“All I see is Red”

Market Meltdown or Mood Swing? [Morning Reckoning] September 10, 2024 [WEBSITE]( | [UNSUBSCRIBE]( Urgent: Tune In for Rickards Reaction! The Trump-Kamala faceoff is TONIGHT and you’re probably seeing all kinds of conflicting headlines in the media. That’s exactly what the media wants, confusion and division. That’s why we’re bringing Jim Rickards onto our [Paradigm Press YouTube Channel]( to break down EXACTLY what’s happening and what you need to pay attention to. The video will go up on our channel tomorrow, Wednesday, September 11. Click below to subscribe, that way you’ll be the first to catch this urgent video. “All I see is Red” Baltimore, Maryland September 10, 2024 [Greg Guenthner] GREG GUENTHNER Good Morning Reader, September strikes again! After just a handful of trading days, I’m here to report that this month is going much like many investors feared… Stocks are skidding lower at an alarming rate so far this month and traders are running for cover, buying up safety trades like utilities and consumer staples names as tech stocks and other popular plays continue to dive. The post-Labor Day malaise has been absolutely brutal so far — especially since it’s coming on the heels of the record-breaking August snapback. The S&P 500 went from sneaking up on new highs to dropping more than 4% in just four trading days during the holiday-shortened week. Brutal. First and foremost, it’s important to remember seasonality is working against the bulls right now. September is a historically volatile month. And it’s clear investors are a bit rattled right now (The early August Yen panic isn’t helping, either). But the world isn’t ending just yet. Yes, it’s true — stocks have gotten off on the wrong foot. My screen was red almost everywhere I looked last week, and we witnessed a tentative, back-and-forth bounce to begin the new trading week. I think there are a couple of key reasons why investors are dumping stocks right now. First, the most popular (and visible) stocks on the market have been underperforming for weeks. Yes, I’m talking about semiconductors. NVDA has sucked all the air out of the room since breaking out in early January. Not a second of market coverage could pass on the financial news without discussing this world-beating stock’s performance. But NVDA hasn’t posted a new high since June. Shares have also dropped as much as 20% since the company announced strong earnings late last month. Naturally, the other chip stocks have mostly failed to gain traction while NVDA struggled. In fact, many other high-profile semi-stocks topped out well before NVDA’s slump began. The VanEck Semiconductor ETF (SMH) is down 15% from its August highs — and 23% removed from those all-time highs set back in July. It’s difficult to convince the herd that everything’s gonna be alright when the one stock that has dominated the tape for the better part of the past eight months needs to take a break and maybe even *gasp* find some support levels and chop along for a bit to digest its recent gains. Still, it’s tough to imagine the market holding up when its most popular name has hit the skids. All the more reason for folks to flip bearish… Next up: I believe a bit more uncertainty has crept back into the picture. Obviously, the future is never certain — especially not when it comes to markets. But investors love to pretend that they know what will happen next. This little act is getting more difficult to pull off right now because we’re collectively focusing our concerns away from inflation and back toward whether this whole soft landing ordeal is going to work out. Here’s a telling passage from a recent WSJ piece on the recent market jitters: “Six months ago we had a zero risk of recession,” says Johanna Kyrklund, chief investment officer at Schroders. Now there is a risk, she says, that weakness among lower-income households starts to affect the rest of the economy. The market’s nervous ticks are now dictated by every little piece of economic data hitting the wire. Unfortunately, we’re running the gauntlet again this week: CPI hits the wire Wednesday morning, followed by PPI on Wednesday. Again, maybe inflation isn’t the big worry here. Instead, investors want to know if the economy is holding up… and not sputtering toward recession. Then, we have the main event! The Fed’s first rate cut is coming in less than two weeks. Barring some surprise numbers, it’s looking like we’ll probably see a 25-bps cut next Wednesday. But until we hear it straight from Powell’s mouth, the noise is going to get louder… [Claim a copy of the most dangerous book in America right now.]( This is the only book I’ve ever read that brings to life the horrifying fallout of a massive international currency war. In fact, I’m offering to send you a copy for free today as a way to help prepare you for what could happen next. But, once we are out, they could be gone for good. [Simply click here now]( [LEARN MORE]( Did the Bears Jump the Gun? Sentiment is also changing incredibly fast. Everyone was bulled up at the end of August following the miraculous recovery from the Yen panic lows. The mood quickly soured last week and investors are now expecting the worst. The truth, as always, is probably somewhere in between. For now, it would be prudent to remain cautious and give the market room to work out some of this angst. Anything can happen — but I would not expect an all-out meltdown at this time. The market’s in flux. Investors are rapidly adjusting their expectations. And many former market leaders are slipping. Yet there’s still positive action under the surface. Check out the stats from our friend Enrique as he breaks down September’s historically bad start: While we have witnessed an ugly drop during the first week of the month, there’s plenty of bullish data to fall back on. For starters, the market was looking constructive heading into the month. Market breadth was expanding (a fact we noted numerous times during the August snapback). As Enrique explains, expanding breadth is a reliable sign that the market will be higher following these bouts of turbulence. That’s great