Their Last Hoorah!

Their Last Hoorah!

The Last HoorahThis is the last hoorah for the old Democratic leaders. They know they are soon “out the door” because of their age.

Not having to stand for reelection because Nancy Pelosi (born March 26, 1940) who is now 80 years old and Charles “Chuck” Schumer (born November 23, 1950) who is 70 now, and Joseph “Joe” Biden Jr.(born November 20, 1942) who is 78 do not stand a chance in hell of holding on to power much longer.

They are now more desperate to overthrow Trump with the help of the media as they deal a death-blow to the investment community.

Beside their plan to restore taxes to the pre-Reagan era of 70%, their last hoorah is to impose a tax on every buy or sell transaction.

Wall Street has been dumping money into Governor Cuomo’s coffers trying to hold off this proposal.

He has been standing up against the Democrats in Washington but this is yet still part of the intense battle going on for the 2020 election.

Should You Borrow Gold?

Should You Borrow Gold?

Should You Borrow Gold? Gold does not bear interest which is why it has often been called a dead asset.

It costs to store it and with no income from the investment without selling it has always been one of the major obstacles to institutional investing in gold. Others have argued that central banks were the biggest lenders of gold and they did so to manipulate prices.

That myth has never stood the test of time for they were lending gold in up and down markets which never altered the natural cycle. In general, any entity which owns gold has always sought to lease it out to earn income.

The borrowers have been generally mines who may need to smooth their cash flow and will borrow gold to sell now which is replaced when the newly mined gold is refined and then used to repay the loan. Other borrowers have tended to be jewelry manufacturers who may be operating on a contract basis to buy gold and again need to borrow to smooth out the flow of manufacture.

Borrowing gold has normally been conducted at interest rates which are below that of borrowing cash because there are costs to physically deliver gold. Consequently, there have been also arbitrages on the interest rates between gold loans and cash loans. This is another whole new area of complexity. Therefore, the fact that gold loans have gone negative is indeed a reflection of lower demand from some industries like the jewelry trade as stores are locked down and people have lost their jobs and marriages have crashed.

If we look at the numbers from the Gold Council you will see that in 2019 new mine gold declined. The sharp rise in the gold supply is coming from people selling their old gold jewelry we called scrap. The rise in gold scrap is reflecting the decline in demand from the jewelry trade.

Indeed, the World Gold Council put out that the gold jewelry trade declined 6% in 2019. As the recession expands into 2022, the retail jewelry demand will decline rather than expand.

With retail down, this is contributing to gold lease rates moving negative.

So, the answer to the question of “Should You Borrow Gold?” is NO. However, you can profit handsomely whether Gold’s price rises or declines.  

InterAnalyst members are immediately notified of directional momentum in Daily, Weekly, and Monthly momentum charts with signals like the actual samples above.

How The V Became W

How The V Became W

A possible change in near-term trend is likely as we approach this month in S&P 500 established back during March. Normally, this implies that the next turning point should be a reaction high. Technical resistance stands at 3393.76 and it will require a closing above this level to signal a breakout of the upside is going to unfold. Our technical support lies at 2271.03 which is still holding at this time. which is still holding at this time,” stated Livio S Nespoli of InterAnalyst.us.

Some caution is necessary since the last high 3393.52 was important given we did obtain three sell signals from that event established during February. Nonetheless, this market is trading below that high by more than 5 percent. Critical support still underlies this market at 2532.68 and a break of that level on a monthly closing basis would warn a further significant decline ahead becomes possible.

The market has consolidated for the past 2 Months and only 3393.54 would suggest a reversal in the immediate trend. The previous low of 219186 made during March only a break of 244749 on a Monthly closing basis would warn of a technical near-term change in trend.

With recent spikes in coronavirus cases and fluctuations in the economic data, the market seems to be stuck in a range amid elevated volatility and how the V became a W.

“For now, volatility and choppy markets remain our base case as an uneven economic recovery likely unfolds, the stock market was suggesting a V-shaped recovery, but the more likely scenario is rolling Ws with a sideways to downward bias.” Liz Ann Sonders, chief investment strategist at Charles Schwab, said in a note.

The central bank unleashed another weapon in its arsenal this week, saying it will start buying individual corporate bonds. As comforting as it is to have the Fed’s support, the central bank can only do so much to ease investor fears.

“The Fed can’t prevent the volatility we’re seeing in stocks, and tt will likely take years for the economy to fully recover and there remain other uncertainties on the path ahead. As such, investors may continue to struggle with this mismatch between markets and the economy before seeing the case for new highs.”

