Fed Day: Warsh Takes Command

- "...I can scarcely contemplate a greater calamity that could befal this country, than to be loaded with            debt exceeding their ability ever to discharge..."

- Brutus, Anti-Federalist Paper #8

Split Thinking

In our early days our young nation had many obstacles. The biggest was war debt. When President Washington appointed Hamilton to be our first Secretary of the Treasury, Alexander copied the blueprint of the England's central bank. Immediately, it was opposed by the Secretary of State, Jefferson and almost all the leaders of our revolution for independence. When you have Franklin and Adams in your corner, Washington took notice. All these opponents to Hamilton wanted a strong currency that would act as a deterrent to debt. They chose gold.

We can thank God that their ideas prevailed. Not only that, Jefferson put the message into the ratified constitution: gold is the currency of the nation. The only set back to gold was the formation of a national central bank. However, there were clauses within the bank that advocated gold, its use as the stength of the nation. Our nation instituted tariffs to protect our early domestic economy. We received so much revenue income from tariffs that by 1800, our bonds were the most respected in the world. We arrived!

Opposition...

...never went away. Keep in mind that over half of our early population still remained loyal to the English King and nation. The elite of this group still had hopes that we would return back to England. When those hopes were dashed by our success and ability to transition from one administration to another, they returned to their greatest want, wealth and power.  

As our nation grew, these elite's still had their nest egg. They capitalized on the emergence of American innovation. As time moved along, a new breed of elite's developed, the barons of industry. Sadly, these wealthy titans leaned toward the weathy ideas of "old" money which had its thinking in aristocratic ways.

Nothing's Perfect

Even though our nation kept growing, we suffered economic relapses or recessions. One of the most recognized titans of industry was the banker, JP Morgan. When JP traveled around the world, he found an idea through France. Its economy also had recessions from time-to-time. They instituted a central bank and had regional banking divisions throughout the country. They reported on their district. In this way the central bank would be alerted to problems. They could move money (playbook) to a troubled district to stop any contagion. JP saw his answer to the dangers of his greed and the use of leverage to increase his buying power.

Enter the Federal Reserve

JP pushed for the return of a central bank. If a crisis happened, he had his flunkies remind the government that a central bank could have prevented the problem (BS). When a leading senator from Rhode Island had his daughter marry a Rockefeller, JP's influence had an important ear. Together, they got President Wilson to establish the Federal Reserve. This is like the morgue ordering a coffin. In this case, the dead body was gold. 

Think About That?

A greedy, corrupt banker develops an idea to protect his interest. This is the root function of the Federal Reserve. Our once wealthy nation has seen the purchasing power of our dollar decline every year since the Fed was created in 1913. We have fulfilled the dangerous warning of Brutus and others about debt. The only way a bank makes money is by DEBT. This is the heart of the Fed. In every economic crisis, most of which was their cause, they solve the problem by throwing money at it. This makes our nation and its citizens poorer as we are drowning into economic bondage of debt. This is the central point in the many examples of why we at Evolution say, "End the Fed!" ...Peace.

Second Thoughts?

- A fool bolts pleasure and then complains of indigestion.

- Minna Antrim

Title Refers...

...to the big downturn last Friday. Insiders know that the market is at all-time highs and yet, 40% of its stocks are below the 200-day moving average. They also know the PE ratio is off the charts as well as the Shiller CAPE Index. Their thinking counters this aspect with strong earnings, big tech investing into chips, AI and data centers. They no longer consider what ordinary people talk about. The lack of quality jobs, affordable housing and the continual loss of retail establishments. The break between the market and the economy is just noise in their thinking. 

We worry. Data centers and AI are feeling robust enthusiasm while everything else starves. The geopolitical environment does not help in the Iranian and Ukraine conflicts. And do you know what else is kept quiet, but is the most dangerous economic factor? Our national debt has exploded over $40 trillion...and counting. With that knowledge, how does the dollar rebound to 100 as it did last Friday? This should remind you that the market is irrational. 

They also hear about Jane Street. We told you about the firm. It leads all investment houses in profits. They are hitting on all cylinders. They made $39 billion last year and made $16.1 billion in the last 90-days or first quarter. Wow! They want to grow. They are entering the fray to build their own data center. They need the power of new tech. This is a big plus in their ledger. These big cats see last Friday as a blip on the chart.They sleep well at night knowing analyst like at Morgan Stanley who see the S&P hitting 8300 this year.

