Wednesday, September 20, 2017

I'm No Prophet. But...

If you stand back and look at what is happening in the US recently, and put it in a biblical perspective, an ancient prophet would say that God is unhappy with our nation. We have so much knowledge today, that we have become arrogant and very secular in our leaning. I had these thoughts last month when the solar eclipse crossed over America. I took my mind back to Mark Twain's book, A Connecticut Yankee in King Author's Court. His main character used a solar eclipse to gain favor with the royal court because they feared what was happening. Twain did not use religious overtones, but I will due to the numerous events and all coming directly after the solar event.   
Let me count the ways...
The point that the eclipse split the nation is very relevant. Consider that people are fighting each other over their point of view. Put up a wall and check immigration or keep things the way they are. Keep the military presence in the world or end this world police mentality that is bankrupting our nation. Black lives matter or these civil rights issues are blown out of proportion. Tariff's to protect our economy or free trade under globalization. There are more issues, but I think that you get my point.
Then,
within a week of the solar event, hurricane Harvey destroys Houston. It gets followed by yet another hurricane, Irma which destroyed many Caribbean Islands, the Florida Keys and other parts of Florida. Oh, yeah, there was a major earthquake in Mexico along with hurricane Katia and tremors in Asia and in Europe.
Irma has come and gone, but then there appeared another crazy moving hurricane, Jose. It defied logic and the experts computer models. Thankfully, it went out to sea. A secularist would shrug that this is a tough season, but it's over.
Oh, yeah?
How about another major earthquake in Mexico and hurricane Maria ripping up the Caribbean? Hopefully, again, it does not hit the US.      However...
Add this to the equation: on the 16th anniversary of 9/11, there were 20 million Americans without power and suffering hardship. This, any ancient prophet would translate, points to an angry God. Things could have been worse. Maybe because there were so many acts of compassion and brotherhood, the Lord held back the calamity. Maybe he tested us and He saw many courageous acts that he relented in His anger. How else could one explain the crazy movements of Jose, of N. Korea and the Middle East.
Our secular nation only gives stats and only worries over the economic effects, especially to insurance companies. Their generalizations overlook the good deeds people performed with acts of courage with acts of kindness and acts of charity. Consider all the donations and the efforts to coordinate those gifts? Since this is football season, a special shout-out to J.J. Watt, great job!
A central problem as I see it is our military complex and its military involvements everywhere on the globe. Today, that mentality is meeting the same mentality in N. Korea. This puts the world in danger. Maybe, just maybe we should follow Putin's advice. He offers their thinking and a way to find peace. He says that N. Korea feels deep anxiety over the US and S. Korea war games on their border. They also claim that the US will attack their nation. This is why they want WMD. If that is the problem, then end the tin soldier games. We can sign a treaty saying that we won't attack them and even seek a final end of the Korean War treaty. We attempt our best to give peace a chance. However, if after all these concessions and the phonies in N. Korea demand more demands, then call a spade a spade. We should show depth of character by cutting off trade with any nation that trades with N. Korea. This strong retort is especially aimed at China. If N. Korea is going to treat us as an enemy, then we respond like an enemy. Keep in mind that we must first give peace our best effort and honesty in negotiation. At the very least, we regain the Lord's favor. But hey, I'm no prophet.
Sebastian asks for an amen. Amen, brother!

