Holiday Outlook

We start with a song. We sing for the bitcoin fools, "...And another one bites the dust..." This may not be the best holiday sentiment, but we do not like these condescending types. What we have learned in our life experience and history is good ideas get a spin by the crooked in society. The EPA is a perfect example. The idea was before climate worries. The legislature passing was to gain votes. The "teeth" of the bill is that it has no teeth. It gets worse. Any new administration can put in place their stooges. No real good gets done even with a good idea. Now, look at bitcoin. When governments like Red China use the idea, it is only to control people. Your money and financial future is under Big Brother. Forget that! 

Thank God...

for our free open society. There is nothing more soothing than Christmas carols. It makes for brotherhood and to honor God. With that acknowledgment, it is time to look at the market. We told you that the falling of King Dollar has given the market breathing room. This is your rally to which we feel is just a bounce. What we saw last week was signs that the dollar formed resistance at 106. We see it poping up to around 110. This will cause a pullback in the market. However, the historical season rally should kick in after this dollar bounce. What we conclude from this sign is that the market is under

Divergence

There is no harmony among the indexes. Dr.Copper keeps attempting to form a new high, but a 40-year resistence level knocks it back. This does not bode well for commodities at the moment. If you look at the most important, oil, you see that it is testing its low around $77. If you look at the Baltic Dry Shipping Index, it is also testing its lows. On the flipside, the Bulls keep trying to push the market higher. They point to the falling dollar to gather others to join their effort. Please, do not fall for any meme stock. The shills will push firms like Coinbase. They say the price is great to get back into the stock. Dear Reader, the company will lose $2 billion this year and another billion next year. Don't be caught nurishing your beer with your head down and hearing from the juke box, "...And another one bites the dust..." Instead, seek friends and or family with a smile on your face and in your heart. Enjoy our great traditions and freedoms. HAPPY THANKSGIVING!   PEACE!

Fool's Money

- If you want it, here it is, come and get it...                                                                                                        ...Did I hear you say that there must be a catch?                                                                                       Will you walk away from a fool and his money?

- Badfinger

BT Barnum...

I could have easily started off with one of his quotes, but the changing demograpghics and a weaker education system suggests something within a generation. Generation Z condescends the rest of us as they believe that teck gives them an advantage. They are right about the teck aspect, but wrong about everything else. 

Bitcoin...

is something that we have been against since it started. We believe the "limited" printed aspect and out of government control are points that are overblown. All these founders are doing is replacing the banking industry that works with fiat money to their "chip" money for them to which is also fiat. It is just plastic as opposed to paper. How about the limited print point? It is probably a lie. Consider, I start a bitcoin. I put no money into the pot. I just set a price of $100 each. When the money comes rolling into the account, I create a few chips in my account. I get rich on fools investment. Even if I'm wrong about that point, the founder is still free to use the account in any form or investment that they seem to like - FTX answers the example. The next thing you know, the coin-chips are worth less and then, maybe zero? A fool and his money...

Meanwhile...

The market is in rally mode. We told you that the falling dollar is the reason. Consider the price action of King Dollar. In 2022, it reached a higher value every month until October. Now, it is retracing. To Where You Ask? That is the 64,000 question. Excuse me (demographics) that is the $2-billion power ball mystery. We see a 38.2% Fibonacci retracement. This will go back to the last breakout level at 105. Then, the market will probably go sideways until earnings are revealed to which leads us to say...We are

In Recession

You and the government might feel otherwise, but here is what we see. The IMF stated that one-third of the global community is already in recession. The UK is at the door and it is open. Every day the news has reports of falling funds like Cathie Woods, FTX and bankruptcies. We hear about teck laying off people by the thousands from Twitter, Alphabet, Meta and 700 more firms. The government reported that inflation for October "fell" to 7.7%. Well, Gen Z, at 7%, you can double your money in 10-years. You do not need to risk it in the market. A government bond like the I-Bond will give safety and the return. We already told you that we are in the worst economic environment, stagflation. Earnings will be less if for no other reason, the strong dollar. Just use this rally to make small trades with a stop. Walk away from any long-term action. The market has not tested its bottom.

One last thought on the present inflation danger. If inflation becomes persistent, the same positives aspects for investing in a bond becomes a consumer nightmare. Consumer prices will double in ten years if this level of inflation continues. I can't even fantom gasoline at $8 bucks or housing doubling from the present levels. There is no such thing as "easy money." Low interest rates hide the structural problems in our economy and that is what needs to be addressed.  

Finally...

Did I hear someone say, Yay! Wise guy. We believe what Franklin and Jefferson believe. We trust gold. You cannot print gold. It takes millions and more millions to develop a mine. You have to find a location. You have to get permits. You need special equipment and since the locations are in far off locations, you have to provide the infrastructure. Then, it takes tons and tons of dirt just to get one ounce. Gold is undervalued. Our founders put it into the constitution. The Federal Reserve violates our constitution which is one of the many reasons that both of our political parties are corrupt. They allow the Fed to exist and control our currency. Thank God that our system allows us to change it. We need to revert back from fiat (fake) to gold (real). It helped to make our country great: Free market, free people with a stable currency and seek to be self-sufficient in as many areas as we can.            Peace.

 

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.