The current market rally from the recovery stimulus is now the longest in history. Of course, the latest obstacle to it is the early stages of a trade war. However, as I have pointed out in past pieces like China's excessive leverage problems or the US housing problems where the traditional starter home is being by-passed in the so-called housing recovery - the market keeps trudging along. It has a few down days over news or fears, but then, it finds its footing to move higher.
If you want to be technical about the progression to new highs, I understand. The Dow hit its high this year back in January. Nevertheless, the small cap and Nasdaq hit highs since that time. Overall, the market stays above 25,000 or near its high which can be called a consolidation.
Bigger Picture...
There is also the total picture and this one offers more truth. It is also way bigger than the stock market. It is the bond market. US bonds as demonstrated by the 10 - year note has been in a range. Upward pressure has been exerted by the Fed who say that they are now near neutral in a gradual return to the normalization of interest rates. The market, however refuses to believe in the Fed's ability or determination to raise rates back to reality(my choice of wording). This has kept downward pressure on long term rates.
In the time lapse since the financial crisis of 2008, the Fed gives BS about inflation, their tool box and using the media like the bully pulpit to control both the masses and Wall St. It has worked, but the world is changing. China is seeking control away from the Fed. To achieve their aim, they have forged alliances, offering gold for oil and now, spending a trillion or more to develop and control a new silk trading road. Europe has broken away from the US with their central banks. They are going beyond low - to negative rates. This is what happens with fiat money. Its true value gets exposed with time. It is actually worth less over time. The central banks of Europe are outwardly stealing from their citizens and in more ways than one.
The US government is working behind the scenes to keep the "petrol dollar." If all nations must use US dollars for oil, then the cornerstone for control by the Fed is in place. This is why the Chinese are offering gold for oil in trading. It is too early in the game to know if this could be a turning point. Yes, there are other factors, but these are the trends in place.
With that said, we return to the bond market for insight. At present, the rising dollar is killing emerging market nations. They borrowed money at lower rates and with a lower dollar. Now, rates are higher as well as the dollar. They have to buy dollars for oil and other commodities, but most of all, financing. Investors always seek yield and safety of that yield. It is why bond trading is controlled by Wall St. Emerging market nations are suffering a double whammy of higher rates and a higher dollar to conduct transactions. Anyone, saying that emerging markets is a buy in nothing more than a shill. They are hurting. China is trying to use that hurt to gather them into their fold. If you go(EM), you will be entering the cave of heroin and watched by a dragon. It is the siren call to your own death.
There is another problem in the bond market. Because the Fed is raising rates and Wall Street does not believe them, we are approaching what is called, inverted yield. The debate is reflected in this fashion. The inverted yield means that short term rates are higher than long term rates. It has not happened, but we are very, very close. Whenever this happens, a recession soon follows.
There are red flags that are pushing this condition in bonds. First, inflationary lies. This is something that I have talked about constantly. The Fed lies about inflation because it directly effects the second reason which is debt. Excessive debt by all in America. If rates were normal, the following three would have great difficulty in servicing their debt. The government is over $21 trillion and projected to add a trillion each year for the decade. Corporations used their capital for buybacks instead of paying down debt or research. They used it for mergers and acquisitions to which added to their liabilities. They have debt up to their eyeballs. Finally, the US citizen has run up credit card debt that recently passed one trillion and student loan debt that also passed one trillion. When they are repaying this debt on monthly installments, it will be higher and higher due to rising rates. It will become more difficult as time passes. It will probably first show up in delinquent car loans, but it will surface. Debt has to be repaid. A day of reckoning is approaching and it will be painful and ugly. These are the reasons why Wall St. does not believe the Fed will raise rates to normalcy.
Finally, consider this big lie...
Lending is based on the US 10 - year bond. Currently, the rate is around 2.99%. This is higher than Europe where in Germany it is only .31% for the same term. In Switzerland it is worse, .09%. These banks are stealing from their citizens. This sends investors to US bonds. In Japan, the rate for the same term is .08%. Crooks! It is like this throughout the world. You can get higher yields in Brazil at 11.62%, but their fiat money could become worthless. Risk must always be in the equation. So, investors buy US bonds, but the Fed is the central liar of all liars. Consider everything in pricing going back 10 years? If you buy a US 10 - year note, it now pays 2.99% and the 30 - year bond pays a paltry 3.32% or for the added 20 years, a buyer only receives .33% higher. Get Real! Simple logic says, if in ten years you get almost 3%, then 30 years should get 3x 3% higher. See how they steal? These people are corrupt! By this logic we are already at negative rates and logic tells me this is already an inverted yield. Danger ahead!
News Flash: 3- and 5-year yields fell to negative 1.4 basis points on Monday. Then, the 2- to 10-year soon followed. First time since 2007 that we have an inversion in notes. This is a major warning to the economy and the strongest indicator that a recession will soon appear.
Wednesday, December 5, 2018
Wednesday, November 28, 2018
Odds and Ends - November 2018
The stock market is reflecting a sad trait in human behavior. Each of us has a boiling point where we lose our patience. It is ironic that the current market volatility coincides with our national holiday of Thanksgiving.
Inside many homes their is a divisive attitude that generally splits along gender lines. The women do all the cooking while the men get to talk, watch football and relax. It is not just the cooking, but the prep work as well as the shopping. The usual chores. Good husbands help and remind their wives that friends and relatives travel many miles to share the day. It generally goes well unless someone with a too strong opinion on an issue causes old memories to surface which results in unkind words or bad vibes. The lack of patience of putting self before others and not counting the blessings.
This is the stock market. Before it could brush off the usual suspects like the Middle East, excessive debt by corporations and nations, migrations problems and whatever the news could throw at it.
Now, the boiling point of trade tensions and Fed rate hikes lead the list as water overflows the pot. The turkey is dry. Did someone forget to baste it? Finger pointing leads to loudness and speaking without thinking, The market uses math formulas that trigger buying or selling without human thinking. At the moment the selling triggers more selling as the system is running the market. The computer does not know patience or cares about the trait. It follows its engineering just like the Fed is trying to manipulate an engineered economy. Here are some other aspects that are on the table along with the turkey, mash potatoes and carrots.
Cost of Money
Banks and other money users like to use short term financing to adjust their books at the end of the month except these rates are rising. One reason is the Fed is no longer supplying these assets to the market. These funds are expiring from the stimulus of the Fed from the financial crisis of 2008. Short term rates have risen and this cost is hurting the bottom line for many institutions. They will cut costs which means come January layoffs will be announced. This is like trying something that you have doubts about and after you tasted it, you regret it. Meanwhile, the Fed is drinking around the punch bowl. When the layoffs become widespread, they will enter the vault for the emergency playbook. It has one verse, "Throw money at it!"
