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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.

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Stunning November Non-Farm Payrolls Up 263,000; Stocks, Gold, Silver Dump, then Pump; BLS Data Questionably Flawed

Friday, December 2, 2022, 1:40 pm ET

Nobody ever said that government data had to be believeable. The latest Non-Farm Payroll report from the infamous BLS (Bureau of Labor Statistics; AKA, Bold Lies and Shills) and the market reaction attempts to prove the negative.

For an in-depth analytical approach to the data, especially exposing the widening, recurring gap between the Establishment and Household surveys, none other than that inestimable bastion of objective journalism, ZeroHedge, offers explanatory commentary, complete with the usual typos and strained syntax. Actually, they did a pretty fair job on this issue.

Using a variety of charts, one of the Tyler Durdens (or maybe a team of them) at "the Hedge" shows how the Establishment survey - the one watched most closely by Wall Street analysts and opinionators - has outpaced the Household survey by a stunning 2.7 million jobs since March, the latter showing an increase of just 12,000 jobs over the period in question.

Not only that, but the author(s) go on to assert that the "gap" between the two surveys has shown up before, oddly enough, in the months leading up to elections in 2012 (Obama's second term) and 2016 (Trump vs. Clinton with Obama a lame duck president). While the pattern may be mere coincidence or the result of some internal adjustment bias, the appearance of vastly more jobs in one survey than the other is nonetheless questionable, especially during major election cycles. Notable by its absence is the 2020 iteration, where the two surveys ran basically parallel to each other, because, as we all know, Russia, Russia, Russia, Orange Man Bad.

Once again, the BLS is being eyed for falsifying data or perhaps just "adjusting" it more than necessary to serve political ends. It certainly isn't the first time and probably won't be the last. Using their births/deaths modeling to show that more businesses are opening rather than ones closing down, the October release showing a record 455,000 more businesses opened than closed in the month.

The birth/death model used by the BLS is based on assumptions, not science or facts, since those might argue the opposite. Even in a country the size of the United States, nearly half a million more businesses cutting the grand opening ribbon than those hoisting the "going out of business" signs is a pretty large whopper, and is not believable in the least. Unashamed, however, the BLS and mainstream financial media tout, month after month, the steady job gains produced by that engine of capitalism that is the Biden administration and the nation-wreckers in the Democrat-led congress.

As the figures were released prior to the market open, Wall Street threw the usual hissy fit, sending futures plummeting to the lows of the sessions. Dow futures, for instance, fell more than 400 points in the minutes following the release. NASDAQ futures were off some 260 points, while S&P threw off 50.

These kinds of one-off huge moves in either futures or in the cash market have become rather commonplace as the market is driven largely by computer algorithms which track headline, mainstream news. Computers, as smart as we are led to believe they are, may in some cases be just a bit on the dullish side. Headline-tracking machines may not be capable of capturing anything beyond the headline, an intentional bias programmed into the algorithms which skews toward the positive, yet another reason stocks always seem to be going up (except when they're programmed to go down).

Watching the reaction through the first four hours of the cash session, it's obvious that dip-buying is being once again encouraged. The Dow, which was down about 300 points right out of the gate, was down a mere 40 points just before noon ET, the S&P and NASDAQ following similar paths. As markets head for the close to yet another tumultuous week, the major indices are split, the Dow down for the week, the S&P and NASDAQ, up.

Somebody makes a lot of money on these data dumps; obviously it's not the retail investor.

On the bright side, whatever the fudge-lovers at BLS are up to, gold and silver are enjoying the ride. Gold slid from Thursday's high of $1817.60 to $1794.70 Friday morning before recovering back to a currnt level around $1810.00. Gold bounced off a Monday low of $1754.00, most of the $50+ gain made on Thursday.

Silver is outright streaking, hitting an overnight high of $23.08 after starting the week down around the $21.10 level. The payroll news sent it spiraling down to $22.52, but it since rallied back to a six-month high, at $23.44, and is currently leveling off around $23.25, good for a 10% move, bottom to top.


November Non-Farm Payrolls a Key Driver for the Week's Wrap-up

Friday, December 2, 2022, 7:28 am ET

Even though stocks staged a ferocious rally on Wednesday, the major indices are up only marginally for the week due to declines or flat-lining the other three sessions (Monday, Tuesday, Thursday).

