Reflection Time Coming

- The true nobility is being superior to your previous self, not to other men.

- Hindustani proverb

Trump Pump

The market set new records in the three indexes immediately after the election and it is a "go" according to Dow Theory. Last week, the effects of the "feel-good" party ended. Trump's return to power helps the same sectors as his last term: energy, commercial real estate, financials. He opposes "green energy," programs for the poor like food stamps, housing assistance, social security and medicare. Don't fall for his rhetoric on not taxing SS benefits. Republicans are anti-social security and medicare. His tax cuts will cause the dollar to fall in value and that alone will create inflation. This will also push our national deficits even higher. It is obvious that Trump does not read Hindu proverbs or John Wooden's ideas for self-improvement. 

Other Worries

With Jewish relatives in Trump's family, the prime minister of Israel, Netanyahu can continue to annex parts of Palestine with his war-mongering and the backing of the US military. This is a big, big worry. Then, we have Putin with his aggression in Ukraine. Europe had better start spending serious money in national defense. They need to remind Putin that Moscow is within its range.

Trump changes from day-to-day with his thinking on NATO and the UN. His tariffs on China and other nations is only tokenism. It will only cause anger, inflation and world tension. When you decide to do something, you must go all-in or don't even bother. For example, VietNam was a mistake, but the real supidity was doing it have-ass, fighting with hands tied your back. We continued this same idiocy in the Middle-East Wars, both in policy and combat. 

Economy

We have written about our fears like in commercial real estate, lack of quality jobs and protecting sectors from more destruction by foreign subsidized competition. We can see the effects of the phony concept, globalism in the rise of homelessness with the additional problem of excessive immigration. We have an economy that provides subsistance work and pay with no benefits. The "Trump Pump" effect will fall sharply with the cold winds of February and by the Ides of March, public sentiment will follow the fall. The stock market will consolidate around the highs, but Wall St. and Main St. are different animals. 

The lie of growth in consumer spending and GDP lays in price levels. Consumers have to pay more for the same product and therefore the bottom line shows higher spending. It is not. It is the same spending, but the costs by inflation brings a higher total. This data gets mixed into the manipulated formula to show growth in GDP and the economy. It is not. We are not buying eggs, cars or homes. Consumers are doing everything that they can to avoid inflation, but it shows itself everywhere, eventually. The only true indicator and chart is...

King $Dollar

It exploded from the election and October low of $100. to touch a yearly high at $107. and close last Friday at $106.61. This killed off the rally in metals and commodities. Gold broke below resistance at $2585 and oil is falling to resistance at $65. With economies slowly, oil faces a serious challenge. However, the gold rally will return with avengence to hit $3000 in 2025. When nothing tangible gets done to keep the dollar strong, it will sink again.  Keep the faith!  Peace. 

Inflation Truth

- Inflation is just like alcoholism. In both cases, when you start drinking or when you start printing too      much money, the good effects come first, the bad effects only come later.

- Milton Friedman, economist (one of the best: JFL)

Inflation

To begin any discussion on the rise of prices, one must go to the root, product and demand for product. The law of supply and demand is a basic truth for any economy. The problem is the misuse of the information. Can you show proof, you ask? 

The truth of the matter is supply and demand does not change very much year to year. A nation and more specifically our nation, will sell the same amount of cars, washers and dryers, etc. every year. The growth in population or immigration are only the real tangibles that can add or subtract the totals.  Yes, a new product will change an outlook for a individual company, but items come and go with fads and copy-cat competition. There is also outside the normal situations like COVID or Bird Flu. If you look at the price of eggs due to Bird Flu, supply shrunk but demand was constant. Friedman said that inflation is caused by too much money chasing too few product. The chicken disease has pushed prices higher. However, consumers seek to evade inflation. They turn to pancakes or cereal or some other substitution. If I had the data on how many eggs were sold for 2024, I wager to bet that the total number is far less than 2020.  

