Swiss America Blog Archive

Swiss America Blog Archive


9.15.21 - Dems Propose $3T Tax Hike on Working Families

Gold last traded at $1,792 an ounce. Silver at $23.77 an ounce.

NEWS SUMMARY: Precious metal prices eased back Wednesday on upbeat economic data and a flat dollar. U.S. stocks traded flat after the latest string of negative trading sessions.

What's Wrong With Gold? -Zero Hedge

"From spiking inflation, falling real interest rates, and massive money printing, it seems logical that gold, a touted inflation hedge, should be rising. Yet, so far this year, gold has done little.

So, what’s wrong with this precious metal? Absolutely, nothing....

Investors tend to buy 'hard assets' when there is 'fear' of increasing debt, inflation, a dollar decline, recession, a market crash...there is presently no 'fear] present to drive investors into the psychological 'safe haven' of gold....

Will that eventually change? Absolutely. When? As soon as the market participants realize the error of their ways."

federal rate Dems Propose $3 Trillion Tax Hike on Working Families and Small Businesses -ATR

"House Democrats are proposing almost $3 trillion ($3,000,000,000,000) in tax increases including tax increases on small businesses and working families. This is the largest tax increase since 1968 compared to the size of the economy and the largest tax increase ever in nominal dollars.

Some of these tax increases include: Raising taxes on working families by increasing the federal corporate income tax rate from 21 percent to 26.5 percent. This tax increase will be passed along to working families in the form of higher prices, fewer jobs, and lower wages.

This will give the U.S. a combined state-federal rate of 30.9 percent, higher than our foreign competitors including China, which has a 25 percent corporate tax rate, and Europe which has an average rate of 21.7 percent. The developed world average (OECD) is 23.5%.

According to the Stephen Entin of the Tax Foundation, labor (or workers) bear an estimated 70 percent of the corporate income tax in the form of wages and employment. Similarly, a 2020 study by the National Bureau of Economic Research found that 31% of the corporate tax falls on consumers.

A corporate tax increase will threaten the life savings of families by reducing the value of publicly traded stocks in brokerage accounts or in 401(k)s. Individual investors opened 10 million new brokerage accounts in 2020 and at least 53% of households own stock. In addition, 80 million to 100 million people have a 401(k), and 46.4 million households have an individual retirement account...

$80 billion in new IRS funding to hire 87,000 new agents. This would allow the IRS to audit and harass small businesses and American families for an additional $787 billion. It would hire enough new IRS agents to fill Nationals Park twice."

Inflation alarm bells keep ringing -Washington Examiner

"On Sept. 10, the Bureau of Labor Statistics released its Producer Price Indexes report for Aug. 2021. It showed 'the largest advance since 12-month data were first calculated in November 2010.'

Moreover, 'The Producer Price Index for final demand increased 0.7% in August, seasonally adjusted… On an unadjusted basis, the final demand index rose 8.3% for the 12 months ended in August.'

According to Investopedia, 'The producer price index focuses on the whole output of producers in the United States. This index is very broad, including not only the goods and services purchased by producers as inputs in their own operations or as investment, but also goods and services bought by consumers from retail sellers and directly from the producer.''

Conversely, "The consumer price index targets goods and services bought for consumption by urban U.S. residents.' In other words, the producer price index measures inflation from the perspective of producers while the consumer price index measures inflation from the standpoint of consumers....

This does not jive with what officials in the Biden administration are saying about inflation being a temporary blip.

In July, President Biden downplayed inflation while pitching his multi-trillion-dollar Build Back Better plan, stating, 'We also know that as our economy has come roaring back, we’ve seen some price increases. Some folks have raised worries that this could be a sign of persistent inflation. But that’s not our view. Our experts believe and the data shows that most of the price increases we’ve seen are — were expected and expected to be temporary.'....

The bottom line, no matter what the Biden administration claims, is that inflation is here, getting worse, and far from temporary or transitory."

Litecoin tumbles on fake Walmart press release -Fox Business

"A press release, distributed by GlobeNewswire, touted the retail giant's alledged new payment option with Litecoin that turned out to be fake, according to Walmart.

The release has since been deleted...Walmart issued the following statement Monday afternoon.

'Walmart was the subject of a fake news release issued on Monday, Sept. 13, that falsely stated Walmart announced a partnership with Litecoin (LTC). Walmart had no knowledge of the press release issued by GlobeNewswire, and it is incorrect. Walmart has no relationship with Litecoin.'

GlobeNewswire issued a notice across its service confirming that journalists and other readers should disregard the news release, 'Walmart Announces Major Partnership With Litecoin (LTC)' issued September 13, 2021, over GlobeNewswire. All further questions should be directed to GlobeNewswire' it stated.

The price of Litecoin popped as high as $233.44 per coin Monday before turning lower on confirmation of the erroneous news."

RealMoneyBlog - Free daily/weekly email


9.14.21 - 3M Warns Inflation is Here to Stay

Gold last traded at $1,804 an ounce. Silver at $23.84 an ounce.

NEWS SUMMARY: Precious metal prices rose Tuesday as persistent inflation worries weakened the dollar. U.S. stocks shrugged off data showing inflation rose 5.3% Y-O-Y to trade modestly higher.

Gold edges up on weaker bond yields; focus on U.S. inflation -CNBC

"Gold prices nudged up on Monday drawing some support from weaker U.S. bond yields but a resurgent dollar kept the metal on a tight leash as investors awaited U.S. inflation readings later this week....

Investors are now eying U.S. consumer price data due on Tuesday which could have a bearing on the timeline the Federal Reserve adopts to withdraw its economic support.

The data comes on the heels of comments from several Fed officials that the central bank should begin tapering asset purchases this year.

'Price pressure for gold is still on the rise, but with growth not strong enough to really support a strong amount of tapering, let alone a rate hike in the U.S., the outlook is still positive once we get some momentum back,' Saxo Bank analyst Ole Hansen said."

landlord The Rapid Increase in Rents -Calculated Risk

"Over the last several months there has been a pickup in rents, especially for single family homes....

U.S. single-family rent growth increased 7.5% in June 2021, the fastest year-over-year increase since at least January 2005[1], according to the CoreLogic Single-Family Rent Index (SFRI).

The index measures rent changes among single-family rental homes, including condominiums, using a repeat-rent analysis to measure the same rental properties over time. The June 2021 increase was more than five times the June 2020 increase....

Typical U.S. rents grew 9.2% year-over-year in July, according to the Zillow Observed Rent Index (ZORI) — the fastest recorded by Zillow records in data that reaches back through 2015 - to $1,843/month....

'We are witnessing strong, broad-based demand for apartments as the U.S. economy continues to recover,' noted NMHC Chief Economist Mark Obrinsky. “Many U.S. gateway metros, which were among those hardest hit during the coronavirus pandemic, have now seen their occupancy rates return to near-pre-pandemic levels. Meanwhile, rent growth remains particularly strong in a number of Sun Belt and Mountain markets.'....

The Market Tightness Index increased from 81 to 96 – the highest index number on record – indicating widespread agreement among respondents that market conditions have become tighter....

A key impact of rising rents will be on inflation...The recent rent increases will boost OER later this year, and this will impact the measures of inflation."

3M Warns Inflation Is Here To Stay, Sees Auto Production Tumbling More Than Expected -Zero Hedge

"Profit warnings are coming thick and fast from American companies as they come to grips with Delta-fearmongered-demand weakness and COVID-scare-driven supply-chain chaos that is anything but transitory. The latest warning comes from massive multi-national conglomerate 3M.

Speaking at a Morgan Stanley conference this morning, 3M CFO Monish Patowala warned that the outlook is much more like the worst-case scenarios than any overly-optimistic view that markets appear to be imbibing....

