Where Is the Connection?

- All knowledge degenerates into probability.

- David Hume

Economy and Wall St.

We have suggested many times in the misguided belief that the strength of the economy is reflected by price and value from the stock market. The government likes to use a rising market as the true barometer of our economy. This correlation ended many years ago. I will offer you a scorecard of recent data in relationship to the stock market. You be your own judge.

King Dollar: It continues to deny gravity. It closed last Friday at 102.2. It has been in a rising price channel since the end of September. At the same time, the US deficits climbed over $40 trillion and this year's yearly budget has surpassed $two trillion. In addition, bonds rates are rising. The 10-year bond rose over 5% and as of last Friday, sits at 5.24%. When you consider that the Federal Reserve might add another quarter point increase, bonds will rise, our debt will rise and although this act will strengthen the dollar, this is only a temporary solution. Why, you ask? Because for every action there is a reaction. You can clearly see the reaction in housing. Interest rates climbed to roughly between 7.38% to 7.57% for mortgages. To qualify for a mortgage, buyers need a clean sheet with income of over $96,000 per year. We are making home buying unaffordable for over two-thirds of our citizens. In a consumer society, our biggest purchase is off the table.

Related

Musk has stated that he seeks a $40 billion dollar loan to buy Invidia's chips for his AI data center. His firm is not alone. All the big players are jumping on the AI band wagon. However, there are two problems stemming fom this action. First, all these "players" are seeking financing. This puts them into competition with the Federal government who needs to finance their excessive debt. Demand will raise rates even higher. This puts a burden on every loan seeking entity. 

The second problem is more for big tech than the federal government. Application! Oracle was one of the first tech members to see the "future" in AI. They spent and borrowed to lead the way. ORCLs stock price was over $300 last October and as of last Friday, it closed at $141.40. OUCH! The company did the usual to keep their stock price up. They implemented cost cutting, especially with jobs. They laid off the people that they need to apply the AI platform. They are not alone. We will see more and more of this playbook by big tech as spending and debt crush earnings. They will attempt to sell the "hope" of AI. 

The federal government leads the way in selling "hope." It starts with the dollar. Inflation is in direct conflict with hope. The recent oil and diesel prices pave the way for more inflation. The BRICS are in direct conflict with the dollar. Together, they are eroding confidence in the government. Hope is a fragile spirit. 

Now, back to the market and interest rates. When bond rates are high, they look better than the risk of the stock market. When investors realize that the market has been in an uptrend since 2022, they may make a judgement call on the further growth of the market as compared to the safety of bonds? If money begins to leave the market, the big boys will begin to feel pain. This money will probably enter the bond market, however, gold will attract a nice piece of it. It will not take too big of an investment in new money to push gold back to $5,000. 

Speaking of Metals

We are in a deficit for silver and copper. The two are needed for AI. President Trump did well to push chip making in America as well as critical minerals, but "working" a deal with Russia for diesel is so very wrong. Anyway, these things take a lot of time and sometimes, they never materialize.

Bulls Counter

They will remind you that the banks are doing extremely well. All the money entering AI and data centers will lead to new riches down the road (hope). They counter Oracle with Apple and Meta. The two are in a rising price channel. The seasonal pullback of Sept./Oct. is almost over and the market held at support. November and December are two big ups for the market. Inflationary acts will reach a limit and the war with Iran should end soon. Plans are in progress to build a new pipeline to end the Hormuz Straight. The future looks bright.

We say, "Only God knows the future." ...Peace.

Malaise or Truth?

- It's not what you look at that matters, it is what you see.

- Henry David Thoreau

Sept./Oct. Pullback

In the stock market, the Fall retracement in stocks is almost a given. If you look at the close last Friday, you may not believe the theory. However, if you look at the chart, the Industrials fell 2,000 points from its high in September and ended down for the month. The S&P 500 also fell for the month, although just 14 points; it bounced up hard entering October. The two leading indexes had steady volume. 

Nasdaq tells a different story. It was up all month and continues rising into October. The small cap, Russell went the other way. It was down from the beginning of September and fell all month, but the volume was very low. No conviction.  

The Transports had a rough month. It too was down all month and like the small cap index, it had low volume. Together, the indexes show some malaise, but the Bulls remain in charge.

