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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, July 22, 2022, 8:54 am ET
Stocks have been rising for the better part of the week. All the major averages are up three straight days after Monday's mini-rout. Charts are showing the indices moving above their respective 50-day moving averages, though the weekly chart tells a different story, with all of them well below the long-trend, 40-week moving average.
Based almost entirely on what appears to be an oversold condition, this week's move higher has essentially ignored poor housing data and some significant earnings misses and margin compression from the likes of IBM, AT&T (T), Discover (DFS), and, after the close on Thursday, Snap, Inc. (SNAP) which fell nearly 30% in after-hours trading.
Earnings misses, warnings, and overall declining profitability has been seen among a diverse mix of stocks. Still, the overall market seems to be ignoring those trends, instead focusing on the upcoming interest rate hike at next week's FOMC meeting (Tuesday, Wednesday, July 26, 27). Stock indices have been coalescing around support centered in February and March 2021. Dropping below those levels would essentially wipe of gains from the last 18 months and could cause a more severe selloff.
This week, however, appears to be headed towards another of the somewhat rare upside weeks. As of the close Thursday, the Dow was sporting a 748-point gain (2.39%), the NASDAQ was up sharply, adding 607 points (5.30%), the S&P gained 135 points (3.51%), and the NYSE Composite was ahead by 421 (2.92%). The Dow Jones Transportation Average is also having a banner week, up 653 points (4.94%).
All indications are that the indices will end the week on the positive side, extending a pattern across them all, alternating between weekly gains and losses, to a sixth week.
With two hours remaining before Wall Street's opening bell, futures are mixed, with the Dow narrowly in positive ground while the NASDAQ and S&P futures are trending lower. Stocks in Europe are holding onto small gains midday.
Reporting Friday morning, American Express (AXP) handily beat earnings and revenue forecasts, citing record card spending by its members and increased its revenue forecast for the second half of the year from a gain of 18-20% to 23-25%. Shares are more than four percent higher in the pre-market.
Twitter (TWTR) also reports before the bell. The company is embroiled in a collapse of the sale of the company to billionaire Elon Musk. The matter is headed to court.
At the Close, Thursday, July 21, 2022:
Thursday, July 21, 2022, 8:54 am ET
A little housekeeping before devling into today's topic:
At 8:15 am ET, the ECB will announce its first rate increase in 11 years. Three key rates are in queue, those being the deposit, main refi and marginal lending rates, each expected to be raised by by 25bps to -0.25%, 0.25% and 0.5%, respectively. The deposit rate is the rate paid on interest banks receive for depositing money with the central bank overnight. The main refi rate is the interest rate which banks pay when they borrow money from the ECB for one week, and the marginal lending rate is the interest rate banks pay when they borrow from the ECB overnight.
They're all super low and have been since the EuroZone banking crisis in 2010-11. THE ECB has experimented with negative interest rates during that time. The general consensus is that negative rates kept inflation in check to some degree, but also hampered investment and saving. Negative Interest Rate Policy, or NIRP, is likely to become just a memory when the ECB raises rates again in September. They set rates every six weeks.
There's some talk of a 50 basis point hike in at least the deposit rate, bringing it to 0.00%. While such a move would put the ECB on a path similar to the US Fed, it might also deliver something of a shock to sovereign governments, which would be forced to service their debt at a higher rate, and to business, as general lending rates would naturally rise.
At 8:30 am ET, the Census Bureau releases the latest set of initial unemployment filings, which have been rising for the past six months, from a multi-decade low of 166,000 (March 19) to last Thursday's 244,000, the highest number since November 20, 2021 [source: FRED.
Those key data points will be posted at the end of this article.
As far as anyone can figure, inflation remains at very high levels, especially for what the bean-counters call "non-core" elements, food and energy, which, to most living, breathing people would be "core" items. Putting Fed-speak on mute, there are a few items in the CPI basket that haven't moved much over the past 14 months of high inflation, the standouts being alcoholic beverages, clothing, and, lately, medical care. So, if you think this summer might be a good time to buy a new outfit, get drunk, and end up in the hospital, you're spot on, as these are some of the more frugal undertakings to be had presently.
In all seriousness, stocking up on liquor is usually not a bad thing, specially when it's so cheap compared to healthier items like meats and vegetables. Staying clothed is also highly advisable, especially with summer turning to fall and then winter. Stores like Target and Wal-Mart overstocked during the pandemic and have been forced to mark down many items, especially seasonal ones. Additionally, home furnishings haven't advanced much in price. Look for sales on everything from tableware to tables, rugs, sofas, and chairs.
