Dow 36K, 40K, 50K

Dow: 40,003.59 on 17 May 2024

The Dow's progression in price can find strong support in the book, Dow 36,000: The New Strategy for Profiting From the Coming Rise in the Stock Market in 1999 by James Glassman. His predicted time frame did not happen as called, but it did reach the title number in 2021. At the time of the publication the Dow stood at 10,700.

As you know, last week the Dow rose and closed over 40,000 for the first time. The internet was a buzz with even higher predictions. I read Dow 50K? Let me remind you Dear Reader, that at the end of the millennium saw another publication in 1999. This one is titled, Dow 100,000: Fact or Fiction by Charles Kadlec. He believes that this will happen, eventually. Do you know what Evolution believes? We say it almost weekly. The Federal Reserve destroys the value of the dollar. This corrupt cabal is killing America and all the founding fathers hoped for. Money printing leads to inflation which means the loss of purchasing power in the currency. Those books on predictions are just another example of what inflation does to an economy. Higher numbers are not getting you rich, but showing how poor you have become. Did anyone write a book on Zimbabwe? They raised their currency bills constantly due to inflation. They had a trillion dollar note. I heard that you could purchase a loaf of bread with it?

Back to the Market

We told you that the Bulls are in control of the market. We also mentioned back in January that analyst stated the market would look choppy in the first six months and turn into a rally in the second half of this year. So far, they appear correct. 

In a related aspect that serves as an indicator for the current rally, Sebastian says look at the junk bond market. Watch the spread. At the moment, it is reflecting a market environment with little risk. If the spread widens, the rally will stop cold. The wider the spread, the further the market will drop. JFL shares a similar thought with the VIX. It is currently low which reflects a bullish market. The confluence point is 15. It is breaches 20, a correction is in the works. Since the chart on the VIX is bullish, the Bulls with their hedge funds, private institutions and big investors will hold court. There is also a belief that a rate cut is coming by the Fed. Meanwhile, wars are continuing. Politicians only seek to win in 2024 with little substance to make life better for the nation. We remind you to say a prayer for people who are troubled by terrible weather like tornadoes and the approaching hurricane season get some relief. Peace.

Insurance for Insurance

In yet another example in how the Federal Reserve is destroying our dollar and standard of living, you need to look no further than home insurance. The magic trick of distraction is the media blaming all the current malaise to climate change. We, at Evolution will not argue that the level of intensity and number of storms needs to be addressed, but the home insurance sector has had wildfires, flooding, hurricanes and tornadoes before. The intrinsic problem is the cost. The cost is inflation and the Fed is responsible for that fact. No one challenges these corrupt controlers of our economy. I do not want to go off on a tangent, but their actions play into the hands of the WEF (World Economic Forum). Those idiot elites (that's an ironic joke) seek to blame all the injustice, all the world's economic gaps on wealthy nations, especially the US. In the near future, JFL will respond to these Davos fools who like the Fed think that they can engineer the world. 

Florida is the Canary...

...in the mine. When coal mining realized the dangers of coal dust, they would bring a caged canary into the mine. If it died, that was the signal to get the hell out of there. The coal dust is blowing in the wind in Florida. The hign cost of damage caused by high winds and hurricanes is presenting a new challenge to the Sunshine State. When you add the cost for flooding and tornadoes, even increased premiums cannot cover the replacement costs.

Did you know that Florida is our nation's third leading state by population (22.9-mil)? It surpassed New York (20-mil). Did you further know that there are 1.5 million condominium owners with most along the coast lines? Well, for years those homeowners have been complaiming about the high cost for home insurance. Now, they have an even deeper problem. No company wants to insure their units! Not only that, we found out that 7 insurance firms have gone belly up and whatever damage their policy owners had, is useless. Ouch! 

Danger

Not only are these condo owners left high and dry or should I say, wet and cold, but their high price property could be worth next to nothing. Think about that! This could cause fear that could ripple across the nation and a catagion in the real estate market? Dear Reader, don't panic. These trends take years and decades to resolve. However, the citizens of Florida and our largest state by population, California does have this problem in their lap. Currently, large insurers are not taking new policies in California. As for Florida, an insurance rating firm is also breathing coal dust. Denotech is connected to all these seven failures. They are an insurance rating service. They rated all these firms as stable under economic terms. I wonder if Evergrande in China had a similar situation? Here is the list of firms that are going out of business:                                 

1) American Capital Assurance Corp.                                                                                                            2) Avatar Property and Casuality Insurance Co.                                                                                            3) Fed. Nat. Insurance Co.                                                                                                                            4) Gulfstream Property and Casualty Insurance Co.                                                                                      5) Southern Fidelity Insurance Co.                                                                                                                6) St. John's Insurance Co.                                                                                                                            7) Western Property and Casualty Insurance Co.

