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Weekly Survey of Gold and Silver Prices
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.
Friday, January 6, 2023, 9:20 am ET
So far, just three days into the new year, stock markets look eerily similar to those of the old year. Thursday's session served as a reminder that issues plaguing US and global economies have not magically vanished with the turning of the calendar.
Inflation remains the #1 problem for individuals and businesses alike, followed by the Fed's relentless efforts to expunge rising prices from the landscape. Friday's focus will be employment, with December's Non-farm payroll (NFP) out an hour prior to US market open.
Expectations are for 200,000-230,000 jobs to have been created during the final month of 2022. Job creation, according to the Bureau of Labor Statistics' (BLS) Establishment Survey (businesses) has been brisk, rising every month since April, 2020, with the exception of December, 2020, which registered the only monthly decline in the past 33 months. In November 2022, total non-farm employment increased by 263,000 to reach 100.7 percent of its level in February 2020, the month before the start of the COVID-19 pandemic and the brief recession that resulted from it.
December is probably going to be more of the same, to the great disappointment of the Federal Reserve, because, in their view, a strong labor market fuels inflation. With a robust economy creating jobs and little unemployment - the current rate is 3.7% - more money is pumped into the system and prices rise on strong demand.
That at least is the current narrative, though the Household Survey (individuals) conducted by the very same BLS shows employment to be essentially flat through much of 2022, a discrepancy of some 2.3 million jobs. Opinions vary on the veracity of the two surveys, though a healthy skepticism of the BLS as a reliable evaluator of the actual employment picture has been prevalent for decades. The current gap between the two surveys only feeds into argument of the doubters and deniers.
For what it's worth, Wall Street relies largely on the establishment survey to gauge the employment sector. Whether that is the wisest of choices is open to debate.
According to the just-released announcement of December NFP:
Total nonfarm payroll employment increased by 223,000 in December, and the unemployment rate edged down to 3.5 percent, the U.S. Bureau of Labor Statistics reported today.
The report - the lowest empolyment figures since the negative reading in December, 2020 - is probably good for stocks because traders believe the Fed will view this as evidence that the economy is cooling and cause them to continue raising interest rates, but at a slower pace. The Fed is expected to raise the target federal funds rate by 1/2 percent, from 4.25-4.50% to 4.75-5.00% at the next FOMC meeting January 31 - February 1, though this report alone is unlikely to change that.
On the release, stock futures unexpectedly rose sharply, driven not by the unsurprising headline number but by average hourly earnings, which grew just 0.3% month-over-month in December, down from 0.6% (revised to 0.4%) in November and below the 0.4% growth expected. Dow futures soar 300 points, S&P futures were up 35 and NASDAQ futures gained over 100 points on the news.
That should help stocks to some degree, as wage growth is a key component of the inflation calculus. Slowing wage increases should be seen as a positive development by the Fed, tempering the anti-inflation quest.
With the last trading session of the week approaching, it appears stocks are going to read negative to start the year. As of Thursday's close, the Dow was down 217 points for the week, the NASDAQ off 161, the S&P 31 points lower, and the NYSE Composite ahead 41 points.
Should stocks finish lower on Friday, it would be the fourth losing week of the past five for the Dow and NYSE, and five straight for the NASDAQ and S&P 500.
December's NFP appears to be a mixed bag of sorts, though it is, by itself, not giving enough of a signal to warrant changes in the Fed's overall plan. Stocks are likely to vacillate through the session without much direction, though the bias, after the lackluster start so far, is probably going to be slightly positive.
At the Close, Thursday, January 6, 2023:
This article was published simultaneously on Substack.
Thursday, January 5, 2023, 9:24 am ET
The new year is only five days old. Thankfully, Wall Street, their stock market circus, has only been on display for two.
The three-ring affair that is the Dow Jones Industrial Average, S&P 500, and NASDAQ markets have gone up-and-down like horses on a carousel, ending up pretty near to where they began. In particular, Wednesday's action was somewhat arousing, especially the final 13 minutes of trading, when the Dow shifted from a small loss to a somewhat sizeable gain, adding 183 points after 3:47 pm ET.
Whistling and cheering was heard behind the CNBC set of "Closing Bell."
Two days in, the Dow is up 123 points, NASDAQ down 7.73, and the S&P has gained 13 points, not really taking a bite out of those 2022 losses. Overheard yesterday was the following: "When there's no Santa Rally, there's usually no January Effect."
The commenter was of course referring to the lack of a meaningful rally the final two weeks of last year and the presumptive lack of any upside due to relief from tax-loss selling or Wall Street's finest putting their bonus money to work.
