Odds and Ends: September 2024

 - Let us not look back in anger, nor forward in fear, but around us in awareness.

- JamesThurber

Fed Fake

With all the fanfare of the Fed meeting last week and the big half-point interest rate drop, the overlooked other announcement was the real one with impact. In both cases the magic was performed for the public, but the misdirection of the trick was for the banking industry. The rate drop helped banks with their losing position (underwater) of government bonds purchased at 2% and 3%. It lowered costs for large corporations issuing their own bonds. 

The quietly held second meeting gave banks what they wanted. The Basel III accord sought higher capital requirements for banks. The proposed level was 19%. The Fed always has their greedy back. They put all of us in danger because the banks are borderline insolvent. The Fed lowered the reserve level to 9%. 

Banks Know...

that they are in trouble. They have been playing manipulation by increasing mergers (54) that allow tax loopholes to make balance sheets appear better. They also have been closing branch banks (2400 last year) to cut costs along with layoffs. So, the Fed rate cut was an appetizer to the main course of lower capial requirements. Like we always say, End the Fed!

Meanwhile...

Bankruptcies continue. This one will bring tears to my mother's eyes. Tupperware filed last week. 

Middle East

The Israeli PM, Netanyahu never misses an opportunity to prove that he is an arrogant, warmonger. He keeps provocating the Arab opposition and has the gall to declare that he is justified. He knows that no matter what damage he creates, the US has his back. He is no different that the North Korean dictator who causes damage all the time because he believes that he can count on his Communist brother, China. 

Market

The rate cut gave a huge rally in the market. The Dow, S&P 500 hit new all-time highs on strong volume. It gave us here at Evolution, pause. Then, we checked with the Transports. They rallied hard, but gave up all their gains. In addition, it never came close to its last high. This is a dangerous market, but gold did hit a new all-time closing high. Yay!   Peace.

Debate and Market Trends

 - All you need in this life is ignorance and confidence and success is sure.

- Mark Twain

The Debate (Trump v. Harris)

First off, this was no debate. A debate centers on a topic. One side declares their position. The other party gets to counter and offer a reason for the counter. The first side gets a rebuttal and offers more proof of position. The opposing side gives their last chance to prove that their position is correct.

Concept of Deduction

Deductive arguments differ from nondeductive arguments in that the truth of their premises ensures the truth of their conclusion.

In the above quote by Mark Twain I would add two more features that has changed since his time. The ability to lie and use the lie in a half truth, the modern sound byte.

When a moderator offers a topic like oil and fracking, the responses are: Trump reminds us that Harris opposed fracking and her policies will destroy the oil industry. Harris says that she reconsidered her call on fracking. She no longer is against it and domestic oil production is at its highest during the Biden administration. Trump's reply. She also wants to defund the police. What debate?! 

Harris replies that Trump caused the January 6th riot. Trump replies that he asked both Pelosi and the mayor of Washington, D.C. to have the national guard on standby, but his request went unheard.  

As you can see, each spins the topic to attack the other, but they never offer any depth to their stance.

Inductive Reasoning

This is logical reasoning that involves: a general conclusion based on specific observation or evidence.

The moderator asked about the immigration problem.

Trump said the problem started with Biden and Harris who repealed his border policy. He says the reason is because these immigrants (he estimates 11 million) will identify with the Democrats, but they are really the criminals from countries who are glad that they are gone. Harris replies that there was a border bill, but Trump got his Republicans to block it. This implies that Trump only cares about himself and not the good of the nation. He wanted to use the issue to get reelected.

Trump replies the crime stats prove that these criminal immigrants like in Aurora are causing crime. He adds the illegal immigrants in Springfield are stealing and eating people's pet dogs.

We ask, When did he observe this? Is their any evidence? The half truth of immigrant gangs gets pushed aside because of the crazy accusation of "eating dogs!" As for Harris, there was no specifics in the bill other than more border guards. Her half truth.  

These types of spins go on and on. The questions themselves were not inflective to ordinary Amercicans. There were four on abortion. Our stance is this: We approve of abortion under incest, rape and other crimes. We approve to protect the life of the mother. To kill an unborn is a crime, especially when there are so many other options like adoption. Enough said. 

There was only one question on the economy. Get real! There were no questions on our national debt or the aspect that our government needs a new debt ceiling. Trump offers tax cuts. This adds to our debt. Harris is worse. Her $25,000 house assistance give away is blatantly buying votes just like Biden with his student debt forgiveness. Both candidates seek to buy votes with no understanding of the dangers of our national deficit or to the dollar as the world's reserve currency.

The take on the wars was just oppotunity to spin. Both candidates claimed victory with the debate. Amazingly, the news networks immediately had polls reflecting the debate. This is not to be believed. After the debate, Bloomberg put in large lettering on its website, "Harris calls for a cease fire." I ask, "Who doesn't?" I'm sure that pro-Trump sites had their half truths.

