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[Markets] Exxon out, Salesforce, Amgen, Honeywell added to Dow because of Apple stock split Shares of Salesforce.com Inc., Amgen Inc., and Honeywell International Inc. rallied in the extended session Monday after the S&P Dow Jones Indices shook up the Dow Jones Industrial Average by switching out three stocks for three new ones for the second time in a decade.
Published:8/24/2020 5:43:21 PM
[Markets] Salesforce, Amgen, Honeywell will be joining Dow industrials in big shake-up Salesforce, Amgen, Honeywell will be joining Dow industrials in big shake-up Published:8/24/2020 5:20:44 PM
[Markets] Dow Industrials Kicks Out Exxon in Biggest Shake-Up Since 2013 (Bloomberg) -- Exxon Mobil Corp, Pfizer Inc. and Raytheon Technologies were kicked out of the Dow Jones Industrial Average as part of the stock benchmark’s biggest reshuffling in seven years.Salesforce.com, Amgen Inc. and Honeywell International will enter the 124-year old equity gauge a week from today, its overseers said. The moves were prompted when Apple Inc.’s stock split effectively reduced the sway of technology companies in the price-weighted average.While any change to the Dow is notable, the ejection of Exxon Mobil -- the world’s biggest company as recently as 2011 -- marks a particularly stunning fall from grace, reflecting the steady decline of commodity companies in the American economy. Worth $525 billion in 2007 and more than $450 billion as recently 2014, the stock had fallen in four of six years before 2020 and is down another 40 percent year to date.“Those changes are a sign of the times - out with energy and in with cloud,” said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance.The latest reshuffling is more testament to the ascent of technology companies, a trend amplified by this year’s Covid 19 lockdowns. While the Dow average is still 4.2% off its February record, the tech-heavy Nasdaq 100 is almost 20% above the pre-pandemic all-time high.Founded in 1999, Salesforce was one of the best-performing stocks of the bull market following the global financial crisis, rising 27-fold since March 2009. Amgen is among the world’s biggest biotechnology companies with a market value of about $137 billion, though it’s replacing a company -- Pfizer Inc. -- that is about $90 billion larger.The blue-chip index weights its constituents by price rather than market value, making it different from the broader S&P 500. A committee chooses members in an effort 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,” according to its website. Other major indexes add and subtract members on a rules-based process.The last time three companies were added to the Dow was seven years ago, when Visa Inc., Goldman Sachs Group Inc. and Nike Inc. displaced Bank of America Corp., Hewlett-Packard Co. and Alcoa Inc.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:8/24/2020 5:20:44 PM
[Markets] Stock Market Today: FDA Gives Stocks a Booster Shot The FDA's emergency-use green light of a COVID-19 treatment helped give the major indices a lift Monday, with the Dow leading the way. Published:8/24/2020 4:42:27 PM
[Markets] AAPLocalypse Now? Nasdaq & S&P Hit Record Highs, Bonds & Bullion Slide AAPLocalypse Now? Nasdaq & S&P Hit Record Highs, Bonds & Bullion Slide Tyler Durden Mon, 08/24/2020 - 15:59

As the anticipated splits of AAPL and TSLA loom, both stocks hit new record highs today (before dumping and pumping.,, and dumping)...

AAPL hit a new record high at $515 today...

TSLA hit a new record high at $2129 today (but ended red ahead of its 4-for-1 split tonight)...

All of which was echoed in the major indices (after their overnight exuberance on COVID treatments faded at the open) which were extremely noisy intraday... Nasdaq lagged but The Dow led...

Energy stocks outperformed today.

"I love the smell of stock splits in the morning"...

But this is what many are starting to get concerned about. Breadth is ugly...

Source: Bloomberg

And the correlation between breadth and the market has collapsed...

Source: Bloomberg

Growth and Value stocks were both bid at the open but growth was sold all day from there...

Source: Bloomberg

Major shift in Value and Momentum today with the latter getting spanked...

Source: Bloomberg

Treasury yields traded in a very narrow range today but ended marginally higher...

Source: Bloomberg

 

 

Source: Bloomberg

 

 

 

Source: Bloomberg

The Dollar ended higher on the day, whipsawed once again today around the European close...

Source: Bloomberg

Cryptos managed modest gains from Friday's close...

Source: Bloomberg

Gold and Silver surged in early trading before being clubbed like a baby seal (copper and crude managed very modest gains)...

Source: Bloomberg

The gold monkeyhammering began right at the London Fix, back below $1950...

Silver also slammed back below $27...

Given the potential impact of the double-whammy of storms looming over Gulf oil production, WTI ended only marginally higher...

And finally, if you thought AAPL was having a good year, Lumber is killing it...

Source: Bloomberg

And gold appears to be shrugging off the renewed pressure lower (a positive for gold) in real yields...

Source: Bloomberg

Time's Up?

Source: Bloomberg

Published:8/24/2020 3:14:20 PM
[Markets] S&P 500, Nasdaq end at record highs as Apple jumps; Dow gains over 370 points S&P 500, Nasdaq end at record highs as Apple jumps; Dow gains over 370 points Published:8/24/2020 3:14:20 PM
[Markets] Boeing and Dow Inc. are 4% gainers as DJIA surges 270 points in opening hour Boeing and Dow Inc. are 4% gainers as DJIA surges 270 points in opening hour Published:8/24/2020 10:11:53 AM
[Markets] Morgan Stanley Warns "The First Tradable Correction Could Begin Imminently" Morgan Stanley Warns "The First Tradable Correction Could Begin Imminently" Tyler Durden Mon, 08/24/2020 - 11:05

Earlier this year, Morgan Stanley's Michael Wilson was the first sellside strategist to turn aggressively bullish on the market, after correctly holding on to a contrarian bearish bet for the prior year, expecting that the flood of central bank liquidity and incipient reflation would push stocks to all time highs. Not long after, one by one his Wall Steet peers jumped onboard the bullish train which earlier today hit a new all time high when the S&P rose above 3,400 for the first time, printing at 3,425.

Which is why we read with interest Wilson's Monday Morning note, in which the strategist who has demonstrated an uncanny ability to spot market inflection points warned that the collapsing market breadth is becoming a major concern for the market, and that while an entire market defined by just one stock - Apple - won't derail the new bull market "we do think it's a precursor to the first tradable correction, which could begin imminently."

We bold the last word in that quote because it reminds us of what we published just yesterday, when we said that "Horrendous" Market Breadth "Stinks To High Heaven", Screams Imminent Risk-Off" and incidentally those who read our article won't find much new in the guts of Wilson's latest note.

Echoing what we said, the Morgan Stanley strategist writes that "breadth continues to narrow with Friday's price action perhaps the most extreme example yet. Just one stock, Apple, contributed 105% of the total return of the Nasdaq 100 and S&P 500 and 88% of the total return of the Dow Jones Industrial Average. For the week, the S&P 500 traded higher by 72bps to a new all-time high while the equalweighted S&P 500 traded down -1.5% and remains almost 8 percent below its all-time high back in February." This, readers may recall, is taken directly from chart which we posted on Sunday, which showed the divergence between the equal-weighted S&P and the normal, cap-weighted index:

Continuing on this theme, Wilson next notes that the equal-weighted S&P is "also still below its June 8th high, which is when the % of stocks making 52-week highs peaked. Finally, the cumulative advance/decline line for the S&P 500 peaked on August 12th, failing to confirm the new all-time highs."

Of course, for those watching the ever growing concentration of just a handful of stocks, this is not news...

... and in fact, as Wilson writes, "this narrowness in breadth has been one of the most discussed features of this rally. What's interesting to us is the fact that breadth showed a dramatic improvement in the first several months of the rally from the March lows and was one of the factors that helped us declare a new bull market early on. It's only been more recently that narrow breadth has become a potential concern in our view."

To Wilson, the "bottom line" is that while he still remains overall bullish and still thinks we are at the beginning of a new cyclical bull market, "the recent extreme narrowness suggests that we are now ripe for the first meaningful/tradable correction. The question is—what will cause it?"

To Wilson, last week saw several developments which could have an overall negative impact on equity markets in the short term:

  • First, several universities have decided to backtrack on in-person learning due to COVID outbreaks as students returned to  campus. Unsurprisingly, other schools followed with decisions to move fully online rather than risk outbreaks of their own: "this is a negative development with respect to our reopening narrative since we first highlighted it back in mid-April."
  • Second, in addition to the heightened concerns from schools moving online, Congress remains gridlocked over the next round of fiscal stimulus. Without it, Wilson thinks "the recovery will almost assuredly roll over, which is why we think there is little chance Congress will fail to execute, especially in an election year. However, that doesn't mean we won't see some moments of doubt and uncertainty about the size and timing of the next package reflected in the market. Every day that goes by, households dependent on unemployment benefits will likely lose confidence in their own finances." Just this past week we heard commentary from several retailers (WMT, TJX, KSS, and FL) suggesting they have begun to see a slowdown in spending. Some of this is likely attributable to the suspension of these benefits along with the fact that demand for certain spending categories was pulled forward in 2Q when much of the economy was locked down. The chart below from Goldman shows just how steep the drop in UI payments has been. 

  • Third, Morgan Stanley notes that the heavily anticipated minutes from the Fed's July meeting did not provide the hand holding that investors were expecting on future Fed policies. More specifically, "guidance on average inflation targeting (AIT) and yield curve control (YCC) were primary sources of the disappointment" which is a concern since "a good part of the bullish view on long-term interest rates, both nominal and especially real rates, is based on the Fed doing both." Last week's minutes suggested to Wilson the Fed is either not ready to, in the case of AIT, or don't have much interest in it at all (YCC). Treasury bonds sold off after the release, followed by a very poor TIPS auction the next day. But neither nominal nor real rates have shown any real follow through: "truth be told, a 10-year Treasury yield at 64bps that leave real rates at -100bps is hardly troubling, in our opinion, for those worried about a non-linear move higher that could be disorderly to financial asset prices."

So, as Wilson asks, "what's going on?"

His answer is that the inability of rates to move meaningfully higher is directly related to the hold-up on fiscal policy and growing concerns about schools reopening, and staying open. Meanwhile, the dismal breadth shows that stocks have traded soft under the surface of the headline indices, "which are now being driven by just one stock—Apple."

Ultimately, Wilson warns that a growth scare "should even start to weigh on Apple just as it's weighed on reopening beneficiaries and some of the COVID leaders more recently." Which, however, is good news, because if and when that happens, "Congress would be quick to act and potentially come through with a bigger stimulus than what is currently expected—i.e. $2.0-$2.5 trillion" leading to even more debt issuance from the Treasury, even more QE from the Treasury's "helicopter money" tag team partner, the Fed, and even higher risk prices. An upside surprise combined with this week's disappointing Fed minutes with respect to YCC is all that would be needed for a sharp move higher in back end rates, Wilson adds.

Morgan Stanley's conclusion: "we expect a growth scare to be followed by a rate scare over the next several weeks/months that could finally give us that first tradable correction in the major US equity indices", one which as he noted earlier, could begin imminently.

Judging by Apple's stark intraday reversal when the stock sprinted to a new all time high of $515 out of the gate on some bullish whispers from - ironically enough from Morgan Stanley of all banks - only to turn red, we wonder if Wilson didn't time the latest market inflection point to the day.

Published:8/24/2020 10:11:53 AM
[Markets] Dow Rises on Optimism Over Coronavirus Treatment Progress Stocks were rising Monday as investors embraced progress in the quest for coronavirus treatments and vaccines. The Dow Jones Industrial Average was up 151 points, or 0.54%, to 28,082, the S&P 500 gained 0.73% and the Nasdaq rose 0.87% after the Food and Drug Administration expanded access to a virus treatment using blood plasma from recovered patients. The FDA issued an "emergency use authorization" for convalescent plasma as a treatment of Covid-19 in hospitalized patients, the Trump administration said. Published:8/24/2020 9:14:51 AM
[Markets] Want a Dow Jones Blue Chip? Try American Express In uncertain times like these, investors seeking lower risks may be looking toward the Dow Jones Industrial Average for large-cap stocks. Founded in 1896, the Dow serves as a benchmark for some of the largest U. Published:8/22/2020 8:23:51 AM
[Markets] How Apple Single-handedly Lifted Stock Markets Friday Investors sent the Nasdaq Composite and the S&P 500 (SNPINDEX: ^GSPC) to new records, and the Dow Jones Industrial Average (DJINDICES: ^DJI) enjoyed the largest gains among major market benchmarks on a percentage basis. Without Apple, the broader stock market might well have looked more like the Russell 2000 index of small-cap stocks, which fell nearly 1% on the day. Published:8/21/2020 4:49:11 PM
[Markets] Von Greyerz: Is COVID The Most Perfect Distraction? Von Greyerz: Is COVID The Most Perfect Distraction? Tyler Durden Thu, 08/20/2020 - 17:05

Authored by Egon von Greyerz via GoldSwitzerland.com,

Is Covid the most perfect distraction that could have hit the world? The timing couldn’t have been more perfect for the European and American economies. We know that there were major problems in the financial system back in August-September 2019 when both the ECB and the Fed declared that they would do what it takes. And since then we have seen massive injections of liquidity in the form of QE and Repos.

The world was never informed what the financial problems were but it is obvious that this was the hangover from the 2006-9 financial crisis which was never solved but just deferred with the help of unlimited money printing and credit expansion. There was clearly something rotten in the kingdom of the financial world.

FRIGHTEN THE PEOPLE WITH HOBGOBLINS

So was it just coincidence that Coronavirus started spreading around the world in January-February this year in the middle of a serious crisis in the financial system? Throughout history, initiating a crisis has always been a popular remedy that leaders have applied to divert attention from the real problem whether it be political or financial.

The normal course of action would be a military conflict. This would both enable massive money printing and also alarming the people which would result in more votes for the ruling government.

The American writer Henry Louis Mencken understood the purpose of these actions:

I am not someone who subscribes to conspiracy theories. But however the Coronavirus started, the timing seems more than coincidental. CV has certainly diverted the attention away from the underlying problems in the financial system and undeniably seems like a hobgoblin. But whether it is a hobgoblin or not, it has allowed some governments around the world to blame it all on CV and run huge deficits combined with massive liquidity injections.

The coming likely implosion of the financial system and depression will for decades be blamed on a pandemic which was only a catalyst and never the cause of the fall of the global economy. The real cause is a rotten financial system and an unmanageable debt burden which I have discussed in many articles.

CORONAVIRUS – OUTCOME WORSE WITH AUTOCRATIC LEADERS

If we look at the effects of CV on various countries the differences are astounding. Sweden which has had virtually no lockdown saw an 8.6% fall in GDP in Q2. Much of the fall was due to lower exports as other countries bought less Swedish products. Switzerland which only has had a very limited lockdown had a 6.4% GDP fall in Q2.
If we then look at the two countries which have totally mismanaged the situation – USA and UK, the outcome is disastrous. US GDP fell 32.9% in Q2 and the UK GDP was down 20.4%.

(MIS-)MANAGEMENT OF CV

It is clear that the countries that have big ego autocratic leaders have fared the worst. Sweden and Switzerland have delegated the CV policy to health officials whilst in the US and UK much of the policy, or lack of, has come from the top.

Sadly the US and the UK have both had high numbers of CV cases and deaths. And in spite of major lockdowns, these two countries have seen a catastrophic decline in their economies, a fall which will take many years to recover from.

BEST RUN COUNTRIES HAVE BEST CORONA RECORD

It is clearly no coincidence that Sweden and Switzerland have strong and well managed economies also whilst the US and the UK are running big deficits and debts. And with the poor economic state of the two latter countries, their economies will continue to suffer badly. Personally I don’t believe that there will be an effective vaccine for years or ever. Historically, any flu vaccine takes years to develop and is only effective in less than 30% of vaccinated people.

We are also seeing CV coming back in many countries that have lifted the lockdowns like for example Germany, Spain and France. Therefore it seems very likely that there will not be any major global recovery in 2021 either.

The biggest dilemma is that CV is not the real cause of the economic downturn but only the catalyst. As I explained above, the virus has allowed weak countries to print huge amounts of worthless money to prop up a financial system in an economy which was already on the verge of imploding before CV started. But fortunately for leaders such as Trump and Johnson they have been lucky to hide their ailing economies behind the CV curtain. So for them CV has been a very lucky excuse.

As the US, UK and many economies will be forced to continue or increase government handouts to suffering people and companies, all these countries’ will fall further into the quagmire of debt, deficits and economic decline.

THE END OF THE STOCK MARKET MIRACLE?

The biggest miracle currently is the stock market. After the February-March collapse, we have seen a rally that defies reality. This rally is a total disconnect with economic facts and only based on a combination of hope and printed money which is worthless. On January 30th this year I published an article called “INFLATE AND DIE – STOCK COLLAPSE AND GOLD SURGE IMMINENT”

The forecast which was based on our cycle system, was quite timely. The Dow crashed and gold went up just a few weeks later. The rallies we have seen since are not confirmed by any technical indicators and are likely to run out of steam very soon. I forecasted that the Dow monthly top would be in January and that is still the case. We have some indications that we could see big moves (down) in stocks in August and September.

But whether stocks soon start to reflect reality or it takes a bit longer is irrelevant. Stocks are overvalued on any criteria and anyone who stays invested will have his greed severely punished.

Much has been made of Buffett’s entry into gold by buying Barrick stocks for $1/2 billion. Has also sold shares for $13 billion including many bank stocks. Relatively this $0.5b into gold stocks is very small. This was at the end of Q2 so it might have increased since. Nevertheless, the $0.5b is 0.07% of this total portfolio so hardly significant. More importantly, it is a major mental change since Buffett has always talked down gold. Buffet had an important position in silver in 1996 but managed to lose money on it even though silver went up at the time. His people managed to mess up a derivative hedge position against silver.

Buffett has been a master investor and ridden a wave for decades. It has confirmed what I wrote about a typical buy and hold investor like Alfred who successfully has only bought and never sold since 1945. Sadly, I believe that both Warren and Alfred are going to lose most of their stock market money, in real terms (gold), in the next few years.

Buffett has $150b in cash which is 20% of total asset. If he spent that on physical gold and gold stocks he would crash protect his portfolio. Just in gold it would mean 2,400t which is 80% of annual mine production so it would clearly take time to accumulate and move the price.

GOLD IS SHAKING OUT WEAK HANDS

Gold moved from a price of $1,450 in March to a high of $2075 on the Aug 6, a 43% move. For the first time in a long time the media started to talk about gold and also many people who normally never look at the gold price. This is often a sign of a short term top and that was clearly the case. From the high on Friday the 7th of Aug, gold lost $200 in three days. It has since recovered and is at $1,985, well above the 2011 top.

This kind of fall is exactly what a short term overbought market needs. It gets rid of the weak hands and speculators. It is possible that the correction will be a bit deeper and last a bit longer, especially if stocks fall.

CENTRAL BANKS UNDERWRITE GOLD

Absolutely nothing has changed in the long term bull market of gold that in this phase started in 1999. What guarantees this secular bull market in gold is central banks’ continued and accelerated destruction of paper money. Nothing can be more certain than that. So gold between $1,900 and $2,000 is still an absolute bargain.

GOLD IS STILL A BARGAIN

The chart below comparing gold to US money supply tells us that gold is as cheap today at $1,945 as it was in 1970 at $35 and as cheap as in 2000 at $290.

So measured in fiat money, gold is likely to move up by multiples from here. But it is obviously meaningless to measure gold in a unit like dollars which will become worthless. So if the dollar becomes worthless gold, will go to infinity which is immeasurable too.

Just think about gold in grammes or ounces as the best insurance and wealth preservation asset that you can acquire today. It is a bargain at current levels and will protect investors from the destruction of currencies and the financial system.

Published:8/20/2020 4:10:39 PM
[Markets] Big-Tech, Bonds, Bitcoin, & Bullion Bid As Dollar Dive Continues Big-Tech, Bonds, Bitcoin, & Bullion Bid As Dollar Dive Continues Tyler Durden Thu, 08/20/2020 - 16:01

From the opening bell today, stocks - well, we should say mega-tech stocks - were utterly panic bid (catalyzed early by JNJ vaccine headlines), with the Nasdaq erasing all of the post-FOMC Minutes losses (NOTE that none of the other major indices managed to retrace the losses)...

On the day, it looked early on like The Dow may suffer its 4th losing day in a row - a terrible thing that has not been seen since February - but it, like everything else, was bid into the green and beyond. Small Caps closed red...

YTD, the Nasdaq is crushing Chinese stocks and Europe remains negative...

FANG stocks rallied back near its record intraday high and closed at a record closing high...

Source: Bloomberg

Bonds were also bid (after disappointing claims data showed an economy un-recovering), erasing all of the FOMC Minutes spike in yields...

Source: Bloomberg

The dollar chopped around early on but tumbled after Europe closed...

Source: Bloomberg

And as the dollar slipped, gold rallied back from yesterday's dive...

Source: Bloomberg

CTA positioning in gold fits with the price move but silver seems to suggest there is room for more as CTAs are squeezed in....

As did silver...

Source: Bloomberg

Since the FOMC Minutes suggested no YCC, only gold is still lower as Nasdaq ripped back to catch up and overtake the dollar and bonds...

Bitcoin also rallied on the day...

Source: Bloomberg

Oil prices dumped and pumped today and ended lightly lower...

Finally, remember tomorrow is opex and there's a metric fuckton of gamma due to lift on QQQs...

What is perhaps more notable is the potential for this to end... soon. Nomura's Charlie McElligott writes today about the impact of tomorrow's options expiration given the derivative market's exposure goinb in. The $Gamma seen in QQQ (Nasdaq) options remains rather "extreme" at 87.3%ile (was 95th %ile into yday) as we have rallied violently to upper strikes.

This, McElligott warns, in conjunction with 99.3%ile $Delta and now an expected 58% of the Gamma rolling-off after this Friday's expiration (!!!) makes the case for potentially "binary" price-action next week with a catalyst in either direction, as Dealer "long Gamma" hedging flows should collapse thereafter and allow for a much larger range of movement.

Additionally, the cross-asset strategy MD notes that he currently sees QQQ Gamma "flipping" below $272.06, ex tomorrow's expiry.

And there is an increasingly ominous major (bearish) divergence between the 'price' of the index and the breadth of its underlying components (in this case, the % of names above their 50-day moving average) suggests trouble ahead...

Source: Bloomberg

It certainly did not end well in February as the index continued to rise in the face of growing virus headlines from around the world (but under the hood, a growing number of names were doubting the index's apparent omnipotence).

Published:8/20/2020 3:10:33 PM
[Markets] Another Market Top Indicator: Paul Ryan Is Launching A $300 Million SPAC Another Market Top Indicator: Paul Ryan Is Launching A $300 Million SPAC Tyler Durden Thu, 08/20/2020 - 13:50

The similarities with the housing bubble boom-bust are growing by the day. Not only are stocks at all time highs, to which we can now add record low yields and an all time high gold price as the 10Y real yield has dropped to an unprecedented minus 1% all time low sparking rampant risk-on euphoria among the retail investing community, but over the past year there has also been a veritable explosion of "blank check" companies  which are shell companies that have no operations but plan to go public with the intention of acquiring or merging with a company with the proceeds of the SPAC's initial public offering.

As we discussed three weeks ago, investment in SPACs usually surges near market peaks, when there is broad consensus among the professional investing community that equities are overvalued as there is now - as a reminder the August Fund Manager Survey from BofA found that a record 78% of Wall Street professionals believe that not only stocks but every other assets is the overvalued on record.

The last time we saw such a surge in SPACs? 2007, just before the housing/credit bubble crashed and Lehman defaulted.

And while the SPAC bubble burst in 2008 along with the rest of the housing/credit bubble, it has now completely recovered, and as Goldman's David Kostin showed in a recent Weekly Kickstart, SPAC capital raising has soared YTD.

For those who missed it, some statistics: since the start of 2020 through the end of July, 51 SPAC offerings have been completed raising $21.5 billion, up 145% from the comparable year-ago period. In 2019, 51 SPAC IPOs were completed totaling $13.2 billion and 2018 witnessed 35 offerings for $9.3 billion. SPACs have accounted for one-third of all US IPO activity since the start of 2019. Completed SPAC offerings currently searching for acquisitions exceeds $38 billion.

Well, to this "blank check" frenzy we can now add the consummate smooth-talking politician and former vice-presidential candidate, Paul Ryan, who according to Dow Jones is also "jumping into the rush on Wall Street toward blank-check acquisition companies."

According to the report, the former Republican House speaker will serve as chairman of a SPAC known as Executive Network Partnering which will seek to raise roughly $300 million in an initial public offering.

While SPACs have been all the rage among Wall Street icons including Bill Ackman and Chamath Palihapitiya, Ryan is the first prominent politician to join a surge this year in the creation of blank-check companies.

And now that the fusion of Wall Street and K Street has been tapped, expect a flood of other US politicians hoping to capitalize on the biggest stock bubble in history which their total dysfunction made possible as it left the Fed in charge of virtually every aspect of the US economy.

Published:8/20/2020 1:09:41 PM
[Markets] Dow industrials lodged near flat line as S&P 500 and Nasdaq post modest gains Dow industrials lodged near flat line as S&P 500 and Nasdaq post modest gains Published:8/20/2020 10:09:19 AM
[Markets] Dow futures down more than 200 points after Fed minutes note concerns Dow futures down more than 200 points after Fed minutes note concerns Published:8/19/2020 10:09:18 PM
[Markets] Stocks took a breather Wednesday, with the Dow losing 85 points at the close Stocks took a breather Wednesday, with the Dow losing 85 points at the close Published:8/19/2020 3:39:51 PM
[Markets] Is It Time to Buy the Dow Jones' 3 Worst-Performing Stocks of 2020? 2020 has been one of the craziest years on record for the Dow Jones Industrials (DJINDICES: ^DJI). After suffering a lightning-fast bear market in February and March due to the COVID-19 pandemic, the Dow has recovered nearly all of its losses. Other stock market benchmarks have already set new all-time record highs, but the Dow still has a long way to go. Published:8/19/2020 5:30:27 AM
[Markets] Market Snapshot: Stocks trade mixed after S&P 500 touches first all-time intraday high in 6 months The Dow was under pressure Tuesday midday after the S&P 500 index registers its first intraday record in about six months. Shares of Walmart had partly helped to buoy the broader market after the giant retailer rang up better-than-expected quarterly results.
Published:8/18/2020 10:56:54 AM
[Markets] Premarket gains in Dow components Home Depot and Walmart vanish ahead of open Premarket gains in Dow components Home Depot and Walmart vanish ahead of open Published:8/18/2020 8:23:58 AM
[Markets] NewsWatch: Investor whose winning stock-market bet amid coronavirus returned over 4,100% says ‘we are in a boom-and-bust cycle, an epic, monumental boom-bust cycle’ Mark Spitznagel, founder of Universa Investments, explained to CNBC during a Monday interview why he thinks that market participants should be cautious as the S&P 500 nears its first record since the coronavirus-induced rout that rocked the Dow Jones Industrial Average and the Nasdaq Composite Index and the U.S. economy.
Published:8/17/2020 4:19:11 PM
[Markets] S&P Fails To Make New Record High As Buffett's Barrick Bid Pumps Precious Metals S&P Fails To Make New Record High As Buffett's Barrick Bid Pumps Precious Metals Tyler Durden Mon, 08/17/2020 - 16:01

Precious Metals outperformed today as the world came to grips with Berkshire Hathaway's 'rotation' from banks to bullion (dumping Goldman and much of its financial exposure and buying Barrick Gold)...

Gold futures tagged $2000...

And Silver soared...

Barrick Gold is up 11%...

And Bitcoin also surged today, finally busting back above $12,000...

Source: Bloomberg

Likely helped by this...

All of which took place as the dollar dumped back to its lowest in over two years...

Source: Bloomberg

Overall, stocks were mixed with Nasdaq soaring, The Dow disappointing and Small Caps and the S&P managing modest gains...

The S&P 500 continued to try and hold above its previous record high close (3386.15)...

Bonds were also mixed with the longer-end bid and short-end flat...

Source: Bloomberg

Oil prices spiked today despite weak Empire Manufacturing data as stocks popped...

And Dr.Copper continued its rebound after last week's tumble...

As LME’s global warehouse network is holding the least copper since 2008...