Problem is, tax-loss selling is still selling and bonuses were pretty darn slim last year. Anybody with extra cash is probably allocating more of that loot to bolstering their pantries with rice, beans, canned goods and other non-perishable edibles rather than pursuing investment opportunities, those few that offer any hope still appearing fairly risky.
Eventually, there will be a rally, but the betting is that it won't happen until stocks head a little further south and that it won't be a big one because all of the elements which drove stocks lower in 2022 are still in play and might even cause further erosion on the indices.
Sluggish trading may have less to do with risk aversion than an appealing condition for profit-takers. After all, selling winners in January equates to not paying capital gains tax on them until April 2024, a full five quarters from now, giving investors plenty of time to make more money or more mistakes, depending on market gyrations.
Whatever are the present issues, there seems to be a high level of trepidation among the usual plungers, still smarting from last year's spanking. There's probably more than a few traders taking the wait-and-see approach, at least until December's Non-farm Payroll report is issued Friday morning.
US employment is expected to have added 200,000 jobs in 2022's final month, though there are some indications that hiring (and spending) wasn't very strong during the crucial holiday shopping season. Brick-and-mortar retailers haven't had much to cheer about for the past few years. Plenty of companies were shutting down locations while few were expanding. Additionally, along with tech companies announcing layoffs recently - Amazon announced another round of layoffs, numbering 18,000, just yesterday - some financial firms also have recently announced job cutbacks.
The lineup is growing, with Salesforce one of the more recent entrants into the jobs cutting lottery. The company announced on Wednesday that it was cutting 10% of its workforce, or about 8,000 employees, and closing some offices. Venmo, part of PayPal, said it was shedding 11% of its staff, though no numbers were given. Goldman Sachs CEO Divid Solomon announced last week that mass layoffs were just weeks away, suggesting that the "Vampire Squid" may be losing a few tentacles prior to the next FOMC meeting (January 31 - February 1).
Thursday morning, The Challenger Report had this sobering message:
"U.S.-based employers announced 43,651 cuts in December, falling 43% from the 76,835 announced in November. It is up 129% from the 19,052 cuts announced in the same month in 2021, according to a report released Thursday from global outplacement and business and executive coaching firm Challenger, Gray & Christmas, Inc."
That's 120,486 layoffs announced in just the past two months, which doesn't jibe well with continuing job growth. The growing discrepancy between the BLS's own Establishment Survey and Household Survey is another major concern. While the Establishment Survey showed consistent job growth in 2022, the Household Survey has been essentially flat.
None of this is very positive going forward, so interested participants may continue to sit on their hands (and wallets) a while longer, despite whatever numbers are released Friday morning (8:30 am ET).
Meanwhile, the dysfunctional US federal government has gone full clown show over electing a Speaker of the House to succeed outgoing Nancy Pelosi. Kevin McCarthy's bid for Speaker has fallen on some deaf ears among Republicans. A group of about 20 representatives, including Chip Roy (TX) and Matt Gaetz (FL), refuse to vote for McCarthy, who recently said he's "earned" the right to be named Speaker.
Aside from McCarthy's annoying bluster, the House holdouts are seeking various changes to rules they say limit their effectiveness in crafting and passing legislation. Through six separate votes Tuesday and Wednesday, McCarthy has failed to garner the necessary 218 votes and has done little in the way of compromising to satify his detractors. The House is set to resume its version of Ringling Brothers at noon, Thursday, though little progress appears to have been made.
Names that have been floated as an alternative to California's McCarthy include Jim Jordan (OH) and Louisiana's Steve Scalise, who has served as both majority and minority whip the past ten years and will be majority leader once the Speakership is decided and legislators are sworn into office.
It's a fine show.
At the Close, Wednesday, January 4, 2023:
Dow: 33,269.77, +133.40 (+0.40%)
This article was published simultaneously on Substack.
Wednesday, January 4, 2023, 8:26 am ET
Maybe you survived 2022 without taking too big a hit, but many people, especially those in managed IRAs or 401(k) funds, took severe losses on the year. The worst things to own in 2022 were tech stocks, the NASDAQ's 34% beating was better than only two other asset classes, British Gilts and the MOEX (Russian stock market).
Among the winners were the CRB Index (commodities), Brizil's iBovespa stock exchange, Brent and WTI crude oil, silver, gold, and select stocks, especially energy producers. ExxonMobil (XOM) was nearly a double through November, since then pulling back a bit.
With the New Year just one trading day old, allocations may not be set in stone already, but plenty of people are paring back their stock percentage and moving more into cash and fixed income. Those with a bent toward long-term store of wealth have naturally made the move into gold and silver. For ages, investment advisors (who largely don't make fees or commissions on precious metals) have advised a five percent allocation to PMs. That's a tune in need of change.
