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Money Daily has been providing business and financial market news, views, and coverage on a nearly continuous basis since 2006. Complete archives are available at moneydaily.blogspot.com.
Money Daily has been providing business and financial market news, views, and coverage on a nearly continuous basis since 2006. Complete archives are available at moneydaily.blogspot.com.
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Friday, November 5, 2021, 8:53 am ET
It's the first Friday of November, so two items need checking off:
1) See how close the major indices are to new all-time highs.
On the how-rich-am-I-today scale, stocks are looking for their fifth straight weekly gains. The industrials are up 304 points through Thursday, but backed off 33 points from Wednesday's record close.
The NASDAQ is having a banner week, up nearly 442 points (+2.85%). The NAZ has produced gains nine straight sessions. Not to be outdone, the S&P 500 has posted gains six straight sessions and 13 out of the last 15. It's up 75 points this week and made record closes eight of the past nine sessions.
Laggard of the bunch, the NYSE Composite is up 152 points on the week despite Thursday's pullback. It set a record closing high on Wednesday as well.
All of these pale by comparison to the rocket ship that is the Dow Jones Transportation Average. With a significant boost from one stock, Avis Budget (CAR), the Trannies are up 826.55 points, but intraday were higher by another 1500 points. The five percent gain has overshadowed the other indices.
At 8:30 am ET, the Bureau of Labor Statistics released its non-farm payroll report for October, showing a gain of 531,000, as the unemployment rate edged down by 0.2 percentage points to 4.6 percent.
The gross number exceeded expectations of 500,000, the major gains coming from leisure and hospitality increasing by 164,000. Professional and business services added 100,000 jobs in October, including a gain of 41,000 in temporary help services.
Manufacturing added 60,000 jobs; transportation and warehousing added 54,000; construction, 44,000; health care, 37,000.
Average hourly earnings for all employees increased by 11 cents to $30.96. The average workweek decreased by 0.1 hour to 34.7 hours.
August was revised up by 117,000, from +366,000 to +483,000, and September was revised up by 118,000, from +194,000 to +312,000.
All in all, the payroll report was a whopper. Stocks figure to go mooning on these numbers.
At the Close, Thursday, November 4, 2021:
Thursday, November 4, 2021, 9:20 am ET
Hat tip to Gregory Mannarino on this one.
On Wednesday, the Fed wrapped up their November meeting. As expected, they kept the federal funds rate at the zero-bound (0.00-0.25%) and announced a timeline for the gradual reduction in asset purchases.
But, as Gregory Mannarino points out in the video below, they really didn't announce any specific reduction in the amounts of their buying, only a lowering of the minimum amounts.
Straight from their press release, it says (emphsis ours),
Beginning later this month, the Committee will increase its holdings of Treasury securities by at least $70 billion per month and of agency mortgage?backed securities by at least $35 billion per month. Beginning in December, the Committee will increase its holdings of Treasury securities by at least $60 billion per month and of agency mortgage-backed securities by at least $30 billion per month.
Note the use of the term "at least" four times in the Fed's statement. All they did was lower the minimum MBS and treasury bonds, bills, and notes they would purchase in November and December.
As for reducing the purchases, the Fed specifically chose to use the word "increase." The truth is, while the media may have been snookered by the fast-talking FOMC committee, they're continuing to buy, as the word "increase" implies.
There's no mention of any reductions (or, rather, increases of the minimum amount of purchases) after December, which affords the Fed significant room to maneuver. Experts from Goldman Sachs and elsewhere thought the Fed would deliver an entire timeline through July 2022, reducing their purchases by $15 billion a month until eventually reaching zero.
That distinctly did not happen. They even say so: "The Committee judges that similar reductions in the pace of net asset purchases will likely be appropriate each month, but it is prepared to adjust the pace of purchases if warranted by changes in the economic outlook."
Basically, the Fed's statement is gibberish, designed to fool market participants and the public into thinking that they are actually going to slow the level of purchases and let the economy function without significant support.
If you called the grocery store for a delivery and they told you they would be bringing at least five apples, what would you think? Well, they'll surely deliver at least five, but they could bring 10, or 20 or a full bushel or more. There's no limit to how many apples the grocer would deliver, just as there is no no limit to the amount of asset purchases the Fed will make in November and December and beyond.
To get an idea of just how well the Fed has orchestrated their latest fraud, check out a few headlines from the usual suspects:
Fed Moves to Unravel Lifeline It Has Provided the Economy, Begins 'Tapering' - US News & World Report
Inflation Debate Can Wait as Fed Tapers Wall Street Journal
So, now you know why stocks went sailing higher after the Fed's announcement. The Dow, S&P, NASDAQ, and NYSE Composite all recorded new record closing highs.
