Non-Stimulus Fatigue? Bond Yields Jump; Election Just 9 Days Away

Stocks took it mostly on the chin this week, though the blow was nothing that could cause a knockdown or even the faintest whisper of a selloff.

Rather, equity markets seemed to be suffering from a combination of coronavirus fatigue, overvaluation fatigue, election fatigue, stimulus fatigue (is such a thing even possible?) and media censorship fatigue. What the market needs most right now is a nap, a good long one, to wring out the excessive volatility that has been built into it by outside forces.

The week's trading provided something along those lines, but it's probably not enough, as Monday will start yet another cycle of incessant noise that has little to do with fundamentals and even less to do with proper valuations, a concept that's been thrown out the window in the age of instant gratification, instant profits, instant allegations, instant bailouts, instant karma.

Instant karma's gonna get you
Gonna knock you right on the head
You better get yourself together
Pretty soon you're gonna be dead

-- John Lennon, Instant Karma, Plastic Ono Band, 1970

What the financial media claimed was responsible for slumping markets was continued foot-dragging by congress on a second stimulus bill. Another week passed without congress capable of agreeing on a bill that would send more money to individuals and families and potentially shore up failing businesses, aid airlines, and maybe even cure cancer.

The mere fact that congress wastes everyone's time on their inability to blow another $1.8 or $2.2 trillion is indictment enough to send them all packing on November 3rd, or to not bother to vote at all, a practice that has been in vogue for decades in the US, with roughly a third of eligible voters to avoid the process altogether every four years, and even more so in off-year elections.

Meanwhile, the presidential candidates squared off in a final debate, with President Trump winning handily, if only for prodding Joe Biden into an outright admission that he would end the use of fossil fuels in America, meaning he would likely ban fracking, which pretty much cost him the state of Pennsylvania and any other constituency that relies on oil or gas for its economy.

Biden, who has called himself a "gaffe machine," really planted his foot into his mouth this time, so much so that moderator Kristen Welker blurted out, "why would you say that?" as almost an admonishment to the favored candidate of the left-leaning media cabal.

On top of that, Trump made reference to Biden's public statements to ban fracking, to which Biden responded that it wasn't true and challenged Trump to put it on his website.

Team Trump did, releasing a tweet that was featured on the campaign website shortly after the debate.

Here you go @JoeBiden! pic.twitter.com/UBqPJT85Pt

— Donald J. Trump (@realDonaldTrump) October 23, 2020

Admist all the chatter of the week, various companies released third quarter earnings results, most notably computer chip manufacturer, Intel (INTC), which was punished for reveaing the truth despite beating earnings and revenue projections.

Revenue fell 4% year-over-year for the quarter, GAAP profits per share slipped 25%, and gross profit margins were lower by 5.7%. CEO George Davis noted that PCs “in the consumer and education markets,” which are “more entry-level,” or lower margin, were leading sales for the quarter.

Not to let the tidbits of bad news stand alone, Intel raised guidance for upcoming quarters. It didn't matter at all to investors, who took the stock down nearly 11% on Friday, from its close Thursday of 53.90 to 48.20 per share.

What Intel's results say about the real economy is that the slowdown from the summer is obvious and not about to self-immolate. Businesses of all sizes have been slammed, the hardest hit, small to medium sized businesses which have traditionally been the backbone of job creation. While the number of initial claims fell again this week, the data is still staggering. Thursday's reading of 787,000 new unemployment claims was the best number in months, but still extraordinarily high.

Alarm bells were going off in fixed income markets as yield on the 10-year note skyrocketed, hitting 0.87% on Thursday before settling in at 0.85% on Friday. The jump, week-over-week, was nine basis points, or 11.8%. The 30 year bond rose 12 basis points, from 1.52% to 1.64%. Yields on the two long-dated instruments were the highest since June 5th.

For reference, the move from 5/29 to 6/5 dwarfed this past week's. Back then, yields on the 10-year and 30-year spiked by 26 basis points (0.65% to 0.91%) and 27 basis points (1.41% to 1.68%), respectively.

