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While You Weren't Watching: Negative Yielding Bonds At Record; Bitcoin's Demise; Silver, Gold Gashed

Friday, November 27, 2020, 8:03 am ET

Focused on the glorious Dow 30,000 meme the past few days, along with post-election foibles and coronavirus circumstances, little notice was paid to a number of developments that may eventually have more to do with a "Great Reset" economy than the rise and fall of old standard stocks and bonds.

Since nobody bothers to keep score on the amount of negative interest rate debt in play throughout the world, Barclay's and Bloomberg try to keep abreast. Via coindesk, a premier purveyor of all news concerning cryptocurrencies, noted on November 16, the amount of negative-yielding debt set a new record, at $17.05 trillion (in US$).

Rising dramatically from around $6 trillion to the prior high mark of $17.04 trillion in 2019, low issuance of new negative debt and the retiring of some older maturities had brought the amount of below-zero interest-bearing debt to less than $8 trillion earlier this year. The global pandemic thrust upon the world stage changed all that as governments scrambled to shore up damaged economies and the amount of new negative-interest debt instruments soared.

Massive emergency funding in the negative space seemed a perfect set-up for investments without counterparty risk, such as gold, silver, and cryptocurrencies like Bitcoin. That theorm held sway early in the pandemic phase, with gold notching a record high, silver and Bitcoin up sharply. Until recently, these alternate investment currencies had held up relatively well, especially Bitcoin, which rocketed within a few dollars of its all-time peak (2017), sailing past the $19,000 mark on Tuesday of this week and hitting a three-year high at 19,488.81 on Wednesday.

It was there that Bitcoin met with distressing news to holders and speculators, as Treasury Secretary Steven Mnuchin was reported to be considering plans to introduce fresh rules for "self-custody wallets" by the end of his term. Bitcoin bottomed out at $16,270.37 on Thursday, Thanksgiving Day in the United States, but began rallying late Thursday into Friday.

Current speculation sees the impact of the Treasury's rumored regulation overblown and credits the decline more to simple overbought conditions. Bitcoin has rallied sharply, nearly doubling in just October and November. A move beyond $20,000 is still seen as a probability by the end of 2020. Considering the volatility of the crypto space, a record high seems a given and further gains are forecast for 2021 and beyond as fiat currencies continue to deprecate and lose purchasing power while Bitcoin and other major cryptos gain new users and advanced spending capabilities.

Despite efforts by governments (Bitcoin is banned in six countries) to regulate the holding and taxation of cryptocurrencies as investments, the Bitcoin bandwagon appears only to be slowed temporarily by efforts to contain its growth.

Precious metals have painted a similar, if not as spectacular a story. Gold, which had rallied from a low of $1167.10 in the summer of 2018 to an intraday high of $2089.20 in August, 2020, was never able to hold that level, falling below $2000 an ounce later that month, commencing a slow decline that has accelerated in recent days.

The world's recognized greatest store of value was punched down nearly $100 just three weeks ago and knocked lower the past two weeks to just above $1800 per ounce. Silver suffered a similar fate, testing $30 an ounce in August, only to be beaten down to current levels around $23 an ounce.

Cries of foul have been loudly sounded by the goldbug community, since manipulation of the precious metals market has been proven by the criminal convictions against JP Morgan and fines paid by other banks, particularly HSBC and Citigroup, and seems not to have deterred the practices of spoofing and naked shorting in the futures markets to facilitate price suppression.

Until real price discovery is attained via a smashing of the closed loop LMBA and standing for physical delivery on the COMEX, gold and silver will continue to frustrate honest investors, subject to the worst criminal behavior that serves only the interests of the central bank counterfeiters who are openly strip-mining the great economies of the world.

As Captain Bligh in the film Mutiny on the Bounty may have accurately surmised, "The beatings will continue until morale improves."

At the Close, Wednesday, November 25, 2020:
Dow: 29,872.47, -173.77 (-0.58%)
NASDAQ: 12,094.40, +57.62 (+0.48%)
S&P 500: 3,629.65, -5.76 (-0.16%)
NYSE: 14,191.58, -57.92 (-0.41%)

Dow Pops, Closes At Record Over 30,000; When Will It Hit 40,000? A History Lesson

Wednesday, November 25, 2020, 9:34 am ET

Dow Jones Industrial Average (Select dates, Closing prices)
March 29, 1999: 10,006.78
February 3, 2017: 20,071.46
November 24, 2020: 30,046.24

On Tuesday, the Dow Jones Industrials closed over 30,000 for the first time ever. From the numbers above, it's easy to see how fast the 30 select stocks (the makeup of which changes fairly frequently these days) comprising the Average has galloped from one giant number to the next.

