BANKSTERS IN CHARGE. MARKETS KEEP RISING. It was this time a year ago that the COVID War was launched. Fear and hysteria spread across the globe.
In the U.S., schools and Silicon Valley were the first to shut down. Remote learning and work-at-home became the new normal… trends that greatly enriched the high-tech industry.
As the lockdowns accelerated, equity markets plunged, that is, until the U.S. Federal Reserve in early March pumped in an unprecedented $1.5 trillion in loans to Wall Street gamblers.
That wasn’t enough. Equities continued to plunge.
On 23 March of last year, the Dow Jones Industrial Average continued its sell-off, erasing three years of gains. It was on pace to clinch its worst calendar month since 1931.
The S&P 500 dropped 2.9 percent, down more than 30 percent from a record close set on 19 February.
The Street needed more cheap money, and the Senate was blamed for not agreeing on the size of the bailout bill.
What a Difference a Day Makes
The next day, the Dow surged over 2,000 points from its three-year low, on news that Washington would dump $2.5 trillion into the economy to artificially prop it up.
Disconnected from the reality of Main Street, which was just beginning to be locked down and would destroy millions of lives and livelihoods, the U.S. government’s stimulus schemes and the Federal Reserve vowing to purchase Treasury and Mortgage-backed Securities (MBS) to help pump up plunging stocks and keep mega banks and trading houses from crashing did the job.
Equity markets have been on a tear since then, despite unemployment numbers soaring and the GDP plunging.
Rigged Game
The U.S. Federal Reserve, as aptly noted by Wall Street on Parade, “has just become a brand new national legislative body. It will, without any oversight in Congress, decide what corporation and business to save and which to let fail.” They note that “Wall Street’s mega banks and trading houses will, once again have trillions of dollars of toxic securities removed from their balance sheets, including plunging stock through the Fed’s Primary Dealer Credit Facility.”
Moreover, the Fed announced last March that they removed any limit to the amount of treasury bonds they will buy to flood the economy with money during and after the coronavirus crisis.
As we have noted, the Fed secretly pumped in over $29 trillion to the Wall Street Gang during the Great Recession, and it will again, behind the scenes, inject more money into banks, hedge funds, and trading houses to artificially prop them up.
Again, the desperate economic conditions across Main Street have nothing to do with the gambler addicts of Wall Street. The Fed also said back then that it will buy corporate bonds for the first time in history.
The Fed took another extraordinary step to intervene last March by adding $1.1 trillion into the commercial paper market. Commercial paper is a promissory note, usually for no more than nine months, which a business uses to fund day-to-day operations such as payroll. While the Fed can’t lend directly to businesses, it juiced its Commercial Paper Funding Facility, through which the Federal Reserve Bank will purchase 90-day debt from companies.
It worked perfectly. Again, despite the disastrous economic fundamentals, equities keep rising.
New World Order
The Dow is up some 5 percent this month, the S&P 500 5.8 percent, and the NASDAQ spiked 7.4 percent.
As for the S&P 500, it has scored ten record closes since the start of the new year.
Prices floated higher on the accelerating vaccination campaign, strong corporate earnings reports, the growing certainty of President Biden’s $1.9-trillion flood of stimulus spending, and the U.S. Federal Reserve’s renewed promise of low-interest rates and bond market support far into the future.
Bubble?
The S&P is trading at 22.42 times its 12-month projected earnings, well above its 12-month average of 17.95.
Again, this love of gambling in equities continues to accelerate despite the hard data of the unprecedented destruction of numerous sectors of the real economy.
As we keep noting, tourism, trade shows, conventions, entertainment, hospitality, fairs, holiday celebrations, restaurants, airlines, brick and mortar retail, malls… dead and dying. Hundreds of millions out of work, 90 million deep in poverty, according to the IMF.
Millions abandoning big cities, working from home as commercial real estate, rental, and condo markets tank in many nations around the world. “For Rent” signs string the streets from Fifth Avenue to Champs-Élysées. Day after day, week after week, the data pointing to economic decline gets worse, yet stock markets around the world keep rising.
