|Commentary on Stocks - Bonds - Gold - Silver - Crypto - Oil/Gas and more|
|HOME||PRICE GUIDE||STORE||BLOGS||SPORTS||BUSINESS||NEWS/UPDATES||WILD SIDE||CONTACT||ARCHIVES|
Downtown Magazine appreciates reader support. If you find the information here helpful, please consider a contribution to the cause for honest money and honest journalism.
Money Daily has been providing business and financial market news, views, and coverage on a nearly continuous basis since 2006. Complete archives are available at moneydaily.blogspot.com.
Money Daily has been providing business and financial market news, views, and coverage on a nearly continuous basis since 2006. Complete archives are available at moneydaily.blogspot.com.
Friday, September 23, 2022, 8:10 am ET
With the FOMC rate hike (0.75%) now firmly in the rear view mirror, stocks are set to fall even further, careening towards the June lows as even the blind mice on Wall Street are beginning to realize that record inflation during a recession is a hard pill for the economy to swallow.
Analysts who had set their annual targets for the S&P above 5000 are now beginning to capitulate, though most are still keeping faith in the official government narrative that we are not in a recession and inflation has peaked. The word salad circulating through the brokerages and banks is that there might be a recession next year and it's probably not going to be very deep or long and the stock market will rebound later in 2023 and 2024 will be glorious.
Nothing could be further from reality.
Denial, which is not a river in Egypt, is as dangerous a financial poison as exists in the world. Keeping faith in markets that are broken - perhaps permanently - can send rich folks to the poor house and workers to unemployment lines. While the Fed will continue to make policy error after policy error (Do four rounds of QE and a balance sheet of $8 trillion ring any bells?) the US economy will sustain a crash posture along with the rest of the Western world. The disastrous government policies against Russia are about to bear bitter fruit yet there are still holdout bulls thinking the S&P can get back to 4200 or the Dow to 34,000.
Here's news. 4200 on the S&P and 34,000 on the Dow won't be seen for a long, long time. That money has gone to currency heaven... or hell, depending on one's personal preference.
What the US economy is experiencing is a terminal decline long overdue in bubble assets, particularly stocks - already well underway - and real estate, which will come soon enough as mortgage rates surge above six percent heading toward eight or nine.
All that's needed for serious analysis of the major indices is a five year chart, which fully captures the steep faux-pandemic losses and quick buck turnaround engineered by the Fed, the government and Wall Street, most of whom have already cashed out. The next move for stocks is back below the February 2020 highs, which are Dow: 29,389; S&P: 3,380; and NASDAQ: 9.731. In other words, there's a lot further to fall, and that's just getting back to when things were good. Now that the perception is that everything is turning to garbage, lower lows will be a steady diet.
Regarding Europe, England, and Japan, the nations with fiat currencies comparable to the US dollar, their currencies are being devalued faster than Joe Brandon can slur the word "recession." The euro, especially, which was 1.14 to the dollar just this past February, has fallen below parity, now at 0.97 and falling. It will be virtually worthless a year from now, as will the pound, the yen, and yes, eventually the dollar. The WEF "Build Back Better" crowd is going to get their "great reset" though it may not be so great as they had envisioned before embarking upon the path of wealth and population destruction.
Finding anybody who is positive about the future has become trying, and close to impossible, but there is hope. Houses, cars, even food and gasoline will be cheaper in the months and years ahead, though being able to afford them might be troublesome.
Before going off the deep end, wondering whether your retirement fund will survive the next six months, bear in mind the following: the major indices are about to post their third consecutive weekly loss and sixth in the last seven. The Dow is already down 745 points (-2.54%) through Thursday's close, but is hardly alone. The NASDAQ is off 381 points (-3.33%), and the S&P is down 115 (-2.98%).
With the opening bell fast approaching, European stocks are cratering. Germany's DAX is off more than 300 points and is down 23.76% year to date. In France, the CAC-40 is down more than 130 points on the day and is about to enter the danger zone, down 19.84% on the year.