Medical care, which was already too expensive for most tastes to begin with, hasn't seen much of an increase over the past year, except for dental care, which bumped up 1.9% in June, the largest increase ever posted in that category. Anybody opting for elective surgery, a routine checkup, or any other non-emergency medical procedure might be doing their pocket book a favor if doing so now.
Gas at the pump has also been steadily falling, though still quite pricey with the US national average at $4.43 a gallon. Should prices be significantly lower in one's neck of the woods, purchasing a little extra might not be a bad idea since prices could go back up. However, with the Fed tightening rates and economies already in a recession in some areas, the odds are good that oil and gas prices will continue to decline. The global economy cannot withstand premium prices with bargain-basement wages for long and the strains are already being observed.
A general rule of thumb during inflationary periods are to buy things that are cheap, or at least cheaper than the alternative. Applying that knowledge to investing, one might suggest stocks, since there are multitudes of them down 20-30-40 percent or more. That reasoning gets a little trickier when adding recession to the economic mix. There are more than a few stocks that are already down substantially, and for good reason. Should the economy continue to weaken - practically guaranteed by Fed action - those same stocks could go even lower. In other words, the bottom probably isn't in, yet.
Saving the best for last, gold and silver have been on sale for the past four months and continue to trend lower. The reasons for their decline run the gamut from precious metals not bearing interest or paying a dividend to the higher US dollar to rampant suppression by central banks and Western governments as part of the punishment(?) they intended to mete out to Russia, which has kind of backfired.
Gold is down 18% since early March; silver has declined by close to 30% over the same period. As pointed out in Wednesday's Money Daily post, there are more than a few reasons to dive into either, but especially silver. While it may go down more, offering the opportunity to buy more at even lower prices, the long-term potential is outstanding. An ounce of gold or silver is still an ounce of gold or silver, regardless of what other, floating fiat currencies are doing.
Precious metals are just about the best hedge against anything, from world war to inflation to deflation to depression. Prudent investors are beginning to stock up presently. Supplies at dealers are dwindling, though delivery times have only been marginally affected.
At 8:15 ET, the ECB announced their first rate hike since July 2011, raising all three key interest rates by 50 basis points, a shock to many, but probably nothing more than a token assault on inflation. It's likely too early to tell, but European stock indices don't seem to appreciate the move. Stocks in Europe are trending lower on the news.
8:30 am ET: Initial unemployment claims came in hotter, at 251,000, the highest this year and the 10th straight week above 200,000. Continuing claims also rose, to 1.384 million Americans, the highest since April.
With less than an hour to the opening bell, stock futures are mixed.
Incidentally, oil is down four percent. Gold and silver are under pressure and the US Treasury 10-year note has spiked to 3.07% this morning.
At the Close, Wednesday, July 20, 2022:
Wednesday, July 20, 2022, 9:35 am ET
As geopolitical events shape the future of planet Earth, one of the many marvels stored within its crust has been on sale for the past few months.
The price of silver on the COMEX futures market and at the London Daily Fix reached a two-year low of $18.24 this past Thursday (7/14). Judging by the commentary from three of the world's foremost experts on gold and silver, this appears to be a major buying opportunity.
On July 7, 2020, London fixed the price of an ounce of silver at $18.02. A month later, the price was $28.33. Silver zealots were rejoicing, calling for a breakout to record highs. As the world was in the throes of the COVID craze, the price of silver had collapsed in February to $12.005. Shortages of the metal pushed delivery times from online dealers out to as long as two months. Those patient enough to lock in the lowest prices were eventually rewarded upon delivery. Finished silver at dealers, if available, was going for anywhere from $15.50 to $18.00 an ounce at the depth of the decline.
Those who bought from reputable firms in February and March received their purchases in May or June and had instant profits. Anybody who held through the subsequent rise and fall in price until today are still likely above water.
On February 1, 2021, the silver fix hit a high of $29.58, but has been slowly declining ever since.
On July 15, in Episode 82 of Kinesis Money's "Live From the Vault" series, host Shane Rand brought on Andrew Maguire, a decades-long precious metals wholesale dealer, who declared that day that the silver market broke. The long-standing COMEX futures hedge via shorting silver was, according to Maguire, at an end, citing backwardation (future contracts lower than current spot price) in silver futures.
The entire episode features Magurie's depth of insight and implications for the future.
