Flawed October Thinking

- The great stock market rally looks like a permanently high plateau.

- Irving Fisher, leading economist of the 1920s. (Note: Two days after the proclamation the market            crashed. 

Every school kid learns about the Great Depression of 1929. The problem in the classroom shows itself in the stock market. 

The central defect in teaching about the economic fallout that autumn lays in the defense of the Federal Reserve. The blame gets shifted to the Smooth-Hawley Act. People, that bill that put tariffs on 900 imports was passed in 1930. Classroom history books were not good in math as clearly the blame comes after the event. 

My problem here is losing focus because I see another problem. Obviously, Congress was anti-labor prior to 1930. The tariff bill had the central idea to protect workers. I ask, why didn't they seek to protect them before 1929? By the way, this is the same central problem in our economy today except it is worse. Now, we import everything. And yes, it is true by putting tariffs on imports we will add to inflation.

Dear Reader, this is the sin of outsourcing in the first place. When we outsourced jobs, the products that we purchased became cheaper due to cheaper foreign labor costs and currency manipulation. Now, with onshoring, the opposite economic effects take place. However, once we return to higher paying manufacturing jobs, inflation will fade. The middle class will grow again and so will social mobility. Family structure will help to stop drugs, crime and regain our schools to a level where innovation will reappear. Long-term, it is all good while long-term outsourcing is all bad. We see the results today with homelessness, unaffordable housing, no social mobility and a shrinking, dying middle class.  

Now, the Federal Reserve as they usually do, made things worse. All of a sudden they cautioned against "call loans" (margin loans). They raised interest rates which had unintended consequences. International banks raised their rates in tandum to protect the outflow of money. The result was a world slowdown that hurt all economies.

Why didn't they say something about call loans during the Roaring 20s? Why didn't they raise rates to limit speculation in the market during that period? One reason is ego. The Fed in 1920 raised rates sharply to prevent inflation and the outflow of gold. Their action gave the nation a recession and deflation. They never do anything right except protect the status quo. We say, "End the Fed!"

Anyway, the month of October has a historical spell on it that is really due to farm loans. When farmers harvest in autumn, they repay seed loans from spring. If prices fall or a poor harvest, loans go bad in October. This is no longer a big deal because farmers have insurance and the size is corporate with strong financial backing. The stock market should really be looking into late February/March time period. Christmas seasonal help is let go. There is less travel and consumer spending. The weather limits construction and infrastructure. On the flipside, Christmas spending must be repaid as well as all our monthly bills. Late winter, early spring is the new October crash time.   Peace

No Respect!

 - I was beginning to believe that no one cared about my feelings. My psychiatrist told me that I'm going crazy. I said, "If you don't mind, I'd like a second opinion." He said, "All right. You're ugly too."

- Rodney Dangerfield

Rodney is my favorite comedian. I miss him. We could all use his wit, observations and a belly laugh. This brings me to an analogy between American workers and the owners of production. From the very beginning of our nation, producers have exploited labor. This is not to say that the ruthless behavior of management is in all cases. However, the bad overwhelm the good. You can see this with outsourcing. When a firm receives cheap foreign labor that gives them an advantage to domestic producers. They will gain a greater market niche with cheaper prices. They may even be able to put the competition out of business. This is the exporting concept behind cheap Chinese EVs. Of course, they do this technique in many other fields like furniture, medical supplies, construction supplies, etc. They play off the manipulation of currency and local laws. 

No Respect for Business Creed

Every firm should put two things as commandments in their business. The first is to make the best possible product and continuing to improve that product. The second is to take care of your workers who produce the product. Sadly, American firms do not follow the two greatest aspects related to their existence. They came up with the idiot idea of planned obsolesence. Product has an expiration date (cheaply made), so you need to buy another. They seek to keep labor at sub-existing, nonwage-living wages. They broke unions with the Taft-Harley Act and they outsource at every opportunity. They will employ robot automation to keep from hiring help. This leads to two recent examples, Boeing and Dockworkers. 

