Few Realize the Next Crisis

 - A man is just about as happy as he makes up his mind to be.

- Abraham Lincoln

Called It Wrong

Unlike the Federal Reserve and most of our leaders, we admit when we are wrong. We believed the Fed would blink. We called only a half-point rate increase. As you know, we received a three-quarter rate increase. However, we did follow-up on that call by saying that we see only a quarter-point rate increase in December. Now, we would like to add that Jerome Powell stated that the Federal Reserve may temper their future rate increases. We can call our call as not being totally wrong. At least, we were in the ball game. Nevertheless, the machinations of the Fed has caused a liquidity problem. Anyone, and we mean generally banks who purchased the "old" lower yielding notes from the government are losing money in two ways. Their reserve values have fallen since these bonds have dropped precipitously. With inflation roaring, these bonds could fall even more. This is why the Federal Reserve is quietly buying these notes. This is their real purpose. To protect the wealthy. Everything else attributed to them is BS.

Question?

You have $5,000 to invest. Two men are of equal value present you with a bond. One offers you a yield of 4.25% (30-year) and the other offers you 9.62% (I-Bond). Now, if idiots out there keep choosing the former, they are losing to inflation and the real value of their bond. This is the current problem for banks. However, like we have stated in the past, by lowering interest rates, you create a danger. We are in that danger. It is inflation. We also stated that there is another more dangerous economic state. It is called stagflation. It means that you have high inflation and low economic output. We are in it now!

Don't Forget

The real inherit danger of low interest rates is that it encourages debt. This is how many companies exist. They are called "zombie" firms. They would be out of business if interest rates were normal. However, with the stimulus of low rates, they can continue. This is another way how the connected receive benefits. The government picks and chooses winners and losers. They always pick the elite and only do things to buy votes from the rest of us.

New Problem

If the Fed maintains their policy of raising rates and the new magic number is 5% (up from 4.25%) many companies will enter bankruptcy. With that said, who is the biggest debtor in the world? Who has abused the privilege of being the reserve currency in the world? Who has consistantly run a deficit budget? You all know the answer. This is the next crisis.

When you borrow money, you have to pay interest on the amount. The drug of low money by the idiots at the Federal Reserve acted like a drug dealer supplying our nation. Our stupid, short-sighted government leaders only know how to address a problem by throwing money at it. They never save for a rainy day. They have abused the privilege that is bestowed on our nation, as the world's currency reserve. Now, the day of reckening is approaching. In fact, it is already here. With our national debt being off the charts, the interest that our nation owes on that debt is now, flying off the charts. We will owe as much interest debt on our budget as we spend for the military. Consider, that at present, this amounts to $425 billion. At 5%, it climbs to $500 billion and it compounds and it will grow worse until our budget is all interest debt. Where will we get money for medicare, for social security, for anything? This is another reason why we say, End the Fed!  If you think that is troubling, consider...

Another Problem

Many nations in the world are angry about the dollars rise because their currency is worth less. This is exporting currency inflation on top of consumer inflation. Now, the lying, Red Chinese under Xi understand the situation. They always look long-term. In 2020, they had their central bank introduce digital money in select regions. The population number is larger than the population of the US at 350 million Chinese people. Last month, they enacted their first cross-border digital transaction. In addition, they informed the BRICS alliance of nations that they would back any new currency that this group would introduce into the market. While doing this, China also is forcing some of its trading partners to do their exchange only with the Chinese yuan. The Red Communist Chinese party seeks to detrone the world from Kind Dollar to King Yuan. Xi knows that China is now the world's leader in exports. It is the #1 manufacturer. It is the #1 nation for foreign investment.  They are the "locomotive" for global growth. Xi seeks to be the number one nation in finances. If they achieve that, then they only have to control space with satillites to become number one in communications. Then, their true colors will show. They seek world domination. 

Whoever wins the mid-term elections had better start putting tariffs on anything and everything coming from China. By the way, the IMF also has a currency waiting to take the crown away from the US. If we ever lose our position as King Dollar, we will fall quickly to third world status as our debt is the cancer and the Federal Reserve is the cause.    Peace. 

The Question on Wednesday

- For we wrestle not against flesh and blood, but against principalities, against powers, against the rulers of the darkness of the world, against spiritual wickedness in high places.

