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Money Daily has been providing business and financial market news, views, and coverage on a nearly continuous basis since 2006. Complete archives are available at moneydaily.blogspot.com.
Money Daily has been providing business and financial market news, views, and coverage on a nearly continuous basis since 2006. Complete archives are available at moneydaily.blogspot.com.
Friday, November 11, 2022, 8:00 am ET
After Thursday's moon shot, there's little doubt the major averages will finish the week with gains, possibly among the best weekly gains of the year, and certainly for the NASDAQ, up more than seven percent in just one session.
Apparently, the investing world believes inflation at an annual rate of 7.7% is wildly positive, but more to the point, that the Fed's constant hiking of interest rates through most of 2022 are finally beginning to work.
The S&P 500 saw its best gain since April 2020. The Dow Jones Industrial Average had its best day since May 2020, while the NASDAQ rose 7.4%, its best percentage gain since March 24, 2020, when the index soared 557.18 points, or 8.12%. Thursday was the best day ever for the NASDAQ, points-wise, the 760.97-point gain topping the old mark of 673.07 (+9.35) from March 13, 2020. Cheers all around for the worst-performing index of the year. Even after Thursday's live cat bounce, the NASDAQ remains down 29.80% on the year.
Does this mean the bear market is over?
According to Dow Theory, not quite yet, as the Industrials would have to close above the prior peak of 34,152.01 from August 16, stay above that level and, additionally, have the primary trend confirmed by the Dow Jones Transportation Average, which closed Thursday at 14,253.40, by climbing past 15,300.60. That's another 1,000 points higher, though the Transports have added upwards of 2200 points since late September.
The Transports ended the day with a gain of 750 points (5.56%), closing right at its 200-day moving average. The Dow Industrials blew past both its 50 and 200-day moving averages, while the S&P, NYSE Composite and NASDAQ closed between the two.
Even the most cynical types have to admit that the set-up looks promising for the stock market, even though the general economy may be a different matter altogether. With the midterms (almost) over, the Democrats still have control of both houses of congress pending late-arriving ballots and some very slow counting in races from Arizona, Nevada, and California.
If Laxalt (R) can hold onto his lead in Nevada and Kelly (D) maintains his 5% edge in Arizona, that would leave the Senate with 50 Republicans and 49 Democrats, making the runoff in Georgia between Warnock and Walker the deciding race, a Warnock victory leaving the Senate in a 50-50 deadlock.
In the House, Republicans have secured 210 seats and are leading in only eight of the remaining 28 races. They would have to win all of them to gain control of the House, and by the slimmest of margins, 218-217. All of this is scarcely believable. There is a lot of suspicion on both sides of the aisle, but especially in states which favored no-ID, early, and mail-in voting. Reform is necessary, and should have taken place after the 2020 debacle. Republicans apparently have little interest in being the majority party.
Taking the eventual election results at face value, it would appear to be a solid base from which Democrats could maintain an aura of acceptability, though reality may be something of a different color. However, as far as stocks are concerned, the media can push the narrative that Biden and his handlers' policies are working and keep markets from falling apart as the Fed continues its inflation-fighting quest.
Outside of Thursday's massive rally, there continue to be signs that all is not a bed of roses. Layoffs at Twitter, Meta and elsewhere haven't quite rung the alarm bell, so holiday hiring and retail sales look to be important data points moving forward.
A couple of key numbers to watch are the aforementioned 34,152.01 on the Dow and 4,030 on the S&P, marking the 61.8% Fibonacci retrace and a point at which markets could whipsaw.
Fibonacci ratios encompassing the most recent substantial movement for the S&P are as follows:
This being Veterans Day, bond markets are closed, though the stock markets will be open regular hours.
With two hours until the opening bell, stock futures are holding onto gains. Dow futures up 120; S&P, +15; NASDAQ, +45.
