WEEKEND WRAP: Wild Week-Long Ride For All Asset Classes As Stocks, Bonds, Cryptos, Metals Fall And (Some) Rise

Trifurcated is the word for the week just past in equity investing. The week fell into three distinct regimens. Monday saw across the board gains in all the major indices. From Tuesday's opening bell to just after 11:00 am ET on Thursday, those same measures were all going in the opposite direction.

Thursday afternoon through Friday's close was all buying, all the time. The Dow Jones Industrial Average gained nearly 1000 points during that last period. After falling to a low of 32,076.11, the Dow just kept on rising, finally closing out the week at an all-time closing high of 33,072.88.

The same pattern repeated across the other averages. The S&P 500 dropped to 3,854.57 on Thursday morning and set off on a 120-point romp to complete the week. It too finished at an all-time high (3,974.54). The NASDAQ wasn't quite so lucky. Though it followed the same pattern, it still ended up with a loss for the week - its fifth in the last six. The NYSE Composite ended the week on the positive side, though it was still short of a record close (15,775.50, 3/15/21).

Attempting to find catalysts for the fall and rise of US stock markets is a fool's errand. One could point to any number of events - financial, political, societal - to explain why stocks went down, then up, and still not have a convincing argument. Anything from the continuing immigrant explosion at the US southern border to the stuck cargo ship, Ever Given, in the Suez Canal blocking all traffic through the busiest shipping lane in the world to the collapse of yields on long-dated treasuries could have contributed to the movements in stocks, and all surely did to some degree, but none can be positively, individually tied to the week's trading.

If anything, the news flow was decidedly negative over the course of the week. Computer algos apparently only scan positive headlines or interpret them as such, especially when indices dip down to their 50-day moving averages, which was the exact case for the S&P 500 and late Thursday morning the exact time it began to rise. Not to put too cynical a spin on it, but the reason stocks went up at the end of the week was because they were down.

Analysis of markets in a controlled environment as exists today is not a worthwhile endeavor. It's more apparent than ever that stocks move on purely technical terms, bouncing off ceertain data points with nothing at all to do with overlaying economic conditions, fundamentals, or significant events.

With stocks invariably, existentially tied to debt markets, the week's gyrating yields on long-dated treasuries had more to do with stocks and money flows than anything else. The 10-year note fell from 1.74% at the end of last week (3/19) to as low as 1.62% by Wednesday, finally bumping ahead to 1.67% at Friday's close. The 30-year took the same route, falling from 2.45% to 2.31%, eventually closing at 2.37%. Both continue untamed, relevant, extended, and close to the high end of the recent range.

The Fed's efforts to tamper and tamp down the long bonds, either through direct intervention or superfluous "jawboning" about the absence of inflation is seeing limited success. Their distortions of fundamental market forces are the likely cause of other, mostly negative, effects elsewhere. Whatever they might like to do or say, there's little doubt about rising price inflation in goods and services throughout the US economy. It's simply economics 101. When you pump money into an environment almost endlessly, ceaselessly, prices are almost certain to rise. The question - seen on the sour faces of people shopping in grocery stores and supermarkets - is how high they will go, given the Fed and the government are dialed into the same line: 1-800-SPEND-MORE.

On the short end of the treasury curve, one-month, two-month, and three-month notes all dipped as low as .01% at varying times since March 16 and have been unable to rise past 0.03% during that period. Given that true inflation is running upwards of 10% annually, those rates, in real terms, are negative, as is everything that follows, all the way out to the 30-year.

None other than Ray Dalio, founder of the world's largest hedge fund, Bridgewater Associates, aligns with the Money Daily suggestion that nobody should be holding bonds when we made the case on February 10th, in the post, Bonds. No Bonds. Dalio recently stated that owning bonds was "stupid." It's a wonder it took him so long to figure that out.

