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U.S. MARKETS STUMBLED INTO THE NEW YEAR
As we have detailed since the beginning of the COVID War, Wall Street’s spiking stock market was, and still is, a total disconnect from Main Street.
Plain and simple: Equites were driven higher by the unprecedented infusions of cheap monetary methadone pumped into the system by the Bankster Bandits to keep the Wall Street money junkies on their high. As we have reported, Merger and Acquisition activity and stock buy-backs hit all-time highs last year… along with PE ratios.
The numbers could not be clearer. The billionaires got richer last year as the middle class keeps shrinking.
CNBC said billionaires Elon Musk, Jeff Bezos, Bill Gates, Larry Page, Mark Zuckerberg, Sergey Brin, Steve Ballmer, Larry Elison, and Warren Buffett grew their combined wealth to about $341 billion in 2021.
As for the plantation workers of Slavelandia, median income fell 3 percent while the cost of living rose nearly 7 percent over the past two years.
As noted by CNBC, the average U.S. household with debt now owes $155,622, or more than $15 trillion altogether, including debt from credit cards, mortgages, home equity lines of credit, auto loans, student loans and other household obligations—up 6.2% from a year ago.
TREND FORECAST: Until there is a stock market crash, Main Street will be unaware of the factual data of how deeper in debt the average American has sunk, how their wages are lagging behind inflation and how deep their standard of living has declined.
When will equities crash? When the Fed rate rises to 1.5 percent.
Remember, the Fed kept lying, saying they would raise interest rates when the inflation rate passed 2 percent. Then, for nearly a year, they continued their lies claiming the spiking Consumer Price Index, which rose 6.8 percent, was “temporary.”
And to illustrate their criminality, three Fed Heads—Robert Kaplan, Eric Rosengren and Richard Clarida—suddenly left their Fed posts after being caught making trades in anticipation of central bank monetary actions.
Therefore, with Fed Chair Jerome Powell announcing today that the Fed will raise rates more over time if needed—while he confirmed our forecast that interest rates will indeed rise—the Bankster Bandits will do all they can to artificially prop up equity markets.
Indeed, as Gregory Mannarino makes perfectly clear in his article, “MARKETS: Expect Debts, Deficits, And Inflation to SURGE MUCH HIGHER.”
Another scenario to consider is that since the Fed runs the U.S. government—indeed, the U.S. Treasury Secretary Janet Yellen was the Fed Head before Powell—they will raise interest rates now, let the economy sink, and then quickly lower rates in anticipation of the 2024 Presidential Elections. Remember, the bottom line: “It’s the economy, stupid.”
Interest Rate Panic
In this year’s first week of trading, the Dow Jones Industrial Average lost 0.3 percent, the Standard & Poor’s 500 Index gave up 1.9 percent, and the NASDAQ shed 4.5 percent, its worst week since February 2020 and its worst entry to a new year since 2015 (see related story in this issue).
Tech stocks lost an average of 10 percent of their market value during the first week of 2022, but began to climb back out of their trough on Monday, 10 January.
The tech rout dragged down Apple and Google owner Alphabet, two stocks that had largely escaped the tech market’s ups and downs last year.
On Friday, 7 January, alone, the Dow surrendered 5 points, the NASDAQ 144, and the S&P 19.
Yields on 10-year treasury notes climbed through the year’s first five consecutive sessions, rising to 1.72 percent from its December close of 1.51, a return not seen since January 2020.
The treasuries’ pop sparked similar moves in other countries, with Germany’s 10-year rate rising to just below zero, its highest in three years.
As bond prices fell and interest rates rose, investors fled stocks of tech and growth companies, both of which do less well as interest rates climb.
As investors bailed out of businesses that fared well in the COVID War, they retreated to companies that should do well as the economy recovers.
Among favored shares: energy giants, financial institutions, airlines, even some mall owners.
Bond sales sped up after the U.S. Federal Reserve released minutes of its 5 January meeting, at which officials indicated the central bank might hike interest rates in March, much sooner than had been expected.
Investors were even more glum after the latest jobs report showed the U.S. economy creating only 199,000 jobs last month, not the 453,000 that some analysts had been expecting.
The figure indicates that the COVID virus’s Omicron variant, which The Street had written off, is clearly hampering the economy more than had been hoped.
For example, due to COVID infections, U.S. airlines canceled several thousand flights over the year-end holiday season through early this year. On the cruise-ship front, Royal Caribbean International and Norwegian Cruise Line canceled some of their upcoming cruises.
And, with COVID fears rising and vax passport regulations, fewer tourists are traveling, going to trade shows, conventions, business travel etc. In the U.S. for example, according to the NPD Group, customer orders at full-service restaurants were some 18 percent lower in the year that ended in November compared to November 2019…prior to the COVID War.
OpenTable Inc., reports that by the end of December, restaurant seatings were down 32 percent from 2019 levels.
We note these examples to illustrate the disconnect between the illusions of equity market activity and the socioeconomic implications of the COVID War on the real lives and livelihoods of We the People.
Yesterday and Today
Registering its fifth consecutive day of losses, yesterday, the broad market gauge moved lower with the Dow down 162.79 points and the S&P 500 off 6.74 points.
On the upside yesterday, after slumping 2.7 percent, the tech-heavy Nasdaq snapped its four day losing streak, closing up 6.93 points… or less than 0.1 percent.
The erratic trading followed the 10-year Treasury yield rising to 1.779 percent… it’s highest level since January 2020… a month before the COVID War began.