It's worth noting that precious metals participated in Thursday's blowout, though not nearly to the extremes of stocks. Gold ($1760) is at a three-month high, while silver trends around 21.40, dropping 25 cents from Thursday's close. There's plenty of overhead resistance around $22 for the world's most underpriced asset.
At the Close, Thursday, November 10, 2022:
Thursday, November 10, 2022, 9:20 am ET
It's certain now that everything has run completely off the rails.
Two days after the elections and nobody knows who controls congress. At least 40 races (most of them in California) are still undecided, votes still being counted.
Sean Penn "loans" one of his Oscars to Ukraine president Zelensky. (Yes, we have achieved peak Full Retard Clown World.)
Losses are mounting on cryptos as Sam Bankman Fried's FTX and in-house token, FTT goes up in flames.
This story is particularly juicy, as Bankman-Fried attracted investments from BlackRock, Sequoia Capital, Tiger Global, Softbank, the Ontario (Canada) Teachers' Pension Fund, and others, gave over $10 million to Joe Biden's presidential campaign fund, and more millions to Democrat PACs, inked deals with NBA teams and individual athletes including Stephan Curry and Tom Brady.
On the heels of this collapse, Bitcoin plunged back to November 2020 levels, bottoming out Wednesday at $15,668, though the demise of all things crypto may only be in the "developing" phase. Fraud has run rampant through business, banking, and government and is not likely to abate until everything blows up at once.
Topping it all off, the BLS announced just minutes ago that October CPI came in with a monthly gain of 0.4%, the same as September's rise. The all items index increased 7.7 percent for the 12 months ending October, the smallest
Stripping out food and energy, core CPI rose 6.3% year-over-year and 0.3% over the month on expectations of a 6.5% annual increase and 0.5% monthly increase in the core CPI reading.
Leading the gains was fuel oil, rising 19.8% for the month and up 68.5% year-over-year. Merry Christmas, plebes! In case you don't starve to death, the plans call for you to freeze to death.
With the release of the CPI figures, which were better than expected, and that's all that matters, stock futures skyrocketed. Dow futures, which were hovering around +$80, shot up to an astounding +$830. No that is not a misprint. Now that inflation is only 7.7%, the economy is so good, you must buy stocks. NASDAQ futures are up more than 400 points.
It's even good for Europe, where Germany's DAX shot up 300 points within minutes. In the UK, the FTSE rose from unchanged to up 100 points. Who knew that having the price of everything rise nearly eight percent a year would bring so much money out of the woodwork?
Now that everything is fixed, can we get those loose ends tied up, like making sure Democrats win all of the remaining open house races to assure they'll stay in power and continue to improve the economy, allow more illegals to cross the Southern border and influence parents to transgender their children?
A few things that haven't happened, but might:
Release of security or police video from the "attack" on Paul Pelosi (husband of House Speaker Nancy Pelosi).
A final tally in the Arizona Governor's race between Republican Kari Lake and Democrat Katie Hobbs.
Violence stemming from cheating in elections.
Shares of META trading under $50.
Truce or peace deal struck in Ukraine.
Black Swan, the term popularized by author Nassim Nicholas Taleb in his book by the same name, represents an unusual event that nobody sees coming, such as the sub-prime crash of 2008, or the dot-com meltdown in 2000-2001. The term has been thrown about loosely, though lately, it's hard to see the sky with so many black swans circling overhead. It won't take much of a trigger to send markets into a tailspin, but there's lots of money going "poof" in bitcoin and many of the thousands of cryptocurrencies, alt-coins, NFTs, and related imaginary wealth sphere.
What happens if a black swan is shot down from the sky? Is there a fine, and who administers it? Does Brandon get his customary 10 percent?
It appears we're about to find out.
Just to make sure that everything is as fake as possible, Beyond Meat (BYND) closed Wednesday at 11.82 after reporting a loss of 1.60 per share for the thrid quarter. Shares of the fake meat company traded as high as 235, peaking in July, 2019. That's a 95% loss. Figures, as the company has never shown a profit, ever.
