The Morning Line

Those who write about such things have attributed virtually every stock-market rally since March 23 to 'vaccine hopes'.  They have overworked and over-hyped this phrase with no sense of irony or awareness; for it is not so much 'hope' that has powered stocks to insane levels, but monetary stimulus pumped liked steroids into a beast that was rabid to begin with.  This is the kind of 'hope' that T-Rex must have felt when it cornered a chubby dinosaur half its size, or that a drug addict might feel after springing the lock on a cartel storage locker filled with white powder.  'Hopeful' is far too modest and gentle an adjective to explain the mass psychosis that has gripped Wall Street over the last ten months. When Bad News Is Bad News Now that a vaccine has finally arrived, however, it is fair to ask what will keep speculators' hopes inflated to infinity.  Under the best imaginable circumstances, it will probably be at least two years before we can look back on the pandemic and marvel at how we finally beat it.  We'll know this has happened when salad bars re-open, subway cars are packed with commuters, and nursing homes welcome visitors with open arms. Does anyone on Wall Street actually believe this is how things are about to play out? More realistically, the stories we will be hearing -- about vaccines that have never been tested on animals or even on significant numbers of humans -- will be scary ones: injection-related deaths, bizarre symptoms, transmission of Covid by the inoculated and the asymptomatic, sterility, vaccine-resistant mutations, inscrutable infection spikes in places locked down like fortresses.  At that point, such hopes as remain will be vested in the central bank and its perceived willingness to step up interventions on bad news.

Stocks have turned timid, although it remains to be seen whether the moderate selling that ended the week will gain momentum as Biden's inauguration approaches.  Regardless, the smell of distribution is in the air, and it is not subtle.  As the tempo of it picks up, expect DaBoyz to work overtime trying to convince us that Wall Street is down with the Democrats. Big Business owns Biden, right? Well, yes and no. It's true that the Silicon Valley muckety-mucks have less to fear from him than from Trump. But there's no getting around the scary fact that this will mark the most radical political change in U.S. history. Most of Biden's appointees are familiar faces from the Obama years, and that has reassured those who hope to benefit from the Democrats' electoral sweep.  But the political checks and balances that existed when Obama was president no longer obtain, and one-party rule could conceivably run amok in ways that Biden's corporate cheerleaders have failed to anticipate. A Fragile Economy For the time being, though, the vaccine program will get most of the attention.  Biden and the Democrats will own it in just a few days, but its success is hardly assured. His procedures and protocols for dealing with the pandemic are unlikely to differ much from Trump's, since there is not enough hard science to justify changing things radically. The danger is that even a small tightening of the lockdown could undo an economy whose fragility has been masked by the powerful bull market in stocks. Do the Democrats understand this?  We may be about to find out. But there should be no illusions in the meantime that the Democrats, cozy as they are with Silicon Valley and social media's opinion-shapers, will be great for stocks.

With gold's gratuitous, 4% plunge on Friday, bullion has once again affirmed its reputation as one of the nastiest, most frustrating assets an investor can own. Its chief enemy is a global network of shamans, thimble-riggers and feather merchants who make their living borrowing bullion from the central banks for practically nothing, then lending it to everyone else for slightly more. They are always looking for excuses to pound quotes so that they can replace what they've borrowed at a lower price. Helpful to this goal is a story that, however ridiculous, spooks gold bugs into dumping their holdings. The current story is that the Democrats will somehow be bad for bullion, although no one can say exactly why. To believe such claptrap is to implicitly believe that when Kamala Harris takes over for the mentally failing Biden, she will impose rigorous constraints on spending that will strengthen the dollar. Yeah, sure. But that's not the point. The balance of power is about to change so radically in Washington that no one really knows what will happen next. For all we know, the Republic might not survive until mid-term elections in 2022.  If such a grave crisis is in fact bearish for gold and silver, then Harris, Schumer and Pelosi are bullish for America and the dollar; Greenspan, Bernanke and Powell were skinflints; John Wayne was a homo, and beer causes cancer. Biden's Replacement The bottom line is that we should tune out bullion's rigged swoons until the crooks and shysters are ready to let it run. Sometimes it takes courage and conviction to stay the course, and this is one of those times. The chart shows that gold's correction since August has been moderate and that when it ends, there is potential for further appreciation to at least $2290/oz.

[Note: This essay ran earlier in the week but I am re-running it because Copper broke out today on the long-term chart, hitting a so-far high of $3.71. RA]  Copper prices are up 75% since cratering in March at $1.97 a pound. Since 'doctor' copper, with a supposed PhD. in economics, has a reputation for accurately predicting growth trends, does this mean a global boom is at hand?  This seems most unlikely, given the vast expansion of public debt used to temporarily counteract the economic effects of the pandemic.  The debt, many trillions of dollars' worth, is the direct cost of supposed stimulus, which, as any idiot can see, has catalyzed asset inflation rather than any real economic growth. Unfortunately, when the party ends there is no way we will evade repayment, even if it means depreciating the dollar to zero via hyperinflation.  There is only one alternative, a deflation that would effectively cancel all debts with a wave of bankruptcies at every level of the economy: public, corporate and private. Neither path is palatable, but it is virtually certain that one or the other, or perhaps both sequentially, will occur, since our collective debts have grown far too large to repay with hard money. Purely Speculative Concerning the chart, it shows that copper prices have stalled in a very crucial place, precisely at a $3.63/pound 'midpoint Hidden Pivot'. If the rally had instead impaled the resistance or gapped through it on first contact, it would have implied beyond doubt that prices were headed to the pattern's $5.33 target. That would be an all-time high and in theory indicative of strong global demand for copper. Could that possibly be right?  No, it could not; far more likely is that it would reflect a blowoff in purely speculative demand for tangible

Interesting times, for sure, but apparently not quite interesting enough to dampen the ardor of wildly exuberant buyers on Wall Street.  With patriots storming the doors of the Capitol and a reported shooting inside the building, the Dow Industrials still managed to finish the day with an immoderate gain of 438 points. Do the institutional chimpanzees who were doing most of the buying know something we don't? More likely is that, because they get their news from MSNBC and the networks, they were ignorant of certain developments that could profoundly unsettle America. Read all three parts of this remarkable exposé  to understand just how serious the crisis could become. If you've been puzzled by Vice President Pence's bizarre willingness to certify an election that he surely knows employed massive fraud to turn him and his boss out of office, the linked story provides a compelling motive. In the meantime, don't expect the patriots to go home any time soon. They blocked the certification of electoral results as intended, and they can probably do it again as long as they remain peacefully within the bounds of the First Amendment. Not surprisingly, the extent of the violence is being exaggerated to a brazen extreme by a news media that saw the torching of Portland as 'mostly peaceful'. For his part, Trump was so forthright in telling them all to go home that the news media will have difficulty convincing even the most ignorant viewers that he incited violence.  If you want to better understand what is going on and what is about to unfold, listen to the news with a skeptical ear. They have been wrong about everything so far, and they will be just as wrong underestimating the extent to which the world-shaking events of the next few weeks were planned

To all of my subscribers and readers, warm holiday greeting and best wishes for a happy, healthy and prosperous new year.  It begins with many troubling issues unresolved, most particularly the question of who will be the next U.S. president. Various vaccines promise to ease the pandemic, but possibly not in time to prevent many small businesses from failing.  A bright spot, particularly in states like California, New York and Michigan,  where dictatorial governors have disregarded individual rights, is that business owners are at the point of revolt. This bodes well for America, since our political leaders are obviously in need of rebuke and a reminder of whom they would serve.

The broad averages have been lapping at some long-term rally targets this week, although not so voraciously that bears should dive for cover quite yet. A 304.07 target for DIA has been exceeded so far by 1.63 points; a 312.29 target in QQQ by 2.35 points; and 12,829 target in the E-Mini Nasdaq by 89 points, or  0.6%. These Hidden Pivot resistance points have already served us well, keeping us comfortably on the right side of powerful uptrends that flouted the pandemic's fatal effect on a wide swath of the U.S. economy. Small businesses are failing by the thousands each day, creating structural unemployment problems that will be with us even if there are ten more stimulus packages yet to come. Wall Street seems not to care, as long as a handful of mega-cap companies that earn their money mainly from advertising continue to grow in value. They have been inflating 'wealth' by tens of billions of dollars each day, dulling whatever lessons investors may have learned from the last bear market. Please note that the Dow Industrials are poised to rally a further 2300 points, to at least 32,692, if the new year begins with a bang. It's hard to imagine what could stop it.

With the post-Christmas resumption of trading Sunday morning, bitcoin tacked on an insane $3,000 in the blink of an eye. Even more preposterous is that a correction one might have expected to last for at least three to five days appears to have run its course in mere hours. This has raised the prospect of cryptomoney fever achieving yet another record high before dawn. How much farther could the rampage go?  A projection using the Hidden Pivot Method suggests that the next big thrust will hit 33,600, about 6000 points, or 22%, above these levels. But why should it stop there, we might ask, with mass hysteria's Olympus beckoning at 100,000? We'll be better able to assess whether bulls have the gumption to get there once we've seen how they handle the 'hidden' resistance at 33,600. If this proprietary pivot is dramatically impaled on first contact, be prepared for a burst to 50,000, a marquee-quality number that would be in play simply because I will have run out of Hidden Pivot targets. Support from Billionaires Disclaimer:  I think bitcoin is, if not a hoax, then a cleverly marketed scheme on the order of alchemy and cold fusion. I get emails all the time from bitcoiners convinced cryptocurrency should be prized over all other investable assets, particularly gold. The most fervent believers are robinhoodies and millennials with little experience of precious metals, other than as jewelry that old people wear. At gold's expense, they have helped push bitcoin into its second speculative mania, the first having ended woefully in 2018. The collapse that year took it from an all-time high of 19707 down to 3134. The current short-squeeze supernova has much more power behind it, however -- not only from speculative excesses fueled by buyers too young to know about or