In the current environment, more than just a few folks aren't paying much attention to any advisors. There's more than enough evidence to suggest that stocks aren't making it and bonds got battered as the Fed pumped the rate pedal. However, as treasury rates are now exceeding most dividend yields on stocks, government and investment grade (IG) bonds are gaining appeal.
So, how does your allocation stack up? Anybody with an exposure of more than 50% in stocks is likely to get skinned again in 2023, but that's exactly where most fund managers put your dough, even as money is fleeing the stock market in rapid fashion. The only reason stocks haven't fallen further is the likelihood that they're being propped up by the Plunge Protection Team (PPT), massive insider coordinated buying, the NY Fed's trading desk, or all three at once.
US stocks markets are an absolute tragedy, a joke, and anything but free. The biggest money managers can move individual stocks any way they like. Take Apple (AAPL) for instance. Vanguard, Blackrock and Berkshire Hathaway own more than three billion shares between them, over 15% of shares outstanding. If these behemoths don't like the direction of their company's shares, they have more than enough money to fix that. As it is, when Apple does go down, they're probably just buying more, so the price of the stock matters less to them than the size of their holdings. They crave control and they have it.
Your 100 or 1000 shares of any stock are meaningless in the larger scheme of things. The big institutional holders consider you lucky they've allowed you into their private club. It never ceases to amaze that people who often work very hard for their money have no problem handing it over to somebody else to manage. Americans in particular have become so accustomed to owning stocks, they fail to seek alternatives until it is too late. When they do show concern, they're often chided for being too panicky or not understanding how markets function. It's a wonder the brokers and fund managers don't fleece every last retail investor.
If last year wasn't warning enough, the first few months of 2023 may be. Stocks show no signs of rallying significantly. If anything, they appear ready to retest the lows from early October, as did the NASDAQ just last week. The tech slump is far from over and they'll drag down the rest of the market even though many sectors don't need any help. Overall, stocks are priced well beyond traditional norms. The CAPE Ratio is currently standing at 27.96, but the median is 15.91. Stocks could fall another 30-40% from current levels.
The point is, it's your money, your future, your college, household, or retirement fund. Does it really make sense to just watch it go up and down without any means of control?
The past 12 years since the GFC have been fueled by easy Fed policy and loads of liquidity. That's all changed as of 2022. The federal funds rate is no longer 0.00-0.25%. It's already 4.25-4.50% and is set to go higher. So long as the Fed believes inflation to be a problem, interest rates are going to stay high. That scares money out of stocks and into money market funds, CDs, savings accounts, cash, and elsewhere.
That 50-60% allocation to stocks should be 25% or less, especially for retirees. Some banks are already paying 3.25% or higher on savings accounts; one-year CDs are pricing above 4.00%; and you can self-manage funds at Treasury Direct, starting with as little as $25 for savings bonds and $100 for many other low-risk, fixed-income products.
Of course, there's always gold and silver, which you can buy online at eBay or any of the reputable online dealers. According to the best analysts and chartists, precious metals look to be at the beginning of a superb bull run. Even if gold or silver doesn't do what the experts suggest - gain 15-20% or more this year - you'll still be holding a valuable long-term asset.
Bottom line, an allocation of 10% stocks, 25% cash, 25% fixed income, and 40% precious metals looks like a winning combination for 2023.
Considering how stocks fared on the first day of trading for the year, they're not where most of your hard-earned funds should be. Despite closing with a minor loss, consider the Dow was down more than 280 points before yet another miracle rally on zero news occurred. To a large extent, the same was true for the NASDAQ and S&P.
A rigged casino is what US stock markets have become. There are much better choices available.
At the Close, Tuesday, January 3, 2023:
Monday, January 2, 2023, 6:50 pm ET
Parts 1 and 2 of this extended WEEKEND WRAP covered results from 2022 and a recap of some major economic trends leading to 2023. Admittedly, Part 2 left out quite a bit of context about Russia's response to sanctions and the bellicose posture of the Western alliance of nations, but that, and more, will be covered in this section.
Please bear in mind that whatever asset classes or specific stocks or issues mentioned here are merely suggestions. Money Daily is not a financial advisor and all investments involve risk. Do your own due diligence.
Since Money Daily is not usually engaged in predictions, this exercise in plotting out the future might not be all one needs to prosper through 2023 and beyond. Rather than take a step-by-step, asset-by-asset approach, it may be more constructive to gather up all the moving parts and inspect them individually and see how they coalesce for a more holistic approach.
There are enough competing narratives to make even CNN producers squirm a little bit. Not only is the Russia/Ukraine conflict reaching further into the economies of all involved, there's that issue of inflation, fuel costs, food costs, production bottlenecks, sanctions, new politics in Washington, D.C., woke agendas, middle American backlash, pension fund decimation, Fed policies and probably a swarm of black swans circling overhead.
