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STOCKS FALL AS COVID WAR HEATS UP IN EUROPE
The tech-focused NASDAQ gained 4 percent last week, but the Dow Jones Industrial Average slid 0.7 percent and the Standard & Poor’s 500 index dropped 0.1 percent as new COVID-inspired lockdowns in Europe sent investors scurrying to the safety of the dollar and government bonds, The Wall Street Journal reported.
As we have detailed extensively in this Trends Journal, Austria entered a national lockdown on Monday; parts of Germany also are shutting down as well as other nations that are locking down regions and imposing strict mandates… especially on the un-vaxxed.
This isn’t rocket science: The more lockdown and restrictive mandates that are imposed, the more lives and livelihoods will be destroyed and the deeper economies will fall.
Despite previous lockdowns failing and, as we have detailed in the Trends Journal, despite vast majorities getting vaccinated, there is no herd immunity. (See, “NO HERD IMMUNITY FOR THE HERD” and “HERD IMMUNITY HERESY: LIES AND DAMN LIES”) Why are governments locking down again? Is it to fight the COVID War, or as Gregory Mannarino notes, “MORE LOCKDOWNS…EXACTLY WHAT THE CENTRAL BANKS WANT”.
The gloomy view also pushed down oil prices for the fourth consecutive week, with benchmark Brent crude ending down 2.9 percent to slip below $79 a barrel, then edging back up close to $80 on Monday this week.
Brent crude December futures closed Monday down 0.4 percent at $76.48.
Prices slipped partly on news that U.S. president Joe Biden will coordinate a release of oil from the strategic petroleum reserves of China, India, Japan, South Korea, and the U.S. (See related story in this issue.)
Last week’s close was “a very typical end-of-week selloff as traders decide it’s not worth the risk to await more potential demand-side bearish news,” research firm Rystad Energy commented.
Japan’s Nikkei 225 index dipped mid-week but rallied to end the five-day trading period essentially flat.
The Hang Seng index in Hong Kong edged up on Monday and Tuesday, then slumped Friday to close the week down 407 points at 25,039, reflecting fears about the COVID virus’s renewed economic impact.
Prices on Shanghai’s SSE Composite Index gained 1.1 percent for the week. The Shenzhen SZSE Composite Index eked out a gain of less than 0.1 percent, closing at 14,751.
TRENDPOST: Speaking at the Abu Dhabi International Petroleum Exhibition and Conference last week, Russian deputy energy minister Pavel Sorokin echoed the forecasts of several analysts in various media by predicting an oil oversupply some time after the first quarter of 2022.
Oil inventories are no longer drawing down, he said to Oilprice.com, indicating that the market is now balanced.
New COVID-related lockdowns in Europe and elsewhere are slowing demand for oil but OPEC and its allies have not cut production.
Prince Abdulaziz bin Salman, Saudi Arabia’s oil minister, added that global oil inventories could begin rising in December and into next year’s first quarter, presaging an oversupply.
TREND FORECAST: An oil glut appearing next spring or summer will not be sustained. OPEC and other oil-producing nations would dial back production just enough to optimize profits without speeding the world’s shift toward renewable power sources, as we have noted in “OPEC+ Rejects World’s Plea for More Oil” (9 Nov 2021).
This Week
Yesterday, the S&P 500 dipped 0.3 percent, the Nasdaq fell 1.3 Percent and the Dow inched up 0.1 percent after it was announced that the current head of the Bankster Bandits, Jerome Powell would serve a second term.
President Joe Biden cited the need for “stability and independence” in leadership of the U.S. Federal Reserve during times of “enormous potential and enormous uncertainty.”
Biden also chose Lael Brainard to succeed Richard Clarida as the Fed’s vice-chair, overseeing monetary policy.
Fed officials have said that the bank’s $120-billion monthly bond-buying program will end before rates rise. The program is timed to end next June, according to recent Fed statements.
Powell Play
Essentially it is more of the same with the expectations that interest rates will be raised and tapering will continue in 2022. And as we have forecast, the higher interest rates rise, the deeper equities and the artificially pumped up economies will fall.
Indeed, CNBC reported today that “The Nasdaq Composite fell sharply for the second-straight day on Tuesday as higher interest rates appeared to put pressure on high-flying tech stocks.”
“Appeared to put pressure?”
Again, it is a Ponzi scheme. Unprecedented trillions have been injected into economies and equites across much of the globe. As we have forecast for the better part of a year, while the media keeps blaming supply chain disruptions as the cause for spiking inflation, what sparked the inflation boom was the monetary methadone injected into the system by the central banksters to keep the money junkies who play and rig the markets on their “high.”
Today, the Nasdaq was down 0.5 percent, the S&P inched up 0.2 percent and the Dow jumped up nearly 200 points.
Over in Europe, with concerns of new lockdowns and COVID War mandates, its pan-European Stoxx 600 provisionally fell 1.1 percent, with tech stocks taking the biggest hit, falling 3.1 percent while most sectors and major bourses slipped into negative territory.
In Asia, MSCI’s gauge of Asia Pacific fell 0.49%, while Hong Kong’s Hang Seng Index fell 1.2 percent. With inflation rising, such as the core inflation rate in Singapore rising 1.5 percent in October on a year-on-year basis—its biggest spike in 3 years—concerns grow that central banks will raise interest rates which will dampen equity and economic growth.
GOLD/SILVER: Last Tuesday gold was at $1,851 per ounce and silver was selling at $24.87 per ounce. This week, on news that Jerome Powell will be serving another term as Fed Head, and on growing expectations that the Fed will soon raise interest rates to fight inflation… which was not expected just last week, both precious metals continue their sharp selloff.
Today spot gold dropped nearly 1 percent, closing at 1,788.51 and silver slumped 2.8 percent to close at $23.49 per ounce.
In anticipation of the rate hikes, the dollar index hit a 16-month high and U.S. Treasury yields firmed with the 10-year U.S. Treasury note yield at 1.653 percent and the yield on the two-year U.S. Treasury Note hitting its March of 2020 0.638 percent level. Bond markets have priced in an interest rate hike for June 2022.
As long noted, gold, as well as many other commodities, are dollar based. When the dollar value rises in comparison to other currencies, it costs more to buy gold, thus demand declines and the price of gold tends to fall in U.S. dollar terms.
Conversely, as the value of the U.S. dollar moves lower, gold tends to appreciate as it becomes cheaper to buy with other currencies. And as the dollar moves up, many currencies, particularly the Turkish lira, are going down.
And since Gold does not yield interest, investors switch to interest-bearing assets, such as treasuries.
TREND FORECAST: We have long noted that gold prices would decline as U.S. interest rates rise. However, we maintain our forecast for precious metal prices to rise as investors seek safe-haven assets to counter rising inflation.
Again, we also maintain our forecast that precious metals will decline as interest rates go higher and the dollar gets stronger. However, the economy cannot run without cheap money. Thus, as a result of the cheap money drying up when interest rates go up, the economy and equity markets will sharply decline… which will in turn strongly drive up precious metals and cryptocurrency prices.
OIL: Despite the White House announcing today that it will release 50 million barrels of crude from the Strategic Petroleum Reserve (SPR), Brent Crude jumped up 3.60 percent and West Texas Intermediate rose 2.64 percent closing at $82.57 per barrel and $78.78 per barrel respectively.
“We think Strategic Petroleum Reserves are not a sustainable source of supply and the effect of such market intervention would only be temporary,” Barclays’s analysts wrote in a note before the release, as reported by Reuters.
While 50 million barrels seems like a lot of oil, the U.S. release amounts to about two and a half days of American petroleum consumption, thus the price spike. Moreover, as we have reported, OPEC+ oil gang will do what it can to make sure supply does not exceed demand, which will in turn keep oil prices from declining.
The Biden Pump
U.S. president Joe Biden has asked China, India, Japan, and South Korea to join the U.S. in releasing oil from their strategic petroleum reserves after OPEC+ has refused requests by world leaders to pump more petroleum so gasoline prices can be reduced.
