WEEKEND WRAP: Second Quarter Ends on High Note, Though Systemic Banking Collapse Is Still Feared

Stocks had a solid week, albeit shorted by a day due to Friday's national holiday, though the recent rally has stalled out over the past month. Despite the sharp rally in equities, prices remain somewhat subdued when put into an historical context.

For instance, since peaking in January of 2018 (13,657.02), the NYSE Composite, the broadest measure of equity valuation, is lower by 12.20 percent, though it did make a new high January 2020 (14,183.26).

The Dow Jones Industrial Average of 30 blue chip stocks followed a similar pattern, peaking at 26,616.71 in January, 2018 - and rallying significantly since then to a high of 29,551.42 - the current price of 25,827.36 shows just how much of a toll the coronavirus and subsequent governmental actions have taken on the industrials.

The NASDAQ and S&P 500 have fared better. Close to its all-time high, the NASDAQ closed out the week at 10,207.63, a massive 25.50% gain from the August 2018 high of 8133.30.

The S&P finished the week at 3,130.01, a measly rise of 6.43% when it reached a then-all-time-high of 2940.91 in September of 2018.

Obviously, being in the riskiest, most prone to speculation stocks has been a winning formula.

Can the winning on the NASDAQ continue without worry of second slump this year? It was less than four months ago when all markets were battered, the NASDAQ dropping to a low of 6641.32 (March 23). Investors with the most extreme risk profiles made fortunes. A gain of 53.70 percent in a span of just three months was the reward for those lucky enough to buy exactly at the bottom and sell right at the top (10221.05) just over a week ago.

With the close of the second quarter, it's time to look ahead, with a focus on the major banking interests in the United States. Bank stocks have generally been pretty well beaten down since the crash in March and most have not recovered to any great extent.

Bank of America (BAC) cratered to 18.08, and closed out this week at just 23.29, not much of a rebound. JP Morgan Chase (JPM) bottomed at 79.03 and closed Thursday at 92.66. Citigroup (C) dipped as low as 35.39. Thursday's close was 50.55. Wells Fargo (WFC), possibly the most vulnerable of the big banking interests, fell as low as 22.53 on May 15, closing out this week at 25.34.

Overarching the activity of the Fed-infused institutions are some fears from the extent of forbearance on all manner of loans, from credit card debt to car loans to mortgages. Many individuals have not made payments on loan balances since April or May and the dearth of revenue has to be taking its toll on the banking balance sheets.

Beyond the revenue decline and potential that people and companies in forbearance (which only delays payments and does not forgive them), the banks have to manage millions of loans (secured and unsecured), some of which will surely end in default, the banks eventually forced to write them down. Thus, it's a safe assumption that the banks will be reporting major loan loss reserves when they report in less than two weeks.

Atop these huge issues is the risk taken in Collateralized Loan Obligations. The banks are out on a very shaky limb there.

How bad is the CLO market? Depends on who you ask. Banks will tell you that they only invest in AAA tranches of CLOs, so their risk is minimized. Companies that are on the receiving end of loans and are placed into tranches - from AAA all the way down to junk, CCC, CC C, C- - give an entirely different perspective.

It cannot be understated that CLOs consist primarily of loans made to companies which have exhausted all other forms of borrowing. They are undeniably the worst credit risks.

There are signs that the CLO market is too big, too unregulated, and risks collapse as oil companies, under pressure from falling crude prices, and retailers, shutting down in droves due to the coronavirus and lockdown edicts in most US states, are leading the lower tranches into default.

As the credit market unwinds (this all takes time... months, years) banks will be under pressure to increase their loan loss reserves, as they showed in first quarter financial reports. Loan loss reserves are likely to be magnitudes higher when second quarter results for the biggest banks are turned out in a few weeks (all the majors, BAC, JPM, GS, MS, WFC, C, from July 13 - July 17).

Another threat to big banks comes from the recent spike in COVID-19 cases in Texas, Florida, California, Arizona, and Georgia.

Bank of America Corp., with $618 billion in deposits across those five states, as per 2019 data; Wells Fargo & Co., with $467 billion; JPMorgan Chase & Co., with $420 billion, and Truist Financial Corp., with $140 billion are the biggest lenders at risk.

Keep a close eye on banks this earnings season and beyond. The risk of systemic collapse is growing by the day. If the coronavirus scare increases over the next few months, banking collapse would not be such an unfathomable outcome, no matter how much the Fed manages to prop up the major instituations.

Crude oil, that engine of progress and the grease of economies, continues to bump up against the $40/barrel mark for WTI crude. Reaching a high of $40.72 on June 22nd, WTI approached that apex, cresting at $40.65 on Thursday before settling down to $40.32 on Friday.

Investors in precious metals were witness to one heck of a week as silver blasted through $18.00 a troy ounce hitting a high of $18.40, and gold rocked close to $1800 ($1790), though both were tamped down on futures markets as the week progressed. Gold finished up at $1774.40. Silver closed at $18.02 on Friday, July 2nd.

While the futures (paper) markets continue attempts to suppress price advances in precious metals, the physical market continues to spin higher with no abatement in the size of premiums charged by dealers and acceptable to savers. The most current prices for selected items on eBay (as we have been now tracking for three months) are presented below (shipping, often free, included):

Item: Low / High / Average / Median
1 oz silver coin: 25.95 / 31.95 / 29.01 / 28.99
1 oz silver bar: 24.45 / 33.00 / 29.00 / 29.45
1 oz gold coin: 1,853.82 / 1,976.95 / 1,897.92 / 1,892.50
1 oz gold bar: 1,853.57 / 1,941.42 / 1,869.76 / 1,861.50

Bonds rallied moderately over the four-day week, but only on the long end. Yield on the 10-year note went from 0.64% on the 26th of June to 0.68% on July 2. Over the same period, the 30-year yield advanced from 1.37% to 1.43%. The entire complex steepened from 125 basis points to 130, not a significant move, though the curve is shaped considerably differently than six months ago, and quite a bit steeper. On January 2nd of this year, 1-month bills yielded 1.53%, a massive change from Thursday's 0.13%, and the 30-year bond yielded 2.33%, a range of merely 80 basis points or 0.8% from trough to peak. That's flat.

The current composition of the treasury yield curve can be considered better aligned toward investment, though not by general banking standards. Taken into context, the curve, on July 1, 1994 (a much better period from an economic standpoint) was steep and healthy, with the range from 3-month (4.32%) to 30-year (7.62%) a stunning 330 basis points. The 10-year note was yielding 7.34% at the time. On can only imagine the wreckage that would be brought about today with those kinds of yields.

While savers would be adequately rewarded for frugal habits, corporations and governments would be smashed into oblivion with massively higher debt burdens. This comparison illustrates just how far afield the Fed has gone to preserve fractional reserve lending and the dramatic slowdown in the velocity of money. Considering the current economic climate, it is difficult, if not impossible, to imagine interest rates ever returning to a healthy or normal condition.

The Fed has created money out of thin air in the trillions of dollars and painted themselves into a corner of insanity that ultimately ends with the destruction of capital and currency on a cataclysmic scale.

What's not being reported by American mainstream media is the extent of flooding in China and India caused by recent heavy rains at what is just the beginning of the monsoon season.

This is a story which bears attention. the loss of lives due to flooding and potentialities for malnutrition and starvation due to crop loss - especially rice and rapeseed - is alarming.



On that sour note, this weekend is a wrap.

At the Close, Thursday, July 2, 2020:
Dow: 25,827.36, +92.39 (+0.36%)
NASDAQ: 10,207.63, +53.00 (+0.52%)
S&P 500: 3,130.01, +14.15 (+0.45%)
NYSE : 11,991.52, +89.97 (+0.76%)

For the Week:
Dow: +811.81 (+3.25%)
NASDAQ: +450.41 (+4.62%)
S&P 500: +120.96 (+4.02%)
NYSE: +387.10 (+3.34%)

It's Time to Say Good Bye to China

Nearly 50 years ago, then-president Richard M. Nixon opened the door to trade and normalized relations with China.

The exact date was February 21, 1972. Months later, on November 7, 1972, Nixon was re-elected in a landslide victory over Senator George McGovern of South Dakota, winning 60.7 percent of the popular vote and 520 electoral votes, to McGovern’s 37.5 percent and 17, respectively.

On August 8, 1974, Nixon left office as the House of Representatives was preparing to launch an impeachment inquiry for his attempt to cover up and participation in the Watergate scandal.