Could this move in the bond market be a signal for a coincident sell-off in equities? Stocks are already lower since October 12. In the week following the June bond rout, the Dow popped to 27,572.44 on June 8, but lost ground the follow four sessions. By June 11, the Dow stood at 25,128.17, a drop of nearly nine percent.

Should bonds and stocks follow the same pattern, the final week of October - and the last full week before the election - could bring an unwanted surprise to the Trump equation, as the president routinely touts the stock market as a gauge for the "recovery."

Certain to bring out the most radical conspiracy theorists, a stock market decline at this juncture might be perceived as damaging to Trump's re-election, though reality suggests that people have already made up their minds and many (as much as 40% in some states) have already voted.

We'll just have to wait and see how things pan out before getting spooked (next Sunday is Halloween).

On the NYMEX, WTI crude oil remained tethered to $40 per barrel. Nothing new there, as crude has maintained this price level - give or take a few points - consistently since the beginning of June. Such remarkable stability in the one market that just happens to be the lifeblood of the global economy is uncanny and is likely the result of an unannounced gentleman's agreement between the major oil producers, the US, Russia, and the Saudis. Nobody will openly admit that oil prices are controlled, but there's undeniable proof that prices that are either too high or too low are damaging to economies. The past five months may have been an orchestrated "goldilocks" moment in the oil fields and something that may extend for longer.

Precious metals were flat on the week. Gold rose from $1899.29 to $1924.33 on Wednesday, only to be beaten back to $1902.05 by Friday's close. Silver put on a small gain, rising from $24.16 to $24.61 the ounce on Friday.

Metals continue to be in short supply as demand has not abated since earlier in the year, especially acute during the early days of the coronavirus panic back in February and March. Back then, shortages were blamed on supply chain interruptions due to travel restrictions, but there's no excuses now, as prices remain elevated and premiums have not come back down.

The most recent prices on eBay for common gold and silver items (shipping - often free - included, numismatics excluded) are presented below:

Item: Low / High / Average / Median

1 oz silver coin: 29.12 / 51.00 / 38.04 / 38.23
1 oz silver bar: 30.50 / 43.01 / 35.81 / 35.00
1 oz gold coin: 1,974.85 / 2,052.13 / 2,023.40 / 2,024.40
1 oz gold bar: 1,995.00 / 2,012.84 / 2,003.75 / 2,003.57

At the Close, Friday, October 23, 2020:
Dow: 28,335.57, -28.09 (-0.10%)
NASDAQ: 11,548.28, +42.28 (+0.37%)
S&P 500: 3,465.39, +11.90 (+0.34%)
NYSE: 13,199.86, +53.94 (+0.41%)

For the Week:
Dow: -270.74 (-0.95%)
NASDAQ: -123.27 (-1.06%)
S&P 500: -18.42 (-0.53%)
NYSE: +30.55 (+0.23%)

Stocks Looking At Losses for the Week as Stimulus Talks Continue to Go Nowhere

To reach positive territory for the week, on Friday, the Dow needs to gain 243 points; the NASDAQ, 166; S&P, 31; and the NYSE Composite, just 24 points.

In the aftermath of Thursday night's presidential debate, stock futures are pointing to a positive open (nothing new there), and headlines are still promoting the idea that the politicians are zeroing in on a stimulus deal.

A stimulus deal has been the dominant, running theme for the past three months. Nothing else seems to matter, indicating the converse of the narrative. Wall Street sees handing out money to individuals and corporations as a positive, but the reality is that if the economy were on sound footing, stimulus would not be needed, such is the paradoxical nature of the market and public perception, usually short-sighted.

President Trump, in a tweet, and also during the debate, put a less-than-enthusiastic spin on current negotiations, saying that there's unlikely to be a deal prior to the election. The president blames House Speaker, Nancy Pelosi, for purposely stalling on any deal, her thinking being that denying a stimulus is somehow good for Democrat prospects in the November 3rd voting. Trump believes the tactic will backfire on the Democrats.