Bloomberg reports (via excerpted transcript): 'All of us are experiencing the semiconductor shortages. I would say to automotive and electronics, but you starting to see it impacting a lot of Industries, the outbreak of the Delta variant continues to impact the world as well as hurricane idea (sic) has also put more stress now on already stress supply chains, causing a lot of inflation, as well as material availability across issues across the globe...

'Auto which was expected to see down -3% for the second half of the year or bills is now going to be down 6%, for the second half electronics is getting impacted....Moving over to raw materials. Again, I think the inflation is unprecedented. We are seeing inflation in the same areas I talked about earlier jobs, raw material, labor and logistics, raw materials again you go down to polypropylene, talk about resins, that inflation remains.

'I would say inflation, when you think about raw material and logistics, both are very high....I think inflation is way outstripping anything that we thought.

'Future will depend on when inflation starts tempering down and, my belief - and I may be wrong - is until we see demand and supply parity somewhere, we can continue to see inflation in raw material, and in logistics. And I think port congestion, as well as port shutdowns.

'In just talking to our OEMs, talking to multiple other people in the industry, we believe that this is going to go into 2022. I don't think it's a 2021 issue....'

The question is - will Jay Powell give 3M a quick call and tell them to stop fretting about the anything-but-transitory inflation they are suffering from? Or should we believe 3M's CFO - a person with real skin in the game - when it comes to the state of the real world?

As we warned last week, expect many more companies to 'unexpectedly' guide much lower for Q3 and Q4...the wheels are again coming off the US economy, with all of Biden's trillions in stimmies spent long ago, and just in time for the Fed's taper."

The Stock Market Fails a Breathalyzer -Wall Street Journal

"Joby Aviation, which plans to begin an electric air taxi service in 2024, is worth more than Lufthansa , EasyJet or JetBlue . Does that seem right? In this market, why not?

Heck, earlier this year, Tesla was worth more than the next nine car manufacturers combined, though now only the next six.

Beyond Meat, made with pea protein, is worth more than the entire market for peas eaten globally—like the bumper sticker says: Imagine whirled peas.

Do fundamentals even matter?

I can go on. Used-car sales platform Carvana is worth more than Volvo, Honda, Ford or Hyundai. Airbnb is worth more than Marriott and Hilton combined.

Crypto-exchange Coinbase is worth more than the Nasdaq. I live at the intersection of innovation and disruption, but when companies are worth more than any possible reality, watch out."

RealMoneyBlog - Free daily/weekly email


9.13.21 - Gold: Next Upside Target $2,000+

Gold last traded at $1,792 an ounce. Silver at $23.73 an ounce.

NEWS SUMMARY: Precious metal prices rose Monday on safe-haven buying, rising inflation and a flat dollar. U.S. stocks traded mixed amid supply chain disruptions, COVID-19 variant risk and stickier-than-expected inflation.

Gold's Inverted Head-And-Shoulders Pattern Suggests $2000+ Is Next Upside Target -Investing.com

"After a moderately strong rebound from the $1,675 lows in early August, gold has clearly started to set up the right shoulder of what appears to be an inverted head-and-shoulders pattern.

The recent weakness in the U.S. dollar suggests any breakdown in the dollar below $91.70 will likely prompt a new bullish price advance in gold targeting highs above $1,900 and likely attempt to reach $2,100 or higher....

We believe the $91.70 level on the dollar is critical to the setup of the inverted head-and-shoulders pattern in gold and that gold may trail downward to levels near $1,775 before finding real support for the next upside price rally.

Once that right shoulder has completed, the next phase for gold is a very solid upside price rally that should rally above $1,845 fairly quickly and attempt to reach the $1,920 to $1,950 level before the end of 2021....

We believe the transition of the U.S. dollar throughout the end of this year will be key to understanding the type of rally we should expect in gold and precious metals. Once the U.S. dollar falls below the $91.70 level, the upside price pressure in precious metals should begin to accelerate. We believe the $91.70 level in the dollar is the key catalyst for gold to break out of this inverted head-and-shoulders pattern."

storm More Strategists Say a Storm Is Brewing in the U.S. Stock Market -Bloomberg

"Strategists from almost all the top Wall Street banks have come out this week with a nervous message about the U.S. stock market.

The latest views hail from Deutsche Bank AG and Goldman Sachs Group Inc., and echo earlier pronouncements from Morgan Stanley, Citigroup Inc. and Bank of America Corp.

While investment banks tend to be measured in their outlooks, there are common threads that underpin their predictions that the market is vulnerable. Valuations are at historical extremes, stocks have rallied non-stop for seven months, the economy looks soft and the Federal Reserve is preparing to taper stimulus.

'The risk that the correction is hard is growing,' wrote Deutsche Bank equity strategists including Binky Chadha. 'Valuation corrections don’t always require market pullbacks, but they do constrain returns.'

Some of the market strain is already showing up. The S&P 500 has fallen about 1% in the past three sessions...Here’s a rundown of commentary this week:

Binky Chadha, equity strategist at Deutsche Bank: 'Equity valuations at the market level are historically extreme on almost any metric.' Trailing and forward price-earnings ratios, as well as valuation metrics based on enterprise value and cash flow, are all in the 90th percentiles, he said.

James Congdon, co-head of Canaccord Genuity’s research division Quest: 'Global stock markets may be entering a period of turmoil.' He added that investors should favor stronger businesses with robust cash flows over weaker and more speculative companies.

Dominic Wilson, strategist in economics research at Goldman Sachs: 'We think peak cyclical optimism in the U.S. may be behind us.' The strategists said hedges look attractive, especially on a shorter time horizon.

Andrew Sheets, cross-asset strategist at Morgan Stanley: 'We are going to have a period where data is going to be weak in September at the time when you have a heightened risk of delta variant and school reopening.' The bank cut U.S. equities to underweight and global stocks to equal-weight on Tuesday.

Savita Subramanian, head of U.S. equity and quantitative strategy at Bank of America: 'The S&P 500 has essentially turned into a 36-year, zero-coupon bond,' she said. 'If you look at the duration of the market today, it’s basically longer duration than it’s ever been. This is what scares me.'"

Fed Officials Prepare for November Reduction in Bond Buying -Wall Street Journal

"Phasing out the Fed’s pandemic-era stimulus by the middle of 2022 could clear the path for an interest-rate increase.

Federal Reserve officials will seek to forge agreement at their coming meeting to begin scaling back their easy money policies in November.

Many of them have said in recent interviews and public statements that they could begin reducing, or tapering, their $120 billion in monthly purchases of Treasurys and mortgage-backed securities this year.

While they are unlikely to do so at their meeting on Sept. 21-22, Fed Chairman Jerome Powell could use that gathering to signal they are likely to start the process at their following session, on Nov. 2-3."

COVID and the Economy -Calculated Risk

"Just over a month ago, many Americans, and economic analysts, assumed COVID was mostly behind us. Unfortunately they were wrong, and COVID has impacted the economic outlook once again.

For example, on July 30th, Goldman Sachs wrote: 'we are launching our Q3 GDP tracking estimate at +9.0% '. Then in mid-August, they downgraded their forecast: 'We have lowered our Q3 GDP forecast to +5.5%, reflecting hits to both consumer spending and production.'

And this week, on September 6th, they downgraded their forecast again: 'We now expect GDP growth of 3.5% in Q3.' That is about one third of the real growth they expected just 5 weeks ago!

Other analysts have made similar downgrades for Q3. There are several reasons for the change: the surge in COVID cases has impacted some consumer spending, supply chain disruptions are ongoing and possibly some downgrades due to policy (expiration of unemployment benefits during a COVID wave).

Right now it is looking like new cases are peaking, but far above the 12,000 per day level we saw in June. And it looks like we might see another Winter wave for several reasons.

A severe winter COVID wave could be a significant economic drag in Q4, and Q1 2022. And the most vulnerable are losing their extended unemployment benefits, and could be facing eviction. Hopefully there won't be another wave."