FAANG STOCKS
If you do not own them because you cannot afford them, I understand. However, it is important to realize these market, technology leaders are diving off a cliff.
Company WAS NOW
*FB $220 $131
*AMZN $2,050 $1502 and touched $1,420.
*AAPL $232 $172
*NFLX $419 $258
*GOOG $1,273 $1,024 and fell below 1K
In addition, the overall market has declined by 10% which is correction level. One reason points to rising interest rates. The question emerges, "Why risk the market when I can get a short term 3% in safe notes? I can wait, collect interest and then, make a decision." Money is in competition with the capital intensive industries which only drives up the rates even higher. As 2019 arrives, the debate will intensify between securities and bonds. If rates keep rising, the tug of war will be won by notes. This makes more money leaving the market and lower prices. This will be the focal point of the market in the coming year.
Bit Coin
As my regular readers know, I'm against the cryptocurrency. I'm for precious metals. With that said, the digital money is still competing for investors money. Lately, they have been hurting like the New York football teams. The cryptocurrency has plunged 24% just last week. It has lost $700 B since January of this year. Nevertheless, traders do not believe this decline is capitulation. The new kid on the block once touched $20K and now, below $4K. It looks like it will hit $3K and then, $1300 is in the cards. After that, $700 and then, ZERO! I just hope these people will turn to gold which even in the crosshairs of fiat governments worldwide, cannot distort its legacy as a holder of real value.
Housing
This is still the most important consumer item in our consumer society. Sales for existing homes rose in October, but they have fallen in six of the last seven months. With rising interest rates the outlook at best is stagnation. However, there is another aspect that is affecting the industry: flippers.
Flippers activity in the market has declined by 18%. They cite rising prices of all homes and material costs are also higher. It looks like these housing repairmen are moving into another segment in the field: NPLs(non-performing loans).
There is still 800,000 non-performing loans out there in the market. These are loans defined by being at least 90 days behind payment. According to Black Knight Inc, this is not a great sign for the market as small investors are buying these notes and seeking to collect. Many of the homeowners who still reside at these residences, believe that since they have not heard from the original lending institution that their mortgage was forgiven. There will be $135B worth of crying in 2019.
OIL
You can never overlook the most important commodity as it relates to the economy. In an aspect that does not make sense other than seasonal aspects, oil is declining. President Trump put sanctions on Iran and the loss of this producer has not caused disruption. This is in addition to Libya and Venezuela, two messy producers, which does not help the market. This is great for consumers, but I feel this will only be temporary at best. You can see the price decline in the XLE as well as the XOI. The supply shortages have been made up by Saudi Arabia, Russia and the US.
energy sector WAS NOW
*XLE $78. $63.
*XOI $1603 $1262.
AUTO
Car sales are still strong. The US is seeking a record of 17m for four straight years. I think it will fall short, especially when you consider the average price of a new vehicle is in the $30s which was the price of a home in the 70s. You can thank the Fed for lowering the purchasing power of the dollar and our overall declining standard of living.
News Flash: GM is closing 5 US plants and laying off thousands. So much for giving US corporations huge tax cuts to incite them to bring production back to the US. GM claims this is a transition to electric cars except one of the factories made the Volt, their electric car. I guess GM remembers the clause in the new NAFTA deal whereby workers must make so much dinero. Yeah, fire all your high paying veterans and you meet the criteria by employing new lower paid wage earners.
They also say this is forward looking. Yeah, they want plants that are all robotic. They also claim the tariffs hurt them on steel. Maybe they should buy US steel in the first place.
President Trump says he will shut down the government if Congress does not give him money for the Border Wall. The countdown begins, 10, 9, 8...I am so sick and tired of all this deficit spending, year-after-year, administration-after administration. Our national deficit is fast approaching $21 trillion. Funny, the Republicans say less government and less spending and all they do is SPEND!
Finally
Did I hear someone say, "Yay?" Wise guy. Just like the split in the home over chores, especially with the added aspects of the holidays, America seems to have a double standard: one for the rich and one for the rest of us.
A trader for J. P. Morgan with 13 years of experience, John Edmonds pleaded guilty to "spoofing." He said that he learned the technique when he started from veteran traders. In this practice, a trader places an order, but cancels the same order before execution. The idea is to influence future prices which distorts the market. Dear Reader, the market claims no one manipulates the price of precious metals, but Edmonds used the technique in the gold market. The CME claims no price irregularities. Fiat money talks, while real money walks.
No matter what the conversation on Thanksgiving. No matter how the food turned out, the pumpkin pie never disappoints. Peace.
Inside many homes their is a divisive attitude that generally splits along gender lines. The women do all the cooking while the men get to talk, watch football and relax. It is not just the cooking, but the prep work as well as the shopping. The usual chores. Good husbands help and remind their wives that friends and relatives travel many miles to share the day. It generally goes well unless someone with a too strong opinion on an issue causes old memories to surface which results in unkind words or bad vibes. The lack of patience of putting self before others and not counting the blessings.
This is the stock market. Before it could brush off the usual suspects like the Middle East, excessive debt by corporations and nations, migrations problems and whatever the news could throw at it.
Now, the boiling point of trade tensions and Fed rate hikes lead the list as water overflows the pot. The turkey is dry. Did someone forget to baste it? Finger pointing leads to loudness and speaking without thinking, The market uses math formulas that trigger buying or selling without human thinking. At the moment the selling triggers more selling as the system is running the market. The computer does not know patience or cares about the trait. It follows its engineering just like the Fed is trying to manipulate an engineered economy. Here are some other aspects that are on the table along with the turkey, mash potatoes and carrots.
Cost of Money
Banks and other money users like to use short term financing to adjust their books at the end of the month except these rates are rising. One reason is the Fed is no longer supplying these assets to the market. These funds are expiring from the stimulus of the Fed from the financial crisis of 2008. Short term rates have risen and this cost is hurting the bottom line for many institutions. They will cut costs which means come January layoffs will be announced. This is like trying something that you have doubts about and after you tasted it, you regret it. Meanwhile, the Fed is drinking around the punch bowl. When the layoffs become widespread, they will enter the vault for the emergency playbook. It has one verse, "Throw money at it!"
FAANG STOCKS
If you do not own them because you cannot afford them, I understand. However, it is important to realize these market, technology leaders are diving off a cliff.
Company WAS NOW
*FB $220 $131
*AMZN $2,050 $1502 and touched $1,420.
