Words: Resilient, Manipulation

 The word resilient was in the news last week, repeatedly. It got connected to the spending of the consumer. Even with data showing that consumers have breached the trillion-dollar level in credit card debt, retail sales came in positive for July. We say the word is misused when they use it because it lacks its real connecting partner, manipulation. If you continue, you will see our proof.

Retail Sales

How is this data gathered? What are the components? Where's the manipulation? The government uses this index: food, clothing and textiles, footwear, jewelry and small stores. You noticed that Sebastian put the first component in bold lettering. Think why? The Federal Reserve does not include for inflation the three things that all of us need every day: food, energy and shelter. And yet, to make the economy appear strong, it appears under retail sales. 

Dear Reader, it not only appears, but we, at Evolution dare to say that it comprises almost 90% of the index. We do not buy new shoes or sneakers every month. We hardly buy jewelry. Clothing sales are mostly seasonal spending, but we all have to eat every day. How do they gather small store info? See the hypocrisy? This is manipulation. It gets worse. Consider the aspect that within each sale is price. Inflation buffers price. For example, in prior years a dozen eggs cost $1.00. The store sold three. Now, you pay $1.50 per dozen. The store sold two. Total sales are the same, but actually fewer products are sold. The real corollary to resilient is the next letter after "r". It is "s" for survivor. The consumer survives by seeking to avoid inflation. The total sales number masks the point that consumers are buying less. The best way to understand this point is the present big movie hit, "Barbie." It is now the best grossing picture. However, if you count ticket sales, it is far less than the original Tom Cruise flick, "Maverick." Today, a ticket runs $10 bucks or more. The ticket price was $5 at one time. Now, do you see our point? The lies of manipulation keep on coming. Many large supermarket chains also sell gas like Walmart and Cosco. So, another item that the Fed does not use is included in retail. End the Fed!

Manipulation...

...is the cornerstone word for the Fed and government agencies. Remember, every administration gets to appoint people to positions in government. They are puppets. Our biggest dislike is the report on labor. The government says it is 3.4%. We say that is BS!

You get a real picture of our economy when you know the number of workers out of the population of working age people. The rate for this year is steady at 62.6%. This data informs you that unemployment is well over 3.4%. Back in the 90s, participation levels were over 66%. By the way, just one tick means around 150,000 people. Part-time work is just existing, not living. Self-employed are a huge segment. Consider a realtor? This person has a job, but if he does not sell a home, he has no income. These examples manipulate the stats. This BS started during the Depression. The great comedy team of Abbot and Costello brought the subject to light. Sadly, we do not have anyone who challenges our government except a few blogs. With that said, we have two lists of jobs. The first reveals the lie of the retail report. The second is like a dawn with an approaching sunny day.

Pink Slips:

 Data Scientist: employers hire for one project and done.                                                                             Soft wear Engineer: There is more help than jobs.                                                                                       UX Designer: AI is showing them the door.                                                                                                 Customer Support: Another AI casualty.                                                                                                       Warehouse: Slower spending, less inventory needs and automation.                                                           Transportation: The rise of Uber and other forms of movement like auto-drive, a shakeout appears.         E-Commerce Builders: The pandemic need is over. Excess workers for demand.                                       Construction: Higher rates will cause a slowdown and layoffs.                                                                   Technology Leads: Recruiting has more people than demand. Basic rules of supply and demand.

Hiring

The labor picture is not all bad. The UPS deal shows extremely high wages for drivers. There are other fields that need help. We have a few.

 EMT: The emergency medical technician field is growing, but it lacks workers.                                         Programming: Robotics cannot solve human issues.                                                                                     Farm Labor: The pay is better than you realize and the help sign is everywhere.                                       Construction Boss: Jack of all trades is always in demand.                                                                           Nurse: The pay is getting better and the need is rising with the Boomers.                                                   Child-Care: The pay is terrible. The need is great. It is the same for restaurant workers, bartenders, truck drivers, dispatchers, dog groomers and all things that make our life better. When the government changes its approach to the economy by worrying about the least and not the haves, only then will we have a better society.   Peace        

Numbers

- The grace of our Lord Jesus Christ be with you all. Amen.

