Once upon a time, we used indisputable facts and hard data as fundamentals to forecast the current events forming future trends.
Those times are gone. Facts and data don’t matter. America’s financial system is nothing more than a con-game that steals from the poor and gives to the rich.
As we continue to note, America, once called “The Land of Opportunity,” is fully controlled by the oligarch one-percent and “The Land of the Free,” has degraded into a political dictatorship—as indisputably evidenced by the COVID War in which arrogant little boys and girls across the nation locked down business to “flatten the curve” for years.
And when the little people of Slavelandia break a law it is punishment to the full extent of the law. But when the Bigs commit major crimes, be they lying the nation into wars that cost trillions to kill millions or stealing the little people’s money, it’s a slap on the wrist.
Today it was reported that Wells Fargo agreed to pay $3.7 billion dollars for stealing billions from the little people who did business with them.
The Consumer Financial Protection Bureau ordered the bank to pay a $1.7 billion civil penalty and “more than $2 billion in redress to consumers.” The CFPB said “The bank’s illegal conduct led to billions of dollars in financial harm to its customers and, for thousands of customers, the loss of their vehicles and homes,” the agency said in its release.
“Consumers were illegally assessed fees and interest charges on auto and mortgage loans, had their cars wrongly repossessed, and had payments to auto and mortgage loans misapplied by the bank.”
CFPB Director Rohit Chopra said Wells Fargo’s “rinse-repeat cycle of violating the law” inflicted financial pain on millions of American families.
On this “good news,” Wells Fargo shares rose nearly 1 percent in early trading.
Again, its prosecution to the fullest for the plantation workers of Slavelandia while the Bigs pay a fine and none of the top brass who run the criminal organization that stole billions of dollars goes to jail.
How about all the felonies JPMorgan Chase has committed, including rigging the precious metals markets for years and was slapped on the wrist with a fine but no jail time for the bankster gangsters running the racket. (See “TWO JPMORGAN EX-TRADERS CONVICTED OF FRAUD” Aug 16 2022, “ECONOMIC UPDATE—MARKET OVERVIEW” Jul 19 2022, “BANKSTER BANDITS: “SERIAL CRIME WAVE AT THE LARGEST U.S. BANK” Dec 21 2021, “GLOBAL CORRUPTION INDEX: HOW LOW CAN YOU GO?” Jan 28 2020 and “DON’T CALL THEM “CRIMINALS”—THEY’RE ‘WHITE SHOE BOYS’!” Sept 29 2020.)
This is Christmas time, a celebration of the birth of Jesus Christ, the Prince of Peace. And as the scriptures tell it, at the age of 33 Jesus drove the money changers out of the temple for screwing over the people… and three days later he was hanging on the cross.
Adding more insult to the financial injury, the money junkies inflict on We the People, today, Wall Street on Parade noted:
The Chairman of the Securities and Exchange Commission, Gary Gensler, announced in June that he was going to tackle the structure of the U.S. stock market – ostensibly to make it fairer to the little guy. His plans were released last Wednesday in a mountain of paper that even Wall Street veterans are having difficulty digesting.
While the overall thrust of the proposed changes appears to be to provide more transparency to order execution, the proposals fail to address key structural issues that have allowed the U.S. stock market to operate as an institutionalized wealth transfer system — moving vast sums of money from the pockets of average Americans to the richest one percent.
Yes, “moving vast sums of money from the pockets of average Americans to the richest one percent” … just as Donald Trump’s 2017 tax cut scam has done. With the maximum corporate tax rate dropping from 35 percent to 21 percent, according to analysis by the Tax Policy Center, by 2027 some 53 percent of Americans will pay more in taxes while 82.8 percent of the bill’s benefit will further enrich the top 1 percent.
Under “normal” circumstances, when the equity markets and economies across the globe began to crash in March 2020 following the draconian political lockdowns that forced the closure of billions of businesses and restricted people from leaving their homes… both should have plummeted to historic lows.
Instead, governments poured in countless trillions and central banks’ low interest rates pumped in countless trillions to artificially prop up failing economies and equities.
Yet, as we have reported, those facts are ignored by both governments and central banks who claim it was supply chain disruptions that have caused inflation and not their dirty tricks. We noted that Austin Goolsbee—the soon-to-be head of the Federal Reserve Bank of Chicago, said it wasn’t the countless trillions of government and Fed cheap money schemes that caused inflation.