This is what America gets to achieve the highest office in the land? Here at Evolution, we feel that JFL would chew up both of these candidates and spit them out. This is why we do not vote. We cherish the right, but we will not validate the two corrupt political parties. Our non-vote shows our disgust. We advocate for a third political party, the Liberty Party. The platform is simple. Protect American labor and industry. End the military as a police force of the world and strive to promote the general welfare. 

Meanwhile...

The market surged up. The belief in a large rate cut coming from the Fed today was behind the thinking. The Industrials and the S&P 500 were approaching new highs last week. This might give cause to our last piece that declared the elevator is going down. We still feel conviction. The rally did not have enough volume which reflects not everyone is convinced about the uptrend. As for the candidates, we can only pray for God's help.    Peace.

"Elevator...Going Down"

 - Fortitude is the marshal of thought, the armor of the will, and the fort of reason.

- Francis Bacon

When the market hit a new all-time high in the industrials two weeks ago, it took inner strength not to buy into it. Whenever the market dropped, those who bought the dip were bragging and smiling ear-to-ear. If you believed what you read at Evolution, your worries are fading. The industrials have dropped 1200 points on strong volume since hitting the high. The elevator is going down. The price action should plow through the gap at 40,000. The real test will be at 38,500. There are the usual indicators...

SMH

The semi's are in a downtrend. They led the market up and now, they squeeze into the elevator. Microsoft is already at the highs of its lows. Google broke below its August 5th low. That's the date to observe for market tests.

King $Dollar

It bounced strongly. The question is this just a bounce or return to highs? The first sign will be at 101.75. Just the possibility gave the bears belief and the loss of faith by the bulls. We see another strange occurrence in the T-bills.

Bonds

The 2-year note sits at 3.65% while the 10-year fell to 3.71%. Some people are jumping on bonds in anticipation of the Fed cutting rates. Dear Reader, you can do better. The 3-month note is at 5.05%. You can safely collect on that until the big picture is clearer.

Meanwhile...

We keep reading about the political candidates talking about the economy. Harris lies! Trump lies! The truth is the Federal Reserve keeps destroying the value of the dollar with money printing, the root cause of inflation. This is why we predict that the retail firm, Dollar Tree will soon change their name. They are adding higher price items on their shelves to increase revenues. They also closed 1300 stores to cut costs. Maybe they cannot scrape up the money for the name change? They worry about other things like payroll, paying venders and keeping the lights on. For the weekly list of firms that cannot afford to keep the lights on, we have...

Shake Shack = closing units and possible bankruptcy.                                                                            Rubio's Coastal Grill = Closing stores and laying off workers.                                                              Rue 21 = teen apparel. Closing all 540 branches.                                                                                    Sam Ash = music chain since 1924. Sadly, closing off 42 locations.                                                        Big Lots = they are experiencing the same worries as DollarTree.

Then, we read the jobs report that says 142,000 found employment. This caused the unemployment roll to tick down to 4.2%. This is definitely a lie. It will be reformatted quietly in another month. Folks, with our population over 340 million, it takes 150,000 new jobs just to stay even. Peace. Enjoy the NFL. The first two games were action packed. Go Niners!

Odds and Ends: August 2024

When the calendar hits September 1st, you realize the year is passing and from an investment point, basically over. Looking back, our calls at Evolution have been fairly accurate. The market discounts ordinary citizens, so what we feel and know, does not count. That is a tough pill to swallow. However, we take comfort in knowing that the "experts" are wrong more than right. Sadly, those experts are the people along with lobbyists who advise the two presidential candidates. This is why our government is disconnected to both our citizens and reality. They do not have to make ends meet like we do. The proof is the continuing budget deficit. Their foolishness will be our future pain. 

Anyway, some market investors are also aware of that problem. Market price action reveals the dichotomy. The Dow hit a new all-time record last week, but the SPY could not. In addition, the transports never reached its high from November 2021. It has been in consolidation. The market has never been in a true rally according to DowTheory. As for us, the common folk of the land, we suffer with inflation. It is why we gave the name to our predicament, "stealth recession." We are not alone.

Super Mico Computer (SMCI): The stock hit an all-time high in March of this year at $1250+ and last Friday sat at $437. Ouch! How about a company that provides insurance in China? U-BX Technology (UBXG) rose to a new high last month at $36. Last Friday, the stock fell to $1.40. Ouch! No! Double ouch. Bankruptcy is the next stop. 

Answer This...

If things are so good, how come we post company-after-company, week-after-week who are either closing retail stores or laying off workers? Cisco announced 7% layoffs. GM throws another 1,000 to the unemployment line. Outback closes 41 locations and Appelbees shuts down 35 units.