*AAPL $232 $172
*NFLX $419 $258
*GOOG $1,273 $1,024 and fell below 1K
In addition, the overall market has declined by 10% which is correction level. One reason points to rising interest rates. The question emerges, "Why risk the market when I can get a short term 3% in safe notes? I can wait, collect interest and then, make a decision." Money is in competition with the capital intensive industries which only drives up the rates even higher. As 2019 arrives, the debate will intensify between securities and bonds. If rates keep rising, the tug of war will be won by notes. This makes more money leaving the market and lower prices. This will be the focal point of the market in the coming year.
Bit Coin
As my regular readers know, I'm against the cryptocurrency. I'm for precious metals. With that said, the digital money is still competing for investors money. Lately, they have been hurting like the New York football teams. The cryptocurrency has plunged 24% just last week. It has lost $700 B since January of this year. Nevertheless, traders do not believe this decline is capitulation. The new kid on the block once touched $20K and now, below $4K. It looks like it will hit $3K and then, $1300 is in the cards. After that, $700 and then, ZERO! I just hope these people will turn to gold which even in the crosshairs of fiat governments worldwide, cannot distort its legacy as a holder of real value.
Housing
This is still the most important consumer item in our consumer society. Sales for existing homes rose in October, but they have fallen in six of the last seven months. With rising interest rates the outlook at best is stagnation. However, there is another aspect that is affecting the industry: flippers.
Flippers activity in the market has declined by 18%. They cite rising prices of all homes and material costs are also higher. It looks like these housing repairmen are moving into another segment in the field: NPLs(non-performing loans).
There is still 800,000 non-performing loans out there in the market. These are loans defined by being at least 90 days behind payment. According to Black Knight Inc, this is not a great sign for the market as small investors are buying these notes and seeking to collect. Many of the homeowners who still reside at these residences, believe that since they have not heard from the original lending institution that their mortgage was forgiven. There will be $135B worth of crying in 2019.
OIL
You can never overlook the most important commodity as it relates to the economy. In an aspect that does not make sense other than seasonal aspects, oil is declining. President Trump put sanctions on Iran and the loss of this producer has not caused disruption. This is in addition to Libya and Venezuela, two messy producers, which does not help the market. This is great for consumers, but I feel this will only be temporary at best. You can see the price decline in the XLE as well as the XOI. The supply shortages have been made up by Saudi Arabia, Russia and the US.
energy sector WAS NOW
*XLE $78. $63.
*XOI $1603 $1262.
AUTO
Car sales are still strong. The US is seeking a record of 17m for four straight years. I think it will fall short, especially when you consider the average price of a new vehicle is in the $30s which was the price of a home in the 70s. You can thank the Fed for lowering the purchasing power of the dollar and our overall declining standard of living.
News Flash: GM is closing 5 US plants and laying off thousands. So much for giving US corporations huge tax cuts to incite them to bring production back to the US. GM claims this is a transition to electric cars except one of the factories made the Volt, their electric car. I guess GM remembers the clause in the new NAFTA deal whereby workers must make so much dinero. Yeah, fire all your high paying veterans and you meet the criteria by employing new lower paid wage earners.
They also say this is forward looking. Yeah, they want plants that are all robotic. They also claim the tariffs hurt them on steel. Maybe they should buy US steel in the first place.
President Trump says he will shut down the government if Congress does not give him money for the Border Wall. The countdown begins, 10, 9, 8...I am so sick and tired of all this deficit spending, year-after-year, administration-after administration. Our national deficit is fast approaching $21 trillion. Funny, the Republicans say less government and less spending and all they do is SPEND!
Finally
Did I hear someone say, "Yay?" Wise guy. Just like the split in the home over chores, especially with the added aspects of the holidays, America seems to have a double standard: one for the rich and one for the rest of us.
A trader for J. P. Morgan with 13 years of experience, John Edmonds pleaded guilty to "spoofing." He said that he learned the technique when he started from veteran traders. In this practice, a trader places an order, but cancels the same order before execution. The idea is to influence future prices which distorts the market. Dear Reader, the market claims no one manipulates the price of precious metals, but Edmonds used the technique in the gold market. The CME claims no price irregularities. Fiat money talks, while real money walks.
No matter what the conversation on Thanksgiving. No matter how the food turned out, the pumpkin pie never disappoints. Peace.
Wednesday, November 21, 2018
Check the Turkey
Forgive me for using an analogy of our iconic symbol for our day of thanks to our economy, specifically in actions of our Federal Reserve. These bankers think that they can engineer our economy and thus, our lives. Everyone fairly understands the concept of booms and busts and how it effects our economy. Behind every bust is the Fed. Anyway follow this example...
You make and sell a product. Research shows that you have a 20% share of the market in the product that you make. Your bean counters, seeking a raise for themselves, offer this plan. We can increase production by this factor, which should not add to labor costs. Money is cheap to borrow. We can
not only increase our market share, but add x-amount of millions to our bottom line. So, the company enacts the plan. The only problem is your competitors utilize the same concept. Lo, and behold, supply exceeds demand just like our present oil market.
What happens?
Production is cut back(OPEC playbook). Workers hours are reduced. People have less to spend and the chain reaction affects all aspects of the economy. We went from boom to bust.
Enter the Fed.
They open their vault and read the emergency playbook. It says, "Throw money on it." They lower interest rates which allows poorly managed firms to rollover their debt and stay in business. It makes housing, the biggest and most important consumer item, more affordable. It gets management thinking, "Do I take this opportunity to do R&D on the cheap? If I buyback shares, I'll look good when the lower earnings come out because the earnings will be divided by a lower figure? What to do?"
The problem with the US economy is CEOs do the ego trip and buyback shares. These greedy, small minded egos follow their predecessors who outsourced our standard of living to China and elsewhere. This is sad to say, but China is the world's biggest economy. They manufacture the most gasoline cars. They seek to make the most electric cars with recent legislation. In alternative energy, wind and solar, they dominate. It is only ego that says the US is #1. Tariffs should be increased and taxes on US outsourced companies should double to force the return to the US. Anyway, China will want
their currency to be the world's reserve money. Heaven forbid! If that happens, everything that we buy will double in price. Our terrible poverty numbers will double and our standard of living will fall further. This is a future problem. Recent data indicates a more pressing concern.
New Problem
The cheap money that the Fed threw into the economy and which becomes debt, is all used up and now, money is costing more. The first signs of liquidity problems is revealing itself in short term financing. Dear reader, it takes hours to cook a turkey not to mention the days it takes to thaw the bird. Then, you have to constantly baste it so it won't dry out or get burnt. The Fed has suddenly realized that it has been enjoying the party at the punch bowl and not basting the bird or even coordinating the other parts of the meal like turnips, carrots, etc.
