Baltic
Dry Index. 1997 +13 Brent
Crude 85.24
Spot
Gold 2322 U S 2 Year Yield 4.70 unch.
In
the run up to the UK General Election on July 4, the LIR will play its part.
Government is best which governs least.
Thomas Paine.
Today’s
real weekend update lies in the next section, where I at least, think the US
economy may have already dropped into recession.
In
the stock casinos, the punters and stock promoters bubble on. What could
possibly go wrong?
Maybe
it’s time to build a financial Noah’s ark.
S&P
500 closes lower Friday as Nvidia falters, Dow posts best week since May: Live
updates
UPDATED FRI, JUN 21 2024 4:23 PM EDT
The S&P 500 ticked
lower Friday as shares of market bellwether Nvidia pulled
back for a second day.
The broad market index fell 0.16%
to finish at 5,464.62, while the Nasdaq Composite dipped
0.18% to settle at 17,689.36. The Dow Jones Industrial Average edged
up 15.57 points, or 0.04% to close at 39,150.33.
“Technology stocks continue to be
in the spotlight,” said Emily Roland, co-chief investment strategist at John
Hancock Investment Management. “I can’t remember a time when one single stock
... has been so influential on the market, and that’s really been a key driver
of the market action as of late.”
Nvidia shares declined 3.2%. On
Thursday, the stock hit an all-time high before closing more than 3% lower.
Nonetheless, the chipmaker is still up 155% year to date, and it briefly
beat Microsoft as the most valuable public company on Tuesday.
The S&P 500 notched an
intraday record of 5,505.53 earlier in the week, and it registered a 0.6%
weekly advance. The Nasdaq finished the week flat, while the Dow rose 1.45% for
its best weekly performance since May.
Some signs of an overextended
market have begun to appear in recent sessions, although it’s unclear whether
the artificial intelligence-fueled rally has reached its limits. Even Nvidia,
which is large enough to sway the market, is showing signs that its upward
momentum may be slowing.
“It’s probably not a bad time to
take some chips off the table,” said Dave Grecsek, a managing director at
Aspiriant. “We’ve had a magnificent run, and the market is looking a little
extended.”
The total U.S. market saw its
highest trading volume since March 15, due to the triple witching — that is,
the expiration of stock options, stock index options and stock index futures
options.
That mid-March day happens to be
the same date as the last triple witching.
Stock
market news for June 21, 2024 (cnbc.com)
The
stock market is in its longest stretch without a 2% sell-off since the
financial crisis
Wall Street’s climb to record highs has come with
conspicuously little volatility.
The S&P 500 has
gone 377 days without a 2.05% sell-off. That’s the longest stretch for the
benchmark since the great financial crisis, according to FactSet data compiled
by CNBC. The index hasn’t experienced a gain of at least 2.15% in that time
either.
This market lull comes as investors pile into
megacap tech stocks, such as Nvidia, amid bets that artificial intelligence
will boost profits. Year to date, the S&P 500 is up more than 14%.
Expectations of Federal Reserve rate cuts have also buoyed the broad market
index in 2024 as new data shows inflation moving closer to the central bank’s
2% goal.
“At a high level, the clouds of macro uncertainty
have parted over the last 12 months as receding inflation provided much-needed
clarity into the future path of monetary policy,” said Adam Turnquist, chief
technical strategist at LPL Financial. ″The changing narrative from
rate hikes to rate cuts and recessions to economic resilience helped drag the
VIX down to multiyear lows, ultimately shifting the backdrop for stocks to a
low volatility from high volatility regime.”
Many investors consider the CBOE Volatility Index (VIX) the
de facto fear gauge on the Street. Last month, it hit its lowest level going
back to November 2020. On Friday, it traded around 13, near historically low
levels.
″[T]he low VIX reflects the options
market’s complacency, with VIX at a three-year low,” said Joseph Cusick, senior
vice president and portfolio specialist at Calamos Investments. “This makes
sense since institutions have been actively hedging; there is no urgency to
sell underlying with these insurance products in place.”
It’s unclear how long this
low-volatility period will last.