RealMoneyBlog - Free daily/weekly email


9.10.21 - Digital Currencies = Negative Interest Rates

Gold last traded at $1,788 an ounce. Silver at $23.78 an ounce.

NEWS SUMMARY: Precious metal prices were up Friday after the wholesale inflation index rose to 10-year highs. U.S. stocks attempted to rebound following four-straight days of losses amid investor economic rebound worries.

Price gains for gold, silver as bargain buyers step in -Kitco

"Gold and silver prices are moderately higher in early U.S. trading Thursday, on some perceived value-buying following this week's selling pressure. Short-covering by the shorter-term futures trades is also likely featured today. A weaker U.S. dollar index on this day is also a friendly outside market force for the metals markets.

The just-released results of the regular monetary policy meeting of the European Central Bank saw no changes in ECB interest rate policy, as expected, but the central bank did slightly reduce its monthly bond purchases at a 'moderately lower pace.'

Global stock markets were mostly down in overnight trading. The U.S. stock indexes are pointed to mixed openings when the New York day session begins. Trader and investor risk appetite is less robust this week. The resurgence of the delta variant of Covid in major economies has the marketplace more pensive....

In a Wall Street Journal interview, Federal Reserve Bank of Atlanta President Raphael Bostic said recent weaker U.S. economic data has likely pushed back the start of the Fed's tapering of its bond-buying program (quantitative easing), but added he still expects a U.S. interest rate hike in late 2022.

Technically, October gold futures bulls still have the slight overall near-term technical advantage but have faded and need to show more power soon to keep their edge. Prices are still in a four-week-old uptrend on the daily bar chart."

stocks Most stocks are duds (yes, you read that right) -The Evidence-Based Investor

"Highlighting the riskiness of individual stock selection, recent research has demonstrated that around the globe the majority of individual common stocks have generated long-run shareholder losses relative to a Treasury-bill benchmark.

The implication is that the large, long-term equity risk premium delivered by the broad stock market was attributable to outsize gains generated by a relatively few high-performing stocks. For example, in his study Do Stocks Outperform Treasury Bills?, covering the period 1926-2015 and all stocks on the NYSE, AMEX and Nasdaq, Hendrik Besssembinder found that:

-From the beginning of the sample or first appearance in the data through the end of sample or delisting, and including delisting returns when appropriate, just 42.1 percent of common stocks had a holding period return greater than one-month Treasury bills.

-Over their full life, only a minority (49.2 percent) of common stocks had a positive lifetime holding period return, and the median lifetime return was -3.7 percent.

-Even at the decade horizon, a minority of stocks outperformed Treasury bills.

-Despite the existence of a small-cap premium (an annual average of 2.8 percent), just 37.4 percent of small stocks had holding period returns that exceeded those of the one-month Treasury bill. In contrast, 69.6 percent of stocks in the largest decile outperformed the one-month Treasury bill.

-Reflective of the positive skewness in returns, 3.8 percent of single-stock strategies produced a holding period return greater than the value-weighted market, and only 1.2 percent beat the equal-weighted market over the full 90-year horizon....

Most common stocks do not outperform Treasury bills over their lifetimes. The research findings highlight the high degree of positive skewness (lottery-like distributions) and the riskiness found in individual stock returns. The implication is striking: while there has been a large equity risk premium available to investors, a majority of stocks have negative risk premiums.

This finding demonstrates just how great the uncompensated risk is that investors who buy individual stocks (or a small number of them) accept — risks that can be diversified away without reducing expected returns.

Such results help explain why active strategies, which tend to be poorly diversified, most often lead to underperformance. At the same time, the results potentially justify a focus on less-diversified portfolios by investors who particularly value the possibility of lottery-like outcomes despite the knowledge that the poorly diversified portfolio will most likely underperform.

The results from the studies we have examined serve to highlight the important role of portfolio diversification — which is said to be the only free lunch in investing. Unfortunately, most investors fail to use the full buffet available to them!"

Iran's Nuclear Weapons Weeks Away? -ZeroHedge

"Since the Biden administration assumed office, the nuclear talks with Iran have gone nowhere. Six rounds of negotiations have been concluded with no results. In contrast, two other issues have gone too far: the Biden administration's appeasement policies towards the Iranian regime, and the advancement of the mullahs' nuclear program.

When the Biden administration took office, it announced that it would curb Iran's nuclear program by returning to the 2015 nuclear deal -- known as the Joint Comprehensive Plan of Action (JCPOA), which by the way Iran never signed -- and by subsequently lifting sanctions against the Iranian government.

Apparently desperate to revive the nuclear pact, the Biden administration at once began appeasing the ruling clerics of Iran. The first concession was delivered when the administration changed the previous administration's policy of maximum pressure toward Iran's proxy militia group, the Houthis….

From the perspective of Iran's mullahs, Biden's desperate efforts to resurrect the nuclear deal manifested his weak leadership and therefore a delectable opportunity for Tehran to buy time, get more concessions, advance its nuclear program and become a nuclear state.

Notwithstanding all these policies of incentives and appeasements, Iran's mullahs continued to make excuses seemingly to drag out the nuclear talks…. Iran's leaders are now saying that they are not likely to restart the nuclear negotiations for another 2-3 months….

At the moment, the Iranian regime is reportedly 8-10 weeks away from obtaining the weapons-grade materials necessary for a nuclear weapon….

Once again it seems that the mullahs of Iran are masterfully playing the Biden administration and the EU by stalling the nuclear talks, buying time to get more concessions, and accelerating their enrichment of uranium and nuclear program to reach a weapons-grade nuclear breakout."

Digital Currencies Pave Way for Deeply Negative Interest Rates - Wall Street Journal

"Investors have been ignoring progress toward government-issued electronic money, even as many countries are progressing rapidly toward their own online cash. They should ask two questions: Will the Federal Reserve issue a digital dollar? And will it eventually replace physical bank notes?

I think the answer to both questions is yes, and those who agree should be assessing the impact on future monetary policy already, because dramatic change is likely within the timespan of the 30-year Treasury.

The main monetary power of the digital dollar comes from the abolition of bank notes. If people can’t hoard physical money, it becomes much easier to cut interest rates far below zero; otherwise the zero rate on bank notes stuffed under the mattress looks attractive. And if interest rates can go far below zero, monetary policy is suddenly much more powerful and better suited to tackle deflation....

Deeply negative rates won’t come straight away. Initially, central-bank digital currencies will almost certainly be designed to behave as much like ordinary bank notes as possible, to make their adoption easy and minimize disruption, while use of physical cash will be allowed to wither away. But those close to the development agree that monetary caution is unlikely to last."

RealMoneyBlog - Free daily/weekly email


9.9.21 - Social Security Reserves Depleted by 2033

Gold last traded at $1,794 an ounce. Silver at $24.04 an ounce.

NEWS SUMMARY: Precious metal prices traded mixed Thursday on bargain-hunting and a weaker dollar. U.S. stocks traded flat as investors remained cautious in considering the delta variant, the economic reopening and the Federal Reserve.

Gold regains some ground as growth concerns take center stage -CNBC

"Gold prices edged higher early on Wednesday after a steep fall in the previous session, as concerns about global growth slowdown weighed on risk sentiment while investors awaited the European Central Bank’s tapering strategy....

'Gold is holding up quite well towards $1,800. There is bit of concern about growth and we are seeing some weakness in the in the equity market,' said Xiao Fu, head of commodity market strategy at Bank of China International.

'Gold prices are in a bit of range bound market because there’s buying on dips. The demand is still very strong in the gold market when prices dip.'....

Austria’s central bank chief Robert Holzmann, considered as a hawkish member of the ECB, said the central bank could tighten policy sooner than many expect as inflationary pressures could prove to be persistent.

