NASDAQ and S&P fell in similar manner over the same time spans. Astute chart watchers viewed this with skepticism, and were even more skeptical when stocks ramped higher after the huge late morning decline. So far, there have been two explanations for the sudden declines. Janet Yellen's screeching testimony before the House Financial Services Committee (Gregory Manarino) about the dangers of defaulting on the public debt was one. The other was to blame the meltdown on the quarterly reset of the JPMorgan Collar Trade (Bloomberg, ZeroHedge, SpotGamma, others) which the JPMorgan Hedge Equity Fund puts on every quarter to protect against an up to 20% crash in stocks. In itself, the idea that the nation's largest bank puts on an enormous options trade every month to keep the whole market from implosion is scary enough. That it could cause a massive disruption is plausible, but, since the trade is so well-known on the street, traders would be prepared for it and some might even devise schemes to trade against it. That seems even more plasible. Money Daily is even more skeptical than most. Our explanation is that it's obvious there's a massive collapse happening in China's real estate market, the giant developer Evergrande is a big part of it, they are going bankrupt, and some (probably all) big US banks are exposed to it. There's actually some point to that. The US recently sent a delegation of business emisaries, including Ken Griffin from Citadel, Abby Johnson of Fidelity Investments, BlackRock Inc.'s Larry Fink and Blackstone Inc. Chairman Stephen Schwarzman, to China for reasons unknown, though the implication that it concerned Evergrande and real estate cannot be overlooked. So, something blew up, or is about to, or somebody found out about something imploding or blowing up. That's our theory, and we're going to stick to it until it becomes obvious, just like our Dow Theory basis for claiming that the stock market turned from a Bull market to a Bear market in August. For those still in the non-believers' camp, witness the Dow Jones Transprotation Average, which is now down 12.2% since its May 7 high (15,943.30). Wrapping up, because it's getting very close to the opening bell, as of Thursday's close, the Dow Industrials were down 954 points on the week, the S&P off by 148, the NASDAQ down 599, and the NYSE Composite had shed 394 points. It's going to take a rip-your-face-off kind of rally to keep stocks from registering their fourth down week in the last five. Somehow, it just doesn't appear likely that the dip buyers are going to come riding in to rescue the rest of us. It's a new quarter. No comment.
At the Close, Thursday, September 30, 2021:
Thursday, September 30, 2021, 9:00 am ET Well, the St. Louis Cardinals finally lost, ending a streak of 17 straight wins - the longest streak this season and one of the longest ever in MLB history - with a 4-0 loss to the Milwaukee Brewers Wednesday night. Now, will the Dow end its streak of 15 straight trading days under the 50-day moving average? Doubtful, as the Industrials would have to gain more than 600 points for that to occur. Maybe the two streaks are unrelated after all. We'll see if the Dow can get to 17 straight on Friday and then break out on Monday or extend the streak to 18 and beyond. In a related vein, the S&P 500 and NASDAQ both spent another day resting between their 200 and 50-day moving averages. Traders and their algos don't like this condition. It does not inspired confidence, nor buying, as we've seen from the dull sessions this week. Both indices spent much of the session in the green, but a wave of selling entered late in the day, pushing everything down to close at or near the lows of the day. Meanwhile, the political savants in Washington, DC now plan on voting to fund the federal government until December 3rd. Senate majority leader, Chuck Schumer, announced Wednesday night that an agreement had been reached to avoid a government shutdown from happening at midnight Thursday, which was the expected outcome. After all, nobody expected the legislature to shut down their cash cow. It boggles the mind how swiftly these cheats, theives, and miscreants can all agree on something that suits their interests, considering how much debate and politicking goes on when the legislation is focused on the people's best interests. They'll vote on the measure Thursday morning with a Senate vote scheduled for 10:30 am ET. With that in mind, stock futures were up sharply overnight, though they've been tempered on the news that another 362,000 individuals filed initial unemployment claims in the most recent reporting week. That was up from an unrevised 351,000 the week prior and well above expectations of 330,000, marking the third straight week of increasing claims. Wall Street is likely to treat this as a positive, since it is another data point discouraging the Fed to taper its $120 billion a month asset purchases. One might assume that averting a government shutdown may also be viewed in a positive manner by the stock wizards, but one never knows what's churning in the minds of these magnificent money managers. The debt ceiling, infrastructure bill, and reconciliation are still up in the air. One plate has stopped spinning, or will later today. Three more need additional twirling.
