Disappointed?

- When the truth is found to be lies                                                                                                                   And all the joy within you dies...

- "Somebody To Love" Jefferson Airplane

Meaning?

Grace is saying that life will disappoint and the best thing that you can do for yourself is to find love. The stock market will not give you love unless your only pursuit is riches. Of course, you must be a successful investor or in management who lives for money. This goes without saying that you do not believe or fear the Lord's words, "What good is it if you possess the world and lose your soul?"

Back to the Market

When the inflation report came out last week at 3.1% and higher than anticipated, the market fell. It  disappointed on many levels. The most serious one looks to the next Federal Reserve meeting. Prior to the inflation report, the market put its faith in the belief that the Fed might begin the first drop in interest rates. The Fed cycle would peak and easy money would be forthcoming. Now, the outlook for a rate drop is uncertain. For the Bulls, all the joy is dying. Of course, they will circle the wagons. They will push forth the meme of the "plot points" laid out by the Fed chairman, Jerome Powell. He stated cuts should come this year unless new data changes the plan. We, at Evolution put no faith in the corrupt cabal at the Federal Reserve. Their existence is a disappointment. We use our own data and we always tell you, our Dear Readers, what we see.

Score card

We remind you that inflation moves from one segment to another with its price destruction. This is why we called our economy to be under a "stealth recession." What we now see is the completion of the inflation wave throughout all segments of the economy. It is reaching insurance, home and auto, medical costs in prescriptions, insurance and hospital costs. It is showing up in car repair costs, tires, batteries and related items. Now, the question is will the whole cycle repeat itself or the lie of deflation take center stage?

Remember we predicted workers in unions would strike in 2023. We were correct. One result of the inflation wave is worker unrest due to wages. With that said, we read that Boeing workers will be seeking a 40% raise. That company is run by the worst people. They have taken a great firm to a crisis point. Management's want of riches has the company seeking the cheapest bid for outsourced parts.  Then, we see plug doors flying off the plane's body. In the last contract talks with the Seattle union, the company lied to the workers. They said new work is coming. They moved it South to a non-union state. I could go on and on like the Max Dreamliner? We also feel that government unions will seek higher wages in contract talks.

Banking

We told you before it happened that the Fed's quick and continuous hike cycle would cause banks to have unrealized losses on their books. Now, we see regional banks in the crosshairs of commercial real estate. New York Community Bank is just the start.

COVID-19 killed attendence at the office. High rates caused tenets to seek cheaper locations. The construction loans on skyscrapers is due. Today's higher rates will make projects unprofitable. The combination spells trouble. This problem will take center stage as loans go bust. This will be another disappointment. When they do, regional banks will feel the pain. The Fed will seek to let the "big boys" gobble them up. At the moment banks are closing branch banks to cut costs. This could cushion their coming losses in commercial real estate. Nevertheless, banking failures will happen in 2024. 

Global Economy

We read that Japan and the UK are in recession. China is under their own real estate crisis with high unemployment among young workers. The two wars are not helping supply issues and the fears of trouble spreading is always on everyone's mind. The news motto is, "When it bleeds, it leads." They add to disappointment.

Layoffs and More

We mention in our Odds and Ends pieces of recent layoffs. We feel this latest news adds to the picture. Blackrock is shedding 3% of its labor force. EBay is dropping 1,000. Unit Software is showing the door to 1,800. UPS is laying off 12,000. Flexport announced 2,600 is no longer needed. Pay Pal is dropping 9% or 2,500. Estee Lauder's fragrance is no longer misting 3,100 employees. Docu Sign is laying off 6% of staff and Zoom is shrinking 2% or 150 workers. One more. Paramount Global is giving pink slips to 800 even though the Super Bowl gave it record ratings. The list grows each week. This is not a sign of a strong economy. It adds to disappointment.

Bankruptcy is happening big time in fast food retail. Burger King and Popeye's, two segements of QSR have entered into Chapter 11. A small chain, Izzy's claims rising costs, labor costs and labor shortages for its bankruptcy. This list of disappointment grows each month.

Earnings?