Boeing

They have continually lied to their workers like the last contract negotiation. They told the union that they were planning a new jet, Dreamliner. They asked the union to accept a lower wage in lieu of keeping the new jet work in Seattle. Before the ink dried on the accepted contract, Boeing shifted the work South to a non-union state. Of course, we now know that they cut corners in safety and parts. Their new CEO should read the creed of Evolution in regards to running a company.

Union Dockworkers

They just ended their strike. Managment offered a higher wage and worked on their conscience about chain lines, consumers and the economic health of the nation. They accepted. I fear that the other aspect in their dispute, automation, was not considered. Management will screw them. It will happen during the slow period around February or when they get a good deal on new robotic equipment. This is the history of labor and management. I hope I am wrong.

Meanwhile

CVS is laying off another 3,000. Last year, they dropped 5,000. This leads to the recent jobs report. If there is one agency that is manipulated and corrupt in their work, it is BLS. Last Friday, they reported that 254,000 new jobs filled. Unemployment dropped to 4.1%. This gets a double upswing because prior to Friday, the consensus was only 145,000 jobs. This makes the Democrats look good. Then, news came out about a revised upward of the August report. It changed from a 142,000 to 159,000. Nothing like having ammunition in an election year. 

Well, there was little news about this truth in jobs reporting. The July report of 114,000 turned out to be  revised down to only 89,000. This happens twice as many times as changes for the better. The labor participation rate is 62.7%. It has not changed in the last three reports. So, if the participation rate remains the same, how can the unemployment rate drop? They also claimed wages rose .04%. How is this calculated? Is it an average? If it is, then the results are flawed. Why, you ask? Well, say if lawyers made much more and everyone else remains the same, you get an increase in the average. See? This is manipulation to make the economy look better. 

Market

It is running out of gas in the recent rally. The breadth is turning down. One strong reason is the breakout of the dollar. The last rate cut had the dollar test the 100 level. The downside channel has the top of the channel line at 102. The dollar burst through it. This will hurt the market and commodity prices.  Keep an eye on King $Dollar...Peace.

Golden Time

- Faith is taking the first step even when you don't see the whole staircase.

- Martin Luther King, Jr.

The Founders...

took the leap of faith by agreeing to put gold as the currency of the nation into the constitution. At the time, inflation was running rampant due to money printing of "Continentals." This was the fiat currency during the American Revolution. Today, it may take another leap of faith by you and I to purchase gold. You should know by now that the Fed and banks are against gold and are for fiat. We, at Evolution believe in gold because we believe in the wisdom of the Founders. We do not like the term, "Gold Bugs." Anyway, this is what we see as the outlook.

Seasonal Pattern

Gold has shown a seasonal pattern in the charts for many years. The best period for the metal to advance is the October to January time. This times well to this piece. The worst period occurs during April to July. 

King $Dollar

It does not matter what commodity that you buy or stock equivalent, the dollar will determine your investment. Also, keep in mind that there are forces, notably the BRICS that are seeking to dethrown the king. They are formidable, but a long way from being a threat. With that said, a closer look at the dollar at this time is necessary in considering the precious metals. 

Resistance and Support

King dollar's last high was in November 2023 at 107. It dropped hard and fast to 100, but rallied quickly. However, it could not pierce 106.5. This is resistance.  Whether market forces were anticipating a Fed rate cut, the price action had the dollar drop back to 100. This becomes support. Any break below this level will add juice to gold. Since the outlook from the Fed is more rate cuts, the dollar will feel pressure and probably fall. After 99, there is no resistance until 91. This gives gold a strong floor.

Gold's Outlook

It is no secret that gold hit a new all-time high recently. We use Fibonacci for up or down movement. The math says that gold will reach $2805. This is a solid gain from the present $2660 level. Gold has strong support at $2585. 

Past Calls

We told you in the past that we liked three gold stocks: Barrick, Wheaton and Argonaut. The three cover all price levels. Since that time, Alamos Gold took over Argonaut Gold. It is a good deal as this is an excellent company. They spun out to shareholders a new company with decent mines. Florida Canyon Gold (FCGVF) is a cheap buy (.44), but Alamos gets added to our buy list. AGI has been in a strong uptrend since the merger. There are eleven analyst who call the firm a strong buy with a target of $24. The miner has grown revenues by 84% yoy and 54% yoy for the last five years. The only negative is the high P/E (39). However, like a tech high flyer, the firm is increasing revenues. The current outlook is for earnings to fall in the next report, but revenues will grow. That would be the time to buy. We will buy at $16, but the stock might not fall to thst level.

We still believe in Barrick (GOLD). It is vastly under valued. We feel the problem lies in a lawsuit at one of its biggest mines. Nevertheless, Barrick has grown revenues by 530% yoy. Wow! The five year average of 293% beats any and all comers. There are 22 analysts who call it a buy and to reach $23. We see a lot higher than that.  

There are a few other good miners. Newmont is the world's largest gold miner and Wheaton is a strong streamer. One more note. Agnico Eagle (AEM) has been the best performing gold stock for years.

Bottom line: We do not give stock recommendations often. We feel terrible if we are wrong, but gold has proven the founders to be right. It retains value and with inflation that is comforting. Gold has solid support from the Fed with its rate cuts looming. We will take the leap of faith.   Peace. 

Odds and Ends: September 2024

 - Let us not look back in anger, nor forward in fear, but around us in awareness.

- JamesThurber

Fed Fake

With all the fanfare of the Fed meeting last week and the big half-point interest rate drop, the overlooked other announcement was the real one with impact. In both cases the magic was performed for the public, but the misdirection of the trick was for the banking industry. The rate drop helped banks with their losing position (underwater) of government bonds purchased at 2% and 3%. It lowered costs for large corporations issuing their own bonds. 

The quietly held second meeting gave banks what they wanted. The Basel III accord sought higher capital requirements for banks. The proposed level was 19%. The Fed always has their greedy back. They put all of us in danger because the banks are borderline insolvent. The Fed lowered the reserve level to 9%. 

Banks Know...

that they are in trouble. They have been playing manipulation by increasing mergers (54) that allow tax loopholes to make balance sheets appear better. They also have been closing branch banks (2400 last year) to cut costs along with layoffs. So, the Fed rate cut was an appetizer to the main course of lower capial requirements. Like we always say, End the Fed!

Meanwhile...

Bankruptcies continue. This one will bring tears to my mother's eyes. Tupperware filed last week. 

Middle East

The Israeli PM, Netanyahu never misses an opportunity to prove that he is an arrogant, warmonger. He keeps provocating the Arab opposition and has the gall to declare that he is justified. He knows that no matter what damage he creates, the US has his back. He is no different that the North Korean dictator who causes damage all the time because he believes that he can count on his Communist brother, China. 

Market

The rate cut gave a huge rally in the market. The Dow, S&P 500 hit new all-time highs on strong volume. It gave us here at Evolution, pause. Then, we checked with the Transports. They rallied hard, but gave up all their gains. In addition, it never came close to its last high. This is a dangerous market, but gold did hit a new all-time closing high. Yay!   Peace.

Debate and Market Trends

 - All you need in this life is ignorance and confidence and success is sure.

- Mark Twain

The Debate (Trump v. Harris)

First off, this was no debate. A debate centers on a topic. One side declares their position. The other party gets to counter and offer a reason for the counter. The first side gets a rebuttal and offers more proof of position. The opposing side gives their last chance to prove that their position is correct.

Concept of Deduction

Deductive arguments differ from nondeductive arguments in that the truth of their premises ensures the truth of their conclusion.

In the above quote by Mark Twain I would add two more features that has changed since his time. The ability to lie and use the lie in a half truth, the modern sound byte.

When a moderator offers a topic like oil and fracking, the responses are: Trump reminds us that Harris opposed fracking and her policies will destroy the oil industry. Harris says that she reconsidered her call on fracking. She no longer is against it and domestic oil production is at its highest during the Biden administration. Trump's reply. She also wants to defund the police. What debate?! 

