Add Global Debt to Problems

- Deficits don't matter!

- Vice-President Dick Cheney

His parents named him right. He is a Dick!

Eli Whitney's great idea of interchangeable parts can also be utilized in other areas, notably, the economy. When things are going well and product is flying off the shelves, production workers enjoy a full forty hour work-week and unemployment is low, the economy should be humming. Well, our unemployment is at record lows, product is flying off the shelves and everyone is looking for help. Full-time work is available. So, why all the recession talk?

What goes up...

also goes down. The connection from production to product to the shelf has many other unseen fasets. There are many parts that are needed to make a machine work properly. There are many little items that the producer must gather to make the final product. The logistics from production to the consumer level requires transportation and packaging. These are the interchangeable parts. If you do not have semiconductors, you have an unfinished product. If you don't have packaging, you cannot deliver. If you don't have your logistics together, everything stops. COVID-19 became the ultimate stopage. 

Then what?

Governments provided stimulus while a vaccine was sought. When they cannot afford the stimulus, they charge it - deficits. It helped, but it was not enough. The one saving grace that most people utilized was to charge it with the credit card. This is personal deficits. They had to because bills still had to be paid and almost everyone was laid off. Then, governments worldwide provided help for housing. Moratoriums were established for renters and mortgages. Now, society is getting the backlash for these restrictions. The moratoriums are ending. Consumers now face balloon payments for back dated leases and mortgages. This forces a new dilemna. Continue to use credit with excessive interest or vacate the premise? As you can clearly see, deficits do matter and they must be repaid.

Anyway, either choice poses problems. This is where we are and another reason for recession talk. Consider the following reports from little known sections of large firms and agencies.

Global Debt Data Sources: They are following the results of the ending worldwide moratoriums on housing. Early signs say a crisis is brewing.

Mastercard Economics Institute: They cover 165 nations. They report that many old, previous businesses to the virus are failing. In 2020, 60% were behind on bills. Their bottom lines improved in 2021, but they are threading on thin ice.

World Bank - Pulse Enterprise Survey: They cover 24 low-income nations. They show 40% of businesses are behind on payments. 

Lenders: They are feeling the pain from the moratoriums. They do not receive mortgage payments and landlord loans.This is part of the interchangeability and velocity of money. This is duress in the system except their influence with government (read taxpayer bailout) and or, central banks watching their back (read Fed) always helps.

Russia's War: Their action in Ukraine only adds various inflationary aspects like shortage of oil, food and worldwide currency exchange. The latest is Russia demanding oil payment in rubles.

World Bank: They reported that under-developed nations need to show more transparency in how they are solving their economic problems. Everyne needs to find ways to keep credit available to households and businesses. 

All of the above are insights to consumers worldwide. They are stretched to their economic limit. Houston, we have a problem.   Take care - Peace.

What's Next?

The title is a little too open ended. I should add clarity. I will talk about two things: the market and what I see as the next big public issue. That is not to say that the present public concerns have been addressd. They have not. Homelessness is the biggest growth issue as well as inflation. The US is getting hit with a double whammy. We oursourced our middle class jobs, but the supply chain to those products got an unexpected bump in the road with COVID. 

We are in for difficult times. Affordable housing gets constructed at a 100,000 units per year. At the moment we have more than one million new low-wage immigrants at the border not to mention the countless more Americans living in cars, vans and vacant lots. It is worth repeating. We are in for difficult times.

Market

It is dropping on high volume. The bounces are at lower highs and the lows at at new levels. Of course, we are in "window dressing." This is the first few days of the month when funds put money into the market. It is the force that always seems to drive the market higher. There will be an unwritten market test. If the market cannot break up over its range, the previous trend, falling, will resume. At present, here at Evolution, we see the Dow testing the 29,200 level. The transports are in sync. They could drop to 13,000 and NASDAQ is leading the down charge. It could hit the 11,000 range. Within the NASDAQ, the three Qs could broach 260. It was as of last Friday, 315. When markets crater like this, it is like swimming naked. The moving tide reveals all things. Sebatian will point out two firms that had big run-ups. People buy into these stocks because they think that someone knows something. This is a flaw in charting. It is why I always like to know the fundamentals as a sidekick to charting.

Teladoc Health (TDOC). This company enjoyed a huge run-up due to COVID. It really has no earnings. It reached $308 in February of 2021 and last Friday, closed at $33 and change.