There is also another problem connected to this mess. The rating service seems like a pay for a rate service that provides insurers an "A" or above rating. Now, those high loans are in danger which means mortgages are in trouble which means mortgage lenders could be in trouble. One sin (fraud) gets compounded and the only winner will be lawyers with litigation.  

It seems that each week we mention some retail firm or restaurant that is going out of business, but this is a whole different sector. It is one connected to the American dream and another reason why we say, "End the Fed!"

Let us say a prayer for our fellow citizens in the South that this new hurricane season does not include one with a landfall... Peace.                                                              

Sell in May...

- There are as many slogans as there are opinions. Most are just catchy without merit, but in deeper           reflection, there is a kernal of truth.

- JFL

Historically

The actual catchphrase continues to say, "...and go away." The thinking is the market is entering a slower season with less volume and volatility. Earnings which drive the market has a tendency to fall. Some investors turn to oil because people do more driving, however, smart money has already drove up those stocks. You are chasing and speculating. This is the perception behind the thought.

Today

Looking at the plus and minus of things, the bulls are still strong. You can see this in the reliable indicator, the VIX. When the VIX is above or below its 50-day moving average, you can see market direction.When it is above, the bear is out. When it is below like now, the bulls hold sway. However, this market does not come completely in the upside. "King Dollar" remains strong. Any price level above 103.5 confirms this outlook. This puts a damper on inflation and limits profits. In addition, we informed you that according to Dow Theory, the industrials and transports must both be in harmony. The transports have never rallied since August 2023. With that said, oil remains high in this political environment. Commodities like copper are rising. The leader in the segment, SCCO has already broken out to new highs. Gold is ready to explode. The only thing holding it back is the dollar and high interest rates. Bottom line: The market is forming a consolidation pattern. The slogan may hold that kernal of truth. With that said, here are some things to keep your eye upon.

Potential Trends

The election will impact everything with the market, especially in sectors. If the Dems retain power, IT and discretionary will benefit. If the GOP wins, utlities and energy get a boost. Clean energy will be more of a campaign promise rather than an actual funding.

Defense in this geopolitical environment gets funding. We think cybersecurity, semi's and satillite providers get more dough.

Mexico becomes the big winner in the ongoing tension between the US and China.

AI and regulations will be in the news. There are 12-states seeking laws and reforms.

Of course, the war in Europe and the Middle East could get worse.

Basel III was suppose to force banking to rein in leverage. It has become a campaign promise. Stock market debt is way too high. Any pullback could force margin calls. By the way, the first bank failure came at the end of April.

The Fed Chairman, Powell says, "Inflation will be much lower by the end of the year." Then, he covers his ass by saying, "...but probably won't reach the 2% target." He goes on to say, "No stagflation! He is tired of answering that question."

Dear Reader, when inflation is higher than your income, you are in stagflation. When inflation is higher than your GDP, your economy is in stagflation. Sebastian reminds us that he pointed out that we are in stagflation for our economy since the beginning of 2022. Beside our ongoing meme, End the Fed, we now add this. Gordon Johnson, financial analyst, calls Powell, "The Gaslighter-in-Chief." Peace.

 

Icon, Chips & Odds and Ends

The calendar caught us offguard. This last monthly piece will not fully address odds and ends to the economy, politics and related matters such as the Federal Reserve announcement today. However, we read this in the news and it is a must for many reasons. 

Icon

The USS Enterprise (CVN-65) is being decommissioned. The famous, first nuclear-powered aircraft carrier will be dismantled. I have not heard from Captain Kirk. I'm sure the name will be resurrected as it was with the original, famous WWII carrier. With that said, I fear two aspects. It is why I am against nuclear power. The Enterprise had eight nuclear reactors. A specialty firm will be needed to end the activation of  power, remove and then, the government will ship the parts to be buried in a secret location. This leads to the heart of the problem. Nuclear rods need a safe, secure burial site. Dear Reader, there is no such thing. Everything decomposes. Everything will eventually leak. We are creating poison for the earth and all of us. This is why we are against nuclear power! 

The second reason is aircraft carriers. Using nuclear-power is a necessity in naval warfare. An enemy will resort to it and then, they will have an advantage. This gives us no choice until a better power source is developed. However, the use of aircraft carriers is obsolete. They will be easy targets for smart bombs, drones and long distance missiles. The sinking of one of these floating cities, never mind all of them, will be devastating. The loss of aircraft, pilots, naval technicians and the total cost of these vessels is beyond belief. The stupid navy leaders are using WWII technology in the 21st century. If you know anything about these idiots, hear this. Before WWI the concept of the carrier was presented to the navy department. They laughed. AfterWWI it was presented again. Again, they laughed. The grandsons of those idiots now run the pentagon. WWIII will need atomic subs, atomic drones, supersonic missiles and robots, but carriers are ancient weapons.