Fed Chairman Jerome Powell reminded investors again in his semiannual testimony before Congress that “significant uncertainty remains about the timing and strength of the recovery.”

Where The Stock Market Goes Now?

Where The Stock Market Goes Now?

Where The Stock Market Goes Now…

With the Rails index back to all-time highs this seems like an especially appropriate question considering the fundamental data which is…. well, see for yourselves.

Consider where rail stocks are trading:

Do fundamentals justify this price? Here is the chart of total carload and intermodal traffic for 2018, 2019 and 2020.

Total U.S. carload traffic for the first five months of 2020 was 4,713,757 carloads, down 14.7 percent, or 815,413 carloads, from the same period last year; and 5,186,630 intermodal units, down 11.3 percent, or 661,703 containers and trailers, from last year.

And another way to see the unprecedented divergence tells us Where The Stock Market Goes Now:

U.S. railroads originated 740,171 carloads in May 2020, down 27.7 percent, or 282,965 carloads, from May 2019. U.S. railroads also originated 912,922 containers and trailers in May 2020, down 13 percent, or 136,241 units, from the same month last year. Combined U.S. carload and intermodal originations in May 2020 were 1,653,093, down 20.2 percent, or 419,206 carloads and intermodal units from May 2019.

In May 2020, one of the 20 carload commodity categories tracked by the AAR each month saw carload gains compared with May 2019. It was farm products excl. grain, up 324 carloads or 10.6 percent.

Meanwhile, commodities that saw declines in May 2020 from May 2019 were coal, down a record 127,201 carloads or 40.7%; Coal carloads are down 26.1% so far this year and have declined on an annual basis for 13 straight months.

In short, lowest rail traffic in years, and that was based on a trend even before the coronavirus, and yet rails stocks are at all time high.

Here is why:

As BMO rates strategist Ian Lyngen writes in “Jay’s Market, Just Trading in it“, a core theme of trading has been “the remarkable resilience of the equity market despite a shuttered economy, historic job losses and civil unrest across the US.”

So to get to the bottom of the question on every trader’s mind – just who is behind this rally – BMO sent out a poll to its clients where the first question showed a clear consensus for the driver behind the move; “73% offered the Fed as the inspiration behind the S&P 500’s impressive rally”, vastly more than those who cited labor market recovery/reopening optimism (6%) greater fiscal stimulus (5%), and progress on Covid-19 treatment (6%). And now that Powell owns this rally, he better not allow to reverse.

1. What is driving the swift recovery of equities?

a) Fed – 73%
b) Earnings Optimism – 0%
c) Labor market recovery – 6%
d) Further fiscal stimulus – 5%
e) Progress in treating/preventing Covid-19 – 6%
f) Other (please specify) – Reopening Optimism/ All of the Above/ Underinvestment

Less relevant to the market’s ramp but just as interesting in terms of what markets expect for the Fed to unveil next in the central bank’s creeping nationalization of capital markets, were responses to BMO’s second special question – when, or even if the FOMC will roll out yield curve control – which were not nearly as clear cut with a wide variety of opinions. 3-6 months was the most common answer with 33%, which points to the September, November, or December meeting as the most probable venue for the introduction of the new policy tool. Within ‘3 months’ or ‘not this cycle’ both took a roughly equal share as the second most frequent reply, so as Lyngen notes, “clearly investors are split on whether YCC needs to be deployed rapidly, or not at all given the state of the economy and recovery. 6-9 months and 9+ months both rounded out the replies with 14% and 12%, respectively.”

2. When will the Fed announce yield curve control?

a) Within 3 months – 21%
b) 3-6 months – 33%
c) 6-9 months – 14%
d) 9+ months – 12%
e) Not this cycle – 20%

Finally, an interesting snapshot on how investors respond to data is BMO’s question how respondents will react to tomorrow’s jobs report: In the event of a disappointment and a Treasury market rally, the clearest takeaway was a reluctance to take profits – only 25% would sell versus a 37% average and the lowest read since October 2019. Meanwhile 11% would join the rally and buy and 64% would do nothing compared to respective averages of 7% and 56%.

The other meaningful takeaway was a positive skew on the belly of the curve as 36% thought the next 15 bp in 5-year yields will be higher; well below the 45% average and matching last month’s figure as the lowest since November 2019.

Watch out below.  The International Monetary Crisis Is Starting, and you will witness precisely where the stock market goes now. Will you avoid the pain.