The Dow took the worst of it on Thursday, down more than 430 points in early going before recovering more than half of that. On the week, the Industrials are up a mere 47.98 points. The NASDAQ shows the best gains, up 256.09 as of Thursday's close, owing largely to the outsized gains from Wednesday, a 484.22 point (+4.41%) rise.

Holding onto a gain of 50 points for the week, the S&P 500 has held up above its 200-day and 40-week moving averages for the past two sessions.

Ahead on Friday is the release of November non-farm payroll (NFP) data, expected to show addition of 200,000 jobs for the month, though estimates have ranged as low as 175,000, and there is some leaning towards a smaller number among analysts.

A strong jobs number would leave many scratching heads, after weak figures from ADP that reported 127,000 jobs added in the month, the lowest since January 2021. Other indicators, such as Thursday's Chicago PMI report see the economy as beginning to contract just as holiday shopping is about to give a boost to confidence.

The week has not been a good one for the Fed and its pursuit of lower inflation numbers. Chairman Powell's appearance at the Brookings Institute on Wednesday may be been misinterpreted as a dovish signal when the message was actually somewhat on the hawkish side, the Chairman explaining that the terminal federal funds interest rate may turn out to be higher than previously anticipated and the length of time the Fed would need to keep rates at high levels may be longer than expected.

While Wall Street normally tunes in for positive sound bites, their selective hearing will be focused on any mention of employment weakness, which, in their interpretation, would be good for stocks because the Fed would likely be inclined to ease up on the pace of FF hikes. It appears Wall Street is keen on getting back to the bad news is good news paradigm, slowing down the Fed's inflation fight and getting back to their favorite treats: QE, expanding the Fed's balance sheet, lower interest rates and profligate spending by congress.

Stock honchos are unlikely to get much of their Christmas list in coming weeks, though the US congress surely seems capable of spending vastly more than they take in via taxes. Government spending and overspending have been key drivers of inflation as legislators have been unrelenting in their avoidance of fiscal responsibility.

November's Non-farm Payroll data is set for release at 8:30 am ET and is likely to be the main driver of equities.

Money Daily will return midday with a report on market activity in the aftermath of the important data release.

At the Close, Thursday, December 1, 2022:
Dow: 34,395.01, -194.76 (-0.56%)
NASDAQ: 11,482.45, +14.45 (+0.13%)
S&P 500: 4,076.57, -3.54 (-0.09%)
NYSE: 15,761.12, -18.89 (-0.12%)


Wall Street Reacts to Fed Chairman Powell's Remarks with A Buying Frenzy; Gold Hits $1800, Silver, $22.60

Thursday, December 1, 2022, 8:54 am ET

I am just a poor boy
Though my story's seldom told
I have squandered my resistance
For a pocketful of mumbles
Such are promises
All lies and jest
Still, a man hears what he wants to hear
And disregards the rest

-- The Boxer, Paul Simon, 1969

A nutshell of lyrics from more than fifty years ago represents what sent global elite traders and their whiz-bang algorithmic computers into a buying frenzy Wednesday afternoon.

As Fed Chairman Jerome Powell stepped to the podium at the Brookings Institute at 1:30 pm ET, the rally was already developing. No sooner than had he opened his mouth, the Dow was already up 60 points, on its way to a mind-numbing 800-point rally that took the index from mildly negative to a gain of 737 points by day's end.

The S&P and NASDAQ graciously followed along.

What was it that Powell said that had all of Wall Street swooning and mooning?

These were the key lines:

"The time for moderating the pace of rate increases may come as soon as the December meeting. Given our progress in tightening policy, the timing of that moderation is far less significant than the questions of how much further we will need to raise rates to control inflation, and the length of time it will be necessary to hold policy at a restrictive level."

-- Jerome Powell, 11/30/22, at the Brookings Institute

What Wall Street, in it's short-sighted, profit-driven groupthink failed to notice - either by accident or on purpose - that even though Powell hinted that the Federal funds rate would possibly increase by 50 basis points at the December meeting, they missed the next part about timing not being as important as how high rates would eventually go and how long they might stay at those higher levels.

The words he actually used were "far less significant." In real terms, Powell's message was hawkish, practically promising higher rates over a longer period of time. He may have had good intentions, but his delivery was less than Oscar-worthy. A huge rally in stocks doesn't really aid his case for fighting inflation.

Beneath the cheering, shouting, chanting, panting, purring, and whirring of the machines, Wall Street was only able to hear the first sentence. The rest was "a pocketful of mumbles, such are promises all lies and jest."

