Stocks gained across the board on Tuesday, after May retail sales figures were up an eye-popping 17.7% as stores reopened across the country post-lockdowns from the coronavirus scare.
The number was more than double what many analysts had expected and prompted a wave of new buying in stocks of all varieties. The Dow gained more than 500 points. The S&P powered up by almost 60 points.
Despite the gaudy month-over-month numbers, gross receipts were 6.1% below a year earlier due mainly to uneven store re-openings, some states keeping stay-at-home restrictions in place longer than others.
With gains on both Monday and Tuesday, stocks have recovered most of the losses suffer last Thursday, June 11. The NASDAQ is about 175 points away from its all-time high, made on June 10. The intraday high was 10,086.89. At the close, the record was set at 10,020.35.
Of particular note is Friday's quad-witching day, which should introduce more volatility to the mix. It seems apparent, however, that bulls have regained the advantage and stocks appear set on a path upward, despite valuations in the stratosphere.
Bonds took a hit as yields on the long end of the treasury complex rose. The 30-year exploded nine basis points higher, from a yield of 1.45% on Monday to 1.54% Tuesday. The 10-year note was yielding 0.75%.
Precious metals were higher on the futures market but investors are becoming impatient with the constant niggling in the paper markets. Considering the level of disruption over the past four months, both gold and silver appear largely undervalued. Prices remain elevated on fair, open markets such as eBay. Dealers are still charging high premiums over spot and many are sold out of popular items.
It was recently reported that gold-backed exchange traded funds (ETFs) added 623 tonnes of the metal worth $34 billion to their stockpile from January to May, exceeding in five months every full-year increase on record. That's an impressive figure, as the amount of gold held in storage by ETFs reflects a growing demand for the precious metal.
While the ETFs are required to hold gold in storage at a percentage of their actual outstanding stock, shares of ETFs are not redeemable in gold and serve as a buffer against physical price increases. Touted as a safe way to invest in gold, they serve to track price increases on the paper (futures and spot) markets. The SPDR Gold Shares (GLD) ETF is up from 142 to 162 this year, roughly the same percentage in gold futures.
As pure derivatives, the gold and silver ETFs cause more confusion and actually dilute the pool of gold buyers. People investing in gold or silver ETFs are actually serving to keep a lid on prices by not engaging in active physical purchase and storage of their own gold.
The ETFs are yet another reason why gold and silver are orders of magnitude lower than where many believe they should be. Speculative in nature, they can be driven in any direction by well-timed buys, sells or shorts.
Oil prices have hit a rock at about $38 per barrel. That could change Wednesday when a monthly report from the Organization of the Petroleum Exporting Countries (OPEC) is released.
At the Close, Tuesday, June 16, 2020:
Dow: 26,289.98, +526.82 (+2.04%)
NASDAQ: 9,895.87, +169.84 (+1.75%)
S&P 500: 3,124.74, +58.15 (+1.90%)
NYSE: 12,161.47, +218.57 (+1.83%)
Wednesday, June 17, 2020
Tuesday, June 16, 2020
Stocks Stutter, Rise On Fake Fed News; Federal Debt Surges Past $26 Trillion; Argentina Default Triggers CDS
Wall Street got a bit of a shock Monday morning as stocks sold off first in the futures market and transitioned into a gap lower at the opening bell. What looked like a continuation of Thursday's selloff - interrupted by the dead cat bounce Friday - turned out to be a short-lived event.
With the Dow down below 25,000, losing more than 700 points just minutes into the session, buyers began to emerge, pushing stocks higher by 2:00 pm ET, the major indices had made up considerable ground. The NASDAQ was already positive when the Fed issued a press release, rehashing some old news to make it look new to the algos.
The press released looked like the Fed was launching another credit facility for corporations when in fact this facility (SMCCF) had been in the pipeline since March. They announced they'd begin buying individual corporate bonds, so that when companies go looking for a lender - for whatever purpose - they need look no further than the Federal Reserve, now not only the buyer and lender of last resort, but of first resort as well.
Per the Fed's press release:
That sent all indices into positive territory, and everything was again alright with the world as stocks sported gains to start the week.
Whether the "recovery" looks like a V or no V, the US national debt vaulted past $26 Trillion over the weekend without much fanfare (in fact, none). Some thought it would make it by the 4th of July. It came in 45 lengths ahead of predictions, like Secretariat winning the 1973 Belmont Stakes.
By the end of June the federal government will have added more than three trillion dollars ($3 trillion) to the national debt, an astonishing pace. At the current run rate of a trillion every two months, by the end of 2020, the debt would rise to $29 trillion, and to $35 trillion by December 2021. What's either frightening or amusing about the growth rate of the national debt is that it is more likely to accelerate than back off as the dollar heads for a fiscal cliff. Combined federal, state, and local government expenditures currently account for nearly half of America's GDP, and, since nearly half of that is borrowed, it means a good quarter of the GDP is an accounting fiction. Government produces exactly nothing of value. They spend. Total combined spending by government will exceed $10 trillion for the fiscal year ending on September 30.