Wednesday, September 13, 2017

Katrina vs. Harvey, add Irma & Jose=Big$

When you listen to the media about recessions, crime or other calamities, they have all the stats. They forget that those words mean little if you lost your job. You are in depression. If your house was robbed or car hijacked, you are in depression. If your house gets flooded, you are in depression. I just had another sad thought, consider anyone that had fate meet them in the recent hurricanes. Now, you need money to eat, another car to find or drive to work and a place to sleep. I don't want to get off topic, but this reality drives home a point about the Federal Reserve. In their formula to engineer life, they do not count under inflation all those things that we need: fuel, food and shelter. This is why I cry, End the Fed!
Anyway, I am looking at those hurricanes even though there are other serious problems out there like the earthquake in southern Mexico or the wildfires out West.
Katrina v. Harvey 
A decade after the devastating hurricane hit New Orleans, the city is still in a rebuilding mode. Yes, it takes that long and as you will see, many businesses and people never recover. It gets worse. Just last month a normal rain downpour caused flooding in New Orleans. Why? The cities water pumps went offline, malfunctioned or had cutbacks in maintenance. Point? They are not ready for anything over a summer shower.
In any event, the city was spared from Harvey, however here is some data that will relate to Houston to Texas and to the nation. New Orleans lost a sizeable chunk of its population. Keep in mind that geography and demographics plays a part in the results. There are 90,000 fewer people living there. It lost 95,000 jobs and this equates to $2.9B in loss of wages and also a loss of revenue for the city and state. We know from historical tendencies that after a disaster 40% of small businesses never come back. By the way, New Orleans has jobs available. There are 12.5% vacancies in jobs that need to be filled and sadly, this is the most vacancies in the US. This is a BS stat. Businesses refused to spend money to train workers and now, they complain that they can't find skilled people...Back to N.O.
New Orleans has limited entry and exit roads. It also was losing population long before Katrina. The city is smaller, but it has good local transit services. It has a strong port and it is central to transportation of goods by the Mississippi River.
Houston is much larger and spread out over the terrain with great access roads. It has been growing in size and population for a long time. It has poor local transport services, however the city is economically diversified and it too has a strong port.
In the immediate month after Katrina, New Orleans lost tourists jobs, health care and port jobs. The same will happen in Houston. One big positive for Houston is that it had a large number of rentals. This will help smooth over any loss in population. One big negative is the loss of an estimated 500,000 cars. In a sprawling city, a car is a necessity. Maybe the government will do another "clunker" vehicle program?
At this time I like to remind you that in natural disasters, water can be the destructive force and at the same time, the most important need to survive. If my water concept had been utilized, the estimated 27 trillion gallons of water to hit the city would have had different results. There would have been less damage and up to two-thirds of the water captured for future use like for drinking and agriculture, but then again, I'm just a blogger, a nobody.
"Take another little piece of my heart..."
- Janis Joplin
The news did a nice job in getting down to street level with the reporting of Harvey. It revealed many kind and generous acts. It is great to hear all the good Samaritans, but the news does a terrible job with insurance agencies. Just this past Sunday, 60 Minutes had a story on insurance fraud relating to hurricane Sandy. Yes, it takes this long for some real truth. It gets worse. FEMA directed many agents to the effected areas and the people who they used, lowballed almost every citizen that they were to serve. It gets worse than worse. It was later discovered that insurance companies rewrote claim figures and estimates to cheat customers. Last year, there was 1,400 arrests nationally due to fraud in the US. With this event filled hurricane and wild fires season, those numbers could explode. The only thing that could hold down the numbers is due to the limited agents working on an overloaded cases.    
Costs: 
Katrina cost $160B in today's dollars. It was actually $106B then. It is another example of how the Fed has destroyed the purchasing power of the dollar. Harvey has early estimates touching $140B. Irma's early call was overblown at $250B. Fortunately, it didn't hit Tampa hard The sad part is that many small farms like in the tomato capital of Immokalee will never return. This will cause more imports and only add to our national debt.
Jose? Let's hope the good Lord turns it out to sea, however costs will rise due to two factors. One, the sea is rising and thus, storm surge will be worse. Secondly, people like to live near the sea. It is therapeutic. Who would not like to spend their last years taking walks on sandy beaches with fishing, boating and swimming? The concentration of homes along with it being prime real estate drives up the costs. This would not change even in a gold standard. It is life. It is the way we are made up. The only problem is who pays when it goes wrong? Our insurance companies need an overhaul. They take the money in good times, but seek loopholes when the fat lady sings. In addition, the federal government almost insures every property in coastal areas and this is wrong. If you cannot afford to pay for your good like, then you are not ready for it. Taxpayers subsidize your lifestyle. Who subsidizes the rest of us? Don't misunderstand me, each should stand on his own two feet. I feel for you if you are standing in two feet of water, but maybe this is the time to reevaluate your life. Come stand in two feet of snow with me. Shoveling is good exercise and there is no danger of tornadoes or hurricanes, however I can't rule out quakes. Peace.