Trump jumped on data like this in his campaign with the question, "Are you better off today than four years ago?" His opposition countered his idea for tariffs with the suggestion that tariffs will cause a rise in prices as producers will pass on the tax increases to you, the consumer. What they said is true, but Trump's point is to make US producers return to America. Just like we gained lower prices with imports that kept inflation in-check, a return of home-producing will pivot the pendulum for a future better economy in the US. By outsourcing, we lost social mobility, the middle-class, family life, a rise in homelessness, poverty and the rise in crime.

The only problem with Trump's tariffs is they are tokenism. To kill a disease, you need to cut it out. Our tariffs should not only be against China, but the whole world because they use our nation as a dumping ground to help their economy. They should be so high that producers could not evade the tax by shifting production to other foreign nations. Anyway, enough on supply and demand. Nations will always seek to gain an edge by currency manipulation, local laws and subsidies. This is life. We are guilty too. So, if  supply and demand is basically constant, where does inflation come from? 

Labor

After the costs of goods, labor is the next biggest expense. Dear Reader, do not look at the contract between Boeing and their workers as the standard. It is not. Regionalism with the cost of housing is a newer concern for producers and labor. Seattle's housing just like the Silicon Valley is extremely high. Workers cannot afford to live where they are employed. Housing costs has multiple supply chains with too many foreign suppliers, environmental issues like trees and lumber, infrastructure. This needs to be addressed for the health of the nation, but we are talking about labor costs. Generally, labor gets few wage increases. A standard raise has a range of 3% to 5%. Therefore, this could result in higher prices, but in the same price range. Sometimes, producers will eat this cost to maintain market niche. We conclude that rising labor costs can add to inflation, but nothing out of the ordinary as work wage increases are spread out throughout the nation and they come at different times. So, where does this lead too?

Federal Reserve

This crooked cabal was started with the idea to protect the wealthy and bankers in case their greed causes a money crisis. It has evolved to be a tool for politicians to make promises like tax cuts with the inside knowledge that the "money system" will cover the tab. Congress spends (both parties are guilty), the Treasury prints bonds for the spending and the Federal Reserve buys the bonds to conclude the transaction. 

Our government is so irresponsible that we do not even produce a budget and worse, we are running deficits of $2 trillion per year. Just to balance the budget, we need the combination of spending cuts and an increase in taxes to make ends meet.

Deficits

They are mostly financed by the Fed's creation of new money. They are guilty of another consequence in running the show. They pay banks not to use their money to which hurts the economy. Demand deposits in 2019 totaled $15.3 trillion. Today that figure is $21.1 trillion. My math says that is an increase of 38 percent. This is the root for inflation and why prices rose around 22% in the past three years. The Fed is printing 7% more every year to which eventually leads to a 7% devaluation of our purchasing power. Inflation is not going away until this practice stops. 

Under the auspices of "crisis management," the Federal Reserve has added 60 percent to the money supply and increased its balance sheet by 85 percent in just 16 years. 

Yes, you read that right. The Federal Reserve was founded in 1913. In the 95 years between then and 2008, just 40 percent of the money supply was created. In the subsequent 16 years, between 2008 and 2024, we have almost "tripled" the money supply. No wonder that we have inflation! Join our meme, "End the Fed!"  Peace.

Election Losers

- Borrowing money to pay a previous debt is the curse of debt

- Brutus, Anti-Federalist paper

Harris or Trump

Whomever wins will probably be announced by Friday unless a new "chad" crisis emerges. Not likely. The real problem is that both of these candidates make all of us losers. Why, you ask? Go back to their one debate. Did either of the two talk about our national debt? The constant stalling of government to entertain the debt ceiling? The fact that 40% of the world's GDP (BRICS) are actively seeking to dethrown the US Dollar as the world's reserve currency and trading vehicle. The two made promises to buy votes with more spending and adding to our tragic debt. Dear Reader, it gets worse.