If one were to take from the GDP calculation all government spending that was done on borrowed money, GDP wouldn't be over $20 trillion as the official version purports. Instead, it would be bumping up against $15 trillion. If one took out all the purchases made on credit cards or by mortgages, it would be even lower. The fact is that the GDP calculation is a convenient reference for Wall Street and government, but it does not really reflect the actual condition of the economy. What's happening is that as expenditures are growing, tax revenues are falling, and borrowing must continue to rise to fill the gap.
It's about as an unsustainable condition as one could imagine. With any luck (and even that's in doubt), the entire system might make it through to November, just in time to implode after the elections. That's hardly a certainty. The US and global economic systems are now so fragile that about a third of the entire global GDP is borrowed. Eventually, half of GDP will be borrowed, then all of it, at which time the system will have completely broken down. Companies which must borrow just to meet payroll cannot last. Governments which borrow to meet spending demands cannot last. Consumers with low to no income and piles of debt will default. It's beginning to happen and will accelerate in the third and fourth quarters of this year.
Everything is in play. Jobs, retirement funds, even Social Security, a ponzi scheme from the start that may not make it through the end of this decade.
Not to be outdone, Argentina extended the deadline for negotiations for a fourth time, to June 19, on $65 billion in sovereign debt.
They missed a $500 million interest payment in May, prompting the lenders to meet with Argentine officials to discuss a solution. It also triggered a credit default swap (CDS) event. Lenders of Argentina's debt include PIMCO, BlackRock, and Franklin Templeton. Because CDS are private contracts, it's not known whether any of them hold the swaps, which acts as insurance against default.
One thing is for certain. Somebody's out $1.5 billion and some other entities made a killing on the trade. Problem arise in credit default swaps are when the company insuring against the loss doesn't have the funds to cover the bet when it goes south. That's what happened with AIG in the GFC back in 2008. If Argentina doesn't solve this issue soon (it may already be too late) other swaps are sure to be triggered, more people will lose money and the derivative market may begin to look like a pock-marked battlefield.
Could Argentina be the canary in the coal mine that sets off a wave of sovereign defaults? Possibly, though such things tend to take years to develop and there are many attempts at remediation in the interim. Sovereign defaults are at the end of the list of things about which central banks need to worry. For now, they've got global stock markets that will melt down without their tacit support, growing civil unrest, and COVID-19 with which to contend.
Their plate seems rather full for the moment.
At the Close, Monday, June 15, 2020:
Dow: 25,763.16, +157.62 (+0.62%)
NASDAQ: 9,726.02, +137.21 (+1.43%)
S&P 500: 3,066.59, +25.28 (+0.83%)
NYSE: 11,942.91, +75.74 (+0.64%)
With the Dow down below 25,000, losing more than 700 points just minutes into the session, buyers began to emerge, pushing stocks higher by 2:00 pm ET, the major indices had made up considerable ground. The NASDAQ was already positive when the Fed issued a press release, rehashing some old news to make it look new to the algos.
The press released looked like the Fed was launching another credit facility for corporations when in fact this facility (SMCCF) had been in the pipeline since March. They announced they'd begin buying individual corporate bonds, so that when companies go looking for a lender - for whatever purpose - they need look no further than the Federal Reserve, now not only the buyer and lender of last resort, but of first resort as well.
Per the Fed's press release:
The Federal Reserve Board on Monday announced updates to the Secondary Market Corporate Credit Facility (SMCCF), which will begin buying a broad and diversified portfolio of corporate bonds to support market liquidity and the availability of credit for large employers.
As detailed in a revised term sheet and updated FAQs, the SMCCF will purchase corporate bonds to create a corporate bond portfolio that is based on a broad, diversified market index of U.S. corporate bonds. This index is made up of all the bonds in the secondary market that have been issued by U.S. companies that satisfy the facility's minimum rating, maximum maturity, and other criteria. This indexing approach will complement the facility's current purchases of exchange-traded funds.
The Primary Market and Secondary Market Corporate Credit Facilities were established with the approval of the Treasury Secretary and with $75 billion in equity provided by the Treasury Department from the CARES Act.
That sent all indices into positive territory, and everything was again alright with the world as stocks sported gains to start the week.
Whether the "recovery" looks like a V or no V, the US national debt vaulted past $26 Trillion over the weekend without much fanfare (in fact, none). Some thought it would make it by the 4th of July. It came in 45 lengths ahead of predictions, like Secretariat winning the 1973 Belmont Stakes.
By the end of June the federal government will have added more than three trillion dollars ($3 trillion) to the national debt, an astonishing pace. At the current run rate of a trillion every two months, by the end of 2020, the debt would rise to $29 trillion, and to $35 trillion by December 2021. What's either frightening or amusing about the growth rate of the national debt is that it is more likely to accelerate than back off as the dollar heads for a fiscal cliff. Combined federal, state, and local government expenditures currently account for nearly half of America's GDP, and, since nearly half of that is borrowed, it means a good quarter of the GDP is an accounting fiction. Government produces exactly nothing of value. They spend. Total combined spending by government will exceed $10 trillion for the fiscal year ending on September 30.