- Letter by Paul to the Ephesians

The above letter reminds you the names change, but the sins are the same. Speaking of the Devil, today, after we post, the Federal Reserve will announce the next level in the fight against the inflationary forces that they caused. We stated back in June that we believe the Fed will announce a half-point rate increase in interest rates. If correct, this is their blink. If wrong, the following meeting will determine our overall ability to see through the phoniness of the Federal Reserve. If you recall, we declared this half-point to be followed with a quarter point rate increase. The bottom line: what is the interest rate at the end of the year? Keep in mind, the Fed claimed that they want to see 4.25% interest rate. Of course, talk is cheap and actions is what really counts.

Market Outlook

The market is undergoing indecision. We begin with the present rally. It can trace its roots to the recent decline in the dollar. We told you that if King Dollar falls below 110.05, the market can breathe. The dollar actually fell below the test number, but on last Friday, it regained to climb to 111.98. One could ask is this a fake out? It would be foolish to answer until more facts present itself. Whatever happens, the market will immediately respond. On the upside, the market faces strong resistance at 33,500 on the Dow. The Transports coud test 14,000 and the S&P, 3950. With that said, if the dollar strengthens due to a rate increase, all the indexs will fall. If we are correct with the half-point increase, the market will go into a consolidation period. The market will make its determination with the December Fed meeeting. In the meantime, more and more analyst are becoming bullish. They want you to believe that they are right by reminding you that the market just had its best October since1976. We do not. We are adding this aspect to which is a serious problem. Consider this:

Diesel Fuel

It is needed by farmers, long distant rigs, shipping, factories and other usages. There is a shortage of supply. It amounts to the level of 1982 and the world has 3-billion more people. The average price for a gallon in 2021 was $3.28. It has been over five ($5) bucks since September. When I was in school and we actually did regular math, that means a gallon cost $2.06 more this year. This is inflation! It means food raised by farmers will cost more. When truckers load stuff and bring it to consumers, it will cost more.When shippers re-calculate costs, fuel will be front and center. All our imports and we import everything, will cost more. When you add wages, insurance, utilities and taxes, everything will continue to rise. 

In the mid-term elections, the Republicans will blame the Democrats, but the two are equally guilty. We are blessed to have a nation where we can vote. However, like Mark Twain said, "If voting mattered, they wouldn't let us do it." We don't vote party elections. We register as Independents. Someday, we hope our fellow citizens realize that there are more independents than either political party. We can form a new party. We advocated the Liberty Party. The platform has two points: protect American workers and end the military's hold on government that we are the police force for the world. Anyway, we do vote on referendums because this is true democracy. By voting party members, either Democrat or Republican, you are validating them and they are both corrupt. Anyway, this is how we see it.   Peace.

Odds and Ends: October 2022

- Fools take to themselves the respect that is given to their office.

- Aesop

Market Outlook

The recent bounce/rally in the market can be traced directly to the pullback in the dollar. Any decline in King Dollar will give the market breathing room. The dollar closed at 111.98 last Friday. The market will continue its upward move as the dollar tests 110.05. This will be big. It connects to the calendar as the Fed has its next meeting on the 2cd. of November. If the dollar returns to its upward trend, the market dies. If the dollar falls, then the market rally will continue. We stated that we believe the Fed will stay in character and blink with only a half point rate increase. We could be wrong. If the dollar does fall, gold will be the biggest beneficiary. Even though gold has declined 25% in the past year, if you look at the other currencies, it did not lose a dime. It is at its all-time high versus the Yen. The Fed will not like that.

Speaking of Rate Increases...

are you familar with the Taylor Rule? The theory says that to fight inflation with interest rate hikes. You must raise the rate by 1.5x the inflation level. Even with the manipulated inflation report by the government (inflation @ 8.6%) this would suggest an interest rate of 12%. Ouch!

I can do that

Take a job like the Prime Minister of the UK. You accomplish nothing for less than 50-days, resign and collect a pension of $115,000 for life. What do I have to do to apply?

God Bless...

Congressman Mooney of W. Virginia. He re-introduced the "Gold Standard" for legislation. He won't get much press for his reasoning: gold gives us a stable prices, fights inflation and it forces government to keep spending in check. It protects our standard of living. These are all things the Fed destroys with fiat money.