As far as the debate is concerned, it's difficult to pick a winner, as both President Trump and former VP Joe Biden had moments of strength and weakness, though the president seemed to be the more confident of the two and able to counter his opponent's arguments. Biden made a number of false claims, such as the US facing another 200,000 COVID deaths by the end of the year, saying Trump was somehow in cahoots with foreign governments when there's absolutely no proof of that, and repeated bleats of "false" or "not true" in response to Trump accusations.

Biden did outright deny receiving money from any foreign government, though the evidence is almost at a point of 100% certainty that he did. The media's continued stonewalling on the explosive stories coming out of the NY Post and elsewhere don't help his case at all. The fact that they are covering for the former VP is probably doing more harm for his campaign than good.

Of particular note on background issues, Russ and Pam Martens' Wall Street on Parade reports that banks - which last week reported generally solid earnings for the third quarter - are not setting aside sufficient amounts for loan loss reserves as they were allowed to under-report expected losses via the CARES Act which gave the banks until December 31, 2020 to opt out of employing the accounting standard, ASU 2016-13, for reporting Current Expected Credit Losses (CECL).

What this means is that some of the largest banks in the country - Well Fargo, Citi, Bank of America, and JP Morgan Chase - are not likely to report sufficient set-asides for the outgrowth of their deferrals, forbearances, and other accounting magic until the first quarter of 2021, or, about the second week of April, 2021, a key time frame to keep back of mind.

This fundamental fakery helps explain why the banks are reporting mostly strong results, but their shares are not appreciating. Rather, bank stocks remain mired closer to the March lows than the August-September highs. Investors simply are not buying into the fake numbers.

Andrew Maguire explains how China is bypassing the London Bullion Market Association (LBMA), which no longer can provide much metal, and buying unrefined gold directly from mines in Africa and South America in the interview below.

At the Close, Thursday, October 21, 2020:
Dow: 28,363.66, +152.84 (+0.54%)
NASDAQ: 11,506.01, +21.31 (+0.19%)
S&P 500: 3,453.49, +17.93 (+0.52%)
NYSE: 13,145.92, +105.79 (+0.81%)

With Election 12 Days Away, Congress Punts On Stimulus; Biden, Media Cabal Hides From Truth

The tenor of Wednesday's session was marked by caution and selling into strength. As was Tuesday, dip-buyers were led to the feeding trough and then slaughtered, mercilessly.

Not only were the past two days of trading tough on short-term tacticians, but the charts from the past four days - only one of which, Monday, produced a positive close - illustrate just how nasty the market has been to those convinced that buying dips is a profitable strategy as every bounce higher was met with engaged selling, marked generally by lower highs and lower lows.

Since it's the middle of earnings season, bets are being laid down on expectations or post-reporting euphoria or derision, but most trades have ended up in tatters, as the mood has shifted quite forcefully to pessimism over everything from the coronavirus to failed stimulus talks to presidential politics. Astute traders are sensing that nothing is being done in Washington prior to the election unless it's a political event, such as the Supreme Court nomination of Amy Coney Barrett. Deadlines and ultimatums on the Covid relief package have turned out to be mostly false bravado and not even good negotiating tactics.

Anyone believing that there's going to be a stimulus bill forthcoming prior to the election - now a mere 12 days off with early voting already well underway - must have overlooked the jabbering and back-and-forth nattering that's been a feature of Washington politics since July (and, for the truly cynical, forever). The stimulus bill is a can that anticipates and enjoys being kicked down the road by any kind of shoe, Republican or Democrat.

Even if, in the extremely improbable case that a bill does manage to sneak through both the House and Senate and reach the president's desk within the next few days, nobody is going to get a check or direct deposit until well after November 3rd, despite promises - like with the first round - that the money will be going out "right away."

In Washington, "right away" generally means after the next recess or at least three weeks into the future and beyond, unless, of course, you're a Wall Street firm, hedge fund, or airline company seeking bailout booty. If the legislators in DC were employed as wait-people, clerks, or messengers, they wouldn't last a week before being fired.

