The Charley Horse Markets

It was a crappy end to a down week. What’s next? September 09, 2024 [WEBSITE]( | [UNSUBSCRIBE]( The Charley Horse Markets SEAN RING Dear Reader, Remember those awful pains you’d get in your calves as a kid if you were dehydrated and played too much? It still happens after a few nights in a row drinking Geman beer for me. The involuntary cramping. The indescribable pain. The desire to scream as loudly as I can. The futile attempt to flatten my foot to stretch my calf muscle. I felt the same pain - albeit emotionally - as I opened my app to check the stock prices of my portfolio constituents. The involuntary cramping, the indescribable pain, the desire to scream… it was all there. Last week was awful, and I’m starting to think the Fed isn’t going to rescue us even if they cut rates a little over a week from now. To be sure, the nonfarm payrolls number missed, but not by much. What started the mess was Federal Reserve Governor Christopher Waller saying he would "advocate" front-loading rate cuts if that is appropriate. According to [Zero Hedge]( “Then Nick “Nikileaks” Timiraos of The Journal interpreted the Fed's speech as much more hawkish than it appeared, saying that "Fed governor Chris Waller’s speech doesn’t explicitly say “25” or “50” but it leans into endorsing a 25 bps cut to start, explicitly reserving the option to go faster “as appropriate” if “new data” show more deterioration."” That first rate cut may be a sell signal instead of a buy signal. But one thing’s for sure: we need to see how stocks react to the cut before we do anything else. Let’s look at some charts. The Economics For a while now, I’ve said we need to see what happens with initial jobless claims, the steepening yield curve, and oil prices. It’s still an interesting story. Initial Jobless Claims Initial jobless claims, a key indicator of the labor market's health, were on a general uptrend until the last reading. But we dipped off in August. This could be because job seekers and businesses are on holiday. My friend and colleague Andrew Zatlin had this to write about it: Initial Claims: 227K (vs Consensus 230K) Continuing Claims: 1.838M (down 0.02M from prior week) Outside August Survey Period, But Still Relevant Recent Jobless Claims data is more positive. HOWEVER the bulk of the improvement happened AFTER the NFP survey period. Nevertheless, the intent to hire would have been underway during the survey period. It suggests that during the survey period businesses were preparing to hire and simultaneously were firing less. Both of these sentiments are positive for payrolls. Ok, so maybe we don’t even have a Strike 1. Yield Curve Steepening The 2s10s curve has steepened so much it’s now positive at 0.06. What’s that? That curve compares the yield on the 2-year treasury to the 10-year treasury yield. It had been inverted since July 2022. Usually, when the yield “un-inverts” quickly, we wind up in a recession. But thanks to the banker in me, I follow the 3m-10s curve. Banks lend long, primarily to the public, thanks to the U.S.’s 30-year fixed mortgage. But most folks only stay in their homes on average for 10 years. Banks fund those mortgages by borrowing short in the interbank markets for about 3 months on average and then roll that funding. Here’s what that curve looks like: This curve is still inverted, so we haven’t reached the recession phase yet. Here’s a handy table, if you’re interested in these yield curves: Now, let’s turn to oil prices. Oil Prices This is staggering. Oil has just fallen out of bed. [ SELL-OFF WARNING ]( [The stock market is entering a cycle of HISTORIC manipulation.]( Prices have surged recently… But when this trend reverses – and trends always do… Millions of investors could be on the wrong side of [a historic “pump-and-dump”.]( That’s exactly what I believe is happening behind the scenes – Wall Street is propping the market up. And within the next week or two… I believe we are going to see a historic selloff. [Click Here To Learn Why]( We are officially in a technical bear market, with price < 50-day MA < 200-day MA. And this is with a weakening dollar! Oil should be rocketing from here, but it isn’t. From [oilprice.com]( Usually, high-impact OPEC+ decisions trigger a notable reaction in the oil markets, but not this time. Sentiment has soured so much that the oil group’s decision to postpone the return of barrels they’ve cut in 2023 barely resonated at all, reinforcing fears that next year will see balances