Final Leg...

...in the inflation race has my third runner, oil handing the baton to our closer. It is "core" inflation. This is the Federal Reserve's bureaucrat. He has a huge lead over the trailing "2%" contestant. We got our runner from the inflation portal. His length of eligibility will be determined at a later date. We did a little digging into our closer.

Basket of Goods...

is the school of economics where he studied. His grades for accreditation do seem questionable, however no one challeges this point. His training comes from a mission statement that says, "Core inflation is the change in the costs of goods and services. It does not include food and energy sectors. It is calculated by using the consumer price index (CPI). 

This CPI is constantly being changed. Manipulation is a better word. The latest change is to drop the cost of a new motorcycle into the formula. In the past, car insurance was dropped along with bus and train fares. The calculations favor national average pricing to reach a conclusion. They do their research on monthly and quarterly time schedules.

What is included?

They mention food, but add a disclaimer. They use food "related" items. They find average pricing for clothing, transportation, housing, electronics, apparels, education, medicine, et al. Then, they assign a percentage for each to reach their estimate of inflation. They also only use the percentage change on a year over year (yoy) data. They can change the end result by substituting a quarterly report over a monthly or the other way around. They are bureaucrats. Their job is to make government look good or they may end up as a statistic on the BLSs for unemployment. They are not alone. They get the media and "hired" economists to back their conclusions. In addition, the missing two elephants from the list, food and energy. This is political corruption by both political parties. Back to the race...

...Our core inflation runner is crusing to the finish line. Our "timer" of the race gives us the results. Writers are already addressing their concerns. People, like John Williams of Shadow Stats are pushed aside. We get the same old, same old story lines from the same shill writers, "Inflation is peaking! The 2% made up ground in the final leg of the race. We should discount the results of food and energy. Housing will stabilize with higher rates. Core inflation was not really tested. We expect a closer race in the future." 

Here are our results. First leg, housing showed record pricing for both new and existing homes. Rents are up 19% on a yoy basis. Our second runner, food is up across the board. Pricing for diary is up. Beef is up. Vegetables are up. Frozen foods cost more due to the rise in utility rates. In addition, transportation costs are up which is a cost that eventually gets into play. The supply chain problems as well as packaging, metal (can) costs and carboard all will make food more costly in the future. When the Fed eventually lies that inflation has returned to the 2% target, they will not mention that the new higher pricing remains. The producers of food will either raise their pricing as we mentioned in the past or go back to the old playbook: smaller amounts in package with the old price. Our fastest runner, oil needs no description other than the false one use by the Fed, government and "hired" economists. They claim that oil "only" rose 48% yoy. We use our math that says 80% is the real price increase. Finally, we come to our portal runner. Core inflation is listed at 8.5%. We will let them use their stats. Our time for the race, although not a record, is a close second. Shelter/housing is up double digits. Food is up double digits. Energy is off the charts. It is racing toward 100% increase. Core inflation could even hit double digits with COVID resurfacing. It is why we always say, "Save for a rainy day." We remind you that the road to a better democracy begins by Ending the Fed!  Peace.

 

3rd. Leg

 In running track relays, you put your second-best runner first and your fastest last. In my inflation race, it does not really matter. If I were to second guess myself with today's climate, shelter/housing would be first and oil, last. However, I am aiming to show you my point when I finish this segment next week. Today, we look at oil, the most important commodity. We begin with you...

Everyman

If you live north of the Mason-Dixon line, you experience winter. If you live south of the boundary, you want AC come summer. So, those of us in the northern half of the nation, might put on the heat to take the night chill off the house. This is oil or it is needed to make the energy that warms your home. If you drive to work, more oil. If you take a bus or subway/train, oil is needed to provide the energy for the machinery. It does not matter your employment, energy is needed. The trip home is a replay of the morning commute. When you realize the truth about the need for oil, you can begin to see why I say, End the Fed!

They have the nerve to get away from their inflation matrix with no oil.

