Signs of Reckoning

- A budget deficit is inflationary if, and only if, it is financed by printing money.

- Milton Friedman

When you realize how true the observation by Friedman is, it is amazing that the US dollar is still the world's reserve currency. We have run deficits forever and financed them by printing money. It is also no wonder that he does not get the recognition that he deserves. Why, you ask? His wisdom goes against the status quo, the Federal Reserve, the military machine and both political parties. 

Market Signs

The health of the stock market seems to be the indicator for Americans. Many have their retirement nest egg involved within it in one way or another. The politicians know this point. They use it as a pro or nay depending on which party is in power or local politics dictate. Each party has their claws in some segment of the media to acknowledge their position. At Evolution, we only have this blog site. Our agenda is truth. As faithful readers, you give us that credence. Thank you. Anyway, we saw signs in the market as well as on the street. They are pointing to what we dclared in January of 2022. We are in a stagflation economy. We called it a "Stealth Recesssion." The market does not acknowledge it, but ordinary citizens know it.

S&P 500

The index continues higher. The Bulls are in charge as we have noted in recent pieces. We also told you in the year ahead forecast that the "experts" called for a down first half of a year in 2024 and a big upswing in the second half. The question is their analysis a self-fulfilling prophecy? We saw some signs that the market is beginning to see what we saw back in early 2022. There are less and less stocks paricipating in rallies. The index sways the price action. This is a form of manipulation. The S&P pushed over 5350, but it could not hold price. This is the line in the sand for a continued rally, deep consolidation or a fall. 

Bonds

The 10-year is at 4.43%. It is trending higher. This is not a good sign for the stock market. Your money is safer in good paying bonds.

King $Dollar

It touched the confluence point of 103.5, but held. It immediately rallied higher. One aspect is the ECB cut their interest rate by a quarter point. Since the US is higher, this attracts money. It could also explain the dramatic drop in precious metals on Friday? The Fed will probably pause again, later today. This will be key. The dollar's fall is the first test of the crucial level. There will be a retest. The results will determine the market action. If the dollar remains strong, the market won't.

Meanwhile...

The unemployment report showed a big swing to higher levels. It reached 4%. It broke the streak of 20 consecutive months at or below that low figure. Trump, by the way, had a streak of 24-months. Neither matters.

What we have included from time-to-time is bankrupcy data. The retail sector overexpanded in the 1990s. At the time many factory workers lost their job, but they found work in the service sector. The pay was poor as it still is. The outlook was terrible as it still is, but it put food on the table and paid the rent. Now, it no longer can pay the rent because money printing by the Fed keeps destroying the purchasing power of the dollar. Food comes from food banks. This is unsustainable for ordinary citizens. 

At the end of each month the Fed holds its breath. They know and worry about commercial real estate meeting debt obligations. The latest news is not encouraging. A New York landlord annouced the sale of an office building at a 67% discount. In Hong Kong downtown property could lose $270 billion in value. London is also having problems.

Also, the continuing retail catastrophe. The over-building has long past the retracement level. Now, the consumer cannot afford to buy anything. Retail firm after retail firm are going out of business as they close stores to stop the bleeding. Sadly, we watch Under Armour and Rite Aid. The two will soon join Radio Shack whenever bankruptcy puts the last nail in the coffin. The count is 3,200 retail stores have already closed this year and we are only at halftime. Keep in mind this point, both poltical parties are guilty and the first thing that needs to be done is end the crooked cabal. End the Fed!  Peace.

Where's Character?

- "It's not whether you get knocked down; it's whether you get up...Everybody fails, but the people who succeed in the end are the ones who are relentless and learn from getting knocked down." 

- Vince Lombardi

The great football coach was talking not only about football, but life. If you lost your job at Foxtrot due to their closing all 35 locations or the Steward Health Care firm that closed 31 facilities, what do you do? There are many other examples. It is not just a loss of income, sometimes life happens. It could be a car accident? It could be your marriage? It could be a ferry sinking in Afghanistan. It could be a trial verdict? 

Where's Your Character?

There was a murder trial in Boise, Idaho. Chad Daybell was found guilty in all 3 charges. The judge did not allow cameras in the court room. The defendent was not allowed to talk to the press about the trial nor the jury. This happens in many largly known cases. 

