For sure, Monday's market action left plenty of dip buyers holding a bag of pain, as gains were wiped out in waves of lower highs and lower lows as stocks stair-stepped their way to a distressing close.
29 of 30 Dow stocks closed in the red, led by:
The only winner of the bunch was Intel (INTC), which closed at 54.58, up 0.42 (+0.78%).
As usual, the financial news pundits trotted out the same tired excuse for stocks losing steam: continued failure of congress to pass a stimulus bill.
Now, this most recent of Washington's foibles has been a steady-state comedy of errors since mid-July, when House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin first began negotiating for a second major coronavirus bailout. For the duration, Pelosi's been pushing for a bigger price tag and including money for states and municipalities, schools, and other pet projects while Mnuchin and the White House favored a much smaller expenditure.
The two sides keep inching closer to a deal, with the latest ploy by Pelosi being a demand that an agreement be reached by Tuesday, which just happens to be today. Accordingly, the newspeople are reporting that the two sides are "close to a deal," a position they've bandied about twice as often as being "far apart."
Blaming the demise of the stock market on the inability of politicians to reach agreement on the size of a stimulus bill is the height of folly. It's akin to blaming the manufacturer for your 12-year-old car's performance when your tires are bald, the oil hasn't been changed in three years, and the half of the fuel injectors are plugged.
In other words, there may be other reasons for stocks to go up or down outside of what the nitwits in the nation's capitol are doing, or not doing.
Here are some other possible reasons for stocks to lose value:
Taken together, those issues would make a normal person want to crawl into a hole and wait until it all passes, but these issues are at least as concerning to some traders and fund managers as a government stimulus bill.
Besides, if the stock market is pinning its hopes on a stimulus bill, having the federal government go deeper into deficit by bailing out everything from airlines to schools to cities to restaurants to you and your neighbor, doesn't that indicate that there may be deeper problems facing the stock market and the general economy?
For some perspective, here's a mind experiment on the value of silver.
Silver and gold aren't going to the moon, as some suggest.
Think in terms of purchasing power. Currently, an ounce of silver is worth about $32 (probably more, see this link for a survey of recent actual sales on eBay).
Let's say a 6 pound roasting chicken (yum) is $8, or $1.33 a pound. (it's usually cheaper, but stick with us here). Right now, you can buy four of those with a one ounce silver coin or bar. OK, you can eat for a couple of weeks.
With inflation, that same chicken may be $2.00 a pound, or $12, in six months, so $32 will only buy two of them, plus a 4-pound fryer.
The ounce of silver will still buy four, and probably more, unless, of course, the mendacious futures marketeers are allowed to suppress the price as they have been for decades in order to keep fiat ($US dollar) the circulating currency.
For reference, chicken was 29 cents a pound in 1960, when silver was still a circulating currency. A six pound chicken cost $1.74, or seven Washington quarters (you'd get an all-copper penny back). That's more than an ounce of silver. There's actually 1.2659 troy ounces of silver in 7 silver Washington quarters, so you couldn't even buy one chicken with an ounce of silver, when today, 60 years later, you can buy four. Four chickens in 1960 would have set you back 5 ounces of silver. Today, that same five ounces will buy you 20 6-pound chickens. On this basis, silver has improved its purchasing power five-fold while the purchasing power of the US dollar has declined in a corresponding fashion.
A six pound chicken in 1960 set you back $1.74. Today, it's $8.00.
That means silver is actually worth much more today than it was then, in real terms (chickens). This illustrates how the dollar has been losing value and will continue to do so. Silver is a long-term investment in real money. This example proves it to be also a worthwhile store of value.
The Fed didn't know how good they had it, both when they conspired to take silver out of circulation and when they started printing money willy-nilly to boost the economy (and the price of everything).
A 401k or an IRA is a trap, tying up fiat currency for decades while its value declines. Silver (and gold) is salvation from inflation.
At the Close, Monday, October 19, 2020:
Dow: 28,195.42, -410.89 (-1.44%)
NASDAQ: 11,478.88, -192.67 (-1.65%)
S&P 500: 3,426.92, -56.89 (-1.63%)
NYSE: 13,018.51, -150.81 (-1.15%)
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