Today’s word on The Street from CNBC is “The only reason to be bearish is there’s no reason to be bearish, Bank of America says.”
“The only reason to be bearish is… there is no reason to be bearish,” Bank of America chief investment strategist Michael Hartnett told clients.
Their survey of 225 mutual fund, hedge fund, and pension fund managers with $645 billion under management showed a majority of investors believe it will be a V-shaped recovery and that global growth is at an all-time high.
The gambler gang is betting that with more people vaccinated, their freedom to live life again will rebound, thus pushing up economic growth. And when all else fails, they are betting on more cheap stimulus money to be injected into the economy.
On the downside, according to the survey, market players are concerned about rising inflation, overplaying the tech stocks, long bitcoin trades, and shorting the dollar trades.
Only 13 percent of respondents said stocks are in a bubble.
Where are the markets heading, when will the bubble burst, when will the Ponzi scheme be over? Read Gregory Mannarino’s new analysis and forecast, “WORLD CENTRAL BANKS: RUNNING A MASSIVE PONZI SCHEME.”
On the market front today, all three major averages hit record highs earlier in the day before pulling back. The NASDAQ fell 0.3 percent, the S&P 500 closed down 0.06 percent, while the Dow hit another record high, closing up 64.35 points.
The latest fear on The Street is that the higher interest rates rise, betting on the bubbling equity markets becomes less attractive. Indeed, for the first time since last February, the 10-year Treasury yield topped 1.25 percent, jumping 9 basis points to hit a one-year high of 1.30 percent.
GOLD/SILVER. With U.S. Treasury yields rising higher and the U.S. dollar index rebounding, investors pulled off non-yielding gold, which sunk some $28, closing below the $1,800 per ounce mark.
It was also reported today that BlackRock, the world’s biggest asset manager, dumped some $471 million worth Gold ETF Gold Shares (GLD) and bought $29 million worth of iShares Silver Trust (SLV) in the fourth quarter of 2020.
A new gold game is being played, and it may continue to push down prices. While we maintain our forecast for gold prices to rise above $2,100 and silver to spike above $50 per ounce this year – it closed flat at $27.30 an ounce. Bitcoin is the new game in town that may keep gold prices soft.
As trend forecasters who monitor the current events forming future trends, we make it 100 percent clear that no one can predict the future. There are too many wild cards, be they man-made or made by nature. And who, a decade ago, would see a wild card future of a digital coin backed by nothing and printed on nothing, named bitcoin, to become the highest-priced single coin asset in the world?
Once the coin of the millennial generation when it came to life in 2009, now major Fortune 500 companies are playing the digital currency game.
Thus, the money flooding into bitcoin is pouring out of gold. However, we maintain our forecast that no matter how high bitcoin flies, there will be a sharp correction and gold will remain the most tangible safe-haven asset that will not be replaced by digital currencies.
BITCOIN. After hitting almost $50,000 per coin today, as we go to press, bitcoin is down some, trading at $48,684 per coin. While the upside is strong, we affirm our forecast that there will be a correction, especially since we have been reporting on growing central bank pressure to reign in the coin. Thus, we maintain our 5 January forecast for bitcoin: “The downward breakout point will be hit should prices fall below $25,000 per coin.”
OIL. With a wild winter storm ripping through Texas, the biggest crude producing state in America, refineries, and wells across the state were shut down, pushing oil prices to their highest levels since January 2020.
We had forecast Brent Crude would trade in the $50 per barrel range in 2021. But wild cards are being played that are driving up prices. As we have been reporting, prices spiked following the OPEC+ deal that cut oil supply and the high hopes that the massive stimulus plans across the globe and the mass vaccination program would push up demand. Yet, the reality on The Street that has not dropped prices are the sharp declines in air travel, cruise ships, tourism, daily commuting to work, rising unemployment, etc.
Another wild card played today that has pushed up oil prices are reports that Yemen’s Houthis, fighting the Saudi’s who invaded their country in March 2015, are said to have struck airports in Saudi Arabia, the world’s biggest oil exporter, with drones.
