Shifting forces were at work the second last week of July, and while the winds of change didn't quite blow stocks away, the dollar's value, precious metals and bond yields saw wild swings.
Bloomberg's dollar index finished the week at 94.435, edging below the level seen at the trough of the March stock market lows (94.895), and lower for the year (96.389, 12/31/19). It was also the lowest recorded reading since September 2018 (94.220).
While the dollar may have been reeling against competing fiat currencies, it was dealt a knockdown blow by precious metals, especially silver, which had it's best week in more than 40 years. Spot Silver closed at 19.33 per ounce on July 17, traded as high as 23.00 on July 22 before settling into a close at 22.77 on the 24th, a gain of 17.80% in just five trading days.
Gold was also making headlines, with spot gold closing out the week at 1,902.02, a record closing price, surpassing the previous high in US$ of 1895.60 from 2011. While the dollar's weakness was a contributing factor in the rise of precious metals, it wasn't the only one. Continued strong demand, which many dealers are calling "unprecedented", massive purchases by the gold and silver ETF funds, and shortages due to mining shutdowns over the past four months have all been weighing on gold and silver prices.
With faith in fiat currencies and the governments that rule by them weakening, gold, silver, and other hard assets are beginning to be looked upon more favorably as the global economy melts away, multi-national protests persist, and unemployment rages. The first rise in initial weekly US unemployment claims in nearly four months sent shock waves across markets and had a dampening effect on stocks in particular.
WTI crude oil, which had remained moored around the $40/barrel mark for most of the month, was bid slightly higher during the week, closing above $41 for the first time since March. Producers, desperate for higher prices see the falling dollar as an aid to their plight. Global prices are in flux, especially with China buying directly from many producers, including Russia and Iran, bypassing the long-standing dollar hegemony completely. If the dollar continues to decline, the price of oil will certainly rise, affecting just about every finished product in some manner. The condition appears ripe for $50 oil and $2.00 gas at the pump though seasonal demand could keep a lid on prices through the fall.
Treasury yields fell on the long end, with the 30-year taking the brunt of the action, closing out the week at 1.23%, a decline of a full 10 basis points from the previous Friday reading. The benchmark 10-year note slipped from 0.64% to 0.59%, and persisted through Thursday and Friday at that level. Even the one-month maturity bill fell from 0.11 to 0.10%, cramming the entire complex into a 113 basis point box.
The shift in sentiment from bullish on stocks to mildly bearish was, in the main, attributable to the decimation in second quarter earnings as companies lost ground across the equity spectrum. Tech, energy, finance, consumer, and industrial sectors were all affected by the shutdowns and stay-at-home orders prevalent during the second quarter and that was reflected in some very dismal reports, especially from banks and finance stocks, which were forced to add significantly to credit loss reserves over the quarter.
With the reopening of most state economies in the US, there was hope for some relief and a return to pre-COVID conditions, but the recent rise of infections in many states has caused a reversal of the reopening protocols and has tempered enthusiasm for a quick recovery. The COVID crisis seems to have a long-lasting effect, not just on people's health but on the economy in general. The outlook for the fall is not particularly promising either.
Wrapping up this Weekend Wrap, here are the most current prices - including shipping - for select precious metal items on eBay:
Item: Low / High / Average / Median
1 oz silver coin: 27.11 / 46.85 / 35.34 / 34.97
1 oz silver bar: 28.00 / 51.95 / 34.33 / 33.75
1 oz gold coin: 1,850.00 / 2,045.42 / 1,982.27 / 1,995.10
1 oz gold bar: 1,985.22 / 2,019.69 / 2,006.68 / 2,010.15
At the Close, Friday, July 24, 2020:
Dow: 26,469.89, -182.44 (-0.68%)
NASDAQ: 10,363.18, -98.24 (-0.94%)
S&P 500: 3,215.63, -20.03 (-0.62%)
NYSE: 12,461.78, -49.09 (-0.39%)
For the Week:
Dow: -202.06 (-0.76%)
NASDAQ: -140.01 (1.33%)
S&P 500: -9.10 (-0.28%)
NYSE: +59.04 (+0.48%)
Sunday, July 26, 2020
Friday, July 24, 2020
Bonds Signal Stock Rally Running On Fumes
Stocks had their worst day in six weeks on Thursday and the bond market was right there to confirm it.
The 10-year note closed with a yield of 0.59% on Thursday, the third-lowest close in history (lowest, 0.54%, 3/9/20). The 30-year saw its lowest close since the end of April, checking in at 1.24%.
Altogether, the treasury complex has been crammed down to a 115-basis point spread, significantly flattening the curve, a signal for more challenging times at hand.
Overall, bonds have not been playing along with the recent market recovery. As the NASDAQ soared to new highs, treasury bonds were latent, barely budging off the lows set down in March. What the flight into the safety of bonds tells the go-go equity community is that their rally has no long-term legs even though the Federal Reserve has set up more than a handful of equity-boosting schemes that buy up corporate, municipal, and junk bonds at overpriced levels just to keep the stock market rally going.
Because of the Fed's recalcitrance toward any kind of sanity in stocks, bonds prices will remain high and stocks will continue to rise. It's all part of the scheme by the government to keep stocks in bubble-land in order to not trigger a complete loss of faith in the Fed, debt-based fiat currency, fractional reserve banking and a crisis in public and private pensions, most of which are severely underfunded and heavily invested in Wall Street's darling stocks.
It's a recipe for disaster, or at least delaying a disaster until the bills come due and all the institutional money has left the building, leaving retail investors with smaller 401k accounts and pension funds with a big fat hole in their actuarial tables.
Anybody who has studied charts just a little bit should be able to point out the fallacies in the recent "V"-shaped stock market bounce and extrapolate out six months to a year of slower economic growth, or, putting it correctly, declining GDP, lower earnings for the S&P 500, rampant unemployment, and currency debasement on a level not seen since the Weimar Republic or the more recent hyperinflation in Zimbabwe.
According to the Shiller PE ratio - otherwise known as CAPE - stocks are currently trading at levels equivalent to those seen on Black Tuesday in 1929. Only during the dotcom mania of 1999-2000 was the CAPE ratio higher. The March downturn was barely a blip on the CAPE chart. Stocks were already overvalued. Today, as the recovery from the COVID crisis and government lockdowns has not even begun, they are even more overvalued, setting up a condition ripe for another waterfall event like the one in March.
All that's keeping stocks from imploding to more reasonable levels are the Fed's emergency measures and the massive stimulus already on the books from the federal government, with more on the way. At the federal level, the Fed's money printing and profligate spending by congress and the president are not about getting Democrats or Republicans elected in November. The graft and corruption hasn't taken sides. It's about all of them fearing for their coveted positions atop the gravy train, where they make the rules and don't have to keep them, where they benefit from insider knowledge, where they live in luxury while the rest of the country devolves into violence, disruption, and poverty.
Government officials, Fed operatives, and wealthy investors are getting their bread buttered on both sides while Main Street and Joe Sixpack get the crust and crumbs.
Trillions to Wall Street and a $1200 check for the rest of you. Sounds like a campaign slogan Bill Gates, Jeff Bezos, and Warren Buffet could get behind.
The solution is rejecting the false facade presented by Wall Street and their cohorts in Washington, DC. Cutting back on expenses, opting out of public education, becoming more self-reliant, and buying gold, silver, and hard assets will free Americans from the tyranny of monetary fakery and fiscal irresponsibility.
Have a nice weekend.
At the Close, Thursday, July 23, 2020:
Dow: 26,652.33, -353.47 (-1.31%)
NASDAQ: 10,461.42, -244.68 (-2.29%)
S&P 500: 3,235.66, -40.36 (-1.23%)
NYSE: 12,510.87, -58.23 (-0.46%)
The 10-year note closed with a yield of 0.59% on Thursday, the third-lowest close in history (lowest, 0.54%, 3/9/20). The 30-year saw its lowest close since the end of April, checking in at 1.24%.
Altogether, the treasury complex has been crammed down to a 115-basis point spread, significantly flattening the curve, a signal for more challenging times at hand.
Overall, bonds have not been playing along with the recent market recovery. As the NASDAQ soared to new highs, treasury bonds were latent, barely budging off the lows set down in March. What the flight into the safety of bonds tells the go-go equity community is that their rally has no long-term legs even though the Federal Reserve has set up more than a handful of equity-boosting schemes that buy up corporate, municipal, and junk bonds at overpriced levels just to keep the stock market rally going.
Because of the Fed's recalcitrance toward any kind of sanity in stocks, bonds prices will remain high and stocks will continue to rise. It's all part of the scheme by the government to keep stocks in bubble-land in order to not trigger a complete loss of faith in the Fed, debt-based fiat currency, fractional reserve banking and a crisis in public and private pensions, most of which are severely underfunded and heavily invested in Wall Street's darling stocks.
It's a recipe for disaster, or at least delaying a disaster until the bills come due and all the institutional money has left the building, leaving retail investors with smaller 401k accounts and pension funds with a big fat hole in their actuarial tables.
Anybody who has studied charts just a little bit should be able to point out the fallacies in the recent "V"-shaped stock market bounce and extrapolate out six months to a year of slower economic growth, or, putting it correctly, declining GDP, lower earnings for the S&P 500, rampant unemployment, and currency debasement on a level not seen since the Weimar Republic or the more recent hyperinflation in Zimbabwe.
According to the Shiller PE ratio - otherwise known as CAPE - stocks are currently trading at levels equivalent to those seen on Black Tuesday in 1929. Only during the dotcom mania of 1999-2000 was the CAPE ratio higher. The March downturn was barely a blip on the CAPE chart. Stocks were already overvalued. Today, as the recovery from the COVID crisis and government lockdowns has not even begun, they are even more overvalued, setting up a condition ripe for another waterfall event like the one in March.
All that's keeping stocks from imploding to more reasonable levels are the Fed's emergency measures and the massive stimulus already on the books from the federal government, with more on the way. At the federal level, the Fed's money printing and profligate spending by congress and the president are not about getting Democrats or Republicans elected in November. The graft and corruption hasn't taken sides. It's about all of them fearing for their coveted positions atop the gravy train, where they make the rules and don't have to keep them, where they benefit from insider knowledge, where they live in luxury while the rest of the country devolves into violence, disruption, and poverty.
Government officials, Fed operatives, and wealthy investors are getting their bread buttered on both sides while Main Street and Joe Sixpack get the crust and crumbs.
Trillions to Wall Street and a $1200 check for the rest of you. Sounds like a campaign slogan Bill Gates, Jeff Bezos, and Warren Buffet could get behind.
The solution is rejecting the false facade presented by Wall Street and their cohorts in Washington, DC. Cutting back on expenses, opting out of public education, becoming more self-reliant, and buying gold, silver, and hard assets will free Americans from the tyranny of monetary fakery and fiscal irresponsibility.
Have a nice weekend.
At the Close, Thursday, July 23, 2020:
Dow: 26,652.33, -353.47 (-1.31%)
NASDAQ: 10,461.42, -244.68 (-2.29%)
S&P 500: 3,235.66, -40.36 (-1.23%)
NYSE: 12,510.87, -58.23 (-0.46%)
Thursday, July 23, 2020
Zucchini Won't Cure COVID-19, But It's Better Than Wearing A Mask; Gold Seeks New High
 |
| By most standards, this zucchini is too big. |
Zucchini is rich in several vitamins, minerals, and other beneficial plant compounds and I have grown two huge ones.
One is already two-thirds eaten. The other - the larger of the pair - is pictured at right.
I cut most of the first one up and sauteed it in olive oil with ground black pepper and seasoned salt. It was quite good, especially considering that it was, by most accounts, too big, and cost nearly nothing to produce.
That is the point. While all of us from time to time chase the elusive riches in the markets, true value is found in seeds, of which every plant produces in bounteous plenty. From those seeds one can grow acres of fruits and vegetables, enough to feed an entire planet. It's been happening for eons.
Since our government has taken upon itself the task of further enslaving every non-elite member of society with the current mask-wearing-social-distancing-be-afraid-of-the-virus dictates, mandates, unconstitutional as they may be orders, it is incumbent upon every individual to do what he or she sees fitting to ensure one's own survival and that of family, friends, neighbors, co-workers, what have you.
Already interfering and directing almost every aspect of human life, our government officials find it now necessary to further encumber the still-breathing populace with face masks, business closures, and soon, a vaccine, which, by the latest measure, will require two shots followed by a booster, designed, I am certain, to make many more people ill or dead in a short period of time.
This is not a happy time in America, or, for that matter, in any part of the world ruled by ruthless dictators masquerading as champions of the common folk. The government has become the enemy and they're not alone. Other forces, like the people rioting, protesting, toppling statues, requiring everyone to bend a knee for people of color or some other such nonsense are also enemies.
The mainstream media, which has lied to everybody for decades about everything, is another enemy. Banks and finance companies which charge interest on loans we require because we don't earn enough money (or the government steals too much of it through taxes and fees) are another enemy.
Anybody who tells you that you must wear a mask, for any reason, is an enemy. If your grocery store says you cannot buy food for yourself or your family, they are an enemy. We are beset on all sides.
If there's any one action that speaks defiance it's raising one's own food. Planting a garden isn't hard. Maintaining one and producing edible food is, but it is well worth the effort.
Most of us were forced to stay home for some period of time recently. We were not asked. We were told. How many of us started gardens or even thought of putting a few seeds into some soil? Probably fewer than thought about putting some lead into a politician, official or other authority figure.
Some of us did. And now, we are reaping what we've sown. Some of us don't have to shop at Wal-Mart or Kroger's or any place that requires the wearing of a mask. We have our own food.
We're reminded daily that "we're all in this together." Nothing could be further from the truth. Every one of us is on our own. The police, for a large part, have proven ineffective at protecting or serving us. Our political authorities, well, we've already covered that.
We've been lied to about this virus. We've been lied to about the effectiveness of hydroxychloroquine, zinc, and vitamins C and D3 taken in appropriate dosages as a preventive. We've never been told by anybody in authority to strengthen our immune systems. They've lied and cajoled and twisted the truth to serve their own interests, as usual.
Anyhow, you may or may not get the message. In any event, here's the lowdown on the nutritional value of zucchini.
One cup (223 grams) of cooked zucchini provides:
Calories: 17
Protein: 1 gram
Fat: less than 1 gram
Carbs: 3 grams
Sugar: 1 gram
Fiber: 1 gram
Vitamin A: 40% of the Reference Daily Intake (RDI)
Manganese: 16% of the RDI
Vitamin C: 14% of the RDI
Potassium: 13% of the RDI
Magnesium: 10% of the RDI
Vitamin K: 9% of the RDI
Folate: 8% of the RDI
Copper: 8% of the RDI
Phosphorus: 7% of the RDI
Vitamin B6: 7% of the RDI
Thiamine: 5% of the RDI
It also contains small amounts of iron, calcium, zinc, and several other B vitamins.
That's a heck of a lot better than wearing a mask or spending $3000 for Remdesivir or getting shot up with something produced by Pfizer, or AstraZeneca, or Johnson & Johnson.
Gold is nearing it's all-time high in dollar terms, currently trending at $1880 an ounce in the front month futures market. The record spot price for gold came in 2011, when it reached $1895. Having already reached new highs in every other currency, the US dollar is the last fiat currency standing against real money.
-- Fearless Rick
P.S.: If you don't believe me, maybe you'll listen to Dr. Chris Martenson and Greg Hunter at USA Watchdog:
At the Close, Wednesday, July 22, 2020:
Dow: 27,005.84, +165.44 (+0.62%)
NASDAQ: 10,706.13, +25.76 (+0.24%)
S&P 500: 3,276.02, +18.72 (+0.57%)
NYSE: 12,569.07, +60.39 (+0.48%)
Wednesday, July 22, 2020
What's In Your Wallet? CapitalOne Stumbles Into Zombie Zone; Gold, Silver Continue Explosive Rallies
Among the 79 or so second quarter earnings reports released on Tuesday, one of particular note was that of Capital One, the credit card and banking behemoth of "last resort" for many.
The company is well-known for its marketing campaign slogan, "What's in Your Wallet" and is also a lender to many who may not qualify for a credit card or auto loan from more traditional loan originators such as the major banks, thus rendering it to a largely "sub-prime" status.
Thus, when the firm released second quarter results after the closing bell on Tuesday, there was a chorus of "told you so" types who saw Capital One's demise in the making months prior.
The company recorded a quarterly loss of $918 million, or $2.21 a share, compared with a profit of $1.63 billion, or $3.24 a share in the year-ago period on a GAAP basis.
Notably, Capital One boosted its provision for credit losses to $4.25 billion from $1.34 billion in the year-earlier period. It also reported $1.51 billion in net charge-offs. That's $1.5 billion of defaults across all of their business units, but in particular, credit cards.
Total net revenue fell to $6.56 billion from $6.business unit.96 billion a year earlier. Analysts targeted $9.22 billion. Those analysts have yet to be fired, but are likely nervous and rapidly revising their third quarter estimates on the consumer lending giant.
Net interest margin, was 5.78%, compared with 6.80% a year ago, a significant decline.
During the conference call, company representatives touted the effectiveness of their forbearance provisions during the COVID crisis. Borrowers were allowed to skip payments on credit cards, home loans, car loans. In its earnings report presentation, the company offered: "As of June 30, 2020, we have assisted 2% of active accounts,
representing 3% of loans outstanding."
Those 2%, 3% figures are leading numbers. When those figures reach 4% to 5%, Capital One will be in dire straits, because of the declining net interest margin, which is heading south of 5% in the current quarter. Capital One also reported that 92% of customers seeking forbearance were current. Put another way, 8% of those were already 30 days delinquent. With net interest margins collapsing and more people expected to go into delinquent status, Capital One will have to provision even more toward credit losses in the third quarter.
Capital One has become the canary in the coal mine for the banking industry, specifically, consumer-oriented banks, like Wells Fargo, Bank of America, Citi, and JP Morgan Chase. When the dominoes begin to fall, expect Capital One to be among the first, if not THE first, to tip over.
Combined with the 3.10 loss in the first quarter, Capital One's price/earnings ratio fell from a high of around 26 to 12 after last quarter to N/A this quarter, as, on a twelve-trailing-month (TTM) basis, they've lost 26 cents per share over the past year.
The current quarter doesn't look very promising for the company either. They lowered their dividend for the third quarter from 40 cents to 10. When they report their third quarter results on or about October 21, expect the dividend to be reduced to zero.
