(Simultaneously published at Downtown Magazine)
Wednesday was April Fool's Day, appropriate for the general public, which is being actively conned into giving up civil liberties at an alarming rate, and also for those who are stuck in passive investments like college or retirement funds, as stocks got hammered again on the day.
Meanwhile, mega banks and major corporations, which gorged themselves on stock buybacks and executive bonuses over the past decade, are being rewarded for their insouciant, self-serving behavior with loans and grants from the Treasury and Federal Reserve, which are rapidly coalescing into a single entity.
Since completing a near-perfect Fibonacci retrace of 38% to the 22,500 level on the Dow (22,552.17), the blue chip index has given up more than 1,500 points over the past two sessions and are threatening to retest the lows of March 23 (18,213.65). ADP private payroll data released Wednesday showed job losses of 27,000, which did not include the end of March when most of the recent layoffs and furloughs occurred. Despite exception of the brunt of a widespread voluntary quarantine imposed by most states the number was the first time ADP reported monthly job losses since 2017. Their next data release is expected to be much more sobering.
With the Federal Reserve firmly in control of the stock and bond markets, equity prices still have a long distance to travel on a downward slope to reach any reasonable level of valuation. While most heavily-traded stocks were wildly overvalued they are still trading at unsustainable levels, especially considering that business and commerce has very nearly ground to a halt globally.
There will be questions about the level of involvement in equity markets by the Fed, especially on days like Wednesday when losses cascaded down the wall of worry. While it's certainly the case that the Fed could buy up all the ETFs, stocks and mutual funds it pleases, their main approach is in the bond market, where they are actively purchasing commercial paper through its proxy, the Treasury. Guaranteeing that the corporations represented in the NASDAQ, Dow, S&P, and NYSE are still able to finance continuing operations is of primary concern. Price levels of individual stocks or even whole indices are of a secondary nature. Massive gains will be available to the Fed and their insider (congress) associates once stocks are reduced to a massive junk heap of debt, enriched management, and damaged operations.
Currently being touted by the financial insiders is the notion that the stock market and the nation will bounce back quickly once the coronavirus is conquered, though that concept is fatally flawed for a number of reasons. First, the goal is to have zero deaths from COVID-19, a near impossibility given that the infection number has not even cracked the one percent level, with the US currently at 217,000 confirmed cases with 5,137 deaths. Second, many small businesses will not reopen when the "all clear" is given, whether that be at the end of April, or some time in July. Third, with most working-age Americans at home or out of a job, the spending level upon the return to some semblance of normalcy will be vastly reduced. GDP growth is likely to be negative for the second and third quarters and the entire year of 2020 will go down as one in which the US economy was running in reverse.
At this point, anyone who has not taken steps to remove money from the stock and bond markets is facing a world of hurt which could have been avoided. The appropriate investment stance at this juncture would likely be 75% cash and 25% in hard assets (real estate, precious metals). Sadly, the gullible American passive investment class has been conditioned to believe stocks will always bounce back and that bonds represent safety. Neither claim can be proven within the present paradigm. Stocks may bounce back, but that bounce may not occur for many years. Bonds may be safe, but at interest rates that are comparable to stuffing matresses with Federal Reserve Notes. And, it's probably not beyond the realm of probability that the almighty dollar will not survive in its current form. At the very least, as severe devaluation is in the cards.
Treasury yields were smashed lower, the curve significantly flattened on the day, with the 30-year bond at 1.27%, the 10-year note at 0.62%, and the full breadth of the curve a mere 124 basis points, down from 130 a day ago and 145 a week prior. These are serious declines, significant moves in a market that is supposed to be stable. The portent is for more dislocation, desperation, and, eventually, negative rates which will obliterate the currency as is happening in Japan and Europe.
Gold and silver are still largely unavailable from regular dealers even though prices on the futures exchanges are dropping, defying the laws of supply and demand. The best place to purchase precious metals in any form is currently ebay, where the market is brisk and one ounce gold coins can be purchased and quickly delivered for prices between $1690 and $1861 while the futures price hovers around $1590.
Silver is in an even better position for sellers, tacking on premiums of up to 100% to the posted price of $14.25 on the futures exchanges. On eBay, the lowest price for a one ounce coin or bar is currently $21.50, with most ranging from $23.00 to $29.00 and uncirculated coins fetching more, up to absurd prices in the $40 and higher range. With mines shut down in many countries, the shortage of bullion is only just beginning. A metal mania is upon us.
Oil prices have caught bids early Thursday morning, with WTI crude priced at $22.37, Brent at $27.19 at the time of this writing. With a supply glut and the Saudis pumping at nearly-full capacity and offering discounts, it's likely that these prices do not reflect reality on the ground nor are they likely to maintain their gains for long.
As another trading day approaches, regular people may be wondering when they will receive their bailout $1200 check or direct deposit from the government and how they will pay their rent or mortgage without a job or some form of assistance. It has been two weeks since Treasury Secretary Steven Mnuchin and President Trump suggested that individuals would receive money within two weeks and nobody has seen a nickel. The bill to provide such assistance was passed last week by the Senate, House, and signed into law by President Trump.
On Wednesday, Mnuchin announced that Social Security recipients who do not regularly file tax returns will receive their checks or direct deposits without having to file "simple returns" as the IRS advised, according to TheHill.com. An actual date for dissemination of the monies was not disclosed, though it may be assumed that these recipients will receive their money along with their regular monthly payments. For the rest of the country, the waiting game continues, despite corporations already having trillions of dollars available to them via loans, loan guarantees or outright purchases of private debt issuance by the Federal Reserve, most of which is outside the Fed's normal chartered activities.