CBO

It stands for the Congressional Budget Office. They go over our lending to calculate the level of debt to our national deficit. Their most recent announcement is alarming. They admitted that they made a mistake. Now, the new debt level should scare everyone. Projecting from now, 2024 to 2033, just to service our debt will cost the nation and taxpayers, another $10.6 trillion. Think for a moment some of the ways that the money could be better spent rather than interest to debt? How about our medical? How about roads, bridges and general infrastructure? How about free trade colleges to address modern tech and machinery? I'm sure that you can add some of your thoughts to Sebastian's. By the way, the new debt projection is double the CBOs first estimate...Getting back to the election of 2024.

Influencers

It is estimated that there are 11,000 political groups (PACs). They will spend $14 billion to influence us on who to vote for. This should tell you a few things. The corrupt have money and they use it to maintain the status quo. Money buys results. You and I are being disenfrantized from government because they spend so much time with people who have money. Money may buy results, but it is also corrupt. This is why we, at Evolution do not vote. Our vote must be earned. By not voting we are actually voting. We are saying that we will not valid either of the two corrupt political parties. Let me end by adding a few more thoughts from Brutus.

On Debt

It should be a last resort. To make it difficult, he recommends a two-thirds majority in Congress to pass a debt bill. 

He worried that Congress may mortgage any or all the revenues of the union, as a fund to loan (think bonds) money upon, and it is probably in this way, they may borrow of foreign nations (they buy our bonds which is debt). This holding of debt by foreign nations could be an avenue for them to influence the nation. He goes on to say, "The interest of which will be equal to the annual revenues of the country. By this means, they may create a national debt so large, as to exceed the abilty of the countey to ever discharge it." No truer thoughts on spending more than your revenues.

Something Interesting

Here at two cycles concerning the market and elections. The first is a 96-year cycle on the S&P 500. It shows the market rises the day after the election and then, falls for the next four trading sessions. The second one is for gold. It too, rises the day after the election, only to fall for the next two trading days. Peace.

Odds and Ends: October 2024

- A people that values its privileges above its principles soon loses both.

- Dwight D. Eisenhower

The above words of wisdom can apply to the owners of production and the laborers who service their product. The creed of business is the priciple and the distribution of the net proceeds is the privilege. The creed should be to make the best possible product and to take care of the workers who produce it. 

Boeing Strike

The company was able to end a pension for its workers a while back. They knew the workers feel cheated by this issue. This hits hard when the CEO has excessive pay with a bonus of share options as well as many others in management. When the company offered a 35% raise, they thought that would win the day. This also made them appear better in the public view. What they should do is to offer a matching donation to the workers K401. Of course, an offer of $10 grand to go with the pay raise. Boeing would need to limit the matching offer or this will be a real big issue in the future. However, it would show a real concern for your workers welfare and the company makes more than enough to go this route. 

With that said, we, at Evolution predicted 2024 would be a year of strikes. When we read Kaiser Health Care workers are also on strike along with many smaller firms, our call is on the money. Many of these strikes are dated to previous contracts. Workers no longer go on spontaneous strikes. The government intervened a long time ago. There is a government arbitrary who steps into disputes, especially if it concerns the national economy. To work off the job without warning is like getting a strike, excuse the oun, against your claim before the mediator. In other news...

Francis Scott Key Bridge

The Department of Justice (DOJ) has reached a settlement with the owners of the vessel that destroyed the bridge. The Singapore shipping firm's insurance will cover $102 million case. However, the owners are not out of hot water. The FBI is conducting a criminal investigation due to the poor maintenance and lying reports about repairs. The owners should reflect. They are blessed with money, but they only seek to enhance their wealth rather than protecting their vessels (product) and the seamen employed (workers). They should read the words of wisdom at the beginning. The CEO of Boeing should read it as well. In seeking another buck, the shipping firm is losing many more. The state of Maryland is also filing a lawsuit against them. 