Like Countrywide, the sub-prime mortgage darling prior to the GFC of 2007-09, Capital One may be forced at some time to sell off business segments. If one were to ask the executives at Capital One "what's in your wallet?" the answer would be, appropriately, "other people's money." And if one were to extrapolate out how that's going to work when millions of their customers are out of work, the correct answer would be "not well."
Oh, well, just another banking crisis the Fed plans on postponing until just before the November elections. COVID-19 and the government response is gearing up for an exciting fall presentation.
Meanwhile, silver and gold continue a rally that has now caught the attention of the financial media, at last. The last time CNBC talked about precious metals was back in Spring of 2011, when gold and silver were headed to all-time highs. A mania was underway.
In October, 2008, when everything was crashing, silver bottomed out at $8.88 an ounce, and gold fell to 712.50.
By the peak in 2011, silver checked in at $48.70, more than a five-bagger by April, and gold struck $1895.00 in September. Now, the shining sisters are back for Act Two.
Silver was slammed down to $12 an ounce in March, but has rebounded smartly. On July 2nd it stood at $17.93. It's currently trading above $22, hitting $22.50 on futures markets overnight.
Also in March, gold got smacked down to $1474.25. Overnight, gold futures hit $1862.50, just $32 short of it's record closing high. As of this writing, gold futures are trending at $1858.90.
While gold and silver aren't exactly what people carry around with them (they used to be), astute followers of currencies and real money might want a couple of one ounce silver coins and a few gram-denominated gold pieces in their wallets.
At the Close, Tuesday, July 21, 2020:
Dow: 26,840.40, +159.53 (+0.60%)
NASDAQ: 10,680.36, -86.73 (-0.81%)
S&P 500: 3,257.30, +5.46 (+0.17%)
NYSE: 12,508.68, +115.70 (+0.93%)
The company is well-known for its marketing campaign slogan, "What's in Your Wallet" and is also a lender to many who may not qualify for a credit card or auto loan from more traditional loan originators such as the major banks, thus rendering it to a largely "sub-prime" status.
Thus, when the firm released second quarter results after the closing bell on Tuesday, there was a chorus of "told you so" types who saw Capital One's demise in the making months prior.
The company recorded a quarterly loss of $918 million, or $2.21 a share, compared with a profit of $1.63 billion, or $3.24 a share in the year-ago period on a GAAP basis.
Notably, Capital One boosted its provision for credit losses to $4.25 billion from $1.34 billion in the year-earlier period. It also reported $1.51 billion in net charge-offs. That's $1.5 billion of defaults across all of their business units, but in particular, credit cards.
Total net revenue fell to $6.56 billion from $6.business unit.96 billion a year earlier. Analysts targeted $9.22 billion. Those analysts have yet to be fired, but are likely nervous and rapidly revising their third quarter estimates on the consumer lending giant.
Net interest margin, was 5.78%, compared with 6.80% a year ago, a significant decline.
During the conference call, company representatives touted the effectiveness of their forbearance provisions during the COVID crisis. Borrowers were allowed to skip payments on credit cards, home loans, car loans. In its earnings report presentation, the company offered: "As of June 30, 2020, we have assisted 2% of active accounts,
representing 3% of loans outstanding."
Those 2%, 3% figures are leading numbers. When those figures reach 4% to 5%, Capital One will be in dire straits, because of the declining net interest margin, which is heading south of 5% in the current quarter. Capital One also reported that 92% of customers seeking forbearance were current. Put another way, 8% of those were already 30 days delinquent. With net interest margins collapsing and more people expected to go into delinquent status, Capital One will have to provision even more toward credit losses in the third quarter.
Capital One has become the canary in the coal mine for the banking industry, specifically, consumer-oriented banks, like Wells Fargo, Bank of America, Citi, and JP Morgan Chase. When the dominoes begin to fall, expect Capital One to be among the first, if not THE first, to tip over.
Combined with the 3.10 loss in the first quarter, Capital One's price/earnings ratio fell from a high of around 26 to 12 after last quarter to N/A this quarter, as, on a twelve-trailing-month (TTM) basis, they've lost 26 cents per share over the past year.
The current quarter doesn't look very promising for the company either. They lowered their dividend for the third quarter from 40 cents to 10. When they report their third quarter results on or about October 21, expect the dividend to be reduced to zero.
Like Countrywide, the sub-prime mortgage darling prior to the GFC of 2007-09, Capital One may be forced at some time to sell off business segments. If one were to ask the executives at Capital One "what's in your wallet?" the answer would be, appropriately, "other people's money." And if one were to extrapolate out how that's going to work when millions of their customers are out of work, the correct answer would be "not well."
Oh, well, just another banking crisis the Fed plans on postponing until just before the November elections. COVID-19 and the government response is gearing up for an exciting fall presentation.
Meanwhile, silver and gold continue a rally that has now caught the attention of the financial media, at last. The last time CNBC talked about precious metals was back in Spring of 2011, when gold and silver were headed to all-time highs. A mania was underway.
In October, 2008, when everything was crashing, silver bottomed out at $8.88 an ounce, and gold fell to 712.50.
By the peak in 2011, silver checked in at $48.70, more than a five-bagger by April, and gold struck $1895.00 in September. Now, the shining sisters are back for Act Two.
Silver was slammed down to $12 an ounce in March, but has rebounded smartly. On July 2nd it stood at $17.93. It's currently trading above $22, hitting $22.50 on futures markets overnight.
Also in March, gold got smacked down to $1474.25. Overnight, gold futures hit $1862.50, just $32 short of it's record closing high. As of this writing, gold futures are trending at $1858.90.
While gold and silver aren't exactly what people carry around with them (they used to be), astute followers of currencies and real money might want a couple of one ounce silver coins and a few gram-denominated gold pieces in their wallets.
At the Close, Tuesday, July 21, 2020:
Dow: 26,840.40, +159.53 (+0.60%)
NASDAQ: 10,680.36, -86.73 (-0.81%)
S&P 500: 3,257.30, +5.46 (+0.17%)
NYSE: 12,508.68, +115.70 (+0.93%)
Tuesday, July 21, 2020
Silver Up and Away Like a Rocket Ship to Mars; Precious Metals Among 2020 Top Performing Assets
For stocks, it was SSDD (Same Stuff, Different Day) After all, it was a Monday and it's a Wall Street imperative that the week starts off with gains.
Pushing the phony COVID-19 narrative was news was Oxford University and AstraZeneca seeing positive results in a clinical trial of its developing COVID vaccine, with immune responses triggered and few side effects other than nausea, headaches, muscle ache, chills and fever. As usual, the news was released right before the opening bell, to ensure maximum fake enthusiasm.
While the Dow and NYSE were flat, the NASDAQ rose 2.5 percent and the S&P closed at a five-month high, but still 135 points shy of it's all-time best of 3,386.15 from February 19.
Not needing any kind of narrative other than the fact that it has been used as money for more than 5,000 years, has incredible conductive properties, and a slew of industrial uses, silver continued its rally, popping above 20 for the first time in four years.
Depending on which futures contract one chooses to quote, gold's shiny cousin is trading at either $20.43 per ounce (August) or $20.85 (September). What's pushing silver and gold higher are a variety of factors, including a growing distaste for fiat currencies, the immutability of precious metals, massive inflows to silver and gold ETFs, or the rumor that JP Morgan was recently told by the Federal Reserve to close out its short positions in silver.
Taken together or separately, gold and silver are among the top performing assets for 2020. Gold ended 2019 at $1514.75 and was quoted at $1815.65 Monday. Silver ended last year at $18.04 and it's gain to $20.43 constitutes a 13 percent gain. Gold's rise in 2020 is just under 20 percent.
It is estimated that fewer than five percent of the world's population has any gold or silver in their possession, despite the fact that all central banks hold tons of gold as a Tier 1 asset.
The days of fiat currency are numbered and the only replacement that will fill the needs of a new era are currencies backed by either gold, silver, or both.
Here's goldsilver.com's Mike Maloney with his thoughts on silver's meteoric rise:
At the Close, Monday, July 20, 2020:
Dow: 26,680.87, +8.97 (+0.03%)
NASDAQ: 10,767.09, +263.89 (+2.51%)
S&P 500: 3,251.84, +27.11 (+0.84%)
NYSE: 12,392.98, -9.72 (-0.08%)
Pushing the phony COVID-19 narrative was news was Oxford University and AstraZeneca seeing positive results in a clinical trial of its developing COVID vaccine, with immune responses triggered and few side effects other than nausea, headaches, muscle ache, chills and fever. As usual, the news was released right before the opening bell, to ensure maximum fake enthusiasm.
While the Dow and NYSE were flat, the NASDAQ rose 2.5 percent and the S&P closed at a five-month high, but still 135 points shy of it's all-time best of 3,386.15 from February 19.
Not needing any kind of narrative other than the fact that it has been used as money for more than 5,000 years, has incredible conductive properties, and a slew of industrial uses, silver continued its rally, popping above 20 for the first time in four years.
Depending on which futures contract one chooses to quote, gold's shiny cousin is trading at either $20.43 per ounce (August) or $20.85 (September). What's pushing silver and gold higher are a variety of factors, including a growing distaste for fiat currencies, the immutability of precious metals, massive inflows to silver and gold ETFs, or the rumor that JP Morgan was recently told by the Federal Reserve to close out its short positions in silver.
Taken together or separately, gold and silver are among the top performing assets for 2020. Gold ended 2019 at $1514.75 and was quoted at $1815.65 Monday. Silver ended last year at $18.04 and it's gain to $20.43 constitutes a 13 percent gain. Gold's rise in 2020 is just under 20 percent.
It is estimated that fewer than five percent of the world's population has any gold or silver in their possession, despite the fact that all central banks hold tons of gold as a Tier 1 asset.
The days of fiat currency are numbered and the only replacement that will fill the needs of a new era are currencies backed by either gold, silver, or both.
Here's goldsilver.com's Mike Maloney with his thoughts on silver's meteoric rise:
At the Close, Monday, July 20, 2020:
Dow: 26,680.87, +8.97 (+0.03%)
NASDAQ: 10,767.09, +263.89 (+2.51%)
S&P 500: 3,251.84, +27.11 (+0.84%)
NYSE: 12,392.98, -9.72 (-0.08%)
Sunday, July 19, 2020
WEEKEND WRAP: Major Banks Put On Happy Face With Stunning Second Quarter Postings; Gold, Silver Continue Advance
As earnings season kicked off, stocks didn't make any explosive moves, but it was a very good week to be a large money center bank in the United States. With the exception of Wells Fargo, the banking sector reported robust results for the second quarter that topped analyst estimates and put the effects of the coronavirus and collapsing US economy into a bizarre perspective that seemed more the handiwork of Hollywood dream-makers than buttoned-down Wall Street executives.
While most Americans were under some form of stay-at-home order and businesses were locked down or locked out from operating as usual, the trading arms of the biggest banks were busy making money hand over fist trading stocks and bonds as those markets rallied back after a near-disaster in the first quarter.
Goldman Sachs (GS), JP Morgan Chase (JPM), Citigroup (C) and Bank of America (BAC) all reported massive gains from their trading desks in the period from April through June. Morgan Stanley, like Goldman, unburdened with consumer loans and credit cards in forbearance like their retail rivals, recorded its most profitable quarter ever. The cumulative results of the nation's largest banks belied the dire conditions plaguing the general US economy. Not only were the banks the beneficiaries of stock and bond market rallies which they largely control, they were also rewarded with infusions of capital from the Federal Reserve in the form of purchases by the Fed of bonds they originated or backed, adding to their Tier 1 assets, strengthening their balance sheets.
The Federal Reserve made certain that 2020 was not going to be a repeat of 2008, when banks were caught with slim reserves, as they were over-leveraged and trapped in a vicious cycle which they helped create without any form of government backstopping.
Thanks to emergency measures taken by the Fed at the beginning of the crisis and executed with alacrity across the spectrum of faulty assets with questionable collateral, the banks came out smelling like rosewater, committed to making money even in the worst of times. Guided by the unerring market-moving hand of the Federal Reserve, the banks managed to put to rest any hint of a liquidity crisis, their magnanimity and generosity expressed as an outstretched hand to beleaguered consumers and small businesses.
Ahead of the curve by committing substantial sums to loan loss reserves, or, in bank parlance, provisions against credit losses, the retail banks, JPM, BofA, and Citi were girded for the worst as they granted forbearance and deferrals on everything from mortgages to credit cards to auto loans. Giving their credit customers a three or four month free ride helped consumers and Main Street business interests ride out the viral storm, though it's unlikely that the banks will be as forgiving when the economy begins to improve, when and if it indeed does. With business loans, mortgages, and credit card delinquencies already on the rise, defaults and bankruptcies are a given going forward, but the cycle is shot-circuited at the banking end thanks to Federal Reserve backstopping. The general economy may crash, but the banks will still be standing. Having bolstered their reserves to a point at which they can withstand not just recession, but depression-like conditions they seem assured of a capability to weather the storm relatively unscathed. Only time will tell if their efforts have been sufficient.
The banks delayed the usual effects of a recession and massive unemployment by - in conjunction with a give-away congress - kicking the debt can further down the road. Their second quarters assured, Wall Street ended the week on a somewhat sober note, as Thursday and Friday's trading lacked any noticeable enthusiasm.
With a banking crisis apparently averted for the time being, the focus of Wall Street was taken off the banks and onto the hope for a miracle vaccine while spiking incidence of the virus had states looking to reimpose stringent demands on the population and widespread business closures.
Topping concerns was the upcoming school year, in which states are ceding authority to local school districts, many of them opting for "virtual" classrooms over actual physical attendance a requirement for students in K-12 grades. Others are adopting a hybrid approach, allowing parents to choose which style of "learning" they think best for their children. No matter the outcome, the trial-and-error, hop-skipping, scattershot solutions across thousands of diverse districts will more than likely ensure more pain than patience, less learning and more disillusion with government remedies. What lies ahead for the economy and humanity in general appears to be a more challenging proposition than the ebullient rejoicing seen on Wall Street this past week.
Over the course of the week Treasury bonds ended where they started. The overall curve structure increased by a mere one basis point. The 10-year note lost one basis point, to end the week at 0.64%. Oil and gas remained rangebound with WTI crude traversing the line at $40 a barrel and gas prices at the pump averaging around $2.00 per gallon.
Precious metals completed another shining seven days, with gold holding above $1800 a troy ounce and silver shooting through $18 and into $19 an ounce territory. Spot silver ended the week at $19.32. Gold closed at $1810.30.
High demand kept premiums elevated for both metals. The most recent sales on eBay for selected items (including shipping) are presented below:
Item: Low / High / Average / Median
1 oz silver coin: 24.00 / 39.90 / 32.32 / 32.47
1 oz silver bar: 24.00 / 39.20 / 31.99 / 31.61
1 oz gold coin: 1,850.00 / 1,931.73 / 1,901.20 / 1,908.06
1 oz gold bar: 1,873.95 / 1,908.01 / 1,895.43 / 1,895.85
As the scare-mongering over COVID-19 continues unabated across all levels of mainstream media, the Bill and Melinda Gates Foundation wants to stick needles in everyone on the planet.
At the Close, Friday, July 17, 2020:
Dow: 26,671.95, -62.76 (-0.23%)
NASDAQ: 10,503.19, +29.36 (+0.28%)
S&P 500: 3,224.73, +9.16 (+0.28%)
NYSE: 12,402.74, +52.63 (+0.43%)
For the Week:
Dow: +596.65 (+2.29%)
NASDAQ: -114.25 (-1.08%)
S&P 500: +39.69 (+1.25%)
NYSE: +52.63 (+0.43%)
While most Americans were under some form of stay-at-home order and businesses were locked down or locked out from operating as usual, the trading arms of the biggest banks were busy making money hand over fist trading stocks and bonds as those markets rallied back after a near-disaster in the first quarter.
Goldman Sachs (GS), JP Morgan Chase (JPM), Citigroup (C) and Bank of America (BAC) all reported massive gains from their trading desks in the period from April through June. Morgan Stanley, like Goldman, unburdened with consumer loans and credit cards in forbearance like their retail rivals, recorded its most profitable quarter ever. The cumulative results of the nation's largest banks belied the dire conditions plaguing the general US economy. Not only were the banks the beneficiaries of stock and bond market rallies which they largely control, they were also rewarded with infusions of capital from the Federal Reserve in the form of purchases by the Fed of bonds they originated or backed, adding to their Tier 1 assets, strengthening their balance sheets.
The Federal Reserve made certain that 2020 was not going to be a repeat of 2008, when banks were caught with slim reserves, as they were over-leveraged and trapped in a vicious cycle which they helped create without any form of government backstopping.
Thanks to emergency measures taken by the Fed at the beginning of the crisis and executed with alacrity across the spectrum of faulty assets with questionable collateral, the banks came out smelling like rosewater, committed to making money even in the worst of times. Guided by the unerring market-moving hand of the Federal Reserve, the banks managed to put to rest any hint of a liquidity crisis, their magnanimity and generosity expressed as an outstretched hand to beleaguered consumers and small businesses.
Ahead of the curve by committing substantial sums to loan loss reserves, or, in bank parlance, provisions against credit losses, the retail banks, JPM, BofA, and Citi were girded for the worst as they granted forbearance and deferrals on everything from mortgages to credit cards to auto loans. Giving their credit customers a three or four month free ride helped consumers and Main Street business interests ride out the viral storm, though it's unlikely that the banks will be as forgiving when the economy begins to improve, when and if it indeed does. With business loans, mortgages, and credit card delinquencies already on the rise, defaults and bankruptcies are a given going forward, but the cycle is shot-circuited at the banking end thanks to Federal Reserve backstopping. The general economy may crash, but the banks will still be standing. Having bolstered their reserves to a point at which they can withstand not just recession, but depression-like conditions they seem assured of a capability to weather the storm relatively unscathed. Only time will tell if their efforts have been sufficient.
The banks delayed the usual effects of a recession and massive unemployment by - in conjunction with a give-away congress - kicking the debt can further down the road. Their second quarters assured, Wall Street ended the week on a somewhat sober note, as Thursday and Friday's trading lacked any noticeable enthusiasm.
With a banking crisis apparently averted for the time being, the focus of Wall Street was taken off the banks and onto the hope for a miracle vaccine while spiking incidence of the virus had states looking to reimpose stringent demands on the population and widespread business closures.
