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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, August 13, 2021, 8:45 am ET
After another day of recording all-time highs (ATH), the Dow and S&P 500 look to close out another solid week for the bulls. The Dow is closing in on a one percent gain for the week, and the S&P is looking for it's 7th winning week in the last nine.
As far as Fridays are concerned, they're just plain Awesome. The Dow has finished in the black 11 of the last 14 days that ended a week. It's tough to go against that kind of consistency, and, even though today is the 13th, futures are indicating another strong open on the Dow and S&P.
At this juncture, with earnings season running down, there seems to be consensus on direction. The only moves recommended by just about every analyst on Wall Street is to either buy or hold. It's almost as if shorting or selling has been banned.
Take, for example, eBay, which posted Wednesday, after the close, second-quarter revenue growth of 14% to $2.66 billion, below the analysts' estimate of $3 billion, though EPS of 99 cents topped the forecasts.
Gross Merchandise Volume or the total value of merchandise sold on the platform fell 7% to $22.1 billion and the company issued slowing guidance.
Despite the revenue miss and poor guidance, shares of the auction and sales giant traded higher on Thursday after falling early in the day (68.89, +0.87, +1.28%).
Nothing short of a nuclear blast can stop this market from running higher.
Gold and silver are both catching bids in pre-market activity, while Bitcoin has rallied back above $46,000. It was down under $44,000 just after noon on Thursday. At last look Bitcoin was going for $46,411.
At the Close, Thursday, August 12, 2021:
Thursday, August 12, 2021, 8:53 am ET
The headline is all you need to know.
Stocks may never, ever come down, but, if they do, you must buy.
You must buy. Even if stocks keep going higher.
That is the message straight from the market. There's no resistance to stocks going higher. There's no reason to sell. There's no reason but to to follow the herd, even if the herd marches right off a cliff.
For 12 years, various people have been calling for a crash, even a correction. There has been no crash, and any slight correction (-10%) has been met on the other side with a furious rally, killing hordes of bears along the way.
No investor can resist this. If the Federal Reserve wants to continue buying up garbage treasury bills, notes, and bonds with negative real returns, that's their business. If they want to buy every mortgage on the face of the earth at wildly inflated values, nobody's going to stop them.
The federal government continues intent on spending more than it receives in taxes, borrowing more than a third of the budget (2020). The fiscal 2022 budget will likely have to borrow half of what it spends because tax revenues are either flat or falling. Joe Biden and the supplicant congress plans to raise taxes on individuals, small businesses (what's left of them) and corporations to make up the difference. It will never work, even if their $3.5 billion human infrastructure reconciliation bill passes, because the increased tax rates will drive business out of the country, raise prices, and the resultant inflation will kill everything.
It doesn't matter. The money is created out of thin air and spent. Congress will just keep doing it. The Fed will continue to talk about tapering, all the while doling out $120 billion a month for treasuries and mortgage-backed securities. They can NEVER TAPER. They can NEVER raise interest rates, because that would crash the stock market, and we can't have that.
There are people who say that this country, the United States of America, was finished after November 6, 2020, or January 20, 2021. If it is, somebody forgot to inform 330 million people. But, if the stock market crashes, that's the end. The Fed knows it. The government knows it. Most of Wall Street knows it.
Now you know it.
Trade and hedge accordingly.
Meanwhile, gold and silver are at five month and eight month lows, respectively. The COMEX and LBMA are daring you to buy some. Both will be lower next week, and next month. Scale in, buy, wait.
At the Close, Wednesday, August 11, 2021:
Wednesday, August 11, 2021, 9:23 am ET
If there was one overriding theme to this week's trading it was today's CPI number for July that mattered most to participants, be they in bonds, stocks, commodities, Forex, art, collectibles, or just plain, ordinary people buying shoes, groceries or gas.
The purchasing power of the US dollar means everything to everybody, and, as has been the norm since April, prices continued to rise overall, though the pace of the advance slowed in July.
The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.5 percent in July on a seasonally adjusted basis after rising 0.9 percent in June, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 5.4 percent before seasonal adjustment.
Not to put too fine a spin on it, but it's beginning to appear that the talkers and promoters at the Federal Reserve have been right all along. The current bout of inflation is, in their words, "transitory," or, to put it in a longer-term light, not terminal. The dollar is not going to die this year and gas prices are not going to $8 a gallon.
