Wednesday, June 20, 2018

Looks Can Be Deceiving

Everything in the market is looking higher. It echoes the late great, Jackie Wilson song, Higher and Higher. Nasdaq recorded a new record high and the small caps joined the party. The Dow and Transports are well off their February lows. Finally, the Baltic Shipping Index is showing signs of life. Keep in mind that all this buying is happening with the usual geo-political tensions in the Middle East, the who knows real results of the summit with N. Korea and the on-going financial problems of the EU members that appear at the end of each month along with Brexit. Last month it was Italy. This problem won't just go away. Then, there are elections in Turkey which is leaning toward being the number one proponent of China's new Silk Road agenda. Finally, the trade war issues. The market refuses to believe that this is happening. It believes Trump will make a deal and all is well. Trade wars are happening.

Even if you don't think the trade war will last, governments have very small memories. Also, I don't trust the N. Koreans and Israel needs to recognize Palestine and stop expanding into land that is not theirs. Syria will be a problem for years to come as well as the entire Middle East. So, I question the internal mechanics of the market. I cannot put my finger on the cause of the markets climb in the face of this many problems. I realize that the buybacks have helped. I understand that the new tax breaks helped. I see the strength in the economy in the job numbers, but that final point is deceiving. Follow the story...

The BLS says the average worker receives $26 plus an hour. This is a skewed piece of data. Walmart is the largest US employer and their average hourly rate in under $15. See what I mean? If you work for Boeing or GM as a union worker, you easily make the BLS stat. However, the majority of workers are not union and can't make ends meet. Why, you ask?

The average price for a new car is over $30,000. You could have bought a house for that much in the 70s. This is an example of our lower standard of living. Our dollars buy less.
Even with the $26 per hour rate, workers cannot afford a new home which is over $326,000. In fact, families cannot even afford rent, if they can find one open. Rental rates are eating one-third of income even one half in many areas. The average price of a re-sale is $267,000 in many locations. Again, the national average is skewed at $207,000 like the hourly wage report. In my example I use the higher real figure in today's market prices for real estate.

Take for example, a New York City developer. He is adding 330 units of condos for sale. However, he is targeting the high end with two penthouses that run $70 million each. No one is doing anything for ordinary people in NY housing which is why one third of its citizens desire to move from the city.
Nationwide, there are 537,000 units being built according to CoStar Group Inc. The vacancy rate on the upper side is 13%, but few new apartments are affordable for working families even in the face of those high vacancy numbers. So, that leaves re-sales for shelter. Let's do the math.

Based on $26: which equals a weekly salary of $1040 less taxes. In addition, all other expenses must be subtracted from the total. This would include car payments, credit debt, school loans, etc.

I won't go into a home's curb appeal, although it connects to the title of piece. The mortgage payment on a re-sale of $267,000 is roughly $1136. This is based on present rates which are rising. Nevertheless, one needs to add taxes, insurance and possibly PIP. I will pass on the closing costs. To meet mortgage qualifications, a buyer must have enough on one weeks earnings to pass the litmus test. As you can clearly see, the average worker does not meet the standards. This is why home builders do not build entry level, single family homes. Therefore, the biggest and most important expense in our consumer society, the average person is not included. Job numbers do not equate to a strong economy, especially if workers cannot afford the products that one needs like food, energy and shelter. Our Federal Reserve is corrupt! They do not include those three necessities in their phony inflation formula.

There is two guilty parties for the plight of our lower standard of living: the Federal Reserve which dilutes our dollars value and the military complex that costs us our lives and eat up our annual budget. End the Fed! Cut the military! We are not the police force of the world!
Let us get back to what the founders visualized in framing our constitution: Promote the general welfare in seeking life, liberty and the pursuit of happiness.

Wednesday, June 13, 2018

As Strong as the Weakest Link

The market is surging again, but internals indicate trouble ahead. The leading financial is Goldman Sachs(GS). Financials make more money on rising interest rates because they can play the spread(cost of money before lending). Rates are set to rise at the next Fed meeting on June 13th.

GS hit a low in February along with the rest of the market. However, most of the market has regained momentum, but GS hit a new, lower low. It is now over 40 points off its highs. This is a red flag.