We See...

...people seeking to avoid inflation at the grocery store. We see and hear more and more firms closing for good. We read where high tech is laying off 108,000 cumulatively and the lies of a strong jobs report. The latest was 170,000 new jobs. We told you with our large population, the neutral point is 150,000. We informed you about the dangers in the private credit market. Now, we hear that the giant, Blackstone is also limiting withdrawals. They saw requests hit 10%. They immediately imposed restrictions to redemptions. If you are not free to withdraw your money, you are not in an open, free market.

We see this same contagion spilling over into bitcoin. The value ($BTCUSD) was $127,000 last October and closed last Friday at $60,496. Ouch! This connects to Strategy (MSTR). It was over $460 last July and closed last Friday at $120. Someone is crying in their beer? It gets worse. Jim Chanos, the famous short seller who sees financial fraud began shorting MSTR. The CEO countered with a parlay stock, STRC to MSTR. It supports Strategy by offering a high dividend. Now, STRC is losing its price. Can it afford to continue the dividend? I trust Chanos, but nevertheless, this is another nail in the recent rally by the market. 

In addition...

...we see a bearish engulfing candlestick in the Dow on the daily chart and the same in the S&P 500 in a weekly chart. We also see disharmony in the indexes. We told you when the transports hit a new all-time high and on the same day, gave it up. This is a red flag. The S&P fell 200 points last Friday while the Dow fell 695 points. Our calculations formulate that one S&P point equals 10 points on the Dow. The market should drop another 1300 points in the Dow as this is a weight on the down elevator. Space X IPO comes out this Friday and the new Fed chair has his first meeting next Wednesday. Any second thoughts? Peace. 

Odds and Ends: May to 3 June 2026

- One man with courage is a majority.

- Andrew Jackson

Good, Bad and the Ugly

It is our favorite cowboy movie. In real life, it has many similarities. The good is a Maryknoll sister working in Hong Kong. Sister Warioba, along with a priest, Fr. John Wotherspoon spend countless time and energy to combat human trafficking. They work a program for prisoners in the leading Asian city. It is called, "Voice for Prisoners." Beside our shout out, I ask those in Hong Kong to give them a donation. We all know that the power-to-be use the law as a weapon.    

The bad was the Supreme Court ruling against President Trump's tariffs. Any nation has the right to protect itself. This ruling takes away more than tariffs. It destroys a nation's sovereignty. 

The ugly is the manipulated stats on our economy. The present state is designed to protect the psyche of the public and the image of whatever is the current administration. The Bureau of Labor Stats (BLS) stated the GDP grew at 1.6% for the first quarter in 2026. They added the Personal Consumption Expenditures Price Index (PCE) came in at 3.3%. This phony created index is the height of manipulation. It does not include food and energy. What do people need every day? They need to use fuel (energy) for warmth or air and or to cook or get to work. We all need to eat every day. The BLS moniker should be shortened to read, the "BS" agency.

Continuing: The last reading by the BLS for the fourth quarter of 2025 came in at 0.5%. This includes Christmas. That should tell you everything that you need to know about our economy. Wall St. does not reflect Main St. By the way, year-over-year inflation gauge came in at 3.8%. Together, even with all the manipulation, the bottom line is our economy is in stagflation. We are the only ones to call it like it is. We see the "Stealth Inflation" getting worse as food prices continue to increase. We do not have to remind you that energy is up 50% this year. The movie was better than our reality. 

Precious Metals

They quietly are consolidating. The next leg up is coming. They just received more help from Abaxx. The Singapore firm is launching their second product Silver Singapore (SSP). It will be a US Dollar denominated to a 1,000 Troy ounce physical product. It will be held in a Singapore vault along with their first launch gold product in 2025. We add this fact. Singapore is now the largest Southeast Asian Stock Market. 

Energy Trend

A new form of power is being utilized. It combines gas with batteries to make electricity. Battery prices have fallen 75% since 2018. We know we have plenty of gas from our politicians and oil rigs that flare it. 

Market and Economic Worry

The stock market overlooks many dangers while riding high with the bulls. With the Dow touching 51,000 last week, no one noticed the momentum was also being carried by margin debt. At the moment, this investment debt vehicle exceeds the 2,000 internet bubble and the financial crisis of 2008. These retail investors are listening to the misleading info from pundits. They tell this tale. If you purchased in NASDAQ after COVID-19, you have in excess $200,000 in profits. This is only one story. We have other influencers citing Nvidia or any of the other chipmakers. These stories effect your thinking. The risk to leverage your investment with margin overcomes any fear...until it is too late...Peace 

Calendar Impact

- I'm not afraid of storms, for I am learning to sail my own ship.