As for rent or mortgage payments, those are individual decisions. It is advisable to contact the landlord or mortgagee to work out payment options. Some landlords are deferring April rent payments while most lenders (represented in the main by servicers) have remained fairly tight-lipped on general guidelines relating to mortgage payments. Deferral is a likely solution, with the principal and interest being added to the end of the amortization schedule.
Just now, the Labor Department announced that unemployment insurance claims for the week ended March 28 doubled over the previous week to 6.64 million.
April and the second quarter is off to a very discouraging start.
At the Close, Wednesday, April 1, 2020:
Dow Jones Industrial Average: 20,943.51, -973.69 (-4.44%)
NASDAQ: 7,360.58, -339.52 (-4.41%)
S&P 500: 2,470.50, -114.09 (-4.41%)
NYSE: 9,844.85, -457.05 (-4.44%)
Thursday, April 2, 2020
Wednesday, April 1, 2020
Dow, S&P Mark Worst 1st Quarters Ever; Stocks Poised for Lower Open; Gold, Silver Markets in Turmoil
Closing out the first quarter of 2020 with a whimper, stocks opened to the downside, briefly turned positive, but the minor rally quickly fell apart sending the main indices to a close near the lows of the day. On the session, the NASDAQ was the best performer of the majors, the Dow the worst, followed closely by the S&P 500.
Thanks to the Wuhan Flu, coronavirus, COVID-19 or whatever one wishes to call the pathogen making its way around the planet, stocks really took it on the chin to start off the year. The major averages were all lower, even after making all-time highs in mid-February.
It was the worst quarter for the S&P since 2008 and the poorest quarterly performance for the Dow Jones Industrials since 1987. Both the Dow and S&P suffered through their worst first quarter ever. The Dow lost more than 23% of its value in January through March, as the S&P 500 fell 20% in the quarter. The NASDAQ didn't set any records but lost more than 14% in the first quarter.
With supply chain issues affecting companies in February and the advance of the virus in March, there's a good chance that GDP has been so negatively affected through first quarter, growth figures may have a minus sign in front of them when the first estimate of GDP will be announced on the fourth Friday of April. Mark your calendars for April 24 to see if the US will be half way to a recession or barely hanging onto some remnant of growth, any of it likely having occurred in January and early February. Any positive number would uplift the markets, but that is still a long way off and first up are employment figures for March. Wednesday, ADP reports private payrolls for the month and Friday the BLS reports on non-farm payrolls for March. Friday's number ought to be a market mover considering the massive job losses over the past week which will be figured into the calculations.
Gold got clobbered again, losing $46.30 per ounce on the day, dipping from $1623.40 Monday to $1577.10 Tuesday. Silver lost eight cents, closing out at $13.92. These prices are for paper contracts on the COMEX and other futures markets and are not aligning with current physical market dynamics. Both gold and silver are in short supply and dealers worldwide are charging severe premiums and assigning minimum purchases in some cases. Silver generally can be had for $20 to $25 per ounce. Gold is selling at roughly the $1800 level, though delivery times are delayed with waiting times up to 45 days in some cases.
As the futures prices and physical market prices diverge and decouple, it's only a matter of time before the fraudulent practices of settling contracts in cash rather than metal at the COMEX will become common knowledge and an open scandal as buyers standing for physical delivery are denied their right. As the coronavirus panic and attendant market turmoil extends, expect precious metals to rise dramatically in price as true owners of the metal divorce themselves from the bogus futures market.
The same is already occurring in the oil market with Saudi Arabia offering steep discounts to the published prices. WTI price continues to trend around $20 per barrel with gas prices across the United States, Canada and throughout Europe (using the Brent crude standard) at multi-year lows.
Experiencing more flattening across the curve, the treasury complex saw yields rise at the short and long durations, with the belly (1-year through 7-year) flatlining. As was the case with equities, bonds were little moved on the day.
ADP announces March private payrolls at 8:15 am ET on Wednesday. Futures are nearing limit down heading toward the opening bell.
At the Close, Tuesday, March 31, 2020:
Dow Jones Industrial Average: 21,917.16, -410.32 (-1.84%)
NASDAQ: 7,700.10, -74.05 (-0.95%)
S&P 500: 2,584.59, -42.06 (-1.60%)
NYSE: 10,301.87, -132.88 (-1.27%)
Thanks to the Wuhan Flu, coronavirus, COVID-19 or whatever one wishes to call the pathogen making its way around the planet, stocks really took it on the chin to start off the year. The major averages were all lower, even after making all-time highs in mid-February.
It was the worst quarter for the S&P since 2008 and the poorest quarterly performance for the Dow Jones Industrials since 1987. Both the Dow and S&P suffered through their worst first quarter ever. The Dow lost more than 23% of its value in January through March, as the S&P 500 fell 20% in the quarter. The NASDAQ didn't set any records but lost more than 14% in the first quarter.
With supply chain issues affecting companies in February and the advance of the virus in March, there's a good chance that GDP has been so negatively affected through first quarter, growth figures may have a minus sign in front of them when the first estimate of GDP will be announced on the fourth Friday of April. Mark your calendars for April 24 to see if the US will be half way to a recession or barely hanging onto some remnant of growth, any of it likely having occurred in January and early February. Any positive number would uplift the markets, but that is still a long way off and first up are employment figures for March. Wednesday, ADP reports private payrolls for the month and Friday the BLS reports on non-farm payrolls for March. Friday's number ought to be a market mover considering the massive job losses over the past week which will be figured into the calculations.
Gold got clobbered again, losing $46.30 per ounce on the day, dipping from $1623.40 Monday to $1577.10 Tuesday. Silver lost eight cents, closing out at $13.92. These prices are for paper contracts on the COMEX and other futures markets and are not aligning with current physical market dynamics. Both gold and silver are in short supply and dealers worldwide are charging severe premiums and assigning minimum purchases in some cases. Silver generally can be had for $20 to $25 per ounce. Gold is selling at roughly the $1800 level, though delivery times are delayed with waiting times up to 45 days in some cases.