Firms beat by 75%, however, pre-annoucements laid the framework and one can never really trust all these reports. Of the losers, Hasbro reports a 20% drop in revenues with a poor outlook. Bayer is slashing its dividend by 95% to pay down debt. We see more of this with higher interest rates.

Last Word

The complete data on inflation from January 2021 to January 2024 is this:

Overall = 17.9% up.                                                                                                                                    Energy =  32.3% up.                                                                                                                                    Electricity = 27.8% up.                                                                                                                                Food = 20.8% up.                                                                                                                                          Shelter = 19.4% up.

The stock market does not reflect the pain of inflation to the citizens of the nation. Wage increases cannot keep up with the overall effects of inflation. The Federal Reserve by printing easy money is the root cause for inflation. This is why we say, "End the Fed!"      Peace.                             

 

EV - Present State

We love the idea, especially in connection to clean air, climate and environment. We dislike the producers. It seems like all new products, the sizzle sells, but the product is not fully developed. Anyone who has had one of their internet contraptions hacked, kwons what we mean. 

Telling it like it is...

The first and biggest complaint is the time to recharge a vehicle. My gas car takes less than five minutes. Not so with EVs. In addition, charging stations are few and far in between. The industry lacks a common portal. So, the charging station's plug gizmo may not fit your make and model. Then, what do you do?

In bad weather your EV performs poorly. To make matters worse, the vehicle is difficult to start in a cold season.

Not usually mentioned is the fact that battery packs need replacing more often than realized. And yes, they are expensive.

Limited driving range. I have driven across our great and large nation many times. I would not dare to venture a trip with an EV.

The price to charge an EV at the moment is more expensive than gasoline. This may change. There are too many varibles to see the future cost.

Cost! EVs are more expensive than combustion engines to purchase. This will even out as more electric vehicles are produced and sold. However, the transition is slow with many obstacles. 

Weight. The batteries that are presently utilized are way, way to heavy. Technology needs to improve the battery packs for EVs. By achieving this point, the range and pick-up response will dramatically be add to the performance of electric vehicles. Also, the development of a battery storage unit would give owners more faith in long road trips. 

Considering an EV? Reread all of the above.

Maybe An Investment?

If you missed the early event, you missed the boat. The P/Es of EV manufacturers offering stock was off the charts. They still are, but the market is catching up to a value and price level. 

The biggest brand is Tesla. The stock hit a record price at $300. It is now $193 and heading for $108. How about Buffett's investment, BYD Co. Ltd.? It reached $36. It is now $23 and heading for $18. One other big name was NIO Co. The stock hit $60. It is now $5.93 and falling. Ouch! The Chinese government will intercede to save it or maybe not with all its other worries in real estate? With all that revealed by the market a new EV is coming from Viet Nam (VFS). It is suppose to sell for $20 grand. India, as well as every gas consuming manufacturer is getting or is in the game. A shakeout will occur. A key to success or failure will be on battery development. Tesla is leading, but South Korea is making up ground. President Biden gave EVs a big push in his Inflation Reduction Act. It provided money for charging stations and gave EV buyers a tax credit of $7,500. We noted this and we also expect others to copy and other changes addressing EV vehicles.

Hyundai is offering a cash back on its EVs for??? If you guessed $7,500, go buy a lottery ticket. We predict that auto insureres will soon offer seperate pricing for combustion v. electric.

We mentioned Tesla as the leading brand, but China is the leading seller of EVs. One aspect to their success comes from Russia. When sanctions got put on Russia by the West, it had no choice but to buy  cars from China. 

Back to Tesla

Tesla is cutting production in its German plant due to the termoil in the Red Sea to shipping. If the tanker cannot bring the materials, you are out of luck. Old man Ford realized this aspect a 100 years ago. Ford produced everything that it needed. Another point with Tesla and tariffs. Tesla sold only one car in all of South Korea in January. There are other months where they had no sales at all. I made this point years ago with the greatest car ever made, the Ford Mustang. How many were sold in foreign nations? They don't buy American. The answer is to put quotas on imports and high, very high tariffs on all imports. Use the tax to lower our national deficit.

