Back in the day, I worked part-time in a retail shop. My boss followed the lead of grocery stores by seeking to have a weekly special to draw customers. He had a large bin where he placed his best seller since the hula hoop, flip-flops. You could select any size for a buck. At times, we had small mobs surrounding the bin to grab multiple pairs. Now, I ask you a question. Would you say that my boss's store was a success? Of course, any intelligent answer would have to ask, what else did the store sell in relationship to costs?
I used the above story to remind you that the recent market rally is only due to tech that is being led by the chips. Microsoft and Apple make up 14% of value in the S&P 500. What are the other 498 firms doing? When you ask intelligent questions, you receive better info. Retail is suffering. VFC is a leader. The stock hit $100. Last Friday, it was $18. How about the farming sector? We know egg pricing is crazy high. The fertilizer firm Nutrien was $117 in April 2022 and now, it is $55. Ouch! It is not alone. Mosaic (MOS) was $64 in its yearly range and now, it is falling to its lower end. Last Friday, it was $33. Oil is in its lower range. The whole market has been in a consolidation pattern for April and May. So, even in the next few trading days, the market rallies, this is only window dressing and debt ceiling news. Remember, the flip-flop fad ended and this chip rally will too. Then what?
Reminder
Inflation is tough on your wallet, but there is another aspect to rising costs. If you have to replace something like an air-conditioner, your car, you realize sticker shock. Then you think the firms that sell these items must be suffering with lower sales? You might be right, but you could be wrong. This dilemma can be seen in home builders. Your home is your biggest expense. We know that inflation makes things cost more. We also know that there have been supply shortages as well as labor. Interest rates on mortgages are also rising. Home prices have fallen from highs. We, at Evolution say, "Don't be fooled!" If you had to replace your home, the costs would exceed the present selling cost. This is reflected in our example of a home builder, Toll Brothers. The home builder is rising to highs ($68). It bust through its last high of $72. Why, you ask? Because inflationary prices become ingrained. The level of inflation may fall, but the prices will remain high and with us.
Downside
The sad aspect of inflation hitting our economy and us, is this, our standard of living declines. We have already told you in past articles that the lie about our nation being number one is based on having the largest GDP. In reality, our standard of living is number 22. The OECD released a report on Western poverty rates. Our nation is not the only one suffering. Canada has a 11.6% poverty level. The UK is 12.4%. Italy is at 14.2%. Japan is climbing to 15.7%. Mexico pushes 16.6%. Now us. The US shows 18%. We think that it is even higher. Whether we are right or wrong, many economists agree about this economic and labor issue. As AI advances, it will replace one-third of the West's labor force. The numbers that this translates too are staggering. They are saying, "300 million!" If our nation does not protect the few industries that remain, we feel that our poverty level will approach 30%. Dear Reader, that is scary.
In another related aspect, another study shows that 63% of part-time workers are women. There is also a rise in self-employment to 20 million. Working age people are doing "gig" work. We feel the reason is because there is no full-time employment available. Everyone is scrambling to make ends meet. The debt level is not only affecting the government, we all need more revenues.
Good News
We, at Evolution, worry about the King Dollar and the privilege of being the reserve currency. Last week, a huge South African miner, Anglo Asanti stated that they are leaving the African Exchange for New York. What it is really is saying is it is leaving the BRICS for King Dollar.
Meanwhile
The banking industry holds its breath. At the end of every month, the pluses and minuses in the banking ledgers are taken. Back in the financial crises of 2008 to 2015, the number of bank failures was 500. The numbers have actually come down. There are only 18 biting the dust since 2017.
"Worst that could happen..."
No, we are not doing our rendition of the Brooklyn Bridge. This goes to our Supreme Court. They are really a dictatorship. In our unpublished book, we have an answer that will make the process more democratic. Now, we suffer. The court made a mockery of the Clean Water Act. Their decision will result in 900 species dying and suffering. We will get more flooding and pollution. It truly is the worst that could happen... Peace.
