Stocks Churn Higher; Currency Backed by Gold or Silver Is Possible

Churning continued on Wednesday, wiping up the losses from Tuesday. The up-and-down action in stocks is likely to continue for the near term, and quite possibly the longer term, as Fed officials and their global central banking brethren have severe solvency problems.

There is no abatement in the mammoth bond rally which has sent sovereign debt into negative yields in much of the developed world. The US has thus far escaped negativity, though the 10-year-note continues to dive, heading below a yield of 1.46% on Wednesday. The slow, grinding erosion of yield in bonds is a symptom of dying currencies. Negative interest yields will be discovered to be both symptoms AND causes of death. The Japanese yen is likely to die first, then the euro, followed by capitulation of the US dollar.

Evisceration of capital will be complete, widespread, and unrelenting as central banks cannot contain the over-saturation of debt, of individuals, companies, and governments. A new currency will be needed to replace the failed ones, and it's likely to be global and crypto.

Any country with the nerve to create and back its own currency with anything tangible will attract both the ire of central bankers (with attendant name-calling and possible military intervention) and the interest of investors seeking not just yield, but safety and security.

With global currencies facing serious headwinds, there has been talk of gold or silver-backed currencies from Greece to Mexico to Canada. Naysayers contend that there isn't enough of the precious metals to suitably service global commerce, though that argument depends entirely upon control of gold and silver prices. If the central banking cartel were to lose control of pricing via their deviate trading in the futures markets, the metals would explode exponentially. Gold might reach $5000 or $10,000 per ounce, silver would be priced in hundreds of dollars.

The solution is partial backing with precious metals. Sovereign governments issuing national currencies could readily assign a percentage of such to be backed by either gold or silver, or both, with the backing in a percentage of anywhere from 10% to 40% of the buck, loonie, yen, what have you.

Thus, the metals prices would not necessarily skyrocket beyond reason and debt would no longer be part of the formula for currency. While such a scenario may be a financial fantasy for now, history favors such, though the future, shaped by the current regime, would have to be radically different from the present state.

At the Close, Wednesday, September 4, 2019:
Dow Jones Industrial Average: 26,355.47, +237.45 (+0.91%)
NASDAQ: 7,976.88, +102.72 (+1.30%)
S&P 500: 2,937.78, +31.51 (+1.08%)
NYSE Composite: 12,796.32, +132.92 (+1.05%)

Stocks Slide As Economic Realities Continue to Worsen; Gold, Silver Soar

September didn't start out very well as stocks lost ground on all indices. Perhaps more concerning was the level to which yield on the 10-year note plunged, dipping to a low of 1.46% before closing out at 1.47%.

Low yields are indicative of demand, and, with some $19 trillion of government bonds globally yielding negative numbers, US bonds are attractive by comparison. This dynamic is not going to end soon, as Japan and the Euro area - the two economies with the most negative yields - are in no-win conditions, with inflation impossible to produce and a swirling drain of deflation threatening the confidence of their currencies.

If low yields are intriguing, consider the gains in gold and silver to be nothing short of demanding attention. Both metals have been on a hyperbolic flight path since May. On Tuesday, silver rocketed through the $19/ounce level, with a gain of more than 8 cents per ounce. Gold topped $1550, and is trading at record levels in most of the world. Only the super-strong dollar is keeping gold's level down, but only in the United States.

Stocks are going to continue a fluctuation with emphasis on the downside for the foreseeable future due to deteriorating economic conditions globally.

Cash is becoming king-like in many countries, with a focus on US dollars, but that dynamic will play out to flatten the wallets of nearly everyone holding hope in fiat currency. Central bankers have reached the proverbial brick wall, with nothing to save economies from crashing headlong into a solvency crisis, an immovable force from which there is no return, literally, as there will not only be no return on capital, but, in many regards - as is the case with negative rates - no return OF capital.

At the Close, Tuesday, September 3, 2019:
Dow Jones Industrial Average: 26,118.02, -285.26 (-1.08%)
NASDAQ: 7,874.16, -88.72 (-1.11%)
S&P 500: 2,906.27, -20.19 (-0.69%)
NYSE Composite: 12,663.40, -73.48 (-0.58%)

Weekend Wrap: Stocks Rebound in Face of Coming Currency Crisis

Other than the idea that Chinese and US officials were "talking" about trade and tariffs, nothing much changed in the world of high finance during the week, though investors thought they heard the "all clear" whistle.

Major indices broke off a four-week losing streak, bounding higher by 2.5 to three precent over the course of the week, heading into the Labor Day holiday.

The end of August marks the unofficial end of summer, back to school activity, and a return from the idyllic Hamptons or other leisure locales of the Wall Street hard-liners, the big boys with big money who guide trades, firms and financial fates.