US Stock futures appear painfully negative, with Dow futures off 340 points, NASDAQ futures down 165 and S&P futures down 50. June lows might be exceeded today. If not, it's almost certain they will be surpassed to the downside within weeks.
There are no more miracle rallies. They've all been used up fighting reality.
At the Close, Thursday, September 22, 2022:
Thursday, September 22, 2022, 9:04 am ET
Stocks suffered another setback Wednesday after the Fed's FOMC announced a policy decision to elevate the target federal funds rate by 75 basis points (0.75%), from 2.25-2.50% to 3.00-3.25%.
The move was readily anticipated by market participants. Never the less, stocks turned negative just minutes after the release, recovered in the hour afterward, but ended the day with a deep slide, taking the major averages down by 1.65-1.79%, closer to the lows reached in mid-June.
Prior to the Fed's latest tightening of credit markets, analysts glibly stated that the move was already "priced in" to stocks, which is what the clueless and naive usually say when events turn out to be more negative than they anticipated. Nothing is ever "priced in," as the saying goes. Contemporary investors are prone to react to data slower than headline-scanning algorithms, which are one of the primary causes of quick reversals and outsized directional trades.
What the market saw from the Fed was an outline of the near future of the global economy, greatly influenced by actions of the Federal Reserve, neatly displayed by what is known in financial circles as the Fed's "dot-plot", a simplistic charting of FOMC members' estimates on the appropriate level of the federal funds rate (see Figure 2) [PDF] for the current and following three years. What is at once alarming and cynically hilarious is how the projections change over time and how far removed from reality these nothing more than educated guesses really are.
For instance, looking at Figure 2 from the September 2021 economic projections [PDF], it is clear that these eggheads clearly did not anticipate anything even remotely resemblant of current conditions. The projection from September of 2021 for 2022 shows the median "dot" at 0.25-0.50% and for 2023 at a dovish 1.00%. Considering that the FOMC just raised the rate to 3.00-3.25%, one might actually have done a better job predicting future policy by throwing darts at a board.
Thus, the projections on display currently are likely to be erroneous by a rather large factor. The current grouping of dots is clustered around 4.25% for 2022 and an area between 4.50% and 4.75% for 2023. It's entirely possible and likely probable, given the accuracy of prior assessments, that the federal funds rate at this time next year could be as high as 7.00% or as low as 1.50%. That's how reliable these predictions have been over time.
The upshot is that Wall Street traders, the shuffling zombies who are paid enormous sums of money to move stocks and funds around, take these charts to heart and make moves with other people's money based upon them. Looking for reasons why the global economy and stock markets are suffering so badly, one might first examine the quality and reliability of data used to make investing decisions. Doing so would reveal that chasing after the predictions and biases of the FOMC is a fool's errand, suitable for dunce-cap wearing idiots devoid of a single coherent original thought.
What happens next in the global economic circus is probably disastrous. The world has been led down a blind path by people with no skin in the game (Fed presidents, FOMC participants, politicians, and top financial analysts are all very rich) towards an economic dysphoria that is neither advantageous to the average working person nor stable over the short, medium or longer run.
The Fed will continue to be wrong about everything, politicians will howl about everything except who's to blame, and Wall Street will follow like lemmings over the financial cliff into a bottomless abyss.
Here's a link to Fed Chairman Jerome Powell's press conference that followed the policy decision. It's good for either a few laughs or much hand-wringing and tears, depending on one's disposition.
At the Close, Wednesday, September 21, 2022:
Wednesday, September 21, 2022, 7:27 am ET
Beisdes Russian President Vladimir Putin delivering a nationwide speech to his country that provides guidance concerning Russia's next steps in the war in Ukraine, there wasn't much to spark foreign stocks or US futures overnight.
Wall Street's sloppy session on Tuesday highlighted what most observers consider a natural reaction to tighter economic conditions as the Fed prepared to turn the screws again with another 75 (0.75%) basis point addition to the target federal funds rate on Wednesday, the announcement due out at 2:00 pm ET.