- Mary Louise Alcott

Second Thoughts

I am developing some doubts about my call for a market pullback. All the indexes have hit new record highs. This is in harmony to Dow Theory. It indicates that the market will rise higher. The only blimp on the chart came from the transports. On the day that it hit a new record high, it pulled back to form a bearish engulfing pattern. Then, it dropped all the way to resistance at 19,950. This is worth watching.

We maintain our belief that the market no longer corresponds to the economy. The break happened a while back, but it is clearly evident in our present state. Inflation is crushing the poor. It is shrinking the already shrunken middle class. They have given this a new label, the E-economy. They love labels. Anyway, homes sales are down. This effects labor and construction. Car sales are down. This effects many providers to make a vehicle. The recent surge in EVs hit a roadblock. The money starved government is looking for revenues. Word abounds about a yearly tax to EV owners. Why, you ask? Because combustion cars pay two taxes with gasoline on fillups. There is a state and federal tax. President Trump was talking about giving a tax holiday as we mentioned previously. We also stated that we do not like this idea as the US Department of Highways needs the revenue for roads. 

Then, President Trump, seeking to keep his already depressed voter's approval rating, has given Russia another 30-day waiver to sell petro. Very, very bad. He asks us to be patient with inflation due to the Iran conflict and quietly, shows he lacks conviction. Again, very, very bad. 

With that said, King $Dollar is staying strong and the charts show a bullish rising pennant pattern. This puts a cieling on inflation. California needs that. Gasoline is $6.95 a gallon in San Diego and over $6 bucks all over the state. This could be our future? 

Title Translation

There are certain dates on the calandar that for one reason or another, the market responds favorably. We just past a big one, Memorial Day. The market popped! This coincides with lull in the conflict. President Trump would like nothing better for the conflict to end before the next one. It is very big. This Fourth of July will mark the 250 anniversary of our independence. President Trump is a lot like Fernando who was famous for saying, "It is better to look good than feel good." 

There are a few other calandar dates that the market watches. The January Barometer, which came in positive, the Santa Claus Rally and Thanksgiving Day. However, this years Independence Day is special. The market could consolidate and then, rise for the holiday. 

Related

The new Fed Chair, Kevin Warsh takes the seat with Iran conflict, inflation and a divided FOMC. His first meeting is June 16-17. What does he do? We'll see says the blind man.

Bottom line: We feel that the market should temper its gains until we get closer to the big event. Then, a blow-off rally that is followed by razor cuts by the market as it finally pulls back. If we are wrong, all that $650 billion that is being spent by big teck for data centers and AI will rally the market even higher. We see Fernando's lifestyle in these CEOs. They are laying off people like Meta just did last week (10%) to balance out the money invested into AI. This approach makes the stock evaluations look better, but it is only magic misdirection. If you don't produce and AI has not, a day of reckoning is coming...Peace.  

  

History Repeats

- History may not repeat, but it rhymes.

- Theodor Reik or Mark Twain (confusion does not distract the wit).

Recession Delayed

It is no secret that the world is losing 20% of the economic commodity, oil due to the Iran / US-Israel conflict. The big summit between the US and China did little to nothing to change the outlook except to agree that no nation can place a toll on waterways. So, how are nations coping under the stress of this important supply chain disruption? 

Strategic Oil Reserves

The US learned way back in 1973 with the OPEC oil embargo to have an oil reserve for emergencies. Currently, it is estimated the SPR stand at 392 million barrels of oil. The figure represents the weekly decline from 397 million barrels of oil. President Trump has also kicked around the idea to provide an oil tax holiday during this conflict. This is the federal tax on each gallon that consumers pump. 

We believe the tax holiday is foolish. The US needs this money for road service. Trump made a critical error in forgiving Russia of the oil sanction imposed on them due to Ukraine conflict. He must accept responsibility for his actions. His decision has caused oil prices to rocket higher. We all suffer together until this mess clears itself and peace is restored.    

You may not like our stand against the oil tax holiday, but our national deficit does not need any more juice. The fact that our yearly budget now has to pay $1 trillion every year just to cover the interest on our debt. The total still compounds every day, week, month and year. To give you a perspective of this sin consider this point. In 1981, the total debt under President Reagan was $1 trillion. Flash forward. Now, it accounts for 10% of our yearly budget. Our nation has many problems. This is one of the most serious.

IEA

It stands for International Energy Association. This was the global community's answer to develop an energy policy after the OPEC oil embargo. It started in 1974. It has 32 member nations and 13 associate members. They represent 75% of the global demand for energy. They have deployed 164 million barrels of oil to its members. They are ready to release another 210 million barrels more. This is how the West has been getting by due to the oil disruption. 

However...

...the West was not ready for the sharp oil price increases to its economy, especialy with jet fuel and deisel. The tipping point is at hand. Then, we have to take into account the Asian nations. China has an SPR. Many, if not all the other Asian nations do not. President Trump has told China it could buy US oil because almost all of its oil comes from Persia. China keeps secret all the oil it buys from Russia. That oil can be delivered by train and over land routes. All those other Asian economies are in peril due to the lack of oil to keep their economic engine running. The worst has the largest population. India is contemplating ways to stop its citizens from buying imports like precious metals to concerve currency. The country not only lacks a SPR, but currency reserves to purchase oil. They are in a bind.

Looking Ahead...

...we can easily see an oil spike to $140 a barrel. Not good for anybody. JFL is old enough to remember seeing signs like "no gas" on service stations. If the conflict continues and at the moment, it appears to do so, he says this will happen...

Odd / Even

It is a designation by the last number on your license plate. If the number is odd, you can buy gas on odd number calendar days. If even, the same way to buy gas. I wonder what vanity plates will do? Anyway, let's hope things do not deteriorate to that point? ...Peace

Numbers: Fear and Risk

- Faith means trusting in advance what will only make sense in reverse.

- Phillip Yancey

10 New Millionaires

Last week 10 chipmakers added a combined $10 trillion in value in price and maket cap. Some like Micron's boss who says that they see another 80% growth. We know big teck has spent trillions on new data centers for AI. Someone had to feel the effects of all their spending. The chips on the table are all-in on the chipmakers. Anyone who had a chipmaker last week is rolling in big bucks. The NFL isn't the only one printing new millionaires.  

Chip Snapshot

Microm (MU) rose an incredible 38% just last week on strong volume. The chart agrees with the CEO. It says momentum will continue.                                                                                                                  Nvidia (NVDA) is now worth over $5 trillion in market cap. Even at highs and highly priced, it rose another 8% last week. The volume was steady.                                                                                            Broadcom (AVGO) is not as strong as its peers, but rose with them.                                                            Intel (INTC) is one of the big turnaround stories. Since late March, it has been on a tear. It rose another 25% last week. The volume is very strong. It could rise even more.  

Sounds Great, but...

...we stand by our call on the market. We see a pullback. Remember, we told you that the market indexes are overly influenced by teck firms. The money spent like Nvidia on its partner, Coreweave (CRWV). The firm loses money, but Nvidia keeps the stock up. Together, this is pumping up the market and related sectors in technology. A cheaper way to play is the ETF in technology, XLK. However, when we look at that chart, there is no conviction in volume. This is a red flag. This is another reason why maybe you should know when to walk away from the table, have a nice dinner, treat your family and self a night on the town. There will always be another trade. Why, you ask?

NASDAQ

It was 23,000 in March. In less than 10 trading days, it rose to 26,000. The Nas- 100 has climbed a crazy to 29,000. The market says there is no risk and no fear. Consider cybersecurity in data centers. The AI models are not perfect. Hackers are breaking into these platforms. They are just stealing from big teck with no investment other than their time to hack. 

Then...

...look at the rest of the market. The high tide is not lifting all boats. Check out the price of Avis (CAR). It was $850 in April. Last Friday, it was $145. How about doing some laundry? Whirlpool (WHR) was over $107 last July. Last Friday, it was $44 on strong negative volume. How about Nike? They got shot with a 44 too. The stock was over $78 last August. Last Friday, it was $44. Not good. There are many others. I think that you get the point.

In addition...

...the government released its jobs report. They BS was about a strong showing. Folks, it was 115,000 new jobs. Well, that is a lie! With our population over 325 million, it takes a minimum of 150,000 just to stay even. So, this is a negative and yet, the government claims unemployment held steady at 4.3%.  This lie will quietly be changed in the next update to read 4.4% which in itself is another lie like the inflation report. You can get a clearer picture with the labor participation rate. It fell again. It is below 62%. This is a danger zone. As we put the pieces together, we say there is serious risk in this market. When the tide goes out, it leaves all boats stranded. Beware!   Peace.