As reported by The Wall Street Journal, back in the summer of 2021, Goolsbee “was among the many economists who argued that increasing inflationary pressures were being driven primarily by supply-chain bottlenecks and were likely to abate largely on their own.”
And we also reported how the former Fed Head and now head of the U.S. Treasury Secretary, Janet Yellen declared, when inflation was spiking in May 2021, “I don’t think there’s going to be an inflationary problem.”
Back in April 2021, we reported that “At their meeting on 16 and 17 March, officials of the U.S. Federal Reserve expressed confidence in an increasingly strong U.S. economic recovery and said they expect to keep interest rates near zero through 2023.”
While the list of stupidity—or lies—goes on we note the history to illustrate how disgustingly corrupt and corroded the so-called financial system is in America.
Adding more insult to injury, with economies and equities artificially propped up, the initial public offerings scam rapidly accelerated in 2020 and 2021 when some 600 companies that were mostly unprofitable went public.
Now, according to Dealogic, they are on pace for its worst year in at least two decades as measured by money raised in traditional listings.
Noting the IPO meltdown, The Wall Street Journal said Eddie Molloy, co-head of equity capital markets for the Americas at Morgan Stanley who said, “A lot of companies got public in an exuberant market window amid a strong economic backdrop.”
TREND FORECAST: There was no “strong economic backdrop.” It was, by the hard facts and calculable data, a totally rigged “economic backdrop” that was artificially propped up. Without the unprecedented government and central banks, cheap money schemes, equities and economies would have crashed at the height of the COVID War in 2020 and 2021.
Considering the overt corruption of governments, central banks and their money overlords who are in full control, it is difficult to forecast when economic reality will take down The Street.
If there is a strong “Santa Claus Rally” over the next 10 days, it will signal a bullish start to 2023. And, as we have noted, in the 12 months following the last 40 mid-year elections in the United States, the S&P 500 rose on average 16 percent.
Will it be different this time? Considering wild cards such as the Ukraine War and tensions building in the Middle East, should these continue to escalate, oil prices will spike to new highs and equities and economies will sink to new lows.
LAST WEEK: STOCK PRICES DOWN, RECESSION FEARS UP
All three major U.S. stock indexes ended the week off at least 1.5 percent, with tech stocks and other growth sectors leading the way down.
The Dow Jones Industrial Average sank 1.8 percent over the week, the tech-laden NASDAQ gave up 2.9 percent, and the Standard & Poor’s 500 index fell 2.3 percent.
Share prices climbed earlier in the week as new inflation figures showed the rate of price increases moderating again last month, slowing to 7.1 percent from 7.6 in October.
Then, after the U.S. Federal Reserve bumped its federal funds interest rate by another half point on Wednesday, the Dow gave up more than 1,200 points into Thursday and slid further Friday as data showed retail sales, factory output, and services slumping, fanning fears of recession.
Comments by Fed chair Jerome Powell that the central bank will keep jacking its rate into next spring added to investors’ pessimism. The equation is simple: higher interest rates rise, the deeper equities and the economy will sink, and up until recently The Street believed that with inflation slowing down, the Fed would ease up on its rate hikes.
Excluding the first half of 2020 when the COVID War began, the U.S. is seeing the quickest drop in business activity since 2009, S&P Global Market Intelligence noted.
That looks like a buying opportunity to some players.
“Finally, there’s an opportunity for investors to start putting money to work,” CEO Nancy Tengler of Laffer Tengler Investments, told The Wall Street Journal.
The price of the benchmark 10-year treasury note fell Friday, pushing up its interest rate to 3.481 percent from 3.449 percent Thursday. Yields rise as bond and note prices fall.
For the week, spot gold’s price edged up 0.4 percent to $1,793 at 5 p.m. on 15 December.
Brent crude oil ended the week down 2.7 percent at $79.04 at 5 p.m. on 15 December, reflecting widespread expectations that demand will continue to fall as the global economy slides toward recession. West Texas Intermediate gained 3.4 percent to $74.07.
Bitcoin lost 2.4 percent to $16,812 at 5 p.m. on 15 December and flatlined through the weekend.
Abroad, the FTSE 100 in London dropped 2 percent during the week. Europe’s Stoxx 600 index slumped on data that the continent’s economy is shrinking again this month.
The Japanese Nikkei moved down 0.8 percent and South Korea’s KOSPI index gave back 0.7 percent.
