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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.
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.
Friday, September 9, 2022, 7:35 am ET
More likely than not due to the absence of any meaningful economic data, US stocks have taken the holiday-shortened week to post gains that look to end a streak of three consecutive weeks of declines.
Following the two-month rally that ended on August 16, stocks have trended lower since, punctuated by the mammoth losses on the heels of Fed Chairman Jerome Powell's terse, nine-minute address at Jackson Hole on the 26th of August. Just as the S&P bottomed out at 3909 Monday, completing a 61.8% Fibonacci retrace of the 638-point gains from mid-June to mid-August with a 404-point decline, stocks once more looked attractive, sparking the two-day rally.
Looking at a third straight winning session, futures are higher and stocks in Asia and Europe were sporting reasonable gains. The DAX, CAC, and England's FTSE are all higher by roughly 1.50% just past midday on the Continent.
On the week, the Dow is up 456.08 through Thursday's close, the NASDAQ has tacked on 231.26 points and the S&P is ahead by 81.92. Barring any disaster, the major indices should manage to finish up the week in the black.
There's nothing unusual about this brief rally. Sharp, volatile advances are built into bear markets, as speculators look for entry points and momentum chasers bid up heavily-shorted issues. There's also the undeniable signature of coordinated central bank intervention via various trading schemes designed to keep stocks looking good, despite data and conditions to the contrary.
Friday appears to be headed for another face-slap to the bearish camp, evne though the bulls are running on fumes, another downturn inevitable in the near future. CPI data for August appears on Tuesday, PPI on Wednesday of next week, and the FOMC is expected to keep pounding on the inflation monster when they meet September 20-21 and launch into another expected 75 basis point hike to the federal funds rate.
Bulls should enjoy this brief respite from serial declines because they are unlikely to last.
At the Close, Thursday, September 8, 2022:
Thursday, September 8, 2022, 8:48 am ET
Yesterday, bears, and warnings to not feed them, were the focus of the daily screed.
Today, as we delve further into the economic animal kingdom, whales are the top topic, especially those swimming in the Crypto Ocean, occasionally surfacing for a belly flop or a gusher from the blow hole.
Whales, in the economic sense, are individuals or companies with large sums of cash on hand with which to play markets, or, in the case of Las Vegas, where the humanization of the species first became popular, a person who flaunts money, gambles profusely, tips heavily, and frequently loses.
Most whales made their money from outside the particular casino or market in which they play, but have found themselves in the comfort of blowing away millions worth of monay they neither need nor respect. Winning or losing is just part of the routine. They often have so much money, investments, real estate, or large business enterprises that "whaling" around is more a pastime or hobby than serious investing.
There's a difference. While nobody is every going to accuse stately, conservative Warren Buffett of being a whale, the moniker sticks to the likes of a Mark Cuban or Elon Musk, or even a Michael Saylor, founder and CEO of Microstrategy (MSTR), who famously put most of his company's cash into bitcoin and a few other choice crypto investments. He's currently losing, big time, and he and his company are being sued by the District of Columbia for tax evasion.
For his part, Saylor is doing occasional belly flops but keeping his blow hole shut. Other whales in the crypto space - the place where lots of money laundering, fraud, and various rip-off schemes are hatched and executed - are making moves and have been since bitcoin began crashing off the November, 2021 highs near $68,000, to their current zone in the $19,000 range. Yes, bitcoin has voided nearly 3/4s of its value in 10 short months, and the whale community isn't saying much, which, in and of itself, is somewhat of a - using another Vegas term - "tell", a sign that a player or players are making moves outside their normal method of operation.
To suggest that bitcoin millionaires and billionaires, the biggest of the whales, have been selling is simply common sense. None of these plucky, lucky types had much skin in the game after bitcoin exploded in 2020, from $6-9000 in the Spring and Summer to more than $40,000 in January, 2021. Some of the whales owning 1000 (still worth close to $20 million, even at current reduced prices) or more bitcoins are obviously knocking a little off their stack and converting to fiat, be it in US dollars, yen, euros, or pounds. They want cash and a little diversity hedge and they're getting it, but their actions continue to weigh upon the crypto ecosystem.
Whale disruptions are relatively easy to spot on the crypto charts. Disposing of or unloading 500 bitcoins at once causes a drop and a splash, just like flopping whales do in real world oceans.