If one were to take from the GDP calculation all government spending that was done on borrowed money, GDP wouldn't be over $20 trillion as the official version purports. Instead, it would be bumping up against $15 trillion. If one took out all the purchases made on credit cards or by mortgages, it would be even lower. The fact is that the GDP calculation is a convenient reference for Wall Street and government, but it does not really reflect the actual condition of the economy. What's happening is that as expenditures are growing, tax revenues are falling, and borrowing must continue to rise to fill the gap.
It's about as an unsustainable condition as one could imagine. With any luck (and even that's in doubt), the entire system might make it through to November, just in time to implode after the elections. That's hardly a certainty. The US and global economic systems are now so fragile that about a third of the entire global GDP is borrowed. Eventually, half of GDP will be borrowed, then all of it, at which time the system will have completely broken down. Companies which must borrow just to meet payroll cannot last. Governments which borrow to meet spending demands cannot last. Consumers with low to no income and piles of debt will default. It's beginning to happen and will accelerate in the third and fourth quarters of this year.
Everything is in play. Jobs, retirement funds, even Social Security, a ponzi scheme from the start that may not make it through the end of this decade.
Not to be outdone, Argentina extended the deadline for negotiations for a fourth time, to June 19, on $65 billion in sovereign debt.
They missed a $500 million interest payment in May, prompting the lenders to meet with Argentine officials to discuss a solution. It also triggered a credit default swap (CDS) event. Lenders of Argentina's debt include PIMCO, BlackRock, and Franklin Templeton. Because CDS are private contracts, it's not known whether any of them hold the swaps, which acts as insurance against default.
One thing is for certain. Somebody's out $1.5 billion and some other entities made a killing on the trade. Problem arise in credit default swaps are when the company insuring against the loss doesn't have the funds to cover the bet when it goes south. That's what happened with AIG in the GFC back in 2008. If Argentina doesn't solve this issue soon (it may already be too late) other swaps are sure to be triggered, more people will lose money and the derivative market may begin to look like a pock-marked battlefield.
Could Argentina be the canary in the coal mine that sets off a wave of sovereign defaults? Possibly, though such things tend to take years to develop and there are many attempts at remediation in the interim. Sovereign defaults are at the end of the list of things about which central banks need to worry. For now, they've got global stock markets that will melt down without their tacit support, growing civil unrest, and COVID-19 with which to contend.
Their plate seems rather full for the moment.
At the Close, Monday, June 15, 2020:
Dow: 25,763.16, +157.62 (+0.62%)
NASDAQ: 9,726.02, +137.21 (+1.43%)
S&P 500: 3,066.59, +25.28 (+0.83%)
NYSE: 11,942.91, +75.74 (+0.64%)
Sunday, June 14, 2020
Markets Skid, Ending Three-Week Win Streak As Rally Falters; Gold, Silver Continue Abusing Futures Pricing; Treasuries Rally
Stocks broke off a streak of three straight winning weeks courtesy of a trend-reversing, cascading selloff Thursday that erased all or most of June's gains.
The downdraft followed two straight days of minor losses and may have put a punctuation mark on the market's 11-week rally. The NASDAQ, which made a fresh all-time closing high on Monday (9,924.75) and crested over 10,000 on Wednesday, took a 517-point collapse on Wednesday. Like the Dow, which lost over 1800 points, the loss was the fourth-highest one-day point decline in market history. For both indices, the three higher point losses all occurred this past March.
Friday was snapback day, though the gains were paltry compared to the prior day's losses. Stocks gained back less than a third of what was surrendered on Thursday.
The late-week action prompted market observers to question the solidity of the recent rally, which, in V-shaped manner, took the markets straight off their March lows and out of bear market territory. Stocks had gained even as entire states were in lockdowns and the COVID-19 virus raged across America. Stocks continued to rise in the face of nationwide protests against police violence in the aftermath of the death of George Floyd at the hands of Minneapolis police. Many of the protests turned violent, as disruptive elements rioted and looted stores.
Fueled by emergency lending by the Fed, stocks seemed to be out of touch with mainstream economics, a condition not unusual for Wall Street types. Thursday's turnabout was broadly-based and unsparing of any sector though banking and tech stocks were leaders to the downside.
Coincidentally, protesting fell off as well, probably due to uprising fatigue. After two weeks of marching around in hot weather, the movement became somewhat pointless and many lost interest in reform toward better policing, though success was claimed in some areas, such as Minneapolis, where the city council decided to defund and disband the police, and New York, where measures were take by legislators to ratchet down the heavy-handed tactics of its force.
In Louisville, Kentucky, the city council voted to ban no-knock warrants. The resolution was passed in reaction to the death of Breonna Taylor, who was killed in a March no-knock raid at the wrong address.
One city in which protests have not tailed off is Atlanta, the scene of widespread rioting and looting early on, where chief of police, Erika Shields, has resigned on Sunday after officers fired upon and killed 27-year-old Rayshard Brooks Friday night.
And, in Seattle, the madness reached a climax on Monday as officials decided not to defend a police precinct, resulting in protesters, led by Black Lives Matter (BLM) taking over a six-block urban area and renaming it the Capitol Hill Autonomous Zone (CHAZ).
All of this is a backdrop to pent-up emotions and outrage that were magnified during the coronavirus lockdowns. Some people, took issue with Wall Street's rapid rally, citing it as an affront to societal mores and economic inequality. By the looks of where markets were heading on Thursday, the impact of the lockdowns and protests finally have reached lower Manhattan.