As the futures prices and physical market prices diverge and decouple, it's only a matter of time before the fraudulent practices of settling contracts in cash rather than metal at the COMEX will become common knowledge and an open scandal as buyers standing for physical delivery are denied their right. As the coronavirus panic and attendant market turmoil extends, expect precious metals to rise dramatically in price as true owners of the metal divorce themselves from the bogus futures market.
The same is already occurring in the oil market with Saudi Arabia offering steep discounts to the published prices. WTI price continues to trend around $20 per barrel with gas prices across the United States, Canada and throughout Europe (using the Brent crude standard) at multi-year lows.
Experiencing more flattening across the curve, the treasury complex saw yields rise at the short and long durations, with the belly (1-year through 7-year) flatlining. As was the case with equities, bonds were little moved on the day.
ADP announces March private payrolls at 8:15 am ET on Wednesday. Futures are nearing limit down heading toward the opening bell.
At the Close, Tuesday, March 31, 2020:
Dow Jones Industrial Average: 21,917.16, -410.32 (-1.84%)
NASDAQ: 7,700.10, -74.05 (-0.95%)
S&P 500: 2,584.59, -42.06 (-1.60%)
NYSE: 10,301.87, -132.88 (-1.27%)
Tuesday, March 31, 2020
As Usual, Government Solutions Are Wrong, Damaging the Economy as COVID-19 Ravages the Planet
The trading desk at the NY Fed apparently bought everything, all day long.
That's not a joke. It's probably much closer to the truth than many would believe.
Since the Fed took steps to backstop every bond, loan, or financial obligation on the planet over the past two weeks, and the Congress and President passed a $2.2 trillion rescue relief bill last week, stocks have done nothing but shoot the moon higher as four of the past five trading sessions have been positive for the Dow, S&P and NYSE Composite, and three of five for the NASDAQ.
Amid a crisis condition across the country and around the globe, this kind of action - with similar moves in international markets as well - is completely devoid of any fundamental pricing structure. Simply throwing more good money after bad seems to be the only way the Fed operates, as if it were in a void zone and it's the worst kind of malinvestment, chasing away the demon of real price discovery by throwing more fake, phony, fiat currency at it.
At current levels, the major indices have achieved bear market territory and are about as likely to escape it as President Trump is to refrain from tweeting. With giant swaths of the economy shut down for the past two weeks and looking forward to another month of idleness, stocks should be going down, not up. Even down as much as 60% from their recent peak, many stocks are still overvalued and the main indices are settled in at or near levels that are 40-60% (NASDAQ) higher than prevailing levels in 2007 prior to the Great Financial Crisis (GFC), indicating that stocks, rather then stabilizing at current levels, hav emuch further to fall.
The degree of decline should be back to levels below the lows of 2008-09, since the issues which caused the crash then were never addressed in any meaningful manner, instead just kicked down the road. Banks and corporations have re-leveraged well beyond any reasonable price, using nearly-free money from the Fed to perform stock buybacks, boosting prices to extremes.
Initially, the cascading waterfall of falling stock prices as COVID-19 panic became evident was justifiable, more extreme than the beginning of any bear market including 1929, 2000, and 2008, ending nowhere near a bottom.
The Fed's bazooka-style blitzkrieg has blown up the markets, exacerbated by the rescue relief package. It won't last. Eventually, the near-term lows will be tested, re-tested, and finally exceeded as the long, slow grind of a second phase bear market assumes command. All the money in the world - and that's how much the Fed has at its disposal - cannot prevent another wave of selling, and another, and another, nor can it limit the size and scope of the global tragedy that will unfold in coming months and years.
In its latest attempt to curry favor from the masses, the CDC proposed a best-case prognosis of 200,000 deaths from COVID-19, but that number pales by comparison to the economic and social damage the policies of demand isolation, shuttering of businesses, and crushing unemployment will produce over the next 12-18 months.
Government policy promoting social distancing, travel restrictions, and business closures are misguided and harmful, will not contain the virus to satisfactory levels and are likely to foment a Greater Depression worse than 1929 in terms of unemployment, poverty, and malnourishment. Sadly, almost all other developed and developing nations have taken a similar approach, a groupthink solution that isn't a solution at all, but rather a quest for more control, more power, and more curtailment of civil liberties by the authorities currently in charge.
Other approaches are better suited to achieve better results, especially ones suggested in a brilliant essay by Percy Carlton for the Saker Blog, titled Covid-19 Derangement Syndrome: A World Gone Mad.
Carlton relies upon logic and science to achieve his solutions, rather then the over-emotional reaction of today's government incompetents. It is a must read for everyone, especially those who value freedom of choice, liberty, and thoughtful self-expression over government controls, socialized solutions, pharmacological mandates, pseudo-science, and pathological lies.
Laid bare before the American public and the world is the staggering incompetence and outrageous insolence of world "leaders." Beyond that lies an unpromising land of replete with shortages, monetary imbalances, fiscal irresponsibility, societal dislocation, rioting, looting, starvation, and death which could have been avoided.
Lack of advance planning and reliance on extreme measures adopted from China's experience with coronavirus, combined with political grandstanding and media obsession and obfuscation of facts have the world lumbering toward desperation. The longer the general public is subjected to the dictates of the administration the worse the condition will become.
Defeating the disease is the easy part. Putting back together the pieces of a broken global economy figures to be a more difficult task, one which sovereign governments and a central banking cartel are not well-suited to handle.
Meanwhile, the treasury curve flattens out, with the 10-year note yield slipping to 0.70% on Monday. Gold and silver remain difficult to obtain at prices well above the futures levels. Crude oil has fallen to 18-year lows with the price of gasoline falling in line.