The market is bracing for the obvious, though there is some opinion that the Fed will launch a full percent hike to the rate. A third straight 75 basis point raise will bring the target rate to 3.00-3.25%, the highest it has been since December 2007, prior to the Great Financial Crisis and sub-prime real estate meltdown.
All indications are for a fourth 0.75% increase in November, which would get the Fed closer to its target rate of around 4.35%, a level at which Fed economists believe will be sufficient to balance inflation with economic growth, which has stalled out, the last two quarters producing a contracting GDP, formerly the definition of a recession.
The inflation/recession debate having been beaten to death over recent weeks, concern over whether the Fed is making a policy error has waned. Most of the cognoscenti on Wall Street and in the financial media have gotten on board with Fed Chairman Jerome Powell's painful message from Jackson Hole in August and believe the Fed must continue to pursue higher interest rates in a graduated manner in order to keep inflation from running out of control.
Meanwhile, higher interest rates are producing adverse effects on consumers and real estate markets. With the average interest rate on credit cards already at a record 18.17%, the Fed's hike on Wednesday will lead to another record, possibly surpassing 19%. Home mortgages are also taking a hit as Freddie Mac's 30-year interest rate is now over six percent and will also likely climb higher, pricing out many would-be home buyers.
Fed tightening will be ongoing through the end of the year, though at a more moderate pace, as predictions for November and December see little more than an additional one percent added between the two FOMC meetings. There is no meeting in October, giving the Fed a little more time to assess their position prior to the midterm elections, though the November FOMC meeting (November 2-3) does fall prior to the elections on November 8.
That will be a trickier call for the supposedly non-politicized Fed than today's announcement.
Wall Street seems to be well-prepared for whatever the Fed decides to do today. With the S&P down 450 points from its most recent bear market rally high (4105.20, August 16), the market appears to have the rate policy decision pretty well "priced in." It would not be surprising to see stocks rally if the Fed does decide on 75 basis points, being that the market looks technically oversold at present, though further declines cannot be ruled out due to economic data suggesting further erosion in the US and global economy.
On Tuesday, Germany reported a dismal August PPI as producer prices rose by 7.9% over the month, and were up 45.8% from a year earlier, both records for the German economy. More than anything else, data like this only serves to exacerbate an already unstable market and undermine confidence.
There are too many negatives at play in the current environment for any serious investor to be seeking gains in equities. Rather, safe playing in the bond market appears to be the prudent, if overly conservative approach. Getting a three to four percent return may still produce a net loss of purchasing power when figuring in inflation at seven to nine percent, but it's still preferable to riskier bets in stocks which have produced losses exceeding 20% already this year.
The markets will likely be trading at close to stall speed until the Fed announcement this afternoon.
At the Close, Tuesday, September 20, 2022:
Tuesday, September 20, 2022, 9:24 am ET
Other than the fact that futures were down alarmingly right into the cash open, there was nothing unusual about Monday's stock market advances, as the major indices all began to rise right at the bell.
Germany's DAX was down 80 points, at the lows of the day, but began ramping higher when US markets opened. That also was not strange or out of the ordinary, because other markets, like the FTSE and CAC-30 made similar moves.
Investors, a laughable term from bygone days, have gotten used to these kinds of antics in equities over the years. Alternatively attributable to nefarious elements such as the Plunge Protection Team (PPT), the New York Fed's trading desk (based in Chicago), insider trading by members of congress (looking at you, Nancy Pelosi), the emergence of EFTs, short covering, or hedge funds employing the worst techniques of High Frequency Trading (HFT) like spoofing and front-running, unforeseen rapid, volatile directional moves have become a standard in modern markets, devaluing them to a point at which they have outgrown their former usefulness.
There are no longer markets as were known in days past, like in the 50s, 60s, or 70s. They've been replaced by what looks and feels similar to the S&P 500, the Dow Industrials or the NASDAQ, but are, in reality and in practice, dumping grounds and hoarding containers for the same corporations which are traded on them. It's an open secret that a few big funds, designated or disguised as holding companies, Vanguard, via its various stock and bond funds, BlackRock (BLK), Berkshire Hathaway (BRK.A), and State Street Corporation (STT), own controlling interests in nearly all large and mid-cap companies traded on the exchanges, allowing them unbridled ability to move individual stocks, entire sectors, or even whole indices on a whim.