In the South, your energy bill is low during winter. However, come summer, you feel the pain of the different season. In any event, we see that all of us need oil and its ability to help create other energy like gas and electricity. In the US, we use around 20 million barrels of oil every day. Today's energy prices reflect the lack of preparation in developing energy alternatives. We had plenty of time to develop other forms of energy. This gives insight to our lack of leadership and their vision for our society. In Europe, Germany is crucial. They have implemented alternative energy. To their credit, they receive 20% from this category. However, they and other "cold nations" could have worked with the US and Norway/Sweden to develop LNG for winter heat. They need to sacrifice some cold for the greater good. They need to help put Russia in their place. Russia should seek to make their domestic economy better with all the natural resources that they have. This shows the lack of goodwill among the Communist with their doctrine that every man be treated equally: all talk, no action.

Peace Talks...

are BS! The communist has demonstrated over the years that they only do what is in their benefit. Quick reminder: Korean conflict had talks for three years. Viet Nam had talks for over four years. Putin declared that he would not invade Ukraine. Talk is cheap! We need action! The price of oil jumped due to the possibility of actions by Russia. They supply 7 million barrels a day. We need to make them realize that maybe we can get along fine without their oil. Ultimately, electric cars will dawn the light on them. If there are no buyers for your product, you are out of business. Don't count on peace talks to get the price of oil to decline. Back to reality. Back to the price of oil...

Brent or US Crude?

Brent is heavy oil and US crude is light. Light is better, but heavy has a more plentiful supply. Many users have switched their mechanics to use the heavy stuff. In any case, they both follow the same price pattern with Brent getting a little higher premium. The recent price action on Brent had it touch $139, then it fell to $95. It bounced again to $119, and it is now in retracement. It settled at $101 on Friday.

US crude follows the same price movement. It closed at $98 on Friday. This type of price action is exactly what will continue to happen. Oil will jump or decline on news, data and expectations. However, you and I feel only one thing - a higher price. Oil has increased in price by 80% from last year. This equates to everyman having to cover the cost and still make ends meet. Some of us have already dropped the baton. This race is over like your football team being down by 3 touchdowns at the end of the third quarter. Some of us will need a second job and or, cut back on things like TV streaming. We need to put some money aside for that electric vehicle. It is closer than you think.    Peace.

Next Leg in the Inflation Relay

Two weeks ago, we gave you our outlook on housing/shelter. We mentioned briefly in our Odds and Ends segment last week, the second leg in the relay of inflation - food. The three main components as we see, are housing, food and energy. The Federal Reserve gets away with the BS that these three are not considered in their matrix formula for inflation due to their high volatile nature. We have no one with the bravado to challenge their formula. Our basis is built into reality. Everyone needs those three to live. They are essential. We do not buy a computer every day, but that item is in their formula. 

We can knock the Russians, the Chinese, blame the immigrants, but everything that is wrong begins with the Fed. They control the use of money. Lately, with inflation in the news, the Fed says it will act to fight inflation. Dear Reader, they are the cause of it. You cannot print dollars excessively without impunity. President Biden has the nerve to call our economy strong with record low unemployment. The only record that our government has achieved is record deficits. The president is ending tariffs which will guarantee a new record deficit. He is opening the borders. We will get more crime and gang warfare in our big cities. When we get a recession, we will begin to see record homelessness, our first proud school system reduced to third world status. Food banks will be our growing segment in society. Things are not looking good. Chris Rock won't be the only one slapped in the face. We all will feel the pain. It begins with the bureaucrats.

Unemployment at 3.6%?

Yes, according to government stats. However, if anyone looked deeper into the mechanism to determine unemployment, the labor participation rate tells us a different story. If one goes back to just 2002, the labor rolls showed 66.5% of us were employed. Today, it is down to 62.4%. Where did the 4.1% of us go? How many people is that? I can ballpark it for you. It takes about 150,000 to move one tick. This equates to roughly 6.1 million people out of work. Keep in mind that our population has grown in those 20-years. This means our estimate is on the low end of reality. These are just sample reasons why we at Evolution say that both of our political parties are corrupt. Anyway, we were going to get into food inflation. 