The recent rally has nowhere to go under current conditions and should not have happened in the first place even under the best of circumstances, which are certainly not prevalent.
At the Close, Monday, March 30, 2020:
Dow Jones Industrial Average: 22,327.48, +690.70 (+3.19%)
NASDAQ: 7,774.15, +271.77 (+3.62%)
S&P 500: 2,626.65, +85.18 (+3.35%)
NYSE: 10,434.75, +247.54 (+2.43%)
That's not a joke. It's probably much closer to the truth than many would believe.
Since the Fed took steps to backstop every bond, loan, or financial obligation on the planet over the past two weeks, and the Congress and President passed a $2.2 trillion rescue relief bill last week, stocks have done nothing but shoot the moon higher as four of the past five trading sessions have been positive for the Dow, S&P and NYSE Composite, and three of five for the NASDAQ.
Amid a crisis condition across the country and around the globe, this kind of action - with similar moves in international markets as well - is completely devoid of any fundamental pricing structure. Simply throwing more good money after bad seems to be the only way the Fed operates, as if it were in a void zone and it's the worst kind of malinvestment, chasing away the demon of real price discovery by throwing more fake, phony, fiat currency at it.
At current levels, the major indices have achieved bear market territory and are about as likely to escape it as President Trump is to refrain from tweeting. With giant swaths of the economy shut down for the past two weeks and looking forward to another month of idleness, stocks should be going down, not up. Even down as much as 60% from their recent peak, many stocks are still overvalued and the main indices are settled in at or near levels that are 40-60% (NASDAQ) higher than prevailing levels in 2007 prior to the Great Financial Crisis (GFC), indicating that stocks, rather then stabilizing at current levels, hav emuch further to fall.
The degree of decline should be back to levels below the lows of 2008-09, since the issues which caused the crash then were never addressed in any meaningful manner, instead just kicked down the road. Banks and corporations have re-leveraged well beyond any reasonable price, using nearly-free money from the Fed to perform stock buybacks, boosting prices to extremes.
Initially, the cascading waterfall of falling stock prices as COVID-19 panic became evident was justifiable, more extreme than the beginning of any bear market including 1929, 2000, and 2008, ending nowhere near a bottom.
The Fed's bazooka-style blitzkrieg has blown up the markets, exacerbated by the rescue relief package. It won't last. Eventually, the near-term lows will be tested, re-tested, and finally exceeded as the long, slow grind of a second phase bear market assumes command. All the money in the world - and that's how much the Fed has at its disposal - cannot prevent another wave of selling, and another, and another, nor can it limit the size and scope of the global tragedy that will unfold in coming months and years.
In its latest attempt to curry favor from the masses, the CDC proposed a best-case prognosis of 200,000 deaths from COVID-19, but that number pales by comparison to the economic and social damage the policies of demand isolation, shuttering of businesses, and crushing unemployment will produce over the next 12-18 months.
Government policy promoting social distancing, travel restrictions, and business closures are misguided and harmful, will not contain the virus to satisfactory levels and are likely to foment a Greater Depression worse than 1929 in terms of unemployment, poverty, and malnourishment. Sadly, almost all other developed and developing nations have taken a similar approach, a groupthink solution that isn't a solution at all, but rather a quest for more control, more power, and more curtailment of civil liberties by the authorities currently in charge.
Other approaches are better suited to achieve better results, especially ones suggested in a brilliant essay by Percy Carlton for the Saker Blog, titled Covid-19 Derangement Syndrome: A World Gone Mad.
Carlton relies upon logic and science to achieve his solutions, rather then the over-emotional reaction of today's government incompetents. It is a must read for everyone, especially those who value freedom of choice, liberty, and thoughtful self-expression over government controls, socialized solutions, pharmacological mandates, pseudo-science, and pathological lies.
Laid bare before the American public and the world is the staggering incompetence and outrageous insolence of world "leaders." Beyond that lies an unpromising land of replete with shortages, monetary imbalances, fiscal irresponsibility, societal dislocation, rioting, looting, starvation, and death which could have been avoided.
Lack of advance planning and reliance on extreme measures adopted from China's experience with coronavirus, combined with political grandstanding and media obsession and obfuscation of facts have the world lumbering toward desperation. The longer the general public is subjected to the dictates of the administration the worse the condition will become.
Defeating the disease is the easy part. Putting back together the pieces of a broken global economy figures to be a more difficult task, one which sovereign governments and a central banking cartel are not well-suited to handle.
Meanwhile, the treasury curve flattens out, with the 10-year note yield slipping to 0.70% on Monday. Gold and silver remain difficult to obtain at prices well above the futures levels. Crude oil has fallen to 18-year lows with the price of gasoline falling in line.
The recent rally has nowhere to go under current conditions and should not have happened in the first place even under the best of circumstances, which are certainly not prevalent.
At the Close, Monday, March 30, 2020:
Dow Jones Industrial Average: 22,327.48, +690.70 (+3.19%)
NASDAQ: 7,774.15, +271.77 (+3.62%)
S&P 500: 2,626.65, +85.18 (+3.35%)
NYSE: 10,434.75, +247.54 (+2.43%)
Monday, March 30, 2020
Coronavirus Will Kill Many, but Government Response Has Killed the Economy
Theories have been floated about the coronavirus, or COVID-19, pandemic, suggesting (or outright claiming) that the infectious virus is variously a Chinese communist plot, an American false flag, a scheme by central banks or other nefarious, elitist secret society types, a message from God, an outer space concoction that has something to do with planet X, or that it's just the flu and the media, in cahoots with the governments of the world, is hyping it to the maximum degree as a cover story for the second Great Depression that was about to unfold, anyway.