Indicators

The Fed has another meeting at the end of the month (27th Oct.). There is another Wall St. aphorism, "Buy the rumor, sell the news." The rumor on interest rates changes on a daily calendar. We pay little attention to heresy. Facts speak to us as well as the charts. The big announcement from the G-7 about diesel and oil is news, but you have to understand the big picture. The group will offer the market (world) 100 million barrels of both diesel and oil. However, this is to be spread out over four months and diesel will not enter the market for probably another 20-days. So, how did this effect the market? Brent rose to $102 on Friday. US crude, initially fell, but recovered to close at $91. The two oil commodities are in a rising price channel line.

For perspective, consider this point. The world consumes over 100 million barrels of oil on a daily basis and around 30 million barrels of diesel. The news makes headlines, but it will make no difference to rising price and more inflation.

Market Disconnect

We have stated many times in past pieces that the stock market no longer reflects the US economy. The latest stats on our economy says it grew at 2.2% in the 2cd quarter. This is deceiving. The formula uses price to determine value. Inflation causes prises to rise and thus, it appears that the economy is growing. What should be included is the misery index. However, this index of inflation and employment has been massaged. We do not believe the inflation numbers from the BLS. Unemployment rose one notch to 4.2%. 

Back to the disconnect: A report on jobs last Friday was a big failure. The market expected 90,000, but it received only 29,000. This is a big miss. So, what does the market do? It rose and the dollar for the week strengthened to close at 101.9. This is not logical. We already knew the market is not logical and now, we see this as another proof there is no connection between Wall St and Main St...Peace.

 

Odds and Ends: September 2026

- Fishing largely consists of not catching fish.

- Robert Hughes

No Colors in the Desert

As the seasons change from summer to fall, most of us get to see the beauty in His design except for those in desert regions like New Mexico. The economic weather in that state is jumping into winter. We told you in past pieces that Oracle (ORCL) was laying off 152,000 in cost cutting due to expenses in data centers. Their flagship facility in New Mexico has all kinds of trouble with a capital "T." Oracle wanted to construct a 17 mile gas pipeline to provide energy, but the state has rejected permission to build it. Their contract with the state says that the state gets paid no matter what. Oracle has stopped payments. Oracle has invested billions into this project and the outlook could cause contagion? We also told you in past pieces that one of the biggest problems in building these data complexes is being able to get transformers, switches and other electrical msterials. We believe Oracle's problems will not be the only greedy tech to have construction problems.

Want to Bet on It?

Well, it got cheaper in North Carolina as the BS from lobbyists to that state claimed, "It's not gambling, it is a derivative call." So, if you want a "derivative" on Oracle's ability to finish their New Mexico data center, the tax in N.C. is just 6% as opposed to the normal 23% in betting platforms. This leads us to the question, "How high can BS go?" Answer: As tall as the CEO of Polymarket.

We Invented It...

...but China did it. China's solar energy surpassed coal. Why not us? Spain did it. Spain's solar energy accounts for 60% of their energy source. If Spain can do it, why not us?

This Is What We Did

The SEC passed regulations to allow data centers to sell stock issues without any details. Buyer beware!

We Also Did...

...nothing as far as safety for our future with AI. President Trump said that he got AI developers to sign an accord to "self-regulate" AI. This translates to no safeguards and no regulations. The influencers got everything that they wanted for greedy big tech. This puts our future at risk.

Good News

Fusion Energy has relicated the power of a star (Sci-Fi stuff). In 2022 at the Livermore National Labortaory, scientists proved it could be done. Pacific Fusion in South San Francisco is leading the charge that has 50 horses in the race to produce commercial, clean energy source.

Wastewater Scan

As the weather changes, the flu virus awakens. Two US schools, Sanford and Emory are developing a program that checks wastewater. It can find infectious diseases in their scan and give local regions a heads up on the health of its citizens. Good work.

Indoor Activities

The colder weather finds us inside our homes. We use to love to go to concerts, but the price for tickets is outrageous. You and I asked, "Why?" Now, we know. Live Nation had a monopoly and they were ripping us all off. Glad, they caught that fish...Peace.

Look at Economy and Market

- All knowledge degenerates into probability.

- David Hume

A Pulpit of Doubt 

A recent media announcement by the Secretary of the Treasury (Scott Bessent) stated, "Our budget deficit under President Trump has peaked." This is so bad that it reminds us of Chairman Powell's declaration on inflation, "It is transitory." We have come to the conclusion that President Trump like President Reagan is cutting any Democratic influence to save money to make his other spending not to overload the deficit. We do not agree with this approach, especially when green energy is cut. Both of our political parties have a spending problem and this includes state and federal. They spend, but they show no positive results for the nation. They have no watchdog and corruption is rampant. Case in point: Committees are looking into AI and its dangers. We see the same faults as in the internet. There are no safeguards. We have one for AI. In any program by AI and its conclusion, it cannot envoke a decision. The decision must be human determined.

