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22 August 2023, Homepage Featured, TRENDS ON THE U.S. ECONOMIC FRONT – Aug 22 2023

ECONOMIC UPDATE – MARKET OVERVIEW

August 22, 2023August 22, 2023
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ECONOMIC UPDATE – MARKET OVERVIEW

It’s barely mainstream news. Most people don’t have a clue what in the real world is going on. Flooded with “news” about Donald Trump indictments, Women’s World Cup soccer, the latest tropical storm, etc., the socioeconomic and geopolitical trends shaping the future aren’t clickbait worthy to capture the crowd.

Need more proof? Illustrating the level of mass stupidity, “Trump indictments boost MSNBC primetime ratings”—Axios.

What are some of the “news” items that should be making center headline stage that the plantation workers of Slavelandia should be tuned into? 

How about the Office Building Bust that will be a major economic bullet that will destroy banks across the country and around the world. See:

Crisis Ahead

Barely noted by the public and barely reported by the mainstream so-called “business news” is the coming banking crisis. 

Another week, another week of bank downgrades. No surprise to Trends Journal subscribers. We have been forecasting the coming banking crisis as a result of the COVID War which has destroyed the commercial real estate sector, particularly office buildings, many of which are vacant and/or with low occupancy rates as remote work has become reality.

As we reported, the trend is global. From Canary Wharf in the U.K. to Toronto whose offices are half empty, the office building bust will destroy much of the banking sector.  

Yesterday S&P Global cut its credit ratings of five banks while downgrading three others because of the troubled commercial real estate sector and higher funding costs.

Also, the higher the Fed raises interest rates, the lower banks’ ratings will fall since they must give depositors higher interest rates on CDs, money market accounts, and savings deposits.

And, as Wall Street on Parade has noted, “Since April 13, 2022, there has been the largest upheaval in the movement of deposits in the past four decades.” 

And today, they note, the 3-month T-Bill is yielding 5.43 percent; the 6-month T-Bill is yielding 5.48 percent; the two-year Treasury Note is yielding 5.01 percent; while the 10-year Treasury Note is yielding 4.34 percent.

Stock You!

Not only are investors and gamblers pulling their money out of banks, with the S&P 500 down nearly 5 percent this month, they are also pulling it out of the stock market. 

According to Refinitive Lipper, over the past 5 weeks, nearly $12 billion was yanked out of stock funds, with most of it, some $9.1 billion, pumped into money market funds. The Federal Reserve data retail money market funds grew over 25 percent this year and are now holding $1.5 trillion in cash.

TREND FORECAST: We maintain our trend forecast that when the summer season in the Northern Hemisphere ends and the vacation-state-of-mind wakes up to reality in late September/October, there will be a strong downward trend hitting the equity markets. Also, the banking crisis will worsen. 

While most of the mainstream media had predicted that housing prices would sharply drop as interest rates rose higher, we disagreed. The housing boom that was generated with ultra-low interest rates was unlike the fully artificial one of the early 2000’s that was inflated with fictitious subprime loans: “Don’t have a job? Deep in debt? Don’t worry sign here,” was the scam the Bankster Bandits pulled on the population… and got away with it.

Not only did they rob from the poor to give to the rich, firms such as Blackstone, the world’s largest alternative asset manager, private equity firms, venture capitalists, and hedge funds created a new “trend” by buying up slews of foreclosed single-family homes and then renting them out to the plantation workers of Slavelandia.

And back to the Banksters cleaning up while the little people went down, the Federal Reserve jumped in to save the failing banks that created the fraud that ignited the Panic of ‘08. Unlike the homeowners whose failures are too small to matter, for the “Too-Big-to-Fail” banksters, according to the Levy Institute at Bard College, the Federal Reserve gave them $29 trillion… which bailed them out and enriched them.

Then and Now

Meanwhile, there is concern that inflation, while down, still has uptrend potential when it comes to what the plantation workers of Slavelandia can buy and own.

Today, the National Association of Realtors reported that sales of previously owned homes fell 2.2 percent in July from June. With supply tight—there are 14.6 percent fewer homes for sale than July of 2022 and half as many homes for sale in 2019, before the 2020 COVID War—and with demand high, the median price of a home sold in July was $406,700… up nearly 2 percent from last July. 