Donald Trump stated before the trial that he would testify. He didn't. Lawyers usually do not want their client to take the stand when their case is weak or their client has poor composure. I repeat. Trump did not take the stand. He was told not to talk about the case. He did. He was fined, He cries, "No freedom of speech. I'm a political prisoner!" He knew that he would lose the case. He was setting the tone in the public's eye that he is a victim and he did not receive justice. He also knew that being a influential citizen and a first-time offender that he will probably receive probation. He has no redeeming character traits and he wants to be president. 

In Hong Kong there was a trial of 16 pro-democracy demonstrators. The government (read China) passed a national security law. The government claimed that these protestors violated the law and caused domestic disturbance. The court found 14 guilty. They could receive 30-years in jail. Two were acquitted. The prosecution seeks an appeal trial to get the two acquitted in jail. A protestor, Emily Lau says, "The law does not allow assembly or any demonstration of any kind." This is life in Communist China. These people definitely show true character. Say a prayer for them and Emily.

Elections

The election in South Africa ended the 30-year majority of the ANC party. The people had enough character to seek change. Here in the US, we do not have the courage, faith or character to vote for a new political party when deep inside we know that both of our political parties are corrupt with poor leaders with no vision or character. 

We vote for the lesser of two evils. Biden forgives student loans to buy votes. He has a weak border policy to attract the Spanish vote. He takes union votes for granted as well as black votes. He rides this historic policy of the Democractic Party when in reality the democrats only turned to the black voters and union voters because the Republicans were known to oppose these two groups. 

Trump only offers token gestures like his tariff acts. His tax cut is a code for the rich. Ordinary citizens will receive a $100 while the rich will receive a $100,000. His policies are no different than Biden's. He will spend and drive up our debt like his first term. By the way, his call to reduce social security goes back to the formation of the agency. Republicans were against it then and this shows that they still are opposed to workers paying into a system that keeps them out of poverty in their old age. His call for the executive branch to control the Federal Reserve is tyranny according to the Federalist Papers when our nation was seeking ratification of the constitution. 

We, at Evolution do not vote. We will not give either party a validation to govern. We have said this many times. We need a new third party. We suggest the "Liberty Party." The platform is government that operates for the general welfare. This translates to protection of American products and workers. We are not the world's police force. Cut the military spending. Use the money for ourselves and pay off the debt. Free trade is a code for the status quo. Nations use our country as a dumping ground for their economies. Our nation needs to return to self-sufficiency. We are not against trade. You utilize trade when you need something that you cannot make or make at this moment. This requires protection against foreign subsidised firms. We need tariffs high to be able to reach American made products with at least 40% share of our market place. This is how you make America first.

Corporate Character

We are losing it as fast as we outsource. One only has to look at Boeing and how far they have fallen. This money first is a disease! The most important thing for a company is its product. The second most important thing is to take care of your workers. Shareholders will be rewarded if the firm follows this creed. There is another type of character. It is for those who hold position.

Leadership Character

There are many examples. I will provide two. One for each side of a coin. The best example of character under pressure while commanding the big chair is John F. Kennedy in the Cuban Missile Crisis in 1962. Russia secretly began building missiles sites in Cuba which is only 90 miles from the US. Spy planes took pictures. The fear was high that some idiot warmonger would start WWIII. The military advised Kennedy to bomb the sites and attack the island. We got idiot warmongers too. The military put pressure on Kennedy to act, especially with their pupits in the media. JFK kept his cool. He came up with his own plan to use the navy to stop any shipping to the island. He sealed off the island. If they fired on us, they will be responsible for the carnage. Russia backed down. Kennedy kept peace, but angered the Deep State. They would do anything to see that he was not reelected in 1964. RIP, brother.

The other side is shown by the leaders in baseball today. They are not leaders, just businessmen concerned with the all mighty dollar. Their recent decision bowed to pressure. They committed the second travesty. The first one was the discrimination of black baseball players. Now, they compounded that sin with this one. They merged all the Negro League stats with the major league records under pressure from black leaders. Some of these egotistical leaders are unconscionable, unbelievable and unbearable. They are pushing lies and myth. This is a sin against the heritage of the league. 

I will explain. The most important player in baseball is the pitcher. You can win a championship with pitching. Pitching beats hitting all the time. Now, this is reality. Almost every team only has one good starter. The talent drop-off from him to the next in rotation is huge. It drops further after that. You would be a genius if you can remember the names deep in rotation. Now, the old Negro League did not have the luxury of a minor league where pitchers and players can develop. If those teams had one good pitcher and that is even questionable, the drop-off after that star would be very deep. This is how the black stars fattened their stats against second rate players. The whole Negro League would only be equal to Double AA in terms of competition, at best. They definitely had great players like Josh Gibson just like the present day black college football divisions, but the quality and depth is not there. This is a sad day for baseball. Babe Ruth is by far the greatest player in the game.  Where's your character?  Peace.

Odds and Ends: May 2024

 - April's showers brings May's flowers.

- Old Saying

Nice observation, but the world cannot spend a moment to smell the roses. In the Middle East the smell is rot, decay and death. Along the Ukraine border, the air is pungent with blood, burning metal and death. Tornadoes rip apart homes in the central US. Floods drown everything in its path on Pacific Islands and Asia. Drought causes pain, worry and death in India and Africa. Sorry for that. 

There is hope because God gave us compassion and intellect. However, we fail to use these blessings. It is reflected in Churchill's observation on the US, "America will do the right thing, after they tried everything else." With that said, we see glimmers of it in this transition month into summer. 

Electrification

The process to end the high pollution of the gas combustion engine is still a work in progress. However, individuals and companies are moving onto planes, helicopters and self-driving taxi's that will help with climate and environment. It gets better. Boston Metal is a private firm that has developed a way of producing steel by electrification. They will go into operation in 2026. A steel firm in Brazil is already using their technique. How about ocean tankers? Yes! The first one is floating on the sea as you read this piece. We thought about this cargo carrier. We know water shorts out electricity. Maybe this vessel should have a sailing mask as a fuel back-up? I read that some cargo ships are already employing this idea to cut fuel costs. 

Hydrogen Jets?

Another private start-up says that they will produce the clean energy aircraft by 2030. Wow! Of course, I hope that these people understand that hydrogen fuel production is very low?

Solidion

The firm says it has developed a solid-state battery that will provide a charge to go over 900 miles. Mileage is one of the biggest factors holding down EV sales. Currently, the longest range is about 410 miles. In a similar role, SAIC, a Chinese firm says it too has a solid-state battery that it will produce by 2026. 

Super Micro Computer

The firm's stock (SMCI) is to expensive for us, but we like it. They have developed a new cooling system for AI servers that is cheaper to utilize.

Even in the deteriorating commercial real estate market, we find a ray of hope. Pinnacle Bank of Texas just bought a 40-story commercial building at auction for $12.3 million. This edifice was recently appraised at $104 million. This falls under the theory by Joseph Schumpeter with his view of economic progression. An old idea is destroyed by a new, better approach. The "Creative Destruction" leads to innovation. Here's hoping this bank transitions this building into something good for Texas and America?

These things are happening while the present news is bad. Maybe if we all treat each other better like the hippies in 1967 that fostered the "Summer of Love," we can make tomorrow a better place to live. We can use John and Yoko's chanting song, "All we are saying, is give peace a chance."    Peace. 

Dow 36K, 40K, 50K

Dow: 40,003.59 on 17 May 2024

The Dow's progression in price can find strong support in the book, Dow 36,000: The New Strategy for Profiting From the Coming Rise in the Stock Market in 1999 by James Glassman. His predicted time frame did not happen as called, but it did reach the title number in 2021. At the time of the publication the Dow stood at 10,700.

As you know, last week the Dow rose and closed over 40,000 for the first time. The internet was a buzz with even higher predictions. I read Dow 50K? Let me remind you Dear Reader, that at the end of the millennium saw another publication in 1999. This one is titled, Dow 100,000: Fact or Fiction by Charles Kadlec. He believes that this will happen, eventually. Do you know what Evolution believes? We say it almost weekly. The Federal Reserve destroys the value of the dollar. This corrupt cabal is killing America and all the founding fathers hoped for. Money printing leads to inflation which means the loss of purchasing power in the currency. Those books on predictions are just another example of what inflation does to an economy. Higher numbers are not getting you rich, but showing how poor you have become. Did anyone write a book on Zimbabwe? They raised their currency bills constantly due to inflation. They had a trillion dollar note. I heard that you could purchase a loaf of bread with it?

Back to the Market

We told you that the Bulls are in control of the market. We also mentioned back in January that analyst stated the market would look choppy in the first six months and turn into a rally in the second half of this year. So far, they appear correct. 