'There may be some influence from the ECB meeting if the meeting is more dovish than expected,' Nicholas Frappell, global general manager at ABC Bullion said."

dollar 4 Under-Reported Signs Paper Money Is Dying -Zero Hedge

"Below, we look at four deliberately ignored reasons why extreme liquidity is drowning paper money.

Reason 1: The Taper Debate May Not be a Debate at All - Here, we look past the taper headlines and ask a simple question: Would a Fed 'tapering' of QE really matter? As we’ve written elsewhere, the Great Taper Debate is less of a debate than it is a pundit circus, forever fueling now classic yet complimentary debates on inflation vs. deflation, gold vs. the dollar and Fed-speak vs. honesty....

Reason 2: The IMF Signals More Liquidity - But if you think the Fed is the only monetary body growing more desperate and hence liquidity-clever by the day, let’s not forget those Wunderkinder at the IMF nor Forest Gump’s reminder that when it comes to dumping more paper money onto an already unsustainable debt pile, 'stupid is as stupid does.'....

Reason 3: The World Reserve Currency - Not So Exceptional - But as for such declining trust, political gaslighting and dollar-debasing trends, we can thank our so-called 'experts' rather than the Chinese or Russians, who are calmly playing financial chess while Powell, Lagarde and others struggle comically to master checkers....We’re not suggesting that the U.S. Dollar’s 'status' will change tomorrow, but we do believe strongly that owning real assets in general and precious metals in particular is simply commonsense realism in the backdrop of increasing currency fantasy spewing out of D.C.

Reason 4: Simple Math and the 'Not-So-Crazy' of Rising Inflation & Deeper Negative Rates - A core aspect of that realism comes down to inflation now surging past 'transitory' and morphing into just plain dangerous. As repeated so many times, negative real rates (i.e., inflation outpacing sovereign bond yields) have extraordinary implications for rising gold price....

As Voltaire quipped, eventually all paper money reverts to intrinsic value: zero. So, which asset do you want to own when the current fiat currency ship sinks like all who have come before it?"

Mortgage applications hit summer low -Fox Business

"Demand for mortgage applications fell 1.9% from a week ago, according to the Mortgage Banker's Association's survey. The Refinance Index decreased 3% percent and Purchase Index decreased 0.2%.

'Mortgage application volume fell last week to its lowest level since mid-July, as mortgage rates have stayed just above 3% for several weeks,' said Mike Fratantoni, MBA's senior vice president and chief Economist. 'Refinance volume has been moderating, while purchase volume continues to be lower than expected given the lack of homes on the market.'

The August nonfarm payroll report showed the U.S. economy added just 235,000 jobs, less than the 728,000 estimate. The unemployment rate fell to 5.2%.

'Economic data has sent mixed signals, with slower job growth but a further drop in the unemployment rate in August. We expect that further improvements will lead to a tapering of Fed MBS purchases by the end of the year, which should put some upward pressure on mortgage rates,' added Fratantoni."

Social Security reserves estimated to be depleted earlier than previously expected -The Hill

"The Social Security trust fund for retirement and survivors benefits is estimated to have its reserves depleted in 2033, one year earlier than previously projected, according to the trustees’ report released Tuesday.

At the time of depletion, income flowing to the trust fund would be enough to pay 76 percent of scheduled benefits, the report said.

Senior administration officials said on a call with reporters that the earlier projected depletion date was due to the coronavirus-related economic downturn, particularly a near-term decline in revenue.

The Social Security trust fund that pays disability benefits is estimated in the report to have its reserves depleted in 2057, eight years earlier than was estimated in last year’s report. The Social Security trust funds combined are estimated to have depleted reserves in 2034, one year earlier than had been projected last year.

'The pandemic and its economic impact have had an effect on Social Security’s Trust Funds, and the future course of the pandemic is still uncertain,' Social Security Administration Acting Commissioner Kilolo Kijakazi said in a statement. 'Yet, Social Security will continue to play a critical role in the lives of 65 million beneficiaries and 176 million workers and their families during 2021.'

The trust fund for Medicare Part A, which covers hospital care, is estimated to have its reserves depleted in 2026, the same year that was projected last year. At that time, continued income would be able to pay 91 percent of scheduled benefits, the trustees reported."

RealMoneyBlog - Free daily/weekly email


9.8.21 - Why a National Living Wage Doesn't Work

Gold last traded at $1,793 an ounce. Silver at $24.04 an ounce.

NEWS SUMMARY: Precious metal prices slipped Wednesday on profit-taking and a firmer dollar. U.S. stocks traded flat as investors reassessed the economic growth outlook for the remainder of the year.

Trove of 239 Rare Gold Coins Discovered in Walls of French Mansion -Smithsonian

"Three construction workers were busy renovating a historic mansion in Brittany, France, when they came across an intriguing find: a metal box embedded in a wall.

To their astonishment, the box opened to reveal a trove of centuries-old gold coins....

The following Monday, the trio discovered yet another cache of gold coins, this time wrapped in a cloth pouch that had been hidden above a wooden beam, reports Agence France-Presse.

All told, 239 rare gold coins were discovered on the property. The treasure will go under the hammer on September 29, per a statement from auction house Ivoire....

Archaeologists determined that the coins were minted during the reigns of Kings Louis XIII and Louis XIV, monarchs who ruled France from 1610 to 1643 and 1643 to 1715, respectively....

Per French law, the proceeds from the sale will be split in half, with half going to the married couple who owns the property and half to be split evenly among the three discoverers. Experts estimate that the sale of the coins will garner between €250,000 and €300,000."

wages Why a National Living Wage Would Never Work -Rogue Economics

"Of great interest to people in America on Labor Day – as indicated by the usual newspaper headlines – is how much the laborers earn.

No one – or almost no one – writing in the editorial pages works at McDonald’s or earns the minimum wage. But practically every one of the elite has an opinion about how much the low-wage, non-elites should earn.

A 'living wage' is what they say they should have. Thirty thousand dollars a year is the amount we’ve seen discussed. They say it would help solve the inequality problem.

Of course, a national living wage is absurd. How much living you can do depends on where you do it.

You could live well in the Ozarks on $30,000 a year. In Manhattan, you might starve to death. And it is far less expensive to live with Mom and Dad than to have a place of one’s own....

Logically, there are only two possibilities. Either wages are determined by a free give-and-take between those who offer their labor and those who want to buy it… or someone else sets wages according to his own standards.

The do-gooders want to use other people’s money to raise the wages of the least well-paid, but they make no mention of their own take-home. Nor do they offer to pay more for their hamburgers so that McDonald’s can raise its wages....

But the price-fixers are so self-satisfied on the high road – driving along comfortably in their Subarus and Priuses – that they can’t be bothered to look out the window. If they did, they would see that price fixing always – always! – makes people poorer, not richer....

If it makes sense to set the wages of the least among us, why not do likewise for the most, too?

If people not involved in a labor transaction can know better than the participants what the terms should be, why not set the salaries of editorialists… publishers… CEOs… sports celebrities… movie stars?

And if it makes sense to raise the wages on the low end… wouldn’t it make just as much sense to lower them on the other? Why not promote equality by taking the elite down a peg? You can see what a jolly undertaking this would be for a bureaucrat with a sense of mischief."

Everything Is Infrastructure Now -Reason

"'I truly believe we're in a moment where history is going to look back on this time as a fundamental choice that had to be made between democracies and autocracies,' President Joe Biden declared during a March 31 speech in Pittsburgh, Pennsylvania. What exactly could be so vitally important that not only America's future but the entire project of liberal democracy hangs in the balance?

Infrastructure. Well, 'infrastructure.'

In Biden's telling, everything hinged on passing a multi-trillion-dollar spending package that was ostensibly meant to upgrade America's basic infrastructure but that also contained a wide range of unrelated spending on new social programs, industrial policy, and other forms of federal bureaucracy.