Treasuries staged a solid rally at the long end of the curve through Thursday, with the 10-year note yield falling from 0.91% to 0.66% and from 1.69% to 1.41% on the 30-year. On Friday, bond prices fell, with the 10-year closing out at 0.71%; the 30-year bond finished at 1.45%.
Precious metals rose early in the week, but were tamped down as the week drew to a close. Gold reached $1742.15 before ending the week still elevated at $1733.50. Spot silver was as high as $17.87 an ounce, closing at $17.62 on Friday. Spot and futures prices continue to trend toward irrelevance as premium prices for physical metal and shortages continue into a third month. Many dealers show popular items out of stock or with significant delivery delays, a condition that has persisted for retailers since the onset of the coronavirus.
eBay continues to light the way for purveyors and buyers alike, with calculable prices (at premiums over spot) and rapid, reliable deliveries. Here are the most recent prices on select items from ebay sellers (prices include shipping):
Item: Low / High / Average / Median
1 oz silver coin: 25.50 / 36.20 / 31.00 / 29.90
1 oz silver bar: 19.95 / 35.20 / 29.32 / 29.88
1 oz gold coin: 1,837.00 / 1,900.52 / 1,857.86 / 1,855.40
1 oz gold bar: 1,806.00 / 1,880.00 / 1,840.52 / 1,832.63
As far as stocks are concerned, after the FOMC meeting concluded Wednesday and the Fed committed to keep the federal funds rate at or near the zero-bound at least until the end of 2022, investors got a little jittery over their engineered V-shaped rally, the overall stability of the global economy, and valuations heading into the end of the second quarter and some supposedly horrifying earnings figures coming the second week of July.
The coming week may be epochal or apocalyptic as Friday offers a quad witching day as stock index futures, stock index options, stock options, and single stock futures expire simultaneously. There should be some volatility showing up at the convergence of day-trading, options players and real-time economics all roll together.
While Thursday's massive decline in stocks sent shock waves through the markets, Friday's returns were uninspired and had the look of a an exhausted rally on its final legs. Trading was sluggish at best and flatlined around 2:00 pm ET only to be saved by late-day short covering and the usual hijinks by backroom operators (NY Fed).
If stocks fail to close higher next week - as this week marked the end of a three-week uptrend - damage could become more or less permanent. While many placed hope in the Fed's power to purchase as many types and varieties of bonds that confidence was shattered on Thursday and should lead the way back to some fundamental rethinking of market dynamics.
Nothing goes up or down in a straight line, but this week should provide some clues as to the ultimate short-and-long term market direction.
At the Close, Friday, June 12, 2020:
Dow: 25,605.54, +477.37 (+1.90%)
NASDAQ: 9,588.81, +96.08 (+1.01%)
S&P 500: 3,041.31, +39.21 (+1.31%)
NYSE: 11,867.17, +208.00 (+1.78%)
For the Week:
Dow: -1505.44 (-5.55%)
NASDAQ: -225.27 (-2.30%)
S&P 500: -152.62 (-4.78%)
NYSE: -774.27 (-6.12%)
The downdraft followed two straight days of minor losses and may have put a punctuation mark on the market's 11-week rally. The NASDAQ, which made a fresh all-time closing high on Monday (9,924.75) and crested over 10,000 on Wednesday, took a 517-point collapse on Wednesday. Like the Dow, which lost over 1800 points, the loss was the fourth-highest one-day point decline in market history. For both indices, the three higher point losses all occurred this past March.
Friday was snapback day, though the gains were paltry compared to the prior day's losses. Stocks gained back less than a third of what was surrendered on Thursday.
The late-week action prompted market observers to question the solidity of the recent rally, which, in V-shaped manner, took the markets straight off their March lows and out of bear market territory. Stocks had gained even as entire states were in lockdowns and the COVID-19 virus raged across America. Stocks continued to rise in the face of nationwide protests against police violence in the aftermath of the death of George Floyd at the hands of Minneapolis police. Many of the protests turned violent, as disruptive elements rioted and looted stores.
Fueled by emergency lending by the Fed, stocks seemed to be out of touch with mainstream economics, a condition not unusual for Wall Street types. Thursday's turnabout was broadly-based and unsparing of any sector though banking and tech stocks were leaders to the downside.
Coincidentally, protesting fell off as well, probably due to uprising fatigue. After two weeks of marching around in hot weather, the movement became somewhat pointless and many lost interest in reform toward better policing, though success was claimed in some areas, such as Minneapolis, where the city council decided to defund and disband the police, and New York, where measures were take by legislators to ratchet down the heavy-handed tactics of its force.
In Louisville, Kentucky, the city council voted to ban no-knock warrants. The resolution was passed in reaction to the death of Breonna Taylor, who was killed in a March no-knock raid at the wrong address.
One city in which protests have not tailed off is Atlanta, the scene of widespread rioting and looting early on, where chief of police, Erika Shields, has resigned on Sunday after officers fired upon and killed 27-year-old Rayshard Brooks Friday night.