Really? 3.2% and 2%?

- The real problem is not why some pious, humble, believing people suffer, but why some do not.

- C.S. Lewis

Sell in May...

...and go away is an old Wall St. saying. Last week the government broadcasted two important stats. They claimed inflation grew in March at 3.2%. They followed this by announcing that our GDP grew by 2% in the quarter. Really?

Infaltion: This is only true by their phony matrix formula that does not include the three necessities that we all need everyday. We all know that fuel has risen by 40%. Every time we go to the grocery store, prices rise from week-to-week. Your rent only changes when the lease is due. Your home may have risen in value, but the expenses to keep and maintain it have risen. The worst is utilities and insurance. So, does anyone believe that inflation only rose 3.2%? We don't think so. It is more like 10%.

DGP: Our economy grew by 2% in the quarter. We find this misleading. We point to two facts with our conclusion.

First, the government, especially the administration, by now knows that war pumps the economy. They keep the debt caused by it out of the limelight. Ever since Russia invaded the Ukraine, we have aided the Ukrainians with weapons, supplies and other aspects. This aid has added strength to the economy. The recent conflict with Iran only adds to military spending which helps the economy. It masks my second point. Our economy has been consumer generated since the late 1970s. Then, our retail environment grew radiply along with housing. This created a problem. We overbuilt shopping centers and malls.  

As inflation slowly worked itself into the pocketbook of consumers along with the impact of shopping on the internet, brick and mortar locations began to suffer. The gradual decline was not alarming as everyone knew developers overbuilt. However, this decline saw two dramatic surges in the decline. The first was the financial crisis of 2008 and this was followed by COVID-19 in 2020. 

We have posted in many of our pieces the continuation of retail damage. It is now at the catastrophic stage. It is no longer just retail. Spirit Airlines is just the latest firm to go to bankruptcy. It seems every week another business announces job layoffs. Almost every firm cuts back on investment research. This implies no future products or service. Of course, you may doubt our point when you read about high-teck and their investment in AI and data centers. Dear Reader, this is a two-sided sword. Case in point: Meta announced that they will be risking $600 billion in AI and data centers. Folks, that extremely high number does not come without repercussions. In another statement, Meta is dropping 8,000 skilled positions. 

This type of investment and subsequent cutbacks appears with all the big players like Oracle, Apple, Microsoft, Amazon and Tesla. There are many more firms that are seeking the benefits of AI, but so far, and as far as we can see, there is no financial reward. Google is seeking money to do their entry into the field with a 100-year bond. That is crazy! This money has enticed chipmakers, servors and other infrastucture in the sector. It has also caused the stock market to hit new all-time highs in the S&P 500 and NASDAQ. We already told you that their indexes are closely tied and over represented by these same firms. This is misdirection. We said it before and we will repeat it here: there is a disconnect between the market and the economy. The market has nothing to do with the economy and the lives of our citizens. It may hold positions that could effect our retirement and things like that, but nothing in our present state. Oh yeah, the hidden dangers looming in private credit market.

2cd. Opinion?

Gary Shilling, the past, famous economist from Merril Lynch, sees recession as definite with the market dropping 30% by the end of the year. He sees some of the things that we see.

Present State:

Nike: they are cutting 1,400 jobs.                                                                                                                  Lammes Candies: famous candy store in Texas that had been in business for 141 years is gone.            Microsoft: is offering buyouts to 7% of their firm.                                                                                      Meta: is laying off 10% of its help.                                                                                                              Amazon: throwing in the towel on 16,000 workers.                                                                                    Oracle: They can't decide on how many they will lay off. Somewhere between 10,000 & 30,000.        Block (part of Square): they are dropping 4,000.                                                                                        Salesforce: so long to another 1,000.                                                                                                            Snap: Goodbye to 1,000.                                                                                                                              Eddie Bauer: is filing for bankruptcy.                                                                                                          Popeyes: is closing 3,193 locations and all the jobs tied to them.                                                                Starbucks: continues store closings. They added another 568 locations and jobs.                                      Coinbase: is cutting 14% of its workforce.

Bottom Line: Our consumer economy cannot keep retail from declining which means consumers do not have enough disposable money to maintain our economy. We advised you to save for a rainy day...Peace.