We told you at the end of April that the old slogan, "Sell in May and go away" is no longer valid due to our changing economy, the machinations of the Federal Reserve and the weakening influence of the agricultural industry with farm loans. In addition, the influx of so much stimulus money that created excessive hopes for not only an economic recovery, but an off the chart growth expectation. So far, it isn't happening. With that said, don't be fooled by the recent uptick in the market. It is "window dressing" at the end of the month and first few days after.
We, at Evolution stated that the recovery had major barricades to overcome. The first and most important is labor. No matter what is written in the media, labor has not returned. A few have noted the loss of women into the labor participation force as one of the culprits. This is very true. If parents feel a danger in letting their kids go to school and they have to stay home to watch them, then, Houston, we have a problem. However, this is only one aspect. The stimulus gave the unemployed an opportunity to do something different in their life. It could be learning solar instillation, coding or some other skill that would result in wages above minimum. The phony politicians in 22 states notice that employers that counted on bottom line wages are having trouble finding workers. So, these BS artists who ran on getting higher paying jobs in their states, have elected to end the extra unemployment income from the stimulus act. At the moment, this is a standoff.
I like to insert this informative piece from an unknown Fed official. He stated that the true unemployment picture is 10% rather than the 5.8% published by the government. We agree. We have showed you the difference in government data. One agency says 8 million are unemployed while the total of all states claims is 16 million. Go figure?
Then, we have the problem with shelter. Housing is not included in the lying, phony Federal Reserve matrix formula for inflation. Rents and housing are becoming unaffordable. A CBS report shows 71% of the nation cannot afford to purchase a house. People are living in vans, cars and or, are homeless. The government is aware of this. The stimulus provided $40B to help renters and home owners. However, only 10% of this money has been utilized. It is an example of too little too late. Evictions would be terrifying if it were not for successive moratoriums on them by Trump and Biden. Some people are electing to move to new areas of the nation. This type of data lags, but it will soon be known. Some states, probably in the sunbelt will gain population while the northeast will lose. The census revealed this trend. It continues.
Then, something that is debated, but not seen in twenty years, inflation. Economists differ on the causes of inflation. I agree with Milton Friedman that when the money supply is increased, inflation rears its head. We have increased the money supply ten times over with little change in inflation during the past two decades. There are reasons. One, almost all nations have increased their money supply. This levels the effect. China is the second. It has control of global trading and uses manipulation to keep its currency low. Together, these aspects have kept the dangerous genie of inflation in the bottle. Now, it is showing its ugly head. Many realize it could get worse, stagflation. The thinking causes many overreactions. For instance, housing developers noticed the rising costs of lumber. They built ahead of demand. They figured to capture a lower price for their needs with time allowing for the market forces to work to lower the price of lumber. What happened? Housing is feeling the twin forces of excessively high prices and jittery buyers. For the third straight month, existing home sales fell.
The stock market reflects this new uncertainty. The down days in the market show very high volume. The up days rise on low volume. There is no conviction. It even appears that the market is about to roll over. Didn't we say that June is the new May? However, the Bulls do not want to surrender. They keep hoping for the "melt-up." Then, least we forget, the "Yellen" Yellen day. She expressed the danger in inflation. People put two-and-two together. The Fed will raise rates? Just this thought sent the market crashing. She back tracked her comments and the market recovered...for the day.
It is not just housing, but all the components needed in a home from furniture to lumber. Wood costs are at records along with copper and almost everything else. Add to this, the fallout effects from the pandemic. Meat and poultry rose due to producers losing workers to the virus. Consumers substituted to avoid inflation. Neither had a positive effect because prices rose all across the board. Truck companies could not find drivers due to the virus. Shortages are becoming apparent. Finally, high tech showed it too was not immune to the effects of the pandemic. Chip demand exceeds supply. It takes months to correct and of course, prices will rise.
When you cook and you are putting everything into the pot, the odds and ends must always include the dollar action. It is basic like salt and pepper. King Dollar keeps attempting to rise above the .92 level. It has always failed. On the downside, it touches .89, but fails to drop lower. The dollar's eventual direction will determine the direction of our economy. We, at Evolution see the dollar breaking lower to .83. When it reaches that level, all things will have a new perspective.
Believe It or Not
A tiger was loose in Houston. After a little panic (tigers weigh around 700 pounds) the animal was safely returned to its owner. The whole episode reveals this: There are more "pet" tigers in captivity (5,000) than in the wild (3,900).
Remember when...
President Bush declared after he signed the tax relief bill that our deficits would fall by 2020? Remember when President Obama signed a similar legislation? He said our deficits would be ending by 2025? Remember when President Trump signed his tax relief? He said our deficits would be over by 2024, after he is reelected? The March deficit broke another negative record. The one it broke was the month before to which was broken by the previous month. Bottom line: three straight record months of deficits. The monthly figure was $74.4 billion. The BS about this sad point is it shows our economy improving. For who, we ask? The problem with these sound bytes by the shills is a full story. The deficits show an improved economy for the exporters and the same old, same old for the US.
Tesla...
could be in trouble? The "Big Short" guy, Michael Burry is shorting the stock. Many in the past have tried to undermine the electric car company and all have suffered with their attempts. The first resistance point would be $539. If strong, down volume, then $450 is game. Two other plays that are constantly being shorted with extreme volatility are GME and AMC. I don't like either of these two.
Law of Accelerating...
is a concept, I don't know if it is a law, but it seems to be. It says, the more money you print, the more money you have to print again, just to keep the system going. This will be in the news a lot, especially this year due to all the stimulus and its resulting debt. To me, it is another way to say, End the Fed! Peace.
