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Money Daily has been providing business and financial market news, views, and coverage on a nearly continuous basis since 2006. Complete archives are available at moneydaily.blogspot.com.
Money Daily has been providing business and financial market news, views, and coverage on a nearly continuous basis since 2006. Complete archives are available at moneydaily.blogspot.com.
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Friday, February 25, 2022, 8:30 am ET
What happened Thursday? Why did all Asian and European stock markets dive on Russia's invasion of Ukraine, but US stocks rallied off morning dumps?
To put it into very a simple two-word explanation: Short covering.
The explanation is just as simple. Wall Street pros - Goldman Sachs, JP Morgan, Merrill Lynch, various hedge funds - were well aware that retail investors would be buying puts and selling stocks, so they took the other side of the trade and sold puts, bought stocks, crushing the retail rubes, as usual.
Thursday's put-call ratio was 6:1. There were six puts (betting stocks would go down) to every call (stocks would go up). Just like any smart bookie would do in case of an over-leveraged situation, the "house" took the other side of the bet, aided by the immutable forces of the PPT, the Exchange Stabilization Fund, and the NY Fed's trading desk.
When the NASDAQ opened 450 points lower (12,587.90), the Dow down as much as 859 points (32,272.64), and the S&P down a meager 110 points (4,114.65), the behind-the-scenes operators sprang into action, buying stocks, squeezing the retail put buyers, thus averting a market crash.
Shenandoah's take is more humorous and likely closer to the truth.
In similar fashion, gold and silver were bid much higher. Paper gold on the COMEX rose as high as $1978.00 by 6:00 am ET, but could not hold that level. Selling continued non-stop throughout the day. By 3:00 pm ET, an ouce of gold was nearly $100 cheaper, touching down at $1880. By the 5:00 pm ET NY close, it settled out at $1903.50.
Silver traded similarly, rising as high as $25.60, before crashing back to earth around $23.85 and closing in NY at $24.19. WTI crude oil shot up to over $100 per barrel but this morning sits at $93.35.
Bitcoin, being treated as a risk asset by the big Wall Street traders, bounced from a low of $35,220 to just below $39,000, a swing of more than 10%.
As Thursday turned to Friday and Russian forces appeared to be closing in on the central city of Kyiv, the nation's capitol, European bourses are recouping most of Thursday's losses.
Clown World has gone global.
Russia is likely to have taken Ukraine by Sunday, since many Ukrainian soldiers surrendered rather than fight and the Russian offensive was well-planned and coordinated. So, not only does Russia have great reserves of oil and natural gas that Europe needs, they'll soon have control of one of the most fertile areas of the world, Ukraine has been referred to as "Europe's breadbasket" for centuries.
The Russian forces will have taken the entire nation in less than a week, using guns, missiles, tanks, and jets. Western nations - the US, NATO, Europe - responded with press releases, statements, and sanctions. This serves as a stark reminder that the days of American Empire are waning. Russia and China are rising. Latin America is also escaping from the bonds of two centuries of North American and European domination.
As far as stocks are concerned, your guess is as good as anybody's. Markets are obviously about as rigged as select NFL football games, so traditional analysis, charting, and fundamentals aren't going to be of much help to the average trader, or even above-average traders.
Wall Street has always been a game for the rich, who usually get richer. When retail rubes get involved, markets crash, like in 1929, 2000, 2008. There are still some retail investors determined to outwit the professionals. Since they don't have the tools, expertise, or connections the pros do, they'll get crushed.
The world has devolved into controlled confusion. Not only do Western nations have leaders chosen by phony elections (Macron, Trudeau, Biden), but fake news is the norm in the mainstream. Money, or currency, is all fiat, backed by nothing, essentially worthless. It would make perfect sense that markets are not anywhere close to being free or open.
At the Close, Thursday, February 24, 2022:
Thursday, February 24, 2022, 9:25 am ET
For the fifth straight session, the Dow Industrials and NASDAQ composite lost ground, while the losing streak extended to four days for the S&P and NYSE, both of which made minor gains on February 16th.
The sucker punch stocks took on Thursday was the worst of the current slide, the NASDAQ leading the way down with a 344-point loss, or 2.57%, pushing it further into bear territory, now down 17.66% YTD.