Our Worry

It is not that we do not sympathize with the above loss of jobs, but here at Evolution, we are coffee drinkers. Did you realize that over half of all produced coffee beans come from just two countries? Those two, Brazil and VietNam are having climate problems that will effect production and costs. We hope that someone finds a better way to grow the beans that we love.

Nuclear

We oppose nuclear power because it is deadly to the environment and us. When we read that China is doubling down to expand the power source, we worry. We would rather read that China is researching for new, safer and better energy source. However, the Communist Party rulers lack imagination and innovation. The nation falls in line to the party line. Too bad the free thinkers from Singapore are not invited to offer a different outlook like the plan to have Singapore import solar energy from Australia. It sounds crazy, but I hope it works.   

Quiet Time?

For those who prefer a quiet night out dining, good news. Serve Robotics Serve is a chip-maker. They have developed a better robotic product that does all kinds of restaurant duties. However, we at Evolution like ambiance and love to meet new people. 

We end with on our favorite investment, Gold. Its next move might be linked to the next BRICS meeting in October. They could bring out a plan to have their currency backed with the precious metal? Maybe in collecting votes behind closed doors with a quid pro quo? The BRICS have loaned South Africa money to develop a water project.   Peace. NFL starts. Yay! Go Niners!

  

Two Conformations

Last week we talked about market price movement with the analogy of a ball moving. We ended with the word, stop. It signifies the give and take between the Bulls and the Bears. The conclusion being the market would settle into a consolidation period, waiting for something to change perspective. It came from Jackson Hole, Wy. The Fed chair, Powell kicked the ball to get it rolling again. He announced an interest rate is coming at the next meeting in September.   

Dear Reader, it does not matter the size of the rate cut. The important aspect is the change in policy. The future rate cut will break the uptrend in interest rates. History shows that the Fed follows a pattern. When they raise rates, it develops a channel rising. By the same token, when they cut, rates go staight down. This kicking of the ball sets many other things in motion. We can see the most important one...

King $Dollar

It has fallen sharply from 105+ last month to 100.61 last Friday. This drop was based on the anticipation of a rate cut. The dollar experienced the same type of price action last November when the value of the dollar was 106+ and then, dropped in December to the 100 level. The rumors proved to be wrong. The dollar rose. This time is different. The price change is based on verification from the horse's mouth. The story in the dollar's value will get more juice or stall by what Powell says at the September meeting. We believe the dollar will test the last low of 99 and consolidate until the word is given. If the market believes that more rate cuts are coming, the dollar will test the next level down at 89. Powell does not want that to happen because the...

Market could explode. The lower rates will help housing. We can see the anticipation in two large home builders. Toll Brothers and Lenar rose to all-time highs. The spark of lower rates will help commercial loans that are in do-do. Job layoffs will stop and turn to hiring. This all sounds good. Even the two presidential candidates will spin off these developments. Harris will say the Democrats plan is working. Trump will say the economy is responding to his projected victory. Neither will mention the second confirmation. Powell gave us the first one. The truth is just like rate increases take time to be felt, so does rate cuts. However, the value of the dollar is effected right away. The falling value will enact the second confirmation.

Inflation!

The dollar is central to world trade and commodities. Gas will get expensive and if demand rises, a spike to $100 is possible. It gets worse because everything is shipped. Transportation costs rise. Producers will hike prices and shrink product size. Housing prices will rise and this will make rental prices rise. No matter how you look at it, we all will suffer another round of high prices. As we stated in an previous piece, a second wave of inflation. I suggest that you stock up on products like bathroom tissue, coffee, rice and similar items that are not perishable. To be warned is to be forearmed.   Peace.

The Ball Bounces, Rolls, Stops

The ball is the stock price. The recent rally is the bounce from the last market correction. When a ball stops bouncing, it rolls for a spell until it stops. The reason is gravity. There are more Bulls than Bears. After the bear growls, the bulls put juice back into the market. However, there is only so much juice. The energy runs out. With the knowledge of charts, we can see the strength of gravity. The chart pattern of the three black crows is being completed. A retest toward the last high, but never eclipsing it. As for the juice, it is stronger to the downside. This tells us at Evolution that another drop is coming. We believe the market will test the last correction at 38,500 of the industrials. If the price is not pierced with stronger volume, than what we stated in the previous piece, a market consolidation.

The ball is rolling until it stops. The market is waiting for something to give conviction. At the moment, it is just playing catch between the bulls and bears. 