Nixon's crime in Watergate was heinous enough. Perhaps, revisiting history from our perspective today, he should have been impeached for his China policy. It opened the door for American manufacturers to relocate facilities to the Asian nation, costing millions of Americans their jobs and setting in motion decades of trade imbalances and a long, slow decline of American culture.

It could also be alleged that Nixon's worst crime was his "temporary" closing of the gold window on August 15, 1971, effectively ending the Bretton Woods era. Taken together with his China policy, Nixon set in motion the wreckage of a prosperous middle class in America.

while it's easy to scapegoat Mr. Nixon, it should be pointed out that his policies were mostly not of his making, but those of his advisors and cabinet members, particularly Secretary of State Henry Kissinger, advance man Dewey Clower, founder of the notorious February Group, speechwriter Pat Buchanan, and Donald Rumsfeld, who served as counsellor to the president (1969–73), the United States Permanent Representative to NATO (1973–74), and White House Chief of Staff (1974–75), among others such as George Romney, George Schultz, John Connally, Elliot Richardson, but that's a deep state story for another day.

As of 2019, over $560 billion worth of products come from China. Everything from electric blankets to video game consoles, from cooking appliances to baby carriages are made almost exclusively in China. Proctor & Gamble estimates that Chinese materials impact 17,600 different finished products.

Decades of cheap, sub-standard manufactured products from China have eroded the quality of life in America. dealing with the communists allowed the propagation of Wal-Marts across the country, wiping out hundreds of thousands, if not millions, of small businesses that dotted the business landscape of both urban and rural America. Our economy is now almost fully dependent on imports from China and spending by consumers.

Corporations don't make much of anything in America any more. The mainstream media, flush with scary stories about COVID-19, the second wave, lockdowns, protesting in the streets, and the cultural revolution of Black Lives Matter and ANTIFA, will almost certainly have a field day if trade relations with China sour, which they already have, though they're too busy with all the other nonsense to notice.

American dissatisfaction with China is reaching catastrophic proportions. According to a polls conducted by the Gallup organization, 67 percent of Americans have a negative view of China. 87 and 89 percent of those polled view China's military and economic strengths, respectively, as critical or important threats to America. 62 percent believe China's trade policies toward the US are unfair, and 86 percent are either somewhat concerned or very concerned about China's trade policies. And these polls were taken before the coronavirus, of which 77% of people polled by Harris believe originated in China [PDF], spread disease and death around the world.

Aside from the lying, spying, stealing of state secrets, knock offs and pirating of American products, pet food that kills dogs and cats, substandard plywood, concrete and other building materials like nails that bend on impact and screws that break in half, forays into the South China Sea and Africa, aggressive attitude toward Hong Kong and Taiwan, defective coffee makers, blenders and a slew of household and consumer products, China is just fine as a trading partner.

The United States should, instead of appeasing them on trade as many former presidents have, take President Trump's approach to the extreme and just sever relations with them altogether. While such a policy would likely result in many empty shelves in WalMart and Target stores, it might just be enough of a spark to ignite a fire under the dormant manufacturing base in the United States of America and create millions of new jobs in a restructured economy.

The world has been ravaged by a Chinese scourge for nearly 50 years. It's time to turn the tables on the Communists and banish them rather than bless them and promote them, as the BLM and ANTIFA protesters do.

Markets will be closed on Friday, in observance of Independence Day. Enjoy the holiday by buying American-made goods, if you can find any.

At the Close, Wednesday, July 1, 2020:
Dow: 25,734.97; -77.91 (-0.30%)
NASDAQ: 10,154.63, +95.86 (+0.95%)
S&P 500: 3,115.86, +15.57 (+0.50%)
NYSE: 11,901.55, +7.77 (+0.07%)

Credit World May Become A Battlefield If FICO and Square Butt Heads; Silver on the Move; ADP Fairy Tales

A couple of stories from the world of personal credit are noteworthy as the world enters the third quarter of 2020 hoping for improvement but fearing a repeat of the second quarter from the same enemy which ran roughshod over the world economy.

It's not the virus that people fear, but government response to it in terms of restricted mobility, business operations, and general closures of everything from schools and churches to bars and hair salons.

While the planet and government managers struggle with the virus and their chances in the upcoming US elections in November, credit issues are popping up like daffodils in Springtime. Huge numbers of Americans are foregoing rent and mortgage payments, citing unemployment as the main cause for a diminished cash flow, and delinquencies are piling up not only on mortgages (which are vitally important), but on car loans and leases, student debt, credit cards, and personal loans.