At least for a change, nobody is blaming Vladimir Putin, the Russians or the Ukraine. They seemed to have worn out their scapegoat status.
Whatever and wherever the truth may lay, it's becoming apparent that the cure may be worse than the disease.
If a business were to shut down for a month or six weeks or maybe two months, the chances of it coming back to life in a healthy manner would be slim. Employees may have found new positions at other companies, customers would have had the time to find alternative sources for the product or service the shut-down business provided, bills, such as rent, utilities, and loans may or may not have been paid in a timely manner, and most of all, there would have been zero income for said business.
Now, multiply that case by thousands in one area, then expand the condition to all areas of the country and you've got a real mess, or, the current state of the global economy. Hundreds of thousands of businesses are temporarily closed and have been shuttered for as long as six weeks in some countries. Many of these operations are small businesses with a handful of employees, but the afflicted include major corporations with thousands of employees as well.
Adding to the nightmarish scenario are government orders or advisories at national or local levels telling people to stay home, to not go to work, to shelter in place, and otherwise avoid all unnecessary travel and contact with other people.
This is madness.
There is precisely zero possibility that the global economy will return to any place similar to what it was six months ago. And while that may be a good thing in the long run, in the short term it will almost completely destroy most of the economy, and rip to shreds any of the tattered fabric that remained of societies at local or national levels.
We have all of this for the sake of people getting sick, some dying, others experiencing nothing more than a minor cold, even more not contracting the virus at all. The latest figures from reliable sources put the number of confirmed cases of COVID-19 worldwide at around 750,000. The number of deaths has surpassed 34,000. In the United States, there are now 143,000 confirmed cases and just over 2,500 deaths.
These numbers may sound frightening or staggering, but knowing how many people die every day may put them into a less-panicky perspective. Globally, about 153,000 people die every day. That's 1,071,000 every week and more than 380 million annually. In the United States, about 7500 people die daily, or about 2,750,000 each year.
Sure, the COVID-19 cases and death toll are mounting, but just taking the number of deaths already presented - 34,000 - and, for the sake of argument, assume they all died within the last month, that number is minuscule compared to the 4.6 million that normally die every month. It works out to 0.75%, or less than one percent worldwide.
So why are government officials making such a big deal out of COVID-19 when 80% of cases are resolved with little to no medical attention necessary and less than two percent eventually die from it?
Good question. People die in car accidents every day and we don't ban cars. There are murders and suicides every day and people have debated how to prevent them for decades. The normal flu variant - another virus - kills 290,000 to 650,000 people every year. Coronavirus has a lot of catching up to do, yet governments insist that we must destroy our economy in order to keep it in check. And guess what? It's not working. The caseloads and deaths pile up every day regardless of whether people stay home, avoid contact, wash their hands or (and, if the CDC were serious, they would require this of all Americans) wear face masks.
The goal is supposedly to slow the progress of this highly infectious pathogen. OK, fine, let's save some lives while killing our economy. Has anybody considered the number of lives that will be damaged or ruined, or the number of people that will die or have their lives shortened because of how this is being handled?
Face the facts. Many jobs are not going to be there if and when this virus panic is concluded. Over the weekend, President Trump extended the social distancing, avoid social contact, and stay at home guidelines though April 30. That's 4 1/2 more weeks. By that time, many people will have to stay at home - if they have one - because they'll have no job and no money, and ironically, even if they do have enough dough on hand to put gas in their cars at massively reduced prices, other than the grocery store, pharmacy, or bank, there's nowhere for them to go. Everything else is closed.
So, our so-called leaders (Chris Martenson of Peak Prosperity calls them "managers," because they aren't really leading anybody) have made the decision to save some number of lives (10,000? 4 million? Who knows?)by effectively shutting down the economy, crashing the stock market, then fixing it all with a $2.2 trillion rescue attempt which includes sending checks to most people who make less than $75,000 a year. Those checks or direct deposits, when and if they do arrive, will amount to $1200 for most adults and $500 for each dependent child. If they wanted to be fair about it, they could take that $2.2 trillion and just doe out $6,666 to every man, woman and child in the country. If they took the entire amount and send money to just people who earn less than $75,000 a year - roughly 200 million - everyone would get $11,000.
However, since those roughly 200 million are going to get $1200, that's only $240 billion. The rest of that money - roughly $2 trillion, is largely going to corporations, which are going to lay people off in droves, and states, to cover extra expenses incurred in dealing with the crisis and for additional unemployment insurance. It's a rather large boondoggle, which will explode the federal budget, but who cares, since we're destroying the economy anyhow? The US is already $23 trillion in debt, what's another $2 trillion? The rest of the developed nations are in equally bad conditions, so they're planning on doing some similar bailout.
When this is all over, maybe by September, your local restauranteur will be out of business, but the McDonalds, Applebees, Pizza Huts, and Taco Bells of the world will be there to please your palette. The government's solution to COVID-19 will manage to crush small businesses and reduce the middle class to rubble.
Stock market declines will wipe out pensions.
Banks and large corporations will get loans or grants, aka, bailouts, again.
In the face of all of this, stocks went on a tear last week, having the best week since 1932, supposedly, which is ironic, because 1932 was in the midst of the Great Depression. All of the top five or seven best daily or weekly gains for stocks have come during bear markets, just as last week's did.
While some people were claiming that the bear market was vanquished last week, there's absolutely no truth to that. All major indices are at least 20% lower from the all-time highs made in February. Stocks are in a bear market and they'll stay in one no matter how much money the government and Federal Reserve throws at them. Stocks may go up for a while, but they're destined to go right back down. There's no escaping the fact that the global economy is broken, banks are largely insolvent and at some point will likely be shut down, unemployment is headed north of 20% and bankruptcy attorneys are set to make fortunes.
