Surprises

 As we celebrated our Independence Day yesterday, two expressions ran through my mind. The first gets replayed many times due to the short, but powerful book by its author. We should not lose its message due to seeing it repeatedly. 

- "Wars will begin where you will, but they will not end where you please."

- Niccolò Machiavelli

The other comes from the silver screen. Dear Reader, motion pictures are a stronger influence than one imagines. It is the lead character from A Fist Full of Dollars.

- "When a man has money in his pocket, he begins to appreciate peace."

- Bounty Hunter, Clint Eastwood

The two thoughts find their way into our world. We have China/Taiwan, Ukraine/Russia to the closer aspect of student debt, environment, combustion/electric, old energy/alternative power and whatever else festers within each of us. We each have our own baggage.

We have a media that just repeats the news, but they never have anyone appear to challenge what is said or has happened. We, at Evolution, have our own views. We oppose cancelling student debt. However, in our unpublished book, we have an answer to the dictatorship of the Supreme Court. It goes back to the foundation of our nation.

Federalist Papers

Alexander Hamilton, John Jay and James Madison wrote the "Federalist Papers." They were seeking to influence the other colonies to ratify our constitution. They exaggerated the truth of the judicial system. The job does not separate one from personal baggage. We have seen this over and over since the beginning of our nation. One court with baggage says separate but equal is fine and another says it violates our rights as citizens. You get the verdicts you want by choosing people with your views. There are times that the court gets it right like with student debt, but a truer, fairer democracy is needed in the judicial branch of government. We like to think that we have an answer. Anyway...

We spend too much of our resources on the military and we neglect our environment, our mental health and medical in general. We allowed greedy, small-minded men to outsource jobs to which lowered our standard of living. Men do not have money in their pocket and we see the results on the streets: crime, homelessness, civil unrest.

We only hear one side to a story. The media never challenges the status quo. However, every once in a while, we get a positive surprise. One answer to problems comes from innovation and technology. We have got serious car pollution. Technology gave us the catalytic converter. Smog is no longer rising from car exhaust. We cut down on lead gasoline. Now, we are developing electric vehicles. We are winning this battle. However, you never hear a balanced argument. We cannot trust politicians because they always have a hidden agenda. When they offer a solution, it is to win votes and satisfy their campaign donorship. They never reveal the true cost of their suggestion or if it really has any value like a bridge to nowhere. The truth about climate change is this: we still need our old technology until we can develop something new and better. There is no such thing as "Zero Emissions!"

We allow corrupt bankers to establish the Federal Reserve which is destroying our democracy, freedoms and currency. They are generating another banking crisis which will consolidate the industry. How, you ask? Their playbook calls for throwing money at a problem. They create liquidity, but in doing so, they devalue the currency. Milton Friedman had it right, "Inflation is always a money supply issue." It is why the US dollar has lost 95% of value since the creation of the Fed. Ever wonder why cars are so expensive? The Fed has destroyed the intrinsic value of the dollar. Instead of a policy that starts from the bottom, they concentrate on the top. Their policies enable the bigger banks to get enormous. This allows the too big to fail concept to take hold. Yet, somehow, we survive the surprises and we still enjoy our day of independence. Hope yours was good, and pray for no more negative surprises.  Peace.

Odds and Ends: June 2023

Dichotomy...

Appears to be the perfect word for the present state of the world, market and Russian/Ukraine War.

Argentina...

is suffering extremely high inflation as well as drought hurting their crop production and exports. As a result, the nation has a shortage of dollars in reserve. This causes contagion within the nation and in trading. Whirlpool has a factory in that nation. With the shortage of dollars, the US firm is turning to the Yuan to purchase parts within that nation. China and Argentina have a trade pact that utilizes each other's currency. The US dollar is still the top choice in international trading, but necessity is causing players to turn to the yuan. This is small, but that is how things change. Dichotomy in trading.

Market...