Unless BlackRock, Coinbase, and other big players (corporate whales) concentrate on buying bitcoin rather than fleecing their customers, this downward "whale splash" will continue to erode both price and confidence. All the other alt-coins (some 13,000 of them) are affected by moves in bitcoin and ethereum, the latter of which is currently undergoing a significant upgrade called a "merge", which investors and speculators hope will lead to gains for the second-most-popular crypto. It may be something, but more than likely won't have a lasting effect.
Just as stock whales try to couch their major positions moves in a series of trades over time so as to not tip their hand, so too the crypto blubber brethren try to shield themselves, though it's not always possible in volatile markets. Needless to say, the whales are dumping crypto and turning to cash, much of which likely ends up in stocks, adding fuel to variations of frequent bear market rallies, such as occurred between mid-June and mid-August, and again, just yesterday.
Suffice it to say that crypto whales are taking profits, and who can blame them, especially if bitcoin and the rest of the space continues to cost investors money on a regular basis.
Elsewhere, all of the investing class is keeping a close eye on the ECB, which is meeting today and is expected to announce a rate hike of between 50 and 75 basis points, chasing the Federal Reserve's tail in the interest rate splurge that's been a major concern in both bond and equity markets. 75 basis points appears to be the choice of most in the know, with plenty more to come. The difference between 0.50% or 0.75% today won't matter much in the larger scheme months from now, but any hikes further weigh on stocks as corporate and sovereign debt becomes ever more increasingly attractive.
With the decision announced as scheduled at 12:15 GMT (8:15 ET), the ECB took a hawkish position, opting for hiking 75 basis points (0.75%).
European stocks rallied prior to and upon the announcement but were seen pulling back shortly thereafter. US equity futures remained near unchanged, anticipating the 12:45 GMT (8:45 ET) press conference with ECB Chair Christine Lagarde and Fed Chairman, Jerome Powell's speech shortly after 9:00 am ET.
Stay clear of whales. Their splash can overturn your vessel and send all that gold and silver bullion down to the bottom of the ocean, again ;-).
At the Close, Wednesday, September 7, 2022:
Wednesday, September 7, 2022, 7:24 am ET
The signs are obvious.
DO NOT FEED THE BEARS.
Anybody who's ever traveled to some larger state parks or popular national parks in the US are familiar with the warnings. Bears are large, they'll eat just about anything, and if people get too close to them, they can be quite detrimental to one's health.
World politics and economics offer some of the same warnings, though they are not as conspicuous as the park variety. Nonetheless, the warning is the same: DO NOT FEED THE BEARS.
Despite this, the hubris of many government and financial leaders of Western nations have recently decided to put reason on a back burner and forge ahead with risky endeavors, like provoking the Russian Bear into military conflict and promoting loose money policies for too long, producing a bear market that is likely to bring ruin upon millions of people and their own countries and currencies.
Pain has already been evident from ignoring the warnings. Stock markets have been roiled since the start of the year. Policies aimed at harming Russia have worn down the nations which imposed the sanctions. Inflation is raging across Europe, the UK and the US, and also in Canada, Australia, Japan, and South Korea as supply chains have been damaged or broken, fuel supplies crimped, and food prices soaring beyond what most families can reasonably be expected to afford.
Worse yet, the people at the top of the government hierarchy refuse to back off from policies that are overtly harmful to their own well-being and that of their people. Instead, they're implementing various stop-gap spending programs to help ease the pain. Germany just annnounced a 65-billion euro plan to subsidize high energy costs. England's newly-elected prime minister, Liz Truss, plans to announce plans to combat high fuel prices on Thursday, including a possible freeze on gas prices.
Other European nations have joined in the chorus of virtue-signaling with spending plans of their own, including Sweden and Austria.
Throughout Europe, popular protests opposing government policies are spreading, France, Germany, and the Chech Republic amongst them. Similarly, protests in Croatia, Italy, and the Netherlands are routinely ignored by the mainstream media. The policy-makers clearly see their people suffering and the populace about to explode in a frenzy of anti-government hate, yet do nothing to change course.
Meanwhile, stock markets are bearing the brunt of slowing demand, price pressures and an ongoing recession. Germany's DAX is down 19.95% year-to-date. France's CAC-40 has shed 15.74% this year, and the EURO STOXX 50 is down 19.57%.
National currencies are being debased at an accelerated pace. The Euro, a year ago at 1.18 to the US dollar, is now trading at less than parity, 0.9894, a level not seen since 2002. The British pound, 1.38 to the dollar a year ago, is now 1.14, and falling. It's reached a level not seen since 1985, a 37-year low. The US$:Yen pair is going ballistic. It was 140.05 just three days ago. Currently, it's ramping higher, at 144.77, a 32-year high.
All of these currency devaluations are costing the exporting nations dearly in lost revenue while the US dollar, apparently the last bastion of fiat monetary policy, has skyrocketed, as the dollar index shoots past 110, the highest level in 20 years.
Bears are very dangerous.
DO NOT FEED THE BEARS.
At the Close, Tuesday, September 6, 2022:
Sunday, September 4, 2022, 9:44 am ET
Since nine minutes of oratory by Jerome Powell at the Jackson Hole Economic Symposium on August 26, economic ideology has become reality, as the Fed Chairman left no mistake that the central bank's main directive was to defeat inflation by raising interest rates, for as long and as high as necessary.
Powell's message was taken to heart by scores of investors and advocates for the Federal Reserve to rapidly reverse their low-interest, easy money policies that had juiced the economy to extreme levels since the Great Financial Crisis (GFC) of 2008-09.
Now, instead of cheap funding to finance frivolous corporate activities such as stock repurchase programs, companies are being forced to hunker down to a regime of higher borrowing costs and stricter business management, the emphasis shifting from enriching the C-suite to engaging shareholders with value opportunities.
The turnaround of policy, denied by many over the past year, was cemented at Jackson Hole. The Fed will not "pivot" from austerity back to easing. The die has been cast.
For once, Wall Street's knee-jerk reaction seems to have been the correct approach. When stocks turned immediately to the downside during a post-Powell's speech last Friday, it was pure signal, devoid of the usual attendant noise normally accompanying a sudden directional shift. In the week that followed the huge selloff, stocks continued their descent, led by the NASDAQ, which shed 510.85 points (-4.21%), in the third consecutive losing week for the major indices.
Thursday, September 1, was the only positive session for any of the majors, and even then the Dow only made a gain on the back of a stunning 160-point ramp in the final ten minutes of trading. The S&P was the sole follower, posting a tiny gain of less than 12 points. The NASDAQ and NYSE Composite both finished lower on the day, on their way to six straight losing sessions, through Friday.
To now deny the obvious existence of a bear market - to say nothing of the eminence of a recession in the general economy - is the height of either arrogance or folly. Those in the dip-buying camp have been hammered with losses most of the year. Last week, these holdouts of a dead practice were slaughtered. Anybody not already convinced of the path the Fed is taking regarding interest rates had not been taking notes previously and paid the price as stocks continued to dive ahead of the upcoming August CPI (9/13) and PPI (9/14) readings and the 75 basis point hike that is almost a certainty at the September 20-21 FOMC meeting.
Even if CPI comes in lower than the expected 8.0-8.3% range (July, 8.5%), the Fed would likely be even more encouraged to hike rates by 75 basis points rather than the 50 being proposed by a few of the leading economists at Goldman Sachs and JP Morgan. The hunger pangs for more easing can be discerned quite readily from the likes of those who gained so enormously from Fed largesse. They will likely be disappointed as will their clients.
Year-to-date, the Dow is off 14.40%; the NASDAQ, -26.54%; S&P 500, -18.19%, and the NYSE Composite, -14.73%.
A month from now, those figures may look like the good old days, as September is historically the cruelest month for equity investors. If past is prologue, it's looking fairly dire. All of the major indices lost ground in August, particularly in the second half of the month.
With stocks busily selling off, money managers were not exactly rushing into bonds as a safety play. In fact, there was not a single maturity showing a decline in yield week over week, loudly proclaiming that investors would rather hide out in cash than risk falling behind in real terms as the entire yield curve continues to rock higher.
Yields rose the least in one and two-year notes, gaining just three and four basis points, respectively, along with 3-month (+5 bp) and 6-month bills (7 bp). Everything else was at least 10 basis points higher for the week.
The longest-dated saw the biggest gains, the seven year closing at 3.29% (+15 bp); 10s, 3.20% (+16); 20s, 3.61% (+17), and 30s, 3.35% (+14). Thus, the yield curve steepened a bit overall, but remains inverted from six-months out to 10 years, with an inverted chunk at the end, with 20s higher than 30s, making the once-orderly treasury market look more like a 17-car pile-up on Interstate 95.
Nobody can claim that this is in any way good or likely to improve any time soon.
Even as oil bulls were screaming for higher prices after WTI crude closed the week of August 26 at $92.97, the forces of nature - or possibly demand destruction - took oil prices back below $90/barrel, the final quote of the week an encouraging $87.25. While explorers, drillers, and producers may look at that price askance, assured that oil "must" be priced higher because of the Russian deficit due to sanctions, the market may have filled an inside straight with oil pricing in regional baskets instead of a unified price mechanism for all parties.
As countries, companies, pirates, and defiers of US hegemony contrive methods to circumvent the outlandish schemes of the EU-UK-US policy-makers, which this week included a ludicrous cap on the price of Russian oil, as if that's even remotely possible, oil is sold at prices agreeable to the buyer and seller, and nothing more.
No country is pricing all of its oil to every other country at a set price. It varies according to the payment, be it in rubles, dollars, gold, grain, or any other currency. There is so much chaos in the global energy market that wild price swings in either direction are not only possible, but already occurring in regional and trade duopolies outside of the former petrodollar, which has been declared dead, though the obituary hasn't quite yet been properly worded nor released.
While there's still a relationship between the US dollar and oil and other imported commodities (dollar up / prices down), that's a fading remnant of the reserve currency empire which is unwinding at an ever quickening pace.
As far as US motorists are concerned, the final holiday weekend of summer is better than the earlier long, hot weekends, with the US average price for a gallon of unleaded regular gas down another nickel this week, to $3.78, from $3.83 last Sunday.
Those professing that it "can't get any better" may be right as far as summer is concerned. With gas prices generally lower over the past few months, it's not going to be easy to get prices much lower than they already are.
The next hurdle to clear is likely to be higher, that of heating oil and natural gas across Europe and the US. Some European nations are already subsidizing their price-pressured energy companies, such as in Sweden and Austria.
Others are promising end-user consumers assistance over the coming winter and protests are occurring regularly across Europe, against the war in Ukraine generally, for relief from high energy bills, and some calling for governments to step down, as did the roughly 100,000 protesters in Prague on Saturday.
Boneheaded policies, support of Ukraine, and sanctions against Russia by the EU-UK-US coalition are under pressure from the populations and the fissures are beginning to develop into political squabbles out in the open.
Bitcoin continues to dance around $20,000, though that level appears to be breaking down, with the current price at $19,858.10. While anybody's guess as to what is happening to the only cryptocurrency that matters, it appears that "whales" (holders of more than 50 bitcoins) are slowly reducing their holdings, keeping the pace at a level not alarming to the general public.
Should bitcoin fall below the recent lows around 18,948 (June 18), a drop back to the area of $9,000 to $11,000, which maintained from May through September of 2020, could be the ultimate resting place. While bitcoin's proof of work methodology is theoretically and mathematically sound, real life human actions are having profound negative effects upon it. Survivability and sustainability being the two most important features presently, there appears to be a secular downtrend that threatens to break all but the steadiest holders.
Everybody and everything has a breaking point and bitcoin is approaching a make or break moment.
As the LBMA and COMEX, in association with the dollar index (109.61, highest in more than 20 years), continue to depress the price of precious metals through naked shorting, rehypothication and leverage, buyer demand shows no signs of slackening.
The secondary market for finished goods (coins and bars) remains steady, evidenced by price power on eBay. Dealers are scrambling for business in a very competitive, profitable market, some offering discounts on selected items and free shipping, generally over a $200 threshold.
For the time being, the status quo remains intact and buyer demand is hend over fist. In what may be the strangest unromantic triangle inverse relationship, as the US economy falls further into recession, the dollar strengthens and precious metal prices decline. In the rest of the world, however, especially those with currencies in decline, gold and silver are at or near all-time highs. In almost all cases outside of the US, prices have not pulled back as much as seen in the US since March.
Gold/Silver Ratio: 96.18
Silver price 08/05: $19.86
Below 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) fell again through the week, to $34.48, a decline of 61 cents from the August 28 price of $35.09.
There isn't much to add to what was undeniably a bad week for just about all asset classes. The global economy is slowly grinding down; a recession that will prove most harmful to western economies continues to evolve. Prepare for conditions to worsen as the weather cools. By next year, deflation and unemployment will be the main cause of concern as economies are turned upside down, the social contract torn to shreds.
At the Close, Friday, September 2, 2022:
For the Week:
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