"Still a man hears what he wants to hear and disregards the rest." And that's how Wall Street's groupthink engineered a very fake, albeit very powerful, rally, turning what should have been regarded as a warning into a celebration.

It's almost like a lifeguard telling eager swimmers, "the water is fine," as they race off into the surf not hearing the rest, "but there are sharks fifty feet out."

As a matter of fact, very little changed as Powell spoke and markets roared. Workers kept working. Executives kept executing. The companies listed on the various exchanges didn't actually make more money, cut expenses back or do anything to materially affect their market valuations, except in the minds of traders, brokers and investors hoping for pots of gold at the ends of their particular rainbows.

Anybody buying into the current mania, either on yesterday's pump-priming or the massive fool's rally on November 10, might want to take a step back and look at the bigger picture.

Stocks have essentially gone straight up since the September 30 bottom. Earnings season was good, but not great. Tech stocks are still down 30-60% or more.

Chicago PMI printed a horrific 37.2 Wednesday morning, a level that has always preceded a recession, with a 55-year history of accuracy.

Pending home sales fell for the fifth straight month and 11th of the last 12. The 36% year-on-year decline is the largest annual drop ever. Home buyers face 20-year-high mortgage rates and home prices that haven't come down sufficiently.

Sharpies on Wall Street will surely enjoy the short-term gains. Their clients will likely get fleeced.

Meanwhile, gold and silver continue to heat up. Just minutes ago, gold struck $1800.60 on the COMEX. Earlier, in the overnight, silver topped out at $22.60, since then retreating back to a still-healthy range around $22.40.

Both metals remain in bargain territory, though that condition may not last much longer. Both are poised for breakouts from a six-month lull.

Stock futures are higher as market participants look forward to the next leg of the rally. Bear in mind that the S&P has exceeded the 68.1% Fibonacci retrace and is now poised to go even higher. Against an economic backdrop that is far from roses and puppy dogs, the question is one of resolve. Will the markets continue to fight off the Fed (usually a bad practice) or will capitulation come sooner or later?

At the Close, Wednesday, November 30, 2022:
Dow: 34,589.77, +737.24 (+2.18%)
NASDAQ: 11,468.00, +484.22 (+4.41%)
S&P 500: 4,080.11, +122.48 (+3.09%)
NYSE: 15,780.02, +346.56 (+2.25%)


Tesla, Apple, Amazon Led NASDAQ Lower Tuesday; Dow, S&P Little Changed; Gold, Silver Appear Solid

Wednesday, November 30, 2022, 9:17 am ET

Stocks drifted Tuesday, as dip buyers stepped in to shore up shares and indices following Monday's drawdown. There was little volume and a noticeable lack of enthusiasm in the tech space, dominated by the three most actively-traded stocks of the day: Apple (APPL), Tesla (TSLA), and Amazon (AMZN).

The trio of high-tech titans are among the most widely held stocks by institutions and their performances this year have been a large part of the NASDAQ's decline from 16,000 at the start of the year to its closing level Tuesday of 10,983.78, the first time it has closed below 11,000 since November 9. On a year-to-date basis, NASDAQ is down 30.63%, the worst among major US indices by far. It is only 641 points away from the closing mark of 10,342.94 from November 3, a level not seen since early July, 2020.

Of the three aforementioned shares, Tesla is the worst performer for 2022, down 54.78%, followed by Amazon, a 45.78% loser. Apple, currently under pressure from disruptions and walkouts at its Foxconn iPhone factory in China, appears to be in better shape, down just 22.44% on the year, but it has been the worst of the three the past week, dropping 10 points since November 23, to 141, though still above its 52-week low of 130.06 (June 16). Tesla and Amazon are at their lows of the year.

The continued wreckage in tech-related companies shouldn't be surprising to anybody who understands value investing. Tech stocks are notoriously overvalued, especially so during the recent pandemic. These three in particular have been cut in half or worse after rising in spectacular fashion in 2020 and 2021.

Tesla, currently at 180.83 reached a high of 407.36 on November 5, 2021.

Amazon, benefitting from high demand for delivery service during the COVID crisis, peaked at 183.83 on November 19. It is a $92 stock today.

Apple topped out at 174.75 on March 25, 2022 and could go sub-100 if problems in China translate to lower sales through the important holiday season.

As they stand, each of these companies are still overvalued. The P/E ratio on Tesla is 55, while Amazon sports an even higher ratio of 85. By comparison, Apple appears almost a buy with a P/E of just 23.