The global market is seeing the effects of political influence, which is generally never good. We have tariffs, migrations tensions, Brexit, Iran, Venezuela, Greece, Italy, Spain and the Middle East. We have Asians nations caught in the trade conflict between the US and China and everyone has excess debt that now, costs more. Investors are moving into dollars(safe haven) which hurts emerging markets. The higher dollar hurts all international companies. It does provide small relief to you and me, but it is only temporary.
Those names are the usual suspects except market conditions has banks and financial firms in the crosshair. The lending industry has to have their books balance at the end of the month. They take a short term asset to appear credible. Now, those rates cost more and it is beginning to effect the bottom line. The playbook is to cut costs which means, layoffs. This begins the bust phase in the economy as people have less to spend. This is the small picture. The closer to home aspect. In the big picture, a nation's debt and its ability to service that debt costs more. The US is already at unsustainable levels and with the Fed raising rates(expect one next month). The international market is looking fragile as emerging markets suffer with debt borrowed in US dollars and must be repaid in US dollars.
Finally,
We have the war between the bulls and bears in the market. People, I'm not just talking about the outlook for a stock like GE which has too much debt, but the different investing approaches to the market. As the Fed raises rates, this makes notes the safer and easier decision by investors. Why gamble on the unknowns of the market when I can get secure interest on treasury bills? This struggle for investor money will define 2019. Investors see what happened to Facebook(bear territory). The recent declines in market leaders like Nvidia and Apple(also bear territory). Even dividend firms are being questioned. Where is GEs dividend? LBrands just said all is well and then, cut its dividend in half There are many other examples. The present cloud in the market makes the safety of notes the better choice. Then, there is this aspect. In a higher market(like we have)notes should back off. They are not. Even with the looming expected rate increase by the Fed, they have not backed off. This is a tell by the market. The market believes that the Fed will stop raising rates. The market is reaching a confluence point. The market had better be right because 35% of all S&P revenues come from global aspects. Evaluations are already too high and if earnings falter, the market will tank. Sadly, the Fed relates to the market. If it is high, they conclude all is well. If it falls, get the emergency playbook out.
The turkey is done. Surprisingly. it comes out cooked to perfection. The Fed returns to the punch bowl and toast each other. We give thanks, eat, watch football and fall asleep. Black Friday comes. People shop and life resumes. All seems well except the banking industry is preparing to cut workers in January. Enjoy the day. Enjoy the season because the banking engineers are out of oil to grease the economy. Peace. Plan for a rainy day, but enjoy this one. Happy Thanksgiving.
You make and sell a product. Research shows that you have a 20% share of the market in the product that you make. Your bean counters, seeking a raise for themselves, offer this plan. We can increase production by this factor, which should not add to labor costs. Money is cheap to borrow. We can
not only increase our market share, but add x-amount of millions to our bottom line. So, the company enacts the plan. The only problem is your competitors utilize the same concept. Lo, and behold, supply exceeds demand just like our present oil market.
What happens?
Production is cut back(OPEC playbook). Workers hours are reduced. People have less to spend and the chain reaction affects all aspects of the economy. We went from boom to bust.
Enter the Fed.
They open their vault and read the emergency playbook. It says, "Throw money on it." They lower interest rates which allows poorly managed firms to rollover their debt and stay in business. It makes housing, the biggest and most important consumer item, more affordable. It gets management thinking, "Do I take this opportunity to do R&D on the cheap? If I buyback shares, I'll look good when the lower earnings come out because the earnings will be divided by a lower figure? What to do?"
The problem with the US economy is CEOs do the ego trip and buyback shares. These greedy, small minded egos follow their predecessors who outsourced our standard of living to China and elsewhere. This is sad to say, but China is the world's biggest economy. They manufacture the most gasoline cars. They seek to make the most electric cars with recent legislation. In alternative energy, wind and solar, they dominate. It is only ego that says the US is #1. Tariffs should be increased and taxes on US outsourced companies should double to force the return to the US. Anyway, China will want
their currency to be the world's reserve money. Heaven forbid! If that happens, everything that we buy will double in price. Our terrible poverty numbers will double and our standard of living will fall further. This is a future problem. Recent data indicates a more pressing concern.
New Problem
The cheap money that the Fed threw into the economy and which becomes debt, is all used up and now, money is costing more. The first signs of liquidity problems is revealing itself in short term financing. Dear reader, it takes hours to cook a turkey not to mention the days it takes to thaw the bird. Then, you have to constantly baste it so it won't dry out or get burnt. The Fed has suddenly realized that it has been enjoying the party at the punch bowl and not basting the bird or even coordinating the other parts of the meal like turnips, carrots, etc.
The global market is seeing the effects of political influence, which is generally never good. We have tariffs, migrations tensions, Brexit, Iran, Venezuela, Greece, Italy, Spain and the Middle East. We have Asians nations caught in the trade conflict between the US and China and everyone has excess debt that now, costs more. Investors are moving into dollars(safe haven) which hurts emerging markets. The higher dollar hurts all international companies. It does provide small relief to you and me, but it is only temporary.
Those names are the usual suspects except market conditions has banks and financial firms in the crosshair. The lending industry has to have their books balance at the end of the month. They take a short term asset to appear credible. Now, those rates cost more and it is beginning to effect the bottom line. The playbook is to cut costs which means, layoffs. This begins the bust phase in the economy as people have less to spend. This is the small picture. The closer to home aspect. In the big picture, a nation's debt and its ability to service that debt costs more. The US is already at unsustainable levels and with the Fed raising rates(expect one next month). The international market is looking fragile as emerging markets suffer with debt borrowed in US dollars and must be repaid in US dollars.
Finally,
We have the war between the bulls and bears in the market. People, I'm not just talking about the outlook for a stock like GE which has too much debt, but the different investing approaches to the market. As the Fed raises rates, this makes notes the safer and easier decision by investors. Why gamble on the unknowns of the market when I can get secure interest on treasury bills? This struggle for investor money will define 2019. Investors see what happened to Facebook(bear territory). The recent declines in market leaders like Nvidia and Apple(also bear territory). Even dividend firms are being questioned. Where is GEs dividend? LBrands just said all is well and then, cut its dividend in half There are many other examples. The present cloud in the market makes the safety of notes the better choice. Then, there is this aspect. In a higher market(like we have)notes should back off. They are not. Even with the looming expected rate increase by the Fed, they have not backed off. This is a tell by the market. The market believes that the Fed will stop raising rates. The market is reaching a confluence point. The market had better be right because 35% of all S&P revenues come from global aspects. Evaluations are already too high and if earnings falter, the market will tank. Sadly, the Fed relates to the market. If it is high, they conclude all is well. If it falls, get the emergency playbook out.
