- 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.