In China, Hong Kong’s Hang Seng lost 0.7 percent. On the mainland, the CSI Composite slipped 0.8 percent and the SSE Composite 1.1 percent.
YESTERDAY: NO HOLIDAY CHEER AS RECESSION FEARS LOOM
The Dow Jones Industrial Average was down yesterday 281.76 points, or 0.9 percent, to 32,920.46, and the benchmark S&P 500 was off 0.90 percent to 3,817.66. The tech-heavy Nasdaq Composite was also down 1.49 percent to 10,546.03.
Amazon was down 3.35 percent to $84.92 a share, which dragged down the Nasdaq. Analysts at Evercore said the stock was likely down due to a change in shopping habits due to financial challenges in the economy. They noted that the e-commerce giant relies on discretionary purchases and not staple items like food and gas, Motley Fool reported.
It was the fourth-consecutive day that the market’s three main indexes took a hit due to concerns among traders that the Federal Reserve will continue hiking up interest rates until the U.S. economy enters a recession.
TRENDPOST: There seems to be no Christmas miracle on The Street this year that bruised many investors and your 401K. The Nasdaq is deep in bear territory, down about 33 percent on the year, and the S&P lost 20 percent. The DJIA is also down more than 3,800 points from its high.
The idea that Fed Head Jerome Powell may keep his foot on the gas to tame inflation has investors hedging their bets. The Nasdaq and S&P both lost over 2 percent after the Fed indicated that it intends to continue its monetary tightening.
Reuters noted that the S&P, DJIA, and Nasdaq are on track for their biggest annual declines since the 2008 financial crisis. The Fed has increased its all-important benchmark lending rates to a range of 4.25 percent to 4.5 percent. Now, word on the street is that the Fed will aim to raise interest rates to 5.1 percent next year, which is higher than the 4.6 percent that were considered in September.
Again, the game is rigged, and it is the middle class that ends up paying for the corruption.
The Wall Street Journal’s Dollar Index, which measures the currency against a basket of its peers, decreased by 0.1 percent, but is on track to wrap up 2022 up 9 percent. And Treasuries fell.
Elsewhere, the global markets were mixed on Monday. London’s FTSE was up 29.19 points, or 0.40 percent, to 7,361.31 and the STOXX 600 was up 1.13 points, or 0.27 percent, to 425.87. In Asia, Japan’s Nikkei was down 289.48, or 1.05 percent, to 27,237.64, and Hong Kong’s Hang Sang was down 97.86 percent. China’s Shanghai Composite was down 60.74, or 1.92 percent, to 3,107.11, and the Shenzhen Component was down 1.51 percent.
European and Asian markets were timid on concerns of a global recession and there is still worry about China’s COVID-19 outbreak.
And while the number of flights in and out of China is 80 percent below pre COVID War levels for most of this according to Cirium, they reported that the total number of domestic flights are up 158 percent from two weeks ago.
However, as we have forecast, there will be more lockdowns as winter sets in and COVID cases and deaths increase. And while fear and hysteria about cases and deaths rising keeps making the mainstream news, as we have detailed, to date, of its 1.4 billion people, only 5,242 died in China … compared to America, a country of some 332 million, with 1,113,307 according to Worldometer.
OIL: Brent crude was up 76 cents per barrel to $79.80 and West Texas Intermediate rose 90 cents to $75.19 a barrel on hopes that China’s economy would reopen.
Fears of a global recession continue to weigh down the price of oil.
The U.S. Energy Department announced on Friday that it will begin repurchasing oil to refill its Strategic Petroleum Reserve that The Wall Street Journal noted will be a $4 billion “windfall” for the U.S. government due to depressed oil prices.
The report said Washington sold 180 million barrels of crude at the average of $96.25 per barrel, which was above the recent marketplace price of $74.29.
TRENDPOST: The price of oil is a good gauge to get a sense of the global economy and the fact that crude prices are so low—even after OPEC+’s decision to reduce output and amid the EU’s sanction war against Russia—should be concerning to the entire equities market.
GOLD: Gold was trading lower on Monday, down $3.80 per ounce, or 0.21 percent, to $1,796.40.
The precious metal usually benefits from a weaker dollar and lower Treasury yields. Traders believe that recession fears will help support the safe-haven asset. Investors say gold is “sending out mixed messages” as the Federal Reserve continues its push for rate hikes.