In a related aspect that serves as an indicator for the current rally, Sebastian says look at the junk bond market. Watch the spread. At the moment, it is reflecting a market environment with little risk. If the spread widens, the rally will stop cold. The wider the spread, the further the market will drop. JFL shares a similar thought with the VIX. It is currently low which reflects a bullish market. The confluence point is 15. It is breaches 20, a correction is in the works. Since the chart on the VIX is bullish, the Bulls with their hedge funds, private institutions and big investors will hold court. There is also a belief that a rate cut is coming by the Fed. Meanwhile, wars are continuing. Politicians only seek to win in 2024 with little substance to make life better for the nation. We remind you to say a prayer for people who are troubled by terrible weather like tornadoes and the approaching hurricane season get some relief. Peace.

Insurance for Insurance

In yet another example in how the Federal Reserve is destroying our dollar and standard of living, you need to look no further than home insurance. The magic trick of distraction is the media blaming all the current malaise to climate change. We, at Evolution will not argue that the level of intensity and number of storms needs to be addressed, but the home insurance sector has had wildfires, flooding, hurricanes and tornadoes before. The intrinsic problem is the cost. The cost is inflation and the Fed is responsible for that fact. No one challenges these corrupt controlers of our economy. I do not want to go off on a tangent, but their actions play into the hands of the WEF (World Economic Forum). Those idiot elites (that's an ironic joke) seek to blame all the injustice, all the world's economic gaps on wealthy nations, especially the US. In the near future, JFL will respond to these Davos fools who like the Fed think that they can engineer the world. 

Florida is the Canary...

...in the mine. When coal mining realized the dangers of coal dust, they would bring a caged canary into the mine. If it died, that was the signal to get the hell out of there. The coal dust is blowing in the wind in Florida. The hign cost of damage caused by high winds and hurricanes is presenting a new challenge to the Sunshine State. When you add the cost for flooding and tornadoes, even increased premiums cannot cover the replacement costs.

Did you know that Florida is our nation's third leading state by population (22.9-mil)? It surpassed New York (20-mil). Did you further know that there are 1.5 million condominium owners with most along the coast lines? Well, for years those homeowners have been complaiming about the high cost for home insurance. Now, they have an even deeper problem. No company wants to insure their units! Not only that, we found out that 7 insurance firms have gone belly up and whatever damage their policy owners had, is useless. Ouch! 

Danger

Not only are these condo owners left high and dry or should I say, wet and cold, but their high price property could be worth next to nothing. Think about that! This could cause fear that could ripple across the nation and a catagion in the real estate market? Dear Reader, don't panic. These trends take years and decades to resolve. However, the citizens of Florida and our largest state by population, California does have this problem in their lap. Currently, large insurers are not taking new policies in California. As for Florida, an insurance rating firm is also breathing coal dust. Denotech is connected to all these seven failures. They are an insurance rating service. They rated all these firms as stable under economic terms. I wonder if Evergrande in China had a similar situation? Here is the list of firms that are going out of business:                                 

1) American Capital Assurance Corp.                                                                                                            2) Avatar Property and Casuality Insurance Co.                                                                                            3) Fed. Nat. Insurance Co.                                                                                                                            4) Gulfstream Property and Casualty Insurance Co.                                                                                      5) Southern Fidelity Insurance Co.                                                                                                                6) St. John's Insurance Co.                                                                                                                            7) Western Property and Casualty Insurance Co.

There is also another problem connected to this mess. The rating service seems like a pay for a rate service that provides insurers an "A" or above rating. Now, those high loans are in danger which means mortgages are in trouble which means mortgage lenders could be in trouble. One sin (fraud) gets compounded and the only winner will be lawyers with litigation.  

It seems that each week we mention some retail firm or restaurant that is going out of business, but this is a whole different sector. It is one connected to the American dream and another reason why we say, "End the Fed!"

Let us say a prayer for our fellow citizens in the South that this new hurricane season does not include one with a landfall... Peace.                                                              

Sell in May...

- There are as many slogans as there are opinions. Most are just catchy without merit, but in deeper           reflection, there is a kernal of truth.

- JFL

Historically

The actual catchphrase continues to say, "...and go away." The thinking is the market is entering a slower season with less volume and volatility. Earnings which drive the market has a tendency to fall. Some investors turn to oil because people do more driving, however, smart money has already drove up those stocks. You are chasing and speculating. This is the perception behind the thought.