After an intense rally two weeks ago, the market dropped last week. The up and down movement provides no clues as to strength of conviction or sentiment. The calendar points to the nation's big holiday. Historically, the market turns upward. We, at Evolution, feel that this trend will stay in place. We look for the market to turn upward. With that said, when the market hits resistance (Dow - 35,000), the true character of the market will be revealed. We stand by our call for the market to test its lows (Dow - 29,000). Tip: One indicator that we use is the weekly Bolinger Band. If a price drops out of the band and stays out for a week, you have your new direction.

Russian/Ukraine War...

just took a new direction. Russia could enter into a civil war to which would be good for Ukraine. However, just as this twist was like a magician pulling a rabbit out of a hat, Putin and the railing general could reach an agreement. Not 24 hours after Sebastian wrote this sentence, an agreement is reached. Bed fellows make promises that the morning light disperses. What is the future? We cannot say, but the outcome in this dichotomy will have lasting effects.

Internet...

A report states that one-half of all internet traffic is performed by Bots. This sad development can only cause more fragmentation in the US and global community. Dichotomy in spades.

Last Thought...

...goes to the Fed. Who else? The chairman, Powell stated last week that new regulations will be set for the banking industry. They will be tighter; however, the smaller banks will probably be exempt. This dichotomy in thinking only allows the greed of smaller banks to resurface. In the last debacle by the Fed, they allowed the smaller banks a "loophole" in leverage reserves. Banking greed caused their demise. They overleveraged. The failure allows the big banks to grow by taking the assets and the Fed covering the liabilities. This is setting up for a repeat. If the Fed wanted to be truly fair, all they have to do is put the new requirements in proportion to the size of the bank. Every player will feel the same proportion of the requirements. Instead, when greed appears and these smaller banks fail, the big boys will eat and grow due to this dichotomy in thinking. As always, we say, "End the Fed!"   Peace.

Another Fed Deception

The Federal Reserve had their meeting last week. After, the chairman, Powell talked. As always, the Fed uses their bully pulpit to control the market and influence society. They have so many tools at their disposal along with the ability to seek more tools and more control.

The Fed as well as our government leaders have swayed the public's view of our economic climate. Our present economic climate is gauged by the stock market. This translates to this: if the market is up, so is our economy and versa. The recent rally is skewed by one aspect: the elite eight stocks can push the index higher. This distorts the real picture of the economy. In our view, the economy is good when the three basics to life - food, energy and shelter - are affordable. When there is social mobility and affordable health care, especially for families. We have none of the above. 

Dream World

Our nation has blinders like a horse who cannot face the wall of noise. Our leaders constantly claim that we are the number one economy in the world. We, at Evolution, believe that China is the number one economy. They have the largest manufacturers; the largest exports and they lead in many other categories. What news do we talk about? We talk about Trump and how he carelessly used classified documents. Then, we have a Congress report against Congressman Adam Schiff who abused his findings into Trump concerning the Capital 6 mob disturbance. In a tit-for-tat, Congressman Simpson (Id.) says, "Revenge politics comes when the other party becomes the majority." While this takes place, hackers broke into government agencies and "took" all documents, including classified. People are robbed every day on the internet. How can we be number one if we cannot protect our citizens? This is a primary purpose of government. This is why we advocate for a new third political party, The Liberty Party. Then, we have the Federal Reserve.

4% to 2%

We all have heard that the Fed desires a 2% inflation target. Even if they manage to reduce the present 4% down to 2%, what does that really mean? Dear Reader, this is just another deception. All it means is that prices from a year prior have stopped rising at a pace over 2%. If the price of a dozen eggs was $1.69 before inflation and now, they cost $3.49 to which is only 2% higher than the previous year, the Fed did its job. We say, "BS!" Eggs used to cost $1.69 and now we pay $3.49. The damage caused by inflation remains with us. The only way that we can return to our previous standard of living is to have wages climb equal to the new ingrained inflation. It never does. This is the real state of the economy. We run deficits every month because we do not protect American made products and this lack of protection has destroyed every category of production. It has eroded our standard of living. We see it every day in our cities with people sleeping on the street. The Federal Reserve covers our reckless leaders by buying up the debt to keep the lies going, to maintain the status quo. They are the cause of our deterioration. We say, "End the Fed!"

