Irresistible Impulse

  • Doomy headlines in the mainstream business press
  • What if they’re right?
  • Precious metals get crushed
  • Supply-chain snafus (Acts I & II)
  • False-flag energy in El Salvador
  • A reader on “Covid vaccinations and choice”… A rare call to activism… And more!

It’s impossible to get away from the doomy headlines in the mainstream business press…

“Suddenly Everyone Thinks the Stock Market Is Going to Plunge” is how Yahoo Finance greeted its readers Monday morning.

Ditto the front page of Monday’s Wall Street Journal: “After a record-breaking bull run for the U.S. stock market this year, many Wall Street analysts are starting to warn that investors could be in for a bumpy ride in the coming weeks and months.”

CNBC reminds us “September has historically been a down month for the markets… And after eight months of straight gains, strategists say a major pullback could be imminent.”

Meanwhile, Deutsche Bank is among the many mainstream finance firms warning of an imminent “hard correction.”

On the one hand… it’s tempting to say if the mainstream is all leaning one way, you’re better off taking “the other side of the trade.” Double down on your bullish bets.

But on the other hand, it never hurts to ask: “What if they’re right?”

It’s been 10 months since the stock market experienced even a modest 5% pullback — much less a 10% “correction” or, God forbid, a 20% “bear market.”

No, that’s not to say the bull market that started 18 months ago is nearing an end. Just that we’re overdue for a nasty spill — maybe something like the summer of 1998.

Let’s rewind: The stock market was in the midst of an epic five-year run that climaxed with the peak of the dot-com bubble in early 2000.

But that summer, a wave of Asian currency collapses that began the previous year came to a head… with a default by the Russian government and the collapse of the hedge fund Long Term Capital Management.

In only seven weeks, the Dow tumbled 18.2%.

Depressive Episode in a manic Market

And then the market took off again, soaring to one new high after another.

Now, if you were in the markets in 1998, think back. And if you weren’t, just imagine.

How likely is it you would have had the conviction to hold on tight — and resist the impulse to sell?

No shame in your answer; giving into that impulse is only human.

But the price of giving in is even steeper than you might think. Ask yourself: How long would you likely have waited for the market to go back up before you got back in? In other words, how much of the recovery would you have missed? Again, be honest. We’re talking about all-too-human reactions here.

Consider this: What if you had devoted a tiny portion of your portfolio to a hedge that gave you peace of mind during that 1998 pullback — so you didn’t give in to the impulse to sell?

That could change everything, right?

Again, we’re overdue for a pullback. It could happen anytime for any reason. For all we know, this coming Monday could be the next “Black Monday” — the stuff of future stock market legends.

But if you could devote, say, 1% of your portfolio to a “disaster insurance” trade… you could breathe easy. You wouldn’t panic about the losses elsewhere in your portfolio. Depending on how events played out, this one trade could make you 40 times your money — and significantly pad your retirement account.

Recently, I sat down for a briefing with Alan Knuckman, our 25-year trading-floor veteran — who spelled out how you can put this strategy to work for yourself. You can start watching right away at this link.

Meanwhile, the big story in markets today is precious metals getting crushed.

The slide began overnight during trading in Hong Kong… accelerated once trading began in London… and registered its biggest drop as trading opened this morning in New York.

At last check, the Midas metal is down $41 to $1,753. Silver — ugh — is down $1.14 to $22.68.

No, there’s no obvious explanation apart from the same old manipulations we used to be skeptical about but can no longer deny.

In the stock market, a mini-taper tantrum appears to be underway.

The big economic number of the day is an upside surprise: Retail sales jumped 0.7% in August — in contrast with the “expert consensus” calling for a drop of 0.8%.

If you factor out automobiles (volatile month to month) and gasoline (rising prices can skew the total higher), the numbers are even better — a jump of 2.0% instead of an expected 0.3% dip.

And so begins the Wall Street narrative: OH NO! The economy is performing better than we thought! That means the Federal Reserve will taper back on its bond purchases and deprive us of our easy-money heroin!

Perverse, we know. But that’s where we are.

Thus, at last check, all the major U.S. stock indexes are down close to two-thirds of a percent. The Dow is close to a two-month low, under 34,600. The S&P 500 is its lowest in nearly a month at 4,446. The Nasdaq is only 60 points away from slipping below 15,000.

Other economic numbers are also perking up: The Philly Fed survey of mid-Atlantic manufacturing for September rang in way better than expected this morning… as did the New York Fed’s survey of Empire State Manufacturing yesterday.

Supply-chain snag of the day, Part 1: The number of containerships waiting to unload at the Ports of Los Angeles and Long Beach has shattered all previous records.

“There were an all-time-high 61 containerships in the queue in San Pedro Bay on Wednesday,” according to the FreightWaves website, citing the Marine Exchange of Southern California. “Of those, a record 21 were forced to drift because anchorages were full.”

If the total is 61, that means this chart from Bloomberg — passed along this morning by colleague Byron King — is already out of date.

Waiting and Waiting...