Previous generations may have fought civilization-defining battles against tyrannical rulers and such toxic ideas as slavery and Nazism. But the fate of the free world, the president would have you believe, now depends on whether 50 senators (plus Vice President Kamala Harris) will vote for bigger Amtrak subsidies and expanded government-run internet service.

On one hand, you can't really blame Biden for overselling his infrastructure proposal. That's what presidents have to do to get Congress' attention, especially at a time when culture wars have come to dominate so much of the political discourse....

Biden's American Jobs Plan began its life in March as a $2.25 trillion proposal, but by mid-summer it had been split into two separate legislative efforts: a roughly $1 trillion bipartisan bill that includes about $550 billion in new spending, and a parallel, Democratic-backed $3.5 trillion budget proposal that encompasses many of the so-called 'human infrastructure' elements from Biden's original plan....

Only about a quarter of Biden's initial proposal was aimed at anything traditionally classified under that term, such as roads, bridges, railroads, ports, pipes, and power lines. The original package spent twice as much to expand government-run health care as it did on highway projects.

Some parts of Biden's plan would actually work against the stated goal of improving America's infrastructure. His push for 'Buy American' rules and union regulations would drive up prices for raw material and labor. That means taxpayers would pay more and get less....

Whatever your views on religious freedom, abortion, online speech, the minimum wage, or the legality of selling your own kidney, such debates should not be settled by legislation that's ostensibly about building bridges and airports. Infrastructure is important. Not every important thing is infrastructure."

The Silence of Economists about Lockdowns -Brownstone

"As professional economists, we have watched the response of much of the economics profession to COVID-era lockdowns with considerable surprise. Given the evident and predictable harms of lockdowns to health and economic well-being, we expected economists to raise the alarm when lockdowns were first imposed.

If there is any special knowledge that economists possess, it is that for every good thing, there is a cost. This fact is burned into economists’ minds in the form of the unofficial motto of the economics profession that 'there ain’t no such thing as a free lunch.' From the depths of our souls, economists believe that the law of unintended consequences applies to every social policy, especially a social policy as all-encompassing and intrusive as lockdown....

That lockdown would, in principle, impose overwhelming costs on the population at large is not surprising. The scope of human activity touched by lockdown is overwhelming. Lockdowns closed schools and playgrounds, shuttered businesses, and barred international travel.

Lockdowns told children they could not visit their friends, put masks on toddlers, and dismissed university students from campus. They forced elderly people to die alone and prevented families from gathering to honour their elders’ passing. Lockdowns cancelled screening and even treatment for cancer patients and made sure that diabetics skipped their check-ups and regular exercise. For the world’s poor, lockdown ended the ability of many to feed their families.

Economists, who study and write about these phenomena for a living, had a special responsibility to raise the alarm. And though some did speak, most either stayed silent or actively promoted lockdown. Economists had one job - notice costs. On COVID, the profession failed....

The moral zeal with which lockdown proponents pushed this idea undoubtedly played an important role in side-lining economists. No one wants to be cast as a heartless Scrooge, and economists have a particular aversion to the part. The charge was unfair given the costs in lives that the lockdowns have imposed, but no matter.

Second, economists belong to the laptop class. We work for universities, banks, governments, consulting agencies, corporations, think tanks, and other elite institutions. Relative to much of the rest of society, the lockdowns posed much less harm on us and maybe even kept some of us safe from COVID....

Rather than hide behind the false belief that lockdowns are a free lunch, it is crucial that economists soon evaluate the global impacts of rich countries’ lockdowns. A better understanding of our lockdowns’ global effects will facilitate a more compassionate COVID response in rich countries, and also a better response to future pandemics - the kind of response that values how our response in rich countries influences the economic and health outcomes in the less prosperous parts of the world."

RealMoneyBlog - Free daily/weekly email


9.7.21 - An Experiment to Test Digital Currencies

Gold last traded at $1,797 an ounce. Silver at $24.37 an ounce.

NEWS SUMMARY: Precious metal prices fell Tuesday on a normal corrective pullback and firmer dollar. U.S. stocks traded lower on investor concerns over the delta variant’s impact on the economic reopening.

Gold Technical Analysis – $1839.00 Next Trigger Point for Acceleration to Upside -FX Empire

"Gold futures closed higher on Friday, surging more than 1% to its highest level since July 29, as slower-than-expected U.S. jobs growth in August drove the U.S. Dollar lower, casting doubts on the Federal Reserve’s tapering timeline.

Gains may have been capped by a rise in Treasury yields. That move was fueled by a surprise jump in Average Hourly Earnings, which fanned the flames of inflation. The Unemployment Rate fell to 5.2% as expected.

On Friday, December Comex gold futures settled at $1833.70, up $22.20 or +1.23%.

The price action on Friday suggests that traders are lifting short trades placed in anticipation of a September tapering by the Fed. The big question is whether speculative buyers have enough confidence to drive prices higher....

A sustained move over $1828.00 will indicate the presence of buyers. Taking out the two main tops at $1837.50 and $1839.00 will indicate the buying is getting stronger. This could trigger an acceleration to the upside with the next major target the June 8 main top at $1919.10."

taxes Biden to Impose Largest Tax Increase Since 1968 -Americans for Tax Reform

"The $3.5 trillion tax hike being pushed by President Biden and congressional Democrats would be the largest tax increase since 1968.

In nominal dollars, Biden’s $3.5 trillion tax increase would be the largest in history. But even when comparing this tax as a percentage of the economy, this tax hike would be the largest in more than 50 years.

While Democrats claim this tax increase will fall on ‘the rich,’ the proposal will raise taxes on small businesses and working families. Some of the tax increases proposed by Biden and Democrats include:

1. Raising the Federal Corporate Income Tax to 28 Percent - After accounting for state corporate taxes, Biden would give the U.S. a 32 percent corporate rate, a tax rate significantly higher than communist China’s 25 percent tax rate....

2. Retroactive Tax Increases on Capital Gains and Dividends - President Biden has proposed doubling the capital gains tax rate. Under Biden, the average top capital gains rate will be 48.8 percent after state taxes....

3. Creating a Second Death Tax by Repealing Step-Up in Basis - Democrats are proposing the creation of a second Death Tax by repealing step-up in basis....

4. Increasing the Top Income Tax Rate to 39.6 Percent - This tax increase will hit small business that are organized as sole proprietorships, LLCs, partnerships and S-corporations....

5. Imposing a 15 Percent Minimum Tax on 'Book Income' - This tax increase will create a new minimum tax on American businesses and disallow important, bipartisan credits and deductions that help promote job creation and economic growth....

6. Imposing Global Tax Hikes That Will Make American Business Uncompetitive - Democrats have proposed several international tax increases on American businesses....

With a covid-wracked economy and rampant inflation, the last thing America needs now is an enormous tax increase."

Central Bank Digital Currencies to Be Tested in BIS Experiment -Bloomberg/Yahoo Finance

"The Bank for International Settlements will test the use of central bank digital currencies with Australia, Malaysia, Singapore and South Africa in an experiment that could lead to a more efficient global payments platform.

Codenamed 'Project Dunbar,' the study aims to develop prototypes for a common platform that will enable international settlement in digital fiat currencies issued by central banks, BIS said in a release Thursday. The system would allow direct transactions in central bank digital currencies, or CBDCs, between institutions, while reducing time and cost, according to BIS....

The rapid growth of cryptocurrencies - which are distinct from digital currencies issued by central banks - is posing a potential threat to existing monetary regimes and adding urgency to debates on handling cross-border money transfers.

Read: Why central bankers got serious about digital cash.

'We are confident that our work on multi-CBDCs for international settlements will break new ground in this next stage of CBDC experimentation and lay the foundation for global payments connectivity,' said Andrew McCormack, head of the BIS Innovation Hub Singapore Centre.

Results of the study are likely to be published early next year, BIS said"

A Ground Zero Chaplain Remembers 9-11 -Medium

"From Rubble to Redemption offers readers a fresh reflection on 9–11 - the greatest murder scene in American history - a generation later from a Ground Zero perspective.