And, in Seattle, the madness reached a climax on Monday as officials decided not to defend a police precinct, resulting in protesters, led by Black Lives Matter (BLM) taking over a six-block urban area and renaming it the Capitol Hill Autonomous Zone (CHAZ).
All of this is a backdrop to pent-up emotions and outrage that were magnified during the coronavirus lockdowns. Some people, took issue with Wall Street's rapid rally, citing it as an affront to societal mores and economic inequality. By the looks of where markets were heading on Thursday, the impact of the lockdowns and protests finally have reached lower Manhattan.
Treasuries staged a solid rally at the long end of the curve through Thursday, with the 10-year note yield falling from 0.91% to 0.66% and from 1.69% to 1.41% on the 30-year. On Friday, bond prices fell, with the 10-year closing out at 0.71%; the 30-year bond finished at 1.45%.
Precious metals rose early in the week, but were tamped down as the week drew to a close. Gold reached $1742.15 before ending the week still elevated at $1733.50. Spot silver was as high as $17.87 an ounce, closing at $17.62 on Friday. Spot and futures prices continue to trend toward irrelevance as premium prices for physical metal and shortages continue into a third month. Many dealers show popular items out of stock or with significant delivery delays, a condition that has persisted for retailers since the onset of the coronavirus.
eBay continues to light the way for purveyors and buyers alike, with calculable prices (at premiums over spot) and rapid, reliable deliveries. Here are the most recent prices on select items from ebay sellers (prices include shipping):
Item: Low / High / Average / Median
1 oz silver coin: 25.50 / 36.20 / 31.00 / 29.90
1 oz silver bar: 19.95 / 35.20 / 29.32 / 29.88
1 oz gold coin: 1,837.00 / 1,900.52 / 1,857.86 / 1,855.40
1 oz gold bar: 1,806.00 / 1,880.00 / 1,840.52 / 1,832.63
As far as stocks are concerned, after the FOMC meeting concluded Wednesday and the Fed committed to keep the federal funds rate at or near the zero-bound at least until the end of 2022, investors got a little jittery over their engineered V-shaped rally, the overall stability of the global economy, and valuations heading into the end of the second quarter and some supposedly horrifying earnings figures coming the second week of July.
The coming week may be epochal or apocalyptic as Friday offers a quad witching day as stock index futures, stock index options, stock options, and single stock futures expire simultaneously. There should be some volatility showing up at the convergence of day-trading, options players and real-time economics all roll together.
While Thursday's massive decline in stocks sent shock waves through the markets, Friday's returns were uninspired and had the look of a an exhausted rally on its final legs. Trading was sluggish at best and flatlined around 2:00 pm ET only to be saved by late-day short covering and the usual hijinks by backroom operators (NY Fed).
If stocks fail to close higher next week - as this week marked the end of a three-week uptrend - damage could become more or less permanent. While many placed hope in the Fed's power to purchase as many types and varieties of bonds that confidence was shattered on Thursday and should lead the way back to some fundamental rethinking of market dynamics.
Nothing goes up or down in a straight line, but this week should provide some clues as to the ultimate short-and-long term market direction.
At the Close, Friday, June 12, 2020:
Dow: 25,605.54, +477.37 (+1.90%)
NASDAQ: 9,588.81, +96.08 (+1.01%)
S&P 500: 3,041.31, +39.21 (+1.31%)
NYSE: 11,867.17, +208.00 (+1.78%)
For the Week:
Dow: -1505.44 (-5.55%)
NASDAQ: -225.27 (-2.30%)
S&P 500: -152.62 (-4.78%)
NYSE: -774.27 (-6.12%)
Friday, June 12, 2020
So Much for That V-Shaped Recovery as Dow Sheds 1861 Points, NASDAQ Drops 527
That rally - the one that started on right away on March 24 with a 2100-point gain, the day after the Dow bottomed out at 18,591.93 - is over. Smart traders made money. Anybody who was fretting about their retirement account and didn't exit, well, there's still time. The market giveth and taketh away. In this case, thanks to emergency measures by the Fed, the market gave almost everybody who didn't get out a gold opportunity to make for the hills.
If you're still in, you're either a day-trading maniac or just plain stuck on stupid. There are other asset classes. There's always cash. This second leg down is likely to be much more severe than the first because it will take months instead of days to wipe out trillions in invest dollars. Rest assured, at the end of the second leg, everybody's a loser.
Putting it all into perspective, after the major indices fell into bear market territory - defined as down more than 20% - the duration of the bear market was record for brevity: five weeks. Not that those five weeks in the doldrums will go down in the history books as a traditional bear market; they'll likely be remembered as the start of the Greatest Depression, spawn of the coronavirus, oil shock, and global plebeian protests because the stock market decline began again in earnest on Thursday, June 11.
The loss on the Dow was nearly seven percent, ranking it just outside the Top 20 in percentage terms, but number four in regards to points lost. It ranks behind three other losses, all from this year, which is about all one needs to know about stocks in the year 2020. The NASDAQ loss of 527.62 was also the fourth-highest, point-wise. Similarly, the three greatest point losses in NASDAQ history also occurred just this past March.