We all know that the Dow and other indexes re-align from time-to-time. Last week Twitter took the place of Monsanto on the S & P 500. I find that very reflective of what is wrong with America and our economy. Bayer bought out Monsanto. They will be the biggest agricultural concern in the world. I don't want to go off point, but I have to include this tidbit. With that merger five companies control the world's food production. That is scary for food safety.

Anyway, Twitter is a social media company. A magazine in digital form. The company produces nothing for society while Monsanto was a producer. We lose on the index a creator of wealth for a creator of chit-chat. Look around! Facebook could be worth more than Exxon. How about SNAP (rhymes with crap)? We all need Exxon. My life is fine without Facebook and Snaps of the world. There are many more examples, but they all are waving a red flag.

If you doubt my point, consider this: The US invented the chip, the computer and the internet. YAY! Hold the excitement! As of last week, our computer ranking in the world was FIFTH! That is no typo. We were behind the Swizz and China. Fortunately, IBM collaborated with a chip firm, Nvidia to place the US back at number one. The question remains, number one for how long? Red flag.

Back to the Market

Chips are also weak beneath the surface of the market. Check out Lam and Amat?  Red flag.
The airlines say that earnings will suffer due to the rising cost of fuel which is up 60% from a year ago. Southwest already missed and American indicated that they will miss. Red flag.

Finally, a geo-political concern. This is not one of the usual suspects. Argentina's currency is falling off a cliff like many emerging markets due to the rise in the dollar. Argentina raised its interest rates to - are you ready for this? 40%. That is no typo. Can you imagine having to pay off your credit debt at those rates? Anyway, they received a $50 billion loan from the IMF. The only concern the IMF had was in seeing Argentina control its inflationary problem. If 40% can't do it, the world market is going to get one big shock. By the way, Argentina's currency, the peso is still falling in value. Red flag!

Wednesday, June 6, 2018

High on Profits

Cheech and Chong made the hippie comedy, Up In Smoke. It had many implications amongst which some dreams don't happen in life. They found relief from stress in pot and thus, up in smoke.
If we look back on the changing morality in America regarding pot, mostly it is done by states seeking revenue.
Say It Ain't So...
What once was immoral, is now acceptable. Why? Revenues.
Numbers guys faced years in prison, but state lotteries are now legal.
Alcohol created two amendments over its use. Booze runners faced jail time. The only controversy today is whether 18 or 21 is the legal age to drink.
Gambling was limited to Las Vegas. Illegal houses faced jail time. Gambling was increased to native American locations on a state-by-state approach. It is now almost everywhere.
Finally, in desperation for revenues, marijuana is acceptable in a few states like California, Colorado and Washington. It is being discussed in many more even though the federal government still considers pot illegal. It was great to hear my QB hero, Joe Montana come out in support for pot as a pain reducer. In this form, it is legal in many more states even though the federal government will arrest you if found in your possession.
At present, our president does not smoke or drink and his attorney general, Sessions is on board as against the legalization of pot. I still believe that Sessions will stage a big crackdown on states that allow the use of pot. It is in that vein that I now suggest to you, dear reader, to watch my two suggestions in the budding industry. The day after the big crackdown will be your moment to obtain a pot stock. However, if there is no pushback on pot and Canada legalizes it, jump on the bandwagon.
Aurora Cannabis and Canopy Growth
These two are benefitting from our changing morality in the US. They are both Canadian companies and yes, this will be another industry that creates money, jobs and revenue for a foreign nation. By the way, legalization is coming to Canada before the end of 2018. This gives these two solid support. They should spike when that bill is passed in Canada.
Aurora is positioned well with medical acceptance by pot for glaucoma and pain. They have acquired their competition. They are growing at 30% plus, but most followers think a consolidation should happen before the next explosive surge in the stock(ACBFF).
Canopy(CGC) is in great position to extend their market strength when Canada passes legalization. They have more supply sources to accommodate market growth. They are also growing at 30% plus. Whether you believe that pot is no more harmful than a glass of beer is immaterial. These two are primed to grow. Just don't smoke your profits away as in up in smoke.
BREAKING NEWS: Colorado congressman stated that President Trump will look into the pot dilemma. He will recommend what he will accept and not accept with something in the very near-term. He is leaning to allow states to make their own call. It's like the old expression, "Money talks, everything else walks."