A few days earlier, Ted Butler, renouned for his deep knowledge of the global silver market, published "The Perfect (And Only) Solution", tying silver's price action to March's extraordinary collapse of the LME (London Metals Exchange) over the price of nickel, wherein a huge short position in the base metal was called on margin causing nickel's price to spike from $18-19,000 a ton on March 7 to $80,000 a ton on March 8, at which point the LME halted trading and began cancelling trades.
With significant egg on the faces of London metals exchanges, Butler posits that managers of the CME Group, which handles silver, gold, and a slew of other contract-related futures products, including stock and bond futures, currencies, energies, foodstuffs and grains would not desire to suffer a similar meltdown, being they are a global systemically-important exchange. According to Butler, "It would be easier to list the products that the CME doesn't trade."
Thus, after decades of silver price suppression, Butler outlines how the slow decline in the price of silver, which has accelerated since March, in much the same manner as Maguire would a few days later.
This past Sunday, July 18, Butler followed up with another blockbuster, "Epic Silver Selloffs", in which he compares the recent decline to the Hunt Brothers escapade in 1980, and to declines in 2008 and 2020.
As if the opinions of two of the most respected voices in precious metals wasn't enough, just yesterday, Tuesday, July 19, Mike Maloney, of goldsilver.com released a video which originally was issued exclusively to insiders a day earlier.
Maloney employs charts and Fibonacci sequences to make the case that silver is currently at a price - in relation to gold and to the US$ - that occurs only fleetingly and triggered his own buying.
When stars align like this, it pays to consider the outcomes and act accordingly.
At the Close, Tuesday, July 19, 2022:
Tuesday, July 19, 2022, 9:32 am ET
It's earnings season, so there are likely to be surprises and pitfalls as companies roll out their second quarter results. In its entirety, the process of providing what should be transparent reports on business operations has been reduced to gamesmanship and goal-seeking, as executives try to position their companies in the most positive lights.
Since the 1990s and the advent of online internet trading, 24/7 stock market coverage, and general loosening of regulations, reportage of quarterly earnings has devolved, especially prior to and after the dot-com crash in 2000 when many investors were first introduced to GAAP (Generally-Accepted Accounting Principles) and non-GAAP reporting.
Back in those early days of internet access, honest disclosures about company operations were hidden deep in the bowels of earnings reports. Many start-up and venture equity-seeded companies weren't making profits, so they used all kinds of gimmicks to lure in more people to buy their stocks. Terms like "eyeballs", "stickiness", and "active users" became popular as internet-based companies applied heavy layers of lipstick to their pig-like, unprofitable companies. The massive, eventually-disastrous bull run of 1999 was the result of pro forma and non-GAAP reporting, all of which came back to haunt the market in 2000 when pump-and-dump tactics became widespread, early investors cashing out at the expense of common shareholders.
It was all about the "new economy" evolving in Silicon Valley and other high-tech wastelands. Turns out, there was nothing new about the onrush of IPOs and pie-in-the-sky valuations. Similar accounting tricks had been in use for years, though not as widespread as during the internet boom-bust period.
Much the same is occurring in filings today, as companies strive to play along with the pandemic recovery theme, ESG metrics, and what's termed the "new normal" on Wall Street. It's gotten so bad that even long-time Dow components like IBM have resorted to non-GAAP reporting to boost their perceived profitability.
The dinosaur of high-tech reported after the bell on Monday, shading their results with GAAP and non-GAAP figures. Investors aren't buying it, sending shares of the company down five to six percent in pre-market trading.
Another trick companies use to keep their stock prices above water is lowering earnings expectations. Estimates of a company's quarterly results are made by analysts who are supposed to have a razor-sharp view of operations, but, all too often they merely parrot the noise coming from the C-suite, lowering revenue and earnings estimates to make the company's performance look good, with little or no comparison to prior results.
Case in point is banks. The biggest - JPM, BAC, GS, WFC, C - have already polished their turds for the quarter with mixed results. JP Morgan Chase (JPM), led by legend-in-his-own-mind Jamie Dimon, couldn't hide their second earnings miss in as many quarters. Shares of the nation's largest bank and their "fortress balance sheet" haven't done so well in 2022, down 30% as of Monday.
Goldman Sachs (GS) tired its best to hide the fact that they've been losing money in the market for the better part of a year. After they reported prior to the open on Monday, shares shot up above 309, only to fall the rest of the session, closing up seven points instead of 15.
Like their partner in crime, JPM, Goldman's earning continue to deteriorate. First quarter EPS was $10.76. Second quarter, $7.73. Oops.