First, I need a cup of coffee. Question? Is coffee food? To me, yes. The charts show coffee is consolidating on the high-end price range. I don't know about you, but I did not need the charts to tell me the price of coffee. My supermarket never puts it on sale. It constantly cost more. I took to the dollar store to escape inflation. They had Spanish coffee in small package of 6-ounces. I did the math. It would be cheaper to buy 4 of these packages and get 24-ounces than buy my larger brand at the supermarket. However, inflation just killed my alternative.

Dollar Tree Store...

is no more. The store sold itself by claiming that anything it sold, it would only cost a dollar or less. No more! It should now be called the $1.25 Store. They raised all their prices by 25%. This is the clearest picture that you can get on food inflation. Even some of the Federal Reserve Governors are coming out to say that they see inflation for March coming in at 9%. They will BS about a half-point interest rate increase. People, you can get a better yield on the 3-year T-Bill than on the 30-Year note. This is revealing to you the truth on inflation. It is only in the early stages, but again, no one has the bravado to tell it like it is. The Fed Chairman, Powell will try to manipulate the market and media by declaring that inflation is peaking. We predict this will be his follow-up to the "transitory" remark on inflation that he gave. We told you before that the CEOs of food companies will be raising their prices this spring. Since the bottlenecks in the supply chain have not receded, we see higher prices across the board. Here is another insight to view inflation in food prices. Yesterday, the top thirty traded stocks were all down. They are selling everything. Now, I mentioned a food fund (DBA) in last week's piece. In the down day of yesterday, it was up. Next week, we will look at the third leg in the relay of inflation - oil.   Peace.

Odds and Ends: March 2022

We begin where we left off last week - housing/shelter. I use the two descriptions because many of the world refugee's or displaced people live in tents. We will have a dual problem in the US. We now have a serious civil problem in America concerning shelter. People are working; however, their wages cannot cover rent. There are visual protests and disturbing street scenes of people sleeping on cardboard or living in tents. City and state governments will soon be cracking down to remove them. Question? Where will they go? 

We have a suggestion. Maybe the federal government could pass a stimulus with the protection clause that the money should be used by the receiving state to build affordable housing? Tent cities will only become poverty zones and an easy target for crime and illegal drugs.

Ukraine

The war in that nation of 44 million is seeing a mass migration. It is estimated that one-fourth or 10 million people are being displaced. We have another suggestion. The EU should put aside billions to build "Migration Cities" to house these people. Even after, (hopefully) the conflict passes, these structures should be maintained because the world is way too close to nuclear conflict and or, possible famine. These migration cities could then be used to shelter displaced people in Europe - Heaven forbid this happens. Sadly, there are too many idiots in the world. By the way, China built a "Ghost City" of tall, empty skyscrapers. Again, sadly this points to the thinking of a human tragedy. 

Silent Spring...

was a great work about the killing aspects of pesticides back in 1962. Sadly, we are still slow to change. With that said, we have another fear this spring. In 2022, the news is so scary for humanity and our climate. The ego in Russia is overlooking the dangers. If things go wrong and WWIII dawns, you will have an empire of ashes? Ponder that, you idiot!

Even if things settle down, there is another crisis on our doorstep. Before the first cornerstone is laid for affordable housing, we all have to eat. It is no new news that food costs are rising. However, did you know that Ukraine provides 26% of Europe's food supply in wheat, corn and other staples? They also export to the global community. The war will kill this supply. Prices are going to rise. Already there have been announcements by the largest companies in the US that food prices will rise this spring. Sadly, these food costs will stop the good nature of fellow Americans to continue to contribute to food banks as they will feel the pain of inflation. Indeed, this appears to be a silent spring.  

Another Outside Aspect

The House is set to vote on the legalization of pot this week. This is definitely food related. The effects of THC on your body is hunger. The "munchies" are a real side effect.