Since the current posture on both sides appears to be one of not giving in to even the most severe prodding to get a deal done and the second round stimulus bill likely already priced into many market models, any stimulus bill passed will have little to no lasting effect on stocks. There are a plethora of other, more pressing issues facing up to the wall of worry that is the stock market that make coronavirus relief a second rate passenger on the road to ruin.

At 8:30 am ET, another 787,000 people filed initial unemployment claims, futures are off the bottoms put in overnight, as though something uplifting is about to happen. Meanwhile, the mainstream media cabal continues to refuse to report on the unfolding Joe and Hunter Biden graft, corruption and bribery scandal, all the while scaring the bejeezus out of the viewing public with warnings about a third wave of COVID-19 infections, cases, hospitalizations, deaths and the toll it is taking on health care workers, teachers, kids, and even pets.

The mainstream meadia has been consistent above all else in reporting anything even remotely negative about President Trump while ignoring any indications that he is drawing enormous crowds at rallies and that his administration continues to work on important issues such as immigration and Middle East peace.

While Kamala Harris spoke to a "crowd" of what looks like about a dozen "supporters" in Asheville, North Carolina, President Trump held a rally for thousands of cheering, enthusiastic supporters in Gastonia, NC. (full videos below, judge for yourself)

The contrast in crowd size and enthusiasm is stunning, putting the accuracy of the mainstream polls into question and reminiscent of scenes from 2016, when Hillary Clinton was supposed to sweep the nation to victory and instead Donald J. Trump shocked the sold out media.

The media circus stopped being amusing last week when Twitter and Facebook began banning stories from the New York Post that were damaging to Joe Biden and became a national emergency because their censorship effort was quickly reinforced by all of the major media outlets, including the New York Times, Washington Post, ABC, NBC, CBS, MSNBC, CNN, and FOX. If the media enjoyed using the word "collusion" in their non-stop fake news reporting over the Trump-Russia hoax, they're going to hate it when American citizens and hopefully a court of law takes up the same term in referring to their election interference efforts, not just in this cycle, but from 2016 as well.

The American public may be a lot of things, but they are certainly capable of discerning - after plenty of obfuscation and misinformation - when they are being deceived. The mainstream press has been lying, prevaricating, and amplifying anti-Trump messaging so consistently for the past five years (and longer), that people are tuning it out. Those Democrats and left-leaning individuals who still feel a need to get rid of the current president and replace him with a crooked, demented, sick individual like Joe Biden have to be checking their morals at the polling station door and selling their worthless souls to the devil.

That's why there's mail-in and absentee voting. It makes impossible decisions palatable, unseen, and quickly forgotten.

All the time Joe Biden cowers in his basement, millions of early voters are trying desperately to forget what they've already done, quietly hoping that their votes will be repudiated come November 3rd and their worst fears - that they've elected a serial criminal to the highest office in the land - will not be realized.

BTW: The final presidential debate is Thursday night at 9:00 pm ET. It will be carried by the major networks and should likely provide more talking points for each candidate and little more. It's time to go to the polls and start counting the votes.

This will soon be over, though the aftermath may be even more unsettling than what the country has been though the past eight months.

Kamala Harris in Asheville, NC:

President Trump in Gastonia, NC:

At the Close, Wednesday, October 21, 2020:
Dow: 28,210.82, -97.97 (-0.35%)
NASDAQ: 11,484.69, -31.80 (-0.28%)
S&P 500: 3,435.56, -7.56 (-0.22%)
NYSE: 13,040.13, -52.03 (-0.40%)

Stocks Slump Into Close, Futures Flat as Stimulus Talks Fail, 10-Year Yields Spike

Slumping into the close, stocks posted small gains Tuesday as Nancy Pelosi's deadline for a stimulus bill passed with nothing accomplished in the nation's capitol.

As the opening bell approaches, deal-makers in Washington are probably just getting around to talking points for another day of finger-pointing and doing nothing. Meanwhile, the corrupt media still won't address the issues stemming from emails and text messages discovered on the Hunter Biden's computer as father Joe, presidential candidate, cowers in his bunker, refusing to answer any questions related to the findings.