On May 26, 1896, two financial reporters, Charles Dow and Edward Jones, first published their average.

It consisted of 12 companies:

  • American Cotton Oil

  • American Sugar

  • American Tobacco

  • Chicago Gas

  • Distilling & Cattle Feeding

  • General Electric

  • Laclede Gas

  • National Lead

  • North American

  • Tennessee Coal & Iron

  • U.S. Leather

  • United States Rubber
  • ...all of which, with the notable exception of General Electric (GE, consequently, not part of the current roster) have been gobbled up, picked apart, merged, liquidated or somehow morphed into some other corporate entity.

    So, it took nearly 103 years for the Average to go from the first published value of the Dow Jones, 40.94, which was calculated by taking the average market price for the 12 companies, to 10,000, obviously changing the formula along the way.

    Just as a side note, if one were to use the same formula as the originators, simply taking the average price of each of the now 30 component stocks, the number would be - just guessing - somewhere around 120, but that would hardly get anyone excited. Does anybody really want a hat that reads "Dow 100?" Probably not.

    Perhaps it's worth taking note of the original calculation of a simple average, but the genius of simplicity is a discussion for another time. Today, we're focused on how fast we can reach the next big number, 40,000.

    After bouncing above and below that 10,000 mark for a short time, and, notably dipping below it in 2000 on a number of occasions and then for an extended period of time before and after the tragic events of 9/11/2001, falling as low as 7,286.27 on October 9, 2002, the Dow recovered and was off to the races, well, kind of...

    until the sub-prime crisis crashed it all the way down to 6,547.05 on March 9, 2009, the day otherwise known as the "Haines Bottom" after CNBC anchor, Mark Haines (RIP), correctly called the stock market bottom on that very day prior to the open (see video below).

    So, then, finally, the Dow was off to the races, crossing again over 10,000 to the upside on October 14, 2009, to eventually reach the legendary level of 20,000 in 2017. Thus, depending on perspective, the Dow took either 19 years (1999-2017) to go from 10 to 20,000, or eight (2009-2017). Either way, it was done in fairly short order, doubling in value.

    The next step, from 20,000 to 30,000, took less than four years (3 years, nine months, and 21 days) to complete. While the value of the Average only increased by 50% instead of the 100% in the previous epoch, the move is no less impressive. Mathemeticians may note that at the current trajectory, 40,000 should be within striking distance in about 2 years and 8 months, or roughly speaking, July 17, 2023.

    A calculation done on the internet returned a result of 58 years, with this note:

    The next number for given series 103,19,4 is 58
    General polynomial is 34.5x2-187.5x+256

    ...whatever that means.

    So, for the true pessimists out there, according to at least one website's calculator, the Average won't hit 40,000 until 2078. The best guess is that it will hit the magic 40,000 mark (and there will be hats available, promise) somewhere between 2023 and 2078. Understand that it is a smaller and smaller percentage gain every 10,000 points. The value of the Dow Average will only gain by 33.3% on a move from 30,000 to 40,000, so doing it in under three years is actually not improbable.

    Just to amplify the idea that nothing in the financial world goes up or down in straight lines, as we saw with the bumpy road between 1999 and 2009 (aka, the lost decade), a couple of points:

  • The bottom in 2009 was actually lower than the one in 2002.

  • It took 27 years for the Average to recover from the October, 1929 crash, from a high of 381.17 to a low of 41.22 in 1932, and back to a yearly high of 404.39 in 1956.
  • Back in the world of the real or imagined (take your pick), presumptive president, Joe Biden, has apparently chosen former Chair of the Federal Reserve, Janet Yellen, as his presumptive Secretary of the Treasury. Yellen, an uber-dove on monetary policy, is likely to empty the treasury with the same abandon she promoted easy money when Fed Chair. The skies will open up and twenties will fall from the heavens.

    Oil prices have skyrocketed above $45 per barrel for WTI crude, the highest price since early March of this year. It's probably nothing more than the idea that, opposed to the whole lockdown COVID preaching, many families are traveling over the Thanksgiving holiday, so the oil companies want to get an extra piece of pie. It could be more than that, but it's a good bet that oil prices will fluctuate between $40 and $48 until Christmas and then stabilize near or below that range in 2021.