With fewer homes for sale and prices still high and mortgage rates in the 6.5 percent to 7 percent range, July registered the lowest amount of home sales since 2010 at the depth of the Great Recession.

TREND FORECAST: With America’s national median household income at around $71,000, housing supply limited and high mortgage rates, the facts are clear that more people will be renting apartments than buying them.

And, when the equity markets go down sharply in the coming months, home prices will begin to decline… but not rapidly or dramatically.

LAST WEEK: STOCKS SLUMP, T-YIELDS UP

The three major U.S. stock indexes each gave up 2 percent or more last week while yields on treasury securities climbed higher than they have in as many as 16 years.

“The market seemed to be a bit ahead of itself in these last couple of months,” Eric Kelley, chief investment officer at UMB Financial, told The Wall Street Journal. “It was due for a slowdown.”

Also, yields on government securities are comfortably above 4 percent, offering their best returns in years and also avoiding the sudden dramas that can define stock markets.

Since the Great Recession, investors have believed in TINA, the WSJ noted—the idea that interest rates are so low that “There Is No Alternative” to putting money into stocks if an investor wants a decent return.

“Now there are plenty of alternatives,” Doug Peta, chief strategist at BCA Investments, said to the WSJ.

Money market funds, which invest in secure, short-term investments, are paying more than 5 percent and collected about $36 billion in new cash last week. See “High Interest Rates are a Windfall for Savers” in this issue.

Markets are awaiting Nvidia’s earnings report; the trillion-dollar chip company makes most chips used in artificial intelligence and its performance will benchmark AI’s outlook for many investors. 

Also, U.S. Federal Reserve chair Jerome Powell will speak at a Fed conference next week. Some investors are sitting on the sidelines until he expresses his view of where interest rates are going. 

For the week, the Dow Jones Industrial Average slid 2.2 percent, the NASDAQ was also down 2.2 percent, and the Standard & Poor’s 500 index shed 2.0 percent.

Treasury bond yields continued their rise, partly riding on the belief that the U.S. Federal Reserve might raise interest rates again next month. 

The benchmark 10-year treasury note carried a 4.251-percent yield at Friday’s closing. It edged down from Thursday’s 4.307 percent, which was the note’s highest close since 2007.

Short-term treasury bills, up to a one-year maturity, are returning more than 5 percent.

Gold’s U.S. spot price was down 0.1 percent for the week to $1,902.00 at 3 p.m. U.S. EDT on 18 August.

Brent crude moved down 1 percent to $84.80 at 5 p.m. U.S. EDT on 18 August. West Texas Intermediate also slipped, falling 1.3 percent to $81.25.

Bitcoin tumbled 12 percent through the week, trading at $25, 882.70 at 5 p.m. U.S. EDT on 18 August. Treasurys’ high yields helped to draw money out of crypto, analysts said, sinking the sector by more than $1 billion for the week.

London’s FTSE 100 lost 3.5 percent last week. The Europe-wide Stoxx 600 was off 2.3 percent.

The Nikkei 225 shed 3.1 percent. South Korea’s KOSPI plunged 4.1 percent. The country’s economy is driven largely by exports and China’s continuing malaise is hurting manufacturing.

Chinese stocks are still being battered by the country’s economic crisis and Beijing’s failure to intervene. The Hang Seng index in Hong Kong dumped 4 percent, the CSI Composite 1.5 percent, and the SSE Composite 0.8 percent. See “Hong Kong Equities Enter Bear Market” in this issue.

YESTERDAY: WALL STREET MIXED AS TECH STOCKS SEE GAINS

The Dow Jones Industrial Average was down 36.97, or 0.11 percent, yesterday to $34,463.69 and the benchmark S&P 500 was up 30.06, or 0.69 percent, to 4,399.77. The Nasdaq Composite was up 206.81, or 1.56 percent, to 13,497.59. 

Stock traders will be monitoring comments due later in the week from Fed Chairman Jerome Powell. There is a feeling on the Street that interest rates will either stay in place or even rise given the strength of the economy and persistently high inflation.

The Nasdaq Composite benefited from NVIDIA, the AI company, and Tesla both rising more than 7 percent. They are due to release quarterly results later this week. 