These developments put quite the spin on the final two weeks heading into the election. Donald Trump is surging while the Biden-Harris ticket appears t be circling the drain. The massive censorship and denial campaign being waged on social and mainstream media points up the levels of corruption that exist on the Democrat, liberal side of the equation. While Republicans may or may not be much better, at least they haven'tbeen accused of anything illegal lately. More importantly, President Trump weathered four years of bad (horrifyingly biased) press and every effort, including impeachment, to remove him from office and is now on the cusp of winning a second term in the White House.

The left has no answers and the election, should this condition persist, may as well be over. The media and pollsters, along with their candidates, have been shown to be frauds at best, criminals at worst. The American public isn't going to sit back and allow crooks to rule over them. The Democrats - and some RINO Republicans - are about to get a shock treatmet of public outrage and withdrawn consent. People really don't like being lied to, and theyre not very fond of censorship and politicians who hide from misdeeds. The Biden campaign is effectively over.

With the sudden reversal of fortunes (remember, like in 2016, the Democrat candidate was supposedly well ahead in the polls), Wall Street will reassess their positions, though a Trump win wouldn't exactly be the worst outcome for the country. As it stands, the economy was doing OK until the coronavirus hit, so it stands to reason that President Trump's comtinued policies would include lower taxes and reduced regulation, both good for business. Thus, regardless of one's political position, a Trump victory on November 3rd should be seen as a positive.

However, the damage done by the government shutdowns of businesses in the US and around the world, and with Europe looking at another virus wave and more shutdowns is compelling and has set gloabl economies back substantially. Individual freedoms are being challenged around the globe. And while the lack of a stimulus bill from Washington may be top of mind for some, underlying trends, especially for major urban areas, are still quite troubling.

Should the politicians actually come up with a satisfactory stimulus bill within the next week, it's not going to change the dynamics of the market or the election very much. Minds are already made up; money is already in play. It's doubtful that even a $2 trillion package would move the needle much at all on either front.

With the opening bell just moments away, a serious development come via the bond market where the yield on the 10-year note has creasted above 0.80 for the first time since early June. The 10-year benchmark yield has been elevated recently and may be getting away from the control freaks at the Federal Reserve. Should the bond selling spree continue apace, gold and silver - already higher on the day - will rocket higher. Stocks could be getting set up for a dramtic multi-session decline.

At the Close, Tuesday, October 20, 2020:
Dow: 28,308.79, +113.37 (+0.40%)
NASDAQ: 11,516.49, +37.61 (+0.33%)
S&P 500: 3,443.12, +16.20 (+0.47%)
NYSE: 13,092.16, +73.66 (+0.57%)

Stocks Dump on Anniversary of Black Monday; Silver Buys Much More Chicken Than in 1960

On the 33rd anniversary of Black Monday (October 19, 1987), stocks didn't drop by 20% or more as they did on that fateful day, though there was a level of trepidation not seen in recent market action. After a lull in September, the major averages have been rising over the past two to three weeks.

For sure, Monday's market action left plenty of dip buyers holding a bag of pain, as gains were wiped out in waves of lower highs and lower lows as stocks stair-stepped their way to a distressing close.

29 of 30 Dow stocks closed in the red, led by:

AAPL, Apple: 115.98, -3.04 (-2.55%)

JNJ, Johnson & Johnson: 144.32, -3.78 (-2.55%)

MSFT, Microsoft: 214.22, -5.44 (-2.48%)

AXP, American Express: 102.47, -2.44 (-2.33%)

The only winner of the bunch was Intel (INTC), which closed at 54.58, up 0.42 (+0.78%).

As usual, the financial news pundits trotted out the same tired excuse for stocks losing steam: continued failure of congress to pass a stimulus bill.

Now, this most recent of Washington's foibles has been a steady-state comedy of errors since mid-July, when House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin first began negotiating for a second major coronavirus bailout. For the duration, Pelosi's been pushing for a bigger price tag and including money for states and municipalities, schools, and other pet projects while Mnuchin and the White House favored a much smaller expenditure.