For a less sanguine look at what a true tech wreck looks like, one need only consider META, the former Facebook, which performed a face-plant this year over its foray into virtual reality with its questionable "Metaverse" concept.

On September 10 of 2021, META was trading at 378.69 per share. It closed Tuesday at 109.46, a 71% decline. The only thing META has done well the past year is destroy shareholder value. Revenue has fallen off from a high of $33.67 billion in 2021's fourth quarter to $27.71 billion in the third quarter this year. while the company is still profitable, net revenue has fallen for three straight quarters, from $10.29 billion in December, 2021, to the most recent report of $4.4 billion for the quarter ending September, 2022. The stock is trading at levels not seen since 2016.

What's most concerning for investors in the space is that the declines that began in late 2021 do not appear to be nearly complete. While other companies in the tech sector have suffered losses of 40, 50, 60% or more, the fallout from the bigger names has not yet reached alarm-bell levels. If the widely-publicized coming recession of 2023 materializes, these stocks will see further declines, some similar to the wipe-out from the dot-com bust of 2000-2001. A recession would pull down not just the damaged tech sector, but widen to include stocks across the investment spectrum.

As Wednesday's opening bell approaches, futures are tanking on the November ADP report of only 127,000 jobs added in the month, the lowest since January 2021, spurred by a 100,000-job loss in manufacturing, but buoyed by the addition of 224,000 jobs in leisure/hospitality.

Also hard-hit was Professional/business services, shedding 77,000 jobs. Finance lost 34,000 and information (tech) slashed 25,000.

The Commerce Department's second estimate of third quarter GDP showed growth of 2.9 percent, compared to the previously reported 2.6 percent in the initial estimate a month ago.

If protection is on the menu, gold is holding well at recent levels and silver continues to show strength for a potential breakout move, trending close to $22/ounce, a level not approached since June.

At the Close, Tuesday, November 29, 2022:
Dow: 33,852.53, +3.07 (+0.01%)
NASDAQ: 10,983.78, -65.72 (-0.59%)
S&P 500: 3,957.63, -6.31 (-0.16%)
NYSE: 15,433.46, +63.02 (+0.41%)


Monday's Stock Rout a Warning Shot; 87,000 "new, gun-toting" IRS Agents is - Like the Agency Itself - Pure Bunk

Tuesday, November 29, 2022, 9:10 am ET

By now, most of the Thanksgiving leftovers have been devoured, just like the stock market gains from the past two weeks. Monday's holiday hangover took care of any bullish sentiment for the time being and put a severe dent in any argument suggesting that stocks could go higher through the end of the year.

What triggered Monday's selling had its roots in the technical trading nature of the two sessions surrounding Thanksgiving, Wednesday (11/23) and Friday (11/25), when the S&P 500 hit the trifecta, topping out just beyond 4,030, at the conjunction of its 200-day moving average, 40-week moving average and the 68.1% Fibonacci retrace of the August 16 - September 30 decline, when the index topped out at 4033.22 at 3:15 pm ET on Wednesday, November 23rd and could never quite make the grade on Friday, hitting 4032.77 at 11:15 am ET. Despite the early 1:00 pm ET close Friday, it was all downhill from there.

Stocks got overextended, for sure, and now are in a rare space, tempting Bears to go short and taunting Bulls on the long side. There could be some little dying cat bounce on Tuesday, but the Bears will be there to snatch up any gains and dash all hope through this week at least, which ends Friday with the BLS November non-farm payroll report, with estimates hovering around 200,000 net new jobs for the month.

Prior to that, there's other important data being released, such as this morning's S&P CoreLogic Case-Shiller 20-City Composite Home Price NSA Index for September (a lagging indicator), which fell for a fourth straight month, down 1.2%, seasonally adjusted [PDF].

Wednesday, Fed Chairman Jerome Powell will cool off the bulls a little more when he addresses Economic Outlook, Inflation, and the Labor Market at the Brookings Institution, 1:30 pm ET.

Thursday, the second estimate of third quarter GDP is released, a number which was put out at +2.6% a month ago and could go either way.

That's the set-up for this week. Following that, next week is somewhat data-light. CPI for November coincides with the first day of the last FOMC meeting of the year, on Tuesday, December 13. The rate policy decision is slated for Wednesday, the 14th. Current projections are for a 50 basis point hike in the federal funds target rate, though a fifth straight 75 basis point raise is still on the table.