Three Strikes and You Are Out!

The news is so sad. Kids cannot learn to accept that life has ups and downs. Killing and dying for nothing? Then, we read about the corporate world. Our free market is so much like democracy. People abuse freedoms. In this case, for money and greed. Where is the public responsibility and trust with TikTok pushing a "Choke" challenge? How can the CEO of Fisher-Price who appears before Congress and say that he does not know about any complaints over his products when 14 babies have died because his products are defective? They won't spend money to do research to ensure their product is safe. Then, Unilever puts out products with cancer causing chemicals. They have the resources to produce a safe, quality product. They cut corners for more profits. Well, if repeat (three felonies) criminals should be locked up for life because they cannot adjust to civil society, then, repeat corporate companies should be banned from the market place after three violations of consumer trust. Can I hear an Amen?             Peace.

Old Is New

- Keep your face always toward the sunshine - and shadows will fall behind you.

- Walt Whitman 

Buybacks

No! Not stocks. We are talking about "old" government bonds. The quiet news last Friday is typical of the government. A crisis is brewing, but the powers-to-be are seeking, as they always do, to keep it under wrap. The US Treasury Department stated that "Yellen" Yellen is considering buying back old government bonds.

Just recently, figuratively speaking, the Fed said that they will shrink their excessive balance sheet. They sold old government bonds in the marketplace. The problem is no one wants to buy them. Now, they say that they will repurchase them and hold to maturity. By the way, the US government bond market is the world's largest. It stands at $22.6 trillion. That is almost half the world's GDP. Danger on so many levels and all as a result of the Fed's polcies.

End the Fed!

You have read that meme many times in this blog. Here is another reason. You should be aware by now of the financial crisis occurring in the UK. They are having a liquidity crisis. Their central bank has been forced to intervene or England might have a "Lehman" moment? Well, the same type of problem is developing in the US. Let us step back (not a buyback) for a moment.

Europe Vacation?

If you traveled to the UK in June of this year, our dollar lost to the pound. The pound stood at 142. However, behind the scenes, with rising interest rates, the problem could have been seen. In fact, whenever rates change, this concept has to be considered. What is it? Why, you ask?

You can answer the question by understanding the present value of the pound. Last Friday, it closed at 111. It touched 102 in September. The English pay more for everything. Inflation, yes, but the root problem is the value of their currency. Having a choice, wouldn't you rather have your European vacation now? This is the present situation in the UK. It has not yet been resolved. It centers on our example. Would you want to purchase a government bond that pays 1.5% or 3% with the exact same time duration?

In the US, you can get buy a 30-year note that yields 3.99% or a 12-month note that yields 4.46%. Why would anyone buy the "old" 30-year note when the one year pays more? This is the brewing financial crisis in the US. This is the story behind Yellen's statement. 

Cause?

The Federal Reserve is to blame. By keeping interest rates artifically low, (1st cause) and our nation importing everything, (2cd cause) the currency differential kept inflation in check. However, humans being human, want and need a little more for their work. When they receive better eages, their producers pass along the price increase. This is what is happening now. Foreign imports cost more. Our higher interest rates have held these costs increases in check (which is really scary), but at the same time, this Fed manuver is causing havoc in the global community. Every nation is suffering from currency differential. Inflation is a worldwide problem. We are not making friends and the Chinese see that. They are seeking to gain from the Fed's mistakes. Can you say...

Asian Yuan?

The Chinese are copying everything. Their latest is to clone the euro by offering the yuan to all Asia. This danger is still yet, another reason to End the Fed!             Peace. 

Markets and Oil

Outlook 

The market could barely muster a bounce to which we called with the disclaimer that the trend is down. We further stated that we are already in a stealth recession. By that we mean that like inflation the signs appear at different sectors at different times. 

You can best see that with oil. It was one of the first places inflation showed itself. Then, the president opened the nation's oil reserve and stated that the Arabs would produce more oil. The price slowly declined. The pulpit is a strong influence, but time reveals the truth. OPEC publically stated that they will reduce production by two million barrels a day. Demand has been leveled by higher prices. By that we mean even though oil usage has fallen, the higher price maintains the margins. The price of oil shares has risen.

Elsewhere...