Carvana Co. (CVNA). This is another firm with little in the bank. Last August it touched $376 per share. As of last Friday, you could get the same stock for $57. Both of these forms demonstrated destruction of capital. Always do your homework. There is no free lunch.

Fed Today...

they will try to control the narrative in our economy and mostly, the market as well as you and I. Whatever BS they throw out after their action will have a lot to do with the near-term market price action.

King $Dollar

You should always watch the price action of the US Dollar. It has been rising as a safe heaven due to world geo-concerns. It pierced $103 last Friday. This price action came from the $95 level. It went straight up. However, long-term charts show resistence at $104. If the dollar breaks higher than that, $120 is game. This will not be good news for the precious metals and commodities. On the contrary view, the dollar could be forming a triple top in charting. This is bearish. It fell back on Friday to $102. Watch King Dollar!

Plastics

This will be the next big public concern. It has been a long time since the "Graduate." He is old and is getting health concerns. When he heard the suggestion of "plastics" no one knew this issue. It is tied to health. Just like the health issue of cigarettes and climate change with fossel fuel, plastics are a problem. They have ingredients that cause cancer. They are in every plastic bottle like water. Talk about irony? We have to have water to live, but drinking it from plastic could cause cancer. Already, the American Chemistry Council is putting out lies to challenge the science and to protect their idustry. Instead of seeking to develop a safe container while they are making huge profits, these no vision CEOs, are playing the same old, same old game. They throw out more garbage to confuse the public. Just like the previous idiot at Exxon, Lee Raymond. He had the chance to develop solar and wind energy at its invent. Instead, he played the confuse the public game. He is a disgrace in our eyes. By the way, the garbage lies by plastic firms are filling up our dump sites and clog our waterways and hurt our oceans. That should tell everyone something.  Pray for peace in Ukraine and Peace to all.

Odds and Ends: April 2022

Earth Day may be on the 22cd of April, but the year ending with 22 is not showing the earth any love. The global community faces a rise in living costs, possible famine in the Middle East, worldwide drought that results in huge wildfires, virus in the air along with other pollutants and war. With the eternal hope of spring, we pray that this will pass. In the meantime, we have to adjust and do the best that we can. 

Market...

had looked at the situation, heard the threats from the Fed and decided to take profits. For many others, cut their losses as signs appear that this downtrend has strength. Not to give self-praise, but here at Evolution, we called this correction. 

Conviction...

comes from many sectors. Sebastian will point out a few past market leaders and their current standing. One leader was NFLX. Netflix double gapped lower. When stocks gap, they trend to come in threes. This is very negative in charting called, "Three Black Crows." NFLX dropped on high volume. It was $700 last November. It closed on Friday at $215. Ouch! By the way, this is its 2019 price.

Facebook, now called Meta Platforms was $350 in November. It closed Friday at $184. It too has a serious, large gap. It too is priced at its 2019 level.

XBI or the biotech sector was $174 in February 2021. It closed Friday at $79 on big, down volume. 

XLK or the technology sector was $176 just four months ago. It closed Friday at $143. It is testing a lower low at $140.

Oil...

is always the most important sector. You always have to watch the price action of the commodity. US crude was $130 in March. It closed Friday at $102. Brent was $139 in March. It closed on Friday at $105. Price action is suggesting, (we are not sure) that the $130 could be a top? If that is true, oil could retrace all the way back to $85? 

What we see

The market is extremely oversold. This could result in a relief rally. You might want to risk a short term trade, but don't be fooled. The 4th of May and the Federal Reserve will be market moving news. The so-called half-point rate increase is a ploy by the Fed. If they were serious about fighting inflation, a full point would happen. They are liars and manipulators. This is another reason why we say, End the Fed!

Strange Occurrence

Everyone knows about the various consumer products that cost more due to inflation. Food is necessary every day. There have been reports of many fires recently to food warehouses and producers. This is conspiracy stuff to some. However, this is a fact. Massive fires in food plants have happened repeatedly and across the nation. I do have one fear. Could this be the result of Russian hackers who found a way to overload elecric lines? The causes have not been determined. In a related aspect, FBI reports that farmers are also being attacked with ransomware. Back to the fires - these fires are spread across a wide range. There was one in Oregon. There was one in New Hampshire. There was one in California and another in Indiana. One of the largest food banks in Texas went up in flames. No answers to the cause in any of the locations. Sadly, as I am writing this piece, another fire broke out at a General Milla plant in Iowa. We conclude that food inflation will continue to rise, especially with the loss of Ukrainian supply. Let's pray that this will pass. Peace

 

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.