Edward Moya, senior market analyst at OANDA, told Kitco News that he is bearish in the short-term, but bullish in the long-term.
“We are going to see gold traders being cautious here. Because of lighter liquidity, it will still be more of a one-way trade and pressure gold,” Moya said. “Right now, we need to price in more Fed tightening, more ECB tightening, and interest rates going up.”
But he estimates that gold will emerge in 2023 as a safe haven and the market will “start to see more strains on crypto and more pressures with economic data deteriorating quickly, gold will start to see more safe-haven flows next year.”
BITCOIN: The world’s most popular crypto hovered in the $16,700-range yesterday as traders consider the Fed’s next moves.
There is hardly any investment that has as many passionate detractors and supporters as bitcoin. Some see the digital currency as the clear answer to an immoral Federal Reserve, while others consider the currency as Tulip Mania Part II.
Expect more turbulence in the coming weeks as the global economy suffers. But advocates should take some comfort that bitcoin continues to find support in its current range given the downfall of FTX.
JUNK BOND DEFAULTS COMING OUR WAY, ECONOMISTS WARN
The U.S. Federal Reserve’s months-long campaign of rising interest rates has primed the $1.4-trillion U.S. market in highly leveraged loans or “junk bonds” for a two-year wave of defaults that will at least double the current default rate of 1.6 percent, analysts told the Financial Times.
JPMorgan’s analysts see defaults rising to 3.5 percent next year and 4.5 percent in 2024. Morningstar thinks the rate is likely to be 2.5 percent by next September.
However, some observers forecast that one in ten highly leveraged companies will walk away from their loans, the FT noted.
For example, Deutsche Bank foresees defaults reaching 5.6 percent next year and then leaping to 11.3 percent in 2024, rivaling 2009’s all-time record rate; economists at USB expect defaults to reach a whopping 9 percent already in 2023.
Companies with bonds rated B or CCC, close to the worst in terms of risk, now comprise 75 percent of the leveraged loan market, compared to 62 percent in 2012, UBS calculated.
Many troubled companies availed themselves of the Fed’s rock-bottom interest rates during the COVID War and borrowed—some time to pay off older loans with higher interest rates—to keep themselves in business, often issuing bonds with variable interest rates that have risen by multiples since spring.
High leverage also has been a favored way that private equity firms finance corporate takeovers.
In 2021, leveraged loans totaled $615 billion, according to data service LCD, the highest since 2000 when the service began keeping records.
Now many of those loans are either coming due, need to be refinanced at hugely higher interest rates, or need to keep up with vastly costlier coupon payments to bondholders.
In any case, the slowing global economy is not giving those firms enough business to be able to afford those costs. Also, the growing likelihood of a recession in the near future threatens to whack corporate earnings.
“It’s the U.S. loan market that has the most fundamental risk because that’s where the floating rate debt has combined with aggressive re-leveraging,” Steve Caprio, Deutsche Bank’s chief rate strategist, told the FT.
Junk bonds are “the weakest link in U.S. credit,” UBS analysts wrote in a recent research note, expressing fears that defaults could contaminate the market for collateralized loan obligations (CLOs), which are bundles of debt from various borrowers that are sold to investors at different risk levels.
If the market for CLOs freezes, default rates could skyrocket, analysts noted.
The market for junk debt issues has decelerated this year to $225 billion as of 7 December, its smallest since 2010, the FT noted.
TODAY: DOW SEES MODEST GAINS TO END LOSING STREAK
The Dow Jones Industrial Average closed 92.20 points higher today, or 0.28 percent, to 32,849.74 and the S&P 500 was also up 3.96 points, or 0.10 percent, to 3,821.62. The tech-heavy Nasdaq was up 1.08 points, or 0.01 percent, to 10,547.11.
The big news on The Street today was the Bank of Japan’s decision to become more hawkish and raise its benchmark bond yields to 0.5 percent. The bank, which has been hesitant to keep pace with other central banks to raise rates, said the move was intended to “improve market functioning and encourage a smoother formation of the entire yield curve, while maintaining accommodative financial conditions.
CNBC, citing FactSet currency data, reported that the yen saw its biggest single-day rally against the U.S. in 27 years. The U.S. dollar was down as much as 4 percent against the yen.
Deutsche Bank analysts told clients the move by the bank was significant because a tighter BOJ policy would “remove one of the last global anchors that’s helped to keep borrowing costs at low levels more broadly.”