Good News

Form Energy has developed a battery that feeds electrical power grids up to 100 hours. Of course, you and I do not realize what this means. It means their battery is 25x better than anyone else. Sorry, we cannot buy their sares. This is a private company. That does not take away the good news by an American firm. Peace.

Market Gravity

- What goes up must come down.

- Law of Gravity

Market Movement

The price action says loud and clear that our market call of a large retracement is wrong. There are many reasons that we believe it is correct, but the charts do not lie. However, they can deceive?

Anyway, the Industrials hit a new all-time record at 43,325. The volume was okay. The SPX also broke a new record at 5872. Finally, in true Dow Theory, the Transports joined the rally. This constitutes a bull market. The only point that keeps our conviction is the transports did not hold price. When you cannot hold price, you have to look at other indicators. We did.

Big Boys

Apple (AAPL) is hanging around its highs. This is a big plus for the bulls.                                                Microsoft (MSFT) could not hold price. It fell back into its consolidation range. Question mark?    Google (GOOG) also could not hold price. It too fell back into its consolidation range. Question mark? Facebook (META) is at its highs. Another plus for the bulls. We continue looking...

Semi's

The chips always lead the charge up and conversely, down. They have been acting weird. They hit new highs and then, fell hard. Then, they rallied hard. We look at a few.

Intel (INTL) Fell hard on poor earnings and outlook. Rallied hard, but fell back into consolidation.          Nvidia (NVDA) Was at $140 in June. It fell to $95 and now has rallied back to its highs.                        ASML Holdings (ASML) It reached $1100 in July only to fall to $675. Last Friday was at $723.              Advanced Micro (AMD) It was over $225 in February and fell back into consolidation at $155.

So, the semi's are mixed, but indicate more downside than upside. Next...

Commodities

The most important is falling sharply. This is happening while the Middle East is spiraling in war. This is happening at the same time the market indexes are hitting new all-time highs. Brent fell to $69 last Friday and US crude hit $68. Low resistance for American oil is $65. This needs to be watched closely. The best indicator for commodity pricing is King $Dollar. It has rallied hard from low resistance. It pierced the upper resistance at 103.5. However, it failed to hold price. If it attacks the upper level of resistance and holds price, commodities should fall. However, there are other aspects to each segment within the sector. We had a great week in...

Precious Metals. Gold hit a new record and silver joined the party. Last Friday, the old coins rose $2.15 to $33.23. This relates to the BRICS and their fight against the dollar. It also points to the Fed and their cutting of interest rates which could also hurt the dollar. Like I say in my unpublished book, "All things are connected."

Other Points...

in commodities is lithium. Bloomberg reports that 10% of all car miles is from electric power. Lithium and copper are the two chief needs in electric power. Doctor Copper fell from its record high, but it is in its upper consolidation range. You can see that through Freeport-McMoRan and Taseko Mining. The two are in their upper consolidation range. However, lithium stocks reflect a deep fall in price. The leader is Albemarle. This material giant was $155 last December and fell hard to $75. Last Friday it was $95. Lithium American Corp (LAC) rose to $7.50. It has a great mining location in Argentina. However, it fell to $4.50 and last Friday was at $3.14. The two lithium stocks say demand is falling. This is a market tell in our book. Finally, we look at the present state. We see...

Strikes, Layoffs and Store Closings

The striking leader is Boeing. The company might get an agreement. The union votes Wednesday. The big point is a pay hike from 25% to now, 35%. These workers make on average $75K per year. This is a good paying job. but Seattle is very expensive. However, most of us do not even make the $75K? What does this say about our economy? Meanwhile, three large drug chains are showing collapse. Walgreens is closing 1200 stores. CVS has closed 1300 in the last two years and Rite Aid is in bankruptcy. Consider all the workers who will lose their job? Consider the supply chains that will layoff workers because their main customer is dropping demand? Consider the lie from the BLS about unemployment? We still say that our economy is in stagflation and that is not good. We stand by our call. Peace. 

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.