At the Close, Wednesday, September 29, 2021:
Wednesday, September 29, 2021, 8:49 am ET After four straight days of gains on the various indices, Tuesday was a WTF? moment for investors, traders, and speculators as stocks caught a dreadful downdraft coming out of Washington, DC. It was in the nation's capitol that self-important politicians were flailing about, falling over each other in desperate attempts at keeping their own system and own narrative from imploding. Wall Street, which has been casually optimistic over the political and economic mess that is the federal government, caught a whiff of official failure at the "highest levels" and barfed up a few hundred billion in share prices in response. The rejection of dip buying and sending stocks to ever higher levels has recently become more of a natural reaction. Charts of the S&P 500 reveal that the current "dip" is deeper than the previous four (240 points as compared to an average of 112) and is taking longer to resolve, likely because the underlying issues remain extant, open, obvious, and odious. The S&P and NASDAQ were the hardest hit on Tuesday, as bond yields spiked and fears running the gamut from government shutdown to liquidity crisis to debt default made the rounds. Both indices departed to the downside from their 50-day moving averages. Now, along with the Dow Industrials spending the past 14 session under its 50 DMA, the S&P and NASDAQ have re-entered that gloomy grey area where fear often dominates greed. All the talk of inflation and spiking yields is mere noise when contrasted with the real calamities in the Chinese real estate market (and possible contagion) and the collapsing power structure in Washington, DC. As for the latter, Democrats, who unwisely thought that a 50-50 split in the Senate, a slim majority in the House, and a puppet resident in the White House gave them ultimate authority, are finding their calculations skewed badly towards tilting over, as internecine warfare and internal strife are taking a toll on their institutional jurisdiction. They have before them three separate pieces of business: debt ceiling, reconciliation, infrastructure; and they are attempting to join them together in an attempt to circumvent the intransigence of the Republican party in the Senate. Their whole battle plan is imploding as they now find themselves facing an insurrection within their own ranks from "progressives" on one side and "moderates" on the other, leaving Nancy Pelosi's ruling junta with fewer and fewer options. As recently as last week, resolution of these matters was largely a foregone conclusion, but, as the deadline to a government shutdown (October 1) and debt default (now pegged at October 18) come closer, an air of panic has overtaken the usually smug demeanor of the political class. Meanwhile, a growing number of Americans are rooting for failure, disregarding the ultimate calamity that may befall them. Literally, without at least a framework of a federal government, chaos would soon overwhelm all aspects of life in America. How the elected representatives - few of which have formal training in even basic bookkeeping - end up resolving issues involving trillions of dollars remains an open question. Government is living on borrowed money and borrowed time and Wall Street has it leveraged to extremes. Don't play nice. This is for all the marbles.
At the Close, Tuesday, September 28, 2021:
Tuesday, September 28, 2021, 9:28 am ET
Turns out, YouTube is good for something. In the clip above, excerpted from the incomparable film, "The Wizard of Oz," starring a young Judy Garland as Dorothy, there are some very obvious comparisons to the plight of the world, and, particularly, the United States of America. Dorothy represents much of the American public, but mostly Baby Boomers, now Baby Seniors, who just want to go "home," or, back to the lives they remember from the 50s, 60s, and early 70s. The Tin Man is an appropriate metaphor for the American workforce, rusted and in need of oiling. The Cowardly Lion references the Trumpists and other deviants, who know they've been hornswaggled by the government and the media but are too afraid to do anything about it. The Scarecrow might as well be the mainstream media and social media giants, still able to scare a few people, though their numbers are dwindling, unable to return to honest journalism lest the entire narrative of Big Government, Big Pharma, Big Media, Big Corporations be unraveled and revealed as lies. Then, there's Toto, Dorothy's little dog, representing the alternative media, pulling back the curtain to reveal... the great Wizard of Oz, who is, in reality, Federal Reserve Chairman Jerome Powell. And what he says in this clip is a superb metaphor for the current condition of the USA. Prior to being exposed, upon learning that the Wicked Witch of the West (Janet Yellen) has been "liquidated" (his very word), he breaks his promise (ignores mandates) and tells the gang to come back tomorrow (kicking the can down the road). Later, he admits that while he