Wednesday, September 6, 2017

Round Two With NAFTA

The first 100 days have come and gone and Trump's central rhetoric of ending trade deals or at least, renegotiate them, is just hot air in the wind. All this week behind some closed doors, the second round of negotiation between the US, Canada and Mexico is taking place in Mexico.
Trump complains that he cannot get results from the people that he hired. I could have told him that Republicans will never do anything for ordinary Americans. These are the same people who pushed for NAFTA. Then again, Trump said that he won't hire poor people. There goes my social mobility.
The Argument
The people who favor NAFTA (nothing but shills) point out the success of US corn and soybeans since the program began, I have news for you. People and governments buy when hungry. Those two products in the US favor large industrial/agricultural farms. The two may not have had the huge growth during this time period without NAFTA, but the basic law of economics would have garnered some success in any event. I'm not even going to include the stupid ethanol program. Food is basic. Hunger equals demand and demand equals sales!
Now, flip the coin! The US lost 12 million jobs in manufacturing. That's right! Now, SHUT UP!
An auto parts factory lost along with the actual assembly plant, Adios! An air condition plant closed. No jobs, Nada! An appliance maker deployed over the border. Hasta Luego!
We hear the BS in other aspects of the economy like the shrinking middle class and stagnant wages. Well, just read the above sentence. Republicans gave us the "trickle down economy." They just didn't say where it trickled too - south of the border. But hey, it is not just Republicans. Old "slick" Willie persuaded, lobbied and signed the law. This is why I always say we need a new third party. A party for the people and one that has middle class thinking and values and its people. All we have in Congress is millionaires and lawyers.
Getting off the topic. In the pause the shills gather their second point: technical service jobs because of NAFTA.
This is smoke and mirrors because those jobs are temporary in nature. The foreign companies are training home grown workers in this field and when ready, those jobs will go to the local yokels.
Closer Look
I like to offer you a different perspective with tomatoes.
Tomatoes
I would estimate that at least half of the US population has tried to grow tomatoes at one point or another. However, I am talking about farms and farmers. Recently, a small Florida farmer pointed out the problem and it centers on NAFTA. He hires transient Mexican workers for his product. He says he cannot compete with his Mexican workers versus the Mexican workers in Mexico. Why?
First and foremost is currency manipulation. It is central to why Mexico sends 80% of its exports to the US and why it has excessive surplus monetary gains against the US. It is why the ETF, EWW is soaring. It is why the central bank of Mexico upped its forecast for GDP from 2% to 3%. The rules and regulations of NAFTA add to the problems of US producers. Even if parts of the deal could be renegotiated, any upset party could take the new deal to NAFTA's court and even the WTO. There is a bureaucracy of layers working against the US, but I have an answer(see end).
It is why this small Florida farmer is slowly dying. It is not just manufacturing that is gutted by NAFTA, but every aspect of our society. To be fair it is true that the US tries to level the field by subsidizing agriculture. The problem is the program only helps large industrial complexes and does little or nothing for the small farmer.
No Milk for YOU!
It is why one day our milk will come from Canada. Sadly, the currency tricks work north of the border too. Our diary farmers are also dying a slow death.
All talk no action
That is the feeling behind the bravado of the "Donald." This is reflected in the Mexican peso. After Trump's election win, the peso plunged 17% on fear of tariffs. Now, it is actually up versus the dollar and up over 5% from that victory night. This is what the smart money is doing. They are making profits on the wall of economic worry with Mexico, while the media plays circus games with new appointees and talk of trade deals.
This should be added to NAFTA and if we can't, drop it like a bad habit. The US will place tariffs on all products and services to the tune of the difference between the high of the US dollar and the low of the competing foreign currency. Amen! Oh yea, those NAFTA and WTO courts? Screw you, US law "trumps" your bureaucracy. Amen!