    With stocks booming, a little money leaked out of treasuries, with the 10-year note and 30-year bond yields both higher, by two and four basis points, respectively.

    Markets are closed on Thursday, and a half-day session (close at 1:00 pm ET) is scheduled for Friday, so Wednesday is the last full trading day of the week, November closing out the month on Monday. With that, the Labor Department moved it's reading on initial unemployment claims to today, noting 778,000 new unemployment claims in the most recent week.

    Happy Thanksgiving!

    At the Close, Tuesday, November 24, 2020:
    Dow: 30,046.24, +454.97 (+1.54%)
    NASDAQ: 12,036.79, +156.15 (+1.31%)
    S&P 500: 3,635.41, +57.82 (+1.62%)
    NYSE: 14,249.50, +251.26 (+1.79%)

    Drive-by Posting Because Markets Are All Rigged to Vaccine Algos

    Tuesday, November 24, 2020, 8:58 am ET

    Another Monday, another vaccine announcement, making it three weeks in a row that the COVID crisis has managed to goose stocks higher.

    This week it was Astra-Zeneca announcing a COVID vaccine that is supposedly 74% effective against a virus that is 97% infectious. Amazingly, most humans are about as good at math as most farm animals.

    No comment on the coming of president Biden and the reincarnation of the Obama administration.

    We prepare for the worst.

    Sorry for the brevity of this post, but there's no need to waste time figuring out what to do in this market. Buy the dips, buy the rises. Everything is wonderful.

    At the Close, Monday, November 23, 2020:
    Dow: 29,591.27, +327.79 (+1.12%)
    NASDAQ: 11,880.63, +25.66 (+0.22%)
    S&P 500: 3,577.59, +20.05 (+0.56%)
    NYSE: 13,998.24, +171.24 (+1.24%)

    WEEKEND WRAP: Precious Metals and Bitcoin Continue to Pose Risk as Alternatives to National, Fiat Currencies

    Sunday, November 22, 2020, 8:16 am ET

    There is every indication that the time when all is rendered into ashes is rapidly approaching. People with fiat, earning fiat, relying on fiat will be impoverished. A currency collapse with no foreign currency to escape into is a cataclysmic event, the like of which we haven't seen before, not even in Roman times. If it doesn't buy you food and warmth a million bucks is worthless.

    -- Alisdair Macleod, The Global Reset Scam,

    It's always about money. Every time. Whether it's politics or medicine or sports or any other human endeavor, it always comes down to a matter of money: who's got it, who wants it, who's holding onto it, who's picking it up.

    Nothing in the world - at least at this point in time - happens without money, which is why it's becoming incumbent upon everybody - from the lowest beggar to the highest oligarch - to determine which form of money is the right one to hold, the right one with which to transact, the right one to hoard for future use.

    Fiat, the yen, euro, dollar, pound, yuan are all dying, albeit a slow death. Fiat currencies backed by nothing more than empty government promises remain dominant. They're completely useful in terms of everyday living, transactions of all manner, for just about anything and everything. That is unlikely to change in the near term.

    While these currencies all are collectively being debased by their respective governments and central banks, their purchasing power continues to erode, though one wouldn't be aware of that watching the Forex pairs like $US-Yen, Euro-Pound, Euro-$US, et cetera. They all go up and down against each other, weakening and strengthening on rumor, suspicion, innuendo, sometimes even facts. At the end of the day, however, they'll all buy less than they did did day before, month before, year before. It takes decades to clearly see the debasing of currencies in terms of inflation, but its been ongoing for at least a century, since the creation of the US Federal Reserve in 1913, and probably before that.

    And the inflation continues to advance. What one could buy with one dollar in 1940 cannot be had with $20 today.

    In 1940 a gallon of gas was 11 cents. In 1940 the average cost of new car was $850. Today, the national average price for a gallon of gas is $2.11, a new car is close to $40,000. It only took 80 years for the purchasing power of the US dollar to decline by roughly 95%. Obviously, fiat money, based on a system of fractional reserve banking reliant on endless debt issuance isn't working for everybody. The top 0.1% of Americans has more accumulated wealth than the bottom 80%. It's working for them, not for nearly everybody else.