Gas at the pump is the lowest it's been in decades. Gold and silver cannot be purchased and delivered at current quoted prices. Most dealers are sold out. Wait times for what may be available are as long as 45 days. While gold popped back over $1600 an ounce last week, nobody can touch an ounce for less than $1800. Pricing for physical has decoupled from the fake, manipulated futures con game price at the COMEX.
The same is true for silver. It's current price is floating somewhere around $14.50 per ounce. Sales on eBay, where delivery can be as quick as two day because private individuals are selling there, have the price for an ounce of silver anywhere from $20 to $25. That market is broken. More markets will break down in coming days, weeks, and months. It might be instructive to consider the equity markets broken since the Federal Reserve can prop up the banks and other companies at will, even though their mandate allows them to buy just about everything but stocks, though that will likely change. Imagine playing poker with a guy who has $20 trillion and you have $200. That's what trading stocks is going to be like soon.
Bond prices are the lowest in history. The short-dated maturities briefly went negative last week. Expect that to be the rule rather than the standard going forward.
It's an absolute mess, a complete shame. Already, the banks are in trouble, as CapitalOne (COF) received a back-handed bailout last week, getting a waiver from the CFTC when they were caught with their pants down playing derivatives in the oil market (yes, the oil market that crashed last month). There's more to come from your friendly banking community, which gets money for nothing and loans it to the public at 20%, 25%, 29% or more.
Everything is just peachy.
Here are some recent numbers for the major indices, noting the recent all-time highs (February, 2020) and interim lows (March, 2020):
Dow High: 29568.57, Low: 18213.65
NASDAQ High: 9838.37, Low: 6631.42
S&P High: 3393.52, Low: 2192.86
NYSE High: 14183.26, Low: 8664.94
Dow Transports: High: 11359.49, Low: 6481.20
At the Close, Friday, March 27, 2020:
Dow Jones Industrial Average: 21,636.78, -915.39 (-4.06%)
NASDAQ: 7,502.38, -295.16 (-3.79%)
S&P 500: 2,541.47, -88.60 (-3.37%)
NYSE: 10,187.21, -349.07 (-3.31%)
For the Week:
Dow: +2462.80 (+12.84%)
NASDAQ: +622.86 (+9.05%)
S&P 500: +236.55 (+10.26)
NYSE: +1054.05 (+11.54)
Dow Transports: +861.46 (+12.60%)
At least for a change, nobody is blaming Vladimir Putin, the Russians or the Ukraine. They seemed to have worn out their scapegoat status.
Whatever and wherever the truth may lay, it's becoming apparent that the cure may be worse than the disease.
If a business were to shut down for a month or six weeks or maybe two months, the chances of it coming back to life in a healthy manner would be slim. Employees may have found new positions at other companies, customers would have had the time to find alternative sources for the product or service the shut-down business provided, bills, such as rent, utilities, and loans may or may not have been paid in a timely manner, and most of all, there would have been zero income for said business.
Now, multiply that case by thousands in one area, then expand the condition to all areas of the country and you've got a real mess, or, the current state of the global economy. Hundreds of thousands of businesses are temporarily closed and have been shuttered for as long as six weeks in some countries. Many of these operations are small businesses with a handful of employees, but the afflicted include major corporations with thousands of employees as well.
Adding to the nightmarish scenario are government orders or advisories at national or local levels telling people to stay home, to not go to work, to shelter in place, and otherwise avoid all unnecessary travel and contact with other people.
This is madness.
There is precisely zero possibility that the global economy will return to any place similar to what it was six months ago. And while that may be a good thing in the long run, in the short term it will almost completely destroy most of the economy, and rip to shreds any of the tattered fabric that remained of societies at local or national levels.
We have all of this for the sake of people getting sick, some dying, others experiencing nothing more than a minor cold, even more not contracting the virus at all. The latest figures from reliable sources put the number of confirmed cases of COVID-19 worldwide at around 750,000. The number of deaths has surpassed 34,000. In the United States, there are now 143,000 confirmed cases and just over 2,500 deaths.
These numbers may sound frightening or staggering, but knowing how many people die every day may put them into a less-panicky perspective. Globally, about 153,000 people die every day. That's 1,071,000 every week and more than 380 million annually. In the United States, about 7500 people die daily, or about 2,750,000 each year.
Sure, the COVID-19 cases and death toll are mounting, but just taking the number of deaths already presented - 34,000 - and, for the sake of argument, assume they all died within the last month, that number is minuscule compared to the 4.6 million that normally die every month. It works out to 0.75%, or less than one percent worldwide.
So why are government officials making such a big deal out of COVID-19 when 80% of cases are resolved with little to no medical attention necessary and less than two percent eventually die from it?
Good question. People die in car accidents every day and we don't ban cars. There are murders and suicides every day and people have debated how to prevent them for decades. The normal flu variant - another virus - kills 290,000 to 650,000 people every year. Coronavirus has a lot of catching up to do, yet governments insist that we must destroy our economy in order to keep it in check. And guess what? It's not working. The caseloads and deaths pile up every day regardless of whether people stay home, avoid contact, wash their hands or (and, if the CDC were serious, they would require this of all Americans) wear face masks.
The goal is supposedly to slow the progress of this highly infectious pathogen. OK, fine, let's save some lives while killing our economy. Has anybody considered the number of lives that will be damaged or ruined, or the number of people that will die or have their lives shortened because of how this is being handled?
Face the facts. Many jobs are not going to be there if and when this virus panic is concluded. Over the weekend, President Trump extended the social distancing, avoid social contact, and stay at home guidelines though April 30. That's 4 1/2 more weeks. By that time, many people will have to stay at home - if they have one - because they'll have no job and no money, and ironically, even if they do have enough dough on hand to put gas in their cars at massively reduced prices, other than the grocery store, pharmacy, or bank, there's nowhere for them to go. Everything else is closed.