Tuesday's price action fell below Monday's low and then, finished higher. This is an indicator of a bounce. However, on the flipside, the VIX is breaking to the upside and it also breached its channel, upward. It shows this on both a weekly and monthly chart. This is bearish. Market might be saying that we will be range bound until the next Fed meeting? However, globally the UK is a mess.

It has the on-going instability in the English marketplace. Their central bank had to intervene again and left the door open for more stimulus. The pound will continue to decline. The IMF said the UK will be hurt the most by inflation. Speaking of the devil, the US showed another inverted yield. You can buy a 10-Year note and barely receive 4% or you can purchase a 2-Year bill and get 4.3%. Some nation is sinking a lot of money to move rates and for what purpose? However, we are talking about the market in general. In that aspect...

Chips...

led the market up and they are leading it down. The SMH index fell to 188 last Friday. It was 245 in August. It looks like 160 is the target and resistance.

Gaps...

are important. The window may eventually close, but the key word means time. The present state of the market is revealing many gaps in price. There are gaps in the continuous contract in oil. We, at Evolution always use oil because it is the most important commodity after food and water. Unlike the Federal Reserve, we need it everyday. $Brent closed Friday at $98.45. It looks to retest resistance at $102. This will raise the price of US crude. It looks to retest resistance at $96. Keep in mind that the US oil price burst through its 50-day moving average of $87 and $96 is also the 200-day average. Of course, oil is only one segment of the market. The rest is being thrown out as buyers will only venture upto a certain price. At the moment, sellers close positions at a certain level. This will change.

Last Friday, the Dow had a huge gap down. The market already broke the June lows in a big way. We repeat what we already stated. The Dow looks to test resistance at 26,000. The transports are driving to the roadblock at 11,000. The S&P is gaining strength to test resistance at 32,000.

Other aspects

Oil received a blow last week. The world's largest reinsurance firm, Munich Re declared that after the end of the year, it will no longer insure new projects. If an oil firm cannot get insurance, it cannot get financing. This is even a bigger blow to consumers. It adds inflation to the cost of oil. The latest an oil firm can get insurance from Munich is next April. There are 30 firms that offer this service and now, 13 are cancelling applications and opting out of this business. 

An analyst, Mish Schneider who specializes in commodities says from her research that when gold out performs the S&P, commodities begin to rise. Something to watch?

Putting these aspects together and with what we have already compiled, we believe stagflation is our biggest and most dangerous danger other than the escalation of the Ukraine war. Try to live your life as best as you can and add love as best as you can.    Peace.

FED: UK Style

Market Outlook

What we here at Evolution called our present economy, "Stealth Recession." It is slowly filtering into bigger investors mindset. This recession style is similar to inflation. It pops up in different sectors at different times. Speaking of the devil, inflation, the cousin of debt, is hitting Europe and last week, made a serious threat in the UK. Their central bank like all their sibblings acted for the elite. It is their true purpose. Before we get into that, we review the US market and our outlook.

New Lows

We stated that we felt that the market bulls would seek to rally or at least get a bounce? That call was late in developing, but it turns out correct. Keep in mind that we declared to participate in this market environment is dangerous. We refer to our original call over a month ago. We stated that we feel our economy is in a stealth recession. This fear gage is slowly taking hold as the market could only generate a poor bounce and then, fell to new lows. All 30 of the Dow stocks were red last Friday. Keep in mind this is twice as powerful because the date coincided with option expiration. The market showed strength in the decline as the price pierced the March 2020 low. The price is now in the high of the low which is a whole new range level. 

Crucial Level

We love Fibonacci math. In retracement moves, we look for two price levels. A fifty percent decline is normal in Bull markets. A .618 says further declines could come. At present, the market says it could fall to the 26,000 level. The S&P could hit 3136 and the transports touch 10,000. The fear level is rising and we are in October. Buyer beware! 

UK

The central bank over in England acted just like our Federal Reserve. It should. It was the blueprint for ours even though ours is more important. Anyway, their banks made the wrong calls in trades. Their pension funds were about to collapse. They intervened. They purchased bonds which we call QT stimulus. The good news is it saved the day. The bad news is the pound will continue to decline. Debt, the cousin of inflation will rise along with inflation. Pick your poison.