In 2017, the S&P 500 recorded
just eight daily moves of more than 1%, while the VIX fell to historic lows
below 9. The following year, however, volatility came back into the market, and
the VIX surged above 50 before easing.
Stocks
are in their longest stretch without a 2% sell-off since the financial crisis
(cnbc.com)
In
EU news, the weak economy weakens again.
Euro zone government bond yields
drop on weak PMI data
June21,
2024
(Reuters) - Euro zone government bond yields dropped on Friday after
French and German economic survey data came in weaker than expected, supporting
expectations for policy rate cuts.
Weak demand dragged down France's business activity as the country heads
into a snap parliamentary election, while an upturn in Germany slowed in June.
Euro area business growth decelerated sharply this month as demand fell
for the first time since February.
Surveys "suggest a solid recovery in the euro zone economy is not a
done deal", said Franziska Palmas, senior European economist at Capital
Economics.
"Meanwhile, aggregate price pressures continued to ease but
remained strong in the services sector, which will keep ECB policymakers
cautious," she added.
Money markets price in cumulative around 68 bps of European Central Bank
rate cuts by year-end from 65 bps before PMI data, implying a further move and
a 70% chance of a third cut in 2024.
Bund yields were on track for a slight weekly rise, as hopes that
France's far right National Rally (RN) party will backtrack on fiscally
expensive pledges stopped last week's rush into safe-haven assets.
German 10-year bond yields, the benchmark for the euro area, fell 4.5
basis points to 2.38% and were set to end the week 2 bps higher.
The gap between French and German 10-year yields - a gauge of risk
premium investors demand to hold French government bonds – was at 72 bps, after
hitting 82.34 bps last Friday, its highest level since February 2017.
"OATs (French government bonds) look priced for a hung
parliament/RN-lead with a benign fiscal outcome but might widen sharply to 100
bps over Bunds on a more forceful far-right/left manifesto implementation,
while tightening to 60 bps on a centrist coalition," Citi analysts said.
France's 10-year yields fell 3.5 bps to 3.12%.
RN is seen leading the first round of the country's parliamentary
elections with 35% of the votes, according to a survey released on Thursday.
President Emmanuel Macron's centrist camp was in third place with 20% of the
votes.
Market
sentiment towards France and the euro area's most indebted countries improved
on Thursday as the market got through a French bond auction largely unscathed.
However, on top of that, there were hopes of monetary easing ahead after
the Swiss National Bank marginally surprised markets by cutting rates, and the
Bank of England delivered a dovish message, analysts said.
Italy's 10-year yield remained at 3.916%, while the Italian-German yield
gap stood at 152 bps.
Euro zone government bond yields drop on weak PMI data
(msn.com)
In
EV news, more Tesla disaster,
Dead
Tesla Traps Toddler In Hot Car, Raises Concerns About Electric Doors
Adults
can use manual door releases from inside dead electric vehicles but younger
ones can't
June
20, 2024 at 18:05
- A Tesla in Arizona died and in the
process trapped a toddler in the hot car.
- Firefighters had to break the window of
the vehicle to get the child out as quickly as possible.
- The incident highlights the danger to
those who own vehicles with electronic door releases.
More
Dead
Tesla Traps Toddler In Hot Car, Raises Concerns About Electric Doors |
Carscoops
Finally,
does history repeat? And if it does, does it repeat in stocks? A cautionary
tale from the past. But this time it’s different, right?
A warning from history about large-cap stock booms
By Edward
Chancellor June 21,
2024 6:12 AM GMT+1
LONDON, June 21 (Reuters Breakingviews) - Fifty years ago, the
U.S. stock market was in turmoil. Between January 1973 and September 1974, the
S&P 500 Index fell by nearly 50%. With the benefit of hindsight, this
decline was the second leg of a bear market which commenced in late 1968.
However, stocks had rallied from the summer of 1970, led by a small group of
large, high-quality companies, before suffering a more severe collapse. Today,
as the U.S. equity market rests on the continued success of a handful of
giants, this earlier period appears particularly instructive.
The short-lived boom of the early 1970s started with the demise
of highly speculative stocks in the late 1960s. After inflation picked up and
interest rates climbed, technology, computer-leasing and other small-cap growth
companies dropped out of fashion. Once inflation peaked in 1970, the market
rallied. This time, however, investors were more cautious. They still wanted
exposure to growth but congregated in higher quality, large-cap stocks of
companies with proven track records.
Contemporary commentators dubbed the small number of favoured
names as “vestal virgins”, “sacred cows” and “religion stocks”. Posterity knows
them as the Nifty Fifty. Different Wall Street firms disagreed about the
group’s exact membership. But it included technology firms like Eastman Kodak,
Polaroid and Xerox, consumer goods companies such as Avon Products, drugmakers
Johnson & Johnson and Merck, and other established businesses, such as
fast-food chain McDonald’s.
What these companies had in common was their
ability to deliver above-average growth in sales and earnings. According to the
investor Jeremy Grantham, who observed the boom from a small-cap value
investment firm in Boston, the Nifty Fifty had produced abnormally few
disappointments in prior years.
The investment world at the time was undergoing a
profound change. Private investors no longer dominated the stock market. By
1972, institutional managers held around 45% of the shares traded on the New
York Stock Exchange. Bank trust departments, of which the largest was Morgan
Guaranty, controlled the United States’ rapidly growing pensions pot. Their
managers favoured the liquidity provided by the largest stocks. They regarded
the Nifty Fifty as “one decision” stocks: the visibility of future earnings was
seen as so assured that, once purchased, they need never sell the shares.
No price was too high for proven growth stocks. As
money flowed from small investors into institutional funds, a remarkable
two-tier market opened. By early 1973, the median stock on the NYSE was trading
at a multiple of 11.5 times earnings, while the average price-earnings ratio
for Kidder Peabody’s list of the top 50 stocks stood at heady 48. An
institutional investor told the New York Times that “too many analysts spend
too much time worrying about these multiples and not enough time examining the
uniqueness of the company ... we’re talking about companies where the ability
to create and innovate is of a more permanent nature ... Go with the best.”
The rising concentration of the market in a mere
handful of stocks prompted a Senate investigation. The head of trust operations
at First National City Bank (which later became Citibank) assured the Committee
that in placing “our primary investment emphasis on large, growing, advanced
technology or consumer-oriented companies in the so-called ‘top tier’” his firm
was exercising its best judgement in line with its fiduciary responsibilities
to clients.
Barton Biggs, who joined Morgan Stanley in
mid-1973, recalled that these top-tier stocks kept grinding higher even as the
rest of the market faltered. “As the year progressed, the Nifty Fifty got
narrower and narrower, and by the late summer, only a small number of the
biggest and best were holding up.” The selloff started with an oil embargo on
the United States by the Organization of the Petroleum Exporting Countries. The
following year Franklin National Bank collapsed, and President Nixon resigned
in the wake of the Watergate scandal. Rising inflation brought tighter monetary
policy. In the sharp recession that followed, the U.S. unemployment rate hit
9%.
In the stock market selloff, the Nifty Fifty underperformed,
declining by 60% according to Ned Davis Research. As one commentator famously
put it, they were taken out and shot one by one. Shares in Polaroid and Avon,
which suffered specific problems, fell respectively by 90% and 86% from their
peaks. But most of the other growth stocks cratered without any serious
earnings disappointments. For instance, McDonald’s and Xerox both declined 72%.
More
A warning from history about large-cap stock booms |
Reuters
There can be few fields of human endeavour in which history
counts for so little as in the world of finance. Past experience, to the extent
that it is part of memory at all, is dismissed as the primitive refuge of those
who do not have the insight to appreciate the incredible wonders of the
present.
John Kenneth Galbraith.
Global Inflation/Stagflation/Recession
Watch.
Given our Magic Money
Tree central banksters and our spendthrift politicians, inflation/recession now needs an entire
section of its own.
This
weekend, my view of the US economy and why I think it is in, or at best,
entering recession. But what does dinosaur Graeme know? After all, Jerome
Powell and his stocks bubbles teams are paid gadzillions to get the US economic
guesses right. They will tell us when to
panic, right?
Within the last few days of June, I have come to the conclusion that the US economy is far closer to a deep recession than I, and mainstream media, realised. In fact, I think the US economy probably entered recession in April.
Since the start of June, we have had the Schannep Recession Indicator triggered on June 7. Right 11 times out of 12 since 1945, not wrong but 6 months early in 1959. Usual Lead time 1 to 3 months. The much faster McKelvey recession indicator was triggered last October.
The latest University of Michigan Consumer Confidence Index fell to 65.6 for June from 69.1 for May, but the "experts" had expected a rise to 72.0 for June.
US retail sales came in weak for just released May, but more tellingly, were revised down for March and April. That suggests to me many US consumers are far more stressed out than generally realised. US credit card default rates have risen from the very low rates, probably due to all the earlier Covid-19 stimulus money, to the highest default rate in 12 years today.
The first of the buy now pay
later debt traps was forced to file for bankruptcy last week. The first of many
to come perhaps. Are consumers now to tapped out for the death debt
traps?
A stock market wealth effect is nowhere to be seen, probably because the current bubble is so narrowly focused in AI tech stocks.
Adding to my concern of an imminent crash landing, Electric Vehicle sales have evaporated and ICE vehicle sales have turned weak. Unsold inventory is now piling up in dealers lots, and for EVs, closed shopping malls once deserted parking spaces have filled up with unsold EVs. Out of sight out of mind, perhaps.
US GDP expanded at a decent 3 percent rate in 2023, but in 2024, has so far only expanded at a rate in the 1 percent range.
The FDIC (US banks insurer,) now estimates that FDIC banks have 525 billion dollars of unrealised losses on their books, a significant problem that sooner or later has to be realised.
Note, US banks have over 1.5 trillion dollars of total unrealised losses on interest rate and other securities’, leases, commercial and other real estate loans, though that’s more of a problem for the US Treasury and Federal government, when the US banks start failing.
Weather wise, there is unlikely to be much in the way of global food price inflation relief in the rest of 2024. High food prices tend to make American foodies tetchy.
Any prospect of relief out of Europe is misplaced. Germany is all but in recession. Same for Holland and Belgium. France is undergoing Russian roulette elections on June 30 and July 7. The polls say that the UK is about to swing hard left socialist on July 4th.
Yes, Germany is getting a consumption boost from hosting the European Cup football competition now underway. France will get a similar boost from the Paris Olympics in late July through August 11th, but neither will last, nor prevent the EU from following the US economy into recession.
The Swiss central bank just cut their key interest this week citing a slowing Swiss export economy and slowing global economy in general. The ECB, citing a slowing EU economy, cut on June 6th.
In short, we may already be two months into a US stealth recession, but one that is likely to quicken and deepen over the next three months.
Likely also adding to our G-7 summer of distress, retaliation by China for tariffs and Russia for stealing Russia's financial assets in the USA and Europe.
Covid-19
Corner
This section will
continue until it becomes unneeded.
COVID-19 Misinformation: Brought to
You by the U.S. Government
June 20, 2024
Remember when the federal
government accused social media companies of spreading misinformation about
COVID-19? Well, according to a recent bombshell report from Reuters, top U.S. policy
makers should have pointed their fingers at a giant mirror.
That's because the U.S.
military, under both former President Donald Trump and President Joe Biden,
deliberately spread misinformation on social media about the COVID-19 vaccines,
in hopes of encouraging Filipinos to distrust the Chinese government. The disinformation
campaign—which involved hundreds of fake accounts on X—promoted the idea that
Sinovac, the COVID-19 vaccine created in China, was dangerous.
"COVID
came from China and the VACCINE also came from China, don't trust China!"
read one typical tweet.
Other tweets aimed at Asian
Muslims incorrectly asserted that the vaccines contained pork and were contrary
to religious dictates. One implied the Chinese vaccine contained rat poison.
"What if their vaccines are dangerous?" wondered one Twitter user.
As Reason's
Matthew Petti points out, poorly
conceived government-backed disinformation campaigns supposedly aimed at
foreign adversaries are nothing new. But this one is especially hypocritical
since opposition to vaccine misinformation has become one of the Biden
administration's central philosophies.
---- Indeed, the traditional media soon became obsessed with the idea that
people were insufficiently enthusiastic about vaccination and that social media
was to blame. The Center for Countering Digital Hate, a British
nonprofit, branded 12 vaccine-skeptical online
accounts as the "Disinformation Dozen." In its write-up about the
Disinformation Dozen, The New York Times lamented that one of the offenders, a
Florida doctor named Joseph Mercola, had made "easily disprovable"
claims on Facebook.
Mercola "declared
coronavirus vaccines were 'a medical fraud' and said the injections did not
prevent infections, provide immunity or stop transmission of the disease,"
complained theTimes.
One sees the problem with
stigmatizing any and all vaccine-related opinions that depart from the current
orthodoxy. While some of these claims seemed "easily disprovable" in
summer 2021, the scientific consensus subsequently conceded that vaccines do
not fully prevent infection, provide immunity, or stop transmission. The
vaccines lower the risk of serious illness and death, particularly for
vulnerable people: the elderly, the obese, and the chronically sick. The
miraculous powers initially attributed to them by government health
advisers—coronavirus adviser Anthony Fauci described vaccinated
Americans as "dead ends" for COVID-19—have not withstood the test of
time, unfortunately.
More
COVID-19 Misinformation: Brought to You by the U.S.
Government (msn.com)
Technology Update.
With events happening
fast in the development of solar power and graphene, I’ve added this section.
Graphene
Breakthrough Paves Way for Advanced Energy and Computing
June 21, 2024
Scientists at the National Graphene Institute have made a
significant breakthrough that has the potential to transform energy capture and
information processing. Their research, detailed in a paper in Nature, demonstrates the
ability of electric field effects to selectively enhance coupled
electrochemical reactions within graphene.
Batteries, fuel cells, and electrolyzers are
renewable energy technologies that depend on electrochemical processes.
However, sluggish reactions and undesirable side effects frequently compromise
their effectiveness. Traditional tactics have focused on new materials, yet
there are still many obstacles to overcome.
Under the
direction of Dr. Marcelo Lozada-Hidalgo, the Manchester team has adopted a unique strategy. They have
managed to break the irreversible bond between charge and electric field in
graphene electrodes, providing previously unheard-of control over the
material's electrochemical reactions. This discovery casts doubt on earlier
theories and creates new opportunities for energy technologies.
We have managed to open
up a previously inaccessible parameter space. A way to visualize this is to
imagine a field in the countryside with hills and valleys. Classically, for a
given system and a given catalyst, an electrochemical process would run through
a set path through this field. If the path goes through a high hill or a deep
valley – bad luck. Our work shows that, at least for the processes we
investigated here, we have access to the whole field. If there is a hill or
valley we do not want to go to, we can avoid it.
Dr. Marcelo Lozada-Hidalgo,
National Graphene Institute
More
Graphene Breakthrough Paves Way for Advanced Energy
and Computing (msn.com)
Next, our
latest new section, the world global debt clock. Nations debts to GDP compared.
World Debt Clocks (usdebtclock.org)
This
weekend’s music diversion. Vivaldi season again. Approx.10 minutes.
Vivaldi
Molti Istromenti Concerto RV 558
Vivaldi Molti
Istromenti Concerto RV 558 - YouTube
This
weekend’s chess update. Approx. 9 minutes.
Magnus
Wins Because He is Magnus
Magnus
Wins Because He is Magnus - YouTube
This
weekend’s final diversion. A tour of Manhattan’s
largest mansion. Approx. 7 minutes.
What
Was the Largest Mansion Ever in New York City?
What Was the Largest Mansion Ever in New York City? |
Watch (msn.com)
Limitation is essential to authority. A government is legitimate only if it is effectively limited.
Lord Acton. (Of "Power tends to corrupt, and absolute power corrupts
absolutely." Fame.)
No comments:
Post a Comment