Wednesday, May 30, 2018

OIL in the World of Eco-Military-Geo-Politics

Dear Reader, if you bear with me, I will take a page from the late, great Rod Serling and together we can journey into a world where time, sound and dimension is similar to ours. Imagine, if you will, in this dual, bizarre world, things are done by its own perception rather than rule. There are hidden bureaucrats that work in conjunction with the "Deep State" which is run by the military complex. They answer to no one and yet, there actions have consequences to all. In this economic-military-geo-political world, they follow no precedent and their continuation is entrenched by their own schools that fill all gaps in personal. Sadly, they are the true masters of the nation. Doubly sadly, they believe that they are masters of the universe.

In this weeks episode, we look at oil.

Our government paid shills will tell you when the price becomes high and noticeable that oil no longer holds the power over our economy as in the days of old. One part of that statement is true. We lost all our manufacturing and therefore, we need less oil. The Federal Reserve does not include it in its inflation matrix which is another reason to End the Fed! However, you and I know differently. We need oil everyday and the government knows this too. It is why when Nixon went off the gold standard in 1971, world currencies and trade went into a tailspin. It is like the theme in my unpublished work, "All things are connected." Follow the dots and you can see the connection.

Nixon made a secret deal with the Saudi's under the cloak of this bizarre world. The pact with Saudi Arabia was this. We protect the House of Saud and you make sure that all transaction in oil has to be done in US dollars. Thus, the petrol-dollar exchange began and with all nations using fiat money, world trade started anew. The dollar remained number one as the world reserve currency.
Funny isn't it, the Fed does not recognize oil, but our currency depends on it. This aspect has kept the US dollar as the world reserve currency. Without this status, our economy could be crushed with inflation.

We could look at many world interactions by our Deep State except this is only a half-hour show. So, forgive me if I pass over Noriega in Panama, invasion of Grenada or even the failed coup in the Bay of Pigs. There are countless dictators in Africa and around the world that receive aid from the Deep State which is contrary to the words and ideas of our Founding Fathers. Today, we look at its latest machinations with the House of Saud.

Mohammed Bin Salmon
is the young, crown prince in Saudi Arabia. At the moment, this highly educated man is the minister of oil in the kingdom. He has a lot of new ideas for his country like preparing it for the day when oil is no longer in demand. In a conservative nation, he is liberally minded and I wish him well. Some of his countrymen do not. Rumors have surfaced lately on an attempt at his life for various reasons like his role in attacking Yemen or the leaders in Qatar. Maybe the hated Iranians. Who knows?

My story centers on oil and the kingdom has decided to go public with their state oil. The IPO has been in the works for years. It got placed in limbo due to the last recession and the falling oil prices. At one time analysts thought that the value of the IPO would be two trillion. That's right! Trillions of mullahs. After the fallout in the price of oil, the projected value of the IPO plummeted down to less than one trillion. The House did not like that. So, I guess they held a meeting and came up with a plan.

We now know the plan as actions speak louder than words. The Saudi's got OPEC to cut production. In addition, the House made a pack with non-OPEC member, Russia which was their largest competitor. Russia cut production and two years later, demand exceeds supply. Lo and behold, the price of oil rises. In the latest public lie, the two cohorts say that oil needs to stop at $80. Because deep inside they fear a push to alternative energy and the PR makes them look better.
Anyway, the manipulation goes deeper. You see, young Mohammed went on a world trip to promote the IPO which they plan to proceed with.

Three months ago and just before the huge upward movement in the price of oil, Mohammed meets Trump. I think that they made some kind of a pack. Trump bowed to the Deep State. Oil rose from the low forties to touch $80. Coincidence? C'mon!

Why the doubt, you ask?

Because while this tour was developing, China was counter-acting. The Commies have their own delusional Deep State influence. They want to be number one. In order to do that, they need to supplant the dollar. They held a meeting. They made a plan. This is their plan. If you sell oil to China, you must do it in Chinese currency, however you can have an option. You can receive GOLD in exchange for your oil...Wait! There's more! The plan has two parts.