Putting it all in perspective isn't a task for the meek or feeble-minded, but, we'll take our best shot.
First, everybody has to eat, so the most basic decisions will be made over nutrition choices. Americans, and, by and large, Europeans and Britons, aren't going to go hungry. Despite all the scare-mongering over a coming food crisis, one is unlikely to materialize in developed nations. After all, there's money to be made all around, and proof that companies will raise prices whether basic inputs cost more or not can be found in the charts and third quarter reports from PepsiCo (PEP) and Coca-Cola (KO), two multi-line food and snack providers, both of which weren't shy about raising prices 15-20% across the board in their most recent filings.
From early October (post-earnings) through early December, Coke put on about an 18% gain, while Pepsi, with its higher share price, added about 14%. Both flattened out through December and into year-end, but they're both likely to report a solid, if uninspiring, fourth quarter and possibly produce some short-term gains, given they are legacy outfits offering a dividend despite relatively high p/e ratios (in the mid 20s).
What may be worrisome for those considering investing in the food sector is the threat of a recession, tighter household budgets and finicky consumers who may shy from big branded, high-priced processed food and opt instead for more nutritious meat-and-potatoes offerings. Then again, their brands are strong, people are stupid, and not very health conscious. One could find worse companies than these old-time stalwarts, but you'll pay plenty for them as they're near all-time highs.
Prudent investors might want to pass on these if only because they're pricey.
Whether there's a recession in our future and whether its deep and long or shallow and short, people will still want to eat out, so McDonald's (MCD) or Yum! Brands (YUM) might be on the menu. Both hung in well through 2022, with Mickey D's the better, down only 2%, while Yum shed six. Again, as is the case with most big-name stocks, they're near all-time highs. McDonald's carries a 32 multiple.
Both of these companies will be profitable and relatively safe plays, but, for the money, not the soundest of plays in a year that promises many ups and downs. Waiting for the eventual recession (which we're probably already in) and lower prices may be a better play. The entire food segment is worth watching and may perform better in the second half. Taking matters into one's own hands and growing some of your own is never a bad idea, cutting your food costs significantly.
Before delving any further, it should be addressed that stocks are probably going to keep falling at least through the first half of the year. The potential for a big, loud crash is evident. Besides the NASDAQ's 34% drop in 2022, the Dow, which lost just 10% and the S&P, down 20%, look like bargains. The fact that their 2022 returns were just under 10% and 20% was not an accident. There's more downside to come.
The Fed is going to keep raising rates at least for the next two FOMC meetings. Even if they pause at the May meeting, they're not about to just reverse course and start cutting rates, recession or not. They have a long history of standing pat for months on end, even years go by without a significant policy move. Once they quit hiking rates, they're more than likely to just keep them there for quite some time, probably into 2024, so, if money costs are 4-5-6% and CDs are offering 5% or more, even if inflation is 7 or 8%, plenty of dough will go into bonds and other fixed income funds and ETFs.
Treasury yields are going to be a great source of income for plenty of retirees and people and companies who shed risk and take what's available. Bonds, for income, are going to do quite well in 2023 and probably well beyond that. Just be sure you get return of capital in addition to return on capital.
Those of the buy the dip persuasion got slammed hard in 2022. Those days - of ever-higher stock and index prices - are over. The trend has morphed from piling on to piling out of stocks that don't perform. Shorting, selling call options or buying puts against individual stocks may turn out to be profitable, both short and long-term. Unless you're in defense stocks like Raytheon or Northrop Grumman, there's plenty of downside risk in just about every sector.
While a recession with layoffs may prove positive for bottom lines of some companies, eventually, lack of top-line growth will erode those profits. There's a thing about demand destruction. It is pervasive and persuasive, capable of taking down even the best of companies when the herd runs the other way.
Tech stocks are out. As a whole, they're too volatile, don't pay solid dividends and are still overvalued. Apple, Google, Tesla, Amazon, Meta, Nvidia, Netflix, Intel and a host of others took serious losses in 2022 and haven't yet bottomed.
Crypto is also out the window, except for bitcoin itself. For all the scandal and sketchy behavior associated with the crypto universe, bitcoin still is unscathed as far as operational integrity is concerned. Bitcoin itself has not been hacked, broken, manipulated, or scarred. The blockchain has not even shrugged, though the price action has been unnerving. At around $16,000, it may be worth a go, if only to shield some currency from regulators, friends, or foes. It's supposed to be "money" so maybe people should start treating it that way, i.e., store of value, medium of exchange.
