Inflationary Outlook

 Two words: Not good!

We all know about the supply chain problems. It is the repercussions of it that gets little attention. This is how inflation becomes imbedded. When prices rise, they do not return to their lower level. You cannot buy a new Mustang for $1995 like in 1965. The phony Fed and politicians will claim victory when prices stabilize, however we all will have to live with the same income to purchase higher price necessities. Also, watch oil! Every time it hits $100-per barrel, we have a recession. It is guaranteeing our call in 2021. However, there are other aspects to ponder.

We begin with the words from the horse's mouth. The CEO of Norway's and the world's largest wealth fund, Nicolai Tangen sees continuing inflation. This will decrease returns from the market. He believes inflation will touch 9%. 

It gets worse...

There was a series of announcements by some of America's and the world's largest firms. The message was that they will be raising prices this spring. Famous brand names like Tide, General Mills and Ikea made the call. Firms that carry brand names also made similar calls. Kraft/Heinz which markets Maxwell House, the Ketchup, Oscar Mayer and Velveeta cheese will also rise by 9%. Many other firms are going to the old playbook: smaller package, less product, but keeping the same price.

When you return home, your mail will also carry bad news. Rents are rising 14% on a national level. How about a home purchase? If you could not afford one in the past, the future will be less kind. Then, there is a question of taxes and utilities? They will rise in every state and the federal government knows it had better find a way for increasing their revenues or the dollar could tank. If "King Dollar" begins to crater, inflation will go off the charts. Maybe this is why the streaming services like Disney, Netflix and others have already raised their subscription pricing. They want you to be ready and addicted to their programing. 

Shadowstats.com

Ever visit the site? It is run by a good guy, John Williams. He is honest and he has been around the block a few times. Anyway, when the government released their report on inflation by the Labor Department for the year 2021 and ending in December, it said inflation was at 7%. Well, this almost gave JW a heart attack. The report went on to say that the current inflation is the highest since 1982. John Williams steadied himself. He reminds us of the formula that was in place two years earlier in 1980. The government retooled the inflation matrix. Manipulation is a better word. If our present government had used the 1980 formula, guess what our present inflationary rate would be? 15%. Ouch!!

There was also a burb on our national debt. It stated that our debt has passed $30 trillion. We are the worse in the world. That is another ouch!! Anyway, the shills immediately came out from under the carpet to say that our debt was only $22 trillion. The BS centered around the point that $8 trillion was planned debt and not actual debt. They gave the example of a homeowner remodeling his kitchen. The cost would be so many dollars, however the homeowner is not in debt for the repair until he actually has the work done. This is pure BS! If that is the case, our national debt is actually over $100 trillion. Yes, because we will owe for social security, Medicare and of course, future interest on the culminated debt. Debt gets compounded and worse as it builds. The shills did not mention this aspect.

The next inflation report comes out tomorrow. It will show another increase. It should say that our annual rise is up to 7.3%. We'll see says the blind man. Anyway, there is one other tidbit that I would like to bring to your attention. If we enter a recession for whatever reason, our dollar and banks could suffer which also means that we all will pay a price. Did you know that back in the 1970s when inflation was terrible, that our Fed and FDIC had a plan in case our banks were to suffer with their loans to the 3rd World? The plan was to nationalize our banks and banking system. Another reason to End the Fed!   Peace.

Second Corrupt Link

 - "judiciary...will always be the least dangerous to political rights of the constitution. The Executive holds the sword. The legislature controls the purse and makes the rules. The judiciary has no influence and can take no active resolution whatever."

- Alexander Hamilton advocating in his Federalist Paper #78.

Quick review:

The Federalist Papers were written to get each free colony/state to ratify the constitution and become one new nation. Dear Reader, you know my stance on the phony, corrupt Federal Reserve. They are destroying our nation's living standard. By breaking away from gold to fiat, it has allowed the military to spend and influence both political parties for its purposes. However, there is another corrupt link within our system, the Supreme Court. 

Last week, Judge Stephen Breyer said that he will retire. Who will Biden get to replace him? Early politics says it will be a black woman. I say, I could care less. Why, you ask?

Did you not read the above BS by Hamilton? He got away with it because people had less education and what was known was passed down by word of mouth. The knowledge of the time said that European aristocrats took advantage of people with the court system. Judges were appointed by the rich for the rich, just like our Federal Reserve. Anyway, a wealthy person could employ a carpenter to remake his stables and coach. After the job was completed. He didn't pay. Go to court! The judge always favored his rich cousin over the working class. No justice! People believed Hamilton's lies. It didn't take long for the oversight in forming this third branch of government. By the way, Jefferson said that he never intended for the court to have the power it took by the oversight.