Summing up, we have fake markets run by fake businesspeople, governed by a fake president and congress members selected via mail-in fake elections (except in Florida), and we'll all be having a fake steak with frozen fake French fries for dinner.
Beats eating bugs. Yum, yum.
At the Close, Wednesday, November 9, 2022:
Wednesday, November 9, 2022, 8:52 am ET
Welcome to your brave new banana republic.
As of 8:00 am ET this Wednesday morning, there's still no clear-cut winners in a handful of Senate races and about 40 races for the House of Representatives.
When all the ballots are counted, recounted, audited, and all the lawsuits settled, the United States will still be poorly governed, no matter which party controls congress and/or the White House. Politics in America has become an even uglier game than it always has been, especially since 2016. As far as can be seen, it continues to worsen.
A country that devotes an inordinate amount of time, money, effort, and media coverage to shammy elections in a system riddled with questions and failures isn't a country worth fighting for or fighting over. In the great pecking order of importance, politics, and who gets to call the shots from positions of power is close to the bottom. It's especially alarming that a country with such a rich and patriotic history as the United States of America could fall so far, so fast from being home to decency, morality, and peace, to a crime-ridden hell-hole with open borders and elected people who barely represent their constituents, if at all.
It's why Money Daily generally sticks to finance and economics. Politics is too scammy, scummy, dirty, and unwholesome. Mamas, don't let your kids grow up to be congressmen.
Moving on, behind the election hoopla, cryptocurrencies crashed on Tuesday, sending bitcoin - the uncrowned king of cryptos - to its lowest level in two years, bottoming, for now, at $17,439. The cause of rapid deterioration in the crypto market was the sudden devaluation of a company known as FTX, the operational arm of (former) billionaire Sam Bankman-Fried, and a bailout rescue by Binance, a crypto exchange.
The details of the demise of Bankman-Fried are less than important. What's of more vital interest is that his fiat money empire, estimated to be between $22 and $26 billion, has been flushed down the crypto drain, in a little more than one day, proving, again, that fake money in corrupt crypto assets is even more fake than fiat US dollars.
Even further behind the scenes, gold and silver were bid higher on Tuesday, just as stocks were zig-zagging twoards a thrid straight session higher.
Gold gained $37.10 on the day, closing out in New York markets at $1712.60. Silver rose from $20.80 an ounce to $21.33. A week ago, silver was around $18.65. There's a distinct impression that US elections, a crypto crash and acceleration of the rally in precious metals are all somehow related. It would bear watching how financial trends follow the machinations of the elections "process" in days and weeks ahead, especially with the balance in the US senate probably not going to be decided until December 6 or later, as the senate seat in Georgia looks to be headed for a runoff.
Disney (DIS) reported fiscal fourth quarter earnings on Tuesday, missing badly on EPS, posting a 30 cent per share profit on estimates of 56 cents. Shares of the Mickey Mouse franchise are down nearly 10% in pre-market trading, into the low 90s. Tracking the trade of Disney stock the past year looks more like one of the rides at the Magic Kingdom than a bellwether, stable company, with peaks (as high as $125) and valleys (as low as $91) dotting the path to Tuesday's washout.
Meta Platforms (META, formerly Facebook, FB) is nixing 11,000 jobs, or, about 13% of its workforce, according to various reports being circulated this morning. Nice job, Zuck.
Bear in mind, as the US political system crumbles, gas prices advance back toward $4.00 a gallon nationally, the southern border remains wide open and crime runs rampant in big cities...
If you like your banana republic, you can keep your banana republic.
At the Close, Tuesday, November 8, 2022:
Tuesday, November 8, 2022, 7:55 am ET
The notion that stocks are being juiced prior to the elections on Tuesday may have come to fruition with the gains from Friday of last week and Monday's returns. Without so much as a shrug, the Dow quietly put on nearly 1000 points over the past two sessions and remains the strongest of the major indices.