Lack of Vision

Again, we look at our Secretary of the Treasury. He squanders money supporting foreign currency and manipulating the bond market, but nothing lasting for the nation. Idiot!

Meanwhile

Our nation suffers the continual catastrophe in the retail industry. Sadly, we lost almost all our manufacturing ability, but our innovative sense developed retail. The sad reality of retail is those jobs lack benefits and the pay is difficult. However, it got us bye, but we overbuilt. The Federal Reserve detroys our dollars purchasing power and inflation decreases our disposable income. For the last twenty-five years our malls declined, our strip shopping centers decayed and individual businesses got pushed to death by the e-commerce firms. How will peope get bye? We have chronicled reports from time-to-time. This destruction also tells us that the unemployment numbers are bogus. This is why we refer to the labor participation rate for a truer reflection on the state of the economy.

Economic Reality

Dollar Tree no longer has anything for a buck and it is closing 75 stores.                                                    Staples is closing 7 stores.                                                                                                                              Dick's Sporting to close 113 stores.                                                                                                              7-11 plans to close 645 locations.                                                                                                                  Red Robin is closing 76 locations.                                                                                                                Eddie Bauer is closing its remaining 174 outlets.                                                                                        Hardee's is filing Chapter 11 bankruptcy and closing 60 stores.                                                                  Dairy Queen is closing 46 locations.

There is some firm adding to the list every week and especially, at the end of the month. Recent interviews with top executives from Walmart and McDonalds cite weak consumer spending. Our government (Republicans) passed the Corporate Transparency Act or should I say repealed the act of 2021 which allows companies to hide data. This helps zombie firms to be a going concern when they are really bankrupt.  We note that large firms, those with over $ one billion in revenue are failing and the next stop is bankruptcy. We also remind you that the unemployment numbers get revised all the time. Jobs were revised down for April, May, June and July. In addition, 17,000 lost jobs in manufracturing in August. Our economy is being lifted by war. We need ammuntion. We need missiles. All those troops need supplies, food and transportation. Planes and vessels need fuel. It also gets a big push in the quest for AI and data centers. The two masks the suffering by the rest of us. 

Disconnect

We have stated many times that the stock market no longer reflects our economy. With that said, there are still connections. You can connect the dots to the economy from the ETF indexes. The worries showed itself last week as the market fell sharply for the week. 

INDU  = Fell to strong support at 51,000. The index has another strong price level at 50,000, but if that gets pierced, it could fall to 45,500 level. However, it seems buyers buy the dip.                                        SPX    =  Similar to Dow. Support is at 7,100. Could form a consolidation range with top around 7,600 and bottom around 7,300.                                                                                                                              Transports  = Fell straight down to support at 20,100. The next stop is 18,000 which was its price level back in March.

The high price of oil is reflected in Exxon (XOM) and Chevron (CVX). The two are in an uptrend, but Chevron shows a bearish engulfing candle on the weekly chart. Something in the works? Venezuela?

The two oil indexes are in an uptrend which leads us back to other indicators.                                            XLP = Consumer staples broke below its 50-day and 200-day moving average on a daily chart with heavy down volume on its weekly chart.                                                                                                      XLU = Utility index looks scary to the downside.                                                                                        XLF  = Financials broke support on heavy volume.                                                                                      XLY  = Consumer discretionary went straight down.                                                                                  XLK  = Tech index is staying strong, but caution, as there was no volume which is no conviction...Peace.

Dr. Copper and Market

- I don't need no doctor, 'cause I know what's ailing me. I've been too long away from my baby, ahh!        I'm coming down with misery. I don't need no doctor...

- Ray Charles

Third Component

Our last two pieces dealt with the most important commodities (oil) and the best commodity (gold) for your economy and currency. However, central to both and next in importance is copper. The good doctor is needed for almost everything. At the moment, with the race to build data centers for AI, the demand is exceeding production. Silver and copper mines cannot need global demand. That alone should tell you everything that you need to know. It is why Barrick, the second largest gold miner, is developing the Reko-Dig Copper/Gold Project in Pakistan. It could become one of the largest copper mines in the world. At the moment, Chile produces the most copper for world supply.