Topping concerns was the upcoming school year, in which states are ceding authority to local school districts, many of them opting for "virtual" classrooms over actual physical attendance a requirement for students in K-12 grades. Others are adopting a hybrid approach, allowing parents to choose which style of "learning" they think best for their children. No matter the outcome, the trial-and-error, hop-skipping, scattershot solutions across thousands of diverse districts will more than likely ensure more pain than patience, less learning and more disillusion with government remedies. What lies ahead for the economy and humanity in general appears to be a more challenging proposition than the ebullient rejoicing seen on Wall Street this past week.
Over the course of the week Treasury bonds ended where they started. The overall curve structure increased by a mere one basis point. The 10-year note lost one basis point, to end the week at 0.64%. Oil and gas remained rangebound with WTI crude traversing the line at $40 a barrel and gas prices at the pump averaging around $2.00 per gallon.
Precious metals completed another shining seven days, with gold holding above $1800 a troy ounce and silver shooting through $18 and into $19 an ounce territory. Spot silver ended the week at $19.32. Gold closed at $1810.30.
High demand kept premiums elevated for both metals. The most recent sales on eBay for selected items (including shipping) are presented below:
Item: Low / High / Average / Median
1 oz silver coin: 24.00 / 39.90 / 32.32 / 32.47
1 oz silver bar: 24.00 / 39.20 / 31.99 / 31.61
1 oz gold coin: 1,850.00 / 1,931.73 / 1,901.20 / 1,908.06
1 oz gold bar: 1,873.95 / 1,908.01 / 1,895.43 / 1,895.85
As the scare-mongering over COVID-19 continues unabated across all levels of mainstream media, the Bill and Melinda Gates Foundation wants to stick needles in everyone on the planet.
At the Close, Friday, July 17, 2020:
Dow: 26,671.95, -62.76 (-0.23%)
NASDAQ: 10,503.19, +29.36 (+0.28%)
S&P 500: 3,224.73, +9.16 (+0.28%)
NYSE: 12,402.74, +52.63 (+0.43%)
For the Week:
Dow: +596.65 (+2.29%)
NASDAQ: -114.25 (-1.08%)
S&P 500: +39.69 (+1.25%)
NYSE: +52.63 (+0.43%)
Friday, July 17, 2020
Banks Earnings Show Big Score for Wall Street, Not Much Hope for Main Street
Stocks took a breather Thursday, ending a four-day win streak on the Dow, after Bank of America posted second quarter results which saw their profit cut in half from a year ago.
That wasn't the only news to cross the tape on Thursday. Morgan Stanley's (MS) net income came in at an record $3.2 billion for the quarter, against the $2.2 billion the bank earned a year earlier and the $1.8 billian that had been expected by analysts in a Bloomberg poll.
Morgan Stanley’s investment bank had trading revenues up 68 percent, including a 168 percent increase in fixed income revenues, while investment banking fees were up 39 percent year on year.
Credit loss reserves were not of particular concern for the firm, posting just $239 million, as compared to consumer banks like JP Morgan Chase and Bank of America, which put aside multiple billions to shield against expected defaults on mortgages, credit cards and auto loans.
Overall, it was a banner week for the big banks, as all except Wells Fargo turned profits amid the confusion and government shutdowns stemming from the coronavirus.
Main Street businesses, which suffered the brunt of government action, must be looking at the banking sector with a jaundiced eye. While many small businesses were shut down for lengthy periods, the banks hauled in money as the stock market rallied wildly. Many of the small businesses - particularly retail, restaurant, health and beauty, and fitness establishments - will never reopen. Their silver lining will come with bankruptcy filings, where they will tell the banks that their loans will not be repaid.
While not a rosy picture for either side, the banks will manage to recoup some of their losses if they wish to claim real estate or significant assets in court proceedings from the broke businesses and sell them off in fire sales to the highest bidders, if any are to be found.
Vulture investors are sharpening their claws at the prospect of hundreds of thousands of commercial establishments and billions of dollars worth of salvage assets hitting the auction blocks at pennines on the dollar.
When the crisis is finally put to rest at some unknowable future date the retail landscape of urban and suburban America will be changed forever. Gone will be the majority of boutique retail shops and family-run restaurants.
If the future pans out according to the plan set out by the Federal Reserve, federal and state governments, it will belong to Amazon, Wal-Mart and Target and dining out will offer a choice between KFC, Taco Bell, and McDonald's.
Chains such as Cheesecake Factory, Buffalo Wild Wings and Applebee's may or may not survive, dependent upon how much longer the public feels compelled to submit to the madness of government mandates.
According to the loan loss reserves posted by the likes of Citi (C), Wells Fargo (WFC), JP Morgan Chase (JPM) and Bank of America (BAC), losses are mounting, but have yet to reach critical levels. Defaults on commercial and residential mortgages will take months and years to sort out, along with personal bankruptcies, credit card, and auto lease and loan defaults.
Thanks to the actions by the Federal Reserve, the banks appear solvent and well-capitalized for now, but that may change, dependent upon two primary factors: 1) the degree and length of government mandates on lockdowns, mask-wearing and social distancing, and, 2) the November elections for president, senate and house of representatives.
No matter the case, a deep and long depression appears all but certain.
At the Close, Thursday, July 16, 2020:
Dow: 26,734.71, -135.39 (-0.50%)
NASDAQ: 10,473.83, -76.67 (-0.73%)
S&P 500: 3,215.57, -10.99 (-0.34%)
NYSE: 12,350.11, -41.19 (-0.33%)
That wasn't the only news to cross the tape on Thursday. Morgan Stanley's (MS) net income came in at an record $3.2 billion for the quarter, against the $2.2 billion the bank earned a year earlier and the $1.8 billian that had been expected by analysts in a Bloomberg poll.
Morgan Stanley’s investment bank had trading revenues up 68 percent, including a 168 percent increase in fixed income revenues, while investment banking fees were up 39 percent year on year.
Credit loss reserves were not of particular concern for the firm, posting just $239 million, as compared to consumer banks like JP Morgan Chase and Bank of America, which put aside multiple billions to shield against expected defaults on mortgages, credit cards and auto loans.
Overall, it was a banner week for the big banks, as all except Wells Fargo turned profits amid the confusion and government shutdowns stemming from the coronavirus.
Main Street businesses, which suffered the brunt of government action, must be looking at the banking sector with a jaundiced eye. While many small businesses were shut down for lengthy periods, the banks hauled in money as the stock market rallied wildly. Many of the small businesses - particularly retail, restaurant, health and beauty, and fitness establishments - will never reopen. Their silver lining will come with bankruptcy filings, where they will tell the banks that their loans will not be repaid.
While not a rosy picture for either side, the banks will manage to recoup some of their losses if they wish to claim real estate or significant assets in court proceedings from the broke businesses and sell them off in fire sales to the highest bidders, if any are to be found.
Vulture investors are sharpening their claws at the prospect of hundreds of thousands of commercial establishments and billions of dollars worth of salvage assets hitting the auction blocks at pennines on the dollar.
When the crisis is finally put to rest at some unknowable future date the retail landscape of urban and suburban America will be changed forever. Gone will be the majority of boutique retail shops and family-run restaurants.
If the future pans out according to the plan set out by the Federal Reserve, federal and state governments, it will belong to Amazon, Wal-Mart and Target and dining out will offer a choice between KFC, Taco Bell, and McDonald's.
Chains such as Cheesecake Factory, Buffalo Wild Wings and Applebee's may or may not survive, dependent upon how much longer the public feels compelled to submit to the madness of government mandates.
According to the loan loss reserves posted by the likes of Citi (C), Wells Fargo (WFC), JP Morgan Chase (JPM) and Bank of America (BAC), losses are mounting, but have yet to reach critical levels. Defaults on commercial and residential mortgages will take months and years to sort out, along with personal bankruptcies, credit card, and auto lease and loan defaults.
Thanks to the actions by the Federal Reserve, the banks appear solvent and well-capitalized for now, but that may change, dependent upon two primary factors: 1) the degree and length of government mandates on lockdowns, mask-wearing and social distancing, and, 2) the November elections for president, senate and house of representatives.
No matter the case, a deep and long depression appears all but certain.
At the Close, Thursday, July 16, 2020:
Dow: 26,734.71, -135.39 (-0.50%)
NASDAQ: 10,473.83, -76.67 (-0.73%)
S&P 500: 3,215.57, -10.99 (-0.34%)
NYSE: 12,350.11, -41.19 (-0.33%)
Thursday, July 16, 2020
Bank Of America Posts Earnings, Sets Aside $5 Billion For Credit Losses; Logic Sees Through COVID Crisis
Anybody who has every employed critical, logical thinking to address any problem probably sees what's going on regarding the pandemic, government mandates, Wall Street's enthusiastic rally, and the financial strip-mining of what's left of the middle class, not just in the United States, but around the world.
Just in case one is in need of a refresher, here's a brief month-by-month rundown:
January, 2020: WuHan Flu detected and reported upon in China.
February, 2020: Flu spread, China is largely locked down, other countries begin reporting cases.
March, 2020: Flu spreads massively to Europe and Asia, entire countries locked down, businesses closed, people forced to "shelter-in-place" and "social distance." Stock market crashes. Fed steps in with various programs to aid Wall Street and bolster stressed balance sheets in major firms and banks.
April 2020: Flu continues to spread: New York City is epicenter in United States; lockdowns continue. Stocks begin to rally.
May 2020: Some states begin re-opening their economies, CDC and mainstream media warns of a second wave. Stock rally accelerates as unemployment spikes to record levels.
June 2020: Cases begin to build up in states that were warned by the CDC. Stock rally moderates.
July 2020: The world's biggest banks, those in the US, begin reporting second quarter results, which are almost universally positive and higher than estimates. Stocks resume rally. Media and CDC continue to warn about virus, which, to most people, seems non-existent. States begin imposing more strict requirements for mask-wearing, shut down "non-essential" businesses again. Northeaster states (New York, New Jersey) begin imposing travel restrictions and mandatory quarantines to visitors from other states.
OK, left out are a load of details, including the protests, looting, rioting, tearing down of statuary and associated BLM and ANTIFA-inspired madness. That was largely an unrelated sideshow.
Logical-thinking people have determined a number of things:
Now, here are two stories to sort out in the logic maze:
Wolf Richter of Wolf Street reports: It Starts: Mortgage Delinquencies Suddenly Soar At Record Rate
and
From Great Britain: NHS Consultant Says Staff Are Being Silenced Over COVID19
Finally, the last of the important second quarter earnings reports, from Bank of America (BAC):
Bank of America (BAC) profit was cut in half from a year ago, totaling $3.28 billion, or $0.37 per share in the second quarter of 2020. This compares with $7.11 billion, or $0.74 per share, in 2019's second quarter.
Analysts had expected the company to earn $0.27 per share, so it actually counts as a win ("beat") and will be reported as such by many outlets.
Revenue for the quarter fell 3.2% to $22.33 billion from $23.08 billion last year.
Loan loss reserves, or, as the banks like to call it now, "provision for credit losses" was increased by 5.1 billion to nearly $10 billion total for the first and second quarter combined. Bear in mind that Bank of America is one of the world's leading consumer lenders, issuing mortgages for residential and commercial clients, credit cards, auto loans, personal loans, business lines of credit, and home equity loans.
While $10 billion in reserves may sound like a lot of money, in reality, it's far short of what will eventually be written down by the bank. Mortgages and credit cards have been put into various forbearances, beginning in March. Along with the PPP loans to small businesses and the $600 extra unemployment benefits doled out to millions across the country, the recession and resultant slowdown in consumer spending and business activity has been delayed. More pain will come in the third and fourth quarters. This quarter's results are very counter-intuitive, so it's essential to sift through the noise and bluster and realize that this is only an early reprieve from a financial panic which continues to unfold in fits and starts.
The biggest banks largely made money trading, as the stock market rallied from late March through to the present.
Those interested in slogging through the 18-page press release and financial data [PDF] can do so here.
Second quarter results and loan loss provisions from non-bank financial entities, especially CapitalOne (COF) and Discover (DFS) should be more revealing and possibly more severe. These "shadow banks" don't have investment arms like BofA or JP Morgan. They are mainline consumer lenders of credit cards, auto loans, and a small mix of home equity and mortgage loans, thus, subject to be hard hit by an economic downturn and chronic unemployment. Both report next week, CapitalOne on the 21st and Discover on the 22nd. Also, watch American Express (AXP) which reports on the 24th.
As an afterthought, consider what's coming down the pike. Now that the BLM and ANTIFA protests have subsided and the backlashing by conservative America has begun, the next issue will be whether or not to open public schools over the next four to six or seven weeks, depending on where one lives.
So far, the school districts that have announced plans have presented a basket of options, each district making up an agenda as they go along. Some are not re-opening to students, opting for some form of distance learning alternative. Others are using a hybrid approach. A small number are opening fully, but with various new rules and restrictions. It's complete chaos with no guiding principles.
The other issue will be professional sports, which have been shut down for four months, suspending the NBA season and all but canceling Major League Baseball. Both are supposed to resume in some fashion - without fans in the stands - soon. The NBA is set to resume play for the 2019-20 season on July 30. MLB is planning to open a 60-game season beginning July 23 and 24. Both leagues have announced that some players have tested positive for COVID-19 and some players are already refusing to play.
College football is in limbo. There's been no word from the NCAA on whether play will go according to schedule (about six weeks from now) or whether there will be a delay. The NFL has announced that the 2020 season will proceed as planned. Some teams have already announced that no fans will be allowed to attend games.
First, it's hard to imagine empty stands in arenas, stadiums, ballparks, and fields which normally accommodate tens of thousands of fans. Up to 100,000 attend some college football games. Baseball stadiums are built for anywhere from 38,000 to 50,000 fans. NFL stadiums routinely host up to 80,000. Even if the games are played, it won't be the same. One questions the logic of even playing in the huge facilities. Teams and leagues could save significant sums of money playing in more cozy environs. Without fans, all they need are the fields or courts and some sideline area. NFL games could be played at larger high school stadia.
Then there's the distinct possibility that the games will be cancelled again, either by government edict or over fear of contracting the dreaded COVID by players, officials, mascots, trainers, you name it.
Schools and sports need to be monitored for future developments.
You've been played. Again. You're still being played right now and it's not going to stop.
Do not be guided in your personal economic and social decisions by garbage media, Wall Street hype, nor government dictates. Let logic and critical thinking guide you to your best outcome.
The following is presented as a public service:
Dr. Vladimir (Zev) Zelenko
Board Certified Family Practitioner
501 Rt 208, Monroe, NY 10950
845-238-0000
March 23, 2020
To all medical professionals around the world:
My name is Dr. Zev Zelenko and I practice medicine in Monroe, NY. For the last 16 years, I have cared for approximately 75% of the adult population of Kiryas Joel, which is a very close knit community of approximately 35,000 people in which the infection spread rapidly and unchecked prior to the imposition of social distancing.
As of today my team has tested approximately 200 people from this community for Covid-19, and 65% of the results have been positive. If extrapolated to the entire community, that means more than 20,000 people are infected at the present time. Of this group, I estimate that there are 1500 patients who are in the high-risk category (i.e. >60, immunocompromised, comorbidities, etc).
Given the urgency of the situation, I developed the following treatment protocol in the pre-hospital setting and have seen only positive results:
1. Any patient with shortness of breath regardless of age is treated.
2. Any patient in the high-risk category even with just mild symptoms is treated.
3. Young, healthy and low risk patients even with symptoms are not treated (unless their circumstances change and they fall into category 1 or 2).
My out-patient treatment regimen is as follows:
1. Hydroxychloroquine 200mg twice a day for 5 days
2. Azithromycin 500mg once a day for 5 days
3. Zinc sulfate 220mg once a day for 5 days
The rationale for my treatment plan is as follows. I combined the data available from China and South Korea with the recent study published from France (sites available on request). We know that hydroxychloroquine helps Zinc enter the cell. We know that Zinc slows viral replication within the cell. Regarding the use of azithromycin, I postulate it prevents secondary bacterial infections. These three drugs are well known and usually well tolerated, hence the risk to the patient is low.
Since last Thursday, my team has treated approximately 350 patients in Kiryas Joel and another 150 patients in other areas of New York with the above regimen.
Of this group and the information provided to me by affiliated medical teams, we have had ZERO deaths, ZERO hospitalizations, and ZERO intubations. In addition, I have not heard of any negative side effects other than approximately 10% of patients with temporary nausea and diarrhea.
(Under severe pressure from the media, government entities, and presumably the CDC, Dr. Zelenko retired from his clinic on May 20, 2020 after 20 years as a medical practitioner.
At the Close, Wednesday, July 15, 2020:
Dow: 26,870.10, +227.50 (+0.85%)
NASDAQ: 10,550.49, +61.89 (+0.59%)
S&P 500: 3,226.56, +29.04 (+0.91%)
NYSE: 12,391.32, +187.12 (+1.53%)
Just in case one is in need of a refresher, here's a brief month-by-month rundown:
January, 2020: WuHan Flu detected and reported upon in China.
February, 2020: Flu spread, China is largely locked down, other countries begin reporting cases.
March, 2020: Flu spreads massively to Europe and Asia, entire countries locked down, businesses closed, people forced to "shelter-in-place" and "social distance." Stock market crashes. Fed steps in with various programs to aid Wall Street and bolster stressed balance sheets in major firms and banks.
April 2020: Flu continues to spread: New York City is epicenter in United States; lockdowns continue. Stocks begin to rally.
May 2020: Some states begin re-opening their economies, CDC and mainstream media warns of a second wave. Stock rally accelerates as unemployment spikes to record levels.
June 2020: Cases begin to build up in states that were warned by the CDC. Stock rally moderates.
July 2020: The world's biggest banks, those in the US, begin reporting second quarter results, which are almost universally positive and higher than estimates. Stocks resume rally. Media and CDC continue to warn about virus, which, to most people, seems non-existent. States begin imposing more strict requirements for mask-wearing, shut down "non-essential" businesses again. Northeaster states (New York, New Jersey) begin imposing travel restrictions and mandatory quarantines to visitors from other states.
OK, left out are a load of details, including the protests, looting, rioting, tearing down of statuary and associated BLM and ANTIFA-inspired madness. That was largely an unrelated sideshow.
Logical-thinking people have determined a number of things:
- The mainstream media is full of liars, prevaricators, and propagandists. This was already well known.
- The coronavirus kills mostly people over 60 with pre-existing conditions (co-morbidities) such as heart disease, diabetes, and especially, morbid obesity.
- Government lockdowns, school closings, business closings, stay-at-home orders, etc. were government overreach and crushed the Main Street economy.
- The Federal Reserve bailed out Wall Street and the banks, as it always does.
- While private sector small businesses and employees were ravaged, nobody in the public sector (federal, state, local government) missed a day's pay even though most of them were not working full or even part time.