China is spending hundreds of billions, maybe a trillion to rekindle the Silk Road. This was the ancient camel-back route that traders journeyed from the Chinese region to India, the Middle East and even Europe. The Chinese are also offering low, almost free money to anyone or any nation to join their alliance. This is why I say below that Europe will sell us out for Chinese gold and trade.

You have to admire the way the Chinese get things done and so quickly. If my unpublished book was in China, the ideas would already be activated while here it is not even in print. The only hope that I see here is China loses all their gold and their currency will crash due to all these new loans going bad. It is just a matter of time. The leading thinkers in the Pacific Rim express my conclusion this way when regarding the US and China: I rather have an evil that I know, than the evil I don't know. You can also read in this revelation that our Deep State represents evil. Of course, our dollar is already set to be devaluated, thanks to the Deep State. We are not much better than the Commies.

Back on target...

Now, folks, as much as I love dollars, I'd rather have gold. How about you? By the way, so would our Founding Fathers. Anyway, this is where our story ends and yet, it continues. I predict the EU will desert us for gold to which Brexit will become more important. The real kicker will be natural gas as the world turns to cleaner energy. Also, the next Fed meeting is on June 13th and I expect a rate increase, but I bet you this: there will be no mention of the rising price of oil. And they will say that inflation still does not meet their 2% target. So much BS from the Deep State.

Wednesday, May 23, 2018

Homes, Gas and Recycling

It is no secret that rising interest rates sink home sales. Even though interest rates are still at historical lows, the housing industry has seen lower sales, lower applications for housing permits and rising rates on mortgages. One central reason is workers cannot afford new housing with little affordable units for sale. This aspect surfaced in the earnings news from Home Depot. They had a rare earnings miss. What the media is overlooking is the flippers.

Remodeling

Ever since the financial crisis of 2008, home flipping has disappeared. Well, that is not true entirely. Flippers returned to their original role by buying distressed homes, remodeling them and returning them to the market. These homes are generally more affordable, but flippers have turned to up-scale neighborhoods. They have abandoned the entry level, starter homes for the big bucks. In addition, there are no more distressed bargain homes for sale in the market. This is what is hurting Home Depot's bottom line. The loss of flippers and this aspect will reveal itself going forward. This too, will hurt housing sales going forward along with rising interest rates.

On the flip side of flippers, KKR is starting a new program to lend money to flippers. Of course, these mortgages will be shorter in term and come with a higher interest rate. And so, we have begun again to chip away at housing precautions. The road to trouble has been cleared.
A new start-up called Ribbon is offering home buyers "cash." The thinking is cash buyers "appear" stronger on paper and have their offer accepted. If the buyer ultimately fails to secure a purchase mortgage, Ribbon will buy the home and offer it to the buyer or re-sale market. This company is speeding on the trouble road.

Finally, NBR reports that homes sales declined last month. This is big since this is the busiest time of the year for home sales. In addition, permits are down and new starts was revised lower. With higher rates coming, our most important consumer category is looking weak. This same weakness was reflected in the earnings miss by Toll Brothers. They blamed the miss on higher wages and costs of materials. Funny, no one mentioned lumber which is off the charts. Homes just got more expensive.

Gasoline

The price for a gallon is close to $3.00 nationally and I predict it will smash through that figure. Yes, the US is now the largest producer of oil, but lobbyists got permission to sell aboard. Our democracy in action. Ha!
Whenever you talk oil, you have to include the dollar. The dollar stopped its downturn and it is now rising or at least at a higher level. A rising dollar should keep gas prices low. However, this is not happening. The crack spread has risen from $1.85 three months ago to $2.26. This is a Fibonacci expansion level. There could be a retracement, but oil seems to be heading for $75 a barrel. This is a huge move and we will pay at the pump. It also means that $2.50 wholesale, is within range. At that wholesale price, we can expect to pay $3.50 at the pump. Ouch!
With world demand is rising and OPEC is manipulating production. Russia is selling to China, and the supply glut is dwindling. The basic supply/demand curve is in effect. Bottom line: less money in our pockets and the market will also feel pain. It will be reflected first in the airlines as American and Southwest will tell you.