is a very good man, he's a very bad wizard. So, from this old, worn film fragment, we learn that Dorothy - and the Wizard - don't like the Wicked Witch of the West. In other words, the citizenry and the Fed both feel they would be better off without the US Treasury. And, the Wizard is correct. He's (Powell and the Fed) not a bad man, just a bad wizard. The Fed can't fix everything that's wrong with the economy, try as it may. Anybody who's ever seen this film, knows how it ends. Dorothy clicks the ruby slippers and goes back to the simple, joyful life of farming in Kansas. What many people do not understand about the film, and more directly, the book "The Wizard of Oz" written by L. Frank Baum in 1900, was not a children's' book, but a satire on populism, and other political thought, focused on monetary policy, the gold standard and silver per the Crime of '73. The ruby slippers in the movie were silver in the original book. From the article linked above, Baum's original metaphors were much more exacting than those presented here in Money Daily, though the salient points are the same. The American public is forced to accept the standards of big government, including what form of currency they can use. It's the same today as it was back then, or, as has been said (by somebody), "history does not repeat itself, but it rhymes." Well, we've ventured quite a way off the proverbial yellow brick road, so let's head back to reality, or, what's left of it. Monday's miasma of mismatched markets left participants with the feeling that's something's missing, and that something is a catalyst to take stocks higher. That will come in the form of earnings announcements - though they may not produce the desired effect - in a couple of weeks, but, by then it may already be too late. While the S&P and NASDAQ were putting on weight and going down the river like waterlogged flotsam and jetsam, the Dow Industrials and small cap NYSE Composite were moving in the opposite direction, though not far afield. Make note that the Dow refused to close above either its 50-day moving average nor its bear market indicated resistance at 34,895. It was above that level most of the session, but just... plain... refused into the market's close. Further, the NASDAQ and S&P 500 could not escape the grasp of their own 50-day MAs. The had their feet stuck in quicksand, unable to generate alpha and risk being dragged down by the mostly external forces at work, now clearly identified as the US congress, wherein the Senate failed to pass a bill forwarded from the House that would have resolved both the debt ceiling and funding for the government past September 30. That puts the congress nearly back to square one, where they must figure out how to extricate themselves from the mess they've created. While it's true that about 800 people a year die from being twisted up in their own bedsheets, we expect better from our elected representatives. Then again, many of them are in their 70s and 80s and may not have full capacity of all their cognitive functions, much like the current resident of the White House, so, there's sufficient rationale to support the idea that they may not be up to the task, and further, that they may not do a very good job of it nor get it done on time.
As it stands, congress has already missed one deadline. The debt ceiling suspension legislation ran out on July 31. Since then, the Time's running short. Hedge accordingly.
At the Close, Monday, September 27, 2021: Sunday, September 26, 2021, 9:26 am ET The week just past should be given a plaque or at least an honorable mention in the Buy the Dip Hall of Fame. After stocks plunged on Monday to their lowest levels of the month, investors saw fit to buy the dip again, a strategy so uncannily successful since the Great Financial Crisis (GFC) that it must rank right up there with Dow Theory and the best work of Warren Buffett. Even John Maynard Keynes would be amused over how well the strategy has worked. Since March of 2009, outside of the pandemic panic of February-March 200, major US stock indices have suffered more than a 10% pullback only a handful of times, and all of them reversed course and produced gains in short order. That's what happens when the Federal Reserve takes its role as the "buyer of last resort" seriously and backstops everything with unlimited liquidity, either through ZIRP or QE or outright purchasing of debt issued by listed corporations. It's working. It keeps on working. People who don't believe it works are blind or ignorant. There's never been an easier way to make money in the stock market than to buy an index fund when it is down 2-5% and simply wait a few days or weeks. This week's Monday dump was corrected by Thursday. You cannot fight it. If stocks will never go down and only go up, the bond market has an answer. Sell all bonds and buy stocks. Here's the simple breakdown of how yields moved over the course of the week. When yields go up, bonds are being sold and prices are down. When yields decline, bonds are bought and prices rise.