Rallying alongside the runaway Dow Industrials, the S&P 500 and NASDAQ both gained, and while the NASDAQ's bounce off deep lows is more noise than signal, the S&P ended Monday's session sitting right on top of its 50-day moving average. It's been there before, as recently as last week, but failed to hold at that level. Four straight losing sessions, similar to the five straight in early October, squelched any hint of a breakout.
Conventional conspiracy thinking says that stocks will hold up fine through the end of today, then go into volatile spasms once voting has concluded. The causes may be more politically oriented than fundamental, as vote-counting in key races has been promised - by the resident himself - to take days finalize.
Will there be cheating? Count on it, though it may not be as egregious as past experiences. For the most part, any swindling will have the effect of keeping Democrat losses to a minimum, so that the balance of power doesn't swing too heavily towards Republicans. Anything less than a 230-205 Republican majority in the House of Representatives will serve the Democrat cause that they remain a significant minority with enough bullying and bellowing about lack of a conservative mandate to meet the needs of the media, which will, no doubt, continue to push forward with their pet agendas: climate change, abortion rights, genderism, and "equality."
Nothing substantial is likely to come of the change in the Senate, where the Republicans are likely to regain a majority somewhere in the 54-46 to 52-48 range. Pennsylvania and Georgia senate races will be the primary battlegrounds, though surprises could occur anywhere from Wisconsin to Oregon to New Hampshire and Arizona.
If - and that's a very, very large if - Republicans manage to pick up more than a marginal majority in both houses of congress, don't be surprised if Democrats start calling their opponents out for cheating. After all, projection has been the primary attack posture for the Dems. Calling out the other side for what you're in fact doing has been stamped approved by the leadership and media toadies.
How the midterms affect markets is largely a guessing game, though the main takeaway is that a Republican congress will act as a counterweight to the Democrat occupant in the White House, thus neutering any significant legislation for the next two years, a positive development for everybody except the over-fueled, fully-demented politicians who stick to the belief that they actually matter.
Once the farce of elections is over, life can return to some degree of normalcy, or what remains of a normal existence. There's going to be a news lull between the midterms and the first week of December, when congress will go back to arguing over how much money they'll be borrowing to keep the government operational. Another short-term spending drama will see battle lines more clearly defined.
In the final analysis, politics and finance will find some common ground, though finance will return to the primary position in terms of investment, money management, and domestic budgets.
Everybody will need to take a deep breath, exhale a sigh of relief, assess the situation and move forward.
By all means, if you haven't already, get out and vote. Who knows? It might actually count for something.
At the Close, Monday, November 7, 2022:
Sunday, November 6, 2022, 9:52 am ET
Highlighting the week was the FOMC policy decision to raise the federal funds target rate by another 75 basis points - the fourth consecutive 3/4-point hike - to 3.75-4.00%. Major indices were hammered four straight days, while Friday's knee-jerk rally came in two waves, one from the open until just before 11:00 am ET, the second, just after 2:00 pm ET into the close, started by a bump off the unchanged level. Insider fingerprints could be found all over the second push to the upside.
While the Fed's non-stop inflation fighting certainly damaged equities, also on the pain threshold are mortgage rates, new car loans, and credit card rates, the average of the latter somewhere between 18.77% and 18.94%, set to rise to a level above 19.50% when the Fed's most recent hike is applied. Coupled with inflation near nine percent, strapped consumers are staring into what is developing into a 30% black hole of debt.
With the Fed insisting that unemployment needs to rise, the ongoing recession with attendant job losses will translate into massive credit card defaults, unpaid rents and an unprecedented market crash. County courthouses will be up to their eyeballs in loan default lawsuits by the second quarter of next year. The jingle of car keys returning to dealerships will rival the "walk away" mortgage defaults from 2008-09.
The Fed will slay inflation, but with it, the entire economy, and that's on a global basis, not just in the USA.
The NASDAQ got taken to the cleaners again this past week, ostensibly for extra starch and One Hour Martinizing. While the reference is objectively "old school", the result is a cleansing of high-risk target assets and removal of high leverage and speculation stains. It's an ongoing process.
