It appears as if Friday's trading was extended, all of the bourses would have joined the NYSE in negative ground as the final hour was all selling, perhaps spurred by smart money exiting the equity markets in anticipation of the weekend's re-pricing of $80 trillion of loans and derivative contracts form LIBOR (London InterBank Offered Rate) to SOFR (Secured Overnight Financing Rate), a result of the manipulation of LIBOR during the sub-prime crisis of 2007-09.
Since the resetting of interest rates on trillions of dollars worth of loans and derivative contracts isn't an ordinary practice, this weekend's reset has been nicknamed the "Big Bang" as banks and financial institutions around the world hope to make the transition a smooth one. The vast majority of these contracts are over-the-counter derivatives held by banks, ostensibly between two contract partners, but about five percent of the total $200 trillion notional are business loans, floating rate notes and bonds, securitizations, and consumer loans (credit cards, car loans, personal loans).
How this all plays out will be closely guarded by the participants, but could show up in differences in rates on some mortgages and consumer loans.
While some people have become apoplectic over the change, it's likely that nothing earth-shattering will result. Still, there is some trepidation that this event might lead to some overflow turbulence in other markets, particularly, stocks and bonds. Thus, some people were likely selling late Friday to avoid possibly being left out in the open with their pants down on Monday morning.
Otherwise, the week just ended was dominated once again by presidential politics as the November 3rd date with destiny crept closer. With less than three weeks in the monumental election race between President Donald J. Trump and former Vice President Joe Biden, the rancor reached a fever pitch when damning evidence of Biden's son, Hunter's, involvement in Ukraine politics - implicating the senior Biden as an influence peddler - was reported by the New York Post and subsequently squelched by social media giants, Facebook and Twitter.
The story, which involved emails and photos from a computer supposedly belonging to Hunter Biden that was left at a Delaware repair shop and never picked up, gained traction in the alternate media but was completely ignored by the mainstream, to which proponents on the right claimed foul.
Twitter accounts of the NY Post, Trump's campaign, Trump press secretary, Kayleigh McEnany and others were shut down on Wednesday, though most of them were restored by Thursday. Twitter CEO Jack Dorsey issued a couple of thinly-worded apologies, neither of which satisfied congressmen and senators who rang the alarm over first amendment protections and sought to bring Dorsey and Facebook CEO in for hearings on the matter.
By the weekend, following Thursday night's dueling presidential town halls (Trump on NBC, Biden on ABC), the mainstream, including the major networks, ABC, NBC, CBS, CNN, and Fox, remained mum on the story, despite the attempted censorship by their cohorts in the social universe. The censorship of these explosive allegations and evidence of wrong-doing by Biden while he was Vice President under Obama (2009-2016) was so egregious it could not be readily contained. Unless one were living under a rock, the story made the rounds to the public nonetheless.
More revelations have followed from Hunter Biden's hard drive and elsewhere, and the mainstream media's reluctance to even acknowledge their existence shows how partisan and biased these giant media companies are and poses a serious threat to democracy and to the welfare of the United States.
Outside of politics, earnings were the focus on Wall Street, as banks posted third quarter results, noting the usual record-setting trading profits and the unusual, severely slashed loan loss provisions. Apparently, the banks aren't gearing up for a spate of bankruptcies, mortgage defaults and credit card delinquencies stemming from the coronavirus and associated lockdowns, business closures, and various state-by-state restrictions.
In congress, the Senate was occupied with confirmation hearings of Trump Supreme Court nominee Amy Coney Barrett, while Treasury Secretary Mnuchin and House Speaker Nancy Pelosi continued to spar over stimulus proposals. On Saturday, Senate majority leader Mitch McConnell announced that the senate would take a standalone vote on more funds for the Paycheck Protection Program Tuesday, followed by the main relief bill, including, ostensibly, $1200 checks for most Americans, money for states and municipalities, relief for the airlines, and other measures on Wednesday. Estimates vary, but it's assumed that McConnell's bills will amount to less than the $1.8 to $2.2 trillion being bandied about by the administration and House operatives.
Treasuries saw little movement. Yield on the 10-year note fell three basis points to 0.76%, while the 30-year dropped six basis points to 1.52%.
Price for a barrel of WTI crude oil continued to hug the $40 mark, dipping as low as $39.43 (Monday), but gaining through the week to close out at $40.88.
Precious metals were lower, primarily due to another raid on the futures Tuesday which brought the price of gold down from $1922.77 to $1891.36. The price finished the week at $1899.29 on Friday. Silver was victimized as well, losing just under a dollar on the spot market, to 24.16.
Premiums for deliverable, physical gold and silver remained high. Latest prices for common items on eBay are as follows (numismatics excluded, shipping - often free - included):
Item: Low / High / Average / Median
1 oz silver coin: 28.00 / 43.95 / 37.91 / 38.20
1 oz silver bar: 28.00 / 45.05 / 35.49 / 34.40
1 oz gold coin: 1,950.00 / 2,108.82 / 2,018.20 / 2,026.65
1 oz gold bar: 1,903.70 / 2,019.73 / 1,996.39 / 2,000.08
Obviously, buyers of small physical gold and silver items aren't quite buying into the derivative-based prices generated by the futures market. Of particular note this week was the US Mint's jacking of the price of its flagship silver eagle to $67.00, along with significant price hikes (30-60%) on other silver products. The mint's move may explain the extraordinary premium price rise in silver eagle auctions on eBay and by dealers.
At the Close, Friday, October 16, 2020:
Dow: 28,606.31, +112.11 (+0.39%)
NASDAQ: 11,671.56, -42.31 (-0.36%)
S&P 500: 3,483.81, +0.47 (+0.01%)
NYSE: 13,169.32, +32.07 (+0.24%)
For the Week:
Dow: +19.41 (+0.07%)
NASDAQ: +91.61 (0.79%)
S&P 500: +6.67 (+0.19%)
NYSE: -83.30 (-0.63%)
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