No, there will not be any v-shaped recovery as the market charts suggested. That was all a fantasy, spun out of whole cloth from the Federal Reserve. After all, how could stocks rally when unemployment was somewher in the neighborhood of 15%, people around the world were dying from a pandemic, whole nations and most states in the US were shut down for anywhere from a month to ten weeks, corporate earnings were in the toilet and second quarter results were still a month down the road?
The fairy tale rally never made any sense and never will except in regards to some very rich people making even more money without doing a damn thing. Rest assured, most of them were selling today or have either significantly trimmed their positions or added hedges, by which they'll enrich themselves even further on another downdraft.
There is likely to be a snapback on Friday. No telling which way it will eventually eventually turn, but recent market action offers a strong indication that a 1200-point swing to the upside on the Dow might be key to understanding the psychology of crazy. Anything less than that would leave the Dow just below its 200-day moving average.
Be mindful that despite the Dow's 9,000-point gain (yes, that's right, 9,000 points!) over the past 12 weeks, the current chart is one of a primary BULL market according to Dow Theory. The Industrials exceeded the December 2018 lows to the downside, and then erupted to the upside, cancelling out the bear reversal. Dow Transports confirmed the move, doing the same.
Nobody is betting on conformity with current market conditions. The Fed's emergency rescue facilities have only added to the overall distortion from QE, ZIRP, and other experiments in currency counterfeiting. Hanging one's hat on theories dating back to the early 20th century might engender more anguish than reward.
Some will call Thursday's pullback "healthy", but those are probably the perma-bulls in the room. Anybody who can say with a straight face that the US or global economy is healthy ought to be selling used cars rather than stocks.
WTI crude fell more than $3 on the day, from a range around $39 to $36. Gold and silver were unceremoniously smashed lower on futures markets, but, as has been a repeating theme, will likely bounce back quickly as premiums and shortages persist.
The long end of the treasury complex continued to rally, dropping yield in the 10-year note and 30-year bond from 0.91% and 1.68% last Friday to 0.66% and 1.41%, respectively.
Stay liquid.
At the Close, Thursday, June 11, 2020:
Dow: 25,128.17, -1,861.82 (-6.90%)
NASDAQ: 9,492.73, -527.62 (-5.27%)
S&P 500: 3,002.10, -188.04 (-5.89%)
NYSE: 11,659.17, -790.05 (-6.35%)
If you're still in, you're either a day-trading maniac or just plain stuck on stupid. There are other asset classes. There's always cash. This second leg down is likely to be much more severe than the first because it will take months instead of days to wipe out trillions in invest dollars. Rest assured, at the end of the second leg, everybody's a loser.
Putting it all into perspective, after the major indices fell into bear market territory - defined as down more than 20% - the duration of the bear market was record for brevity: five weeks. Not that those five weeks in the doldrums will go down in the history books as a traditional bear market; they'll likely be remembered as the start of the Greatest Depression, spawn of the coronavirus, oil shock, and global plebeian protests because the stock market decline began again in earnest on Thursday, June 11.
The loss on the Dow was nearly seven percent, ranking it just outside the Top 20 in percentage terms, but number four in regards to points lost. It ranks behind three other losses, all from this year, which is about all one needs to know about stocks in the year 2020. The NASDAQ loss of 527.62 was also the fourth-highest, point-wise. Similarly, the three greatest point losses in NASDAQ history also occurred just this past March.
No, there will not be any v-shaped recovery as the market charts suggested. That was all a fantasy, spun out of whole cloth from the Federal Reserve. After all, how could stocks rally when unemployment was somewher in the neighborhood of 15%, people around the world were dying from a pandemic, whole nations and most states in the US were shut down for anywhere from a month to ten weeks, corporate earnings were in the toilet and second quarter results were still a month down the road?
The fairy tale rally never made any sense and never will except in regards to some very rich people making even more money without doing a damn thing. Rest assured, most of them were selling today or have either significantly trimmed their positions or added hedges, by which they'll enrich themselves even further on another downdraft.
There is likely to be a snapback on Friday. No telling which way it will eventually eventually turn, but recent market action offers a strong indication that a 1200-point swing to the upside on the Dow might be key to understanding the psychology of crazy. Anything less than that would leave the Dow just below its 200-day moving average.
Be mindful that despite the Dow's 9,000-point gain (yes, that's right, 9,000 points!) over the past 12 weeks, the current chart is one of a primary BULL market according to Dow Theory. The Industrials exceeded the December 2018 lows to the downside, and then erupted to the upside, cancelling out the bear reversal. Dow Transports confirmed the move, doing the same.
Nobody is betting on conformity with current market conditions. The Fed's emergency rescue facilities have only added to the overall distortion from QE, ZIRP, and other experiments in currency counterfeiting. Hanging one's hat on theories dating back to the early 20th century might engender more anguish than reward.
Some will call Thursday's pullback "healthy", but those are probably the perma-bulls in the room. Anybody who can say with a straight face that the US or global economy is healthy ought to be selling used cars rather than stocks.
WTI crude fell more than $3 on the day, from a range around $39 to $36. Gold and silver were unceremoniously smashed lower on futures markets, but, as has been a repeating theme, will likely bounce back quickly as premiums and shortages persist.
The long end of the treasury complex continued to rally, dropping yield in the 10-year note and 30-year bond from 0.91% and 1.68% last Friday to 0.66% and 1.41%, respectively.
