The Pending Bond Market’s Time Of Woe

Historical Stock, Securities, Certificates, Fund, Bonds

This week the Dow Jones saw three additional BEV Zeros (new all-time highs) for the post March 2020 advance, of which there are now twenty. The last time the Dow Jones was down more than 5% from its last all-time high was on November 4, over four months ago. Eight trading days later the Dow Jones made the first of its twenty new all-time highs.

Long strings of new all-time highs happen, as from late 2016 to early 2018 below.  The Dow Jones went from one new all-time high to the next; 100 of them exactly, without correcting even 5% during Trump’s first year in office.

Are the guys back at the FOMC going to do the same for Joe Biden’s first year in office? We’ll just have to wait to see what happens.  But if commodity prices continue to rise, and bond yields increase to an unknown threshold, we may see this market decline faster than it had risen off its lows of a year ago.

C:\Users\Owner\Documents\Financial Data Excel\Bear Market Race\Long Term Market Trends\Wk 696\Chart #1   DJ BEV 2007 to 2021.gif

Here are the major market indexes’ BEV values in the table below. We can just see the “liquidity” flowing into the stock market in it. Only two indexes are down by double digits from their last all-time highs;

Dow Jones Utility Average / -12.07%

XAU (Precious Metals Mining) / -38.97%

Keep in mind the upper portion of the table are Bear’s Eye View values, or the percentages from last all-time highs. Seeing the XAU at the bottom of the table with a BEV of -39% is a bit disheartening.

But looking at the performance of the XAU in the table at the lower left hand side above, we see the XAU coming in at #7 of 22 indexes. But the XAU has been here before, many times since it began trading in May 1983.  For most of the past four decades, it likes to trade between 50 & 150. Then, before and during the sub-prime mortgage debacle it twice broke above 200, before correcting back down to 50.

C:\Users\Owner\Documents\Financial Data Excel\Bear Market Race\Long Term Market Trends\Wk 696\Chart #2   XAU Price.gif

So why should anyone invest in gold and silver mining? Because unlike everything else that can be bought and sold in the financial markets, mining shares as well as the gold and silver they mine are not overvalued and over owned by the public.

Since August 1982, when the Dow Jones began its historic advance, there have been four major financial bubbles inflated into the market by the FOMC:

  1. Junk Bond, Leverage Buyout bubble (1984 to 1988)
  2. High-Tech, Internet bubble (1993 to 2000)
  3. Single Family Mortgage bubble (2003 to 2008)
  4. The Everything above is again in a bubble (2010 to today)

Does the financial headline below about a high-tech IPO jumping up 41% in its first day of trading remind you of the late 1990s?  It sure does to me.

And with mortgage rates near historic lows, millennials are taking advantage of the borrowed money from the banking system to invest in “long-distance real estate.”  What could go wrong with that?

Poor millennials; they know enough not to trust the stock market. But to be young is to be dumb; but long-distance real estate? I didn’t even finish reading the article as I fear it’s just another big scam to take from the poor and give to usual suspects, leveraged with a huge loan from a bank.

The world really was a much better place when my grandfather could save 10% of his wages at 4% at a local bank to provide for himself and my grandmother in retirement. But that works only if the money being saved is in a stable currency, which the dollar hasn’t been since before WWII. Today we all have to swim with the sharks in the financial markets to get anywhere.

So how are the bait fish doing in the stock market? Not bad, as seen below with the NYSE 52Wk H-L Nets. Since February 8 the high-low nets have seen multiple +300, indicating it’s not just the 30 blue-chip stocks in the Dow Jones that are seeing new 52Wk Highs. I’m sure as is the case for the Dow Jones, many if not most of these 52Wk highs are also new all-time highs too.

Here’s the Dow Jones in daily bars below. This was a BIG WEEK in the stock market; still the higher it goes the less I like it. It’s just a fact that every advance ultimately sees its last all-time high before it has a day of reckoning with Mr. Bear. Investors who now come in late in the advance have already missed out in most of what they came in to get – profits.  But it’s fun watching the bulls run wild and free on Wall Street.

What could spoil the party seen below? If you go back to my Major Markets BEV Table above I have a commodity price performance table in its lower half.  Crude Oil is up 232% in the past year. There is a threshold level in the crude oil market; somewhere above (over $80?) that may spoil the party.  But rising long-bond yields and mortgage rates are also problems. We currently have a geriatric dementia patient signing executive orders in the Oval Office for reasons he admits he knows not what for. That also could be a problem.

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Disclosure: None.

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