    When a currency stops being an effective means of preserving wealth for huge swaths of people - at which the fiat currencies have failed miserably - poverty ensues. Lines of cars miles long are now typical at food banks across the country. The mainstream media - reliable purveyors of truth that they are - won't show the poverty and even if they do, they'll blame it on the coronavirus, and eventually on President Trump. That's just how they roll.

    The matter of fact is that the US middle class has been strip-mined and hollowed out, plunging millions of people into poverty or week-to-week, even day-to-day scratching out of an existence. They're turning to begging, barter, selling off what few assets they may have, prostitution, crime. By whatever means available, they all need to eat.

    Not to belabor the point, but homelessness would be rising even more rapidly than it already is without mandated eviction moratoria and foreclosure forbearance rules imposed by states and the federal government during the "pandemic," many of which are expiring soon. US household debt reached an all-time high in the third quarter, $14.35 trillion. Nearly $10 trillion of that is in mortgages, with new and existing home prices at record highs and interest rates near record lows. Sustainable? Probably not.

    When a currency implodes, the usual characteristics are runaway inflation caused by easy money policies, joblessness, credit defaults, bankruptcies, evictions, small business failures, boarded up storefronts, homelessness, general poverty. Sound familiar? We are there.

    If all of these problems are the end result of a currency that works to enrich the few at the expense of the many, what do ordinary people do?

    Here are a few options: protest, riot, burn, loot, fight, commit crimes, starve, die. Lovely.

    For the rest of us lucky enough to have some means to continue making a living or having enough cash and/or liquid assets to survive reasonably well, he time to start looking for alternative currencies was yesterday, last month, last year, last decade, last century. We should have known we were doomed when Nixon closed the gold window in 1971, but most of us weren't economists nearly 50 years ago. Those of us who were even adults at the time were in our teens, 20s and 30s. We were more concerned about making the scene at the newest disco, making headway at work, finding a mate, raising a family. Now we're mostly retired, watching our world collapse right before our eyes.

    For the bulk of people born after 1965, the economy of the past 50 years is all they know. They're largely unprepared for what's happening and what's to come. Some of the millennials get it. Generation Z gets it. They don't hold out much hope for the future. Many have turned to Bitcoin while old-timers have turned to gold, silver, and real estate.

    As far as land is concerned, it's not the most liquid of assets, but it does serve the purpose of having stability, a place to live, a place from which to run a business. Beyond that, it's sunk money, a long-term necessity.

    Gold, silver, and Bitcoin are going to win out over any government issued currency, be it fiat US dollars from the Federal Reserve or a new currency that's 100% digital, or in central banker lingo, CBDC (Central Bank Digital Currency), which is all the rage in the conference rooms frequented by these preposterous imposters of monetary witchcraft.

    Years ago, after the sub-prime crisis of 2007-09 nearly bankrupted all the major banks and destroyed the global economy (it did, it's just been papered over since then), Money Daily posited that the next crisis would be more destructive by degrees and likely the last crisis. We are there. It's just taking longer than anyone expected.

    When the US dollar goes poof for good, it's going to be bad for hundreds of millions, if not billions, of people, because, as the quote at the top of this article says, "If it doesn't buy you food and warmth a million bucks is worthless."


    Stocks split the difference for the week, the Dow and S&P, after reaching all-time highs, quickly retreated, ending the week on the downside. The NASDAQ and NYSE Composite managed gains. Everything was minimized, amounting to nothing. Everybody's waiting for some resolution to the presidential situation, dealing with COVID-related nonsense, thinking about Thanksgiving or not caring about anything.

    Wall Street types continue to be focused on pushing equity prices higher and they've done a swell job in 2020, considering the multiple challenges they faced. Maybe it's time for them to sell, or to tell other people to sell. Maybe not.

    Bonds are signaling that all is not well with the system. The 10-year and 30-year treasury yields remain stubbornly high, as they have been now for the past five weeks. Money flowed back into the safety of fixed income over the past week, pushing yields down. The 10-year note dropped six pasis points, from 0.89 to 0.83%, while the 30-year dropped 12, falling from 1.65 to 1.53%. While not indicative of a trend (yet), investors are looking to lock in longer yields that are essentially losing bets with real negative yields as inflation is running at least at two to three percent.

    Bond sleuths surmise that it's better to lose a percent or two or three to inflation than 10 to 20 percent in equities. At least with heavy exposure to long-dated maturities, the pain will be somewhat less than that of peers in stocks. While the longest-dated bond yields have taken off, the shorter end of the treasury curve remains flat. Everything prior to a five-year maturity is essentially trading at the zero-bound.