Drawing from a lifetime of compassionate, spiritually-driven service, author, pastor and U.S. Navy Chaplain Jim Jenkins shares with readers his life-changing experience volunteering at Ground Zero just days after the tragic attack — which most of us witnessed vicariously through an incomplete media lens.

Jim helps readers fill in both the sensual and spiritual blanks of this national trauma that only first-hand observation, participation and revelation can provide.

From the darkness and haunting cricket-type sounds of the 300 First Responders body alarms who were buried in the rubble at the 'Pile'… to the challenge of encouraging exhausted Morgue workers… to ministering to grieving family members at the sprawling Family Assistance Center, Jim sweeps readers into the chaotic behind-the-scene post-9–11 world.

Jim recounts how often he saw 'the stare' - the look of someone reliving a horrible memory - when working on the 'Pile' or at the Morgue. 'I was so proud to be in the company of such amazing Americans who were fighting through their own pain,' writes Jenkins....

'The victim’s families were so numerous that I was unable to give the care that I would instinctively want to give to every individual who was suffering. I still see their faces. I still see the stare.'

During a meal at the Family Assistance Center Jim remembers seeing one of the thousands of cards sent to NY Fire Department from NYC schoolchildren showing a rescue helicopter with a stick figure looking out on the falling tower. 'The stick figure was crying… the child wrote: DEAR FIREMANS, I AM BOKEN HEATED. THAT IS ALL.'....

Jenkins offers readers keen insights on how to compassionately be present to both the tragedy and grief of others, as well as to our own 'pile' of rubble. Moving from tragedy to grace requires letting go and letting God transform temporal rubble in our lives into eternal redemption of our souls."

RealMoneyBlog - Free daily/weekly email


9.3.21 - Gold Gains on Jobs, Weak Dollar

Gold last traded at $1,830 an ounce. Silver at $24.72 an ounce.

NEWS SUMMARY: Precious metal prices rose sharply Friday on safe-haven buying and a weaker dollar. U.S. stocks declined after the August jobs report came in short of expectations, showing the impact of the delta-fueled Covid resurgence.

Gold gains on sluggish dollar; U.S. jobs in focus -CNBC

"Gold prices rose on Friday after the dollar weakened, with investors awaiting the U.S. jobs data to gauge the Federal Reserve’s plans to start tapering asset purchases, although for the week, the metal was headed for its first decline in four....

The dollar index fell to a one-month low, bolstering gold’s appeal to those holding other currencies. The greenback was headed for second straight weekly decline.

'We’re seeing minor pre-positioning for people that may be wanting to take a punt into the non-farm payroll,' said Stephen Innes, managing partner at SPI Asset Management.

A weaker number 'would be quite positive for gold, cause it reinforces (Fed Chair Jerome) Powell’s more cautious outlook for the U.S. economy'....

Powell had said last week if job growth continues, the central bank could start to cut its asset purchases this year, but would remain cautious in decision to raise interest rates."

phone book Here we go again: Some shoppers are panic-buying toilet tissue -USA Today

"Please don't run straight to the supermarket, but some shoppers are buying up all the toilet paper - again.

Of course, this brings back distressing memories of spring 2020 and the onset of the coronavirus pandemic. Demand for toilet paper skyrocketed as Americans were faced with a possibly lengthy stay-at-home future.

Even though manufacturers eventually caught up with demand, there were occasional local and national shortages with shoppers again finding empty shelves where TP used to be.

This latest rebound in toilet paper demand comes as the delta variant drives COVID-19 cases and deaths up across the U.S., with some folks foreseeing another lockdown. Many Americans have used up their stockpiles and some have begun buying again in bulk, The Wall Street Journal reports....

Shoppers who find empty shelves can ask their store when shipments are expected, the Georgia-Pacific statement said. 'Our advice to consumers should they run into limited supplies at one location is not to panic, check other retail outlets … and only purchase what you need.'

Meanwhile, people online are dreading the potential of another toilet paper shortage. 'Please don't tell me that we are doing this again,' read one tweet with a picture of empty store shelves."

COVID Hospital Admissions Fall For First Time Since June In Latest Sign Delta Wave Has Peaked -ZeroHedge

"In recent weeks, we have seen a barrage of evidence that the delta-variant-driven summer COVID 'wave' (amplified, as it was, by increased testing) has finally peaked. First, the CDC pointed to regional data from the south and the northeast to show that the COVID wave had peaked in the original 'hotspots'.

Then we shared research from BofA analyst Hans Mikkelsen, who showed that the delta of the delta wave had finally dropped into negative territory. And of course, the whole time, Dr. Scott Gottlieb has been sharing projections showing the wave was set to peak in late August or early September.

But now, as the latest CDC data show, it's not just cases, but also hospitalizations, that are showing signs of a peak. The latest daily data show hospitalizations declining for the first time since June.

According to the Epoch Times, hospital admissions for COVID-19 patients in the United States are declining for the first time since late June, suggesting the latest surge has peaked. The seven-day average of new daily hospitalizations with confirmed COVID-19 dropped by 2.4% from a week earlier to about 12,280 - the first such drop since around June 27, according to the Department of Health and Human Services. It comes as fewer hospitalizations are being reported in Florida, Texas, and other Southern states, the agency said.

If they continue to trend lower at their current rate, the drop in hospitalizations has been roughly in line with BofA's 'optimistic' scenario. And it's not just hospitalizations and cases that are showing signs of peaking. The CDC's COVID-19 tracker shows that the seven-day average for both deaths and cases appears to be leveling out.

Even though recent studies have showed that vaccines are far from perfect, roughly 74.4% of all US adults have received at least one dose of a COVID-19 vaccine. And natural immunity might be even more extensive than previously believed....A blockbuster study from Israel recently showed that natural immunity confers better protection against the delta variant than vaccine-induced immunity.

After all this, our biggest question is: why does the mainstream press only report on hospitals kinda-sorta nearing capacity in their ICUs, and the endless parade of cities and states imposing mask mandates and vaccine mandates, or bans on mask and vaccine mandates. Maybe it's time to cover some 'good news' related to COVID for a change?"

Learn to rewire instead of retire -Calgary Sun

"Aging isn’t optional, but growing is, says Chip Conley, mega hospitality maverick and best-selling author, who’s inspiring a new kind of midlife learning and living, and bringing attention to the benefits of rewiring, not retiring.

Conley, 60, is shifting negative mindsets on aging through frequent lectures on the benefits of age diversity in the workplace, along with his midlife wisdom school and regenerative communities....

'The technical definition of retirement is to move into seclusion while regeneration means to bring something back to life,' says Conley, and that’s where purpose, instead of going out to pasture, comes in.

His social projects provide a place and the tools to reframe a lifetime of experience for a relevant 'middlescence,' including his Modern Elder Academy (MEA) in Baja California Sur, which offers workshops and sabbaticals to help master elderhood.

And he’s re-imagining retirement communities. Wave goodbye to conventional and welcome intentional: Think golf courses being replaced by wisdom schools, says Conley, and regenerative communities of interconnected, inter-dependent living. The first of a collection of communities will open in 2023 in Santa Fe, New Mexico on 2,500 acres....

Aging isn’t to be feared as long as you embrace purpose, wellness and community, says Conley, adding that Yale professor Becca Levy has shown in her research that when you shift from a negative or neutral perspective on aging to a positive mindset, you add 7.4 years of additional, happy life....

The idea of retiring and rehiring is big now. And there’s a real opportunity to collaborate and transfer wisdom. Conley says we need to help companies see that age diversity on teams can make a big difference in companies while also 'acknowledging that everyone should be a 'mentern' - a mentor and intern at the same time.'"

RealMoneyBlog - Free daily/weekly email


9.2.21 - Cryptos Eventually 'Worthless'

Gold last traded at $1,809 an ounce. Silver at $23.89 an ounce.