news for longer-term-minded investors. We don’t need to jump the gun and try to pick a bottom here just yet. Keep it simple! Let the market have its little tantrum, then wait to see if we get a failed move lower heading into October (perhaps a washout following the expected Sept. 18 rate cut?). If the expanding bull market over the summer was correct, we should see a meaningful bounce during the fourth quarter. Keep the bear suit in the closet for now… Best, [Greg Guenthner] Greg Guenthner Contributing Editor, Morning Reckoning feedback@dailyreckoning.com [Man Who Predicted Biden's Drop Out In October Issues Shocking New Election Prediction]( [Click here to learn more]( After calling Biden's withdraw, former White House advisor Jim Rickards issues an even more shocking election warning... [>> Watch this Video to learn more <<]( [LEARN MORE]( In Case You Missed It… A Titan of Old Germany Sean Ring, Editor [Sean Ring] SEAN RING Hi Reader, I’m in Frankfurt, teaching a course on fixed income. It’s my first time roaming through the city, though I’ve spent far too much time using its airport for connecting flights. I’m reminded of a piece I wrote a year ago that’s worth revisiting, thanks to Germany’s dire economic state. Once, a business titan reshaped Europe thanks to his riches and connections to the Habsburgs. No man had a more significant influence on medieval finance and politics than the man you’re about to read about. But so few Americans have heard of him. Well, sit back, relax, and enjoy the biographical piece. Who the Fugger is this? In the annals of history, few names resonate with the opulence and influence of Jakob Fugger. Dubbed 'Fugger the Rich,' this medieval magnate's wealth and power dwarf the riches of many modern billionaires. His story is a tapestry woven with threads of ambition, innovation, and strategic mastery, set against the backdrop of a Europe on the cusp of the Renaissance. Fugger wasn’t just a wealthy merchant but a pivotal figure in his era's economic and political transformation. His life story reads like a grand narrative, intertwining empires' destinies with the evolution of modern finance. Early Life and Background Born in 1459 in the imperial city of Augsburg, then a bustling mercantile center in the Holy Roman Empire, Jakob Fugger was destined for a life beyond the ordinary. His family, already established in the textile trade, provided a fertile ground for his early introduction to commerce. Fugger's education, rare for its breadth and depth during that period, was a fusion of practical business training and a broader grasp of the geopolitical landscape of the time. This blend of knowledge and acumen set the stage for his later exploits. In his early twenties, Fugger traveled extensively, a journey crucial in shaping his global perspective on trade and finance. These formative years were instrumental in developing his understanding of the interconnected nature of European economies and the emerging global trade networks. Rise to Power and Wealth Astute, bold financial moves marked Jakob Fugger's ascent to the top of European wealth. His entry into the banking world was almost accidental, born out of necessity and opportunity, but it quickly became the cornerstone of his empire. The pivotal moment came with his foray into financing the ambitions of the Habsburg dynasty, particularly Emperor Maximilian I. This was more than a mere financial transaction; it was a strategic partnership that would yield immense power and influence. His business ventures were characterized by a mix of innovation and risk-taking. He was a pioneer in the use of financial instruments such as bills of exchange and letters of credit, precursors to modern banking tools. A bill of exchange mandates that one party pay a fixed amount of money to another party at a specified time in the future. The entity that creates the bill, known as the drawer, usually issues it to another party, the drawee, who is instructed to pay a third party, the payee, or to the order of the payee. Bills of exchange are often used in transactions between buyers and sellers in different countries. They secure payment for goods or services and can be bought, sold, or traded. A key feature of a bill of exchange is that it can be endorsed to another party, making it a negotiable (in this case, “negotiable” means “tradable” or “transferable”) instrument. This means the legal ownership of the bill and the right to receive the money can be transferred. Bills of exchange are often used to guarantee payment at a future date, which can help manage cash flows and credit risks. A letter of credit is a document from a bank guaranteeing that a seller will receive payment up to the amount specified in the letter, provided certain conditions are met. In international trade, this is particularly useful as it reduces the seller's risk. The seller is assured that they will receive payment if they deliver the goods according to the agreed-upon terms. The buyer obtains the letter of credit from a bank and provides it to the seller. The bank will release the funds to the seller once the goods are shipped and the required documents are submitted. Letters of credit are crucial in international trade, where the buyer and seller may not know each other personally and operate under different legal systems. They offer a level of security in transactions, ensuring that the seller is not at risk of non-payment and that the buyer receives the goods or services as specified. His establishment of joint-stock companies was revolutionary, predating the famed Dutch East India Company by decades. But, the Dutch East India Company was the first publicly traded joint stock company. Joint-stock companies - like today’s publically traded companies - have several defining features: Shared Ownership: In a joint-stock company, ownership is divided into shares, each representing a portion of the company. Individuals or entities can buy and sell these shares, and they are known as shareholders or stockholders. Limited Liability: Shareholders in a joint-stock company typically have limited liability. This means they