What happened during the cash session on Wednesday is going to pale by comparison to what's straight ahead. Overnight, Russia's excursion into Ukraine intensified into a full-blown invasion, as Russian President, Vladimir Putin, ordered a de-militarization of the entire country. Russian forces have essentially locked down the country in less than two days. Air traffic has been grounded other than Russian jets, helicopters, and service craft. All major cities, including the capitol, Kyiv, have been shelled from the air and the ground.
With the Russian assault on the entire country serving as background, Wednesday's sharp decline in US stocks is going to register as a minor nose bleed compared to the bloodbath set to begin with Thursday's opening bell. At this juncture, the NASDAQ and S&P are already well beyond correction space (-10%), and the Dow managed to close just above the -10% mark at 33,119, closing above that level by a mere 12 points or 0.02%. From a January 3rd all-time high, the Dow closed down 9.98% on Wednesday and is certain to finish below that key level on Thursday.
Getting back to Ukraine, the response from Western nations has been woefully inadequate, calling for further sanctions against the Russian economy. There's a real sense that Putin and the Russian citizenry could care less. They are using guns, rockets, missiles and bombs to make their point, while NATO and the US responds with talking points and gestures of incompetence and impotence.
The likelihood of military conflict between Russia and any NATO ally remains slight. No nation wants to commit its military against the Russian juggernaut, already well entrenched throughout Ukraine and neighboring territory, like the Black Sea and Belarus.
Here's a snippet of the response by the EU's European Council:
We demand that Russia immediately ceases military actions, unconditionally withdraws all forces and military equipment from the entire territory of Ukraine and fully respects Ukraine's territorial integrity, sovereignty and independence. Such use of force and coercion has no place in the 21st century.
If it wasn't so inept and immaterial, it would be hilarious, something right out of a Monty Python skit.
Few can blame Putin and Russia for its unprecedented military advance into Ukraine. After all, the United States fomented and financed a coup in Kyiv in 2014, the so-called "Maidan" revolution, and has used Ukraine as a backwater vassal state to fund all manner of money laundering and illegal activity, much of it by current White House occupant, Joe Biden, and people connected to him. Besides overthrowing the government of Ukraine, the US and NATO allies have been encroaching closer to Russia's borders since the breakdown of the Soviet Union in the 1980s, expanding NATO membership further East.
Putin saw a need to halt NATO aggression and he chose to do so in Ukraine, which, arguably, might as well be a part of Russia rather than a NATO ally, as much of it borders Russia.
So, with history in the making, all markets look to be shaken violently over the next few days and weeks. The bear market Money Daily has been warning about the past six weeks is about to take on a rather more serious look. Stocks in countries around the world have been shattered, none more than Russia's MOEX, currently down 34% on the day.
Japan's NIKKEI fell 478 points, down 1.81%. In Hong Kong, the Hang Seng lost 758.72 points (-3.21%). India's Sensex posted a loss of 2,702.15 (-4.72%). In Europe, the DAX (Germany) has fallen into correction with a decline of 737.25 Points (-5.04%). France's CAC-40 is down 306.04 points (-4.51%). Britain's FTSE is currently down 231.81 points (-3.09%).
In the US, the VIX has shot straight up to 37.05, a 28% jump from Wednesday's close. Dow futures are off 750 points, NASDAQ futures are down 400 points and S&P futures are nearly 100 points lower. WTI crude oil peaked at over $100 a barrel Thursday morning and is currently straddling that number.
As the Russian takeover of Ukraine advances without much pushback either from NATO, the US or the Ukrainian armed forces (financed by NATO and the US), the entire episode will be over and done within days. The response from Western nations will remain inadequate. They simply don't have the nerve or temerity to confront Russia head-to-head militarily.
Thursday and Friday's trading is likely to be the most dramatic, complete with panic declines and talk of recession, losses in the trillions, and how the Fed will react (as if that matters). By Monday, calmer heads may well prevail, with some intrepid traders even bold enough to "buy the dip," though such endeavors are probably going to be premature.
Depending on the depth of Thursday's declines, it's more than likely that most investors will finally have their eyes open to the fact that the bull market of the past 13 years has come to an abrupt end and that bears will dominate for as long as some people insist on buying stocks. After this week, volatility will probably be less pronounced, but, as is normal in the second phase of bear markets, the grind lower will be more painful and deeper than expected.
Gold and silver have exploded higher. Gold: 1,956.20; silver: 25.30. Bitcoin took another hit, down to $35,510 as of 9:15 am ET.