The turkey is done. Surprisingly. it comes out cooked to perfection. The Fed returns to the punch bowl and toast each other. We give thanks, eat, watch football and fall asleep. Black Friday comes. People shop and life resumes. All seems well except the banking industry is preparing to cut workers in January. Enjoy the day. Enjoy the season because the banking engineers are out of oil to grease the economy. Peace. Plan for a rainy day, but enjoy this one. Happy Thanksgiving.
Wednesday, November 14, 2018
Battle: State Rights Vs. Federal Government
This conflict started long before our independence. The people who pioneered America knew the tyranny of government, especially the monarchy. They united in the war for liberty, but were conflicted within over how to construct a new nation. States wanted liberties, but realized with a central government, governing would be an easier transition. With the constitution they thought that they had the answer. They settled on democracy as it seemed the least negative in forming a state.
You put things down on paper like an insurance policy, but life and lawyers throw obstacles that the original words on paper did not address. When you think about the civil war in America, one wonders if the southern states had asked for a national vote about leaving the union along with their state vote results, maybe the war could have been avoided? Maybe some type of restitution by the withdrawing states to the federal government could have been reached? It probably would have been a short term fix as European powers would have tried to enter upon the split. It is what it is.
Today
We are entering the debate again as we have often re-visited this question. In all conflicts the federal government wins or at least reaches a compromise. The "pot" question is the latest to enter the fray.
It has many names...
The lingo on marijuana is as vast as the many regions with the US and the world for that matter. It was many years ago when George Harrison of the Beatles was arrested in Japan for concealing some cannabis in his luggage. In many places this is still the law. It is not however in ten US states, and yet, it is still illegal under federal law. If you fly from California where it is legal and land in New York, you will be sent to Riker's Island. If you survive that experience, you will go to court and probably pay a fine. What is one to do?
In our democracy citizens are rarely offered true democracy. We elect lawmakers who do not listen to the people who voted them into office. They condescend citizens by calling their wishes, "Populism."
Nevertheless, politicians understand the changing climate of the masses. They also know the need for more government revenues that are taxes, but never called taxes directly, if possible. So, from time-to-time referendums are added to ballots and government allows its citizens to express their intentions. This is why 10 states now have legal recreational Mary Jane, Thai Sticks, Panama Red, Columbian Buds, Acapulco Gold, Hawaiian and African Black along with your home grown varieties.
Other debate...
There is also the dangers of cannabis. This is the human frailty aspect. It is why some people cannot stop eating. They become fat. It is why some dudes say that they do not feel anything after a few drinks and then, wrap their car around a telephone pole. This is the sad tragedy of our beings. We do not look within like Socrates said, "Know thy self."
Sadly, their will be citizens who use pot only to have it be the gateway drug into something really dangerous and deadly like heroin. For the majority it will be a few moments of pleasure like a cocktail after work. Then, there is also the lies infused into society about the effects of cannabis. These phony made up tales have hid the powerful positive effects of marijuana in medical terms. Some elected leaders have offered a change in perception.Whether it is politicians seeking revenues or learning the truth, cannabis is now allowed legally in 33 states for medical use. In addition, 8 more states are studying the possibility of legalizing pot either for medical and or, recreational. The city of Northampton, Massachusetts thinks it found another hidden treasure in legalizing pot, "tourism." People will drive over the border to buy and return home in the same day.
Bye, bye, Sessions.
Recently, President Trump has stated that he is 100% behind medical marijuana. His AG which is the DA of America , Jeff Sessions was totally against cannabis. Trump forced him out of office. This will probably lead Trump to use pot as a "trump card" when he seeks re-election in 2020. The federal government will want to get their hands on tax revenues from the selling of pot. It is just a matter of time in some smoke filled back room before it becomes public. Count on it. Personally, I'm getting some pot as in cannabis stocks like Aphria or Aurora. Maybe watch an old Cheech and Chong movie?
You put things down on paper like an insurance policy, but life and lawyers throw obstacles that the original words on paper did not address. When you think about the civil war in America, one wonders if the southern states had asked for a national vote about leaving the union along with their state vote results, maybe the war could have been avoided? Maybe some type of restitution by the withdrawing states to the federal government could have been reached? It probably would have been a short term fix as European powers would have tried to enter upon the split. It is what it is.
Today
We are entering the debate again as we have often re-visited this question. In all conflicts the federal government wins or at least reaches a compromise. The "pot" question is the latest to enter the fray.
It has many names...
The lingo on marijuana is as vast as the many regions with the US and the world for that matter. It was many years ago when George Harrison of the Beatles was arrested in Japan for concealing some cannabis in his luggage. In many places this is still the law. It is not however in ten US states, and yet, it is still illegal under federal law. If you fly from California where it is legal and land in New York, you will be sent to Riker's Island. If you survive that experience, you will go to court and probably pay a fine. What is one to do?
In our democracy citizens are rarely offered true democracy. We elect lawmakers who do not listen to the people who voted them into office. They condescend citizens by calling their wishes, "Populism."
Nevertheless, politicians understand the changing climate of the masses. They also know the need for more government revenues that are taxes, but never called taxes directly, if possible. So, from time-to-time referendums are added to ballots and government allows its citizens to express their intentions. This is why 10 states now have legal recreational Mary Jane, Thai Sticks, Panama Red, Columbian Buds, Acapulco Gold, Hawaiian and African Black along with your home grown varieties.
Other debate...
There is also the dangers of cannabis. This is the human frailty aspect. It is why some people cannot stop eating. They become fat. It is why some dudes say that they do not feel anything after a few drinks and then, wrap their car around a telephone pole. This is the sad tragedy of our beings. We do not look within like Socrates said, "Know thy self."
Sadly, their will be citizens who use pot only to have it be the gateway drug into something really dangerous and deadly like heroin. For the majority it will be a few moments of pleasure like a cocktail after work. Then, there is also the lies infused into society about the effects of cannabis. These phony made up tales have hid the powerful positive effects of marijuana in medical terms. Some elected leaders have offered a change in perception.Whether it is politicians seeking revenues or learning the truth, cannabis is now allowed legally in 33 states for medical use. In addition, 8 more states are studying the possibility of legalizing pot either for medical and or, recreational. The city of Northampton, Massachusetts thinks it found another hidden treasure in legalizing pot, "tourism." People will drive over the border to buy and return home in the same day.
Bye, bye, Sessions.
Recently, President Trump has stated that he is 100% behind medical marijuana. His AG which is the DA of America , Jeff Sessions was totally against cannabis. Trump forced him out of office. This will probably lead Trump to use pot as a "trump card" when he seeks re-election in 2020. The federal government will want to get their hands on tax revenues from the selling of pot. It is just a matter of time in some smoke filled back room before it becomes public. Count on it. Personally, I'm getting some pot as in cannabis stocks like Aphria or Aurora. Maybe watch an old Cheech and Chong movie?