As an explanatory note, consider buying a $30,000 vehicle versus buying a 10-year bond. You plunk down your $30,000 (or, if you're really game, you take advantage of 0% financing for seven years and keep much of your cash) to buy your vehicle. For the next 10 years, you have complete use and control of the vehicle, whether it be driving to and from work, hauling the kids or groceries around, or in use for a business. It's yours. You maintain it, pay for repairs, gas, insurance, tires and so forth, but it's a useful asset, and, if you use it for business purposes, you can claim depreciation on your taxes.

With the ten-year note, and, being generous, let's say you got a deal at 3.00% in 2011, you hand over your $30,000 to the US Treasury, and they give you back $900 every year for 10 years, at which time they give you back your original investment. Over that time, you've taken in $9,000. If you saved it all - which would be unlikely since you'd be paying taxes on it - you'd have $39,000. However, if you then thought about buying that very same car that cost $30,000 in 2011, it might run upwards of $45,000 today, at just four percent inflation. Although you've made an investment, it paid less than the rate of inflation. Yo u may have gained some currency, but you've lost purchasing power. There are better ways.

Naturally, nobody's getting three percent on their money today on the 10-year note, so the comparison is even worse using present values. Instead of taking in $900 a year on your investment, today's rates would net you a locked in $495 at 1.65%.

Like stocks and bonds, oil prices had an up-and-down week. To illustrate, here are the closing New York prices for WTI crude oil on the NYMEX:

3/19: 61.42
3/22: 61.55
3/23: 57.76
3/24: 61.18
3/25: 58.56
3/26: 60.97

Obviously, crude was in play, but the tug-of-war between the extended European CV-19 lockdowns, re-openings in the US, Suez Canal blockage, China slowdown, OPEC+ production cuts, and the usual price manipulation by producers contributed to some wild swings. Seems nobody has an accurate picture of the global condition, except that for now, that double top at $66 a barrel appears as considerable upside resistance and the entire complex is in backwardation as far as the eye can see. Futures prices are quoted lower over time, instead of higher, which is the usual condition.

Nor were cryptocurrencies excluded from the roller coaster ride. Over the past week, Bitcoin fell from a range from $56,000 - $58,000 to a low of $50,305 (Thursday, 8:30 am ET), which was apparently seen as a buying opportunity, as the price has raced higher since, currently quoted right around $56,000. For the "no-coiners" once again declaring the death of Bitcoin and all cryptos, the failure to hold new highs ($61,788, 3/15) is their latest deflection. What they fail to realize is that Bitcoin closed out February around $46,390, so it's up about 20% in March and the month isn't over... yet.

Gold and silver were probably the most stable of all the asset classes. They went down and stayed down as all compliant non-fiat money should. Gold started the week at $1749.60, fell as far as $1727.50, and ended the week at $1731.90. Silver was the most-hated asset on the planet, at least according to the COMEX. Starting from last weekend's closing price of $26.39, an ounce of the shiny stuff fell out of favor, bottoming Wednesday at $25.05 before recovering to $25.39.

Elsewhere, in the real world, prices were again sporting high premiums and shortages of both metals were notable.

Here are the most recent prices paid for common gold and silver items for immediate delivery on eBay (numismatics excluded, shipping - often free - included):

Item: Low / High / Average / Median
1 oz silver coin: 37.75 / 50.90 / 43.42 / 42.00
1 oz silver bar: 36.12 / 50.00 / 41.14 / 40.50
1 oz gold coin: 1,875.75 / 2,100.00 / 1,938.52 / 1,919.50
1 oz gold bar: 1,808.00 / 1,976.00 / 1,848.03 / 1,833.98

As has been the case for many months, small quantity buyers are either simply ignoring COMEX wholesale price and LBMA spot guidelines or they've reached a point of speculative insanity from which there may not be any escape. Non-numismatic gold coins are now in extremely short supply. Everything is either fractional or collectible, with expected premiums, while gold bars are still plentiful and somewhat more uniformly priced with premiums much lower than those for coins. Silver continues to be red hot in small quantities with the new Single Ounce Silver Market Price Benchmark down a slice from last week ($41.85) to $41.77.