I will say one more thing about Tesla. They make a beautiful looking car. Just address the problems. Peace.  

China New Year and SB

This week is big for China as well as US sport lovers. What China does effects the world. The US has been the most influencial nation to the world. In the US, American football is the country's most favorite sport. This aspect alone will get the global community's interest and most likely to follow the game.

Year of the Dragon

The Chinese most favorable zodiac sign approaches as the nation is experiencing a slowdown in its economy. On the surface, this is not visable as the country grew its GDP by 5.2% for 2023. Under the hood shows the problem. Younger workers are being laid off due to foreign firms leaving the country. Real estate which is their consumers nest egg is in termoil. The largest firm, Evergrande has entered bankruptcy. When your debt load is $300 billion and your assets are $245 billion that spells trouble. It leads to where the firm is located. This could foreshadow what the Communist government is doing in China. They get behind an idea to expand the economy with a segment in production. To their credit this technique has forged the nation to be the world leader in exports. They are number one in many categories like EV vehicles and number two in world production of all vehicles. In our thinking at Evolution, this makes China the number one economy in the world. They are considered second, but we feel this is due to currency manipulation. Their currency should be the most expensive. This would change the results. Then, the global community would balance out the import/export equation. However, egos and other agenda by the US and the West come into play. Nevertheless, China spends way more than it can afford. Their debt to GDP is way over 200%! This spells trouble and trouble leads to bankruptcy. The Communist government blames the US and the West with false claims of keeping China down when they lie, cheat, steal, hack and subsidize their economy to be the leader of the world. Pure ego! Pure corruption!

Coal

It is king in China as the nation consumes more than the rest of the world combined. It realizes this climate dangerous fact and they are making great changes. They are the leader in solar, EVs, and panels for wind turbines. This is good and bad. The good part is China is seeking to change their energy consumption and cleaner air. The negative part is they don't seek just to change, but to control this energy field. They subsidized their firms to which puts other firms in the global comuunity at a disadvantage. When they retaliate with tariffs, the Chinese government complains. They go to their false slogan about keeping China down. 

However, China is trying to give their citizens a better life and a higher standard of living. China accounts for 31% of global manufacturing and 13% of global consumption. Their problem is to know when to hold them and know when to fold them. The global economy is slowing, but China keeps production high. They seek to dominate global firms by putting them out of business like the many in the US. For instance, the city of Gary, Indiana has 10,000 abandoned buildings. They use the proceeds to suppress the yuan to keep this advantage. It is no wonder that China is facing a backlass. Then, they do dangerous things like seeking to develop a nuclear battery to dominate the battery segment. We would recommend to the Communist government to copy the Japanese firms. They make a product and they continually seek to refine it. They build a brand name for market niche. If you keep doing what you are doing, you are on the road to failure and ruin. Maybe a new year with new thinking will turn things around? Anyway, Happy New Year!

Super Bow LVIII

- We ain't here to start no trouble, we're just doing the Super Bowl Shuffle

- Da Bears - SB XX

It had to be the greatest hype and it is the best musical for a Super Bowl. Of course, back in that day, I was mad as hell at the Bears. In the prior playoff game, not only did they knockout the greatest quarterback out of the game, they put him in the hospital. The game was way more physical in those days. There never was a call for roughing the passer. That is why I put no credence in stats nowadays. 

With that said, we can't wait! Our team is playing. Go Niners! We would love to go to the game, but the Federal Reserve has destroyed the purchasing power of the dollar. The cheapest ticket runs over $5,686 dollars and the outlets charge fees that cost over another grand. Are you kidding me!? The average cost of a ticket is $9,619 dollars plus fees! Get out of town!

We would never spend that much even though in our heart this is something that we long to do like a bucket list. It appears that we never will. It isn't just us. US car makers are not advertising for the first time because commercial time is too expensive. A 30 second ad will cost $7 million. The NFL makes most of its revenue from commercials. The loss of value by the Fed's policies will result in moving football games to streaming services. This will be the death of our favorite sport. Now, can you see why we say, "End the Fed!"

As for now, let us enjoy the game. If we attend a party, put our best forward with comradeship even if the game does not go the way we hope. Enjoy. Peace and GO NINERS!