It could go higher or lower, but, considering the various geo-political threats out there, upside seems more the logical direction.
Gold held up well in 2022, up 1.67%, despite a deep dive from March through November. Silver was the stellar performer, up 6%, and an encore is as likely as a repeat performance for years. Precious metals may finally emerge as the real money they are, and, in a world that is increasingly looking at an East/West split, further deterioration in the value of the US dollar as reserve currency and potential devastation in all fiat currencies, both gold and silver appear poised for breakout runs.
Rounding out, oil and gas at the pump are going to fluctuate around $75-80 a barrel and $2.50-3.50 a gallon depending on where you live. Unless the federal government reigns in spending, there will be pricing power and inflation. There's still far too much liquidity in the system. People aren't failing yet. Companies aren't going broke, but, there's only so much strength in a stand of string and the Fed and government are pulling on both ends. Eventually it's going to snap.
As far as housing is concerned, prices in general need to come down some 30-50% or more in some areas. Commercial real estate is playing a dead hand after the COVID shutdowns. Far too many people found out they could be just as productive working from home than in the office, and that trend sees no signs of abating. Any work done on a phone or computer can be remote. Office space is old hat, much of it being converted into housing or mixed use. Dabbling into some of the more speculative REITs may prove bountiful.
Bottom line, stocks are probably going to be up less than five percent if that. Flat to lower is more likely, with steeper losses coming in the first half and some gains in the second half, though that scenario could easily be reversed. If it plays out as expected, second half gains may just cover the losses from earlier in the year.
There may be some bargains in real estate, but not before foreclosures and individual bankruptcies begin to bite. Arable land is expensive in many parts of the world. Commercial space is still pricey, but getting to distressed levels in smaller communities. Residential will be sucking it up big time because of tighter lending standards and higher interest rates. Deaths from disease and pharma and a shrinking birth rate are evening up the score. Look for residential to drop another 20% this year.
There is plenty of excrement flying around and plenty of fans by which to blow it back in one's face. Speculation is like day-to-day ju-jitsu. It's hand-to-hand, hand-to-mouth. You'll have to be agile and alert. By the this time next year, a 3-month CD may have become your new BFF.
OK, this isn't our bag and you're looking bored, so, here are some numbers. Highs (H), lows (L), and year end (YE) figures for various assets are below (this looks better in table format, but Substack doesn't do HTML):
Dow Jones Industrial Average: High: 34,265; Low: 23,250; Year End: 29,335
NASDAQ: H: 12,090; L: 8,605; YE: 9,780
S&P 500: H: 4,072; L: 3,135; YE: 3,375
NYSE Composite: H: 15,590; L: 12,200; YE: 13, 867
6-month Treasury bill: H: 6.65%; L: 4.42%; YE: 6.07%
2-year Treasury note: H: 6.05%; L: 4.25%; YE: 5.65%
10-year Treasury note: H: 5.77%; L: 3.94%; YE: 5.45%
30-year Treasury bond: H: 5.44%; L: 3.79%; YE: 5.55%
The yield curve will remain inverted, albeit much flatter.
WTI crude oil: H: $96; L: $58; YE: $75
US national average gas: H: $3.90 L: 2.65; YE: $3.00
Bitcoin: H: $25,800; L: $15,240; YE: $25,280
Gold: H: $2345; L: $1780; YE: $2288
Silver: H: $34.80; L: $22.50; YE: $33.60
As Tony Shalhoub's character, Adrian Monk might say, "I could be wrong, but I don't think so."
Happy New Year
This article was simultaneously published on Substack.
Monday, January 2, 2023, 10:22 am ET
Part 1 of this expanded WEEKEND WRAP was mostly about numbers. This part will revisit some of the more important developments of 2022 and how they intertwined through the global economy.
It's a new year, but the events of the prior one continue to resonate. Military conflict in Ukraine proceeds, sanctions remain in place, inflation continues to plague Western nations and central banks around the world remain committed to raising interest rates with slowing growth as a primary policy objective.
Those were the main thrusters of 2022. How the world arrived at this place is simple, non-revisionist history, important to keep front of mind as the new year evolves.
This will be brief. Other publications and websites have the time and patience to review recent history. What's necessary in a financial context are facts and outcomes.
COVID-19 and various government responses can be blamed for a plethora of evils brought upon the world, but beyond the deaths and illnesses, two important financial aspects have emerged. First, the widespread lockdowns destroyed many a small and medium business in the US, UK, and EU. Second, between the central banks and governments of most advanced economies, the currency liquidity spigot was opened wide, giving rise to mal-investment, speculation, and eventually, runaway inflation.