Wednesday, August 30, 2017

Currencies and Precious Metals

- "No problem can be solved from the same level of consciousness that created it."
- Albert Einstein

The above quote is for the shills meeting in Jackson Hole, Wyoming. We should all know by now that governments manipulate their currency to either export or import. This of course, is only one layer of the onion that governments use. This piece does not examine protectionism, but the implications of the recent action in major currencies.
$USD
I told you a little ways back that the dollar is under attack. It has fallen from its high of 103.8 in January of this year to Friday's close of 92.6. It even touched a new yearly low of  92.2, only to find a new lower low on Tuesday at 91.5. Every time that the dollar has tried to bounce, the ball has no air. The volume of negative contracts has enough juice to not only test 88, but carry it through to 84. The dollar has broken its 50 and 200 - day moving average. If you have not realized this extensive move, you may now ask what does it mean? The answers only lead to more questions, however I stand by Sebastian's prediction that our exports will grow and Trump will look great. This does not mean America will be great again, but a replay of the Clinton administration. US citizens will get inflation, the same stagnant wages and more of our industries will be gutted by globalization. Even if Sebastian and I are wrong about the effects of a low dollar, we know for certain what it means elsewhere.
-"one man's ceiling is another man's floor..."
- Paul Simon
EURO
When its low tide on one side of the ocean, its high tide on the other side. Back in January of this year, the talk on the Euro was parity to the dollar. The euro hit 104. Now, at 1.192 and touching 120, the shills bark European stocks. The strength behind the move could carry it to 124. As stated for the dollar, if 88 is penetrated, then 84 is in play. The correlation can thrust the euro to the 128-131 range.
Yen 
It too has risen against the dollar as it sits at 109 and it could go lower.
Where does this lead? Fortunately. I have a friendly doctor who is a world traveler. He gave me this answer.
Dr. Copper 
China is buying and that means prices will rise. Copper was $2.50 a pound in May. It closed last Friday at $3.06. This is a huge, huge move in a short period of time. The volume is strong and copper has surpassed its 50 and 200 - day moving average. It should run to $3.23.
Putting the currencies in a basket which by the way is what the IMF wants to do, but only an expression in my usage, the conclusion is simple= $Gold! 
The results of all the manipulations on currencies cannot manipulate gold. It is the only real money to win against the fiat moves. It has finally breached a new top last Friday and when I relate to you the machinations within the market, you will realize what Sebastian and I see.
On Friday about 30 - minutes before Yellen would speak in Jackson Hole, a whale sold 2- million contracts of gold. This huge short in the past would have ended the gold rally. It didn't. In fact, it was not only engulfed by gold, but gold rose to close up at $1297.9. This shows the conviction of the internals and strength behind the move. We see $1327 and a possible run to test the $1375 set back in July 2016. We also like silver and one reason close to my heart is that I can afford it. At present, silver is moving in a monster range. The volume is very strong to the upside and we see $17.88 in play. Not only that, but if things continue the way that they are trading, $18.28 looks doable.

