- Be on the alert then, for you do not know the day nor the hour. -
Matthew 25:13
October gets the infamous press of being the month where the stock market could correct or worse, collapse. History has not been kind to investors during this period. It appears with all the world worries like trade tensions, Brexit, Middle-East conflict, impeachment and the Fed that the market will escape unharmed. It did. A new all-time high record was recorded. Go figure?
We, at Evolution of Democracy heed the wisdom of Matthew. The present earnings season is peppered with red flags. We also do not feel that another rate cut will make any difference at all to the overall economy. The Fed is wasting all its ammo of rate cuts. We do feel that there is something happening behind the scenes. This worry finds a basis point in the recent Fed activity in the repo market. This is an overnight loan for banks and companies to make their book look like things are in balance. There has been excess borrowing in this market which could cause short term rates to rise. This is what the Fed is fighting. Day-after-day the Fed has injected billions into this segment of the market. I think that they are trying to put the lid on some problem loans by a bank. Sebastian thinks that some bank's derivative portfolio is imploding.
We also feel that the earnings books are being cooked. Price can be misleading. Consider this example from two stock exchanges: Mexico and Venezuela.
Earlier this year Venezuela was in the news for all the wrong reasons. The value of its currency was collapsing. Their stock market fell to the one thousand level (1K). At the same time the Mexican exchange was around 44,000 (44K). As of last Friday, the Venezuela exchange rose over 48K and the range bound Mexican market stood at 43K. Price can be misleading and CEOs are misleading the American public about the strength of their companies. All these adjusted incomes is nothing more than bamboozle-ling the public. You either sold product at a profit or you didn't. Keep in mind that just five stocks caused the new record high. With that said, here are some more tidbits for you to ponder.
Pluses and Minuses
Industrial powers like 3M and Caterpillar had terrible quarters with poor guidance. Hasbro is paying the price for outsourcing as the tariffs destroyed its quarter and the stock. Delivery service giants like FedEx and UPS missed and both gave weak outlook. Chip maker Texas Instruments missed, but Intel came up huge. Restaurant king, McDonald's missed as we wait to see how their competition fared. The king of e-commerce, Amazon also missed, but they still make a lot of money. Tech giant, Cisco failed for the quarter as competition for the cloud heats up with them, Amazon and Microsoft as well as a few others. Boeing is still BS-ing about the Max 737. They are suffering and in one aspect, I'm glad. How can you offer a plane for sale that costs millions and then, ask for more for things like sensors? You offer one price for one safe product. This is an example of excessive greed by corporations and the irony is, the sensors are the planes biggest problem. One railroad, Norfolk Southern posted a miss. Ford cut guidance. GM had the strike. Nokia is cutting its dividend due to outlook. No trick or treat for you! Hershey's sales fell in its biggest market, North America but somehow they made a profit.
Bottom line: oil and gas firms are not doing well. Mining is not doing well and construction is average to which makes manufacturing weak and that is never a good thing. In the auto sector 7- million consumers are 90 days late in loan payments and new cars cost 25% more than they did a decade ago. In addition, consumers are finding new ways to get into serious debt. They are taking out installment loans with high interest rates. This is a new dangerous version of a credit card. This will be big news in mid-2020 when customers will be asking for rollover loans. This action could "rollover" the consumer who is carrying this economy. These are bad ingredients for a healthy economy.
On the plus, Tesla showed a big improvement. Proctor and Gamble had a solid quarter. They said sales in China were up 13%. I think this paints a cloudy picture for the trade talks. The Chinese are stock piling US products because a ban could be placed on them by the Chinese government? The financial industry did well. As earning season is still in progress, we can only speculate. We do feel that Sebastian and Matthew's advice are worth heeding.
Nobel Prize
A trio received the award for pioneering on-the-ground experiments in tackling poverty. Good for them, but I'll stick with the CEO of Salesforce who said, "Capitalism needs a reboot." He was referring to the wealth gap in our society.
More Tariffs
The US won its claim against the EU as it subsidizes Air Bus and other firms. The US can place tariffs on EU companies. However, the tariffs will be put on agriculture like cheese and specialty firms that make wine. This is not right! Place the tariffs on the guilty and not the innocent.
I'm a Capricorn not a Libra
Mark Zuckerberg appeared before Congress talking about his introducing a cryptocurrency, the Libra.
He says that it is safe and we can trust him. Let's add up the scoreboard or his record. He failed with our privacy. He failed to protect our emails. Facebook has phony accounts that seek to influence the social media. They are also guilty with political ads and possible slave trade. I say, "Hell no!"
By the way I say no to cryptocurrency too. We already have a currency that we can trust - gold. I'm with the Dutch National Bank who said, "In gold we trust."
Christmas Retail
Rod Sides of Deloitte forecasts a solid Christmas season for retail. This is what he said, "The top 20% of US consumers will spend 60% of all sales." This shows that the rest of us, 80% are hurting. He also said that these top earners buy online while it is the rest of us who actually go to stores. He also predicted that Cyber Monday will overtake Black Friday in holiday sales. He also feels that all consumers are looking for experiences this year. This translate for a good restaurant season as well as entertainment. I guess this is the thinking at Nordstrom. They spent $500 to build a flagship store in New York City. It is seven stories tall with retail. They offer an experience while shopping.
More Waste
Leave it to the government. A report shows that the government spends $2 million a year on vacant buildings to keep them from rotting. These structures are no longer needed. Here's an idea. Give them free to the states to be used a homeless sanctuary.
VLCC
If you don't know stands for oil tankers. In a little known report these specialty carriers are being forced by insurance companies to pay higher premiums due to the dangers in the gulf. Insurance rates went from $28K to over $125K per load. Dear Reader, this means gasoline prices will soon rise to reflect these higher costs. Nothing more spells recession than high oil prices even though some faithful point to the inverted yield that we saw this year. I say that they are both right.
Finally
Did I hear someone say, "Yay?" Anyway, there are more millionaires than ever. They are worth $158 trillion. They hold one-half of the world's wealth. The US has the most at 675K and China has 158K.
The "Joker" is no fool as it is the biggest Oct. box office, ever. On the other hand, the gamers are being gamed, played as some say. It appears that hackers find flaws in games. They sell them to gamers who cheat to win. They know before hand when something is going to happen in the game that they are playing. I'll stick to Monday quarterbacking.
By the way you could help Hershey's whose sales dropped in their biggest market, North America by buying some chocolate kisses and passing out some love to kids. Happy Halloween!