Between central banks, huge holding companies, and the US and other sovereign governments and their funds, smaller investors have been relegated to nothing more than passengers on the train to nowhere. These outsized entities make a mockery of the notion of free markets everywhere, not just in stocks, but also in commodities, precious metals, currencies, and fixed income vehicles, which is why the current bout of inflation has damaged the lives of countless individuals comprising the bottom 90% of earners and net worth while those atop the heap are smoking Cubans and dining on caviar and truffles.
Inflation, which has already eaten your lunch, is salivating over your dinner and has designs on tomorrow's breakfast. It's an insatiable beast with an unlimited appetite which the Federal Reserve was only too willing to accommodate since the GFC of 2008-09.
Via round after round of QE in the 2010s and then the pandemic-induced 33% increase in the US money supply (M2) in 2020, a private bank known to most people as the Federal Reserve, managed to debase the US currency to a point of near worthlessness.
Stocks, measured in US dollars remain at absurd levels because of the debasement. Food, fuels, and just about anything related to ordinary wants and needs of the general public have increased in price by amazing amounts. CPI and PPI calculus only offers a broad and often understated measure of the size of the inflation problem. What's gone up the most in recent times are things people need in order to live, particularly, food, fuel, and shelter.
While the stock markets bounce around meaninglessly in advance of Wednesday's FOMC interest rate policy decision, regular folks still have to eat, put gas in their cars and trucks, pay rent or mortgages. What was a modern industrialized economy a few short decades ago has devolved into a cruel game of survival, created by and controlled mostly by government and banking interests with adequate stand-by provisioning by corporate and hedge fund skimmers, who manage to keep the public from panicking by their continuous monitoring of their wholly-owned "markets."
None of this is by accident. Inflation, as described by economist Milton Friedman, is "always and everywhere a monetary phenomenon." The Fed pumped the gas on the money supply in 2020 after seeing that their rounds of QE had not produced sufficient inflation. Their goal had been consistently two percent inflation, which is bad enough, devaluing the purchasing power of any currency by a third over 20 years, but they wanted more and they got it.
With the excess liquidity pumped into the money supply from September 2019 forward, the Fed soon found itself between a rock (hyper-inflation) and a very hard place (global catastrophic economic seizure) as inflation took off in 2021 and failed to subside, prompting them to begin a series of interest rate increases, the intent to crimp borrowing and slow down the economy.
The problem with interest rate hikes as a bludgeon against an overheating economy is that while such measures may have worked well in the 50s, 60s and 70s, when the US was more of an industrial, mercantile economy, the cumulative effect of higher interest rates is likely to foment as much adverse reaction as it does to slow things down.
Fact of the matter is that the US economy is driven by government and consumer spending, and little else. Raising interest rates increases the cost of borrowing for everybody, in mortgages, home equity lines, credit cards and personal loans, and for government, already nearing $31 trillion in debt and growing. The federal government spent $392 billion in 2021 on interest payments on publicly-held debt and is expected to be near $400 billion in 2022, the fiscal year closing on September 30, but rates are rising and the cost of borrowing - even for the government - is increasing.
With the cost of money now rising just as fast, or faster, as everything else, another 75 basis point hike in the federal funds target rate (currently at 2.25-2.50%) is not likely to cool inflation, but rather, exacerbate it. Variable-rate mortgages will increase. Government borrowing costs will increase. Credit card interest rates will increase beyond the average of 18.17% - already a record - to nearly 19% after this week's Fed decision, and they're not done yet.
Americans, their government, and most of the rest of the world has binged on credit since 1971, when Nixon ended the era of reasonable limitations on money supply by closing the gold window, and especially since the late 90s, as the government decided that "deficits don't matter," ironically stated by Dick Cheney in 2002.