At the Close, Wednesday, February 23, 2022:
Wednesday, February 23, 2022, 9:30 am ET
Vladimir Putin, President of Russia, is not somebody whose buttons one should push.
Putin, even if he wasn't Russia's leader, would be a fearsome foe in just about any encounter, political, sporting, intellectual, or otherwise. Put in why Russia has the US, NATO, and most of the European Union in a serious bind. By recognizing the (former) Ukranian provinces of Donetsk and Luhansk as independent republics by proclamation, Putin bamboozled the idiots who claim to be the leaders of various countries in the Western sphere of influence.
Joe Biden in the USA, UK's Boris Johnson, Emmanuel Macron of France, and Germany's Olaf Scholz were left flat-footed Monday night as Russia made clear its intention to support the new republics with military (peace-keeping) force. As Russian troops crossed into the provinces and began defending the new western borders of the two countries, the response from the opposition leaders was little more than a slap on the wrist to the Russians.
The US imposed sanctions on a couple of banks. France, Germany and the UK followed along like the obedient lapdogs they are, NATO expressed anger and called the move a violation of international law. Germany halted progress on Nordstream 2, the Russian-German pipeline that should be supplying Germany with cheap, plentiful energy, but, because Germany has to follow America's lead, Germans will pay double and triple to heat their homes the rest of this winter and beyond.
The new paradigm, crafted by Putin's strategic brilliance, is such that Russia will do what it will, economically, politically, and especially militarily, and the rest of the world will watch, mouths agape, as freedom and self-determination is doled in in copious amounts throughout the Russian sphere of influence.
Cutting off Russian banks and a handful of Russian citizens from Western capital markets is hardly going to be noticed. Russia has other trading partners beyond Eyrope, including China, India, Japan, South Korea, most of South America, and many Middle East, African, and Asian countries. They do not need Europe or the United States. They do not need their fiat, their fractional (now fictional since reserves are officially set at ZERO) reserve dollars and Euros. Sanctions and defense of the US dollar's reserve status is all the West has left and their influence is fading fast.
Putin, craftily declared economic war on the West without saying so. He objectively told the Western world that Russia's military might is strong and largely unopposed in the Region and can project power around the world if need be. The expected, non-military response by Europe and the US - condemnation, sanctions, and bluster - is a lame excuse for guns, aircraft, bombs, and military response.
Joe Biden - not the actual president of the United States, an imposter - said the US would defend NATO members. Putin laughed back. Ukraine is not a member of NATO and will never be. It's a very good possibility, in fact, that Ukraine will be split up or fully annexed into Russia as this tableau develops.
Putin respects his people and the people of the world. It's fairly obvious that Western nations do not. Just take a look at conditions in Australia, Canada, New Zealand, France, Germany, UK, Italy. After two years of fake pandemic restrictions, these countries are still limiting the freedom of their own people. Canada is practically a police state. The US is not far behind.
Western dominance in politics, society, and military readiness is over. They just haven't realized it yet.
Market response to the immediate developments was somewhat subdued in the Euro Zone, but equity markets in the US continued to quake under pressure from the Ukraine-Russia situation, home-baked inflation, and a stuttering economy.
Stocks were down across the board. The Dow missed by a sliver of posting what would have been its sixth 500+ point decline this year. The S&P fell into correction territory, closing down 10.25% from its January 3rd closing high (4796.56), though CNBC and TV network news shows failed to mention that to their viewers. Maybe they will today, though probably not. The S&P joins NASDAQ with losses in the correction zone. The NASDAQ is down more than 16%.
With US markets moments away from the opening bell, futures have been guided higher and indices in Europe are also on the plus side. These markets are a joke. They're nothing more than algo-driven computers buying and selling on command. There's been no price discovery for years and fundamentals of many stocks are horrible and about to get worse. US stocks are especially weak and vulnerable to collapse at a moment's notice, as has been the case with companies like PayPal and Facebook (now Meta Platforms).
Western economies are in for a world of hurt as their equity markets will crash soon enough, their debt markets complete fictions, and their fiat currencies soon to be relegated to the dustbins of history.
Bitcoin will lead the charge back to honest money. Gold and silver will follow when released from the chains of suppression of the LBMA price fix and COMEX futures markets.