Happy Holidays!


Like most of the usual media fear-mongering, the threat of 87,000 new IRS agents auditing Americans earning less than $75,000 turns out to be mostly bunk, or bologna, take your pick. With a staff of nearly 80,000, half of which will likely retire in the next five years, most of the new hires will only be replacing old ones, albeit with much less experience, and most of those won't be doing audits or carrying guns.

Woody Allen's classic holdup scene from "Take the Money and Run" seems appropriate here:

Time magazine published a half-baked "fact check" on the claim of 87,000 new IRS agents ensconced within the Inflation Reduction Act of 2022 and uncovered - to the unequalled delight of anybody who understands technology and taxes - this nugget of information:

Funding from the Inflation Reduction Act will also go toward tech modernization. The IRS currently uses technology from the 1960s, called COBOL, to process and intake individual tax returns. According to government officials, the agency has struggled to find workers who are still equipped to code under the antiquated system.

COBOL. Really?

Yes, COBOL, really, a high-level computer programming language with a readable syntax developed in the 1950s, as COmmon Business-Oriented Language, mainly developed for the Department of Defense by Grace Hopper, known as the Mother of COBOL. It's fairly dated, though far from obsolete because COBOL programs have become embedded in many businesses and government departments, like the IRS and many state agencies, actively seeking programmers familiar with the language.

Technical issues at the IRS are probably worse than most people would expect. Sure, government agencies routinely underperform, and the IRS is no slouch in the slouching department. In March of this year, Americans for Tax Reform (ATR) published an article detailing 40 years of tech failures at the agency, the ultimate kicker being the IRS's continued reliance on the "Individual Master File," components of which include 20 million lines of computer code dating back to 1960, when John F. Kennedy was president.

So, anybody worried about the IRS knocking down their doors with an audit might want to consider other government "big lies" like climate change, previously known as "global warming," which was supposed to have submerged major coastal cities by now, or, maybe in another three, four, or three hundred years.

The IRS, for all we know - because they're really tight-lipped about systems they use to collect taxes, impose penalties and screw the American public relentlessly - will likely be unable to process returns efficiently for the remainder of the decade, and beyond, because everybody knows that government estimates are about as reliable as... um, honest journalism.

The 60-year-old system slated for replacement is called the Individual Master File. It's the key source for individual tax data, and a modernized system would provide the infrastructure needed for real time digital taxpayer interactions, rapid access to data and agile response to legislative changes, according to the GAO report.

The program intended to modernize it, called Customer Account Data Engine 2 [CADE 2], has seen many delays and cost changes since the IRS first started developing it in 2009, according to the GAO. A key milestone for replacing selected functions, for example, has been pushed back by nine years, from 2014 to 2023.

The CADE 2 program actually had lower reported costs than anticipated for 2020 and met most performance goals for the last two years, but GAO called its long term performance and outlook "troubling."

The modernized system isn't scheduled to be finished until 2030. Development costs are now about four times higher than originally planned, and CADE 2 is also now expected to replace only core components of the old program, as opposed to the entire system.

All you tax accountants, swindlers, Ponzi-schemers, and cheaters have seven years to fess up.

You've been warned.

At the Close, Monday, November 28, 2022:
Dow: 33,849.46, -497.57 (-1.45%)
NASDAQ: 11,049.50, -176.86 (-1.58%)
S&P 500: 3,963.94, -62.18 (-1.54%)
NYSE: 15,370.44, -235.23 (-1.51%)


WEEKEND WRAP: China Woes, Holiday Spirits Lift Stocks as Treasury Rate Inversion Deepens; Currency Wars Masks Looming Value Crisis

Sunday, November 27, 2022, 11:11 am ET

The shortest trading week of the year didn't produce much of anything, other than the continued melt-up in stocks and further inversion of the treasury complex, now fully upside-down, from 1-month out to 30 years.

Thanksgiving and Black Friday came and went without incident. Apparently, door-busting deals on big-screen TVs or overpriced cell phones weren't sufficient to cause and deaths or rioting. Chalk that up as a rare positive for contemporary society.

While Americans were getting stuffed with turkey, stuffing and gravy, conditions in China continue to deteriorate, with widespread protests over idiotic COVID lockdowns in many areas. From the Foxconn iPhone factory to protests in Shanghai, Beijing, Nanjing, Guangzhou, and elsewhere, it's becoming obvious that President Xi's "Zero Covid" policies are not working and probably causing more harm than good.