Finally, an anonymous cryptic note of the week from somewhere in cyberspace:

To those in power, "citizens" are mules to do their work and sheep to be sheared.

They have the population under total control. They make you work, take their share up front, then tax you again everywhere, at all times, as often as possible.

Typical day in the life of a mule/sheep with the applied taxes/expenses in parentheses:

Get up, take a shower (water bill)

Make coffee, maybe breakfast (sales tax)

Get in car to go to work (car payment, insurance, excise taxes, fuel taxes, sales taxes)

Arrive at and spend 7-9 hours at work (federal, state, local income tax, SS tax (FICA), Medicare tax)

Pick up kids from school (School/education tax, police, fire district taxes)

Drive home (see above, plus, let's not forget property tax)

Have dinner (sales taxes again)

Watch TV (cable bill taxes, electricity bill tax, sales tax on TV purchase)

Go to sleep (sales tax on bed, pillows, blankets)

Everything you do is taxed, and, to make matters worse, the money they collect is ultimately wasted, so they have to borrow more, which is on your tax bill.

They are taxing interest on debt, which is all the fiat really is.

Some call it apathy, or fear of opposing the system. It's more like normalcy bias than anything else. Why do you think 80% of people are getting vaccinated?

Everybody's doing it, so it must be OK.

We should have listened to our parents when they said, "if everybody is jumping off a cliff, are you going to jump, too?"

We, as a people, have failed. We've allowed ourselves to be ruled and overseen by a select few who have their best interests - not ours - in mind.

Stop playing, stop paying. It's the only solution.

---

At the Close, Friday, March 26, 2021:
Dow: 33,072.88, +453.40 (+1.39%)
NASDAQ: 13,138.72, +161.04 (+1.24%)
S&P 500: 3,974.54, +65.02 (+1.66%)
NYSE: 15,682.54, +272.17 (+1.77%)

For the Week:
Dow: +444.91 (+1.36%)
NASDAQ: -76.51 (-0.58%)
S&P 500: +61.44 (+1.57%)
NYSE: +120.28 (+0.77%)

Day-Traders' Delight: Dow Wows With 940-Point Round Trip Thursday Turnaround

With the Dow down more than 340 points Thursday, it appeared that the Money Daily post prior to the market open - Stocks Looking For Reasons To Rally; None To Be Found - was proving to be prophetic.

All of the major indices were bleeding out, led lower by the NASDAQ, which has been the usual suspect over the past two weeks.

It was just after 11:00 am ET that things began to change. From that point, the Dow rallied from 32,071.41 to 32,672.69, taking a little off the top into the close for a nearly 200-point gain. The entire round trip, from the prior close, to the bottom, then to the top, encompassed 940 points, one of the better single-day turnarounds in market history. Certainly, this was one that left many investors scratching their heads because there really wasn't a good reason for stocks to rally other than that they were momentarily oversold.

Just like clockwork, when the S&P 500 broke below its 50-day moving average, the rally commenced. Obviously, some algo-triggering takes place at these important inflection points and Thursday was no exception. The fact that stocks kept rallying over the ensuing five hours into the close suggests that this was more than the ordinary dip-buying and surely nothing that could have been accomplished at the retail level, stimulus checks or otherwise.

It was the usual combination of buying the most-shorted issues, carrying on with favorites and overall bullishness that keeps Wall Street a casino flush with insider winners, all of which leads one to wonder whether this was a one-day wonder or a lasting reversal.

As with everything else in the bizarro-land the 21st century has become, we won't know until after the fact, making trading stocks, holding stocks, shorting stocks or even thinking about stocks an exercise not just in futility, but possibly exposing a masochistic side to the investing life. For years, passive investing has been the go-to methodology for making gains. General indices just go relentlessly higher over time. Pullbacks are brief and shallow. Life is good for people who allow others to manage their money even though it is not supposed to be that way.