Let's face it, prices for just about everything have been rising and they've been doing that for decades. Americans in particular, have been spoiled by too many years of benign inflation, below two percent (officially) thanks to Fed policies of ZIRP and QE keeping money flowing into the system and being trapped there by Wall Street and various tycoons, billionaires, hedge fund managers, and anglo-centric mercantilists.
It wasn't until the government - on the fiscal side, as opposed to the Fed's monetary side - began giving cash to citizens directly via stimulus checks, enhanced unemployment benefits, and other programs, and indirectly via mortgage forbearance, rent moratorium, and education loan forbearance.
Back in the heyday of the virus panic, credit card issuers and servicers were extending helping hands as well, allowing debtors to skip as many as six payments due to the dire circumstances. The largesse offered by the financial and governmental communities was nothing short of a grand debt jubilee, which, when one considers the levels of debt carried by Americans, should eventually become the ultimate solution. There's really no good way out of global currency devaluation other than to destroy its basis, which happens to be any and all debt. Wiping out terms for repayment would collapse the system and the currency simultaneously, rendering all contracts null and void, making for a clean slate, introduction of the the new digital dollar in the form of a Central Bank Digital Coin (CBDC) and a fresh start for everybody.
It's this kind of scenario with which the Fed is currently experimenting. Knowing full well that crushing the currency in one fell swoop would be disastrous, engendering too many loose ends and bankrupt creditors, the Fed, in conjunction with the money center banks and the federal government, has been, and will continue to tinker at the edges of the economy, mostly at the consumer end, to prop up the 90-95% of the population that depends on a more or less stable currency while at the same time debasing it.
Comforted by the notion that they've been right about inflation - and everything else - all along, the Fed is now freed to pursue whatever other zany monetary policies they have at their disposal, and they have many. With their agent, Janet Yellen, heading the US Treasury department, the Fed now has monetarist and fiscal control over the entire American economy. They can buy up whatever they like and strip mine the best assets off the surface, keep a lid on inflation and pacify the masses, all while keeping the punch bowl full at the Wall Street toga party.
It's the best of all worlds for the Fed and their cohorts and they know it. Their game is a long one. The past four months of heady inflationary CPI readings can be put behind them and they can move more towards normalizing policy and talking a little bit about tapering asset purchases, which anybody with an economics degree knows they can never do for long.
Wall Street and the government needs the lowest rates possible in order to survive. Without a federal funds rate at the zero-bound, they're all doomed to failure, a stock market collape, pension funds bleeding out and an end to their 108-year fiat currency party.
Today's CPI reading advances their policies a step further. There's no FOMC meeting this month, the next not until September 21-22. The interim buys the Fed more time, which is what was exactly needed to kick the inflation can further down the road.
At the Close, Tuesday, August 10, 2021:
Tuesday, August 10, 2021, 8:42 am ET
Even before the opening bell, Monday looked to be a devastating day for precious metals as futures on the COMEX were smacked down in an early-morning raid on gold and silver.
Whatever sparked the decline in PMs, it was quick and sharply to the downside in the thinly-traded Far East markets. Silver fell from nearly $25 an ounce to below $23 and gold dropped from $1770 to $1695 in mere minutes. Both commodities recovered during the course of the day, but failed to reach the closing prices from Friday. By the end of trading in New York (4:30 pm ET), gold sat at $1729.60, silver at $23.425, both down significantly from just a week ago.
Amplifying the argument that gold and silver investment money is turning more and more often towards the crypto space, Bitcoin rallied from $43,439 to an evening high of $46,618, the highest price since mid-May. It has since fallen back to as low as $45,289.
Oil took another hit, as WTI crude dropped into the $66 range. Crude has been under pressure off and on for the past two weeks and appears to be stuck in a range 10-15% lower than recent highs.
Stocks did little to inspire confidence, with the Dow underwater the entire session. Only the NASDAQ saw modest gains on the day. Earnings season is winding down, so equity investors will be seeking another catalyst (CPI is released Wednesday; PPI, Thursday) and will be looking at data dumps through the week for clues to where the markets head.
