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%)
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