Source: Bloomberg

And finally, with the S&P desperately testing record highs, we wanted to clarify one thing... it's not about the fun-durr-mentals...

Source: Bloomberg

Tick-tock, time's up for the dead-cat-bounce...

Source: Bloomberg

Published:8/17/2020 3:19:05 PM
[Markets] S&P 500 ends higher, but falls short of record close; Dow finishes in the red S&P 500 ends higher, but falls short of record close; Dow finishes in the red Published:8/17/2020 3:19:05 PM
[Markets] S&P 500 Aims for Record High as Tech Sector Rallies Stocks were mixed Monday following Wall Street's third straight week of gains but the S&P 500 approached a record high as technology shares lifted the index. The Dow Jones Industrial Average fell 53 points, or 0.19%, to 27,879, the S&P 500 gained 0.38% to 3,385, above its all-time high, and the Nasdaq was up 0.92%, led by gains in Tesla , Nvidia and JD.com . The Dow rose 1.8% last week and the S&P 500 gained 0.6%. Published:8/17/2020 12:48:01 PM
[Markets] Dow Falls, S&P 500 Aims for Record High as Tech Sector Leads Stocks were mixed Monday following Wall Street's third straight week of gains as investors seek fresh catalysts to continue pushing equities higher. A stalemate in Congress on the next round of coronavirus stimulus, U.S. and China trade tensions and the end of the summer vacation season were leading to cautious trading and light volumes. The Dow Jones Industrial Average fell 65 points, or 0.23%, to 27,865, the S&P 500 gained 0.29% to 3,382 and the Nasdaq was up 0.75%, led by gains in Tesla , Nvidia and JD.com . Published:8/17/2020 11:47:27 AM
[Markets] Gold Stocks Lead a New Stock Market Surge The stock market got off to a good start on Monday morning, with only the Dow Jones Industrial Average (DJINDICES: ^DJI) holding back investors from celebrating solid gains toward record highs. Both the S&P 500 (SNPINDEX: ^GSPC) and the Nasdaq Composite (NASDAQINDEX: ^IXIC) flirted with unprecedented levels. Published:8/17/2020 10:49:21 AM
[Markets] Where's the Market Headed? What the Charts and Data Reveal Let's take a close look at the latest charts and data for the stock market and make sense of it all. The DJIA (see below), Dow Jones Transports and Value Line Arithmetic Index posted modest gains as the rest finished with minor losses. The NYSE saw positive breadth and up/down volume with the Nasdaq having negative breadth but positive up/down volume, all of which occurred in relatively light trading. Published:8/17/2020 10:18:27 AM
[Markets] Dow Slips, S&P 500 Aims for Record High as Tech Sector Leads Stocks were mixed Monday following Wall Street's third straight week of gains as investors seek fresh catalysts to continue pushing equities higher. The Dow Jones Industrial Average fell 84 points, or 0.3%, to 27,846, the S&P 500 gained 0.25% and the Nasdaq was up 0.84%, led by gains in Tesla , Nvidia and JD.com . The Dow rose 1.8% last week and the S&P 500 gained 0.6%. Published:8/17/2020 9:46:55 AM
[Markets] Dow futures edge higher as investors wait for next spark Dow futures edge higher as investors wait for next spark Published:8/17/2020 6:15:54 AM
[Markets] How Apple's Stock Split Will Affect the Dow Jones Industrial Average Apple (NASDAQ: AAPL) announced a 4-for-1 stock split when it reported fiscal third-quarter results last month, the first such corporate action since the last split (7-for-1) occurred back in June 2014. While stock splits are generally meaningless in terms of fundamentals due to the way that math works, the move will actually have a significant impact on the Dow Jones Industrial Average (DJINDICES: ^DJI). For starters, you have to recall that the Dow is unique among all major benchmarks: The index is price-weighted instead of market-cap-weighted. Published:8/14/2020 8:26:37 AM
[Markets] Apple Seeks To Boost Lagging Subscription Sales With "Amazon Prime"-Style 'Bundles' Apple Seeks To Boost Lagging Subscription Sales With "Amazon Prime"-Style 'Bundles' Tyler Durden Thu, 08/13/2020 - 09:45

Apple shares are riding high right now, after reporting blockbuster Q2 earnings with revenue from device sales beating expectations, and the company announced a stock split that has helped push its market capitalization even further into record territory.

However, as we noted at the time, there were a few blemishes on what was otherwise a sterling report, most prominent among them being a rare sequential decline in service revenue, which dipped to $13.156BN from $13.348BN last quarter.

Although investors didn't seem to care when Apple announced the results last month, CEO Tim Cook has increasingly pushed growth in the company's services segment as the key driver of future growth. And although Apple didn't release forecasts for the year ahead. Clearly, Apple CEO Tim Cook is acutely aware of this, and the company is already planning a new initiative to try and maximize revenue from its subscription services at a time when most Americans are using these types of services more than they ever have before.

According to Bloomberg, Apple is reportedly planning to launch a subscription bundle akin to Amazon's popular "Prime" service, that will combine everything from health and wellness, to streaming of TV shows, movies and music, to video games.

The decline in services revenue reported a few weeks back isn't the only motivator for Apple to switch to a bundle, instead of offering all of these services a-la-cart. Last month, the New York Times announced that it would part ways with Apple's "News+" service, a sign that the tech giant has struggled to strike deals with publishers like the NYT, LAT and other papers, even as WSJ and its owner, the News Corp.-owned Dow Jones, insisted that they would stick with Apple News as the platform has brought in "a significantly new audience."

However, a bundle package with News+ included would boost revenue, and leverage, for a service that the company hopes will entice at least a majority of its customers in the US. Apple has already hinted at this possibility as its agreements with publishers have included a warning that services could be offered as part of a bundle.

The "Apple One" package, as it is known inside the company, will featured tiered subscription models, which also fits with Apple's decision to offer some "cheaper" phone models as it struggles to grow its handset market share.

Here's more from BBG:

Apple Inc. is readying a series of bundles that will let customers subscribe to several of the company’s digital services at a lower monthly price, according to people with knowledge of the effort.

The bundles, dubbed “Apple One” inside the Cupertino, California-based technology giant, are planned to launch as early as October alongside the next iPhone line, the people said. The bundles are designed to encourage customers to subscribe to more Apple services, which will generate more recurring revenue.

There will be different tiers, according to the people, who asked not to be identified discussing private plans. A basic package will include Apple Music and Apple TV+, while a more expensive variation will have those two services and the Apple Arcade gaming service. The next tier will add Apple News+, followed by a pricier bundle with extra iCloud storage for files and photos.

Apple plans to leverage its deep trove of user data to allow devices to "suggest" different bundle packages to their owners, based on their previous app usage. Here's a rundown of other salient details from the BBG report.

  • The new bundles will also be built on the company's "family sharing" system, which provides access to up to 6 people for each service.

  • Apple’s plans, and the structure of the bundles, may change. But the goal is to offer groups of services at lower prices than would be charged if consumers subscribed to each offering individually. An Apple spokesman declined to comment.

  • The iPhone and iPad will suggest different packages to users based on which Apple apps and services they already use. This feature will come later this year as part of iOS 14, the next software update for Apple’s devices.

  • The new bundles will be geared toward families, meaning they will work with Apple’s Family Sharing system that provides access to as many as six people for each service. 

  • Bundles will save consumers between $2 and $5 a month, depending on the package chosen. For example, if a family subscribes today to all of Apple’s major services, plus the highest iCloud storage tier, that would cost about $45 a month, but a bundle would presumably knock about $5 off of that price (will this jolt of tech-induced deflation help offset rising food prices? That's probably a problem for another day).

  • The "Apple One" project is being spearheaded internally by Peter Stern, who reports to Apple's longtime services chief Eddy Cue.

  • Last year, BBG reported that "bundles" would launch before the end of 2020. The company is reportedly planning to unveil the service during its upcoming product event.

  • Note: Apple doesn’t plan to integrate the bundles with services such as AppleCare support or monthly payment plans for new iPhones and iPads.

  • In addition to the services bundles, Apple is planning new software and hardware bundles, including giving buyers of the Apple TV set-top box a free year of Apple Arcade.

Apple tested the waters last year by offering students free access to Apple TV+ combined with a subscription to Apple Music.

Furthermore, just as Facebook often mimics the most successful features of rival platforms, Apple is building a subscription service for workout classes, a direct challenge to Peloton, which has soared during the pandemic after a lackluster trading debut last year.

The company is also developing a new subscription for virtual fitness classes that can be used via an app for the iPhone, iPad and Apple TV, the people said. That service will be offered in a higher-end bundle with the rest of Apple’s services. Codenamed "Seymour," the workout package would rival virtual classes offered by companies including Peloton Interactive Inc. and Nike Inc., according to the people.

The news clearly blindsided investors, as Peloton shares slumped nearly 5% in response.

Apple’s services segment is one of the company’s fastest growth areas and has become a $50 billion-a-year business. While services like those for advertising and AppleCare were down in recent quarters due to the impact of Covid-19, digital offerings like the App Store, iCloud and video products set records.

So, to sum up, Apple shares are spiking to new record highs after confirming with their 'Apple One' bundle that services revenue is slowing...

Published:8/13/2020 8:54:32 AM
[Markets] S&P 500 dips at open as labor market rebound falters The Dow Jones Industrial Average fell 54.33 points, or 0.19%, at the open to 27,922.51 and the S&P 500 opened lower by 7.40 points, or 0.22%, at 3,372.95. The Nasdaq Composite gained 14.62 points, or 0.13%, to 11,026.86 at the opening bell. Published:8/13/2020 8:54:31 AM
[Markets] 3M Reports Solid July Update As Healthcare Sales Lead Q3 Comeback 3M said July health care sales rose 29% from last year's levels, suggesting a solid start to the third quarter for the Dow component. Published:8/13/2020 5:54:20 AM
[Markets] Dow ends up nearly 300 points; S&P 500 closes just shy of record Dow ends up nearly 300 points; S&P 500 closes just shy of record Published:8/12/2020 3:15:15 PM
[Markets] Apple’s Split to End Dominion of Dow Average’s Biggest Stock (Bloomberg) -- Apple Inc.’s planned stock split will diminish its influence on the Dow Jones Industrial Average after the iPhone maker’s 100% surge since March lows nearly dragged the price-weighted measure back to an all-time high.At its current price of $452 a share, Apple has the biggest weighting in the index at 11%. A 4-to-1 split now would drop its price tag to about $113 and send its ranking in the Dow Average down to 16th. Apple has rallied almost 55% in 2020, adding more than 1,100 points to a stock measure that’s fallen about 2% during that time. The split is scheduled to take effect Aug. 31.In a world where passive investing rules the stock market, a drop of weight in indexes like the Dow Average is likely to prompt outflows from money managers who mimic benchmark changes. About $31.5 billion was either indexed or benchmarked to the gauge at the end of 2019, according to data from S&P Dow Jones Indices.A stock split “is an appeal to retail,” said Charles Day, a UBS managing director and private wealth adviser with more than $600 million in assets under management. “It will make a difference for the Dow.”The split, however, won’t affect Apple’s No. 1 position in the S&P 500, an index that’s weighted by market capitalization, rather than stock prices.Apple has rallied the most in the Dow this year as locked-down consumers snapped up new iPhones, iPads and Mac computers to stay connected during the pandemic. While any selling as a result of the weighting change may pale in comparison to the company’s market value of $1.9 trillion, it’s nonetheless not good news for a stock whose relentless gains are stirring angst at a time when tech shares have lagged behind the market over the past month amid valuation concerns.Apple’s split is “theoretically decreasing demand from passive indexers,” Julian Emanuel, chief equity & derivatives strategist at BTIG LLC, wrote in a note. “Combined with a generalized loss of momentum in the Nasdaq 100, AAPL could succumb to Newton’s Law of Gravity in the weeks ahead.”(Updates prices on second paragraph.)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:8/12/2020 2:14:39 PM
[Markets] Dow transports en route to longest winning streak in a decade Dow transports en route to longest winning streak in a decade Published:8/12/2020 9:43:47 AM
[Markets] Stocks resume upward march a day after snapping of Dow, S&P win streaks Stocks resume upward march a day after snapping of Dow, S&P win streaks Published:8/12/2020 9:15:00 AM
[Markets] Dow Rises as August Stock Market Rally Resumes Stocks rebounded Wednesday after the S&P 500 posted its first decline in eight trading sessions amid uncertainty over the next U.S. coronavirus stimulus package. The Dow Jones Industrial Average was up 268 points, or 0.97%, to 27,955, the S&P 500 gained 0.95% and the Nasdaq jumped 1.12%. The S&P 500 had traded higher for most of Tuesday's session and approached an all-time record but turned lower following a slide in technology stocks. Published:8/12/2020 8:43:18 AM
[Markets] Just one Dow component in the red as blue-chip index racks up 260-point rise Just one Dow component in the red as blue-chip index racks up 260-point rise Published:8/12/2020 8:43:18 AM
[Markets] U.S. stock futures stronger after a down day for the Dow and S&P 500 U.S. stock futures stronger after a down day for the Dow and S&P 500 Published:8/12/2020 6:46:21 AM
[World] Market Snapshot: Stock-index futures point higher after Dow, S&P 500 snap 7-day winning streak Stock-index futures point to the upside Wednesday, with U.S. equities on track to resume a march to the upside a day after the Dow Jones Industrial Average and the S&P 500 snapped a seven-day winning streak
Published:8/12/2020 6:21:10 AM
[Markets] Stocks Finish Down as Tech Slides in Late-Day Trading Stocks give up early gains - the Dow had been 1.3% higher - and finish lower as tech pulls shares down. Published:8/11/2020 3:48:15 PM
[Markets] Liquidation: Stocks, Bonds, Bullion, & Bitcoin All Puked Liquidation: Stocks, Bonds, Bullion, & Bitcoin All Puked Tyler Durden Tue, 08/11/2020 - 16:01

Well that really did escalate quickly...

Today had the feeling of 'liquidation' (similar to March) as big-tech stocks (growth/value rotation), bitcoin, bonds, and bullion were all dumped unceremoniously.

While Nasdaq futs were bid along with everything else on Putin's vaccine headlines overnight, it didn't take long for the growth/value rotation pressure to kick in and send them lower as small caps (financial/energy dominant) surged... but late on things rolled over as the liquidations spread and the rest of the market tumbled lower on 'stalled stimulus' talks...

This 3-day losing streak for the Nasdaq is the worst in 5 months and the Dow/S&P broke its 7 day win streak.

The momo/growth vs value rotation continued to pick up...

Source: Bloomberg

Another serious quant-quake...

Source: Bloomberg

The early 'value' gains were erased in the last hour...

Source: Bloomberg

FANG stocks staged the typical BTFD effort after an initial tumble but accelerated lower later to foll the gap-up from July 31st...

Source: Bloomberg

VIX spiked 13 handles to 25 (after tagging a 20 handle intraday)...

Notably the S&P has a way to go until gamma flips (3218)...

Source: Nomura

But the Nasdaq's gamma just flipped negative...

Source: Nomura

However, it was precious metals that caught the eye today as gold saw its biggest daily drop sine April 2013...

And silver crashed by its most since Lehman (Oct 2008)...

Sending the gold/silver ratio spiking...

Source: Bloomberg

Gold's initial tumble tracked real yields perfectly but over-did as the yellow metal broke $2000 and ran stops...

Source: Bloomberg

So, Vladimir Putin (whose nation has been among the most avid buyers of gold for its reserves in recent years), announces a vaccine (which crushes the price of gold by the most since Lehman)? Does make you wonder eh?

But let's not over-react too much eh?

But it was not just gold and silver were clubbed like a bay seal. Bonds puked led by the long-end, but as stocks started to accelerate lower in the last hour, things turned around and bonds were suddenly bid (McConnell said 'stimulus talks are stalled')...

Source: Bloomberg

With 10Y exploding 9bps higher (the biggest absolute jump since March) to its highest since July 8th and tagged the 50DMA...

Source: Bloomberg

...and then reversed notably...

Source: Bloomberg

We are all in big trouble if this gap is really starting to fill - a surge in rates of that scale will kill America's balance sheet and a purge of that scale in stocks will be worse for sentiment still...

Source: Bloomberg

Simply put, The Fed is in a corner, it can't let rates run (debt loads) on the back of hope-filled 'reflation' and if the growth-to-value rotation escalates further it will create a flight to safety in bonds... which will hurt financials and thus leave the two legs of the growth/value rotation hurting.

Bitcoin was monkeyhammered...

Source: Bloomberg

The dollar ended marginally higher after another roller-coaster today...

Source: Bloomberg

Oil prices were higher early on, excited about Putin's vaccine but as the liquidation accelerated WTI was bashed back below $42...

And Dr.Copper also stalled and tumbled again at key resistance...

 

Finally, we note that today's reversal came at an interesting moment in mega-tech valuation... Combine Apple Inc. and Microsoft Inc. with the FANG stocks, and the result is a record valuation. The average price-sales ratio among the so-called FANMAGs climbed as high as 8.33 last week, according to data compiled by Bloomberg. Their peak just surpassed the previous mark of 8.32, set in June 2018.

Source: Bloomberg

And one wonders if the 'dead cat bounce' is over (if nothing else, today's reversal is interestingly timed)...

Source: Bloomberg

Published:8/11/2020 3:08:55 PM
[Markets] Nasdaq down 50 points as Dow gain is nearly halved at midafternoon Nasdaq down 50 points as Dow gain is nearly halved at midafternoon Published:8/11/2020 2:08:06 PM
[Markets] S&P Futures Hit All Time Highs On Stimulus, Vaccine Hopes; Gold, Silver Tumble S&P Futures Hit All Time Highs On Stimulus, Vaccine Hopes; Gold, Silver Tumble Tyler Durden Tue, 08/11/2020 - 08:27

S&P 500 futures hit a record high as investors shrugged off continuing U.S.-China tensions and instead focused on news of an approved, if largely unclear, Russian vaccine, and more stimulus optimism as President Donald Trump said he’s considering a tax cut on capital gains. According to Reuters calculations at the current levels, the benchmark index is set to open about 12 points below its Feb. 19 record peak of 3,393.52.

American Airlines and Carnival led a boom in travel shares in the premarket. The S&P 500 closed less than 1% below its record high on Monday as investors extended a rotation into value stocks from heavyweight tech-related names. At 8:00 a.m. ET, S&P 500 e-minis were up 23.25 points, or 0.69%, topping an all-time high of 3,372.25 points last hit on Feb. 20.
A rally in the tech megacaps including Amazon.com, Netflix and Apple that thrived during the shutdowns helped the Nasdaq reclaim its all-time high in June, while the Dow still remains about 6% below its peak.

“Equity has never looked cheaper compared to fixed income and the like,” Jun Bei Liu, portfolio manager at Tribeca Investment Partners, said in a Bloomberg TV interview. “If you want any return, any yield, any income or even any growth you have to go to equities.”

In Europe and Asia, a broad rally from industrial goods to health-care shares set the Stoxx Europe 600 Index headed for its best increase since mid-June. The Stoxx 600 Europe index rose more than 2% , with auto shares leading the way after a surge in Chinese car sales. Gains for Asian equities ignited a rally in European stocks that lifted Stoxx 50 as much as 2.8% and weighed on bunds, pulling Treasuries along. Elsewhere, the resignation of Lebanon’s government after the devastating explosion in Beirut threatened to upend prospects of a debt restructuring deal in the next few months.

Earlier in the session, Asian shares ex-Japan gained nearly 1%, with Japan's Nikkei rising 1.9% after a Monday holiday. There were hopes Beijing’s sanctions on 11 U.S. citizens  may end this round of tit-for-tat moves between the two powers.

“It has left the White House untouched,” said Vishnu Varathan, head of economics at Mizuho Bank in Singapore. “That gives some relief that China is still giving some priority to the (trade deal) dialogue,” he said.

Market participants remain eager to see an agreement on the fifth federal aid bill to help Americans battle with the health crisis was far from over with U.S. cases surpassing 5 million last week. The mood remains cautious as sparring continues in the U.S. Congress over extending fiscal stimulus while economic data such as a steep drop in South Korean exports and a rise in UK jobless rates remain a cause for concern. But upbeat comments by U.S. Treasury Secretary Steven Mnuchin on the prospects for a bipartisan stimulus deal supported Brent crude futures at near five-month highs and kept the dollar index near a one-week peak.

Commerzbank analysts said markets were shrugging off doubts over the legality of Trump’s order and appeared convinced Congress would agree a deal

"Not without good reason, because in the election campaign both parties have an interest in presenting  themselves well,” they said. "Who wants to be seen as the stingy bad guy even in times of great need?"

General optimism kept safe haven assets under gentle pressure, with gold falling back under $2000 an ounce, down more than 2%, even as the dollar slumped. Precious metals dropped with spot gold south of $2000 and spot silver just about holding onto a USD 28/oz handle having briefly dipped below the figure. No fundamental news flow coincided with the losses across precious metals but action could merely be a function of tech play alongside some profit taking/stops being triggered. But the most likely reason for the back down in gold prices is that 10Y real rates - which gold has been tracking tick for tick - also dipped from recent record lows.

In FX, the dollar slipped as European stocks follow Asian equities higher, with markets taking encouragement from falling hospitalization rates in California and New York and decreasing new infections in Hong Kong. The euro rose as much as 0.5% after ZEW data revealed investors raised their expectations of a rebound for the German economy in August. Italy’s 10-year yield premium over its German equivalent tightened to its lowest level since February.

In rates, ten-year U.S. Treasury yields were near a two-week high of 0.5870% while German yields likewise rose to two-week highs. Treasury yields were cheaper by 1bp to 2.5bp across the curve led by long end, steepening 2s10s, 5s30s by 1.6bp and 1bp; 10-year yields around 0.60% while bunds, gilts both lag by ~1bp. Ahead of 3-year auction, WI yield is ~0.160%, 3bp richer than July’s record low stop at 0.19%; refunding includes $38b 10-year Wednesday and $26b 30-year Thursday; all sizes are records.

In commodities, WTI and Brent continue to grind higher in early trade, with upside more-so a function of the overall risk tone as opposed to fresh fundamental catalysts, albeit prices remain underpinned by the recent upbeat assessment from Saudi, Iraq and Gulf members alongside the constructive outlook by Saudi Aramco post-earnings. Looking ahead, traders will be eyeing the weekly API inventory release, with expectations for crude stockpiles to decline by almost 4mln barrels, but ahead of the weekly release, participants will pay attention to the EIA Short Term energy Outlook which will include US crude production forecasts for the rest of 2020 and 2021. In terms of base metals, Dalian iron ore futures snapped its two-day losing streak as prices were bolstered by falling portside inventories, whilst LME copper prices saw early downside.

Looking at the day ahead, and data releases out include UK unemployment data for June, the German ZEW survey for August, as well as July’s PPI reading and the NFIB small business optimism index from the US. Otherwise, Fed speakers today include Barkin, Daly and Brainard.

Market Snapshot

  • S&P 500 futures up 0.6% to 3,371.75
  • STOXX Europe 600 up 1.8% to 371.07
  • MXAP up 1.1% to 169.75
  • MXAPJ up 0.6% to 562.38
  • Nikkei up 1.9% to 22,750.24
  • Topix up 2.5% to 1,585.96
  • Hang Seng Index up 2.1% to 24,890.68
  • Shanghai Composite down 1.2% to 3,340.29
  • Sensex up 0.9% to 38,507.25
  • Australia S&P/ASX 200 up 0.5% to 6,138.65
  • Kospi up 1.4% to 2,418.67
  • German 10Y yield rose 1.3 bps to -0.513%
  • Euro up 0.3% to $1.1768
  • Brent Futures up 0.8% to $45.33/bbl
  • Italian 10Y yield fell 0.8 bps to 0.795%
  • Spanish 10Y yield fell 0.2 bps to 0.253%
  • Brent Futures up 0.8% to $45.33/bbl
  • Gold spot down 2.1% to $1,985.04
  • U.S. Dollar Index down 0.2% to 93.44

Top Overnight News from Bloomberg

  • Britain’s mounting labor market crisis was underscored by a 220,000 slump in employment during the height of the coronavirus lockdown, the worst decline since the global financial crisis
  • Even as China continues to hit back at the Trump administration, leaders in Beijing are also signaling they want to ease tensions with the U.S. as the clock ticks down to the presidential election
  • Lebanon’s political leaders are expected to launch parliamentary consultations to choose a new prime minister after Hassan Diab’s government resigned on Monday over the devastating explosion at Beirut’s port
  • Hong Kong’s worst coronavirus outbreak is showing signs of coming under control as the city reported the lowest number of new local infections since its resurgence began over a month ago

A quick look at global markets courtesy of NewsSquawk:

Asian equity markets traded higher as risk appetite in the region improved on the tepid performance seen on Wall St where most major indices finished in the green but tech underperformed and indecision lingered amid the ongoing stimulus talks stalemate, mixed views on President Trump’s recent executive orders and ongoing US-China tensions. ASX 200 (+0.5%) was positive as top-weighted financials spearheaded the advances and with the broad sector gains offsetting the weakness in gold miners and tech, while Nikkei 225 (+1.8%) was buoyed on return from an extended weekend helped by a predominantly weaker currency and after bank lending increased by its fastest pace on record. Hang Seng (+2.1%) and Shanghai Comp. (-1.2%) conformed to the upbeat mood after the PBoC upped its liquidity efforts with a CNY 50bln reverse repo injection and although China announced sanctions against officials in retaliation to US sanctions on Hong Kong, they refrained from imposing them on Trump administration officials. Furthermore, casino stocks are red-hot after reports China is to remove the quarantine requirement for Macau effective tomorrow and Next Digital shares surged over 400% in an extension of yesterday’s sharp intraday turnaround as activists piled into the shares in a show of support following the founder’s recent arrest and amid speculation it could sell its listed entity as a shell for other firms to acquire for a back-door listing. Finally, 10yr JGBs were lower and approached 152.00 to the downside as they played catch up to the recent weakness in T-notes and as havens were shunned amid gains in riskier assets, while the lack of BoJ presence in the market also added to the dampened mood for JGBs.

Top Asian News

  • One of World’s Strongest Rallies Propels Kospi to Two-Year High
  • Tough-to-Impress Harvard Grad Molds Fortunes of China’s Rich
  • Singapore’s Economy Posts Worse Contraction in Second Quarter
  • Iron Ore Futures Gain as China’s Economic Recovery Fuels Demand

European equities trade higher across the board [Euro Stoxx 50 +2.7%], with upside accelerating after the cash open as sentiment improved following an initially bleak APAC handover – prompting DAX cash and Sept futures to gain above 13k, albeit fresh fundamental catalysts remain light throughout the session thus far; some modest impetus coincided with vaccine updates from Russia. Firm gains are also seen across all European sectors, with cyclicals/value clearly outpacing defensives, whilst the breakdown paints a similarly performance, with Travel & Leisure topping the chart, closely followed by Oil & Gas, Autos and Banks, whilst the other side of the spectrum sees Healthcare and Chemicals as the laggards. In terms of individual movers, UK listed Cineworld (+17%) extended on earlier gains and resides at the top of the Stoxx 600 amid reports that the group could go private. BP (+3.7%) coattails on the back of firmer energy prices coupled with source reports the group is said to be mulling the sale of its German chemicals’ unit DHC Solvent Chemie. Mediobanca (+5.9%) extends on opening gains after the ECB gave the green-light for shareholder Del Vecchio to increase his stake in the Co. to 13-14% from 10%.

Top European News

  • Hungary Inflation Surges, Putting Rate Policy Back in Focus
  • U.K. Jobs Crisis Worsens as Employment Drops Most Since 2009
  • Vestas Shares Surge as 2020 Revenue Guidance Reintroduced
  • Unilever Warns of Dutch Tax Proposal’s Risk for Plan to Move

In FX, another back up in US Treasury yields and mild steepening along the curve into record refunding has underpinned the Dollar to a degree, but a deeper retracement in spot bullion to test support around the psychological Usd 2000/oz level coincided with the DXY marginally eclipsing Monday’s high at 93.729. However, the Greenback has lost momentum against the backdrop of extended gains in global equities that is keeping high beta/cyclical currencies supported and safe-haven demand suppressed.