You can listen to Joe Biden and the US congress on matters they have limited understanding, or you can get your money out of the system and into hard assets, hard currency, and bitcoin.
At the Close, Tuesday, February 22, 2022:
Sunday, February 20, 2022, 10:47 am ET
Seven weeks into the new year, stocks stumbled yet again. For the fifth time in seven weeks, the Dow, S&P and NASDAQ each ended lower. Though it traded in lockstep over the week, the NYSE Composite has been the outlier for 2022, down just three of seven weeks so far.
As a whole, the week wasn't severely punishing to equity holders, but it was worse than what appears superficially. The Dow Industrials suffered the lowest closing price of the year (34,079.18), It was the lowest close since December 1, 2022 (34,022.04). Additionally, the NASDAQ chart shows the ominous "death cross," wherein the 50-day moving average crosses below the 200-day. It's a classic signal of near-term volatility and weakness, which really comes as no surprise. Tech, of which the NASDAQ is largely composed, has been on a glide path lower since late November and now sports a stunning year-to-date decline of 14.43% and a 15.63% loss from its ATH on November 19, 2021 (16,057.44).
None of the other indices have yet to reach the commonly-referred-to correction level of -10%, though they're getting closer. The Dow is off 6.85%, the S&P down 9.33% YTD. From its peak close of 4796.56 (January 3), the S&P is as close to correcting as it has been in two years, dating back to the start of the plandemic in February/March of 2020.
Despite not fitting into the neat calculus of the modeern era definitions of bear market and correction, it's plain for anyone with eyes open to see that stocks are not the place to be in 2022. The Fed hasn't even begun to taper its asset purchase program nor raise the federal funds rate, both promised to happen in March. Odds for a 50 basis point hike at the upcoming FOMC meeting (March 15-16) are rising, though there doesn't seem to be much stomach for it other than James Bullard's, president of the St. Louis Fed, who has been trotted out several times over the past few weeks to trumpet rate increases at a faster and more expedient pace than what's been whispered.
A 1/2% bump in the federal funds rate would likely cause a stock market crash, or at least pave the way for one. It's with that in mind that the Fed might proceed with caution at the next soire. There's little they can do to extricate themselves from the box they're in - wholly created by themselves. They either bite their lips and hike rates, halt asset purchases and begin to wind down their balance sheet (nearly $9 trillion) or allow inflation to destroy the economy, which has already been badly damaged, especially the small and medium business segments.
As ludicrous as it sounds, people believe the Fed has the power to simultaneously keep stocks at extreme valuations, stem inflation at the consumer level and keep the US dollar from debasing and losing world reserve status. There's so much worry about the latter, the US senate has introduced a bill designed to delve into the ramifications of El Salavdor's adoption of bitcoin as legal tender. More on that below.
After some gyrating and grinding through the week, treasuries ended about where they were a week prior, nearly in a state of suspended animation, though that condition is unlikely to persist for long. The continuing bellowing of war chants emmanating from Washington, DC and London haven't done much to change the structure of the treasury complex, probably a good sign that nothing much of consequence is actually going to occur in Ukraine. Putin's Russia seems too smart to fall for the neocon's goading.
On 2/18, the 30-year finished the week at 2.24%, the 10-year at 1.92%, exactly where they stood on 2/11. Yield on the 2-year note dropped three basis points, to 2.47%, leaving the 2s-10s gap at 45 basis points. At the start of 2022, that distact was 85 basis points. Inversion is not likley to be avoided. That will signal a recession within six months, if not sooner, if the US isn't already ensconced in one already. One would have a difficult time finding enough honest data to support that possibility, though the economy certainly isn't firing on all cylinders.
WTI crude oil peaked at $95.46, but subsequently fell to $91.66 by Friday's New York close. The small drop off didn't help prices at the pump, as the US national average for unladed regular gained more than five cents over the course of the week and are up 20 cents from a month ago, according to gasbuddy.com, currently holding at $3.53 a gallon. Thank you, Democrats and Joe Biden for absolutely ignorant energy policies.
Bitcoin and cryptos in general have been savaged in recent weeks, with bitcoin falling below $40,000 this morning to $38,241 as of this writing. Trading more as a risk asset than a deflating currency, bitcoin is being largely affected by forces outside its control, from various futures trading and the proliferation of ETFs and other investing schemes. There's a short rope for these derivative plays that will eventually find themselves bidless. Eventually, bitcoin, but possibly not any other cryptos, will detach itself from manipulative forces, as gold and silver seem to have done recently.