2020 and 2021 set the background for the current environment. Failure of hundreds of thousands of small and medium-sized businesses did irreparable harm to the business owners and to the robustness of local, regional, and national economies. Nothing can easily replace a "mom and pop" type of operation, be it a hair salon, restaurant, retail operation, or any enterprise that serves a clientele defined by locality or niche.
Many communities were financially devastated by lockdowns and government restrictions, as if the usual paperwork and regulations weren't already enough of a burden; the lockdowns were specifically designed to target smaller firms, to limit competition as the WEF Great Reset agenda chose winners and losers.
Walmart and Kroger's were "essential." Grandma's Knitting Shop and Bob's Diner, not so much. They were forced to shut down... temporarily... two weeks to "flatten the curve" we were told. As the repressive lockdowns extended from weeks into months, the government went further. At the federal level, the CARES act was legislated, a multi-trillion dollar monstrosity that flooded the US economy with stimulus, business loans, extended unemployment benefits and more. The Federal Reserve enacted a slew of programs to assist their corporate buddies in ways Keynes and Austrian economists never conceived.
After all the masking, shaming, lending, and glad-handing was complete, the world generally emerged from lockdown and WHO hell in January, 2022, the Omicron variant of the virus ineffective at holding people back from jobs, education, social advancement. People had had enough and moved on, but not without some radical changes. Many of the temporarily-closed businesses never re-opened, an army of commuters found work-from-home (WFH) a better environment for family and mental health and many businesses agreed. The world was making a quantum leap to a post-industrial age, or so we were told.
Additionally, some people had taken advantage of the unusual conditions to save or pay down debts and other obligations with the help of rent and mortgage moratoriums or forbearances. Corporations and individuals were flush with cash. The federal government ran enormous deficits to fund the greatest wealth transfer in history. While individuals and families were, for a large part, solvent, some segments of the corporate world were struggling while others prospered. Nowhere was this more evident than in the success of Amazon and the distress of brick and mortar retailers.
In what is surely the most distorted aspect of all the COVID fallout, financial analysts and economists began making comparisons to 2019 for revenues and earnings of public corporations, treating 2020 and 2021 as if they never existed. The entire episode a gigantic fraud, when the economy began to "normalize," Wall Street took note. Inflation ran hot from mid-2021 through the end of the year and then accelerated. The bear market in stocks began in November, 2021 and deepened by January, 2020. The Fed began tightening financial conditions via a series of hikes to the target federal funds rate in March, 2020 and proceeded to increase them in frequency and size for the rest of the year. Inflation must be contained, they said, as the CPI hit eight and nine percent by summer.
As inflation raged and stocks declined, by late February, NATO and its US, UK, and EU members had finally pushed Russia into invading Ukraine. Through a series of purposely stalemated negotiations and advanced military activity (Ukraine shelled the Donbass since 2014), Vladimir Putin and Russia were left with the only choice: military involvement. Russians rolled into Ukraine and the carnage began. At the same time, Western governments began a series of sanctions and adverse actions against Russia in response to their "aggression," including seizing government assets and those of wealthy Russian citizens (oligarchs).
Similar to the COVID show, the Western response to Russia doing little more than basically defending itself is based on a false narrative that continues to this day via the propaganda mainstream media that goes something like: "Russia is aggressive; Ukraine is a democracy. Support Ukraine."
Americans, Brits, and Europeans are too busy figuring out how to stay solvent, eat and heat their homes to offer much in the way of popular resistance. The Nanny State and Big Brother have been married, forming the new fascist family of nations. Things have changed incrementally, not necessarily for the better.
The message from official Washington, London, and Brussels is quite clear: We will Build Back Better. You will eat at McDonald's and shop at Walmart, or, a condition similar to full spectrum dominance. And it will cost more every day.
Thus, as we recollect on prior events these early days of January, the pieces have all fallen into place. At last reading, CPI is still above seven percent. Stocks and bonds are still under pressure. Russians and Ukrainians continue to battle and die. Western governments continue to fund the madness while grifters in congress and the White House steal and launder money disguised as government appropriations.
Part 3 of this 3-part WEEKEND WRAP will examine current conditions and offer suggestions and projections on how 2023 may unfold.
This article was simultaneously published on substack.
Sunday, January 1, 2023, 12:21 pm ET
Friday, December 30, was the final day of trading for the year in stocks, bonds, oil, gold, silver, and just about everything other than cryptocurrencies, including Bitcoin.
Closing the book on 2022, it concludes the worst year ever for the 60/40 portfolio and marks the end of the cheap money era and the start of what eventually should turn out to be extended financial repression and austerity, prodded along by higher inflation and interest rates, in effect, the double-whammy of currency debasement and restrictive monetary policy. Thus, "buy the dip" has quickly reversed to "sell the rip."