Hold the Press!

Not everything is rosy for the red metal. US housing is in a slump and the outlook asks, what is lower than a slump? Mortgage rates rose over 7% which in itself is not bad, but since the medium home cost, from Redfin data is $407,730, affordability is falling off the cliff. If you want perspective on that, here is the math. First off, very few home seekers, especially first time buyers, can save the 10% to 20% down. So, let us do a VA, no down paynnt loan. 

Your monthly payment P/I is $2,707.78. Of course, you have to add insurance and taxes. To qualify, your weekly paycheck must cover the monthly P/I. This equates to a solid job that pays $100,000 per year. In addition, you must be debt free, no $30 grand car payment or student loans. So, what is lower than the housing slump? In baseball, it is the bench or back to the minors. For new home buyers, it is renewing their apartment lease. In addition, if the Fed hikes today, everything gets more expensive. A quarter point won't stop inflation, but it will strengthen the dollar. This is only temporary, stopgap measure. This brings us back to copper. It is losing its biggest user, but at the moment, data centers are covering that loss. 

Other Factors

Miners use diesel fuel. It hit its highest price level last week. (over $6.) This is a big negative along with payroll and the cost to find, dig and retrieve the metal. However, Mr. Market has given miners incentive by raising the price for copper to a new, all-time high last week at $6.80. It immediately fell and is in retracement at this time. How far does it fall is the question? Dear Reader, this could be a blessing in disguise. Doctor Copper had many house calls with gaps in pricing. The producers value rises and falls with the commodity price. The first test will be at the 50-day moving average ($6.46) and then, the 200-day around $6.02. We should hope it falls back to its consolidation range at around $5.60. This leads us to the copper stocks.

Southern Copper (SCCO) is the largest miner from Chile. It rose in anticipation to a new, all-time high at $220. It fell with copper's price to close last Friday at $193.49. A good entry point would be at $170, just below the 200-day moving average at $175.

Freeport-McRan (FXC) is a dual commodity producer. Its large mine has both gold and copper. It too hit a high at $80, but has retraced to $71. Its 200-day average is $61 and we see it consolidating in that range level. If you entered at $40 last December, thank the Lord.

Trekor Metals (TGB) did a name change when its new mine came into production. This is a personality stock. It follows the price of copper. When it falls, this firm crashes. It has touched $2 bucks, repeatedly. That is the time to enter and sell when it hits a high. At its present price level, we would not be interested.

Capstone Copper (CSCCF) is a miner to watch. We have. We were hoping to enter around $8.00 last April, but we missed. Strike one! It rose quickly to $11.50 and retraced. It never reached the April low and we missed again. Strike two! Recently, it climbed to $12.00 last week and fell with the price of copper. We are buyers at $8.00 to $8.25. This Canadian firm has three producing mines. One is in Arizona with another one in Mexico and the last in the big producing region in Chile. Earnings date is 30 October. Forecast is slightly less revenue, but big rises in the following quarters. Lastly, 16 out of 20 analysts have a buy recommendation on Capstone for a $18 price in Canadian money. Nice...Peace.

Golden Time

- All that glitters is not gold.

- An aphorism used by John Florio and William Shakespeare.

Cycle

We told you over a year ago that gold has a 12-year cycle. The last down version was in 2024 to which started the new cycle. It took less than two years (January 2026) to establish a new record high that broke over $5,000 to 5,600. In addition, like seasonal buying, hiring or selling and layoffs, gold is entering its seasonal buying period (end of August to early February).

4-Seasons

No, not the singing group although we love them. We are talking nature's cycle. Some people love the spring and some the summer, but we like the fall because His nature gives us such beautiful colors. It just so happens that baseball has its championship and football begins. We love it all and if you throw in some upside with gold, we say, "Praise, the Lord!" PS: Sorry, winter. As a kid, it was my favorite, but as an adult, no way, Jose.

Right on Cue

You may think that gold is down, but you would be wrong. The charts indicate the seasonal buying in gold. It did fall, but with war, trade wars, inflation and $40 trillion of debt, it is rising. The charts show that when it fell, it held around the $4,000 price level (give or take a daily price change). We stated that gold could fall to a $3,800 to $4,200 range. We pat ourselves on the back. Now, we see a new range level. The low around $4,200 to $4,750. Monthly, resistance is at $4,800. If it pierces that level, a test of the record high is coming. We can see this clearly in the ETFs for gold.