swinging heavily towards oversupply. As ICE Brent futures hover around $73 per barrel, oil prices are set to close this week at their lowest level since June 2023. OPEC+ Delays Output Increase by Two Months. Citing worse-than-assumed economic data from China and the United States, eight members of OPEC+ that were scheduled to unwind their 2.2 million b/d of voluntary production cuts have agreed to delay their production hikes by two months. So, it looks like oil prices won’t be increasing soon. Let’s go back to Andrew Zatlin: Nothing in the data indicates that the wheels are about to fall off It's very easy to argue that we are easing into a recession or similar slowdown: - GDP Going from 3% 2Q to 2% 3Q (per Atlanta Fed) - Payrolls looking choppy - 3 months of payroll run-rate very soft - Latest month trending up but maybe not enough - CPI slowing - More macro pain coming as companies continue to delay spending due to election and pending rate cuts History would argue that things tumble quickly and not slowly. HOWEVER that same history needs to account for a few things. - Lean economy: This isn't the dotcom boom or the housing boom. The AI spending is not driving the economy (except for the stock market). There are no major sector bubbles. The opposite, actually: - CAPEX: Inventories have been managed down aggressively - Staffing: hiring will kick in quickly - Payrolls are lean: up 4.6% since February 2020 pre-COVID vs 11% Real GDP growth during that time. - Layoffs: already undertaken and mostly offshore. Jobless Claims benign. - Companies ready to spend: once the election is done and rate cuts start, spending will kickoff. Ok, so things may be better than we think. What about the dollar? The Dollar With the economy looking okay, you’d expect the dollar to strengthen a bit, which it did. But when oil falls out of bed, you’d expect a crazy dollar rally. That’s not what’s happening. Since the end of June, the USD has fallen from 106 to 101.188. You’d expect that to goose oil prices, but it didn’t. Weak dollar, weaker economy? Or is oil getting hammered because of the oversupply? I favored the former argument, but my publisher Matt Insley has long argued that America’s oil abundance has kept prices down. The evidence is turning in his favor. What about the shiny stuff? Gold & Silver Gold has held up wonderfully well. Thanks to an overspending Congress, I still think it’ll break $3,000. Gold looks to be consolidating at $2,500 for another rally. The next price target is $2,630. Alas, silver’s chart isn’t as bullish: But a weaker dollar will surely help both these metals out. Gold & Silver Miners The senior miners (GDX) and the juniors (GDXJ) have similar charts, with the juniors being the more volatile of the two. They’re both in a clear uptrend, but I suspect it’ll be a bumpy ride until Powell is well into the cutting cycle. For the silver miners, let me show you Hecla’s chart. I’m a long-suffering owner myself. As my trading buddies in London would say, “Whore’s drawers, mate. Up and down. Up and down.” I just want silver to pop to be rid of this beast. But owning silver miners is to own pain. Tech Stocks I don’t want to call time on the tech rally just yet, at least not until we’re below the 200-day moving average. But this chart is starting to look shortable. The second peak is lower than the first. The 50-day MA is beginning to turn south. And Friday had a massive down candle. We may bounce off the 200-day MA, so we wait and see. Wrap Up Sorry to throw so much at you on a Monday morning. So let me tell you what I’ve told you. Initial jobless claims look much better and are no longer trending upward. The 2s10s curve has “un-inverted,” but the 3m10s has not. And oil prices are going down faster than students at a Willie Brown career advancement seminar. So, despite our common sense, it doesn’t look much like a recession. Though the dollar has slightly increased over the last week, its primary trend is down. While this has done nothing for oil, it’s helping gold. Silver struggles to stay near the $28 level. As for anyone who owns the miners, hold and buy some Alka Seltzer. Finally, the Nasdaq looks a bit peaked, but we’re not selling yet. I hope that helps. Stay hydrated to avoid those charley horses, and have a wonderful week ahead. All the best, Sean Ring Editor, Rude Awakening X (formerly Twitter): [@seaniechaos]( Rate this email Like Dislike Thanks for rating this content! Looks like something went wrong. Please try to rate again. In