In the nation's capitol, Democrat leader, Chuck Schumer, announced that a vote on the nearly $1 trillion infrastructure legislation will take place Tuesday and the measure is almost certain to pass, as more then a dozen Republicans have pledged their vote, adding to the 50 Democrats fully behind the bill. Unlikely to occur during trading hours, passage of the bill will be seen as a positive, even though the House will not vote on it until September unless they are called back for an emergency session.
As Monday's session was about as dull as it gets, Tuesday appears to be in a similar mode. Futures have barely budged from the flatline as markets prepare for the opening bell.
At the Close, Monday, August 9, 2021:
Sunday, August 8, 2021, 11:55 am ET
The beginning of the third quarter has so far been a profitable period for holders of equities.
Since June 30, the S&P 500 is up 3.2%, the NASDAQ, 2.3%, and the Dow, 2.0%. Those figures may not appear to be blockbusters, but, annualized, they represent gains of 20-30 percent, being that the period in question is just five weeks and two days, or, about 1/10th of an entire year.
That noted, investors may reasonably conclude that stocks will continue to rise through the remainder of 2021. After all, the major indices are up substantially so far. The S&P is up 18.88% so far in 2021. The NASDAQ is sporting gains of 15.11%, and the Dow is higher by 15.04%.
Friday saw the Dow, S&P 500, and the NYSE Composite Index all close at record highs. The NASDAQ, which was the only major index to lose ground on Friday, had already made a new closing high just one day prior, on Thursday.
Following the tumultuous year of 2020, which was mildly profitable despite the collapse in February and March, stockholders are looking at solid gains for this year even if stocks don't go any higher than where they are presently. Obviously, this brings up the question of how stocks are expected to perform through the remainder of the year.
Though a good number of analysts have called for a rough patch in the second half of the year, it has failed to materialize, as the world and the United States continue the recovery process. It does not appear that there will be any government intervention such as lockdowns, mandates, or restrictions that would cover the entire country, taking that fear out of the playbook. Any government actions would likely be imposed by local authorities, either at the state, city or county level. Thus, they would have limited effect on the general economy. while there are still mandates and travel restrictions in place, they're generally not preventing any industries to recover, though the leisure and hospitality sector has been damaged and is likely to take longer to get back to levels consistent with 2019.
Superficially, prospects for a reasonably good second half of the year in equities appear to be well-founded. Of course, unforeseen events have a nasty habit of overtaking good intentions. Primary concerns are centered around the federal government, which is in an unusual bind over an infrastructure bill and a 2022 budget (or continuing resolution), the two of which have been tied together by an intransigent house speaker, Nancy Pelosi, who has stated without reservation that the House would not take up the infrastructure proposal making its way through the Senate before voting on a reconciliation budget of $3.5 trillion that includes a host of pet Democrat proposals and new tax schemes. There's also concern over the debt ceiling, which became an issue when the deferment expired July 31, and needs to be dealt with before the government runs completely out of money in October or November.
If there's anything that could derail the current rally in stocks, it would be government mistakes. The infrastructure bill continues to be bogged down in the Senate. After spending Saturday in session, little progress was made, and the chamber will be in session again on Sunday, beginning at noon Eastern time.
Normally, the Senate would be shut down for nearly the entire month of August, but Majority Leader Chuck Schumer has vowed to keep sentors working until the initial infrastructure bill has passed and work is begun on the budget. What is normally a four-to-five week vacation for both the House and Senate has turned into a marathon session in the upper chamber, while many members of the House have already departed from the Capitol. Even if the Senate wraps up its work Sunday or early next week, the House isn't planning a vote until it returns after Labor Day in September, ostensibly, on the 8th of the month. That scenario is suggesting smooth sailing for stocks through August, but possible fireworks out of congress in early September.
Another possible fear factor for stocks comes from the Federal Reserve, which has managed to not spook markets with "taper talk" despite months of inflationary data via the CPI and PPI. Both data sets will be updated for July this coming week, the CPI on Wednesday, and the PPI figures on Thursday. Further increases in the CPI are a cause for concern on Wall Street because the Fed may want to tighten earlier than proposed by cutting back on its $120 billion a month spending on Treasuries (Agency) and Mortgage-Backed Securities (MBS).
