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[Markets] Dow Jones Surges 400 Points As Stock Market Rallies; Nasdaq Nears Record High The Dow Jones Industrial Average held near session highs Wednesday afternoon, as the stock market continues to look past the coronavirus pandemic and civil unrest. Published:6/3/2020 12:47:03 PM
[Markets] Stocks open higher, aim for fourth day of gains after private-sector jobs report is better than feared U.S. stocks rose at the start of trade Wednesday as investors focused on signs of a rebounding global economy and a report from payroll firm ADP, which showed far fewer private-sector job losses in May than economists were expecting. The Dow Jones Industrial Average rose 222 points, or 0.9%, to 25,965, the S&P 500 index gained 21 points, or 0.7% to about 3,102 and the Nasdaq Composite index advanced 26 points, or 0.3% to trade at 9,640. ADP said the private sector shed 2.76 million jobs in May, below economists expectations of 8.66 million losses, according to Econoday, compared to 19.56 million job losses in April. U.S. stocks were also following the lead of global indices, which rose earlier Wednesday after a private gauge of China's services sector showed it hitting a near 10-year high as it returned to expansion last month. Investors also continued to shrug off a wave of protests across American cities against police violence toward people of color, which have led to clashes with police and incidents of looting. Published:6/3/2020 8:43:40 AM
[Markets] 3M CFO to retire after 6 years in the role, to be succeeded by current GE Healthcare CFO 3M Co. said Wednesday that Chief Financial Officer Nick Gangestad has announced his intention to retire after about 6 years in the role, and 33 years with the company. The diversified consumer and industrial products company, which products include N95 respirators, Scotch tape and Post-it notes, said it has named Monish Patolawala as its new CFO, effective July 1. Patolawala is currently at General Electric Co.'s GE Healthcare, where he has served as CFO. Gangestad will remain with the company until July 31 to ensure an orderly transition. 3M's stock, which ticked up 0.4% in premarket trading, has gained 8.5% over the past three months, while the Dow Jones Industrial Average has slipped 0.7%. Published:6/3/2020 5:45:16 AM
[Markets] Dow futures climb as ADP jobs report looms Dow futures climb as ADP jobs report looms Published:6/2/2020 7:39:45 PM
[Markets] Dow futures climb Tuesday evening after stocks shook off civil unrest to end at a 3-month high as ADP jobs report looms U.S. stock-index futures rose Tuesday evening, implying that the trend for Wall Street continues to be higher after the stock market closed at its highest level since early March. Futures for the Dow Jones Industrial Average were trading 102 points, or 0.4%, higher at 25,803, those for the S&P 500 index were gaining 0.3%, while Nasdaq-100 futures were advancing 26 points, or 0.3%, at 9.673.75, at last check. The gains come as unrelenting bullishness surrounding the prospects of business reopenings in the U.S. continue to buoy stocks, despite a wave of issues that should otherwise serve as impediments to a bullish uptrend. Those factors include, Chinese-U.S. tensions, seething civil unrest in America and a pandemic that remains a public-health problem throughout the world. In Tuesday's regular session, the Dow rose 267.63 points, or 1.1%, to end at 25,742.65, marking its highest close since March 6, according to Dow Jones Market Data. Meanwhile, the S&P 500 index rose 25.09 points, or 0.8%, closing at 3,080.82, its loftiest finish since March 4, and the Nasdaq Composite Index advanced 56.33 points, or 0.6%, to finish at 9,608.37, representing its best closing level since Feb. 20. On Wednesday, investors will get a fresh read of the impact of efforts to limit the spread of COVID-19, with a report on private-sector employment likely to show that 8.663 million jobs were lost in May, according to Econoday, compared with Automatic Data Processing Inc.'s estimate in April for a loss of 20.236 million. Markets have shrugged off poor economic news and a wave of protests across U.S. cities sparked partly by the death of George Floyd in Minneapolis last week, an unarmed black man who perished under the knee of a white police officer. Protests about social injustice in America has resulted in curfews imposed in a number of major cities, including New York, which has set a curfew from 8 p.m. Eastern to 5 a.m. In corporate news, shares of Zoom Video Communications Inc. soared in after-hours trade Tuesday after the videoconference company reported record sales and earnings, and expectations for more amid boom times during a pandemic that has fostered, perhaps, a lasting stay-at-home business culture. Published:6/2/2020 7:10:40 PM
[Markets] Stock Market Wrap-Up: This Left-for-Dead Sector Is Back on the Upswing The stock market picked up more ground on Tuesday, with investors feeling more comfortable about the prospects for a full economic recovery from the coronavirus pandemic. Major market benchmarks closed near their best levels of the day, and gains for the Dow Jones Industrial Average (DJINDICES: ^DJI), S&P 500 (SNPINDEX: ^GSPC), and Nasdaq Composite (NASDAQINDEX: ^IXIC) were as much as 1%. Published:6/2/2020 4:09:09 PM
[Markets] Dow Inc., Caterpillar share gains lead Dow's 230-point jump DOW UPDATE Buoyed by positive momentum for shares of Dow Inc. and Caterpillar, the Dow Jones Industrial Average is climbing Tuesday afternoon. Shares of Dow Inc. (DOW) and Caterpillar (CAT) have contributed to the blue-chip gauge's intraday rally, as the Dow (DJIA) was most recently trading 230 points higher (0. Published:6/2/2020 3:08:32 PM
[Markets] Dow ends up over 260 points as investors keep focus on economic reopening Dow ends up over 260 points as investors keep focus on economic reopening Published:6/2/2020 3:08:32 PM
[Markets] Dow Jones Rises Amid Ongoing Social Unrest; Apple Stock Still Trades Near This Buy Point The Dow Jones jumped more than 200 points in early trading before paring gains following President Trump's comments regarding ongoing U.S. civil unrest. Published:6/2/2020 1:08:45 PM
[Markets] American Express, J.P. Morgan Chase stocks rally to lead the Dow's gainers Financial stocks were set for a broad rally Tuesday, with the SPDR Financial Select Sector ETF climbing 1.2% in premarket trading. The top two early gainers among the Dow Jones Industrial Average's components were financial stocks, with shares of American Express Co. rising 1.8% and J.P. Morgan Chase & Co. gaining 1.5%. Fellow Dow component Goldman Sachs Group Inc.'s stock rose 1.0%. Meanwhile, Dow futures advanced 150 points, or 0.6%. Among other more actively traded financial stocks in the premarket, Bank of America Corp. rallied 1.8%, Wells Fargo & Co. climbed 1.9% and Citigroup Inc. tacked on 2.2%. Helping provide a lift to bank stocks, the yield on the 10-year Treasury note rose 1.3 basis points to 0.675%. Higher longer-term rates can help boost bank profits, as that can widen the spread banks earn on longer-term assets, such as loans, that are funded by shorter-term liabilities. Published:6/2/2020 8:08:04 AM
[Markets] Dow Jones Futures Jump 200 Points Amid Trump Comments, As Civil Unrest Continues; 3 Tech Giants In New Buy Zones Dow Jones futures were up early Tuesday. Tech giants Apple, Netflix and Tesla were in new buy zones, while Domino's Pizza broke out. Published:6/2/2020 5:36:18 AM
[Markets] Dow futures swing higher following positive open in Europe Dow futures swing higher following positive open in Europe Published:6/2/2020 4:05:42 AM
[Markets] "This Is The Perfect Environment For Gold To Take Center-Stage" "This Is The Perfect Environment For Gold To Take Center-Stage" Tyler Durden Tue, 06/02/2020 - 03:30

Excerpted from Grant's Interest Rate Observer (via Sprott.com),

Changing Monetary Places

The price of gold peaked at $1,900 an ounce in September 2011. Nine years and many radical monetary-policy experiments later, it trades at $1,702. That it ought to move higher, and will move higher, is the theme of this analysis.

If we’re repeating ourselves, it’s in the noble cause of protecting the wealth of the readers of Grant’s. The sheer brute force of pandemic public policy is tilting the balance of financial risk. History can’t exactly predict the outcome of the Federal Reserve’s unprecedented jag of money creation (never mind the humane reasons why those dollars were set afloat). But as to the perishability of paper money, the record is unarguable.

“[T]he French people,” pronounced the Bank for International Settlements in 1949, four years after the end of World War II, “remembering the old gold franc introduced by Napoleon in 1803 (the so-called franc germinal), which maintained its value intact up to 1914, and thus withstood the strain of two lost wars—1814 and 1871—as well as a number of other vicissitudes, cannot help thinking that, compared with the paper franc which since 1914 has lost 99% of its purchasing power, gold, irrespective of any short-term fluctuations in the price paid for it, is in the long run a trustworthy basis for savings.”

Even so, it’s not gold but bonds that investors crave.

They are grateful to purchase, for instance, the brand new triple-B-plus-rated PayPal 3¼s of 2050. How will the online money-transfer pioneer fare in the next 30 years? Could it be disrupted? What will become of the dollar, and interest rates, along the way? Is today’s buyer being compensated for these risks? Good questions, but, to yield-famished fiduciaries, not the most relevant ones. They need basis points, not monetary theory, and they draw confidence, rightly or wrongly, from the long-running decline of interest rates.

Gold may boast a multi-millennial record of honorable monetary service, but bond prices have been rallying for 39 years.

For all that gold is the epitome of money, and for all that Wall Street worships money, gold is unrespectable.

Mention it in most any institutional setting, and people wince, though perhaps we overanalyze. Asset managers want the prices of their assets to rise, and QE answers that need. The kind of money the beneficiaries of radical monetary policy want is the kind you mine on a keypad.

Yet now comes BofA Securities with a $3,000-per-ounce price target and persuasive supporting analysis under the very headline, “The Fed can’t print gold.” The seven authors—Michael Widmer leads the cast—make their case with the opening contention that gold is “the ultimate store of value.”

Amen to that, though you have to take the long view. In January 1980, the gold price briefly touched $850 an ounce. Nineteen years later, the same ounce fetched but $250. The dollar that you entrusted to the ultimate store of value had dwindled to 30 cents.

And if you had only bought a dollar’s worth of the S&P 500 instead, you’d have had $24.02. It was enough to turn the French peasantry to paper.

Gold promoters are therefore understandably more partial to the past 20 years than to the two decades preceding them. Since the peak of the dot-com stock market in early 2000, gold has handily outperformed equities and bonds alike.

It would be something to brag about if gold were an investment asset.

It is no such thing. Gold is a monetary asset (if the central banks didn’t think so, they wouldn’t be buying it). Under a gold standard, its value is fixed. Under no standard does it pay interest or retain earnings. Stocks and bonds are regenerative. Gold, being money, is as sterile as a dollar bill. Buying it, one incurs an opportunity cost in the shape of foregone interest, rent or dividends.

As money, gold competes with dollars. It likewise competes with credit, the promise to pay dollars. Thus, as the dollar strengthens, as real rates rise, so paper prospers. What sent gold into the investment wilderness in the 1980s and 1990s were high real rates, an improving U.S. government fiscal position and the oftrepeated incantation of Robert Rubin, Bill Clinton’s secretary of the Treasury, “A strong dollar is in the U.S. interest.”

Now that the length of the Treasury yield curve is pitched below the pre-lockdown inflation rate of 2%, the fiscal position is an even bigger shambles than it was before the bug bit. Black Sox–fashion, the government is trying to lose the monetary competition. If it wants it, gold is welcome to the title of the hardest and most value-retaining money under the sun. No central bank wants it...

*  *  *

In the final year of the 1929–32 bear market, the investor Bernard M. Baruch was buying gold rather than orphaned stocks and cast-off credit instruments. Long after the fact, Franklin D. Roosevelt’s Treasury secretary, Henry Morgenthau, Jr., asked him why. It was no innocent question, as the government had outlawed private gold holdings in 1933 and pre-1933 “hoarders” were still under a retrospective cloud. “[B]ecause I was commencing to have doubts about the currency,” the investor and elderstatesman-without-portfolio forthrightly replied.

Those doubts were surely well founded. Roosevelt did devalue the dollar, and he did commandeer the gold (paying the citizens $20.67 an ounce before marking it up to $35 an ounce), but reasoned doubts about the quality of the currency are perhaps as warranted today as they were in the final year of the Hoover administration. And the opportunity cost of owning a safe full of bullion is arguably lower today than it was even then.

Gold holders in 1932 passed up an average high-grade tax-exempt yield of 4.33%, more than double the one on offer today. In January 1932, the Dow Jones Industrial Average had fallen by 81% from its 1929 peak; within six months, the blue chips would hit bottom at 11% of the top index value. At this writing, the Dow has declined by 20% from its February 12 high and trades at 17.55 times trailing earnings (don’t ask about future ones). The Nasdaq is knocking on the door of a new high. “[S]ound investment securities are selling at prices lower perhaps than we shall see again,” Baruch observed in a January 1932 oped in the old New York Evening Post. Few would make that claim for today’s Fedsponsored opportunity set.

What makes the gold price go, according to the BofA analysts, is a conflation of real interest rates, the dollar exchange rate, volatility in the financial markets and commodity prices. We would add to that list a single word, “trust.” The greater the confidence in the words and deeds of the central bank, the weaker the gold price. Apropos of which, respondents to a Gallup poll conducted in the first two weeks of April said they had “a great deal” or a “fair amount” of confidence in Jay Powell to do right by the American economy. It was the highest such reading in 15 years.

We wonder what 1,000 random investors would tell Gallup if asked whether the Fed has abolished bear markets. To judge by the BofA’s conclusions as to speculative gold-positioning, replies would lean to the affirmative. Thus, Widmer et al. report, “momentum players” in gold futures “are currently holding 5.7% of their maximum allocations, well below the historical 99th percentile in history of 48%.”

As for gold-mining shares, John Hathaway, co-portfolio manager of the $1 billion-plus Sprott Gold Equity Fund, reports that interest is exactly nil. The Sprott bullion business is jumping, but not the mining-stock investment business. Blame previous poor performance, he says, or long memories of mine mismanagement around the time of the 2011 gold-price high, or the inherent risks of digging for a vanishingly scarce metal in inhospitable places. But for whatever set of reasons, he goes on, gold shares, in relation to bullion, are the cheapest they’ve been in his 20 years in the business: “What astonishes me—I’m an old value investor—is that so many companies are generating free cash flow, and it is not hard to find companies with free cash flow yields of 10% or better.”

There are finer judges of confidence in the stewards of paper money than this publication, which has had so little confidence, but we can read as well as the next person. And, in reading, we mark a new comment by Michael Arone, chief investment strategist of State Street’s American SPDR business.

“[G]overnment deficits funded by massive central bank balance sheets have distorted markets and the economy,” Arone says. “Also, the Fed’s failure to reduce monetary policy accom modation in better economic times has likely encouraged investors to take excessive risks, laying the groundwork for future asset price bubbles.”

Writing under the headline “Moral Hazard: Are Risky Bonds the New Treasurys?,” Arone concludes with a kind of resigned yes:

The disconnect between an investment’s underlying fundamentals and its price makes investors uneasy. As a result of the Fed’s new programs, this tension is now most evident in the credit markets. Sadly, investors may have no choice but to dive in.”

Some do have a choice, though, and for those with the flexibility to choose we commend the words of Rick Rieder.

“[T]he monetary policy endgame may well be monetary debasement,” BlackRock, Inc.’s chief of global fixed income speculated in early September, months before the lockdown-induced monetary onslaught began.

“Under the gold standard this would not have been possible...but today money is created by printing presses, or even a few computer keystrokes.”

What to do? Seek protection in “equities, real estate and even hard assets that have historic value-relevance, such as gold.

Perhaps the monetary seed that bloomed at BofA, and that has produced green intellectual shoots at State Street and BlackRock, holds the promise of a more open-minded investment establishment. Paul Singer, founder and president of Elliott Management Corp., a different, nonconforming kind of Wall Street establishmentarian, bangs the nail on the head in “Perspectives,” his new investment comment:

This is a perfect environment for gold to take center stage. Fanatical debasement of money by all of the world’s central banks, super-low interest rates and gold mine operation and extraction issues (to a large extent related to the pandemic) should create a fertile ground for this most basic of all money and stores of value to reach its fair value, which we believe is literally multiples of its current price. In recent months, gold has gone up in price to some degree, but we think that it is one of the most undervalued investable assets existing today...

[It] is the answer to the question: Is there an asset or asset class which is undervalued, underowned, would preserve its value in a severe inflation, and is not adversely affected by Covid-19 or the destruction of business value that is being caused by the virus?

If Singer is right (strength to his arm!), it won’t be because of any change in the nature of gold, but on account of a belated realization of the change in the quality of its competitors.

Published:6/2/2020 2:35:08 AM
[Markets] Dow Jones Futures Slide On Trump Comments; 3 Tech Giants In New Buy Zones Dow Jones futures were down late Monday. Tech giants Apple, Netflix and Tesla were in new buy zones, while Domino's Pizza broke out. Published:6/1/2020 9:04:07 PM
[Markets] Dow futures slump Monday evening as Trump pledges military deployment if cities fail to quell civil unrest U.S. stock-index futures headed lower in thin trading Monday evening as President Donald Trump said he would deploy military personnel across cities facing protests if state governors and local officials prove unable to contain civil unrest erupting across the nation. "I am dispatching thousands and thousands of heavily armed soldiers," Trump said on Monday at the White House, according to news reports. "If a city or state refuses to take the actions necessary to defend the life and property of their residents, then I will deploy the United States military and quickly solve the problem for them," Trump said, at a news conference late Monday. Futures for the Dow Jones Industrial Average were down 138 points, or 0.5%, at 25,327, those for the S&P 500 index were off 0.5% at 3,039, while Nasdaq-100 futures were off 0.3% at 9.568. Major cities from Los Angeles to New York have been engulfed in nightly protests after George Floyd, a black man, died last Monday following a confrontation with police in Minneapolis in which a white police officer, Derek Chauvin, was captured on video driving his knee onto Floyd's neck until the handcuffed man lost consciousness and later died. Curfews were announced Monday for Minneapolis and St. Paul, while New York's Gov. Andrew Cuomo placed New York City under curfew Monday night, for the first time in about eight years. However, the stock market has mostly trended higher as optimists focus on efforts by businesses to emerge from lockdown protocols implemented to curtail the spread of COVID-19. The Dow finished regular trade on Tuesday 91.91 points, or 0.4%, higher at 25,475.02, after trading negative at the start of Monday's session. The S&P 500 rose 11.42 points, or 0.4%, to end at 3,055.73; while The Nasdaq Composite added 62.18 points, or 0.7%, to close at 9,552.05. All 50 states have embarked on some stage of reopening from forced shutdowns. Meanwhile, a report from the Congressional Budget Office released on Monday, said the recessionary atmosphere triggered by the coronavirus caused it to lower its 2020-30 forecast for U.S. economic output by almost $8 trillion, or 3% of gross domestic product, relative to its January projections. GDP isn't expected to catch up to the previously forecast level until the fourth quarter of 2029, the CBO added. Investors have also been paying attention to rising Sino-American tensions, with Chinese government officials telling major state-run agricultural companies to pause purchases of some American farm goods, including pork and soybeans, according to reports. Published:6/1/2020 7:03:37 PM
[Markets] Dow futures slump Monday evening as Trump threatens military deployment Dow futures slump Monday evening as Trump threatens military deployment Published:6/1/2020 7:03:37 PM
[Markets] Dow Jones Futures: Apple, Netflix, Snap, Tesla In New Buy Zones, While Applied Materials, Domino's Pizza Near Buy Points Dow Jones futures were down late Monday. Tech giants Apple, Netflix and Tesla were in new buy zones, while Domino's Pizza broke out. Published:6/1/2020 5:34:20 PM
[Markets] "The Fed Did It" - Riots Across America Are About More Than George Floyd "The Fed Did It" - Riots Across America Are About More Than George Floyd Tyler Durden Mon, 06/01/2020 - 12:50

As we detailed last night, what's happening to America right now: rioting, looting, pillaging, Americans fighting other Americans and while the media is spinning self-serving narratives that frame the bad guy as Trump, or China, or Russia, or this political party, or that, or some social movement, hides the truth that the culprit behind the upcoming collapse of the US is just one thing, the same one that Thomas Jefferson warned the brand new nation about more than two centuries ago:

"I believe that banking institutions are more dangerous to our liberties than standing armies. The issuing power of currency shall be taken from the banks and restored to the people, to whom it properly belongs.

If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered."

And as RealInvestmentAdvice.com's Lance Roberts notes, while the murder of George Floyd was both unjust and tragic, his death was the catalyst that lit a powder keg of dissension, which has simmered beneath the headlines for over a decade. 

While we focus on events that fill our media streams, it is worth remembering Oscar Grant, Trayvon Martin, Manuel Diez, Kimini Gray, and Michael Brown. These events, and many others throughout history, show civil unrest has deeper roots. Pew Research made a note of this in 2017:

“The U.S. economy is in much better shape now than it was in the aftermath of the Great Recession. It cost millions of Americans, their homes, and jobs. It led him to push through a roughly $800 billion stimulus package as one of his first business orders. Since then, unemployment has plummeted from 10% in late 2009 to below 5% today, and the Dow Jones Industrial Average has more than doubled.

But by some measures, the country faces serious economic challenges: A steady hollowing of the middle class and income inequality reached its highest point since 1928.”

Look at the faces of those rioting. They are of every race, religion, and creed. What they all have in common is they are of the demographic most impacted by the current economic recession. Job losses, income destruction, financial pressures, and debt create tension in the system until it explodes. 

It has been the same in every economy throughout history. While the rich eat cake, the rest beg on street corners for scraps. Eventually, those most disenfranchised and oppressed storm the castle walls with “pitchforks and torches.” 

The Root Of The Problem

A recent article by MagnifyMoney hit on this issue.

“As the coronavirus pandemic continues to pummel the economy, many Americans are decreasing their retirement contributions, but some are raiding their retirement accounts to pay for essentials. A new survey found 3-in-10 Americans dipped into the funds meant for their golden years — and the majority of those who have done so spent their nest egg on groceries.”

America was not prepared financially for the downturn caused by the pandemic. They are angry, financially stressed, and the visible face of their ire has become Wall Street and the Fed. 

Since the “Financial Crisis,” the role of the Federal Reserve shifted from its dual mandate of “full employment” and “price stability” to a seeming inclusion of a “third mandate” supporting consumer confidence via the inflation of asset prices. As Ben Bernanke stated in 2010: 

“This approach eased financial conditions in the past and, so far, looks to be effective again. Stock prices rose, and long-term interest rates fell when investors began to anticipate the most recent action.

Easier financial conditions will promote economic growth. For example, lower mortgage rates will make housing more affordable and allow more homeowners to refinance. Lower corporate bond rates will encourage investment. And higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending.”

Unfortunately, it didn’t work out that way.

Unintended Consequences

As with all things, there are always the unintended consequences which follow. For the vast majority of  Americans:

  • Housing did not become more affordable.

  • Wall Street bought massive numbers of homes at distressed prices and went into the landlord business, which led to a rise in home prices. 

  • Many Americans, still recovering from the “Financial Crisis” were unable to obtain financing.

  • For many others, affordability due to suppressed wage growth was the issue.

  • Lower corporate bond rates didn’t lead to more investment, but rather increased share repurchases which benefited “C-Suite” executives at the expense of the working class.

Instead, as discussed previously, the Fed’s policies led to a growing divergence between the stock market and the economy. To wit:

“The one lesson that we have clearly learned since the 2008 “Great Financial Crisis,” is that monetary and fiscal policy interventions do not lead to increased levels of economic wealth or prosperity. What these programs have done, is act as a wealth transfer system from the bottom 90% to the top 10%.

Since 2008 there have been rising calls for socialistic policies such as universal basic incomes, increased social welfare, and even a two-time candidate for President who was a self-admitted socialist.

Such things would not occur if “prosperity” was flourishing within the economy. “

This is simply because the stock market is not the economy.

Stocks Are Not The Economy

The Fed’s interventions and suppressed interest rates have continued to have the opposite effect of which was intended. I have shown the following chart below previously to illustrate this point.

From Jan 1st, 2009 through the end of March, the stock market rose by an astounding 159%, or roughly 14% annualized. With such a large gain in the financial markets, one would expect a commensurate growth rate in the economy. 

After 3-massive Federal Reserve driven “Quantitative Easing” programs, a maturity extension program, bailouts of TARP, TGLP, TGLF, etc., HAMP, HARP, direct bailouts of Bear Stearns, AIG, GM, bank supports, etc., all of which totaled more than $33 Trillion, cumulative real economic growth was just 5.48%.

While monetary interventions are supposed to be supporting economic growth through increases in consumer confidence, the outcome has been quite different.

Low, to zero, interest rates have incentivized non-productive debt, and exacerbated the wealth gap. The massive increases in debt has actually harmed growth by diverting consumptive spending to debt service.

“The rise in debt, which in the last decade was used primarily to fill the gap between incomes and the cost of living, has contributed to the retardation of economic growth.”

Financial Shortcomings

The recent economic downtown caused by the pandemic has once again exposed the financial weakness that plagues the broader economy. The  report by MagnifyMoney shows nearly 50% of Americans made changes to their plans within the first month of the pandemic for basic necessities.

What this tells you is that individuals could not survive more than ONE MONTH before tapping retirement savings. But what about the 50-60% of individuals that didn’t have a plan to start with?

“A 2018 report from the non-profit National Institute on Retirement Security which found that nearly 60% of all working-age Americans do not own assets in a retirement account.”

Here are some findings from that report:

  • Account ownership rates are closely correlated with income and wealth. More than 100 million working-age individuals (57 percent) do not own any retirement account assets, whether in an employer-sponsored 401(k)-type plan or an IRA nor are they covered by defined benefit (DB) pensions.

  • The typical working-age American has no retirement savings. When all working individuals are included—not just individuals with retirement accounts—the median retirement account balance is $0 among all working individuals. Even among workers who have accumulated savings in retirement accounts, the typical worker had a modest account balance of $40,000.

  • Three-fourths (77 percent) of Americans fall short of conservative retirement savings targets for their age and income based on working until age 67 even after counting an individual’s entire net worth—a generous measure of retirement savings.

Read those finding again.

If we use a more optimistic number of 50%, then 50% of American workers did not have the ability to tap additional “savings” to offset financial hardships during the pandemic.

It’s no wonder they are in the streets rioting.

Only The Few

While the “savings rate” suggests that individuals are “hoarding money” due to the downturn, the reality is quite different. If American’s had savings they would not be tapping into 401k plans and begging for checks. However, Deutsche Bank recently showed the savings rate for 90% of Americans is negative. 

This is far different than the Governmental statistics suggesting the average American is saving 33% of their income.

In actuality, if you aren’t in the “Top 20%” of income earners, you probably aren’t saving much, if any, money.

The problem for the Fed is their own policies are what created the “wealth gap” to begin with. As noted by the WSJ.

“As of December 2019—before the shutdownshouseholds in the bottom 20% of incomes had seen their financial assets, such as money in the bank, stock and bond investments or retirement funds, fall by 34% since the end of the 2007-09 recession, according to Fed data adjusted for inflation. Those in the middle of the income distribution have seen just 4% growth.” – WSJ

This isn’t surprising. A recent research report by BCA confirms one of the causes of the rising wealth gap in the U.S. The top-10% of income earners owns 88% of the stock market, while the bottom-90% owns just 12%.

The Fed Did It

The lack of economic improvement is clearly evident across all demographic classes. However, it has been the very policies of the Federal Reserve which created a wealth transfer mechanism from the poor to the rich. The ongoing interventions by the Federal Reserve propelled asset prices higher, but left the majority of American families behind.