Wednesday, November 7, 2018
Currencies and Oil Volatility
There are a few things that everyone wants stable regardless in whatever their government policies dictate. Consumers do not want to see inflation in food, energy and shelter. Contrary to what economists say and the media reports, food is up, gasoline is up, heating oil is up and whether you rent or buy, housing is up. Dear reader, the costs far exceed the phony 2% inflation target approach of the Federal Reserve.
Nevertheless, consumers are told that inflation is benign. I, for one, do not believe the government agencies reports on consumer pricing. People don't keep track of stats, but fortunately for you, Sebastian does. The past week was an alarming change in two metrics that could cause an explosion in inflation. If it occurs, I wonder how the powers-to-be will keep the price of gold down?
Last week, the price of oil dropped significantly which is actually helpful to consumers, but the correlation in the drop in value of the dollar will offset the savings in oil. This is where the market is reaching a crucible point.
Major Currencies:
Keep in mind that emerging markets must utilize the US dollar in making purchases in oil. When the dollar rises this adds a burden in costs to these nations. Now, if their other trading partners for example like any nation in the EU and the euro goes up in value, this adds more costs and stress to their economies. This is what is happening in the present market. Then, there is the Brexit situation. What happens to the pound? This too will disrupt world trading and economies. Houston, we have a problem.
Last week change in values.
First, I'll look at the US dollar since it is the world's reserve currency. A distinction that China wants.
* USD - went from a low in February of this year at 88 to a high in August at 96. Then, it dropped to 93, but resumed its climb with a new high at 97. Keep in mind that in 2017 the dollar touched 104. Now, it is holding price at 96.34. This is a strong price.
The strength in the dollar is good for oil producing nations as they get a higher value for their product. I mention this aspect because this week President Trump has imposed sanctions on Iran. He wants a new deal. Under the previous sanctions, Iran saw a significant drop in revenues which led to a big drop in oil production from the 4m to 5m range down to one million barrels in sales. Fortunately for the global community that loss in barrels was made up by increasing production from the US, Russia and Saudi Arabia. The improving world economies from the 2008 crises made demand exceed supply. Prices rose and everyone suffered until the Iran nuclear deal was agreed upon. Iran oil entered the market which led to an oil glut. Prices dropped. Everyone was happy except the oil companies. Many went out of business. Fast forward to today. Now, we are facing world demand with less oil on the market. This major aspect will effect the value of the major world currencies as I repeat in my unpublished book, "All things are connected."
(I will show the change in oil prices after the currencies.)
*Euro - it has declined in value which makes the EUs exports cheaper, but it showed a big jump last week from 1.13 to 1.145 in exchange. This trend could be fast and furious.
*Pound - Brexit fears are building and along with them is what will be the exchange rate for the pound? It jumped from 127 to 130 which is a huge move. Currencies are usually slow like the Titanic turning and for this rapid change in value in one week is off the charts.
*Yuan - the Chinese dollar continues to fall which makes their exports cheaper. Is this a coincidence that the US and China are having tariff tensions as China seeks to be even cheaper for buyers? People, they are the poster child for currency manipulation.
OIL
We can talk about trade, tariffs and currencies all we want, but the elephant in trading is oil. Funny, the Federal Reserve does not include the world's most valuable export in their inflation matrix. Crooks! Anyway, oil has been declining rapidly while at the same time the new sanctions on Iran cuts off a big world producer with world demand rising. This is a conundrum if there ever was one. Oil by the barrel has dropped from a high in August of $77 a barrel to $63 last week. Many see oil touching $58 and possibly $55. Wow! Another way to view the price action in oil is through the oil index(XOI). The value change is mind blowing. The index went from 1600 in October to 1349 last week and it touched 1325. This is less than 30 days. How can that be? Keep in mind that two other producers, Libya and Venezuela are a mess. Prices are falling and one reason is the seasonal factor in oil, but if things remain the way that they are, prices will return to $90 or more early next year. This is what I see. Find a cheap oil stock in December and come next spring, you can go fishing 'cause you will catch a big one.
Nevertheless, consumers are told that inflation is benign. I, for one, do not believe the government agencies reports on consumer pricing. People don't keep track of stats, but fortunately for you, Sebastian does. The past week was an alarming change in two metrics that could cause an explosion in inflation. If it occurs, I wonder how the powers-to-be will keep the price of gold down?
Last week, the price of oil dropped significantly which is actually helpful to consumers, but the correlation in the drop in value of the dollar will offset the savings in oil. This is where the market is reaching a crucible point.
Major Currencies:
Keep in mind that emerging markets must utilize the US dollar in making purchases in oil. When the dollar rises this adds a burden in costs to these nations. Now, if their other trading partners for example like any nation in the EU and the euro goes up in value, this adds more costs and stress to their economies. This is what is happening in the present market. Then, there is the Brexit situation. What happens to the pound? This too will disrupt world trading and economies. Houston, we have a problem.
Last week change in values.
First, I'll look at the US dollar since it is the world's reserve currency. A distinction that China wants.
* USD - went from a low in February of this year at 88 to a high in August at 96. Then, it dropped to 93, but resumed its climb with a new high at 97. Keep in mind that in 2017 the dollar touched 104. Now, it is holding price at 96.34. This is a strong price.
The strength in the dollar is good for oil producing nations as they get a higher value for their product. I mention this aspect because this week President Trump has imposed sanctions on Iran. He wants a new deal. Under the previous sanctions, Iran saw a significant drop in revenues which led to a big drop in oil production from the 4m to 5m range down to one million barrels in sales. Fortunately for the global community that loss in barrels was made up by increasing production from the US, Russia and Saudi Arabia. The improving world economies from the 2008 crises made demand exceed supply. Prices rose and everyone suffered until the Iran nuclear deal was agreed upon. Iran oil entered the market which led to an oil glut. Prices dropped. Everyone was happy except the oil companies. Many went out of business. Fast forward to today. Now, we are facing world demand with less oil on the market. This major aspect will effect the value of the major world currencies as I repeat in my unpublished book, "All things are connected."
(I will show the change in oil prices after the currencies.)
*Euro - it has declined in value which makes the EUs exports cheaper, but it showed a big jump last week from 1.13 to 1.145 in exchange. This trend could be fast and furious.
*Pound - Brexit fears are building and along with them is what will be the exchange rate for the pound? It jumped from 127 to 130 which is a huge move. Currencies are usually slow like the Titanic turning and for this rapid change in value in one week is off the charts.
