The Dow hit a new record last week which means it could go higher. However, we, at Evolution are sticking with our call for a correction. In an earlier piece, we mentioned three views on the market. Kiyosaki sees a crash. Steve Sjuggerud sees a melt-up and "Doc" Eifrig is neutral.
We begin with the ongoing problem with inflation and the LA harbor. At the beginning of the month there were 60 vessels circling the waters, waiting to be serviced. President Biden pushed to allow the port to remain open 24/7. Today, there are over 100 vessels with cargo waiting for transport. This should tell you what it tells me - lack of supply will keep prices high and even Biden says inflation will stick until the end of the year. Meanwhile, the Fed Chairman, Powell continues his lie that inflation is transitory. Maybe he is right? The transition will happen when prices are so high, no one buys?
Evergrande Saga...
It got a reprieve last week when the real estate developer made a $83 million payment that was due a month earlier. They are not out of the frying pan. They have a few more notes with coupon payments due by the end of the year. The total due is $385.5 million. However, as Evergrande took the headlines, another developer defaulted. Fantasia Holding Group defaulted. They could start a contagion problem that is under the radar. And no sooner than that thought emerges, another Chinese developer defaulted. Modern Land joins to "Default Club." By the way, Evergrande says it will devote its money and energy into its electric car company. The automaker has no model, no design and no revenue.
Speaking of no revenue,
Digital World Acquisition (DWAC) closed at $94.20 last Friday. They have no income and no details as to when they will make money. Shares were offered as units for $10 a piece. You are paying excess on a hope and dream. These are the type of things which indicate the market needs to cleanse itself and why we see a correction.
Biden's Bill...
is still a work in progress. At Evolution, we backed the electric car provision that helps union workers, however the question on how to pay for the infrastructure bill is unknown. Biden did reveal that 55 major US corporations paid no taxes in 2020. What we would like to see is how many rich people paid little or no taxes. We need to close tax loopholes and raise taxes on the wealthy. Another report showed that the wealthy avoided paying $163 billion in taxes with loopholes. Bottom line: We cannot continue reckless deficit spending. Programs must be paid as they go and the rich are not contributing their share.
Earning season...
is off to a good start as reflected in the Dow. This is not real. It is based on earnings and sales in 2020. With COVID-19, there were few sales and little income. You can get the picture by looking at the picture industry. Movie ticket sales have topped 2020. One would think things are getting better like the stock market indicates. Dear Reader, ticket sales are 70% less than 2019 which was before the pandemic. Don't be fooled again...
Some good news
A successful transplant of a pig kidney to a human. All signs look good. I guess pigs will be flying.
Go Purdue! Not the football team. We are for the Irish. However, Purdue's research is second to no one. They have developed a new white paint that can keep surfaces 10 to 15 degrees cooler without using air. We paint our roofs with it and we help the environment without using energy. This is the "White" Revolution for climate.
Conundrum Club
Is it possible to have a company with a market value in excess of one trillion and offer bonds that are rated junk? Yes! Tesla becomes the first member of the club. Many more will join in the future as the Fed will continue to erode the purchasing power of the dollar to which will also grow inflation.
Speaking of Inflation
We got two more clues that it isn't transitory. Billionaire grocery store owner, John Catsimatidis sees higher prices sticking around well into 2022. Proctor and Gamble reported higher costs with little relief...It gets worse. Jack Dorsey, CEO of Square, sees hyperinflation for the US and world. Not good.
So, who are you going to believe? "Yelling" Yellen and "Lying" Powell or reflections from life?
One scary note...
A shooting streak across the northern US sky last week is unknown. Our government says it thinks it is a Russian satellite gone bad. We have our doubts. Why, you ask? Because a failing satellite will descend in an orbit until it crashes. The sighting should have been noticed around the world and not just in the US. Then, you add this: recently, Russia revealed it successfully tested a hypersonic plane. Maybe they used it to test our defenses? Back in the day, we flew spy planes over Russia. Do you recall the stupid U-2 policy. It was provocative to say the least and now, maybe Russia is doing the same stupid provocative spying? Our government does not want to cause the Sputnik fear again by saying it is a failed satellite. I say, shoot it down! With those words, it is hard to leave with the message of goodwill, but stupid is as stupid does. Peace.