Enter the Fed

The conviction should come from the Fed decision in September. Whatever happens, the verdict will be seen through the value of the dollar. King $Dollar broke support at 103.5. Last Friday, it closed at 102.3. The market may like a lower dollar, but so does inflation. The two fools running for the top spot only offer ideas that destroy the dollar, our standard of living and most importantly, endanger the dollar as the world's reserve currency. Our currency is becoming unhinged. Wall Street, the government and the media are like the French nobility just before the revolution except no one can afford cake. They forget that the inflationary prices are set. Our citizens cannot make ends meet. Just because they say inflation is falling, does not mean that a dozen eggs are back to $1.25. They are $2.75. Those prices are my regional costs. Yours will differ, but the point is the same. We can see the future in the price of gold. It broke a record last week at over $2500 an ounce. Gold has a value. Paper does not. The two political parties are too egotistical consisting of mostly rich lawyers who have lost touch with reality. 

This is Reality

The average home tax on Long Island, New York is $10,000. Could you afford that? If our nation were to lose the dollar as the world's reserve currency, the above number will double as well as whatever you are paying this year. What a knowledgeable candidate should propose is the necessity of a balanced budget amendment. Amen! 

By the way, last week's inflation index showed a reading of 5.7% rise in the cost for shelter. It didn't give a mention to utilities which rose everywhere in the nation like in Baltimore at 11%. Ouch! Of course, the three things that we all need everyday, food, shelter and energy are not included in the phony Fed matrix formula for inflation. The BS is because of the volatility within each. Here is the inflation level with just the three needs for life. Food rose 2.9%. Energy 2.2% and shelter up 5.7% = 3.3% for the month of July. You compound the years total and then, you can understand why we say we are in a "stealth recession." This is the sad reality of life.

A long time ago (1965) in a different life, a folk singer sang, "The Eastern world, it is explodin' Violence flarin', bullets loadin'...You can leave here for four days in space, but when you return, its the same old place: fighting and destruction all over the place...And you don't believe we're on the eve of destruction." Thank you P.F. Sloan for your true words and the voice of Barry McQuire. You won't hear that song from the Democratic convention or at a Trump rally. That is our reality. Peace. 

Market Indecision

- The market could go up or down.

- Wisdom of nonsense

Market Direction

We saw heavier volume to the downside. This has been our call since 2022 because we see our economy in stagflation. The media under the influence of the power in office, says the economy is fine with job growth and low unemployment. The government does not worry about making ends meet. This is why we need a balance budget amendment.

Of course, we need a lot of changes, but the central point that the market is evaluating is the political outcome. The winner will effect certain industries. We could care less. We have stated many times that both of our political parties are corrupt. Whoever wins will spend or tax cut until the nation wakes up one day to see the world no longer trusts us to be the world's reserve currency. The day of reckoning will have us all feel pain for a long time. Anyway, market signs are being digested. We saw the VIX rise to 65. This has only happened three times since the financial crisis of 2008. Consider all the events in the timeline from then to today - presidential changes, wars in Europe and the Middle East, COVID, bank failures and interest rates that moved from zero to over 5%. The IWM gives us a clue of stock rotation. The index has fallen big time. The Bulls have not given up. They gave the market a big bounce. The question is this, is it only a bounce because the Bears have strength when the elevator goes down? This tells us that we will probably be in a large trading range or consolidation until something happens that changes the outlook.

Meanwhile

The CEO of Nvidia, J. Huang sold $323 million of his shares just before the companies stock fell 29%. We told you last week that one analyst says an 80% drop could happen. When JFL looked at the chart of the chipmaker, he noticed many gaps. They have a tendency to be filled. Stops in the down elevator are at $96 with heavy volume. There is another at $75 and another at $68. If you purchased the stock split, put in your stop. 

Speaking of stops, beware Coke Cola. They lost a tax case that the IRS says the firm owes them $6 billion. Ouch! I don't feel sorry because the company sought to avoid paying their tax liability by putting the revenue overseas. We predict that government will crack down on firms that seek loopholes to avoid taxes as our government will become desparate for revenues.

Billionaire

Barry Sternlicht expects a bank failure at the rate of one per week due to real estate loans. In a related aspect, regional banks, PNC, Truist, Regions and Webster have decided to take their losses in low yielding bonds and use the proceeds to purchase the present higher notes.

Retail Death...

continues as Outback announced the closing of 41 locations and Appelbee's is dropping 35 units. Each week more and more firms reveal failure in their model and the catagion is extending into other industries. This is not a strong economy and the unemployment figures cannot be trusted as well as job growth numbers.

Inflation 

The second wave could arrive as the dollar broke below the confluencial point of 103.5 last week. It tried to bounce, but it could not hold price. Any fall in the dollar will help the stock market, but the inflation will hurt everyone.

In the meantime, try to enjoy the Olympics. There are many good stories like the French swimmer, Leon, Shari Richardson's marvelous effort to come from behind to win gold and the persistence of Rai Benjamin in the 400 hurdles. Gold for the Bronx/Mt Vernon athelete. Maybe the best is a poster of the great Spanish painter, Francisco Goya. His work, Two Old Men was used in reference to James and Curry of the USA basketball team. Is their an artist out there who can update the work to three old  men and add Durant?   Peace.