Claim of the Day
Here’s the claim of the day: Wall Street Opens Higher as Faith in Stimulus Persists; Dow up 130 Pts
Reality
No one really has any idea on most days why the market does this or that.
It’s likely the market and gold are both higher not because of any deal between House Speaker Nancy Pelosi and president Trump, but for something not so obvious.
If the market falters this afternoon there will be another reason perhaps the opposite: Market down as stimulus hopes fade.
What About the Election?
It’s entirely possible the market the market lately has been pricing in a Biden victory and is happy about it.
After all, some 3,500 corporations will be happy to get rid of Trump tariffs that have totally backfired.
For discussion, please see 3,500 Corporations So Fed Up With Trump’s Tariffs They Sue the US
Is that the reason?
I don’t know, but it is as least as good a reason as reasons provided in headlines every day.
The market can go up or down for many reasons or no reason at all.
But looking ahead, a Biden victory coupled with increased deficits rates to be good for gold.
Mish
every dollar of deficit spending is a dollar in an account of a Wall Street bank. ref. https://thepriceofliberty.org/2019/05/06/the-bizarre-relationship-between-the-fedgov-and-wall-street/ FEDERAL RESERVE FOR DUMMIES. The funds must be spent. They are laundered in the stock market. Up go the prices.
Super thought, the USA has been in default since 1972, you got a Mona Lisa? print a trillion then see what she is worth. Good luck with that. I suspect you can no longer export your inflation, its going to get you.
Can we rephrase Mish’s question about stocks and gold?
Why do Wall Street firms support the Democrat Party?
Some reasons might be:
They believe Democrats policies reflect their best interests.
Higher taxes are existentially ‘better’ than lower taxes.
The Green New Deal will generate massive economic growth, with far greater energy efficiency than carbon/nuclear forms.
It’s all about insurance.
Either Rep or Dem, money flows. Neither side can afford increasing interest rates and crashing bond/stock markets. Wall Street can’t lose. Ergo, stocks go up. Gold is up because global economic implosion draws steadily nearer.
It’s option four: they benefited hugely from outsourcing the US economy, and they see this policy strengthened under Democrat party.
They certainly don’t look far ahead of their nooses.
“Why do Wall Street firms support the Democrat Party?”
I don’t know why, but a couple of common denominators are:
Stocks are up because of FOMO.
Gold is up because the risk of holding anything else keeps rising whist yields keep falling.
I agree that what some journalist thinks about what makes markets move….on a given day……. is guaranteed to be made-up bullshit 99% of the time.
The other 1% of the time the problem is so obvious that almost everybody knows.
Some things I seldom see mentioned……foreign companies or foreign ultra high net worth individuals……. with liabilities denominated in dollars…….can hedge by owning American stocks…maybe something large cap that pays a dividend. (More Dollar Milkshake Theory, fwiw).
In general, the Fed policy is accommodative right now in a way that creates a strong belief that the equity markets will be supported….maybe that’s a bit of an understatement.
Gold thrives on disaster and uncertainty…and we have both right now….but I caution folks……at times I believe that the Fed and/or the PPT and the flagship American banks….., working together, have made sure gold price doesn’t get out of control.
They do this by using incredible leverage in the futures market (naked shorting), assisted by HFT programs, On a given day, they can take gold down if they want to…..maybe they can’t control it completely over the long haul…but they can still smack the hell out of it…if it suits their purpose.
I love to read Paul Mylchreest on this one……I spent six months once looking daily to see if I could spot the HFT algos he has described……and it isn’t that hard, if you do pay attention.
Right now it sort of makes sense to me that they would let gold rise……because they want to weaken the dollar….but they never want gold to get super bullish…..if they can help it. They want a weaker dollar, but not a worthless dollar…not hyperinflation. They want it to be in a range. Maybe a DXY somewhere between 75 and 85 would be ideal?
Everybody says…or a lot of people do…that you need to hold gold when there is currency debasement……and if we ever had currency debasement, this year would be a banner year I suppose….so I think anyone who is any sort of gold bug thinks gold will outperform over the next few years…as we seem to be going total Japanification..buying our own debt with printed money.