Harris replies that Trump caused the January 6th riot. Trump replies that he asked both Pelosi and the mayor of Washington, D.C. to have the national guard on standby, but his request went unheard.  

As you can see, each spins the topic to attack the other, but they never offer any depth to their stance.

Inductive Reasoning

This is logical reasoning that involves: a general conclusion based on specific observation or evidence.

The moderator asked about the immigration problem.

Trump said the problem started with Biden and Harris who repealed his border policy. He says the reason is because these immigrants (he estimates 11 million) will identify with the Democrats, but they are really the criminals from countries who are glad that they are gone. Harris replies that there was a border bill, but Trump got his Republicans to block it. This implies that Trump only cares about himself and not the good of the nation. He wanted to use the issue to get reelected.

Trump replies the crime stats prove that these criminal immigrants like in Aurora are causing crime. He adds the illegal immigrants in Springfield are stealing and eating people's pet dogs.

We ask, When did he observe this? Is their any evidence? The half truth of immigrant gangs gets pushed aside because of the crazy accusation of "eating dogs!" As for Harris, there was no specifics in the bill other than more border guards. Her half truth.  

These types of spins go on and on. The questions themselves were not inflective to ordinary Amercicans. There were four on abortion. Our stance is this: We approve of abortion under incest, rape and other crimes. We approve to protect the life of the mother. To kill an unborn is a crime, especially when there are so many other options like adoption. Enough said. 

There was only one question on the economy. Get real! There were no questions on our national debt or the aspect that our government needs a new debt ceiling. Trump offers tax cuts. This adds to our debt. Harris is worse. Her $25,000 house assistance give away is blatantly buying votes just like Biden with his student debt forgiveness. Both candidates seek to buy votes with no understanding of the dangers of our national deficit or to the dollar as the world's reserve currency.

The take on the wars was just oppotunity to spin. Both candidates claimed victory with the debate. Amazingly, the news networks immediately had polls reflecting the debate. This is not to be believed. After the debate, Bloomberg put in large lettering on its website, "Harris calls for a cease fire." I ask, "Who doesn't?" I'm sure that pro-Trump sites had their half truths.

This is what America gets to achieve the highest office in the land? Here at Evolution, we feel that JFL would chew up both of these candidates and spit them out. This is why we do not vote. We cherish the right, but we will not validate the two corrupt political parties. Our non-vote shows our disgust. We advocate for a third political party, the Liberty Party. The platform is simple. Protect American labor and industry. End the military as a police force of the world and strive to promote the general welfare. 

Meanwhile...

The market surged up. The belief in a large rate cut coming from the Fed today was behind the thinking. The Industrials and the S&P 500 were approaching new highs last week. This might give cause to our last piece that declared the elevator is going down. We still feel conviction. The rally did not have enough volume which reflects not everyone is convinced about the uptrend. As for the candidates, we can only pray for God's help.    Peace.

"Elevator...Going Down"

 - Fortitude is the marshal of thought, the armor of the will, and the fort of reason.

- Francis Bacon

When the market hit a new all-time high in the industrials two weeks ago, it took inner strength not to buy into it. Whenever the market dropped, those who bought the dip were bragging and smiling ear-to-ear. If you believed what you read at Evolution, your worries are fading. The industrials have dropped 1200 points on strong volume since hitting the high. The elevator is going down. The price action should plow through the gap at 40,000. The real test will be at 38,500. There are the usual indicators...

SMH

The semi's are in a downtrend. They led the market up and now, they squeeze into the elevator. Microsoft is already at the highs of its lows. Google broke below its August 5th low. That's the date to observe for market tests.

King $Dollar

It bounced strongly. The question is this just a bounce or return to highs? The first sign will be at 101.75. Just the possibility gave the bears belief and the loss of faith by the bulls. We see another strange occurrence in the T-bills.

Bonds

The 2-year note sits at 3.65% while the 10-year fell to 3.71%. Some people are jumping on bonds in anticipation of the Fed cutting rates. Dear Reader, you can do better. The 3-month note is at 5.05%. You can safely collect on that until the big picture is clearer.