It's because of these issues, or perhaps in spite of them, that FICO (Fair Isaac Corporation) wants to rate your resilience and ability to pay back borrowed money in a recession or economic downturn. The company and its affiliate credit scorekeepers - Experian, TransUnion and Equifax - are looking back at credit histories from the GFC in 2007-09 for hints of riskiness in borrowers.

Their findings, which won't be relevant for at least a few more months, could affect how consumers are judged when applying for any kind of credit, from mortgages to car loans. If economic conditions remain below par, many people with poor resilience scores could find themselves out of luck getting credit.

Countering FICO's foray into past performance of borrowers, Chime continues to innovate in the banking and credit space with the launch of the Chime Credit Builder Visa Credit Card.

Actually a debit card that works like a credit card, users can transfer funds from a secure Chime account to a Visa card, and use that money to charge anything, including everyday items like food, gas, clothing or general expenses. The charges are paid by the card automatically, and the results reported to the credit bureaus. The goal is to improve credit scores for mainly younger folks, who favor debit cards over credit, but who need to establish or improve their credit history.

If it sounds like cheating, it very well may be. This is reporting of purchases made with essentially a debit card being reported as a credit card. The credit bureaus are likely to balk at this methodology. A clash between the old standard bureaus and the upstart Chime might make for some interesting developments in how credit and individual risk are measured down the road.

Tuesday's hands-down big winner was silver, which rocketed up by more than two percent in the futures space, vaulting over the psychologically-challenging $18 mark and holding around $18.20. Gold's little sister has a lot of catching up to do and if this price maintains, should signal that a run up to resistance in the $20-21 range is imminent. Correlated closely to the S&P index (for God only knows what reason), if stocks falter and silver holds or goes even higher, that would qualify as a major development. Keep eyes peeled on that space.

Stocks continued their rally from Monday into Tuesday, which was the final day of the month and of the second quarter, an important milestone, since GDP for the quarter - heavily affected by the coronavirus and state-by-state lockdowns and business closures - is expected to check in with a very negative number on a scale likely never seen before. Estimates for second quarter GDP range between -25% to -52%.

Current stock valuations seem to be suggesting that investors are leaning toward the upper end of that range. A decline of 30-35% might actually be seen as a positive for markets because it will be viewed as a one-off event followed by a rapid recovery, though the jury is still out on whether economic recovery will look like a "V", "W", or an "L".

Any view of the stock market indices over the past five months clearly show a "V" shape, with stocks declining and rising at the same frenetic pace. The recovery pattern for stocks can hardly be taken as definitive by any measure of economic activity. Stocks were skyrocketing off their lows as millions of people were losing their jobs, the government and Federal Reserve exercising emergency measures, and the general economy entering a recession.

A "W" pattern goes along with the "second wave" theory of the virus, already being engineered by increased testing and renewed calls for shutdowns, lockdowns, face masks, social distancing and all the assorted recommendations which were successful only in wrecking the Main Street small business economy.

The "L" pattern is the one most despised by money managers, banking executives, and financial central planners because it offers no realistic hope for the immediate future. The "L" concept implies that the economy falls and stays down for an extended period. Like just about everything else the experts at the biggest banks and financial institutions predict, contrarian view has the slow recovery "L" pattern front of mind and it is actually the most likely pattern - not for stocks or any other asset classes - for the general economy in terms of GDP, personal income, and employment.

Finally, queueing the start of the third quarter in the typical doublespeak manner, ADP's June Employment Report showed a gain of 2,369,000 jobs in the non-farm private sector. This follows a decline of 2,760,000 in May, with June just about covering all those job losses. ADP saw 19.5 million people lose their jobs in April, another 2.8 million lost jobs in May (which has now been revised to +3.065mm!). It's almost as if many of those 20 million people filing continuing unemployment claims don't exist, which is fine, since we're all living in bizarro-world now.

At the Close, Tuesday, June 30, 2020:
Dow: 25,812.88, +217.08 (+0.85%)
NASDAQ: 10,058.77, +184.61 (+1.87%)
S&P 500: 3,100.29, +47.05 (+1.54%)
NYSE: 11,893.78, +116.69 (+0.99%)

Boeing Leads Stocks Another Bump Higher; What Your Life Will Be Like in 2021 and Beyond

The economy is changing, rapidly.