The recessionary fears and the Fed’s monetary tightening have investors looking to established blue chip stocks. The Wall Street Journal reported that Tesla was recently worth less than Johnson & Johnson for the first time since 2020.
Elsewhere, London’s FTSE saw slight gains and was up 9.31 points, or 0.13 percent, to 7,370.62 and the STOXX600 index was down 1.69 points, or 0.40 percent, to 424.18. In Asia, Japan’s Nikkei fell 669.61 points, or 2.46 percent and Hong Kong’s Hang Seng was also down 258.01, or 1.33 percent, to 19,094.80.
South Korea’s Kospi was down 18.88, or 0.80 percent, to 2,333.29. China’s Shanghai Composite was down 33.35, or 1.07 percent, to 3,073.77 and the Shenzhen Component lost 175.58 points, or 1.58 percent, to close the day at 10,949.12.
The main concern in the Asian markets is the risk of recession in the U.S. as the Federal Reserve looks to be ready to continue with rate hikes to bring down inflation. There is also concern that China will not be able to contain its COVID-19 outbreak.
There is a feeling among economists that the world is about to absorb a global recession. Some economists say these central banks, which have downplayed the inflationary risks, would rather risk doing too much than to have to hike rates again in the future.
The normally dovish Bank of Japan made a surprise decision today to allow Japanese government-bond yields rise to 0.5 percent from 0.25 percent, a move that caused the yen to rise.
OIL: Brent crude was trading lower today and was down 72 cents a barrel, or 0.86 percent, to $79.10 and West Texas Intermediate was also down 9 cents a barrel to $75.10 as recession fears continue to spook the oil market.
The U.S. dollar fell to 131.50 Japanese yen from 136.99 yen. The euro also rose to $1.0620 from $1.0604. Oil traders were also eyeing the major winter storm over much of the U.S. that could lower demand.
GOLD: The precious metal was up $26.80, or 1.49 percent, to $1,824.50 an ounce and silver jumped $1.051 an ounce to $24.24. Despite global turmoil, spot gold is nearly flat this year, down 0.3 percent.
TREND FORECAST: Back in September, when gold slumped to its lowest price since April 2020 at $1,626.41, we had forecast that gold had bottomed out… it has.
As economies sink deeper into recession, there is going to be a big push by the Bigs for central banks to lower interest rates so they can make more money in all business sectors… financial, industrial, service, tech, etc.
And as Gerald Celente has said gold should be trading significantly higher than its current price due to all the world’s uncertainty. The Ukraine War is expanding, and Kyiv is becoming more desperate for NATO to take an active role in the conflict. We forecast that low gold prices are just temporary and it remains the world’s #1 safe haven asset.
BITCOIN: Bitcoin saw midday gains today and was up $427.70, or 2.60 percent, to $16,867.40 after a year where the world’s most popular crypto saw a 60 percent loss of its value.
Reuters noted that it is not just bitcoin that saw major losses. The entire crypto ecosystem lost $1.4 trillion the past year and has been a less attractive investment. The report, citing data provided by CoinShares, noted that there was $498 million invested in cryptos in 2022 compared to $9.1 billion in 2021.
To illustrate how cryptos lost their luster, the report spoke to James Malcolm, the head of FX strategy at UBS. He said in the beginning of 2021, he spent about 70 percent of his time talking to clients about cryptos, but now spends about 2 percent of his time talking about digital currencies.
TREND FORECAST: With so many uncertainties in the economy and the recent downfall of FTX, it is unsurprising that people are hesitant to invest in the non-yielding digital currency. You have to remember that bitcoin reached its all-time high when Americans were being flooded with COVID-19 stimulus checks—while the Fed funds rates were near zero.
Of course, bitcoin HODLERS see the recent rate hikes by the Fed as a shining example of why an alternative like bitcoin is essential. Bitcoin was up after the Bank of Japan’s policy decision. Bitcoin also benefited also from a weakening U.S. dollar.
One Twitter user posted, “Friendly reminder that the Bank of Japan printed itself $ and now owns 7 percent of Japan stock market. This is ultimate goal of Fed & other Central Banks. I have faith that humanity will break from the shackles before it’s too late.. we have Bitcoin, Ethereum & Crypto.”
However, on the downside, there will be more government regulation imposed on cryptocurrencies and as we forecast back in March 2020, governments will be going to go from “Dirty Cash to Digital Trash,” and when they do, they will ban digital competition.