The Fed is well aware of the condition of the US and global economy, and, while they say publicly, "With progress on vaccinations and strong policy support, indicators of economic activity and employment have continued to strengthen," they aren't telling the truth. Third quarter GDP, which was originally pegged to grow at a rate of 5-7%, actually came in at 2.0%. That was announced last week. Other data the Fed has on hand include last month's horrific showing in non-farm payrolls, coming in at 194,000, when 500,000 was expected.
The Federal Reserve is conning the public (with help from the media) on financial conditions just as the federal government is on everything from the virus to vaccines to inflation to the border crisis.
Now that you are aware the government and its financial arm, the Fed, are leading you down a primrose path with thorns on all sides, what are you doing to protect yourself, your family, and your assets?
There are alternatives to stocks, as has been pointed out repeatedly by Money Daily.
Here's Mannarino's take:
At the Close, Wednesday, November 3, 2022:
Wednesday, November 3, 2021, 9:49 am ET
Yesterday, prior to the market open, Money Daily suggested that the main indices would likely exhibit relative calm prior to Wednesday's FOMC policy announcement.
We were partially right, but seriously wrong.
While the three majors - Dow Industrials, S&P 500, and NASDAQ - each moved to new all-time highs, they were up by piddling percentages (see below), all gaining less than 0.40% on the day.
Meanwhile, all manner of lunacy was breaking loose on the Dow Jones Transportation Average, which, guided by only one stock, Avis (CAR), ended the day with a gain of over 1,000 points and 6.88%, one of the best single days ever for the Transports.
The catalyst was easy to spot. Avis (CAR) has been on something of a tear the past few months. Money Daily was wise to it a week ago and provided insight, but Tuesday, somebody popped the cork and let the champagne flow.
Avis closed Monday at 171.46, but on Tuesday, began gathering upside momentum right from the opening bell. Just after 11:00 am ET, it reached its high of the day, an incredible gain of $373.65, or 217.9%, to 545.11. Avis finally settled for a gain of xxx, closing at 357.17 (108.31%)
At the same time, the Dow Transports gained 2,303 points, or 14.4%, at its intraday high of 18,246.51. The previous close was 15,943.09.
Consisting of just 20 stocks, the Transportation Average is subject to wild, speculative swings. Back in 2020, as the virus crisis was taking shape, the Trannies swung wildly, fueled by airline and moving stocks, which had been all but shut down.
Here are some of the one-day spikes, lower and higher on the Dow Transports in 2020:
Wednesday, March 11: 8,126.09
Monday, March 23: 6,703.63
Friday, April 3: 7,305.31
Friday, May 15: 7,761.00
The unusual activity in Avis (CAR) was almost certainly due to a couple of large hedge funds and the willing diamond hands of the reddit group, r/wallstreetbets, a group that has caused similar chaos in so-called "meme" stocks such as Gamestop (GME) and AMC Entertainment Holdings, Inc. (AMC). With nearly 30% of its shares short, CAR was a juicy target.
As the redditers poured in, shorts were forced to cover. In early September, shares were going for around 90, but began to ramp significantly higher through October. Avis shattered third quarter expectations when it announced its earnings on November 1, which provided the catalyst for the incredible gains the following day.
For sure, some of the short sellers were crushed by Tuesday's blow up, but it's possible that one hedge fund - STS Investment Management - has figured out how to play along with the reddit crowd, and could have profited as much as $5 billion.
Not to look too blind, oblivious, or stupid, Deutsche Bank and JPMorgan Chase downgraded Avis (CAR) Wednesday morning.
The mainstream financial media covered Tuesday's event in subdued tones, as if such activity is now accepted as normal. Here's one example, laughingly citing Dow Theory, which, for all intents and purposes should be declared dead, null, and void. The article writers still think it's valid as the stock markets have turned into a giant, rigged casino, where the House (Wall Street banks) always wins.
Players are advised to meep their chips within their sight at all times as the House is not responsible for unexpected losses.
With that little bit of madness in the rear view mirror, the Fed will announce no change to the federal funds rate today at 2:00 pm ET, but is expected to lay out its plans for tapering asset purchases into 2022. And analysts think that will move markets.
At the Close, Tuesday, November 2, 2021;
Tuesday, November 2, 2021, 8:40 am ET
The Fed's penultimate FOMC meeting begins Tuesday, so don't expect much movement in markets unless there's a major news leak or some other market-moving event occurs prior to the policy statement release at 2:00 pm ET Wednesday. It's widely assumed that the Fed will announce a tapering of its $120 billion monthly asset purchase program at the conclusion of their meeting.
For numerologists only, Tuesday and Wednesday have significant date signals. Tuesday's nine indicates a change; Wednesday's one signals a new beginning.