Behind the Scenes

President Biden made another mistake with our economy. He ended the steel tariffs with Japan, and he followed up by ending them with England. We have the need, but our manufacturing sector has been decimated by outsourcing. He has not allowed what is left the time to expand to cover the demand. On the plus side, he signed an agreement with the EU to deliver more LGN gas. This is where our energy sector should be putting money to work.

One Positive Note

There is an agricultural fund, DBA. It is run by Invesco DB Agriculture Fund. It is a nice way to protect your money with rising food prices. There are two gaps. The lowest is $21. The other is around $21.60. We still believe the market has another pullback. It probably will test the last high before declining. That would be a good time to enter. Maybe the crooks at the Federal Reserve do not count food in their phony matrix for inflation, but you and I know better. We need to eat every day.   Peace.

The Nightmare on Rental Street

We begin by reminding you that the three most important things one needs in day-to-day living is food, energy and shelter. The Federal Reserve gets away from including any of them in its matrix formula of manipulation about inflation. This should be the national protest and not just from a picket line, but the media, internet and Congress. It doesn't happen. Now, the third piece in the important items will become more visual both literally and physically. The moratorium is ending on evictions. We will see more people living on the streets, in cars and RVs. This will be an ongoing horror film just as sad as the videos from Ukraine. 

Landlords...

have been raising their prices on rentals in double digits. They are seeking to reclaim the lost rents due to the moratorium. They seek to prepare for the next moratorium edict. Rents are up nationally by 19%. Rents have risen by 0.6% every month! There is also another hidden problem in rentals. Because landlords have not received any rents for a long period of time, many of these small owners could end up in bankruptcy. This will only add to the problem of finding rental space that is safe and affordable.

Anyway, we start by showing life in the Big Apple. A medium one-bedroom apartment leases for $2,045 per month. Dear Reader, according to mortgage loan officers, to qualify for a home loan, one must be able to cover the P&I with one week's pay. By calculating the rental price in New York, this implies a salary of $8K per month or $96,000 a year. Keep in mind, that my example uses a small unit. I'm sorry, but very few of us make that much money. This is why we not only cannot afford to buy a home, but now, we cannot even make rent. People are using one-half of their income on rent. This is why living paycheck-to-paycheck, our poor citizens cannot sustain a car breakdown, dental need or any of the other of life's unexpected situations. 

Single-family homes...

give us another picture of inflation and affordability.  The above NY example is with an apartment or multi-family building. Many times, and locations in inner cities, these are areas where families do not want to raise their children. They seek a family neighborhood. However, single-family rentals are up 12.6% from a year ago. An Apartment Life report shows leases are rising even higher at 17.6% from a year ago. It seems whoever is releasing a study, their findings are one upping somebody else's work. In addition, other factors are causing costs to spike like repairs, taxes, and insurance. Even insiders like the Fed Governor of San Francisco says higher prices are coming. Former Secretary of the Treasury, Larry Summers says, "Another 7.4% rise leases is coming."

Other Factors...

like the recent lockdown in China where 51 million people are in curfew. This will mean more supply chain problems. Governments are putting more budget money into the military due to Russia and Ukraine. Again, this means less consumer items which will result in higher prices. Law of Economics: more demand, less product = higher costs. The recent Federal Reserve interest rate hike is a joke. Speaking of which, the chairman, Powell said that six more hikes will come this year. This is pure BS! He follows that lie with the claim to fight inflation with six more hikes next year. The Fed is for the wealthy. It steals from citizens by using fiat money, which is artificial and in violation of the constitution. Never forget that! This is why we say, End the Fed!

People, rates should never have been this low. It actually causes inflation because the rate was below the actual inflation level all along. This is negative rates!

All these belated rate hikes will accomplish is making home ownership more difficult. Even if we are wrong, the interest rate at the end of this year will only be 1.9%. That is a tragic joke when inflation, even by the government's manipulated formula is running at 7.9%. 

Second Example

The household medium income in 1950 was $2990. This amount actually covered 40% of the average selling price of a home. You could have your castle for $7,354. This is what inflation does to the value of the dollar, our standard of living and social mobility. This is how central bankers and the Fed have destroyed America. End the Fed!   Peace. 

