Wednesday, October 24, 2018

Odds and Ends, Oct. 2018

Interesting thought. Last week on the 19th of October was the 31st anniversary of the Dow's biggest percentage drop in a day. It fell 22%. If this happened today that would equate to 5,700 points. Yowza!

I mention this due to the recent high volatility in the market. As stated in a recent piece, the big boys pulled out the old playbook. They buy when everyone else sells. This steadies the market, but Sebastian is taking a closer look. He does not like what he sees.

In the S&P 500, there are 139 stocks in bear territory. In addition, 66 of these companies are off 50% or more from their highs. Our media rarely provides info on other markets, but we do. The Shanghai index is down 30% for the year. Ouch! The IMF said inflation in Venezuela is one million percent. That is a seven digit ouch!!!!!!!

The Dow would have been down for the week last week if not on Friday when P&G and American Express reported a stellar quarter. The NASDAQ however reflected the mixed market. It fell, again. Technology led the NASDAQ up and now, it is bringing it down. If you look at the chip sector, it is getting messy.

*AMD was $34. Now, it is $24 and heading for $17.
*NVDA was $292. Now, it is $204 and heading to $198.
*LRCX was $209. Now, it is $145 and heading for $119.

IWM is testing its 200-day moving average and the up or down breath on NASDAQ is below 50%.

The charts get more alarming. The banks had good numbers, but the stocks cannot hold price. Net flix had good numbers and it too can't hold price. The charts say that if this trend continues Amazon could fall to $1416. If you bought at the high($2033) I can hear you say #*_* and many more unprintable emotions.

It is not just the stock market that is causing concern. States, especially old Northern stomping grounds are feeling a stress over taxes.
Tax Migration is the problem. There is a lot of news on world migration whether in Europe or the US southern border, but north of the Mason-Dixon line is having a different spin on the problem. Wealthy citizens are moving South, most notably to Florida and Texas because they are tax free states on income and state taxes are lower. California is experiencing this too as their citizens move to Nevada. State budgets and pensions will soon gather headlines.

Speaking of state taxes leads us to the home building industry. Bank of America just downgraded three big construction firms: Toll Brothers, Pulte and Lennar. Zillow reported that California leads the nation in unaffordable housing and affordability in general is the worse since the housing crisis. The ITB, the ETF for home builders is in bear territory. Another firm, D.H. Horton reported disappointing sales with poor guidance.
Home sales declined another 3.4% in September and mortgage rate are at 5% and set to climb again before the year ends. Not good and getting even worse.
Subprime: It's back! Banks are providing capital for buyers who won't need a down payment, and they will receive a low interest rate loan. The test market is South Florida. Sebastian also found this: An internet company is offering a shady service whereby a customer can use. They will provide a phony job, salary and more. They will even answer a phone call to verify the phony report. This is very, very bad.

Tariff War continues as well as our deficits with imports. A new record was set in August at over $50 billion in the negative column. For the year the federal deficit is at $780 billion and racing toward a $trillion. This insanity has got to stop!!! Central banks have increased their "assets" or fake money from less than $1 trillion in 1987 to over $19 trillion today. The New York Fed reported that US consumers have the highest debt on record at $13 trillion. This includes mortgages, credit cards, student loans, car debt, etc. If wages cannot keep up with debt service, citizens are in trouble. If revenues cannot keep up with deficits our dollar is in trouble. Together, this is not good.

Elections are coming...if you vote for any Libertarian consider this: Three large tuna companies all pleaded guilty in price fixing. They kept the price of tuna artificially high. Libertarians say we do not need government regulations. Idiots! How many times have corporations been caught doing practices like this like the OPEC oil cartel like the banks connected to the Libor scandal like the firms who provided equipment to the Tennessee Valley Authority and on and on...

If all this is getting you depressed and hungry, it is diet time. Five chains are shrinking so check before you go to Chipotle, Starbucks, Subway, Noodles or Applebee's. They may have moved or closed the location. Maybe you haven't been getting a good night's sleep. Thinking of buying a new mattress? Don't bother going to Mattress Firm. They just filed for bankruptcy.

On a lighter note: Auto manufacturers have recalls on 70 million vehicles. You can find out if the car that you are driving is on the list and repairs are free. Go to: