WEEKEND WRAP: Stocks Up 9-14% Since July 2; Buffett Goes For Gold; Powell's Jackson Hole Speech Sinks Bonds, Helps Precious Metals

Sell in May and go away?

Balderdash.

Summer slump?

Nonsense.

Stocks have had an amazing run through July and August, thanks to ultra-low bond yields driving money into stocks, momentum, and oodles of dollars going straight to Wall Street from the Federal Reserve.

As noted by countless economists, columnists, and stock enthusiasts, the backstops provided by the Fed have servd the interests of Wall Street in glorious ways, sending stocks soaring, the S&P and NASDAQ having made multiple record highs over the past eight weeks.

While the NYSE Composite Index and Dow Jones Industrial Average have not made it yet to new records, they're getting close and the Dow, specifically, will get a significant boost on Monday (the final trading day of August) when Exxon Mobil (XOM), Raytheon (RTX), and Pfizer (PFE) are replaced with Salesforce (CRM), Amgen (AMGN), and Honeywell (HON).

Already within 900 points of its all-time closing high (29,551.42, 2/12/20), it's within similar range of the intraday high of 29,568.57, which was also made on February 12. The added boost from the booting of three laggards with three high-fliers should send the industrials over the top, possibly this coming week.

Just how good the summer has been to investors is illustrated by the weekly closes for the past eight weeks, beginning July 6 and ending this past Friday, August 28. The slowpokes among the indices was the Dow and NYSE. The latter rose from a July 2 close of 11,991.52 to 13,170.96. It closed on the plus side seven of the eight past weeks for a 9.84% gain.

The Dow Industrials gained in five of the eight weeks, rising more than 2800 points from its July 2 close of 25,827.36, a gain of 10.94 percent.

The S&P closed at 3,130.01 on July 2, and added 378 points during the past eight weeks for a solid 12% upside, while the NASDAQ took home the top prize, vaulting from 10,207.63 eight weeks ago to its most recent record close of 11,695.63, a 14.6% gain. The S&P was up in seven of the past eight weeks while the NASDAQ finished in positive territory in six, including the last five straight.

So, whoever said the era of passive investing was over obviously hasn't taken account of the performance of index funds, which have sparkled recently, despite the narrative supplied to the market by the FAANMGs, the six tech stocks that have largely been responsible for the bulk of the gains in the NAZ and S&P. Facebook (FB), Amazon (AMZN), Apple (AAPL), Netflix (NFLX), Microsoft (MSFT) and Alphabet, parent of Google (GOOG) account for roughly 25% of the market capitalization of the entire S&P 500. Throw in Elon Musk's Tesla (TSLA) and one could make a very strong point about picking the right stocks over passive investing.

Apple, which recently announced a 4-for-1 stock split, was up 39% over the past eight weeks. Tesla gained a whopping 54%, while Amazon gained only 19%, though it and the other FAANMG components have been steady outperformers for years.

Warren Buffett, who turns 90 today, made news this week when it was revealed he was selling off some banking stocks while picking up shares of Barrick Gold. The information came from the latest 13F filing from Bershire Hathaway, the holding company for Buffett's global portfolio.

The punditry of the investment world made plenty of noise over the move, especially since Buffett had previously claimed to not think much of gold as an investment. One of the most-cited quotes attributed to Buffett's disdain for gold is "[Gold] gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility."

While Buffett's purchase of some Barrick Gold shares (roughly $600 million) may look like a departure from the Oracle of Omaha's norm, the truth of the matter is that the shares account for a smidge more than 0.2 percent of Bershire's 250 billion stock portfolio. What's interesting about the move was that Berkshire closed its position in Goldman Sachs (GS), eliminating the Vampire Squid entirely from its holdings. It also trimmed positions in JPMorgan Chase (JPM) and Wells Fargo (WFC), but upped its position in Bank of America (BAC), which is now the second-largest holding, well behind #1, Apple.

It will be another three months before we'll know whether Berkshire intends to keep buying Barrick or even other gold-related stocks. For all anyone knows, Buffett could have a secret stash of gold and silver coins buried in his back yard, just in case.