So as not to get too far ahead of the outlook for 2023, benefits will accrue to those who comprehend recent history and the effect of 2022's results in key markets.
Us equities took a pretty good beating in 2022, none more so than the tech sector, outlined by the NASDAQ, where many of the high-fliers are traded.
Among the most egregious portfolio offenders are Tesla (TSLA, -69.20%), META Platforms (META, -64.45%), Nvidia (NVDA, -51.48%), Amazon (AMZN, -50.70%), Netflix (NFLX, -50.64%), Alphabet, parent of Google (GOOG, -39.15%), eBay (EBAY, -37.92%), Apple (AAPL, -28.61%), and Microsoft (MSFT, -28.36%) Equal allocations in these ten tech titans produced a one-year return of -42.05%. Hallelujah!
A few lesser-known stinkers were money-changer PayPal (PYPL, -63.47%), semiconductor manufacturer, Teradyne (TER, -47.41%), and eBay rival, Etsy (ETSY, -42.94%). Intel (INTC, -50.33%) and Advanced Micro Devices (AMD, -56.89%) also made the grade for worst investments of 2022.
Consumer retailers were another sector that suffered. Led by Bed Bath& Beyond (BBY, -83.44%), Gap (GAP, -38.70%), Target (TGT, 35.74%), Abercrombie & Fitch (ANF, -34.51%), Walgreen's (WBA, -29.59%), and Macy's (M, -24.58%), the sector had a few single-digit winners, and actually held up alright.
If financials are your bag, you became a bag-holder in 2022. Big banks, Citigroup (C, -28.32%), Bank of America (BAC, -28.28%), Wells-Fargo (WFC, -18.61%), JP Morgan Chase (JPM, -17.07%), and Goldman Sachs (GS, -13.14%) all took one for the team.
The NASDAQ was not alone. Top losers amongst the Dow Jones Industrial Average's 30 blue chip companies were Salesforce (CRM, -48.10%), Disney (DIS, -44.58%), 3M (MMM, -32.53%), and Nike (NIKE, -28.94%).
Far and away, the energy sector produced the most winners and best returns. Occidental Petroleum (OXY, +102.80%), Hess (HSS, +84.69%), ExxonMobil (XOM, +73.59%), Marathon Oil (MRO, +60.46%), Chevron (CVX, +50.50%), Phillips 66 (PSX, +37.42%), and Devon Energy (DVN, +34.98%) took advantage of oil and gas price inflation and rode to the winner's circle.
More data (daily, week, month, year):
At the Close, Friday, December 30, 2022:
For the Week:
For the month, December, 2022:
For the Year:
Ups and Downs (weekly)
One final note: charts from the last two trading sessions show that those thin trading times were more about intervention (PPT, NY Fed trading desk, etc.) than anything else. Those final days of 2022 stock market hijinks were a clown show tour d' force, indicating that the turning of the calendar will likely not equate to a turning of financial fortunes.
The normal tables are presented below, but the first two tables represent the year's cycle of treasury yields, at quarterly increments.
One-month yields blew out this past week by 32 basis points, a huge jump. All yields on the short end were higher, though somewhat more tame than that of the 30-day bills.
As can clearly be seen, current yields across the curve are at or within whistling distance of the high points of the year, which should be troubling to everybody, especially the hopelessly wrong-footed "Fed Pivot" crowd. Assuming the consensus is right about a 50 basis point hike at the January 31 / February 1 FOMC meeting, yields and accompanying interest rates on credit cards, personal, auto, commercial, and mortgage loans will be higher in February and March than they are now, a level that already seems close to a breaking point. Expect to see the 10 and 30-year breach 4.00% to the upside within the first few weeks of 2023, and a 5-handle to appear somewhere along the curve, most likely on the 6-month or 1-year maturities, before mid-February.
Peak rates were made between October 20 and November 7. On the 1-year: 4.80%; 2-year: 4.72%; 3-year: 4.63%; 5-year: 4.45%; 7-year: 4.36%. For the 10-year note, 20, and 30-year bonds high yields occurred on October 24, at 4.25%, 4.59% and 4.40%.
At the short end, 1-month bills reached a high yield of 4.16% on November 25. 2-month bills are at the high of 4.41% as of 12/30, the same for the 4, and 6-month, 4.69%, and 4.76%, respectively. 3-month bills peaked at 4.46% on December 27 and 28.
Current inversion spreads are -53 basis points on 2s-10s, and -44 on 2s-30s. The entire distorted curve is inverted by 15 basis points from 1-month (4.12%) out to 30-year (3.97%).
Steepening continued in the longer-dated issues, led by the 20 and 30-year bonds, up 15 basis points. The 2-year was up 10, while the 3, 5, 7, and 10-year notes each gained 13 basis points in yield.
