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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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Make It or Break It Friday for Suspicious Stocks

Friday, March 25, 2022, 9:03 am ET

It's been an interesting, though tiring, week. Former Senator Joe Biden flies to Europe, hoping to strengthen the case against Russia in NATO's Ukraine war, but returns to US soil with nothing more than a strongly-worded statement from the allied forces.

Meanwhile, Ukrainian forces appear to be holding their own, sinking the Russian supply ship Orsk, and holding onto key positions on the outskirts of Kyiv and villages on the borders of Donetsk and Lugansk. It's a real war, with significant losses on both sides, though no figures on troop deaths and injuries are confirmed nor reliable on either side.

Ukraine has been fortified by NATO nations since 2014, as confirmed by the NATO statement delivered by Secretary General Jens Stoltenberg, who has coincidentally served in that position since 2014. Russia has plenty of manpower and firepower in reserve, though Ukraine can counter with fresh supplies from NATO countries.

Some of the best - and most reliably honest - reporting is being done by SouthFront.org.

Stocks are a mixed bag heading into Friday, with the Dow down by 47 points, but the other majors all sporting gains. NASDAQ leads with 269-point advance (1.93%), while the S&P is up nearly 64 points (1.43%). The NYSE Composite has an 89-point advance through Thursday's close, making Friday something of a make-it-or-break-it session, as a positive finish would mark the second straight week of suspicious gains after last week's massive upswing.

Beyond equites, Bitcoin bears watching, as it appears to be breaking out toward what could be three-month highs. Currently trending at around $44,580, the next levels to watch are $47,000 and $50,000. Should bitcoin rise beyond those levels, new all-time highs could come months, if not weeks, into the future.

The grand-daddy of all crypto, having multiple use conditions appealing to savers, investors, and free-thinkers worldwide, is not to be taken lightly, despite efforts by governments and central bankers over the past decade to denigrate, defile, or defeat the uprising of cryptocurrencies.

Silver at $25.83 and gold at $1954.60 remain under pressure, though they both appear to be in a consolidating phase, coiled like springs to rip higher should a significant catalyst or breaking point on the COMEX appear. Political and military uncertainty surely adds to the appeal of precious metals as a means of escaping the clutches of the newly-discredited Western banking system. People are attuned to what the US, EU, and UK nations have done to Russia via sanctions and asset seizures, and the logic dictates that what banks and governments can do to whole nations - even ones nuclear armed - they can do in spades to individuals and businesses.

A move away from US dollar hegemony has been accelerated by recent events and that condition is unlikely to change soon. The battles in Ukraine may rage on for months or even years, as it has become the focal point for East-West relations, quickly deteriorating. Expansion of the war beyond Ukraine's borders might as well be called World War III, because once it happens, there's likely no turning back until one side or the other is decimated to a horrifying degree. Ordinary people wish to not see this happen, with good cause, because the devastation might be beyond the worst one could imagine, which is why planning for an uncertain future makes perfect sense presently.

Here's hoping the lunatics in Washington, DC, London, Paris, and in other Western nations don't lose their cool and escalate the fighting into Eastern Europe and beyond, though there's growing concern that these "leaders" are capable of just about anything.

Do. Not. Panic. Nothing suspicious about this guy's talent:

At the Close, Thursday, March 24, 2022:
Dow: 34,707.94, +349.44 (+1.02%)
NASDAQ: 14,191.84, +269.23 (+1.93%)
S&P 500: 4,520.16, +63.92 (+1.43%)
NYSE: 16,701.82, +143.29 (+0.87%)

Is Bitcoin a Ponzi Scheme? What About Stocks?

Thursday, March 24, 2022, 9:25 am ET

Lately, since the value of cryptocurrencies in general has fallen some 30-40% - and in some cases, much more - there's been an abundance of criticism about the space in general and the leading crypto, Bitcoin, in particular.

Leaving aside the 18,000 other faddish copycats like Dogecoin, XRP, Shiba Inu, Pancake, and the rest, this article will focus on whether or not Bitcoin qualifies as a Ponzi scheme.