Speaking of reasons to own gold and silver, the second estimate of second quarter GDP was released on Friday, and it was a slight improvement from the initial reading, but not enough of one to matter. The decline, which was estimated to be a record 32.9%, was revised to a 31.7% loss, still the largest on record by far. Making matters more concerning, it's been a fact for some time that the government spending portion of the GDP calculation has been inordinately high, and it now accounts for more than 50% of GDP. The other roughly one-half of GDP is largely consumer spending, people buying things they don't need with credit cards they can't afford to pay.

In the oil patch, the slow, relentless rise in the barrel price of oil continued apace with WTI crude peaking at $43.34 on the 26th - the highest price since March 3rd - before settling at $42.97 on Friday afternoon. Theprice of WTI crude has been below $40 just twice since July 2nd, with the recent prices nearing the top of the recent tight range. With the Labor Day holiday a week off, prices for crude and gas at the pump may begin to decline as the traditional end of summer normally results in lower prices, though these days have been anything but normal.

Treasury yields peaked on Friday, with the 10-year note ending at 0.74% and the 30-year at 1.52%, both the highest since June 16. Shorter-dated maturities were little affected by market noise nor Fed Chairman Jerome Powell's virtual keynote for the Jackson Hole symposium in which he promoted increasing inflationary policy incentives at the Federal Reserve. Powell's insistence that inflation of two percent or more somehow equates to the Fed's mandate of "stable prices" serves to point out what an abject liar he is and what a complete failure the Federal Reserve as a whole has been since its inception more than 100 years ago. The Fed has failed spectacularly in achieving both of its mandates as the dollar has lost 97% of purchasing power since 1913 and full employment - the other mandate - is about as far from the minds of the regional Fed presidents and governors of the FOMC as the Earth is from planet Jupiter.

Gold regained some respect on Friday, up $35 to close out the week at $1,964.83. Since peaking at $2,063.54 on August 6, the trend has been lower, but $1900 an ounce appears to be very strong support. With supply strained and demand still very high, recent dips look more like consolidation than manipulation, even though the spot price is subservient to the eminently exploitable futures market where daily claims on precious metals often exceed a year's production. Eventually, the futures market will face an untenable situation when the punters stand for delivery of real metal rather than a paper equivalent of dollars, yen, or euros. Once the COMEX fails to deliver physical in a timely manner - a possibility that's growing increasingly worrying - it's game over for the paper markets, where the rigging has kept the true price of gold to be discovered for decades.

In order to prevent such an occurrence, the CME has been and will continue to raise margin requirements for futures trading in precious metals until none but the biggest players - central banks, bullion banks, private banks, investment and commercial banks, insurance companies, and sovereign trusts - will be able to afford the buying and selling of futures contracts. Thus, the compression of prices could continue indefinitely while physical premiums soar beyond the rooftops.

Silver also appears to be in a consolidation phase, ranging between $26.45 and $27.67 the past two weeks. It finished up Friday near the top end, at $27.50. Considering the recent smackdown sent silver from a high of $29.13 to $24.79 in the course of one day, the recent close puts the loss at less than six percent, a complete nothing-burger in the highly volatile silver market. The inability of the futures' players to keep a lid on silver indicates that the riggers are losing control. Silver's market is much smaller than gold's, and the demand for physical has bordered on a mania recently due to its affordability and monetary and commercial value.

Here are the most recent prices on eBay (shipping - often free - included) for selected items (numismatics excluded):

Item: Low / High / Average / Median
1 oz silver coin: 31.90 / 48.95 / 39.05 / 37.98
1 oz silver bar: 32.95 / 42.00 / 36.75 / 35.98
1 oz gold coin: 1,985.00 / 2,178.90 / 2,090.41 / 2,107.55
1 oz gold bar: 2,006.16 / 2,114.59 / 2,078.62 / 2,081.75

An historical survey of prices from April, 2020 to the present is available here.

Concluding this edition of the WEEKEND WRAP, a reminder: There are just 65 days until Election Day and 117 days until Christmas. With any luck, we'll all know who the president is by the time we're unwrapping presents.

At the Close, Friday, August 28, 2020:
Dow: 28,653.87, +161.60 (+0.57%)
NASDAQ: 11,695.63, +70.30 (+0.60%)
S&P 500: 3,508.01, +23.46 (+0.67%)
NYSE: 13,170.96, +102.15 (+0.78%)

For the Week:
Dow: +723.54 (+2.59%)
NASDAQ: +383.83 (+3.39%)
S&P 500: +110.85 (+3.26%)
NYSE: +261.89 (+2.83%)