“The Southern California gateway is acting like the narrow tube on a funnel,” explains FreightWaves reporter Greg Miller: “Ocean volumes pour in from Asia and can only flow out at a certain velocity due to terminal limitations” — that is, a shortage of dock workers, to say nothing of a shortage of both truck drivers and warehouse space beyond the terminal.

Could it get worse? Absolutely.

“Theoretically, the numbers — already surreally high — could go a lot higher than this,” Miller writes. “While designated anchorages are limited, the space for ships to safely drift offshore is not.”

Big ocean out there, after all…

Supply-chain snag of the day, Part 2: Pilots are quitting one of the major cargo airlines in droves.

From another FreightWaves article: “Pilots for all-cargo carrier Atlas Air are venting frustration over a new five-year contract imposed under binding arbitration even though analysts say the deal significantly raises pay toward the upper end of peers at comparable carriers.”

Indeed the Teamsters union, which represents the pilots, is furious: “This forced contract guarantees that AA will be a place to train, not a place for a career.” The union also says as much as 25% of the workforce might bail by year-end.

Note well: Atlas’ main customers include Amazon and DHL. Yeah, it could get messy…

Not to get all conspiratorial on you, but… we’re feeling some false-flag energy behind the big financial headline from Latin America…

Click here to learn more

“Thousands of protesters have taken to the streets in El Salvador,” reports the BBC, “angry at the introduction of Bitcoin as its legal tender.”

Yesterday marked 200 years of the country’s independence from Spain. If you take Western media at face value, throngs of Salvadorans took the occasion to decry the adoption of Bitcoin as legal tender alongside the U.S. dollar… and in general to denounce the policies of President Nayib Bukele.

We said in June — and only half in jest — that Bukele risked U.S.-instigated regime change if he followed through with his Bitcoin plans.

We’re not saying the protests are phony… but they seem passing strange, given Bukele’s 86% approval rating.

We’ll also remind you that bought-and-paid-for protests are a storied tradition of the American deep state, going back to at least 1953 and Iran.

Iran had a more-or-less functioning democracy back then… until the United States engineered the overthrow of the elected president. Washington dispatched Kermit Roosevelt (Teddy’s grandson) and Norman Schwarzkopf Sr. (father of “Stormin’ Norman”) to Tehran to wave money around and recruit rent-a-mobs.

No, there’s no smoking gun to prove that’s what’s going on now. And for all we know, El Salvador’s Bitcoin rollout has been a total botch. But under the circumstances, we’re not inclined to take the protests at face value.

“COVID Vaccinations and Choice,” says the subject line of a reader’s email, as reactions continue to roll in to our Monday edition.

“COVID is a nasty bug and likely to be with us for some time. I had a friend who was a hunting guide in Alaska, got COVID in June and got it again in August along with his wife. He died — his wife survived, though she has Alzheimer’s. No obvious contributing factors.

“I’m all for vaccinations — I’ve always gotten the annual flu shot just because it’s cheaper than missing a day of work. My wife is in the high-risk category and has chosen not to get the vaccine. We live with our decisions without arguments.

“It’s not about false information or political preferences — it’s about having the freedom to make your own choice and accepting the consequences of your choices.”

The 5: If only the people who presume to rule us felt the same way…

“Just received this alert from my credit union today,” says another entry in our mailbag.

“My first thought was, Damn! My second thought was, I have got to alert The 5! Make a big fuss, please (if truly warranted). I will.”

So… the Liberty First Credit Union in Lincoln, Nebraska, is warning its customers about a move afoot in Washington “to report to the Internal Revenue Service (IRS) many activities on accounts with balances over $600. Such an unprecedented grab of your personal financial data raises several concerns. ”

Which sounds very much one of the worst items in Team Biden’s tax plan — a requirement that banks (and credit unions, and payment providers like PayPal) report annual account inflows and outflows to the IRS.

“This proposal,” warns Liberty First, “would violate the personal privacy of consumers like you by forcing credit unions and other financial institutions to provide the government with information that does not reflect taxable activity.”

In addition, “Financial institutions — particularly those in rural and low-income communities — would face a new and expensive regulatory burden that could make it untenable to serve those consumers already left behind by Wall Street banks.”

We noted on Tuesday that the House Ways and Means Committee dropped this provision from its big tax bill. But we see in this morning’s Wall Street Journal that Treasury Secretary Janet Yellen and IRS Commissioner Charles Rettig are pushing hard to reinstate the requirement.

To be sure, the idea is not a dead letter. The Liberty First Credit Union customer alert links to a petition page from the Credit Union National Association where you can fill out and send a form letter to your congress member.

We’re not much on activism… but this is one instance where it can’t hurt and might even help.

Although as we understand it, phone calls are more effective — especially if they go to the congress member’s local office and not the one in D.C. Your mileage may vary…

Best regards,

Dave Gonigam
The 5 Min. Forecast

Dave Gonigam

Dave Gonigam

Dave Gonigam has been managing editor of The 5 Min. Forecast since September 2010. Before joining the research and writing team at Agora Financial in 2007, he worked for 20 years as an Emmy award-winning television news producer.

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