Wednesday, May 2, 2018

This May, Go Away

There are many points converging in the market as we enter the month of May. If you connect the dots, the picture suggests a correction is beginning. In fact, since the market peaked, it has been in a sideways or consolation range. The trading volume has been stronger on the down side with less and less buyers on the upside. The reason? To each their own fear, but here are a few.

The Republicans claim to be conservative with their approach to government to which, they want smaller, less taxes and less spending. The reality is the GOP utilizes a liberal approach. They are open minded to spend on the military, cut taxes for the rich and sink the government with debt. Of the three worst spenders in US history, two are republicans, Reagan and Bush. Obama leads for the moment, but Trump will trump them all. The treasury revealed that it set a record for bonds in the first quarter(Jan-March) at $488 billion. At this pace, Trump will sink the US with $trillion dollar shortfalls. Our debt is growing at 3X our revenues. The deficit will be so bad that the US could lose its reserve currency standing. If that happens, be prepared for $6.00 a gallon gas. By the way, China is looking to take that position. They offer gold for oil if the seller doesn't want the Chinese currency.

 ...continues to want higher prices. Oil has been on an uptick since January of this year. Gasoline as you should already be aware, is up .65 cents in the past two months. It currently rests at $2.12, but if is rises pass $2.18, watch out! Keep in mind the driving season begins at the end of May. Even the Federal Reserve can't lie about inflation. They stated that inflation "just" met their 2% target. Oh, really? What about the price of homes? The cost to rent? Food? Insurance? Medical? Every thing that we buy. 2% = Get Real!

Speaking of the devils, they will probably not announce a quarter point increase in the cost of money later today. However, everyone feels a rate hike is coming in June. This will add to housing costs and push more buyers out of the market. Even if I'm wrong, this spring, there is no springing into housing. Recent data indicates a 3% drop in signed contracts for sale which follows three straight months of declining sales. However, the market still does not believe in the Fed's strengthening policy. The consensus is the Fed will weaken along with the economy. The signs are in place.

Consider Goldman Sacks:
At one time, a few years back, they had 500 traders on the floor. Today, they have three as in 1,2,3. -tres. They have more people looking into government regulations than market traders.
Even with a record budget for military spending to which the military complex is bankrupting our nation, defense stocks are in correction mode. They are down 15% in the past two weeks.

Nissan revealed a 28% sales decline for April. Ford lost 15% in sales with sedans. It is so bad that Ford will no longer make sedans. They are exiting the market. The maker of the greatest sedan, the Mustang will no longer create sedans. WOW! Tesla failed to meet production levels - again and again it continues to burn through cash at $1 billion a month!

Will give the market a push as it made its numbers to which also effects its suppliers. Additionally, Apple will buy back another $100 billion of its shares and it stated that it still has in effect the planned purchase of another $210 billion making a total of $310 billion. That is support in capital letters. This is Trump's corporate tax gift in action. Money for the rich as the nation goes bankrupt! To be honest, I approve of the tax cut as I hoped that companies would manufacture here in the US, however it does not seem to be happening.

Teacher Strikes:
It is now in five states as Arizona and New Mexico joined the party. This is spreading in another version of "me too." Soon, police, sanitation and fire fighters will be asking for more as the finances of states get busted and they cannot run deficits. Pension problems will resurface.

The current expansion for the stock market and the economy is 106 months. This is tied for the second longest in history. Political officials will take bows on this point, but Sebastian does not. He has a litany of issues like our music industry is dying. Just yesterday, Gibson filed for bankruptcy. Our kids can't buy toys because there is no longer a Toy 'R Us. Our malls only have rats running around, especially where there was a Subway store as 500 are closing - no lunch for you! In addition, he reminds us that this so-called progress fails to include deficits, environmental issues like air and water, to which are never subtracted to give a clearer picture of the overall standard of living in America. Our economists know the price of everything, but the value of nothing.