GLD...

...is the ETF for gold. It has broken out at $380 and hit $430. It retraced to $400. The next target is $440. Follow the 50-day (388) and 200-day (406) moving average. The sign that you want to see is the 50-day crossong over the 200-day.

GDX...

...is the gold miners index (ETF). It broke out at $80 to hit $105. It is now retracing. It should rise to challenge the all-time high at $117. 

We Like...

The same three miners that we mentioned in the past: Newmont, Barrick and Alamos Gold. Newmont and Barrick have very low P/E ratio. Any dollar weakness and they will rise, very high. They all pay a dividend. However, as always we worry about recommending a firm because if we are wrong, we feel a mental pain. With that said, we believe in the three above with one new, lower price company. It is an explorer. It does have income with a producing mine. The real benefit is its control of a mine in the top producing region in Nevada. Newmont and Barrick have adjacent mines. Some big names in gold are attached to it like Sprott and Peter Schiff. Scorpio Gold (SRCRF) had 5x the volume last week. Needless to say the stock rocketed from $.21 to $.61 cents. It retraced to $.26 cents. A good entry point would be between $.24 to $.26 cents. Also, there is the possibility of it being a takeover as it has all its permits and drilling results which are very good...Peace.

Energy Trends

- Nearly all men can stand adversity, but if you want to test his character, give him power.

- Abraham Lincoln

New Players

We all know the teams that comprise the energy oil sector. The world has national firms while the US has individual giants. Then, there is OPEC, but it is losing its influence. Teams that are not allowed into the global league are Russia and Iran. There are fringe teams like China, Venezuela, et al. 

While we have a fairly accurate amount of barrels produced daily and used daily, the stats change with supply and demand. It is no secret that the Hormuz Strait is central. The US/Israel vs. Iran conflict has damaged global needs. The US policy caused the problem. The initial deficits in oil supply caused a severe shock to the global oil league. However, supply passing through the strait is climbing. It is now 16- million barrels of oil per day (BPD). The old level is 24-million. 

Richer nations like the US and China had a national reserve while the remaining nations used their alternative sources. The conflict may continue, but behind the scenes, the smart teams are preparing for the future. We see a new pipeline in the region. Trump is so wrong to be against wind and solar, but that discussion is for another time. There are some "free agents" out there and they will change the energy league in the future.

Enter...

...Amazon has worked three nuclear deals this past year and it is not over yet. They want power for their AI data centers.

Microsoft is pushing to revive Three Mile Island nuclear plant.

Google is seeking partners in small, nuclear reactors. Meta is in the same market.

Beside being tech firms, they have something else in common. A quest for energy, specifically, nuclear. The US energy grid is short capacity. It will need an additional 35 gigawatts of electricity by 2030. 

Digress

Amazon signed a nuclear deal with Energy Northwest in Washington. They covered the South with Dominion of Virginia. It made a partnership with X-Energy to build more than 5 gigawatts of new, small nuclear power by 2039. Microsoft signed a 20-year PPA to take all the output of Three Mile Island. This will cover its data centers in Pennsylvania, Chicago, Virginia, and Ohio. These tech firms are developing their own source of power. Soon, their league will have Google and Meta energy firms.

Oil League

OPEC was once its king, but it is no longer number one. The US leads the world in oil production with 13.8 million bpd. and climbing. OPEC is removing its oil cuts. There will be more oil available in the future, but things change quickly. The suggested "toll" on the strait will only cause more conflict. It will not happen. So, where does the price of oil go? The charts indicate a rising price pattern. Brent started at $72 with a recent high at $95. We see some type of consolidation. WTIC, also shows a rising price channel. The low at $67 and its recent high at $92. It too will find a range. This will pertain to demand. The "old" level of 104-105 million bpd is the basis for oil's price action. The conflict is subject to politics. This is never good. There are a few wildcards. China's connection to Iran. Russia supplying oil to China and India and gas to Germany for winter. The new US policy with Venezuela. Politics is never good.

Related

US and world consumers get hurt with rising oil prices. In addition, necessities like food rise through shipping and production costs. The biggest unmentioned costs in the US is mortgage rates. In February, the 30-year rate was 5.99%. On Monday, it was 6.87%. This is 10% higher and consumers pay this rise in cost for 30-years...Peace.