The knock-on effects to deprivation of civil liberties in China are being felt around the world, as production of exports slows to a crawl and shipping prices have tumbled to multi-year lows. China is already in a recession and the rest of the world will soon follow, with Europe the leading candidate, and the US and other Western nation economies also showing signs of cooling, which is good from an inflation perspective, but hardly desirable in the grand scheme.

Stocks

All the major indices posted a weekly gain, led by the Dow Industrials, which was higher for the sixth time in eight weeks. Even the hated NASDAQ was up for the week, only the fourth weekly gain in the last seven. It's hardly risen at all off the September-October lows, remaining the worst performer of the year, down 29.09% year-to-date.

Also rising for the fourth week in the past seven the S&P 500 has fared better, testing its 200-day and 40-week moving averages as well as the 68.1% Fibonacci retrace at 4030. Should the 500 exceed that level, it may be off to the races for the rest of the year. The Dow has already surpassed the previous August 16 peak and is down a mere 6.12% in 2022.

Bears will point to the current rally being overextended and a false positive, considering all the exogenous factors contributing to skepticism and negative sentiment. Inflation remains a problem, and now higher interest rates are factoring into the equation, with mortgage and credit card rates the highest in decades, though the upside consists of banks offering up to 3.5 percent on savings and four precent on CDs.

Earnings season now essentially past, a few more important companies will release quarterly results this week, among them Workday (WDAY), Hormel (HRL), Intuit (INTU), Petco (WOOF), Salesforce (CRM), Kroger (KR), Dollar General (DG), and everyone's favorites, Duluth Trading Company (DLTH) and Victoria's Secret (VSCO).

December non-farm payrolls will be released Friday morning (December 2).

Treasury Yield Curve Rates

Date 1 Mo 2 Mo 3 Mo 4 Mo 6 Mo 1 Yr
10/28/2022 3.75 3.95 4.18 4.30 4.51 4.55
11/04/2022 3.73 4.00 4.21 4.36 4.55 4.76
11/11/2022 3.71 4.00 4.28 4.36 4.52 4.59
11/18/2022 3.93 4.23 4.34 4.46 4.61 4.74
11/25/2022 4.16 4.33 4.41 4.52 4.67 4.76

Simply put, yields on short-dated paper rose (selling) and those on longer maturities fell (buying), with the pivot point at one year. One-month bills rose 23 basis points, from 3.93% to 4.16%. 30-year bonds fell 18 basis points, from 3.92% to 3.74%, the tilting of the scale nearly symmetrical.

The 10-year note pared down 16 basis points, to 3.68%, marks a 2s-10s inversion of 74 basis points. 2s-30s are inverted 68 basis points, while the recession-trending 1-month-to-10-year inversion is 48 basis points (0.48%). The absolute worst of it is at the 1s-10s, inverted to the tune of 1.08% (108 basis points).

While this current counter-weight on the economy may appear tight, it will get even tighter when the Fed boosts the federal funds rate another half percent in a little over two weeks, at the final FOMC policy meeting of the year (December 13-14). Adding another 50 basis points would get the target rate that much closer to the "new and improved" terminal rate around 5.50%. Currently at 3.75-4.00%, December's add would boost the rate to within roughly one percent of the terminal prospect, but the Fed may be keeping their cards a bit closer to the chest than is widely assumed.

Standard understanding is that the FF rate should be higher than the inflation rate (CPI), in order to quell the inflation monster. Back in the early 80s, Paul Volker had the effective rate as high as 19.08%, though inflation was calculated differently back then and also running at a higher rate (12-15%). The current CPI is mellowing at 7.7% and it may cool somewhat over the next few months, or it may not.

Even if CPI comes in at 6.0-6.5% in February or March, a federal funds target rate of 5.5% runs the danger of being a little on the short side. The Fed can scarcely take the risk of fighting the good fight only to lose the war, so a terminal rate of six or seven percent may be the actual target, though Fed officials are loathe to let that cat out of the bag, lest they crash everything sooner than planned.

Pundits and supposed experts on rates, inflation, the Fed, and everything else seem to be of common mind that 5.00-5.50 is the true target, though four months ago, they were certain it was 4.75%, so they can be relied upon to be exactly wrong again in their assessment of FOMC hikes of 25 basis points in February and March and calling it done.