Case You Missed It… America’s Financial Tombstone SEAN RING There’s nothing like reading my good friend and colleague’s work in the Rude. But when the inimitable Byron King asks me if I fancy seconds, I say, “Yes, please!” Yesterday, he wrote a masterful essay on Reagan, the new movie the MSM is doing its best to ignore or downplay. Today, Byron follows up on [his well-received copper article]( from last week with this peach of an essay about Tombstone, Arizona. It’s the namesake of one of my favorite movies, but I had no idea exactly how rich its history is. I fly home from Frankfurt while you’re reading this. I hope you enjoy it as much as I did. See you on Monday! All the best, Sean Ring Editor, Rude Awakening BYRON KING America’s Financial Tombstone “The only rock you’ll find out there will be your tombstone,” said Army scout Al Sieber to his fellow serviceman Ed Schieffelin. It was 1876, and the two soldiers were dodging the hard-fighting Apache of southeast Arizona in what is now Cochise County. Schieffelin nodded to his colleague and smiled. He mounted his horse, rode off into the desolate scrublands, and in due course located a silver deposit that helped finance the American economy in the 1880s, during an era known today as the Gilded Age. Ed Schieffelin, Army scout and silver prospector. Courtesy Tombstonetimes.com. The Election of 2024 Hold that thought about Ed Schieffelin and his Arizona silver. We’ll return to him in a moment, but right now, obviously, it’s election season with two months yet to come of over-the-top campaigning and plenty of dodgy voting. And in this issue of Strategic Intelligence, Jim Rickards and my other colleagues discuss politics and how to protect and grow your wealth in a time of turmoil and uncertainty. Absolutely, it matters whether Donald Trump or Kamala Harris becomes the next president. Beyond any shadow of doubt, it’s critical who sets policy within the high castles of the U.S. government. Truly, it matters who appoints what kinds of people to positions of federal power that shape the social and economic development of the nation. Again and again, for many years now, we’ve heard Trump’s signature phrase, a promise to Make America Great Again. Heck, I’d settle to Make America “America” Again. That is, were the 1980s and 1990s really all that bad? Hey, just make the place less hyperbolically crazy in terms of sociology, and less dangerous such that people actually get along with each other. And perhaps we should strive to Make America Governable Again; not a dysfunctional, faux-democratic political entity held together by little more than the inertia of government spending with depreciating dollars. How about that? I know… We could discuss these matters all day, but not now. Instead, let’s focus on one key issue: what can you do – and I mean YOU, the subscriber here – in a country with a national debt of $35 trillion, growing at about $2.5 trillion per year? As you surely know, the federal government is deep in debt. Interest payments are huge and growing fast, with, for example, more money paid out annually to cover bond coupons than to fund the Defense Department. So, is the country really broke? Insolvent? Are we on the cusp of a currency crisis? Based on bookkeeping and accounting principles, it’s no longer outrageous to wonder whether or not we’re in the last days of the late, great United States, no matter who is president. The former Soviet Union collapsed; could that happen here? This brings us back to the above-noted Army scout Ed Schieffelin and his explorations in Arizona not quite 150 years ago. Skeptics thought that he would find nothing of value other than his tombstone. So, at least allegorically, is it time for America to chisel some dates into a hunk of rock and compose a pithy epitaph? Looking ahead, what happens next? Where do we go? Back Then, the Wealth Really Was Out There Well, for a few moments, let’s travel back in U.S. history to the decades after the Civil War, when the country rebuilt what was destroyed and built itself out anew and in new ways. Generally speaking, any nation’s growth and prosperity is based on how well, and to what extent people and businesses create wealth. That is, people take raw or semi-finished materials and transform it to a higher state. In other words, they add value. It’s called “making stuff.” In the 19th century, much of America’s development and growth was based on people making stuff by exploiting the country’s vast store of