Recycling

Get ready for higher taxes due to landfill concerns. This is probably another area where the Federal Reserve does not keep track of costs in their phony, manipulated matrix to figure inflation. As stated above, the price of gas has risen .57 cents year-on-year a gallon, but the Fed keeps saying that there is less than 2% inflation. So much B.S.!

Anyway, if I were to ask you what is our largest export to China over the past 20 years, what would you say? The answer is surprising. It is Garbage. That's right, but the Chinese importers are upset and I can see their valid point. Instead of dumping in our landfills, we send to China our used cardboard, cans, etc. under recycling. Now, the Chinses say to us, clean up our act. What they are saying is that we have included waste in our junk. With local cutbacks, our recycling plants have left egg shells in crates, pizza slices in boxes and sauce in jars. We are suppose to separate this crap from the recyclable parts. This complaint has nothing to do with tariff talks. This is just between an exporter and importer. It is so typical of us. We cut corners and now, it is coming back to bite us in the ass and our noses too. We could not only lose our most successful export, but pay through higher garbage rates and taxes for landfill concerns.      

Thursday, May 17, 2018

Buffett Talk, Argentina Talk and B.S. Talk

Buffett spoke to the media at his annual shareholder meeting last week. His thoughts trigger two responses from me. One, he is consistent and secondly, he is such a hypocrite.

He was joined by his right hand man, Charlie Munger and charity buddy, Bill Gates. Together, they trolled the dangers of cryptocurrency. They all agree that it is fake money, but Buffett also thinks gold is not money. I have a serious problem with that.
The subject of bitcoins has two sides. I, too, believe it is a fake asset, but the dialogue that fiat currencies are really products for government manipulation does hold water with me. This is why I believe in gold just as our founding fathers because it is a true asset that cannot be manipulated, especially by governments.

Doug Casey said it best when discussing three choices of money. Since the US went off the gold stand, our currency is backed by faith as in we owe you nothing. The euro is fiat, but the answer to the question is, who owes me nothing? Finally, the answer to cryptocurrency is I don't know who owes me nothing.

With that said, there are nations where citizens have few choices to protect their assets. They utilize the cryptocurrency to protect themselves from inflation and government seizures. There is however, a negative side where criminals can launder money or the wealthy hide money and avoid taxes. Like almost any issue, the bitcoin is a two-sided story.

Nevertheless, there are forces that control stories so we only hear one side of the tale. Buffett is the perfect example. He famously stated that derivatives are weapons of (financial) mass destruction(WMD). What is never talked about is the reality that Buffett controls more derivatives than anyone in the world. He is lock, stock behind fiat money which is the real reason why he opposes gold. He is such a hypocrite!

If I was a citizen of Argentina, I might feel differently about cryptocurrencies. Inflation there, is running at an unbelievable 40%. Their peso fell to almost 24 to the US dollar. The central bank of the nation increased their lending rates three times last week to stem the tide, but nothing seems to work. The citizens have lost confidence and that is all that there is behind fiat money. Their black market is almost as large as their public GDP. The ministers of Argentina have asked the following for help:
1) IMF
2)World Bank
3)Inter-American Development Bank and
4)Development Bank of Latin America(CAF).
The nation already owes $10 billion each year for the next ten years from past debt. They are deep in do-doo. The sad part of all this is the US is following the same path as Argentina. Their nation is rich in natural resources, good agricultural land and once had one of the highest standards of living in the world. Now, poverty is at their door.

We reflect Argentina in many ways except we had the highest standard of living, ever and now, with annual deficits of one trillion that is added to the $21-plus trillions that we owe, who are we going to call for help, Ghostbusters?

By the way, the NAFTA talks ended and they ended the same way as the trade talks with China=
Nothing! - NADA! - Forget About It! - A big Goose Egg - Zero! - OO! - Just B.S.!