- The current "wave" of cases is largely made up and bolstered by an enormous ramp-up in testing. More tests = more cases = more fear-mongering by the media. Meanwhile, death rates have been decreasing steadily and the media fails repeatedly to report that.
- Far less than one percent of the total population in the United States has contracted COVID-19. Fewer than 150,000 have died from COVID-19, according to official sources. Anecdotal evidence that COVID-19 deaths have been wildly exaggerated is everywhere.
- It's estimated that 42-50% of small businesses which were shut down by state governments will never reopen. Bankruptcies are about to explode. Unemployment is not going to rebound.
Now, here are two stories to sort out in the logic maze:
Wolf Richter of Wolf Street reports: It Starts: Mortgage Delinquencies Suddenly Soar At Record Rate
and
From Great Britain: NHS Consultant Says Staff Are Being Silenced Over COVID19
Finally, the last of the important second quarter earnings reports, from Bank of America (BAC):
Bank of America (BAC) profit was cut in half from a year ago, totaling $3.28 billion, or $0.37 per share in the second quarter of 2020. This compares with $7.11 billion, or $0.74 per share, in 2019's second quarter.
Analysts had expected the company to earn $0.27 per share, so it actually counts as a win ("beat") and will be reported as such by many outlets.
Revenue for the quarter fell 3.2% to $22.33 billion from $23.08 billion last year.
Loan loss reserves, or, as the banks like to call it now, "provision for credit losses" was increased by 5.1 billion to nearly $10 billion total for the first and second quarter combined. Bear in mind that Bank of America is one of the world's leading consumer lenders, issuing mortgages for residential and commercial clients, credit cards, auto loans, personal loans, business lines of credit, and home equity loans.
While $10 billion in reserves may sound like a lot of money, in reality, it's far short of what will eventually be written down by the bank. Mortgages and credit cards have been put into various forbearances, beginning in March. Along with the PPP loans to small businesses and the $600 extra unemployment benefits doled out to millions across the country, the recession and resultant slowdown in consumer spending and business activity has been delayed. More pain will come in the third and fourth quarters. This quarter's results are very counter-intuitive, so it's essential to sift through the noise and bluster and realize that this is only an early reprieve from a financial panic which continues to unfold in fits and starts.
The biggest banks largely made money trading, as the stock market rallied from late March through to the present.
Those interested in slogging through the 18-page press release and financial data [PDF] can do so here.
Second quarter results and loan loss provisions from non-bank financial entities, especially CapitalOne (COF) and Discover (DFS) should be more revealing and possibly more severe. These "shadow banks" don't have investment arms like BofA or JP Morgan. They are mainline consumer lenders of credit cards, auto loans, and a small mix of home equity and mortgage loans, thus, subject to be hard hit by an economic downturn and chronic unemployment. Both report next week, CapitalOne on the 21st and Discover on the 22nd. Also, watch American Express (AXP) which reports on the 24th.
As an afterthought, consider what's coming down the pike. Now that the BLM and ANTIFA protests have subsided and the backlashing by conservative America has begun, the next issue will be whether or not to open public schools over the next four to six or seven weeks, depending on where one lives.
So far, the school districts that have announced plans have presented a basket of options, each district making up an agenda as they go along. Some are not re-opening to students, opting for some form of distance learning alternative. Others are using a hybrid approach. A small number are opening fully, but with various new rules and restrictions. It's complete chaos with no guiding principles.
The other issue will be professional sports, which have been shut down for four months, suspending the NBA season and all but canceling Major League Baseball. Both are supposed to resume in some fashion - without fans in the stands - soon. The NBA is set to resume play for the 2019-20 season on July 30. MLB is planning to open a 60-game season beginning July 23 and 24. Both leagues have announced that some players have tested positive for COVID-19 and some players are already refusing to play.
College football is in limbo. There's been no word from the NCAA on whether play will go according to schedule (about six weeks from now) or whether there will be a delay. The NFL has announced that the 2020 season will proceed as planned. Some teams have already announced that no fans will be allowed to attend games.
First, it's hard to imagine empty stands in arenas, stadiums, ballparks, and fields which normally accommodate tens of thousands of fans. Up to 100,000 attend some college football games. Baseball stadiums are built for anywhere from 38,000 to 50,000 fans. NFL stadiums routinely host up to 80,000. Even if the games are played, it won't be the same. One questions the logic of even playing in the huge facilities. Teams and leagues could save significant sums of money playing in more cozy environs. Without fans, all they need are the fields or courts and some sideline area. NFL games could be played at larger high school stadia.
Then there's the distinct possibility that the games will be cancelled again, either by government edict or over fear of contracting the dreaded COVID by players, officials, mascots, trainers, you name it.
Schools and sports need to be monitored for future developments.
You've been played. Again. You're still being played right now and it's not going to stop.
Do not be guided in your personal economic and social decisions by garbage media, Wall Street hype, nor government dictates. Let logic and critical thinking guide you to your best outcome.
The following is presented as a public service:
Dr. Vladimir (Zev) Zelenko
Board Certified Family Practitioner
501 Rt 208, Monroe, NY 10950
845-238-0000
March 23, 2020
To all medical professionals around the world:
My name is Dr. Zev Zelenko and I practice medicine in Monroe, NY. For the last 16 years, I have cared for approximately 75% of the adult population of Kiryas Joel, which is a very close knit community of approximately 35,000 people in which the infection spread rapidly and unchecked prior to the imposition of social distancing.
As of today my team has tested approximately 200 people from this community for Covid-19, and 65% of the results have been positive. If extrapolated to the entire community, that means more than 20,000 people are infected at the present time. Of this group, I estimate that there are 1500 patients who are in the high-risk category (i.e. >60, immunocompromised, comorbidities, etc).
Given the urgency of the situation, I developed the following treatment protocol in the pre-hospital setting and have seen only positive results:
1. Any patient with shortness of breath regardless of age is treated.
2. Any patient in the high-risk category even with just mild symptoms is treated.
3. Young, healthy and low risk patients even with symptoms are not treated (unless their circumstances change and they fall into category 1 or 2).
My out-patient treatment regimen is as follows:
1. Hydroxychloroquine 200mg twice a day for 5 days
2. Azithromycin 500mg once a day for 5 days
3. Zinc sulfate 220mg once a day for 5 days
The rationale for my treatment plan is as follows. I combined the data available from China and South Korea with the recent study published from France (sites available on request). We know that hydroxychloroquine helps Zinc enter the cell. We know that Zinc slows viral replication within the cell. Regarding the use of azithromycin, I postulate it prevents secondary bacterial infections. These three drugs are well known and usually well tolerated, hence the risk to the patient is low.
Since last Thursday, my team has treated approximately 350 patients in Kiryas Joel and another 150 patients in other areas of New York with the above regimen.
Of this group and the information provided to me by affiliated medical teams, we have had ZERO deaths, ZERO hospitalizations, and ZERO intubations. In addition, I have not heard of any negative side effects other than approximately 10% of patients with temporary nausea and diarrhea.
(Under severe pressure from the media, government entities, and presumably the CDC, Dr. Zelenko retired from his clinic on May 20, 2020 after 20 years as a medical practitioner.
At the Close, Wednesday, July 15, 2020:
Dow: 26,870.10, +227.50 (+0.85%)
NASDAQ: 10,550.49, +61.89 (+0.59%)
S&P 500: 3,226.56, +29.04 (+0.91%)
NYSE: 12,391.32, +187.12 (+1.53%)
Wednesday, July 15, 2020
Bank Earnings Continue to Shock and Awe As Goldman Sachs, PNC Blow Out Expectations
The parade of bank earnings reports continued prior to the open on Wednesday with heavy-hitter Goldman Sachs leading the march.
Goldman Sachs (GS)
Roughly 10 years ago, Rolling Stone columnist Matt Taibi slapped the moniker of "vampire squid" on Goldman Sachs, describing how their financial tentacles reached into every asset class around the world. The name stuck and Goldman's reach proved unimpaired by the coronavirus as the firm blew away analyst estimates for second quarter revenue and earnings.
EPS rose 7.7% to $6.26 on revenue of $13.3 billion, a 41 percent improvement over the same quarter a year ago. Fixed-income trading revenue shot up 1.49% to $4.24 billion, the best performance in nine years. Equities revenue jumped 46% to $2.94 billion, the highest in 11 years. Investment banking climbed 36% to $2.66 billion.
Analysts were looking for the firm to generate EPS of $4.27 on revenue of $10.07 billion.
Provision for credit losses rose to $1.59 billion from $214 million a year ago and $937 million in Q1, reflecting predictions for deteriorating economic conditions but Goldman's loan loss reserves continue to be much smaller than rival banks because of their light footprint in consumer banking though exposure to commercial real estate is still significant.
Goldman Sachs stock climbed 4.1% to 222.76 in premarket trading.
Bank of NY Mellon (BK)
The company reported revenue of $4.0 billion and earnings per share of $1.01, which was flat compared to last year's second quarter. BNY Mellon added $142 million to its loan loss reserves and increased Tier 1 Capital by $2.55 billion, including issuance of $1 billion of preferred stock. Overall there were no surprises in the company's second quarter report.
PNC Financial (PNC)
Bolstered by the sale of its interest in Blackrock in May, U.S. regional bank PNC Financial Services Group (PNC) reported second-quarter profit more than doubled. Net income attributable to common shareholders jumped to $3.59 billion, or $8.40 per share, in the three months ended June 30, from $1.31 billion, or $2.88 per share, a year earlier.
However, the company reported a net loss from continuing operations, which excludes the one-time gain from shedding its Blackrock investment, was $744 million.
PNC set aside $2.46 billion as loan loss provisions in the quarter, up from $180 million a year earlier.
The bank’s net income from discontinued operations, which includes gains from the sale, was $4.4 billion. The company also said it will continue the temporary suspension of its common stock repurchase program and reaffirmed the quarterly dividend to shareholders of record at $1.15 per share.
US Bancorp (USB)
Beating lowered EPS estimates, U.S. Bancorp (USB) reported second quarter earnings per share of $0.41, compared to $1.09, a year ago. On average, 22 analysts polled by Thomson Reuters expected the company to report profit per share of $0.22 for the quarter. Net income applicable to common shareholders declined to $614 million from $1.74 billion.
The company's provision for credit losses for the second quarter of 2020 was $1.737 billion, a huge increase over the previous quarter and year-ago quarter, reflecting deteriorating economic conditions due to the coronavirus.
Second quarter total net revenue was $5.84 billion compared to $5.82 billion, previous year, in line with estimates. Net interest income on a taxable-equivalent basis was $3.22 billion, a decrease of 3.2 percent.
Thus far, the banking segment, which was largely routed during the early days of the pandemic issue, has delivered results for the second quarter above and beyond even the most optimistic. With US GDP expected to contract by as much as 45%, the banks managed to make hay within unstable conditions, largely due to actions taken by the Federal Reserve and experience in dealing with potential credit losses from 2008 and 2009.
Bank earnings - with the notable exception of Wells Fargo - have generally surprised to the upside, with Goldman Sachs and JP Morgan Chase managing to navigate the rough waters with steady hands.
A week that easily could have blunted the ongoing rally has instead turned the market wildly positive. Leave it to Wall Street and the bankers that run the investment capitol of the world to put the bears back into hibernation. With less than an hour before the opening bell, stock futures have exploded higher. Dow futures are up 540 points.
At the Close, Tuesday, July 14, 2020:
Dow: 26,642.59, +556.79 (+2.13%)
NASDAQ: 10,488.58, +97.78 (+0.94%)
S&P 500: 3,197.52, +42.30 (+1.34%)
NYSE: 12,204.21, +189.51 (+1.58%)
Goldman Sachs (GS)
Roughly 10 years ago, Rolling Stone columnist Matt Taibi slapped the moniker of "vampire squid" on Goldman Sachs, describing how their financial tentacles reached into every asset class around the world. The name stuck and Goldman's reach proved unimpaired by the coronavirus as the firm blew away analyst estimates for second quarter revenue and earnings.
EPS rose 7.7% to $6.26 on revenue of $13.3 billion, a 41 percent improvement over the same quarter a year ago. Fixed-income trading revenue shot up 1.49% to $4.24 billion, the best performance in nine years. Equities revenue jumped 46% to $2.94 billion, the highest in 11 years. Investment banking climbed 36% to $2.66 billion.
Analysts were looking for the firm to generate EPS of $4.27 on revenue of $10.07 billion.
Provision for credit losses rose to $1.59 billion from $214 million a year ago and $937 million in Q1, reflecting predictions for deteriorating economic conditions but Goldman's loan loss reserves continue to be much smaller than rival banks because of their light footprint in consumer banking though exposure to commercial real estate is still significant.
Goldman Sachs stock climbed 4.1% to 222.76 in premarket trading.
Bank of NY Mellon (BK)
The company reported revenue of $4.0 billion and earnings per share of $1.01, which was flat compared to last year's second quarter. BNY Mellon added $142 million to its loan loss reserves and increased Tier 1 Capital by $2.55 billion, including issuance of $1 billion of preferred stock. Overall there were no surprises in the company's second quarter report.
PNC Financial (PNC)
Bolstered by the sale of its interest in Blackrock in May, U.S. regional bank PNC Financial Services Group (PNC) reported second-quarter profit more than doubled. Net income attributable to common shareholders jumped to $3.59 billion, or $8.40 per share, in the three months ended June 30, from $1.31 billion, or $2.88 per share, a year earlier.
However, the company reported a net loss from continuing operations, which excludes the one-time gain from shedding its Blackrock investment, was $744 million.
PNC set aside $2.46 billion as loan loss provisions in the quarter, up from $180 million a year earlier.
The bank’s net income from discontinued operations, which includes gains from the sale, was $4.4 billion. The company also said it will continue the temporary suspension of its common stock repurchase program and reaffirmed the quarterly dividend to shareholders of record at $1.15 per share.
US Bancorp (USB)
Beating lowered EPS estimates, U.S. Bancorp (USB) reported second quarter earnings per share of $0.41, compared to $1.09, a year ago. On average, 22 analysts polled by Thomson Reuters expected the company to report profit per share of $0.22 for the quarter. Net income applicable to common shareholders declined to $614 million from $1.74 billion.
The company's provision for credit losses for the second quarter of 2020 was $1.737 billion, a huge increase over the previous quarter and year-ago quarter, reflecting deteriorating economic conditions due to the coronavirus.
Second quarter total net revenue was $5.84 billion compared to $5.82 billion, previous year, in line with estimates. Net interest income on a taxable-equivalent basis was $3.22 billion, a decrease of 3.2 percent.
Thus far, the banking segment, which was largely routed during the early days of the pandemic issue, has delivered results for the second quarter above and beyond even the most optimistic. With US GDP expected to contract by as much as 45%, the banks managed to make hay within unstable conditions, largely due to actions taken by the Federal Reserve and experience in dealing with potential credit losses from 2008 and 2009.
Bank earnings - with the notable exception of Wells Fargo - have generally surprised to the upside, with Goldman Sachs and JP Morgan Chase managing to navigate the rough waters with steady hands.
A week that easily could have blunted the ongoing rally has instead turned the market wildly positive. Leave it to Wall Street and the bankers that run the investment capitol of the world to put the bears back into hibernation. With less than an hour before the opening bell, stock futures have exploded higher. Dow futures are up 540 points.
At the Close, Tuesday, July 14, 2020:
Dow: 26,642.59, +556.79 (+2.13%)
NASDAQ: 10,488.58, +97.78 (+0.94%)
S&P 500: 3,197.52, +42.30 (+1.34%)
NYSE: 12,204.21, +189.51 (+1.58%)
Tuesday, July 14, 2020
JP Morgan Chase, Citigroup, Wells Fargo Release Second Quarter Results; Loan Loss Provisions Rise Significantly
Being that this week is going to prove to be one of the more significant periods of the ongoing economic storm, Money Daily plans to dispense with most of the rhetoric and focus on stocks as banks release second quarter earnings reports. The ramifications of bank earnings specifically in this quarter will likely be felt for years.
On Monday, the markets took a decided turn with an hour remaining in the trading session. Some have attributed the sudden reversal from positive to negative as a response to comments from OPEC on oil production levels while others blamed Dallas Fed President Robert Kaplan's remarks that mask wearing would lead to faster economic growth or the WHO's Tedros Adhanam saying that government's have sent mixed messages and the response has been inadequate to halt the spread of COVID-19.
The commentary from these diverse sources seemed to be very well-timed, like a chorus from Wagner's Götterdämmerung, signaling chaos and destruction on a massive scale. Whatever the matter, they provided cover for speculators to flee the scene in advance of Tuesday's expected tsunami of bad news, which starts with second quarter earnings from JP Morgan Chase.
J.P. Morgan Chase (JPM)
The nation's largest bank by assets, JP Morgan blew away analyst expectations, which were significantly lowered in response to the coronavirus impact. Adjusted revenue came in at $33.83 billion vs $30.4 billion expected. Adjusted earnings per share was $1.38 versus $1.05 per share expected, a 51% decline from a year ago as the bank made $4.7 billion net and set aside $8.9 billion in loan loss reserves for the quarter, anticipating massive credit losses due to the severe economic impact from the pandemic and government response.
Trading revenues were JPM's strong suit, with market revenue coming in at $9.7 billion, up 79% from a year ago. Revenue from fixed-income nearly doubled from last year's results, up 99% to $7.3 billion, while equity trading revenue rose 38% to $2.4 billion.
The firm suspended its share buyback program until at least the end of September on orders from the Federal Reserve. CEO Jamie Dimon stressed that the company would continue to pay out its dividend of 90 cents annually.
While Bloomberg and CNBC were gushing over the bank's "positive" results, drilling down into the data showed that JP Morgan Chase last money during the quarter in its Consumer and Community Banking (CCB) division, losing $176 million, compared with net income of $4.2 billion in the prior year. Net revenue was $12.2 billion, down 9%.
The company also lost money in commercial banking, dropping another $691 million. The provision for credit losses was $2.4 billion, driven by reserve builds across multiple sectors. Net charge-offs were $79 million,
up $64 million versus the prior year.
Adding it all up, JPM lost money on both sides of it banking business (consumer and commercial), but made up for it by having a blowout quarter trading stocks and bonds. Their loan loss provisions are probably too low and their gains in the market were driven almost exclusively by easy conditions and easier money from the Fed. If the company has a rough quarter in the markets and loan losses continue to pile on, JPM's "fortress balance sheet" will crumble like Chinese concrete.
The company press release and full financials can be found here. [PDF] Be sure to read the notes at the end, which describe some of the tortured "non-GAAP" metrics the firm deploys to persuade Wall Street and the investing public that all is well.
Following JP Morgan, which reported at 7:00 am ET, were Citigroup (C) and Wells Fargo (WFC) at 8:00 am ET. This is where it got a little more interesting.
Wells Fargo (WFC)
Wells Fargo, the bank in which Warren Buffet has a heavy investment, lost $2.69 billion in the second quarter compared to a profit of $5.85 billion in the same period last year. EPS was -$0.66 in Q2 vs. $1.30 in the same period last year. -Analysts projected -$0.20 per share.
Gross revenue was $17.84 billion in Q2 vs. $21.58 billion in the same period last year.
The bank set aside $8.4 billion in loan loss reserves. The Federal Reserve instructed Wells Fargo to cut its 51 cents per share dividend to 10 cents, or 2.5 cents per quarter.
Citigroup (C)
Citigroup reported a nearly 73% plunge in quarterly profit as the bank set aside $5.6 billion to cover potential loan and credit card defaults stemming from the coronavirus outbreak.
The New York-based bank reported a profit of $1.32 billion, or 50 cents per share, for the second quarter ended June 30, down from $4.8 billion, or $1.95 per share, a year earlier.
Revenues were actually higher, up five percent, to $19.77 billion.
Analysts on average had forecast $19.12 billion in revenue and earnings of 28 cents per share, so, on the surface, Citi looks like it beat the estimates, though the numbers were slashed early in the quarter by analysts.
Overall, the banks have now put over $50 billion into loan loss reserves, while some of the other big names, notably Bank of America, still have not yet reported. While the numbers may seem to be adequate to cover losses, it should be noted that many lenders have provisioned troubled borrowers with considerable forbearance on credit card, mortgage, auto, student and private loans.
With unemployment still very high and the effects of many Main Street businesses going broke having yet to be felt, if the crisis continues much longer, these banks may be facing more serious losses than anticipated. Of course, the Fed has all of them backstopped, thus averting a full-blown banking panic.
As the opening bell approaches, it appears that confidence is waning, with Dow, NASDAQ and S&P futures off considerably from levels prior to the bank earnings reports. The NASDAQ and S&P have fallenen into the red and Dow futures are barely positive.
More tomorrow...
At the Close, Monday, July 13, 2020:
Dow: 26,085.80, +10.50 (+0.04%)
NASDAQ: 10,390.84, -226.60 (-2.13%)
S&P 500: 3,155.22, -29.82 (-0.94%)
NYSE: 12,014.67, -60.91 (-0.50%)
On Monday, the markets took a decided turn with an hour remaining in the trading session. Some have attributed the sudden reversal from positive to negative as a response to comments from OPEC on oil production levels while others blamed Dallas Fed President Robert Kaplan's remarks that mask wearing would lead to faster economic growth or the WHO's Tedros Adhanam saying that government's have sent mixed messages and the response has been inadequate to halt the spread of COVID-19.
How the virus proceeds, and what the incidence is, is going to be directly related to how fast we grow," Kaplan told Fox Business Network in an interview. "While monetary and fiscal policy have a key role to play, the primary economic policy from here is broad mask wearing and good execution of these health care protocols; if we do that well, we'll grow faster.
-- Dallas Fed president Robert Kaplan
The commentary from these diverse sources seemed to be very well-timed, like a chorus from Wagner's Götterdämmerung, signaling chaos and destruction on a massive scale. Whatever the matter, they provided cover for speculators to flee the scene in advance of Tuesday's expected tsunami of bad news, which starts with second quarter earnings from JP Morgan Chase.
J.P. Morgan Chase (JPM)
The nation's largest bank by assets, JP Morgan blew away analyst expectations, which were significantly lowered in response to the coronavirus impact. Adjusted revenue came in at $33.83 billion vs $30.4 billion expected. Adjusted earnings per share was $1.38 versus $1.05 per share expected, a 51% decline from a year ago as the bank made $4.7 billion net and set aside $8.9 billion in loan loss reserves for the quarter, anticipating massive credit losses due to the severe economic impact from the pandemic and government response.
Trading revenues were JPM's strong suit, with market revenue coming in at $9.7 billion, up 79% from a year ago. Revenue from fixed-income nearly doubled from last year's results, up 99% to $7.3 billion, while equity trading revenue rose 38% to $2.4 billion.
The firm suspended its share buyback program until at least the end of September on orders from the Federal Reserve. CEO Jamie Dimon stressed that the company would continue to pay out its dividend of 90 cents annually.
While Bloomberg and CNBC were gushing over the bank's "positive" results, drilling down into the data showed that JP Morgan Chase last money during the quarter in its Consumer and Community Banking (CCB) division, losing $176 million, compared with net income of $4.2 billion in the prior year. Net revenue was $12.2 billion, down 9%.
The company also lost money in commercial banking, dropping another $691 million. The provision for credit losses was $2.4 billion, driven by reserve builds across multiple sectors. Net charge-offs were $79 million,
up $64 million versus the prior year.
Adding it all up, JPM lost money on both sides of it banking business (consumer and commercial), but made up for it by having a blowout quarter trading stocks and bonds. Their loan loss provisions are probably too low and their gains in the market were driven almost exclusively by easy conditions and easier money from the Fed. If the company has a rough quarter in the markets and loan losses continue to pile on, JPM's "fortress balance sheet" will crumble like Chinese concrete.
The company press release and full financials can be found here. [PDF] Be sure to read the notes at the end, which describe some of the tortured "non-GAAP" metrics the firm deploys to persuade Wall Street and the investing public that all is well.
Following JP Morgan, which reported at 7:00 am ET, were Citigroup (C) and Wells Fargo (WFC) at 8:00 am ET. This is where it got a little more interesting.
Wells Fargo (WFC)
Wells Fargo, the bank in which Warren Buffet has a heavy investment, lost $2.69 billion in the second quarter compared to a profit of $5.85 billion in the same period last year. EPS was -$0.66 in Q2 vs. $1.30 in the same period last year. -Analysts projected -$0.20 per share.
Gross revenue was $17.84 billion in Q2 vs. $21.58 billion in the same period last year.
The bank set aside $8.4 billion in loan loss reserves. The Federal Reserve instructed Wells Fargo to cut its 51 cents per share dividend to 10 cents, or 2.5 cents per quarter.
Citigroup (C)
Citigroup reported a nearly 73% plunge in quarterly profit as the bank set aside $5.6 billion to cover potential loan and credit card defaults stemming from the coronavirus outbreak.
The New York-based bank reported a profit of $1.32 billion, or 50 cents per share, for the second quarter ended June 30, down from $4.8 billion, or $1.95 per share, a year earlier.
Revenues were actually higher, up five percent, to $19.77 billion.
Analysts on average had forecast $19.12 billion in revenue and earnings of 28 cents per share, so, on the surface, Citi looks like it beat the estimates, though the numbers were slashed early in the quarter by analysts.
Overall, the banks have now put over $50 billion into loan loss reserves, while some of the other big names, notably Bank of America, still have not yet reported. While the numbers may seem to be adequate to cover losses, it should be noted that many lenders have provisioned troubled borrowers with considerable forbearance on credit card, mortgage, auto, student and private loans.
With unemployment still very high and the effects of many Main Street businesses going broke having yet to be felt, if the crisis continues much longer, these banks may be facing more serious losses than anticipated. Of course, the Fed has all of them backstopped, thus averting a full-blown banking panic.
As the opening bell approaches, it appears that confidence is waning, with Dow, NASDAQ and S&P futures off considerably from levels prior to the bank earnings reports. The NASDAQ and S&P have fallenen into the red and Dow futures are barely positive.
More tomorrow...
At the Close, Monday, July 13, 2020:
Dow: 26,085.80, +10.50 (+0.04%)
NASDAQ: 10,390.84, -226.60 (-2.13%)
S&P 500: 3,155.22, -29.82 (-0.94%)
NYSE: 12,014.67, -60.91 (-0.50%)
Sunday, July 12, 2020
WEEKEND WRAP: Banks To Report All Week As Second Quarter Earnings Season Gets Underway; Gold, Silver Soar
In what's become something of a recurring theme, stocks ramped ahead on Friday, sending the Dow and NYSE into positive territory for the week. As usual, the NASDAQ sent home the biggest gains, popping another four percent as the tech-heavy index scored record closing highs every day except Tuesday.
Large caps chopped ahead. The S&P put in it's ninth week of gains against six losers since hitting bottom in March. Weighed down by Walgreen's, the Dow managed to close positive, thanks to a big upside move on Friday. Ditto, the NYSE Composite Index, which remained the laggard among US equity indices.
Beyond the obvious love for all things tech, the bulk of the market was rather soft. Stocks are being led by a mere handful of companies, but it's been more than enough to almost fully erase the losses from earlier in the year and in the case of the NASDAQ itself, the erasure has been a clean sweep to record highs.
If there was a bit of edginess, it was hardly noticeable, and likely due to the oncoming rush of earnings reports from what figures to be a dismal second quarter, irreparably harmed by the coronavirus and government shutdowns across the nation and around the world. The condition is going to be frenetic come next week, as all of the major banking interests open their books to reveal the carnage from what is likely to be the worst quarter in American history.
Pepsico (PEP) will get things off to an effervescent start before the opening bell Monday, but financials take center stage after that. JP Morgan Chase (JPM), Wells Fargo (WFC) and Citi (C) all report prior to the open on Tuesday which should provide plenty of grist for the stock-churning mill. Wednesday morning has Goldman Sachs (GS), BNY Mellon (BK), and PNC Financial (PNC) reporting. Bank of America (BAC) and Morgan Stanley (MS) join the party Thursday morning and the week closes out with Blackrock (BLK), Citizens (CFG), First Horizon (FHN), Ally (ALLY) and Regions Financial (RF) all due to report prior to Friday's opening bell.
The shorthand approach is to see just how large are the loan loss reserves of the majors (JPM, BAC, WF, C, GS). They should be mammoth, considering the amounts of mortgages, credit cards, auto loans, personal loans and student loans went into forbearance during the quarter. If the set-asides are not shockingly large, the banks are either lying or overly optimistic about a quick recovery, but that too is unlikely, so expectations are set for some truly horrific numbers.
No matter what they bring to the table, individual bank stocks may get an initial whack, but the general market is very likely to continue higher, as has been the case since the March bottoms, defying the laws of commerce, physics, gravity, and common sense all at the same time. At this point, while a serious downdraft would be the primary expectation, a bouncy week ending positive could happen. Nothing would surprise anybody.
The story for oil is pretty simple. With benchmark WTI crude stuck at $40 a barrel, everybody is happy. Sheiks, Russians, shale drillers (maybe not so much, but an improvement over recent weeks), company executives, pipeline workers, and even car drivers are sated with gas at the pump bouncing around $2.00 a gallon ($2.19 according to AAA), highest in the West, cheapest in the South.
Treasuries rallied through the week, especially on the long end where the 30-year yield dropped 10 basis points, to 1.33% on Friday. The ten-year was as high as 0.69% and as low as 0.62%, finding the sweet spot Friday at 0.65%. Shorter maturities, through to 3-years are all yielding less than 0.20%, the one-month dropping down to 0.10% by week's end, the lowest since the end of May.
Precious metals had a banner week, with gold cresting over $1800 an ounce and silver smashing through $19. Premiums persist despite shortages easing on most products.
The US Mint is charging $27.65 for random date silver Eagles while some 2020 varieties are much higher and back ordered for three weeks.
For physical, eBay remains the most vibrant market and trustworthy price indicator. Here are the most recent prices on selected items (shipping included):
Item: Low / High / Average / Median
1 oz silver coin: 24.50 / 43.98 / 33.05 / 32.48
1 oz silver bar: 23.50 / 42.95 / 30.56 / 29.90
1 oz gold coin: 1,892.54 / 1,995.95 / 1,917.91 / 1,914.41
1 oz gold bar: 1,800.00 / 1,917.20 / 1,878.18 / 1,881.80
Stay liquid and hydrated. Most of the US is going to be under an oppressive heat dome all week with record-breaking temperatures predicted for the Southwest and East coast.
At the Close, Friday, June 10, 2020:
Dow: 26,075.30, +369.21 (+1.44%)
NASDAQ: 10,617.44, +69.69 (+0.66%)
S&P 500: 3,185.04, +32.99 (+1.05%)
NYSE: 12,075.58, +146.95 (+1.23%)
For the Week:
Dow: +247.94 (+0.96%)
NASDAQ: +409.81 (+4.01%)
S&P 500: +55.03 (+1.76%)
NYSE: +84.06 (+0.70%)
Large caps chopped ahead. The S&P put in it's ninth week of gains against six losers since hitting bottom in March. Weighed down by Walgreen's, the Dow managed to close positive, thanks to a big upside move on Friday. Ditto, the NYSE Composite Index, which remained the laggard among US equity indices.
Beyond the obvious love for all things tech, the bulk of the market was rather soft. Stocks are being led by a mere handful of companies, but it's been more than enough to almost fully erase the losses from earlier in the year and in the case of the NASDAQ itself, the erasure has been a clean sweep to record highs.
If there was a bit of edginess, it was hardly noticeable, and likely due to the oncoming rush of earnings reports from what figures to be a dismal second quarter, irreparably harmed by the coronavirus and government shutdowns across the nation and around the world. The condition is going to be frenetic come next week, as all of the major banking interests open their books to reveal the carnage from what is likely to be the worst quarter in American history.
Pepsico (PEP) will get things off to an effervescent start before the opening bell Monday, but financials take center stage after that. JP Morgan Chase (JPM), Wells Fargo (WFC) and Citi (C) all report prior to the open on Tuesday which should provide plenty of grist for the stock-churning mill. Wednesday morning has Goldman Sachs (GS), BNY Mellon (BK), and PNC Financial (PNC) reporting. Bank of America (BAC) and Morgan Stanley (MS) join the party Thursday morning and the week closes out with Blackrock (BLK), Citizens (CFG), First Horizon (FHN), Ally (ALLY) and Regions Financial (RF) all due to report prior to Friday's opening bell.
The shorthand approach is to see just how large are the loan loss reserves of the majors (JPM, BAC, WF, C, GS). They should be mammoth, considering the amounts of mortgages, credit cards, auto loans, personal loans and student loans went into forbearance during the quarter. If the set-asides are not shockingly large, the banks are either lying or overly optimistic about a quick recovery, but that too is unlikely, so expectations are set for some truly horrific numbers.
No matter what they bring to the table, individual bank stocks may get an initial whack, but the general market is very likely to continue higher, as has been the case since the March bottoms, defying the laws of commerce, physics, gravity, and common sense all at the same time. At this point, while a serious downdraft would be the primary expectation, a bouncy week ending positive could happen. Nothing would surprise anybody.
The story for oil is pretty simple. With benchmark WTI crude stuck at $40 a barrel, everybody is happy. Sheiks, Russians, shale drillers (maybe not so much, but an improvement over recent weeks), company executives, pipeline workers, and even car drivers are sated with gas at the pump bouncing around $2.00 a gallon ($2.19 according to AAA), highest in the West, cheapest in the South.
Treasuries rallied through the week, especially on the long end where the 30-year yield dropped 10 basis points, to 1.33% on Friday. The ten-year was as high as 0.69% and as low as 0.62%, finding the sweet spot Friday at 0.65%. Shorter maturities, through to 3-years are all yielding less than 0.20%, the one-month dropping down to 0.10% by week's end, the lowest since the end of May.
Precious metals had a banner week, with gold cresting over $1800 an ounce and silver smashing through $19. Premiums persist despite shortages easing on most products.
The US Mint is charging $27.65 for random date silver Eagles while some 2020 varieties are much higher and back ordered for three weeks.
For physical, eBay remains the most vibrant market and trustworthy price indicator. Here are the most recent prices on selected items (shipping included):
Item: Low / High / Average / Median
1 oz silver coin: 24.50 / 43.98 / 33.05 / 32.48
1 oz silver bar: 23.50 / 42.95 / 30.56 / 29.90
1 oz gold coin: 1,892.54 / 1,995.95 / 1,917.91 / 1,914.41
1 oz gold bar: 1,800.00 / 1,917.20 / 1,878.18 / 1,881.80
Stay liquid and hydrated. Most of the US is going to be under an oppressive heat dome all week with record-breaking temperatures predicted for the Southwest and East coast.
At the Close, Friday, June 10, 2020:
Dow: 26,075.30, +369.21 (+1.44%)
NASDAQ: 10,617.44, +69.69 (+0.66%)
S&P 500: 3,185.04, +32.99 (+1.05%)
NYSE: 12,075.58, +146.95 (+1.23%)
For the Week:
Dow: +247.94 (+0.96%)
NASDAQ: +409.81 (+4.01%)
S&P 500: +55.03 (+1.76%)
NYSE: +84.06 (+0.70%)
Friday, July 10, 2020
Teetering On The Brink: US, Global Economies Reeling From Virus, Lockdowns; Bank Earnings Next Week
It didn't have to be this way. Apparently, imploding the US and global economy was part of somebody's plan, though nobody is exactly sure whose.
Expressing discontent and lacking in funds are millions of US consumers, who cut their borrowing by $18 billion in May, according to the Federal Reserve, that bastion of freedom and fairness in all economic activity.
May marked the third consecutive month of reduced borrowing by consumers, coinciding with the outbreak of the coronavirus and the imposition of lockdowns and stay-at-home orders throughout the world and in most US states. After falling 4.5% in March borrowing cratered by 20.1% in April, the largest one-month percentage decline since 1945.
Credit card use fell $24.3 billion in May following April's record $58.2 billion collapse, a result of the purposeful downsizing of the US economy. With stores closed, businesses shut down and many without jobs, borrowing money to pay for mundane items was pretty much out of the question. Spending on vacations, dining out, just about any travel-related expense was off the board for most US consumers. Most people were forced to stay home or very close to it. Those with kids out of school were spending more time reacquainting themselves than luxuriating in the outside world.
On top of the virus-related issues comes the rationalization that many folks were simply shut out of credit card use. Banks closed or limited a massive number of credit card accounts during the corona-crisis, a trend that's more than likely to accelerate as layoffs and furloughs morph into permanent job losses.