high-grade primary resources. For example, consider how people harvested timber from forests that had never been cut, plowed land that had never been farmed, dammed waterways that had never been harnessed, and dug up minerals and ore deposits that had never been touched. All this and more. Yes, by modern standards, much of this historic resource exploitation was crude, to the point of brutal. There’s no need for reminders or snarky lectures about what happened to Native Americans, to ecosystems, and entire environments. We weren’t there. And we’re not here to highlight dark chapters of the past. That’s behind us now, and history is only useful if we are honest about it and learn from it. Meanwhile, much of that late-19th-century resource exploitation occurred in the vast American West. That is, the West was comprised of geographic and geologic regions that the U.S. acquired via the Louisiana Purchase in 1803, supplemented by other lands annexed after the Mexican War of 1846-48. You’ve probably heard of the explorations of Lewis & Clark in the early 1800s or of John Wesley Powell, who mapped the Colorado River and Grand Canyon in the 1870s. With these efforts and more, which ranged from basic birdwatching to uncovering fossilized dinosaurs, the story of the American West was a series of startling discoveries, one after another. For a superb overview of the period, see William Goetzman’s monumental, Pulitzer Prize-winning [1967] book, [Exploration and Empire: The Explorer and the Scientist in the Winning of the American West](. Among those intrepid explorers and scientists chronicled by the late Prof. Goetzmann, don’t neglect the routine work of humble soldiers of the U.S. Army, posted to isolated camps and lonely forts across the continent, mostly west of the Mississippi River. Again, for another great overview of the background to all of this, see Andrew Masich’s outstanding [2017] book, [Civil War in the Southwest Borderlands, 1861–1867](. In essence, from the 1840s through 1890s, the Army went about its assigned tasks out West, often as not fighting the aforementioned Apache in territories like Arizona and New Mexico, all while performing mapping and reconnaissance functions. Along the way, more than a few observant soldiers took an interest in some of the shiny minerals they saw poking out at the surface along the trails and rock faces. In many instances, the Army guys marked locations and brought specimens back to their camps and forts. To make a long story short, some of these Apache-fighting soldiers transformed into the original prospectors of the late 1800s. Either on their own or with the help of better geologic talent, they found immense resources of valuable minerals outcropping across the West, and of interest here, in southern Arizona. [Elon Musk’s Final Masterpiece: X-9840]( After revolutionizing the payment processing industry with Paypal…The space exploration industry with SpaceX…And the auto industry with self-driving Teslas… Elon Musk is now set to revolutionize MONEY with his [“Project X-9840...”]( A project he said could change “Your entire financial life.” [Click here to see the details because there’s not much time to prepare](. Elon has said he could flip the switch “as early as mid 2024.” [Click Here To Learn More]( The Man Who Discovered His Own Tombstone The above-mentioned Ed Schieffelin was one such soldier-prospector. By the mid-1870s, this inquisitive fellow, originally from a small town in north-central Pennsylvania, had ridden trails across the Rocky Mountains, observing things from the eyeball distance of a man on horseback. Across the West, Schlieffen saw deposits of gold, silver, copper and much more during his expeditions to Montana, down through Idaho, Nevada, Utah, Colorado, New Mexico and Arizona. Over time, he developed an innate sense of what to look for as he observed his surroundings. As fate would have it, Schieffelin was eventually posted to Arizona, where he scouted for the Army, and also examined rocks on his own account. Then one fine day in 1877, Schieffelin was surveying the San Pedro River valley, about 40 miles east of what is now the Army’s Fort Huachuca, adjacent Sierra Vista, Arizona. He found silver-bearing ore in a dry wash and began to trace the material upstream to the source, a high plateau called Goose Flats. High-grade silver ore, Goodenough Mine, Tombstone. BWK photo. Over time, Schieffelin mapped the surface traces of a massive, silver-bearing vein structure. He staked his