Since the Fed has hiked 75 basis points in each of the past four meetings, it may be reasonable to conclude that they'll not stray from 50 basis points after December, and that there will be more than one more hike. In essence, look for 50 basis points in December (maybe even 75), and then 50 more in February and March, which would then have the rate at 5.25-5.50. It would be at that point that the Fed "may" consider 25 basis points for the foreseeable future, potentially well into summer of 2023 as it would take six hikes of 0.25% to get to 7.00%.

All the banter and backtalk from Fed officials may be little more than a smokescreen for what must be done but can't be discussed in polite company.

With the December hike already well priced-in to rates, it appears the Wall Street bulls weren't privy to the memo.

Date 2 Yr 3 Yr 5 Yr 7 Yr 10 Yr 20 Yr 30 Yr
10/28/2022 4.41 4.38 4.19 4.10 4.02 4.38 4.15
11/04/2022 4.66 4.58 4.33 4.26 4.17 4.49 4.27
11/11/2022 4.34 4.17 3.95 3.89 3.82 4.24 4.03
11/18/2022 4.51 4.28 3.99 3.92 3.82 4.13 3.92
11/25/2022 4.42 4.20 3.85 3.78 3.68 3.97 3.74


Oil/Gas

WTI crude oil was slightly lower, closing out the holiday week at $76.55, down from last Friday's $77.31/barrel. The price of crude has really dipped from $92.60 three weeks ago, defying the expert gloom-and-doom crowd, many of whom were predicting oil prices above $100.

Along with oil remaining near recent lows, the price of gas at the pump is also dropping, down to $3.55 per gallon for unleaded regular, the lowest level since mid-February, nearly 10 months ago, and a far cry from this spring and summer's extremes, when the national average rose above $4.50 and as high as $5.02.

This week's reading from gasbuddy.com is 13 cents lower than last week's $3.68. Even California has fallen below $5.00, though $4.998 isn't yet cause for celebration, though it is something of a relief from the $6.00+ prices seen earlier this year. Texas and Oklahoma are states with the cheapest fuel, dropping below $3.00, at $2.83 and $2.96, respectively. Other Southeastern states are all in the low $3 range, with Florida the priciest ($3.37), while Mississippi ($3.00), Louisiana ($3.01), Georgia ($3.02) and Arkansas ($3.02) are likely to go sub-$3 next week.

By comparison, prices remain high from Illinois eastward to the Northeast, ranging from $3.44 (Ohio) to $3.97 (Pennsylvania). Western states, Arizona, Idaho, Nevada, Washington, and Oregon are all above $4.00/gallon on average.


Crypto

Bitcoin is currently valued at $16,530.00, just slightly lower than last Sunday's $16,545.60 and the prior Sunday's $16,553.00. There exists no rational catalyst for a higher price in bitcoin. Ravaged by government regulation and savaged by Wall Street hucksters, the once-glorified concept of a "trust-less" currency has been reduced to a shadow.

For those of the sporting mind, there are various means by which to short Bitcoin and its over-hyped cousin, Ethereum. Perhaps the best advice is avoidance as the creators of most coins are dreamers at best and schemers at worst. The exchanges are unsafe and unsound. While Coinbase and other exchanges have witnessed record outflows the past two weeks, Changpeng Zhao (CZ), founder and CEO of Binance, the largest crypto exchange, is calling for a $1-2 billion bailout fund.

The irony is palpable. Crypto runners, the invisible, untouchable, block-chained currency that was supposed to save the world from central banks, is looking for a fiat bailout. No, you can't make this stuff up.


Precious Metals

Gold/Silver Ratio: 81.59

Gold price 10/28: $1,648.30
Gold price 11/04: $1,685.70
Gold price 11/11: $1,774.20
Gold price 11/18: $1,752.00
Gold price 11/25: $1,768.10

Silver price 10/28: $19.20
Silver price 11/04: $20.92
Silver price 11/11: $21.80
Silver price 11/18: $20.97
Silver price 11/25: $21.67

Here are the most recent prices for common one ounce gold and silver items sold on eBay (numismatics excluded, free shipping included):

Item/Price Low High Average Median
1 oz silver coin: 32.99 48.00 38.59 37.70
1 oz silver bar: 31.95 48.00 39.03 38.47
1 oz gold coin: 1,854.15 1,966.82 1,919.59 1,928.87
1 oz gold bar: 1,838.45 1,874.20 1,852.36 1,847.89

A word about the weekly Sunday morning eBay survey is in order, considering the big jump in prices this week. Not only was the average price of a 1 ounce silver coin the highest since June 12, the low (32.99) was also the highest since that date, marking a five month high.