The US economy is collapsing, and with it the currency. If credit continues to be slashed, the Fed is going to get mighty upset about it and probably demand that banks open the spigots to allow more lending to people who are broke or nearly bankrupt. Because of the CARES Act, which pumped some trillions of dollars into the US economy, the full effect of the corona-lockdowns and incredible unemployment have yet to be felt, but that's coming. Enhanced unemployment benefits via the act are due to run dry by the end of July. Unless congress agrees to put up another round of checks to Americans and extend enhanced unemployment, there's going to be some monstrous pain in the body politic.
Because of these projections, perhaps the image of who exactly wanted the economy to implode becomes a little clearer. It's one with the face of Nancy Pelosi, the torso of congressman Jerrold Nadler, the attitude of Mitch McConnell, overall a grotesque figure with a multiple of purposes, getting rid of President Trump chief among them.
To think that elected officials wouldn't lie about the virus, their political leanings, the state of the union, their personal fortunes is to be overtly naive. Politicians wake up in the morning lying about everything and go to bed doing the same. None of them can be trusted to do anything they say they will do, especially with elections less than four months hence, as is currently the condition.
With the latest media-driven barrage of corona-fear, politicians are looking to renew or at least revamp business shutdowns and limit the movements of people, effectively shrinking the economy a little bit more in the run-up to election day because it's all about getting elected, or, as is the case of most of the most heinous among them, re-elected.
Politicians have a high degree of control over the people in America, and it's probably worse in other countries. US politicians have been flexing their unconstitutional muscles for months now, but what's coming from them over the next few months could be even more startling, mind-bending, and autocratic.
As it is already, the economy is a basket case, and the miscreants in DC have plans to make the November elections the most confusing and confounding ever, with mail-in balloting in many states already in the works, ramping up the fear of close contact at polling places has taken on new and alarming anti-democratic dimensions.
With America on the brink of wholesale economic collapse, the rhetoric and spasmodic jerking will intensify next week as the nation's biggest banking interests report second quarter revenue and earnings. If there any doubt that the banks will show up with very distressing news in the coming week, one has to look past credit card use and consider the lost revenue from forbearances on everything from car loans to credit cards to home mortgages that the banks have tossed out to consumers in light of the coronavirus circus. Millions of Americans were not paying on loans, cards, mortgages and other bills over the past three months and that's got to show up on the balance sheets of Bank of America, JP Morgan Chase, Citigroup, and Wells Fargo.
The panic caused by bank numbers in the toilet should be magnificent. Under normal circumstances, the revealing of massive loan loss reserves alone would cause a stock market crash, but these are not normal circumstances. The Fed will be there to protect investors, supposedly, averting a downswing similar to what occurred in March.
Or will they? If the narrative is supposed to be frightening to everybody involved, wouldn't a market crash based on actual business lost by banks and a threat to the entire financial system be in order?
First clues have already been revealed with this week's trading. While the NASDAQ is having another banner week (up more than 3% through Thursday) stocks are marginally lower for the week, led by the Dow Jones Transportation Index. If Friday doesn't end positive for stocks, the carnage coming from bank earnings next week might prove to be a bit unsettling.
At the Close, Thursday, July 9, 2020:
Dow: 25,706.09, -361.19 (-1.39%)
NASDAQ: 10,547.75, +55.25 (+0.53%)
S&P 500: 3,152.05, -17.89 (-0.56%)
NYSE: 11,928.63, -157.76 (-1.31%)
Expressing discontent and lacking in funds are millions of US consumers, who cut their borrowing by $18 billion in May, according to the Federal Reserve, that bastion of freedom and fairness in all economic activity.
May marked the third consecutive month of reduced borrowing by consumers, coinciding with the outbreak of the coronavirus and the imposition of lockdowns and stay-at-home orders throughout the world and in most US states. After falling 4.5% in March borrowing cratered by 20.1% in April, the largest one-month percentage decline since 1945.
Credit card use fell $24.3 billion in May following April's record $58.2 billion collapse, a result of the purposeful downsizing of the US economy. With stores closed, businesses shut down and many without jobs, borrowing money to pay for mundane items was pretty much out of the question. Spending on vacations, dining out, just about any travel-related expense was off the board for most US consumers. Most people were forced to stay home or very close to it. Those with kids out of school were spending more time reacquainting themselves than luxuriating in the outside world.
On top of the virus-related issues comes the rationalization that many folks were simply shut out of credit card use. Banks closed or limited a massive number of credit card accounts during the corona-crisis, a trend that's more than likely to accelerate as layoffs and furloughs morph into permanent job losses.
The US economy is collapsing, and with it the currency. If credit continues to be slashed, the Fed is going to get mighty upset about it and probably demand that banks open the spigots to allow more lending to people who are broke or nearly bankrupt. Because of the CARES Act, which pumped some trillions of dollars into the US economy, the full effect of the corona-lockdowns and incredible unemployment have yet to be felt, but that's coming. Enhanced unemployment benefits via the act are due to run dry by the end of July. Unless congress agrees to put up another round of checks to Americans and extend enhanced unemployment, there's going to be some monstrous pain in the body politic.
Because of these projections, perhaps the image of who exactly wanted the economy to implode becomes a little clearer. It's one with the face of Nancy Pelosi, the torso of congressman Jerrold Nadler, the attitude of Mitch McConnell, overall a grotesque figure with a multiple of purposes, getting rid of President Trump chief among them.
To think that elected officials wouldn't lie about the virus, their political leanings, the state of the union, their personal fortunes is to be overtly naive. Politicians wake up in the morning lying about everything and go to bed doing the same. None of them can be trusted to do anything they say they will do, especially with elections less than four months hence, as is currently the condition.
With the latest media-driven barrage of corona-fear, politicians are looking to renew or at least revamp business shutdowns and limit the movements of people, effectively shrinking the economy a little bit more in the run-up to election day because it's all about getting elected, or, as is the case of most of the most heinous among them, re-elected.
Politicians have a high degree of control over the people in America, and it's probably worse in other countries. US politicians have been flexing their unconstitutional muscles for months now, but what's coming from them over the next few months could be even more startling, mind-bending, and autocratic.
As it is already, the economy is a basket case, and the miscreants in DC have plans to make the November elections the most confusing and confounding ever, with mail-in balloting in many states already in the works, ramping up the fear of close contact at polling places has taken on new and alarming anti-democratic dimensions.
With America on the brink of wholesale economic collapse, the rhetoric and spasmodic jerking will intensify next week as the nation's biggest banking interests report second quarter revenue and earnings. If there any doubt that the banks will show up with very distressing news in the coming week, one has to look past credit card use and consider the lost revenue from forbearances on everything from car loans to credit cards to home mortgages that the banks have tossed out to consumers in light of the coronavirus circus. Millions of Americans were not paying on loans, cards, mortgages and other bills over the past three months and that's got to show up on the balance sheets of Bank of America, JP Morgan Chase, Citigroup, and Wells Fargo.
The panic caused by bank numbers in the toilet should be magnificent. Under normal circumstances, the revealing of massive loan loss reserves alone would cause a stock market crash, but these are not normal circumstances. The Fed will be there to protect investors, supposedly, averting a downswing similar to what occurred in March.
Or will they? If the narrative is supposed to be frightening to everybody involved, wouldn't a market crash based on actual business lost by banks and a threat to the entire financial system be in order?
First clues have already been revealed with this week's trading. While the NASDAQ is having another banner week (up more than 3% through Thursday) stocks are marginally lower for the week, led by the Dow Jones Transportation Index. If Friday doesn't end positive for stocks, the carnage coming from bank earnings next week might prove to be a bit unsettling.
At the Close, Thursday, July 9, 2020:
Dow: 25,706.09, -361.19 (-1.39%)
NASDAQ: 10,547.75, +55.25 (+0.53%)
S&P 500: 3,152.05, -17.89 (-0.56%)
NYSE: 11,928.63, -157.76 (-1.31%)
Thursday, July 9, 2020
Rise of Gold and Silver Signaling the End of Fiat Currencies, Bad Government, Fake News
Lately, Money Daily has been intriguing readers with mentions of signal to noise ratio as a fitting analogy to stocks, currencies, and societies.
While there's no hard numbers to verify the contention that most of what's been happening on the stock markets and in the general news has been noise, there are actually a number of good reasons to believe that most of what's presented for public consumption is more hype than reality, thus, noise has triumphed over signal since the beginning of the pandemic at least, and probably even further back in time than that.
Paramount to the noise argument is the recent rally in stocks. While the world was gripped with fear and uncertainty over the coronavirus, the stock market sank and then quickly rebounded, erasing most of the losses incurred during the rapid decline of February and March. The level of indifference to reality was nowhere more pronounced than on the NASDAQ, which not only rebounded, but launched itself to all-time highs, all of it happening while many US states and countries were shuttered, flummoxed over the pandemic and at less than full operational capacity. The NASDAQ is one of a few prime examples of the noisy nature of our times.
In terms of currencies, nothing hits home as hard as the Fed's balance sheet, which has exploded from under four trill to over seven in a matter of months. Intent on smashing the business cycle, something they've managed to somewhat handle over the past decade, as a response to deteriorating financial conditions, the Federal Reserve embarked upon a path of insane resistance to reality, buying up all manner of assets, from high-grade bonds to junk to munis and ETFs, with assistance from the Treasury and its Exchange Stabilization Fund.
Most of the programs the Fed has been and is currently entertaining are nothing more than stop-gap measures, highlighted by currency creation out of thin air to an extreme level of irresponsibility. The Fed has managed to pervert and distort the global economy to a point at which it - thanks to the Cantillon Effect - continually rewards those at the top of the economic heap while adding distress to the lower rungs of society, exacerbating the wealth gap to a point that not only rivals that of the Robber Baron era of the late 19th and early 20th centuries, but has greatly exceeded it.
The Fed's machinations, near-zero interest rates, meandering mouthings on Modern Monetary Theory (MMT) (which is complete and utter trash in a classical economic sense), and continuing interventions into the formerly-free markets is about as noisy as it can get without fully drowning out the signal of reality, which, of course, is the intent. They, like all central banks in the global fiat era, push the falsity of paper money without intrinsic backing or value.
All major and minor currencies are based on nothing but faith in central bank authority. That condition - which has never before existed in the history of the world - eventually leads to ruination and it is proceeding apace.
On top of it all are the fakery of a pandemic which kills older, obese people with existing medical conditions to a degree that 95% of all deaths attributed to the disease are of this order, various ill-informed government responses, lockdowns, riots, looting, calls for social change, and scare-mongering led by a pompous media devoid of journalistic integrity. All of the media coddling, jawboning, and incessant warning is fake, completely and unequivocally. Nothing about the rising number of positive cases or the potential for serious complications from the virus affecting any more than a small consort of the general population is mind-numbingly true.
All of it is fake, false, a purposeful lie perpetuated by the mainstream media to put the entire planet under a trance and replace good government with tyranny and false dictates. It's a scam and it's nothing but noise, lots and lots of noise, significant of nothing meaningful.
At last, like the calvary charging into battle to save the day as in old Western movies, come gold and silver, real money for the past 5000 years. Despite decades of bad-mouthing, manipulation, and degradation by central bankers and financial media, the twin pillars of economic freedom are rising to the rescue of civilization, though for many, the time is too late.
Because gold and silver have been so universally shunned and banished to "ancient relic" status by the Keynesians of the day, most middle and lower class citizens will not be saved. Some reckon that 95% of the world's population has little to no gold or silver. Even though gold, in particular, has been kept on the balance sheets of central banks as a tier-one asset for time immemorial, these same central banks and their cohorts have repeatedly lied and cajoled the minions into believing that it is inconsequential.
Were that true, why then has gold risen dramatically over the past year, reaching all-time highs against all currencies and approaching an all-time high against the world's reserve currency, the dollar? It is because gold is money. Silver is money. All else is currency or derivatives of paper currencies.
Gold and silver are the real signal that will drown out the noise of phony markets, counterfeit currencies, bad governance, social division, and media overreach. They are saying that now is the time for change. That now is the time to end the madness and the lies and the corruption that is enslaving the people of the world.
There is little doubt that gold will exceed $1900 an ounce this year. It just broke through the $1800 barrier on Wednesday and there is nothing to stop its progress. In fact, central bank pandering and counterfeiting is fueling its growth. Silver, as usual, is tagging along, but will eventually become its own pillar of strength for the middle classes as it is more affordable and more easily transferrable than gold.
Gold and silver are sending a clear signal. Get out of fiat currencies and take up the mantle of real money. Anybody who does not heed this call will suffer consequences befitting of fools.
At the Close, Wednesday, July 8, 2020:
Dow: 26,067.28, +177.10 (+0.68%)
NASDAQ: 10,492.50, +148.61 (+1.44%)
S&P 500: 3,169.94, +24.62 (+0.78%)
NYSE: 12,086.39, +96.26 (+0.80%)
While there's no hard numbers to verify the contention that most of what's been happening on the stock markets and in the general news has been noise, there are actually a number of good reasons to believe that most of what's presented for public consumption is more hype than reality, thus, noise has triumphed over signal since the beginning of the pandemic at least, and probably even further back in time than that.
Paramount to the noise argument is the recent rally in stocks. While the world was gripped with fear and uncertainty over the coronavirus, the stock market sank and then quickly rebounded, erasing most of the losses incurred during the rapid decline of February and March. The level of indifference to reality was nowhere more pronounced than on the NASDAQ, which not only rebounded, but launched itself to all-time highs, all of it happening while many US states and countries were shuttered, flummoxed over the pandemic and at less than full operational capacity. The NASDAQ is one of a few prime examples of the noisy nature of our times.
In terms of currencies, nothing hits home as hard as the Fed's balance sheet, which has exploded from under four trill to over seven in a matter of months. Intent on smashing the business cycle, something they've managed to somewhat handle over the past decade, as a response to deteriorating financial conditions, the Federal Reserve embarked upon a path of insane resistance to reality, buying up all manner of assets, from high-grade bonds to junk to munis and ETFs, with assistance from the Treasury and its Exchange Stabilization Fund.
Most of the programs the Fed has been and is currently entertaining are nothing more than stop-gap measures, highlighted by currency creation out of thin air to an extreme level of irresponsibility. The Fed has managed to pervert and distort the global economy to a point at which it - thanks to the Cantillon Effect - continually rewards those at the top of the economic heap while adding distress to the lower rungs of society, exacerbating the wealth gap to a point that not only rivals that of the Robber Baron era of the late 19th and early 20th centuries, but has greatly exceeded it.
The Fed's machinations, near-zero interest rates, meandering mouthings on Modern Monetary Theory (MMT) (which is complete and utter trash in a classical economic sense), and continuing interventions into the formerly-free markets is about as noisy as it can get without fully drowning out the signal of reality, which, of course, is the intent. They, like all central banks in the global fiat era, push the falsity of paper money without intrinsic backing or value.
All major and minor currencies are based on nothing but faith in central bank authority. That condition - which has never before existed in the history of the world - eventually leads to ruination and it is proceeding apace.
On top of it all are the fakery of a pandemic which kills older, obese people with existing medical conditions to a degree that 95% of all deaths attributed to the disease are of this order, various ill-informed government responses, lockdowns, riots, looting, calls for social change, and scare-mongering led by a pompous media devoid of journalistic integrity. All of the media coddling, jawboning, and incessant warning is fake, completely and unequivocally. Nothing about the rising number of positive cases or the potential for serious complications from the virus affecting any more than a small consort of the general population is mind-numbingly true.
All of it is fake, false, a purposeful lie perpetuated by the mainstream media to put the entire planet under a trance and replace good government with tyranny and false dictates. It's a scam and it's nothing but noise, lots and lots of noise, significant of nothing meaningful.
At last, like the calvary charging into battle to save the day as in old Western movies, come gold and silver, real money for the past 5000 years. Despite decades of bad-mouthing, manipulation, and degradation by central bankers and financial media, the twin pillars of economic freedom are rising to the rescue of civilization, though for many, the time is too late.
Because gold and silver have been so universally shunned and banished to "ancient relic" status by the Keynesians of the day, most middle and lower class citizens will not be saved. Some reckon that 95% of the world's population has little to no gold or silver. Even though gold, in particular, has been kept on the balance sheets of central banks as a tier-one asset for time immemorial, these same central banks and their cohorts have repeatedly lied and cajoled the minions into believing that it is inconsequential.
Were that true, why then has gold risen dramatically over the past year, reaching all-time highs against all currencies and approaching an all-time high against the world's reserve currency, the dollar? It is because gold is money. Silver is money. All else is currency or derivatives of paper currencies.
Gold and silver are the real signal that will drown out the noise of phony markets, counterfeit currencies, bad governance, social division, and media overreach. They are saying that now is the time for change. That now is the time to end the madness and the lies and the corruption that is enslaving the people of the world.
There is little doubt that gold will exceed $1900 an ounce this year. It just broke through the $1800 barrier on Wednesday and there is nothing to stop its progress. In fact, central bank pandering and counterfeiting is fueling its growth. Silver, as usual, is tagging along, but will eventually become its own pillar of strength for the middle classes as it is more affordable and more easily transferrable than gold.
Gold and silver are sending a clear signal. Get out of fiat currencies and take up the mantle of real money. Anybody who does not heed this call will suffer consequences befitting of fools.
At the Close, Wednesday, July 8, 2020:
Dow: 26,067.28, +177.10 (+0.68%)
NASDAQ: 10,492.50, +148.61 (+1.44%)
S&P 500: 3,169.94, +24.62 (+0.78%)
NYSE: 12,086.39, +96.26 (+0.80%)
Wednesday, July 8, 2020
Did Paychex's Earnings Improve Upon the Signal:Noise Ratio for the General Economy and Stock Market?
Continuing Tuesday's commentary on Paychex as a proxy for the general economy and stock market:
Money Daily may have struck the nail firmly on the head with Tuesday's outlook on Paychex's (PAYX) fiscal fourth quarter (2Q) earnings report. While the company had a small beat, reporting net income of $220.7 million, or 61 cents a share, those figures were down from $230.4 million, or 64 cents a share, in the year-earlier period.
While it may not sound like much, the decline in both revenue and EPS may have shed some significant insight on the overall outlook for July and the third quarter. Paychex deals with millions of small businesses, many likely affected by the shutdowns in April, May, and June, though that data didn't really come through their statement, partly because their quarter included results through May 31 only, leaving June an open question.
There's a strong possibility that Paychex saw more erosion in their customer base in June and that was reflected in their guidance. The company is looking for adjusted EPS to fall six to 10 percent in their fiscal 2021, which actually began June 1.
This is actually significant, and was reflected in Tuesday's trade as the company reported prior to the opening bell. At the close, Paychex was 73.94, -3.84 (-4.94%). At that price, using the last four quarters' EPS of $2.99, the P/E ratio stands at 24.72, making Paychex an overvalued stock (but, which stocks aren't these days?).