A Ponzi scheme can be described as follows:

A Ponzi scheme is a form of fraud that lures investors and pays profits to earlier investors with funds from more recent investors.

Using that definition, it's easy to see how Bitcoin could be seen as such. After all, those who took the plunge at $1, $10, $100, or even $1000, have been richly rewarded, especially when Bitcoin topped out around $64,000 in April of 2021 and again in November of last year.

People who cashed out at those levels and into fiat currencies like the US dollar or the euro are now sitting pretty, so to speak. However, in the United States, Bitcoin profits are subject to capital gains taxation, which puts a 20% hit on any profit. Thus, if a person bought a bitcoin at $4000 and sold it at $64,000, the profit of $60,000 would be reduced to $48,000 upon payment of the annual tribute to the US government.

As with any investment in the free and fair USA, the government always gets its cut. If anybody's running a racket, it's the government - which, by the way, wastes most of the tax revenues and has to borrow more just to meet their bloated budgets - and their bagmen and enforcers at the IRS.

If that doesn't qualify as punishment enough, consider that now that the bitcoin has been converted to dollars, the purchasing power of those are quickly being reduced, by about 10% per year. Thus, all of a sudden, selling that bitcoin doesn't appear to be such a "no-brainer." After taxes and inflation, that $60,000 gain looks a lot more like $43,200, which just happens to be roughly the price of bitcoin today.

Again, it's forces outside of Bitcoin that reduce its value in dollar terms. In this case, the Federal Reserve, via its QE and other currency frauds that casued inflation.

Looking at it from that perspective, it may turn out that holding (or hodling, as some bitcoiners call it) through the short-term decline may be a more rational plan because any unrealized gains are not subject to the regulations of the government or the counterfeiting of currency by the Fed.

Originally intended to facilitate peer-to-peer transactions without an intermediary such as a bank or government, Bitcoin remains outside of regulations and confiscations imposed by central banks and national governments, so long as it remains Bitcoin. While it is subject to wild fluctuations, it cannot actually inflate in the same manner as fiat currencies because of a key difference. Bitcoin is capped, forever, at 21 million Bitcoins, while fiats, such as the euro, dollar, yen, et. al., have no limits. The Fed, the ECB, or the Bank of Japan can print up as many dollars, euros or yen as they please, and they've been on a printing spree of late.

Bitcoins come into creation via mining, which, in Bitcoin parlance is solving complex mathematical problems with high-powered computer systems. These "miners" spend a serious amount of time and money to solve these problems and get their Bitcoins as rewards. This method of creating Bitcoins might not fit the exact definition of a Ponzi scheme, especially if the miners converted their gains into fiat currency.

Mining a Bitcoin in, say, 2013 through 2016, when Bitcoin was valued at under $1000, was much easier and less expensive than mining a Bitcoin in 2020 or beyond. Those miners who exchanged their Bitcoins for dollars or euros or yen didn't get much. They would have been better served to hold onto their winnings or invest in faster computers to earn more bitcoins.

From this perspective, wherein mining bitcoins is more expensive as competition rises with the hash rate at price, Bitcoin is the exact opposite of a Ponzi scheme. One has to invest more time and money to gain the pricier bitcoins. The holders from 2013-2016 can cash out at higher prices, or, make purchases with their now more valuable bitcoins. In that regard, the Ponzi badge may apply.

Now that Bitcoin has gone mainstream, it is easy to see how some people might consider the whole thing to be a Ponzi scheme. You buy some bitcoin at $36,000. It goes up to $68,000, then back down to $38-42,000. If anything, it's not a perfect Ponzi, because the gains get decapitated, reduced, as holders turn to sellers. Maybe. There's nothing preventing Bitcoin from going higher other than the competition of the miners and those who are cashing out.

Looking at Bitcoin in comparison to stocks, there are striking similarities. When a company goes public in an IPO or other market-making operation, the original investors, the angels, and Venture Capitalists (VC) who put their money into the company are handsomely rewarded. After a certain lockout period, they are free to sell their shares, often at many times more than for what they paid. So too, early investors post-IPO, will gain if shares of the stock continue to rise. Isn't that just like a Ponzi? Here's our definition again:

A Ponzi scheme is a form of fraud that lures investors and pays profits to earlier investors with funds from more recent investors.