In what appears to be a repeat of the dot-com bust, the NASDAQ is already down more than a third year-to-date, with companies like Facebook - now META - already in the dumpster and beginning to reek. All that is needed is a match and some gas to set off what should be a massive dumpster fire. The Fed has both on hand and has signaled a readiness to use both, saying, in effect, that if the economy refuses to cool down, they'll set it all ablaze.
A weekly Dow chart tells the entire story of the equity market. Clearly, since the start of 2022, the overall trend is to the downside, every rally met with stiff selling and a push to new lows. Charts of the NASDAQ and S&P tell a similar story, only worse.
The week just past pushed beyond peak earnings season with mixed results and bucketfuls of negative guidance. Upcoming are the midterm elections (Tuesday), likely to send shockwaves across most markets. Not to be too cynical, but the week just ahead appears to be trending toward a Democrat bloodbath and questionable election results across the country as Waterloo meets watershed.
A large number of companies will be reporting Q3 earnings over the course of the week. Berkshire-Hathaway (BRK.A, BRK.B), BioNTech SE (BNTX), Norwegian Cruise Lines (NCLH), Disney (DIS), DuPont de Nemours (DD), DR Horton (DHI), Rivian (RIVN), Beyond Meat (BYND), AstraZeneca (AZN), and Wendys (WEN) are among some of the more interesting names. Earnings will likely take a back seat to midterms as far as news flow and stock movements are concerned. There's no way to understate how important the midterm election results are to equity markets. It's likely to be volatile and chaotic through the weeks running up to Thanksgiving and the start of the holiday season.
Expect the next eight weeks to bear witness to massive tax loss selling, punching stock prices of already-beaten-down issues even lower. Any stock down 20-30% could easily turn into a loss of 50% by year's end. The days of BTD (buy the dip) are long gone. STR (sell the rip) is the new darling of speculators.
Yields on shorter maturities bumped slightly higher over the week, with the exception of the one-month, which fell two basis points. the most notable difference was in the spread between six-month and one-year yields, rising from four to 19 basis points, keeping short-term lending on the cheap, relatively speaking. Notable is the two-month yield rising to 4.00% for the first time.
Longer-term maturities pressed much higher with the Fed's 0.75% federal funds target rate hike. The two-year yield set a cycle high at 4.66, up 0.25% from the prior Friday. Other yields rose, though less so, with the 3-year up 20 basis points, the 10-year higher by 0.15% and the 30-year hitting 4.27% (up 12 basis points).
Inverted spreads are now routine. 2s-10s are 49 basis points; 2s-30s, 39; and the spread on six-month (4.55%) and 30-year (4.27%) stands at an inverted 28 basis points. The entire curve has a normal spread of 54 basis points (0.54) which is about as flat as its ever been, despite the bump in the middle. There is a symmetry there, with the nexus at the 10-year rate of 4.17%, which can be interpreted as a temporary "true rate" around which every other yield revolves.
Essentially, the treasury yield curve looks like a messy squiggle or an attempt to draw a stright line using a banana, when in point of fact is signaling higher rates for a longer time, though not as long as 10 years. With the highest rates at one year and two, the expectation is that inflation will remain above the target two percent for at least the next 12-24 months.
WTI crude oil rose again, to $92.60, from $88.37 on Friday, 10/28, and $85.14 on the 21st. OPEC+ production cuts commenced on November 1, the rise in price likely due to market anticipation of lower supply moving forward. Any further increase in the price of crude will be reflected in gas at the pump within days or weeks and the same for home heating oil and diesel fuel.
In the US, the national average for a gallon of regular 87 octane gas rose four cents, to $3.78 from last week's $3.74. California ($5.40) remains the only state averaging over $5.00/gallon. The cheapest gas can be found in Georgia and Texas, at $3.09 and $3.15, respectively. The Southeastern states continue to trend well under $4.00 per gallon. Every state east of Idaho, Utah, and Arizona is under $4.00/gallon, except Illinois ($4.30), this week joined by Pennsylvania ($4.06), Indiana ($4.19) and Michigan ($4.21). In the face of record oil company profits, rising gas prices into the holidays aren't going to make for a very merry Christmas.