  • AUD/NZD/CAD/NOK – As noted above, the Aussie is benefiting from bullish risk sentiment to the extent that declines in NAB business sentiment and conditions have not weighed on Aud/Usd unduly, while the Kiwi is just keeping tabs with 0.6600 ahead of Wednesday’s RBNZ policy meeting even though the bias may be skewed towards a more dovish event compared to the prior assessment and guidance, while NZ reports a local outbreak of COVID-19 cases after a 100+ day run of no infections at all. Elsewhere, elevated crude prices are helping the Loonie and Norwegian Crown remain afloat around 1.3300 and 10.5800 vs the Buck and Euro respectively, with the former now looking for some independent impetus via Canadian housing starts.
  • EUR/CHF/GBP – All benefiting from the aforementioned Dollar fade, with the index now back under 93.500 again and Euro rebounding between 1.1723-83 parameters following a somewhat mixed ZEW survey, the Franc paring losses within a 0.9168-34 range and Pound maintaining 1.3050+ status, but not quite able to retest yesterday’s best a few pips over 1.3100 in wake of mostly weaker than forecast UK labour and pay data.
  • JPY – The Yen is marginally underperforming either side of 106.00 on a loss of safety premium and with Japanese markets back from their long holiday weekend, but little lasting reaction to a wider than anticipated Japanese current account surplus.
  • EM – Oil’s ongoing resurgence is helping the Rouble and Mexican Peso supplement gains vs the flagging Greenback. but the SA Rand has not been deterred by Gold’s meltdown or looming data and has breached key technical resistance in the form of the 100 DMA (17.6240) on the way up towards 17.5400. Similarly, the Turkish Lira is back in recovery mode as tighter CBRT funding conditions prompt some short covering, while Brazil’s Real awaits BCB COPOM minutes from the last meeting.

In commodities, WTI and Brent front-month futures continue to grind higher in early trade, with upside more-so a function of the overall risk tone as opposed to fresh fundamental catalysts, albeit prices remain underpinned by the recent upbeat assessment from Saudi, Iraq and Gulf members alongside the constructive outlook by Saudi Aramco post-earnings. The benchmarks experienced modest downside heading into the European cash open, in which prices briefly dipped below 45/bbl for the Brent Oct contract, whilst WTI Sep tested 42/bbl, before recovering lost ground and some more. Looking ahead, traders will be eyeing the weekly Private Inventory release, with expectations for crude stockpiles to decline by almost 4mln barrels, but ahead of the weekly release, participants will pay attention to the EIA Short Term energy Outlook which will include US crude production forecasts for the rest of 2020 and 2021. Elsewhere, precious metals are under pressure this morning with spot gold south of USD 2000/oz and spot silver just about holding onto a USD 28/oz handle having briefly dipped below the figure. No fundamental news flow coincided with the losses across precious metals but action could merely be a function of tech play alongside some profit taking/stops being triggered. In terms of base metals, Dalian iron ore futures snapped its two-day losing streak as prices were bolstered by falling portside inventories, whilst LME copper prices saw early downside amid the firming USD at the time; albeit, has since nursed losses.

US Event Calendar

  • 6am: NFIB Small Business Optimism 98.8, est. 100.5, prior 100.6
  • 8:30am: PPI Final Demand MoM, est. 0.3%, prior -0.2%; PPI Ex Food and Energy MoM, est. 0.1%, prior -0.3%
  • 8:30am: PPI Final Demand YoY, est. -0.7%, prior -0.8%; PPI Ex Food and Energy YoY, est. 0.0%, prior 0.1%

DB's Jim Reid concludes the overnight wrap

The last 24 hours has pretty much fit the bill as far as slow news days are concerned in markets. That being said there was a somewhat notable milestone reached yesterday as the S&P 500 surpassed the all-time highs from February on a total return basis. This is a fairly astonishing feat when you consider that in late-March the index was down as much as -33.79% from those highs. In price terms it finished +0.27% yesterday which means it’s just -0.76% lower than its all-time closing high. That move also marked the S&P’s 7th consecutive advance for the first time since April 2019.

While the S&P nudged higher, the Dow Jones saw a much larger +1.30% gain, which is somewhat unusual given the strong correlation between the two indices. Indeed, it’s only the 6th time in the last decade that the Dow’s daily move has been more than one percentage point different to the S&P’s (even if 5 of them have been since the pandemic hit). At the other end of the spectrum though, the NASDAQ (-0.39%) slipped for a rare second consecutive session. At the margin the macro news acted as a bit of headwind and included the news of further Chinese sanctions on US officials after similar measures were announced by the US on Friday, with those sanctioned by China including the Republican senators Marco Rubio, Ted Cruz and Tom Cotton. Chinese Foreign Ministry spokesman Zhao Lijan said yesterday that “China has decided to impose sanctions on those individuals who behaved badly on Hong Kong-related issues”. And in a further sign that US-China tensions are showing no sign of abating any time soon, US Secretary of State Mike Pompeo tweeted yesterday that the arrest of Jimmy Lai under Hong Kong’s national security law was “further proof that the CCP has eviscerated Hong Kong’s freedoms and eroded the rights of its people.”

Meanwhile, markets continue to turn a bit of a blind eye to the lack of any progress on the next US fiscal package with no updates to report of yesterday. Nevertheless there was some more positive coronavirus news from the US, with the number of hospitalisations in New York State at the lowest since the start of the pandemic, and the number of cases in Florida at their lowest in over 6 weeks. California and Texas also reported a fall in hospitalizations. Overall, cases in the US grew by 44,647 in last 24 hours or +0.9% while at the same point last week cases had grown by 46,918 or 1.0%. Globally, the number of cases have crossed the 20 million mark. It is worth highlighting that it took 6 months for cases to reach 10 million after the first infection surfaced in China while the second 10 million took only 6 weeks. On the positive side, China has said that it will resume issuing tourist visas for visitors to Macau which has helped casino stocks rally in the region.

Indeed most Asian bourses have posted strong gains this morning. The Hang Seng (+2.40%) has led the way after underperforming on Monday, while the Nikkei (+1.81%) is up following Monday’s holiday. The Kospi (+1.60%) and ASX (+0.84%) all also up while futures on the S&P 500 are also up +0.26%. It’s been fairly quiet for overnight news, however President Trump did say that he’s “very seriously” considering a capital gains tax cut “which would create a lot more jobs”.

Back to yesterday, and over in Europe the moves were pretty similar to the US in terms of the upward direction for equities, though the STOXX 600 (+0.30%) still remains nearly 16% beneath its own record high in February, with European indices having underperformed their US counterparts since the pandemic hit. Energy stocks led the rally on both sides of the Atlantic thanks to a strong performance in oil prices, and both WTI (+1.75%) and Brent (+1.33%) saw solid gains. Staying with the commodities sphere, it’s worth noting that silver was up +2.93% at a 7-year high of $29.13/oz yesterday, though gold (-0.40%) continued to come down from Thursday’s record high with a 2nd successive decline. Looking at other markets, sovereign bonds advanced modestly in Europe, with yields on 10yr bunds (-1.7bps), OATs (-2.3bps) and BTPs (-0.8bps) all moving lower. Indeed yields on 10yr BTPs were down to 0.918%, their lowest level in nearly 6 months. US Treasuries gave up their gains however, with 10yr yields ending the session up +1.2bps at 0.577%. The MOVE index of implied Treasury volatility did nudge up yesterday however still remains just 2 points off the all-time lows from the end of July. Speaking of volatility, the VIX is now down to 22.13, the lowest since 21 February.

Elsewhere, in terms of data yesterday there weren’t a great deal of releases, though we did get the JOLTS job openings from the US, which rose to 5.889m in June (vs. 5.3m expected). That’s their second monthly increase since their low of 4.996m in April, but still over a million lower than their levels in January and February of just over 7m. On a less positive note however, the New York Fed’s Survey of Consumer Expectations showed that households’ expectations on their employment prospects and year-ahead financial situation worsened in July following two months of improvements.

To the day ahead now, and data releases out include UK unemployment data for June, the German ZEW survey for August, as well as July’s PPI reading and the NFIB small business optimism index from the US. Otherwise, Fed speakers today include Barkin, Daly and Brainard.

Published:8/11/2020 7:40:25 AM
[Markets] Dow Jones Leads Stock Market Up; Cruise Shares, Airlines Soar Monday was another tale of two stock markets. The Dow Jones Industrial Average (DJINDICES: ^DJI) soared on strength in key industrial, consumer goods, and energy stocks, but losses in the Nasdaq Composite held back the broader market. Published:8/10/2020 4:32:05 PM
[Markets] Market Extra: ‘Golden cross’ materializing in Dow transports, Russell 2000 A week after a bullish golden cross pattern formed in the Dow Jones Industrial Average, a pair of important stock-market indexes are also beginning to generate upbeat chart formations—suggesting that a mostly technology-driven rally may be fanning out somewhat to other sectors of the market.
Published:8/10/2020 4:32:05 PM
[Markets] Dow Closes Up 1.3%, Nasdaq Falls as Tech Shares Stumble The Dow finishes higher Monday after President Trump signs executive orders to extend unemployment benefits. The Nasdaq slips. Published:8/10/2020 4:04:08 PM
[Markets] The Dow gained 360 points, but the Nasdaq fell in mixed Monday stock trading The Dow gained 360 points, but the Nasdaq fell in mixed Monday stock trading Published:8/10/2020 3:31:56 PM
[Markets] Dow Closes Up 1.3% - Nasdaq Lower as Tech Shares Stumble The Dow finishes higher Monday after President Trump signs executive orders to extend unemployment benefits. The Nasdaq slips. Published:8/10/2020 3:31:55 PM
[Markets] FedEx, UPS stocks surge to power Dow transports to 9th-straight gain Shares of FedEx Corp. and United Parcel Service Inc. surged Monday, to provide a more-than 100-point boost to the Dow Jones Transportation Average, amid bullish analyst comments on the package delivery giants given signs of increasing e-commerce volumes.
Published:8/10/2020 3:31:55 PM
[Markets] Silver Soars Amid Momo Meltdown, Apple Almost As Big As Entire Russell 2000 Silver Soars Amid Momo Meltdown, Apple Almost As Big As Entire Russell 2000 Tyler Durden Mon, 08/10/2020 - 16:00

The last two days have seen the biggest plunge in momentum since the early June quant-quake...

Source: Bloomberg

As the reflation trade inflects as money supply falls for two straight weeks...

Source: Bloomberg

...and momentum vs value flips...

Source: Bloomberg

The biggest two day rotation since the June collapse...

Source: Bloomberg

Cyclicals also dominated defensives...

Source: Bloomberg

Source: Bloomberg

All of which sparked a major divergence between Small Caps (and The Dow) and the Nasdaq on the day (though BTFDers diod not allow that to stand for long)...

That is the 7th straight day higher for the Dow and S&P (and 2nd down day in a row for Nasdaq)

Pushing the Russell 2000 to its highest relative to Nasdaq in almost two months...

Source: Bloomberg

Treasuries rollercoastered in a narrow range today, bid during the EU session overnight and sold during the US session...

Source: Bloomberg

Elsewhere in crazy land, the Junk bond market set a record-low coupon today with a Ball Corp deal. The aluminum packaging company, is selling 10-year notes at a 2.875% yield. As Bloomberg notes, about 40% of high-yield deals sold last week priced at a yield of less than 4%.

Source: Bloomberg

The dollar chopped around all day in a tight range and ended marginally higher

Source: Bloomberg

Bitcoin topped $12k before being flash-crashed once again... but staged a valiant recovery...

Source: Bloomberg

Ether also plunged but managed to make it back into the green...

Source: Bloomberg

While gold ended modestly lower after a morning surge above $2060 (futs), silver, copperm and crude all managed solid gains...

Source: Bloomberg

Silver and gold decoupled for a few hours today (between 11amET and 2pmET)...

Silver's outperformance sent the ratio to gold back below 70 once again...

Source: Bloomberg

And finally, as one wit quipped, Tech is eating the world: The recent surge in Apple shares is pushing the value of the world’s largest company toward that of the entire Russell 2000 Index. The iPhone maker is worth $1.93tn, almost 90% of combined mkt cap of 2,000 US small-cap stocks listed in Russell...

“This is astounding - in the past 40 years, no single stock has come close to dwarfing the value of so many other companies,” wrote Sundial Capital Research Inc. founder Jason Goepfert in a recent note.

Source: Bloomberg

And then there is this...The market value of the world’s equities has risen above the dollar value of the global economy, which some investors say is a sign of overheated markets. As Bloomberg notes, total stock-market capitalization reached $87.83 trillion on Sunday, compared with the 2019 gross domestic product of all countries at $87.75 trillion. With this, stock values have returned to where they were earlier this year, even though the Covid-19 pandemic has dragged many countries into recession.

Source: Bloomberg

It's a Mad World alright!

Published:8/10/2020 3:12:16 PM
[Markets] Dow Rises, Nasdaq Trades Lower as Tech Shares Stumble The Dow trades higher Monday after President Trump signs executive orders to extend unemployment benefits. Published:8/10/2020 1:31:51 PM
[Markets] Dow Higher, Nasdaq Trades Lower as Tech Shares Stumble Stocks traded mixed Monday with declines in tech shares leading the Nasdaq lower. The Dow Jones Industrial Average was up 263 points, or 0.96%, to 27,697, the S&P 500 rose 0.09% and the Nasdaq slumped 0.67%, led by declines in Tesla and Nvidia . The Dow rose 3.8% last week, while the S&P 500 and Nasdaq racked up gains of 2.5%. Published:8/10/2020 11:03:14 AM
[Markets] S&P 500 and Nasdaq Turn Lower as Tech Shares Stumble Stocks turned mixed Monday with declines in tech shares leading the S&P 500 and Nasdaq lower. The Dow Jones Industrial Average was up 187 points, or 0.68%, to 27,620, the S&P 500 fell 0.2% and the Nasdaq slumped 1.06%, led by declines in Tesla and Nvidia . The Dow rose 3.8% last week, while the S&P 500 and Nasdaq racked up gains of 2.5%. Published:8/10/2020 10:31:19 AM
[Markets] Gold, Silver, Small Caps, & Bonds Are All Soaring As Nasdaq Tumbles Gold, Silver, Small Caps, & Bonds Are All Soaring As Nasdaq Tumbles Tyler Durden Mon, 08/10/2020 - 09:54

Buy all the things!!

As the dollar erases overnight gains...

Small Caps and The Dow were suddenly panic-bid at the open as Nasdaq dips)...

Bonds are bid...

Gold futures spiked above $2050...

And Silver futures are surging...

One of these things is not like the other.

Published:8/10/2020 9:00:02 AM
[Markets] Tech Tumbles Into Weekend, Copper Crumbles As Silver Soars Tech Tumbles Into Weekend, Copper Crumbles As Silver Soars Tyler Durden Fri, 08/07/2020 - 16:00

While stocks soared on the week (led by Small Caps' best week in two months)...

Today's "good" news on jobs (spoiling the odds of more imminent money-printing) and stimulus plan delays (again less money to be thrown around) sparked the biggest drop in Nasdaq in almost 3 weeks... Schumer said today's meeting was "disappointing" and that sent stocks lower in the last hour, then Mnuchin said Trump would do an Executive Order and stocks rose pushing the Dow and S&P (barely) green on the day...

Nasdaq down for first time in eight days

As Jim Bianco (@biancoresearch) explained so succinctly:

Talks on passing the latest stimulus package are stalled. This is stimulus checks and additions to unemployment insurance.

Does anyone doubt if the stock market tanked 10% to 20% they would pass this bill immediately?

But it does not tank because the Fed and their "unlimited printing press" stand ready to halt any "unpleasantness" in markets.

So, the better the "wealthy" do (stockholders) the less the urgency to help the "not wealthy" (non-stockholders).

The worst inequality ever?

And FANG stocks tumbled...

Source: Bloomberg

Worst day for momentum in almost a month...

Source: Bloomberg

"Someone turn the machines back on!!!"

Amid the biggest weekly short-squeeze in two months...

Source: Bloomberg

After more than a week of decoupling, bond yields and stock prices converged a little today...

Source: Bloomberg

Treasuries were sold today, sending yields positive for the week...

Source: Bloomberg

Treasury yields remain stuck at or near record lows...

Source: Bloomberg

The dollar ended the week basically unchanged after an early roller-coaster...

Source: Bloomberg

Offshore Yuan was hit on US sanctions today...

Source: Bloomberg

Cryptos were mixed on the week, Ripple and Ethereum gained notably (despite today's weakness), Bitcoin was up very modestly and Litecoin And Bitcoin Cash were red..

Source: Bloomberg

Bitcoin managed to recover the losses from last weekend's flash-crash... only to flash-crash (smaller) today...

Source: Bloomberg

As Ethereum hit $400 and was immediately slammed...

Source: Bloomberg

On the week, silver soared as copper was clubbed like a baby seal today...

Source: Bloomberg

Gold futures fell today but remain above $2,000...

Silver also fell on the day after futures almost tagged $30...

The gold-silver ratio crashed below 70x this week - its lowest since April 2017...

Source: Bloomberg

But still a long way to go its 60x average level...

Copper diverged dramatically from stocks (what does Dr.Copper know?), suffering its worst week since March...

Source: Bloomberg

Finally, we note that one thing is in great demand.

The physical gold premium over futures prices spiked to its highest since 2014...

Source: Bloomberg

Published:8/7/2020 3:16:47 PM
[Markets] Microsoft, Intel, Chevron biggest factors in triple-digit Dow decline Microsoft, Intel, Chevron biggest factors in triple-digit Dow decline Published:8/7/2020 11:42:00 AM
[Markets] Von Greyerz: The Nightmare Scenario For The World Von Greyerz: The Nightmare Scenario For The World Tyler Durden Fri, 08/07/2020 - 05:00

Authored by Egon von Greyerz via GoldSwitzerland.com,

“Gold has no role in portfolio of wealthy clients” said the chief investment officer of Goldman Sachs’ private wealth management in the week that gold in US dollars went up by over $100 and made a new high of $1,984.

Many found this statement puzzling as another Goldman department previously has told clients not to sell anything gold.

The CIO went on to say: “Our view is that gold is only appropriate if you have a very strong view that the US dollar is going to be rebased. We don’t have that view.”

THE IMPLODING DOLLAR

So here we have a dollar that has lost 85% against gold in this century and 40% since 2018. How can the CIO of the mighty GS say that the dollar is not being rebased. History certainly tells us that she is not telling the truth. Or does she believe that the dollar won’t go down in coming years. As CIO she can clearly see what everyone is seeing namely that the prospects for the dollar are doomed with what is happening in the US economy causing surging deficits and unlimited money printing.

The truth clearly lies elsewhere. No asset manager is interested in protecting their clients’ assets by investing in the ultimate form of wealth preservation which of course is physical gold. The reason is very simple. Goldman’s private wealth management like all other asset managers are not interested in holding physical gold for their clients for the simple reason that the bank can’t earn sufficient revenue on just holding client gold. Instead they want to put expensive proprietary products and their own managed funds into client portfolios and also buy and sell shares regularly to churn commissions.

No bank, managing client portfolios, tells their clients that in the last 20 years gold has outperformed all major asset classes including stocks. The Dow for example has lost 70% against gold since 1999 (excluding dividends).

Instead asset managers stick to their conventional portfolios of stocks, bonds and some alternative assets. The Dow – Gold ratio is now 13 on its way to at least 1 to 1 as in 1980 and probably 0.5 to 1 as I discussed in last week’s article.

100 TRILLION GOLD IN WEIMAR REPUBLIC

What 0.5 to 1 Dow-Gold ratio means in price is impossible to say today. It could be $20,000 gold and 10,000 Dow. It could also be $50,000 gold and 25,000 Dow. And if hyperinflation takes hold, which I think is very likely, we could see $100 billion gold. At that point I would expect the ratio to collapse in line with most stocks and be substantially below 0.5 to 1. Gold at $100 billion might sound sensational but remember that the world has seen a lot higher gold in fiat money.

In the Weimar Republic in 1923 gold reached Marks 100 trillion.

But measuring the gold price in worthless paper money obviously serves no purpose. 100 trillion marks might sound like a lot of money. Well, it is if you have to pay it in actual paper money. But the problem is that paper money at that point has lost its useful function. Today paper money is gradually being abolished. In Sweden for example, no one carries or pays with paper money. Even for small amounts like a loaf of bread, a credit card is used.

AS PAPER MONEY DIES

Abolishing paper money has been a planned process by governments and central banks. Firstly it makes bank runs impossible. The banks will simply just turn off the ATMs. They can obviously also stop electronic transfers. The most important aspect of electronic money is the Big Brother is Watching Syndrome. Now the state has total electronic control of the citizens money not just from a tax point of view but the state can decide to block individual accounts or to charge fines or taxes without the permission of the account holder.

As regards hyperinflation, it is only a matter of time before inflation picks up as the frantic printing accelerates further in line with the collapsing economy. The current explosion of the Fed balance sheet combined with surging government debt will increase money supply exponentially. This will also lead to the dollar decline accelerating.

DOLLAR FALL AND MONEY SUPPLY

The dollar index peaked at 103 in March this year and has since then fallen 10% to 93 today. As the dollar continues to decline, US inflation will pick up. So far the official US inflation rate is just above zero. Anyone buying food or paying insurance for example knows that this is not a true figure. But the real reason why inflation is low in spite of the major increase in money supply is the low velocity of money.

All the money printed is not reaching the consumer but instead staying with banks and other major institutions to shore up their balance sheets. Very little reaches the real economy.

The graph below shows the rise in the US Money Zero Maturity stock – MZM. This is the broadest measure of liquid money. It was $4.3 trillion in 2000 and is now $21 trillion. Only since March 2020 it has increased by a massive $4 trillion.

If we then look at the velocity of MZM we see how it reached 3.5 in 1981 when inflation was high and interest rates reached 20%. Today the velocity has collapsed to an all time low of 0.9. So what we are seeing is that the money printed is not spent but used to prevent the financial system from collapsing.

AS THE DOLLAR FALLS VELOCITY OF MONEY WILL PICK UP

As the dollar falls and velocity of money increases, we will see inflation increasing rapidly. Higher inflation will lead to higher interest rates. I experienced this in the UK in the 1970s when inflation was in the mid to high teens for many years. My first mortgage was at 21% in 1974.

Central banks are today managing to artificially suppress interest rates and in the short term defy the laws of supply and demand. High demand for credit should in a free market lead to high interest rates and thus taper demand for credit. But in a world controlled and manipulated by central banks, the laws of nature are temporarily set aside. This leads to false markets and false prices.

The likely course of events in the next few years are as follows:

THE NIGHTMARE SCENARIO

  • Accelerating deficits and debts

  • Falling dollar and other currencies

  • Unlimited money printing to save banks, and failing financial system

  • More printing to save failing companies

  • Ever higher subsidies for furloughed and unemployed

  • Universal Basic Income (UBI) introduced in most Western nations

  • UBI means that everyone is paid a basic wage whether they work or not

  • This will lead to ever fewer people working

  • Higher unemployment means more printing

  • More printing leads to more currency debasement

  • This leads to higher velocity of money higher inflation

  • Central banks lose control of rates as long end of bond market sells off

  • High long rates push short rates up

  • Rates reach 5% then quickly 10% and on to 15-20% at least

  • At 10% rates interest cost on global debt of $275 trillion would be $27t

  • $27t is 34% of global GDP – totally unsustainable

  • So much more money printing required

  • Bad debts surge leading to defaults, sovereign, corporate and private

  • Unemployment escalates leading to more UBI and more money printing

  • Banks start falling including the $1.5 to $2 quadrillion derivatives market

  • Money printing reaches $ quadrillions leading to hyperinflation

  • The financial system collapses together with major parts of industry and society

  • Social unrest, civil wars, cyber wars and major conflict will be rampant

  • Political systems fail as governments lose control leading to anarchy

THE WORLD WAKES UP TO THE FACT THAT IT IS BANKRUPT

Obviously governments and central banks will desperately try to introduce resets, new digital currencies, do a bit of hocus pocus with debt to pretend it has disappeared. The US might even revalue its alleged stock of 8,000 tonnes of gold. But their bluff will be called. The effects of any measure governments take will only be temporary as the world realises that it really is bankrupt.

I sincerely hope that all the above is really a nightmare in the form of a dream and will never take place. Because if it does, the world is back to the Dark Ages or the Dark Years are here as I wrote about in 2009 and revisited in 2018.

THE WORLD GOES BACKWARD 100 YEARS

If the world retraces a century of evolution or more, it is clearly in for at least 50 years of very hard times. But except for the initial shock and readjustment, life will go on for most people but at a different level. Obviously living standards will decline substantially. So will security.

MANY OF LIFE’S TREASURES ARE FREE

The positive aspect is that moral and ethical values will return with family and friends becoming the kernel of society again. And many of the best and free things in life will still be there such as nature, books, music, good conversation, close friendships etc. With the lack of many of the superficial material values, we will appreciate the real value of the new simple life even though it will seem a lot harder initially.

What I have outlined above is not a forecast but a potential scenario which I sincerely hope won’t come to pass but the risk is certainly there.

GOLD WILL ASSUME ITS CRISIS ROLE

Gold and silver are now in the acceleration phase of a secular bull market. As always, there will be corrections on the way to much higher levels.

In a period of such severe crisis which I outline above, gold will obviously assume the role it always has, namely as money and the only money which will maintain its purchasing power and act as insurance and wealth preservation. But remember, it must be physical and stored outside the banking system in a very safe place and jurisdiction.

At that point it will be meaningless to measure gold in worthless dollars or euros. Instead, think of gold in ounces or grammes and purchasing power terms.

Published:8/7/2020 4:24:12 AM
[Markets] NewsWatch: A bullish ‘golden cross’ forms in the Dow industrials A golden cross has formed in the Dow Jones Industrial Average, more than five months after a bearish chart pattern materialized in the aftermath of the carnage wrought by the COVID-19 pandemic.
Published:8/6/2020 4:09:43 PM
[Markets] As the stock rally persists, a bullish 'golden cross' is forming in the Dow As the stock rally persists, a bullish 'golden cross' is forming in the Dow Published:8/6/2020 3:35:31 PM
[Markets] Market Extra: A bullish ‘golden cross’ is forming in the Dow industrials A golden cross has formed in the Dow Jones Industrial Average, more than five months after a bearish chart pattern materialized in the aftermath of the carnage wrought by the COVID-19 pandemic.
Published:8/6/2020 2:05:27 PM
[Markets] McDonald's and Walgreens in lead as Dow extends early gain to 75 points McDonald's and Walgreens in lead as Dow extends early gain to 75 points Published:8/6/2020 10:08:18 AM
[Markets] Dow industrials inch upward at open after surprise decline in new jobless claims Dow industrials inch upward at open after surprise decline in new jobless claims Published:8/6/2020 9:03:06 AM
[Markets] European stocks open lower, while Dow futures edge higher European stocks open lower, while Dow futures edge higher Published:8/6/2020 2:31:20 AM
[Markets] Dow stretches morning advance to 300 points as earnings news outweighs jobs data Dow stretches morning advance to 300 points as earnings news outweighs jobs data Published:8/5/2020 10:02:39 AM
[Markets] Dow futures point to fourth straight advance on Wall Street Dow futures point to fourth straight advance on Wall Street Published:8/5/2020 7:02:07 AM
[Entertainment] Vanderpump Rules Star Danica Dow Files Restraining Order Against Ex-Boyfriend Danica DowDanica Dow has found herself in some relationship drama off camera. E! News can confirm the Vanderpump Rules star and SUR assistant manager filed--and was granted--a temporary restraining...
Published:8/4/2020 2:58:41 PM
[Markets] Gold Soars To Record Highs, Stocks Erase Gains After Pelosi Warns 'No Deal This Week' Gold Soars To Record Highs, Stocks Erase Gains After Pelosi Warns 'No Deal This Week' Tyler Durden Tue, 08/04/2020 - 12:17

While The Dow is holding gains thanks to the insane dominance of AAPL; Nasdaq, Russell 2000, and the S&P are all tumbling into the red on the day after House Speaker Nancy Pelosi said she "doesn't think there will be a deal this week."

Treasury yields are tumbling to fresh record closing lows...

And Gold is soaring to new record highs...

...as Spot gold tops $2,000 for the first time...

What does gold see coming? A Democrat-driven $3 trillion stimulus that breaks the world's confidence in any fiscal restrainst behind the world's reserve currency?