Under the surface of government's official statistics and the normally noisy gyrations of the stock market there's a literal revolution going on in America and around the globe about how business gets done, how society operates, how people live day-to-day.

Changes, brought about not by the coronavirus itself, but by government and popular response to it are quietly, relentlessly occurring just beneath the surface of everyday life.

Some of the changes are overtly obvious. Forced to stay home during the various state lockdowns, people didn't drive as much, if at all. Nobody sat down for a meal at any restaurant. Most of them were closed. If you had kids, you got to know them better... much better. How people dealt with that was a variable count. Your house is probably cleaner than it's ever been. With nothing much to do, many people cleaned like they were on maid service.

These are just a few of the changes that have already happened. What happens next?

As the government and propaganda media - by inference, any national TV or radio network, mainstream newspaper, and local affiliates - push the agenda of a second wave of virus outbreak more people will be wearing masks, the overall level of stupidity will rise, more businesses will be forced into bankruptcy, homelessness will become endemic in cities over 100,000 population, and you will likely make less money than you did at the same time in 2019.

What the government and media don't want you to know is that the virus is getting weaker, not stronger. As is usually the case, COVID-19 will succumb to the same conditions that have befallen every virus before it and likely every virus afterwards. As infections (cases) proliferate, more and more people become immune. People prone to serious, sometimes deadly outcomes - the obese, those with prior medical conditions (especially diabetes and heart conditions), the elderly - will be more effectively isolated, resulting in many fewer deaths than were experienced during the initial blast of the novel coronavirus.

When the virus reaches a stage at which it has either infected almost everybody (herd immunity) or has mutated so much that it's about as deadly as a common cold, it will be a non-issue, but the media and government agitprop actors like Drs. Birx and Fauci from the CDC will continue to push the "wear a face mask and social distance" mantra. Eventually, even the dumbest people on the planet will be able to see through their agenda for the Covi-Pass (now a real app for your tracking device cell phone), vaccine (don't take it; it won't be effective and may make you sicker) and the wreckage of the US economy (well underway) and begin to ignore all their dire warnings and fear-mongering.

Here's a fact: Over the past week (6/23-6/29) there have been 3,791 new deaths attributed to COVID-19, an average of 542 per day. Compare that to roughly two months ago (4/21-4/27), when there were 12,859 deaths, an average of 1,837 per day. That's quite a drop. In fact, it's a decrease of 70.52%.

Confirmed cases, from the same periods were:
6/23-6/29: 275,501 total; 39,357 per day.
4/21-4/27: 206,818 total; 29,545 per day.

What this means is that more people are testing positive, but fewer are dying. Instead of scaring everybody into believing that the virus is advancing into a "second wave," we should be celebrating that it's on the decline because the case fatality rate (number of deaths divided by the number of confirmed cases) is cratering.

In April, it was 0.062 (or 6.2%), meaning that six out of every 100 confirmed cases resulted in death.

In June, it is 0.014 (1.4%). Only one or two out of every hundred confirmed cases is resulting in death.

That's HUGE! The virus is being defeated. Kudos to honest doctors, nurses and health care professionals. A middle finger to the CDC, mainstream media, the federal government, Drs. Birx and Fauci, and anybody else preaching the apocalyptic message of the COVID-19 "we're all gonna die" false prophecy narrative.

Regardless, life (for most people with an IQ over 100, which excludes most of the BLM and ANTIFA goons) is changing.

Here is a short list of what your life may be like in 2021:

• You will work from home more often
• You may have started or expanded your own home business
• You will watch less TV
• You will get more, better, relevant information from the internet
• You will not trust the government at all
• You will dress more casually
• You will be eating better (home-cooked meals over restaurants)
• You will probably have become a better cook
• You will be making less money (but saving more)
• You will be more diligent about budgeting and saving
• You will not be wearing a mask in public
• You will go to a restaurant, sporting event or concert
• You will appreciate your car more
• You will take a trip or vacation, but you will drive, not fly
• You will be happier, less stressed, and healthier

If all that sounds too good to be true, believe it. Many people who lived through the depression have attested to those years being the best of their lives. Money wasn't a top-of-the-list agenda. Living was what everybody had top of mind. People helped each other. People cared for each other. Almost nobody invested in stocks. Food was cheap; almost everybody had a back-yard garden. Many raised chickens or rabbits.