Meanwhile...

We keep reading about the political candidates talking about the economy. Harris lies! Trump lies! The truth is the Federal Reserve keeps destroying the value of the dollar with money printing, the root cause of inflation. This is why we predict that the retail firm, Dollar Tree will soon change their name. They are adding higher price items on their shelves to increase revenues. They also closed 1300 stores to cut costs. Maybe they cannot scrape up the money for the name change? They worry about other things like payroll, paying venders and keeping the lights on. For the weekly list of firms that cannot afford to keep the lights on, we have...

Shake Shack = closing units and possible bankruptcy.                                                                            Rubio's Coastal Grill = Closing stores and laying off workers.                                                              Rue 21 = teen apparel. Closing all 540 branches.                                                                                    Sam Ash = music chain since 1924. Sadly, closing off 42 locations.                                                        Big Lots = they are experiencing the same worries as DollarTree.

Then, we read the jobs report that says 142,000 found employment. This caused the unemployment roll to tick down to 4.2%. This is definitely a lie. It will be reformatted quietly in another month. Folks, with our population over 340 million, it takes 150,000 new jobs just to stay even. Peace. Enjoy the NFL. The first two games were action packed. Go Niners!

Odds and Ends: August 2024

When the calendar hits September 1st, you realize the year is passing and from an investment point, basically over. Looking back, our calls at Evolution have been fairly accurate. The market discounts ordinary citizens, so what we feel and know, does not count. That is a tough pill to swallow. However, we take comfort in knowing that the "experts" are wrong more than right. Sadly, those experts are the people along with lobbyists who advise the two presidential candidates. This is why our government is disconnected to both our citizens and reality. They do not have to make ends meet like we do. The proof is the continuing budget deficit. Their foolishness will be our future pain. 

Anyway, some market investors are also aware of that problem. Market price action reveals the dichotomy. The Dow hit a new all-time record last week, but the SPY could not. In addition, the transports never reached its high from November 2021. It has been in consolidation. The market has never been in a true rally according to DowTheory. As for us, the common folk of the land, we suffer with inflation. It is why we gave the name to our predicament, "stealth recession." We are not alone.

Super Mico Computer (SMCI): The stock hit an all-time high in March of this year at $1250+ and last Friday sat at $437. Ouch! How about a company that provides insurance in China? U-BX Technology (UBXG) rose to a new high last month at $36. Last Friday, the stock fell to $1.40. Ouch! No! Double ouch. Bankruptcy is the next stop. 

Answer This...

If things are so good, how come we post company-after-company, week-after-week who are either closing retail stores or laying off workers? Cisco announced 7% layoffs. GM throws another 1,000 to the unemployment line. Outback closes 41 locations and Appelbees shuts down 35 units.

Our Worry

It is not that we do not sympathize with the above loss of jobs, but here at Evolution, we are coffee drinkers. Did you realize that over half of all produced coffee beans come from just two countries? Those two, Brazil and VietNam are having climate problems that will effect production and costs. We hope that someone finds a better way to grow the beans that we love.

Nuclear

We oppose nuclear power because it is deadly to the environment and us. When we read that China is doubling down to expand the power source, we worry. We would rather read that China is researching for new, safer and better energy source. However, the Communist Party rulers lack imagination and innovation. The nation falls in line to the party line. Too bad the free thinkers from Singapore are not invited to offer a different outlook like the plan to have Singapore import solar energy from Australia. It sounds crazy, but I hope it works.   

Quiet Time?

For those who prefer a quiet night out dining, good news. Serve Robotics Serve is a chip-maker. They have developed a better robotic product that does all kinds of restaurant duties. However, we at Evolution like ambiance and love to meet new people. 

We end with on our favorite investment, Gold. Its next move might be linked to the next BRICS meeting in October. They could bring out a plan to have their currency backed with the precious metal? Maybe in collecting votes behind closed doors with a quid pro quo? The BRICS have loaned South Africa money to develop a water project.   Peace. NFL starts. Yay! Go Niners!