Precious metals haven't look so positive in a very long time. Gold ended the week above $1800 an ounce for the time since June 2, 2022. Silver, despite recent gains, continus to lag. It was trading above $25 on the COOMEX as recently as last November. Gains for gold come at a particularly acute moment, as risk assets are being routinely pummeled and degraded. Hard assets are gaining favor, both as inflation hedges and stores of wealth - what's left of it. The opposite seems to be happening to bitcoin, creating a buying opportunity that may turn out to be a godsend in the longer scheme of things.
With inflation at record levels and fiat currencies devaluing at an agressive pace, gold is the most obvious kneejerk reaction. Whether or not it is sustained remeains to be seen. More pressure on fiat currencies can only be good for precious metals and hard assets in general. Suppression by the globalist central banks continues to loom as a constraint on price discovery in metals and cryptos alike.
Gold price 02/06: $1,808.40
Here are the latest prices for common one ounce gold and silver items sold on eBay (numismatics excluded, shipping - often free - included):
The Single Ounce Silver Market Price Benchmark (SOSMPB) advanced sharply during the week, to $40.46, a gain of $2.57 from the February 6 price of $37.89 and the first time the measure has exceeded $40.00 since January 30.
The war drums continue to beat in the US capitol, threatening Russia, Ukraine, Europe and beyond. The uni-war party of the Washington cabal is recklessly and relentlessly pushing for war, goading Russia and Putin into an action they seem fairly opposed to making. If the war hawks are successful - and they usually are, as history shows - shocks to every market and social life will be extreme.
Across Asia to the East, China continues to suffer a cataclysmic real estate crash, focused on urban apartments in various "ghost cities" which proliferated throughout the country in the early 2000s. China faces a deflating economy at a time when most other countries are inflating. While the immediate conditions seem unkind and harsh to ordinary Chinese, their preeminent position in the global economy may just be a blessing in disguise or a portentous omen of things to come.
As far as rising prices on consumer goods are considered, nothing can drop inflation on its head like a good recession or depression. Through the coming months, higher prices at the pump, the grocery, on utility bills and construction costs are likely to reach untenable levels. The inflation bugaboo is either going to ramp up to hyper-inflationary levels and completely destroy the two percent that's left of the US dollar's purchasing power or flatline as the nation sinks into depression. There's also the possibility of war and martial law (see Canada) when the US trucker protest begin to roll towards DC on Tuesday.
By the time you read this, the Beijing Olympics will have concluded, so another flashpoint date will have come and gone. Meanwhile, the "imminent" invasion of Ukraine by Russia keeps moving backwards. "Any day now" has become "maybe by XXX date," "when the ground freezes," and Biden being certain that Putin has "made the decision" to attack. US stoking and media stroking war has advanced to levels not seen since "Saddam has WMDs" in 2003. US neocons love war. The rest of the world hates it. Probably, now is the time - after Monday's President's Day holiday - to consider emptying bank and brokerage accounts, putting those funds in safer places, like under mattresses or in fireproof safes. Converting fiat into just about anything else may not be a bad idea, certainly into gold and/or silver. Even though the bitcoin carnage may appear to be systemic, it may present a solid buying opportunity, though it certainly could go lower. At the very least, bitcoin is not fiat and that is a big plus.
Keep some cash on hand. Most people with a modicum of common sense like to have three to six months' expenses socked away at home along with ample supplies of food, water, and possibly gasoline. The more prepared one is for a "Mad Max" scenario, the better one would be able to survive and prosper during and after a SHTF epoch.
With Spring on the immediate horizon, now is also an ideal time to start planning that backyard garden. Those who like to sow fro seed and incubate are already on their way to a more palatable future.
The current global condition does not warrant panic, though that is what's likely to happen, given people's proclivity toward emotional reaction. If and when you see people panicking, that's precisely the time to remain calm and composed.
Don't lose your head. Make your opponents lose theirs.
Speaking of panic and losing their heads, the US Senate has a bill pending that seeks to delve into how El Salvador's adoption of bitcoin as legal tender might threaten the US dollar's reserve status. Max Keiser and Stacy Herbert explain:
At the Close, Friday, February 18, 2022:
For the Week:
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