Elsewhere, London’s FTSE was down 4.61, or 0.06 percent, to 7,257.82 and the benchmark STOXX600 was up 0.22, or 0.05 percent, to 448.66. Hong Kong’s Hang Seng was down 1.8 percent and Japan’s Nikkei was up 0.32 percent to 31,565.64. South Korea’s Kospi was up 0.17 percent to 2,508.8. China’s Shenzhen Component was down 138.12, or 1.32 percent, to 10,320.39. The Shanghai Composite shed 38.98, or 1.24 percent, to 3,092.98.

OIL: Worries out of China continue to put pressure on oil prices. Brent gave back 29 cents, or 0.33 percent, to $84.52 a barrel and West Texas Intermediate was down 35 cents, or .43 percent, to $80.90.

“It seems that (China’s recovery) is not going to happen,” John Kilduff, partner at Again Capital, told Reuters. “It’s doubtful they’re going to be buying. They bought a lot of crude for storage earlier in the year. They’re sitting on a lot of crude.”

China is trying to recover from the draconian zero-COVID policy that killed businesses in the country. The country’s central bank cut its one-year loan prime rate by 10 basis points to 3.45 percent on Monday, which was less than anticipated. Investors.com noted that the bank’s move shows Beijing is determined to support the economy as it tries to regain its footing. 

TREND FORECAST: Reports are beginning to emerge in the U.S. that COVID cases are on the rise, and the Biden administration is already urging Americans to—once again—roll up their sleeves. China showed the world the economic toll that lockdowns have on society. Months after the COVID-19 “pandemic” became official, West Texas crude hit $0 a barrel, because there was nowhere to stick it.

Another round of lockdowns will further destroy the global economy that is still far from recovery. 

GOLD: The precious metal was up to 0.26 percent to $1,894.40. 

Gold was helped yesterday by the U.S. dollar weakening slightly, but faced some headwind with a rise in U.S. Treasuries. CNBC noted that the long-term Treasury was up 9 basis points to 4.35 percent, and was trading near highs not seen since 2007.

TRENDPOST: The precious metal is down about 3.6 percent for the month, which DailyFX noted is the worst performance since February. High Treasury yields dim the bullion’s shine for investors, and more consistently high interest rates will keep the U.S. dollar rolling along. Gerald Celente has said the minute that the Fed lowers rates, the dollar will fall and gold prices will spike.

BITCOIN: The world’s most popular crypto was trading down slightly to $26,095.30 by midday yesterday. Bitcoin has been struggling since last week’s selloff.

Alex Kuptsikevich, an analyst at broker FxPro, told Barron’s that it’s concerning that Bitcoin prices are lower today than they were in April.

“Bitcoin closed the week with a notable drop below its 200-week and 200-day moving averages, signaling a shift to a bearish trend,” he said. 

TREND FORECAST: We see cryptos as a gamblers’ game at the moment, and the facts support our feelings. CoinTelegraph, citing analytics firm Glassnode, reported that bitcoin holdings owned by speculators are “nearly 90 percent in the red” after last week’s decline. These short-term-holders need the price to reach $28,500 to break even, the report said. 

As we noted last week, and stick by it, for the time being, the young juice flowing into cryptocurrencies has dried up. It will take an economic crisis of sorts to generate strong growth. Bitcoin is still in a stable range.  

TODAY: DOW DOWN AS ECONOMIC DATA DIMS

The Dow Jones Industrial Average fell 174.86, or 0.51 percent, to $34,288.83 today and the S&P 500 also gave back 12.22, or 0.28 percent to close at 4,387.55. The tech-heavy Nasdaq was barely a bright spot… up just 8.28 points, or 0.06 percent, to 13,505.87.

The hammer is coming, and the data is there for all to see. 

Macy’s and Dick’s Sporting Goods released their quarterly earnings today that showed the American consumer could be tightening their belts and having a harder time making credit card payments due to soaring interest rates on store cards that are a result of Fed hikes. Shares for Dick’s fell 24 percent. 

Lauren Hobart, Dick’s CEO, blamed an increase in thefts for impacting the company’s bottom line.

“While we posted another double-digit [earnings before taxes] margin, our Q2 profitability was short of our expectations due in large part to the impact of elevated inventory shrink, an increasingly serious issue impacting many retailers,” she said. 

She was referring to shoplifting that has taken a bite out of the profits of retailers across the U.S., which has been a direct result of COVID-19 lockdown mandates.

TREND FORECAST: Adding to the struggles of millions of Americans, J.D. Power found that 51 percent of consumers cannot pay off their entire credit card balance at the end of the month and are forced to pay interest, which is the first time the portion who cannot pay is larger than the amount who can.

We had long warned that the higher interest rates rose, the heavier the consumer and business would rise.

We maintain our forecast for a sharp market downturn in late September/October. And as we continue to note, with investors getting over 5 percent when they put their money in money markets and U.S. Treasuries with next-to-nothing risks… as long as interest rates remain high, equity markets will go lower. 

Elsewhere, London’s FTSE was up 12.94, or 0.18 percent, to 7,270.76 and the STOXX600 was up 3.04, or 0.68 percent, to 451.70. The STOXX600 hit its all-time high on 7 November 2021 when it touched 483.44. 

In Asia, Japan’s Nikkei was up 291.07, or 0.92 percent, to 31,856.71 and South Korea’s Kospi was up 6.94, or 0.28 percent, to 2,515.74. Hong Kong’s Hang Seng gained 167.72, or 0.95 percent, to 17,791.01. China’s Shanghai Composite was up 27.36, or 0.88 percent, to 3,120.33 and the Shenzhen Component was up 54.33, or 0.53 percent, to 10,374.73. 

Stock traders were wondering if there was some kind of glitch that sent Chinese stocks higher in the final hours of trading because Bloomberg said there were no obvious market triggers. The report noted that stocks in the region have been down in recent weeks given the poor economic data out of China and the property market slump. 

OIL: Brent crude was down 43 cents a barrel, or 0.51 percent, to $84.03 and West Texas Intermediate fell 36 cents, or 0.45 percent, to $79.77. 

Eurasia Group said in a note today that China’s economic weakness “will create a ceiling for them this year, especially as Beijing appears committed to avoiding large-scale fiscal stimulus,” Reuters reported.

TREND FORECAST: Another drag on oil prices has been Fed rate hikes in the U.S. and there seems to be no good economic news on that front. The looming Office Building Bust will compound recessionary pressures in the U.S. and OPEC+ will need to continue to cut its supply to keep prices leveled and not oversaturate the market. 

Also, as we detail in this and previous Trends Journals, the deeper China’s economy falls, so too will oil prices fall. However, there are always the wild cards such as an escalating Ukraine War and military tensions rising in the Middle East… which if intensified, will push oil prices much higher. And even at their current levels, oil prices are costly to most consumers. 

GOLD: The cost of the precious metal was up 0.13 percent to $1,896.90 today as Treasuries continue to decline. 

Despite recessionary fears and economic instability, the world’s best safe-haven investment has not seen prices jump in recent weeks. 

The Federal Reserve continues to prop up the U.S. dollar by maintaining interest rates between 5.25 percent to 5.5 percent, which is a two-decade high. The central bank has been raising rates to bring down inflation which peaked at 9.1 percent. (The current rate is 3.2 percent. The Fed said its goal is 2 percent.)

Kitco noted that gold did not benefit from the National Association of Realtors that sales of previously owned homes in the U.S. fell 2.2 percent in July, which is higher than expected.

“Two factors are driving current sales activity – inventory availability and mortgage rates,” Lawrence Yun, chief economist at the National Association of Realtors, said in a release. “Unfortunately, both have been unfavorable to buyers.”

TREND FORECAST: There seem to be three theories floating around Wall Street about the future of interest rates. Some believe the Fed will act quickly to bring down inflation by raising rates again before the end of the year, while others believe that the Fed will sit on the current rates for a while. There are also economists who have floated the idea that the central bank could make 3 percent inflation its target rate, which would bode well for gold prices, which is a hedge against inflation.

BITCOIN: The world’s most popular crypto struggled below $26,000 much of the day.

The crypto was trading down $286.40, or 1.10 percent, to $25,838.70 as of 2:35 p.m. ET. 

Bluntz, a popular crypto trader on X who called the 2018 bear market bottom, told followers that “June lows still need to be swept before calling bottoms, but it will probably be the last GOOD buying opportunity of the next few years.”

The Daily Hodl reported that Bluntz expects the total market cap of all crypto to fall to $880 billion. The current market price is $1.032 trillion.

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