$6900 Gold!?

The headline makes you think, "Another crackpot?" Dear Reader, you should know by now that I may be a lot of things, but not that. If one were to project the technical chart based on the history of advancements or declines using Fibonacci math, this is the number. It probably will never happen, but we do see gold at $3400 a real possibility. This is how we came to this conclusion.

New 1965 Mustang, only $1995.

Yes, people. That is no typo. In fact, a new VW bug sold for even less. This is the silent assassin of inflation at work. It is mainly due to excessive money printing alongside of deficit spending. You know who the guilty party is, The Federal Reserve. Anyway, back in the day, gold was still under government machinations. It sold for $35 an ounce. However, if you move the dial to 1975 and gold was allowed to move by the markets, it rose to $160, and a new Mustang rose 5x to $8,995. Gold, by the way was still under the influence and pressure of the anti-gold system that settled upon fiat money. It still is. Anyway, fiat money is only money because the government says its money. If you do the math, gold rose with inflation.

Now, fast forward to today. The new Mustang is over $44,000. Inflation has made the same car multiply in value by another 5x. Now, when we do the math, we have to realize that ten years (1965-75) is missing from the equation. Nevertheless, this is how we addressed the formula. We looked at gold's first peak price in 1980. It reached $850 an ounce. So, we multiply that price by 5x to equal $4250. This is what gold is really worth today. Think about that? Gold is always under influence and pressure from the anti-gold standard people. 

So, how did we come up with the $6900 figure? We took the yearly inflation rate of the ten missing years and added it to the final result. However, gold will never reach that number unless we return to the gold standard. The only way that could happen if people realize that central banks destroy your currency and standard of living. End the Fed!

What the world needs is a new basket of currencies based on real value. 

What is real value, you ask? Any nation could tabulate their currency value by including its precious metals, rare earth minerals, copper, lithium, etc. Then, global trading will have a standard based on commodities that are necessary and add real value to a currency. One should include gas & oil in the mix, but those commodities would gradually shrink due to its polluting nature.

Cup and Handle

If you go back to 2013, gold has formed a cup and handle pattern on a monthly and yearly chart. This is very bullish. If you do an ABC advance or breakout from 2016, one will get a 5x multiple or close to it. The breakout level was $1000. It rose to $2059 in 2020. You get a retracement from then until now. You multiply the percentage, and you reach $6900. We believe the natural progression from today will settle at $3400. The number 34 is a golden Fibonacci number. We love it. With that said, we stand by our three picks. There is a pick in everyone's price range. Our first choice is...

Barrick Gold. It closed last Friday at $24.35. The first test is $26. We see it piercing its previous high of $30. We see $35 a share price. It also pays a dividend that it constantly increases.

Argonaut Gold. It closed last Friday at $1.96. It has a big, down gap due to losing their CEO. However, they will have a new mine that will be very profitable in the near future. They are already profitable. We see $7.75 in the future.

Wheaton Precious Metals. It closed last Friday at $48.10. This is a streamer company with a solid dividend, no debt and strong future mining production. The charts say this stock should rise to $64. Its last earnings report showed a miss. It was due to the Salobo Mine which had excessive rainfall. This is a minor glitch. This caused damage to the mine. We hope that we are right. We get very depressed when we mention a stock and it fails. Let's pray for peace and give thanks to all our blessings. Amen.   Peace.

The Elevator is Going...

down!

We have many indicators that influenced our thinking. More on that after this. It appears that my book will never be published by conventual means. I may have to resort to self-publishing. Dear Reader, this blog is free. When you consider all the correct forecasts that you have read on this site, I ask you one favor. If I self-publish and offer my work on this platform or elsewhere, please purchase it. If you like what I suggest, please suggest it to two of your acquaintances. Thank you.