The problem is the Fed has become trapped by its policies, and consequently, started taking direction from Wall Street. Such has led the Federal Reserve to become a “hostage” of its own making.

If the Fed removes any monetary accommodation, the market declines. The Fed is forced to subsequently increase support for the financial markets, which exacerbates the wealth gap.

It’s a virtual spiral from which the Fed can not extricate itself. It’s a great system if you are rich and have money invested. Not so much if you are any one else.

As we are witnessing, the United States is not immune to social disruptions. The source of these problems is compounding due to the public’s failure to appreciate “why” it is happening.

Eventually, as has repeatedly occurred throughout history, the riots will turn their focus toward those in power.

That, as they say, is when “s*** gets real.”

Published:6/1/2020 12:00:34 PM
[Markets] Dow claws back early losses as ISM data suggest worst is past for economy Dow claws back early losses as ISM data suggest worst is past for economy Published:6/1/2020 10:31:23 AM
[Markets] Dow flat despite losses for shares of Pfizer, Cisco DOW UPDATE In spite of negative returns for shares of Pfizer and Cisco, the Dow Jones Industrial Average is nearly flat Monday morning. Shares of Pfizer (PFE) and Cisco (CSCO) account for -13% of the index's intraday losses, as the Dow (DJIA) was most recently trading 2 points lower (0. Published:6/1/2020 10:31:22 AM
[Markets] Gilead Falls After Phase 3 Remdesivir 10-Day Trial Failed To Reach Significance Gilead Falls After Phase 3 Remdesivir 10-Day Trial Failed To Reach Significance Tyler Durden Mon, 06/01/2020 - 08:45

One week after the New England Journal of Medicine found mixed results in its pivotal study of Remdesivir in covid-19 patients which "found no marked benefit from remdesivir for those who were healthier and didn’t need oxygen or those who were sicker, requiring a ventilator or a heart-lung bypass machine" and only "significantly helped those on supplemental oxygen", concluding that  "given high mortality despite the use of remdesivir, it is clear that treatment with an antiviral drug alone is not likely to be sufficient", moments ago Gilead announced its own results from a Phase 3 trial of Remdesivir in patients with moderate Covid-19 and which, similarly, appeared to disappoint because while the press release was quick to point out that "patients in the 5-day remdesivir treatment group were 65% more likely to have clinical improvement at Day 11 compared with those in the standard of care group," this was not relevant, and what did matter is that "the odds of improvement in clinical status with the 10-day treatment course of remdesivir versus standard of care... failed to reach statistical significance."

The release scrambled to recover the Remdesivir momentum, quoting Francisco Marty, MD, an infectious diseases physician at Brigham and Women’s Hospital, and associate professor of medicine at Harvard Medical School, who said that "our understanding of the spectrum of SARS-CoV-2 infection severity and presentations of COVID-19 continues to evolve. These study results offer additional encouraging data for remdesivir, showing that if we can intervene earlier in the disease process with a 5-day treatment course, we can significantly improve clinical outcomes for these patients."

In short, anything to save the drug, even if the drug ultimately does not provide much of a benefit compared to placebo. In the end it will be up to the FDA to decide whether said lack of significance is enough to grant Gilead drug approval.

Key efficacy and safety results from the study are included in the table below.

The news sent ES futures lower, with the Emini down 8 points and Dow futures sliding back in the red...

... while GILD stock initially dumped but has managed to rally back some kneejerk losses.

Published:6/1/2020 7:59:50 AM
[Markets] Beijing Retaliates: Trade Deal On Verge Of Collapse As China Halts Some US Farm Imports Beijing Retaliates: Trade Deal On Verge Of Collapse As China Halts Some US Farm Imports Tyler Durden Mon, 06/01/2020 - 06:39

Veteran traders couldn't help but laugh when they checked US equity futures last night and saw that - as some probably had suspected they might - Dow futures were tracking for a 100-point jump at the open. With so much emergency liquidity still sloshing around the financial system, it seemed the most near-term risk many could fathom was a probable spike in new coronavirus infections in the coming weeks, hardly an imminent, overnight risk.

But as futures faded into the red around 6amET, a headline showing Beijing had just given the US-China 'Phase 1' trade deal - which has been essentially moribund for weeks now even though President Trump spared it on Friday - one more 'kick' seemed to remind investors where the real near-term macro risk lies: That is, the light-speed "decoupling" of the world's two largest economies.

Spare us the commentary about how markets are more concerned with these trifles than the looting-and-burning-and-pillaging unfolding across the US - we warned investors about these risks last night. It appears investors are only just waking up to them, however.

To be clear: Over the past hour, reports about Beijing halting some US farm imports have rattled investors, and sent the Chinese yuan traded on- and offshore lower on the day.

The decision appears to be the first part of China's "retaliation" against the actions announced by President Trump on Friday, as well as the increasingly belligerent posture taken by his administration in the aftermath of the coronavirus outbreak. China's Ministry of Foreign Affairs accused the US of undermining bilateral relations, and said it would meet any U.S. action with “firm counterattacks”

Perhaps the most obvious "hint" that China would choose the trade channel as its preferred means of retaliation came late last week, as we reported on surging demand from China for Brazilian soy products, a major competitor for US soy.

So far, the reaction has been relatively mild in equities and equity futures. But we suspect more headlines about China's reaction to the latest restrictions on Chinese nationals working and studying in the US, announced by Trump on Friday, will hit the tape later in the day.

Published:6/1/2020 6:00:04 AM
[Markets] Dow futures fall more than 200 points as protests grip nation Dow futures fall more than 200 points as protests grip nation Published:5/31/2020 5:57:18 PM
[Markets] 3 Things to Watch in the Stock Market This Week Stocks jumped last week, as investors celebrated the resumption of more normal activity across big parts of the economy. Both the Dow Jones Industrial Average (DJINDICES: ^DJI) and the S&P 500 (SNPINDEX: ^GSPC) gained over 3%, which put the S&P at just a 6% decline so far in 2020, while the Dow is lower by 11%. A few big-name stocks will announce earnings results over the next few trading days, including Ambarella (NASDAQ: AMBA), Slack Technologies (NYSE: WORK), and Zoom Video Communications (NASDAQ: ZM). Published:5/31/2020 1:24:16 PM
[Markets] These stocks performed best in May as the market rally continued DEEP DIVE U.S. stocks rose in May, extending a rally that began after the coronavirus-crisis bottom in March. • The Dow Jones Industrial Average (DJIA) recovered from an earlier decline Friday, as President Trump discussed actions against China, to end the day with an 18-point decline. Published:5/30/2020 8:16:58 AM
[Markets] There Will Be A Lot More Rioting, Looting, And Civil Unrest As The US Economy Continues To Crumble There Will Be A Lot More Rioting, Looting, And Civil Unrest As The US Economy Continues To Crumble Tyler Durden Sat, 05/30/2020 - 08:10

Authored by Michael Snyder via The Economic Collapse blog,

What we have been witnessing on the streets of Minneapolis is just the beginning.  Our nation is so deeply divided, and a large portion of the population is losing faith in the basic institutions that govern our society.  Personally, I don’t know how anyone can watch the video of what happened to George Floyd without having an emotional reaction.  Police brutality has been a massive problem in the United States for many years, and it has gotten to the point where most of the country no longer has faith in the police. 

Of course the rioters are not helping their cause by burning down the communities that they are supposedly defending.  And after causing so much chaos on Wednesday night, protesters were back in the streets of Minneapolis on Thursday

Protests and, in some cases, violence, continued Thursday in the aftermath of the death of George Floyd, a black man who died in police custody after a white officer pinned him to the ground under his knee.

Hundreds of protesters flooded Minneapolis streets Thursday evening for a march through downtown. Traffic was halted as a crowd of people stretched for up to four blocks. Protesters shouted “I can’t breathe” and “no justice, no peace; prosecute the police” as volunteer marshals in highlighter-colored vests directed traffic.

Sadly, this is just a small preview of what is coming to major cities all over America.

If you think that these riots about police brutality are intense, just wait until the economic riots start.

We are moving into a time when millions upon millions of Americans will become increasingly desperate as we plunge even deeper into a new economic depression.  On Thursday, we learned that another 2.1 million Americans filed initial claims for unemployment benefits last week…

First-time claims for unemployment benefits totaled 2.1 million last week, the lowest total since the coronavirus crisis began though indicative that a historically high number of Americans remain separated from their jobs.

Economists surveyed by Dow Jones had been looking for 2.05 million. The total represented a decrease of 323,000 from the previous week’s upwardly revised 2.438 million.

This was the 10th week in a row when the number of new claims for unemployment benefits has been above 2 million.

As I keep reminding my readers, prior to this year the highest that number had ever been for a single week was 695,000 in 1982.

So even after so many catastrophic weeks in a row, we are still at a level that is approximately three times higher than that old record.

Overall, 40.8 million Americans have filed new claims for unemployment benefits over the past 10 weeks.  That is the greatest spike in unemployment in all of U.S. history by a very wide margin, and it means that more than one-fourth of all the jobs in the United States have already been wiped out.

But for now, the impact of those job losses has been cushioned by the extremely generous $600 a week unemployment bonuses that the federal government has been handing out, but those benefits are set to expire at the end of July

Right now, many are able to take advantage of an additional $600 a week in unemployment benefits provided by the federal government on top of each state’s standard jobless benefit. But that benefit is set to expire at the end of July if Congress does not pass another stimulus bill to extend benefits.

If those benefits are not extended we will see a massive national temper tantrum, and right now President Trump and Republican leaders in the Senate do not plan to extend them.

We shall see what happens, but we may soon have tens of millions of very angry unemployed Americans that are unable to pay their bills anymore.

And with each passing day, more bad economic news just keeps rolling in.  We just learned that orders for durable goods were down 19.4 percent on a year over year basis last month, and we also just learned that pending home sales were down 34.6 percent in April compared to the same month a year ago.

As I discussed yesterday, we are watching a full-blown economic collapse begin to unfold, and the fact that many U.S. states are starting to “reopen for business” is not going to stop the momentum that has now been created.

During the first few weeks of the pandemic, there was just a trickle of major bankruptcies, but now that trickle has become a flood

In the first few weeks of the pandemic, it was just a trickle: companies like Alaskan airline Ravn Air pushed into bankruptcy as travel came to a halt and markets collapsed. But the financial distress wrought by the shutdowns only deepened, producing what is now a wave of insolvencies washing through America’s corporations.

In May alone, some 27 companies reporting at least $50 million in liabilities sought court protection from creditors — the highest number since the Great Recession. They range from well-known U.S. mainstays such as J.C. Penney Co. and J. Crew Group Inc. to air carriers Latam Airlines Group SA and Avianca Holdings, their business decimated as travelers stayed put.

And we are watching store closings occur at a rate that we have never seen before in our entire history.

At this point, Coresight Research is projecting that about 25,000 stores will permanently close by the end of this calendar year

Coresight Research, which tracks retail openings and closings, has upped its projected store closures for 2020 from 8,000 at the beginning of the year to 15,000 at the beginning of March to about 25,000 now.

“That’s unlike anything the industry has ever seen,” Coresight CEO and founder Deborah Weinswig said. “It’s the speed with which it’s all happening which has been a little surprising.”

So much anger was building up all over America during the “good years”, and now this new economic depression is going to make things much, much worse.

When there are no jobs available and people can’t even provide the basics for their families, we are going to see frustration on a scale that is unlike anything we have ever witnessed before.

So please take careful note of what is happening in the streets of Minneapolis right now, because that is what the future is going to look like in all of our major cities.

Published:5/30/2020 7:16:15 AM
[Markets] Stock Market Wrap-Up: Yes, This Retail Stock Really Did Hit a Record High Friday Market participants were initially wary about the possibility of a big rise in tensions between the U.S. and China over recent actions in Hong Kong, but a White House press conference turned out not to be as confrontational as some had feared. The Dow Jones Industrial Average (DJINDICES: ^DJI) lost ground, but the S&P 500 (SNPINDEX: ^GSPC) and Nasdaq Composite (NASDAQINDEX: ^IXIC) had modest gains. Much of the Nasdaq's outperformance came from a great day for technology stocks, which once again proved how resilient their business models are, even in the face of coronavirus-provoked economic pressures. Published:5/29/2020 4:44:50 PM
[Markets] The Dow and S&P 500 join the Nasdaq on the plus side after Trump's China words The Dow and S&P 500 join the Nasdaq on the plus side after Trump's China words Published:5/29/2020 2:13:56 PM
[Markets] Dow stumbles 100 points lower early Friday as Nasdaq ekes out a gain Dow stumbles 100 points lower early Friday as Nasdaq ekes out a gain Published:5/29/2020 8:41:37 AM
[Markets] Dow's 100-point fall led by losses for shares of Walt Disney, Goldman Sachs DOW UPDATE Shares of Walt Disney and Goldman Sachs are trading lower Thursday afternoon, dragging the Dow Jones Industrial Average into negative territory. Shares of Walt Disney (DIS) and Goldman Sachs (GS) are contributing to the index's intraday decline, as the Dow (DJIA) was most recently trading 103 points (0. Published:5/28/2020 3:07:47 PM
[Markets] Dow finishes down nearly 150 points after giving up earlier gains Dow finishes down nearly 150 points after giving up earlier gains Published:5/28/2020 3:07:47 PM
[Markets] Dow trims gains in final hour of trade Thursday as Trump seen holding a Friday news conference on China U.S. stocks pared solid gains within the final hour of trade Thursday afternoon, as markets digested a report that President Donald Trump was set to hold a news conference on China on Friday. Word of an event comes as tensions between China and the U.S. have ratcheted higher, particularly as Beijing was seen threatening the autonomy of Hong Kong. The Dow Jones Industrial Average was up 0.2% at 25,602 but off its best level at 25,758.79, while the S&P 500 index was up 0.5% at 3,051 and the Nasdaq Composite Index was holding onto a 0.3% gain at 9,444. The U.S. on Wednesday said it no longer considered Hong Kong highly autonomous under a 1992 law, a move that could lead to measures to limit Hong Kong's trade privileges and open the door to sanctions against individuals the U.S. sees as suppressing civil liberties in the territory. Published:5/28/2020 2:36:43 PM
[Markets] Merck, Pfizer share gains contribute to Dow's 86-point climb DOW UPDATE Shares of Merck and Pfizer are trading higher Thursday afternoon, sending the Dow Jones Industrial Average into positive territory. Shares of Merck (MRK) and Pfizer (PFE) are contributing to the blue-chip gauge's intraday rally, as the Dow (DJIA) is trading 86 points, or 0. Published:5/28/2020 2:07:31 PM
[Markets] Dow, S&P 500 rally again, but NYSE Arms suggests panic-like selling behavior While the Dow Jones Industrial Average and S&P 500 head for a third-straight day of significant gains, the NYSE's Arms Index indicates market internals are exhibiting signs of panic selling, suggesting investors may be looking to sell on the day's rally. The number of stocks trading higher on the big board outnumbered decliners by a ratio of 1.24 to 1, but volume in declining stocks is leading advancers by a 1.77-to-1 ratio. That pushed the Arms Index to 2.195, the highest reading since it reached 2.486 on March 3, when Dow plummeted 786 points, or 2.9% and the S&P 500 plunged 2.8%. The Arms is a volume-weighted breadth measure that tends to rise above 1.000 when stocks sell off. Many market technicians view gains above 2.000 as suggesting panic-like selling, as volume in losing stocks jumps relative to the number of stocks declining. But on Thursday, the Dow is up 146 points, or 0.6%, and the S&P 500 is rallying 0.8%; over the past two days, the Dow had surged 1,083 points and the S&P 500 had run up 2.7%. Published:5/28/2020 1:36:04 PM
[Markets] Dow up 200 points on gains in shares of Boeing, Pfizer DOW UPDATE Shares of Boeing and Pfizer are posting strong returns Thursday afternoon, propelling the Dow Jones Industrial Average into positive territory. The Dow (DJIA) was most recently trading 205 points, or 0. Published:5/28/2020 1:07:42 PM
[Markets] GE's stock pulls back after CEO Culp presents at analyst conference Shares of General Electric Co. pulled back 2.9% in midday trading, after running up 13.7% over the past two sessions, as the industrial conglomerate provided an update on its business at analysts conference. The selloff reverses and earlier intraday gain of as much as 2.7% soon after the opening bell. Chief Executive Larry Culp said at the Bernstein Strategic Decisions Conference that second-quarter free cash flow (FCF) was expected to be negative $3.5 billion to $4.5 billion, according to report in The Wall Street Journal. That follows negative FCF of $2.2 billion in the first quarter. In the post-earnings conference call with analysts on April 29, Chief Financial Officer Carolina Dybeck Happe said looking forward, she expected "continued free cash flow pressure," according to a FactSet transcript. Culp also said Thursday at the Bernstein conference that business in its Aviation segment remained slow, and expects increased costs in the "hundreds of millions" in the second quarter as the value of long-term service contracts are reduced, as they are now expected to be less profitable, the WSJ report said. GE's stock has slumped 35.0% over the past three months, while the Dow Jones Industrial Average has gained 1.3%. Published:5/28/2020 12:06:00 PM
[Markets] Dow Jones Rises Despite Trump Tweet, China Worries And Dismal Economic Data Stocks pared early gains midday with the Dow Jones Industrial Average giving up a 195-point advance as China, jobless claims and President Trump's social media attack weighed. Published:5/28/2020 11:39:12 AM
[Markets] Dow climbs 69 points on gains in shares of Boeing, Merck DOW UPDATE The Dow Jones Industrial Average is up Thursday morning with shares of Boeing and Merck leading the way for the blue-chip average. The Dow (DJIA) was most recently trading 69 points, or 0.3%, higher, as shares of Boeing (BA) and Merck (MRK) are contributing to the index's intraday rally. Published:5/28/2020 9:04:36 AM
[Markets] The Dow Is Set for a Higher Open — and 2.1 Million Jobless Claims Can’t Change That 8:36 a.m. The Dow Jones Industrial Average looks set for a higher after the number of Americans filing for jobless claims fell but was larger than economists had predicted. Dow futures have gained 141, after being up 140 point at 8:08 a.m. before the release. S&P 500 futures have advanced 2.5 points, and Nasdaq Composite futures have risen 4.55 points, both near where they were before the release. Published:5/28/2020 8:03:58 AM
[Markets] Rabobank: Free Speech And Free Markets Go Hand In Hand; We Have Neither Rabobank: Free Speech And Free Markets Go Hand In Hand; We Have Neither Tyler Durden Thu, 05/28/2020 - 08:55

Submitted by Rabobank's Michael Every

I keep repeating that (some) markets are not properly reflecting reality and that the power of markets is not in their elevated heights (“Dow 36,000!”) but in their honest price discovery. They are supposed to be the little boy pointing out that the Emperor has no clothes. If they don’t do that, they aren’t good for much. Except perhaps acting as a substitute for wage growth, if you want to join me in believing this has been global central-bank policy for the past few decades. (And which may be needed again soon given reports in the Fed’s latest Beige Book that wage and benefit cuts are already being seen; they also make the rich much richer, of course – which I am sure is just a coincidence.)

At a time when the corpulent Emperors of monetary policy are sitting on as many little boys as possible to shut them up, and the financial press are mainly throwing bouquets of flowers at their bare majesty, it seems appropriate that in a general sense we are seeing arguments about news-flow as a corollary to pricing signals. Yes, ideally we don’t want to be recommended bleach to drink as a virus cure. However, as philosophers have pointed out, and market theory is supposed to accept, all voices may contain a slice of the truth. As Voltaire said “I disapprove of what you say, but I will defend to the death your right to say it.”; nowadays that would more probably be “I defend to the death my right to disapprove of what you say.” After all, Voltaire was a rabid anti-Semite who should probably be de-platformed.

As such, it seems appropriate that we are seeing US President Trump get drawn into a row over Twitter, which slapped a ‘fact-check’ label on one of his latest tweets. There are claims that he will sign an executive order today to strip US social media giants of the legal immunity they claim as ‘platforms’ if they act as censors, which de facto makes them publishers instead. (As well as being gargantuan corporations that like the things that gargantuan corporations do.)

So is this Trump censorship, or is it censorship of censorship? Expect arguments to rage. Yet consider that this month alone we have seen passionately anti-Trump Michael Moore’s new film ‘Planet of the Humans’ dropped from YouTube “for copyright reasons”, and YouTube also admit that a “software glitch” had seen a series of videos critical of China all demonetised. That’s a trend many other YouTubers have complained about, and which has led the incredibly-popular Joe Rogan podcast to move to Spotify to ensure freedom of speech. (And USD100m as a signing fee.)

Also, if we are going to fact check Tweets, how about ones from all politicians or economists? Is it “true” that austerity is a great idea in a recession, as so many voices said post-2008 and some still say again now? The policy has failed utterly by many measures. Is it “true” that free trade always generates prosperity? Country after country is scrambling to bring supply chains home in the Hamiltonian argument I have been making for many years. Is it “true” QE narrows the gaps between rich and poor, as an ECB tweet last year tried to show graphically? I say otherwise: do I get flagged for it? Is it “true” we will see a ‘V-shaped’ recovery in a 2-metre/6-foot economy, as some central bankers are saying? Is it “true” that debt liability sharing within the Eurozone is a good thing? There are two very different answers to that, depending on which side you stand – as we see with the new proposal of a huge new EU budget, including grants(!), and the pushback from the opposed Frugal Friends. In short, free speech, freedom to see all sides of complicated arguments, and free markets ideally all go hand: and if one goes, they can all go.

And perhaps they have. Because markets are again largely ignoring what just happened between the US and China. Yesterday US Secretary of State Pompeo told Congress “Hong Kong does not continue to warrant treatment under United States laws in the same manner as US laws were applied to Hong Kong before July 1997. No reasonable person can assert today that Hong Kong maintains a high degree of autonomy from China, given facts on the ground.” It is now a certainty Congress will vote to trigger the ‘nuclear option’ of removing Hong Kong’s separate legal status, which would open the door to restrictions on trade, visas, and technology, as well being a huge psychological vote of no confidence in Hong Kong’s future. The Hang Seng reaction? To go up, while CNH is flat. This was probably party due to mainland money - or perhaps the locals mistook the US response for that of Angela Merkel, who in bold EU values-based foreign policy fashion basically shrugged.

Indeed local Hong Kong chatter is again that this latest US step, which wasn’t going to happen a few weeks ago, now does not mean anything as China is the trading future and the US is the past – and powerless. Fact-check, please! If the imposition of a Hong Kong national security law is approved by the National People’s Congress today we will almost certainly see US sanctions against Chinese entities in Hong Kong (on top of the risk of other sanctions stemming from a Uighur human rights bill just passed by the House of Representatives). These could make Hong Kong of no de facto use to Beijing as a capital conduit – and hence of little use at all. Welcome to the Eurodollar weapon. Some say this no longer matters because China can just access USD via other banking centres. Let’s put a fact-check marker on that too, because is the US really going to let China circumvent sanctions that easily? What just happened with Iran, for example?

Today we will find out how China is going to react to the US action – and also to the Canadian court decision to proceed with the “outrageously wrong” extradition of Huawei CFO Meng Wanzhou to the US. On the US the Global Times editorial today notes: “A long-term rivalry between China and the US is inevitable.…[a] core advantage of the US is its financial hegemony, which will make China's exchanges with the outside world inconvenient. If the US dares to resort to financial means, it will hurt the integrity of the financial system it leads. If a financial war spirals out of control, it is the US that will suffer the most.” Again, we need a (partial) fact-check there given the Fed is and can do whatever it takes and the PBOC isn’t and can’t. (Moreover, the editorial also says China will leap up the technology ladder to overcome US tech dominance: this as a report published yesterday argues China is “unlikely” to achieve its target of 70% self-sufficiency in semiconductor production by 2025. Tech, trade, and capital; tech, trade, and capital.) On Meng, the Global Times says Canada’s upcoming decision on Huawei is now key and “Whether Canada can keep its stance or will surrender to US pressure…will influence whether the already strained relationship will come to a full head.”

From underneath the Emperor’s ample posterior a muffled voice is shouting “Geopolitical risk!; and while little boys may be stifled by layers of liquidity/flab, they still have sharp teeth that can bite - as can geopolitics. This may not matter for stocks given they can always be bought by central banks if needed – but it does arguably matter for key FX crosses, which along with low, low bond yields are still a fact-check we can rely on…like the honest brokers of social media(?).

Published:5/28/2020 8:03:58 AM
[Markets] Apple price target lifted at J.P. Morgan on optimism for iPhone SE in India J.P. Morgan analyst Samik Chatterjee lifted his price target on Apple Inc.'s stock to $365 from $350 on Thursday, writing of his optimism for the lower-cost iPhone SE's potential in emerging markets. "Apple has struggled to date to build a material presence in India on account of premium price positioning as well as other drivers," he wrote, but the iPhone SE could be a "panacea" for Apple's problems in the country. "We estimate if Apple were able to capture roughly half of the 30 million to 35 million opportunity, it would translate into a 215 million steady annual replacement run-rate for iPhones globally and a ~$7 billion revenue or ~$0.70 cents of EPS upside," Chatterjee said. He argued that the $399 price point looks attractive and could help Apple gain market share from Samsung in India. He has an overweight rating on Apple's stock, which is down 0.9% in premarket trading Thursday. It's gained 16% over the past three months as the Dow Jones Industrial Average has added 0.6%. Published:5/28/2020 7:37:49 AM
[Markets] Dow Jones Futures: China OKs Hong Kong Security Law; Vertex, Netflix Lead Bullish Rebounds In Coronavirus Market Rally Dow Jones futures pared gains as China OK'd a national security law for Hong Kong, a new worry for the coronavirus stock market rally. Published:5/28/2020 6:05:38 AM
[Markets] Disney downgraded to underperform at Imperial on concerns about theme parks, film business in pandemic Imperial Capital downgraded Walt Disney Co. shares to underperform from in-line on Thursday, on expectations the company's theme parks and film business will be hurt by the coronavirus pandemic. Analyst David Miller lowered his stock price target to $105 from $107, about 14% below its current level. Disney shares have climbed 21.2% in the last four weeks, and "we think that based on our experience, the stock has risen too far too fast and the performance is simply due to excitement around the prospects of the domestic theme parks re-opening, for which Disney submitted a plan to Orange County, Florida government officials just yesterday," Miller wrote in a note to clients. The stock also got a boost from the official re-opening of "Disney Springs" in Florida on May 15, a small shopping complex that will have little effect on the company's earnings, said Miller. The analyst is advising investors to take profit on Disney stock as it looks like a name that should be traded rather than owned, at least for now, he wrote. Disney shares were down 0.4% premarket and have lost 16% in the year to date, while the Dow Jones Industrial Average has lost 10%. Published:5/28/2020 5:33:39 AM
[Markets] Dow futures shoot higher after Wall Street's latest rally U.S. stock index futures gained late Wednesday, after benchmark indexes surged forward in regular trading. As of midnight Eastern, Dow Jones Industrial Average futures were up about 100 points, or 0.4%, while S&P 500 futures were flat and Nasdaq-100 futures fell after word of an upcoming executive order by President Donald Trump against social-media companies. Stocks jumped Wednesday despite rising tensions between the U.S. and China, as the U.S. and European countries continued to gradually reopen from pandemic-related shutdowns. The Dow advanced 553.16 points, or 2.2%, to close at 25,548.27, while the S&P 500 rose 44.36 points, or 1.5%, ending at 3,036.13. The Nasdaq Composite gained 72.14 points, or 0.8%, to close at 9,412.36, staging its biggest intraday percentage comeback since Feb. 28, according to Dow Jones Market Data. Published:5/28/2020 12:47:47 AM
[Markets] U.S. Stocks Charge Past a Milestone in Late Rally Shares of the most coronavirus and economically sensitive firms rose, allowing the Dow to close above 25,000 points since March 10. Published:5/27/2020 3:46:32 PM
[Markets] Dow closes back above 25,000 level with over 500-point gain Dow closes back above 25,000 level with over 500-point gain Published:5/27/2020 3:17:08 PM
[Markets] The Dow is on the verge of crossing an important line in the sand that may signal that a record high is next The Dow is flirting with a key technical level that is viewed by market technicians as signal that a new bullish trend may be at hand. Published:5/27/2020 2:49:24 PM
[Markets] Market Extra: The Dow is on the verge of crossing an important line in the sand that may signal that a record high is next The Dow is flirting with a key technical level that is viewed by market technicians as signal that a new bullish trend may be at hand.
Published:5/27/2020 2:49:24 PM
[Markets] Bill Ackman Dumps Berkshire, Blackstone As Pershing Returns 21% YTD Bill Ackman Dumps Berkshire, Blackstone As Pershing Returns 21% YTD Tyler Durden Wed, 05/27/2020 - 14:56

It looks like hell isn't coming after all.