Stay liquid.
At the Close, Thursday, June 11, 2020:
Dow: 25,128.17, -1,861.82 (-6.90%)
NASDAQ: 9,492.73, -527.62 (-5.27%)
S&P 500: 3,002.10, -188.04 (-5.89%)
NYSE: 11,659.17, -790.05 (-6.35%)
Thursday, June 11, 2020
Fed To Keep Rates At ZERO Through 2022; Are Gold and Silver Investors Batty?; Implications of Global Madness
If Forex is in your wheelhouse, you've no doubt noticed the recent decline in the US dollar against other major currencies. The Dollar Index has been pretty shaky as of late, but the current trend in the aftermath of the worst of the coronavirus pandemic is lower, with no bottom in sight.
After sinking to 94.89 on the 3rd of March, the dollar leapt back to an interim high of 102.82 on March 20th. Wednesday's quote was 95.96, a decline of nearly seven precent, most of that happening within the last three weeks.
That's not surprising, given that American cities have been beset upon by hordes of protesters, complete with rioters, looters, cop killings, tear gassings, rubber bullet maimings, autonomous zones (Seattle's Capitol Hill is one, recently claimed and occupied by protesters as police vacated the 3rd Precinct) and general lawlessness, making dollar holdings somewhat of a risky bet in the near term and, as dollar dominance recedes, maybe for much longer.
At the conclusion of the Fed's Tuesday and Wednesday's FOMC policy meeting, Chairman Jerome Powell made a definitive statement on interest rates, saying that the overnight federal funds rate would remain at the zero-bound at least until 2022. That kind of central bank sentiment doesn't exactly inspire confidence in the world's reserve currency. It indicates nothing less than a failure of financial system underpinning, a condition that first appeared in 2007, was not adequately addressed and has now become a systemic crisis without hope of positive resolution.
While the Fed still has the monetary muscle to backstop financial assets it does so with counterfeit, a fictional fiat currency without backing that eventually will be worthless. History has shown this to always be the case. Fiat currencies die and a new financial system is erected. Normally, the new system is backed by gold or silver, or a combination of the two. This time is no different than any other. The Federal Reserve and other central banks can continue their charade for only so long. Eventually, income disparity results in runaway inflation and widespread poverty, prompting clamor from the masses, which we are witnessing on a global scale today as an epochal societal revolution.
Such incalculable convulsions encourage escape from the clutches of unfair finances promulgated by central banks. People seek refuge from currencies that are losing value rapidly. Housing, health care, and eventually, food become unaffordable to the vast swath of middle and lower classes. Alternatives are sought. Gold and silver are the most readily available to the public. Silver becomes particularly of interest due to its lower price points. The availability of metallic money becomes a point of contention as people with limited means crowd into the space, which is exactly what's happened since the onset of the coronavirus.
A 10 troy ounce gold bar at Apmex.com is offered for $18,255.90. At Scottsdale Mint, the popular one ounce silver bar dubbed "The One" starts at $25.05 and goes down in price to $23.42 depending on quantity and method of payment. Of course, given that one would be willing to pay a price that carries a premium of seven dollars over spot, one would be out of luck, as "The One" is currently out of stock.
These are just a few examples of what happens when a confluence of events (pandemic, endless fiat currency creation, summer-long protests, high unemployment, rampant inflation) strikes the minds of people with money and assets. They either go with the flow and stay in stocks or look to gold and/or silver for some safety. With bonds yielding little to nothing - sometimes less than that via negative rates - and default risk rising (hello, Argentina!), precious metals offer a reasonable alternative.
Futures and spot prices for the precious metals might as well be cast upon stones for what they fail to deliver in terms of price discovery. Being holdovers from the failing fiat regime, they are being left behind as physical holdings dominate the marketplace. Prices are exploding on eBay and at dealers, as shown in the examples above. Money Daily tracks prices on eBay for one ounce gold and silver coins and bars weekly in it's Weekend Wrap every Sunday.
Other ways to deploy currency are in art, collectibles (comic book prices are through the roof), vintage automobiles, commodity futures, real estate, ad other asset classes, but none of those share the characteristics of precious metals as real money, except possibly cryptocurrencies like Bitcoin.
Wall Street, the Federal Reserve, and the federal government are hanging onto their prized positions of monetary and political authority by their teeth. It's only a matter of time before all of it fails. The nationwide protests are proof that the federal government is losing control of the country in manifest ways. Unrelenting gains in precious metal prices - and the attendant, repeated attempts to contain those gains in the futures markets - is evidence of the Fed's desperation, just as Wall Street's recent snapback rally is a mirage based on easily available fiat currency and nothing else.
It's all tumbling down and there's nothing that can stop it. The demise of the dollar has been an ongoing orgy of dislocation for decades. Trillions of dollars added to the Fed's balance sheet, euros at the ECB, yen at the Bank of Japan, yuan at at PBOC are mere stop-gap measures which do not address the underlying solvency issues. If the stock market crash in March wasn't enough to scare people out of stocks and fiat, the coming wave will surely devastate those who failed to heed the warning. Via the Fed's emergency measures, Wall Street has given investors a golden opportunity to diversify out of stocks. Those who fail to take the opportunity will suffer a heavy economic blow.