Published:8/4/2020 11:28:03 AM
[Markets] Dow futures slump as caution surfaces in wake of technology-led run-up Dow futures slump as caution surfaces in wake of technology-led run-up Published:8/4/2020 7:51:11 AM
[Markets] Stocks start August with solid gains, with the Dow rising 235 points Stocks start August with solid gains, with the Dow rising 235 points Published:8/3/2020 3:16:04 PM
[Markets] Nasdaq Surges To Another Record High Despite Dollar Surge Nasdaq Surges To Another Record High Despite Dollar Surge Tyler Durden Mon, 08/03/2020 - 16:01

Another day, another nicely engineered short squeeze...

Source: Bloomberg

Oh and a panic bid into the world's biggest market cap company (after it already rose over 10% on Friday), but a lot of that faded as the day went on...

And a better than expected ISM print (ignoring the decline in the Markit PMI) sparked a bid in value/cyclical stocks...

Source: Bloomberg

All helped lift the broad markets today (despite a late-day drop on McConnell comments about the Democrats "not budging" on negotiations... (Small Caps managed to outgain tech on the day thanks to that late drop)

NOTE the cash open saw an immediate panic-bid in Nasdaq and dump of Small Caps, but the latter quickly reversed.

AAPL & MSFT accounted for more than half of The Dow's gains today, but gun stocks surged more on the back of huge surge in background checks...

Source: Bloomberg

Momentum continues to keep the dream alive...

Source: Bloomberg

The rally in stocks held up despite a big surge in the dollar (which has been highly inveresely correlated with stocks for much of the last four months)...

Source: Bloomberg

Biggest 2-day jump in the dollar since early June (though it started to give back some gains after Europe closed...

Source: Bloomberg

But the bounce was from a serious point of support...

Source: Bloomberg

Bitcoin continued to recover from its flash-crash over the weekend...

Source: Bloomberg

And Ethereum even more so...

Source: Bloomberg

Treasury yields were higher on the day skewed to long-end underperformance amid the massive Google issuance (2Y +0.5bps, 30Y +4bps)...

Source: Bloomberg

But even with those rate-locks and rotation, 10Y yields barely budged by the close...

Source: Bloomberg

Gold scrambled into the green as the dollar started to leak lower...

Source: Bloomberg

Finally, there's this: Bloomberg reports that income-oriented investors have less reason than ever to favor U.S. corporate bonds over stocks. The gap between the yield on the Bloomberg Barclays U.S. Corporate Bond Index and the dividend yield for the S&P 500 Index shows as much. Both yields were about 1.9% at the end of last week, according to data compiled by Bloomberg.

Source: Bloomberg

Corporate yields have been as much as 11 percentage points higher on a monthly basis since the 1970s, as shown in the chart. The most recent peak was 2.4 points, reached in November 2018. But then again with The Fed's foot on the throat of all price discovery, it makes sense that everything is the same, no matter the risk differentials.

That's all that matters.

Published:8/3/2020 3:16:04 PM
[Markets] Mission Accomplished: Fed Officially Blows The Biggest Ever Bubble Mission Accomplished: Fed Officially Blows The Biggest Ever Bubble Tyler Durden Fri, 07/31/2020 - 16:00

Mission Accomplished:

Stocks managed gains on the month (4th month in a row) - Nasdaq best, Dow worst...

Source: Bloomberg

And note that despite the epic surge in the mega tech stocks overnight... Yes, that is AAPL up 10%!! (GOOGL -4%)...MSFT  managed to rally back to unch after rumors of it buying TikTok...

Apple is up $170BN today, more than the market cap of Oracle, more than the GDP of Hungary; Apple's value increase today would be the 33rd biggest company in the S&P500.

Nasdaq was not a one-way street today as CNBC stunningly remarked "nasdaq has now gone negative which is quite interesting..."

And you have to laugh at this - The Dow scraped by today... as AAPL's insane squeeze higher dominated the rest of the entire index...

Source: Bloomberg

but that will change when AAPL splits.

BUT, it was in currency, commodity, credit, and crypto land that the real fun and games took place.

Bonds were bid pretty much all month with the long-end notably outperforming...

Source: Bloomberg

... and pushing to new record low yields...

Source: Bloomberg

Some highlights:

  • 2Y Treasury yields fell for the 8th month in a row

  • 30Y Treasury yields fell for the 5th month this year

  • 2s30s Curve flattened by the most since August 2019

Source: Bloomberg

Still a long way down for stocks if bonds are right...

Source: Bloomberg

Gold and silver screamed higher on the month.

  • Silver's best month since 1979 (when the Hunt Brothers tried to corner the market)

  • Gold's best month since 2011

Spot Gold reached a new record above Sept 2011 and Futures topped $2000...

Source: Bloomberg

Silver's at its highest since June 2013...

Source: Bloomberg

Oil's up for the 3rd month in a row, but has largely trod water all month...

Source: Bloomberg

Cryptos soared in July with Ethereum best (up over 50%, its 4th monthly rise in a row) and Bitcoin up 22%...

Source: Bloomberg

Ethereum closed at its highest since August 2018...

Source: Bloomberg

And helping all these assets rise in value, DXY Dollar Index suffered its biggest monthly drop since 2010...

Source: Bloomberg

Breaking a key up-trend line...

Source: Bloomberg

Did Washington mess with the 'money' one too many times?

Gold seems to think so...

Source: Bloomberg

Finally, we note that 'soft' survey macro data has surged full of hope to a region that has not ended well in the recent past

Source: Bloomberg

Better keep pumping...

Source: Bloomberg

Remember, Diversify, Diversify, Diversify... oh wait!

h/t @Not_Jim_Cramer

Trade accordingly.

So - summing up July - Stocks up, Bonds up, Gold up, Silver up, Oil up, Crypto up, Dollar Down (along with Fed credibility.)

Published:7/31/2020 3:28:15 PM
[Markets] Schiff: "The Dollar Is Not Just Going Down; It's Going To Crash" Schiff: "The Dollar Is Not Just Going Down; It's Going To Crash" Tyler Durden Fri, 07/31/2020 - 10:00

Via SchiffGold.com,

As gold was closing in on its all-time record price last week, Peter Schiff appeared on the Claman Countdown and warned about the looming dollar crisis.

Claman set up the interview pointing out that Peter predicted this big move up in gold months ago and asked, “What’s your new prediction about the dollar?”

Peter said it’s not really a new prediction, but perhaps it’s more timely.

The dollar’s not just going down. It is going to crash.”

Prior to the interview, Claman mentioned that the Dow was up, but Peter said there is another way to look at it.

Priced in real money, gold and silver, the Dow is actually down. And what gold is telling you, and silver, is that the dollar is losing value. It’s losing purchasing power.”

The dollar had been drifting lower against other fiat currencies over the past several weeks. At the time of the interview, the dollar index was just a few ticks off its March low.

But I think the dollar is going to keep drifting down until it collapses,” Peter said.  “And this is going to usher in a real economic crisis in America, unlike something we’ve ever seen. Because it’s going to force the Fed to choose between saving the dollar, and dumping all the bonds its been buying, letting interest rates rise sharply, forcing the US government to slash spending right now and abandon all these stimulus plans, or just let inflation ravage the entire economy and wipe out a generation of Americans.”

Claman asked Peter what is the trade given what’s coming down the pike. Peter said his advice is “to get out of Dodge.”

Get out of dollars. Number one, yeah, own gold and silver. The gold and silver mining stocks are killing it, but they’re just getting started. I mean, these stocks, I think, can go up 10, 20 times in dollar terms.”

Peter also recommended foreign stocks that derive their revenues outside the US and earn them in foreign currencies, not US dollars. They can return those appreciated foreign currencies to you in dividends that avoid the inflation tax.

Forget about the payroll tax. The real tax that’s going to clobber every American is inflation because that’s how the government is now funding its spending is through inflation. And inflation is a tax on anybody who owns US dollars.”

Published:7/31/2020 9:22:56 AM
[Markets] Dow Jones Futures Signal Modest Gains Ahead Of Fed Rate Decision; Apple Rises On iPhone Sales, While AMD Soars 11% On Earnings Dow Jones futures were in focus early Wednesday. Four stock market leaders near key support levels include Apple and Microsoft. AMD surged on earnings late. Published:7/29/2020 5:42:04 AM
[Markets] Dow Jones Futures Fall 75 Points After Stock Market Sells Off On Coronavirus Stimulus Debate; AMD Soars 10% On Earnings Dow Jones futures were in focus early Wednesday. Four stock market leaders near key support levels include Apple and Microsoft. AMD surged on earnings late. Published:7/28/2020 11:05:05 PM
[Markets] Dow Jones Futures Rally 50 Points After Stock Market Sells Off On Coronavirus Stimulus Debate; AMD Soars 10% On Earnings Dow Jones futures were in focus late Tuesday. Four stock market leaders near key support levels include Apple and Microsoft. AMD surged on earnings late. Published:7/28/2020 9:35:08 PM
[Markets] Dow Jones Futures Turn Lower After Stock Market Sells Off On Coronavirus Stimulus Debate; AMD Soars 10% On Earnings Dow Jones futures were in focus late Tuesday. Four stock market leaders near key support levels include Apple and Microsoft. AMD surged on earnings late. Published:7/28/2020 9:05:16 PM
[Markets] Dow Jones Futures Rise After Stock Market Sells Off On Coronavirus Stimulus Debate; AMD Soars 10% On Earnings Dow Jones futures were in focus late Tuesday. Four stock market leaders near key support levels include Apple and Microsoft. AMD surged on earnings late. Published:7/28/2020 5:34:56 PM
[Markets] Dow Jones Futures: Stock Market Sells Off On Coronavirus Stimulus Debate; AMD Soars 10% On Earnings Dow Jones futures were in focus late Tuesday. Four stock market leaders near key support levels include Apple and Microsoft. AMD surged on earnings late. Published:7/28/2020 4:09:43 PM
[Markets] Dow Jones Slides As Pfizer, McDonald's Stock Report Earnings The Dow Jones Industrial Average posted mild losses in today's stock market while the Nasdaq composite also moved lower. Published:7/28/2020 2:36:33 PM
[Markets] Dow ends down over 180 points, suffering weekly loss as Intel slides Dow ends down over 180 points, suffering weekly loss as Intel slides Published:7/24/2020 3:09:21 PM
[Markets] Dow Jones Resilient Despite Intel Sell-Off; 5 Top Growth Stocks Test Key Support Level The Dow Jones held up well in afternoon trading Friday despite a nasty sell-off in Intel shares. Several top growth stocks rebounded after early weakness. Published:7/24/2020 2:07:55 PM
[Markets] Dow Jones Loses 200 Points As Intel, China Tensions Fuel Stock Market Sell-Off Stocks were firmly lower midday as China tensions weighed and Intel's sharp drop hit the Dow Jones Industrial Average. Published:7/24/2020 12:38:00 PM
[Markets] Jim Grant "Confidently Bullish" Gold & Silver Amid "Unprecedented Monetary Moment" Jim Grant "Confidently Bullish" Gold & Silver Amid "Unprecedented Monetary Moment" Tyler Durden Fri, 07/24/2020 - 13:05

Via SchiffGold.com,

Jim Grant has long been skeptical of the mechanization of the Federal Reserve. He was warning about the distortions created in the markets and broader economy caused by the central bank’s monetary policy long before the monetary Hail Mary it threw up in response to the coronavirus pandemic.

Last month, Grant wrote an op-ed for the Wall Street Journal headlined, “Powell Has Become the Fed’s Dr. Feelgood,” and he recently appeared on Fox Business to talk more about how the Fed is further distorting an already distorted economy.

In the WSJ piece, Grant asserts that the Fed’s zero interest rate monetary policy is hopelessly distorting the economy and policymakers, Powell in particular, should find a bit of humility.

Ground-scraping interest rates turn savers into speculators and quarantined millennials into day traders. They facilitate overborrowing, suppress market signals, misdirect investment dollars and promote the dubious business of turning well-financed public companies into heavily indebted private ones. Concerning the future and its side effects, Mr. Powell should admit how little he knows — he and the rest of us.”

Conventional wisdom holds that given the economic shutdowns, the central bank had to “do something.” Grant takes a position similar to Peter Schiff who has said the Fed policy isn’t helping and it’s actually hurting. During his Fox Business interview, Grant said it was doomed from the start.

The Fed faced kind of an insuperable difficulty, right? Without revenue, things don’t work. And there is no kind of monetary policy that is designed to supplant the absence of commerce. That’s what they faced in March.”

The Fed may have acted with good intentions, but as Grant put it, investors aren’t really concerned with “motives or necessity.” All that really matters is outcomes. The outcomes won’t be good.

So, what does all this mean?

It means a uniquely aggressive monetary stance. It means interest rates no longer are prices that reliably direct investment flows and valuations. Interest rates are the artificial constructs of the Fed that is doing its best to step in and make something happen in the absence of economic activity as we used to know it. So, interest rates distort judgments and flows. And the amount of money that the Fed has created is itself a distorting factor.”

Peter has been warning about a dollar crash and looming inflation for months. Grant expressed concern as well.

The Fed wants us to believe that we should believe that there will be no inflation out of all this and to me that is a vast unknown. We have America’s fasted peacetime money-growth coexisting with the all-time 4,000-year record lows in interest rates. It’s a most curious and troubling juxtaposition there.”

Grant said aggressive moves by governments and central banks are unwise.

I think what we have is a monetary moment that is unprecedented and therefore calls for extreme caution and great humility on the parts of all of us.”

Grant pointed out that commodity prices are at their lowest level compared to the Dow in about 120 years.

That, to me, kind of lights a light. It reminds us that there may be an extreme valuation out there that might be inviting capital rather than thought to be repelling it.”

Grant said that he is “confidently bullish” on precious metals.

We feel that they are an alternative to what is happening in equities and in bonds.”

You can watch the interview HERE.

Published:7/24/2020 12:05:54 PM
[Markets] Dow Jones Loses 170 Points As Intel, China Tensions Fuel Stock Market Sell-Off Stocks were firmly lower midday as China tensions weighed and Intel's sharp drop hit the Dow Jones Industrial Average. Published:7/24/2020 11:38:13 AM
[Markets] Dow Jones Drops 150 Points On China Retaliation; Intel Crashes 17% On Earnings And Tesla Dives 9% On Downgrade The Dow Jones Industrial Average fell 150 points on rising China tension. Intel dove on earnings, while Tesla skidded on an analyst downgrade. Published:7/24/2020 9:37:33 AM
[Markets] Intel is by far the sharpest decliner as Dow industrials give up 150 points Intel is by far the sharpest decliner as Dow industrials give up 150 points Published:7/24/2020 9:05:10 AM
[Markets] Levine: Reading The Market's Postmodern Mind Levine: Reading The Market's Postmodern Mind Tyler Durden Thu, 07/23/2020 - 21:50

Authored by Seth Levine via RealInvestmentAdvice.com,

No matter how you slice it, markets are human. This even applies to the “algos” as it’s we who write their mechanistic marching orders. Thus, understanding human behavior can be helpful in assessing and anticipating market moves. There’s no choice in the fact that we all need a philosophy to live. The same holds for investing. Thus, understanding the dominant market philosophies can potentially give us an investing edge. We can thank Tony Greer, the editor of the Morning Navigator, for doing just this.

In a recent Hidden Forces interview, Greer casually states the following:

“I’ve been calling it financial postmodernism, Demetri (emphasis added).

And I call it that because we just came out of a scenario where as we were getting the actual read on what the lockdown did to the economy and those literally ghoulish economic data numbers, the stock market was putting in massive upside rallies, right? And it was rallying off of the lows and it was rallying off of a spike low. So, it looked even more obnoxious that Wall Street is celebrating while Main Street is getting crushed. And that was sort of the new dichotomy that happened right through, jeez, I guess through April, May, and right into June. Where you’re getting an economic data point on Friday of 9 million people unemployed and nonfarm payrolls and you’re getting the S&P up 6% in the same day against the headlines of Dow up 1,000 on CNBC.

And people are like, ‘What the hell is going on here? What? Does Wall Street not care? Does the market not care?’”

Tony Greer, Hidden Forces Episode 142

Greer’s characterization of today’s investment markets as financial postmodernism is as genius as it is obscure. Since mentioning it, I see parallels between today’s investment markets and the postmodern philosophy everywhere. Perhaps teasing out Greer’s identification can help make better sense of these seemingly insane investment conditions.

What is Postmodernism

Only recently did I stumble upon postmodernism. I never heard the term before and suspect few outside the halls of academia have either. While largely unknown, it’s hard to escape postmodernism’s effect on the culture. Investment markets are just one manifestation.

Postmodernism is an intellectual movement with roots dating back to the 1950s in America. It’s a mixture of philosophy and history that underpins much of the modern culture, and especially the political Left. While postmodernism’s intellectual leaders may not be household names, many postmodern ideas are unfortunately commonplace. These include the beliefs that the U.S. is fundamentally racist, sexist, and shallowly materialistic; that Christopher Columbus is a villain; that one’s ethnicity or race define one’s politics; that Western nations exploit the less developed, and; that humans are a scourge destroying the planet.

My introduction to postmodernism came via Stephen Hicks. Hicks is a philosophy professor and author. His book Explaining Postmodernism masterfully does just that. It both outlines postmodernism’s core tenets and maps its historical lineage from the end of the Enlightenment up to the present day.

According to Hicks:

Postmodernism’s essentials are the opposite of modernism’s.

  • Instead of natural reality—anti-realism.

  • Instead of experience and reason—linguistic social subjectivism.

  • Instead of individual identity and autonomy—various race, sex, and class group-isms.

  • Instead of human interests as fundamentally harmonious and tending toward mutually-beneficial interaction—conflict and oppression.

  • Instead of valuing individualism in values, markets, and politics—calls for communalism, solidarity, and egalitarian restraints.

  • Instead of prizing the achievement of science and technology—suspicion tending toward outright hostility.

Stephen Hicks, Explaining Postmodernism

The following chart compares postmodernism’s perspectives with preceding philosophies’. Note that Hicks uses “modernism” synonymously with Enlightenment ideas and ascribes “pre-modernism” to the dominant intellectual framework from 400 to 1300 CE.

Source: Explaining Postmodernism

Hicks’s summaries are heavy, even for those steeped in philosophy. Nonetheless, the above is a useful framework for examining the zeitgeist of the financial markets. Let’s take it one step at a time to tease out postmodernism’s various influences.

Metaphysics

Metaphysics sits at the base of all philosophic systems. It describes the nature of existence (the “meta” moniker is not ironic). For example, are things simply as they appear (A is A in Aristotelian parlance), or can supernatural forces alter the natural world that we perceive? Hicks describes the postmodern view as:

“… anti-realist, holding that it is impossible to speak meaningfully about an independently existing reality. Postmodernism substitutes instead a social-linguistic, constructionist account of reality.”

Stephen Hicks, Explaining Postmodernism

To me, anti-realism is the perfect description for today’s markets. Many people assume that markets must continue to rise. That’s what they’ve always done so that’s what they’ll always do. It’s just the way the world works. The underlying causes and possibilities for change are almost ignored. Then there are those who see markets as distorted and disconnected from economic realities. Central banks and covert “plunge protection teams” are backstopping the equity markets to ensure that they never decline. There’s no other explanation for their behavior given the mess the economy is in.

To be honest, I see partial truths in both arguments. There’s plenty of evidence for there being a “Fed put” and Donald Trump does make every attempt to pump the stock market. However, human prosperity continues to advance and there could be other potential reasons for the stock market’s unrelenting rise (i.e. financial asset creation is lagging wealth’s).

Regardless, the market simply is; it is an immutable fact. Treating it as such is a realist perspective. Rather than looking to conspiracies or a long term trend line that ignores the path dependency of returns, this perspective should simply try to uncover the current market drivers and probabilities for change. To contest its state is to contest reality. It is an anti-realist stance.

Epistemology

Epistemology is another philosophy concept that I needed to look up two or three hundred times before I grasped its meaning. It’s the science of knowledge formation. In other words, epistemology examines how we uncover truths about the world. Do we learn by using the scientific method or do we receive wisdom from revelations; and is there even such a thing as truth to begin with?!

“To say that we should drop the idea of truth as out there waiting to be discovered is not to say that we have discovered that, out there, there is no truth. It is to say that our purpose would be served best by ceasing to see truth as a deep matter, as a topic of philosophic interest, or ‘true’ as a term which repays ‘analysis.’ ‘The nature of truth’ is an unprofitable topic, resembling in this respect ‘the nature of man’ and ‘the nature of God’ …”

Richard Rorty, Contingency, Irony, and Solidarity

According to postmodernism, there is no such thing as “truth.” Knowledge comes from consensus. Thus, reality can be whatever we want it to be, so long as enough people believe it.

How true this rings in today’s world of endless market interventions. Central banks have adopted zero and negative interest rate policies, and are voraciously buying sovereign bonds, mortgage bonds, corporate bonds, “junk bonds”, exchange traded funds, and even equities outright (as of this writing, the Swiss National Bank is a top 30 shareholder of Apple according to Bloomberg). What’s the reason for all these drastic actions? Well, because this misplaced concept of inflation is apparently undershooting some arbitrary target of course! (Huh?)

Sadly, there is little concern for the separation of governments from the capital markets. This feature is conveniently ignored as if it were an accident. So long as we believe these interventions produce prosperity it must be so. Never mind that monetary policy is just another price control with predictable effects; or that any attempt to tip the scale of markets only acts to destroy them and the immense prosperity they produce. We simply wish it were different so it must be so. Truth shmuth. This is the essence of social subjectivism.

Human Nature

We can even see hints of Postmodernism in how we view markets themselves. According to Hicks, postmodernism sees humans as pertaining to different groups that are in constant conflict. There are no individuals acting according to their own mind or for mutual benefit. Life is merely a zero-sum, social construction made up of competing teams.

“Postmodern accounts of human nature are consistently collectivist, holding that individuals’ identities are constructed largely by the social-linguistic groups that they are part of, those groups varying radically across the dimensions of sex, race, ethnicity, and wealth. Postmodern accounts of human nature also consistently emphasize relations of conflict between those groups; and given the de-emphasized or eliminated role of reason, postmodern accounts hold that those conflicts are resolved primarily by the use of force, whether masked or naked; the use of force in turn leads to relations of dominance, submission, and oppression.”

Stephen Hicks, Explaining Postmodernism

This collectivism and conflict have analogues in financial markets. We rarely describe them as beneficial methods for allocating capital to individual companies, countries, and entities. They are more commonly considered ways to disperse wealth among competing interests. The characterization takes various forms such as profits vs. wages, shareholders vs. other “stakeholders”, Wall Street vs. Main Street, “labor” vs. “capital”, and so on. Furthermore, only governments (i.e. force) can possibly arbiter these perceived conflicts. We must breakup “Big Tech” monopolies, regulate business, and “nudge” people in the direction of the “common good.” Left to his/her own devices, the free human would destroy financial markets, modern economies, and the planet. Thus, the intellectual elite, who somehow lack these intrinsic faults, must plan every action.

Ethics

Ethics is the science that studies how we should act. Our defined purpose for living frames the context for these decisions. Thus, you will come to a different moral code by making your own happiness paramount than by putting all others’ first (and your’s last).

Hicks describes the postmodern take on ethics as egalitarianism. Here, the belief in equality does not mean political equality, but rather a metaphysical equality. In other words, it’s not that we’re unique individuals who should be treated equally under the law; it’s that we’re literally all the same: physically, emotionally, and spiritually. We differ only by our various group identities (but are interchangeable within our belonged tribes). Individual values are a myth.

In my view, there’s a parallel to passive investing. Today’s investing context is quite small. Only returns and price fluctuations (i.e. volatility) matter. What’s your Sharpe ratio? If its worse than passive indices with higher fees, watch out, outflows will likely follow.

While maximizing returns is a key investment goal, it is not the only one. The value of investing cannot be divorced from the investor. Investing—like all actions—serves a purpose to an entity (person, pensioners, etc.). These needs are individualized. Why should every portfolio maximize its Sharpe ratio? To be sure volatility is a admirable attempt to quantify investment risk. However, there’s a whole host of other attributes like liquidity, governance, and political environments that may also suit an investor’s preferences. While I’m sympathetic to the case for passive investing, I take issue with its limited dimensionality. It paints everyone’s financial values with the same brush. This is the spirit of egalitarianism.

Politics and Economics

Politics describes the appropriate rules for governing human social systems. Thus, it follows from one’s deeper philosophic principles; politics do not stand on their own. Capitalism is the application of individualism in ethics to a group setting. Collectivism (socialism, communism, fascism, etc.) results from viewing people as parts of various factions. In other words, what we think of the goose dictates our prescriptions for the gander.

According to Hicks, postmodernists are rationalizing socialists. Their world views logically lead them to collectivism. However, the postmodernists have a problem. Socialism’s historical record is disastrous. Whenever (and to the extent) it’s been implemented, misery, poverty, death, and destruction have followed. Furthermore, not only have dire predictions for capitalism failed to materialize as postmodernists expect, but it created unimaginable prosperity.

What’s a postmodernist to do when his/her beliefs are in such stark conflict with reality? Simple, just ignore facts and invent a good narrative. After all, there is no truth, so go spin a good story and exercise some power.

“Postmodernism, Frank Lentricchia explains, ‘seeks not to find the foundation and the conditions of truth but to exercise power for the purpose of social change.”

Stephen Hicks, Explaining Postmodernism

What could be more postmodern than Mario Draghi’s “whatever it takes” speech. Given in a July 2012 address at the Global Investment Conference in London, the serving President of the European Central Bank (ECB) stated the following with respect to the European Union:

“When people talk about the fragility of the Euro … very often non-Euro area member states or leaders, underestimate the amount of political capital that is being invested in the Euro. … Within our mandate, the ECB is ready to do whatever it takes to preserve the Euro (emphasis added). And believe me, it will be enough.”

Mario Draghi

Draghi’s comment is laughable. Maintaining the Euro is well beyond the ECB’s power to control. However, it’s a clear instance of rhetoric trumping facts. There are plenty more. Take quantitative easing (QE) for example. It’s failed to deliver on its original promise and only resulted in more. How about Japan’s monetary policies? They are the model for most major central banks, yet the Bank of Japan’s efficacy is wholly ignored. It’s as if central banks throughout the Western world are simply competing to one-up the next. There’s no evidence that their theories are correct. Yet, they remain popular.

There are other ways too. Failure is not tolerated. In policy, it’s ignored. In industry and markets, pain is collectivized for the greater good of “the economy”, or “the workers”, or “the nation”, or pick your group. Bailouts are now commonplace. Policymakers and central banks reflexively act to prop up all markets, as one. We’re a far cry from capitalism.

When and Where

Just as postmodernism got its start in the late 20th century, so too did the current market’s philosophy. While Alan Greenspan’s reign as Fed governor may seem like its origin—after all, he’s the father of the “Fed put” due to his attempts to prop up investment markets—I believe Richard Nixon’s presidency is a better starting point.

It was Nixon who ushered in the modern era of fiat currency. By removing the dollar’s objective standard of value, its worth became completely subjective. We now must rely upon official releases riddled with vague adjustments to gauge its purchasing power. We can’t ascertain it ourselves. The dollar became a social construct! This lack of objectivity, self-reliance, and autonomy has postmodernism’s fingerprints all over it.

Our Postmodern Markets

The financial postmodernism that Greer astutely notes is merely a reflection of the culture. Many of the philosophy’s absurd beliefs have parallels in the investment markets. This manifests in heavy-handed regulations, endless interventions, and a neurotic obsession with markets’ continual rise to name a few. The investment markets are a far cry from a capitalist utopia—no surprise given our world views.

As investors, identifying the dominant ideas being expressed in the economy can be a useful edge. After all, markets are nothing more than an aggregation of human interactions. Understanding how an investment culture behaves might allow us to better anticipate how investors will integrate new information into price movements. These fluctuations may differ whether pre-modernist, modernist, or postmodernist principles are dominant. Greer’s anecdote illustrates this perfectly. The equity market rise following “literally ghoulish economic data” surprised many.

To be sure, this is a complex research topic worthy of deep exploration. We merely scratched the surface in this article. Hopefully though, we uncovered some ideas that can help us better read the market’s mind, see around corners, and grow our p&ls.