NEWS SUMMARY: Precious metal prices inched higher Thursday on safe haven buying and a weaker dollar. U.S. stocks rose after weekly jobless claims came in slightly better than expected.

Paulson says cryptocurrencies will eventually be ‘worthless’ -Fox Business

"John Paulson, the hedge fund billionaire who made a fortune in 2008 when he shorted the housing bubble, said in an interview published Sunday that he believes cryptocurrencies will eventually go bust.

The 65-year-old told 'Bloomberg Wealth with David Rubenstein' that he wouldn't recommend the investment to anyone. He said there is a cryptocurrency bubble that will 'eventually prove to be worthless.'

'I would describe them as a limited supply of nothing,' he said. 'So to the extent there’s more demand than the limited supply, the price would go up. But to the extent the demand falls, then the price would go down. There’s no intrinsic value to any of the cryptocurrencies except that there’s a limited amount.'

The Bloomberg report pointed out that Paulson is a big believer - and buyer - of gold despite digital assets outperforming the metal."

stagflation" The Stagflation Threat Is Real -Project Syndicate

"There is a growing consensus that the US economy’s inflationary pressures and growth challenges are attributable largely to temporary supply bottlenecks that will be alleviated in due course. But there are plenty of reasons to think the optimists will be disappointed....

I have been warning for several months that the current mix of persistently loose monetary, credit, and fiscal policies will excessively stimulate aggregate demand and lead to inflationary overheating. Compounding the problem, medium-term negative supply shocks will reduce potential growth and increase production costs. Combined, these demand and supply dynamics could lead to 1970s-style stagflation (rising inflation amid a recession) and eventually even to a severe debt crisis.

The optimistic spin from Wall Street analysts and policymakers is that this mild stagflation will be temporary, lasting only as long as the supply bottlenecks do. In fact, there are multiple factors behind this summer’s mini-stagflation. For starters, the Delta variant is temporarily boosting production costs, reducing output growth, and constraining labor supply....

But what if this optimistic view is incorrect, and the stagflationary pressure persists beyond this year? It is worth noting that various measures of inflation are not just well above target but also increasingly persistent. For example, in the US, core inflation, which strips out volatile food and energy prices, is likely still to be near 4% by year’s end....

As I have argued before, negative supply shocks are likely to persist over the medium and long term. At least nine can already be discerned.

For starters, there is the trend toward deglobalization and rising protectionism, the balkanization and reshoring of far-flung supply chains, and the demographic aging of advanced economies and key emerging markets. Tighter immigration restrictions are hampering migration from the poorer Global South to the richer North. The Sino-American cold war is just beginning, threatening to fragment the global economy....

The continuation of loose monetary and fiscal policies could trigger a de-anchoring of inflation expectations. The resulting wage-price spiral would then usher in a medium-term stagflationary environment worse than the 1970s – when the debt-to-GDP ratios were lower than they are now. That is why the risk of a stagflationary debt crisis will continue to loom over the medium term."

Stuck in the Fed’s Vicious Cycle -Rogue Economics

"Labor Day is coming up. So let us continue honoring the laboring man… the salt of the Earth… the rag-taggy people, who make the lattes and drive the trucks.

Upon his sweaty brow, the gray-suited grifters press down their thorny claptrap. And upon his back, they place the whole burden of their goofy plans.

Federal Reserve top dog Jerome Powell is howling for something he calls 'maximum employment:'

We have much ground to cover to reach maximum employment, and time will tell whether we have reached 2% inflation on a sustainable basis.'

He thinks everybody should be schlepping or toting, bussing… or hod-carrying, helping us dig our way out of the hole he has dug for us. He believes his policies are the key to getting us all on the job....

And continuing in this delusional direction, perhaps the wackiest of all comes from economists themselves. Business Insider reports:

'It’s inequality that dragged interest rates lower, not the other way around, NBER researchers said Friday...Wealthy Americans’ booming income powered the decades-long decline in interest rates, economists Atif Mian, Ludwig Straub, and Amir Sufi wrote. That downtrend then lifted stocks and most recently powered the market’s rebound from 2020 lows.'

'It is a vicious cycle, and we are stuck in it,' Mian wrote in a Tuesday tweet. In other words, it may not be the Fed’s fault, which means it will be much harder to solve....

The Fed has spent $7.5 billion every day for the last 18 months – $4 trillion in total – intentionally pushing down interest rates by buying bonds. That is, for every dollar the working stiffs created in the real economy (GDP growth), the Fed printed more than three dollars and fed it into the financial industry.

The wavering millions saved their pennies. But they got nothing for their efforts. After inflation, they lost money on their savings accounts."

Stocks Shake Off Bad News to Rally for Seventh Straight Month -New York Times

"Bad news doesn’t seem to bother Wall Street these days.

Deaths and hospitalizations related to the coronavirus are soaring, and many businesses have shelved plans to return to the office. Staffing shortages and supply-chain bottlenecks linger, while consumer confidence has fallen.

And yet, the stock market continued its quietly remarkable year in August, posting its seventh straight monthly rise. The S&P 500 index is up over 20 percent for 2021 and has more than doubled in value since it hit bottom in March 2020. The market has closed at a record high 53 times - the most by this point of the year since 1964, according to LPL Financial.

It’s an ascent that looks out of step with the reality of the virus in many parts of the country, but most investors are confident of two things: The Federal Reserve will keep interest rates at rock-bottom levels, possibly for years to come, and the federal government won’t be shy about spending heavily to keep the recovery going....

Not everybody expects the rally to continue unabated. And any disruption of investors’ expectations about interest rates and governmental supports — or a big slowdown caused by Delta or some other variant — could alter the persistently sunny outlook."

RealMoneyBlog - Free daily/weekly email


9.1.21 - Rent Costs Soar Nearly 13% YTD

Gold last traded at $1,812 an ounce. Silver at $24.14 an ounce.

NEWS SUMMARY: Precious metal prices consolidated recent gains Wednesday on a weaker dollar. U.S. stocks traded mixed, led by technology shares.

Mobius Says Hold 10% in Gold as Currencies Will Be Devalued -Bloomberg/Yahoo Finance

"Veteran investor Mark Mobius said investors should have 10% of a portfolio in gold as currencies will be devalued following the unprecedented stimulus rolled out to fight the coronavirus pandemic.

At this stage, '10% should be put into physical gold,' said Mobius, who set up Mobius Capital Partners after more than three decades at Franklin Templeton Investments. 'Currency devaluation globally is going to be quite significant next year given the incredible amount of money supply that has been printed.'

Bullion rallied to a record last year as the coronavirus pandemic spurred a flight to haven assets but it’s pulled back since with the roll-out of vaccines. To fight the crisis, central banks and governments worldwide have unleashed an unprecedented wave of monetary and fiscal stimulus, boosting balance sheets at the Federal Reserve and elsewhere and straining state finances.

'It is going to be very, very good to have physical gold that you can access immediately without the danger of the government confiscating all the gold,' Mobius, a long-time fan of the metal, said in an interview."

You Take My Breadth Away: Market's Underlying Deterioration -Charles Schwab

"The stock market could use some mouthwash. Breadth in the S&P 500 remains fresher than either the NASDAQ or Russell 2000, but it’s also been deteriorating. Generally, market breadth indicators highlight the percentage of stocks in an index trading above moving averages; or the number of stocks rising relative to the number that are falling - often incorporating volume statistics as well.

An analogy often used to explain why breadth matters comes from the battlefield. When the generals are on the front line; but the soldiers are lagging behind, the force is less powerful than when the soldiers are on the front line alongside the generals.

Let’s start with a very broad look at breadth. Although the S&P 500 traded at an all-time high as recently as last week, the cumulative advance/decline (A/D) line for the broader NYSE universe peaked on June 11 this year....

chart

In the case of the NASDAQ, as the chart shows, new lows have exceeded new highs recently - even though the index hit an all-time high as recently as August 5 this year. This is strikingly different than the massive breadth thrust for the NASDAQ from last November through this past February....