So, if one wishes to categorize Bitcoin as a Ponzi scheme, investing in stocks may be just as guilty. The early investors, who, just like early Bitcoin adopters, took on considerable risk, are rewarded with profits. In real terms, these so-called Ponzi schemes are at the heart of what's commonly known as capitalism.

But, just like Bitcoin, stocks go up and down in price, so, as Ponzi schemes, they're far from perfect because people trade them, buy them, sell them. Some people win, others lose. The difference is that Bitcoin, for all the fear, uncertainty, and doubt (FUD) that's been unleashed by the media, the government, central bankers, and various financial talking heads, is actually an asset and a currency that can be held completely outside the capture system of those same central banks and governments.

Somewhere between $20 and $50 billion of Bitcoin is traded every day. The number of transactions in Bitcoin on an annual basis is third, behind Visa and Mastercard. If Bitcoin is a Ponzi, so are stocks, but they are both not very good ones, as even late investors can reap profits (or suffer losses).

There are lots of people who aren't convinced that Bitcoin is a scheme, a fad, a scam or a Ponzi. It's a safe bet that the number of people and institutions buying into the Bitcoin promise - of a currency not controlled by government or central banks - is growing and will continue to do so.

Checking the markets as the opening bell approaches in the US, stocks look to reverse Wednesday's losses, though that's in doubt as Asian markets were a mixed bag and European stocks are flatlining. Russia's stock market has partially reopened after being shuttered since February 25. Trading is brisk, with the MOEX index up more than four percent.

This comes on the heels of Russia announcing that any "opposition" countries - the US, EU nations, UK - would have to pay for oil in roubles. It's a big move by Russia and further erodes confidence in US dollar reserve currency hegemony.

Tread lightly.

Gold, silver, bitcoin higher.

At the Close, Wednesday, March 23, 2022:
Dow: 34,358.50, -448.96 (-1.29%)
NASDAQ: 13,922.60, -186.21 (-1.32%)
S&P 500: 4,456.24, -55.37 (-1.23%)
NYSE: 16,558.53, -176.95 (-1.06%)

The Inevitable Crash; the Impossibility of Predicting It; Treasury Curve Gone Haywire; Housing to the Wall

Wednesday, March 23, 2022, 9:21 am ET

Since reliable financial information has become increasingly difficult to obtain on a regular basis, today's note is going to hopscotch around some information that is sketchy and some that is hard fact.

All of the information - sketchy and otherwise - seems to be pointing in one direction, straight into a swirling toilet bowl of inflation, recession, and ultimately, a housing market crash followed by a stock market crash, though the dual crashes could occur in an opposite manner, with stocks going down before housing crashes, though interest rates and housing (un)affordability suggests a housing bust rivaling 2008 may have already begun.

First up, hard fact #1. Mortgage lending is a government racket. It's unreasonable, unprofitable, and constantly propped up by the Federal Reserve via the US Treasury.

Fannie Mae and Freddie Mac have been operating under U.S. conservatorship since September 2008, when investments in risky loans pushed them to the brink of insolvency. Under conservatorship, as opposed to receivership, the two taxpayer-owned companies continue to operate while having drawn almost $190 billion in aid from the U.S. Treasury.

On top of the useless government administration at all bureaucracies, appraisals are all going to be performed in a virtual manner, i.e., Zillow.com, which is normally off by 20-30% or more in property valuations, usually inflating to extremes. Nobody at Zillow or any government agency will see or visit a property, using the magic of AI to value properties nationwide. This is a recipe for disaster on a national scale, which is all planned to destroy the US economy, an effort well under way since the phony elections in 2020.

Housing is so out of control and unaffordable to so many, that rents have increased in almost every city, suburb, and even in rural locales. In 2021, property owners increased rents for new tenants an average of 17 percent throughout the year, while rent increases for those renewing their leases rose only an average of 6.2 percent in the same period.