Wednesday, May 9, 2018

Brexit v. EU - China v. US

No, this is not a schedule for competition in World Cup. It is the recent revelations in negotiated talks as well as related material. It follows the script of my unpublished work, "all things are connected."
Brexit

There is a fierce dialogue in Parliament concerning the on-going talks and repercussions of those actions with the EU. The trade unions fear that by losing structured trade with the EU members, they and England will be left in "nowhere land." The trajectory will leave the English behind and they will disintegrate as a nation. The talk from Brussels isn't helping. The EU has taking a hard line with England and the US with Trump's tariffs on products.
David Davis, a foreign minister in Exiting the European Union(DExEU) has tried to calm the fears of labor in Britain. His speech centered on combating union fears of a "Mad Max" collapse. He pointed out the strength in the pound as things are in a positive direction.
The calm was short lived as news of a "divorce bill" that the EU is placing on England for leaving. It is said to be $50 billion euros. Ouch! Theresa May claimed it will be less as she added a two year transition period to Brexit. The additional time will begin after the extended timeline of March 2019. This thing even won't begin until 2021 or later.
Isn't it ironic that the recent budget for the EU was $25 billion short with $12 billion gone as this was England's participation fee. The EU just fills the short with the divorce proceedings. Got to love those bureaucrats.

May also stated that England now has the right to negotiate its own trade deals, but it would like to continue working with the EU on terrorism. The EU said it will not share its files with non-members, but it will try to restrict illegal immigration into England, ...And the beat goes on...

In the other competition, the trade talks between the US and China ended with no results other than the wants.
The US wants at least a $200 billion decline in annual trade with China. It is too bad that our negotiators have not studied the wisdom of the Ugly, Tuco from The Good, the Bad and the Ugly. He prevailed although caught with his pants down in a tub, "When you come to shoot, shoot, don't talk."
China wants the US to stop investigating technology transfers to Chinese companies. They want more high-end technology.
Yeah, they are such good and honest trade partners. Do they honor patents=NO!
Do they steal corporate information and products=YES!
Do they cut corners in license agreements=Yes!
In addition, they demand full knowledge of company products in China and all these companies must be registered as Chinese. Bottom line: SCREW YOU! Let's close the door again to China.

Since this is the 200 birthday of Karl Marx, it is appropriate to mention him. Just because he is the founder of Communism, that does not mean that all his ideas were wrong. He had some great insights into our human nature. His observations on class are relevant, especially today. He said the middle class will die off and there will be just rich and poor. He said capitalist will do anything for profits even outsource to anti-capitalist nations. He is looking correct in those two points. After the Russian Revolution, capitalist went to Moscow to do deals. Nixon opened China to our jobs.
By the way, one million people have left the "Golden State" in the last ten years due to the high cost of housing. California became the largest state because it had land to grow and opportunities to advance. No longer. There is a sharp class divide in California. People now buy RVs to live-in because they cannot afford rent or to buy a home.
Same old same old

New York led our nation until government taxed its companies and citizens to exit. Seattle is doing the same today with Boeing and Amazon. They are leaving as well as citizens. California is following the same script and I'm sorry Eagles fans, "You can check out and NEVER RETURN!"
This conflict in democracy and our capitalist society goes back to Ford at Ford and Sloan at GM. Ford paid workers so that they could grow along with his company. His philosophy was the company, its workers and its product. Shareholders benefitted over the long-term because the foundation and intangibles were strong. The company was like your house. You did not see the appreciation from year-to-year, but in time you benefitted greatly. They could afford to buy the product.
Sloan said the company comes first. His corporate greed was excessive. He paid workers as little as possible. Unions saved those auto workers, but anti-unionism is winning in America. That is so sad. Greed has over-taken the philosophy of everyone benefits to only the rich benefits.
For example: Apple just instituted a $312 billion dollar buyback of its shares. They should have used the tax break to build a factory in the US. This is why I hate Apple, Nike and many other ungrateful, rich companies who outsource work. In Ford v. Sloan, I'm for FORD. 

Marx spoke a few truths. Only one man spoke truth all the time. This one should be applied by corporate thinking as their philosophy. His words as written by a follower: 
- "If one member suffers, all suffer together; if one member is honored, all rejoice together."
- Cor: 12:26.