Just over two months after billionaire investor Bill Ackman scared CNBC's viewers with his prediction that "hell is coming" and "America will end as we know it" unless America is shut down for 30 days - while at the same time admitting he was buying stocks hand over fist - Ackman's "investing strategy" appears to be bearing fruit. According to Reuters, Pershing Square is up between 21% and 27% this year. On the fund's call this morning, Ackman disclosed that his fund had exited Berkshire Hathaway (Ackman and Buffett sycophant Whitney Tilson must feel quite conflicted about this) and the position in Blackstone he had put on just months prior. Ackman also said that he exited Park Hotels & Resorts. 

As discussed previously, Ackman's returns for the year were boosted along by a short credit hedge that Ackman, in all fairness, disclosed he was putting on well before the market reacted to the pandemic. The hedge paid off 100x, netting the firm about $2.6 billion for the fund. 

Ackman also said he added Lowe's about 6 weeks ago and got the "bargain" of a lifetime, and said that he added Starbucks in the $60/share region.

Ackman had said earlier this month that tech companies could become even more dominant as a result of the pandemic:

"The impact of the crisis on companies like Amazon is actually a little bit of short-term negative because they're spending a lot of money managing through this, but it's long-term hugely beneficial to the company."

Recall that it has barely been 2 months since Bill Ackman took to CNBC's airwaves to proclaim that "hell is coming", he a few days before the unofficial bottom for the Dow at 18,213 when Powell announced unlimited QE and expanded into buying corporate bonds, helping rebound the Dow above 20,000, where it has been since.  Three days later the hedge fund manager admitted  he went "all in" long on the market. 

Published:5/27/2020 2:14:41 PM
[Markets] Dow Jones Holds Above 25,000, But Stocks Mixed As China Tensions Mount Again Stocks remained well off session highs amid falling techs and rising China tensions, but the Dow Jones Industrial Average held above the 25,000 level. Published:5/27/2020 12:44:48 PM
[Markets] Apple passes Microsoft into 1st place on list of largest U.S. companies Shares of Apple Inc. rose 0.2% in morning trading Wednesday, enough for the technology giant to leapfrog Microsoft Corp. into first place on the list of largest U.S. companies by market capitalization, for the first time in three months. Apple's stock price rose 65 cents, which raised Apple's market cap by $2.82 billion to $1.376 trillion. Meanwhile, shares of Microsoft fell $2.68, or 1.5%, to lower the software and cloud giant's market cap down by $20.32 billion to $1.357 trillion. The last time Apple was the largest company by market cap was March 18, when it ended the day at $1.081 trillion versus Microsoft's $1.069 trillion. Meanwhile, Apple and Microsoft remained well ahead of third-place Amazon.com Inc. , which stock fell $48.23, or 2.0%, to lower the e-commerce giant's market cap (498,776,032) by $24.06 billion to $1.184 trillion. Apple's stock has not rallied 16.0% over the past three months, while Microsoft share have advanced 13.1% and the Dow Jones Industrial Average has slipped 1.9%. Published:5/27/2020 9:43:02 AM
[Markets] Dow Jones Futures Jump 400 Points; Tech Giants Alphabet, Apple Stage Breakouts In Coronavirus Vaccine Stock Market Rally The Dow Jones futures were higher late Tuesday following the coronavirus stock market rally. Five top stocks near buys include Alphabet and Apple. Published:5/27/2020 5:11:46 AM
[Markets] Dow Jones Futures Jump To Session Highs; Tech Giants Alphabet, Apple Stage Breakouts In Coronavirus Vaccine Stock Market Rally The Dow Jones futures were higher late Tuesday following the coronavirus stock market rally. Five top stocks near buys include Alphabet and Apple. Published:5/26/2020 11:10:08 PM
[Markets] Dow Jones Futures Hit Session Highs; Tech Giants Alphabet, Apple Stage Breakouts In Coronavirus Vaccine Stock Market Rally The Dow Jones futures were higher late Tuesday following the coronavirus stock market rally. Five top stocks near buys include Alphabet and Apple. Published:5/26/2020 8:40:14 PM
[Markets] Dow Jones Futures Reverse Lower; Tech Giants Alphabet, Apple Stage Breakouts In Coronavirus Vaccine Stock Market Rally The Dow Jones futures were lower late Tuesday following the coronavirus stock market rally. Five top stocks near buys include Alphabet and Apple. Published:5/26/2020 7:38:23 PM
[Markets] Dow Jones Futures Higher; Tech Giants Alphabet, Apple Stage Breakouts In Coronavirus Vaccine Stock Market Rally The Dow Jones futures were higher late Tuesday following the coronavirus stock market rally. Five top stocks near buys include Alphabet and Apple. Published:5/26/2020 5:37:46 PM
[Markets] Stock Market Wrap-Up: Why Luckin Coffee Jumped 50% While Hertz Stock Crashed The stock market moved higher on Tuesday, reflecting rising optimism among investors about the prospects for a return to more normal business conditions in the coming weeks and months. Public health officials fear that relaxed mitigation efforts could bring back a resurgence of COVID-19 outbreaks, but progress on several fronts toward a possible vaccine also made market participants more comfortable. The Dow Jones Industrial Average (DJINDICES: ^DJI) led the way with a greater than 2% gain, with smaller rises for the S&P 500 index (SNPINDEX: ^GSPC) and Nasdaq Composite (NASDAQINDEX: ^IXIC). Published:5/26/2020 4:37:20 PM
[Markets] Dow notches over 500-point gain as stocks rally on vaccine, recovery hopes Dow notches over 500-point gain as stocks rally on vaccine, recovery hopes Published:5/26/2020 3:36:54 PM
[Markets] Vaccine Vacillation Sparks Stock Surge, Dollar Purge Vaccine Vacillation Sparks Stock Surge, Dollar Purge Tyler Durden Tue, 05/26/2020 - 16:01

US equity markets roared higher overnight on several vaccine-related headlines (but repeated China sanctions headlines - especially at the close, took the shine off the ball, especially for tech stocks)...

Shrugging off Gilead's Remdesivir "statistically insignificant" results and Moderna's reality checks in favor of Merck and Novavax...

NOTE - Moderna is now 20% below its secondary offering levels.

Novavax soared early on the back of an announcement that it was planning on starting a phase 1 trial in Australia... no results at all... But the market didn't hold all those gains...

It appears Dr.Fauci's optimism was unfounded... just as his pessimism was too...

Of course, US equity markets are not alone in their irrationality. Nothing says bid the yuan like Washington threatening China with sanctions and capital controls...

Source: Bloomberg

And nothing says Buy Hong Kong stocks like the cavalcade of freedom-crushing new laws and headlines unleashed from the mainland this weekend...

Source: Bloomberg

While the Nasdaq (blue) lagged on the day it was still higher on the day BUT just look at Trannies (green) and Small Caps (red). Dow broke above 25k and S&P above 3,000 before the whole fragile facade fell apart on repeated headlines on China sanctions...

The S&P 500 broke above its 200-DMA and Small Caps tested their 100DMA (as The Dow got close) but the late-day China sanctions headlines spoiled the party...

But it was a different crowd leading the day with FANG stocks back at one-week lows...

Source: Bloomberg

As FANGs faltered, Bank stocks soared...

Source: Bloomberg

But the "virus fear" is fading fast once again...

Source: Bloomberg

"Most Shorted" Stocks extended their fourth squeeze leg higher...

Source: Bloomberg

Treasury yields were higher across the curve with the long-end notably underperforming (2Y +1bps, 10Y +7bps)...

Source: Bloomberg

The Dollar dumped notably today - biggest daily drop in 2 months...

Source: Bloomberg

Breaking below critical support...

Source: Bloomberg

Cryptos have slipped lower since Friday...

Source: Bloomberg

Oil and copper ended the day higher but, despite the dump in the dollar, precious metals ended the day down...

Source: Bloomberg

Finally, you have to laugh really... The last 16 trading days have seen the S&P rise 163.0 points from the US day session close to the open the next day... and fall 4.3 points from the open of the US day session to the close.

Source: Bloomberg

Published:5/26/2020 3:06:34 PM
[Markets] Dow Soars 700 Points On Economic Optimism; Google Stock In Buy Zone The Dow Jones Industrial Average gained momentum in the stock market today while Google stock triggered a key buy signal. Published:5/26/2020 2:36:55 PM
[Markets] Dow Jones Roars Back Above 25,000, S&P 500 Retakes 3,000 For First Time Since March Stocks rallied Tuesday amid rising hopes for a coronavirus drug as the Dow Jones Industrial Average vaulted 660 points to get back above the 25000 level. Published:5/26/2020 1:36:43 PM
[Markets] The Dow has surged over 61,000% as it marks its 124th year — Here’s a brief history of the most popular stock-market barometer amid the coronavirus crisis The Dow has become one of the most widely tracked stock gauges in the U.S., if not the world, since its was created in 1896. Published:5/26/2020 12:06:16 PM
[Politics] Trump Touts Rising Stocks, Calls on States to Open Up ASAP President Donald Trump touted gains as the New York Stock Exchange opened its session significantly higher on Tuesday. "Stock Market up BIG, DOW crosses 25,000. S&P 500 over 3000," the president wrote on Twitter. He stressed that "States should open up ASAP. The Transition to... Published:5/26/2020 11:05:31 AM
[Markets] Trump urges states to open ‘ASAP’ as Dow surges Trump urges states to open ‘ASAP’ as Dow surges Published:5/26/2020 10:35:33 AM
[Markets] Dow industrials surge nearly 600 points in first half-hour of Tuesday trades Dow industrials surge nearly 600 points in first half-hour of Tuesday trades Published:5/26/2020 9:35:09 AM
[Markets] European stocks open higher on recovery hopes as TUI surges over 30% European stocks opened higher on Tuesday on economic recovery hopes. The FTSE 100 rallied 1.9% after a three-day break in the U.K., while the German DAX added 0.7%. Travel group Tui surged 32% after its CEO said the company will resume flights at the end of June, while Wirecard slipped 4% after delaying its 2019 results for a third time. Futures on the Dow Jones Industrial Average surged 491 points. Published:5/26/2020 2:33:17 AM
[Markets] Dow Jones Futures Jump; Five Titans Near Buy Points In Coronavirus Stock Market Rally Dow Jones futures surged, signaled strong gains for the coronavirus stock market rally. Apple, Tesla and AMD are near buy points. Published:5/26/2020 12:03:08 AM
[Markets] Dow Jones Futures: Breakouts Slowing In Coronavirus Stock Market Rally, But These Five Titans Are Near Buy Points Dow Jones futures: The coronavirust stock market rally is roaring on, but breakouts are slowing. Apple, Tesla, Microsoft, Google and AMD are near buy points though. Published:5/24/2020 5:54:20 PM
[Markets] Central Banks Are Destroying What Was Left Of Free Markets Central Banks Are Destroying What Was Left Of Free Markets Tyler Durden Sun, 05/24/2020 - 16:15

Authored by Alasdair Macleod via The Mises Institute,

President Reagan memorably said that the nine words you don’t want to hear are “I’m from the government, and I’m here to help.” Governments in all the major jurisdictions are now making good on that unwanted promise and are taking responsibility for everything from our shoulders.

Those receiving subsidies and loan guarantees are no doubt grateful, though they probably see it as the government’s duty and their right. But someone has to pay for it. In the past, the redistribution of wealth through taxes meant that the haves were taxed to give financial support to the have-nots, at least that was the story. Today, through monetary debasement nearly everyone benefits from monetary redistribution.

This is not a costless exercise. Governments are no longer robbing Peter to pay Paul. They are robbing Peter to pay Peter as well. You would think this is widely understood, but the Peters are so distracted by the apparent benefits they might or might not get that they don’t see the cost. They fail to appreciate that printing money is not just the marginal source of financing for excess government spending, but that it has now become mainstream.

There is almost a total absence in the established media of any commentary on the consequences of monetary inflation, and in a cry for more we even have financial experts warning us of a deflationary collapse and the need for the Fed to introduce negative interest rates to stave off deflation. Yes, there are deflationary forces, because banks wish to reduce their loan exposure at a time of increasing risk. But we can be sure that central banks and their political masters will do everything they can to counter the trend of contracting bank credit by increasing base money. There can only be one outcome: the debasement and eventual destruction of fiat currencies.

There is an aspect of the destruction brought about by monetary policy which is almost never considered by policymakers, and that is how it distorts the allocation of capital and leads to its misallocation. In free markets, capital is scarce and must be used to greatest effect if the consumer is to be properly served and the entrepreneur is to maximize his profits.

Capital comes in several forms and encompasses every aspect of production: principally an establishment, machinery, labor, semimanufactured goods and commodities to be processed, and money. An establishment, such as a factory or offices, and the availability of labor are relatively fixed in their capacity. Depending on their deployment and capacity they produce a limited amount of goods. It is just one form of capital, money and credit, which central banks and the banking system now provide, and which in its unbacked form is infinitely flexible. Consequently, attempts to stimulate production by monetary means still run into the capacity constraints of the other forms of capital.

Monetary policy has been increasingly used to manipulate capital allocation since the early days of the Great Depression. The effect has varied, but it has generally come up against the constraints of the other forms of capital. Where there is excess labour, it takes time to retrain it with the specialized skills required, a process hampered by trade unions ostensibly protecting their members but in reality resisting the reallocation of labor resources. Government control over planning and increasingly stifling regulations, again putting a brake on change, mean that changes and additions to the use of establishments have lengthened the time before entrepreneurial investment is rewarded with profits. Government intervention has also discouraged the withdrawal of monetary capital from unprofitable deployment, or malinvestments, lengthening recessions needlessly.

When the advanced nations had strong industrial cores, the periodic expansions of credit and their subsequent sudden contractions led to observable booms and busts in the classical sense, since production of labor-intensive consumer goods dominated production overall.

There have been two further developments.

The first was the abandonment of the Bretton Woods agreement in 1971, which led to a substantial rise in prices for commodities. The broad-based UN index of commodities rose from 33 to 157 during the decade, a rise of 376 percent. This input category of production capital compared unfavorably with US consumer price increases of 112 percent  over the decade, the mismatch between these and other categories of capital allocation making economic calculation a fruitless exercise.

The second development was the liberation of financial controls in the mid-eighties, London’s Big Bang and the repeal of America’s Glass-Steagall Act of 1933, allowing commercial banks to fully embrace and exploit investment banking activities.

The banking cartel increasingly directed its ability to create credit toward purely financial activities mainly for their own books, thereby financing financial speculation while deemphasising bank credit expansion for production purposes for all but the larger corporations. Partly in response, the nineties saw businesses move production to low-cost centers in Southeast Asia, where all forms of production capital, with the exception of monetary capital, were significantly cheaper and more flexible.

There then commenced a quarter-century of expansion of international trade replacing much of the domestic production of goods in the US, the UK, and Europe. It was these events that denuded America of its manufacturing, not unfair competition as President Trump has alleged, and Germany’s retention of manufactures proves this. But the effect has been to radically alter how we should interpret the effects of monetary expansion on the US economy and others, compared with Hayekian triangles and the like.

Business cycle research had assumed a capitalistic structure of savers saving and thereby making monetary capital available to entrepreneurs. Changes in the propensity to save sent contrary signals to businesses about the propensity to consume, which caused them to alter their production plans. Based on the ratio between consumer spending and savings, this analytic model has been corrupted by the state and its licensed banks by replacing savers with former savers now no longer saving, and even borrowing to consume.

Today, the inflationary origins of investment funds for business development are hidden through financial intermediation by venture capital funds, quasi-government funds, and others. Being mandatory, pension funds continue to invest savings, but their beneficiaries have abandoned voluntary saving and run up debts, so even pension funds are not entirely free of monetary inflation. Insurance funds alone appear to be comprised of genuine savings within an inflationary system.

Other than pension funds and insurance companies, Keynes’s wish for the euthanasia of the saver has been achieved. He went on to suggest there would be a time “when we might aim in practice…at an increase in the volume of capital until it ceases to be scarce, so that the functionless investor will no longer receive a bonus.”

Now that everywhere bank deposits pay no interest, his wish has been granted, but Keynes did not foresee the unintended consequences of his inflationist policies which are now being visited upon us. Among other errors, he failed to adequately account for the limitation of nonmonetary forms of capital, which leads to bottlenecks and rising prices as monetary expansion proceeds.

The unintended consequences of neo-Keynesian policy failures are shortly to be exposed. The checks and balances on the formation and deployment of monetary capital in the free market system have been completely destroyed and replaced by inflation. So, where do you take us from here, Mr. Powell, Mr. Bailey, Ms. Lagarde, Mr. Kuroda?

Taking Stock

We can now say that America, the nation responsible for the world’s reserve currency, has encouraged policies which have turned its economy from being a producer of goods with supporting services as the source of its citizens’ wealth into little more than a financial casino. The virtues of saving and thrift have been replaced by profligate spending funded by debt. Unprofitable businesses are being supported until the hoped-for return of easier times, which are now gone.

Cash and bank deposits (checking accounts and savings deposits) are created almost entirely by inflation and currently total $15.2 trillion in the US, while total commercial bank capital is a little under $2 trillion. This tells us crudely that the $13 trillion sitting in customer accounts can be attributed to bank credit inflation. Increasing proportions of those customers are financial corporations and foreign entities, and not consumers maintaining cash and savings balances.

On the other side of bank balance sheets is consumer debt, mostly off balance sheet, but ultimately funded on balance sheet. Excluding mortgages, the total consumer debt, comprising credit card, auto, and student debt, was $3.86 trillion in mid-2019, amounting to an average debt of $27,571 per household, confirming the extent to which consumer debt has replaced savings.3

At $20.5 trillion, bank balance sheets are far larger than just the sum of cash and bank deposits, giving them a leverage of over ten times their equity. Bankers will be very nervous of the current economic situation, aware that loan and other losses of only 10 percent wipe out their capital. Meanwhile, their corporate customers are either shut down, which means that most of their expenses continue while they have no income, or they are suffering payment disruptions in their supply chains. In short, bank loan books are staring at disaster. Effectively, the whole banking system is underwater at the same time that the Fed is extolling them to join with it in rescuing the economy by expanding their balance sheets even more.

The sums involved in supply chains are considerably larger than the US’s GDP. Onshore, it is a substantial part of the nation’s gross output, which captures supply chain payments at roughly $38 trillion. Overseas, there is a further mammoth figure feeding into the dollar supply chain, taking the total for America to perhaps $50 trillion. The Fed is backstopping the foreign element through currency swaps and the domestic element mainly through the commercial banking system. And it is indirectly funding government attempts to support consumers who are in the hole for that $27,571 on average per household.

In short, the Fed is committed to rescuing all business from the greatest economic collapse since the Great Depression and, probably greater than that, to funding the US government’s rocketing budget deficits and funding the maintenance of domestic consumption directly or indirectly through the US Treasury, while pumping financial markets to achieve these objectives and preserve the illusion of national wealth.

Clearly, we stand on the threshold of an unprecedented monetary expansion. Part of it will be, John Law–style, to ensure that inflated prices for US Treasurys are maintained. At current interest rates, debt servicing was already costing the US government 40 percent of what was expected to be this year’s government deficit. That bill will now rise beyond control even without bond yields rising. Assistance is also being provided to the corporate debt market. Blackrock has been deputed to channel the Fed’s money-printed investment through ETFs (exchange-traded funds) specializing in this market. So not only is the Fed underwriting the rapidly expanding US Treasury market, but it is underwriting commercial dollar debt as well.

In late 1929, a rally in the stock market was prolonged by a similar stimulus, with banks committed to buying stocks and the Fed injecting $100 million in liquidity into markets by buying government securities. Interest rates were cut. And when these attempts at maintaining asset prices failed, the Dow declined, losing 89 percent of its value from September 1929.

Today, similar attempts to rescue economies and financial markets by monetary expansion are common to all major central banks, with the possible exception of the European Central Bank (ECB), which faces the unexpected obstacle of a challenge by the German Federal Constitutional Court claiming primacy in these matters. There is therefore an added risk that the global inflation scheme will unravel in Europe, which would rapidly lead to funding and banking crises for the spendthrift member states. Doubtless, any financial contagion will require yet more money printing by the other major central banks to ensure that there are no bank failures in their domains.

Whither the Exit?

So far, few commentators have grasped the implications of what amounts to the total nationalization of the American economy by monetary means. They have only witnessed the start of it, with the Fed’s balance sheet reflecting the earliest stages of the new inflation which has seen its balance sheet increase by 61 percent so far this year. Not only will the Fed battle to fund everything, but it will also have to compensate for contracting bank credit, which we know stands at about $18 trillion.

The Fed must be assuming that the banks will cooperate and pass on the required liquidity to save the economy. Besides the monetary and operational hurdles such a policy faces, it cannot expect the banks to want responsibility for the management of businesses that without this funding would not exist. The Fed, or some other government agency, then has to decide on one of three broad options: further support, withdrawing support, or taking responsibility for business activities. This last option involves full nationalization.

We must not be seduced into thinking that this is an outcome that can work. The nationalization of failing banks and their eventual privatization is not a good precedent for wider nationalization, because a bank does not require the entrepreneurial flair to estimate future consumer demand and to undertake the economic calculations to provide for it. The state taking over business activities fails for this reason, as demonstrated by the collapse of totalitarian states such as the USSR and the China of Mao Zedong.

That leaves a stark choice between indefinite monetary support or pulling the rug from under failing businesses. There are no prizes for guessing that pulling rugs will be strongly resisted. Therefore, government support for failing businesses is set to continue indefinitely.

At some stage, the dawning realization that central banks and their governments are steering into this economic cul-de-sac will undermine government bond yields, despite attempts by central banks to stop it, even if the deteriorating outlook for fiat currencies’ purchasing power does not destroy government finances first.

Earlier in the descent into the socialization of money, nations had opportunities to change course. Unfortunately, they had neither the knowledge nor the guts to divine and implement a return to free markets and sound money. Those opportunities no longer exist, and there can be only one outcome: the total destruction of fiat currencies, accompanied by all the hardships that go with it.

Published:5/24/2020 3:26:42 PM
[Markets] Dow Average Showing Its Age Getting Crushed in Recovery Trade (Bloomberg) -- This week marks a milestone for the Dow Jones Industrial Average: its 124th birthday. Not that anyone watching markets needs a reminder it’s getting old.Wrinkles show in the gaping divide between the venerable gauge and its younger brethren. Like many grandparents, it’s struggling to keep up with tech. Plunges in Boeing Co. -- its biggest member at the start of February -- were very costly, and some wonder if the benchmark represents the 21st century economy at all, especially in the coronavirus age.“The Dow has been on its way out for years,” said John Ham, associate adviser at New England Investment and Retirement Group. “Obviously it’s going to stick around just because so many people are familiar with it. But as far as relevancy goes, it’s your grandfather’s index.”Rarely have differences among indexes been more stark than they are now, in a market where the outbreak has made heroes of New Economy firms. Deprived of their benefits, the Dow remains down 14% in 2020 and was off 35% at its worst point. Meanwhile, the Nasdaq 100 has gained more than 7% this year, and the S&P 500 is 9% away from a positive return.Of course, the Dow has been consigned to history before, and survived. While it might be showing its age now, brief divergences among broad indexes are extremely common, and over long enough intervals they tend to even out.“Yes it is old,” said Howard Silverblatt, senior index analyst at S&P Dow Jones Indices. “If you constructed something today, you would probably do it differently. But it’s worked for 124 years. Even currently. And it is a much smaller portfolio yet it does track over time to the broader S&P 500.”Judging an index by whether it rises more than another misconstrues the purpose of stock benchmarks, which is to measure the progress of a market. The S&P 500’s edge over the Dow in 2020 doesn’t make it a better or more useful tool. It does, however, shine a light on what in the economy is calling the shots during the lockdown -- online and automated companies like Amazon.com Inc. and Netflix Inc.Divergences among the gauges also matter to the masses of investors who invest in funds that track them. Roughly $11.2 trillion is indexed or benchmarked to the S&P 500, according to S&P Dow Jones Indices, and $4.6 trillion in passively managed assets are tied to it. About $31.5 billion is benchmarked to the Dow, with $28.2 billion of passively managed funds linked.Thanks to tech’s dominance, those divisions are getting especially pronounced. Less than halfway through the year, the Nasdaq has already outperformed the Dow by a full percentage point on 17 different days. That’s more than in any full year since 2009, data compiled by Bloomberg show.A lot of the discrepancy boils down to which companies don’t make the Dow’s cut. Take Amazon.com, for example, whose 35% gain this year has accounted for almost half of the Nasdaq’s advance and 10% of the S&P 500’s. Because of the stock’s $2,500 price tag, the Dow’s old-fashioned price-weighting system makes it impossible to let Amazon in.Other high-fliers that have proved themselves in a stay-at-home world also don’t appear in the Dow. Nvidia Corp., Netflix Inc. and PayPal Holdings Inc. -- all winners in the coronavirus age -- are each up at least 30% this year. The venerable Dow has gotten none of that boost.“If all you’re following is the Dow, you’re missing some big components,” said Ryan Detrick, senior market strategist for LPL Financial. “I hate to say it’s old, but there’s no question that it’s behind the times if you look at the way it’s broken down.”The Dow Jones Industrial Average, created on May 26, 1896, is different from other indexes. It’s weighted by share price rather than market cap, which is more commonly used today. Such methodology essentially rules out inclusion of several of the largest companies in the world, among them Google parent Alphabet Inc., whose shares trade above $1,000 and would likely take up too much of the index.A committee chooses members, not an objective, rules-based process. According to Dow Jones Averages methodology papers found on its website, the Dow seeks to maintain “adequate sector representation” and favors a company that “has an excellent reputation, demonstrates sustained growth and is of interest to a large number of investors.”As a result, a company like jet-maker Boeing Co., down 60% this year, is more influential on the Dow’s performance than even the fourth largest American company, Alphabet, is on the S&P 500’s returns. Industrial firms, as the name of the index suggests, make up a notable 13% of the Dow -- 5 percentage points more than the sector’s weight in the S&P 500 and 11 percentage points more than the Nasdaq.Such focus has hurt in a pandemic-arranged stock market, where closed factories and shuttered economies have left industrials as one of the worst performing groups. The emphasis on the old-age economy is all the more striking in a world where companies that can operate with little face-to-face contact excel and a technological shift is accelerated.“That’s the unique nature of this particular recession, and it’s coming from the virus,” said Luke Tilley, chief economist at Wilmington Trust Corp. “If you take those contours of both big companies tend to have a buffer because of their access to capital markets and then you compound what is expected to be a dramatic change to the economy, you can get that bifurcated performance.”That leaves another way to view the index gap: the Dow is perhaps the stock gauge that is most representative of the broad economy precisely because it’s not dominated by these megacap firms. Surging shares of Amazon or Netflix certainly don’t reflect an America with over 20 million people unemployed and a collapse in spending.While the S&P 500 and Nasdaq may be methodologically optimized for a stay-at-home world, the Dow is certainly not.“Covid is actually amplifying all types of inequalities in the economy but the inequality in the market in terms of market concentration is also being amplified,” said Nela Richardson, an investment strategist at Edward Jones. “That rally is highly concentrated in a handful of firms. Most firms are still in bear territory.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P. Published:5/24/2020 7:20:42 AM
[Markets] Master Of Puppets: Bitcoin Cuts The Strings Master Of Puppets: Bitcoin Cuts The Strings Tyler Durden Sat, 05/23/2020 - 19:00

Authored by J.D.Salbego via CoinTelegraph.com,

The centralized financial system has compromised itself several times during the last two decades alone, and now it’s time for a serious change!

image courtesy of CoinTelegraph

Did you notice the song that Christian Bale’s character was jamming out to in his office when his partner came in to pull the money in The Big Short? Well, it happens to be my favorite metal band of all time: Metallica. And that song is called “Master of Puppets.” It’s almost ironic that as I was writing this article on the real truth behind what’s currently happening with the collapse of our financial and economic markets and calling it “Master of Puppets” — well, this movie scene popped in my mind. 