At the sector level, as shown below, Energy’s breadth stinks the most; while given the market’s recent bias toward classic defensive areas, Utilities have the freshest breadth (followed by Financials).

The bias recently toward traditional defensives likely reflects growing concerns about COVID’s Delta variant’s impact on economic growth; but also the peak in the growth rate for both the economy and earnings, as well as fading fiscal and monetary stimulus. ...

As summer winds down, we soon head into September - historically the worst month for stocks in terms of average performance. Aside from seasonality, there are several risks with which the market is confronting … including deteriorating breadth, fading monetary and fiscal stimulus, peak earnings/economic growth rates, and of course the Delta variant...

With regard to rebalancing, it’s one of the most beneficial disciplines in that it forces us to do what we know we’re supposed to do - add low, trim high. Notice I adjusted that from the classic 'buy low, sell high' adage; which can infer an all-or-nothing strategy."

Newsmax's Steve Cortes Blasts The Fed For Crushing The Middle Class & Protecting Biden -ZeroHedge

"Former Fox Business anchor Trish Regan spoke with former investment manager turned White House advisor turned Newsmax host Steve Cortes on her podcast called 'American Consequences' about the Federal Reserve decimating the American middle class.

Before Regan spoke with Cortes, she provided readers with a backdrop of the word 'transitory' and how The Fed ignores soaring prices of goods and services. Heck, it's a brilliant strategy by the Fed because if six months from now prices are still increasing, Chair Jerome Powell will merely say inflation remains transitory.

Regan asked a very important question during in the intro of the podcast: How long can the middle class handle surging stagflation: soaring gasoline and supermarket prices and barely any real wage growth (on top of new virus restrictions).

She said the 11-14% food price increases at the supermarket are beginning to dent consumer sentiment, adding that middle-class wages adjusted for inflation aren't going as far as they used to. Many folks are living a different life than they were in pre-COVID times, and they're becoming furious that the American dream is collapsing in front of their eyes.

Regan adds a confluence of bad events, such as inflation, souring consumer sentiment, and the Afghanistan withdrawal debacle is damaging people's perception of the Biden administration.

And to circle back to the Fed, she said unless Powell and his gang of monetary wonks begin to taper or at least raise rates in the near-term, the inflationary impact will continue to crush middle America....

With all the wealth and power increasingly being transferred to financial elites under an easy money regime via the Fed, who are enjoying asset price inflation, comes at the expense of an increasingly debt-ridden (just to keep up appearances) collapsing middle class that has been well underway for decades."

House Rents Pop Up as New Investors Pile In -Wall Street Journal

"Would-be home buyers priced out of the sales market are finding little consolation when they turn instead to the single-family rental market.

Prices are soaring there as well. Asking rents for houses rose nearly 13% for the year to date through July, the highest annual increase in the past five years as tracked by real-estate data company Yardi Matrix, which analyzed professionally managed properties.

The sharp rise partly reflects increasing demand from people who can’t afford to buy homes as well as city-dwellers who moved to the suburbs to rent during the pandemic. Meanwhile, the supply of new houses also continues to trail historical levels relative to population growth, and builders in some places remain constrained by zoning laws and available land.

Price increases are more moderate for single-family tenants renewing their leases, said Haendel St. Juste, a real-estate securities analyst at Mizuho Securities USA. 'You’ve got to be careful in this industry. You can’t be perceived as gouging.'

Apartment asking rents also have risen, but at a slower pace: 8.3% for the year to date through July, Yardi Matrix said. The difference partly reflects weaker demand in downtowns that lost population after Covid-19 hit, although those markets have rebounded in recent months."

RealMoneyBlog - Free daily/weekly email


8.31.21 - Covid Bailout: Nothing to Do with Covid

Gold last traded at $1,814 an ounce. Silver at $23.94 an ounce.

NEWS SUMMARY: Precious metal prices rose Tuesday on momentum buying and a weaker dollar. U.S. stocks traded mixed to close out a winning month with the major indexes reaching record highs.

Gold consolidates near 1-month peak on cautious Fed -Reuters

"Risk appetite got a boost after U.S. Federal Reserve chief Jerome Powell assuaged market fears of a quick withdrawal of pandemic-era stimulus, dampening bullion's safe-haven appeal....

'People are more interested in equity markets, but in case of a correction we may see a sharp rise in gold prices,' Vandana Bharti, assistant vice-president, commodity research at SMC Comtradem said.

In a virtual speech at the Jackson Hole economic conference, Powell offered no signal on when the central bank plans to cut its asset purchases beyond saying it could be 'this year' and indicated it would remain cautious in any eventual decision to raise interest rates....

Powell's dovish statement helped gold gain 1.4% on Friday, while pushed the dollar index to a two-week low.

'The market is starting to re-adjust expectations for U.S. rate hikes after Powell's speech on Friday, which was the green light for gold to move higher,' Stephen Innes, managing partner at SPI Asset Management said."

consumer inflation The Coming Inflation Shock -ZeroHedge

"Rents (surge) are about to impact PCE and CPI. A surge in PPI is flowing into CPI. History will record tthat during the present time the most used word was 'inflation' and the second most used word was 'temporary.'

What isn't in this life transitory? But if inflation lasts three years because of a demand shift caused by a zero-carbon emissions goal consensus, then call it what you will, we at The Bear Traps will allocate capital accordingly. It reminds us of Marty Zweig not caring if the down stock market was a correction or a bear market. Either way, he didn't want to be long stocks. We don't really care if inflation ends a year or three from now. We want to be long energy and metals.

By insisting on the word 'transitory' all the Fed is signaling is that it is ignoring and will continue to ignore prices of goods and services. It's brilliant in its own way because if six months from now prices are still going up, the Fed will merely say that, aha, now, surely, inflation is transitory. And it will play that game every six months for years if it can....

Additionally, we have stressed the dawn of the age of the power of labor. Labor is harder to find and more expensive. And after decades of getting shafted, it is only fair the pendulum is finally swinging the other way. But labor inflation is difficult to cure for the simple reason that a majority of the voting population doesn't see getting paid more money as a problem.

And finally, we have the problem of more money supply. At this point, money creation is no longer the immediate risk. No. The immediate risk is an increase in the velocity of the money that has already been created. Velocity has collapsed to such an extent that simply to mean revert to its downward regression line of old would be massively inflationary....

So sustainable inflation seems fairly inevitable at this point even if years from now it proves 'transitory.'"

Inflation Update: This is Serious -Calafia Beach Pundit

"Energy is by far the most volatile component of the CPI. The (above) chart shows the ex-energy version of the CPI, which rose by about 2% per year for almost 20 years. It's now risen significantly above that trend line, and this suggests that the rising inflation we've seen this year is not likely to be temporary.

The whole price level has been lifted by an excess supply of money, and the Fed has no plans to raise short-term rates or to withdraw excess reserves from the banking system for a very long time....

The real yield on 10-yr Treasuries is now deeply in negative territory. This represents a significant loss of purchasing power for anyone holding Treasuries. Caveat emptor.

How much longer will bond investors tolerate a government-guaranteed loss of purchasing power? How much longer will people keep tons of money on deposit in the banking system, when it pays no interest and is losing at least 4-5% of its purchasing power every year?....

If the demand for money declines but the supply of money holds steady or increases, that is the classic prescription for a higher price level (i.e., inflation). And in fact that is what we have seen over the past year.

Viewed in velocity terms, what has happened over the past year is that people have been trying spend their money instead of accumulating more money. Dollars are being passed

More Links

Weekly Charts

Current Spot Prices

Weekly Charts
Current Spot Prices

Gold

$1763.46

Silver

$22.61

Platinum

$998.13