Judicial Review...

became the oversight. It resulted in saying that the supreme court has the last word to review actions by Congress or the Executive. It was said that this is the checks and balance within the three branches of government. This is a lie!

There is no check and balance. It is checkmate! Whatever the court decides becomes law of the land with no one having a say in this appointed realm. Yeah, the constitution gives us the right to add amendments. This is very difficult. For example, at one time, the court said that "separate but equal" was valid. No one even offered to fight this ruling with an amendment. People, you can get any decision that you seek as long as you put people in power who favor your thinking. There is no independent thinking. This is a myth! 

I have a solution. It is in my unpublished work, The Evolution of Democracy: The Book of Multiple Ideas and Predictions. However, if I put the answer here in the blog, who will buy the book if it ever gets published? Another reason is theft. Someone with influence can read and take the idea. He can claim it is his own. I'm sorry, but this is the way the world really operates. Too bad in 1789, the colonists didn't have a Monday Morning Quarterback. They could have amended the power of the court with my resolution. Peace.

Odds and Ends: January 2022

2022 is the Year of the Tiger and it's hungry. The big cat is not the only one. The bear woke up from hibernation. It is very hungry. Worker bees all over the earth are seeking more for their efforts. This is one part of the inflation scenario. Then, there are evil workers like hackers. In 2021, they hit 77 government agencies, over 1,000 schools and over 1100 medical outlets. Everyone and everything are in a biting mood. The January barometer is negative which indicates a down year on the market. It could be like 2020 and bad for everyone?

We called the market. A correction is a natural occurrence in the marketplace. However, there is another bear that is threading on thin ice. The Russian buildup along the Ukrainian border is a very dangerous ploy. It has all the stupidity and ego of war-mongering generals. We fear their plan is to do a blitzkrieg. They will run from the North border, take the country by force and then, entrench their army on the other side of the nation. This will be the new border with Europe and NATO. 

Problem...

One jet with nuclear capability sees a tempting target. The pilot sees a field of tanks, weapons and nearby troops. One bomb, he thinks will end this. The consequences of this unforeseen action could and will destroy half the world. It will starve most of the survivors due to contamination, and for what? Live and let live, you stupid idiots!

Meanwhile...

workers need a living wage. Every job is important. There is a great example in Russia, that's right, the Russians are a great people. It is their leaders like ours that suck. Anyway, no one respected or wanted to do the work associated with garbage pick-up. The idea was to teach in school the respect these workers deserved. They do sanitation. They pick-up trash that smells. Those odors can eventually kill. They prevent bacteria and viruses from developing and spreading. They make our life better. We need this kind of teaching in our schools. Workers need rewards for their efforts. This is why, we, at Evolution back unions.

Now, some good news...

Good Act (Bill)

This bill stops medical facilities from ripping off patients with unasked for procedures with outrageous pricing. No surprises in medical are a big win for all of us.

COVID-19 Free Tests

The Biden administration spent some money that will help everyone. They are giving away up to four free test kits. You can apply online. Go to a library if you need computer help and access. The IP is: Covid Free Tests.gov. 

You can also get a free 95-mask at local distribution centers. Again, you need to do the search online for your local area. So, for those who celebrate the new year in late January and early February, HAPPY NEW YEAR!                                                                                                                                                Disclaimer: Contrary to the stock market and the geopolitical scene there are sports teams that welcome the Year of the Tiger. In college basketball, the Auburn Tigers, In the NFL, the Cincinnati Bengals and in baseball, the Detroit Tigers.  Peace.                   

A Deep Dive into the Market Says...

- If you want it, here it is                                                                                                                                Come and get it. Mm. Make your mind up fast                                                                                            If you want it, anytime I can get it                                                                                                                But you better hurry 'cause it may not last                                                                                                    Did I hear you say that there must be a catch                                                                                                Will you walk away from a fool and his money?

- Badfinger          

...our intuition is coming into reality. There could be a bounce, but the market is going lower. With the market at highs, why do you say that? Good point. The market is not in harmony as I will point out. With that said, the Chinese market, the Hang Sang (HSI) has seen a great decline, but it appears to have tested its lows. It is now rising. This is disharmony. We, at Evolution will continue to look at market volumes for conviction. However, since we generally discuss the US market, although we are in a global network, I will start with Home Depot.

It was the best performing stock in 2021. Now, what do we see? It is forming a "M" pattern. Some call this a reverse Head and Shoulders pattern. It is bearish. The price could and probably will return to its consolidation level at $335. Keep in mind that it just touched a high at $420. Watch the volumes on this pullback. HD is on the Big Board. How about NASDAQ? Let us look at the 3Qs.