  

Odds and Ends: January 2024

- To master love, you have to practice love.

- Miguel Ruiz

We believe the above quote is appropiate for all of us to incorporate into our lives as a new year's resolution. Yes, it is good to watch our health with better eating and living habits. Yes, it is good to set a goal for ourselves. However, by seeking to put our best foot forward, we will be generating a more positive environment. We receive a better mental frame of mind as St. Francis reminds us, "It is in giving that we receive."

Bull Market?

The stock market hit new highs in the Dow and S&P 500. This would indicate a new bull market. However, according to Dow Theory, the industrials and the transports must be in conjunction. The transports are a long way from their last high. In addition, the old Wall St. adage about the "January Barometer" says the first week results sets the tone for the year. It was down. However, it is up for the month. 

Bottom line: Disharmony. This translates to a wait and see. Maybe later today after the Federal Reserve announces the results of their meeting, we will glean a better insight. If no action and that is the prevailing thought, you can follow King $Dollar. This effects everything and the market goes inverse to the dollar price.

Economy?

The government would like us to believe that a strong stock market reflects our economy. It does not. Recent news about layoffs are tripping over into various segments from retail, Macy's to energy, Solar Edge to tech, Salesforce and Microsoft to service, UPS. Existing home sales for 2023 was at a 30-year low. Then, the government reported that unemployment fell to 3.7%. We do not believe this stat. Apparently, Jeffery Gundlach does not believe it either. He makes this observation, "88% of our states report rising unemployment." This does not jive. Nevertheless, most analyst say that the August low of 2022 will not be tested. Of course, this is an election year. History says the stock market rises in the last year of a president's term (President Cycle). With that in mind, we read two quotes from our leading financial institutions. Goldman Sachs says, "Trump will win." JP Morgan Chase says, "Biden will withdraw from the election." Talk about influencers?   

Speaking of influencers, the IMF says, "Commercial real estate is under its worse drop in price and value during the last two years." We say that the worse is still to come. One strong indicator was Chinese real estate developers failed to repay oversea bonds. The value is over $100 billion.

Here is some other interesting notes. For the last 60 years a chart shows that the S&P rises in January and falls in February. In the declines in February, the fall is more prominent in the President Cycle year. Sebastian adds this: A four year chart on gold related to election years reveals gold fell in 2012, rose in 2016 and fell in 2020. If this is valid, this points to gold rising in 2024.

Harry Dent

This is someone whom we pay attention too. He is a financial bestseller. His theory on economics is based on demographics. China will not like his work, but it seems all industrialized nations are under the same problem, population decline. Harry sees a big crash coming. He says to look for market tests of price levels for proof. If NASDAQ falls below 10,088, look out! He adds the first of three down waves appeared in the August low of 2022. He adds Bitcoin should fall below $40,000 and all the way to its first pricing point. 

Conclusion: This is a leap year and under the Chinese zodiac, its most favorable sign. Let us put forth Miquel's words to work and practice love, end war and violence and be grateful for the little things in life like the sun's warmth, smiles on faces, a safe home with food on the table.  Peace.

No High Five Here

Congrats, Yes! No!

One side of me wants to congratulate the country of Japan for being the fifth nation to land something on the moon. The other side begs, pleads, screams and worries why space garnishes so much attention while important matters for our existence on earth are overlooked?

1st Step

I understand that the moon serves as the first step into a deeper understanding and eventually, the colonization of planets, but in the here and now, earthly inhabitants have not demonstrated that we can take care of our home base, let alone develop another one.

Water

It is abundant in theory, but fresh, drinking water that sustains our life is dwindling and faces contamination. Man has always used water locations to dump their residue. As man progressed, he learned to harnish the earth's most valuable commodity by building dams, retention ponds and aqueducts to provide this necessary component of life. If we flash forward to the end of the 19th century, enlightened civil servants spent to develop infrastructure that featured a plumbing system that provided indoor access for drinking water. It provided a safe way to exit our faeces that gave us our modern world. The system not only gave comfort, but improved sanitary conditions for all citizens. Those government leaders displayed a better service to society and the nation than our present government leaders.