Consider the falling revenue and earnings guidance to be an early warning. If the next four quarters come in with a 10% dip in EPS - a distinct possibility - that would put the P/E ratio at an alarming 27.22 (73.94/2.70). In anticipation, the selling was vigorous, with volume close to double the average.
As a proxy for the Main Street economy - because Paychex has so many small and mid-sized business customers - this is a solid sell signal. As earnings decline, so should the share price. Using an EPS of 2.70, figure fair value to call for a P/E around 15, which would put the stock at 40.50 per share, a decline of 45.23%, in line with the general market.
Thus, Paychex is offering a window into July and the third quarter. The stock could just glide along the normal flight path with the market, though the Fed's infinite QE message is beginning to wear thin, but, if Tuesday's five percent knock on Paychex is any kind of signal, the general market may be headed for a deep dive during earnings season, and that's going to heat up significantly beginning next week.
Traders and investors are properly looking to get out of the way of any oncoming steamroller. Paychex is providing a signal to the market, overwhelming the noise from the past two months. This is very likely a tradable event, however, Money Daily is not an investment advisor and has no position in Paychex, at this time. (see full disclaimer below)
Think about it. Who is willing to pay 24 times earnings for a company like Paychex, with a customer base that may be largely going out of business presently or in the near future? A small company with most of its employees laid off or furloughed has little need for a payroll service. With little to no revenue, a company would have diminished need for a tax service like Paychex. A company that closes its doors for good would only need Paychex to do the finalizing paperwork for submission to the IRS or state tax authorities which lays ahead. Such reporting and the lack of an ongoing customer relationship may be as long as a year into the future and not show up readily on Paychex's balance sheet. Keep that in mind. This could play out quickly or be drawn out over many months, but there appears to be a clear case that Paychex's business model may be breaking down as a result of the pandemic, lockdowns, and the obvious, current recession.
Because of the type of business Paychex operates and the unique characteristics of its customer base, there could be quite a bit of downside to their operation. Further, the company may be telling the market to brace for another round of selling, to commence shortly.
Disclaimer: Information disseminated on this site should not be construed as investment advice. Downtown Magazine, Money Daily and it's owners, affiliates and/or employees are not investment advisors and do not offer specific investment advice. All investments have risk. You should consult a professional investment advisor or stock broker or use your individual judgement when making investment decisions. By reading this site, you hold harmless Downtown Magazine, Money Daily, its owners, affiliates and employees from all liability.
At the Close, Tuesday, July 7, 2020:
Dow: 25,890.18, -396.85 (-1.51%)
NASDAQ: 10,343.89, -89.76 (-0.86%)
S&P 500: 3,145.32, -34.40 (-1.08%)
NYSE: 11,990.13, -169.87 (-1.40%)
Money Daily may have struck the nail firmly on the head with Tuesday's outlook on Paychex's (PAYX) fiscal fourth quarter (2Q) earnings report. While the company had a small beat, reporting net income of $220.7 million, or 61 cents a share, those figures were down from $230.4 million, or 64 cents a share, in the year-earlier period.
While it may not sound like much, the decline in both revenue and EPS may have shed some significant insight on the overall outlook for July and the third quarter. Paychex deals with millions of small businesses, many likely affected by the shutdowns in April, May, and June, though that data didn't really come through their statement, partly because their quarter included results through May 31 only, leaving June an open question.
There's a strong possibility that Paychex saw more erosion in their customer base in June and that was reflected in their guidance. The company is looking for adjusted EPS to fall six to 10 percent in their fiscal 2021, which actually began June 1.
This is actually significant, and was reflected in Tuesday's trade as the company reported prior to the opening bell. At the close, Paychex was 73.94, -3.84 (-4.94%). At that price, using the last four quarters' EPS of $2.99, the P/E ratio stands at 24.72, making Paychex an overvalued stock (but, which stocks aren't these days?).
Consider the falling revenue and earnings guidance to be an early warning. If the next four quarters come in with a 10% dip in EPS - a distinct possibility - that would put the P/E ratio at an alarming 27.22 (73.94/2.70). In anticipation, the selling was vigorous, with volume close to double the average.
As a proxy for the Main Street economy - because Paychex has so many small and mid-sized business customers - this is a solid sell signal. As earnings decline, so should the share price. Using an EPS of 2.70, figure fair value to call for a P/E around 15, which would put the stock at 40.50 per share, a decline of 45.23%, in line with the general market.
Thus, Paychex is offering a window into July and the third quarter. The stock could just glide along the normal flight path with the market, though the Fed's infinite QE message is beginning to wear thin, but, if Tuesday's five percent knock on Paychex is any kind of signal, the general market may be headed for a deep dive during earnings season, and that's going to heat up significantly beginning next week.
Traders and investors are properly looking to get out of the way of any oncoming steamroller. Paychex is providing a signal to the market, overwhelming the noise from the past two months. This is very likely a tradable event, however, Money Daily is not an investment advisor and has no position in Paychex, at this time. (see full disclaimer below)
Think about it. Who is willing to pay 24 times earnings for a company like Paychex, with a customer base that may be largely going out of business presently or in the near future? A small company with most of its employees laid off or furloughed has little need for a payroll service. With little to no revenue, a company would have diminished need for a tax service like Paychex. A company that closes its doors for good would only need Paychex to do the finalizing paperwork for submission to the IRS or state tax authorities which lays ahead. Such reporting and the lack of an ongoing customer relationship may be as long as a year into the future and not show up readily on Paychex's balance sheet. Keep that in mind. This could play out quickly or be drawn out over many months, but there appears to be a clear case that Paychex's business model may be breaking down as a result of the pandemic, lockdowns, and the obvious, current recession.
Because of the type of business Paychex operates and the unique characteristics of its customer base, there could be quite a bit of downside to their operation. Further, the company may be telling the market to brace for another round of selling, to commence shortly.
Disclaimer: Information disseminated on this site should not be construed as investment advice. Downtown Magazine, Money Daily and it's owners, affiliates and/or employees are not investment advisors and do not offer specific investment advice. All investments have risk. You should consult a professional investment advisor or stock broker or use your individual judgement when making investment decisions. By reading this site, you hold harmless Downtown Magazine, Money Daily, its owners, affiliates and employees from all liability.
At the Close, Tuesday, July 7, 2020:
Dow: 25,890.18, -396.85 (-1.51%)
NASDAQ: 10,343.89, -89.76 (-0.86%)
S&P 500: 3,145.32, -34.40 (-1.08%)
NYSE: 11,990.13, -169.87 (-1.40%)
Tuesday, July 7, 2020
What Paychex Earnings Report Tells About The Pandemic, Lockdowns, the Future
With the second quarter closing out last week, investors look ahead to what promises to be a challenging earnings season, as April, May, and June were marked by the impact of the coronavirus and resultant government responses to containing its spread.
Stay-at-home orders, forced business shutdowns, and other social distancing recommendations during the period had an indelible impact on business globally. Especially hard-hit were small to mid-sized companies many of which contract with Paychex (PAYX) for their tax accounting and payroll administration.
Paychex (PAYX) announced its fiscal fourth quarter earnings prior to the opening bell on Tuesday, reporting net income of $220.7 million, or 61 cents a share, in their fiscal quarter ended May 31, down from $230.4 million, or 64 cents a share, in the year-earlier period.
The company was expected to report quarterly earnings at $0.60 per share, so it is technically a beat in Wall Street parlance, but the company has given some reason to pause, considering this statement by Chief Executive Martin Mucci:
The company ended the quarter with $1.0 billion in cash and $801.9 million in debt and pays an annual dividend of $2.48 (3.19% yield). Along with ongoing operations their outflows are tremendous and the accumulated debt has been growing over the past two years. While their cash to debt ratio is still positive, they may be headed for zombie territory if the companies they do business with fail to remain going concerns.
Paychex repurchased $350 million of its common stock from July 2016 through May 31, 2019, and more than $500 million prior to that. A year ago, the company announced a share repurchase program of another $400 million.
After reaching a high of 90.23 on February 20, the price of Paychex shares was cut nearly in half, hitting a low of 50.39 on March 23, as panic over the coronavirus hit Wall Street hard. Since then, share price improved to a closing price of 77.78 on Monday, July 6, though after the announcement, shares were sliding in pre-market trading.
This particular earnings report does offer some insight, even though it's backdated to May 31. Some of their business may have taken a hit in June and there may be more going forward, as there's a lag time between companies going bust and formally ending their business relationships. Paychex's fortunes may not be so rosy going forward. The company sees earnings and revenue falling in 2021, a gloomy picture for a perennial high-flier and another negative for the economy. As far as stocks - and, in particular, Paychex - are concerned, their performance will largely be the function of investor sentiment and the level of largesse bestowed upon Wall Street by the Fed in the next round of emergency financing.
Here's another somewhat frightening vision of the future: The only restaurants will be chains like Applebee's, Taco Bell, and McDonald's.
It just could go that way since most mom-and-pop individually-owned restaurants were forced to shut down during the COVID crisis and most of them don't have the financial resources to weather a shutdown for a month or longer. It's already been estimated that more than half the small, local one-location restaurants in America will be permanently out of business by September, if not sooner.
Those that are fortunate enough to stay in business will likely be burdened by loans they were forced to take on due to the government lockdowns. And, as the above-linked article suggests, the chain reaction to other businesses servicing restaurants may be even more severe, affecting delivery services, linen companies, pest-control firms, farmers, and even the local and state taxing authorities, who will take an enormous hit to revenue when hundreds or thousands of sales tax and property tax producers are no longer around.
Under this scenario, companies like Paychex, which cater to small businesses, could see dramatic declines in revenue and profits.
Elsewhere, Argentina's government representatives have apparently sweetened the deal for bond-holders in the ongoing discussions over some $65 billion in debt on which the country recently defaulted. The deadline for a formal agreement has been pushed back (again) to August 4.
Stay liquid.
At the Close, Monday, July 6, 2020:
Dow: 26,287.03, +459.67 (+1.78%)
NASDAQ: 10,433.65, +226.02 (+2.21%)
S&P 500: 3,179.72, +49.71 (+1.59%)
NYSE: 12,160.01, +168.49 (+1.41%)
Stay-at-home orders, forced business shutdowns, and other social distancing recommendations during the period had an indelible impact on business globally. Especially hard-hit were small to mid-sized companies many of which contract with Paychex (PAYX) for their tax accounting and payroll administration.
Paychex (PAYX) announced its fiscal fourth quarter earnings prior to the opening bell on Tuesday, reporting net income of $220.7 million, or 61 cents a share, in their fiscal quarter ended May 31, down from $230.4 million, or 64 cents a share, in the year-earlier period.
The company was expected to report quarterly earnings at $0.60 per share, so it is technically a beat in Wall Street parlance, but the company has given some reason to pause, considering this statement by Chief Executive Martin Mucci:
"We currently anticipate that cash, restricted cash, and total corporate investments as of May 31, 2020, along with projected operating cash flows and available short-term financing, will support our business operations, capital purchases, share repurchases, and dividend payments for the foreseeable future."
The company ended the quarter with $1.0 billion in cash and $801.9 million in debt and pays an annual dividend of $2.48 (3.19% yield). Along with ongoing operations their outflows are tremendous and the accumulated debt has been growing over the past two years. While their cash to debt ratio is still positive, they may be headed for zombie territory if the companies they do business with fail to remain going concerns.
Paychex repurchased $350 million of its common stock from July 2016 through May 31, 2019, and more than $500 million prior to that. A year ago, the company announced a share repurchase program of another $400 million.
After reaching a high of 90.23 on February 20, the price of Paychex shares was cut nearly in half, hitting a low of 50.39 on March 23, as panic over the coronavirus hit Wall Street hard. Since then, share price improved to a closing price of 77.78 on Monday, July 6, though after the announcement, shares were sliding in pre-market trading.
This particular earnings report does offer some insight, even though it's backdated to May 31. Some of their business may have taken a hit in June and there may be more going forward, as there's a lag time between companies going bust and formally ending their business relationships. Paychex's fortunes may not be so rosy going forward. The company sees earnings and revenue falling in 2021, a gloomy picture for a perennial high-flier and another negative for the economy. As far as stocks - and, in particular, Paychex - are concerned, their performance will largely be the function of investor sentiment and the level of largesse bestowed upon Wall Street by the Fed in the next round of emergency financing.
Here's another somewhat frightening vision of the future: The only restaurants will be chains like Applebee's, Taco Bell, and McDonald's.
It just could go that way since most mom-and-pop individually-owned restaurants were forced to shut down during the COVID crisis and most of them don't have the financial resources to weather a shutdown for a month or longer. It's already been estimated that more than half the small, local one-location restaurants in America will be permanently out of business by September, if not sooner.
Those that are fortunate enough to stay in business will likely be burdened by loans they were forced to take on due to the government lockdowns. And, as the above-linked article suggests, the chain reaction to other businesses servicing restaurants may be even more severe, affecting delivery services, linen companies, pest-control firms, farmers, and even the local and state taxing authorities, who will take an enormous hit to revenue when hundreds or thousands of sales tax and property tax producers are no longer around.
Under this scenario, companies like Paychex, which cater to small businesses, could see dramatic declines in revenue and profits.
Elsewhere, Argentina's government representatives have apparently sweetened the deal for bond-holders in the ongoing discussions over some $65 billion in debt on which the country recently defaulted. The deadline for a formal agreement has been pushed back (again) to August 4.
Stay liquid.
At the Close, Monday, July 6, 2020:
Dow: 26,287.03, +459.67 (+1.78%)
NASDAQ: 10,433.65, +226.02 (+2.21%)
S&P 500: 3,179.72, +49.71 (+1.59%)
NYSE: 12,160.01, +168.49 (+1.41%)
Sunday, July 5, 2020
WEEKEND WRAP: Second Quarter Ends on High Note, Though Systemic Banking Collapse Is Still Feared
Stocks had a solid week, albeit shorted by a day due to Friday's national holiday, though the recent rally has stalled out over the past month. Despite the sharp rally in equities, prices remain somewhat subdued when put into an historical context.
For instance, since peaking in January of 2018 (13,657.02), the NYSE Composite, the broadest measure of equity valuation, is lower by 12.20 percent, though it did make a new high January 2020 (14,183.26).
The Dow Jones Industrial Average of 30 blue chip stocks followed a similar pattern, peaking at 26,616.71 in January, 2018 - and rallying significantly since then to a high of 29,551.42 - the current price of 25,827.36 shows just how much of a toll the coronavirus and subsequent governmental actions have taken on the industrials.
The NASDAQ and S&P 500 have fared better. Close to its all-time high, the NASDAQ closed out the week at 10,207.63, a massive 25.50% gain from the August 2018 high of 8133.30.
The S&P finished the week at 3,130.01, a measly rise of 6.43% when it reached a then-all-time-high of 2940.91 in September of 2018.
Obviously, being in the riskiest, most prone to speculation stocks has been a winning formula.
Can the winning on the NASDAQ continue without worry of second slump this year? It was less than four months ago when all markets were battered, the NASDAQ dropping to a low of 6641.32 (March 23). Investors with the most extreme risk profiles made fortunes. A gain of 53.70 percent in a span of just three months was the reward for those lucky enough to buy exactly at the bottom and sell right at the top (10221.05) just over a week ago.
With the close of the second quarter, it's time to look ahead, with a focus on the major banking interests in the United States. Bank stocks have generally been pretty well beaten down since the crash in March and most have not recovered to any great extent.
Bank of America (BAC) cratered to 18.08, and closed out this week at just 23.29, not much of a rebound. JP Morgan Chase (JPM) bottomed at 79.03 and closed Thursday at 92.66. Citigroup (C) dipped as low as 35.39. Thursday's close was 50.55. Wells Fargo (WFC), possibly the most vulnerable of the big banking interests, fell as low as 22.53 on May 15, closing out this week at 25.34.
Overarching the activity of the Fed-infused institutions are some fears from the extent of forbearance on all manner of loans, from credit card debt to car loans to mortgages. Many individuals have not made payments on loan balances since April or May and the dearth of revenue has to be taking its toll on the banking balance sheets.
Beyond the revenue decline and potential that people and companies in forbearance (which only delays payments and does not forgive them), the banks have to manage millions of loans (secured and unsecured), some of which will surely end in default, the banks eventually forced to write them down. Thus, it's a safe assumption that the banks will be reporting major loan loss reserves when they report in less than two weeks.
Atop these huge issues is the risk taken in Collateralized Loan Obligations. The banks are out on a very shaky limb there.
How bad is the CLO market? Depends on who you ask. Banks will tell you that they only invest in AAA tranches of CLOs, so their risk is minimized. Companies that are on the receiving end of loans and are placed into tranches - from AAA all the way down to junk, CCC, CC C, C- - give an entirely different perspective.
It cannot be understated that CLOs consist primarily of loans made to companies which have exhausted all other forms of borrowing. They are undeniably the worst credit risks.
There are signs that the CLO market is too big, too unregulated, and risks collapse as oil companies, under pressure from falling crude prices, and retailers, shutting down in droves due to the coronavirus and lockdown edicts in most US states, are leading the lower tranches into default.
As the credit market unwinds (this all takes time... months, years) banks will be under pressure to increase their loan loss reserves, as they showed in first quarter financial reports. Loan loss reserves are likely to be magnitudes higher when second quarter results for the biggest banks are turned out in a few weeks (all the majors, BAC, JPM, GS, MS, WFC, C, from July 13 - July 17).
Another threat to big banks comes from the recent spike in COVID-19 cases in Texas, Florida, California, Arizona, and Georgia.
Keep a close eye on banks this earnings season and beyond. The risk of systemic collapse is growing by the day. If the coronavirus scare increases over the next few months, banking collapse would not be such an unfathomable outcome, no matter how much the Fed manages to prop up the major instituations.
Crude oil, that engine of progress and the grease of economies, continues to bump up against the $40/barrel mark for WTI crude. Reaching a high of $40.72 on June 22nd, WTI approached that apex, cresting at $40.65 on Thursday before settling down to $40.32 on Friday.
Investors in precious metals were witness to one heck of a week as silver blasted through $18.00 a troy ounce hitting a high of $18.40, and gold rocked close to $1800 ($1790), though both were tamped down on futures markets as the week progressed. Gold finished up at $1774.40. Silver closed at $18.02 on Friday, July 2nd.