Wednesday, August 23, 2017

More Bits and Pieces

I call this "more" B&Ps because it is in effect, a continuation of Odds and Ends. Also, Bits and Pieces is a song title by the DC5. They sang of a broken heart and I sing of our poor, convoluted brain that is constantly bombarded with data. Sadly, I am adding to it.
Stock Market
Cracks are showing in this bull rally. In the past two weeks the market stopped its uptrend, and had triple digit down days with volume. This is reflected in small cap, S&Ps and the Dow Index. The Russell 2000 and Dow Transports both fell below key levels and also on volume. When there are fewer people in the store, you sell less. That is the way this market hit its record highs. I have warned you that with less companies to choose from, money gets concentrated. When everyone exits for the door at the same time, you have a stampede. The Trump election win gave this market a 4,000 point boost. I see the expectations faltering. This will cause the market to retrace back to the point where it began its climb. The one positive that I see has been energy. We have been using more oil and gasoline this summer. Although this aspect took to our economy after the Independence Day time period, this usage is following the old cycle of summer driving. This means that the oil market will hold up the stock market until Labor Day. At that point if the oil glut returns, the market will tank. One fundamental reason for this is the internals of our economy. We are a credit economy. This means everything is in debt: our homes are mortgaged, our cars are mortgaged and most of our gadgets are mortgaged. If the paycheck gets cut due to less hours, delinquencies will rise. This causes a chain reaction in a negative spiral. Not good.
Housing
The need for shelter is eternal. No wonder the Fed does not include it in its inflation formula. In our consumer economy it is our biggest purchase for an individual. The only positive at the moment is the Fed has kept the interest rates low. In fact, mortgage rates are at its lowest point in 2017. Nevertheless, housing starts and permits continue to decline with a tight inventory of existing properties and at very high prices. A central problem for buyers has been the down payment. With the medium price for an existing home at $267,000, a buyer needs at least $30 grand for 10% down and other closing costs. This stumbling block has caused purchasers to seek the lower 3% FHA loans. I have nothing against these mortgages except life happens. See above or below. In addition, buyers are returning to ARMS(adjustable rate mortgages). The housing industry has utilized these two loopholes for years, but the threat of liar loans or ninja loans could resurface with the high demand. The real risk to housing will be in the future. Any downturn or spike in ARMS could severely damage the housing market recovery. According to Susan Wachter with the University of Pennsylvania's Wharton School, the key will be multifamily construction. Rents are too high, but more available and affordable rentals will allow people to save for the down payment. This point like all intellectual concepts does not jive with reality. Rents are too high, but the people building new units know this and they are seeking to keep it that way. In a related aspect the Trump administration is looking into all tax loopholes including the home deduction on interest payments. The present talk centers on a cap. Consider BeyoncĂ© and Jay Z just signed a contract for an $88 million dollar home in L.A. The monthly payment comes to $250,000. Now, I say this these crazy homes prices have a deep root in the tax deduction. I say it should be eliminated after $5 million and dramatically reduced after the average home price for that tax year. You want to close the wealth gap? This is a good starting point.      
Three Mile Island
is scheduled to close. Not what you think. No environmental disaster is looming. It is basic economics. Costs are too high. The cost to maintain a nuclear plant is very high. These guys never suggest this when seeking to get a license to build one or the design flaws. Don't fret these points because they won't be building more in the near future. The reason is natural gas prices. As long as gas prices remain under $3, nuclear facilities lose money. Three Mile Island is set to close in the near-term. In fact, five nuclear plants have closed in the US since 2013. I, personally rejoice about this. I am against nuclear energy, however there is another option to explore for nuclear fission and it is very safe. I would like to see more research into this option. Trump is working with the Department of Energy to study flaws in nuclear design with the hope to resurrect the industry. It never hurts to have choices. Out.