At the Close, Wednesday, June 10, 2020:
Dow: 26,989.99, -282.31 (-1.04%)
NASDAQ: 10,020.35, +66.59 (+0.67%)
S&P 500: 3,190.14, -17.04 (-0.53%)
NYSE: 12,449.22, -170.30 (-1.35%)
After sinking to 94.89 on the 3rd of March, the dollar leapt back to an interim high of 102.82 on March 20th. Wednesday's quote was 95.96, a decline of nearly seven precent, most of that happening within the last three weeks.
That's not surprising, given that American cities have been beset upon by hordes of protesters, complete with rioters, looters, cop killings, tear gassings, rubber bullet maimings, autonomous zones (Seattle's Capitol Hill is one, recently claimed and occupied by protesters as police vacated the 3rd Precinct) and general lawlessness, making dollar holdings somewhat of a risky bet in the near term and, as dollar dominance recedes, maybe for much longer.
At the conclusion of the Fed's Tuesday and Wednesday's FOMC policy meeting, Chairman Jerome Powell made a definitive statement on interest rates, saying that the overnight federal funds rate would remain at the zero-bound at least until 2022. That kind of central bank sentiment doesn't exactly inspire confidence in the world's reserve currency. It indicates nothing less than a failure of financial system underpinning, a condition that first appeared in 2007, was not adequately addressed and has now become a systemic crisis without hope of positive resolution.
While the Fed still has the monetary muscle to backstop financial assets it does so with counterfeit, a fictional fiat currency without backing that eventually will be worthless. History has shown this to always be the case. Fiat currencies die and a new financial system is erected. Normally, the new system is backed by gold or silver, or a combination of the two. This time is no different than any other. The Federal Reserve and other central banks can continue their charade for only so long. Eventually, income disparity results in runaway inflation and widespread poverty, prompting clamor from the masses, which we are witnessing on a global scale today as an epochal societal revolution.
Such incalculable convulsions encourage escape from the clutches of unfair finances promulgated by central banks. People seek refuge from currencies that are losing value rapidly. Housing, health care, and eventually, food become unaffordable to the vast swath of middle and lower classes. Alternatives are sought. Gold and silver are the most readily available to the public. Silver becomes particularly of interest due to its lower price points. The availability of metallic money becomes a point of contention as people with limited means crowd into the space, which is exactly what's happened since the onset of the coronavirus.
A 10 troy ounce gold bar at Apmex.com is offered for $18,255.90. At Scottsdale Mint, the popular one ounce silver bar dubbed "The One" starts at $25.05 and goes down in price to $23.42 depending on quantity and method of payment. Of course, given that one would be willing to pay a price that carries a premium of seven dollars over spot, one would be out of luck, as "The One" is currently out of stock.
These are just a few examples of what happens when a confluence of events (pandemic, endless fiat currency creation, summer-long protests, high unemployment, rampant inflation) strikes the minds of people with money and assets. They either go with the flow and stay in stocks or look to gold and/or silver for some safety. With bonds yielding little to nothing - sometimes less than that via negative rates - and default risk rising (hello, Argentina!), precious metals offer a reasonable alternative.
Futures and spot prices for the precious metals might as well be cast upon stones for what they fail to deliver in terms of price discovery. Being holdovers from the failing fiat regime, they are being left behind as physical holdings dominate the marketplace. Prices are exploding on eBay and at dealers, as shown in the examples above. Money Daily tracks prices on eBay for one ounce gold and silver coins and bars weekly in it's Weekend Wrap every Sunday.
Other ways to deploy currency are in art, collectibles (comic book prices are through the roof), vintage automobiles, commodity futures, real estate, ad other asset classes, but none of those share the characteristics of precious metals as real money, except possibly cryptocurrencies like Bitcoin.
Wall Street, the Federal Reserve, and the federal government are hanging onto their prized positions of monetary and political authority by their teeth. It's only a matter of time before all of it fails. The nationwide protests are proof that the federal government is losing control of the country in manifest ways. Unrelenting gains in precious metal prices - and the attendant, repeated attempts to contain those gains in the futures markets - is evidence of the Fed's desperation, just as Wall Street's recent snapback rally is a mirage based on easily available fiat currency and nothing else.
It's all tumbling down and there's nothing that can stop it. The demise of the dollar has been an ongoing orgy of dislocation for decades. Trillions of dollars added to the Fed's balance sheet, euros at the ECB, yen at the Bank of Japan, yuan at at PBOC are mere stop-gap measures which do not address the underlying solvency issues. If the stock market crash in March wasn't enough to scare people out of stocks and fiat, the coming wave will surely devastate those who failed to heed the warning. Via the Fed's emergency measures, Wall Street has given investors a golden opportunity to diversify out of stocks. Those who fail to take the opportunity will suffer a heavy economic blow.
At the Close, Wednesday, June 10, 2020:
Dow: 26,989.99, -282.31 (-1.04%)
NASDAQ: 10,020.35, +66.59 (+0.67%)
S&P 500: 3,190.14, -17.04 (-0.53%)
NYSE: 12,449.22, -170.30 (-1.35%)
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