The trend may not be so friendly to the entire economy if food (already at premium prices) and gas continue to rise, the essentials stripping cash away from discretionary purchases like toys for the tykes. Retailers, already suffering through some of the worst multiple years on record (2020-2022) are going to be under the gun to maintain market share and profitability through the end of the year.
Bitcoin settled in at $21,236.50 this Sunday morning, making the two-week move from $19,156.50 on October 21 noticeable and intriguing, though not quite convincing. The case for bitcoin is clear, but the market is beset on all sides with rumors, distractions, detractors, regulators, and skepticism. While massive gains may not be as much the goal of hodlers as previously, today's crypto fanatics may be more interested in coins as a store of value outside of a sea of floating - and failing - fiat currencies. Whether bitcoin is $20,000 or $40,000, it has shown recently to be more stable than either the euro or the yen, and has stood up well against the devaluation of the US$, beyond the misdirection of the dollar index. Eventually, all fiat will fail. Whether bitcoin has staying power depends largely on acceptance as currency, which, at this point, remains the province of marginal states, El Salvador and Nigeria, most notable.
Gold/Silver Ratio: 80.58
Gold price 10/07: $1,701.80
Silver price 10/07: $20.16
Silver gained 8.3% on the week; gold rose 2.3%. The catalyst for the big move in silver remains an open question, though more credence is being given to the idea that COMEX vaults are being cleared out and a true silver shortage may be more fact than fiction in coming weeks and months. Prices are still just hovering above the lows and it will take time to discern whether the upward trajectory is maintained into a breakout or if it's just another bump on the rocky road of price suppression.
The weeks' gains - most of which occurred on Friday - may have more to do with the huge decline of US currency via the dollar index (DXY), which fell 2.14 points (-1.90%) from 112.93 to 110.79. A two percent move in currencies is huge. The dollar index peaked at 114.10 on September 26, coinciding perfectly with the gold low of $1,633.40. Correlation is not causation, though in this instance it looks to be very much the case. There are more than a few strings attached to the price of gold and silver. Singling out just one is probably not adequate to assess the market in a prudent manner.
At least for goldbugs, the buying urge remains intact, with prices well below all-time highs from 2020. Silver stackers are grousing over premiums, which exceed 100% on some products, especially American Eagles (ASE). Nobody is doubting the idea that prices for precious metals are suppressed and thus, too low for the average PM bull. Breaking the COMEX and LBMA stranglehold on prices is a long struggle that may eventually be determined by an outside force, be it from Shanghai or Moscow, the focal points of a coming new world multi-polar currency and valuation paradigm.
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) leveled off this week, to $37.36, a slight loss of 23 cents from the October 30 price of $37.59.
Tying the bow on the weekend wrap are midterm elections and geopolitics, which will collide with extreme force Tuesday through Friday. If the Democrats are dumped, as has been indicated by recent polls, the level of damage to their brand will be seen mainly in the Senate numbers, where Republicans may pick up as many as four seats and potentially a majority of 54 to 44, plus two independents (VT, ME).
If the outcome matches the most recent polling, it will be up to newly-elected Republicans to right the many wrongs of the Democrats, who have run roughshod over the constitution, the economy, and the American public for the better part of the last six years and especially, the past two.
Expecting great change may be another fools' errand, as the left-right, blue team, red team paradigm has been shown in recent years to be as fake as the news and everything else.
The final day of voting is Tuesday, November 8, with Veteran's Day on the 11th, a national holiday, though equity markets will remain open. Most banks, post offices and the bond market will be closed.
Stock up on popcorn and adult beverages because this show is about to become very entertaining.
At the Close, Friday, November 4, 2022:
For the Week:
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