Yes, The Big Short is about the big 2008 financial crisis caused mainly by none other than the United States Federal Reserve. Spoiler alert! This will be one of the last times you read about any type of “correlation” here in this article.

Master of Puppets is Metallica’s third album, released in 1986, and it is probably the greatest metal album of all time. I still listen to it almost weekly. It’s great for working out or getting pumped up before a business meeting.

Anyways, back to the master. The curtain has been removed and the truth revealed: money is created out of thin air, and the banks and Wall Street are bathing in it.

To be very clear, there was a major and historical financial crisis by orders of magnitude already about to explode, and the COVID-19 pandemic just brought the economy to its knees a tiny bit quicker.

At a crucial intersection of events in time that couldn't have been more bluntly shoved in your face, 16 million people in the U.S. lost their jobs (and it's almost 36.5 million now.) And like a drunk driver recklessly running a red light at an intersection, the Dow Jones Industrial Average had the highest gains since 1938. All while the Fed was printing 4 trillion U.S. dollars out of thin air.

Where's the correlation? Whoever can find it will prove reincarnation exists, as they must be J. P. Morgan himself, reincarnated in the flesh — only 100 years even more crafty and conniving. And the government and the Federal Reserve say Bitcoin (BTC) is backed by thin air?

Our economy and the Federal Reserve is built on sticks (debt), and remember what happened to that little piggy that didn’t use bricks? Let’s hope the strings become severed from the puppet master and like a bungee cord slap back into its face with the inertia and momentum of more than 150 years of control, lies and manipulation.

The amount of truth that’s starting to become available and acknowledged by the general public about our governments and financial institutions is alarming, and hopefully this will be a stepping point into a new paradigm or, what I like to say, a “new world order.”

The Fed and the government’s economic strategy is just putting an already used Band-Aid (quantitative easing and debt monetization) on a gunshot wound. It’s not fixing the real problem. And for obvious reasons.

The U.S. has for years substantially spent trillions of dollars more than it brings in. To date, the debt owed by the federal government is over $25 trillion. Even more unfathomable to see, with some very complicated calculations, is that it’s looking like an estimated, or near, amount of $100 trillion will need to be printed (out of thin air), or what the Fed likes to call "increase the monetary base,” in order to bail out and keep institutions afloat.

This would then create the ripple effect of causing global economies to reach hyperinflation such as has been never seen before. That's called a lose-lose (or no-win) situation caused by none other than our government, the banking system, Wall Street and their combined mismanagement of our economies.

Understanding economics and monetary policies can be complicated for many, even myself, but it’s not complicated enough where I will not speak up and just sit here as the blind sheep being led by the wolf in sheep’s clothing to my bitter end.

To clarify, as it's important: Bitcoin will never be a replacement for a nation’s central bank currency or new digital currency that's in development now. It’s more the digital gold of the 21st century and onward.

But most importantly, and much like the U.S. fighting for its freedom and control from an unfair controlling centralized system such as England, it was the first to step in thousands of years of oppression to launch a revolution.

Like Joan of Arc or Che Guevara, who became martyrs for the better of society, Bitcoin itself has taken the beating from its first inception — including being declared a national security issue — but it was so powerful in igniting a revolution that it withstood all the hardships and persecution that the governments and central banks cast upon it. So, what it serves to be is the Medal of Honor for this new paradigm shift of the people’s money, leading the future of money with a more transparent, fair and peer-to-peer monetary system.

The more we talk about this, the more people may eventually get it — I hope. The general public should really try to understand this. It’s all credits and debts and leveraged positions and margins.

Remember that incredible luncheon scene in The Wolf of Wall Street where Matthew McConaughey’s super Wall Street broker character educates a young and hungry rookie broker, played by Leonardo DiCaprio, breaking down how the real system works? Matthew McConaughey, with a straight face and twist of sarcasm, says, “Fugayzi, fugazi. It's a wazzy, it's a woozy. It's fairy dust. It doesn't exist. It's never landed. It is no matter. It's not on the elemental chart. It’s not f------ real.”

Just so you know: This system doesn’t just apply to brokering trades on the stock market. It applies to all the banking, monetary and financial systems around the world. 

Fairy dust old money is just a hierarchically controlled propaganda belief system.

Blockchain-based new money is the P2P, fair and transparent people’s-money.

That's exactly right. Thank you, Martin Scorsese and your screenwriters, for this brilliantly creative scene. Yet it’s fair to say that this part of the scene was definitely outshined by the more memorable “rookie numbers” part.

But as history has continuously proven to us, unfortunately, much of the population takes comfort in the machine (the “master”), no matter the consequences. As some say, “Ignorance is bliss.” 

Maybe they were so caught up in the genius writing and humor from Scorsese and these two brilliant actors that they missed it. I know I almost fell out of my chair laughing.

So, as the banker artistically creates his leveraged position out of thin air, like abstract images flow out of the tip of Dali’s paintbrush — or Scorsese's brain to film — I ask you: Does art imitate life, or does life imitate art?

Finally, the cat is out of the bag, though unfortunately only hindsight is 20/20, and time will tell what changes actually occur after this mess. Hopefully it’s different this time. 

As says the famous "possible quote" of Henry Ford (most people don’t know the real facts behind that quote) that was paraphrased by congressperson Charles Binderup on March 19, 1937, in the House of Representatives:

“It is perhaps well enough that the people of the nation do not know or understand our banking and monetary system, for if they did I believe there would be a revolution before tomorrow morning.”

Want to know how the banking system really works? Here it goes:

You don't deposit cash at a bank. You actually just lend it to the bank, and when you go to draw on that account, you are just creating a transaction inputted on a digital ledger. You are not actually drawing out your original money. The banks then charge you fees to actually lend them money as well in the form of monthly account fees, overdraft fees and all the other small print fees that sneak in.

When the bank deposits money in your account in the form of a credit — for instance, if you buy a house — it's not an actual credit, it's really a debt that it repackages and calls a mortgage by leveraging its position and creating a profit margin for the services of lending you part of your own money back that you originally gave it, as well as all its other customers’ money. There is only one form of real money in this transaction, and that is the money that you originally gave the bank. It’s basically holding a lien over you and on your new house with the money you and its other customers let it borrow, which it turned around and let you borrow again and charged fees on it. All it did was “artistically” create a leveraged position and profit margin by creating a credit and debt out of thin air.

The stark reality is that there really is no money. This centralized system is just conjured up credit, debt and margin entries on a centralized ledger that’s agreed upon (consensus) by a centralized group of participants.

Published:5/23/2020 6:16:42 PM
[Markets] Dow Jones Futures: Coronavirus Stock Market Rally Breakouts Slowing, But Apple, Microsoft, Google, Tesla, AMD Near Buy Points Dow Jones futures: The coronavirust stock market rally is roaring on, but breakouts are slowing. Apple, Tesla, Microsoft, Google and AMD are near buy points though. Published:5/23/2020 2:16:35 PM
[Markets] Is This Controlled Demolition All Over Again? Is This Controlled Demolition All Over Again? Tyler Durden Fri, 05/22/2020 - 19:05

Authored by Gilad Atzmon,

For years Eco-Enthusiasts, both activists and scientists, have been telling us that the ‘party’ will come to an end. The planet we are stuck on can’t take it for much longer, it is getting too crowded and unbearably warm. Most people didn’t take any real notice of the situation and for a reason. This planet, we tend to think, isn’t really ‘ours,’ we were thrown onto it and for a limited time. Once we grasp the true meaning of our temporality, we begin to acknowledge our terminality. ‘Being in the world’ as such is often the attempt to make our ‘life-time’ into a meaningful event.

Most of us who haven’t been overly concerned with the ecological activists and their plans to slow us down knew that as long as Big Money runs the world, nothing of a dramatic nature would really happen. In the eyes of Big Money, we tended to think, we, the people, are mere consumers. We understood ourselves as the means that make the rich richer.

Rather unexpectedly, life has undergone a dramatic change. In the present age of Corona, Big Money ‘let’ the world lock itself down. Economies have been sentenced to imminent death. Our significance as consumers somehow evaporated. The emerging alliance we have been detecting between the new leaders of the world economy (knowledge companies) and those who carry the flag of ‘progress’ ‘justice’ and ‘equality’ has evolved into an authoritarian dystopian condition in which robots and algorithms police our speech and elementary freedoms.

How is it that the Left, that had been devoted to opposition to the rich, has so changed its tune? In fact, nothing has happened suddenly. The Left and the Progressive universe have, for some time, been sustained financially by the rich. The Guardian is an illustrative case of the above. Once a left -leaning paper with a progressive orientation, the Guardian is now openly funded by Bill & Melinda Gates. It shamelessly operates as a mouthpiece for George Soros: it even allowed Soros to disseminate his apocalyptic pre-Brexit view at the time he himself gambled on Brits’ anti- Brexit vote. By now it is close to impossible to regard the Guardian as a news outlet – a propaganda outlet for the rich is a more suitable description. But the Guardian is far from alone. Our networks of progressive activists fall into the same trap. Not many of us were surprised to see Momentum, Jeremy Corbyn’s campaign support group within the Labour Party, rallying for the ‘Holocaust Survivor’ and ‘philanthropist’ George Soros. When Corbyn led the Labour Party, I learned to accept that ‘socialists’  putting themselves on the line of fire defending oligarchs, bankers and Wall Street brokers must be the new ‘Left’ reality.

We are now inured to the fact that in the name of ‘progress’ Google has demoted itself from a great search engine into a hasbara outlet. We are accustomed to Facebook and Twitter dictating their worldview in the name of community standards. The only question is what community they have in mind. Certainty not a tolerant and pluralist western one.

One may wonder what drives this new alliance that divides nearly every Western society? The left’s betrayal is hardly a surprise, yet, the crucial question is why, and out of the blue, did those who had been so successful in locating their filthy hands in our pockets go along with the current destruction of the economy? Surely, suicidal they aren’t.

It occurs to me that what we may be seeing is a controlled demolition all over again. This time it isn’t a building in NYC. It isn’t the destruction of a single industry or even a single class as we have seen before. This time, our understanding of Being as a productive and meaningful adventure is embattled. As things stand, our entire sense of livelihood is at risk.

It doesn’t take a financial expert to realise that in the last few years the world economy in general and western economies in particular have become a fat bubble ready to burst. When economic bubbles burst the outcome is unexpected even though often the culprit or trigger for the crash can be identified. What is unique in the current controlled demolition is the willingness of our compromised political class, the media and in particular Left/Progressive networks to participate in the destruction.

The alliance is wide and inclusive. The WHO, greatly funded by Bill Gates, sets the measures by which we are locked down, the Left and the Progressives fuel the apocalyptic phantasies to keep us hiding in our global attics, Dershowitz tries to rewrite the constitution , big Pharma’s agenda shapes our future and we also hear that Moderna and its leading Israeli doctor is ready to “fix” our genes. Meanwhile we learn that our governments are gearing up to stick a needle in our arms. Throughout this time, the Dow Jones has continued to rise. Maybe in this final stage of capitalism, we the people aren’t needed even as consumers. We can be left to rot at home, our governments seemingly willing to fund this new form of detention.

I believe that it was me who ten years ago coined the popular adage “We Are all Palestinians” – like the Palestinians, I thought at the time, we aren’t even allowed to name our oppressor…

Published:5/22/2020 6:10:29 PM
[Markets] Stocks, Silver, Black Gold & Bond Yields Jump This Week As Dollar & Yuan Dump Stocks, Silver, Black Gold & Bond Yields Jump This Week As Dollar & Yuan Dump Tyler Durden Fri, 05/22/2020 - 16:02

Millions more job losses, thousands more deaths, hundreds more earnings outlooks cut or dismissed, dozens of rancorous threats and promises exchanged between US and China... and still a handful of key US stocks sent the major indices soaring on the week led by Trannies and Small Caps...

A panic bid at the close to get the indices green for the day...

Almost as if it never happened...

Source: Bloomberg

Or put another way...

Notably, after the European close on Monday, The Dow and S&P went nowhere!

But hey "vaccines" and shit means it's a good week!!

Source: Bloomberg

Or it could be something else?

Source: Bloomberg

Seriously though, it's Mission Accomplished...

Source: Bloomberg

The big banks are higher on the week but notice that from the opening spike on Monday, they are all lower...

Source: Bloomberg

FANG Stocks were up on the week but sold off after The Fed...

Source: Bloomberg

Treasury yields ended the week higher across the curve, but only modestly with the long-end up 4bps...

Source: Bloomberg

Bonds and stocks decoupled...

Source: Bloomberg

The Dollar slipped again this week (selling ahead of The Fed and rallying after)...

Source: Bloomberg

But on a longer-term context, the dollar is coiling...

Source: Bloomberg

Offshore Yuan dumped this week as US-China tensions rose...

Source: Bloomberg

And Hong Kong Dollar Fwds puked amid Beijing's new "security" law...

Source: Bloomberg

Bitcoin was flat on the week, erasing most of the post-halving gains, but Ethereum had a strong week...

Source: Bloomberg

The dollar continues rangebound against its fiat friends but is weaker and weaker against sound money...

Source: Bloomberg

Oil was the week's big winner (again) but silver surged as gold slipped...

Source: Bloomberg

Gold/Silver just got too juicy after The Fed went all-in...

Source: Bloomberg

July WTI is back at around the $34 level and stalling again...

Finally, we appear to still be following the 1930s analog for now... which means we lift to around 26k on The Dow... Bear market rallies in 1929, 1938, 1974 saw an average 61% rebound from lows (after an average 49% drop)...which would take SPX to 3180...

Source: Bloomberg

As Johnny Depp said, COVID deaths tell no tales of economic collapse...

Published:5/22/2020 3:09:18 PM
[Markets] Von Greyerz: The Global Forest Fire Is Here Von Greyerz: The Global Forest Fire Is Here Tyler Durden Fri, 05/22/2020 - 05:00

Authored by Egon von Greyerz via GoldSwitzerland.com,

It drives you absolutely mad to see a whole world living a lie. How can anyone believe that the fake world the Fed and their fellow central bankers have created has anything to do with reality.

We have fake money, fake markets, fake companies, fake banks, fake interest rates, fake income, fake pensions, fake social security, fake wealth, fake bail outs, fake buildings, fake holidays, fake cars etc which create false lives for most of us especially in the West.

All these fake material values have also created false moral and ethical values. 

IT IS ALL AN ILLUSION 

So you might ask how can it all be fake when we can touch it, use it, or experience it. For people who don’t understand that it is all fake, let me say that we will all soon realise how fake it was. Because many of these things that we perceived as real were all an illusion. 

An illusion is defined as “an act of deception” or “something that produces a false or misleading idea of reality.  And that is exactly what we have been exposed to. The world had been deceived but we have all believed that it was real. 

DEEP STATE WILL LOSE CONTROL

There is a perception in the world that things will continue as they are and that the Deep State is going to control us all in a totalitarian world. What few realise is that the Deep State or Powers That Be are going to lose control totally. They are totally dependent on the world in which they can control everything through debt and the fake monetary system they have created. But let me make it clear that this fake system is about to implode.

$QUADRILLIONS WILL GO UP IN SMOKE 

Before the crisis which has just started is over, global debt, derivatives and unfunded liabilities (medicare, pensions) will virtually all disappear. We are looking at sums in the quadrillions of dollars. How much depends on how much extra debt is created before it all implodes. As the debt goes to zero, most of the assets that were financed by the debt will also lose 90-100% of their real value. This is when the world will discover that all these things we thought had a real worth are actually worthless. 

In this scenario, the ones in control of the money will have lost their power since the printing press has stopped functioning, and money has died. Also, after the collapse of the present monetary system, leverage will disappear and any financial institution will only lend what they have in actual deposits as was the case when banking started 4000 years ago. 

This dystopian system is difficult for most of us to imagine since it would lead to a very different world. It is possible that instead of the whole system coming down in one fell swoop that it happens in stages over an extended period. But I fear that things could go very quickly. What is clear is that the world is now starting a secular decline that’s never been seen before and this on a global basis. The first stage of this decline has now begun and will be totally devastating for the world. However incredible this scenario appears, it is the only possible outcome. 

NOTHING WILL BE THE SAME

The falsity of the current system will soon become apparent. Let’s take some obvious examples of what this false or misleading idea of reality means.

  1. Jobs – the unemployment rates we are now seeing of 15-39% depending on how you measure, will become permanent. Many employed and self-employed will not get their job back. The government has no money to pay these people. Printed money is an illusion and has zero value. Take the UK where now 50% of the adults are being paid by the government in subsidies, unemployment benefits, state employees, and state pensioners. That situation can of course never last. Paying non-productive people with worthless money does not create a sustainable society. 

  2. Pensions – Pension funds will not survive. They have three principal asset classes – Stocks, Bonds, and Property. All three will lose most of their value in real terms. All unfunded pension schemes will remain unfunded since there will be no money to pay the pensioners. 

  3. Airlines – Many airlines will go under. Any remaining ones will be extremely costly to operate leading to fares increasing substantially. Fewer people will fly due to high costs. Business travel will go down significantly both for cost reasons and because people have recently discovered that meetings and conferences can be conducted on Zoom or Skype.

  4. Hotels, Tourism – Tourism will decline dramatically due to high unemployment and high costs. Mass tourism will totally die. The conference business which is a vital income for hotels will also dwindle. Much of it will become Video conferencing. Most of the luxury hotel market will die. 

  5. Offices – Big offices in city centres will disappear. The world has discovered, during the Corona quarantine, that working from home is extremely efficient and convenient. It is also better for family life. Big offices will disappear, instead there will be small offices which don’t have to be in city centres. So there will be less commuting, less pollution and a better quality of life. 

  6. Big Cities – The need for big cites will diminish dramatically. As people work from home or small regional offices, big cites will shrink and many will become ghost towns. Retail in big cities will die.

  7. Big Companies – Many will be broken up. Globalism with big dominant global businesses will disappear. Countries will become more self-sufficient with most production becoming domestic. 

  8. Banking & Finance – Most big banks will disappear as the financial system implodes. Without massive debt, derivatives and leverage, banks will go back to where they started – financing trade, commerce, and industry. There will be no investment banks or proprietary trading. Central banks will disappear or have a very much diminished role. There will be virtually no money printing. There will be no manipulation of money or interest rates. Market swings will be based on supply and demand and not central bank interference. I do realise that some of this sounds like wishful thinking. But it is a natural reaction to the current false and diseased financial system. 

  9. Hedge Funds & Private Equity – These players will disappear as they are totally dependent on massive leverage and debt. They have no place in a system based on sound money. Most hedge funds will go under in the coming collapse as  counterparties fail and derivatives become worthless. Private equity has destroyed many good companies by lumbering them with heavy debt and taking all the equity out.

The list above could be much longer but this is just a taste of all the changes that will take place over the next few years and decades. It will clearly be a gradual process but the first stages could happen quickly if a major part of the financial system doesn’t survive the imminent shocks.

THE WORLD NEEDS A FOREST FIRE 

The transition from a world based on the golden calf and false values will be devastating. But there is no other way to end an era based on fake money and fallacious premises. The world could never continue to grow and prosper with a mountain of debt and liabilities that can never be repaid or even serviced. We need a proper forest fire that burns it all down to the ground and prepares the way for a sounder world with new green shoots. 

Going from a sick system to a soundly based system will clearly involve a lot of suffering. But this is the punishment that the world must go through. Many will suffer and many will die prematurely as a result of poverty, famine, disease, and wars. The scale of this devastation will be multiples of the Coronavirus. 

THIS TOO SHALL PASS

The world economy has always gone in cycles. If the laws of nature and supply and demand were allowed to determine the length and amplitude of the cycles, they wouldn’t reach the extremes we are now experiencing. But when mankind interferes in the shape of governments and central banks, these cycles reach extremes which can have disastrous consequences as the world will soon encounter. 

But remember that “This too shall pass” and when the world comes out on the other side, it will be a better world. Many things will improve, like family values as well as moral and ethical values. A close group of family and friends will be essential during the coming hard times. And remember that so many things in life are free like friendship, discussions, nature, music, and books. Buying gadgets and traveling to the other side of the world only give us ephemeral joy. 

MARKETS

Stocks

Stocks will soon give the world another shock. We saw the all-time bubble top in the Dow  on February 12th, followed by a 38% fall of over 11,000 points. The investment world is assuming we will have a V or U recovery. Sadly, it will be neither. Instead another major fall is around the corner. It is likely to be greater than the first one before it pauses. What is clear is that stocks, like the economy, have started a secular downtrend which will be devastating. The fall will not stop until stocks are down more than 95% in real terms.

Metals

As I have been writing and tweeting about lately, the world is starting to discover that paper money cannot survive when central banks are printing it to death. Gold and silver have for the last twenty years told us this. We are now getting the signal that the uptrend in the metals will accelerate rapidly. 

If you want your savings to survive the coming crisis, hold physical gold and some silver. Don’t store it in a banking system that is unlikely to survive. Silver is leading the current surge in the metals which is a good sign since silver is the leading indicator for big moves in the metals. Silver will move up many times faster than gold but remember that it is extremely volatile. So if you want to sleep well at night, hold more gold than silver. 

Forget about what price the metals will reach. Even in today’s money, whatever figure you think of will not be enoughAnd in hyperinflationary money, the price move will be exponential measured in worthless paper money. So don’t think about the value of gold and silver in dollars or euros. Just remember that gold is the only money that has survived in history. It is therefore the best form of wealth preservation and insurance against a bankrupt financial system.

*  *  *

The title of this article “The Forest Fire is Here” alludes to a previous article I wrote  back in 2009 and again in 2018 called the “The Dark Years Are Here”.   It makes some interesting reading, especially since it now seems that they really are here.

Contact GoldSwitzerland here.