The two sides keep inching closer to a deal, with the latest ploy by Pelosi being a demand that an agreement be reached by Tuesday, which just happens to be today. Accordingly, the newspeople are reporting that the two sides are "close to a deal," a position they've bandied about twice as often as being "far apart."

Blaming the demise of the stock market on the inability of politicians to reach agreement on the size of a stimulus bill is the height of folly. It's akin to blaming the manufacturer for your 12-year-old car's performance when your tires are bald, the oil hasn't been changed in three years, and the half of the fuel injectors are plugged.

In other words, there may be other reasons for stocks to go up or down outside of what the nitwits in the nation's capitol are doing, or not doing.

Here are some other possible reasons for stocks to lose value:

Unemployment is very high

Coronavirus fatigue

Concerns over electing Joe Biden president

Concerns over electing Donald Trump president

Many schools are closed or only partially open

Cities are facing budget deficits (New York, Chicago, others)

Protests, riots, looting by leftist groups ANTIFA and BLM

Stocks are overpriced

Record federal budget deficit

Record trade deficit

Slumping GDP

Corrupt politicians

Corrupt media

Censorship by Big Tech companies like Facebook and Twitter

Consumer price inflation

Lack of trust in government

Wall Street's V-shaped recovery looks more like an "L" on Main Street

Taken together, those issues would make a normal person want to crawl into a hole and wait until it all passes, but these issues are at least as concerning to some traders and fund managers as a government stimulus bill.

Besides, if the stock market is pinning its hopes on a stimulus bill, having the federal government go deeper into deficit by bailing out everything from airlines to schools to cities to restaurants to you and your neighbor, doesn't that indicate that there may be deeper problems facing the stock market and the general economy?

For some perspective, here's a mind experiment on the value of silver.

Silver and gold aren't going to the moon, as some suggest.

Think in terms of purchasing power. Currently, an ounce of silver is worth about $32 (probably more, see this link for a survey of recent actual sales on eBay).

Let's say a 6 pound roasting chicken (yum) is $8, or $1.33 a pound. (it's usually cheaper, but stick with us here). Right now, you can buy four of those with a one ounce silver coin or bar. OK, you can eat for a couple of weeks.

With inflation, that same chicken may be $2.00 a pound, or $12, in six months, so $32 will only buy two of them, plus a 4-pound fryer.

The ounce of silver will still buy four, and probably more, unless, of course, the mendacious futures marketeers are allowed to suppress the price as they have been for decades in order to keep fiat ($US dollar) the circulating currency.

For reference, chicken was 29 cents a pound in 1960, when silver was still a circulating currency. A six pound chicken cost $1.74, or seven Washington quarters (you'd get an all-copper penny back). That's more than an ounce of silver. There's actually 1.2659 troy ounces of silver in 7 silver Washington quarters, so you couldn't even buy one chicken with an ounce of silver, when today, 60 years later, you can buy four. Four chickens in 1960 would have set you back 5 ounces of silver. Today, that same five ounces will buy you 20 6-pound chickens. On this basis, silver has improved its purchasing power five-fold while the purchasing power of the US dollar has declined in a corresponding fashion.

A six pound chicken in 1960 set you back $1.74. Today, it's $8.00.

That means silver is actually worth much more today than it was then, in real terms (chickens). This illustrates how the dollar has been losing value and will continue to do so. Silver is a long-term investment in real money. This example proves it to be also a worthwhile store of value.

The Fed didn't know how good they had it, both when they conspired to take silver out of circulation and when they started printing money willy-nilly to boost the economy (and the price of everything).

A 401k or an IRA is a trap, tying up fiat currency for decades while its value declines. Silver (and gold) is salvation from inflation.

At the Close, Monday, October 19, 2020:
Dow: 28,195.42, -410.89 (-1.44%)
NASDAQ: 11,478.88, -192.67 (-1.65%)
S&P 500: 3,426.92, -56.89 (-1.63%)
NYSE: 13,018.51, -150.81 (-1.15%)