I am not anti-gold….but it is very onerously taxed if you take gains on it…..and even if gold does very well, the typical asset bubbles we complain about might do even better…until they pop.
Gold probably holds its value better than any other tangible asset…..but it is a volatile market in the short run…..and anyone who has dabbled in it over the last two or three decades can tell you that gold markets can remain irrational for long periods of time.
I got out of gold….and spent a couple of years trying to learn about crypto markets…..and as it has often been the the case……throughout my investing career….I paid some dues….and missed a nice move in gold that I had been set up to profit from….
I cannot claim to have mastered trading crypto…..but I do know a lot more than I knew a couple of years ago. I don’t like to feel that the world is passing me by….or that I can’t still learn something valuable by studying markets that are new…..whatever one thinks about crypto as an investment, blockchain technology is fascinating and has a lot of applications.
I don’t think there’s any coordinated attempt to manipulate the Gold price. Even the recent JPM scandal was a short term spoofing play to improve the entry price of trades, not to permanently move the price. The big banks are only short large amounts of futures as a hedge against long bullion positions.
I don’t believe in a constant “hidden hand” kind of manipulation. Just that the Fed has every reason to be concerned by a really hot runaway gold market….and they have the means to move the market if they wish to do so. No different than them manipulating stocks or bonds.
.
The Omaha Of Oracle buying?
Stock market is up because stock can only go up with the money gushing from all orifices: fiscal, monetary, and regulatory.
Also, they trust that morons will be in charge in economic and political positions.
Otherwise known as “the denominator effect”.
Trump built that… LMAO
Gold is likely up because USD is down. Equities? who knows?
Because investors, totally fed up as they are with C19, are completely ignoring the second wave…….Even algos seem to be clueless these days….
Stop calling it a “market”.
It is an electronic, Federal Reserve-controlled policy tool and wealth-redistribution mechanism. Nothing more.
Strawberries.
The market is up today because of strawberries.
The market is down today because of peaches.
Those 2 statements make as much sense as Bloomberg’s headlines.
Mish could you comment why you are so sure there will be no stimulus before the vote?
I’d like to check the futures prices for plywood for after the vote.
Biden appears to be winning.
What political incentive does Pelosi have to agree to a deal unless she gets everything she wants, including Republicans agreeing not to approve a supreme court pick until after the election? If she does not get what she wants now, then she has good odds she will be able to get what she wants after the election.
What political incentive do Republicans have to throw themselves on Pelosi’s sword before the election and how would that possibly help them?
An agreement before the election seems extremely unlikely.
There may be stimulus but as I commented the other Day, Trump stopped negotiations. The next day he tried to negotiate.. So which is it.
Both Trump and Pelosi seem to want “my way or no way”. If they stick to that there will not be stimulus
I suspect Trump sees negotiation as a shell game. He thinks he is three steps, tossing out ‘information’ to distract. He’ll go with ‘my way or highway,’ and then take the off-ramp. It reminds me of dealing with Chinese–there is never a deal with a handshake–negotiating continues up to the end. Machiavelli, he is not.
Gold and stocks are up, because of me. I’m an old-money trillionaire who’s been buying. I’ll wait till everyone’s all in, then I’ll sell.
Why, hello Mr. Market! We haven’t heard from you in a long time. I thought you were dead and wonder if you still are.
Who will you sell to if everyone’s all in 🙂
It’s because the moon is in the seventh house and Jupiter is rising. Or, who the heck really knows other than in hindsight.
Well, it has nothing to do with the seventh house and Jupiter rising or falling. There is a old Italian proverb: Printa Molla, and Golda Goes UUUPPA , wasn’t that line in
the God Father Movies……… LMAO
It’s true, the Age of Aquarius is coming and Pisces is ending. Whether it affects gold and stocks is anyone’s guess.
If what I’m reading is correct, the market is currently forecasting a Biden win and a big stimulus, probably happening during the lame-duck session. As far as gold, it’s an enigma. It’s a small maniputable market (ala the JP Morgan action and $Billion fine) that should be higher, if only to reflect the higher amounts of Fed money created – whether going into assets or much less into GDP creation.
The United States of America has a printing press that no one in the world can match. Period. I don’t believe we will be “taken down”.
Maybe softbank again. See zerohedge