One Problem

The infrastructure was not complete. The government at the time needed tax revenues to do the work. They did not have the revenues to complete the job. Maybe they did not have the technology? Maybe what was known was too expensive? Maybe their ego to be re-elected and being associated with more taxes to finish the system got in the way? Who knows? That answer is not important. Finishing the job is the real question that needs to be answered. 

They let their ego run. They gave their citizens a better life. They dumped the sewerage into the oceans, rivers and lakes. Today, we see the results. 

Clean Water Act

It came as a result of the Cuyahoga River setting itself on fire in 1969 due to dumping in the river. They say that the river is actually safe today because protections got put into place. You can eat the fish from it. To which leads to all the other fish that can feed us in all the other bodies of water. Forget the moon! We need our nation and every nation on the planet to address this contamination. All sewerage water, all excess residue from factories, et al. needs to be treated before being entered into other bodies of water. We, at Evolution believe that almost all illnesses can be traced to poor, dirty, contaminated water. If we want to add to our food supply? If we want to fight cancer? If we want to promote the general welfare? We need to improve our infrastructure. We need to finish the job started over 100 years ago.

Bigger Problem

Our oceans are becoming cesspools that have visible rings of garbage floating on the surface. Who knows what dangers are happening below the surface? However, we can see the results in species. The list of extinct species was not enough to alarm the world. The present visuals of tangled plastic poisioning the remaining species should be our wake up call to action. There are good people trying to help, but money and its shrinking value makes it almost impossible for small groups to achieve any sustaining work. Another reason to End the Fed!

Anyway, our idea is from our founder's unpublished book. It could be the start to end the pollution in our oceans. Every ocean going ship should be taxed because we all know that they pollute. The tax can only be used to develop a process to clean the oceans and find a safe way to dispose of plastics. One way is to develop a "Pollution Ship." This boat would act like a trawler to collect the garbage floating on the surface. The more we look at the problem, the more solutions can come to light. Maybe the fifth idea will be the right one for all of us on earth and not an ego trip to space.

We all need to protect the most precious commodity on earth or we will end up a lifeless, dust bowl that is diseased riddened with poisoned waters. Clean Water Now! Peace. 

New Year, Old Problems

- The US has achieved the soft landing.

- Janet Yellen

I begin with the above quote. I use it in scorn. For most of the world we are in a new year. The Chinese lead the orientals a little later. They should be happy with anticipation. Their favorite zodiac sign, Year of the Dragon is approaching. Maybe they will be right. The year turns out good for them and the rest of us. Then, "Yellen" Yellen would be right and us here at Evolution, wrong. Wesley Snipes said, "Bet on black." We say, "Never bet on what the Federal Reserve says." They always have a hidden agenda. 

Banking

The banking issues surprised all the "experts" in 2023. Dear Reader, they are not over. Our largest bank, JP Morgan Chase showed declining profits. Why? They took a $2.9 billion hit with the acquisition of the defaulted regional bank. Their declines are not over. Then, we hear that Citi Group reported losess of $1.8 billion. They are closing branch banks. They anticipate dropping 20,000 employees. Their pain is not over. Finally, we read from our best bank, Bank of America that they too sustained deep losses. They lost $1.6 billion due to regulatory charges. Their profits declined. Their pain is not over. All these and almost every bank suffers from the Federal Reserve hiking interest rates. They all have government bonds paying 3% or less. Inflation aside, they all are losing money. They all have unrealized losses. The amounts are staggering. They could total over $100 billion. Banking issues are not going away.

Inflation

The phony report came in last week. It stated that inflation ended the year at 3.4%. The media uses ex-president Clinton's concept, "Keep saying things are better and eventually, people will believe it." The various articles showed declines in food like eggs that dropped in price by 29%. So, we did the math. We even used the government's numbers. The egg price beginning in January of 2023 was $1.29 per dozen. When you add inflation by the month, the price in November was $2.54. You show a 29% drop in price. The price of a dozen eggs is $1.81 which is .52 cents more than in January. This is the lie! Inflation may drop in a month, but the total effect remains with us. It is ingrained. People are suffering to make ends meet. You can see the real effect of inflation to consumers by their credit card data. Reports show that 49% of consumers are carrying debt. This translates to 56 million people. They are paying higher debt fees. Many carry a balance that is up 40% yoy. We say, please, live within your means. You have to look out for number one and follow Rodney Dangerfield's wisdom, "Don't step in number two." 