The earliest anybody predicts a reduction of the Fed's spending spree is early 2022. Odds are currently favoring that the Fed will announce plans to reduce the current QE and/or raise interest rates at the November meeting. That's still far enough out that investors don't feel a need to forego any profits that could be made in the interim. All said, there are some concerns, but none that are currently pressuring stocks and the earliest anything substantial might occur looks to be late September. With that, most fund managers are currently cautious though speculators continue to throw that same caution to the wind, figuring the Fed won't do anything that could endanger more all-time highs.
What moved markets more than anything this week was Friday's blowout jobs number in the Non-Farm Payroll report.
US non-farm payrolls increased by 943,000 in July 2021, well beyond market consensus of an 870,000 addition. The unemployment rate fell 0.5% to 5.4%, the lowest level since March 2020, against Wall Street's expectation of 5.7%.
The figures stunned investors in a somewhat positive way. After Wednesday's ADP private payroll report for July suggested a big miss in the NFP, there was some trepidation on the part of the investment community, but Friday's data proved that the recovery was indeed on track, and, while positive overall, boosted concern over inflation and Fed tightening. Stocks responded favorably, but the biggest reaction was in treasuries, which were whipsawed, with the 10-year note rising from a low of 1.16% on Wednesday to a closing yield of 1.31%. The 30-year bond echoed that response, climbing from a yield of 1.80% to 1.94% to end the week. Inflation fear was back on the table as yields in the belly of the curve - 2s through 7s - were also buoyant. The selloff in bonds was particularly acute in Friday's trading, with the jobs report the primary catalyst.
What did not reflect the inflationary tone was the already-high price of crude oil. WTI had been falling since the start of the month, nosediving this week from $73.95 a barrel to $67.83, a loss of 8.3%. Oil took a similar drop mid-July, but recovered quickly, so, gas prices at the pump were barely, if at all, affected. This latest slide may be the beginning of a longer trend lower. Anything in the range of $50-60 per barrel would appear to be a sweet spot for producers and end users alike. Oil's move down was too recent to have affected the price of distillates. Any movement in those will appear in coming weeks as stations sell out and replace the higher-priced fuel.
Gold and silver were brutalized on Friday, with gold selling off by $45.40 (-2.51%), and silver down 96 cents (-3,80%). Anybody still of the belief that the precious metals markets aren't totally broken beyond repair should be convinced by the action this week. Apparently, the thinking at the LBMA and in the COMEX markets is that because there are more jobs available in the United States than potential applicants, there will be less demand for gold and silver. It may surprise those intense malingerers that people with more money might actually want to buy MORE jewelry, coins and bars for safe keeping rather than dump all or some of it for melting or other nonsense.
It used to be a common theme that gold and silver were hedges against inflation and the ravages of countries intent on devaluing their currencies as rapidly as possible. As both conditions have been present for some period of years, the price of gold or silver should have risen skyward. The bullion bank controllers see things differently, or want people to assume so, their objective being to keep the price of real money relative to fake fiat currencies as negatively skewed as possible. So far, they're doing a bang-up business, though buyers at retail have shown an opposite consideration.
Here are the latest prices for common one ounce gold and silver items sold on eBay (numismatics excluded, shipping - often free - included):
Item: Low / High / Average / Median
The Single Ounce Silver Market Price Benchmark (SOSMPB) settled at $40.78, a decline of 39 cents from last week's price of $41.17. This marks the fourth straight week that the SOSMPB has dropped in price, from a high of $42.84 on July 11.
Cryptocurrencies continue to make progress after being deflated earlier in the year. Since its mid-April high near $65,000, Bitcoin had fallen briefly below $30,000 per coin, but has recently caught fire, and topped out at $45,363 early Sunday morning. It has sold off by more than $1000 since then, but continues to be volatile and trending higher over the past two weeks. Where it eventually goes is anyone's guess, with estimates by supporters that it could reach upwards of $200,000 by year's end, though that, to many, is simply pipe-dreaming. Naysayers purport that the true intrinsic value of all cryptocurrencies, altcoins, tokens and other electronic paraphernalia is zero.
Speculation, however, is how fortunes are made ...and lost. The crypto space looks like the last frontier of the fiat currency era.
At the Close, Friday, August 6, 2021:
For the Week:
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