Indicators

We gave our readers many predictions in 2021 and even prior to then. An important recap: When oil was in the $70s in November 2019, we liked it. The COVID-19 crash sent it down to $10 bucks. We thought this was crazy. We predicted the seasonality would recover any losses. We were right. Last Friday, West Texas hit $115 a barrel and Brent rose to $117 a barrel. Our first indicator says every time oil spikes over $100 a barrel, a recession follows.   

The precious metals are not indicators, but they fall under our calls in the recent past. We stand by our founding fathers and favor a strong currency. We stood firm on Barrick Gold. It went nowhere for two years. It is awake! It should test and breach its $30 high. We called gold to hit $1946. Now, $2,000 gold is a given. If volume picks up, a new all-time high will happen this year. You might ask yourself, if these people know so much, how come they are not rich? Well, we don't have the financial resources. When we make a recommendation like Barrick, we are buying 500 shares. If we had the means to purchase 10,000, then, we would be rich. Continuing...

Housing gives up a clear picture of our economy. We believe that everyone should seek to have their own property and domicile. Now, we fear what is happening in real estate. The medium-price home in the US is well over $200,000. Prices are rising over 10% everywhere. If one compounds the price, the results are frightening. Picture your home value or mortgage as a bond. The crooked Federal Reserve keeps rates artificially low. A 30-year bond only yields 2.16%. Get real! Anyway, we will use the 10-Year T-Bill. Why, you ask? Because we want you to understand the near-term big picture. Your house grows 10x more than what the government will pay you. This translates that the medium price home will double by 2028. Maybe President Biden let this secret out in his State of the Union speech? He said, "No one making $400,000 a year will be taxed." First, no average citizen makes anywhere near that much money. Consider, in three years, that person is technically a millionaire? Secondly, housing will not be affordable for police, nurses, firemen, postal employees, etc. We will see more cities planning affordable housing measures. They fear that all service people will flee due to a lack of affordable housing in a safe neighborhood. This is and will continue to be a big problem in our society and economy.

Crime

It will rise with the wealth gap. It will rise with the lack of opportunity. We must remember that we are not a homogeneous society. The lack of clean, safe and affordable housing will negatively affect our economy. "Black Lives Matter" won't help this picture.

2cd Indicator

Do you know what "window dressing" means? It refers to all the funds associated with the market. They purchase stocks at the beginning of every month. This is a hidden Bull aspect to the market. Big money coming in every month. It pushes up prices. Well, last week we had a very poor window dressing. If the Bulls could not move the market, this says the Bears are gaining control. We have had a series of lower highs and higher lows. In addition, NASDAQ displayed a "death cross." The 50-day moving average fell below the 200-day MA. Consider this? The stock market has a circuit breaker of 7%. Trading will be halted if this level is breached. We had it happen 4x in 2020. None since then. However, if it appears, expect some panic selling and margin calls.

Stock/Commodity Ratio (3rd-Indicator)

As stated, oil is on fire. It is not only over $100 per barrel, but the charts say West Texas could hit $167. Ouch! Anyway, this ratio says when it falls below 41, a recession follows. We are below it. Forget palladium. Russia controls almost 90% and they are in no mood to help anyone. If you need a doctor, you will find inflation running rampant. Dr. Copper has his prices at all-time highs. Bottom line: inflation is the virus in commodities. The temperature says our pocketbook will feel the pain. This will not help our economy or the market.  

Two More Nails

After the market closed on Friday at the lows, the market received two more indicators. One, there was follow-through on Monday and secondly, the market had the conviction of strong volume to the downside.

Dichotomy

King Dollar rose to 98.67 last Friday. The war in Europe is the reason. Last March with the virus, the dollar hit 104. If things calm down, we expect the dollar to correct. If things get worse, it won't matter?! Anyway, King Dollar should always be on your radar as well as interest rates. Speaking of the devil, the Fed will probably raise the discount rate by one-quarter. This is basically no change. However, their BS controls the narrative. We predict that they won't mention the compound effect on housing. They will mention the unemployment rate which fell last month to 3.8%. Of course, no one here at Evolution believes that. Peace.