In Europe, the Stoxx Europe 600 closed down 1.5 percent, while in Asia the Shanghai Composite Index rose 0.4 percent.
Today
The big economic news today was Fed head Jerome Powell declaring before the U.S. Senate Committee on Banking, Housing and Urban Affairs that “This year, we see an economy where the labor market is recovering rapidly and inflation is well above 2 percent. This tells us that the economy no longer needs or wants the highly accommodative policies we had in place to deal with the pandemic. But it is a long way to normal.”
Normal or not, after sinking in the morning following Powell’s statement that “If inflation does become too persistent, that will lead to much tighter monetary policy and that could lead to a recession,” because the Fed would aggressively raise interest rates, the Dow closed up 183 points and the S&P finished the day up 42.78 points.
Despite the fears of surging bond yields since the start of this year and fears of rising interest rates rattling the tech-heavy Nasdaq, it rose 1.4 percent today.
Again, these “growth” sector gambles were sharply driven up by the cheap monetary methadone injected by the Bankster Bandits. The low rates made bonds less attractive to the gambler gang that pivoted into high-risk assets.
Tech-Wreck
Four in ten corporations listed on the tech-heavy NASDAQ stock exchange have seen their share prices plunge by 50 percent from 2021’s peaks, according to Sundial Capital Research, and fully half of the exchange’s firms are in a bear market.
A bear market is defined as a stock’s or market’s loss of at least 20 percent from a recent high price.
Not since the dot-com bubble burst at the beginning of this century have so many individual tech firms fared so poorly while the NASDAQ itself remains at near-record levels, Bloomberg noted.
“Whatever the fundamental and macro considerations, investors have been selling first and trying to figure out the rest later,” Jason Goepfert, Sundial’s research chief, told Bloomberg.
“Valuations are at historic highs, companies are raising billions based on fairy dust, and the Fed is signaling a tightening cycle,” he pointed out. “All these are scaring investors that we’re on the cusp of a repeat of 1999-2000.”
Tech stocks have been battered since the year began, when a bond market sell-off boosted yields on treasury securities to 1.72 percent; tech stocks typically fare badly as interest rates rise (see related story in this issue).
Tech’s troubles worsened on 5 January, when minutes of the U.S. Federal Reserve’s December meeting were released, showing the central bank was more likely to raise interest rates as soon as March.
That day’s 3.3-percent tumble was the NASDAQ’s worst one-day drop since February 2021.
GOLD/SILVER: Despite fears of rapidly rising interest rates, today precious metals prices rose on expectations of rising inflation. Today, gold jumped up nearly $24 to close at $1,822 per ounce and silver rose 1.59 percent to close at $22.82 per ounce.
TREND FORECAST: It should also be noted, but absent mainstream media coverage, is that as interest rates rise, it will cost more to service the $30 trillion U.S. debt burden… which will in turn also put downward pressure on the U.S. dollar and push safe-haven assets such as gold, silver and bitcoin higher.
And beyond government debt, the higher interest rates rise, the heavier the business and personal debt loads grow. Thus, the higher the levels of defaults, the deeper the economy falls. And the deeper it falls, the higher safe-haven assets will rise.
Again, as we note in this and previous Trends Journals, 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 as investors seek safe haven assets.
TREND FORECAST: Also, minus a wild card event, such as the Fed rushing to push interest rates much higher than anticipated, we forecast that gold will stay above $1,700 per ounce and silver’s bottom will be in the $18 per ounce range.
OIL: Despite the mainstream media hyping the Omicron virus scare, Wall Street and the Fed Chair are now repeating what we had forecast back in our 21 December 2021 letter to subscribers… that the COVID War would begin to wind-down around the end of March, mid-April.
Indeed, today the Fed Head Powell said the economic impact of the Omicron variant will be short lived, adding that economic growth will be positive. On this, and news of oil production outages in Libya, Brent Crude spiked 3.56 percent to close at $83.75 per barrel, while West Texas Intermediate spiked 4.3 percent to close at $81.46 per barrel.
TREND FORECAST: With Brent Crude only down some $3 from its 2021 high—a year that oil prices spiked 50 percent—the higher oil prices equal higher inflation… and a heavier debt burden on businesses and consumers. And, with interest rates rising and the debt loads getting heavier, plus inflation increasing the cost of living and running business, defaults will escalate.
Furthermore, should military conflict erupt in the Middle East and oil prices spike to above $100 per barrel, it will crash equity markets and the global economy.
BITCOIN: As evidenced by this headline on CNBC today, the major media is selling bitcoin fear:
“Bitcoin briefly tumbles below $40,000 to the lowest since September as investors shed risk”
Yet, despite this blaring headline, as we go to press, bitcoin was up more than 3 percent today, trading $42,747 per coin.
TREND FORECAST: Nothing goes straight up or straight down. It will be a rocky road ahead. Initially, as the Fed raises interest rates, safe haven assets which pay no dividends, will decline in price as investor’s park money in interest-bearing accounts… where they can keep their money safe and earn interest.
However, we maintain our GSB—Gold, Silver, Bitcoin—forecast that all three will maintain and then pass their current and previous highs after the U.S. Fed rate hits 1.5 percent, equity markets sharply fall and the economies sink into Dragflation: Declining Gross Domestic Product and rising inflation.
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 will lessen as more banks, businesses and investment funds are going crypto, thus, the upward crypto trends, especially bitcoin, will continue to gain momentum.
(For more on bitcoin and other cryptocurrencies, please see our “TRENDS IN CRYPTOS” section.)