- Silver is a tougher Redditor targetÂ
- Democrats sidestep bipartisan pandemic aid offer and proceed with budget reconciliation
- Eurozone GDP expected to backslide
Silver is a tougher Redditor target — The Redditor-retail horde since late last week has set their sights on silver, moving their focus beyond heavily-shorted stocks and into a broadly-traded commodity market.
The retail horde proved they have some significant firepower even in the commodity markets with the ability to push silver prices up +9% on Monday. The retail horde in the past few days have been buying all of the instruments related to silver, including physical silver bars and coins, ETFs, futures, options, and silver mining stocks.
The rationale for buying silver seemed to be some combination of “bullion bank” conspiracy theories and underlying bullish fundamentals for precious metals driven by pandemic-related monetary policy stimulus.
The Redditors apparently believe there are some big-time short-sellers to squeeze, such as Wall Street banks that deal in metals. However, managed-money funds, including hedge funds, have been net-long the silver futures market since the middle of last year. That means that the Redditors at the moment are simply helping out the managed-money funds on their long positions.
Redditors may have met their match in the silver market, which is a much deeper market than stock targets such as GameStock and AMC. Bloomberg points out that the average daily trading value in silver in 2020 was $11 billion per day, which is more than 220 times more than GameStop’s average daily volume of about $50 million. It is also much more difficult to discern who is short in the silver market because their positions may be offset in the physical market, ETF market, or one of the many derivative markets.
While March silver was up +12.8% on yesterday’s early high, the contract then fell back and closed the day up +9.3%, near the middle of the daily range. That is a big daily move for silver, but it pales in comparison to the 20-bagger gains seen in GameStop. Redditors may lose interest fairly quickly in silver once they see they are unable to squeeze the price for more than a few sessions.
Democrats sidestep bipartisan pandemic aid offer and proceed with budget reconciliation — President Biden late Monday met for two hours with the ten Republican Senators that offered a $618 billion pandemic aid bill. Senator Susan Collins, the leader of the group, said, “It was a very good exchange of views.” She said that they agreed to “follow up and talk further, at the staff level and among ourselves and with the president and vice president, on how we can continue to work together on this very important issue.”
Mr. Biden has pushed for bipartisan action on a pandemic aid package, but he has also said that the pandemic aid bill needs to be big and needs to be done quickly. Mr. Biden has already said that he approves of Congressional Democrats moving ahead with budget reconciliation. The budget reconciliation process could be set aside if, by some chance, a bipartisan pandemic aid bill were to come to fruition.
Congressional Democrats are not waiting around for Republicans to come on board with a bipartisan plan since the Republican proposal of $618 billion is much less than Mr. Biden’s $1.9 trillion proposal and since there is no guarantee that 10 Republican Senators would vote for a bipartisan bill in the end to vault the 60-vote filibuster level.
Nevertheless, Democrats would like to appear to be working in a bipartisan way, both for political optics and because a smaller bipartisan deal might eventually be needed for increased discretionary spending on vaccines and certain types of aid that cannot be shoe-horned into a budget reconciliation bill. President Biden at this early date does not want to alienate Republicans by appearing to be inflexible or unwilling to negotiate.
Regardless of the Republican proposal, Senate Majority Leader Schumer and House Speaker Pelosi on Monday introduced a 2021 joint budget resolution in their respective chambers, with a goal of passing the resolution possibly by the end of this week. The Senate will be busy next week with the start of Mr. Trump’s impeachment trial on Tuesday.
The budget resolution will then be sent to the committees to formulate the final legislation that must be passed to implement the $1.9 trillion pandemic aid package. The budget reconciliation process is convoluted and time-consuming, and its only benefit is that can pass with a majority vote in the Senate and avoids the 60-vote filibuster rule. Democrats want to get the bill passed as soon as possible because expanded unemployment benefits expire in mid-March.
Eurozone GDP expected to backslide — The consensus is for today’s Eurozone Q4 GDP to fall by -1.0% q/q. Eurozone GDP plunged by a total of -15.4% in the first half of 2020 and then recovered by +12.5% q/q in Q3.
The Eurozone recovery fizzled out in Q4 because of the pandemic surge that required most of the European countries to reimpose strict lockdowns. The economic prospects do not look good for the current Q1-2021, with a consensus expectation that GDP will be unchanged. The market is then expecting a recovery of +2.2% q/q in Q2, +1.9% in Q3, and +1.1% in Q4.
On a calendar year basis, the consensus is for Eurozone GDP in 2021 to recover by only +4.3%, failing to overcome the expected -7.3% decline in 2020.