claim, which he named “Tombstone,” recalling his Army friend's geologic skepticism. What happened next is a long story of great geology: a multimillion-year tale of ancient rocks intruded by molten magmas, which expelled fluids that carried silver, gold, copper, and more. As it all cooled and crystallized, this complex of geochemistry formed a miles-long system of high-grade, mineralized ore zones across the district. Over and above the bedrock geology, there’s a stem-winding tale of the rapid development of a mining boomtown out West. Within just a few months, Goose Flats transformed from empty, dry scrubland into a bustling camp, the town of Tombstone, filled with over 10,000 people from across America and numerous foreign lands. These new Tombstone inhabitants included about 2,500 well-paid miners and their reasonably well-paid helpers. Their daily underground work, in 10-hour shifts, was difficult to the point of backbreaking. But then, as now, people with special skills earned good pay. Tombstone miners, pounding holes for the next blast. Southernarizonaguide.com. Then there were the typical camp followers, people who tend to show up where money is being made: real estate speculators, peddlers, blacksmiths, horse thieves, bartenders, gamblers, the occasional doctor or dentist, and, of course, women who profit from being in the company of people who mine silver from the ground. In its boom days, Tombstone was a jurisdiction of both law and lawlessness, the latter such that the federal government sent Marshal Wyatt Earp down from Dodge City, Kansas to help keep the peace. And his particular story became famous, and iconic Americana, if you’ve ever heard of the legendary, 1881 “shootout at the OK Corral.” Then and Now, Where Real Money Is Made Today, Tombstone is a surprisingly nice tourist town; it’s just delightful, and I mean that with all sincerity. Give it a visit if you are ever in the vicinity. There, reenactors engage in Old West shootouts daily. Stores sell cowboy gear, much of which is made in China (no shock there). And the Longhorn Restaurant serves a great lunch at a good price. Your editor, with the reenactor who plays Marshal Wyatt Earp, Tombstone. BWK photo. All this, and just down the street from the Longhorn eatery, you can tour one of the oldest, best-preserved silver mines in the area, called the Goodenough. It’s run by a retired Air Force veteran whose attention to detail, and respect for true mining history, is second to none. Meanwhile, beneath the streets of Tombstone and adjacent acreage are over 2,000 miles of old tunnels and related shafts. For comparison, that’s about the distance from Tombstone to, say, Detroit if laid end to end. These tunnels extend laterally and also quite deep underground, to about 600 feet or more, which is not bad considering that they were hand-dug and blasted through solid rock. For a decade, from 1879 to about 1889, Tombstone was among the most productive silver mines in America. In its early years, when the highest-grade veins were exploited, Tombstone’s silver output rivaled the great Comstock Lode near Carson City, Nevada, or the massive copper-silver deposits of Butte, Montana. Later on, problems with pumping out water caused serious problems, although the upside is that there’s still a heck of a lot of silver left in the rocks. At the mouth of the mineshafts, back in the old mining days, ore went to stamping mills that crushed the rock and separated out the silver minerals. Then after a series of metallurgical treatments, high quality silver was poured into 180-pound ingots (which are hard to steal) for transport by rail straight east, across New Mexico and Texas, to the U.S. Mint at New Orleans, Louisiana. There, at the Mint, the federal government coined tens of millions of silver dollars, with the iconic “O” mark to indicate the place of origin. It was real and serious money, back then. U.S. 1881 Morgan silver dollar, New Orleans Mint; note “O” above the “Dollar” wording. Another way to say it is that when people mined silver at Tombstone, they were mining money. All that was required to turn it into official U.S. currency was to ship the ingots to the Mint, to stamp into silver dollars. And in a growing national economy, decades before anyone even dreamed of an entity called the Federal Reserve, those silver coins were the key to monetary liquidity. As for Army scout Schieffelin, instead of finding his own Tombstone, he unearthed a cornucopia of wealth in the form of metallic