Deficits do matter. So does credit card debt, mortgage debt, and all other forms of debt that are costing more and will continue to cost more as long as the Fed keeps its foot to their policy-driven inflation brake of rising rates. The Fed can't fix inflation, so the duty falls to the American public, the housing market and the stock market to do it instead.
It's going to be a messy project, with house prices collapsing, stock market crashing, enormous numbers of credit card and mortgage defaults, and individual and corporate bankruptcies. In case you thought inflation and economic conditions are bad now, just wait, it's all going to get worse thanks to government policies and the actions of the Federal Reserve.
At the Close, Monday, September 19, 2020:
Sunday, September 18, 2022, 9:00 am ET
With the term "global economy" soon to become a relic of the past, the US and other Western nations suffered through a long week of distress, as stocks fell precipitously in the face of tightening economic conditions, inflation pressures, and general dissatisfaction with politicians and the economy.
The world is changing in dramatic ways. Economic distress and questionable political decisions are leading to social unrest in many nations, especially in Europe. The American experience is rapidly devolving into a failing economy caused by structural ineptitude and long-term infrastructure failings.
Highlighting one of the worst weeks of the year was August CPI registering an 8.3% increase year-over-year, which caused cascading decline in stocks on Tuesday. As the week progressed, additional sour economic data - inflation-driven August retail sales up 0.3%, Industrial Production down 0.2% in August, Capacity Utilization falling to 80.0% from 80.3% - kept dip-buyers in check. The week concluded with FedEx (FDX) dropping a bomb, slashing its forecast for fiscal first quarter (calendar 3rd quarter) earnings and revenue. The company also withdrew its outlook for the full fiscal year, and planned measures to offset the effects of shrinking demand, including a hiring freeze, closing 90 FedEx office locations, and ending Sunday operations for some FedEx Ground locations. The company will report its full quarterly results after next Thursday's (9/22) closing bell.
FedEx shares dropped the most on record for a single day (21.44%) and was a major contributor to Friday's massive 685.39 (5.07%) decline on the Dow Jones Transportation Average, sending the index to a 19-month low at 12,825.34, surpassing the June 12 closing low of 12,868.60. What was striking about the Transportation Average's 1235.57 (-8.79%) loss for the week is that it is still more than 1500 points above the pre-pandemic high (11,278.85, 1/13/20), a clear signal that the economy will experience more pain in stocks, bonds, and living standards.
On the week, the NASDAQ fell more than five percent, with the Dow, S&P, and NYSE Composite each dropping more than four percent. The Transports' nearly nine percent loss stood out like a sore thumb, prompting questions over just who (Nancy Pelosi and others in congress, perhaps?) made money on the quick reversal Friday morning from positive news (railroad strike averted) to FedEx's big market negative.
With the Fed's FOMC meeting next week (9/20-21) almost certain to produce another 75 basis point hike in the federal funds target rate - and a possible 1.00% leap forward - this week's losses in equities portend further declines, as the June lows are coming into focus. The Dow Industrials are less than 1000 points above their June 17 closing low (29,888.78), the S&P just 217 points above its 2022 low and down 19.45% on the year, and the NASDAQ about 800 points above its June 16 low (10,646.10). The NASDAQ is down 27.69% year-to-date.
For the second straight week, yields rose across the entirety of the treasury complex, with massive spikes higher in the six-month, from 3.52% to 3.77%; the 1-year, up 29 basis points, from 3.67% to 3.96%; and the two-year note, which also galloped ahead 29 basis points, from 3.56% a week ago to 3.85% as of Friday's finish.
The curve's inverted structure is now out from 6-months to 10 years and from one year out to 30. Simply put, all rates are exceedingly higher than a few weeks ago and ridiculously up from the beginning of the year. If anything, this week's signal was even worse than the scare from last week. With the FOMC meeting concluding this Wednesday (9/21), both stock and bond markets are likely in for yet another punch to the gut. Consumers will feel even more pain from rising interest rates on mortgages and credit cards.
Interest on a Freddie Mac 30-year fixed mortgage surged to 6.02% (up from 2.86% a year ago), the highest since November 2008. Another hosing in housing is about to unfold.