Published:5/22/2020 4:07:04 AM
[Markets] Dow futures inch lower Thursday night as investors start to position for Memorial Day weekend amid coronavirus U.S. stock-index futures edged lower in thin trade Thursday night as investors looked ahead to the final trading session of the week before a three-day weekend in the U.S. Futures for the Dow Jones Industrial Average were down 46 points, or 0.4%, at 24,474, those for the S&P 500 index declined 0.3%, at 2,928.75, while Nasdaq-100 future gave up 0.3% at 9,331.50. Markets in the U.S. will be closed on Monday for Memorial Day and the bond market will close an hour early at 2 p.m. Eastern Time on Friday and remain closed until Tuesday. The week has been fraught with worries about U.S.-China relations which have deteriorated in recent weeks as the Trump administration blames Beijing for mishandling the COVID-19 pandemic that was first identified in Wuhan back in December. Legislators in Washington also approved a bill aimed at censuring China's move to impose new national-security laws on Hong Kong. On Wednesday, the Senate, separately, passed legislation that could have the effect of banning Chinese companies from listing on U.S. exchanges. All of these actions have been mostly dismissed by investors but could renew Sino-American animosities. Still, the main equity benchmarks have gained for the week with returns pegged to optimism surrounding state reopenings. Indeed, Universal Orlando executive John Sprouls asked Orange County Mayor Jerry Demings for approval to open the company's theme parks as early as June 5, the Orlando Sentinel reported. Expectations that a remedy for the illness, which has infected more than 5 million people and claimed 330,000 lives, according to data compiled by Johns Hopkins University, also have buoyed assets perceived as risky. For the week, the Dow has climbed 3.3%, the S&P 500 has returned 3% and the Nasdaq Composite Index has risen 3%, as of Thursday's regular close of trade. The big question may be whether investors are willing to buy assets into an extended holiday weekend. Published:5/21/2020 10:37:20 PM
[Markets] Dow futures rise 100 points Thursday evening, ahead of Memorial Day weekend Dow futures rise 100 points Thursday evening, ahead of Memorial Day weekend Published:5/21/2020 7:49:30 PM
[Markets] Dow futures rise 100 points Thursday evening as investors start to position for Memorial Day weekend amid coronavirus U.S. stock-index futures rose in thin trade Thursday evening as investors looked ahead to the final trading session of the week before a three-day weekend in the U.S. Futures for the Dow Jones Industrial Average were up nearly 104 points, or 0.4%, at 24,480, those for the S&P 500 index climbed less than 0.4%, at 2,948.75, while Nasdaq-100 future advanced 0.5% at 9,400.25. Markets in the U.S. will be closed on Monday for Memorial Day and the bond market will close an hour early at 2 p.m. Eastern Time on Friday and remain closed until Tuesday. The week has been fraught with worries about U.S.-China relations which have deteriorated in recent weeks as the Trump administration blames Beijing for mishandling the COVID-19 pandemic that was first identified in Wuhan back in December. Legislators in Washington also approved a bill aimed at censuring China's move to impose new national-security laws on Hong Kong. On Wednesday, the Senate, separately, passed legislation that could have the effect of banning Chinese companies from listing on U.S. exchanges. All of these actions have been mostly dismissed by investors but could renew Sino-American animosities. Still, the main equity benchmarks have gained for the week with returns pegged to optimism surrounding state reopenings. Indeed, Universal Orlando executive John Sprouls asked Orange County Mayor Jerry Demings for approval to open the company's theme parks as early as June 5, the Orlando Sentinel reported. Expectations that a remedy for the illness, which has infected more than 5 million people and claimed 330,000 lives, according to data compiled by Johns Hopkins University, also have buoyed assets perceived as risky. For the week, the Dow has climbed 3.3%, the S&P 500 has returned 3% and the Nasdaq Composite Index has risen 3%, as of Thursday's regular close of trade. The big question may be whether investors are willing to buy assets into an extended holiday weekend. Published:5/21/2020 7:06:36 PM
[Markets] Dow industrials end down 100 points on escalating U.S.-China tensions Dow industrials end down 100 points on escalating U.S.-China tensions Published:5/21/2020 3:33:54 PM
[Markets] Exxon Mobil, IBM share losses contribute to Dow's 75-point drop DOW UPDATE The Dow Jones Industrial Average is trading down Thursday afternoon with shares of Exxon Mobil and IBM seeing the biggest losses for the blue-chip average. Shares of Exxon Mobil (XOM) and IBM (IBM) have contributed to the index's intraday decline, as the Dow (DJIA) was most recently trading 75 points lower (-0. Published:5/21/2020 3:03:56 PM
[Markets] Dow Jones Still Up Nearly 800 Points In 4 Days; Will The Alibaba Stock Breakout Fail? A quiet decline by the Dow Jones Industrial Average bodes well for the recent rebound in stocks. Alibaba has broken out; will the new move succeed? Published:5/21/2020 2:32:41 PM
[Markets] Barron's Daily: Trump tweets have been a drag on the Dow early Thursday Barron's Daily: Trump tweets have been a drag on the Dow early Thursday Published:5/21/2020 8:31:16 AM
[Markets] Dow futures pare loss after weekly jobless-claims report shows adjusted gain of 2.4 million job losses, indicating that 1 out of every 5 Americans are out of work U.S. stock-index futures on Friday hold losses after a report on those seeking unemployment benefits rise to 2.438 million for the week ended May 16, on an adjusted basis, according to the Labor Department. On an unadjusted basis the figure of those unemployed for the week is 4.4 million. Futures for the Dow Jones Industrial Average 66 points, or 0.3%, at 24,455, those for the S&P 500 index were off 0.3% at 2,960, while Nasdaq-100 futures retreated 0.3% at 9,471. The labor market data for the week likely brings the total job losses since the beginning of the COVID-19 crisis to nearly 40 million. Published:5/21/2020 8:00:39 AM
[Markets] Dow futures fall 175 points Wednesday night ahead of report that may indicate 1 out of 5 Americans are out of work U.S. stock-index futures were trading lower Wednesday night after stocks closed out the regular session with sharp gains, making up some lost ground after a late-session pullback Tuesday. A weekly report on Thursday is expected to show that some 2.35 million people sought unemployment benefits in the week ended May 16, likely bringing the total number of Americans out of work during the COVID-19 pandemic to nearly 40 million on a seasonally adjusted basis. That's about one out of every five workers in the labor force. To be sure, the weekly figure represents a deceleration of the recent unsightly trend of job losses, but may still be a sobering reminder of the toll the viral pandemic has exerted on the U.S. economy over the past few months. Futures for the Dow Jones Industrial Average were off 178 points, or 0.7%, at 24,344, those for the S&P 500 index were trading 0.7% lower at 2,948, while Nasdaq-100 futures declined by about 0.5% at 9,439. During the regular session Wednesday, the Dow advanced 369.04 points, or 1.5%, to finish at 24,575.90. The S&P 500 climbed 48.67 points, or 1.7%, to end at 2,971.61, its highest close since March 6, according to Dow Jones Market Data, while the Nasdaq Composite rose 190.67 points, or 2.1%, closing at 9,375.78, representing its highest finish since Feb. 21. In corporate news after-hours, Macy's Inc. said it has appointed Felicia Williams as its interim chief financial officer, effective June 1. Retailer L Brands Inc. reported a wider-than-expected loss in the first quarter and said it remained "committed" to spinning off its Bath & Body Works business. Meanwhile, Aurora Cannabis Inc. it was acquiring U.S. company Reliva LLC for roughly $40 million in an all-stock deal. Published:5/20/2020 9:57:58 PM
[Markets] The Market May Be Stronger Than It Looks. Here’s Why. The Dow bounced back from Tuesday’s loss. More strength is starting to be seen in individual stocks, as well. Published:5/20/2020 7:31:32 PM
[Markets] Dow futures see muted action Wednesday evening ahead of report that may indicate 1 out of 5 Americans are out of work U.S. stock-index futures were trading on either side of unchanged Wednesday evening after stocks closed out the regular session with sharp gains, making up some lost ground after a late-session pullback Tuesday. A weekly report on Thursday is expected to show that some 2.35 million people sought unemployment benefits in the week ended May 16, likely bringing the total number of Americans out of work during the COVID-19 pandemic to nearly 40 million on a seasonally adjusted basis. That's about one out of every five workers in the labor force. To be sure, the weekly figure represents a deceleration of the recent unsightly trend of job losses, but may still be a sobering reminder of the toll the viral pandemic has exerted on the U.S. economy over the past few months. Futures for the Dow Jones Industrial Average were up less than 0.1% at 24,527, those for the S&P 500 index were trading very nearly flat at 2,969, while Nasdaq-100 futures edged up by about 0.1% at 9,494.25. During the regular session Wednesday, the Dow advanced 369.04 points, or 1.5%, to finish at 24,575.90. The S&P 500 climbed 48.67 points, or 1.7%, to end at 2,971.61, its highest close since March 6, according to Dow Jones Market Data, while the Nasdaq Composite rose 190.67 points, or 2.1%, closing at 9,375.78, representing its highest finish since Feb. 21. In corporate news after-hours, Macy's Inc. said it has appointed Felicia Williams as its interim chief financial officer, effective June 1. Retailer L Brands Inc. reported a wider-than-expected loss in the first quarter and said it remained "committed" to spinning off its Bath & Body Works business. Meanwhile, Aurora Cannabis Inc. it was acquiring U.S. company Reliva LLC for roughly $40 million in an all-stock deal. Published:5/20/2020 6:30:16 PM
[Markets] "Trust Is Being Undermined" - Harvard Medical School Prof Questions Fauci's "Shading" Vaccine Results "Trust Is Being Undermined" - Harvard Medical School Prof Questions Fauci's "Shading" Vaccine Results Tyler Durden Wed, 05/20/2020 - 16:45

At a moment in time when narrative-following "scientists" are lauded like unquestionably omniscient supreme beings enabling dumb-as-a-rock-partisan-politicians to play omnipotent overlords without fear of blowback, the world needs more people like William Haseltine.

The last two weeks have seen markets and politicians jump exuberantly at the hope of every press release from a biotech firm that proclaims one of their pet rabbits didn't die when they fed it their latest DNA-reshaping test material (oh that is except if anyone dares say anything positive about hydroxychloroquine but that is a topic for another discussion).

Barstool Sports' Dave Portnoy said it right - when did we shift from "flatten the curve, flatten the curve, flatten the curve" to "we have to fund a cure or everyone's going to die."

And that is where we find ourselves. Every talking head proclaiming the same malarkey - we will re-open carefully, with PPE, and social distancing, and whetever else is mandated from on-high "until we find a vaccine in 12-18 months" at which point the world will be made whole again and Kumbaya...

All of which brings us back to the man of the day in our humble opinion.

Former Harvard Medical School professor and founder of the university's cancer and HIV/AIDS research departments, William Haseltine dared to speak out today about the high level of bullshit and damage that is being done to "trust" in "scientists" and even dared to break the one holy writ that shall go un-mentioned, throwing some shade a Dr.Fauci.

Reflecting on Moderna's press release this week (which was immediately followed by massive equity raises across numerous biotech firms and upgrades from the underwriters, surprise), Haseltine said:

"If a CFO had tried to get away with such an opaque and data-less statement it would have bee treated with derision and possibly an investigation."

The CNBC anchor desperately tried to guilt him into the official narrative of clinging to any hope as long as it lifts stocks - no matter its utter bullshittiness - but Haseltine destroyed her naive party line:

"we all know its an emergency, and in an emergency it's even more important to be clear on what you know and what you do not know."

Moderna did not follow the process:

"you don't know what happened, we don't know what happened, there is no data."

But, but, but... the CNBC anchorette blubbered, "are you questioning Dr. Fauci who also said that this was encouraging news?"

"Whether [Fauci] shaded what should should have been done, I think is an important question. He's obviously under enormous pressure for positive results but it was not the right thing to do if you can't see the data."

The full interview below is a must-watch by all who care about their freedom being controlled by a narrative directed by fearmongering elites in the name of "science" when the "science" is a) being ignored, b) being bastardized to meet a political need, c) being treated as if handed down on high from the man himself, or d) being manipulated explicitly.

Why this former Harvard Med School prof says Moderna's vaccine trial 'publication by press release' from CNBC.

Haseltine's interview is perfect lead into his opinion piece in todays' Washington Post:

Faith in medicine and science is based on trust. But today, in the rush to share scientific progress in combating covid-19, that trust is being undermined.

Private companies, governments and research institutes are holding news conferences to report potential breakthroughs that cannot be verified. The results are always favorable, but the full data on which the announcements are based are not immediately available for critical review. This is "publication by press release,” and it’s damaging trust in the fundamental methods of science and medicine at a time when we need it most.

The most recent example is Moderna’s claim Monday of favorable results in its vaccine trial, which it announced without revealing any of the underlying data. The announcement added billions of dollars to the value of the company, with its shares jumping almost 20 percent. Many analysts believe it contributed to a 900-point gain in the Dow Jones industrial average.

The Moderna announcement described a safety trial of its vaccine based on eight healthy participants. The claim was that in all eight people, the vaccine raised the levels of neutralizing antibodies equivalent to those found in convalescent serum of those who recovered from covid-19. What to make of that claim? Hard to say, because we have no sense of what those levels were. This is the equivalent of a chief executive of a public company announcing a favorable earnings report without supplying supporting financial data, which the Securities and Exchange Commission would never allow.

There is a legitimate question regarding what Moderna’s unsupported assertion means. The scientific and medical literature reports that some people who have recovered have little to no detectable neutralizing antibodies. There is even existing scientific literature that suggests it is possible neutralizing antibodies may not protect animals or humans from infection or reinfection by coronaviruses.

Such “publication by press release” seems to be a standard practice lately.

The National Institutes of Health announced last month that the drug remdesivir offered a clear benefit to covid-19 patients with moderate disease, shortening the length of their hospital stay by several days. But did it really? Twenty days after the announcement, the supporting data has still not been published. Without the data, no doctor treating a patient can be sure they are doing the right thing.

Another paper, published the same day, found that remdesivir had no measurable effect on patient survival or the amount of virus detectable in nasopharynx and lung secretions. What then should a practicing physician do? Follow the unsupported advice of a news announcement or a medical report published in a leading scientific journal? This is not an idle question: The NIH announcement triggered a global stampede for limited supplies of the drug.

The case is more nuanced for the vaccine developed by the Jenner Institute at Oxford University, though the mileposts remain the same: It started with a public pronouncement of favorable results from an early study, this time in monkeys, well before any data was publicly released. An NIH scientist working on a trial of the Oxford vaccine gave an interview to the New York Times, claiming the drug was a success.

But the data, released as a prepublication version more than two weeks after the story ran, didn’t quite live up to the early claim. All of the vaccinated monkeys became infected when introduced to the virus. Though there was some reduction in the amount of viral RNA detected in the lungs, there was no reduction in the nasal secretions in the vaccinated monkeys. So the positive result reported by the Oxford group turned out not to be protection from infection at all, something most would agree is what a successful vaccine would do. Instead, it lowered only the amount of virus recoverable from the vaccinated monkey’s lung.

To the Jenner Institute’s credit, it does warn visitors to its website that there have been many false reports about the progress of its vaccine trial. Still, having a scientist working on the trial paint preliminary results in such a positive manner without having yet released the full data is cause for concern.

We all understand the need to share scientific and medical data as rapidly as possible in this time of crisis. But a media announcement alone is not enough. There are ways to share the data quickly and transparently: posting manuscripts before review or acceptance on publicly available websites or working with journals to allow an early view. Publishing in this manner allows doctors and scientists to reach their own conclusion, based on the evidence available.

The media also bears responsibility. Asking experts to opine on unsubstantiated claims is not useful. Medicine and science are not matters of majority opinion; they are matters of fact supported by transparent data. This is the backbone of scientific progress and our only hope to end this pandemic. We can’t give up on our standards now.

*  *  *

So, by all means, trust in "science" but choose your "scientist" well...

Published:5/20/2020 3:59:05 PM
[Markets] Dow Soars 1,860 Points From May 14 Low; Can These 5 Stocks Crush Blue Chips In 2020? While the Dow Jones Industrial Average is doing well in May, it remains a market laggard. Watch these chip, software and consumer spending leaders. Published:5/20/2020 2:28:09 PM
[Markets] Dow's 265-point rally highlighted by gains for shares of American Express, Intel DOW UPDATE Powered by strong returns for shares of American Express and Intel, the Dow Jones Industrial Average is rallying Wednesday afternoon. The Dow (DJIA) is trading 265 points, or 1.1%, higher, as shares of American Express (AXP) and Intel (INTC) have contributed to the index's intraday rally. Published:5/20/2020 1:28:23 PM
[Markets] China ETFs stumble lower midday Wednesday as Senate passes bill that could bar listings of Chinese companies Exchange-traded funds that allow investors to bet on Chinese companies were knocked lower midday Wednesday after the U.S. Senate approved sweeping new legislation that could ultimately bar many Chinese companies from listing shares on U.S. exchanges. The Invesco China Technology ETF , which offers exposure to a basket of popular Chinese technology firms that are listed in the U.S., including the American Depositary Receipts of Baidu Inc., , was down 0.7%; those for KraneShares CSI China Internet ETF , which offers exposure to Alibaba Group Holding Ltd. and JD.com , was trading 1.4% lower, at last check, according to MarketWatch's website. The Global X MSCI China Consumer Discretionary ETF was down 1% on Wednesday, with that ETF also tracking Alibaba and JD.com. The Senate bill, if it is written into law, would The bill would require Chinese companies to establish that they aren't owned or controlled by a foreign government. Furthermore, they would be required to submit to an audit that can be reviewed by the Public Company Accounting Oversight Board, the nonprofit body that oversees audits of all U.S. companies that seek to raise money in public markets. U.S. stocks came off their highs of the session Wednesday afternoon following the passage of the bill, which comes amid increasing tensions between the U.S. and China, with representatives from the world's biggest economies fighting over Beijing's handling of the COVID-19 pandemic, which was first identified in Wuhan, China. Still, markets were holding onto solid gains, with the Dow Jones Industrial Average up 1.2%, the S&P 500 index climbing 1.4% and the technology-heavy Nasdaq Composite Index rising 1.7% Wednesday. Published:5/20/2020 12:55:07 PM
[Markets] Intel, Caterpillar share gains lead Dow's 333-point rally DOW UPDATE Buoyed by strong returns for shares of Intel and Caterpillar, the Dow Jones Industrial Average is rallying Wednesday afternoon. The Dow (DJIA) was most recently trading 333 points, or 1.4%, higher, as shares of Intel (INTC) and Caterpillar (CAT) are contributing to the index's intraday rally. Published:5/20/2020 11:25:31 AM
[Markets] Dow Michigan HQ Threatened With "Nine Feet Of Water" Flood After Two Dams Break Dow Michigan HQ Threatened With "Nine Feet Of Water" Flood After Two Dams Break Tyler Durden Wed, 05/20/2020 - 11:20

The headquarters of chemical giant Dow, which was spun off from DowDuPont last April, are threatened by flooding, prompting the company to activate its local emergency center in Michigan and implement "flood preparedness plan which includes the safe shutdown of operating units on site,” the company said on Facebook after two dams failed upstream of its Midland, Michigan, headquarters.

Dow said that "only essential Dow staff needed to monitor the situation and manage any issues as a result of the flooding remain on site." Other companies with operations at Dow’s Midland complex include DuPont and Corteva Agriscience, according to Bloomberg which adds that the companies are working together on their response.

Michigan Governor Gretchen Whitmer, who is already managing a public health crisis in one of the states that has been hard hit by Covid-19, announced an emergency declaration in response to the dam collapse. She told people to evacuate the area around Midland, urging those in the flooding zones to get to a shelter.

"In the next 12 to 15 hours, downtown Midland could be under nine feet of water,” Whitmer said. “To go through this in the midst of a global pandemic is almost unthinkable."

The Edenville Dam, at the base of nearby Wixom Lake, failed amid high floodwaters in the area, sending water gushing through a now-gaping hole near its spillway. A second one, the Sanford Dam at the base of Sanford Lake, had also failed, according to the National Weather Service, which issued an alert advising of “extremely dangerous flash flooding” in the area.

The Tittabawassee River that flows below those lakes, through Midland, crested at nearly 34 feet in a 1986 flood that saw Dow Chemical shutter nearly all of its local operations. Floodwaters in Midland are expected to reach nearly 4 feet higher than that on Wednesday, the Midland Daily News said.

Published:5/20/2020 10:30:08 AM
[Markets] Dow up nearly 400 points on gains for Caterpillar, Intel stocks DOW UPDATE Buoyed by positive momentum for shares of Caterpillar and Intel, the Dow Jones Industrial Average is rallying Wednesday morning. Shares of Caterpillar (CAT) and Intel (INTC) are contributing to the blue-chip gauge's intraday rally, as the Dow (DJIA) was most recently trading 396 points (1. Published:5/20/2020 10:00:04 AM
[Markets] Dow rallies 311 points on gains in JPMorgan Chase, Dow Inc. shares DOW UPDATE Shares of JPMorgan Chase and Dow Inc. are posting positive momentum Wednesday morning, propelling the Dow Jones Industrial Average rally. Shares of JPMorgan Chase (JPM) and Dow Inc. (DOW) have contributed to the index's intraday rally, as the Dow (DJIA) is trading 311 points (1. Published:5/20/2020 8:54:10 AM
[Markets] Dow Jones Futures Jump Amid Earnings; Alibaba, Facebook, Netflix Above New Buy Points In Stock Market Rally The Dow Jones futures were in focus late Tuesday. Six top stocks near buy points include Alibaba and Facebook. Published:5/20/2020 6:53:53 AM
[Markets] Dow Jones Futures Hit Overnight Highs; Alibaba, Facebook, Netflix Above New Buy Points In Stock Market Rally The Dow Jones futures were in focus late Tuesday. Six top stocks near buy points include Alibaba and Facebook. Published:5/19/2020 11:52:26 PM
[Markets] Dow Jones Futures Hit Session Highs; Alibaba, Facebook, Netflix Above New Buy Points In Stock Market Rally The Dow Jones futures were in focus late Tuesday. Six top stocks near buy points include Alibaba and Facebook. Published:5/19/2020 7:51:18 PM
[Markets] Dow Jones Futures Extend Gains; Alibaba, Facebook, Netflix Above New Buy Points In Stock Market Rally The Dow Jones futures were in focus late Tuesday. Six top stocks near buy points include Alibaba and Facebook. Published:5/19/2020 7:20:48 PM
[Markets] Dow Jones Futures Turn Higher; Alibaba, Facebook, Netflix Headline 6 Stocks In Or Near Buy Zones After Stock Market Losses The Dow Jones futures were in focus late Tuesday. Six top stocks near buy points include Alibaba and Facebook. Published:5/19/2020 6:21:31 PM
[Markets] Dow Jones Futures Fall; Alibaba, Facebook, Netflix Headline 6 Stocks In Or Near Buy Zones After Stock Market Losses The Dow Jones futures were in focus late Tuesday. Six top stocks near buy points include Alibaba and Facebook. Published:5/19/2020 5:54:39 PM
[Markets] Stock market news live updates: Stock futures fall, extending declines Stock futures opened lower Tuesday evening, adding to earlier losses that sent each of the Dow and S&P 500 off more than 1% by the closing bell. Published:5/19/2020 5:23:22 PM
[Markets] Dow stumbles 390 points lower to end down sharply as report throws cold water on Moderna's coronavirus vaccine candidate The Dow Jones Industrial Average ended sharply lower Tuesday, with losses gathering steam within the final minutes of trading, as investors pointed to a report on Moderna Inc., as one possible catalyst for the dip for the blue-chip index. Stat News in a Tuesday afternoon report attempted to throw some cold water on an upbeat study released by Moderna about its coronavirus vaccine candidate. The Stat News article said that the Moderna report on its experimental remedy for COVID-19 lacked sufficient data. The report of early success from the Moderna vaccine candidate was one of the key catalysts for markets soaring a day ago. The Dow closed down by about 391 points, or 1.6%, at 24,207, the S&P 500 index closed down 1.1% at about 2,923 and the Nasdaq Composite Index ended 0.5% lower at 9,185, giving up its gains for the day in the final half-hour of trading. Moderna shares, meanwhile, finished down by 10.4% in late Tuesday action after a 13% surge on Monday which brought it to a record close. Meanwhile, Boston Federal Reserve President Eric Rosengren during a CNBC interview cautioned that businesses reopening may be "premature" as Americans continue to contend psychologically with the COVID-19 pandemic. Rosengren suggested that demand from consumers may still be an issue as the economy attempts to restart from coronavirus-induced closures. The Fed officials comments come after Fed Chairman Jerome Powell and Treasury Secretary Steven Mnuchin Tuesday morning were grilled by the Senate Banking Committee about why funding from the $2 trillion economic-relief package approved by Congress legislation remains unspent. Published:5/19/2020 3:49:32 PM
[Markets] Dow finishes down 390 points as Moderna vaccine doubts surface Dow finishes down 390 points as Moderna vaccine doubts surface Published:5/19/2020 3:22:08 PM
[Markets] Dow's down over 250 points in final half-hour of trading Dow's down over 250 points in final half-hour of trading Published:5/19/2020 2:54:45 PM
[Markets] Dow stumbles 300 points lower in final half-hour of trade as report throws cold water on Moderna vaccine candidate The Dow Jones Industrial Average on Tuesday took a leg lower within the final hour of trading, with investors pointing to a report on Moderna Inc. as one possible catalyst for the dip for the blue-chip index. Stat News in a Tuesday report attempted to throw some cold water on an upbeat study released by Moderna about one of its coronavirus vaccine candidates. The Stat News article said that the Moderna report on its experimental vaccine for COVID-19 lacked sufficient data. The report of early success from the Moderna vaccine candidate was one of the key catalysts for markets soaring a day ago. Late Tuesday, the Dow was down 312 points, or 1.3%, at 24,283, those for the S&P 500 index were off 0.8% at 2,930 and the Nasdaq Composite Index was trading 0.2% lower at 9,216. Moderna shares, meanwhile, were down by about 10% in late Tuesday action after a 13% surge on Monday which brought it to a record close. Published:5/19/2020 2:54:45 PM
[Markets] Dow Jones Lags Nasdaq, But Intel Nears Buy Point; Facebook Breakout Leads Nasdaq 100 The Dow Jones couldn't keep up with the Nasdaq Tuesday, but the blue-chip index served up some nice gainers, including Intel stock. Published:5/19/2020 2:18:37 PM
[Markets] Morgan Stanley: Monday's Huge Stock Buying Was One Giant Hedge Fund Short Squeeze Morgan Stanley: Monday's Huge Stock Buying Was One Giant Hedge Fund Short Squeeze Tyler Durden Tue, 05/19/2020 - 14:41

Yesterday morning, ahead of the torrid rally that sent the Dow Jones more than 1,000 points higher at one point, we warned that the "bulk of Wall Street institutions is once again positioned on the wrong side of today's rally."

As we showed last Friday using the latest Deutsche Bank flow data...

... both consolidated and systematic positioning was just off decade lows, while discretionary positioning - namely hedge funds and various other levered investors - continued to take down exposure going even further net short, and selling to retail investors all the way on the way up, assuming of course that Robin Hood is up on any given day.

In retrospect, it turns out that the surge higher was just too much for institutions, and as Morgan Stanley's prime brokerage desk writes today, "Monday was one of the largest days of buying we have seen in recent months, as HFs covered short positions as the market rallied higher. Equity L/S funds were the largest net buyer, with ~60% of the net activity coming from covers, and the remainder coming from long additions."

Yet while hedge funds scrambled to minimize the pain having been caught offside, the majority of the buying can be attributed to ETFs, which saw large amounts of covering as the S&P 500 closed over 3% higher DoD. Notably, HFs had added a sizable amount of ETF shorts last week as equities slid at the start of the week, but a good portion of this has now been undone when taking into account yesterday’s activity. Meanwhile, aAcross single-names, while flows were still positive, activity was slightly more divergent at the industry level.

As a result of yesterday's panicked HF activity, Equity L/S net leverage in the US increased by 3% to 45% (40th %-tile over last 12M; 14th %-tile since 2010), in line with the positive net activity / strong market performance but still relatively low considering where the market is. At the same time, weighted Equity L/S gross leverage also increased by ~2% to 189% (53rd %-tile over last 12M; 81st %-tile since 2010), and tracking the SPX tick for tick, though most of this can be attributed to MTM increases in the  underlying positions.

Finally, and has been the case for much of the artificial Fed-driven rally of the past decade, hedge funds failed to capitalized on yesterday's rally, and while the broader S&P jumped over 3%, HF performance was not nearly as strong – for L/S funds in the Americas, with one-day returns up just ~70-75bps vs. the S&P 500 +3.2%. A main driver of
this was due to the Cyclical rally, in which HFs continue to have fairly light exposure to.

And in another echo from the sins of the past decade, crowding performance was particularly painful yesterday as the longs lagged the market by ~1% and the shorts rallied 80bps more than the market, resulting in a long vs. short spread of -1.8%.

In fact, yesterday was the worst 1D spread for the crowded stocks since Mar 16th. MTD and YTD crowding spread still remains positive, aided by the crowded longs.

Published:5/19/2020 1:50:48 PM
[Markets] Dow falls nearly 100 points on losses for shares of Merck, Home Depot DOW UPDATE The Dow Jones Industrial Average is declining Tuesday afternoon with shares of Merck and Home Depot delivering the stiffest headwinds for the price-weighted average. The Dow (DJIA) was most recently trading 99 points lower (-0. Published:5/19/2020 12:19:08 PM
[Markets] Dow off 50 points at midday; P&G, Merck, Exxon, Chevron, Home Depot pace retreat Dow off 50 points at midday; P&G, Merck, Exxon, Chevron, Home Depot pace retreat Published:5/19/2020 11:23:09 AM
[Markets] Dow Jones Lags But Apple, Intel, Microsoft Lead Tech Stock Rally; Which Is In Buy Range? Stocks were mixed midday as the Dow Jones Industrial Average remained slightly underwater but the Nasdaq extended its recent rally. Published:5/19/2020 11:23:08 AM
[Markets] Dow under pressure as stock-market investors await testimony from Powell, Mnuchin U.S. stocks trade on either side of unchanged, following the best day for the S&P 500 index and the Dow since early April. Wall Street will be watching for congressional testimony from Federal Reserve chair Jerome Powell and Treasury Secretary Steven Mnuchin. Published:5/19/2020 8:48:12 AM
[Markets] Dow futures waver as stock-market investors await testimony from Powell, Mnuchin U.S. stock-index futures indicated a lackluster start to trade on Tuesday, following the best day for the S&P 500 index and the Dow since early April. Wall Street will be watching for congressional testimony from Federal Reserve chair Jerome Powell and Treasury Secretary Steven Mnuchin. Published:5/19/2020 8:20:34 AM
[Markets] Dow Jones Futures Pare Losses As Walmart Earnings Offset Home Depot After Vaccine-Led Coronavirus Stock Market Rally Dow Jones futures pared losses as Walmart earnings offset mixed Home Depot earnings. The coronavirus stock market rally surged Monday on vaccine hopes. Published:5/19/2020 7:18:08 AM
[Markets] Dow Jones Futures Fall On Home Depot Earnings After Coronavirus Stock Market Rally Soars On Vaccine Hopes Dow Jones futures extended losses on Home Depot earnings. The coronavirus stock market rally surged Monday as vaccine progress raised hopes for a rapid economic recovery. Published:5/19/2020 5:47:44 AM
[Markets] Dow futures retreat as stock-market investors await testimony from Powell, Mnuchin U.S. stock-index futures indicated a lackluster start of trade on Tuesday, following the best day for the S&P 500 and the Dow since early April. Wall Street will be watching for congressional testimony from Federal Reserve boss Jerome Powell and Treasury Secretary Steven Mnuchin. Published:5/18/2020 10:45:00 PM
[Markets] Market Snapshot: Dow futures retreat as stock-market investors await testimony from Powell, Mnuchin U.S. stock-index futures indicated a lackluster start of trade on Tuesday, following the best day for the S&P 500 and the Dow since early April. Wall Street will be watching for congressional testimony from Federal Reserve boss Jerome Powell and Treasury Secretary Steven Mnuchin.
Published:5/18/2020 10:45:00 PM
[Markets] "This Is Not A Costless Exercise" - The Unintended Consequences Of Monetary Inflation "This Is Not A Costless Exercise" - The Unintended Consequences Of Monetary Inflation Tyler Durden Mon, 05/18/2020 - 21:25

Authored by Alasdair Macleod via GoldMoney.com,

“In short, the Fed is committed to rescue businesses from the greatest economic catastrophe since the great depression and probably even greater than that, to fund the US Government’s rocketing budget deficits, fund the maintenance of domestic consumption directly or indirectly through the US Treasury, while pumping up financial markets to achieve these objectives and preserve the illusion of national wealth.