On Tuesday morning, three minor players in the banking space reported. Citizens (CFG) beat by a penny and is indicated higher in pre-market trading, despite their EPS falling for a third consecutive quarter. Ally Financial (ALLY), the bastard offspring of GMAC Bank which imploded in 2008, reported Monday morning, meeting EPS expectations. They too are seeing EPS declines quarter-on-quarter. The market is indicating a five percent loss at the opening bell.
Finally, Truist (TFC) reported a beat on lowered estimates, their fourth straight quarter of lower EPS. Surely, everybody wants to own part of a company that is slowing going broke. Truist was formed in December 2019 as the result of the merger of BB&T (Branch Banking and Trust Company) and SunTrust Banks, both shut down by regulators as the result of shady and outright fraudulent practices. Hooray! We spawned a new bank.
While the banks may or may not be employing accounting trickery like non-GAAP reporting, their SEC filings are about as transparent as a brick wall. Major institutions hold huge percentages of these beasts, but they still are managing to lose shareholder value on a regular basis. For the record, year-to-date Citizens is down 12%, Ally, 14%, and Truist has lost 13%.
These are the people to whom many Americans trust to hold their money.
At the Close, Monday, July 18, 2022:
Sunday, July 17, 2022, 10:22 am ET
The following is a message from Money Daily publisher, Rick Gagliano:
By now, anybody still thinking that "standing with Ukraine" is a good idea, should go pick up a gun, get on a plane or a boat and go fight in a war that was completely avoidable, serves no purpose other than those of elitist control freaks, and will eventually bring the Western nations, NATO, Europe, the USA, and the British Commonwealth to its knees.
The conflict in Ukraine has been a disaster for the West since the start. It's caused far too much human suffering and the economic consequences are only beginning to be felt in the West. Sanctions against Russia have backfired, Ukraine's military has been decimated, and the USA-UK-EU nations are quickly becoming third-world hell holes.
Led mostly by unelected bureaucrats, presidents who have won elections by cheating, and a media complex that has turned lying to the public into a sick, twisted art form. Meanwhile, Russia has been kicking ass on the battlefield, selling more oil and gas than before the conflict was forced upon them, and making alliances with nations beyond control of US hegemony.
Simply put, the East is rising; the West is in severe decline.
Over the course of the past week, US and European markets stubbornly shrugged off distressing data of CPI and PPI inflation continuing to rise and Western economies weakening. On both Wednesday and Thursday, US markets fell at the open, only to rally back to only minor losses. Finally, Friday's huge one-leap rally was entirely inexplicable, sending stocks to yet another weekly loss, albeit a small one.
My job is to make some sense of this. I can only try my best, but the past week defied reason. My best analogy is to that of a losing sports team. The players and coaches console each other with the idea that they came close to winning.
We all know that's a false hope. Like the Detroit Lions in football or the Baltimore Orioles in baseball, they'll lose by a field goal or a couple of runs, then get beat 49-7 or 12-3 the next game.
The Fed, the financial and mainstream media, and the government have kept feeding the same line of bull to the public for years, but especially THIS YEAR.
Let's face facts. The economy sucks. The government is full of people we cannot trust. The media lies constantly and now, nobody believes them. Eventually, reality has its day and clips from "A Few Good Men" emerge, with Jack Nicholson bellowing, "you can't handle the truth."
The problem for the aristocratic moonbeams in government and narcissistic blowhards in finance and media is that most of the public CAN handle the truth. It is they who can't, thus they hide it from everybody else.
The people pulling the strings are engineering a slow motion depression. They've been strip-mining the middle and lower classes for generations and their hubris and attitude has worn out its welcome.
I don't know what Americans and Canadians are waiting for. The rest of the world seems to be up in arms over everything. Perhaps we're too spoiled by easy living, or we've been so dumbed down over the past 50 years that we're now entirely apathetic and complacent.
The longer this takes to play out, the better for the top tier to screw everybody royally. The stock market continues to be propped up by backroom players in an effort to placate the masses. Gold and silver are suppressed. Western media portrays everything as a US-UK-EU virtuous loop, with the rest of the world as villains. Western governments are the most corrupt the world has ever seen and cracks in the facade are already appearing.
There have been protests and clashes in countries around the world but the media acts as though nothing unusual is occurring. People are rising up in Sri Lanka, Netherlands, Italy, Panama, Nicaragua, Germany, and elsewhere.
The time has come for Google, Facebook, and Twitter to stop threatening, censoring, and distorting reality and start telling the truth. It would be a welcome change.
Watch the Sky News Australia piece below for a refreshing perspective:
See above. Totally fake, rigged.
