Mid-Year Report

- Wisdom is knowing what to do next, virtue is doing it.

- David Starr Jordan

What We Said...

...We called for a maket pullback. The market did attempt a few, but not at the level that we felt was more closely resembling the economy. This makes our initial call wrong. We did amend it after we saw the huge amount of money flowing into AI and data centers. Our updated version says the pullback should begin after the July 4th celebration. We could be wrong. 

Thanks to Tom Bowley of Stock Charts who showed us charts related to the money flowing into semi-makers. For example, Micron looks parabolic on a chart until you look at their earnings. They made over $43 billion in the last 90-days.  Its guidance indicates the boom will continue. This is central to our outlook call. The entire producers of chips are seeing their stock price go parabolic. The question becomes for how long? Placing an order is one thing, however orders can be cancelled. This is the risk in the current state of the market. Dear Reader, it gets worse because the market indexes are rigged. 

Do you realize that 38% of the SPY is tech and 18% is the semi's. Firms that once were included in the index are no longer a part of it. It is like creating a team of all-stars. Only the best is on the team. This is why maybe an analyst from Morgen Stanley calls for the S&P 500 to hit 8300? It is even worse under NASDAQ. They allocate 58% in tech and 32% is in the semi's. It is no wonder that index is going bananas. Everyone overlooks that 40% of both indexes have stocks below their 200-day moving average. We don't. Anyway, we feel that since our economy is consumer controlled and the consumer is deep in debt, the break in the market will happen. Apparently, our call due to the collapse of retail does not matter to Wall St. They only look at all the money flowing into AI and data centers. They do see some risk associated with the continuous influx of money into this special field. We see it too. High-tech is seeking money to cover this investment. They are up against the government which has to cover the national deficit. This will push up rates and then, everyone suffers. Anyway, this is our outlook, but we offer you the view from two leading brokerage houses, Morgan Stanley and Charles Schwab.

Schwab and Morgan

They both agree that AI has pushed the market prices at a parabolic rate. They both see the boom time continuing. Some investors do not realize that the expression boom and bust can include semi's. Most think the term only refers to the oil industry. Semi's experience the same type of spike demand and then, no demand just like oil producers. 

Schwab noted that more retail customers are in the market than in the past. If there is a pullback, retail has a tendency to sell.  Many buy on margin. They are considered by Wall St as weak hands. However, selling has a way of creating panic. Morgan mentioned that the new Fed chair might change the way the Fed looks at inflation. Generally, a spike in oil leads to higher interest rates and versa versa with lower rates.   

The two agreed that bitcoin is in a bear market. The price has been cut in half. They think some of that money went into chips and AI. They both feel a "wait and see" approach to the new Fed is the proper course of action. 

What They Didn't Say...

Neither mentioned precious metals or copper. Copper is needed for data centers and AI. In a future piece we will name our new favorite copper stock. As for precious metals, our floor price for gold was $4800. We are wrong. We feel the metal will be in a consolidation range until August. The top is $4200 and the bottom is $3800. 

Our silver floor was way off the mark. We do not like to use an excuse like the rigging in this market. You should know by now never to trust Goldman or Morgan Chase as they are for fiat and debt. However, the present range of $50 to $55 appears to be the resistance price. It is a full retracement from the time that it rallied over $120. This metal should awaken in August. We'll see says the blind man. By the way, the first crack in AI expenses is from Oracle. They announced the cutting of 21,000 workers. If that sounds high, maybe it is, but then again, consider Volkawagen. They plan to close 4 plants and laying off 100,000. No, that is not a typo...Peace. 

Odds and Ends: June 2026

- Peace is not made at the council tables, or by treaties, but in the hearts of men.

- Herbert Hoover

60-Day Ceasefire?

It didn't last one day. Why? Ben Netanyahu. It is clear by now that he uses any excuse to continue the conflict with his Middle-East neighbors. His purpose is to take land. He not only allows illegal settlements, but he encourages it. In any peace deal, he demands a buffer zone to "protect" Israel. Then, he uses this land for new settlements. This aggressive act only emboldens the negative thinking of the groups that hate Israel. Two wrongs don't make a right. It is because of people like him that we realize there has been no peace in this region for a thousand years. 

Strange Prices in Oil and Stocks

Although oil is testing its recent low and not to debate if that price is low for consumers, investors appear cautious. Not difficult to understand. Maybe peace or the ceasefire doesn't hold. They do know that oil producers are scaling up and if peace holds, a possible glut? 

A study in two outcomes. Western Digital (WDC) was around $40 last August. Last Friday it closed at $746. How about Sandisk (SNDK)? It too was around $40 last August and it closed last Friday at $2184. Are these two a study in parabolic moves? On the flipside, Strategy (MSTR) was $440 last August and last Friday ended at $112. Trade Desk (TTD) was $90 last August and closed Friday at $18.51. We also read where the US Dept. of Justice has charged three leaders in SuperMicroComputer (SMCI) of smuggling billions of dollars in artificial intelligence technology to China. We remind you that these type of sins appear just before the market crashes. However, there is one analyst who calls for the S&P 500 to clear 8300. We'll see says the blind man.

The market dismisses consumer sentiment at a 80-year low. We realize the market is crushing upward with new records, but 40% of its stocks at below their 200-day moving average. When we look at one of the big indicators, King Dollar, we are confused. It closed back over 100 last Friday. I believe this is positioning with the perception that Warsh will hike interest rates. Anyway, this is a tough market.

Space X

We did not seek the IPO, but how could we not follow the debut? Musk generates enthusiasm, but in his soul, if he has one, he disrespects workers and he is anti-union. Too bad. He pushes some good ideas. With his demands for money and control, we wonder about one of his predictions. He stated, "The US will 100% go bankrupt." We sadly see the US facing a financial crisis, but the whole world is in deep doo-doo of debt. We don't know when, but there will be a world financial crisis. Sadly, the people who led us into this predicament will say that they have the answer.

Inflation Report...

...it came in at 4.2%. We say that this figure is short by 6 percentage points. How about this connected aspect? Grown-ups: A new report says that one in three adults under 35 still live with their parents. 

Shout Out!

In the world of lying politicians this man deserves a pat on the back. Prime Minister of Pakistan, Shehboz Sharif is probably going without sleep as he works to end the conflict between the US/Israel and Iran. You are going a great effort and work?

Meanwhile...

...in the US we read about more firms laying off workers or worse, closing their doors. One of the saddest is from Coca-Cola. They are shutting down a California plant that had been functioning for 114 years. By the way, this is the third bottling plant closed by the soda giant. Long John Silvers is closing 700 locations along with their jobs. Popeye's largest franchise owner is filing for bankruptcy. He will close 20 locations. Giant Eagle Food and Drug announced the closing of multiple grocery stores. An operator of 53 Applebee's is declaring bankruptcy. You can add to the list of stores, Subway and Domino's. High-tech, Cloudflare (NET) is laying off 1,000. Another high-tech, Oracle (ORCL) is dropping 21,000 workers. This is not a typo. The race to AI is expensive and needs a lot of power. High-tech firms in the race are seeking to maintain their stock price as they spend excessively. Something has to give?...Peace.

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