Oil remained stable in the mid-80s range, with WTI crude closing out the week at $85.40, down modestly from last week's ending price of $86.10. Oil remains the one area that has seen some relief and it looks to be more than transitory. Demand has tailed off and the results of Western sanctions on Russia have had only a small effect on the United States, though the condition is more severe in Europe.
At the pump, the US average price of a gallon of unleaded regular dropped only a smidge, to $3.66, from $3.68 a week ago, according to gasbuddy.com. Mississippi came in the lowest, at $3.08/gallon, with California leading, at $5.41. Only five other states - beyond California - have average prices over $4.00 a gallon - Utah, Nevada, Idaho, Washington, and Oregon.
Bitcoin is holding near the week's lows at $19,915.40 after spending the week whipsawing above $22,400 and below $19,300. Traders are having a little fun, though the future of all crypto remains dubious. There are still no positive developments suggesting a return to the glory days of 2020 and 2021. Rather, the entire space appears ready to implode.
Gold got walloped on the COMEX, losing $42 on the week, but silver was higher as information about COMEX vault holdings continued to make the rounds, suggesting that the silver market is about to blow up. Once again, conspiracy theory may evolve into conspiracy fact.
Keeping up with developments in precious metals, Andrew Maguire, via the Live from the Vault series, is a leading expert with decades of experience. Episode 90, below, offers valuable insights into the current precious metals environment.
The reversal in gold:silver ratio from 91.94 last week, to 85.56 as of Friday's close, raises attention to silver, and a potential global shortage, similar to the pandemic-driven breakdown from Spring 2020, with the low of $17.91 (9/2/22) potentially proving as a long-term bottom.
Should gold continue to sell off while silver gains, the COMEX and LBMA spot fixing could be under extreme pressure, along the lines of the March nickel debacle, which could break the back of the COMEX. Be aware that silver is the Achilles' Heel of central banks. They own none of it.
Gold price 08/19: $1,760.30
Silver price 08/19: $18.96
Below are the most recent prices for common one ounce gold and silver items sold on eBay (numismatics excluded, free shipping included):
Notable in the weekly survey was the massive amounts of one ounce gold bars available at a price essentially ranging around $1775 and the average and median prices of gold bars and coins, all below $1800 for the first time since Money Daily began its weekly survey in April 2020, two-and-a-half years ago!
This very well could tie into economic strain the United States, as one-ounce gold hoarders are forced to liquidate at prices quite possibly below their purchase prices during the pandemic. While this may not constitute a bottoming - and probably does not - it does indicate at least some middle class capitulation, although there is also no shortage of ready buyers with cash in hand at these levels.
The Single Ounce Silver Market Price Benchmark (SOSMPB) rose sharply over the week, to $35.06, a gain of $1.53 from the September 11 price of $33.53, snapping a four week decline, from a level of $37.35 on August 14 to last week's low.
This past week was one emanating straight from hell for equity holders, as the mid-June to mid-August rally was almost fully unwound with declines in the major indices four of the past five weeks, the most recent te worst of the bunch and the worst since early June, just before the bounce-back rally.
Credit markets, indicated by the rise in treasury yields overall, are strained to near the limit even though fixed income rates are almost certain to move steadily higher next week. Precious metals were the most interesting asset class of the week with gold and silver moving in opposite directions and gold going on sale, now down well over $100 per ounce from the start of the year.
There are massive changes afoot in all areas of human existence, driven by economic conditions the world has not experienced in nearly 100 years. These are epic and epochal times and it cannot be emphasized enough how important it is for individuals and businesses to have a grasp on current economic, political, and social realities.
For the Week:
Sign up for the Back Issue Price Guide newsletter to receive updates and special sale info.
Subscribe by entering your email address:
All information relating to the content of magazines presented in the Collectible Magazine Back Issue Price Guide has been independently sourced from published works and is protected under the copyright laws of the United States of America. All pages on this web site, including descriptions and details are copyright 1999-2022 Downtown Magazine Inc., Collectible Magazine Back Issue Price Guide. All rights reserved.