*Yuan - the Chinese dollar continues to fall which makes their exports cheaper. Is this a coincidence that the US and China are having tariff tensions as China seeks to be even cheaper for buyers? People, they are the poster child for currency manipulation.
OIL
We can talk about trade, tariffs and currencies all we want, but the elephant in trading is oil. Funny, the Federal Reserve does not include the world's most valuable export in their inflation matrix. Crooks! Anyway, oil has been declining rapidly while at the same time the new sanctions on Iran cuts off a big world producer with world demand rising. This is a conundrum if there ever was one. Oil by the barrel has dropped from a high in August of $77 a barrel to $63 last week. Many see oil touching $58 and possibly $55. Wow! Another way to view the price action in oil is through the oil index(XOI). The value change is mind blowing. The index went from 1600 in October to 1349 last week and it touched 1325. This is less than 30 days. How can that be? Keep in mind that two other producers, Libya and Venezuela are a mess. Prices are falling and one reason is the seasonal factor in oil, but if things remain the way that they are, prices will return to $90 or more early next year. This is what I see. Find a cheap oil stock in December and come next spring, you can go fishing 'cause you will catch a big one.
Wednesday, October 31, 2018
The TEST Is Coming
Did the capitals catch your eye? No, this is not an eye exam. Since this is a political and economic blog, you can quickly eliminate many choices. To save time and space let me get to it.
The Market
It has been volatile lately, and in a previous piece I pointed out to you how big money is looking at the market under the eyes of greed and fear. Individual money managers realize that there are less than 60 trading days left in the market for the year. Why risk my 30% profit in Apple when I see another media giant, Facebook already at a loss for the year? Big Blue, IBM is touching the low end range of its 2008 low and GE continues to reveal excessive debt, hidden book looses and cut its dividend. The manager is thinking, sell. Take profits and if things settle down, buy back at a lower price. Good logic. You can never lose if you take profits before pullbacks.
There is another point to be considered. I found when I first entered the market many years ago that charting was more accurate and easy for me to understand. One could block out the name of a stock and just read the chart to get a feel to where the company was going.
The problem with charting is this: half of the market and mostly, the big firms like fundamental knowledge of a corporation before placing money into it. For example, if interest rates are in the normal range, the banking industry will do well with the spread in the cost of money. If the crack spread in oil is right, refiners will clean up. If a banking firm is dealing exclusively with a company that needs money for a new gismo that will sell like crazy, they're in. This is the way the market works. Today, I like to begin with charts and add whatever limited fundamental aspect that I know to make a decision to invest. I do have one problem in investing. I'm pro gold and the market is pro fiat.
Nevertheless, human nature still effects the market and one truth about charting is this: a stock whether is in an up trend or down trend will always test the point where volume meets a transition point. At present the charts indicate that the market is heading down to meet the low of the year back in February.
As of last Friday the following prices for the main indexes were:
Friday February low
*Dow 24,688 23,400
*S&P 500 2658 2532
*NASDAQ 7167 6630
*Small cap 1483 1436
Those targets could be met by the end of the month or early in January, but they will be met. The point that you should entertain is the volume on the day of the test. If it is lower than the February low, the test points to a higher market from that point. If the volume is higher than back in February that says the market will continue downward to the next level of support or resistance. Keep your EYES on the Chart.
The Market
It has been volatile lately, and in a previous piece I pointed out to you how big money is looking at the market under the eyes of greed and fear. Individual money managers realize that there are less than 60 trading days left in the market for the year. Why risk my 30% profit in Apple when I see another media giant, Facebook already at a loss for the year? Big Blue, IBM is touching the low end range of its 2008 low and GE continues to reveal excessive debt, hidden book looses and cut its dividend. The manager is thinking, sell. Take profits and if things settle down, buy back at a lower price. Good logic. You can never lose if you take profits before pullbacks.
There is another point to be considered. I found when I first entered the market many years ago that charting was more accurate and easy for me to understand. One could block out the name of a stock and just read the chart to get a feel to where the company was going.
The problem with charting is this: half of the market and mostly, the big firms like fundamental knowledge of a corporation before placing money into it. For example, if interest rates are in the normal range, the banking industry will do well with the spread in the cost of money. If the crack spread in oil is right, refiners will clean up. If a banking firm is dealing exclusively with a company that needs money for a new gismo that will sell like crazy, they're in. This is the way the market works. Today, I like to begin with charts and add whatever limited fundamental aspect that I know to make a decision to invest. I do have one problem in investing. I'm pro gold and the market is pro fiat.
Nevertheless, human nature still effects the market and one truth about charting is this: a stock whether is in an up trend or down trend will always test the point where volume meets a transition point. At present the charts indicate that the market is heading down to meet the low of the year back in February.
As of last Friday the following prices for the main indexes were:
Friday February low
*Dow 24,688 23,400
*S&P 500 2658 2532
*NASDAQ 7167 6630
*Small cap 1483 1436
Those targets could be met by the end of the month or early in January, but they will be met. The point that you should entertain is the volume on the day of the test. If it is lower than the February low, the test points to a higher market from that point. If the volume is higher than back in February that says the market will continue downward to the next level of support or resistance. Keep your EYES on the Chart.
Wednesday, October 24, 2018
Odds and Ends, Oct. 2018
Interesting thought. Last week on the 19th of October was the 31st anniversary of the Dow's biggest percentage drop in a day. It fell 22%. If this happened today that would equate to 5,700 points. Yowza!
I mention this due to the recent high volatility in the market. As stated in a recent piece, the big boys pulled out the old playbook. They buy when everyone else sells. This steadies the market, but Sebastian is taking a closer look. He does not like what he sees.
In the S&P 500, there are 139 stocks in bear territory. In addition, 66 of these companies are off 50% or more from their highs. Our media rarely provides info on other markets, but we do. The Shanghai index is down 30% for the year. Ouch! The IMF said inflation in Venezuela is one million percent. That is a seven digit ouch!!!!!!!
The Dow would have been down for the week last week if not on Friday when P&G and American Express reported a stellar quarter. The NASDAQ however reflected the mixed market. It fell, again. Technology led the NASDAQ up and now, it is bringing it down. If you look at the chip sector, it is getting messy.
*AMD was $34. Now, it is $24 and heading for $17.
*NVDA was $292. Now, it is $204 and heading to $198.
*LRCX was $209. Now, it is $145 and heading for $119.
IWM is testing its 200-day moving average and the up or down breath on NASDAQ is below 50%.
The charts get more alarming. The banks had good numbers, but the stocks cannot hold price. Net flix had good numbers and it too can't hold price. The charts say that if this trend continues Amazon could fall to $1416. If you bought at the high($2033) I can hear you say #*_* and many more unprintable emotions.
