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The Stock Market Plunge Is Wall Street Sending a Message to the Fed

The September slump on Wall Street took a turn for the worse yesterday, as stocks plunged on Monday in their worst sell-off since July. Even with a huge…

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This article was originally published by Investor Place

The September slump on Wall Street took a turn for the worse yesterday, as stocks plunged on Monday in their worst sell-off since July. Even with a huge end-of-day bounce, the Dow Jones still closed down 1.7%, while the S&P 500 shed 1.6% and the Nasdaq tumbled 2.2%.

Source: Shutterstock

The catalyst?

It wasn’t obvious. But most folks pointed to the Evergrande crisis over in China. Long story short, one of China’s largest property developers is at serious risk of defaulting on its $300 billion debt mountain, and investors are concerned that a default of such size would have collateral effects across the global economy.

But that’s not really what’s going on here…

Evergrande is big in China, and it collapsing would have a negative impact on the Chinese economy, but the impact of a default on the rest of the global economy (especially in the United States) would be minimal.

So… why did stocks plunge yesterday?

The Fed.

The Fed is slated to meet today and tomorrow to discuss monetary policy. Many Fed members have voiced a hawkish tone ahead of that meeting, advocating for some tightening via a tapering of asset purchases.

Wall Street is braced for this – investors are largely “OK” with a gradual and smooth taper.

But Wall Street doesn’t want anything more, and they’re letting the Fed know by selling stocks ahead of the meeting, basically saying: “Hey, Fed, if you tighten more aggressively than you’ve signaled, the stock market’s going to collapse, and the whole world is going to blame you.”

It’s a warning shot.

And it’ll work.

For all the talk the Fed gives us that it doesn’t follow the market, it absolutely does – this Fed, in particular, has a history of responding to the financial markets. Heck, it even owns stocks!

The smart money on Wall Street knows Fed Board Chair Jerome Powell and company are watching the markets, and they’re know that if Fed members see the market bleeding on Monday, Tuesday, and Wednesday, they’ll be less inclined to tighten any more aggressively than absolutely need be…

So, here’s how my team and I think the next few days will play out.

Monday was bloody. Tuesday and Wednesday will be choppy. Then, Powell will take the stage around 2 p.m. ET on Wednesday to discuss the Fed’s meetings. We expect him to announce a taper at that conference, but nothing more, and to ultimately sound an ultra-dovish tone (which the markets want to hear).

Stocks will reverse course and rebound from this sharp sell-off in the back half of the week.

That’s our base case outlook for the next week. But, please remember, this is a volatile market and anything could happen. Stocks could bounce back today. They could slump into the end of the week.

And that gets to our bigger point here: If you want be a successful investor, you have to develop an immunity to these short-term market gyrations.

What matters more than how stocks fare over this week, is how they fare over the next 12 months. And what matters more than how stocks far over the next 12 months, is how they far over the next three years… the next five years… the next ten years.

When the stock market drops, you have to zoom out and look at the big picture. Ask yourself: Is today’s drop because of something fundamentally wrong with my stocks and/or the global economy, to a point where my stocks will be adversely affected over the next 12 months? Or three years? If no, move on – if yes, then reassess.

It’s that simple.

And, as we ask ourselves that very question right now, the answer is unequivocally no, so we move on.

We ignore the noise. We gradually roll into the dips as they come. We cost-average into our favorite positions. And we put ourselves in a spot to see big gains in the market over the next 12 months… three years… five years… so on and so forth.

Easy to say. Harder to do.

Which is why we’re here.

We run an exclusive investment advisory called Innovation Investor that focuses entirely on investing in the world’s most innovative technologies and world-changing trends. We don’t care about the Fed. Or interest rates. Or inflation. Or even pandemics.

We care about innovation, because humankind has multi-millennia track record of relying on innovation to always – always – beat a crisis. Doesn’t matter if we’re in a world war, a global pandemic, or if Wall Street is just worried about a Fed meeting. Innovation, which powers the world forward, always wins at the end of the day.

That’s why we invest in innovation. It’s the one thing you can always count on to generate huge returns for you in the stock market.

So, don’t stress this market sell-off. Instead, sit back, relax, and join us in investing in innovation.

Click here to find out more.

On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.

The post The Stock Market Plunge Is Wall Street Sending a Message to the Fed appeared first on InvestorPlace.