- Revelations 22:21

Jackson Hole

The Fed now uses this vacation forum as a pulpit. It is coming, soon. They will use numbers to manipulate. No one will challenge their data. These banking criminals are treated like gods in the ancient world. We don't. The only numbers that are worthy of higher adulation are scripture verses. With that said, we will now take a look at the recent numbers in reports and the market.

INDU: The best days show that up volume is the strongest on a weekly chart, but the daily shows more strength on down days. This is slightly bullish.

SPX: The best volume day is up, but the price level (3808) is way below the current market = confusion.

Tran: Volume strength is decidedly downward. According to Dow Theory, both the industrials and transportation must be in harmony in a direction to determine where the market is heading. This says the market is lacking direction in one way or the other.

Compq: Has led the market up, but it appears to be leading it down. Volume strength is equal in both directions. However, high evaluations will test investors convictions. 

Dr. Copper: The need is there, but at the moment, the price is in a downtrend. Copper will find support at $3.20, but with inflation, the miners will not like that level. 

Gold: We told you that this is the season for metal. The best days in volume are up. At the moment, gold is retesting the support at $1900. We see gold hitting $2100 - very soon.

Oil: It is within reach of breaching its last high. It appears that $94 is the next resistance level. This will be inflationary, but the Fed does not include the most important commodity in its matrix. It is another reason why we say, "End the Fed!"

King $Dollar: It has resistance at 105 and support at 99. If it stays up, this will limit inflation, but if it declines, another wave of inflation will hit everyone.

Other Stats

Stats is the best way to use numbers to influence and manipulate. We like to look at the root of who is citing numbers and stats. Warren Buffett uses the Wilshire 5000 index and divides it by the annual US GDP. The result is not looking good.

Consumer credit card balances leaped over $one trillion. This is also not good. 

Auto makers cannot solve the electric weight solution. Car bloat is their problem. New vehicles average 4329 pounds. This is 1,000 pounds higher than 1980. Besides being dangerous for smaller autos, it uses too many resources and becomes too expensive. There are many other uses for numbers like the banking industry is setting aside big money numbers due to losses in loans and government notes. Climate numbers, food costs and housing all point to problems. The real question is what numbers get addressed?   Peace. 

Signs

- Sign, sign - Everywhere a sign                                                                                                                      Blockin' out the scenery                                                                                                                                Breakin' my mind                                                                                                                                          Do this, don't do that                                                                                                                                      Can't you read the sign?

- Five Man Electrical Band

King $Dollar

It gave us a sign as it is bouncing upward. It could hit 104. This will negate higher oil prices and higher import prices that appeared to be coming in August. This is happening even after the ratings service Fitch downgraded the US debt. The last rate hike by the Fed might have saved their ass...for now.

However, the dollar and the US economy have other problems and these will not disappear overnight. Of course, the shills will deny. Jamie Dimon of JP Morgan Chase who said about the downgrade, "It doesn't matter." It does and I give thanks to this agency for having the guts to make this call. We need a balanced budget among many other issues to be remedied. Then, we noticed these signs that are like a dark cloud coming our way.

Charts: They are taking the escalator up and the elevator down. Translation: higher volume on down days.

Layoffs: Anheuser-Busch announced pink slips. AT&T thought this was a party and they joined. Layoffs are up this year by 244% over last year. We could add the sad saga of Yellow Trucking and their 37,000 people. The firm averaged 49K shipments per day in 2022. It dropped this year to 10/15K per day. In our continual dispute with the unemployment figures, we offer this: full-time employment fell by 585,000 in July. There are jobs and there is BS. Job losses are a lagging piece of data. Shipping is a huge indicator of the health of an economy. You also can get a connection through cardboard use. It is down. In a related aspect, stores and plants are closing.

Corporate Debt: Defaults have already exceeded 2022 and now, interest rates are even higher. 

Inflation: It is bad enough that the Fed's BS gets away from not including the three things' people need every day (food, energy, shelter), but no one mentions other aspects that inflation has affected such as, auto repair. The costs are up 20% year-over-year. There are others, but space is limited.

Household Debt: Consumer's credit card debt just passed one $trillion. Many struggle to meet shelter costs which keep on rising. In LA, CA, more than 768,000 households are behind on rent. Evictions are coming and not just in LA. Homeowners are also feeling the pain of higher interest rates. Foreclosures are coming. The estimate is 186,000 will join the homeless along with the evicted renters.

EVs: They are the wave of the future, but at the moment, not cost effective. Ford and Lucid lose money on every ev vehicle that they sell. What other auto-makers are not revealing about this point? Ford says it will lose $45B on electric vehicles this year.

Yield Curve: It has been inverted way too long and the spread has not changed. In a related aspect, Moody's downgraded 10 banks and are looking into downgrading a few more. So much for the Fed's stress test.

Commercial Real Estate: This segment is already in recession and approaching depression. Hey, Jamie, "It does matter!"

Strikes: We wrote over a year ago that strikes would be coming due mostly to inflation, but there are other factors. We repeated the alert last January. We also told you that this aspect would rekindle inflation, especially when government unions entered the scene. It is happening as you read this piece. Of course, the Fed controls the media. The question is how they will address the strikers, unions and workers in general. Look for the signs.

"...signs, signs, everywhere a sign. Can you read the sign?"  Peace.

Odds and Ends: July 2023

 Right and Wrong

We called the rate hike by the Federal Reserve last week, but our overall call about the recession has an obstacle. This could make our "stealth" recession into a full recession call wrong. The SPX is starting to form a reverse head and shoulders pattern. If it does, the Bulls will be singing. Fibonacci price projections could send the index 110 points higher to 5700. However, head fakes do happen and we stand by our call. 

One Strong Reason...

...why we are standing firm is this revelation from the banking industry. They are putting aside money to cover loan losses in commercial real estate and from bond holdings (prior lower rate issues). By the way, the Fed's rate hikes are causing havoc to our national debt figures. They are ballooning. We are watching the dollar. It is forming a new consolidation range from 105 to 99. Keep in mind, at the end of consolidation, big price swings happen. There are other factors like the challenge to King Dollar by the BRICS. We got news on their currency expectation...

Gold Backed Currency...

...by the BRICS is officially off the table. The central point about a true gold currency is the ability to convert those dollars for gold. These people will never agree to giving up their gold. This ends the threat to the USD for now. It is not all good news. There are over 40 nations seeking to join the BRICS. This reveals a lot of resentment over the dollar.

Singapore Blues...

...the small, so-called city state puts a premium on land. Real estate is expensive and the latest news has got people singing the blues. Two large real estate firms, Dalian Wanda Group and County Garden both need financing or they may go bust. People love owning their own homes, but greed always enters when money is involved. Remember just last year the largest real estate firm in China, Evergrande defaulted. Not much news has been forthcoming. It is a back-room deal that keeps the company operating. Then, we hear another large Chinese real estate firm, Greenland also needs financial help. We would like to make a suggestion, but we will admit our knowledge, especially when it relates to their culture, is limited. 

We suggest, leave Singapore for the island of Matsu. Singapore will suffer for a lack of free choices like Hong Kong due to Communist control. The island use to be a large fishing port, but modern trawlers have changed the landscape. Now, there are many abandoned homes and the island has many needs like doctors, mechanics, etc. The people will feed and house you for free during their festival. You can sell your property high and live there cheaply while you start your own business. Just an idea.

Poor Nation?

UK. The newspaper, the Telegraph, stated this point. They show how the average standard of living cannot even compete with Serbia. The English may end up asking Ireland for help. Our point here is the US is going down this same road. It takes a yearly salary of over $64K to purchase a starter home. Don't be fooled by stats declaring the average income of $58K. They are skewed. The majority of the population makes around $35K per year. 

Good News...

...American football is just one month away. Go Niners! Peace.

Today's Gorgias *

* In a story by Plato, students learn to use persuasive arguments even if they are not true. Today, we have whole industries and government full of these sophists: lawyers, economists, politicians (Democrats or Republicans), economists, et al.

- There is no such thing as new truths; error might be old or new, but truth is as old as the universe.

- Frederick Douglas

Today, the Federal Reserve will make an important decision on whether to continue to hike interest rates to fight inflation, pause or declare victory. We, at Evolution, believe another hike is coming. The real story is why are we in this continual raise or lower our price of money? The better question is why do we continue to let this cabal control over our money and economy? The only remedy that they employ after their policies cause havoc is to inflate the crisis by rolling over the debt with new debt. 

Constitution...

...remember that it expressly declares that Congress will make this decision. Even after the Federal Reserve was established, their committee favored a one and done approach. The rate would be set for a year and reevaluated the following year. Generally, they kept the same rate year after year. In those days, the stable action on the price of money allowed Congress to actually have a budget. It allowed industry to plan ahead, research and develop. So, what happened?

Fiat Spending...

This allowed politicians and political parties to promise "goodies," get campaign contributions and buy votes. They make the sophists proud. One thing leads to another. Greed took control of capitalism. There was never a love of owners for workers, so outsourcing jobs has no conscience for the captains of industry. Then, we entered the world stage by getting into two wars. Fiat spending allowed the government to run deficits to finance both campaigns. Then, egos got in the way. We went from a peaceful, neutral nation to the police force of the world. Fiat allows this reckless policy. 

So, you ask, "How does the Fed connect to this?"

The Federal Reserve buys the government debt. The selling of bonds by the US Treasury is just a rubber stamp procedure. The real dangers are the poor decisions on foreign policy. The reckless use of the dollar as the world's reserve currency. The excessive influence of the military in our government. They spend like the dollar comes from a genie bottle. All these and other aspects of spending are provided by the Federal Reserve and fiat money. The reason that they desire fiat money is because it uses debt. This is why the Founders chose gold. You cannot spend more than you have. Anyway, the title of this piece refers to our recent Fed leadership. We start with...

Ben Bernache (2006-2014)

When the financial crisis began, he said nothing. He hoped it would go away. The Fed's policy of low rates and less regulations gave the real estate industry an invitation to greed. Then, he took action in 2007. He stated, "Everything is under control." The country almost collapsed in 2008. 

We will say this, in his younger years, he did profess two smart observations. One, bank failures propagate downturns and are not a side effect of them. The other is monetary policy by the Fed was the cause of the Great Depression. By the way, our economy is presently suffering bank failures. In addition, it is nothing new for Fed chairpersons to demonstrate intelligent thinking in their younger years. Remember, Alan Greenspan? He once wrote the best essay on gold and why gold makes the best currency. Then, he became the Fed leader. He played interest rates up and down like notes on a scale. He steered our economy up and down. The rich got richer and the poor get poorer. The middle-class began to shrink.

Janet Yellen (2014-2018)

She kept rates low. She got out before the damage became apparent. She kept the printing press humming and bought all the debt the government could provide. Now, she is the Secretary of the Treasury. She sells bonds to keep inflation hidden. Her problem is the global community fears all our debt and continual reckless spending. However, we will only point out this one quote from her, "No recession!" Now, we at Evolution, know that our call is correct. She also says that inflation can come down without unemployment rising. Sorry, we couldn't stop ourselves. The rich got richer and the poor get poorer. The middle-class is disappearing. 

Jerome Powell (2018 -present)

He kept rates low, but the damage was building for inflation to break out. It did. He, like Bernanke, hoped it would go away. It didn't. He said, "It is transitory." He was wrong. He never admits the Fed's policy causes inflation. He likes to point to Congress for spending, but if the Fed did not buy, Congress could not spend. The rich continue to get richer and the poor as a class are growing, with competition from those at poverty levels. The middle-class is so small that it is getting harder to be classified as a segment of society. In the majority of regions in our nation, the middle-class cannot afford home ownership.

We stand by our call that we are in a "stealth recession." The reason is inflation is greater than our growth either as a nation or individually. This is stagflation and we are in it. Now, you should ask why do we allow our nation to keep this terrible agency in existence? Join our meme, "End the Fed!"    Peace.

King $Dollar and Inflation

When the inflation news came out last week, you could hear the relieved exhale from Wall Street. Jerome Powell immediately put a damper on the joy. He stated that his Federal Reserve will continue to fight for the 2% inflationary target. He cited his phony indicators. The fact that inflation fell below 4% with nine straight months of falling prices has not convinced Powell the fight is over.

Believe it or not, he is right. With that said, our reasons are a far cry from the weak and poor indicators that the Fed uses. We look no farther than your wallet. 

King $Dollar...

...had a very troubling week. It broke its resistance price at 100.5. It continued to fall under 100. It closed last Friday at 99.61. It is way below its 50-day moving average of 105.11. It is inching towards its 200-day moving average of 98.18. If it breaches that level, it will probably test its next support level at 96. If this trend in a falling dollar continues, the next resistance point will not matter. The damage will be done.

Last Week

We mentioned that gold comes alive after the 7th of July. It lived up to our alert. It had a strong week. When the dollar weakens commodities strengthen. If the dollar continues to fall, we see gold testing $2100. This may be good news for gold stocks and investors like JFL, but the US consumer will be hit by a new wave of inflation. Since we import everything, a weaker dollar makes everything cost more. Prices are set to soar in August.

We will never know, but I feel that the Fed will buy dollars to keep the currency from falling. This is how bureaucrats manipulate to deceive us. However, the Fed could help the dollar with another rate hike later this month. They do have multiple means and ways to perform. With that said, consider this tidbit? The Suisse parliament has been investigating the fall of their bank, Credit Suisse. They will not reveal the findings for 50 years. Yes! You read that correctly. The Swiss people should find their own meme to end this deception. Of course, we like ours, End the Fed!

Anyway, there is other related news that emboldens our view. The CEO of Citibank stated after she released their earnings report, "There is no investment demand!" We told you that commercial real estate is in do-do due to COVID, stay at home workers and higher interest rates. They are taking effect. These things take 12-18 months to have an effect. Commercial real estate is feeling the pain. This puts pressure on the banking industry and Powell's higher interest rates are not medicine. They are a pillow over your face. In yet another news related aspect, Russia has again put its block cage on Ukraine grain shipping. The last time saw a loaf of bread rise by one dollar. Not good.

Debt

Our government leaders seem to have only one concern, their ego. President Biden shows total disregard to our national debt with his $39 billion forgiveness program for student debt. He is only seeking to buy votes. This is unconscious able! In addition, world leaders are following in the same footsteps. We are heading for a day of reckoning and a debt crisis. By the way, this is more bad news for the dollar.

Conundrum

A lower dollar will give the stock market breathing room. Prices will rise, but we have tried to reveal to you that troubling weather is approaching. We say, "Take your profits. Put your stops in. If you reach break-even, get out!" We may be wrong, but it is better to be safe than sorry.   Peace.

 

July, the Pivotal Month

In a recent piece, JFL reminded you that that the market has a historical rally into the 4th of July holiday. It did. No biggie. However, space limited us to other aspects to the month of July. 

Forward Looking

The market is a forward-looking mechanism. It would like to project pricing six months in advance. So, if you recall, back in December, the experts gave their market predictions. All the shills were wrong. They called for a higher market. Surprise! Again, they are calling for a higher market in the next six months.

We, at Evolution, stated that we are in a stealth recession. We believe that we are correct. The economy moved along due to do a series of things like ramping up weapons to help Ukraine. The Biden administration passed stimulus bills. A lot of that money has still not entered the economy. Due to machinations, COVID money is used for other purposes. July puts these same aspects into play for the year end estimations.

It is also earnings season and somehow, someway, it is a point in time when credit needs to be established for the remainder of the year and into the coming years. In this vein, April had 54 firms file for bankruptcy. There was a period in mid-May when 7 companies entered into the bankruptcy court in a 48-hour timespan. July will also entertain another Federal Reserve meeting on the 26. As you can see, July is a big month for the future of the market and the economy. 

What We See...

CONSOLIDATION in capital letters. When a consolidation pattern appears, many things can unfold. Japan experienced 34-years of the pattern in its market. In the US, we also had a long period before a change took place. From 1929 to WWII, the US market suffered a negative consolidation. Generally, a stock or a sector will make a dramatic move after a drifting in a range. Japanese candlestick charting can reveal a pivotal point to the pattern. It helps. We also use a few other indicators like the Chaikin Money Flow (CMF). Anyway, we took a look at the market indexes, commodities, banking, shipping and chips. Note: Chips led the last market rally and it also led in its decline.

INDU= stocks are the top of the range. The top is 35,000 and bottom is 31,500. Money is moving in.      SPX = stocks are also at the top of the range. The top is 4500 to 3800.   Money moving in.                      NASDAQ = stocks climbing to the top of range. The top is 14,500 to 13,100.  Money is moving in.        IWM = the small caps are in the bottom of their range. The top is 200 to 165. Money is leaving.            Tran = at the top of the range. 16,000 to 13,400. Money is moving in.          

SMH = The chips are approaching their highs. The top is 155 to 142. Money is moving in.                      BDI = Products need shipping; however, this index is declining. It hit a new low last February.               BKX = companies need credit. Banking is in a downtrend. Like shipping above, things are looking bad. In addition, lending is tightening. Commercial real estate is suffering severe vacancies. This puts a strain on the landlord. Defaults are happening. Car repossessions are also on the rise.

When you do not feel well, you should see a doctor. Dr. Copper is in the middle of his range. The top is $4.35 to $3.50.

Before you leave for your appointment with the doctor, you might need gas. Energy is in a neutral position. Oil is at the bottom of its range. The top is $85 to $62. Some cash is entering.

There are only two other aspects of the market. Gold has not performed well. Having said that, it is actually in the top of its range. The top is $2000 to $1850. We are glad to see that the metal held price at $1900. July is also the month that gold comes alive. The rally extends until the end of October.

$King Dollar = no conversation can be conducted without mentioning the dollar. It is at the low end of its range. The top is 106 to 100. If the dollar declines the market will rally. If it strengthens, the market will take the elevator down.

Finally...

...We mentioned at the beginning of the year that workers will strike for more money due to the effects of inflation. These things take time. One reason is ego. If so and so gets so much, well, we are worth more. The Writer's Guild is on strike. The regional retail union in LA is on strike. UPS may go on strike. The auto makers contract is up in September. We see the big government unions like the police, fire and sanitation coming as well as teachers. Then, this related aspect. With tensions rising between China and the US, tit-for-tat actions follow. China has put limits on rare earth minerals. This will cause prices to rise. Inflation is not going away. Please note, when workers strike for higher and livable wages, this does not directly cause inflation. Consider this point, owners of larger corporations make somewhere between 400x and 100x more than their help. Workers are asking for dollars per hour while the Fed prints billions per hour. The Federal Reserve is the chief cause of inflation with their printing press.

We stand by our call thar our economy is in a stealth recession, even if it is mild up to now. It could turn for the worse. Then, again, maybe not?   Peace.