10-year note: Friday (9/17) 1.37%; Monday (9/20) 1.31%; Friday (9/24) 1.41% Money rushed into bonds on Monday and then were distributed out the rest of the week, with a final crescendo of selling on Friday, pushing yields on the 10 and 30-year issuances to their highest levels since July. Cryptocurrencies were dashed and did not recover as well as stocks, especially after China reiterated its ban on all things crypto, for about the 58th time, on Friday. On Sunday, September 19, Bitcoin was as high as $47,866. This Sunday morning, around 3:50 am ET, it fell to a low of $40,803, but, two hours later, stood at $43,767 and currently is nesting around $43,300. The big winner on the week was crude oil. WTI crude surged from a low of $70.29 a barrel on Monday to a closing price in New York on Friday of $73.98. The price gain reflects recent reports of drawdowns in oil reserves, though distillates (especially gasoline) have not experienced similar demand, so, for now, gas prices will remain at the levels that have maintained since late last winter. To say that gold and silver have been clubbed like baby seals would do damage to the reputation of seal clubbers. The pounding down of prices over the past three weeks has been nothing short of relentless sledgehammering of the same extrusion of rebar by seasoned tradesmen. Gold ended last week at $1753.80 an ounce. When trading shut down in New York on Friday afternoon, it was $1750.20. Apparently, the same people who buy the dipping stocks care not one whit for gold... or silver, which finished up last Friday at $22.36. In case anybody thought that was too low, it actually finished this week at $22.39, higher by a whopping three cents per ounce. Silver stackers are apparently not planning on sending their kids to college. Here are the latest prices for common one ounce gold and silver items sold on eBay (numismatics excluded, shipping - often free - included):
Item: Low / High / Average / Median The Single Ounce Silver Market Price Benchmark (SOSMPB) settled at $36.82, a reasonable gain of 70 cents from last week's price, $36.12. So, what does all of this mean? In a world in which the country with the biggest economy has as its president a senile, grumpy, fake chief executive who often does not know what he's doing or why he was installed by some ruling elite rather than elected by the people in a fair and honest election, where the media dispenses lies and half-truths about as regularly as a Coke machine spits out cans or battles of sugary drink, where the stock market never goes down, and a majority of the people are scared of catching a virus that kills less than one-half of one percent of its victims and 95% of them are over the age of 65, the United States has become a bad version of Disney Land. The rest of the world has largely followed along or done even more stupid things over the past 18 months. China, the second-largest economy in the world, has banned any other form of payment or investment other than stocks or real estate (which is collapsing) and cryptocurrencies, which promise honest money, are prohibited. The United States is taking notes. Stocks don't follow the general economy. They only go down so that rich investors and managers of retirement funds can make up for stupid trades and make more money. Any suggestion that the Evergrande scandal and coming bankruptcy might cause contagion into the larger financial market is dismissed as hysterical speculation. Social media companies are free to censor anything they like, punish transgressors with impunity via bans and bars to posting, and the world's largest search engine is able to present whatever skewed results for searches whether they are relevant, true, or even real. The US congress is being counted on to avoid a government shutdown, suspend or extend the debt ceiling and pass a bill that looks and acts like a $3.5 trillion budget but is nothing more than a blueprint for massive deficit spending within the next two to three weeks. Chances of them achieving all three: 0.00%. Chances of them dancing around issues, betraying the public, and passing bills that do little to promote the general well-being of the country: 100%. For whatever reasons being the salient ones, people are not supposed to buy or hold gold, silver, bitcoin or other cryptocurrencies, altcoins or tokens that might interfere with the devaluation of Federal Reserve Notes. At its meeting concluded this past Wednesday, the FOMC of the Federal Reserve indicated that it might, possibly, maybe will end its purchase of $120 billion a month in treasury bills, notes and bonds, and mortgage-backed securities, sometime soon, they think. The federal funds rate will remain anchored at zero percent until sometime next year, if all goes well, everybody has a job, illegal aliens can cross the Southern border with impunity (and complementary whippings) and everybody gets vaccinated as often as possible and carries around a card or image on a cell phone proving it. That transitory inflation may be able to remain transitory for months or years, and then get worse. Everybody must buy stocks, especially when they go down. Just in case you don't believe all the information disseminated about the scary virus that has successfully eliminated the flu, there's this: 30 Facts You Need to Know about COVID-19. Soon, sarcasm will be outlawed. Nobody will notice. Or care. Buy the dip.
At the Close, Friday, September 24, 2021:
For the Week:
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