PS: Putin annexed land in Ukraine. What he is doing is escalating war. If the Ukraine troops enter their home-land to retake it, they are technically invaking Russia. If NATO accepts Ukraine into membership and comes to their aid, war could be enacted in all Europe. Then, to add fear, Putin reminded the world that the US is the only nation to use the atomic bomb, but laid the presicent. He didn't mention that Russia was not smart enough to develop their own. They stole it from us. He better heed that insight. The US is capable of inventing and sadly, this includes warfare.

Famous Last Words

Hitler declared the Reich would last 1,000 years. Putin said the Ukraine land is Russia's forever.              You reap what you sow.   Peace.

Odds and Ends: September 2022

Market Outlook

The market displayed real fear for the first time since the depths of the pandemic. The VIX broke above 30 last Friday.  This is what we, at Evolution call the crucial point in the fear index. The price did not hold. We stated in our last piece that the Bulls will seek to bounce the market. There was the expected pause as the Fed had its meeting and results. We predict that the three-quarter hike will be the last three-quarter hike. The next meeting the Federal Reserve will lay the groundwork for smaller hikes and then, pause with no hike. This will be their blink. However, we are getting a head of ourselves. 

Near-term

The shills will remind you that the market has some of its biggest rallies in November. They will "sell" their new favorite, MATANA (Microsoft, Apple, Tesla, Alphabet, Nvidia and Amazon). We feel that there will be a bounce just like the one in the first week of September. We called that one. In fact, we gave you the target at Dow, 32,500. Since the Dow fell below the June low, we feel that the bulls will only be able to reach 31,000. Then, a more likely consolidation period before forming a new low at 27,000. We see the transports break 10,000 and the S&P reach 3,300. Volume will determine a new target at that time. We say this because the bulls do not want to surrender their control of the market. They have the deeper pockets to cannibalize retail. If you look at last Friday's price action, the bulls rallied the market 30 S&P points or 300 in the Dow before the close. This aspect in price correction showed itself on Monday. The bears could not get enough sellers to breach Friday's low. If the bears manage to sell lower than Friday's low, this changes everything. Whatever the way the price action moves, volume will be the convincing tone. Whether I'm right or wrong, remember: the market is not rational.

Inflation

It is not going away any time soon. It rose 8.3% yoy in August. At the moment, the strong dollar, which touched a new high at 113, is causing havoc to the rest of the world. We may have seen low gas prices, but do not expect that to last for long. The way the dollar is trending, it appears that it will attack its all-time high at 120. This may give US consumers some inflation relief, but we still import everything. Inflation moves around. You will see it appear in your utility bill and banks will seek more fees. Speaking of the shills selling the November rally, turkey will be the most expensive ever. We mentioned global inflation due to the strength of the dollar, consider Argentina? Their interest rate spiked to 75% with inflation running at 100%. That, Dear Reader is hardship. 

Danger Zones

The SPACs will be one cause for the market to form new lows. These special purchase acquisition companies are buying firms with no revenue and they are losing money. Don't fall for the meme.

Gold is also in the danger zone as long as it remains near its lows. Remember the market is not rational and the fiat people hate the precious metals. 

Don't forgt China and Asian nations. Their housing problems needed government intervention to avoid a collapse. 

Food insecurity is rising as more and more nations restrict food exports. Again, US consumers may not feel the pain, but the global community does.

The next item is the saddest of all. A report reveals that US retirement living standards continues to fall. It is sad enough that basic US standard of living keeps falling, but now, the elderly will suffer. According to the report, the US living standard for retirement had dropped to 18th on the world level. We see trouble everywhere. The scientists who gave us the "Doomsday Clock" also have a new report. It spells trouble with a capital "T" for Europe. When you look at the decline in the euro, you realize things are not good.

How about a leak in the underwater Nord Stream pipeline? Water geyers are happening and we already know water burns from the Cayuga River. It seems like more and more idiots are making decisions that hurt the world and pushing warlike actions.

Then, this from NASA. Shoot a rocket at a meteor to see if we can move its rotation path. At least someone was thinking if we destroy it, we get raining meteors like a buckshot. But, we ask, If moving the rotation path, are you not making it possible to collide it with another meteor? Of course, we are not scientists.

It is hard to write such scary stuff, but live in peace and love. This will make Him happy.  Peace.