11/2/2021 = 9
The reliability of numerology at prediction or analysis is sketchy, although the most widely employed system was developed by Greek philosopher and mathemetician, Pythagoras.
Given that fundamental analysis hasn't been capable of capturing most of the stock market gains since 2008, perhaps taking up less-acceptable methods of analysis should be entertained. In retrospect, the simplest of strategies has turned out to be among the best: buying and holding an index fund tracking the NASDAQ or S&P 500.
Elsewhere, Pfizer reported third quarter earnings that beat expectations and raised guidance. The company posted net income of $8.146 billion, or $1.42 a share, for the quarter, up from $1.469 billion, or 26 cents a share, in the year-earlier period, mostly on virus vaccine sales, even though their injections don't prevent the inoculated from catching or spreading the disease any better than natural immunity.
Driven by an unprecedented vaccination drive against the pandemic globally, Pfizer's shot has quickly become one of the best-selling products in the company's roughly 172-year history. Pfizer splits expenses and profit from the vaccine with its German partner, BioNTech.
Cryptos caught a bid overnight. Bitcoin is roughly $2,000 higher since midnight, currently marked around $62,250.
Heading into Tuesday's session, European markets and US futures are mixed, a condition which is likely to persist until the policy announcement and subsequent press conference.
At the Close, Monday, November 1, 2021:
Sunday, October 31, 2021, 10:45 am ET
Equity investors had another solid week as all but the NYSE Composite recorded their fourth straight week of gains. Each of the averages made new all-time highs, including the Composite on Monday, after which small caps were largely discarded.
It was a banner week for tech, with the NASDAQ posting by far the largest percentage gains, thanks to a mammoth rally on Thursday and closes in the black every day of the week. The tech rally flew in the face of disturbing data, as the Commerce Department reported the economy slowing to a two percent annual GDP growth rate in the third quarter, the weakest month-over-month quarterly expansion of the year and the worst showing since the third quarter of 2020. [pdf]
Following readings of 6.7% in the second quarter and 6.3% in the first quarter, the quarter just past was seen as a great disappointment. Estimates had been declining throughout the quarter and into October, but the paltry two percent figure was below even the most pessimistic estimates which centered around 2.8% growth.
With this deceleration in hand, analysts are beginning to question fourth quarter predictions and the very real possibility that the economy could return to negative growth as supply chain issues persist and inflation appears to be the dominant growth driver, rather than production increases. Already a month into the quarter, retailers are bracing for a holiday season that, while expected to be better than last year, may fall short of expectations due to store shelves not being fully stocked with items consumers are seeking.
The continued appearance of heavily-laden container ships moored off the ports of Long Beach and Los Angeles and a trucker shortage of some 60,000 drivers indicates that seasonal items may not make it to their final destinations in time for a holiday retail boost.
With Black Friday less than four weeks away and Christmas Eve another four weeks after that, the push is on to get cargo off of the ships and onto trucks or rail cars, but there are significant issues facing transporters, one of which is the volume of full and empty containers clogging the streets of Long Beach and Los Angeles to a point at which local authorities have imposed a temporary standard allowing stacking of empty containers from the usual two high to as much as five high.
Empty containers are what are normally shipped back to China since the US trade imbalance is so severe. We buy from them, but they purchase relatively little from the US, causing the empty container surplus. Rumors are swirling that China is refusing to take back empty containers because they have too many of them already, but more reliable sources say the bigger issue in the US is that beneath each of these two-to-five high stacks of empty containers sits a truck chassis which could be moving full containers to distribution centers or warehouses of retailers.
Exacerbating the condition at the West coast ports are fines now being imposed by port operators on shippers. Containers sitting idle for more than nine days if to be hauled by truck, and three days for those assigned to rail cars, will be subject to a fine of $100 per container per day. There are hundreds of thousands of containers passing through these ports and storage facilities every day, so the fines could add up quickly. The new rules go into effect on Monday, November 1, though fines won't be assessed until the 15th.
Additionally, new laws in the state of California requiring all truck hauler vehicles to be 2014 models or newer has taken many reliable, safe trucks off the roads. The supply chain issues that are being referenced daily in the mainstream media appear to be mostly man-made and fixable. However, since the world is supposed to undergo this "Great Reset" from which it can "Build Back Better," there needs to be a crisis before government can step in to correct the situation. The incompetent continue to lead the world down a spiraling path to insolvency.
The average time to unload a cargo ship of 5-to-10,000 containers is 2 1/2 days. Time to get those containers from the port to an inland warehouse (the further away the longer) is six to nine days. With roughly 100 cargo ships moored off the California coast, the current backlog will take more than six months to clear. Merry Christmas, in advance.