U.S. gas prices at the pump have risen 60 percent so far this year, with prices in California setting records, Oilprice.com reported.
Biden warned OPEC+ that he would act if the cartel did not.
Biden is considering releasing as much as 35 million barrels of crude from the reserve over time, Bloomberg reported.
The coordinated release could bring down oil prices globally if four of the world’s largest oil consumers rely on their reserves instead of buying the same amount of oil day-to-day in world markets.
China drew oil from its reserves in spring and summer, reducing imports by 5.7 percent year over year, Oilprice reported.
India already has been selling small volumes of oil from its national reserve to state-run refineries. About 5.5 million barrels are being released, according to Reuters.
The nation is prepared to draw more from its reserves in concert with other major oil-consuming nations, officials in the government of Narendra Modi told Bloomberg.
Japan is preparing to open its reserves and Prime Minister Fumio Kishida is considering coordinating the release with other nations, Japan’s TV Asahi said.
Recently, China has indicated that it is preparing further releases, although perhaps reluctantly.
Saudi’s rulers fear Biden will revive the nuclear treaty with Iran, enabling that country to export oil once again and force prices lower.
In 2011, the release of 60 million barrels from world oil reserves following supply disruptions during Libya’s revolution were coordinated by the International Energy Agency.
A coordinated release also would show OPEC nations that the world is not at its mercy, Biden administration officials said to CNN.
TREND FORECAST: The bottom line of oil will remain supply and demand. Should nations continue to lock down and impose strict mandates on the un-vaxxed, there will be a considerable economic decline which will in turn drop demand for oil.
However, as we continue to note, should military hostilities occur in the Middle East, particularly between Israel and Iran, Crude Oil prices will spike well above $100 per barrel, which will in turn ignite the Greatest Depression.
Will it occur? Read this first paragraph from this Monday’s New York Times:
Israeli Attacks Spur Upgrade Of Iran Sites
Hopes Dim for Revival of ’15 Nuclear Deal
WASHINGTON — Over the past 20 months, Israeli intelligence operatives have assassinated Iran’s chief nuclear scientist and triggered major explosions at four Iranian nuclear and missile facilities, hoping to cripple the centrifuges that produce nuclear fuel and delay the day when Tehran’s new government might be able to build a bomb.
Imagine if the text read:
Over the past 20 months, Iranian intelligence operatives have assassinated Israel’s chief nuclear scientist and triggered major explosions at four Israeli nuclear and missile facilities, hoping to cripple the centrifuges that produce nuclear fuel and delay the day when Jerusalem’s new government might be able to build a bomb.
We note this not only to illustrate the “allies” hypocrisy of both the media and nations, but of the reality that there may be a military conflict in the Middle East… which beyond the deadly consequences, will spike oil prices.
Indeed, yesterday, Israeli Prime Minister Naftali Bennet said, “Israel against Iran is really the whole world’s battle against a radical Islamist regime that seeks a Shi’ite hegemony under a nuclear umbrella. We hope the world won’t blink, but even if they do, we don’t plan to blink.”
BITCOIN: While there has been some sharp volatility in Bitcoin, and it is down some $11,000 from its recent all-time high, it is still trading in the strong $57K per coin range. It should also be noted that while safe-haven precious metals such as gold and silver took a sharp dive in recent days, bitcoin and other top cryptocurrencies have moved sharply higher today.
TREND FORECAST: We also maintain that a major factor in forecasting the future price of bitcoin and other crypto currencies is dependent upon government regulations. However, that threat in the U.S. and Europe is lessening as more banks, businesses and investment funds are going crypto, thus, the upward crypto trends, especially bitcoin, will continue to gain momentum.
And now, El Salvador, in a partnership with Blockstream, a digital assets infrastructure company based in Canada, has announced plans to issue $1 billion in bitcoin backed bonds next year.
Part of the funds will be used to build a “Bitcoin City that will have no income, property or capital gain taxes.”
(For more on bitcoin and other cryptocurrencies, please see our “TRENDS IN CRYPTOS” section.)