It is not just the stock market that is causing concern. States, especially old Northern stomping grounds are feeling a stress over taxes.
Tax Migration is the problem. There is a lot of news on world migration whether in Europe or the US southern border, but north of the Mason-Dixon line is having a different spin on the problem. Wealthy citizens are moving South, most notably to Florida and Texas because they are tax free states on income and state taxes are lower. California is experiencing this too as their citizens move to Nevada. State budgets and pensions will soon gather headlines.
Speaking of state taxes leads us to the home building industry. Bank of America just downgraded three big construction firms: Toll Brothers, Pulte and Lennar. Zillow reported that California leads the nation in unaffordable housing and affordability in general is the worse since the housing crisis. The ITB, the ETF for home builders is in bear territory. Another firm, D.H. Horton reported disappointing sales with poor guidance.
Home sales declined another 3.4% in September and mortgage rate are at 5% and set to climb again before the year ends. Not good and getting even worse.
Subprime: It's back! Banks are providing capital for buyers who won't need a down payment, and they will receive a low interest rate loan. The test market is South Florida. Sebastian also found this: An internet company is offering a shady service whereby a customer can use. They will provide a phony job, salary and more. They will even answer a phone call to verify the phony report. This is very, very bad.
Tariff War continues as well as our deficits with imports. A new record was set in August at over $50 billion in the negative column. For the year the federal deficit is at $780 billion and racing toward a $trillion. This insanity has got to stop!!! Central banks have increased their "assets" or fake money from less than $1 trillion in 1987 to over $19 trillion today. The New York Fed reported that US consumers have the highest debt on record at $13 trillion. This includes mortgages, credit cards, student loans, car debt, etc. If wages cannot keep up with debt service, citizens are in trouble. If revenues cannot keep up with deficits our dollar is in trouble. Together, this is not good.
Elections are coming...if you vote for any Libertarian consider this: Three large tuna companies all pleaded guilty in price fixing. They kept the price of tuna artificially high. Libertarians say we do not need government regulations. Idiots! How many times have corporations been caught doing practices like this like the OPEC oil cartel like the banks connected to the Libor scandal like the firms who provided equipment to the Tennessee Valley Authority and on and on...
If all this is getting you depressed and hungry, it is diet time. Five chains are shrinking so check before you go to Chipotle, Starbucks, Subway, Noodles or Applebee's. They may have moved or closed the location. Maybe you haven't been getting a good night's sleep. Thinking of buying a new mattress? Don't bother going to Mattress Firm. They just filed for bankruptcy.
On a lighter note: Auto manufacturers have recalls on 70 million vehicles. You can find out if the car that you are driving is on the list and repairs are free. Go to: SaveCar.gov.
I mention this due to the recent high volatility in the market. As stated in a recent piece, the big boys pulled out the old playbook. They buy when everyone else sells. This steadies the market, but Sebastian is taking a closer look. He does not like what he sees.
In the S&P 500, there are 139 stocks in bear territory. In addition, 66 of these companies are off 50% or more from their highs. Our media rarely provides info on other markets, but we do. The Shanghai index is down 30% for the year. Ouch! The IMF said inflation in Venezuela is one million percent. That is a seven digit ouch!!!!!!!
The Dow would have been down for the week last week if not on Friday when P&G and American Express reported a stellar quarter. The NASDAQ however reflected the mixed market. It fell, again. Technology led the NASDAQ up and now, it is bringing it down. If you look at the chip sector, it is getting messy.
*AMD was $34. Now, it is $24 and heading for $17.
*NVDA was $292. Now, it is $204 and heading to $198.
*LRCX was $209. Now, it is $145 and heading for $119.
IWM is testing its 200-day moving average and the up or down breath on NASDAQ is below 50%.
The charts get more alarming. The banks had good numbers, but the stocks cannot hold price. Net flix had good numbers and it too can't hold price. The charts say that if this trend continues Amazon could fall to $1416. If you bought at the high($2033) I can hear you say #*_* and many more unprintable emotions.
It is not just the stock market that is causing concern. States, especially old Northern stomping grounds are feeling a stress over taxes.
Tax Migration is the problem. There is a lot of news on world migration whether in Europe or the US southern border, but north of the Mason-Dixon line is having a different spin on the problem. Wealthy citizens are moving South, most notably to Florida and Texas because they are tax free states on income and state taxes are lower. California is experiencing this too as their citizens move to Nevada. State budgets and pensions will soon gather headlines.
Speaking of state taxes leads us to the home building industry. Bank of America just downgraded three big construction firms: Toll Brothers, Pulte and Lennar. Zillow reported that California leads the nation in unaffordable housing and affordability in general is the worse since the housing crisis. The ITB, the ETF for home builders is in bear territory. Another firm, D.H. Horton reported disappointing sales with poor guidance.
Home sales declined another 3.4% in September and mortgage rate are at 5% and set to climb again before the year ends. Not good and getting even worse.
Subprime: It's back! Banks are providing capital for buyers who won't need a down payment, and they will receive a low interest rate loan. The test market is South Florida. Sebastian also found this: An internet company is offering a shady service whereby a customer can use. They will provide a phony job, salary and more. They will even answer a phone call to verify the phony report. This is very, very bad.
Tariff War continues as well as our deficits with imports. A new record was set in August at over $50 billion in the negative column. For the year the federal deficit is at $780 billion and racing toward a $trillion. This insanity has got to stop!!! Central banks have increased their "assets" or fake money from less than $1 trillion in 1987 to over $19 trillion today. The New York Fed reported that US consumers have the highest debt on record at $13 trillion. This includes mortgages, credit cards, student loans, car debt, etc. If wages cannot keep up with debt service, citizens are in trouble. If revenues cannot keep up with deficits our dollar is in trouble. Together, this is not good.
Elections are coming...if you vote for any Libertarian consider this: Three large tuna companies all pleaded guilty in price fixing. They kept the price of tuna artificially high. Libertarians say we do not need government regulations. Idiots! How many times have corporations been caught doing practices like this like the OPEC oil cartel like the banks connected to the Libor scandal like the firms who provided equipment to the Tennessee Valley Authority and on and on...
If all this is getting you depressed and hungry, it is diet time. Five chains are shrinking so check before you go to Chipotle, Starbucks, Subway, Noodles or Applebee's. They may have moved or closed the location. Maybe you haven't been getting a good night's sleep. Thinking of buying a new mattress? Don't bother going to Mattress Firm. They just filed for bankruptcy.
On a lighter note: Auto manufacturers have recalls on 70 million vehicles. You can find out if the car that you are driving is on the list and repairs are free. Go to: SaveCar.gov.
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