By various measures, the bond market suffered its worst year on record. With the Federal Reserve doing what seemed prudent to them - raising the target Federal Funds Rate incrementally at every meeting except the first of the year (January 25-26) - to tamp down inflation, the aggressive policy wreaked havoc on investors of all stripes, especially those who had gotten used to small but stable returns during the years of QE and ZIRP after the sub-prime crash in '08 and '09.
2022 was the most painful year ever for fixed income, illustrated by the Bloomberg Aggregate, which suffered an annual loss for only the fifth time, but by far the most severe.
Among the more active bond ETFs, the best of the bunch was the iShares Short Treasury Bond ETF (SHV, -0.43%) and the worst, the iShares 20 Plus Year Treasury Bond ETF (TLT, -31.00%), followed closely by the Vanguard Long-Term Corporate Bond Idx Fund ETF (-27.36%).
The iShares 7-10 Year Treasury Bond ETF (IEF, -15.93%) was also near the bottom. Close to the average return on bond ETFs was iShares 3-7 Year Treasury Bond ETF (IEI, -10.33%). Losing money in fixed income, traditionally the safest of all investment asset classes, is not something one gets used to easily. As the Fed isn't quite finished with its rate-hiking regime, there's likely to be more pain associated with bonds in the first half of the new year, though the second half is not guaranteed to be an easy ride either.
For more analysis of what happened in the bond market and why, Doug Noland's year-end wrap-up is a solid read with scathing commentary and sharp insights.
WTI Crude Oil: $80.51, +5.30 (+7.05%) 1-year.
Crude rose and fell over the course of the year. WTI crude priced at $76.08 on January 4, 2020, reached a peak of $123.70 on March 8 and nearly reached that level again three months to the day, on June 8, when it priced out at $122.11 per barrel. Ending the year at $80.51, the low point of the year was just less than a month ago, at $71.02, on December 9.
The government (and likely, the Fed) wants to keep a lid on oil, to stymie Russia via sanctions and the brain-dead oil price cap plan which will never work. The government and powerful corporate interests outside the energy sector plan to keep stomping on the price of oil for now. Fickle as they can be, they may change course soon enough or market forces could alter the price in a manner not to the liking of most Americans, Europeans or British subjects.
Their intricate plan involves everything from oil to gas to the US dollar and gold, so, chances of everything going accordingly are slim. Stay alert and prepared for volatile price movements.
Gas at the pump did a parabolic turn in 2022, the US national average starting out the year at $3.26, peaking in June at $5.02, before falling steadily through the remainder of the year to a low of $3.06.
The current US average for a gallon of unleaded 87 grade is $3.19, up 13 cents from a week ago, which was the low for the year, at $3.06. Highest price is, as usual, in California, the state average of $4.38 the only one above the $4.00 mark. Nevada ($3.94) and Washington ($3.74) are the next-highest.
On the low end, Georgia is reporting the low of $2.75, followed closely by a cluster of states - Louisiana, Texas, Arkansas, Kansas, Oklahoma, and Mississippi, between $2.78 and $2.81. The Northeast is still elevated, with Pennsylvania the outlier, at $3.62.
Hodlers were forced to endure the tedium of a 65.30% loss (-$31,168.50), from a starting point of $47,299.00 on January 2nd, peaking at $47,454.10 on March 29, and then a steady decline to the current level of $16,564.90, which is only marginally better than the November 9 low of $15,757.20.
The shine is off the rose that once was Bitcoin and all of the crypto universe. Wracked by scandal and losses throughout the year, only the hardiest of true believers are still in the game.
Like everything else, bitcoin could go either way, though chartists will likely point to upside as the most realistic direction. If nothing else, it's a gamble on the future.
Gold/Silver Ratio: 75.69; last week: 75.50
Gold price 12/02: $1,811.40
Silver price 12/02: $23.35
Gold: $1,830.10, +1.50 (+0.08%) 1-year
Gold and silver were two of the best-performing assets of 2022, which speaks volumes about current economic conditions. Premiums remain high on refined products and will likely remain so until the global economy normalizes or blows up, whichever comes first.
Here are the most recent prices for common one ounce gold and silver items sold on eBay (numismatics excluded, free shipping included):
The Single Ounce Silver Market Price Benchmark (SOSMPB) fell this week, to $36.96, a loss of 10 cents from the December 25 level of $37.06.
In Part 2 of this 3 part series, Money Daily ties a bow on 2022 with a look at the major developments in finance and economics. Part 3 will present some likely scenarios for the various asset classes and what to expect through the year. Parts 2 and 3 will appear on Monday, January 2.
Happy New Year!
For the Year:
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