For the hard-core trader, life is difficult standing aside the buy-and-holders who aren't responsible for their gains or losses. The trader needs purpose. Ike a shark which dies if it doesn't constantly hunt and eat, the trader must buy and sell in order to survive, which is exactly why they've become nearly extinct. Today's trading is mostly computerized, employing advanced strategies and algorithms to minimize risk. While profits are not always maximized for the passive investor, the losses are few and far between, keeping the universe of hedge funds, retirement accounts, and general wealth funds and their managers all propped up and spending weekends on their yachts.

It's a cozy club at the top because they’re beneficial to the market as a whole. You don't have to do a thing, they say. Just leave it to the masters of the universe and all will be well.

From the looks of things from Thursday, they've got the bull by the horns and appear to be in complete control.

Yawn. Baseball's regular season begins next week. Even with its slow pace, the American pastime might prove a little more exciting than the usual offerings from lower Manhattan.

At the Close, Thursday, March 25, 2021:
Dow: 32,619.48, +199.42 (+0.62%)
NASDAQ: 12,977.68, +15.79 (+0.12%)
S&P 500: 3,909.52, +20.38 (+0.52%)
NYSE: 15,410.37, +133.81 (+0.88%)

Stocks Looking For Reasons To Rally; None To Be Found

This has not been a very good week for stocks, but it's nothing a few days of rallies can't fix. Through Wednesday, the Dow Industrials are off 203 points, the NASDAQ has shed 253 points, has spent the past two days trading below its 50-day moving average and is once again approaching correction territory.

Another rough session will send the NAZ into the red for the year (12,888.28) and it doesn't even have to be that bad. A little more than -0.5% would do it.

While the NASDAQ appears to be a troubling index highlighted by weakness in tech stocks, the rest of the market isn't nearly as ugly. The aforementioned Dow Jone Industrial Average marked a new all-tine high just last week (33,015.37, 3/17), though it has suffered losses four of the past five sessions. Wednesday's late-day collapse knocked off a 365-point gain intraday, a turnaround that portends ill for the remainder of the week.

The Dow is still sporting healthy gains for the year, up more than 1700 points (30,606.48, 12/31/20) or roughly five percent.

A mixed bag for the S&P 500, which, like the Dow, has been down four of the past five days. On March 17, it got to within 17 points of 4,000 before closing slightly off the highs of the day, at 3,974.12. It's lost 50 points since Monday and is clinging to a gain of less than four percent for 2021 (3,756.07, 12/31/20).

On the NYSE Composite, five straight losses have it resting just above the 50-day moving average.It too made a record closing high on the 17th (15,731.15), and is up 5.17% on the year (14,524.80, 12/31/20), the best of all the major indices. The Composite is down 286 points so far this week.

It would be presumptive to suggest that all the main averages should go negative for the year, though that prospect is rearing its ugly head this morning. Just prior to the release of two key data points (final 4Q GDP and weekly unemployment claims), futures took a severe turn to the downside, wiping out modest overnight gains.

Oddly enough, both releases were somewhat positive, as GDP came in at 4.3%, revised 0.2% higher than last month's estimate, and just 684,000 people filed initial unemployment claims, a post-pandemic low. The total number of individuals claiming some form of unemployment relief rose, however, back above 19 million, a discouraging sign for the "recovery" boosters.

Stocks aren't the only things falling off the wagon this week. Gold, silver, and cryptocurrencies have all been driven down. Bitcoin fell to $50,305.00 just moments ago. Silver is bid at 24.54, and is down for 2021, as is gold, though it is holding up well at $1731 per ounce.

The opening bell is just minutes away. Futures are indicating a slow start to Thursday's session.

(Post 3003)

At the Close, Wednesday, March 23, 2021:
Dow: 32,420.06, -3.09 (-0.01%)
NASDAQ: 12,961.89, -265.81 (-2.01%)
S&P 500: 3,889.14, -21.38 (-0.55%)
NYSE: 15,276.56, -69.96 (-0.46%)

Stocks Knocked; Techs Under Pressure; Oil Skid Continues; New Home Sales Drop 18 Percent

Even as longer duration bond yields fell, there wasn't much to wrap a trade around Tuesday sending the major averages slipping into the red across the board.