As one person who lived through the 1930s in a medium-sized city once put it: "Nobody thought of themselves as poor because we all were poor."

The standard of living in the Great Depression didn't go down. Perhaps it did at first, but, in terms of human well-being and satisfaction, it went up and continued to improve until the entire country was once again gainfully employed due to the World War II effort. And then, America boomed, becoming the greatest country with the greatest economy the world had ever seen.

So, if you get a little stressed out over the current conditions, remember that it's temporary and it will pass. Make your life better. Make your neighbor's life better. Care more. Give more. Live more. The future looks brighter than ever.

In case you still have an interest in stocks, they did well on Monday (as they almost always do... it's a psychological thing. The stock market going higher on Mondays supposedly gives everybody a rise). The Dow was the big winner on the day, with Boeing leading the charge, up 24.48 points (+14.40%).

Imagine that. A company that's losing money, on the brink of bankruptcy, which makes airplanes that crash and kill people, selling to an industry (airlines, air travel) that's collapsing is the leading stock of the day.

Go right ahead. Put more money into that failing enterprise. The rest of us are moving on to a better life without Boeing, or the stock market, or the Federal Reserve, all of which deserve to die painful deaths.

Excelsior!

At the Close, Monday, June 29, 2020:
Dow: 25,595.80, +580.25 (+2.32%)
NASDAQ: 9,874.15, +116.93 (+1.20%)
S&P 500: 3,053.24, +44.19 (+1.47%)
NYSE: 11,777.08, +172.66 (+1.49%)

WEEKEND WRAP: Stocks Slide; Island Reversal Seen; Gold, Silver Soar; Treasuries Flatline; Argentina On The Ropes

For a second time in the past three weeks, stocks suffered another round of losses which accelerated as the week progressed. Of the major indices, taking the biggest hit were the Dow Industrials, followed by the NYSE Composite, S&P 500, and NASDAQ, in percentage terms.

The Dow's 3.31% fall was made possible by a Friday selloff which saw the blue chips decline by 730 points, the largest selloff since June 11, when stocks suffered a major blow preceded by an ominous island reversal of June 5, 8, 9, and 10. (see video below for more)

Friday's action may be presaging an oncoming decline of a magnitude rivaling the initial slide in March. The second quarter comes to a close on Tuesday and everybody on wall Street knows that it's difficult to "price in" a GDP decline which may be on the order of 35-50% when the first figure is announced on July 30.

Prior to that momentous milestone, corporate earnings reports will begin to flow to the street following next week's July 4 Independence Day holiday. The coming week will be shortened by a day, as Friday is a national holiday, giving most Americans a three-day weekend. Stock markets, banks, the postal service and most city and county offices will be closed. Hopefully, most of them will reopen on July 6.

For the week just concluded, treasury yields were clobbered, the 10-year note falling from 0.71 to 0.64%, the lowest since May 14 and approaching the record low of 0.58% from April 21st. As the 30-year bond yield fell from 1.47 to 1.37 over the course of the week, the curve flattened significantly, 125 basis points covering the entire complex. If this is what the Fed considers success in "curve control," they can have it, with the short end - one-month to two-years - covered by just five basis points (0.12 to 0.17%).

These low rates at the front end aren't by accident. They are policy and they are indicative of a recession if not outright depression. Adamant that they will not go to negative rates as has been the case in the Eurozone and Japan for years, the Fed's real rates have been in the red pretty much since the previous crisis in '08-'09, i.e., they were lower than the inflation rate. The one year note only crested above one percent in 2017. A year ago, it was yielding 1.92%, a stark comparison to Friday's close at 0.17%.

The Fed promised cheap credit and they are delivering.

Oil prices were slapped down after WTI crude tested $40/barrel, peaking at $40.73 on Monday, only to close out at $38.49 on Friday. Expect oil to continue trading sideways to lower if stock prices begin to falter, or, vice versa. Oil declines could help trigger or exacerbate a rundown on equities.

Precious metals were by far the big winners for the week. Both gold and silver advanced smartly despite a desperate attempt to crater their prices Friday on the NYMEX failed miserably. The morning rout sent gold reeling $20 to the downside, bottoming just below $1745 per ounce. So enamored with "V"-shaped recoveries, Wall Street got an unexpected one when gold prices recovered all of the losses within an hour and proceeded to close near the high for the day at $1771.50. Laughably, Friday's recorded London PM fix was set at $1747.60, setting up a $24 weekend arbitrage gap. Maybe, considering the problems the paper COMEX markets have had in recent months, it's not so funny for gold shorts, which are burning.