are only liable for the company's debts and obligations up to their invested amount. The shareholders' personal assets are generally protected if the company goes bankrupt or faces legal issues. Capital Accumulation: One of the main advantages of joint-stock companies is their ability to accumulate large amounts of capital. By selling shares, a company can raise significant funds from a broad base of investors, making it easier to finance large-scale projects and ventures. Transferability of Shares: Shares in a joint-stock company can be freely bought and sold (transferred) on stock exchanges or privately. This transferability makes it attractive for investors, who can liquidate their investments if necessary. Separate Legal Entity: A joint-stock company is a separate legal entity from its owners. This means it can own property, enter into contracts, sue, and be sued in its name. Governance Structure: Such companies are usually managed by a board of directors elected by the shareholders. The board makes major decisions and oversees the company's overall strategy, while executives appointed by the board manage the day-to-day operations. Perpetual Succession: Joint-stock companies continue to exist even if the ownership or the board members change. This perpetual succession is not dependent on the life of its shareholders or directors, giving the company stability and an indefinite lifespan. Without these three innovations, we simply don’t have world trade or modern finance. Major Business Ventures and Achievements The scope of Fugger's business ventures was vast, covering everything from mining operations in Central Europe to trade expeditions to the Far East and Africa. His investment in the mining industry was a testament to his business acumen and a strategic move to control essential resources. The Thuringian copper mine, for example, provided him with not only immense wealth but also a commodity in high demand across Europe. Fugger’s involvement in the spice trade was another cornerstone of his empire. He understood the value of these commodities in a way that few others did, capitalizing on the burgeoning demand for luxury goods in Europe. His trade routes were not just commercial enterprises; they were geopolitical tools that helped him build a network of influence that extended far beyond the borders of Augsburg. His monopoly over the European copper market was akin to controlling a precious lifeline of the continent's economy. This control afforded him leverage over commercial and political realms, making him indispensable in European power dynamics. Political Influence and Relationships Jakob Fugger's wealth and business acumen catapulted him into the upper echelons of European politics. His financial support was crucial in securing Charles V's election as Holy Roman Emperor, which reshaped European politics for decades. His influence extended beyond mere financial transactions; he was a crucial player in the complex chess game of European politics. His carefully cultivated relationships with monarchs and church leaders allowed him to navigate the tumultuous political landscape of the time. He balanced his business interests with political alliances, often acting as a mediator and advisor to the most powerful figures of his era. Legacy and Impact on Banking and Finance Jakob Fugger’s contributions to the field of finance were revolutionary. His pioneering of financial instruments like letters of credit and bills of exchange laid the groundwork for the modern financial system. His practices in banking and finance were ahead of their time, setting the stage for a more interconnected and efficient economic world. His legacy in finance is comparable to that of modern financial innovators. Fugger was a visionary who saw the potential of financial markets long before the concept of globalized economies had taken shape. His impact is felt even today in the principles and practices of banking and trade. Personal Life and Philanthropy Despite his immense wealth and influence, Fugger's personal life was marked by a commitment to his community and a deeply ingrained sense of responsibility. His establishment of the Fuggerei, a housing complex for those in need that still operates today, is a testament to his philanthropic vision. He was a devout Catholic, and his faith played a significant role in his charitable endeavors. His personal life was characterized by a balance between his ambitious business pursuits and a commitment to social welfare. This aspect of his character often contrasts with the typical image of a shrewd and ruthless businessman, showcasing a complexity that defines the man behind the wealth. Wrap Up Jakob Fugger's life and achievements represent a pivotal chapter in the history of finance and economics. He was more than just a merchant or a banker; he was a visionary who transformed the economic landscape of his time. His story is a blend of ambition, innovation, and strategic mastery, underscored by a nuanced understanding of the power of wealth. Fugger was not just a man of the Middle Ages; he was a figure who laid the foundations for the modern economic world, a legacy that continues to influence the way we understand and engage with finance and economics. All the best, [Sean Ring] Sean Ring Contributing Editor, The Morning Reckoning feedback@dailyreckoning.com X (formerly Twitter): [@seaniechaos]( Thank you for reading The Morning Reckoning! We greatly value your questions and comments. Please send all feedback to [feedback@dailyreckoning.com.](mailto:dr@dailyreckoning.com) [Greg Guenthner] [Greg Guenthner, CMT,]( is chief strategist at Forge Research Group. He has spent the better part of the past two decades developing long-term and short-term strategies with a single goal in mind: to help everyday investors generate outstanding returns and control their financial futures. Greg’s charts, analysis, and insights have appeared in Marketwatch, Forbes, Yahoo Finance, and many other financial publications. [Paradigm]( ☰ ⊗ [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. 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