So, our so-called leaders (Chris Martenson of Peak Prosperity calls them "managers," because they aren't really leading anybody) have made the decision to save some number of lives (10,000? 4 million? Who knows?)by effectively shutting down the economy, crashing the stock market, then fixing it all with a $2.2 trillion rescue attempt which includes sending checks to most people who make less than $75,000 a year. Those checks or direct deposits, when and if they do arrive, will amount to $1200 for most adults and $500 for each dependent child. If they wanted to be fair about it, they could take that $2.2 trillion and just doe out $6,666 to every man, woman and child in the country. If they took the entire amount and send money to just people who earn less than $75,000 a year - roughly 200 million - everyone would get $11,000.
However, since those roughly 200 million are going to get $1200, that's only $240 billion. The rest of that money - roughly $2 trillion, is largely going to corporations, which are going to lay people off in droves, and states, to cover extra expenses incurred in dealing with the crisis and for additional unemployment insurance. It's a rather large boondoggle, which will explode the federal budget, but who cares, since we're destroying the economy anyhow? The US is already $23 trillion in debt, what's another $2 trillion? The rest of the developed nations are in equally bad conditions, so they're planning on doing some similar bailout.
When this is all over, maybe by September, your local restauranteur will be out of business, but the McDonalds, Applebees, Pizza Huts, and Taco Bells of the world will be there to please your palette. The government's solution to COVID-19 will manage to crush small businesses and reduce the middle class to rubble.
Stock market declines will wipe out pensions.
Banks and large corporations will get loans or grants, aka, bailouts, again.
In the face of all of this, stocks went on a tear last week, having the best week since 1932, supposedly, which is ironic, because 1932 was in the midst of the Great Depression. All of the top five or seven best daily or weekly gains for stocks have come during bear markets, just as last week's did.
While some people were claiming that the bear market was vanquished last week, there's absolutely no truth to that. All major indices are at least 20% lower from the all-time highs made in February. Stocks are in a bear market and they'll stay in one no matter how much money the government and Federal Reserve throws at them. Stocks may go up for a while, but they're destined to go right back down. There's no escaping the fact that the global economy is broken, banks are largely insolvent and at some point will likely be shut down, unemployment is headed north of 20% and bankruptcy attorneys are set to make fortunes.
Gas at the pump is the lowest it's been in decades. Gold and silver cannot be purchased and delivered at current quoted prices. Most dealers are sold out. Wait times for what may be available are as long as 45 days. While gold popped back over $1600 an ounce last week, nobody can touch an ounce for less than $1800. Pricing for physical has decoupled from the fake, manipulated futures con game price at the COMEX.
The same is true for silver. It's current price is floating somewhere around $14.50 per ounce. Sales on eBay, where delivery can be as quick as two day because private individuals are selling there, have the price for an ounce of silver anywhere from $20 to $25. That market is broken. More markets will break down in coming days, weeks, and months. It might be instructive to consider the equity markets broken since the Federal Reserve can prop up the banks and other companies at will, even though their mandate allows them to buy just about everything but stocks, though that will likely change. Imagine playing poker with a guy who has $20 trillion and you have $200. That's what trading stocks is going to be like soon.
Bond prices are the lowest in history. The short-dated maturities briefly went negative last week. Expect that to be the rule rather than the standard going forward.
It's an absolute mess, a complete shame. Already, the banks are in trouble, as CapitalOne (COF) received a back-handed bailout last week, getting a waiver from the CFTC when they were caught with their pants down playing derivatives in the oil market (yes, the oil market that crashed last month). There's more to come from your friendly banking community, which gets money for nothing and loans it to the public at 20%, 25%, 29% or more.
Everything is just peachy.
Here are some recent numbers for the major indices, noting the recent all-time highs (February, 2020) and interim lows (March, 2020):
Dow High: 29568.57, Low: 18213.65
NASDAQ High: 9838.37, Low: 6631.42
S&P High: 3393.52, Low: 2192.86
NYSE High: 14183.26, Low: 8664.94
Dow Transports: High: 11359.49, Low: 6481.20
At the Close, Friday, March 27, 2020:
Dow Jones Industrial Average: 21,636.78, -915.39 (-4.06%)
NASDAQ: 7,502.38, -295.16 (-3.79%)
S&P 500: 2,541.47, -88.60 (-3.37%)
NYSE: 10,187.21, -349.07 (-3.31%)
For the Week:
Dow: +2462.80 (+12.84%)
NASDAQ: +622.86 (+9.05%)
S&P 500: +236.55 (+10.26)
NYSE: +1054.05 (+11.54)
Dow Transports: +861.46 (+12.60%)
Friday, March 27, 2020
Dow, S&P Gain Third Straight Day; Fed Buying Evident
There are signs everywhere that the Federal Reserve has taken an active role in the stock market, especially in the US, but probably abroad as well, in cahoots with their central bank partners, as stocks have recovered sharply over the past three days after being battered by fears stemming from the coronavirus global pandemic, or COVID-19.
Probably the most glaring evidence - outside of the Dow's near-500-point gain in the final 12 minutes of trading Thursday - is the ballooning of the Fed's balance sheet, which has grown by $507,323,000,000 ($507.323 billion) in just seven days, from March 18 to the 25th.
Being almost completely transparent, the Fed, in recent days has announced that they would purchase everything from municipal debt, to corporate debt, to exchange traded funds (ETFs) in the open market in order to "stabilize" the situation. There's one good reason why the Dow was up 1,351 points on a day that started with the announcement that more than three million Americans has lost their jobs in the past week, and it's because the Federal Reserve, with literally unlimited amounts of buying power, was actively in the market.