Another Aspect

We claim an open market, however foreign entries into it have an unfair advantage. Any big corporation in almost every country receives government assistance in one form or another. This aspect has not gone unnoticed. Our agricultural and energy sectors do receive subsidies. We say, go back to a real open market. End all subsidies, but make all imports pay with tariffs that are high enough to offset the differences in their economic levels to ours. This would also have to include currency manipulation. There are other points, but the first big steps need to be taken. 

Back to the Fed

Since no one challenges the Fed in its meetings, we never hear about this one important point, the M2 money supply. The Fed discontinued providing info on the issue. This is another one of their deceptions. Well, it has been contracting. This means fewer loans and a slower outlook. Maybe this is the reason that within the recent market rally, three tech giants all had a down day last Friday? Who, you ask? Two are chip makers, Nvidia (NVDA) and Advanced Micro (AMD). The other is Microsoft (MSFT).  Peace.

 

Siren Call - Gold Update

 According to legend, the Sirens song is both sad and beautiful. Those who hear it, can't resist, which ends in their death.

Shills...

...were out in force last week. Their song is that we are now in a Bull Market. They base their lyrics on the aspect that the SPX has risen 20% from its October lows. Sounds good, right? Well, we at Evolution do not agree. One reason is we believe this concept is flawed. To us, a new bull market would prove itself if it can climb higher than the last high. We even indicated in our last piece that we feel that this rally has legs. With that said, the SPX would have to climb to 4819 to show us belief. We do not see this. If you buy the dip, keep this in mind. The market can go sideways for a long time. Case in point: From February 1966 to November 1982, it remained in consolidation. There are many other price actions like this. Check the charts! Then, add this aspect. When the market climbs, it is a slow staircase upward. When it falls, the elevator goes down in express mode. The siren call could wipe out your nest egg. 

One Last Point

Many concepts like the 20% move in price action are used to manipulate our thinking. The Fed is the king at this. They repeat something so often that we take the point as truth. It isn't! Case in point: How can you measure inflation without the three most important things that we need, food, energy and shelter? We have our own siren call, End the Fed!

Gold

We haven't talked about precious metal in a while. Our timing is not good. At the moment, it is in a downtrend. We see it possibly falling to and testing $1880. It has acted strangely to say the least. It hit a new high at $2078 only to fall to a lower low at $1618 in 2022. Since then, it formed a new high at $2085 and now, it is retracing. We would like it to hold $1902.

If you remember the debate on how gold would react to the Fed's tightening of rates, it turns out to be just noise. King Dollar affects gold as well as all commodities more than rates. At present, the dollar looks like it will test 106. This puts pressure on gold and commodities. We also have another Fed meeting. We see the market turning sideways after this rally stalls. Sometime around August, gold will wake up. We see a new all-time high of $2150. The strength of that rally will determine its next move. The more the dollar weakens, the higher the metal will rise.  Peace.

Focusing the Picture

We, at Evolution, told you last week that the timing by calendar along with the debt ceiling issue would lead to a market rally.  To be honest, we did not anticipate the upward push would be this strong. We understand why behind the scenes. The market Bulls saw the same thing. In addition, they had ammo from AI with Nvidia. The chip company jumped like Michael Jordan on a dunk layup. It gapped higher. It made a 100-point rally in three trading sessions. This is the second gap higher for the company. It rose 40-points in one day back in February of this year. That gap has not been filled. The firm could get another gap upward. If it does, beware! A triple-gap formation in a stock price ends with the price falling back to where it started. At the moment, the PE ratio is over 200. Would you invest $200 for one dollar in earnings? This is what we mean to focus on the picture.

The Fed is...

...the smudge on the lens. It is connected to the US debt issue. The bill allows the US Treasury to issue bonds for our debt. The revenue is the money the government uses to pay the bills. In that short sentence, the next issue for the market will emerge. The government needs to raise trillions with a "T." They will not be able to sell out all the bonds available. So, you ask, who buys the remainder? The Fed. (Just another reason why we say, End the Fed!) 