Published:7/23/2020 9:01:02 PM
[Markets] Dow Jones Dives Up To 400 Points As Apple, Microsoft Fall, Jobless Claims Weigh Selling ramped up late Thursday with the Dow Jones Industrial Average at one point plunging nearly 400 points to new session lows. Published:7/23/2020 2:32:14 PM
[Markets] Dow Jones Dives 300 Points As Stocks Sell Off On Jobless Claims, Earnings Selling ramped up Thursday afternoon with the Dow Jones Industrial Average down nearly 300 points, to new session lows. Published:7/23/2020 1:30:11 PM
[Markets] Stocks have fallen decisively into the red, with the Dow now down 350 points Stocks have fallen decisively into the red, with the Dow now down 350 points Published:7/23/2020 1:30:11 PM
[Markets] Top drivers of Dow's 150-point skid: Travelers, Dow Inc., Microsoft, Apple Top drivers of Dow's 150-point skid: Travelers, Dow Inc., Microsoft, Apple Published:7/23/2020 10:35:55 AM
[Markets] Dow Jones Today, Futures Reverse Gains After Jobs Data; Tesla's Unexpected Profit, Twitter's 186-Million Surprise Twiter and Tesla were learly leaders, as Pfizer led. Microsoft lagged on the Dow Jones today, ahead of weekly jobless claims data. Published:7/23/2020 8:33:01 AM
[Markets] Dow Jones Today, Futures Edge Up Ahead Of Jobs Data; Tesla's Unexpected Profit, Twitter's 186-Million Surprise Twiter and Tesla were learly leaders, as Pfizer led, Microsoft lagged on the Dow Jones today, ahead of weekly jobless claims data. Published:7/23/2020 7:31:26 AM
[Markets] Dow futures edge higher ahead of the Wall Street open Dow futures edge higher ahead of the Wall Street open Published:7/23/2020 6:58:13 AM
[Markets] Dow Jones Surpasses 27,000 On 3rd Straight Gain; This Medical Stock Shines After Earnings While the Dow Jones Industrial Average finished up 0.6%, the Nasdaq cut its early mild losses to close ahead 0.2%. Published:7/22/2020 4:23:04 PM
[Markets] Market Recap: Wednesday, July 22 Stocks rose Wednesday, shaking off earlier concerns as tensions appeared to flare again between the US and China. Pfizer led gains in the 30-stock Dow after the drugmaker and a partner announced a near $2 billion agreement with the US government over their Covid-19 vaccine candidate. Myles Udland and Seana Smith break it all down on The Final Round. Published:7/22/2020 3:53:19 PM
[Markets] Dow Rises but Wall Street Wobbles on Escalating U.S.-China Tensions Stocks fluctuated Wednesday on escalating tensions between the U.S. and China. Equities had been given a boost earlier in the session after Pfizer reached a coronavirus vaccine agreement with the U.S. government. The Dow Jones Industrial Average rose 62 points, or 0.23%, to 26,903, the S&P 500 rose 0.18% and the Nasdaq was down 0.19%. Published:7/22/2020 1:58:43 PM
[Markets] Stocks Wobble on Escalating U.S.-China Tensions, Pfizer Holds Higher Stocks fluctuated Wednesday on escalating tensions between the U.S. and China. Equities had been given a boost earlier in the session after Pfizer reached a coronavirus vaccine agreement with the U.S. government. The Dow Jones Industrial Average rose 13 points, or 0.05%, to 26,854, the S&P 500 rose 0.03% and the Nasdaq was down 0.31%. Published:7/22/2020 1:22:34 PM
[Markets] Dow Jones Rises 100 Points Amid U.S.-China Tension, As Pfizer Soars On Coronavirus Vaccine Deal; Microsoft, Tesla Earnings Due Late The Dow Jones Industrial Average turned higher amid rising U.S.-China tensions. Dow Jones drug giant Pfizer soared on coronavirus vaccine news. Published:7/22/2020 11:22:13 AM
[Markets] Dow Jones Rises Amid U.S.-China Tension, As Pfizer Soars On Coronavirus Vaccine Deal; Microsoft, Tesla Earnings Due Late The Dow Jones Industrial Average turned higher amid rising U.S.-China tensions. Dow Jones drug giant Pfizer soared on coronavirus vaccine news. Published:7/22/2020 10:03:09 AM
[Markets] Dow Gets Lift From Pfizer, Wall Street Eyes U.S.-China Tensions Stocks rose Wednesday despite escalating tensions between the U.S. and China and after President Donald Trump warned the coronavirus outbreak probably will get worse before it gets better. The Dow Jones Industrial Average rose 71 points, or 0.27%, to 26,911, the S&P 500 rose 0.32% and the Nasdaq was up 0.56%. Pfizer was the biggest gainer on the Dow rising 3.3% after the drugmaker and its German partner BioNTech reached an agreement to receive $1.95 billion from the U.S. government for 600 million doses of their developing coronavirus vaccine once it's approved by regulators. Published:7/22/2020 9:20:25 AM
[Markets] Dow Jones Futures Fall 100 Points On U.S.-China Tensions; Snap Plunges On Earnings Dow Jones futures were in focus early Wednesday. Four stock market winners with big moves include Apple and Tesla. Snap plunged on earnings after the close. Published:7/22/2020 5:20:40 AM
[Markets] Dow Jones Futures Rise 125 Points: 4 Big Stock Market Winners In Coronavirus Rally; Snap Plunges On Earnings Dow Jones futures were in focus late Tuesday. Four stock market winners with big moves include Apple and Tesla. Snap plunged on earnings after the close. Published:7/21/2020 10:19:52 PM
[Markets] Dow Jones Futures: 4 Big Stock Market Winners In Coronavirus Rally; Snap Plunges On Earnings Dow Jones futures were in focus late Tuesday. Four stock market winners with big moves include Apple and Tesla. Snap plunged on earnings after the close. Published:7/21/2020 4:48:14 PM
[Markets] Dow Jones Jumps 160 Points, Led By Chevron, Exxon Mobil; Tesla, EBay Weigh On Nasdaq The Dow Jones ended near its session low Tuesday, but a euro zone stimulus package boosted the price of oil, helping the cause of Chevron and Exxon Mobil. Published:7/21/2020 3:47:45 PM
[Markets] Gold Soars, Euro Roars As Dollar Dumps And Stocks Slump Gold Soars, Euro Roars As Dollar Dumps And Stocks Slump Tyler Durden Tue, 07/21/2020 - 16:03

For much of the day, the dominant theme was one of dollar weakness which saw the Bloomberg dollar index tumble below 1,200 and also take out the June 10 lows...

... the direct result of not just cable strength, as the sterling hit its 5-week highs, but mostly due to the ongoing surge in the EURUSD which continued its recent ascent, catalyzed by today's successful conclusion of the EU summit where the stimulus package was finally approved after five days of discussions.

And as the dollar tumbled, gold has continued its impressive surge, rising to $1,840 and now less than $100 away from its all time highs hit in September 2011. Even more remarkable, perhaps is that silver has also finally caught a bid, surging by more than $1 today, to trade at $21.20, surpassing the highs set in 2016, and now trading at a level not seen since 2014.

A zoomed in version of the chart above just covering the YTD period shows the impressive acceleration in silver in recent days...

... and if one goes by the long-term gold/silver ratio chart, silver still has a ways to go before catching up to its average of 60x. All else equal, if one assumes a gold price of $1,840, silver has about $10 of upside to go just to catch up to its historical "fair value".

So what about stocks? Well Europe was happy, with the Stoxx 600 rising to a new 5 month high, if still having a ways to go until it is unchanged for the year, a feat which Germany's DAX has almost achieved already.

In the US, things were more dramatic, with the Dow Jones blasting off out of the gate, while the Nasdaq slumped erasing some of its massive Monday gains as traders took profit in the FAAMGs even as IBM jumped after sales topped forecasts.

The Nasdaq 100 edged lower after closing at an all-time high on Monday, up 25% YTD, with investors awaiting a barrage of megacap tech earnings later this week. And while the S&P and the Dow were trading notably higher for much of the day, they gave up all most gains shortly after 3pm when Senate GOP leader Mitch McConnell was quoted as saying he does not expect the next stimulus bill to pass by next week, in effect ending the massive benefits that US consumer have gotten used to in the past three months, and hammering consumer shares.

It only got worse toward the close, when a sizable $1.8BN Market on Close sell imbalance hammered stocks, and sent the S&P cash into the red, and less than 1% up on the year.

Oil’s surge lifted Exxon Mobil and Chevron in the Dow Jones Industrial Average. Brent jumped more than $1, rising just shy of $45, while WTI traded at $41.76, both hitting the highest levels since March on hopes reflation will bloom thanks to Europe's €750BN stimulus fund.

Meanwhile, with bonds no longer reflecting anything besides the Fed's liquidity and YCC intentions, the 10Y went nowhere - and has gone nowhere in the past week - keeping the curve trading in a painfully narrow range.

Finally, with the VIX sliding to its lowest level since March, the "fear index" ramped higher all day, and closed just shy of session highs in what may be an ominous reversal which kept the VIX just above 25.

Published:7/21/2020 3:16:50 PM
[Markets] Forget The Fed, "Don't Fight The Narrative" Is The New Mantra Forget The Fed, "Don't Fight The Narrative" Is The New Mantra Tyler Durden Tue, 07/21/2020 - 14:05

Authored by James Rickards via The Daily Reckoning,

It’s widely believed that the stock market looks ahead and discounts the future. But consider this November’s presidential election...

Joe Biden has a substantial lead over President Trump in the polls. But Biden’s platform is not what you would call market friendly. For example, it calls for a 39.6% tax rate on dividends and capital gains.

But the stock market is near all-time highs again, with the Dow Jones Industrial Average nearing 27,000, the S&P over 3,200 and the Nasdaq actually at record highs.

What more proof do you need that stock markets are clueless when it comes to discounting future outcomes?

Now, it’s true you can’t always trust the polls. I know it well since I was one of very few analysts who predicted a Trump victory in 2016, even though he was behind in the polls.

But the same analytical tools that led me to predict a Trump win last time are showing me his chances are poorer this time.

OK, a true believer might say, but maybe the market’s anticipating a robust economic recovery. That’s why it’s rebounded so strongly.

But that argument just doesn’t hold much water.

Yes, unemployment dropped from over 13% to just over 11% last month, but that’s still the highest level since the end of World War II.

And there’s good reason to believe the unemployment rate will surge again heading into August as Payroll Protection Plan loans run out, lockdowns resume and states catch up with a backlog of claims that have not been processed yet.

Big business may be doing fine because it’s crowded into technology, finance and telecommunications, which are relatively unaffected by the pandemic.

But almost half the economy and half of all jobs are the domain of small-and-medium sized enterprises that have been decimated.

These restaurants, salons, dry cleaners, boutiques and other mainstays of neighborhoods across America are operating at half-capacity (at best) or have shut their doors permanently (at worst).

Meanwhile, a wave of bankruptcies is sweeping across the nation.

In other words, the V-shaped recovery that many analysts have been touting simply isn’t in the cards.

My own estimate is that this year may be even worse than the Great Depression.

We’re probably in for an L-shaped recovery, where the economy goes down steeply and is followed by low growth for an indefinite period of time.

But it’s full speed ahead for the stock market.

The market dip in March was the shortest bear market in history. Someone who just looked at stock charts could not be blamed for believing that the pandemic had never really happened.

So, why the strong stock market in a weak economy?

The simplest answer is that the stock market doesn’t have much to do with the economy. It’s just a casino driven by fear, greed, momentum, robots and indexation. There’s certainly something to that.

A more sophisticated answer is given by Nobel Prize-winning economist Robert Shiller.

Shiller writes that stock markets are driven by “narratives” or stories market participants tell each other.

  • From January to mid-February, even as the coronavirus was spreading out of control, the narrative was that the virus was contained to China. Markets reached new highs.

  • In March and April, the narrative changed to panic as Italy shut down and the U.S. did likewise. This is when the market fell over 30% ending the record bull market of 2009-2019.

  • The third phase started in late April as the market rallied 40% based on massive Fed money printing and $5 trillion of new government spending. The narrative was that easy money would rescue the market.

All of these narratives were wrong in the sense that the virus was not under control in February, it did not necessitate a lockdown in April, and the money printing and spending won’t solve the problem today.

Still, the narratives prevailed. “Don’t fight the Fed” is one of the oldest sayings on Wall Street.

The new conventional wisdom might be, “Don’t fight the narrative.”

Published:7/21/2020 1:17:22 PM
[Markets] Dow Jones Up 300 Points As Oil Stocks Surge, But Nasdaq Backs Off New High The Dow Jones Industrial Average rallied 300 points midday Tuesday amid hopes for more stimulus to aid the coronavirus-wracked economy. Published:7/21/2020 12:50:51 PM
[Markets] Dow Jones Rallies 300 Points On Coronavirus Stimulus Hopes; Nasdaq Pauses The Dow Jones Industrial Average rallied 300 points midday Tuesday amid hopes for more stimulus to aid the coronavirus-wracked economy. Published:7/21/2020 11:46:19 AM
[Markets] Dow Jones Jumps Over 300 Points On Coronavirus Stimulus; Coca Cola, IBM Rally On Earnings, While Lululemon, Vertex In New Buy Zones The Dow Jones Industrial Average rallied 300 points early Tuesday after the European Union agreed to a coronavirus stimulus fund. Published:7/21/2020 10:37:08 AM
[Markets] Dow Jones Jumps 300 Points On Coronavirus Stimulus; Coca Cola, IBM Rally On Earnings, While Lululemon, Vertex In New Buy Zones The Dow Jones Industrial Average rallied 300 points early Tuesday after the European Union agreed to a coronavirus stimulus fund. Published:7/21/2020 9:52:08 AM
[Markets] Market Snapshot: Dow flips positive, follows Nasdaq’s more than 2% surge in afternoon trade as Wall Street awaits earnings crush Dow follows other major U.S. stock indexes higher Monday afternoon, as investors look forward to quarterly results from corporations over the coming days. More than 480 companies are slated to report updates, including a number of prominent technology-related firms.
Published:7/20/2020 2:10:51 PM
[Markets] Dow Turns Higher, Nasdaq Jumps as Tech Shares Rally Stocks were higher Monday as Wall Street came off its third straight week of gains and investors turned their attention to a flurry of earnings reports. Investors also assessed promising data from an early stage trial of a key coronavirus vaccine study from Oxford University and AstraZeneca . The Dow Jones Industrial Average rose points, or 0.1%, to 26,698, the S&P 500 rose 0.58% and the Nasdaq was jumping 1.79%, getting a boost from Amazon.com which was up more than 6%. Published:7/20/2020 1:09:21 PM
[Markets] Dow Jones Gets Boost From These 4 Key Stocks; Nasdaq Eyes New Closing High The Dow Jones Industrial Average was near session highs midday after falling as much as 167 points, while the Nasdaq was on track for a new closing high. Published:7/20/2020 12:39:24 PM
[Markets] Dow Down as Wall Street Assesses Vaccine Data, Nasdaq Soars Stocks were mixed Monday as Wall Street came off its third straight week of gains and investors turned their attention to a flurry of earnings reports. Investors also assessed promising data from an early stage trial of a key coronavirus vaccine study from Oxford University and AstraZeneca . The Dow Jones Industrial Average fell 44 points, or 0.17%, to 26,627, the S&P 500 rose 0.42% and the Nasdaq was jumping 1.51%, getting a boost from Amazon.com which was up nearly 6%. Published:7/20/2020 11:39:57 AM
[Markets] Dow Jones Cuts 150 Point Loss As Coronavirus Stock Market Rally Continues; Pfizer Jumps On Covid-19 Vaccine News The tech-heavy Nasdaq composite outpaced the Dow Jones industrials and the S&P; 500 early Monday. Amazon stock jumped on price-target hikes. Published:7/20/2020 10:07:32 AM
[Markets] Dow Jones Falls 150 Points As Coronavirus Stock Market Rally Continues; Pfizer Jumps On Covid-19 Vaccine News The tech-heavy Nasdaq composite outpaced the Dow Jones industrials and the S&P; 500 early Monday. Amazon stock jumped on price-target hikes. Published:7/20/2020 9:39:18 AM
[Markets] Dow Jones Today Propped BY Pfizer-U.K. Vaccine Deal; Stocks Mixed, Quest Diagnostics In Buy Range Quest Diagnostics and eBay were early leaders amid mixed trade Monday. Pfizer led the Dow Jones today on a vaccine deal with the U.K. Published:7/20/2020 9:05:54 AM
[Markets] Stocks Trade Mixed as Wall Street Preps for Earnings Parade Stocks rose modestly Monday as Wall Street came off its third straight week of gains and investors turned their attention to a flurry of earnings reports. The Dow gained 2.3% last week, the S&P 500 rose 1.3% and the Nasdaq declined 1.1%. The U.S. has 3,773,260 cases of the coronavirus, the most in the world, according to Johns Hopkins University. Published:7/20/2020 8:44:08 AM
[Markets] Dow Jones Today Gets A Boost From Pfizer-U.K. Vaccine Deal; Futures Mixed, Quest Diagnostics In Buy Range Quest Diagnostics and eBay were early leaders amid mixed trade Monday. Pfizer led the Dow Jones today on a vaccine deal with the U.K. Published:7/20/2020 7:41:47 AM
[Markets] Dow futures give up early gains, sink about 130 points Dow futures give up early gains, sink about 130 points Published:7/19/2020 9:34:02 PM
[Markets] Big Weekly Gain For The Dow As Pfizer Advances In Coronavirus Drug Race Stocks finished mixed Friday as the Nasdaq and S&P; 500 held modest gains but the Dow Jones Industrial Average gave up 0.2%. Published:7/17/2020 4:47:48 PM
[Markets] Dow Jones Jumps 2.3% This Week As Pfizer Advances In Coronavirus Drug Race Stocks finished mixed Friday as the Nasdaq and S&P; 500 held modest gains but the Dow Jones Industrial Average gave up 0.2%. Published:7/17/2020 4:28:43 PM
[Markets] Market Recap: Friday, July 17 Stocks finished mixed on Friday, though all three major indices remained on track to end the week higher. The Dow ended a four-day winning streak, after new data showed a greater-than-expected number of new jobless claims were filed last week. The Final Round panel breaks down the details. Published:7/17/2020 3:46:49 PM
[Markets] "We're Going To Hell In A Handbasket" - David Stockman Slams Washington's "Clown Brigade" "We're Going To Hell In A Handbasket" - David Stockman Slams Washington's "Clown Brigade" Tyler Durden Fri, 07/17/2020 - 16:45

Authored by David Stockman of Contra Corner blog,

The eruption of government red ink literally defies imagination. The deficit figure topped $863 billion during the month of June alone.

Indeed, the number is so massive that it’s hard to put it in context. But consider this: When your author joined the Reagan campaign in the summer of 1980, the public debt was also $863 billion and it had taken 192 years and 39 presidents to get there.

So during the last 30 days, the clown brigade which passes for a government in Washington has actually borrowed nearly two centuries worth of debt!

Indeed, the numbers for June are so bad as to give ugly an entirely new definition:

  • June receipts of $242 billion were down by 28% or-$92 billion from last year; 

  • June outlays totaled $1.105 trillion, representing a +$713 billion or 182% increase from last year; 

  • Leading the charge was SBA outlays of $511 billion compared to $80 million last year— and, yes, that’s the PPP boondoggle and it amounts to a 4,400% gain; 

  • Not far behind was unemployment benefits at $116 billion compared to $2 billion last year; 

  • There was also a $70 billion increase in the cost of student loans owing to CARES act repayment deferrals and an adjustment for massively higher student loan defaults in the future than had been previously assumed; 

  • And the red ink total for June, which is usually a low deficit month due to estimated tax payments, rose from $8 billion last year to the aforementioned $863 billion.

But the issue is far more than the humongous numbers. There is now at work a trifecta of baleful forces that is literally destroying any semblance of fiscal discipline in Washington.

The first of these, of course, is the Fed. It has so completely and recklessly monetized the ballooning public debt that Washington officialdom and politicians are getting zero honest price signals from the bond market. In any practical sense the Brobdingnagian amounts of money they are borrowing is perceived as free, and rightly so.

After all, as of this morning, 90-day, 2-year and 10-year money costs the Treasury only 0.14%, 0.17% and 0.58%, respectively.

Secondly, there has been what amounts to a highly improbable “doctors plot” to take down the already debt-entombed US economy with an unprecedented regime of quarantines, economic locksdowns and drastic social regimentation in response to a virus that is really only an abnormal medical threat to the old and infirm.

The fact that the lockdowns are so wildly disproportionate to the 5%-of-population threat posed by the Covid is attributable to the rampant Trump Derangement Syndrome (TDS) among the Dems, the MSM and the permanent Washington ruling class. They are so rabid with TDS that they have mindlessly cheered on the health care apparatchiks, mayors and governors in a blunderbuss attack on the US economy that pales all prior recessions in severity.

And, thirdly, the elected politicians—beginning with the Donald—have stood idly by during this economy-wrecking campaign, deluded by the belief that Washington has the responsibility and means to fund a virtual make-whole for every worker and business in America that has suffered a loss of income and cash flow.

That is to say, America has fallen under the dictatorship of an unaccountable and unconstitutional Virus Patrol. But there has been almost zero political resistance to its insanities such as closing schools, bars, gyms and air travel because the fiscally incontinent policy-makers of Washington have stood up multi-trillion coast-to-coast soup-lines to ameliorate the damage and pain.

But for crying out loud, this jerry-built trifecta of madness cannot possibly be sustained. Your can’t print $3 trillion of fiat credit in just four months as the Fed has done and get away with it. Nor can you spend $7 trillion and collect only $3 trillion as Uncle Sam will do this year and not expect dire repercussions down the road.

And, for that matter, you can’t run-up the NASDAQ to an all-time high in the face of this fiscal, monetary and economic mayhem, and on the strength of just ten stocks, and not expect that a thundering financial collapse lies just around the corner.

Indeed, as David Rosenberg pointed out this AM, the top 10 stocks in the NASDAQ Composite (Apple, Microsoft, Amazon, Facebook, Google, Nvidia, Tesla, Intel, Netflix, Adobe) now make up 48% of the index’s market cap, and an incredible 58% of the NASDAQ 100.

So what you see in the chart below is an accident waiting to happen. The NASDAQ’s all-time high is being propped up by a massive bubble in a few stocks, while what is happening down below is more like a foretaste of things to come. To wit-

  • The equal-weight S&P 500 is at the same level today as December 18th, 2017; 

  • The NYSE Composite is at same level as in Sept. 15th, 2017; 

  • The Russell 2000 small cap index is where it was on July 14th, 2017;

More crazy still, during the three years in which the index of America’s main street small and mid-cap stocks has gone nowhere, the total return (price plus coupon) on the 30-year UST has been a staggering 43%; and in the case of the zero-coupon 30-year UST, the return has been 56%. 

Now that’s just nuts. Given the egregious fiscal breakdown and the near $80 trillion of public and private debt weighing down upon the nation’s faltering economy, owners of long-term bonds should be facing severe capital losses, not insanely massive capital gains on top of essentially non-existent coupons.

Likewise, you have Tesla trading at 288X its pittance of free cash flow and valued more highly than Toyota for the same reason that bond prices are soaring irrationally: Namely, unhinged speculation on Wall Street that is being fueled by grotesque infusions of central bank liquidity.

That’s also why in the face of a quarter in which GDP is slated to plunge by upwards of 40%, the Dow booked its best quarter in 33 years; the S&P 500 posted its best performance since 1998.; and the NASDAQ had its biggest increase since 1999—jumping 39 percent in just three months.

Indeed, the chart below is truly grotesque by any other name. The 4-week moving average of continuing unemployment claims now stands at 19 million or at 6.1X its level at the start of 2013, when the NASDAQ composite stood at just 3,000.

Today it closed at 10,617 or 254% higher and because, why?

  • Netflix is worth $241 billion or 111X net income or an infinite multiple of free cash flow, of which it has generated negative $11 billion during the last 5 years? 

  • Amazon is worth $1.600 trillion or 151X net income and 83X free cash flow? 

  • Facebook is worth $700 billion or 33X net income and 30X free cash flow—after two years of low single digit growth and in the face of the biggest impending plunge in advertising revenue in modern times?; 

  • NVIDIA is worth $258 billion or 108X net income and 60X free cash flow? 

  • Microsoft is worth $1.622 trillion or 35X net income–even though its earnings growth rate over the last 8 years has been just 6.5% per annum? 

  • Apple is worth $1.664 trillion or 29X net income—even though its earnings have grown by just 4.5% per annum since 2012? 

  • Google is worth $1.053 trillion—even though its earnings too have plateaued during the last two years and it is now facing a brutal decline in advertising spending?

In fact, the above chart actually understates the case because—surprise—the financial press doesn’t even report the correct figures for the number of US workers on the unemployment dole at the present time.

In addition to the 18.56 million of continuing claims reported yesterday under the standard state programs, there is another 14.36 million of so-called uncovered employees—-gig workers, free lancers, temp agency contractors etc.—now getting the Federal pandemic unemployment assistance benefit (PUA) . That means at the time we are supposed to be sharply ascending the other side of the “V”, there are actually 32.92 million workers lounging at home and collecting unemployment benefits in lieu of a paycheck.

As Wolf Richter recently demonstrated, there are now nearly 2X more workers getting UI checks than the 17.75 million unemployed workers the BLS reported for June.

That’s right. We have repeatedly reminded that the BLS does not arrive at its jobs and unemployment numbers by counting; it generates them by modeling, and when the economy is at a big inflection point, to say nothing of the unprecedented turmoil of the moment, its models are not worth the digital ink they are printed on.

Stated differently, it do make a difference that 15.2 million workers no longer on the job are not accounted for in the BLS ballyhooed monthly jobs report.

In short, the whole shebang is on a razor’s edge and there is nothing much immediately ahead except opportunities for the whole system to go tilt.

For instance, the SBA payroll protection program (PPP), which has already shelled out an incredible $521 billion to nearly 5 million US businesses will expire next month, while the $600 per week Federal supplement to average state UI checks of $500 per week will expire at the end of July. 

What this means is that the whole economy is floating on a massive air mattress of government subsidies and transfer payments which could suddenly evaporate if Washington becomes politically paralyzed; and, in any event, can’t be sustained much longer as a matter of sheer fiscal math.

For want of doubt, here again is the craziest upheaval of income flows to the household sector in all of economic history. To wit, paychecks (brown line) are now running $524 billion below year ago levels, while transfer payments (purple line) are running an incredible $2.13 trillion higher.

Self-evidently, without this massive injection of borrowed money, which in turn was 100% monetized by the Federal Reserve, household spending and confidence would have imploded weeks ago. In fact, it is only the likes of June’s $863 budget deficit that has prevented the outbreak of economic and social chaos.

So what happens next?

We’d say nothing very pleasant. Congress will be in recess until the last week of July, and the two parties have not yet begun to reconcile the Everything Bailout 4.0 passed by the House Dems with a price tag of $3.0 trillion and the GOP/White House position, where the Great Capitulator, Senate Leader McConnell, has drawn a wobbly line in the sand at just another, well, $1.0 trillion (on top of the $3.3 trillion that has already been approved).

But consider just one of the thorny issues that will take until at least Labor Day to solve, if at all. Namely, extension of the greatest incentive for unemployment ever conceived in the form of the $600 per week Federal supplement to regular state UI benefits.

Together, the state plus Federal dole now amounts on average to a $57,000 wage at annualized rates.

Of course, there are 80 million jobs in America or 50% of the total which pay under $45,000 per year—so when we say perverse moral hazard that’s exactly what we mean.

Apparently, Stevie Mnuchin, the Donald’s hapless “watchdog” at the US Treasury has finally sobered-up, recently insisting that the impending Everything Bailout 4.0 must ” limit the UI top up”:

Any extension would ensure that jobless benefits would be “no more than 100%” of what
workers were earning, Mnuchin said.

“We knew there was a problem with enhanced unemployment in that certain cases people
were paid more than they made in their jobs,” he said. “We’ll fix that and we’ll figure
out an extension to it that works for companies and works for those people who will still
be unemployed.”

Well, goodness me, yes.