money, straight from the ground. He did well in life, but died in 1897 of a heart attack at the relatively young age of 50. Some Silver Investment Ideas Great story, right? A guy discovered silver, founded a mining boomtown, people got rich (although some went broke, too), and it all helped to grease the skids of commerce for a growing and productive nation. But all of this was a long time ago. It was a different world, with different standards and ways of doing things. We don’t live there anymore. Today, the U.S. government is deeply in debt. Every day/week/ month/quarter, it issues dollars by the billions, if not trillions, via electronics, not real metal. Which means, of course, that those electronic units of currency constantly lose purchasing power while specimens of real metal hold value over time. People and companies that explore for metal and moil it out of the ground are a special breed at the level of silver deposits. You just won’t find many old Army scouts doing geologic prospecting these days. But still, fear not because along these lines, we have a few ideas for you. First, you should own a store of physical silver. This includes what’s called “junk silver,” meaning bags of old, pre-1964 dimes, quarters, half-dollars, and silver dollars. These were made from about 90% silver, with some copper in the alloy for strength. And they will retain value over time as our Fed-dollars lose purchasing power. You can buy them at coin shops, on eBay, and other venues, but always check to ensure you’re dealing with a legitimate business. Also, own silver bullion of more recent mintage, such as coins, small ingots, bars, etc. If you’re new to the game, just go with straight silver bullion. Don’t get fancy, which means paying hefty markups. Do not get caught up in rare coin collecting, a field for players with much more expertise than most people possess. Stick with the basics. And then we have a few silver mining ideas for you, namely three great, well-run companies that are strongly entrenched in the overall sector. Consider Hecla Mining (HL), with a market cap of over $3 billion; Coeur Mining (CDE), with a market cap of about $2.4 billion; and First Majestic Silver (AG), with a market cap of about $1.6 billion. These companies are well known and associated with silver mining. The share prices and market caps rise and fall with the silver price, which should be a good thing in the months and years to come as the dollar deteriorates and silver retains its value. And of course, many other companies work in the silver space, ranging from small cap explorers and developers to other silver giants. Sorry, but there are way too many to list here. The takeaway point of all this is that once, long ago, silver and real wealth came straight from the ground. Converted to currency, it formed the foundation to American prosperity, but this was back in a different era of history, society and of course politics. Today, it’s a different world. As you surely know, the U.S. is in a bitter, internal fight over the future of the country. One way or the other, whoever becomes the next president in 2025, the country is overleveraged and of course, deeply in debt. To protect your own wealth, and to seek gains in the months and years ahead, you should have some exposure to silver, both physical metal and mining shares. The companies named above are not part of the official Strategic Intelligence portfolio, and we won’t track them over time. Still, be assured that I watch the news and share price performance. Plus, I follow developments in silver markets and with related mining companies. Of course, I’ll report to you if I have any breaking news in the silver (or gold) space. So, watch the charts, buy shares on down days, and never chase momentum. With that, I’ll end here and wish you well during the upcoming election season, and far beyond. Thank you for subscribing and reading. Best wishes… All the best, Byron W. King Contributing Editor ☰ ⊗ [ARCHIVE]( [ABOUT]( [Contact Us]( © 2024 Paradigm Press, LLC. 1001 Cathedral Street, Baltimore, MD 21201. By submitting your email address, you consent to Paradigm Press, LLC. delivering daily email issues and advertisements. To end your Rude Awakening e-mail subscription and associated external offers sent from Rude Awakening, feel free to [click here.]( Please note: the mailbox associated with this email address is not monitored, so do not reply to this message. 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