With residential housing about to be whacked on two sides - lack of inventory (less than 3 months nationally) and rising mortgage rates - renting is an unwelcome necessity for millions. A standard established over the post-war years from the 1950s through the 1980s, was that a home price should be no more than three times household income.

ZIRP (Zero Interest Rate Policy) by the Fed since the GFC of 08-09 caused mortgage rates to crater to some of the lowest on record, so much so that the median home selling price surged out of control, to six times household income because mortgage payments were less due to the low interest rates. The unsustainability of that new standard is about to be shown to the public as rates rise on 30-year fixed mortgages above 4.40%. As the Fed increases the federal funds rate through 2022, 30-year mortgages are likely to rise to near six percent, if not higher.

Higher mortgage rates will only increase the unaffordability of housing leading to an eventual price crash.

With housing a major concern for much of the population, costs of maintaining a home are also inflating rapidly. That trend is not about to slow. Everything from fried chicken to gas at the pump is going ballistic, price-wise, affecting everything else, except, in most cases, wages, which are not keeping up with 7.9% CPI inflation, which is probably three to four percentage points below reality.

At the same time, the treasury curve has gone haywire, as mentioned in yesterday's post (scroll down). Shorter-term rates (3s, 5s, 7s) are all higher than the 10-year yield. Such inversion has presaged a recession nearly every time in the past 60 years. Inverted 2s-10s, which are still 20 basis points to the good (2.18% vs. 2.38%) lead a recession by anywhere from three months to two years. This one looks to be of the shorter variety, say, six months, but the pain will be deeper and longer.

Timing the crash of housing or the stock market is not something even the most astute bankers and traders can perform. Just about everybody will be surprised by a crash, even though it is written into every economics lesson since Keynes. Business cycles used to be somewhat predictable, but in today's fake media, fake money circus, there are no guidelines nor guardrails. Things can go sideways and down the tubes in a hurry.

Thus, the inevitability of a price crash in widely held assets is baked into the economic cake. Instead of trying to figure out when it will come, which is close to impossible, it behooves serious investors and money managers to just plan for it, taking gains where appropriate, shedding losing positions, holding cash in reserve along with hard assets such as gold, silver, bitcoin, easily-valued collectibles, and ownership of productive enterprises (farming and/or small business).

At the Close, Tuesday, March 22, 2022:
Dow: 34,807.46, +254.47 (+0.74%)
NASDAQ: 14,108.82, +270.36 (+1.95%)
S&P 500: 4,511.61, +50.43 (+1.13%)
NYSE: 16,735.48, +128.81 (+0.78%)

Treasury Curve Inverted at Four Levels; Note and Bond Yields Rising Dramatically; Money Flows to Stocks (for now)

Tuesday, March 22, 2022, 9:28 am ET

On Sunday, we posted the following information on US Treasuries:

Treasuries (yield as of 3/18, gain from 3/11):
2-year note: 1.97%, +22 bp
5-year note: 2.14%, +18
7-year note: 2.17%, +16
10-year note: 2.14%, +14
30-year bond: 2.42%, +6

Here's the change from Friday, 3/18, to the close on Monday, 3/21:
2-year note: 2.14%, +17 bp
5-year note: 2.33%, +19
7-year note: 2.36%, +19
10-year note: 2.32%, +18
30-year bond: 2.55%, +13

Additionally, the 3-year note is 2.34%, and the 20-year bond is 2.67%.

This is an absolute rout in bonds. Imagine a stock losing 15% in just over a week. That's the condition in the bond market. And, it's worse when compared to a month ago, six months, a year ago.

For instance, on March 22, 2021, the yield on a 2-year note was 0.11%. A 5-year note yielded 0.61%. Obviously, anybody who lent the government money a year ago is seriously underwater. Getting paid 0.61% for another four years, while inflation runs at 6, 7, 8% or more is sheer madness. Buyers are demanding better return on capital while simultaneously, subconsciously concerned over return OF capital, as the Fed looks to hike the federal funds rate to nearly two percent this year. Last Wednesday's 0.25% hike brought the rate to 0.25-0.50%, with six more hikes - one at each FOMC meeting the rest of the year - rumored to be in the works.