While the futures (paper) markets continue attempts to suppress price advances in precious metals, the physical market continues to spin higher with no abatement in the size of premiums charged by dealers and acceptable to savers. The most current prices for selected items on eBay (as we have been now tracking for three months) are presented below (shipping, often free, included):
Item: Low / High / Average / Median
1 oz silver coin: 25.95 / 31.95 / 29.01 / 28.99
1 oz silver bar: 24.45 / 33.00 / 29.00 / 29.45
1 oz gold coin: 1,853.82 / 1,976.95 / 1,897.92 / 1,892.50
1 oz gold bar: 1,853.57 / 1,941.42 / 1,869.76 / 1,861.50
Bonds rallied moderately over the four-day week, but only on the long end. Yield on the 10-year note went from 0.64% on the 26th of June to 0.68% on July 2. Over the same period, the 30-year yield advanced from 1.37% to 1.43%. The entire complex steepened from 125 basis points to 130, not a significant move, though the curve is shaped considerably differently than six months ago, and quite a bit steeper. On January 2nd of this year, 1-month bills yielded 1.53%, a massive change from Thursday's 0.13%, and the 30-year bond yielded 2.33%, a range of merely 80 basis points or 0.8% from trough to peak. That's flat.
The current composition of the treasury yield curve can be considered better aligned toward investment, though not by general banking standards. Taken into context, the curve, on July 1, 1994 (a much better period from an economic standpoint) was steep and healthy, with the range from 3-month (4.32%) to 30-year (7.62%) a stunning 330 basis points. The 10-year note was yielding 7.34% at the time. On can only imagine the wreckage that would be brought about today with those kinds of yields.
While savers would be adequately rewarded for frugal habits, corporations and governments would be smashed into oblivion with massively higher debt burdens. This comparison illustrates just how far afield the Fed has gone to preserve fractional reserve lending and the dramatic slowdown in the velocity of money. Considering the current economic climate, it is difficult, if not impossible, to imagine interest rates ever returning to a healthy or normal condition.
The Fed has created money out of thin air in the trillions of dollars and painted themselves into a corner of insanity that ultimately ends with the destruction of capital and currency on a cataclysmic scale.
What's not being reported by American mainstream media is the extent of flooding in China and India caused by recent heavy rains at what is just the beginning of the monsoon season.
This is a story which bears attention. the loss of lives due to flooding and potentialities for malnutrition and starvation due to crop loss - especially rice and rapeseed - is alarming.
On that sour note, this weekend is a wrap.
At the Close, Thursday, July 2, 2020:
Dow: 25,827.36, +92.39 (+0.36%)
NASDAQ: 10,207.63, +53.00 (+0.52%)
S&P 500: 3,130.01, +14.15 (+0.45%)
NYSE : 11,991.52, +89.97 (+0.76%)
For the Week:
Dow: +811.81 (+3.25%)
NASDAQ: +450.41 (+4.62%)
S&P 500: +120.96 (+4.02%)
NYSE: +387.10 (+3.34%)
For instance, since peaking in January of 2018 (13,657.02), the NYSE Composite, the broadest measure of equity valuation, is lower by 12.20 percent, though it did make a new high January 2020 (14,183.26).
The Dow Jones Industrial Average of 30 blue chip stocks followed a similar pattern, peaking at 26,616.71 in January, 2018 - and rallying significantly since then to a high of 29,551.42 - the current price of 25,827.36 shows just how much of a toll the coronavirus and subsequent governmental actions have taken on the industrials.
The NASDAQ and S&P 500 have fared better. Close to its all-time high, the NASDAQ closed out the week at 10,207.63, a massive 25.50% gain from the August 2018 high of 8133.30.
The S&P finished the week at 3,130.01, a measly rise of 6.43% when it reached a then-all-time-high of 2940.91 in September of 2018.
Obviously, being in the riskiest, most prone to speculation stocks has been a winning formula.
Can the winning on the NASDAQ continue without worry of second slump this year? It was less than four months ago when all markets were battered, the NASDAQ dropping to a low of 6641.32 (March 23). Investors with the most extreme risk profiles made fortunes. A gain of 53.70 percent in a span of just three months was the reward for those lucky enough to buy exactly at the bottom and sell right at the top (10221.05) just over a week ago.
With the close of the second quarter, it's time to look ahead, with a focus on the major banking interests in the United States. Bank stocks have generally been pretty well beaten down since the crash in March and most have not recovered to any great extent.
Bank of America (BAC) cratered to 18.08, and closed out this week at just 23.29, not much of a rebound. JP Morgan Chase (JPM) bottomed at 79.03 and closed Thursday at 92.66. Citigroup (C) dipped as low as 35.39. Thursday's close was 50.55. Wells Fargo (WFC), possibly the most vulnerable of the big banking interests, fell as low as 22.53 on May 15, closing out this week at 25.34.
Overarching the activity of the Fed-infused institutions are some fears from the extent of forbearance on all manner of loans, from credit card debt to car loans to mortgages. Many individuals have not made payments on loan balances since April or May and the dearth of revenue has to be taking its toll on the banking balance sheets.
Beyond the revenue decline and potential that people and companies in forbearance (which only delays payments and does not forgive them), the banks have to manage millions of loans (secured and unsecured), some of which will surely end in default, the banks eventually forced to write them down. Thus, it's a safe assumption that the banks will be reporting major loan loss reserves when they report in less than two weeks.
Atop these huge issues is the risk taken in Collateralized Loan Obligations. The banks are out on a very shaky limb there.
How bad is the CLO market? Depends on who you ask. Banks will tell you that they only invest in AAA tranches of CLOs, so their risk is minimized. Companies that are on the receiving end of loans and are placed into tranches - from AAA all the way down to junk, CCC, CC C, C- - give an entirely different perspective.
It cannot be understated that CLOs consist primarily of loans made to companies which have exhausted all other forms of borrowing. They are undeniably the worst credit risks.
There are signs that the CLO market is too big, too unregulated, and risks collapse as oil companies, under pressure from falling crude prices, and retailers, shutting down in droves due to the coronavirus and lockdown edicts in most US states, are leading the lower tranches into default.
As the credit market unwinds (this all takes time... months, years) banks will be under pressure to increase their loan loss reserves, as they showed in first quarter financial reports. Loan loss reserves are likely to be magnitudes higher when second quarter results for the biggest banks are turned out in a few weeks (all the majors, BAC, JPM, GS, MS, WFC, C, from July 13 - July 17).
Another threat to big banks comes from the recent spike in COVID-19 cases in Texas, Florida, California, Arizona, and Georgia.
Bank of America Corp., with $618 billion in deposits across those five states, as per 2019 data; Wells Fargo & Co., with $467 billion; JPMorgan Chase & Co., with $420 billion, and Truist Financial Corp., with $140 billion are the biggest lenders at risk.
Keep a close eye on banks this earnings season and beyond. The risk of systemic collapse is growing by the day. If the coronavirus scare increases over the next few months, banking collapse would not be such an unfathomable outcome, no matter how much the Fed manages to prop up the major instituations.
Crude oil, that engine of progress and the grease of economies, continues to bump up against the $40/barrel mark for WTI crude. Reaching a high of $40.72 on June 22nd, WTI approached that apex, cresting at $40.65 on Thursday before settling down to $40.32 on Friday.
Investors in precious metals were witness to one heck of a week as silver blasted through $18.00 a troy ounce hitting a high of $18.40, and gold rocked close to $1800 ($1790), though both were tamped down on futures markets as the week progressed. Gold finished up at $1774.40. Silver closed at $18.02 on Friday, July 2nd.
While the futures (paper) markets continue attempts to suppress price advances in precious metals, the physical market continues to spin higher with no abatement in the size of premiums charged by dealers and acceptable to savers. The most current prices for selected items on eBay (as we have been now tracking for three months) are presented below (shipping, often free, included):
Item: Low / High / Average / Median
1 oz silver coin: 25.95 / 31.95 / 29.01 / 28.99
1 oz silver bar: 24.45 / 33.00 / 29.00 / 29.45
1 oz gold coin: 1,853.82 / 1,976.95 / 1,897.92 / 1,892.50
1 oz gold bar: 1,853.57 / 1,941.42 / 1,869.76 / 1,861.50
Bonds rallied moderately over the four-day week, but only on the long end. Yield on the 10-year note went from 0.64% on the 26th of June to 0.68% on July 2. Over the same period, the 30-year yield advanced from 1.37% to 1.43%. The entire complex steepened from 125 basis points to 130, not a significant move, though the curve is shaped considerably differently than six months ago, and quite a bit steeper. On January 2nd of this year, 1-month bills yielded 1.53%, a massive change from Thursday's 0.13%, and the 30-year bond yielded 2.33%, a range of merely 80 basis points or 0.8% from trough to peak. That's flat.
The current composition of the treasury yield curve can be considered better aligned toward investment, though not by general banking standards. Taken into context, the curve, on July 1, 1994 (a much better period from an economic standpoint) was steep and healthy, with the range from 3-month (4.32%) to 30-year (7.62%) a stunning 330 basis points. The 10-year note was yielding 7.34% at the time. On can only imagine the wreckage that would be brought about today with those kinds of yields.
While savers would be adequately rewarded for frugal habits, corporations and governments would be smashed into oblivion with massively higher debt burdens. This comparison illustrates just how far afield the Fed has gone to preserve fractional reserve lending and the dramatic slowdown in the velocity of money. Considering the current economic climate, it is difficult, if not impossible, to imagine interest rates ever returning to a healthy or normal condition.
The Fed has created money out of thin air in the trillions of dollars and painted themselves into a corner of insanity that ultimately ends with the destruction of capital and currency on a cataclysmic scale.
What's not being reported by American mainstream media is the extent of flooding in China and India caused by recent heavy rains at what is just the beginning of the monsoon season.
This is a story which bears attention. the loss of lives due to flooding and potentialities for malnutrition and starvation due to crop loss - especially rice and rapeseed - is alarming.
On that sour note, this weekend is a wrap.
At the Close, Thursday, July 2, 2020:
Dow: 25,827.36, +92.39 (+0.36%)
NASDAQ: 10,207.63, +53.00 (+0.52%)
S&P 500: 3,130.01, +14.15 (+0.45%)
NYSE : 11,991.52, +89.97 (+0.76%)
For the Week:
Dow: +811.81 (+3.25%)
NASDAQ: +450.41 (+4.62%)
S&P 500: +120.96 (+4.02%)
NYSE: +387.10 (+3.34%)
Thursday, July 2, 2020
It's Time to Say Good Bye to China
Nearly 50 years ago, then-president Richard M. Nixon opened the door to trade and normalized relations with China.
The exact date was February 21, 1972. Months later, on November 7, 1972, Nixon was re-elected in a landslide victory over Senator George McGovern of South Dakota, winning 60.7 percent of the popular vote and 520 electoral votes, to McGovern’s 37.5 percent and 17, respectively.
On August 8, 1974, Nixon left office as the House of Representatives was preparing to launch an impeachment inquiry for his attempt to cover up and participation in the Watergate scandal.
Nixon's crime in Watergate was heinous enough. Perhaps, revisiting history from our perspective today, he should have been impeached for his China policy. It opened the door for American manufacturers to relocate facilities to the Asian nation, costing millions of Americans their jobs and setting in motion decades of trade imbalances and a long, slow decline of American culture.
It could also be alleged that Nixon's worst crime was his "temporary" closing of the gold window on August 15, 1971, effectively ending the Bretton Woods era. Taken together with his China policy, Nixon set in motion the wreckage of a prosperous middle class in America.
while it's easy to scapegoat Mr. Nixon, it should be pointed out that his policies were mostly not of his making, but those of his advisors and cabinet members, particularly Secretary of State Henry Kissinger, advance man Dewey Clower, founder of the notorious February Group, speechwriter Pat Buchanan, and Donald Rumsfeld, who served as counsellor to the president (1969–73), the United States Permanent Representative to NATO (1973–74), and White House Chief of Staff (1974–75), among others such as George Romney, George Schultz, John Connally, Elliot Richardson, but that's a deep state story for another day.
As of 2019, over $560 billion worth of products come from China. Everything from electric blankets to video game consoles, from cooking appliances to baby carriages are made almost exclusively in China. Proctor & Gamble estimates that Chinese materials impact 17,600 different finished products.
Decades of cheap, sub-standard manufactured products from China have eroded the quality of life in America. dealing with the communists allowed the propagation of Wal-Marts across the country, wiping out hundreds of thousands, if not millions, of small businesses that dotted the business landscape of both urban and rural America. Our economy is now almost fully dependent on imports from China and spending by consumers.
Corporations don't make much of anything in America any more. The mainstream media, flush with scary stories about COVID-19, the second wave, lockdowns, protesting in the streets, and the cultural revolution of Black Lives Matter and ANTIFA, will almost certainly have a field day if trade relations with China sour, which they already have, though they're too busy with all the other nonsense to notice.
American dissatisfaction with China is reaching catastrophic proportions. According to a polls conducted by the Gallup organization, 67 percent of Americans have a negative view of China. 87 and 89 percent of those polled view China's military and economic strengths, respectively, as critical or important threats to America. 62 percent believe China's trade policies toward the US are unfair, and 86 percent are either somewhat concerned or very concerned about China's trade policies. And these polls were taken before the coronavirus, of which 77% of people polled by Harris believe originated in China [PDF], spread disease and death around the world.
Aside from the lying, spying, stealing of state secrets, knock offs and pirating of American products, pet food that kills dogs and cats, substandard plywood, concrete and other building materials like nails that bend on impact and screws that break in half, forays into the South China Sea and Africa, aggressive attitude toward Hong Kong and Taiwan, defective coffee makers, blenders and a slew of household and consumer products, China is just fine as a trading partner.
The United States should, instead of appeasing them on trade as many former presidents have, take President Trump's approach to the extreme and just sever relations with them altogether. While such a policy would likely result in many empty shelves in WalMart and Target stores, it might just be enough of a spark to ignite a fire under the dormant manufacturing base in the United States of America and create millions of new jobs in a restructured economy.
The world has been ravaged by a Chinese scourge for nearly 50 years. It's time to turn the tables on the Communists and banish them rather than bless them and promote them, as the BLM and ANTIFA protesters do.
Markets will be closed on Friday, in observance of Independence Day. Enjoy the holiday by buying American-made goods, if you can find any.
At the Close, Wednesday, July 1, 2020:
Dow: 25,734.97; -77.91 (-0.30%)
NASDAQ: 10,154.63, +95.86 (+0.95%)
S&P 500: 3,115.86, +15.57 (+0.50%)
NYSE: 11,901.55, +7.77 (+0.07%)
The exact date was February 21, 1972. Months later, on November 7, 1972, Nixon was re-elected in a landslide victory over Senator George McGovern of South Dakota, winning 60.7 percent of the popular vote and 520 electoral votes, to McGovern’s 37.5 percent and 17, respectively.
On August 8, 1974, Nixon left office as the House of Representatives was preparing to launch an impeachment inquiry for his attempt to cover up and participation in the Watergate scandal.
Nixon's crime in Watergate was heinous enough. Perhaps, revisiting history from our perspective today, he should have been impeached for his China policy. It opened the door for American manufacturers to relocate facilities to the Asian nation, costing millions of Americans their jobs and setting in motion decades of trade imbalances and a long, slow decline of American culture.
It could also be alleged that Nixon's worst crime was his "temporary" closing of the gold window on August 15, 1971, effectively ending the Bretton Woods era. Taken together with his China policy, Nixon set in motion the wreckage of a prosperous middle class in America.
while it's easy to scapegoat Mr. Nixon, it should be pointed out that his policies were mostly not of his making, but those of his advisors and cabinet members, particularly Secretary of State Henry Kissinger, advance man Dewey Clower, founder of the notorious February Group, speechwriter Pat Buchanan, and Donald Rumsfeld, who served as counsellor to the president (1969–73), the United States Permanent Representative to NATO (1973–74), and White House Chief of Staff (1974–75), among others such as George Romney, George Schultz, John Connally, Elliot Richardson, but that's a deep state story for another day.
As of 2019, over $560 billion worth of products come from China. Everything from electric blankets to video game consoles, from cooking appliances to baby carriages are made almost exclusively in China. Proctor & Gamble estimates that Chinese materials impact 17,600 different finished products.
Decades of cheap, sub-standard manufactured products from China have eroded the quality of life in America. dealing with the communists allowed the propagation of Wal-Marts across the country, wiping out hundreds of thousands, if not millions, of small businesses that dotted the business landscape of both urban and rural America. Our economy is now almost fully dependent on imports from China and spending by consumers.
Corporations don't make much of anything in America any more. The mainstream media, flush with scary stories about COVID-19, the second wave, lockdowns, protesting in the streets, and the cultural revolution of Black Lives Matter and ANTIFA, will almost certainly have a field day if trade relations with China sour, which they already have, though they're too busy with all the other nonsense to notice.
American dissatisfaction with China is reaching catastrophic proportions. According to a polls conducted by the Gallup organization, 67 percent of Americans have a negative view of China. 87 and 89 percent of those polled view China's military and economic strengths, respectively, as critical or important threats to America. 62 percent believe China's trade policies toward the US are unfair, and 86 percent are either somewhat concerned or very concerned about China's trade policies. And these polls were taken before the coronavirus, of which 77% of people polled by Harris believe originated in China [PDF], spread disease and death around the world.
Aside from the lying, spying, stealing of state secrets, knock offs and pirating of American products, pet food that kills dogs and cats, substandard plywood, concrete and other building materials like nails that bend on impact and screws that break in half, forays into the South China Sea and Africa, aggressive attitude toward Hong Kong and Taiwan, defective coffee makers, blenders and a slew of household and consumer products, China is just fine as a trading partner.
The United States should, instead of appeasing them on trade as many former presidents have, take President Trump's approach to the extreme and just sever relations with them altogether. While such a policy would likely result in many empty shelves in WalMart and Target stores, it might just be enough of a spark to ignite a fire under the dormant manufacturing base in the United States of America and create millions of new jobs in a restructured economy.
The world has been ravaged by a Chinese scourge for nearly 50 years. It's time to turn the tables on the Communists and banish them rather than bless them and promote them, as the BLM and ANTIFA protesters do.
Markets will be closed on Friday, in observance of Independence Day. Enjoy the holiday by buying American-made goods, if you can find any.
At the Close, Wednesday, July 1, 2020:
Dow: 25,734.97; -77.91 (-0.30%)
NASDAQ: 10,154.63, +95.86 (+0.95%)
S&P 500: 3,115.86, +15.57 (+0.50%)
NYSE: 11,901.55, +7.77 (+0.07%)
Subscribe to:
Posts (Atom)
Posts
