As we pass through the mid-point of the first month of trading in 2020, here is a look at why panic set in immediately.

Panic Set In Immediately
January 16 (King World News) – Art Cashin:  On this day (+2), a little over 100 years ago, one of the greatest schemes in American history began to come apart – just as it was on the verge of changing the future of the nation. The scheme was to lay a land grant claim on what was virtually two states – Arizona and New Mexico. But it had all started earlier and simpler. 

During the Civil War, a certain James Addison Reavis was kind of the “Radar O’Reilly” of the Confederate Army. He managed to get officer’s signatures on passes and requisitions without troubling the respective officers. His….er….penmanship was so good that after the war a pal took him to St. Louis where he showed some….er….interpretive creativity in the office of public deeds. 

In 1871, he met a man named George Willing who had a very creative mind but very poor “penmanship.” Willing suggested “back signing” and “redrawing” old Spanish land grants. Reavis began to think Willing was thinking small. But he needn’t have worried, because Willing died of poisoning shortly thereafter. 

Reavis traveled to Mexico and spent some time in missions, monasteries and libraries. He mastered the language and idiom of formal documents in the 1600’s and 1700’s. Shortly thereafter, he emerged to lay claim to the fabulous “Peralta Grants.” And fabulous they were – they showed Reavis to be the owner of nearly 19,000 square miles of Arizona and New Mexico. 

Panic set in immediately. The Southern Pacific paid Reavis $50,000 good faith deposit to protect its right of way. The fabled Silver King Mine gave $25,000 as the first year’s rent. And when Reavis, amid great pomp, married a “Peralta Heiress” (a poor Mexican girl he set up with phony credentials), he claimed thousands more square miles. Soon there were lines of folks waiting to give money to the “Baron of Arizona.” 

But as your grandmother said “Pride cometh before a fall” (maybe that was my grandmother….er….and come to think of it…it was “four Manhattans cometh before a fall). Anyway, Reavis got a case of the “haughties” and turned down a newspaper interview. The publisher decided to do a background piece anyway. It was then that he noticed the type-face on some of the documents was of rather recent origin. He then talked an official into letting him see one of the “official documents.” He noticed the century old parchment paper had a watermark from a factory in Wisconsin. Since neither the King of Spain nor the original Don Diego Peralta were known to cavort with cheeseheads, an odor ensued. On this day in 1896, the Baron of Arizona was indicted. He was quickly convicted and sent to prison. Later released, he died a pauper in 1908. There lies a lesson – forge not on recycled paper. 

It was documents that influenced the stock market yesterday but not every document had an impact. 

Stocks opened somewhat mixed but almost instantly buy programs kicked in and, 15 minutes into trading, the bulls had a solid rally going and the indices were moving to new record levels. 

At 10:00, House Speaker Pelosi signed the impeachment articles, appointed the trial managers and sent the articles over to the Senate. 

The stock markets showed no response or reaction to any of those moves. 

Stocks stayed at, or near, the day’s highs throughout the late morning and into the early afternoon when the President began the signing ceremony by introducing scores and scores of corporate and political leaders who were in the room. The rally stalled during these introductions. 

Upon the actual signing, stock prices began to ease. By way of explanation, I sent this email to some friends: 

Details of the trade pact were embargoed until the President actually signed the pact. So once he signed it, people began to read into the pact and found that it was not quite as meaty as the market had first thought and that has led to a bit of a pullback in the rally. Key will be whether the bulls can come back and restart the rally. 

Around 2:00, the bulls appeared to regroup and attempted to restart the rally but Nasdaq and the S&P never got near their morning highs. By 2:40, stocks began to roll over amidst several confusing headlines about the status of tariffs and their possible impact on the new trade pact. 

The late pullback took both Nasdaq and the S&P back into mild negative territory.

A half-hearted rally in the closing minutes averted a negative close that might have done some technical damage.

The game is still on the table although there are some hints of stalling. 

Overnight And Overseas – Asian equity markets had a somewhat mixed response to the trade pact. Tokyo closed virtually unchanged. Hong Kong had a modest rally, while Shanghai closed with a moderate selloff. India stocks closed with small gains. 

European markets are seeing mild profit-taking. Frankfurt is fractionally lower, while Paris is nearly unchanged London is seeing a modest selloff. 

Among other assets, Bitcoin continues to trade just below $8700. Gold is fractionally higher and crude is unchanged. The euro is very slightly higher against the dollar and yields are basically unchanged. 

Consensus – Focus likely to shift back to earnings season although the trade pact is still being explored for details. 

President now awaits Senate approval of Nafta 2. If done quickly, it could strengthen his position when he speaks at Davos next week. 

Stick with the drill – stay wary, alert and very, very nimble.

Silver And The Endgame
ALSO RELEASED: We Are In The Endgame, Plus A Look At Silver CLICK HERE TO READ.

***Alasdair Macleod discusses the wild gold trading in gold this week, what to expect for gold, silver and the markets in 2020 and much more and you can listen to his powerful KWN audio interview by CLICKING HERE OR ON THE IMAGE BELOW.

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