Over the holiday weekend, the US slapped on the promised tariffs on September 1, with China responding with some of their own on US imports. That ran in stark contrast to the trading sentiment from the week past and suggests that the gains may be fleeting.

As the opening approaches for the first trading day of September, US futures are sliding. Anticipation of easing tensions in the trade wars are fading fast, though the narrative that the trade and tariff foibles of Trump and Xi are the sole motivator for moving equities is likely a contrived one.

What really worries Wall Street and should concern anybody with a pension tied to a 401k or other stock market vehicle is the shaky state of global commerce. The World Bank, IMF, and pundits far and wide have been predicting a recession for well over a year. Though the timing of such a downturn is far from settled science, evidence continues to build. More than just recession concerns are deeper fears that central banks have run out of ammunition with which to save the world again.

Interest rates, long regarded as the primary tool of central banks to stave off natural downturns in the business cycle are already low and many negative, prompting unbelievers to portend the end of central bank monetary hegemony. While such calls for an impending end to the global financial scheme are almost always present, this time appears to hold some truth.

Fractional reserve lending of debt has impoverished the lower and middle classes, expanded wealth inequality, and may now be acting as a brake on the system as money movement is nearing stall speed. It's been nearly 50 years since President Nixon closed the gold window and set the world on a path of unbacked, floating currencies. The result has been a revolving bubble, boom-bust scenario, punctuated by massive counterfeiting by coordinated central banking interests, each successive round more severe than the last.

Considering the depth of the last crisis in 2007-2009, central banks are desperate to keep the financial plates spinning for as long as possible, because the next crisis may well be their last.

These prospects are not pretty for central banks, or, for that matter, anybody. However, change is always in the wind, and the wind is blowing with a hot breath.

2001 was a malinvestment correction. 2008 was a liquidity affair. 202---? will be a currency crisis that will shake the foundations of monetary policy.

At the Close, Friday, August 30, 2019:
Dow Jones Industrial Average: 26,403.28, +41.08 (+0.16%)
NASDAQ: 7,962.88, -10.51 (-0.13%)
S&P 500: 2,926.46, +1.88 (+0.06%)
NYSE Composite: 12,736.88, +32.88 (+0.26%)

For the Week:
Dow: +774.38 (+3.02%)
NASDAQ: +211.12 (+2.72%)
S&P 500: +79.35 (+2.79%)
NYSE Composite: +320.43 (+2.58%)

Good News Lifts Stocks; No Pain Equals Gain

A tweet here, a headline there, and everything's all right in bizarro finance world.

News that China would not retaliate against President Trump's latest round of tariffs sent stocks soaring on Thursday, dismissing the belief that the tariffs on Chinese imports would cost consumers more.

Apparently, Wall Street doesn't really care about household budgets, so long as their favored companies make profits, and the tariffs, some of which take effect on September 1, aren't going to hurt bottom lines in the near future. Tariffs on many touchy consumer items were delayed until late December, a strategy composed by the White House to minimize pain during the holidays.

The avoidance of pain is what markets are all about these days. Stocks are not allowed to go down, to correct, even though their fundamentals may scream overpriced. Nobody is supposed to feel any pain.

The problem with such a nomenclature is that, like never telling a child not to touch a hot stove, investors are going to get burned badly when the pain is unavoidable.

So far, everybody's fingers are cool.

At the Close, Thursday, August 29, 2019:
Dow Jones Industrial Average: 26,362.25, +326.15 (+1.25%)
NASDAQ: 7,973.39, +116.51 (+1.48%)
S&P 500: 2,924.58, +36.64 (+1.27%)
NYSE Composite: 12,704.03, +144.80 (+1.15%)

Stocks Gain, Gold, Silver Gain More; 2s-10s Remain Inverted

Stocks. More noise.

And it will remain that way as long as the 2-year and 10-year notes remain inverted.

On Tuesday, the 2-year was yielding 1.53, the 10-year, 1.49.
On Wednesday, the 2-year was at 1.50, the 10-year, 1.47.

Gold and silver continue to outperform stocks by enormous margins. Spot silver closed the day in the US at $18.315 per ounce. Gold spot was $1538.70.

Keep a close watch on your 401K. It could vanish at a moment's notice. While that is not probable, the chances for it losing price are very good.

The global financial system is on the verge of complete collapse. Some say it has been since 2008. There is unlikely to be a bell rung when it all falls apart, but a steady, slow, wrenching decline is in the cards now that the marginal utility of a dollar is less than one.

The central bankers know this. Politicians know this. It's best to be informed.

At the Close, Wednesday, August 28, 2019:
Dow Jones Industrial Average: 26,036.10, +258.20 (+1.00%)
NASDAQ: 7,856.88, +29.94 (+0.38%)
S&P 500: 2,887.94, +18.78 (+0.65%)
NYSE Composite: 12,559.23, +85.18 (+0.68%)