A National Bureau of Economic Research working paper by researchers at the University of
Chicago found that

  •  68% of unemployed workers who are eligible for unemployment insurance will get

  • benefits exceeding their lost earnings;

  •  One out of five eligible jobless workers will get at least double their lost earnings;

  •  The overall median replacement rate of the enhanced benefits is 134%.

Then you have the collapse of state and local revenues, thank you Lockdown Nation, where the Dems want to toss $1 trillion of money Uncle Sam doesn’t have into the kitty to help tide them over and preserve the mostly higher paying 18 million jobs dependent on state and local payrolls.

The run-rate of state and local receipts was $1.907 trillion during Q1 2020, but is slated to drop by at least 20% or $400 billion during the current quarter, and continue to bleed profusely for many more quarters to follow. Again, the Red State/Blue State mud-wrestling match over the amount of and allocation formula for the proposed Federal bailout will be one for the ages, which also won’t make the finish line by Labor day or even Election day.

And then comes a food fight over extending the rottenest boondoggle ever conceived in Washington—-the PPP programs that has already showered helicopter money on 4.9 million businesses. Notable recipients include:

  • The law firm Boies Schiller Flexner, whose chairman David Boies has represented powerful clients such as former Vice President Al Gore and Harvey Weinstein, among notorious others, received between $5 million and $10 million; 

  • Several million went to Kanye West’s clothing brand, Yeezy, and Grover Norquist’s anti- tax group, Americans for Tax Reform. 

  • Transportation Secretary Elaine Chao’s family’s business, Foremost Maritime, got a loan valued at between $350,000 and $1 million. Chao is the wife of Senate Majority Leader Mitch McConnell, R-Ky. 

  • Perdue Inc., a trucking company co-founded by Agriculture Secretary Sonny Perdue, was approved for $150,000 to $350,000 in loan money. 

  • Restaurant chains P.F. Chang’s China Bistro and Chop’t received aid of between $5 million and $10 million. 

  • TGI Fridays, which is backed by private equity firm TriArtisan Capital Advisors, received at least $5 million. 

  • The Archdiocese of New York got a loan valued at between $5 million and $10 million, while the Catholic Charities of the Archdioceses of San Francisco, Washington, D.C., New Orleans and Boston, among others, all received assistance valued at more than $2 million. 

  • The Ayn Rand Institute, named for the objectivist writer cited as an influence on libertarian thought, was approved for $350,000 to $ 1 million. 

  • Joseph Kushner Hebrew Academy in New Jersey, which is named after Trump’s son-in- law and advisor Jared Kushner’s grandfather, got a loan in the range of $1 million to $2 million. Jared Kushner’s parents’ family foundation supports the school, NBC News reported. 

  • Niche movie theater chain Alamo Drafthouse received a loan of at least $5 million. Theaters have been closed while new film releases have been delayed or pushed to streaming platforms. 

  • Numerous news organizations received PPP loans: Forbes Media got at least $5 million; The Washington Times got at least $1 million; The Washingtonian got at least $350,000; The Daily Caller received at least $350,000 and The Daily Caller News Foundation got at least $150,000; The American Prospect received at least $150,000. 

  • Political organizations also received loans: The Ohio Democratic Party got at least $150,000 and the Florida Democratic Party Building Fund got at least $350,000, while the Women’s National Republican Club of New York got at least $350,000, the Black Republican Caucus in Florida got at least $150,000.

In short, this thing smells so bad that our Capitol Hill legislators will have to wear oxygen masks to the negotiating table, and not because of the Covid.

And yet, and yet, the robo-machines and boys and girls on Wall Street keep buying the dip because, apparently, all will be well if the Fed just keeps on printing, Washington keeps on borrowing and speculators keep on pretending that the Virus Patrol is actually battling the Covid.

We’ll take the unders. Big Time.

Published:7/17/2020 3:46:49 PM
[Markets] Dow Jones Stocks Mixed As Biotechs Rise On Johnson & Johnson Vaccine News The Dow Jones traded slightly higher in today's stock market as the S&P; 500 and Nasdaq composite also posted mild gains of less than 1% each. Published:7/17/2020 12:49:54 PM
[Markets] Dow Holds 650-Point Weekly Gain; Why Ericsson, Wingstop, Zoetis Hit Buy Points Today The Dow Jones Industrial Average had trouble padding its recent gains, yet the action in stocks today points to a market in a confirmed uptrend. While the Dow's opening gain of 0.3% was much smaller than some of its strong daily increases, and eroded during the first 45 minutes of trading, the 30-stock blue chip index continues to stay at five-week highs. At this week's high of 27,071, the Dow industrials have now risen 48% off its coronavirus stock market crash low of 18,213. Published:7/17/2020 9:45:38 AM
[Markets] Market Snapshot: Stock-index futures edge higher after Thursday decline; Netflix falls premarket Stock-index futures see modest gains Friday, a day after the Dow Jones Industrial Average broke a four-day winning streak,
Published:7/17/2020 6:15:02 AM
[Markets] Dow Jones Fades Weekly Gains; Netflix Falls On Q2 Earnings Miss The Dow Jones Industrial Average fell in today's stock market as the S&P; 500 and Nasdaq composite also posted mild declines of less than 1% each. Published:7/16/2020 4:23:16 PM
[Markets] Market Recap: Thursday, July 16 The markets closed in the red after Thursday’s trading session with the Dow falling for the first time in five days and technology and real estate being the worst performers in the market. The Final Round panel discusses the latest. Published:7/16/2020 3:40:47 PM
[Markets] Dow Jones Dips, But UnitedHealth, Caterpillar Strong; Netflix Reverses Higher Ahead Of Earnings The Dow Jones, S&P; 500 and Nasdaq composite were down 0.7% to 0.9% in afternoon trading. It was an orderly pullback even though growth stocks lagged again. Published:7/16/2020 2:13:42 PM
[Markets] Dow Jones Stuck In Red As Coronavirus, Jobless Claims Weigh On Stock Market Stocks remained under pressure midday with the Dow Jones Industrial Average on track to end a four-day win streak as jobless claims weighed. Published:7/16/2020 12:46:39 PM
[Markets] Market Recap: Wednesday, July 15 The three major averages finished higher on Wednesday, after a strong set of earnings results from companies such as Goldman Sachs and UnitedHealth before market open added to earlier hopes for a coronavirus vaccine after news from Moderna. The Dow Jones Industrial average and Russell 2000 both logged their sixth straight day of gains. The Final Round panel discusses the day’s market action. Published:7/15/2020 4:04:13 PM
[Markets] Dow Vaults 1,365 Points In 4 Days, Moderna Soars 29% For Week; These Stocks Also Lead The Dow Jones Industrial Average is finding newfound strength in the stock market today, partially getting a boost by Wall Street giants in banking and investment management. While U.S. equities eased off session highs, the Dow Jones' 0. Published:7/15/2020 11:41:08 AM
[Markets] Dow Jones Up 300 Points As Coronavirus Drug News Fuels Stock Market Rally Key market indexes eased after gapping up sharply at the open, sending the Dow Jones Industrial Average up as much as 429 points. Published:7/15/2020 10:07:57 AM
[Markets] Goldman Sachs set to power 60 points' worth of Dow rally after earnings report Goldman Sachs set to power 60 points' worth of Dow rally after earnings report Published:7/15/2020 8:06:21 AM
[Markets] Dow Jones Futures Signal Stock Market Rally On Moderna Coronavirus Vaccine News; Tesla Gains On Cybertruck Tax Breaks Dow Jones futures rose on positive Moderna coronavirus vaccine news, following a stock market rally rebound. Apple and Tesla climbed on news, Published:7/15/2020 6:36:37 AM
[Markets] Global Stocks Soar On Vaccine Optimism Global Stocks Soar On Vaccine Optimism Tyler Durden Wed, 07/15/2020 - 07:33

Global stocks surged, and US equity futures jumped rising to the Monday pre-dump highs, on coronavirus vaccine optimism (with headlines now conveniently appearing every time stocks appear poised for a selloff) and looking past record daily death rates in some states and brewing tensions between Washington and Beijing. Yields rose and the dollar slumped to a one month low.

US stocks staged a late session surge on Tuesday after news that Moderna’s coronavirus vaccine produced antibodies to the coronavirus in all patients tested in an initial safety trial. The vaccine developments brought optimism to financial markets that have been struggled to make headway recently in the face of new outbreaks across the U.S. and Asia.

Moderna shares surged 18% in pre-market trading following late Tuesday news that it was safe and provoked immune responses in all 45 healthy volunteers in an ongoing early-stage study, while AstraZeneca rose after a report that a medical journal will release positive news on the coronavirus vaccine the company is developing with University of Oxford researchers. American Airlines, United Airlines Holdings, Carnival Corp, Royal Caribbean Cruises Ltd and Norwegian Cruise Line Holdings Ltd rose between 6% and 6.8%.

“The vaccine news is clearly a positive development,” said Mark Nash, head of global fixed income at Merian Global Investors. “But it’s still long way off. The fear of the W-shaped recovery is probably very high at the moment. Good news is that markets still have a chance to ride it out because the Fed has bought time, so financial conditions can stay easy until growth kicks in.”

Europe's Stoxx 600 Index extended gains to 1.3% shortly before noon in London, with travel leading among sectors, amid positive sentiment in markets on the back of progress in developing a coronavirus vaccine. European index heads for a third day of gains in four sessions The Travel & Leisure sector rose 2.7%, led by Carnival while the Stoxx Europe 600 Industrial Goods & Services +2.5%, boosted by Schneider Electric, Adyen. Banks and telecom gauges are the only two trading lower. Atlantia SpA surged 22% as Italy’s government moved to resolve a long-running dispute linked to a 2018 bridge collapse.

Earlier in the session, Asian stocks gained, led by industrials and materials, after falling in the last session. Most markets in the region were up, with India's S&P BSE Sensex Index gaining 1.9% and Australia's S&P/ASX 200 rising 1.9%, while Shanghai Composite dropped 1.6%. Trading volume for MSCI Asia Pacific Index members was 17% above the monthly average for this time of the day. The Topix gained 1.6%, with Danto and SERAKU rising the most.

Surprisingly, Chinese markets underperformed with the Hang Seng and Shanghai Comp. (-1.6%) both negative after US President Trump signed legislation and an executive order to hold China accountable for actions in Hong Kong, with the executive order to remove preferential treatment for Hong Kong and which will now be treated the same as China. Furthermore, China later responded that it strongly opposes US signing the sanctions bill and that it will implement its own sanctions on US officials and entities. Reports of China state funds continuing to sell shares also did not help in which a pension fund was said to have offloaded 42.3mln BoCom A-shares on Tuesday. Qianjiang Water Resources Development and Shanghai LongYun Media Group Co Ltd posting the biggest drops.

In FX, the Bloomberg Dollar Spot Index fell to a one-month low as Norway’s Krone led G-10 gains followed by the pound; the krone was also supported by higher oil prices, while sterling got a boost after U.K. inflation surprisingly accelerated last month. The euro rose a fourth day against the dollar to a four- month high of 1.1445, and the cost to hedge one-day fluctuations in euro-dollar suggests market makers see a good chance that year-to-date highs may come to test as Thursday’s European Central Bank meeting comes into focus. Sweden’s krona touched its strongest level in 17 months against the euro as risk sentiment improved and following a report that showed Swedish inflation expectations didn’t drop further.

In rates, Treasury yields moved higher with gilt yields also rising after a debt sale. US Treasury yields were higher by 2bp-3bp at long end, remaining inside weekly ranges, 10-year by ~2bp at 0.643; U.K. 10-year yield higher by 2.6bp, gilts leading declines for sovereign bond markets. UST 5s30s steeper for first day in five, approaching 104bp.

In commodities, oil gained after a report pointed to a drop in U.S. crude stockpiles; gold remained well above $1800.

 

Top Overnight News from Bloomberg

  • German Chancellor Angela Merkel said she’s prepared to compromise in difficult talks on assembling a European recovery plan this weekend in Brussels, as Spanish Prime Minister Pedro Sanchez urged leaders to reach an accord at the meeting
  • The EU Council needs to make a decision on a European recovery plan by the end of July, Italy’s Prime Minister Giuseppe Conte tells lawmakers on Wednesday
  • Bank of Japan Governor Haruhiko Kuroda said Japan’s economy was past the worst, but warned the recovery would be slow, adding that he remains ready to take further action if needed; said that excessively low super-long yields could cause problems
  • The U.K. will sell nearly twice as many bonds than it did during the height of the financial crisis, according to estimates of primary dealers
  • Bank of England policy maker Silvana Tenreyro says current pace of recovery will be slowed by social distancing, restrictions in some sectors and higher unemployment
  • U.K. levels of Covid-19 infection fell faster than previously reported in May, according to a study of 120,000 people that took place before the country’s lockdown was eased
  • OPEC+ is seeking extra production cuts from members that have missed their targets again in June, potentially tempering the impact of the supply resumption planned by the wider coalition next month.

Market Snapshot

  • S&P 500 futures up 0.8% to 3,208.00
  • STOXX Europe 600 up 0.9% to 370.81
  • MXAP up 1.1% to 166.57
  • MXAPJ up 0.8% to 548.07
  • Nikkei up 1.6% to 22,945.50
  • Topix up 1.6% to 1,589.51
  • Hang Seng Index up 0.01% to 25,481.58
  • Shanghai Composite down 1.6% to 3,361.30
  • Sensex up 1.9% to 36,710.28
  • Australia S&P/ASX 200 up 1.9% to 6,052.92
  • Kospi up 0.8% to 2,201.88
  • German 10Y yield fell 1.1 bps to -0.458%
  • Euro up 0.3% to $1.1438
  • Italian 10Y yield fell 2.4 bps to 1.085%
  • Spanish 10Y yield fell 1.4 bps to 0.394%
  • Brent futures up 1.5% to $43.54/bbl
  • Gold spot little changed at $1,810.36
  • U.S. Dollar Index down 0.4% to 95.91

Asian equity markets were mostly positive as the regional bourses tracked the cyclical-led gains in US peers and on vaccine hopes after Moderna’s COVID-19 vaccine produced antibodies in all 45 patients tested in an initial study. ASX 200 (+1.9%) and Nikkei 225 (+1.6%) were lifted from the open with Australia’s tech sector and gold miners front-running the broad advances in the index which surpassed the 6000 milestone, while the Japanese benchmark printed its highest level in over a month and withstood the ongoing virus concerns in Tokyo which prompted the city to switch to its highest COVID-19 alert status. Chinese markets underperformed with the Hang Seng (U/C) and Shanghai Comp. (-1.6%) both negative after US President Trump signed legislation and an executive order to hold China accountable for actions in Hong Kong, with the executive order to remove preferential treatment for Hong Kong and which will now be treated the same as China. Furthermore, China later responded that it strongly opposes US signing the sanctions bill and that it will implement its own sanctions on US officials and entities. Reports of China state funds continuing to sell shares also did not help in which a pension fund was said to have offloaded 42.3mln BoCom A-shares on Tuesday. Indian markets were also notable gainers with the NIFTY up 0.2% and the NIFTY IT index gaining around 3% in early trade alongside Wipro shares which hit 10% upper circuit following a beat on earnings. Finally, 10yr JGBs were lacklustre amid the gains in stocks and unsurprising BoJ policy hold, while there was notable corporate supply with Nissan pricing a JPY 70bln 3-tranche in its first JPY-denominated bond offering since 2016.

Top Asian News

  • Hong Kong’s Beaten Down Stocks Face Yet Another Blow from Trump
  • Central Banker Urges Israel to Seize Cheap Debt Opportunity
  • Hillhouse Invested About $1 Billion In Beigene’s Share Sale
  • ChemChina, State Funds Said in Talks for Syngenta’s Pre-IPO

European equities trade higher across the board (Eurostoxx 50 +1.1%) following the recovery in the latter half of yesterday’s session for US equities. As has been the case throughout the week, there wasn’t a great deal of narrative-altering newsflow for the majority of the session with many of the same macro factors that are in focus having been present for some time now. Some of the positivity late doors emanated from a COVID-19 drug update from Moderna, however, the latest update doesn’t necessarily mark a breakthrough from the data already published in May with the latest findings instead from a larger sample group than prior. More recently, global bourses took another leg higher and moved back into proximity to session highs on reports via ITV’s Peston that positive news is on the way, perhaps as soon as tomorrow, for AstraZeneca’s (+2.9%) COVID-19 vaccine – which is seeing a rare ‘twin effect’ in terms of the response for both antibodies and T-cells. In terms of sectoral performance for Europe, travel & leisure names are the clear outperformer with the sector noted as one of the purest reopening plays. Carnival (+5.3%), Ryanair (+5.1%), Tui (+3.2%) and easyJet (+2.9%) all trade with notable gains, however,  there has been little in the way of sector-specific newsflow in the past 24 hours for European airline names. Elsewhere, Auto names are also trading firmer today with Renault the outperformer in the sector after reports that Nissan is to start selling an EV. To the downside, Telecom names lag peers in a potential pullback from some of the upside seen yesterday in the wake of the UK’s decision to bar Huawei from the UK’s 5G network by 2027. In terms of individual movers, Atlantia (+24.2%) sit at the top of the Stoxx 600 as the company appears to be making progress in striking a deal with the Italian government, whilst Burberry (-6.9%) are a notable underperformer after its latest trading update in which it expects a potential 50% decline in H1 sales.

Top European News

  • The 700 Billion-Euro Man Counting Each Cent to Keep Italy Afloat
  • Kremlin Plots Pullback from Stimulus Despite Rising Infections
  • Sunak Orders Review of U.K. Capital Gain Tax After Virus Splurge
  • BOE’s Tenreyro Is Ready to Boost Stimulus Again If Needed

In FX, it was a woeful start to Wednesday’s EU session for the Greenback as losses accumulate across the board on various fundamental and technical factors, including a rebound in broad risk sentiment due to more positive COVID-19 vaccine reports and somewhat contradictory persistent/latent concerns about the resurgence of the virus in US states. The index has fallen below 96.000 and close to June lows (95.716) at 95.866 as several Dollar/major pairs extend beyond or breach round number levels that have been providing some support for the Buck and resistance in terms of G10 counterparts. Ahead, a busy midweek US data docket and more Fed speak from Harker before the latest Beige Book.

  • GBP - Sterling has benefited most from the Greenback’s ongoing travails, with Cable back above 1.2600, but the Pound also reclaiming losses vs the Euro from sub-0.9100 lows yesterday on a technical retracement rather than anything specifically Gbp supportive. On that note, UK CPI data was a tad firmer than expected, but still benign and BoE’s Tenreyro subsequently countered with a disinflationary outlook, while adding that NIRP is a live issue for the MPC currently under review.
  • AUD/NZD/EUR/JPY/CAD/CHF - All firmer against the US Dollar as noted above, with the Aussie hitting fresh 1+ month highs with the aid of momentum buying when 0.7005 was breached, but meeting offers into 0.7020 ahead of jobs data on Thursday. Meanwhile, the Kiwi continues to lag around 0.6550 and 1.0680 in Aud/Nzd cross terms awaiting Q2 CPI tonight in contrast to the Euro that has extended gains on the 1.1400 handle to circa 1.1445 and surpassing June 10’s 1.1422 best along the way pre-ECB tomorrow. Elsewhere, the Yen has rebounded from 107.30 to 106.90 and the Loonie is pivoting 1.3600 in the run up to the BoC with options pricing in a 57 pip break-even on the event, while the Franc remains mixed either side of 0.9400 vs the Buck and down to 1 month lows against the single currency near 1.0740.
  • SCANDI/EM - The Norwegian and Swedish Crowns are both nudging key markers vs the Euro at 10.6500 and 10.3500 respectively, with the former buoyed by firm crude prices and latter maintaining post-inflation data impetus even though June’s trade deficit widened significantly and almost all CPI/CPIF projections from Prospera were unchanged. Similarly, the Rand has taken weaker than forecast SA inflation in stride on overall Dollar weakness and despite potential implications for the SARB policy meeting next week given a relatively reserved -25 bp consensus vs -1/2 point last time.

In commodities, WTI and Brent remain bolstered ahead of the JMMC meeting, with sentiment generally positive this morning and after last nights larger than expected draw in private inventories. Firstly, the JMMC, which energy correspondents note is expected to commence from around 13:00BST/08:00ET but as with any OPEC related event the timing should be taken as guidance only. Indications heading into the JMMC meeting point towards the committee recommending that the level of production cuts is reduced, which would be in-line with the original plan. As a reminder, the JTC committee met yesterday to discuss the planned easing of cuts to 7.7mln BPD; note, Saudi is said to be looking to keep export figures steady for the month of August. JMMC aside, much of the upside price action follows on from yesterday’s private inventories where crude stocks printed a larger than expected draw of 8.3mln vs. Exp. draw of 2.1mln; focus turns to today’s EIA stocks for confirmation of this reading with expectations pointing to a draw of 2.09mln. Turning to metals, spot gold has been choppy this morning with the upside just after the European cash open derived from further USD downside as well as resistance levels lying in proximity to the current high. Elsewhere, Antofagasta is calling for further negotiations to resolve the strike action in Chile; but, the strike action has not been sufficient to bolster copper prices thus far.

US Event Calendar

  • 8:30am: Export Price Index MoM, est. 0.8%, prior 0.5%; Import Price Index MoM, est. 1.0%, prior 1.0%
  • 8:30am: Empire Manufacturing, est. 10, prior -0.2
  • 9:15am: Industrial Production MoM, est. 4.3%, prior 1.4%; Manufacturing (SIC) Production, est. 5.65%, prior 3.8%
  • 2pm: U.S. Federal Reserve Releases Beige Book

DB's Jim Reid concludes the overnight wrap

Unless I’m forgetting a random trip, I drove a car yesterday for the first time since lockdown and also wore a mask for the first time. Luckily I didn’t do the two together as my glasses kept on steaming up wearing it. Watch that mobility data climb in the U.K.. It was only 4 minutes to a local physio as I’ve hurt my hip and back over the last month and it won’t go away, especially when my wife asks me to do something. The physio has managed to diagnose it. It’s got quite a complicated name so bear with me. She said it’s likely “middleagemanovergolfingintheeveningsinlockdownitis”. In short I’m having spasms all over my lower back. Interestingly she said that since she reopened she is seeing a surge in patients as people have either done too little exercise in lockdown or too much.

Talking of aches and pains, US markets leapt off Monday’s treatment table to power to 5 week highs overnight as earnings season got underway. The US rally has continued into Asia as we’ll see below. The S&P 500 advanced by +1.34% yesterday as cyclicals such as energy (+3.61%), materials (+2.54%) and industrials (+2.18%) led the way. Tech stocks underperformed somewhat, as the NASDAQ rose ‘only’ +0.94%, while the Dow Jones saw a much stronger +2.13% advance on the back of CAT (+4.83%). In terms of the earnings details we heard from 3 major US banks. JPM rose +0.57% as Q2 profits were down just over 50%, a smaller drop than analyst’s forecasted as the firm set a record for trading revenue in the Spring at $9.72bn. Citigroup (-3.93%) also saw a large rise in trading, but saw their shares fall on loan-loss provisions. Such provisions, as well as one off costs and the lack of a large trading operation, saw Wells Fargo (-4.57%) post its first quarterly loss since 2008 as it also lowered its dividend. The three banks set aside nearly $28bn for defaulted loans this past quarter, only the last quarter of 2008 and the heights of the Financial Crisis saw a larger total provision. On the back of all of this, US banks were the only S&P industry group to finish lower on the day, falling -1.19%.

While we’re on the subject of earnings, our Chart of the Day yesterday highlighted that our equity strategists see a quarter where we’re likely to see a notable collective beat as analysts expectations lagged data surprises in the last few weeks of the quarter. We also show how bifurcated the S&P 500 is with 490 stocks range trading since early April while the 10 mega cap growth stocks (27% of market cap) power ahead to new highs. If you missed the CoTD see it here with all the links to our equity strategists pieces contained within. Please email Jim-Reid.ThematicResearch@db.com to get added to this new daily CoTD.

Futures on the S&P 500 are up another +0.73% this morning after Moderna announced post the market close that their Covid-19 vaccine produced antibodies in all 45 patients tested in an early round of trials. This is a key threshold for US regulators and raises hopes that the vaccine may be within sight. However a number of patients did experience side effects with some being severe. The vaccine now moves onto a much later-stage trial which will most likely determine whether the US approves it for use. According to the results published in the New England Journal of Medicine, antibody levels produced in the trial were equivalent to the upper half of what’s seen in patients who get infected with the virus and recover. The stock was up over +16.5% in after-market trading following the report.

Overnight, the Bank of Japan left its monetary policy unchanged even as their price and growth forecasts were revised down. The latest forecasts point to a deeper slump this year, but suggest a slightly faster pick up in the following years. Outside of US futures, Asian markets are trading mixed this morning with the Hang Seng (-0.55%), CSI (-1.04%) and Shanghai Comp (-1.39%) lower likely helped by the US Hong Kong legislation news mentioned below while the Nikkei (+1.26%), Kospi (+0.48%) and Asx (+1.35%) are trading up boosted in part by the vaccine news.

Back in Europe yesterday the picture was more negative as much of the US rally occurred after the European close as they caught down to the previous day’s US declines. By the close the STOXX 600 (-0.84%), the CAC 40 (-0.96%) and the DAX (-0.80%) had all seen noticeable declines. Sovereign bonds performed strongly however given the earlier risk-off, and yields fell across the continent. Gilts were the strongest performer (more on which below), but otherwise bunds (-3.0bps), OATs (-3.0bps) and BTPs (-2.5bps) all saw similar moves. In the US, 10yr Treasuries ended the session +0.5bps.

The advances for US equities came in spite of the fact that the number of coronavirus cases there continues to rise. Tuesday is often a day with weekend catch up so we have to be a bit careful with the data, but some states did actually record cases under their weekly average. Florida posted a further 3.3% rise in cases yesterday, under the 7 day average of 4.6%, however the state recorded 132 deaths, well above the 7 day average of 72. On the other hand, Arizona had its most recorded cases in nearly 2 weeks. The 3.5% increase in cases was well above the 7 day average of 2.9%, as the number of cases over each of the past 2 days were far below the 3200 per day average observed over the last week, indicating a good deal of catch-up. California was another state that saw a higher case load than their weekly average, with 10,898 new cases vs. 7800. Overall the pace of new cases in the US rose in line with the weekly average at 2%. This week and early next week will be key to see if some shutdown measures undertaken in the Southern US begin to work and also whether we see a larger spike in deaths in heavily affected areas. So far fatalities have been notably lower per recorded case than they were in the first wave.

Over in New York, where case growth was at a much-more subdued 0.2%, a further 4 states were added to its 14-day quarantine list, bringing the total to 22. And in Philadelphia, ABC-6 reported that the city would ban big public events through February 2021. Meanwhile, Tokyo has said overnight that it will raise the Covid-19 warning one notch to the highest level on a scale of 4. Tokyo has reported daily infections exceeding 200 for four consecutive days and cases of unknown origin are rising. On the positive side, China is set to allow tour agencies and online tourism companies to run local group tours and hotel bookings across provinces, though foreign tourism will still be banned.

With the virus picture murky in the US, Fed Reserve Governor Brainard said yesterday that, “A thick fog of uncertainty still surrounds us, and downside risks predominate.” She noted that the central bank should ensure that both forward guidance and asset purchases provided long-term accommodations for financial markets. Like others at the Fed, she espoused on how important fiscal support would be for the recovery, while saying it was “unclear” whether the recent pace of labour-market recovery would endure. Brainard also weighed in on YCC, saying that the time may come for the central bank to reinforce forward guidance by selectively targeting parts of the yield curve, while also making very clear that was imminent in that regard. Later, we heard from Federal Reserve Bank of St. Louis President James Bullard and he said that he sees little need for stronger forward guidance or yield curve control because markets are already projecting very low interest rates for the indefinite future. He also cited Homebase data as a guide for the US employment report and said, “You would see a positive report for July but it wouldn’t be as big of a gain as for May and June. That wouldn’t be surprising because those gains were quite large”.

Here in the UK, the main announcement yesterday was official confirmation that masks would be compulsory in English shops from July 24, punishable by a £100 fine. That said, the case numbers in the UK are substantially lower than in the US, and the latest official death statistics from England and Wales yesterday showed that the total number of deaths from all causes in the week ending July 3 were below the five-year average for a 3rd consecutive week. Similar moves on masks are taking place in France, with president Macron saying he wanted people to wear masks in all indoor public spaces by the start of August.