Clearly, we stand on the threshold of an unprecedented monetary expansion.”

Introduction

President Reagan memorably said that the nine words you don’t want to hear are “I’m from the government and I’m here to help.” Governments in all the major jurisdictions are now making good on that unwanted promise and are taking responsibility for everything from our shoulders.

Those receiving subsidies and loan guarantees are no doubt grateful, though they probably see it as the government’s duty and their right. But someone has to pay for it. In the past, by the redistribution of wealth through taxes it meant that the haves were taxed to give financial support to the have-nots, at least that was the story. Today, through monetary debasement nearly everyone benefits from monetary redistribution.

This is not a costless exercise. Governments are no longer robbing Peter to pay Paul, they are robbing Peter to pay Peter as well. You would think this is widely understood, but the Peters are so distracted by the apparent benefits they might or might not get that they don’t see the cost. They fail to appreciate that printing money is not just the marginal source of finance for excess government spending, but it has now become mainstream.

There is almost a total absence in the established media of any commentary on the consequences of monetary inflation, and in a cry for more we even have financial experts warning us of a deflationary collapse and the need for the Fed to introduce negative interest rates to stave off deflation. Yes, there are deflationary forces, because banks wish to reduce their loan exposure at a time of increasing risk. But we can be sure central banks and their political masters will do everything they can to counter the trend of contracting bank credit by increasing base money. There can only be one outcome: the debasement and eventual destruction of fiat currencies.

It was the nineteenth century French economist, Frederic Bastiat, who pointed out there were unseen consequences from violating property. He took the biblical approach of a parable, famous as the broken window fallacy. It is not what is seen, but what is unseen. He told of a boy breaking a window, its destruction giving business to the glazier which he would not otherwise have had. That is seen; unseen is the constructive spending that otherwise would have occurred if the cost of the broken window had not been incurred.

We see the helicoptered money, the furlough support, and the businesses helped not to go bust. But we do not see the cost. We don’t see how the resources taken up might otherwise be constructively deployed. We are told that the government is paying for it all, but taxes are not being raised.

Was Reagan’s aphorism wrong after all? If so, the government employee on our doorstep with his offer of help is to be welcomed. He comes bearing gifts. And without an increase in taxes what is not to like?

Bastiat gave us the answer. Unfortunately, the unseen consequences of apparently costless inflationary financing are myriad, as we will painfully discover.

The Cantillon effect

Over a century before Bastiat, an Irish banker in France, Richard Cantillon, observed that new money drove up prices as it was spent. He had experienced John Law’s Mississippi bubble, which was fueled by printed money and the issuance of bank credit, so Cantillon had observed the effect. It made well-connected speculators their fortunes, whose profligate spending drove up prices for everyone else. The effect at that time was that in real terms insiders became rich and the poor got poorer. To this day the process by which this happens is known as the Cantillon effect.

Now that it is official policy, the lesson for today is that a rapid increase in monetary inflation will, as the effects trickle through the economy, further impoverish the poor. It will do this by driving up prices of their essentials and reducing the purchasing power of their salaries, if they are lucky enough to still be employed. But as Cantillon pointed out in his Essai, reflecting the increased quantity of circulating money prices rise unevenly. Never has it been truer than today, when we face the combination of an unprecedented slump in economic activity combined with a sharp escalation in monetary inflation: the rich whose stocks are rising can buy their expensive toys at knockdown prices, while the poor, increasing numbers of which are newly unemployed, struggle to make ends meet with rising prices for life’s essentials.

It gets worse. Just as in Cantillon’s day, modern monetary policy is aimed at maintaining and increasing financial asset values. John Law’s puffery attempted to inflate the combination of his Banque Royale and his Mississippi ventures. Today it is all government bond markets, corporate debt, and stocks and shares. The intention is to maintain and further a wealth effect to replace the true wealth that has been lost, originally accumulated by entrepreneurs and businessman serving the consumer successfully. All we have now is John Law-style puffery.

The enrichment of the few at the expense of the many is a finite process. The outcome will inevitably be the same: Law’s scheme began to run into headwinds in December 1719, and by the following September his unbacked currency had failed. It was dead, worthless, an ex-currency. The empirical evidence is clear. Central banks emulating Law’s scheme today will destroy their currencies and everything that floats on their seas of paper credit and debt. The rapidity of the collapse of the Mississippi scheme strongly suggests that once control over bond prices is lost the contemporary financial and monetary collapse will be similarly swift.

For this reason, understanding the consequences of monetary inflation spiralling out of control has never been more important. We should know what they are from a study of sound economic theory and empirical evidence. The poor will starve and many of those who became rich through financial asset inflation will eventually join them. For the latter class, there will come a point where they abandon a failing dollar-based inflation scheme to save what they can from the financial wreckage.

Distortions and misallocations of capital

There is an aspect of the destruction brought about by monetary policy, which is almost never considered by policy makers, and that is how it distorts the allocation of capital and leads to its misallocation. In free markets, capital is scarce and must be used to greatest effect if the consumer is to be properly served and the entrepreneur is to maximise his profits.

Capital comes in several forms and encompasses every aspect of production; principally an establishment, machinery, labour, semi-manufactured goods and commodities to be processed, and money. An establishment, such as a factory or offices, and the availability of labour are relatively fixed in their capacity. Depending on their deployment and capacity they produce a limited amount of goods. It is just the one form of capital, that is money and credit, which central banks and the banking system now provide, and which in its unbacked form is infinitely flexible. Consequently, attempts to stimulate production by monetary means run into the capacity constraints of the other forms of capital.

Monetary policy has been increasingly used to manipulate capital allocation since the early days of the great depression in the 1930s. The effect has varied but it has generally come up against the constraints of the other forms of capital. Where there is excess labour, it takes time to retrain it with the specialist skills required, a process hampered by trade unions ostensibly protecting their members, but in reality, resisting reallocation of labour resources. Government control over planning and increasingly stifling regulations, again putting a brake on change, meant that changes and additions to the use of establishments lengthen the time before entrepreneurial investment was rewarded with profits. Government intervention has also discouraged the withdrawal of monetary capital from unprofitable deployment, or malinvestments, lengthening recessions needlessly.

When the advanced nations had strong industrial cores, the periodic expansions of credit and their subsequent sudden contractions led to observable booms and busts in the classical sense, since production of labour-intensive consumer goods dominated production overall.

There were then two further developments. The first was the abandonment of the Bretton Woods agreement in 1971, which led to a substantial rise in prices for commodities. According to the broad-based UN index of commodities rose from 33 to 157 during the decade, a rise of 376%. This input category of production capital compared unfavourably with US consumer price increases over the decade of 112%, the mismatch between these and other categories of capital allocation making economic calculation a fruitless exercise. The second development was the liberation of financial controls in the mid-eighties, London’s big-bang and the repeal of America’s Glass Steagall Act of 1933, allowing commercial banks to fully embrace and exploit investment banking activities.

The banking cartel increasingly directed its ability to create credit towards purely financial activities mainly for their own books, thereby financing financial speculation, while de-emphasising bank credit expansion for production purposes for all but the larger corporations. Partly in response, the nineties saw businesses move production to low-cost centres in South-East Asia where all forms of production capital, with the exception of monetary capital, were significantly cheaper and more flexible.

There then commenced a quarter-century of expansion of international trade replacing much of the domestic production of goods in the US, the UK, and Europe. It was these events that denuded America of its manufacturing, not unfair competition as President Trump has alleged and Germany’s retention of manufactures proves. But the effect has been to radically alter how we should interpret the effects of monetary expansion on the US economy and others, compared with Hayekian triangles and the like.

Business cycle research had assumed a capitalistic structure of savers saving and thereby making monetary capital available to entrepreneurs. Changes in the propensity to save sent contrary signals to businesses about the propensity to consume, which caused them to alter their production plans. Based on the ratio between consumer spending and savings, this analytic model has been corrupted by the state and its licensed banks by replacing savers with former savers now no longer saving, and even borrowing to consume.

Today, the inflationary origins of investment funds for business development are hidden through financial intermediation by venture capital funds, quasi-government funds and others. Being mandatory, pension funds continue to invest savings, but their beneficiaries have abandoned voluntary saving and run up debts, so even pension funds are not entirely free of monetary inflation. Insurance funds alone appear to be comprised of genuine savings within an inflationary system.

Other than pension funds and insurance companies, Keynes’s wish for the euthanasia of the saver has been achieved. He went on to suggest there would be a time “when we might aim in practice… at an increase in the volume of capital until it ceases to be scarce, so that the functionless investor will no longer receive a bonus…”

Now that everywhere bank deposits pay no interest, his wish has been granted, but Keynes did not foresee the unintended consequences of his inflationist policies which are now being visited upon us. Among other errors, he failed to adequately account for the limitation of non-monetary forms of capital, which leads to bottlenecks and rising prices as monetary expansion proceeds.

The unintended consequences of neo-Keynesian policy failures are shortly to be exposed. The checks and balances on the formation and deployment of monetary capital in the free market system based on the division of labour have been completely destroyed and replaced by inflation. So, where do you take us from here, Mr Powell, Mr Bailey, Ms Lagarde, Mr Kuroda?

Taking stock

We can now say that America, the nation responsible for the world’s reserve currency, has encouraged policies which have turned its economy from being a producer of goods with supporting services as the source of its citizens’ wealth into little more than a financial casino. The virtues of saving and thrift have been replaced by profligate spending funded by debt. Unprofitable businesses are being supported until the hoped-for return of easier times, which are now gone.

Cash and bank deposits (checking accounts and savings deposits) are created almost entirely by inflation, and currently total $15.2 trillion in the US, while total commercial bank capital is a little under $2 trillion. This tells us crudely that $13 trillion sitting in customer accounts can be attributed to bank credit inflation. Increasing proportions of those customers are financial corporations and foreign entities, and not consumers maintaining cash and savings balances.

On the other side of bank balance sheets is consumer debt, mostly off-balance sheet, but ultimately funded on-balance sheet. Excluding mortgages, the total comprised of credit cards, autos and student debt was $3.86 trillion in mid-2019, amounting to an average debt of $27,571 per household, confirming the extent to which consumer debt has replaced savings.

At $20.5 trillion, bank balance sheets are far larger than just the sum of cash and bank deposits, giving them a leverage of over ten times their equity. Bankers will be very nervous of the current economic situation, aware that loan and other losses of only ten per cent wipes out their capital. Meanwhile, their corporate customers are either shut down, which means most of their expenses continue while they have no income, or they are suffering payment disruptions in their supply chains. In short, bank loan books are staring at disaster. Effectively, the whole banking system is underwater at the same time as the Fed is extolling them to join with it in rescuing the economy by expanding their balance sheets even more.

The sums involved in supply chains are considerably larger than the US’s GDP. Onshore, it is a substantial part of the nation’s gross output, which captures supply chain payments at roughly $38 trillion. Overseas, there is a further mammoth figure feeding into the dollar supply chain, taking the total for America to perhaps $50 trillion. The Fed is backstopping the foreign element through currency swaps and the domestic element mainly through the commercial banking system. And it is indirectly funding government attempts to support consumers who are in the hole for that $27,571 on average per household.

In short, the Fed is committed to rescue all business from the greatest economic collapse since the great depression, and probably greater than that, to fund the US Government’s rocketing budget deficits, fund the maintenance of domestic consumption directly or indirectly through the US Treasury, while pumping financial markets to achieve these objectives and preserve the illusion of national wealth.

Clearly, we stand on the threshold of an unprecedented monetary expansion. Part of it will be, John Law style, to ensure inflated prices for US Treasuries are maintained. At current interest rates debt servicing was already costing the US Government 40% of what was expected to be this year’s government deficit. That bill will now rise beyond control even without bond yields rising. Assistance is also being provided to the corporate debt market. Blackrock has been deputed to channel the Fed’s money-printed investment through ETFs specialising in this market. So not only is the Fed underwriting the rapidly expanding US Treasury market, but it is underwriting commercial dollar debt as well.

In late-1929, a rally in the stock market was prolonged by a similar stimulus, with banks committed to buying stocks and the Fed injecting $100m liquidity into markets by buying government securities. Interest rates were cut. And when these attempts at maintaining asset prices failed, the Dow declined, losing 89% of its value from September 1929.

Today, similar attempts to rescue economies and financial markets by monetary expansion are common to all major central banks, with the possible exception of the ECB, which faces the unexpected obstacle of a challenge by the German Constitutional Court claiming primacy in these matters. There is therefore an added risk that the global inflation scheme will unravel in Europe, which if it does will rapidly lead to funding and banking crises for the spendthrift member states. Doubtless, any financial contagion will require yet more money-printing by the other major central banks to ensure there are no bank failures in their domains.

Whither the exit?

So far, few commentators have grasped the implications of what amounts to the total nationalisation of the American economy by monetary means. They have only witnessed the start of it, with the Fed’s balance sheet reflecting the earliest stages of the new inflation which has seen its balance sheet increase by 61% so far this year. Not only will the Fed battle to fund everything, but it will also have to compensate for contracting bank credit, which we know stands at about $18 trillion.

The Fed must be assuming the banks will cooperate and pass on the required liquidity to save the economy. Besides the monetary and operational hurdles such a policy faces, it cannot expect the banks will want responsibility for the management of businesses that without this funding would not exist. The Fed, or some other government agency has to then decide one of three broad options: further support, withdrawing support, or taking responsibility for business activities. This last option involves full nationalisation.

We must not be seduced into thinking this is an outcome that can work. The nationalisation of failing banks and their eventual privatisation is not a good precedent for wider nationalisation, because a bank does not require the entrepreneurial flair to estimate future consumer demand and to undertake the economic calculations to provide for it. The state taking over business activities fails for this reason, demonstrated by the collapse of totalitarian states such as the USSR and the China of Mao Zedong.

That leaves a stark choice between indefinite monetary support or pulling the rug from under failing businesses. There are no prizes for guessing that pulling rugs will be strongly resisted. Therefore, government support for failing businesses is set to continue indefinitely.

At some stage, the dawning realisation that central banks and their governments are steering into this economic cul-de-sac will undermine government bond yields, despite attempts by central banks to stop it, even if the deteriorating outlook for fiat currencies’ purchasing power does not destroy government finances first.

Earlier in the descent into the socialisation of money, nations had opportunities to change course. Unfortunately, they had neither the knowledge nor the guts to divine and implement a return to free markets and sound money. Those opportunities no longer exist and there can be only one outcome: the total destruction of fiat currencies accompanied by all the hardships that go with it.

Published:5/18/2020 8:43:16 PM
[Markets] Asian Stocks Advance After U.S. Rally; Oil Gains: Markets Wrap (Bloomberg) -- Asian stocks rose Tuesday, spurred by a surge on Wall Street, after early results for an experimental vaccine sparked speculation economies could snap back quickly. Oil extended gains and Treasury yields held near five-week highs.Equities rose in Tokyo, Sydney and Seoul, though the magnitude of the advance was less than in the U.S. Contracts on the S&P 500 reversed modest gains on a report that Nasdaq would tighten IPO rules, affecting some Chinese companies. The U.S. benchmark jumped the most in almost six weeks after Moderna Inc. said its vaccine tests yielded signs it can create an immune-system response in the body. Oil consolidated above $30 a barrel.The risk-on rally comes as more economies around the world and within the U.S. ease restrictions that created one of the steepest downturns since the Depression. Federal Reserve Chairman Jerome Powell is scheduled to speak on the state of the recovery Tuesday, amid expectations he’ll press for further fiscal support.“Short-lived bounces in stock prices even while markets establish new lows are not unheard of,” Ashwin Alankar, head of global asset allocation at Janus Henderson, said in a note. “Forward-looking metrics such as earnings revisions and options prices, on the other hand, sound a more cautious tone both for the economy and stock prices.”Among the headwinds for stocks is a deteriorating U.S.-China relationship. In a further sign of tightening scrutiny on capital flows to China, Reuters reported that Nasdaq is set to to unveil new rules on initial public offerings that will make it more difficult for some Chinese companies to list on the exchange. That follows moves in Washington to halt investments by a retirement plan into the stocks of Chinese firms.These are some of the main moves in markets:StocksS&P 500 futures were down 0.1% as of 9:37 a.m. in Tokyo. The S&P 500 Index surged 3.2%. The Dow Jones Industrial Average climbed 3.9% and the Nasdaq Composite Index rose 2.4%.Topix index gained 1.7%.Australia’s S&P/ASX 200 Index rose 2%.South Korea’s Kospi index rose 1.9%.Hong Kong’s Hang Seng Index futures advanced 1.8% earlier.CurrenciesThe Japanese yen was at 107.41 per dollar, little changed.The offshore yuan traded at 7.1163 per dollar.The Bloomberg Dollar Spot Index was little changed after sinking 0.7%.The euro was at $1.0920.The British pound was at $1.2214, up 0.2%.BondsThe yield on 10-year Treasuries fell one basis point to 0.71% after jumping eight basis points in the previous session.Australia’s 10-year bond yield climbed six basis points to 0.97%.CommoditiesWest Texas Intermediate crude climbed 4.1% to $33.12 a barrel.Gold rose 0.1% to $1,734.75 an ounce.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P. Published:5/18/2020 8:14:24 PM
[Markets] The Oil Rally Is Running On Fumes The Oil Rally Is Running On Fumes Tyler Durden Mon, 05/18/2020 - 20:38

Submitted by Nick Cunningham at Oilprice.com

Oil prices have surged to two-month highs on growing signs of a rebound in oil demand, as the easing of lockdowns spread worldwide. At its peak in April, global lockdown measures affected around 3.9 billion people. But an estimated 3.7 billion people are now living in areas that are experiencing some version of a “reopening,” according to an estimate from Raymond James. 

Data from China has stoked some bullishness in oil markets, although there are some mixed signals. Traffic is back in many Chinese cities, and there are early signs that China’s oil demand is rising back close to pre-pandemic levels around 13 million barrels per day (mb/d). 

At the same time, a new coronavirus cluster in China suddenly sparked another lockdown measure. While Wuhan and other regions may be opening up, roughly 108 million people in Jilin province just went into lockdown. It’s a sign that the fight against COVID-19 will likely be frustrated by repeated flare ups in new cases, which may ultimately lead to renewed lockdowns. 

But for now, the markets apparently want to focus on the positive. On the global vaccine front, there appears to be some progress. Moderna said on Monday that its vaccine has shown to be safe in humans and has also demonstrated promising results in stopping COVID-19. Meanwhile, AstraZeneca said it could have 30 million doses of its vaccine ready by September.

Financial equities rejoiced, with the Dow Jones up roughly 3.5 percent during midday trading. WTI surged past $30 per barrel, up at one point on Monday by more than 10 percent. 

Massive supply cuts go even further in explaining the recent jump in prices. Oil traders view the implementation of the OPEC+ cuts favorably, with the 9.7 mb/d cuts phasing in swiftly. Part of the reason is that some oil producers, including Saudi Arabia, began having difficulty finding a home for its oil, so a portion of the cuts arguably became involuntary. 

Meanwhile, weeks of catastrophically low oil prices ravaged North American oil producers over the past two months. Shut ins could reach 2 mb/d in the U.S. by June, and Canada could lose 1 mb/d. 

But a reality check is in order. WTI at $30 per barrel is suddenly seen as “bullish,” but that price level is financially unsustainable for a vast swathe of global oil supply, including most of the U.S. shale complex. 

Moreover, the physical oil market is not “out of the woods” just yet, according to Rystad Energy. “We still see a 13.7 million bpd implied liquids (crude, condensate, NGLs, others) stock builds in May-20,” the firm said in a statement. That is down by half from the peak of the glut (-26.7 mb/d in inventory builds in April), but a significant overhang remains. 

Separately, Commerzbank argued that the oil market optimism may be running a little too far. “Despite all the euphoria, however, we believe that caution is still advisable: it will probably take some years before demand recovers to its pre-crisis level,” Commerzbank wrote on Monday.

U.S. Federal Reserve Chairman Jerome Powell warned that the American economy recovery could take until the end of 2021. “It could stretch through the end of next year. We really don’t know,” Powell said over the weekend. He noted that the economy might not return to normal simply because stay-at-home-orders are in the process of going away. “For the economy to fully recover people will have to be fully confident, and that may have to await the arrival of a vaccine,” Powell added.

In addition, the price rally may also be the result of speculative positioning – the physical market is trending towards rebalancing, but the rally can also be explained by overly exuberant speculative positioning. “Retail and institutional investors are also likely to have played a key part in the latest price rise. According to the CFTC, the latter expanded their net long positions in WTI on the NYMEX to around 352,000 contracts in the week to 12 May, putting them at their highest level since September 2018,” Commerzbank added. “Thus the positive trends (for the oil price) are largely expected and already priced in.”

The lockdowns are lifting, but there is nothing to suggest that the end of the pandemic is near, or that oil supply will remain shut in. “[T]here is significant downside risk related to two events, the resurgence in COVID-19 outbreaks, and deteriorating compliance to OPEC+ cuts as demand comes back,” Rystad warned. 

Published:5/18/2020 7:42:55 PM
[Markets] Dow Jones Futures: Coronavirus Stock Market Rally Soars On Vaccine Hopes; Alibaba Clears Buy Point, Apple Near Dow Jones futures: The coronavirus stock market rally surged as vaccine progress raised hopes for a rapid economic recovery. Will real economy stocks lead? Published:5/18/2020 5:16:18 PM
[Markets] Deep Dive: Here are Monday’s best stock-market performers as airlines and cruise lines shine Only one Dow Jones Industrial Average component declined.
Published:5/18/2020 4:07:36 PM
[Markets] Dow surges over 1,000 points, on track for best day since April 6 Dow surges over 1,000 points, on track for best day since April 6 Published:5/18/2020 3:12:18 PM
[Volokh Conspiracy] [Michael Abramowicz] The Value of a Vaccine The stock market this morning offers a useful event study on how much of the social value of a vaccine the producer of the vaccine may expect to be able to capture. The good news from Moderna's early-stage coronavirus vaccine trials lifted the Dow about 3 percent and Moderna itself around 30 percent, according to… Published:5/18/2020 1:41:18 PM
[] Moderna's vaccine candidate looking good per preliminary results from phase one trials Published:5/18/2020 10:43:14 AM
[Markets] Dow Jones Soars 700 Points, Led By Walt Disney Stock; Top Chip Stock Shoots Higher On Upgrade The Dow Jones opened sharply higher with the Nasdaq composite and S&P; 500 Monday. An upgrade lifted shares of Nvidia ahead of Thursday's earnings report. Published:5/18/2020 9:42:12 AM
[Markets] Dow surges nearly 700 points at Monday's open amid hopeful report on Moderna's experimental coronavirus vaccine U.S. stock benchmarks surged at Monday's open after a report of early success in a vaccine for the COVID=19 pandemic helped to stir optimism on Wall Street. Meanwhile, Federal Reserve Chairman Jerome Powell said that Americans need to prepare for a tough road ahead in the aftermath of the COVID-19 pandemic but that he wouldn't bet against the domestic economy's ability to persevere through the most significant public-health crisis in more than a century. The Dow Jones Industrial Average rose 685 points, or 2.9%, at 24,361, the S&P 500 index gained 2.4% at 2,932, while the Nasdaq Composite Index advanced 1.7% at 9,165. The rally for the benchmark futures accelerated after a report on a phase-one human trial for a coronavirus vaccine produced by Moderna Inc. showed the production of antibodies to the virus in all of its 45 participants involved in the study.CNBC reported that participants in the trial received two doses of the potential vaccine via intramuscular injection in the upper arm approximately 28 days apart. "These interim Phase 1 data, while early, demonstrate that vaccination with mRNA-1273 elicits an immune response of the magnitude caused by natural infection starting with a dose as low as 25 µg," Tal Zaks, Moderna's chief medical officer, said in s statement. Bloomberg reported that the study is being conducted with the U.S. government, noting that Moderna will expand its trial. Markets had already looked set to kick off the week on a high note after the worst weekly decline in almost two months, as U.S. central bank chief Powell said the Fed would continue to support the economy and financial markets through the viral outbreak. Published:5/18/2020 8:39:45 AM
[Markets] Moderna Spikes 20%, Dow Futs Soar On Promising Early COVID Vaccine Trial Data Moderna Spikes 20%, Dow Futs Soar On Promising Early COVID Vaccine Trial Data Tyler Durden Mon, 05/18/2020 - 07:52

In what appear to be the first data from a human vaccine trial, Modern has reported promising early signs that its vaccine "can create an immune-system response in the body that could help fend off the new coronavirus" according to sampling data from a small group of humans who participated in the phase 1 study.

Signs that one of the most hyped vaccines out of the 130+ projects underway around the world have helped Moderna's shares soar 20%+ in premarket trade.

According to BBG, citing data released by Moderna, the study was primarily designed to look at the safety of the shot, and showed no major warning signs in a small phase 1 trial, the company said in a statement Monday. The trial is being run in partnership of the US government under the watchful eye of Dr. Fauci and the NIH. Moderna plans to continue advancing it to wider testing.

More importantly than the safety-related findings, researchers found that at two lower dose levels, antibodies could be detected, a sign that the vaccine could help those who receive it fend off infection by the virus.

The researchers found that at two lower dose levels used in the study, levels of antibodies found after getting a second booster shot of the vaccine either equaled or exceeded the levels of antibodies found in patients who had recovered from the virus.

Moderna's CEO - who later appeared on CNBC Monday morning for an interview - praised the results as "a very good sign."

"This is a very good sign that we make an antibody that can stop the virus from replicating,” Moderna Chief Executive Officer Stephane Bancel said in an interview. The data “couldn’t have been better,” he said.

Bancel said that safety profile appeared to be good, and the reactions were typical of vaccines. They included injection site pain and redness, as well as temporary fever or chills that quickly go away on their own, he said.

Bancel added that the safety profile of the vaccine appeared to be good, and the reactions were mostly typical, including soreness and pain at the injection site. Some patients experienced temporary fever and chills in reaction to the shot. Though Bancel clarified that this only emerged in a few cases during the second round of dose administration. The symptoms mostly went away on their own, according to the company.

The company felt it needed to release these interim data from the trial due to the "high level of interest" in the vaccine (helped by CNBC's Jim Cramer, who often mentions the company on air).

A phase 2 trial is expected to begin shortly, and a final-stage trial will begin in July, Moderna said. Dow futures are soaring on the news, with the Dow up 560 points in recent trade, building on earlier gains.