QQQ

The charts say that it is going to the lows. It will probably fill a gap at $360. It is definitely game. This means a lot of the NASDAQ will fall with it. Still not satisfied. In the spirit of fair play, I throw out this for you.

AMZN vs. BABA

These two online powerhouses are the biggest in their nations. What do we see? Amazon is dropping. It has already fallen over 10%. It has a P/E ratio of over 63. Alibaba has already tested its lows. It has a P/E ratio of 18. It has a better price, larger market in the same business. This is no indorsement. I do not buy anything Chinese until they play fair to which is probably never.

This is not everything that we see. We look at the big picture and trend. This movie is a disaster waiting for the final scene. If you look at Cattie Wood's ETF, she is suffering from withdrawals. The stock is at the 52-week lows. Then, don't forget Evergrande? We have not heard the last ramifications from this real estate developer. In addition, there are serious, dangerous protests occurring in Europe. The Brexit clash with focus on the fishing waters, subsidies for gas and energy in France and Kazakhstan. The border problem with Ukraine and Russia which is really about NATO and weapons deployment. The geopolitical picture is a mess. When a pot is boiling, you do not put a cover on it. We have pots that could be covered in the Middle East, Asia and Africa.   

Easy Money Era

This is the heart of our distress. For example, how about Bolt Financial? The share price has doubled in three months with no material reason. The only point that could be made is that BlackRock is now an investor. How about AMC? The movie theater is losing money to the tune of over $5-per share. It has over 500 million shares floating. My math says they are losing $2.5 billion, and the virus is still out there. Oh yeah, their market cap is $10.5 billion. Are you kidding me! They are losing one-fifth of their value on a daily, weekly, monthly and yearly rate. Sing it Badfinger, "A fool and his money..." How about Zoom? Not only is it in a bear market level, but it also shows the accuracy of charting. How about the big financial, JP Morgan? It shows how quickly market perception can change.

Whatever you do and before you do it, watch the dollar. It is finally showing some of the cracks that we were predicting. Keep in mind, when something begins to breakdown, it will test the swing point. If it breaks 93, that will be the conviction sign. Hope you have some gold before this point because at that moment, gold will soar. Finally, we get back to the biggest reason for our distress, the Federal Reserve. 

Last week, President Biden appointed (these people are not elected) Lael Brainard to the Fed. All this is another mouthpiece to deflect pressure from the chairman. Anyway, she says, "That she is open to a rate hike in March." Can you see through this BS? First, she is buying time. Second, it is only a suggestion. Thirdly, it gives Powell the entire first quarter not to do anything. It is buying time. A big investor, Kyle Bass is on the books as saying, "The Fed is bluffing!" And by the way, what are we talking about? A rate hike of a quarter point still keeps the rate under 1%. Pure BS! How about three hikes? Dear Reader, we will be looking at a Fed's Fund Rate of 1.5%. This is still easy, funny money! This is why we say in order to return to real prosperity with social mobility for all, End the Fed!  Peace.

American Housing with a European Problem

Ever wonder why whenever we get a glimpse of Europe, especially England, we see photos of stately estates with huge castle-like mansions? The media sound bite quickly moves on to whatever their story point is addressed like crowning a new royalty. However, my point is the actual estate. It is sad enough that citizens were exploited to build these privilege structures, but my point is this: aristocrats never sell their property. The history of an estate goes back as long as the time of the area becoming a modern nation. 

History also has multiple examples how aristocrats hold shelter. When English aristocrats took control of Ireland, people were evicted in mass. They raised rents and made a nation full of sharecroppers. In anti-bellum South, we see the same attitude. The war changed the landscape, but the thinking came back strongly. There are plenty of mansions on a hill that are surrounded in poverty. Of course, time has changed this too. Now, the previous wealthy sold their hilltop locations for a guarded gate community. 

The US in general, has never had this problem as we developed social mobility. However, our standard of living took a double hit. Our jobs were exported. Our social mobility suffered. Then, the last housing crisis in 2008 changed the landscape. With the recession home builders scaled back their developments. Their data showed more interest in high-end housing. The traditional single-family starter home was abandoned by market forces. Thus, this action damaged the three-step approach in housing: the starter, the family home and retirement home.

Builders cannot meet demand for starter homes for many reasons. Inflation made the cost/sale approach not feasible. Builders also suffered labor and supply shortages due to COVID-19. The family home is now blended into a gated community that looks to add amenities to attract buyers and buyers who will pay more. The retirement home is also now a community. It is also developing its unique problem - resale. When an aged resident passes, who seeks to buy? Arizona is feeling this housing problem. Florida could be next in places like the Villages. 