Author: Luke Lango

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Precious Metals

Stocks, Bonds, Bitcoin, & Bullion All Bid As Billionaire Tax Threat Builds

Stocks, Bonds, Bitcoin, & Bullion All Bid As Billionaire Tax Threat Builds

First things first, when is a wealth tax not a wealth tax?…

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Stocks, Bonds, Bitcoin, & Bullion All Bid As Billionaire Tax Threat Builds

First things first, when is a wealth tax not a wealth tax? When Janet Yellen says so…

The proposal under consideration from Senate Finance Committee Chairman Ron Wyden (D., Ore.) would impose an annual tax on unrealized capital gains on liquid assets held by billionaires, Treasury Secretary Janet Yellen said Sunday on CNN.

“I wouldn’t call that a wealth tax, but it would help get at capital gains, which are an extraordinarily large part of the incomes of the wealthiest individuals and right now escape taxation until they’re realized,” Ms. Yellen said.

But House Speaker Nancy Pelosi told CNN:

“We probably will have a wealth tax.”

But markets either a) don’t believe a word of it (given the relationship between all these billionaires as benevolent overlords of the political class), or b) don’t give a shit as The Fed will always be there…

And nowhere is this craziness more obvious than here. While Trump’s SPC (DWAC) stalled today (after rallying 800% in 2 days), TSLA and BKKT took over the crown of momentum-driven insanity kings

TSLA topped the trillion-dollar market-cap level for the first time (TSLA was up more than 1 GM today) on headline about HTZ ordering 100,000 TSLA vehicles…

Surpassing FB (ahead of tonight’s earnings) to join the ‘cuatro comas’ club…

Source: Bloomberg

All on the back of a massive gamma bomb.

@Stalingrad_Poor exclaimed:

“TSLA call options strikes up $10,000 in a single day. I’ve never seen this in my life”

NOTE: If unrealized gains are taxed as income (as several Democrats have indicated), Elon Musk would face a $30 billion tax bill for his gains this year!!

And BKKT soaring over 160% on its partnership with Mastercard on crypto rollout…

Bitcoin and Ethereum were both up today on the Mastercard news (and Neuberger Berman has linked up with BlockFi).

Bitcoin topped $63,500…

Source: Bloomberg

And Ethereum rallied back above $4200…

Source: Bloomberg

All the major US equity indices were higher today, led by Nasdaq and Small Caps. The Dow lagged but still closed green…

Record intraday (and closing) highs for The Dow and S&P today.

On a side-note, the S&P/TSX Composite rose again today – a record 14th straight daily gain (a record that stood for 102 years)…

All thanks to yet another major short-squeeze….

Source: Bloomberg

Utes and Financials lagged today while Consumer Discretionary and Energy ripped…

Source: Bloomberg

Treasuries were mixed today with yields lower across the curve aside from 30Y…

Source: Bloomberg

The yield curve (5s30s) steepened back into its recent range…

Source: Bloomberg

The dollar rallied on the day to the top of its recent narrow range…

Source: Bloomberg

WTI hit a new 7-year-high today above $85 before fading back into the red…

Gold jumped back above $1800…

Real yields dropped a little today, leaving room for a considerable move higher in gold still (to around $2000)…

Source: Bloomberg

Finally, the level of “greed” in the market is back at 2021 highs…

Source

“probably nothing” – oh and don’t forget that the last time capital gains taxes were hiked significantly was 1987 (from 20% to 28%) and that didn’t end so well eh?

Tyler Durden
Mon, 10/25/2021 – 16:00



Author: Tyler Durden

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Economics

Crypto news: BlockFi partners with $437 billion investment fund; EY sponsors Chainlink ‘hackathon’ event

Cryptocurrency lending firm BlockFi has partnered with Neuberger Berman to offer crypto-based products to the US investment manager’s customers. BlockFi,…

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Cryptocurrency lending firm BlockFi has partnered with Neuberger Berman to offer crypto-based products to the US investment manager’s customers.

BlockFi, along with Celsius and Nexo, is one of the crypto industry’s big three lending services. It made the announcement on  Monday and revealed the joint venture will include the development of exchange-traded funds (ETFs) and “other traditional structures.

The partnership’s products and strategies will be formulated and delivered by a newly created entity called BlockFi Nb.