2cd. View of Inflation

You might have doubts about our above example as egg prices differ throughout the nation. How about shelter? Even the government admits rents are up 6% yoy. We all know mortgage rates are high and they make the price of a home very expensive. However, how about those who already have a home? Home insurance is up everywhere in the country. The worst state is our third largest. Florida has a dual whammy. Many insurance firms are leaving the state due to hurricane costs. The ones who remain have raised their rates like around Tampa at 100% yoy. Rate increases hit our largest state, California by 40%. Many states like New York and New Jersey have boards to request rate hikes. They too approved insurance hikes at 17% for Jersey and 8% for New York. People are having a hard time in keeping their home due to taxes, insurance and maintenance. This is very troubling.

Scary Trendline

The above is troubling. This is down-right scary. Russia started war with Ukraine in Febuary 2022. Hamas invaked Israel in October 2023. In 2024 we have Yemen rebels attacking shipping. We have civil unrest in Ecuador. We have cities throughout Europe where citizens are upset about immigration. We have elections in many global nations. Dictatorship is rising. Taiwan just elected a president friendly to democracy and China does not like that. The list goes on and on. Let's hope and pray this threndline ends. Peace.

Returns, Polls and Ratings

Food for Thought: Always remember when people disagree with your economic and or, political views is what they are really saying is I have a closed mind because I have my beliefs. Liberal is not a bad word. It means to have an open mind. It is okay to be conservative too and base your beliefs on values. However, people at one time believed in many false truths like the world is flat.

It is a new year and the RPR is a popular forecast sandwich. We, at Evolution believe that the "Return Factor" is an overlooked aspect. It holds a deeper meaning with the amount of merchandise returned. We are not scholars that spend a lifetime looking at aspects to make a determination. We may not be as accurate as those deeper intellecturals, but we feel that we are 300-hitters using a baseball analogy. Anyway, we feel the larger the volume of retrurns forebodes a weaker consumer and it is an indicator for consumer spending for the coming year. 

At one time, reteail firms took returns and refunded or offered another product with no questions asked. Today, you need an ID, a receit, and if paid by credit card, the same card. You go through a thorough check at customer service to verify the product. This also happens, although unseen by e-commerce. Of course, paying by credit card makes the process easier. With that said, e-commerce is beginning to charge shipping costs. In the future we see retail adding fees for returns. There is no free lunch.

Polls

A media service asked their patrons for their opinion on things that they were concerned about for 2024. This is the results from 34 nations with an average of 25,000 responses.

1) 71% say climate events is their biggest worry.                                                                                        2) 71% say immigration will continue and they worry about the consequences.                                          3) 64% say AI will cause the loss of many jobs.                                                                                            4) 59% say workers will return to work at their office.                                                                                  5) 35% say Trump will be re-elected in 2024.                                                                                                6) 31% say they do not believe the Ukraine war will end in 2024.

Ratings

The Fitch Ratings Service downgraded the US standing in global ranking from AAA to AA. This means the US will have to pay a premium in seeking loans from international lenders. They based their results on the excessive US debt, now at $34 trillion and poor governance. This should be a headline, especially in an election year. Sadly, American citizens are numb to debt figures since we have a deficit every year. The number is not understandable and people do not grasp how wealth is made. In addition, there are multiple trillions that are off the books like social security. Our society does not realize the dangers of the US losing its currency as the world's reserve. There are forces seeking to dethrone King $Dollar. We have stated this before. We need an amendment to force our government to have a balanced budget. We don't need to wake up one morning to the news that our dollar is no longer king. If that were to happen, we would be a Third World country with an atomic bomb like India, Pakistan and North Korea. 

Try to find peace. As for me, I'm trying to locate my receipt. I still shop at brick and mortar stores. Later.