Published:5/18/2020 7:12:35 AM
[Markets] Dow Jones Futures Signal Coronavirus Market Rally On Vaccine Hopes; Apple, Tesla Lead Tech Giants Near Buy Points Dow Jones futures signaled a strong coronavirus stock market rally on coronavirus vaccine and treatment news. Apple, Facebook, Google, AMD and Tesla are near buys points. Published:5/18/2020 7:12:35 AM
[Markets] The S&P 500 Was Stopped in Its Tracks Last Week. Here’s Why Another Drop Could Be in the Offing. The Dow Jones Industrial Average dropped 645.90 points, or 2.7%, to 23,685.42, while the S&P 500 index fell 2.3%, to 2863.70, and the Nasdaq Composite declined 1.2%, to 9014.56. It was the Dow’s and the Nasdaq’s worst week since the week ended April 3, and the S&P 500’s worst since the week ended March 20. Thanks to Covid-19, the economic data continue to be terrifying—nearly 3 million additional people filed for jobless claims, retail sales suffered the largest plunge on record, and industrial production cratered. Published:5/15/2020 7:52:14 PM
[Markets] Dow Jones Fights To Close Higher Amid Rising China Trade War Tension The Dow Jones fought to close higher on the stock market today, as investors turned their attention to potential renewed trade tensions with China. Published:5/15/2020 4:23:36 PM
[Markets] 'Asset prices remain vulnerable to significant price declines should the pandemic take an unexpected course,' says Fed The markets are vulnerable to a pullback, said the Federal Reserve in the central bank's most recent account of the health of the financial markets in the aftermath of coronavirus. "Asset prices have been volatile across many markets," the central bank wrote in its latest semi-annual report on the financial sector published at 4 p.m. Eastern Time on May 15. "Since their lows in late March and early April, risky asset prices have risen and spreads have narrowed in key markets, the Fed wrote. "Asset prices remain vulnerable to significant price declines should the pandemic take an unexpected course, the economic fallout prove more adverse, or financial system strains reemerge," policy makers explained. Fed Chairman Jerome Powell said earlier this week that a lengthy downturn could turn liquidity problems into solvency issues. The Dow Jones Industrial Average , the S&P 500 index and the Nasdaq Composite Index have all surged by more than 20% since hitting a bear-market low on March 23, with a number of high-profile investors warning that valuations may have gotten lofty amid the worst viral outbreak in more than a century. The COVID-19 pandemic has killed nearly 300,000 people globally and infected more than 4 million people, according to data compiled by Johns Hopkins University. The Fed was forced to unleash a series of unprecedented actions to limit the economic damage from forced shutdowns and closures intended to curtail the spread of the deadly pathogen. Those lockdowns, however, have likely pushed the domestic economy into one of its worst recessions since the Great Depression, with some 36.5 million people out of work over the past two months. "Uncertainty remains high and markets remain volatile relative to historical norms, suggesting the possibility of further price declines should developments prove more adverse than expected," wrote the Fed. Published:5/15/2020 3:52:24 PM
[Markets] Raytheon Technologies Corp., American Express share losses contribute to Dow's 25-point drop DOW UPDATE Behind negative returns for shares of Raytheon Technologies Corp. and American Express, the Dow Jones Industrial Average is falling Friday afternoon. Shares of Raytheon Technologies Corp. (RTX) and American Express (AXP) have contributed to the blue-chip gauge's intraday decline, as the Dow (DJIA) was most recently trading 24 points lower (-0. Published:5/15/2020 2:50:07 PM
[Markets] Dow jumps nearly 50 points on gains in Walt Disney, Home Depot stocks DOW UPDATE Led by strong returns for shares of Walt Disney and Home Depot, the Dow Jones Industrial Average is climbing Friday afternoon. Shares of Walt Disney (DIS) and Home Depot (HD) are contributing around a quarter of the blue-chip gauge's intraday rally, as the Dow (DJIA) was most recently trading 48 points (0. Published:5/15/2020 1:20:14 PM
[Markets] Dow Jones Stumbles As Retail Sales Plunge; Stock Soars 130% On Coronavirus Drug The Dow Jones Industrial Average tumbled nearly 300 points early Friday before paring losses, amid grim economic data and U.S.-China trade concerns. Published:5/15/2020 11:19:07 AM
[Markets] Stocks Are Shrugging Off a Double Dose of Bad News The Dow staged a comeback despite a report that the U.S. is taking steps to block semiconductor shipments to Huawei, and news that retail sales fell even more than expected in April. Published:5/15/2020 10:19:15 AM
[Markets] Dow under pressure Friday amid worst retail sales report in more than 50 years; J.C. Penney's stock halted for news U.S. stock benchmarks opened lower on as investors parsed economic reports that further underscored the economic harm from the COVID-19 pandemic. The Dow Jones Industrial Average was trading 70 points, or 0.3%, lower at 23,555, the S&P 500 index declined 0.4% at 2,841, while the Nasdaq Composite Index retreated 0.5% at 8,897. Data on U.S. retail sales fell 16.4% in April as the economy remained all but shut down, exceeding the 12.5% drop expected, on average, by economists polled by MarketWatch. Excluding autos, sales still dropped 16.2%. Meanwhile, the New York Fed's Empire State business conditions index rose 29.7 points to -48.5 in May. Economists had expected a reading of -65, according to a survey by Econoday. A figure below 100 indicates a contraction in demand. In corporate news, J.C. Penney Co.'s shares were halted for news with many expecting that the beleaguered retailer may file for bankruptcy protection. Published:5/15/2020 9:18:57 AM
[Markets] Dow down triple digits Friday in wake of weakest retail-sales report in 50 years Dow down triple digits Friday in wake of weakest retail-sales report in 50 years Published:5/15/2020 8:52:52 AM
[Markets] Dow Jones Futures Fall On China Tensions After Coronavirus Stock Market Rally; JD.com, Chip Giant, Covid Test-Maker Are Earnings Movers Dow Jones futures fell on revived China tensions after Thursday's coronavirus stock market rally. Covid-19 test-maker Co-Diagnostics led earnings movers. Published:5/15/2020 6:47:50 AM
[Markets] How Bad Is It? How Bad Is It? Tyler Durden Fri, 05/15/2020 - 05:00

Authored by Jeff Deist via The Mises Institute,

How bad is it?

That is the question on everyone's mind as we come to grips with the economic carnage caused by global economic shutdowns, supply chain disruptions, and ongoing quarantines of million of people. Do we face another Great Depression, or simply a deep recession more like 2008? And equally important, are soft Americans prepared for either? Have we started to process all of this psychologically? Have we really come to terms with the enormity of the situation, with the unprecedented risk posed by business shutdowns? Are Americans so accustomed to a certain material standard of living that they do not understand how fragile it is?

Here is what we know. 

Since February, 30 to 40 million of Americans have been thrown out of work. Four or 5 million file new unemployment claims each week. The real unemployment rate is probably over 20 percent, while the labor force participation rate drops like a stone. In states like Hawaii unemployment may approach 35 percent. Deutsche Bank economists predict an absolutely staggering 40 percent reduction in US GDP for the second quarter of 2020. Meanwhile, millions of American households and businesses simply stopped paying rent or mortgages on March 1, and bankruptcies spread across major American retailers like wildfire. Countless small local businesses, many left out of the running for the new SBA (Small Business Administration) loans recently created by Congress, simply will not reopen regardless of what happens over the next few months.    

So although we have a sense of how deep the economic damage runs, we can only guess how long it may last.

Will the virus remain a threat, real or perceived, for months or years? And if so, how long will state governments maintain at least partial business lockdowns? Will the US economy enjoy a vaunted V-shaped bounce-back recovery, as promised by Trump administration cheerleader Larry Kudlow? Will it look more like a U, with months or years of stagnation at the bottom? Or worse still, like an L with no rebound in sight? 

Looking back at the 2008 crisis provides a sober argument against a quick recovery later this year.

Consider this analogy:

Most roller coasters feature what is known as a "lift hill," a chain-driven steep ascent at the beginning which takes nervous riders to the top of of a sharp drop-off. Going over this first hill not only creates the most thrilling moments, but also generates energy to propel the coaster cars farther along the path of the ride. How much farther and faster the ride goes depends on the height of the hill and the mass of the coaster train. Bigger and higher make for a more precipitous fall. 

Absent some kind of additional mechanical intervention, the coaster never again reaches the height of the initial hill due to simple friction. Congress and the Fed are busy attempting to overcome this friction using government stimulus and central bank "liquidity."  But per our analogy, the coaster's potential energy is highest during the pregnant pause at the peak of the lift hill; its kinetic energy is highest at the bottom of the first drop. No subsequent hill, twist, or turn quite matches the feeling of that first free fall. 

Recall, from those terrible days of 2008, how a crash gathers speed. At first a few cars on the coaster crest the hill, well before the rest of the train plummets. In mid-September of that year, Lehman Brothers was the first car in the coaster to go over the hill into the abyss. It took a few weeks, until September 29, for investors to fully grasp what was happening and send the Dow plummeting in the largest single-day loss in history.

But the Dow did not reach its ultimate low until March 2009. Nine million lost jobs were not recovered until well into the next decade. And US housing prices didn't bottom out until 2012. 

Crashes are fast, like that first hill on a coaster. Recoveries are not, for the simple reason that production is more difficult than destruction.

Although the Great Recession of 2008 "lasted" eighteen months in official terms, its effects lasted far longer and are still felt today. Its scars remain particularly visible on two bookend generations, Millennials and Baby Boomers. In stark terms, many of the former failed to launch and many of the latter found comfortable retirement out of their grasp. Millions of Millennials sought more education and degrees (with resulting debt) to ride out the soft job market; millions of older workers simply gave up and limped along until they were eligible for Social Security. Now both face another crisis just a decade later. 

How bad will the Great Crash of 2020 be? Even more unsettling is the question of whether it represents a self-inflicted wound, caused by state-mandated business shutdowns which increasingly appear wildly disproportionate to the actual threat posed by the COVID virus. Economist Daniel Lacalle and I will attempt to answer both during a live webinar later this week, particularly in the context of what governments and central banks have done in recent months. 

The first step in addressing a crisis is understanding how severe it really is.

Published:5/15/2020 4:18:58 AM
[Markets] European stocks open higher after strong Wall Street finish, Chinese data European stocks opened higher Friday, buoyed by a strong Wall Street finish as well as data showing rising Chinese industrial production. The Stoxx Europe 600 ] rose 1.1% and the U.K. FTSE 100 added 1.3%. Cruise operator Carnival surged 9% and easyJet climbed 5%. Futures on the Dow Jones Industrial Average edged up 86 points. Published:5/15/2020 2:47:44 AM
[Markets] Dow marks sharpest intraday comeback in 2 months, partly powered by a rally in battered banks The Dow staged the biggest turnaround in about two months on Thursday, as investors overlooked data that showed 2.9 million Americans lost jobs last week, bringing the total unemployed to about 36.5 million since COVID-19 pandemic began. Published:5/14/2020 3:46:56 PM
[Markets] American Express, UnitedHealth share gains lead Dow's nearly 300-point rally DOW UPDATE Shares of American Express and UnitedHealth are trading higher Thursday afternoon, leading the Dow Jones Industrial Average rally. Shares of American Express (AXP) and UnitedHealth (UNH) have contributed to the blue-chip gauge's intraday rally, as the Dow (DJIA) is trading 296 points, or 1. Published:5/14/2020 3:14:00 PM
[Markets] Banks, Bonds, Black Gold, Bitcoin, & Bullion Bounce Despite Jobspocalypse Banks, Bonds, Black Gold, Bitcoin, & Bullion Bounce Despite Jobspocalypse Tyler Durden Thu, 05/14/2020 - 16:01

Over 36 million newly jobless Americans in the last 8 weeks... and the Nasdaq is up over 30% in the same period...

Mixed bag in US stocks today (more below) with Dow best, Small Caps and Trannies lagged...

This is the 7th week of the last 8 with massive job losses and gains for The Dow...

  • 3/26 - 3.31mm jobless, S&P +6.24%, Dow +6.38%

  • 4/02 - 6.87mm jobless, S&P +2.28%, Dow +2.24%

  • 4/09 - 6.62mm jobless, S&P +1.45%, Dow +1.21%

  • 4/16 - 5.24mm jobless, S&P +0.58%, Dow +0.12%

  • 4/23 - 4.43mm jobless, S&P -0.04%, Dow +0.18%

  • 4/30 - 3.84mm jobless, S&P -0.92%, Dow -1.17%

  • 5/07 - 3.17mm jobless, S&P +1.15%, Dow +0.89%

  • 5/14 - 2.98mm jobless, S&P +1.15%, Dow +1.62%

Major sell program at the open today (almost historic)...

But, the NASDAQ Composite is red year to date (8972)...

Source: Bloomberg

Banks were panic bid today...

Source: Bloomberg

US equity markets rebounded almost perfectly off critical technical levels today...

Dow futures soared over 800 points off the lows

Some claimed the bounce was due to positive comments from Nelson Peltz on CNBC - who mention that he was optimistic that "a vaccine is going to come sooner than later," suggesting that the Pfizer CEO had said something positive (but Pfizer has not even started its trials and has only one vaccine in Phase 1). In fact Peltz poured cold water on the broad market, saying he had two new positions, was not buying the market:

"I'm not buying the market: I’m buying specific companies. In this case, two companies that I like very much."

Peltz comments hit around 1230ET and as the chart shows, there was no reaction at the time... but what what retail heard on their apparently delayed feeds: buy all the things!

After two ugly days, shorts were squeezed once again today (and banks and energy gains - worst performers YTD - suggest this was nothing but a squeeze bounce)...

Source: Bloomberg

The Dow and Small Caps bounced off their 50DMA...

The Fibs held...

At 1345ET The Fed's Kashkari said he had "more confidence in the signal from the bond market than the stock market..." Equity bulls better hope he is wrong...

Source: Bloomberg

It's pretty clear the market wants negative-rates no matter what Powell et al. say...

Source: Bloomberg

Bonds were bid today...

Source: Bloomberg

Bitcoin was bid today...

Source: Bloomberg

Gold Bullion was bid today...

Source: Bloomberg

Silver had even bigger day, back above $16...

Source: Bloomberg

Oil prices surged today, extending the week's gains...

WTI June topped $27,50

The Dollar dropped today...

Source: Bloomberg

As the peso soared after Mexico cut rates by 50bps (yes!?)...

Source: Bloomberg

Finally, American consumers ain't buying what American stocks are selling...

Source: Bloomberg

Published:5/14/2020 3:14:00 PM
[Markets] Dow snaps losing streak with 377-point gain as financial sector rallies Dow snaps losing streak with 377-point gain as financial sector rallies Published:5/14/2020 3:14:00 PM
[Markets] The Dow is staging a nearly 800-point U-turn that has the index in the midst of a sharp reversal from its opening tumble The Dow Jones Industrial Average Thursday midday was trading firmly higher, reversing a sharp drop that served as a gut-check to bullish investors amid the COVID-19 pandemic. The Dow was up 308 points, or 1.3%, at 23,562, following a skid that saw it lose as many as 458 points at its intraday nadir at 22,789.62. Gains were being driven by an advance in American Express Co. and UnitedHealth Group Inc., which were helping to lead the charge. The S&P 500 index was up 0.8% at 2,843, powered by a gain in the financials sector and a rally in the energy sector . The technology laden Nasdaq Composite Index was trading up 0.4% , or 37 points, at 8,900--well off its lows at 8,705.25. Published:5/14/2020 2:45:22 PM
[Markets] Dow, S&P 500 Bounce Hard Off Lows; Take Profits In Zynex, Co-Diagnostics? The Dow Jones Industrial Average is demonstrating resilience, erasing an early 2% loss, unfazed by news of another big surge in weekly jobless claims. Published:5/14/2020 1:46:56 PM
[Markets] The Dow is now up 200 points as stocks stage a major U-turn from early lows The Dow is now up 200 points as stocks stage a major U-turn from early lows Published:5/14/2020 12:47:43 PM
[Markets] Dow Jones, S&P 500 Bounce Hard Off Lows; Is It Time To Take Profits In Zynex? The Dow Jones Industrial Average is demonstrating resilience, erasing an early 2% loss, unfazed by news of another big surge in weekly jobless claims. Published:5/14/2020 12:47:42 PM
[Markets] The Dow is staging a 600-point U-turn that has the index in the midst of a sharp reversal from its opening tumble The Dow Jones Industrial Average Thursday midday was trading firmly higher, reversing a sharp drop that served as a gut-check to bullish investors amid the COVID-19 pandemic. The Dow was up 140 points, or 0.6%, at 23,392, following a skid that saw it lose as many as 458 points at its intraday nadir. Gains were being driven by an advance in American Express Co. and UnitedHealth Group Inc., which were helping to lead the charge. The S&P 500 index was up 0.3% at 2,828, powered by a 1.9% gain in the financials sector and a 1% rally in the energy sector . The technology laden Nasdaq Composite Index was off 0.2% but well off its lows at 8,705.25. Published:5/14/2020 12:13:45 PM
[Markets] After a sharp early decline, the Dow is now up slightly as stocks rebound After a sharp early decline, the Dow is now up slightly as stocks rebound Published:5/14/2020 11:43:53 AM
[Markets] Dow Jones News: Cisco Stock Surges; 3M Suffers Double-Digit Sales Decline The stock market was volatile on Thursday, declining early, recovering, then declining again. The Dow Jones Industrial Average (DJINDICES: ^DJI) was down around 0.3% at 11:30 a.m. EDT. Cisco Systems (NASDAQ: CSCO) was the Dow's top performer on Thursday, boosted by a quarterly report that wasn't as bad as expected. Published:5/14/2020 11:43:53 AM
[Markets] Dow's Move Higher Fizzles Amid Grim Employment Data Stocks declined Thursday after another 3 million Americans filed for unemployment benefits in the latest week and as tensions were rising between the United States and China. The Dow Jones Industrial Average fell 81 points, or 0.35%, to 23,166, the S&P 500 declined 0.63% and the Nasdaq dropped 0.97%. The Dow made a brief move into positive territory earlier as bank stocks led by JPMorgan Chase moved higher. Published:5/14/2020 11:13:26 AM
[Markets] 26 of 30 Dow components in the red; Nasdaq absorbs 150-point loss 26 of 30 Dow components in the red; Nasdaq absorbs 150-point loss Published:5/14/2020 9:13:52 AM
[Markets] Dow Jones Futures Signal Another Coronavirus Stock Market Rally Sick Day Amid Heavy Jobless Claims Dow Jones futures: After the coronavirus stock market rally retreated again Wednesday, Cisco earnings beat views and Mastercard the start of "normalization." Published:5/14/2020 7:56:16 AM
[Markets] Dow Jones Futures: Another Coronavirus Stock Market Rally Sick Day? Cisco Earnings Top, Mastercard Sees 'Normalization' Dow Jones futures: After the coronavirus stock market rally retreated again Wednesday, Cisco earnings beat views and Mastercard the start of "normalization." Published:5/14/2020 5:55:53 AM
[Markets] European stocks slide at the open European stocks slumped at the open Thursday, with the Stoxx Europe 600 falling 1%, after a rough Wall Street session following the grim outlook from Federal Reserve Chairman Jerome Powell. Geopolitical tensions were apparent as the U.S. accused China of trying to steal vaccine information while France objected to one of its drugmakers, Sanofi, saying it would give U.S. priority to a coronavirus vaccine. Futures on the Dow Jones Industrial Average fell 67 points. Published:5/14/2020 2:16:14 AM
[Markets] The Last Hour of the Day Hasn’t Been Good for U.S. Stocks Lately (Bloomberg) -- U.S. stocks have been dropping toward the end of their regular session in the past couple of weeks.“Yesterday, a late day S&P sell-off continued a trend over the last two weeks of weakness in the last hour of the day,” Susquehanna Financial Group LLP’s Chris Murphy wrote in a note Wednesday. The gauge was negative over the 3 p.m. to 4 p.m. time period in New York in eight of the 11 days through Tuesday, with a daily average performance of minus 0.34%, he said, compared with a 0.07% average gain from 9:30 a.m. to 3 p.m.Read more: Noise for Sale in Giant U.S. Auctions Used to End Stock SessionsThe Smart Money Flow Index, which measures the Dow Jones Industrial Average 30 minutes into a session versus the end of the day, has been decreasing in the past few weeks, Murphy said. A trading maxim is that the action early in a session features “dumb money,” which reacts emotionally to news, while “smart money” like institutions wait until the end of the day.With the growth of passive investments and other changes in dynamics that may be less true, but the decline in the SMF Index could be a sign “smart money” is selling.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P. Published:5/14/2020 1:48:42 AM
[Markets] Dow Jones Futures: After Coronavirus Stock Market Rally Sick Day, Cisco Earnings Top, Mastercard Sees 'Normalization' Dow Jones futures: After the coronavirus stock market rally retreated again Wednesday, Cisco earnings beat views and Mastercard the start of "normalization." Published:5/13/2020 7:38:45 PM
[Markets] Stock Market Wrap-Up: These 2 Stocks Hit New All-Time Record Highs Wednesday reminded investors about the potential downside of the stock market. Market participants got a dose of economic reality from the chair of the Federal Reserve, as Jerome Powell emphasized the need for further fiscal stimulus in order to prevent what could otherwise be a prolonged period of deep economic retrenchment. After having opened near the unchanged mark, the Dow Jones Industrial Average (DJINDICES: ^DJI), S&P 500 (SNPINDEX: ^GSPC), and Nasdaq Composite (NASDAQINDEX: ^IXIC) finished the dow with losses of as much as 2%. Published:5/13/2020 4:13:15 PM
[Markets] Stocks & Bond Yields Tumble On Beijing Blowback, A Fearful Fed, & Billionaire Alarm Bells Stocks & Bond Yields Tumble On Beijing Blowback, A Fearful Fed, & Billionaire Alarm Bells

For the second day in a row, it was not pretty in equity market land...

Small Caps are worst on the week, followed by Trannies with Nasdaq best but still down hard...

The mega-techs begin to catch down to the "median" stock...

Source: Bloomberg

Three main themes stood out that spoiled the promise of a v-shaped recovery!...

Billionaires are ringing alarm bells - Druck, Tepper, & Lasry - the market's way overvalued and hopes of (and pricing in) a v-shaped recovery are a fallacy.

Stocks are decoupled from reality...

Source: Bloomberg

Valuation is extreme to say the least (despite the plunge)...

Source: Bloomberg

Trump didn't like their view...

A Fearful Fed Chair - Powell warned of a prolonged recession but said no negative rates... we promise! No really, we really really mean it this time... but the economy is really in a bad way and unless we get more fiscal we are cornered... into maybe cutting rates negative..

The market refuses to give up hope for negative rates...

Source: Bloomberg

Which is concurrently crushing bank stocks..

Source: Bloomberg

Beijing blowback is building - China banned Aussie beef imports after questioning COVID source and now has indirectly threatened "punishment measures" after US pension fund pulls China investment and GOP pushes 'Sue China' bill over COVID reparations.

For now, it appears vol is striking US more than China... for now!

Source: Bloomberg

The 'Virus Fear'-Trade has been soaring despite the broad indices recent gains...

Source: Bloomberg

And the most directly affected sectors from the virus were a bloodbath today as hope for "normal" fade...

Source: Bloomberg

Of course the answer from the talking heads, asset-gatherers, and commission-takers...

FANG Stocks fell for the 2nd day in a row...

Source: Bloomberg

Riding The Fed's largesse on long-momo has suddenly failed - the last two days have been the biggest drop in long-momentum since mid-March...

Source: Bloomberg

And other cyclically-positive quant factors faded notably...

Source: Bloomberg

The Dow is back below its 50% crash retracement level...

Dow and Small Caps pushed down towards key technical levels...

VIX surged back above 35...

And the VIX term structure notably inverted...

Source: Bloomberg

It would seem that The Fed can't save HY bonds everyday (HYG tumbled today and LQD rolled over from a pop open)..

Source: Bloomberg

The yield curve was lower on the day with the long-end outperforming...

Source: Bloomberg

The yield curve notably flattened...

Source: Bloomberg

Another v-shaped recovery in the dollar today...

Source: Bloomberg

Cryptos limped higher once again today...

Source: Bloomberg

Gold jumped notably today as Powell spoke...

Gold in yuan rallied...

Source: Bloomberg

Oil prices were volatile once again with OPEC demand cuts and EIA inventory draws...

 

Finally, where's the beef?

Source: Bloomberg

Tyler Durden Wed, 05/13/2020 - 16:00
Published:5/13/2020 3:10:09 PM
[Markets] Dow ends with more than 500-point loss after Powell strikes cautious tone Dow ends with more than 500-point loss after Powell strikes cautious tone Published:5/13/2020 3:10:09 PM
[Markets] American Express, Exxon Mobil share losses contribute to Dow's 585-point drop DOW UPDATE The Dow Jones Industrial Average is slumping Wednesday afternoon with shares of American Express and Exxon Mobil seeing the biggest losses for the blue-chip average. Shares of American Express (AXP) and Exxon Mobil (XOM) have contributed to the blue-chip gauge's intraday decline, as the Dow (DJIA) was most recently trading 585 points lower (-2. Published:5/13/2020 2:39:19 PM
[Markets] The Dow is down nearly 700 points as stocks reach their lows of the day The Dow is down nearly 700 points as stocks reach their lows of the day Published:5/13/2020 2:39:19 PM
[Markets] American Express, Exxon Mobil share losses lead Dow's 450-point drop DOW UPDATE Dragged down by declines for shares of American Express and Exxon Mobil, the Dow Jones Industrial Average is in a selloff Wednesday afternoon. The Dow (DJIA) was most recently trading 459 points (1. Published:5/13/2020 1:24:02 PM
[Markets] Stocks Tumble As Tepper Says Market "Most Overvalued Since The Bubble Of 1999" Stocks Tumble As Tepper Says Market "Most Overvalued Since The Bubble Of 1999"

On a day when the market commentary of "big rich guy" investors has earned a public rebuke from the president himself, we suspect more than the usual number of viewers tuned in to hear David Tepper, the founder of hedge fund Appaloosa Management and owner of the Carolina Panthers, during a noontime interview on CNBC Wednesday.

Offering a wary market outlook, Tepper said that while he suspects the bottom might already be in, there are simply too many areas in this market that are way too overvalued, and the legendary trader predicted more chaotic trading ahead. And speaking specifically about the Nasdaq, which has been on a surprising tear as just a handful of tech stocks carry the entire market, Tepper said the overvaluations were some of the worst he's seen since 1999, the heyday of the dotcom bubble.

Tepper even acknowledged that many of the tech stocks which he still holds - stocks with arguably the best earnings prospects post-crisis - are "fully valued".

Stocks tumbled on Tepper's comments as traders ignored the president's advice to ignore rich Wall Street traders.


We imagine a Trump tweet is in the works.