With the Mastercard and Bakkt collab news barely a day old, it seems we’re in institutional crypto adoption season, although that’s pretty much been the case for the past 12 months.

“We are witnessing a significant shift in investor sentiment towards digital assets, and we believe that digital assets should be considered in modern portfolios,” said Greg Collett, president of the joint venture.

Neuberger Berman is a New York-based, 82-year-old independent investment management firm that looks after US$437 billion in client assets as of September 30. The firm’s main holdings reside in equities, fixed income, hedge funds and real estate.

 

Also making news: EY, Chainlink, GBTC, Uniswap, Rand Paul

• “Big Four” accounting firm Ernst & Young is sponsoring the Chainlink Fall 2021 Hackathon, running until Nov 28. The event gives crypto startups pitching opportunities with VCs.

• Grayscale’s GBTC (which is as close to a Bitcoin ETF as you’ll get in the US without actually being one), delivered better returns last week than the market’s new BTC ETFs.

• Decentralised exchange Uniswap is set to gain more exposure. Swiss digital asset issuer Valour is launching the first ever exchange-traded product (ETP) tracking the UNI token.

• US Republican Senator Rand Paul has stated that he thinks it’s possible Bitcoin could become the world reserve currency if more people lose faith in governments.

 

 

 

The post Crypto news: BlockFi partners with $437 billion investment fund; EY sponsors Chainlink ‘hackathon’ event appeared first on Stockhead.


Author: Rob Badman

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Economics

Oil in wait-and-see mode, gold moves up

Oil consolidates at the highs Oil markets probed the upside overnight, helped along by another large spike in natural gas prices. However, oil lacked the…

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Oil consolidates at the highs

Oil markets probed the upside overnight, helped along by another large spike in natural gas prices. However, oil lacked the momentum to maintain those intra-day highs as the US dollar started strengthening. With a lack of new headline drivers to sustain the moves. Brent crude finished 0.28% higher at USD 85.95 and WTI finished 0.50% lower at USD 83.75 a barrel, having traded as high at USD 85.35 intra-day. Asia has adopted a wait-and-see approach this morning, possibly on China nerves, leaving both contracts almost unchanged.

The US API Crude Inventories will be oil’s next volatility point, with a low print likely to lead to more price gains. However, the price action overnight does suggest that short-term upward momentum is waning as the trade gets ultra-crowded and the RSI indicators on both contracts remain overbought. Another 3 million barrel jump in inventories could spur some short-term long covering and see oil’s long-predicted sharp move lower finally occur to wash out some of the weak speculative longs. Once again though, I will reiterate that the overall environment for oil remains very constructive and any sharp sell-off is likely to see an equally sharp recovery. Of the two, WTI looks more vulnerable as it is more heavily traded by specs and Brent crude is more aligned to the international physical market.

The overnight highs at USD 86.70 and USD 85.40 a barrel for Brent and WTI form initial resistance. Trendline support at USD 83.40 and USD 79.70 a barrel should be the limit for any downside correction. Only a daily close below those levels suggests a deeper correction is possible.

Gold’s price action remains constructive

Gold staged another impressive rally overnight and there is no doubt that its price action is becoming more constructive towards further gains. Gold rose 0.85% to USD 1807.80 an ounce before some long-covering saw it fall 0.25% to USD 1803.20 an ounce in Asia. The rally is made more impressive by the fact that the US dollar has continued strengthening against the major currencies overnight. In contrast, US bond yields eased across the curve, and it looks like gold is taking its cues from them for now.

Gold has now recorded a daily close above USD 1800.00, and more importantly, the 100 and 200-day moving averages at USD 1793.50 and USD 1790.25 an ounce. One must respect the price action in these circumstances, especially when it appears not to be driven by fast-money gnomes. Therefore, gold has formed a nice layer of support between USD 1790.00 and USD 1800.00 now followed by USD 1780.00 an ounce. Initial resistance is at USD 1814.00 followed by the formidable zone of daily highs between USD 1832.00 and USD 1835.00 an ounce.

Gold continues to slowly but surely, form what appears to be the second shoulder of a longer-term inverse head and shoulders pattern. In the bigger picture, a rise through USD 1835.00 an ounce, would trigger the multi-month inverse head-and-shoulders technical pattern and swing gold’s outlook back to positive, targeting a move back above USD 2000.00 an ounce.




Author: Jeffrey Halley

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