    What's spooking the bond market has probably more to do with equity valuations than politics or medical issues. Even the announcement of two COVID vaccines coming to the rescue shortly has not apparently sufficiently allayed fears to any significant extent. With forecasts of holiday retail spending looking pallid and stocks at stretched prices one can hardly blame money managers for seeking shelter. Unemployment, productivity, and industrial production data seems to be pointing more to a prolonged recession rather than a quick, one-off, V-shaped recovery.

    Oil prices ended the week at a two-month high ($42.42), putting in a solid gain of over two dollars a barrel from the previous Friday price of $40.13.

    Precious metals are just so obviously manipulated by a consortium of banks and dealers at the LBMA and at the futures trading hub, COMEX, it's hard to to laugh, or cry, or puke out one's guts.

    Gold ended the week at 1,872.40, down $12.80 from the prior Friday. Silver fell from $24.77 to finish the week at $24.36. The "consolidation" (see spoofing, cheating, naked shorting) in the precious metals over the past two months is nothing short of criminal, as traders at JP Morgan can attest.

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

    Item: Low / High / Average / Median
    1 oz silver coin: 32.50 / 55.00 / 39.77 / 36.75
    1 oz silver bar: 29.05 / 43.30 / 33.54 / 33.02
    1 oz gold coin: 1,890.00 / 2,054.25 / 1,979.26 / 1,984.13
    1 oz gold bar: 1,915.00 / 1,990.59 / 1,969.30 / 1,975.25

    In the eBay sampling, the presence of more and more numismatics - especially in silver and gold coins - has been prevalent for the past four weeks, while premiums remain high. Sellers are getting extremely good prices on numismatic (proof, high grade, low mintage) coins and bars while prices have declined overall, the desired effect of the controlling hands in the futures and spot markets.

    Anecdotally, a good number of gold-focused internet reporting sites mention increased buying of bulk gold tonnage by central banks. Speculation is that banks are bolstering their gold reserves in anticipation of an economic event that will change the financial order significantly. Otherwise, nothing out of the ordinary in precious metals. Banks continue to pressure price lower while small, independent buyer demand has skyrocketed, a trend effective over the past nine months and counting.

    Finally, Bitcoin continues to march toward all-time levels in price. The price, in US$, of one Bitcoin reached a high of $18,980.00 on November 20 and has retreated from there. As of this writing, the price in US$ is $17968.81. Wild swings in price are nothing new to Bitcoiners. A year ago, the price was $7283.19, a month ago, $12,988.20.

    What to make of the recent rise in Bitcoin and other cryptocurrencies? The global dominance of fiat currencies has nearly run its course and alternatives are being sought. The rise of Bitcoin is not by chance. It is fast approaching its all-time high, measured in US$ of $19,891.99 from December 16, 2017. Advocates for the original cryptocurrency believe that further adoption by the general public and widespread use as a means of exchange are within reach, probably two to five years out.

    Bitcoin's price is determined by demand, which is increasing. Of 22 million Bitcoins total, 18.6 million have been mined, making the supply now somewhat stable. Bitcoin's market cap of $335.8 billion remains minuscule by comparison to fiat currencies, though it is approaching silver's. Price appreciation is expected as long as central banks continue debasing fiat. The process will likely take longer than most people have the patience for, but holders of alternatives will eventually be winners. All unbacked, fiat currencies have met the same fate - every one - of eventually returning to their intrinsic value of zero.

    At the Close, Friday, November 20, 2020:
    Dow: 29,263.48, -219.75 (-0.75%)
    NASDAQ: 11,854.97, -49.74 (-0.42%)
    S&P 500: 3,557.54, -24.33 (-0.68%)
    NYSE: 13,827.00, -36.23 (-0.26%)

    For the Week:
    Dow: -216.33 (-0.73%)
    NASDAQ: +25.69 (+0.22%)
    S&P 500: -27.61 (0.77%)
    NYSE: +65.68 (+0.48%)

    Disclaimer: Information disseminated on this site should not be construed as investment advice. Downtown Magazine, Money Daily and it's owners, affiliates and/or employees are not investment advisors and do not offer specific investment advice. All investments have risk. You should consult a professional investment advisor or stock broker or use your individual judgement when making investment decisions. By viewing this site, you hold harmless Downtown Magazine, Money Daily, its owners, affiliates and employees against any and all liability.