Silver savers should be delighted with the price action this week. Not only was a raid similar to the gold price suppression thwarted on both Thursday and Friday, but spot edged three cents higher than the closeout future price, at $17.83 the ounce, the highest Friday price since February 21, just prior to the epic COVID collapse.

Current physical prices continue to demand high premiums. This week saw prices for silver art bars absolutely explode higher, some one ounce bars selling above $40. Average and median prices for one ounce gold coins and bars were captured at prices $33 to $45 higher than a week ago.

Here's a glimpse at current selected prices on eBay (shipping included):

Item: Low / High / Average / Median
1 oz silver coin: 25.95 / 40.95 / 30.92 / 29.47
1 oz silver bar: 27.00 / 45.44 / 34.62 / 32.93
1 oz gold coin: 1,827.85 / 2,109.95 / 1,919.39 / 1,901.60
1 oz gold bar: 1,861.66 / 1,920.65 / 1,879.77 / 1,873.92


Argentina's Debt Crisis Far From Resolution

Argentina's government continues to play cat and mouse with international creditors, extending the deadline for negotiations concerning $65 billion worth of bonds to July 24.

Having already defaulted on a $500 million interest payment on May 22, the government is doubling down, indicating that it will miss another similar payment in June, which has a 30-day grace period. The chances of a settlement agreeable to the government and its creditors continue to deteriorate as interest payments are missed and the value of the bonds plummets, some selling off to as low as 37 cents on the dollar.

Talks stalled over the past two weeks as investors including BlackRock, Fidelity, AllianceBernstein, and Ashmore Group PLC, rejected a government proposal tied to agricultural exports while seeking recovery of between 49 and 57 cents on the dollar.

At the same time, the province of Buenos Aires, Argentina’s largest province, is negotiating with bondholders on the restructuring of $7.148 billion in debt and extended its deadline for a negotiated settlement to July 31.

Per previous proposals, payments would not begin being made on the currently-defaulted bonds until 2025. This article, published by the Council on Foreign Relations, offers the most comprehensive details, including charts that break down Argentina's $323 billion of debt, all of which is at dangerous risk levels.

At a time when the country's GDP is predicted to decline by 10 percent, the severity of the financial crisis cannot be understated, though mainstream television media in America has nearly completely neglected to report on the issue. Argentina has suffered through decades of boom and bust over the past 45 years, 20 of which showed GDP in decline.

It's not a question of when Argentina defaults on its debts, it's a question of how severe the defaults will be, how they will affect government pensions, and the ability of the government to maintain its status as a going concern. With a population estimated at 45 million, Argentina's problems are quickly becoming everybody's, as tens and perhaps hundreds of billions are in the process of being eviscerated.

With the government of President Alberto Fernandez content to play kick the can by extending the negotiation deadline for a fifth time, the dithering is taking its toll on investors. While a formal default has only been declared on portions of Argentina's debt, triggering the awarding of a credit default swap (CDS) recently, these things have a nasty way of snowballing into global crises, as was the case with Mexico in 1982, the Asian Crisis in 1997, and when Russia devalued the ruble in 1998.

Having to deal with some of the most severe lockdowns in the world due to the COVID-19 panic, Argentina is ill-prepared to deal with a financial hardship of this magnitude. The situation could spiral out of control at any time, when one side or the other finally throws in the towel and walks away. Consider Argentina's plight a fluid situation with more headlines and fireworks likely over coming months.

At the Close, Friday, June 26, 2020:
Dow: 25,015.55, -730.05 (-2.84%)
NASDAQ: 9,757.22, -259.78 (-2.59%)
S&P 500: 3,009.05, -74.71 (-2.42%)
NYSE: 11,604.43, -260.68 (-2.20%)

For the Week:
Dow: -855.91 (-3.31%)
NASDAQ: -188.90 (-1.90%)
S&P 500: -88.69 (-2.86%)
NYSE: -375.19 (-3.14%)

Peak Prosperity's Adam Taggert and friends discuss threats to the stock market, highlighted by their charting of the recent Island Reversal: