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A note from Greg Guenthner

That was ugly.

The morning relief rally began sputtering in the early afternoon. Then, once the averages went negative, the selling really picked up, cascading stocks lower into the closing bell.

The Nasdaq Composite led the way down with a drop of 1.8%. But keep in mind, that’s actually a 3.5% drop from its morning highs. Once again, the tech-growth names that started showing cracks late last month were the stocks that were hammered yesterday.

Bottom line: Yesterday’s action is about as bad as it gets. The absolute worst thing you want to see after a drop is a relief rally where the averages gap higher, then sell off in the afternoon. That’s textbook distribution. Investors are selling the rips… and it’s starting to feel a little panicky out there.

Here are some numbers as I screen through some charts this morning:

More than 830 stocks listed on the Nasdaq are down more than 10% this week. 70 are down at least 20%…

More than 60 S&P 500 components are down double-digits this week as well…

If it wasn't for some of the market's biggest names propping up the averages, this action would appear much, much worse...

Cathie Wood's ARKK lost almost 7% yesterday and is now down more than 20% from its Nov. highs.

We can use ARKK as a proxy for the tech-growth trade. These are the most hyped growth names on the planet...

We could get a kick-save later this week. But overall, this looks like big trouble to me. ARKK has retraced its entire Q4 2020 - Q1 2021 melt-up rally, after consolidating for almost a year. That looks toppy to me. The combination of "lockdown" favorites such as ZM, along with some of the higher-flying software names has proven poisonous here.

In fact, the two "opposing" themes of lockdown and reopen are both suffering. Airlines, travel names, casios, etc have awful looking charts right now. But so do lockdown names like PTON and ZM.

The averages are green right now, but nothing too exciting going on.

AAPL and some chip names are dragging on the Nasdaq, it feels heavy right now.

Careful out there today!

Gold is looking terrible today so let’s cut our losses so we can move onto better plays.

Elsewhere, LEN is looking great... it's been our refuge during this volatility storm. I appreciate the effort from FCX but it has a lot of work to do.

That’s it for today, let’s see what the afternoon brings.

Happy trading,

Greg Guenthner

Greg Guenthner
Editor, The Weekly Fortune Alliance
AskGreg@StPaulResearch.com

Insanity reigns supreme in the markets Are the gremlins at work? Update 11 29 2021 READ

Insanity reigns supreme in markets

The economy continues to give analysts much to dwell on, as it seems like almost daily we get more news, some of it making sense and some of it not so much.

Predicament or Problem? Market update 11 17 2021

Predicament or Problem?

It is said that problems have solutions, whereas predicaments only have outcomes. If that is true, the U.S. economy’s future and indeed our immediate way of life, awaits an outcome that the Feds can do nothing about. Ex-Federal Reserve Chief Alan Greenspan used the word conundrum on occasion, yet conundrums do have outcomes, they are just difficult ones.

The predicament we now find ourselves revolves around the subject of last week’s column about inflation, the latest one trillion dollar spending bill passed this weekend, and the six trillion or so spent during 20/21 for CoVid relief.

Deficit spending and inflation go hand in hand. There is no argument on that economic reality. The debate is not whether inflation follows massive deficit spending. It does, it is now, and everyone knows it. The question is can the Feds stop inflation if it gets out of hand. The answer is yes, they can, but that is not the predicament.

The question becomes what is the effect on the economy from using the known tools to stop inflation.

Therein lies the predicament.

If inflation begins to accelerate to unacceptable levels, and it going pretty fast now, real damage to the economy and its inhabitants will occur. The most obvious problem is people won’t be able to afford to buy the things they need. But as horrible as that is, that will be the least of our problems.

Really bad inflation, known as hyperinflation, or even approaching hyperinflation, can cause breakages in the economic system, many of which can actually stop it from predictably functioning.

The result of that is the normal economic signals that transmit what it happening in the marketplace, to those participating in it (which is anyone who has to procure anything), begin to fail, sending false or even misleading signals to all concerned, which again, is all of us.

Since markets (not just stock markets but all markets where things are sold) depend on accurate economic signals to regulate the flow of goods and services from suppliers to end users, when these signals fail, the normal flow of everything is interrupted or may even fail altogether. This can translate into empty store shelves at best, and chaos on many levels at worst.

For a recent but relatively inconvenient example of a market failure, just look at the job market, where unemployment levels are relatively high, in the midst of millions of unfilled jobs. In spite of rising prices, slowing unemployment checks and stimulus programs ending, employers still cannot find enough worker to fill staffing positions. Although a serious problem, it will pale in comparison of what will happen should we even get close to a hyperinflationary environment.

The tools to stop inflation are the same used for normal inflation, except on a much more drastic scale. The Fed would increase interest rates and likely not the quarter point increases we have seen in the past. Interest rates were increased 3% in one day in the 80’s. Experts agree an increase of this proportion would crash the economy in today’s environment. Social programs would have to be eliminated or drastically cut. Government spending would have to be significantly cut. The Fed would have its hands tied to initiate more stimulus and bailouts as this is what caused the problem so those suffering would get little help from the government. Credit and loans would likely have to be recalled in an attempt to remove cash from the system. The credit markets would likely freeze up due to the unpredictable yields of fast moving interest rates. Both government, business and individual balance sheets would explode due to rising interest rate costs to service existing debt. In essence, all hell would break loose, and the Feds, having only one tool in the proverbial toolbox (printing money) would be powerless to use it as that is what caused the problem in the first place.

Simply put, the predicament is that the very thing they would use to address the economic malady, caused the malady.

With no solution, the Feds have essentially painted themselves into a corner. Hence the statement, “print or die”, which always eventually morphs into “print and die”.

Not a happy ending I know.

This article is opinion only of Marc Cuniberti, and may not represent those of this news media and should not be construed as investment advice nor represents the opinion of any bank, investment or advisory firm. Neither Money Management Radio (“Money Matters”) nor Bay Area Process receive, control, access or monitor client funds, accounts, or portfolios. Contact: (530)559-1214 or news@moneymanagementradio.com

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The Trillion Dollar coin HALLOWEEN EDITION 2021

Can a trillion dollar coin make the deficits Ghosts disappear?

With the U.S. government running a 29 trillion dollar deficit (USDEBTCLOCK.ORG), with another 157 trillion in unfunded liabilities (debts not due yet but still owed) the additional 1.9 trillion stimulus proposal (the amount changes daily) is being hotly contested in Congress. Washington desperately wants to authorize this additional spending. Opponents of the bill from both parties point to the money already spent during CoVid (about 4.5 trillion) saying another two trillion is excessive and will add even more debt to an already bloated U.S. budget. Now a U.S. default approaches, which is only compounding the problem.

Keep reading..

Where there is a will there is a way, and an idea that was originally tossed about and discarded in last decade is once again up for discussion. The idea is to mint a platinum coin with a face value of one trillion dollars, then give that to the Federal Reserve of United States, who in turn would deposit it into the U.S. Treasury. Then the Treasury Department could essentially cash the coin back at the Federal Reserve to fund one trillion dollars in additional spending. The idea is with the theoretical $1 trillion coin on deposit, the government could pay its bills without additional borrowing, making the debt ceiling a nonissue and, therefore, averting a government shutdown. Since the coin would be legal tender per the original U.S. Coinage Act, it is essentially just making change from the coin to U.S. dollars, which it could then spend.

The idea is being pushed by, among others, Professor of Economics and Nobel Prize winner in Economic Sciences, Economist Paul Krugman. In his latest article (Oct 1, 2021) entitled “Wonking Out: Biden Should Ignore the Debt Limit and Mint a $1 Trillion Coin”, Krugman suggests the coin could provide a respectable solution to the spending plan and not officially increase the deficit. Krugman also suggests the coin does not have to actually contain a trillion dollars’ worth of platinum (that would be beyond huge), but would only have to be denominated as such.

If you find yourself scratching your head and trying to put the pieces together in your mind, you’re not alone. Not only did the Treasury Department and the Federal Reserve nix the idea a few times in the last decade, the logic of it, well, defies logic.

That the coin is being seriously considered by the powers at be makes more than a few of us shake our heads.

More concerning is that the Treasury Department and the Federal Reserve for the most part, not commenting much, nor outright killing the idea like they did way back when. We have to remember different people run these institutions now, and along with many other ideological changes, what seemed impossible a few short years ago is now on the proverbial table of consideration.

Not everyone in Washington is onboard with the idea. Ex-Federal reserve chief now our Treasury Secretary, Janet Yellen, dismissed the of minting a $1 trillion coin as a last-ditch effort to help the United States pay its debt, saying the concept shouldn’t be considered seriously despite its popularity.

Like I said, where a will comes a way. I would ask why stop at a trillion? Why not stamp it 29 trillion and wipe out that nasty deficit once and for all?

Well the “for all” part is probably not going to happen. Wipe the deficit clean is like destroying a beaver dam. Get rid of it and you’ll likely find another in short order. Wipe the deficit clean and do you think they would start running it back up again?

Me thinks so.

In any case, the very concept seems ludicrous. Why bother wasting the platinum? Just print a “one trillion dollars” on a lead fishing weight and be done with it.

Many analysts and economists doubt the coin idea will ever make it out of the concept stage, but if we have learned anything in the last six years or so, don’t bet against putting anything past those that rule us. It can get a whole lot wackier before we come to our senses.

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The National Debt UPDATE

The Federal Reserve Building

THE NATIONAL DEBT

How much the U.S. government owes is called the National Debt and to no one’s surprise, it grows larger by the day.

Actually by the second.

For a sobering look as to just how fast and how much, check out the website www.usdebtclock.org.

Our debt is about to hit 29 trillion. This is what we spend (and are spending) that we do not take in from taxes and other revenue sources.

That stunning figure does not include our unfunded liabilities, which are debts we are on the hook for but are not yet due (like an end of the month payment at mid-month).

Unfunded liabilities can only be estimated and by estimation, they stand at 157 trillion by that same U.S. debt clock. Other figures tossed about double that. Like I said, it depends on how one figures it.

It took about 200 years for the U.S. to amass its first trillion in debt. Now we borrow that much debt every year. That is the power of compounding. It can help you when saving money but bite you in the you-know-where if you are on the borrowing end.

Just how much is a trillion?

Measured in time, 1000 seconds is about 17 minutes. Sit down for a million seconds and you can resume standing up in 11.5 days.

Repeat the same exercise for a trillion seconds and you wouldn’t be there anymore, and probably neither would anything else. A trillion seconds ticks off in 31,688 years.

Imagine that.

Well actually, I can’t.

But the over spenders can. Or maybe they can’t. Because if they could, maybe they wouldn’t spend that much.

Think again.

The current spending figures for the CoVid bailout is about 3.5 trillion dollars. Measured at a dollar a day it stands at about 110,908 years.

This does not include another 1.9 trillion in additional spending proposed in the next bill from Washington.

Do we want it to pass?

Guess that is a matter of opinion right? (And no, I am not giving mine).

Considering the amounts, we can assume it is a foregone conclusion the U.S.will never pay off its debt. With 29 trillion on the hook, it’s literally impossible. Too bad for those creditors, which by the way includes American taxpayers.

Reminding everyone about the additional unfunded liabilities, (that figure again is 157 trillion), in years that amounts to “E”, also known as error, as that is what my calculator says when I attempt to arrive at a total.

I’m not real good at carrying zeros so hence the reason I list an “E” as an answer. Whatever my calculator says, it basically should say “N” for never.

With a number so large, does it really matter how much we owe?

In the words of Former Vice President, “deficits don’t matter”.

My opinion is that “deficits don’t matter, until they do”.

If deficits don’t matter, why have deficits brought countless countries to their knees at the moment they did matter?

Better said, deficits don’t matter, until they are large enough, then they will.

The question then becomes how large can the U.S. deficit become before the “it matters” moment arrives.

No one knows. What we do know is that moment will arrive eventually. It approaches nearer and nearer with every dollar we spend.

What will happen when the “it matters”’ moment arrives?

We have countless examples throughout history to draw from:

Inflation gradually accelerates long before the “moment” arrives. Rapidly accelerating inflation will be the next canary in the coalmine. Next will follow rising interest rates, first purposely raised by the monetary authorities, then they will rise on their own uncontrollably. The public bond market will start to convulse and bond auctions (the public markets where debt is sold) will begin to fail. This occurs because interest rates are rising so fast, debt buyers will not commit funds to a fixed interest rate product because rates are rising too fast. The final straw will be lack of confidence in the currency in question, and then, basically, all hell breaks loose.

When the currency has its “Mexican Peso” moment, you can imagine how life will be. Usually governments will then attempt to make a new currency, or get a bailout from somebody. In the case of the U.S., the question becomes is any one entity big enough to bail out the largest economy on the planet?

Let’s not go there.

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