Chip Act

The one thing that we approve that Biden accomplished was the Chips Act. The greedy, stupid producers in our society offshored everything in their fight against unionization and more profits. The idiots at the pentagon used money and influence to develop technology in South Korea and Taiwan. This gave both nations a strong economic setting. Then, we hear this press announcement that new chip factories will be built in America.  We say, "Hallelujah!" 

Before the last echo, we read that Biden gave $6.4 billion to Samsung (South Korea) as a subsidy. We bribe a subsidized firm whose freedom we gave and now, we have to bribe them to build a necessity for our defense and economy. It is the same story with TSMC of Taiwan. They get $6.6 billion to do the same thing and they complain about technology being compromised. 

The government needs to fulfill its mission: to protect and promote the general welfare. Maybe they should start their own development of superchips? Then, they could license their creation to US firms that have factories in America. Use the profits to paydown the debt...Peace.

War, Banking News

 - "War! h'uh What is it good for? Absolutely nothin'!                                                                                     It ain't nothin' but a heartbreaker! Friend only to the undertaker...                                                           

   They say we must fight to keep our freedom. But Lord, knows there's got                                                   to be a better way...                                                       

   War! What is it good for?                                                                                                                               Stand up and shout it. Nothin'!

- War by Edwin Starr

Society is still a work in progress. With the Age of Enlightenment our so-called civilized society began settling vigorous deputes by dueling. In early American history Burr shot Hamilton. Today, the Israeli prime minister, Netanyahu slapped Iran in the face which was the historical approach for a dispute to reach the point of one's life. Israel is already in conflict with Palestine. To do a bombing mission in another nation (Syria) to show a vigorous dispute with Iran by destroying their embassy which by protocol is a nuetral site, is blantantly war-mongering. We stated in previous pieces that peace cannot come with this man in charge. He is no different than Kim in North Korea who pushes buttons because he believes that China will back him up like in the Korean War. Netanyahu bullies, pressures and commits war crimes because he believes the US will back him. We should cut him off with all aid. This will tell the good people of Israel to vote him out of office. War! What's it good for? Absolutly nothin'!

Banking

Historically, banking was needed to finance wars. Today, branch banking is a service for citizens and an aid to the economy. Central banking is the realm for war machines and their undertakings. Fiat makes it easy to which is another reason for the gold standard. Gold means that you have the money in hand. Fiat means that you can print as much as you need. With that said, the banking that we are looking at is our branch system. The results were good, but the market has underlining issues. High interest rates by the central bank has resulted in unseen losses by all banks. The banks are putting money in reserve for a possible rainy day. They will not sell these losses because then, they will have to put that in their financial statement. Banks are also losing depositors who are closing accounts to seek other financial instruments with higher yields. We start with the earnings of the big boy.

JP Morgan Chase (JPM): earnings was good, but the market wanted more. Stock fell 6%.                      Wells Fargo (WFC): great results, but the bank still has internal problems and big loss of depositors.    Citigroup (C): beat, but complained about the loss of depositors.                                                              Bank of America (BAC): beat, but stock fell due to more money being placed in reserve.                      State Street (STT): positive, continues uptrend.                                                                                          XLF: (banking etf) Shows an uptrend from last November. It pulled back with the market, but at highs.

In similar vein smaller, but still a large banks like Truist Bank announced the closing of 72 branch outlets. They will save $750 million to which they will probably need to cover some future losses like in commercial real estate.  They are not alone. Barclays is preparing pink slips to use the money for similar reasons.  We, at Evolution believe branch banking should be regulated like utilities. They are necessary, but the evil in man like greed needs to be controlled. We cannot afford more problems of too big to fail. Peace.                                                                                                                

New Tune, Same Beat

- Datadog is a new tune while Google plays a familiar beat. Politicians promise, lie and swipe. Powell has nightmares of a 70s flick. The status hold their breath, while holding the game as Ukraine goes dry without saving rain. Palestine knows that song but Israel forgot the line. Can anyone help?

- (rhyming) JFL

Last week...

we told you that the Bulls went from a meme of Dow 40K to please, hold 38,000. It didn't. However, the recent rally will provide incentive to push up the indexes again. We look at the volume. Which ever has the strongest action, they will control the market in the near-term. 

Long Term

We noticed many noted CEOs and Executives throwing out their views. Dimon of Morgan Chase worries about persistant inflation. Payne says the unexpected rise in gold is telling the market something. We, at Evolution do not have access to mainstream media. We just have you. Thank you, Lord. If we did have a large media outlet, we would say the same things that we write on a weekly basis. 