Then, this danger emerged within the market: House flipping. There is nothing wrong with repairing a home and reselling it. It makes the community stronger. It is actually a small business that helps the economy as a whole. The problem is big fund managers took notice like BlackRock. They realized that they too could buy all the distressed homes on the market in 2008. They bought. They repaired, but they never had the intention of reselling. They raised rents and they keep raising rents. We are now a rental nation. The problem is this: those distressed homes should have been resold into the market. They would have become the starter home in the three-step housing formula. It didn't happen. Those homes are now acting like aristocrats in Europe. They will be held forever by these big funds who are now one-third of the buying market. 

Market Forces...

are showing the demand for rentals. The last quarter of the year is the slowest for rentals. However, recent data shows that occupancy is at record levels. According to Real Page, a tech real estate platform, property owners are asking and getting new leases at 13.9% higher than the previous period. At the moment, the rental market has more demand than the for-sale market. 

The strength of the market is reflected with rent prices rising 0.6% just from October. This goes against the long-term data of declining demand at the end of the year. Of course, high real estate prices are a core reason why consumers are trending toward the rental market. Rental growth is the highest in sun belt regions and lowest in the Midwest. Minneapolis saw the lowest price increase of just 4% year-over-year. Put this info with what Europe has showed.

Europe has always had the problem of social mobility. Due to its land size, housing development is limited. Almost all the housing in Europe is rental and the owners are the aristocrats of our era. The US is suffering the high cost of shelter which makes the trend a dangerous road. By the way, the crooked Fed does not include shelter in its phony matrix inflation formula. It is another reason to End the Fed!

A home is a man's (family) castle. Set a goal to be a homeowner. Don't fall prey to the schemes of the rich.  Peace.

Warning Signs

 We, at Evolution have been suggesting a correction is coming in the market. We feel more strongly after studying the latest retail data. Our conclusion will be quite controversial. In previous pieces, our prediction was for the market to turn downward after the first of the new year. The timing could be wrong. However, the realization for the market as to what we see now, will not only cause a correction, but a huge drop in market price and evaluations. 

How we see this play out...

We begin with the retail data. From a quick glance, it appears great. It is not.

Total sales were up 8.6%. Gains were made by both internet and in-store. Online sales rose a huge 11%. Brick and mortar gained 8.1%. Looking deeper, apparel surprised with 47.3% gain in sales. Electronics saw a 16.2% rise and jewelry posted a whopping 32% rise. If you compare the year-over-year price action, it is all positive. So, why the long face, you ask? 

We believe this is the first signs of stagflation (economy stagnates while inflation roars). When consumers feel that inflation is prevalent like it has been showing for the last two years, people buy because they fear that the items that they wanted will only cost more. This is reflected in the positive data. However, the consumers stop buying at a point, this is where the economy stagnates.

Why we say this?

If you take a look at Amazon, the leading retailer, you discover the signs. A year ago, Amazon made $108 billion in the fourth quarter. This year they will make $138 billion. Looks good, doesn't it. Well, it isn't. Why, you ask? With the previous year sales, Amazon made $15 per share. This year, even with the higher revenue, they will only make $4 a share. They are eating the inflation cost. It won't continue, but their timing will not jive with the consumer's. Higher prices will drive away spending.

We have seen this movie before.

Retail giant Home Depot is the best performing stock on the market. Share price is up 50%. There are only so many homes that can be made ready for sale at any given time. You buy the parts, do the work and then, sell the home into the marketplace. This has been going on since the recovery of 2008. It is coming to an end. Why again, you ask? Because we are realist. A plot for a happy ending must have an obstacle to overcome. This film starts will positive news. It can only lead to a sad ending. Nothing goes up forever.

Then, we see this change in retail and many other industries. 

Robots!

They will cause more unemployment as firms have been suffering from labor shortages. Retail and restaurants are getting into robots to fill the labor problems. They also see this as a way to solve the higher expectations by labor for wages. For example, Sam's Club uses robots to scrub floors, scan inventory and eliminate cashiers. Dinners are getting their tables, menus and orders from machines. Even the small dog walking entrepreneurs will face competition from robot dog walkers. Walgreens is filling their prescriptions with automation. I see lawsuits a coming. There will be no George Bailey to watch Mr. Gower at the pharmacy. I don't like this trend, but Brain Corp is making a fortune with its software. Their sales to retail are up 40%. They saw a gain of 69% to airports and 113% to malls with their robot software.

Second Opinion?

Remember Michael Burry of the "Big Short" fame? He sees some of the same things that we see. His prediction for 2022 is scary, too. He says, "More speculation than the 1920s. More overevaluation than the 1990s. More geopolitical and economic strife than the 1970s." Remember what we showed you in our last piece. The Fed with its easy money has led to highest corporate debt while at the same time the quality is at its lowest. It is like the old joke which follows the news that 2022 is the year of the Tiger under the Chinese zodiac. Two guys are walking in the jungle. They see a tiger. The first, a reader of Evolution, begins to run. The second stands saying, "You can't outrun a tiger." He hears this, "You're right! But I only have to outrun you."  ...Peace and hopefully, a Happy New Year!

Odds and Ends: December 2021

This is the last post for 2021. If you read the last post of 2020, you could say nothing has changed, only the names. COVID-19 is replaced with Omicron. The stimulus of that year has been partially spent, but a new stimulus is already passed. The only question is when does the money get circulated? In 2020, airlines were cancelling flights. On Christmas Eve, the airlines cancelled over 1,000 domestic flights and over 3,000 worldwide. Retail was suffering then, and it still has problems. Holiday gatherings for Christmas and New Year's were scaled back in 2020. You can say ditto for 2021. The only thing off the top of my head that is constant, is the Federal Reserve. They have kept money cheap. They offer interest rates below inflation. No! Wait! I'm wrong on that. The negative gap on yielding rates and inflation has widened. However, I'm not the one who is wrong. It is the Fed. As we say here at Evolution, "The first step back to prosperity is to End the Fed!"

Speaking of the Devil...

The Fed announced last week that they see the US labor market at full employment by March 2022. Their "plot points" give them this reinsurance. We say, this will be another "transitory" moment. They will be wrong as they always are. This is our "plot points." The Fed's easy money made pigs out of our corporate firms. Going into the last recession, corporations added $6 billion in new debt. Today, they have $11.5 trillion in debt. Many firms cannot service their borrowing like the Chinese real estate giant, Evergrande. That company is in default. The Chinese government is doing their best to keep a lid on the damage. We see further problems in 2022. Anyway, the lowest rated level on a bond that is above junk is BBB. At present, over 57% of these bonds is at risk to falling to junk. This sad contagion is also putting households at risk. The Fed grew our money supply by 40% since 2019. This data does not even take into account all the new stimulus in the works. Consider for a moment: There are over 11 million renters who have not paid rent. They are covered from eviction due to both President Trump and Biden placing a moratorium on evictions. Students owe over one trillion in loans. They also have not paid a nickel. They too are covered by presidential decree. Then, there is inflation. It is not going away. The first commodity to show the effects was lumber. It rose fourfold. Then, it dropped. The pundits and shills for the Fed said, "See! We told you prices would stabilize." Well, they are back at highs. The inflation data keeps getting worse, month after month. We, at Evolution offer you this insight to the future. Containers! These large metal crates carry the imports to our nation. Before the pandemic, the rate to load one container was $1700. Then, it rose to $14,000. Today, it runs between $18,000 and $20 grand. This affects everything. We all can see the ladder at the gas station. We see the new price. We cannot see all the ramifications due to these shipping containers.

The new word for 2022 in inflation as it relates to consumer prices will be "Drip Price." The product price might be the same, but the package will be smaller. In banking, it could mean fees. Then, there is the aspect of labor shortages, especially skilled labor. A roof trust goes up in price on a daily basis. Housing, the biggest purchase by consumers will continue to rise. The only thing keeping inflation from spiraling off the charts is the dollar.

King Dollar

At present, the dollar remains high. We look at the price action on a daily basis. It is forming a triangle. This is often a continuation pattern. However, a breach will indicate a big change is coming. Watch the dollar closely in 2022.

Spiritual Relapse...

Israel is using aid to control free speech in firms and nations that receive their government aid or stimulus. If you say anything bad about their government policy, you will not receive anything from them. The only nation lower on "strings attached" is China. If you say anything that they deem harmful, you could end up in jail or dead!

Last Idea...

for 2022 is visit Doctor Copper. In a recent report on vehicle sales for 2020, electric car sales tallied 10% of all sales. The recent stimulus has money to create vehicle charging outlets. Electric vehicles require more copper. It creates a floor in the commodity. A higher demand will mean higher prices. Find yourself a good copper mine / firm. By the way, this will negatively affect the two million workers in auto parts because there are less components in the electric vehicle. Good news is robots need repair parts and the transition is not that difficult. HAPPY NEW YEAR! Peace.