Velocity Of Financial Collapse

Velocity Of Financial Collapse

The velocity of money is like blood pressure. If it is too high or too low, it can be the Velocity Of Financial Collapse. Too high indicates inflationary pressures are building and/or the presence of speculative bubbles. If too low, deflationary pressures are growing, presaging a dangerous collapse. (eLearning)

The velocity of money reached its high during the 1990s dot.com bubble. After it collapsed in 2000, low-interest rates (2002-2007) fueled another bubble, the US property bubble, and when it collapsed in 2008, the velocity of money again plunged and never recovered.

Despite trillions spent by central banks after 2009, the velocity of money has continued to fall. Today, in 2020, the velocity of money reached an all-time low. In Q1, the average velocity was only 1.37. Q2 will be even lower.

To offset the historic plunge in demand caused by COVID-19, central banks resorted to money printing on an unprecedented scale. While the money printing will stave off starvation for the vast majority at the bottom of the economic food chain and ensure profits for the few still at the top; today’s money printing will turn fiat money into little more than food stamps and give the economic elites little incentive to do otherwise.

Despite central banks’ excessive money printing, hyperinflation may not occur, at least not immediately. In capitalist economies, because currencies are circulating coupons of credit and debt, when credit disappears, so, too, does “money”; and, today, money is disappearing into deflation’s waiting paw even faster than the Fed can print it.

The mandate of the Fed in 1913 was to create a system of debt-based fiat money that insured bankers profited, i.e. “made bank”, off all societal productivity, a never-before-seen form of economic parasitism.

Since that time, the Fed has done admirably with that mandate, given the problems they’ve had to deal with, e.g. a dangerously low gold/fiat ratio in the 1920s, the 1929 stock market crash, the 1930s collapse of world trade, the loss of gold reserves due to US overseas military spending, the serial collapse of bubbles beginning in 2000 triggering “the great recession of 2008, the amuse-bouche to what is now about to happen, 

America the Frog

AMERICA THE FROG

The frog is frozen still 

In water now so hot 

The water’s almost boiling 

But the frog knows it not

Quickly it must jump

To avoid a boiling death

The Fates themselves are watching

With collective bated breath

Will America survive?

Or will it now succumb

Its heritage abandoned

Its future now undone

By its own hand it’s threatened

Itself its great threat

The frog continues sitting still

In denial ignorant yet

The water’s getting hotter

The heat’s turned up to high

And it’s an even money bet

That the frog is gonna die

It is June 2020. The water’s boiling. The frog’s still in the pot. The velocity of financil collapse it closer than we might imagine.

Protect yourself now.

Are Commodities Oversold And A Buy Right Now?

Are Commodities Oversold And A Buy Right Now?

Commodity prices and related commodity ETFs have fallen off in recent weeks on concerns over demand weakness in emerging markets, the ongoing trade war and potential oil production increases. However, the selling may have been overdone.

Over the past month, the Invesco DB Commodity Index Tracking Fund (DBC) fell 1.9%, iPath Bloomberg Commodity Index Total Return ETN (DJP) dropped 5.0% and United States Commodity Index Fund (USCI) declined 3.3%.

Goldman Sachs argued that concerns over oil and other commodities have been “oversold,” and even those most exposed to the risks of a U.S.-China trade war are now worth a second look.

Most of the selling may be attributed to the potential fallout from an escalating trade war between Washington D.C. and Beijing. The White House is set to implement a 25% tariff on $34 billion in Chinese goods while China said it would retaliate on the same value in U.S. goods.

Commodities Not Set to Be Largely Hit

However, Goldman argued that commodities were not set to be largely hit.

“Only markets that cannot be rerouted globally to other consumers will be impacted by the proposed July 6th tariffs … We believe that the trade war impact on commodity markets will be very small, with exception of soybeans where complete rerouting of supplies is not possible,” according to a Goldman note.

Goldman also singled out soybean contracts, which have “value at current levels.”

The Teucrium Soybean Fund (SOYB) jumped 4.2% Friday, with CBOT corn futures up 2.4% to $3.6075 per bushel, according to Bloomberg. Nevertheless, SOYB is still down about 11% since June.

“We believe all of these concerns have been oversold. Even soybeans, the most exposed of all assets to trade wars, is now a buy,” Goldman analysts said.

The bank is broadly bullish on commodities as its outlook is bolstered by strong global growth and depleting inventories in energy and metal markets that would likely result in higher prices. Goldman Sachs maintained its “Overweight” assessment of the commodities space, projecting a 12-month expected return of 10% for the S&P Goldman Sachs Commodity Index.

Goldman also singled out soybean contracts, which have “value at current levels.”

If you see a red arrow turn green in the commodities area of your InterAnalyst subscription, it may be profitable to move on it right now.

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