Not withstanding the advancements of modern "just-in-time" delivery and souring economic data, the stock market should continue to enjoy gains up to this coming week's FOMC meeting, set down for November 2-3, at which time the Fed is expected to announce a timeline and schedule for tapering its asset purchases down from $120 billion a month - which has been the norm since March of 2020 - to ZERO by July, 2022.
The Fed currently buys $80 billion each month in treasury bonds and $40 billion in agency mortgage-backed securities (MBS). The plan is to reduce the purchase of MBS by $5 billion a month and treasury bonds by $10 billion a month beginning in December and completed by July 2022.
Well, good luck with that as the economy is slowing down and the federal bureaucracy - led by the phony Biden administration and the feckless, corrupt congress - determined to destroy what's left of the former United States of America. As the saying goes, "with these kinds of friends, who needs enemies?" The US is on a suicide economic path.
Earnings will again dominate the financial news, though warnings from Apple and Amazon last week set a dire tone for the fourth quarter and 2022. Some of the better-known companies reporting in the coming week include Pfizer (PFE), British Petroleum (BP), Goodyear Tire (GT), Square (SQ), CVS Health (CVS), Moderna (MRNA), and Peloton (PTON).
On Wednesday morning, prior to the Fed policy statement (2:00 pm ET), ADP releases its monthly private sector payroll figures of October, followed Friday by the government's non-farm payroll release prior to the opening bell. All the earnings, policy, and employment numbers make for an active week.
Seemingly ignorant of the ongoing inflation trends, treasuries rallied on the week, with the 10-year yield falling from 1.66% to 1.55%, and the 30-year tumbling from 2.08% to 1.93%. Paradoxically, the moves on the long end of the treasury curve are suggestive of looser business conditions becoming a necessity, possibly front-running the Fed's tapering plans. The curve is flattening at the same time, with the 2s-10s spread down from 1.21 at the start of the month to 1.07 by the end of this week, the flattening curve indicating tougher business conditions going forward.
The price of oil remains stubbornly high, closing out the week marginally lower, with WTI crude priced at $83.22 per barrel, down from $83.76 a week ago, though that will have little effect on auto fuel, as the price of a gallon of unleaded regular at the pump increased 2.9 cents over the past week, to a US average of $3.39. High fuel prices are putting a strain on the average consumer and small businesses particularly and there doesn't appear to be any relief ahead as the holiday season approaches. If anything, the national average may exceed $3.50 by Thanksgiving.
Throwing salt on the wounds of drivers, ExxonMobil's third quarter results were exceptional, posting $6.8 billion in profits or $1.57 per share, assuming dilution. The company also announced plans to buy back as much as $10 billion of its own shares over 12-24 months, beginning in 2022.
Gold and silver remained muted to slightly lower on the week, though demand for the metals continues to be strong. The weekly survey of eBay prices suggests that buyers of finished goods are still willing to pay extraordinary premiums, with prices paid steady to slightly higher.
Gold price 10/22: $1,792.00
Silver price 10/22: $24.30
Here are the latest prices for common one ounce gold and silver items sold on eBay (numismatics excluded, shipping - often free - included):
Item: Low / High / Average / Median
The Single Ounce Silver Market Price Benchmark (SOSMPB) settled at $38.66, a gain of 20 cents from last week's price of $38.46.
The two major cryptocurrencies, Bitcoin and Etherium, both had an excellent run in October, the two up more than 45% since the start of the month. Overnight, Bitcoin has dropped some $2,000, from a high of $62,427 to a reading of $60,378 Sunday morning. Such a drop is routine for the granddaddy of cryptos. Considering that Bitcoin started the month around $43,000, it does not seem alarming. Etherium actually outperformed Bitcoin over the month. It's utility in the burgeoning NFT (Non-fungible token) market makes it a prime holding for artists, creators, and speculators.
Recent strength in cryptos is, for the time being, cyclical, though signs of a coming breakout are evident since Bitcoin broke through its all-time high earlier in the month. Spurred on by increasing acceptance
One notable data point comes from the Dow Jones Transportation Average, which came close, but failed to achieve a new closing high during the week. On Wednesday, the average closed at 15,936.69, just short of its all-time high of 15,943.30 (May 7, 2021). With the Industrials making a new all-time high this week, the Transports need to exceeding the old high to confirm a primary trend from bear to bull. Without the confirmation, the Dow's new territory remains a false high, as outlined by Money Daily recently.
That said, it would not surprise anybody to see stocks continue to rally, as the markets have proven impervious to bad news or fundamental analysis since the GFC of 2008-09. On the other hand, the Fed's tapering announcement may be a sell-the-news event for markets. It's really anybody's guess at the moment, though a downturn would figure to be at least a short-term probability.
Hedge accordingly or get out of the way.
At the Close, Friday, October 29, 2021:
For the Week:
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