Premiums, especially on silver are through the roof, with ASEs fetching eye-popping numbers, mostly in excess of 100% over spot. Now, it's not like silver stackers and fans of real money aren't aware of the prolonged suppression of gold and silver, but their willingness to pony up double spot to purchase Eagles speaks of a more pronounced desire to own assets or money that is not fiat, be it US dollars, euros, yen, or pounds.

Gold and silver advocates are particularly keen on calling out fakes and there's nothing more phony than the currency employed worldwide, courtesy of central banks which conjure the stuff out of thin air. While de-dollarization has been gaining momentum even as the dollar rises against other currencies, de-fiatization will likely turn out to be a primary influence away from currency backed by nothing more than full faith and credit of some sovereign nation, as many have lost faith in governments, their credit largely undeserved as almost all are deeply in debt.

The systems in place since the past 100 years or more have run their courses. Decrepit and devoid of value, the current inflationary surge has exposed debt-based currencies, fractional reserve banking, and taxation beyond what anyone would consider to be fair value for service rendered as the frauds they are. When central banks and governments collude to confiscate more than half a person's income and then debase the value by which it is measured, there will assuredly be unrest, crime and rampant poverty among the unprivileged classes.

The only thing holding the current global monetary system together is normalcy bias, as nobody is as yet prepared to step beyond the system and demand fairness. If a total breakdown of economics and finance is near at hand, gold and silver holders are cheering for it to be complete, laying waste to both government dictates and central bank counterfeiting.

More than a currency war, a war over standards of value is upon us and precious metals supporters are at the proverbial tip of the spear.

Now that bitcoin has been beaten into a regulatory and tax abyss and associated crypto frauds are being exposed, the central planners may be in for a shock when they unveil their central bank digital coins (CBDC) as gold, silver and other alternatives - even barter - create a global black market that will undermine their "block-chained" efforts.

As the elites enrich themselves in fountains of fiat at the expense of all others, blowback will be a constant, emerging from the distrust and ill-repute they themselves created.

Stack now, or forever hold your (worthless) fiat. Victory goes to the swift and the brave.

Victory at all costs, victory in spite of all terror, victory however long and hard the road may be; for without victory there is no survival. -- Winston Churchill

The Single Ounce Silver Market Price Benchmark (SOSMPB) got a huge bump higher this week, to $38.45, a gain of $1.79 from the November 20 price of $36.66.


WEEKEND WRAP

Even though this was a short trading week, there was plenty besides turkey, stuffing, sweet potatoes, and cranberries to digest. Just as stocks appear to have taken hold of some newfound optimism in time for the holidays, fixed income markets are rattled, layoffs appear to be accelerating, the housing market is reeling, credit card defaults are on the rise, so too mortgage rates and bankruptcies. On top of all that, China may become quite messy and what about Ukraine and the demise of Europe and the EU? To say nothing of de-dollarization and the debasement of fiat currencies (looking at you, yen, and you, euro, and the pound) is akin to driving blindfolded.

All the while, inflation persists and the Fed is insistent on tightening economic conditions. November's non-farm payroll report (Friday, December 2nd) may be the first to show actual job losses rather then the outsized gains to which many have become accustomed month after month.

In other words, holiday spirits may be all well and good, but feeling flush about stocks and the economy is an emotional state, not a rational one. A bear market rally is well underway and it could very well get even more extended or it just as easily could fall apart tomorrow or next week.

Be prepared for a bumpy ride as this cycle is not nearly over and the final chapters of the inflation/recession saga have not yet been written.

At the Close, Friday, November 18, 2022:
Dow: 34,347.03, +152.97 (+0.45%)
NASDAQ: 11,226.36, -58.96 (-0.52%)
S&P 500: 4,026.12, -1.14 (-0.03%)
NYSE: 15,605.67, +60.16 (+0.39%)

For the Week:
Dow: +601.34 (+1.78%)
NASDAQ: +80.29 (+0.72%)
S&P 500: +60.78 (+1.53%)
NYSE: +295.91 (+1.93%)


Disclaimer: Information disseminated on this site should not be construed as investment advice. Downtown Magazine Inc., 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 Inc., Money Daily, its owners, affiliates and employees against any and all liability. Copyright 2022, Downtown Magazine Inc., all rights reserved.

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