Yields on the 10-year note and 30-year bond were 1.63% and 2.34%, respectively, each down 11 basis points over the two sessions from Friday’s close.

After stocks vacillated across the unchanged line with slim gains through most of the morning, non-committal waves of selling began to appear in the afternoon, accelerating into the close.

For the Dow Jones Industrials and S&P 500, it was the third losing session in the last four. The NYSE Composite Index fell for a fourth straight day while the NASDAQ was a loser for the second time in the last four, trading in a resistance range just below its 50-day moving average, a level its found hard to shake free from for the past month after falling off from all-time highs.

Part of the problem for stocks is the uncertainty of economic recovery in the developed European nations and the United States. While America seeks to rebound with states reopening to business as usual, Germany, France, Italy, and the UK continue to be beset by a third wave of the neve-ending virus that has battered economies for the past year. Travel restrictions, mask mandates, and all manner of social distancing disorder have become the norm in the the four biggest European economies.

Such discomfiture sent oil futures to six-week lows, well off the 11-month highs made two weeks ago. WTI crude oil closed at $57.76 a barrel, down $3.69 from Monday's finish at $61.55 a punishing five percent decline, an indication that if economic recovery is going to occur at all, it will be in fits and starts, with many surprises and setbacks along the way.

As cliche as it sounds, markets are not appreciative of uncertainty, the displeasure becoming manifest in recent days, even as stimulus checks are rolling out in the USA with estimates of as much as 20% of the individual $1400 booty earmarked for stock trading.

That retail buyers would end up eventual bag-holders would not be surprising given that stocks have been highly-valued for months, if not years. A wash out correction led by tech stocks which have already been hard hit could be days or weeks away.

More optimistic analysts predict equities to continue rising as economic data indicates an improving condition, but positive data has been scant of late. Monday's Existing Home Sales for February from the National Association of Realtors showed a 6.6% monthly decline, although home prices remained at astronomical levels, rising to a record of $313,000 for the median-priced home, 15.8% higher from one year ago.

At best, recent data drops have been a mixed blessing. Tuesday's new home sales 2:00 pm ET release was the likely culprit for the stock selloff, as it showed a decline of 18.2% in February. Taking the worst of it were Midwest builders, where sales were off a whopping 37.5% month-over-month, the data skewed by unusually harsh weather conditions.

All of these shifting winds have Wall Street in a tight spot, making for tough trading while calling for deeper analysis. For now, until there is more directional clarity, it appears the economy is still operating at close to stall speed and stocks should respond as they have been for the past month, sideways to slightly down. Desire for more positive news is growing, though it has not yet reached the desperation stage.

Thursday's final estimate of 2020 fourth quarter and year-end US GDP should be the capper for the week. Expectations are for the quarterly figure to come in at 4.1%, in line with the second estimate from February.

(Post 3002)

At the Close, Tuesday, March 23, 2021:
Dow: 32,423.15, -308.05 (-0.94%)
NASDAQ: 13,227.70, -149.84 (-1.12%)
S&P 500: 3,910.52, -30.07 (-0.76%)
NYSE: 15,346.53, -205.05 (-1.32%)

Key To Recovery Will Be Demographics, Especially Millennials and Generation Z

For years, it's been widely reported - thus assumed to be true - that 10,000 Baby Boomers retire every day, and, the numbers generally hold to that standard. That's an enormous number of people leaving work permanently, ostensibly their positions replaced by younger people with years to go before hitting the porch rocker and shuffleboard courts.

It's 3,650,000 people a year, so, logically, there should be plenty of job openings for those both after 1964, the official end of the Baby Boom generation (1946-64). But, is that enough? The generations following the Baby Boomers - Generation X: (1965 – 1980), Millennials: (1981 – 1996) and Generation Z: (1997 – 2012) - make up 62.28% of the population, though anyone in Generation Z born later than 2003 hasn't yet entered the workforce, many of them still in college.