Moving on, we got a number of China headlines yesterday as tensions continue to ratchet up between them and the US. Firstly, we got the news that China would be imposing sanctions on Lockheed Martin, following the decision of the United States to approve the sale of missile parts to Taiwan. Separately, we then heard later in the day that the UK would completely remove Huawei from its 5G networks by the end of 2027, and that there would also be a total ban on the purchase of any new 5G kit from Huawei after the end of this year. The decision follows new advice from the UK’s National Cyber Security Centre on the impact of US sanctions on Huawei. Meanwhile, President Trump said overnight that he has issued an order to end Hong Kong’s special status with the US and signed legislation that would sanction Chinese officials responsible for cracking down on political dissent in the city. In response, China has vowed to take strong countermeasures and sanction US officials and entities over the Hong Kong law while, urging the US to “correct its wrongdoings” and to stop interfering in Hong Kong affairs.

While we’re on China, yesterday our economist Yi Xiong released his H2 outlook for the country (link here). According to him, the V-shaped recovery is largely complete, and he forecasts +4.5% year-on-year GDP growth by Q4 2020. Interestingly, he says that sectoral divergence will be the main theme in the second half, thanks to changes in consumer preferences and business models. This will mean that some sectors see permanent revenue losses, while others have the potential to achieve above-trend growth.

Back to yesterday and here in the UK, we got some disappointing GDP data for May yesterday, with just a +1.8% month-on-month expansion (vs. +5.5% expected). Even with the growth in May, that still leaves economic activity for the month down by -24.5% compared with February’s level, and raised concerns that the hoped-for V-shaped recovery won’t be materialising any time soon. Gilts outperformed after the release as investors hoped for further monetary stimulus, with 10yr yields (-3.6bps) closing at an all-time low of 0.15%. Furthermore, at one point in the day, 2-year gilts were actually yielding less than their Japanese counterparts for the first time in living memory. Our UK team also updated their fiscal projections yesterday (link here), and now see borrowing rising to £375bn in 2020/21, with risks firmly tilted to the upside.

In terms of yesterday’s data, the main highlight was the US CPI reading for June, with inflation rising to +0.6% year-on-year, in line with expectations, while core inflation remained at +1.2%. The month over month measure rose to 0.6%, just above expectations of 0.5% and the highest one month pickup since Jan 2017. Elsewhere, the NFIB small business optimism index also rose to 100.6 (vs. 97.8 expected).

To the day ahead now, and earnings season continues apace, with highlights including UnitedHealth Group, Goldman Sachs, US Bancorp, BNY Mellon and Infosys. Otherwise, there’ll be a rate decision from the Bank of Canada, the release of the Fed’s Beige book, as well as remarks from the BoE’s Tenreyro and the Fed’s Harker. Finally, data highlights include the UK CPI reading for June, while from the US there’s the June industrial production and capacity utilisation numbers, along with July’s Empire State manufacturing survey.

Published:7/15/2020 6:36:37 AM
[Markets] Dow Jones Futures Rise On Moderna Coronavirus Vaccine News After Stock Market Rally; UnitedHealth, Goldman, ASML Earnings On Tap Dow Jones futures rose on positive Moderna coronavirus vaccine news, following a stock market rally rebound. Three key earnings reports loom. Published:7/14/2020 4:57:59 PM
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[Markets] Dow Jones Rallies 300 Points To Regain Key Support; Nasdaq Pares Losses Stocks were mostly higher midday as the Dow Jones Industrial Average rallied 300 points and the Nasdaq pared earlier losses. Published:7/14/2020 11:26:18 AM
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[Markets] Dow Jones Futures Signal Gains For Coronavirus Stock Market Rally; Analog Devices To Buy Maxim Integrated; Apple, Amazon, Tesla, Netflix In Focus Dow Jones futures: Apple, Amazon, Tesla, Netflix are fueling the coronavirus market rally. Analog Devices will buy Maxim Integrated for over $17 billion in a big chip deal Published:7/13/2020 5:22:01 AM
[Markets] Dow Jones Set To Post Weekly Gain; Netflix Stock Soars To New Highs The Dow Jones Industrial Average rose on today's stock market as Netflix stock jumped to new highs of 555.88 on analyst upgrades. Published:7/10/2020 2:32:00 PM
[Markets] Dow Jones Leads Market On Coronavirus Vaccine Hopes, But Nasdaq Dips Into Red The Dow Jones Industrial Average was up 200 points Friday afternoon as the stock market got a boost from bullish coronavirus vaccine news. Published:7/10/2020 12:05:22 PM
[Markets] Dow Jones Rallies 220 Points To Lead Stock Market; Is A Coronavirus Vaccine Near? The Dow Jones Industrial Average extended its gains to 200 points midday as the stock market got a boost from bullish coronavirus vaccine news. Published:7/10/2020 11:32:26 AM
[Markets] Dow Jones Futures Signal Coronavirus Market Rally Losses As Shanghai Win Streak Ends, Covid Cases Soar Dow futures fell as Covid cases soar and the Shanghai composite ended a win streak. The coronavirus market rally has been a stock picker's paradise. Published:7/10/2020 4:27:00 AM
[Markets] Dow Jones Futures Fall As China Win Streak Ends; Coronavirus Market Rally Is Stock Picker's Paradise Dow Jones futures fell Friday as the Shanghai composite ended a win streak. The coronavirus market rally is a stock picker's paradise. Published:7/10/2020 3:57:11 AM
[Markets] Dow Jones Falls, Nasdaq Climbs As China Stocks Lead The Dow Jones Industrial Average sold off on today's stock market, but the Nasdaq composite closed higher. A handful of China stocks led the market. Published:7/9/2020 3:54:28 PM
[Markets] Dow closes down over 360 points as Walgreens slides; Nasdaq ends at record Dow closes down over 360 points as Walgreens slides; Nasdaq ends at record Published:7/9/2020 3:25:30 PM
[Markets] Dow Pounded 541 Points, Alibaba Still Extended; Will Costco Lead Retailers Again? The 30-stock Dow Jones has gained as much as 5.1% since the June 26 sell-off and key test of its rising 50-day moving average. Published:7/9/2020 10:52:09 AM
[Markets] Dow down 500 points as Thursday stock-market declines steepen Dow down 500 points as Thursday stock-market declines steepen Published:7/9/2020 10:52:09 AM
[Markets] Dow Sinks 309 Points, Alibaba Still Extended; Will Costco Lead Retailers Again? The 30-stock Dow Jones has gained as much as 5.1% since the June 26 sell-off and key test of its rising 50-day moving average. Published:7/9/2020 9:52:02 AM
[Markets] Dow now down 360 points while Nasdaq retreats from record heights Dow now down 360 points while Nasdaq retreats from record heights Published:7/9/2020 9:52:02 AM
[Markets] Dow Lags Nasdaq Gain, Alibaba Still Extended; Will Costco Lead Retailers Again? The 30-stock Dow Jones has gained as much as 5.1% since the June 26 sell-off and key test of its rising 50-day moving average. Published:7/9/2020 9:28:00 AM
[Markets] Nasdaq hits all-time intraday high as S&P and Dow dip at opening bell Thursday Nasdaq hits all-time intraday high as S&P and Dow dip at opening bell Thursday Published:7/9/2020 8:48:47 AM
[Markets] Dow Jones Today, Futures Turn Up As China Stocks Rally; Brazil Overtakes Europe On Covid; Walgreens Earnings Miss Atlassian and Chipotle rose in buy ranges Thursday, while Walgreens dragged on the Dow Jones, after above-forecast jobless claims data. Published:7/9/2020 7:53:25 AM
[Markets] Dow futures point to lackluster stock-market open as jobless claims decline Dow futures point to lackluster stock-market open as jobless claims decline Published:7/9/2020 7:53:25 AM
[Markets] Dow Jones Today, Futures Mixed As China Stocks Rally; Covid: Brazil Overtakes Europe; Walgreens Earnings Miss Atlassian and Chipotle rose in buy ranges Thursday, Walgreens dragged on the Dow Jones today, as markets awaited jobless claims data. Published:7/9/2020 7:22:15 AM
[Markets] Europe stocks rise while Dow futures ease as U.S. sees record COVID-19 cases Europe stocks rise while Dow futures ease as U.S. sees record COVID-19 cases Published:7/9/2020 4:49:35 AM
[Markets] Dow Jones Up, Still Can't Hurdle This Technical Barrier; These 5 Stocks Break Out The Dow Jones is lagging the Nasdaq again amid the current stock market uptrend. Five highly rated growth stocks, including LGI Homes, are breaking out. Published:7/8/2020 1:19:07 PM
[Markets] Dow Jones Up But Still Cannot Hurdle This Technical Barrier; These 5 Growth Stocks Break Out The Dow Jones is lagging the Nasdaq again amid the current stock market uptrend. Five highly rated growth stocks, including LGI Homes, are breaking out. Published:7/8/2020 12:45:57 PM
[Markets] Dow Jones Pares Gains; Apple, Alibaba Rally To New Highs The Dow Jones Industrial Average swung between small gains and small losses on today's stock market, paring its morning gains in early afternoon trading. Published:7/8/2020 11:18:57 AM
[Markets] Dow, S&P Tumble Into Red, Erase Opening Spike As EU Close Nears Dow, S&P Tumble Into Red, Erase Opening Spike As EU Close Nears Tyler Durden Wed, 07/08/2020 - 11:20

Of course, Nasdaq is holding its gains (for now). The opening panic-buying has given way to panic-selling as the European close approaches...

Small Caps are the biggest laggards.

Is it time for stocks to catch down to bonds?

 

Published:7/8/2020 10:22:18 AM
[Markets] Futures Drift As Gold Soars Futures Drift As Gold Soars Tyler Durden Wed, 07/08/2020 - 08:00

S&P futures traded in a narrow range even as European stocks slid amid new tensions between Washington and Beijing, as well as worries that an alarming rise in coronavirus caseloads across the country pose a risk to the recovery in business activity and will hit consumer spending. The dollar was flat as gold continued its surge, rising  above $1,800 and rapidly approaching its Sept 2011 all time high.

Global markets have been struggling for traction ever since the Fed's balance sheet started shrinking modestly in mid-June...

... after a sharp rally last week amid concern it’ll take a long time for the broader economy to recover from the pandemic. Many Americans are planning to spend less on things like movies, event tickets or at bars, even as states allow businesses to start re-opening, according to Bloomberg.

On Tuesday the Nasdaq notched yet another intraday record high but all the three main stock indexes finished lower as investors booked profits following a strong run after a batch of upbeat data strengthened the case for a bounce back in economy.

European shares gave up gains early in the trading session after Hungarian Prime Minister Viktor Orban said regional leaders will probably fail to agree on a massive spending plan aimed at reviving their economies. Negotiations at a summit next week will be "very tough" and will likely need to continue throughout the summer, he said.

“It’s not unusual for stocks to take a breather at this point,” Susan Schmidt, a portfolio manager at Aviva Investors, said on Bloomberg TV. “We could see ourselves in a bit of a trading range in the next couple of weeks,” before U.S. earnings season ramps up.

Asian stocks were little changed, with communications rising and industrials falling, after falling in the last session. Most markets in the region were up, with Jakarta Composite gaining 1.8% and the Shanghai Composite rising 1.7%, its seventh daily rise in a row to the highest level since the 2018 start of the U.S.-China trade war, with Nanjing Iron & Steel and Jilin Yatai posting the biggest advances.

Trading volume for MSCI Asia Pacific Index members was 69% above the monthly average for this time of the day. The Topix declined 0.9%, with Teac and Airtech Japan falling the most. Australia's S&P/ASX 200 dropped 1.5%. Emerging-market equities resumed gains, heading for the highest level since February.

China stocks rose even as HSBC Holdings slumped after a report that some of Donald Trump’s advisers proposed a move to destabilize Hong Kong’s currency peg to the dollar as a way of punishing China.

Meanwhile, China on Wednesday said it will restrict visas for U.S. officials for what it called “egregious” behavior over Tibet,  reciprocating a move announced by Secretary of State Michael Pompeo a day earlier.

Eastern European currencies weakened, while gains for the Mexican peso and South African rand limited losses on the MSCI Inc.’s gauge for emerging-market exchange rates. Stock market gains in China have even pushed the country’s financial publications to caution investors about overheating. But as The Trump administration is said to be considering options to punish China for recent moves to chip away at Hong Kong’s political freedoms, markets “appear to be learning to look past the noise,” according to Credit Agricole’s Eddie Cheung. “While valuations would suggest that there is ground for China’s markets to continue to rally, it remains to be seen whether that alone can continue to be a driving force regionally, especially with Western markets trading more tentatively,” the Hong Kong-based strategist said in note.

In rates, Treasuries were slightly weaker across the curve on low volumes, with long-end yields higher by 1bp and front end little changed. Price action creates small concession in 7- to 10-year sector for $29b 10-year note auction at 1pm ET that may draw a record low yield. Treasury 10-year yields hover around 0.65% ahead of auction, steepening 2s10s by 0.8bp; bunds outperform by 3.5bp vs. Treasuries, gilts by 2.5bp. Futures volumes as of 7am ET were 70% to 90% of 20-day average levels across the curve, Bloomberg reported. German Bunds bull-flattened, outperforming Treasuries.

In FX, the dollar erased a decline as investors measured signs of renewed political tension between the U.S. and China. Hong Kong’s Dollar remained at the strong end of its established trading range after a report that advisers to President Trump suggested undermining the currency’s peg to the greenback after Beijing’s moves to curb the island’s political freedoms. Australia’s dollar weakened against all of its Group-of-10 peers after rising infection rates in the nation’s second-most populous state and S&P Global Ratings warned that the return to lockdown in Victoria would put pressure on its economic recovery. “From an economic point of view, this is potentially disastrous,” said Michael McCarthy, chief market strategist with CMC Markets Asia Pacific. "Forex traders are certainly expressing their growth outlook worries by selling the Aussie, and we’re likely to see support for the havens like the dollar, yen and Swiss franc."

In commodities, the biggest mover was once again gold, which continues its tremendous ascent, topping $1,800 an ounce, with silver needing to catch up.

Upside in WTI and Brent front month contracts were hampered by a surprise build in private inventories (crude stocks +2mln vs. Exp. -3.1mln), and the relevant headlines overnight were also on the bearish side with ADNOC set to boost oil exports next month and Total’s Port Arthur refinery said to be running at 60% capacity due to subdued demand.

Looking at the day ahead now, we have central bank speakers including ECB Vice President de Guindos and the Fed’s Bostic, while data releases from the US include consumer credit for May and the weekly MBA mortgage applications.

Market Snapshot

  • S&P 500 futures up 0.2% to 3,143.25
  • STOXX Europe 600 down 0.3% to 367.88
  • MXAP up 0.07% to 164.44
  • MXAPJ up 0.5% to 544.63
  • Nikkei down 0.8% to 22,438.65
  • Topix down 0.9% to 1,557.23
  • Hang Seng Index up 0.6% to 26,129.18
  • Shanghai Composite up 1.7% to 3,403.44
  • Sensex up 0.04% to 36,687.46
  • Australia S&P/ASX 200 down 1.5% to 5,920.30
  • Kospi down 0.2% to 2,158.88
  • German 10Y yield fell 1.6 bps to -0.445%
  • Euro up 0.1% to $1.1286
  • Italian 10Y yield fell 3.6 bps to 1.077%
  • Spanish 10Y yield fell 1.0 bps to 0.415%
  • Brent futures down 0.2% to $43/bbl
  • Gold spot up 0.2% to $1,797.93
  • U.S. Dollar Index up 0.1% to 97

Top Overnight News

  • Some top advisers to President Donald Trump want the U.S. to undermine the Hong Kong dollar’s peg to the U.S. dollar as the administration considers options to punish China for the recent imposition of a security law in the former British colony.
  • The threat of U.S. action to undermine Hong Kong’s longstanding U.S. dollar peg is highly unlikely to become reality given the practical difficulties of pursing such a path and the damage it would do to U.S. interests, economists say.
  • HSBC Holdings Plc, which draws more than two-thirds of its pretax income from Hong Kong, slumped as advisers to U.S. President Donald Trump were also said to be discussing measures against banks there.
  • Boris Johnson warned Germany’s Angela Merkel that the U.K. is ready to do without a trade deal if the European Union wasn’t prepared to compromise.
  • Japan’s investors are flocking to Australia’s sovereign bond market, lured by cheaper currency-hedging costs and some of the highest yields among developed nations.

Asian equity markets were mixed as attempts to shrug off the weak handover from global peers were somewhat hindered by the record infection rates stateside and a slew of punchy US-China related headlines. ASX 200 (-1.5%) was subdued as Australia’s 2nd largest city heads into a 6-week lockdown and with the declines in the index led by notable losses in consumer stocks and financials, while Nikkei 225 (-0.8%) was pressured by the ongoing virus flare up in Tokyo where more than 100 new cases were reported for a 6th consecutive day, but with downside stemmed after data showed the largest increase in bank lending on record. Hang Seng (+0.6%) and Shanghai Comp. (+0.7%) were supported as the latest coronavirus updates from Beijing showed zero new cases for a 2nd consecutive day although caution was also observed on the inauguration day of China’s national security office in Hong Kong and as reports continued to suggest increasing tensions between the world’s largest economies. This includes confirmation by US President Trump that he is looking at banning TikTok in the US and his administration also warned the Railroad Retirement Fund against Chinese investments due to risks of additional sanctions, while the White House is considering executive actions which involve targeting Chinese businesses operating in the US and aides were also said to propose undermining the USD/HKD peg although this was not put forward to President Trump and certain officials have opposed the idea. Finally, 10yr JGBs were initially copy as they conformed to the unsettled overnight tone across asset classes, but eventually edged only marginal gains amid a subdued risk tone in Tokyo and the BoJ’s presence in the market for JPY 870bln of government bonds with up to 5yr maturities.

Top Asian News

  • AirAsia Is Said to Weigh Raising $234 Million Via Rights Issue
  • Itochu Makes $5.4 Billion Bid for Rest of Japan’s FamilyMart
  • Hong Kong’s Resilient Markets Just Knocked Down Another Big Test
  • Singapore in Survival Mode Looks to Reinvent Itself. Again

European stock markets initially attempted to nurse losses seen at the open before losing steam as the mid-week session goes underway [Euro Stoxx 50 -0.9%], following on from a mixed APAC lead overnight. Fresh fundamental newsflow has been light for the session, with the calendar also sparse, albeit key risk events, aside from COVID-19 US-China headlines, could include UK Chancellor Sunak’s fiscal unveiling alongside the European Commission’s potential compromise recovery fund proposal. Sectors are all in negative territory with a clear defensive bias, with the detailed breakdown also painting a similar picture. Financial names underperform, likely on the back of HSBC (-4.0%) amid reports President Trump’s aides were said to propose undermining the USD/HKD peg, although the idea had not been put forward to President Trump and certain officials opposed the idea. In terms of other individual movers, Nokia (-7.5%) shares extend on losses amid a negative broker move coupled with speculation that Verizon may be dropping the Co. as a 5G partner, Nokia stated that it continues working with Verizon amidst these reports. On the flip side, Deutsche Post (+0.8%) remains buoyed after reporting an improvement in Q2 prelim figures whilst noting FY22 EBIT in the least favourable case of EUR 4.7bln and the most favourable case in excess of EUR 5.3bln.

Top European News

  • Serbia’s Vucic Sees Rising Risk of Regional Conflict in Europe
  • Volkswagen Management Tumult Spills Over to Truck Subsidiary
  • Medtronic Is Said to Make Offer for Medical Device Maker Intersect
  • Analysts Applaud Deutsche Post Earnings, Dividend Proposal

In FX, the Dollar and its G10 currency counterparts are stuck in a rut after 2 volatile sessions, but ultimately no clear direction amidst fluctuating and flaky risk sentiment on coronavirus updates interspersed with economic data and surveys supporting the recovery from first wave pandemic lows. Major pairings are muted and the subdued state of affairs exemplified by the DXY showing little sign or inclination to stray too far either side of the 97.000 level that has been magnetic of late. Moreover, Wednesday’s agenda does not bode well in terms of market-moving potential, barring any surprises from UK Chancellor Sunak and/or an unscheduled event given a blank US agenda beyond weekly mortgage applications and then consumer credit.

  • CHF/EUR/CAD - All marginally firmer against the Greenback, but within relatively tight confines as noted above, as the Franc hovers just below 0.9400, Euro shy of 1.1300 where a hefty 1.9 bn option expiry resides and Loonie pivots 1.3600 ahead of Canadian housing starts and an update from Finance minister Morneau on the economy in context of measures taken to combat COVID-19.
  • JPY/XAU/NZD/GBP/AUD - The Yen remains tethered between 107.70-40 parameters with a light underlying bid that is also apparent in Gold as bullion continues its assault on Usd 1800/oz, while the Kiwi is still straddling 0.6550 and fractionally outpacing the Aussie around 1.0600 in cross terms due to the return to lockdown in Melbourne. As such, Aud/Usd is capped circa 0.6950 in similar vein to Cable on the 1.2550 axis in advance of the aforementioned Economic Update. Note, contacts are touting stops at 1.2530 that are currently being tested and could be filled in conjunction with the absorption of offers in Eur/Gbp close to 0.9000.
  • SCANDI/EM - Not much lasting reaction to weaker than forecast Norwegian GDP data hot on the heels of a drop in manufacturing output yesterday, with Eur/Nok flitting either side of 10.7000 and Eur/Sek likewise around 10.4300. However, more pronounced activity in the Hkd overnight following reports that the US may target the peg in response to China’s security legislation with the HKMA forced into concerted intervention.                

In commodities, a choppy session thus far for the crude complex, albeit prices remain somewhat flat and within tight ranges amid a lack of notable catalysts. Overnight, upside in WTI and Brent front month contracts were hampered by a surprise build in private inventories (crude stocks +2mln vs. Exp. -3.1mln), while the relevant headlines overnight were also on the bearish side with ADNOC set to boost oil exports next month and Total’s Port Arthur refinery said to be running at 60% capacity due to subdued demand. On the flip side, EIA lifted 2020 world oil demand growth forecast by 190k BPD (to 8.15mln BPD Y/Y fall) but cut 2021 world oil demand growth view by 190k BPD (to 6.99mln BPD Y/Y increase) – with participants awaiting the IEA report on Friday. Looking ahead, aside from COVID-19 headlines and sentiment-driven moves, the complex will likely eye the weekly DoE release for confirmation of the Private Inventory data, whilst State-side production will also be in focus as some believe output has bottomed. Elsewhere, spot gold has extended on gains but has decoupled from its safe-haven status, whilst Dollar dynamics also provided little influence on prices. The yellow metal has eclipsed the 1800/oz mark for the first time since 2012 before immediately running into selling pressure at the key figure. Copper meanwhile briefly topped USD 2.8/lb to levels last seen in January amid supply woes coupled with hopes of a rebounding Chinese economy.

US Event Calendar

  • 7am: MBA Mortgage Applications, prior -1.8%
  • 3pm: Consumer Credit, est. $15.0b deficit, prior $68.8b deficit

DB's Jim Reid concludes the overnight wrap

Yesterday I boasted about nearly 5 year old Maisie winning a race at Sports Day. I’ve since got the video from the school and I must admit if I was another parent I would be questioning whether she false started. Put kindly she anticipated the “B” of the Bang a bit too perfectly. Still a victory is a victory. On that the latest in my 15 month journey to remodel my golf swing left me finishing 3rd last in the first cup competition at my club after lockdown on Sunday. It was my worst round since I was 11. You may say that at least I wasn’t last. However I should add that the two below me were octogenarians who were only too delighted to be out after isolating during lockdown. Meanwhile I’ve been practising hard most evenings where I can. I have a heart to heart planned with my golf coach tomorrow night to see if there is any light at the end of the tunnel. He says I’m on the verge of a major breakthrough. I feel I’m on the edge of a breakdown.

Markets broke down yesterday, albeit nowhere near as much as my golf swing. A drip-feed of negative stories on the economic outlook as well as covid headlines from all around the world dampened investor sentiment. By the end of the session, the S&P 500 had fallen -1.08%, and unable to reach a 6th successive move higher which would have been a first since April 2019. Over 85% of the index was lower on the day, with the worst performing industries being energy (-3.18%) and banks (-3.16%). Tech stocks outperformed slightly, with the NASDAQ down -0.86%. The Dow Jones was the worst performer, down -1.51% (Boeing -4.8% and Goldman Sachs -3.9%). Bourses also fell across Europe with the STOXX 600 (-0.61%) and DAX (-0.92%) lower. Just like with the S&P, European banks were among the worst performers, with the STOXX Banks index down by -1.34%.

Markets in Asia are a bit more mixed this morning. While we’ve seen modest declines for the Nikkei (-0.24%), Kospi (-0.29%) and ASX (-0.61%), the Shanghai Comp (+0.74%) and Hang Seng (+0.34%) are up along with S&P 500 futures (+0.20%). The main talking point overnight has been a Bloomberg story suggesting that some top advisers in the Trump administration are weighing proposals to undermine Hong Kong’s dollar peg to the greenback as a way of penalizing China. However, the report added that the idea has not been pitched to senior levels of the White House which suggests that it hasn’t gained serious traction yet.

Back to yesterday and after Senate Majority Leader McConnell signalled a willingness to pass another stimulus bill with case numbers rising across the country, the White House announced they want the package by the first week of August. Vice President Pence’s top aide said, “we want to make sure that people that are still unemployed or hurting are protected but at the same time, we want to take into consideration the fact the economy is bouncing back and want to try to contain the amount of spending.” This is aligned with Senate Republicans who want to keep the overall price tag south of $1 trillion. President Trump said that there would be another round of stimulus checks for Americans, though it will likely be even more targeted this time around. With some states pausing reopening and even re-entering shutdowns, additional stimulus is likely needed in order for economic data to continue improving.

Meanwhile, the slowdown in reopenings continues to be driven by the US seeing high numbers of new cases. Texas had over 10,000 new cases in one day for the first time yesterday, with cases rising 5% compared to a weekly average of 3.9%. Daily increases in some other recent hot spots were below the weekly average, which while encouraging may still be experiencing after-effects of the holiday weekend. Florida reported a 3.6% rise in new cases, under the 5% 7-day average, however the 7-day rolling total of 61,360 cases was the highest yet. Fatalities rose by 1.7%, with the 7-day average at just under 48 per day. Arizona meanwhile recorded a record 98 new fatalities yesterday, however the data has clearly seen big lags on Sunday and Monday in the past. Overall the 7 day average of covid fatalities in the state is roughly 40 per day, while cases are rising by just under 3700 per day. When New York state was at 3700 and 8700 (similar to Florida now), it was seeing around 85 and 630 deaths per day, and so both Arizona and especially Florida are seeing better case fatality rates at this time. However, this could change and requires a high level of scrutiny as hospital conditions and capacity constraints are going to be different in different regions. Speaking of New York, the state continues to add more regions to its quarantine list, which is now 19 states long, with Delaware, Kansas and Oklahoma travellers all being asked to isolate for 14 days upon arriving. Overnight, the US Department of Health and Human Services has said that it is ramping up coronavirus testing in Louisiana, Texas and Florida as health officials attempt to get a firm grasp on how the fast-moving pandemic is evolving.

For more details on the current US virus outbreak and what it could mean for upcoming policy decisions, you can join a conference call today at 11:00 EDT/16:00 UK time hosted by our chief US economist Matt Luzzetti. He will be joined by two guest speakers to discuss the outlook for health policy and small businesses. You can find the full details here.

Back to markets and it’s fair to say that the huge pre-covid momentum into ESG was temporarily sidetracked by the pandemic. However this is undoubtedly a multi-year trend and there are signs the topic is springing back to life. Here at Deutsche Bank Research we have launched dbSustainability, a new offering with research reports focused on sustainability issues and spanning thematic, macro, quantitative and individual company analysis. Recent reports include; ‘ESG through the pandemic’. Luke Templeman, Thematic Research (link to report and video), ‘Decarbonisation: Can Mining & Steel sustain in a low carbon world?’ from Head of European Mining And Metals, Liam Fitzpatrick (link to report) and from Juliana Lee, Chief Economist, Asia, ‘Asia Thematic Analysis:Households' ESG action’ (link to report). We will continue to put out research under this banner so best to let Luke.Templeman@db.com on my team know if you want to be added to any future reports. He is on hols but he’ll pick up and add you on Monday.