Wednesday, August 16, 2017

Odds and Ends

Jobs and Unemployment
The big story with jobs and unemployment is this: Job creation has lowered the unemployment rate to 4.3% and yet, there is conflict of information. Why? Because the other big story in 2017 is the slow dying of retail. Stores are closing. Brick and mortar have lost over 465,000 jobs, while e-commerce has added 166,000. Now, my old math says 300,000 people are out of work just from retail. If you review the government stats, unemployment claims have been under 240,000 for the past two years. Of course, these are bureaucrat stats. Go figure?!  
$10 Billion Threat 
That is the real value of all the yearly oil flow from Venezuela to US oil companies like Chevron, Phillips 66, Citgo and Valero. Proposed sanctions will cause a spike in the price of US gasoline. These companies cannot find substitute distributors due to the fact that those same companies have spent millions to coordinate their refineries to work with the Sulphur content of Venezuelan oil. Venezuela is the 3rd largest supplier to the US.
At the moment the Venezuelan president/dictator, Nicolas Maduro is sitting with a smug attitude even though the US processes all their oil for gasoline. His country is in turmoil and the GDP has fallen off the cliff, but he feels the US is all talk and won't follow through on the talk. Trump cannot afford anymore problems, especially with North Korea on the radar. Trump could counter by releasing the reserves from the national storage facility. He also indicated that a military option is on the table, however this plays into Maduro's hand because he blames the counties problems on US intervention.
In any event, I told you in previous articles that Venezuela could cause an economic world recession due to the parabolic move of their stock exchange. Last week, the index hit over 193,000 which means that it has tripled this year after doubling from last year. Help me out? What did they invent or discover to cause such a movement when the citizens are rioting in the street? I see a bad, negative derivative chain of events.
More Middle Class Death 
In the south US workers rejected joining the UAW union. Nissan used the same tactic as Boeing with its workers to reject union membership or proposals. The word union is still a dirty word in economics and yet, it was only the union founders who gave us a 40 hour week and the ideas of a pension, sick pay and unemployment insurance. When you get things for free, you take them for granted.
Federal Reserve 
did not raise interest rates as expected. In addition, rates are not expected to increase from a survey of economist until March of 2018. Sebastian has been saying all along the whole story is just another point of manipulation and control by the Fed. They cannot raise rates due to the ballooning US deficit which by the way is already up 10% this year and sits at negative $566 billion and counting in the RED! By the way the Fed has their vacation in Jackson Hole, WY. next week and we can expect more control, more manipulation and BS!
Pot vs. Wine 
In California the fight is just beginning even though both "pleasures" have been with us for a long, long time. California will issue restricted licenses to grow marijuana. We all know the soil in Napa/Sonoma is the best. The problem centers on a study showing that one acre of pot could return $1 million while one acre for wine only yields $200,000. The wine growers fear that pot growers will economically force them out of the valley.
Bond Bubble
Greenspan has started the dialogue in open forum. He feels if rates keep rising, this will cause the bubble in bonds to pop. He is not alone as Sebastian shouted this fear when the Fed began lowering rates to unhealthy levels. When you raise rates, the value of older bonds decline. Greenspan fears a return to stagflation which is the worst economic condition. It means inflation is rising and yet, the economy is not. Sebastian feels stagflation is possible. We have phony inflation data that does not include food and energy, the two things people need every day. In addition, the government does not include shelter which is off the charts for home ownership or to rent. The Fed is now trapped. Economists like Shiller agree with Greenspan and hedge funds managers are joining the chorus. Trump will probably fire Yellen to get a dove and or a return to QE by the Fed. In any case, no matter how you add up all of the above, things are not looking good.

Wednesday, August 9, 2017

An explanation for Dow 22,000

Yesterday:
Image if you will, your local supermarket. We are going to the dairy aisle to get a quart of milk. Now, in this musing, we have four brands to make our choice. Let us not differentiate between low fat or 2%, just plain milk without GMOs.
First, we have the national brand. For consumers who just moved into the neighborhood, this will be their choice.
Next, we have the local dairy. This will be supported by folks who grew up in this environment.
Thirdly, we have the discount brand. People buy what they can afford.
Finally, we have the new kid on the block with fancy cartoon characters. They will try to get your kid to bug you to buy their product.
These are our choices with some backstory. Now, since the four brands are in the refrigerator section, we must conclude that they are all making money and that is why they are still in active business.
Now, dear reader use an analogy here. Instead of milk, imagine the US stock market in the 1990s.
The market listed almost 7,000 companies. The Wilshire 5,000 was the choice to find a good small cap stock with growth potential. With so many choices, money circulated.
Today:
In the refrigerator section we basically find two choices. The reasons are many like high prices and changing consumer preferences to government subsidies favoring big corporations over ma and pa operations. You can buy the national brand or if still available, the local brand. Since land near cities is so expensive and tax burdened, in short order the local dairy will sell out to a housing developer. Then, we will only receive one choice and when it goes GMO, no choice.
This is what happened to the US stock market. We no longer use the Wilshire 5,000. We use the Russell Small Cap Index or Russell 2,000. The Big board has only 3,400 companies and shrinking. There are many reasons for this, from mergers to going out of business. The shills never mention the reason so many went out of business. It is due to globalization. This is the death of the middle class. The shills sometimes tell some truth, but only to mask their intentions which is really unknown to them as this is behind the doors strategy. They may suggest that rules and regulations are hurting companies. This is true. The Sarbanes-Oxley Act hurts small business which large corporations love because it gets them one step closer to going out of business. This has directly effected IPOs to the market. The cost is too high to go public. It is why the real successful companies in the US are private concerns. This is the real reason why the stock market keeps setting new record highs. There is little to choose and money is funneled into the few remaining choices. If there is a correction, this will cause a stampede to exit the market. By the way, the long-term up channel line has just been reached. This is the first time since the fallout of 2008 and guess what? The market ended its streak of record closes as it had a down day. Not good.