Thus, Generation X and Millennials comprise nearly 42% of the adult population and workforce, roughly 138 million and they make up the bulk of the US labor force. Baby Boomers account for just 69 million, and, as of 2020, most of them haven't reached full retirement age (65-67). Those born in 1954 just turned 66 last year. There's 10 more years (1955-1964) of Baby Boomers still heading toward the glory years, still out there grinding away at 57, 60, or 62.

The math works out pretty well because it's not straight line calculus. Just because a Baby Boomer retires, does not mean that a Gen. Z college graduate will replace them. Jobs change over time. Many of the jobs Baby Boomers started out doing in their 20s aren't around any more. Factory jobs, for instance, have almost all gone to China or elsewhere. Telephony has morphed into cellular and the internet. And many of the jobs that remain now require a greater skill set, such as auto mechanics, the best of whom now must have a working understanding of computers n addition to basic car repair skills.

Over time, the labor market, despite many moving parts, is fairly static, and there are fewer Gen. Z individuals coming out of high schools and colleges than there are Baby Boomers retiring. From a demographic economic standpoint, there should be enough jobs available to support new entrants.

However, with 20 million people currently receiving unemployment benefits, the lockdowns from 2020 put a real kink in the link between generations and work. Workers aged 16-24 were hardest hit by work from home and lockdown regimens. That age group saw unemployment rise from 8.4% to 24.4% from Spring 2019 to Spring 2020, which is why there have been three rounds of stimulus checks and rent moratoriums. Those young folks, the least economically capable of navigating though tough times because they had little savings, have been left behind by what used to be the economic powerhouse of the United States. They don't have skills, or money, or jobs. Three strikes and you're out. Suicides among this age group have soared. Going forward, the outlook for unskilled youth is bleak.

Still, officials in Washington, DC, and media talkers still claim that recovery is right around the corner. Demographics and the rise of technlogy say otherwise.

A bright spot can be found in a darker place. In addition to roughly 10,000 Baby Boomers retiring every day, more than 5,000 of them die every day, or, about one every 17 seconds. While not such a cheery subject, Baby Boomer deaths of that magnitude is releasing a tidal wave of capital, much of it going straight into - you know where - the stock market. Millennials being the primary beneficiaries (children of Boomers), they're inheriting homes, collections, junk drawers, used cars, and retirement accounts often worth hundreds of thousands of dollars, if not millions, and there's more on the way. About 2/3rds of Boomers are still alive.

Without being too morbid, generational wealth being passed along is usually a positive development, and, while that's all well and good for Millennials, it doesn't help out the younger cohort in Generation Z, at least not directly.

The hope is that America will, as it has done in the past, find a way through this rough economic patch. The unemployed youth of today will become the leaders of tomorrow. The Silent Generation and the Greatest Generation, spawned by the Great Depression, built post-war America. Generation Z's opportunity is to help Millennials rebuild an aging infrastructure and lead development and advancement of new technologies. The challenge is to do so largely by disregarding the dictates and wrong-footed realities of the elected people, many of the leaders well into their 70s and 80s.

Youth must look beyond the finger-pointing cancel culture, the distractions, the anger and hate brewed up by the mainstream media and start shaping a better 21st century, already one-fifth wasted. It's not too late for younger people to rise up and take the reins.

Sensing that the aging oligarchs in government won’t relinquish control without a fight, there’s a strong likelihood that the economy will suffer some stresses along the way, making for what appears to be a tumultuous decade that’s just begun.

(Post #3001)

At the Close, Monday, March 22, 2021:
Dow: 32,731.20, +103.23 (+0.32%)
NASDAQ: 13,377.54, +162.31 (+1.23%)
S&P 500: 3,940.59, +27.49 (+0.70%)
NYSE: 15,551.58, -10.68 (-0.07%)