While this will come as a surprise to pretty much 90% of all Americans, central bank direct activity in equity markets has been an open secret in financial circles for at least the past decade. The Swiss National Bank (SNB) and Bank of Japan are major shareholders in many corporations, including Apple (AAPL) and many others. The BOJ has been buying ETFs in earnest since as early as 2012, when their balance sheet exploded from 150 trillion yen ($138 billion US) to 550 ($506 billion US). Today, the Bank of Japan owns stocks and bonds equal to the country's entire economic output, or 100% of GDP. In essence, the Bank of Japan owns the Japanese economy. It is the Japanese economy and a similar scenario is beginning to emerge in the United States, and likely in the European Union as well.
Other independent central banks in Australia, Canada, England, Brazil, and elsewhere are probably considering doing the same in their stock markets if they haven't already.
It's not as though central banks are complete foreigners to intervention in markets. They've completely distorted the capital markets for years, buying up agency (government) debt and mortgage-backed securities en masse before and after the Great Financial Crisis in 2007-09 to the point at which trillions of dollars in government bonds carry negative yields.
So, instead of just buying debt, why not stocks? Ask your broker. I'm sure he or she will have a ready answer after convulsing on the floor in either laughter or tears.
Elsewhere, treasury yields fell across the spectrum, the 10-year note checking in at 0.83%. Gold and silver have returned to being an afterthought in the futures market and largely unavailable in physical quantities. Gold is still testing recent multi-year highs, closing up $11.60 on Thursday to $1624.50 per ounce. Silver closed down slightly to $14.41 in the futures market. Meanwhile, dealers report widespread shortages amid massive demand for "everyman's gold."
Being that silver is so much less expensive than gold, it is available to anybody with a couple of sawbucks. Thus, it is THE prime target of central banks, as their greatest fear is to have a competing currency accepted by the middle and lower classes. It would kind of ruin their monopoly on currency. It's been going on for hundreds of years and isn't likely to change soon.
Oil was beaten down again on Thursday, with WTI crude closing out at $22.60 a barrel, down nearly two dollars from Wednesday's finishing price. Unleaded gasoline is cheap around the globe, the irony being, with so many coronavirus lockdowns or "stay at home" orders in place, gas is a bargain, but nobody can go anywhere.
At the Close, Thursday, March 26, 2020:
Dow Jones Industrial Average: 22,552.17, +1,351.62 (+6.38%)
NASDAQ: 7,797.54, +413.24 (+5.60%)
S&P 500: 2,630.07, +154.51 (+6.24%)
NYSE: 10,536.28, +574.89 (+5.77%)
Probably the most glaring evidence - outside of the Dow's near-500-point gain in the final 12 minutes of trading Thursday - is the ballooning of the Fed's balance sheet, which has grown by $507,323,000,000 ($507.323 billion) in just seven days, from March 18 to the 25th.
Being almost completely transparent, the Fed, in recent days has announced that they would purchase everything from municipal debt, to corporate debt, to exchange traded funds (ETFs) in the open market in order to "stabilize" the situation. There's one good reason why the Dow was up 1,351 points on a day that started with the announcement that more than three million Americans has lost their jobs in the past week, and it's because the Federal Reserve, with literally unlimited amounts of buying power, was actively in the market.
While this will come as a surprise to pretty much 90% of all Americans, central bank direct activity in equity markets has been an open secret in financial circles for at least the past decade. The Swiss National Bank (SNB) and Bank of Japan are major shareholders in many corporations, including Apple (AAPL) and many others. The BOJ has been buying ETFs in earnest since as early as 2012, when their balance sheet exploded from 150 trillion yen ($138 billion US) to 550 ($506 billion US). Today, the Bank of Japan owns stocks and bonds equal to the country's entire economic output, or 100% of GDP. In essence, the Bank of Japan owns the Japanese economy. It is the Japanese economy and a similar scenario is beginning to emerge in the United States, and likely in the European Union as well.
Other independent central banks in Australia, Canada, England, Brazil, and elsewhere are probably considering doing the same in their stock markets if they haven't already.
It's not as though central banks are complete foreigners to intervention in markets. They've completely distorted the capital markets for years, buying up agency (government) debt and mortgage-backed securities en masse before and after the Great Financial Crisis in 2007-09 to the point at which trillions of dollars in government bonds carry negative yields.
So, instead of just buying debt, why not stocks? Ask your broker. I'm sure he or she will have a ready answer after convulsing on the floor in either laughter or tears.
Elsewhere, treasury yields fell across the spectrum, the 10-year note checking in at 0.83%. Gold and silver have returned to being an afterthought in the futures market and largely unavailable in physical quantities. Gold is still testing recent multi-year highs, closing up $11.60 on Thursday to $1624.50 per ounce. Silver closed down slightly to $14.41 in the futures market. Meanwhile, dealers report widespread shortages amid massive demand for "everyman's gold."
Being that silver is so much less expensive than gold, it is available to anybody with a couple of sawbucks. Thus, it is THE prime target of central banks, as their greatest fear is to have a competing currency accepted by the middle and lower classes. It would kind of ruin their monopoly on currency. It's been going on for hundreds of years and isn't likely to change soon.
Oil was beaten down again on Thursday, with WTI crude closing out at $22.60 a barrel, down nearly two dollars from Wednesday's finishing price. Unleaded gasoline is cheap around the globe, the irony being, with so many coronavirus lockdowns or "stay at home" orders in place, gas is a bargain, but nobody can go anywhere.
At the Close, Thursday, March 26, 2020:
Dow Jones Industrial Average: 22,552.17, +1,351.62 (+6.38%)
NASDAQ: 7,797.54, +413.24 (+5.60%)
S&P 500: 2,630.07, +154.51 (+6.24%)
NYSE: 10,536.28, +574.89 (+5.77%)
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