Beyond the debacle in treasuries - which affect prices and rates for all other debt, loans, credit, leases, etc. - are the corporates, now borrowing at much higher rates to buy back their own stock. Most of the CEOs and other executives who plan to cash out could care less about the balance sheets of the companies they run. It's nothing short of wholesale fraud.

As the US equity market open approaches, Asian stocks were higher overnight with the Hang Seng leading with a gain of 667.94 points (+3.15%), European bourses are modestly higher, gains limited to well under one percent, but US futures are poised for a gap up at the bell.

Gold and silver took their customary beatings in the early morning hours, but are recovering. Bitcoin shot briefly past $43,000, presently holding around $42,859.65.

Stocks took little solace on Monday as various Fed officials - including Chairman Powell - hinted at 50 basis point rate hikes in the near future. Money flows are being directed towards stocks, but there's an absolute mess in the treasury complex which is inverted at various levels. 3s-10s, 5s-10s, 7s-10s and 20s-30s are all inverted. The logical outcome is for a huge bubble in the belly (2s-7s) and eventually the 30-year going bidless.

The US economy cannot survive with a treasury complex in such complete disarray. The Federal Reserve has lost control on inflation and the market is reacting with fear and loathing.

Gold, silver, Bitcoin.

At the Close, Monday, March 21, 2022:
Dow: 34,552.99, -201.94 (-0.58%)
NASDAQ: 13,838.46, -55.38 (-0.40%)
S&P 500: 4,461.18, -1.94 (-0.04%)
NYSE: 16,606.67, -5.97 (-0.04%)

WEEKEND WRAP: Just the Numbers, Please. Stocks Best Week Since November, 2020; Bitcoin Rises; Treasuries Inverting

Sunday, March 20, 2022, 9:05 am ET

Because there's so much propaganda and false narratives being presented these days, little commentary this week.

Here's useless idiot Andy Serwer with one of the more disturbing commentaries.


The Dow, NASDAQ, S&P 500, and NYSE Composite had thier best week since the first week of November, 2020.

Treasuries (yield as of 3/18, gain from 3/11):

2-year note: 1.97%, +22 bp
5-year note: 2.14%, +18
7-year note: 2.17%, +16
10-year note: 2.14%, +14
20-year bond: 2.42%, +6

WTI Crude:
Barrel of WTI Crude, 3/04 $115.68
Barrel of WTI Crude, 3/11 $109.33
Barrel of WTI Crude, 3/18 $105.10

Gasoline (at the pump, via GasBuddy.com):

US National Average as of 3/20: $4.264
3/13: $4.325


3/13: $38.524.44
3/20: $41,635.94

Precious Metals

Gold price 03/06: $1,974.90
Gold price 03/13: $1,992.30
Gold price 03/20: $1,921.50

Silver price 03/06: $25.89
Silver price 03/13: $26.22
Silver price 03/20: $25.14

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

Item/Price Low High Average Median
1 oz silver coin: 34.00 56.50 42.40 40.55
1 oz silver bar: 34.65 51.00 41.61 40.25
1 oz gold coin: 2,098.87 2,230.84 2,131.04 2,123.13
1 oz gold bar: 2,077.86 2,103.41 2,089.17 2,085.43

The Single Ounce Silver Market Price Benchmark (SOSMPB) rose over the course of the week, to $42.42, a solid gain of $1.22 from the March 13 price of $41.20.


At the Close, Friday, March 18, 2022:
Dow: 34,754.93, +274.17 (+0.80%)
NASDAQ: 13,893.84, +279.06 (+2.05%)
S&P 500: 4,463.12, +51.45 (+1.17%)
NYSE: 16,612.64, +129.06 (+0.78%)

For the Week:
Dow: +1810.74 (+5.50%)
NASDAQ: 1050.03 (+8.18%)
S&P 500: +258.81 (+6.16%)
NYSE: +858.94 (+5.45%)

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. 2022, Downtown Magazine Inc., all rights reserved.


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