In terms of those economic stories we alluded to earlier, we firstly had some underwhelming numbers on German industrial production, which saw just a +7.8% increase in May. This was lower than the +11.1% rebound expected and still leaves IP -19.3% below its levels a year earlier. Furthermore, it comes just a day after some worse-than-expected data on factory orders, adding to fears that the German recovery won’t be as rapid as hoped for. Next, we had the European Commission’s summer economic forecasts, which revised down their economic forecasts for Euro Area growth both this year and next. They now see the economy contracting by -8.7% this year compared with -7.7% before back in May. And 2021 growth was revised down two-tenths to +6.1%. And finally, we had a warning from Atlanta Fed President Bostic in the FT yesterday, who said that the high-frequency data had pointed to a “levelling off” in activity. We also heard from the Fed’s Vice Chairman Clarida later who said that the Fed can turn to additional forward guidance and asset purchases if the economy needs more aid and Cleveland Fed President Loretta Mester said that “If we don’t get further fiscal support, things won’t come back as well as they could” while adding, with disruption from the virus lasting longer than expected, “this is a period where we need to be supporting both individuals and businesses who but for the pandemic would have been healthy.”

Given this negative newsflow yesterday, safe havens performed relatively strongly, and gold hit another milestone as it closed above its 2012 peak to reach an 8-year high of $1795/oz. Other metals performed reasonably well too, with copper up +0.78% to advance for a 6th successive session. Over in fixed income, there was clear differentiation in core sovereign bonds, with yields on 10yr Treasuries down -3.6bps and those on bunds up +0.2bps. However that mostly reflected a post European close rally for USTs. There was a further narrowing in peripheral spreads however, with yields on Italian 10yr debt over bunds falling by -3.8bps to 163bps, their tightest level since late March, and Greek spreads down -3.7bps to their tightest since late February.

Here in the UK, sterling was the strongest performing of the G10 currencies yesterday, as it strengthened by +0.46% against the US dollar. It comes ahead of Chancellor Sunak’s much-awaited “Summer Economic Update” before the House of Commons today, in which he’s expected to announce a package of measures to aid the economic recovery. We’ve already had some announcements in recent days, with Prime Minister Johnson announcing last week that £5bn of capital investment projects would be brought forward, as well as a subsequent £1.57bn package for the arts. Our UK economists’ base case is that Sunak will broadly stick to the mandate set out by PM Johnson last week, possibly topping up the package by another 0.2% of GDP, focusing particularly on apprenticeship schemes, and modest wage subsidies to get furloughed employees back into work. There’s certainly been a fair amount of speculation in the media as to what to expect, including reports that a Stamp Duty holiday could be announced on homes under £500k.

Elsewhere in Europe, we heard from ECB Executive Board member Schnabel, who said in an interview that positive confidence indicators “suggests that the recession could turn out somewhat milder than expected”. She also waded in to the debate on the EU recovery fund, saying to the Dutch newspaper NRC Handelsblad that “If most of the fund is made up of loans, this could create a public debt overhang after the crisis. That could then cause problems of its own.” It comes ahead of the summit of EU leaders in just over a week, which is scheduled to begin on 17 July.

There wasn’t a great deal of other data yesterday, though the number of job openings in the US unexpectedly increased in May to 5.397m (vs. 4.5m expected), while the number of hirings rose to a record high of 6.487m. Furthermore, in a sign of the labour market recovery, the quits rate of voluntary separations that generally correlates with economic strength ticked up to 1.6% from 1.4% the previous month, even if it still remained some way down from the 2.3% recorded in February. Our US Economist Matt Luzzetti noted that private quits rate is a good leading indicator for wage growth and it remained low at 1.8%, down from a 2.6% peak late last year. This indicated that there could be a collapse in wage growth in the coming months. The ratio of unemployed people per job opening remained elevated in May, with 3.9 unemployed per job opening. This compares to a sub-1.0 figures late last year, however it is well below GFC levels of over 6.0. Lastly, he noted that change in job openings can proxy for employment data and that doing so would suggest that job loss was much more extreme in March, less extreme in April, and not as robust in May, with 2.4m jobs created vs the NFP tally of 3.2m.

To the day ahead now, and one of the highlights will be the previously mentioned UK economic statement from Chancellor Sunak. Central bank speakers today include ECB Vice President de Guindos and the Fed’s Bostic, while data releases from the US include consumer credit for May and the weekly MBA mortgage applications.

Published:7/8/2020 7:14:19 AM
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[Markets] Dow Jones Falls 200 Points, But Walmart Surges 4%; 2 Coronavirus Stocks Score Bullish Gains The Dow Jones bore the brunt of selling early Tuesday, but the Nasdaq showed resilience again. Coronavirus stocks Regeneron and Novavax scored big gains. Published:7/7/2020 11:41:41 AM
[Markets] Nasdaq ekes out early Tuesday gain as Dow and S&P 500 retreat Nasdaq ekes out early Tuesday gain as Dow and S&P 500 retreat Published:7/7/2020 9:37:32 AM
[Markets] Dow Jones Falls 150 Points, But Apple, Microsoft Buck The Trend; Top Biotech Stock Reclaims Buy Point The Dow Jones bore the brunt of the selling early Tuesday, but the Nasdaq showed resilience again. Biotech Vertex reclaimed a buy point. Published:7/7/2020 9:37:32 AM
[Markets] Dow Jones Today, Futures Poised To End Win Streak: Tesla's $2,070 Bull Case; Novavax Spikes On Fed Covid-19 Funding Regeneron and Tesla were early leaders, as the Dow Jones looked set to pull back below 26,000, and futures were set to end the Nasdaq/S&P; 500 win streak. Published:7/7/2020 8:08:44 AM
[Markets] Dow Jones Today, Futures Set To End Win Streak: Tesla's $2,070 Bull Case; Novavax Spikes On Fed Covid-19 Funding Regeneron and Tesla were early leaders, as the Dow Jones looked set to pull back below 26,000, and futures were set to end the Nasdaq/S&P; 500 win streak. Published:7/7/2020 7:38:36 AM
[Markets] Dow Jones Futures Fall After Apple, Amazon, Tesla, Microsoft Lead Coronavirus Stock Market Rally; Alibaba, Dexcom, Chipotle Break Out Dow Jones futures fell Tuesday after Monday's strong coronavirus stock market rally, as Apple, Amazon and Tesla led the way. Alibaba broke out. Published:7/7/2020 5:34:19 AM
[Markets] European stocks, Dow futures reverse part of Monday's gains European stocks, Dow futures reverse part of Monday's gains Published:7/7/2020 5:06:16 AM
[Markets] China’s Stock Market Just Entered Bubble Territory. The U.S. Could Be Next. The Dow Jones Industrial Average soared on Monday after Chinese stocks went parabolic. The Dow gained 459.67 points, or 1.8%, to 26,287.03 on Monday, while the S&P 500 rose 1.6% to 3179.72, and the Nasdaq Composite climbed 2.2% to 10433.65, a new record high. The (ASHR), which tracks the 300 largest stocks on the Shanghai and Shenzhen exchanges, jumped 11% to $34.82. Published:7/6/2020 5:01:56 PM
[Markets] Dow ends up over 450 points as tech rallies; Nasdaq closes at record high Dow ends up over 450 points as tech rallies; Nasdaq closes at record high Published:7/6/2020 3:30:53 PM
[Markets] Nasdaq rings in another record close after stocks see last-gasp bidding U.S. stocks closed higher on Monday to kick off the first week of full trading for July as the market saw broad-based gains in tech and financial shares despite worries around climbing COVID-19 infections across the country. The S&P 500 rose 1.6% to 3,180. The Dow Jones Industrial Average added 460 points, or 1.8%, to end at 26,287, based on preliminary numbers. The Nasdaq Composite advanced 2.2% to 10,434, stringing together a fifth consecutive gain. Equities managed to extend their upbeat tone even as investors held doubts about the ability of the U.S. to contain the viral outbreak and its further economic fallout. In economic data, the Institute for Supply Management reported its index of service sector companies jumped to 57.1 in June from 45.4 in May. Published:7/6/2020 3:30:53 PM
[Markets] Dow's nearly 450-point rally highlighted by gains in shares of Goldman Sachs, Boeing The Dow Jones Industrial Average is rallying Monday afternoon with shares of Goldman Sachs and Boeing delivering the strongest returns for the blue-chip average. The Dow (DJIA) was most recently trading 440 points higher (1.7%), as shares of Goldman Sachs (GS) and Boeing (BA) have contributed to the blue-chip gauge's intraday rally. Goldman Sachs's shares are up $10.08, or 5.1%, while those of Boeing are up $7.46, or 4.1%, combining for an approximately 120-point bump for the Dow. Published:7/6/2020 3:00:58 PM
[Markets] Big-Tech Wrecks Short-Shorts In Another Melt-Up, Bonds Shrug Big-Tech Wrecks Short-Shorts In Another Melt-Up, Bonds Shrug Tyler Durden Mon, 07/06/2020 - 16:01

A weekend full of scaremongering headlines about soaring COVID cases (though oddly very little mention of the plunge in deaths)...

Source: Bloomberg

Combined with mass shootings across many American cities, didn't damped the enthusiasm for buying stocks, bigger the better, and more expensive the best... but as the chart below shows, bonds weren't buying it...

Source: Bloomberg

An oldie but a goodie...

This followed an explosion higher in Chinese stocks (as outflows soared) on officials jawboning retail to invest in stocks... Yes, that is Chinese mega caps up 7% on the day!!

Source: Bloomberg

The S&P up 5 days in a row - the longest streak since Dec 2019... Nasdaq hit a new record high, surging over 2% from Thursday's close...

Stocks soared in the last few minutes - as they have tended to do recently - pushing The Dow back above its 200DMA...

The market also shrugged off the following headline...

  • *FAUCI SAYS ASSUME ANY VACCINE WILL OFFER `FINITE' PROTECTION

But that wasn't going to stop the short-shorts getting crushed...

Source: Bloomberg

MAGA stocks soared, with all now back above $1 trillion market cap again...

Source: Bloomberg

AMZN >$3000

TSLA >$1300

Tech valuations are absurd again...

Source: Bloomberg

And then there's Consumer Discretionary stocks' valuations...

Source: Bloomberg

Everything was squeezed at the open but defensive were sold back to unchanged as cyclicals held gains...

Source: Bloomberg

Just for some context, from the US Cash open, things diverged quite notably today with Nasdaq panic bid, Small Caps dumped and S&P and Dow flat...

And what that has meant since the start of May - S&P +284pts during overnight session, -22pts during day session...

Treasury yields were around 1bps higher across the curve on the day...

Source: Bloomberg

The dollar slipped lower once again...finding support...

Source: Bloomberg

Cryptos surged higher in the last 24 hours...

Source: Bloomberg

Silver outperformed among the major commodities with WTI flat...

Source: Bloomberg

Gold futures tried (but failed) to regain $1800...

Source: Bloomberg

Finally, this is probably nothing...

Source: Bloomberg

Published:7/6/2020 3:00:58 PM
[Markets] Dow Rallies Following Surge in Chinese Stocks, Nasdaq Hits Record Stocks jumped Monday, getting a lift from a surge in Chinese markets amid improving bullish sentiment. The Dow Jones Industrial Average was up 344 points, or 1.34%, to 26,172, the S&P 500 gained 1.35% and the Nasdaq rose 1.84%, following the three-day Independence Day weekend. The Nasdaq traded at an intraday high early Monday. Published:7/6/2020 9:29:15 AM
[Markets] Dow surges 400 points early Monday as U.S. stocks track China rally Dow surges 400 points early Monday as U.S. stocks track China rally Published:7/6/2020 9:01:30 AM
[Markets] Australian State Closes Borders As COVID-19 Cases Surge; Scientists Urge WHO To Revise Guidance: Live Updates Australian State Closes Borders As COVID-19 Cases Surge; Scientists Urge WHO To Revise Guidance: Live Updates Tyler Durden Mon, 07/06/2020 - 07:12

Summary:

  • Global case total nears 11.5 million
  • Victoria, home of Melbourne, closes borders, including with New South Wales
  • Goldman lowers 2020 GDP forecast over COVID-19 rebound
  • California prepares for a COVID-19-infused wildfire season
  • FDA approves new rapid-detection test

* * *

Excuse us - we just couldn't help ourselves...

...after months of a global pandemic killing more than half a million people and infecting 11,470,637 globally (as of Monday morning, per Johns Hopkins University data), hundreds of scientists are joining together in an open letter to the World Health Organization urging the WHO to update its guidelines - which myriad critics (including many quoted on this website) have warned are woefully out of date - to account for the fact that there's a growing body of evidence showing that the virus is, in fact, airborne.

Following the fiasco over the WHO's disastrous flip-flops on its infection-control guidance on issues like the benefits of wearing masks, to the possibility of being infected by an asymptomatic patient (something one top WHO scientist once described as "rare"), few really pay attention to the agency's guidance anymore.

As of now, the WHO guidelines claim that evidence of the virus being "airborne" (ie can glom on to larger particles like air pollution etc) isn't especially convincing. More likely, aerosol droplets expelled when a person coughs, or sneezes or breathes are the primary transmission, and these 'aerosolized' droplets are too large to linger in the air, explaining why the risk of infection outdoors is much lower, so long as social distancing is maintained.

But in an open letter to the agency that will soon be published in a respected scientific journal, 239 scientists in 32 countries outlined the evidence showing that smaller particles carrying the virus that can linger in the air for longer and infect people, and that the WHO should amend its guidance claiming that this evidence "isn't especially convincing."

Of course, if true, this would create serious problems for restaurants as they try to reopen indoor dining, while also showing that health-care workers must wear N95 masks at all times or face odds of infection of virtually 100%.

News of the letter was published by the NYT on the 4th, but has garnered more attention Monday as Reuters approached the WHO for comment.

"We are aware of the article and are reviewing its contents with our technical experts," WHO spokesman Tarik Jasarevic said in an email reply to a Reuters request for comment.

A confidence-inspiring response, to be sure.

Meanwhile, the biggest news overnight comes out of Australia, where the border between Victoria and New South Wales, the country's two largest states, is being closed for the first time in 100 years as the number of new COVID-19 cases surge in Melbourne and the surrounding area, the latest step as the country - which recently touted its triumph over the virus - scrambles to stave off a resurgence. According to the AP, the hard-hit Australian state of Victoria suffered 2 COVID-19-linked deaths and its highest-ever daily tally of newly confirmed infections on Monday as authorities prepare to close the country's border with New South Wales. Both men - one in his 60s and one in his 90s - were in the median age range for deaths in the country, and their deaths brought Australia's death toll to 106.

Here's more from the AP:

Victorian Premier Daniel Andrews said of the 127 new cases, 53 were among 3,000 people who have been confined by police to their apartments in nine public housing blocks since Saturday.

Andrews said the high number of cases reflected a daily record number of tests exceeding 24,500.

Andrews also announced that the state border with New South Wales will be closed from late Tuesday night in an agreement between the two state premiers and Prime Minister Scott Morrison. Morrison had previously opposed states closing their borders.

It will be the first time Australia’s two most populous states have closed their border since the pandemic began.

New South Wales had previously banned travel from dozens of Melbourne suburbs that were locked down last week for a month due to high rates of infection.

NSW is clearly annoyed with its errant neighbor, with the state's leader warning that stringent action must be taken to stop Victoria from reinfecting the country. NSW's premier warned that the decision to close the border between the two states marked a new phase in the country's struggle with the outbreak.

The leader of Australia’s most populous state said her government’s decision to close its border with hard-hit Victoria marked a new phase in the country’s outbreak.

New South Wales Premier Gladys Berejiklian had criticized states that closed their borders to New South Wales residents when Sydney, the state capital and Australia's largest city, had most of the country's COVID-19 cases.

She noted the overwhelming majority of new cases in Melbourne in recent weeks were from community transmission. Everywhere else in Australia, the vast majority of cases were people infected overseas or by a returned traveler, Berejiklian said.

"What is occurring in Victoria has not yet occurred anywhere else in Australia,” she said. “It’s a new part of the pandemic and, as such, it requires a new type of response."

New South Wales police will close the Victorian border from late Tuesday. Some flights and trains services would continue for travelers who are given permits and exemptions, Berejiklian said.

As we reported yesterday, Texas reported a startling spike in COVID-19-related hospitalizations yesterday, as more than 8k new patients have been hospitalized in the last 24 hours. Meanwhile, California is preparing for wildfire season by once again relying on posses of prison inmates to "volunteer" to fight the blaze. The only problem is this year, they'll also be battling COVID-19.

Finally, Goldman revealed over the weekend that it was slashing its GDP forecast due to the COVID-19's "resurgence". 

And once again, the market is expressing its confidence in Goldman's house view by pushing Dow futures 400+ points higher following last night's torrid rally in China.

In other news, the FDA has granted emergency-use authorization to Becton Dickinson for a COVID-19 antigen test that can be administered at the point of care and produce results within 15 minutes.

Published:7/6/2020 6:28:38 AM
[Markets] Dow Jones Futures Signal Strong Open For Coronavirus Stock Market Rally On Bullish China, Covid-19 Trends; Tesla Soars Dow futures jumped as China markets soar and Covid-19 deaths remain low, with the Nasdaq composite at a record high. What's next for Tesla? Published:7/6/2020 6:00:19 AM
[Markets] Can These 3 Hard-Hit Dow Jones Stocks Bounce Back? The stock market has seen extreme volatility so far in 2020, and even after a strong second-quarter performance, the Dow Jones Industrials (DJINDICES: ^DJI) are still down almost 10% for the year. Although there've been a few stocks that have managed to buck the trend and gained ground, the vast majority of Dow stocks have given up ground. As with all falling stocks, the big question investors have is whether these three giants of their respective industries can bounce back and recover some of their lost ground. Published:7/6/2020 5:28:34 AM
[Markets] Dow Jones Futures Signals Strong Open For Coronavirus Stock Market Rally On Bullish China, Covid-19 Trends; Tesla Soars Dow futures jumped as China markets soar and Covid-19 deaths remain low, with the coronavirus stock market rally at highs. What's next for Tesla? Published:7/6/2020 5:02:19 AM
[Markets] The 3 Best Dow Jones Stocks So Far in 2020 After having plunged during the first three months of the year, the Dow Jones Industrials (DJINDICES: ^DJI) have bounced back sharply from their worst levels of the year. Amid a couple dozen losing stocks in the Dow, Microsoft (NASDAQ: MSFT) is doing a lot to limit the average's losses. What's particularly impressive about the software giant's 31% rise so far this year is that it comes on the heels of an even sharper 55% climb for Microsoft in 2019. Published:7/5/2020 10:25:58 AM
[Markets] 3 Things to Watch in the Stock Market This Week Last week, stocks moved higher in a shortened trading week, as the Dow Jones Industrial Average (DJINDICES: ^DJI) and S&P 500 (SNPINDEX: ^GSPC) gained about 3% and 4%, respectively. Let's look at the developments that might send shares of Bed Bath & Beyond (NASDAQ: BBBY), Levi Strauss (NYSE: LEVI), and PriceSmart (NASDAQ: PSMT) moving this week. Investors are bracing for rough operating numbers from Levi Strauss in its quarterly results on Tuesday afternoon. Published:7/5/2020 8:53:30 AM
[Markets] An "Ominous Disconnect" - What Powell & Lagarde Should Have Told The G-7 An "Ominous Disconnect" - What Powell & Lagarde Should Have Told The G-7 Tyler Durden Sat, 07/04/2020 - 07:00

Authored by Egon von Greyerz via GoldSwitzerland.com,

Here is a joint statement from Lagarde and Powell at a secret G7 meeting with all Leaders and Finance Chiefs of the seven nations attending as well as the IMF and BIS:

“The financial system has been on the verge of collapse since September 2019 when we started Repos and QE. And since then it has only got worse. The coronavirus hit us at a time when the banking system was almost down and out. 

We had enough problems saving the banks. But now we must save big corporations, small companies, individuals, local municipalities and states, the Federal State and this on top of rescuing a financial system which is deteriorating by the day. The whole system is leaking like a sieve and we are struggling to keep it all afloat. 

Fortunately we have printing presses and that helps to keep it all going but only just. Our big fear is that the market will realise that all the money we are printing is worthless. And it is of course but we can’t tell anyone. But if the world wakes up to this one day soon, the financial system could implode in a matter of days. And we would be totally helpless to stop it………”

EXPONENTIALLY WORSE THAN 2008 – A BLACK HOLE

And this dear readers is where the world stands today. On the verge of an implosion of the whole financial system. Just a small crack could push the whole system into a black hole. 

All that is needed is a severe second wave of CV-19 or a bank collapse, triggering an implosion of debt markets and the whole system.

Yes, we know the world was in a similar situation in 2008 but with over $100 trillion more in debt and who knows how many additional $100s of trillions of derivatives plus a world economy disintegrating – it is now exponentially worse from a risk point of view. 

We must also remember that bad debts in the financial system are going up by the minute with most borrowers under severe financial pressure. Just look at the chart below how bad debts follow unemployment. The banks haven’t reported this yet but we will see it in the next couple of quarters. 

TELLING THE TRUTH IS A REVOLUTIONARY ACT 

So why don’t the Fed and ECB chiefs tell the truth? Well, maybe they are, in their own CB Speak.

ECB President Christine Lagarde said the recovery from the coronavirus pandemic will be “restrained” and will change parts of the economy permanently. And Powell recently said: ”The path ahead is likely to be challenging. Lives and livelihoods have been lost, and uncertainty looms large.”

So “restrained” and “challenging” is as far as they can stretch without panicking the world. They would obviously never warn bank depositors that their money will soon be gone. This is why people must figure it out themselves. But they won’t of course until it is too late.

LESSONS IN RISK

Most people have never had to worry about risk in the financial system since until now they have been saved by the CBs. 

With more than 50 years in business you learn a lot of lessons on the way. As a young man, when acquiring my MBA back in 1969 I had to learn everything about Keynesian economics, only understanding much later how wrong it all was. 

My first job was in commercial lending in a Swiss Bank. Those were the days when the Swiss banking system was run on conservative principles. That was the perfect training for analysing and understanding risk and very different from the massive leverage of today with minimal capital backing. 

My real grounding in dealing with risk was at Dixons. At the time it was a small listed UK business which we built up to the UK’s leading consumer electronics retailer and a FTSE 100 company. I was first a green 29 year old Finance Director and a few years later Executive Vice-Chairman. Dixons was founded by a Jewish entrepreneur who was a superb businessman and retailer. It was a steep learning curve. He is now 88 and still as sharp as ever. 

One of our principles was to always panic early but in a controlled manner. For example, if there was a substantial downturn in consumer spending, we implemented major cost reductions across the company within a few days. And if we made major acquisitions, we quickly sold off dead or liquid assets to reduce leverage to conservative levels. 

By being financially prudent and commercially aggressive, we managed to grow the company fast without taking excessive risks. We survived without pressure both the oil crisis in the early 1970s and the coal miners’ strike which led to having electricity only 3 days a week. The other days we sold televisions with the help of candle lights. 

Low leverage and low debt were the key. So, very different to today with massive debts and leverage. And that is why no individual and no company can survive a serious crisis without massive state aid. In recent times, no one has been taught to save or build up a nest egg for a rainy day. When things go well, all the money is spent and when they go badly, you either borrow money or the state has to help. This goes for individuals as well as for big corporations. 

DEBTS AND DEFICITS – THE MODERN MANTRA OF FINANCE 

With low or zero interest rates and the value of money constantly declining, there is clearly no incentive to save whatsoever. Also, governments and central banks are setting very poor examples. 

But how can you expect people to be prudent when their governments and central banks have for decades been running deficits and printing money. Debts and deficits are the mantra of modern finance. But what no one seems to understand is that this mantra has become a chronic disease which is killing the world a lot faster than the coronavirus.

WEIMAR & ZIMBABWE SQUARED IS COMING

The world’s central banks are now in the process of outshining both Weimar and Zimbabwe. Together with governments they have globally printed and borrowed $18 trillion since CV started. And since the Great Financial crisis started in 2006 they have  more than doubled global debt from $125 trillion to over $275 trillion but that is just the beginning. 

We talk about billions, trillions and quadrillions as if we understood what it means but nobody really does. It is absolutely impossible to fathom what a trillion is. Let’s start by counting to one trillion. It will take you 32,000 years. And then you would have to count very fast, never hesitate nor make a mistake – nor start from the beginning again. Ok, so the $18T just created globally, how long would that take? Almost 600,000 years. 

FED & ECB QE HAS ZERO VALUE

So clearly totally unrealistic and impossible. Whenever this magnitude of money has been manufactured before, like Weimar, it has always been totally worthless. And it is this time too!

This magnitude of debt can never be serviced at a market rate. Only at near Zero or negative rates. It can never be repaid with properly earned money. $18T represents 22% of Global GDP. And since almost all countries have deficits today, there is absolutely ZERO chance that this debt will ever be serviced or repaid in future. Remember that the US has not had a proper budget surplus since 1960. (Please don’t write to me about the Clinton years. They were fake surpluses as debt continued to increase). 

Virtually all the money created by the US government and the Fed in the last 20 years is totally worthless. Because any money created at will out of thin air is by definition fake. If all that was required to print the $10s of trillions was to press a button and nothing was produced  by way of goods or services, then the money has ZERO value. 

I know I keep stressing the previous point over and over again. This is done so that at least a few people can understand what is likely to happen next and therefore prepare themselves and their financial situation. 

So why don’t Powell and Lagarde tell the people that central bank actions are destroying the economy and the value of  the country’s money. 

The dollar has lost 86% in this century and the Euro 82%, measured in real money. Real money is of course gold since it represents constant purchasing power and is the only money which has survived in history. 

THE JOURNEY TO ZERO WON’T BE LONG!

MARKETS

Stocks

There is an ominous disconnect between equity values and profits. As the chart below shows, values have doubled since 2012 with profits stagnant 2012-19. Now in 2020, profits are crashing and stocks will follow.  

The Dow correction up finished on May 8 and is now resuming the downtrend. All the V recovery optimists are going to get a real shock. The monthly Dow peaked in January 2020, see chart, and the downtrend was confirmed well before CV started to trouble markets. 

I have been saying in the last couple of weeks that a resumption of the stock market downtrend is imminent and it seems clear that imminent is now. Most market participants will be shocked as stocks around the world crash down below the March lows and long term much, much lower.

Gold & Silver

Many have feared that the precious metals will initially fall with stocks but this seems unlikely to be the case. 

On the contrary, it looks like Gold is now breaking above the important $1,770 level. Since the Gold Maginot Line was broken a year ago at $1,350, gold is up over $400 or 30%. The 6 year consolidation since 2013 has built up a lot of energy that will take gold to over $2,000 in the next move. 

There has been a massive fight to hold Silver below the $18 level. It seems the LBMA boys are now losing the fight as silver has gone through the $18 level which it has held below since 2014 with 3 months’ exception in 2016.

This Silver Maginot Line is even more significant than the Gold one as it comes from a much lower level of 64% below the $50 peak. Once through, we are likely to see a silver explosion and a sharp fall in the gold/silver ratio.

Praeterea censeo Carthaginem esse delendam – Cato the Elder
3rd Punic War 149 – 146 BC 

“Furthermore I consider that Carthage must be destroyed” is what Cato the Elder said at the end of every speech he gave in the Roman Senate prior to the 3rd Punic war 149-146 BC. In the end his persistence paid off and Carthage a Phoenician City in North Africa was destroyed. 

I learnt this phrase in Latin at school and also about Roman history and it has stuck ever since. 

The reason why I mention this is that I, like Cato, normally finish most my articles in the same way, namely that you must hold gold for wealth preservation purposes and not for gains measured in phoney paper money which is about to be totally debased. 

Hopefully not just my historical understanding of gold but also my passion and persistence will help a few people to avoid ruin in coming years. 

P.S. The secret G7 meeting discussed at the beginning of this article obviously never took place. But it should have!

Published:7/4/2020 6:14:48 AM
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