Here is another tidbit. It is actually the height of hypocrisy. The name of the bill which allows our government to go into debt of over $31 trillion dollars is called Financial Responsibility Law. How can you claim financial responsibility when you allow our nation to fall into a debt cycle that extends from one administration to the next decade after decade? Anyway, this market rally has legs.

SPY will probably test 440. The calendar timing will connect to the next Fed meeting. The bulls are hoping to continue to control the market with a Fed pause. They have support with a rising banking sector. This leads back to the Fed. By pausing, the banking industry will stop their losses due to when they purchased bonds with negative rates like two and three percent. Any rate drop by the Fed will provide more ammo to the banking sector and market rally. However, there is one other important aspect...

King $Dollar

It looks like it wants to test the 106 level. If it continues to climb, this rally will stall at resistance. You can get a clearer picture by watching the NASDAQ and its leading index, the

QQQ

It looks to test 370.

IWM

The small cap index broke above consolidation. This is a bet that the economy will get stronger. We believe this is a head fake.

The action and price of the dollar will focus the picture. We still maintain that our economy is in a "stealth" recession. Any time that you have inflation in your wallet and the overall economic growth is less than that level, you have the worst of all economies, stagflation. This is what we are experiencing. If things were going great, oil would be much higher in price. It is at its lows. Retail is suffering and a clue comes from a leader, Advance Auto Parts (AAP). It opened a downward gap of over 30 points last week. It is cutting its dividend by 80%. It was $156 in February of this year and last Friday, it was $67 and falling. Ouch!

Science tells us that our eyes only see a small fraction of what we are viewing. They also tell us that our mind can play tricks with us in our ability to ascertain info. We, at Evolution, say, focus your lens and take a moment to understand what you think that you are seeing.  Peace.

Odds and Ends: May 2023

Back in the day, I worked part-time in a retail shop. My boss followed the lead of grocery stores by seeking to have a weekly special to draw customers. He had a large bin where he placed his best seller since the hula hoop, flip-flops. You could select any size for a buck. At times, we had small mobs surrounding the bin to grab multiple pairs. Now, I ask you a question. Would you say that my boss's store was a success? Of course, any intelligent answer would have to ask, what else did the store sell in relationship to costs? 

I used the above story to remind you that the recent market rally is only due to tech that is being led by the chips. Microsoft and Apple make up 14% of value in the S&P 500. What are the other 498 firms doing? When you ask intelligent questions, you receive better info. Retail is suffering. VFC is a leader. The stock hit $100. Last Friday, it was $18. How about the farming sector? We know egg pricing is crazy high. The fertilizer firm Nutrien was $117 in April 2022 and now, it is $55. Ouch! It is not alone. Mosaic (MOS) was $64 in its yearly range and now, it is falling to its lower end. Last Friday, it was $33. Oil is in its lower range. The whole market has been in a consolidation pattern for April and May. So, even in the next few trading days, the market rallies, this is only window dressing and debt ceiling news. Remember, the flip-flop fad ended and this chip rally will too. Then what? 

Reminder

Inflation is tough on your wallet, but there is another aspect to rising costs. If you have to replace something like an air-conditioner, your car, you realize sticker shock. Then you think the firms that sell these items must be suffering with lower sales? You might be right, but you could be wrong. This dilemma can be seen in home builders. Your home is your biggest expense. We know that inflation makes things cost more. We also know that there have been supply shortages as well as labor. Interest rates on mortgages are also rising. Home prices have fallen from highs. We, at Evolution say, "Don't be fooled!" If you had to replace your home, the costs would exceed the present selling cost. This is reflected in our example of a home builder, Toll Brothers. The home builder is rising to highs ($68). It bust through its last high of $72. Why, you ask? Because inflationary prices become ingrained. The level of inflation may fall, but the prices will remain high and with us. 

Downside

The sad aspect of inflation hitting our economy and us, is this, our standard of living declines. We have already told you in past articles that the lie about our nation being number one is based on having the largest GDP. In reality, our standard of living is number 22. The OECD released a report on Western poverty rates. Our nation is not the only one suffering. Canada has a 11.6% poverty level. The UK is 12.4%. Italy is at 14.2%. Japan is climbing to 15.7%. Mexico pushes 16.6%. Now us. The US shows 18%. We think that it is even higher. Whether we are right or wrong, many economists agree about this economic and labor issue. As AI advances, it will replace one-third of the West's labor force. The numbers that this translates too are staggering. They are saying, "300 million!" If our nation does not protect the few industries that remain, we feel that our poverty level will approach 30%. Dear Reader, that is scary.

In another related aspect, another study shows that 63% of part-time workers are women. There is also a rise in self-employment to 20 million. Working age people are doing "gig" work. We feel the reason is because there is no full-time employment available. Everyone is scrambling to make ends meet. The debt level is not only affecting the government, we all need more revenues.

Good News

We, at Evolution, worry about the King Dollar and the privilege of being the reserve currency. Last week, a huge South African miner, Anglo Asanti stated that they are leaving the African Exchange for New York. What it is really is saying is it is leaving the BRICS for King Dollar. 

Meanwhile

The banking industry holds its breath. At the end of every month, the pluses and minuses in the banking ledgers are taken. Back in the financial crises of 2008 to 2015, the number of bank failures was 500. The numbers have actually come down. There are only 18 biting the dust since 2017. 

"Worst that could happen..."

No, we are not doing our rendition of the Brooklyn Bridge. This goes to our Supreme Court. They are really a dictatorship. In our unpublished book, we have an answer that will make the process more democratic. Now, we suffer. The court made a mockery of the Clean Water Act. Their decision will result in 900 species dying and suffering. We will get more flooding and pollution. It truly is the worst that could happen... Peace.

Deceiving Appearances

There are so many in our culture, we are losing our ability to know what is real and truthful as opposed to artificial and phony. There are probably blogs out there at this moment being run by AI. When something is so prevalent it develops its own category. We now have influencers as a job field. Sadly, could this be one of the reasons for so many divorces? I guess the ultimate in deception has to go to the gays with their stage show. Maybe they are showing us deception by asking you to look deeper at the real person? However, here at Evolution, we only address the market and our economy. In politics, as our readers know, we are for a new third political party. With that said, we see the market showing extreme volatility.

Dow...

...has rallied above its two moving averages and with volume.

S&P...

...has allowed the shills to declare that it will rise to 4300. Not to rain on their parade, but simple math with Fibonacci indicates that this should happen. Nevertheless, the index is also above its two moving averages.

$Tran...

...to be in harmony in Dow Theory, this index should also be rallying. It has moved up, but it has not breached its two moving averages. However, the next index is rocketing to the heavens.

NASDAQ...

...the composite is looking at 13,000 with a lot of fuel still in the tank. What gives, you ask? Have we at Evolution flipped our stance?

No! However, we see some strange facts and factors in the market. We always look at oil. It is hanging at its lows. One aspect is this is a nail to inflation and a big plus to consumers. The flipside says the economy is weak and getting weaker. Then, we read this...

One versus 2,000

Like Ripley says, "Believe it or not..." Apple has a market evaluation greater than the 2,000 stocks comprised of the Russell Index. How can that be, you ask? The market receives new money every month from retirement funds, index funds and big, private concerns. They put their cash behind leaders and they especially like tech. We find this aspect very unhealthy. Apple has fallen hard in the past. It could happen again. If it does, there will be a lot of pain out there. Then, we read this report from...

Home Depo (HD)

It missed on earnings. This is big because it directly relates to consumers biggest purchase, a home. The firm always caters to contractors. This is to say there is weakness in the housing industry. You can get more verification by looking at the price of lumber. Like oil, it is hanging at its lows. Not good.

What we think...

The recent market rally can be nothing more than a relief rally centered on the debt ceiling situation. With news affecting the market, the volatility is high and it will remain high until the next hurdle in life. Peace.