Latest Signs

Biden calls the economy strong, but Trump says it is a cesspool. We disagree. Todays results came from yesterdays actions which were effected by previous data. Neither candidate expresses the truth. If a miner discovers a bonanza, it will take ten years to see the rewards. Inflation is from printing for years. One thing that I admire about the Chinese is their patience to view long-term. We need that in America. Look no further than Boeing. How about the governor of California who is trying to fix problems that started 40-years ago? After a series of patchwork of government responses, now has their citizens paying $5.27 for a gallon of gas versus $3.54 national average.  For example, take the point in the new minimum raise of $20 per hour? Do you remember the past protest of low-paid workers with the tune, What time is it? Time for $10. Then, it was $15, which brings us to today. The real culprit is the Federal Reserve which destroys the purchasing power of the dollar. This is why we say, "End the Fed!" 

Meanwhile, other signs of the Fed's failure come to light as more and more firms go bust.

Closings

Macy's: 13 more locations to the now yearly annoucement by the shrinking giant that will be missed.    Dollar Tree & Family Dollar: 1000 stores are closing and multiply that by each store worker.                99 Cents Only: Inflation wiped out the entire franshise. You lose 371 stores and 14,000 jobs.                  Walmart: They closed 24 stores in 2023 with 6 more on the schedule for this year.                                  Barnes & Noble: You can blame Amazon or people don'r read enough. 34 dead in 23' with 6 coming.    REI: Outdoor stuff. Cites theft (hearing this more and more). Moving to new locations.                          Gap: 350 going, going, gone. Includes some sister outlet, Banana Republic.                                            Best Buy: Still deciding if 10 or 15?                                                                                                          CVS: 900 got pink slips and some outlets in Target stores.                                                                        Rite Aid: Originally 154 stores to which climbed to 231 locations.                                                            Walgreens: 100 going along with 500 jobs.                                                                                                  Party City: Declared bankruptcy! Could 850 stores be lost?                                                                      Mod Pizza: Never heard of it. I go to Toto's in SF or the Castle Hill Station in the Bronx for a corner slice.  Anyway, they had 500 spots and now, 27 less.                          

In a related aspect, Apple is laying off 600 workers in California. McKinsey cites a slowdown in demand for cutting jobs. Conagra is closing its Birds Eye facility in Wisconsin and BS the reason. Nike is dropping 1600 shoemakers. Tesla is laying off 10% of its employees. In viewing the above list, Dollar Tree no longer has one dollar items. They rased their basic price to $1.25 and some items as high as $7-bucks. In San Francisco a new ordinance is being considered. It will allow customers of grocery stores to be sued if they do not give their customers a six-month notice of closing. You call this a strong economy?  Peace.

Eclipse of the Market

- Things do not change; we change.

- Henry David Thoreau

For the past two weeks, news of the solar eclipse dominated the media. In the stock market there was another eclipse. Fed members gave forecasts that maybe the Federal Reserve will only have one rate cut instead of three and late into the year?

The solar eclipse lasted less then five minutes; the Fed market eclipse will last a lot longer. The Bulls had pushed the recent market rally with a meme of 40,000 Dow. Now, they secretly hope that support holds at 38,000. They cannot find help in the SPY. We believe it will test 497. We have already told you, Dear Reader, that this is not a true rally according to Dow Theory. The Transports have not participated. The index is still in consolidation. The bottom of the range is 1,000 points below the last high. Unlike Elon Musk who said in 2022 that we will have robo or driverless taxi's in one year, our forecasts are a little more accurate.  

Interest Rates and the Dollar

By keeping interest rates at a higher level, the Fed is playing a dangerous cat and mouse game. At the end of every month commercial real estate loans are closer to be refinanced. At present rates, many will bust like we have seen with Evergrande in China.  Once liquidation happens, there is a danger of  contagion within the commercial real estate sector. This will cause Trump to suffer economically, but his ego could use the disaster to win in November. However, a lot can happen between now and the election. Biden can benefit by saying that he kept the economy going in the face of strong inflation, higher rates by the Fed and all his legislation and efforts to keep the economic boat on an even keel. If he keeps his help to the Baltimore bridge in the news, this will be a plus. Again, too early for election predictions and we dislike both candidates. However, since we mentioned the Francis Scott Key bridge, we will throw out the BDI or shipping index. It has not budged from its low-level range. 

King $Dollar

It has rallied. Even the retrace did not reach the 103.5 level. This has kept inflation at bay, but the danger of inflation in a second wave is never far away. If the dollar falters, inflation will return. At the moment, we are seeing a strong rally in commodities. We predicted this. Truth be told. We believed a falling dollar would be the catalyst. This belief still holds. This is our point. If gold, oil and copper are all climbing in this upper level interest rate structure, how high will they fly when the US debt causes King Dollar to decline?   

Doctor Copper

It reached $4.24 last Friday. The next leg up is $4.40. Then, resistance at $4.60. If this momentum continues, it could pierce the last high at $5.00.  Here's hoping everyone had a pleasant holiday and did not pick up any virus because a doctor's visit can be expensive. Peace.