 

 

 

 

 

 

Tyler Durden Wed, 05/13/2020 - 12:31
Published:5/13/2020 11:35:52 AM
[Markets] Raytheon Technologies Corp., Exxon Mobil share losses contribute to Dow's nearly 150-point drop DOW UPDATE The Dow Jones Industrial Average is falling Wednesday morning with shares of Raytheon Technologies Corp. and Exxon Mobil facing the biggest losses for the price-weighted average. The Dow (DJIA) was most recently trading 149 points lower (-0. Published:5/13/2020 10:06:38 AM
[Markets] Dow logs 200-point stumble as Fed chief says crisis has no modern precedent Dow logs 200-point stumble as Fed chief says crisis has no modern precedent Published:5/13/2020 9:36:11 AM
[Markets] Dow Jones Falls On Fed Chief Powell; Is The Coronavirus Stock Market Rally Disconnected From Economic Reality? The Dow Jones futures fell as Fed chief Jerome Powell gave a cautious outlook: Is the coronavirus stock market rally divorced from economic reality? Published:5/13/2020 9:06:42 AM
[Markets] Dow Jones Futures Fall On Fed Chief Powell; Is The Coronavirus Stock Market Rally Disconnected From Economic Reality? Dow Jones futures fell as Fed chief Jerome Powell gave a cautious outlook: Is the coronavirus stock market rally divorced from economic reality? Published:5/13/2020 8:36:14 AM
[Markets] U.S. stock futures rise coming off last week's rally After starting slowly, U.S. stock index futures were shooting higher late Sunday. As of 8:30 p.m. Eastern, Dow Jones Industrial Average futures were up 126 points, or 0.5%, while S&P 500 futures and Nasdaq-100 futures were also up around the same percentages. Stocks rose Friday, and for the week the Dow advanced 2.6%, the S&P 500 ended 3.5% higher while the Nasdaq advanced 6%, as expectations for an economic bounce-back as businesses gradually reopen outweighed new data showing more than 20 million Americans lost their jobs in April amid coronavirus-related shutdowns. Published:5/10/2020 7:50:06 PM
[Markets] Stock Market Wrap-Up: Friday's Big Stock Winner Looks Like a No-Brainer Right Now The stock market has been extremely optimistic lately, even in the face of heightened uncertainty related to the global COVID-19 outbreak. The Dow Jones Industrial Average (DJINDICES: ^DJI), S&P 500 (SNPINDEX: ^GSPC), and Nasdaq Composite (NASDAQINDEX: ^IXIC) were all higher by about 1% to 2% on Friday. PRA Group (NASDAQ: PRAA) specializes in debt collection, and it stands to see rising demand as business clients struggle to get the customers who owe them money to pay them back. Published:5/8/2020 5:02:40 PM
[Markets] Dow Jones Runs 455 Points Higher As Stock Market Shrugs Off Dismal Jobs Report The Dow Jones industrials rallied late to close near session highs Friday, as investors focused on positive news instead of dreary jobs data. Published:5/8/2020 3:40:25 PM
[Markets] Dow's up over 400 points as stocks extend gains in final hour of trade Dow's up over 400 points as stocks extend gains in final hour of trade Published:5/8/2020 3:04:30 PM
[Markets] Dow Jones Vaults 6,025 Points From March 23 Bottom; This Hot Stock Triggers 8-Week Hold Rule The Dow Jones Industrial Average has now lifted more than 6,000 points from its March low. AudioCodes has triggered a special holding rule. Published:5/8/2020 1:01:43 PM
[Markets] Stocks Soar In Response To Record Rise In Unemployment Stocks Soar In Response To Record Rise In Unemployment

Nothing says BTFD like the worst jobs data in US history...

Dow futures spiked over 150 points on the terrible data...

Are we seriously f**king rallying because "only" 20.5mm people lost their jobs (less than the 22mm expectation)?

WTF!

Tyler Durden Fri, 05/08/2020 - 08:54
Published:5/8/2020 8:00:41 AM
[Markets] Dow Jones Futures Signal Strong Gains For Post-Coronavirus Market Rally Ahead Of Jobs Report; Will Tesla Plant Reopen Today? Dow Jones futures signal more gains in the post coronavirus stock market rally. Several stocks moved on earnings just after breaking out. Will Tesla Fremont open? Published:5/8/2020 5:29:34 AM
[Markets] U.S. Stock Futures Gain as Negotiators Vow Effort on Trade Deal (Bloomberg) -- U.S. stock index futures rose as positive developments around a U.S.-China trade deal added to optimism spurred by news on major economies moving toward reopening.Contracts on the S&P 500 rose as much as 1.5% before trading 0.9% higher as of 9:08 a.m. in London. Futures on the Nasdaq 100 Index and Dow Jones Industrial Average were also up 0.9%. China’s Vice Premier Liu He talked with U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin by phone on Friday Beijing time, according to the Xinhua News Agency. The two sides pledged to cooperate on the economy and public health, the report said.“Given the recent rising tensions between the U.S. and China surrounding Covid-19, investors are likely comforted to see that both sides are still working toward implementing the phase-one deal,” said Takeo Kamai, head of execution services at CLSA Securities Japan. “Disruption in the trade front would’ve added another level of anxiety and put us right back to the central issue for the markets in 2019.”The gains in equity futures added to bullish sentiment that drove shares higher on Wall Street on Thursday. The underlying S&P 500 rallied 1.2% with speculation mounting that the worst of the economic damage from the virus has passed as more of the country reopens.The focus later Friday will be on the U.S. jobs report, which is forecast to show employers slashed about 22 million jobs in April, nearly erasing a decade of job gains in a single month.On Thursday, data showed filings for unemployment remained at historically high levels, but fell from the prior week. The tech-heavy Nasdaq Composite turned positive for the year, wiping out losses that reached as much as 24% at the depths of the pandemic-fueled sell-off.(Updates prices throughout.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P. Published:5/8/2020 3:28:24 AM
[Markets] Dow futures rise 270 points Thursday evening as stock-market bulls brace for final test of week from Friday jobs report U.S. stock-index futures climbed higher Thursday evening in light trading as investors readied for another test of the bullish momentum that has produced gains in two of the past three sessions for the S&P 500 and the Dow, powered by rallies in energy and technology-related firms. However, the market will have to overcome Friday's jobs report, which will underscore the depth of the impact of the COVID-19 pandemic on the American economy. Thus far, the market has blown past Thursday's weekly jobless claims report, which showed that 3.2 million jobs were lost in April, bringing the total seeking jobless benefits in the U.S. over the past six weeks to 33 million, or approximately one out of every five eligible workers. Friday's nonfarm-payrolls report is expected to show that unemployment hit double-digits, with levels likely to exceed those of the 2008-09 financial crisis. Futures for the Dow Jones Industrial Average were up 273 points, or 1.2% at 24,116, those for the S&P 500 index gained 1.1% at 2,896.75, while Nasdaq-100 futures picked up 1.1% at 9,156. During Thursday's regular session, the Dow ended 211.25 points, or 0.9%, higher, at 23,875.89, off its intraday high at 24,094.62, while the S&P 500 added 32.77 points, or 1.2%, to close at 2,881.19, led by a 2.5% rally in the energy sector [s:XX: SP500.10] and a 2.2% climb in financials [s:XX: SP500.40]. The Nasdaq Composite Index wrapped up at 8,979.66, up 125.27 points, or 1.4%, notching a 0.08% year-to-date advance, erasing its losses for 2020. In corporate news, Dropbox Inc. notched its first quarterly profit since its debut as a publicly traded company in 2018, and Uber Technologies reported first-quarter results that revealed weakness in its ride-hailing business but a surge in its food-delivery segment. Published:5/7/2020 10:02:34 PM
[Markets] Boeing, Walt Disney share gains contribute to Dow's nearly 250-point rally DOW UPDATE Led by positive momentum for shares of Boeing and Walt Disney, the Dow Jones Industrial Average is rallying Thursday afternoon. Shares of Boeing (BA) and Walt Disney (DIS) are contributing about a quarter of the blue-chip gauge's intraday rally, as the Dow (DJIA) was most recently trading 243 points higher (1. Published:5/7/2020 2:26:06 PM
[Markets] Boeing, Dow Inc. share gains contribute to Dow's 310-point rally DOW UPDATE Shares of Boeing and Dow Inc. are trading higher Thursday afternoon, propelling the Dow Jones Industrial Average rally. Shares of Boeing (BA) and Dow Inc. (DOW) have contributed about 25% of the blue-chip gauge's intraday rally, as the Dow (DJIA) was most recently trading 310 points higher (1. Published:5/7/2020 1:27:29 PM
[Markets] 3 Reasons the Dow Is Climbing After 3 Million Americans Lost Their Jobs More than three million Americans filed for jobless insurance for the week ended May 3, and yet the Dow Jones Industrial Average had gained more than 300 points. Published:5/7/2020 11:28:03 AM
[Markets] Dow Jones Jumps 400 Points, As Jobless Surge Continues; Coronavirus Vaccine Gets Phase 2 FDA Approval The Dow Jones Industrial Average jumped 400 points midday Thursday amid climbing jobless claims, as the coronavirus stock market rally continues. Dow Jones stocks Apple and Microsoft are above new buy points, while biotech Moderna surged as much as 14% on coronavirus vaccine news. Published:5/7/2020 10:54:18 AM
[Markets] Dow Jones Jumps 350 Points, As Jobless Surge Continues; Coronavirus Vaccine Gets Phase 2 FDA Approval The Dow Jones Industrial Average jumped 350 points early Thursday amid climbing jobless claims, as the coronavirus stock market rally continues. Dow Jones stocks Apple and Microsoft are above new buy points, while biotech Moderna surged 10% on coronavirus vaccine news. Published:5/7/2020 9:26:00 AM
[Markets] Dow futures climb slightly Wednesday evening ahead of jobless claims and parade of Fed speakers U.S. stock-index futures were trading slightly higher Wednesday evening, but have been choppy, as investors prepare for a report on weekly jobless claims and a host of speakers on the Federal Reserve that might offer more insights about the state of a rapidly deteriorating economy due to national procedures in place to avert a deeper crisis from the COVID-19 pandemic. Futures for the Dow Jones Industrial Average were trading up 52 points, or 0.2%, at 23,569, at last check Wednesday at 8:15 p.m. Eastern Time. Those for the S&P 500 index were trading 0.3% higher at 2,841.25, while Nasdaq-100 futures were gaining 0.4% at 8,987.75. During Wednesday's regular session, the Dow fell 218.45 points, or 0.9%, to finish at 23,664.64. The S&P 500 shed 20.02 points, or 0.7%, to end at 2,848.42, with declines for those benchmarks coming in the last hour of trade. The Nasdaq Composite , meanwhile, climbed 45.27 points, or 0.5%, to close at 8,854.39, only 1.3% off for the year to date, as investors continue to buy technology-related betting that they will fare the best in the aftermath of the deadly epidemic. Markets have struggled during the homestretch of regular trade on Wall Street lately as investors fight to identify a catalyst to drive stocks to further gains against a backdrop of history-setting economic pain playing out and that which also lies ahead. Thursday's report on those seeking unemployment benefits is likely to show that another 3 million Americans are out of work, adding to the already 30 million figure that has been racked up over the past two months. In corporate news, shares of Peloton are likely to surge in Thursday regular trade after the exercise-equipment maker reported that quarterly sales hit $524.6 million, up 66% from the year before, thanks to a surge in sales for folks under stay-at-home policies. However, shares of Grubhub Inc. fell more than 4% in the extended session Wednesday after the company missed earnings expectations and did not issue revenue guidance amid the COVID-19 pandemic. And Costco Wholesale Corp. said late Wednesday that its April sales fell 1.8% as skyrocketing e-commerce sales didn't make up for a drop in foot traffic at its stores. In Fed speakers, Atlanta Fed President Raphael Bostic, Minneapolis Fed President Neel Kashkari and Philadelphia Fed President Patrick Harker. Published:5/6/2020 7:50:31 PM
[Markets] Dow ends down over 200 points as stocks lose steam into close Dow ends down over 200 points as stocks lose steam into close Published:5/6/2020 3:18:44 PM
[Markets] Dow drops nearly 150 points on losses for shares of Dow Inc., Travelers DOW UPDATE Shares of Dow Inc. and Travelers are seeing declines Wednesday afternoon, sending the Dow Jones Industrial Average into negative territory. Shares of Dow Inc. (DOW) and Travelers (TRV) have contributed to the blue-chip gauge's intraday decline, as the Dow (DJIA) was most recently trading 143 points (0. Published:5/6/2020 2:49:11 PM
[Markets] Dow's down more than 100 points in final half-hour of session Dow's down more than 100 points in final half-hour of session Published:5/6/2020 2:49:11 PM
[Markets] Dow Jones Lower As Payroll Drop Weighs; Are Apple, Microsoft Still In Buy Zone? The Dow Jones industrials reversed lower after giving up early gains as a biggest-ever drop in payrolls overshadowed a gradual reopening of some states. Published:5/6/2020 2:18:19 PM
[Markets] The Dow Is Going Nowhere. So Why Is the Nasdaq Flying? It’s a tale of two markets, as the Dow Jones Industrial Average and S&P 500go nowhere, while the Nasdaq Composite just keeps on rising. The Dow has dipped 10.10 points, while the S&P 500 has ticked up 0.1%. The Nasdaq Composite, however, has gained 1.2%. Published:5/6/2020 1:18:38 PM
[Markets] Dow Eyes 24,000, MercadoLibre Leads Gainers; Why Beyond Meat Hit An Early Buy Point The Dow Jones Industrial Average has been holding to most of its big gains since the March bottom. Are Beyond Meat and MercadoLibre a buy? Published:5/6/2020 12:48:20 PM
[Markets] Dow Jones Fades Early Gain, But Microsoft, Apple Strong; Biotech Leader Breaks Out On Earnings The Dow Jones Industrial Average lagged Wednesday, but Walt Disney, Intel, Apple and Microsoft outperformed in the blue-chip index. Published:5/6/2020 11:57:08 AM
[Markets] Dow's 75-point jump highlighted by gains for shares of Intel, Apple Inc. DOW UPDATE Buoyed by strong returns for shares of Intel and Apple Inc., the Dow Jones Industrial Average is up Wednesday morning. Shares of Intel (INTC) and Apple Inc. (AAPL) have contributed to the blue-chip gauge's intraday rally, as the Dow (DJIA) is trading 74 points higher (0. Published:5/6/2020 8:53:14 AM
[Markets] Dow futures fall nearly 300 points as states attempt to reopen Dow futures fall nearly 300 points as states attempt to reopen Published:5/3/2020 5:59:25 PM
[Markets] Investing Legend Sees A Second Great Depression For Stocks By 2023 Investing Legend Sees A Second Great Depression For Stocks By 2023

The name of Kiril Sokoloff, author of the weekly WILTW (What I Learned This Week) newsletter through his advisory firm 13D Global Strategy & Research, needs no introduction on this website for the simple reason that over the past few years we have often published his highly insightful excerpts (most recently one month ago with "A Corporate-Debt Reckoning Is Coming").

Which is why the latest "Lunch with the FT" feature by the FT's Rana Foroohar may be of interest to readers curious about Sokoloff's background and how over the past four decades he became one of the most closely sought after independent thinkers and strategists on Wall Street (he works out of St. Thomas in the US Virgin Islands, unaffiliated with any bank), and why his clients - which include Mukesh Ambani, Sam Zell and Raymond Kwok - are quite happy to pay thousands of dollars for a subscription.

We find 13D fascinating, and one of the world's best newsletters for many reasons by the main one is that Sokoloff's overarching philosophy - fiscally conservative, rational, measured - is congruent with ours: as the FT notes, Sokoloff "has been trying to make the financial elite see the dangers of seeking to solve the problems of debt with more debt",  something we too have been doing since 2009 but obviously to absolutely no success.

As the FT continues, "the topic is timelier than ever, given that central-bank balance sheets — already huge before Covid-19 — are headed into the stratosphere, as policymakers struggle to cope with the crisis, not to mention the popping of a debt bubble that grew for years before it."

Sokoloff is, of course, referring to this.

In any event, we'll let readers catch up on the FT's profile of the WILTW author at their leisure, but we did want to highlight one particular aspect of his interview: namely what he believes may be in store.

As Foroohar writes, in preparation for her interview "I’ve been... reading Depression-era journalist Garet Garrett’s 1932 book A Bubble That Broke the World, recommended to me by Sokoloff as a primer for our age, since it covers how central-bank actions contributed to the debt-driven run-up to the stock market crash of 1929 and the Great Depression."

More apropos, Sokoloff also sent the author a chart which compares the Dow Jones between 1918 and 1932 to the current period, a chart which we have also shown repeatedly on this website in recent weeks, months and years. Why that particular chart? Because as the FT explains, it shows that "the rise and the fall are frighteningly similar to the period from 2009 onwards."

If history is a guide, stocks have further to go before they hit bottom. That’s Sokoloff’s view, anyway. Then as now, he says, “central bankers were pushing on a string”, trying in vain to whip up a real economic recovery with monetary policy.

And here is what Sokoloff believes will what happens when, again, "central banks push on a string":

How does Sokoloff - who has traditionally been upbeat, optimistic and generally bullish - justify his outlook so apocalyptic it could be taken from a post on that tinfoil conspiracy theory website Zero Hedge? Here's how:

"The more debt you add [via monetary and even some fiscal policy], the more unproductive the debt becomes,” says Sokoloff, who is now positioned at the dining table in front of his screen. It’s not a popular view these days. Austerity is out, and MMT — the notion that a country that controls its own currency can print it freely to fund deficit spending without worry — is in. (MMT stands for “modern monetary theory” or magic money tree”, depending on your viewpoint.) But Sokoloff believes the stimulus programmes being launched in the US, Europe and many other parts of the world will very likely end in tears.

“I think we’re at the beginning of a long-term period of deflation, falling prices and the loss of pricing power. The only way out of it will be to have a long period of austerity, and to get the US savings rate up dramatically.” He points as an example to the US in the period during the second world war, when federal budget deficits were high, well over 20 per cent of GDP in some years (compared to what may be some 20 per cent-plus by the end of this year) but the personal savings rates of Americans were positively Chinese — as high as 25 per cent including income gains from the war and net exports, as opposed to 8 per cent or so before the Covid-19 crisis — boosted by wartime rationing.

One-upping Sokoloff, we have created a better chart that more clearly lays out what happens if one tacks on the Great Depression outcome to the current Dow Jones. In short, we should see the Dow dropping to the Great Depression-equivalent low of roughly 10,000.

There is good news: after its plunged to all time lows, the Dow traded in a tight range for several years before eventually blasting off to unprecedented highs. What triggered it? Why World War II of course.

Which is why any true comparisons to the Great Depression era should also consider the cataclysmic event that ended it, and look forward to a similar outcome over the next few years. 

Tyler Durden Sun, 05/03/2020 - 15:15
Published:5/3/2020 2:30:27 PM
[Markets] Mark Hulbert: ‘Sell in May and go away’ is a warning to stock investors now more than ever Dow’s weakness since last Halloween is a bad omen for the next six months, writes Mark Hulbert.
Published:5/2/2020 1:24:05 PM
[Markets] "Sell In May" Might Be A Good Risk Strategy This Year "Sell In May" Might Be A Good Risk Strategy This Year

Authored by Lance Roberts via RealInvestmentAdvice.com,

Biggest Rally Since 1974

Could “Sell In May” be a good risk strategy this year? Maybe, considering we asked a simple question last week: “Is the bear market rally over?” 

“That’s the question we have been discussing over the last few weeks. So far, most of it has played out much as expected by turning previous ‘selling panic’ into a ‘buying rush,’ and convincing a vast majority of investors the ‘bull market is back.'” 

Just as we have seen in previous “bear market” bounces, the gains for April were quite stunning with stocks putting in the best one-month advance since 1974.

These exceedingly large bounces usually occur during bear markets. Unfortunately, in many cases, the majority of those big one-month advances are followed by negative returns.

Timing, as they say, is everything.

Sell In May

My colleague, Jeffrey Hirsch from Stocktraders Almanac, recently penned:

“Despite the sell-off on the last day of April, the Best Six Months has ended on a positive note, registering the best month in decades and the best April since the Great Depression.”

Currently, the primary signal has not crossed into negative territory yet but seems to be heading in that direction. It won’t take but a couple of more days of falling, or stagnating markets, to trigger that signal.

While not every “summer period” is negative, the long-term history of investing during the summer months is not stellar.

However, the adage “Sell in May” may be more appropriate this year given the state of the actual economy, earnings risk, and a potential revaluation of markets, the odds of a weak summer period has risen markedly. (This is particularly the case as we head into the Presidential election and trade tensions with China are heating up.)

Managing The Risk

Jeff continues:

“The massive rally has surely been impressive and a welcome change from the carnage we experienced in February and March. April 2020 has been the best month since January 1987 for DJIA and S&P 500, and the best April since 1938.

But April’s huge move was not enough to put the Best Six Months (November-April) in the black, and that concerns us. The DJIA was down 10.0% for this Best Six Months period, which ended today, and the S&P 500 lost 4.1%.

When the market is down during the “Best Six Months,” it’s an indication that there are more powerful forces than seasonality at work, and when the bullish season is over, those forces may really have their say.”

Following the first back-to-back down Best Six Months since 1973-1974, the market hit a secular bear market low in March 2009. The market made a similar secular bear market bottom in August 1982, which began in 1966. Of course, that bottom came after the infamous 1980s double-dip recession.

Our concern here is that this time around, we’ve only just begun.”

The Risk Starts In May

We can’t disagree with that statement. While there are many hoping that the worst of the economic data is now behind us, I highly suspect it isn’t. As noted in this week’s #MacroView:

“The negative 4.8% decline in GDP in the first quarter was stunning. Importantly, that reading only encapsulated the impact of the economic “shutdown” in that last two weeks of the quarter. Such suggests, considering the entire month of April (1/3rd of the quarter) was a wash, the numbers will worse next quarter.”

There is a negative feedback loop between employment and consumption. As unemployment rises, consumption falls due to a lack of income. Since businesses operate based on demand for goods and services, the correlation between PCE, fixed investment, and employment is high.”

“Despite the reopening of the economy, businesses will not immediately return to full operational activity, until consumption returns to more normal levels. Such a recovery is likely going to frustrate policy-makers and the Fed.”

It isn’t just the economic data that is going to be horrid over the next few months, but earnings will likely be just as bad.

Earnings can not live in isolation from the economy.

So goes earnings, so goes the market.

“Sell In May” Starts With Overbought Risk

In the short-term, the markets remain incredibly overbought and extended after the run from the lows.

Previously, I discussed that markets had gone from extremely oversold, to extremely overbought during April. This sharp advance pushed the S&P 500 back to its 61.8% retracement level, where it failed on Friday.

While the sell-off on Friday did trigger an initial sell-signal, a further decline on Monday will trigger the primary sell-signal in the lower panel. Such would coincide with a break below 2800, and signal the start of a deeper corrective process.

There is currently a lot of “bullishness” built up in the markets, so investors will likely buy dips for now. However, it won’t take long for investors to remember March and head for the exits much sooner this time. So, be careful.

Reversions happen fast.

A Risky Game Of Hope

As we discussed with our RIAPro Subscribers (30-day Risk-Free Trial) last week, our colleague Jeffrey Marcus made some salient comments about investor’s “risky game of hope.”

“The table shows EPS growth for U.S. companies that have so far reported the 1st quarter. 20% of U.S. companies have reported so far.”

“There is only one-month of Covid-19 effect in the 1st quarter. Earnings growth from all 993 companies is -12%, but the price reaction to bad EPS has been stellar. The one-day price reaction to EPS on the day of release is in the lower right quadrant of the table.

As TPA has discussed in previous World Snapshots, the positive price action to negative news is a good sign. The problem is that EPS growth is down 12% with only one-month of the Covid-19 effect. Importantly, this is only 20% of stocks having weighed in; one has to wonder why?

The answer has to be that investors have an awful lot of hope in the power of the FED to keep the tire with a large hole inflated and as the man who taught me how to trade told me, ‘Hope is a bad investment strategy.’”

“Sell In May” Risk Outweighs Reward

What this all suggests is that “risk” still outweighs the potential “reward” of being aggressively invested in the markets.

With Friday’s sell-off, the risk/reward ranges remain unfavorable for the “Sell In May” period.

  • -3.0% to 50-dma vs. 4% to the 61.8% retracement.  Risk/reward equally balanced.

  • -5.4% to the 38.2% retracement vs. 6% to the 200-dma. Risk/reward equally balanced.

  • -13.4% to the April 1st lows vs. 4-6% higher. Risk/reward out of favor.

  • -21.0% to the March 23rd low: Risk/reward extremely out of favor.

The risk of a downside retracement as we head into summer months outweighs the upside currently. Importantly, this does NOT mean the markets can’t rally to all-time highs. It is possible, just not probable, and as investors, we must weigh our outcomes.

While we are discussing “Selling in May,” such doesn’t mean we are sitting in cash. We continue to remain long our reduced equity exposure and have been buying undervalued opportunities over the last few weeks. However, we are also balancing that equity exposure with offsetting hedges and a larger than average level of cash. We also continue to increase our duration in our bond portfolios as we expect interest rates will head toward ZERO this summer.

As my friend Victor Adair reminded me this week:

“Investors tend to buy the most at the top and the least at the bottom.” – Bob Farrell.

While it’s no guarantee, “Sell In May” just might be a good “risk strategy” to employ this year in particular.

Tyler Durden Sat, 05/02/2020 - 13:50
Published:5/2/2020 12:52:02 PM
[Markets] ‘Don’t be fooled!’ A 40% drop could hit by next year after this bear-market rally fades, veteran economist warns ‘Don’t be fooled by the recent rebound in stocks; the investment scene is beginning to resemble the 1929 market crash and the early 1930s Great Depression.’ To me, it's like 1929 when stocks first fell, then rallied before plunging anew as the Great Depression set in. In his Bloomberg piece, Shilling pointed to the 48% plunge in the Dow Jones Industrial Average from Sept. 3 to Nov. 13 back in 1929, a pullback which may have “seemed like a reasonable correction” at the time, since the blue chips had rallied 500% in the eight years leading up to it. Published:5/2/2020 10:55:19 AM
[Markets] ‘Bond King’ warns the stock market could hit new lows amid ‘social unease’ “People don’t understand the magnitude of ... the social unease ... that’s going to happen,” Gundlach explained. At last check, the S&P 500 index (SPX) ended nearly 42 points, or 1.5%, higher on Monday, while the Dow Jones Industrial Average (DJIA) and the tech-heavy Nasdaq Composite (COMP) also finished the session firmly in green territory. Published:5/2/2020 9:16:16 AM
[Markets] Buffett's Berkshire spent the coronavirus-induced stock-market rout growing cash to a record $137 billion Warren Buffett's Berkshire Hathaway spent the first quarter, a period of historic turmoil fueled by COVID-19, stockpiling cash to record proportions, public filings show. Berkshire Hathaway Inc. apparently saw its holdings of cash and equivalents balloon to a record $137.2 billion at the end of the first quarter, up from about $128 billion at year-end, suggesting that the legendary investor, viewed as a white knight of sorts on Wall Street, has stayed on the sidelines amid one of the most turbulent periods in financial markets in decades. The Dow Jones Industrial Average , the S&P 500 index and the Nasdaq Composite all tumbled into a bear-market in March, typically defined as a drop of at least 20% from a recent high, hit the lows of that rout on March 23. Since that point, however, stocks have climbed by more than 20% as the market attempted to recover from the effects of the worst pandemic in more than a 100 years--one that caused economies to fall into a recessionary state as businesses across the globe were forced to shut down to slow the spread of the deadly pathogen. Berkshire also has been hit by the epidemic that has infected more than 3.3 million people and claimed about 240,000 lives globally since the illness was first identified in December in Wuhan, China. The conglomerate reported a huge first quarter loss of $49.7 billion, or $30,653 per class A share. However, Berkshire's first-quarter operating earnings were $5.9 billion or about $3,619 per class A share. Buffett is scheduled to host a annual shareholder meeting later today at 4:45 p.m. Eastern Time, where he may offer more clues on his strategy during this public-health crisis. Published:5/2/2020 8:20:20 AM
[Markets] Here are Friday’s biggest stock-market losers, driven lower by disappointing earnings and a shrinking manufacturing sector DEEP DIVE U.S. stocks posted broad declines to start the new month, as disappointing earnings reports and a set of economic numbers soured investors’ mood. • The Dow Jones Industrial Average (DJIA) sank 622 points, or 2. Published:5/2/2020 6:50:13 AM
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