Today

Looking at the plus and minus of things, the bulls are still strong. You can see this in the reliable indicator, the VIX. When the VIX is above or below its 50-day moving average, you can see market direction.When it is above, the bear is out. When it is below like now, the bulls hold sway. However, this market does not come completely in the upside. "King Dollar" remains strong. Any price level above 103.5 confirms this outlook. This puts a damper on inflation and limits profits. In addition, we informed you that according to Dow Theory, the industrials and transports must both be in harmony. The transports have never rallied since August 2023. With that said, oil remains high in this political environment. Commodities like copper are rising. The leader in the segment, SCCO has already broken out to new highs. Gold is ready to explode. The only thing holding it back is the dollar and high interest rates. Bottom line: The market is forming a consolidation pattern. The slogan may hold that kernal of truth. With that said, here are some things to keep your eye upon.

Potential Trends

The election will impact everything with the market, especially in sectors. If the Dems retain power, IT and discretionary will benefit. If the GOP wins, utlities and energy get a boost. Clean energy will be more of a campaign promise rather than an actual funding.

Defense in this geopolitical environment gets funding. We think cybersecurity, semi's and satillite providers get more dough.

Mexico becomes the big winner in the ongoing tension between the US and China.

AI and regulations will be in the news. There are 12-states seeking laws and reforms.

Of course, the war in Europe and the Middle East could get worse.

Basel III was suppose to force banking to rein in leverage. It has become a campaign promise. Stock market debt is way too high. Any pullback could force margin calls. By the way, the first bank failure came at the end of April.

The Fed Chairman, Powell says, "Inflation will be much lower by the end of the year." Then, he covers his ass by saying, "...but probably won't reach the 2% target." He goes on to say, "No stagflation! He is tired of answering that question."

Dear Reader, when inflation is higher than your income, you are in stagflation. When inflation is higher than your GDP, your economy is in stagflation. Sebastian reminds us that he pointed out that we are in stagflation for our economy since the beginning of 2022. Beside our ongoing meme, End the Fed, we now add this. Gordon Johnson, financial analyst, calls Powell, "The Gaslighter-in-Chief." Peace.

 

Icon, Chips & Odds and Ends

The calendar caught us offguard. This last monthly piece will not fully address odds and ends to the economy, politics and related matters such as the Federal Reserve announcement today. However, we read this in the news and it is a must for many reasons. 

Icon

The USS Enterprise (CVN-65) is being decommissioned. The famous, first nuclear-powered aircraft carrier will be dismantled. I have not heard from Captain Kirk. I'm sure the name will be resurrected as it was with the original, famous WWII carrier. With that said, I fear two aspects. It is why I am against nuclear power. The Enterprise had eight nuclear reactors. A specialty firm will be needed to end the activation of  power, remove and then, the government will ship the parts to be buried in a secret location. This leads to the heart of the problem. Nuclear rods need a safe, secure burial site. Dear Reader, there is no such thing. Everything decomposes. Everything will eventually leak. We are creating poison for the earth and all of us. This is why we are against nuclear power! 

The second reason is aircraft carriers. Using nuclear-power is a necessity in naval warfare. An enemy will resort to it and then, they will have an advantage. This gives us no choice until a better power source is developed. However, the use of aircraft carriers is obsolete. They will be easy targets for smart bombs, drones and long distance missiles. The sinking of one of these floating cities, never mind all of them, will be devastating. The loss of aircraft, pilots, naval technicians and the total cost of these vessels is beyond belief. The stupid navy leaders are using WWII technology in the 21st century. If you know anything about these idiots, hear this. Before WWI the concept of the carrier was presented to the navy department. They laughed. AfterWWI it was presented again. Again, they laughed. The grandsons of those idiots now run the pentagon. WWIII will need atomic subs, atomic drones, supersonic missiles and robots, but carriers are ancient weapons.

Chip Act

The one thing that we approve that Biden accomplished was the Chips Act. The greedy, stupid producers in our society offshored everything in their fight against unionization and more profits. The idiots at the pentagon used money and influence to develop technology in South Korea and Taiwan. This gave both nations a strong economic setting. Then, we hear this press announcement that new chip factories will be built in America.  We say, "Hallelujah!" 

Before the last echo, we read that Biden gave $6.4 billion to Samsung (South Korea) as a subsidy. We bribe a subsidized firm whose freedom we gave and now, we have to bribe them to build a necessity for our defense and economy. It is the same story with TSMC of Taiwan. They get $6.6 billion to do the same thing and they complain about technology being compromised. 

The government needs to fulfill its mission: to protect and promote the general welfare. Maybe they should start their own development of superchips? Then, they could license their creation to US firms that have factories in America. Use the profits to paydown the debt...Peace.