Here's how the market was guided to produce only a minor weekly loss:
As mentioned above, there is no rational explanation for the fraud and corrupt practices that produce results that defy logic. Friday's massive rally cut the losses to more "reasonable" levels.
Moving forward, the coming week will feature a huge surge of companies reporting second quarter results. Among them, on Monday, Goldman Sachs (GS), Bank of America (BAC), Charles Schwab (SCHW), and Synchrony Bank (SYF) kick off the week prior to the opening bell. Through the rest of the week, big names reporting include Netflix (NFLX), IBM (IBM), Johnson & Johnson (JNJ), Tesla (TSLA), Alcoa (AA), CSX (CXS), AT&T (T), American Airlines (AAL), United Airlines (UAL), Verizon (VZ), American Express (AXP), Twitter (TWTR), CapitalOne (COF), DR Horton (DHI), Dow (DOW) and many others.
Expectations are for most companies to report reasonable results, mostly against lowered estimates. A closer look at many major companies in the US shows that earnings and revenue growth has been slowing, some for years, and many are not back to levels prior to the plandemic of 2020-21. There's likely to be plenty of excuses (Russia, inflation, etc.) offered for a good number of these companies to issue dull forward guidance.
The foregoing tables show that long-dated maturities were preferred (30s, -17 basis points), (10s, -16), while the short end was being dumped as the Fed is looking at a 75 to 100 basis point hike at their upcoming meeting (July 26-27). one-month rates jumped 41 basis points, to 1.98, an enormous move.
The six-month rate moved from 2.68% to 2.94%, up 26 basis points and is now, along with the 1s, 2s, 3s, 5s, and 7s inverted above the 10-year (2.93).
The current structure of the curve is massively distorted and indicative of major disruptions in credit markets.
Doug Noland's Credit Bubble Bulletin Weekly Commentary: Global Crisis is an essential read. Noland explains the current yield curve structure as more of an international development, tied primarily to a housing/mortgage implosion in China.
From the report:
Longfor bond yields this week surged 13 percentage points to 116%. This is a top-five Chinese developer whose bond yields began the year around 7%. Sunac, another top developer, saw its bond yields jump 600 bps this week to 112% (began the year at 22%). And let's not forget #3: Evergrande yields rose another 358 bps this week to 141%. Basically, the market is saying they're all either bust or heading in that direction.
Credit markets are suffering severe stress which is unlikely to abate any time soon. A bust in China's real estate market is a probable cause for complete disintegration of credit and equity markets. Six months out looks mighty scary.
Crude was slapped down once again over the course of the week, dropping from $104.79 (7/8) to $97.57 as of Friday (7/15). This is a continuance of the general downward trend since WTI topped out at $122.11 on June 8.
Gas prices have declines gradually over the past month as well, with the US national average hitting $4.52 as of Sunday morning, down from the high of $5.01 a little more than month ago. Southern states are approaching sub-$4.00 levels, which should become a reality over the coming week. South Carolina is the lowest, at $4.008, with Texas close behind at $4.024. Mississippi comes in at $4.04, followed by Georgia, $4.042.
No. Just no. Blockchain is an interesting technology, but not fitting as a currency. Bitcoin and all other alt-coins have failed to live up to expectations, overtaken by regulation, fraud, and failure. 21,232.60 is the current level, roughly where it's been for the past month. Speculators are mouthing off about a breakout, though a breakdown to 12,000 is more likely within the next couple of months.
The entire crypto universe is a scam perpetrated by Wall Street sharpies. Avoid.
Gold and silver continue to be suppressed by the LBMA and their daily price fixings and the naked shorting escapades of JP Morgan and Citibank on the COMEX. Both are massive frauds designed to keep the prices of precious metals contained, well below their true values.
Current levels for both gold and silver may be solid entry points for speculators and hoarders alike, especially the latter. As the US dollar has gained strength on the dollar index (^DXY), the precious metals have fallen. In currencies that are not dollar-centric, both gold and silver are at or approaching record levels.
Gold price 06/17: $1,841.60
Silver price 06/17: $21.63
Here are the latest prices for common one ounce gold and silver items sold on eBay (numismatics excluded, free shipping included):
There's nothing to be gained by the West continuing its senseless support of Ukraine other then destroying Western economies, politics, and society. "Elected" officials, from Biden to Macron to Trudeau are on the verge of being deposed from their high positions, ironically, due to their own policies.
Starting with truckers and farmers, ordinary people worldwide have had their fill of the climate change, gender confusion, and media disinformation. Global dysphoria is emerging.
At the Close, Friday, July 15, 2022:
For the Week:
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