Back in January of this year, I reminded readers to find a nice, cheap oil stock to hold until the Fourth of July. Oil and American driving habits coincide in an upswing during this period. Everyone likes to toot their horn once in awhile. There is no praise like self-praise. I am overflowing my cup with it. However, I'm here to say that I was totally wrong on this call. I put my money where my digital mouth writes these lines. I purchased Encana (ECA). Needless to say, it is down like all oil stocks.
Recap
I did not fear the trade tensions or tariff wars. Our economy is doing fine and Americans are slow to change their habits. Driving season has not changed. Then, I considered the civil unrest in Venezuela and Libya which means less oil to the market. The Iran situation was also a kicker under geopolitics. I looked at China and they usually buy ahead of time when they sense trouble on the horizon or the extended layoff their nation endures like during the New Year celebration. Maybe they did buy as oil was rising in April? In any event, the call is wrong. Oil is down 16% for the month of May. However, the fat lady has not sung as of yet.
Reality
The slowdown effected the psyche of the market. It is why the market is up 100 points on Monday and down 100 points on Tuesday. No reasonable explanation as emotions, chart lines, volume and programs rule the exchanges. The rumors and bye-lines add to the impact. As for oil, there continues to be a build on stocks. It becomes bearish since this is a period when driving habits make for large draws on inventory.
Relief on the horizon?
The recent history of oil is reflected in the charts. Do you remember oil hitting $147 a barrel just prior to the financial crisis of 2008? Then, it began a steady decline. One could argue that decline hit a bottom in December 2016 at $26 a barrel. I am not in that camp as the trendline was broken many times during this period. With that said, a closer look at the recent price action reveals that oil has touched the $42 price level repeatedly. When it hits this price range, a reversal happens. Presently, oil is at $53.50. The 200-day average is $52.59. That line has not been pierced. It looks like it will not hold. Oil could fall to its breakout point which is $42 a barrel.
*As mentioned, oil hit $26, but then, reversed. By April of 2017 or four months later, it was $51.
*A low in June 2017 of $42. It reversed. Six months later, it was $66 in December.
*A low in December 2018 of $42. It reversed to $66 in April of this year.
This history presents the case that oil may fall and touch $42 price level. If it does and holds, this could be a triple bottom. Oil could reverse and in six months or so, we could recoup our losses. There is also the aspect of buybacks. Oil companies buyback their stock. This provides a floor. I rather see the money used to pay down debt or a dividend, but sometimes, there are deeper reasons. Maybe the company has a bond or loan and the stock must stay at certain price levels? By the way, bank stocks will drop with oil as they are on the hook for many loans to the industry.
What this data also indicates that some time in the future, due to a lack of investment, the oil stocks reserves will weaken considerably. In addition, oil futures are indicating a reversal. This is a price contradiction to the present trend. If future prices are higher under this downtrend, this means tightness in the market. The fat lady has not sung yet.
Wednesday, June 5, 2019
Wednesday, May 29, 2019
Odds and Ends - May 2019
Trade Talks
Did we call it? No trade deal! Everyone here at Evolution of Democracy agreed that China is like a leopard. The spots of integrity or lack of it when it comes to products, will always appear as theft. These people do not honor patents. The government knows this and until they can change their culture into respect for product development, there can never be a trade deal because this point is ingrained within the habits of the Chinese people. There is a recent example that demonstrates this point. A woman appeared on Shark Tank with an idea for the environmental problem of plastic straws. She has a reusable straw. The idea was well received on the show. It was also watched in China. Within two weeks a Chinses company copied and stole her idea with the new product on the market. These people are deplorable! I don't want to make more of this than it already is, but looking at the historical differences between Asian cultures, specificity, Japanese and China. They don't get along. Could a root cause be dated to historical trade deals between the two Asian powerhouses? Just a thought?
One other point. You have to give it up to the "Donald." By adding tariffs he adds revenues for the government, while at the same time, he calms the markets with positive tweets. The genius of it is that he buys time to collect data on the effects of the tariffs and pushes producers to return to our shores. Of course, this is a two edge sword. The Chinese can shift production to other Asian nations like Vietnam and still avoid paying tariffs while maintaining their economy. This shift will also damper producers to leave Asia to return to America. They can do the same technique. What we will all learn is that this offshore problem cannot be solved overnight.
Freaking Democrats
All they did was complain about the Republicans stone-walling during Obama's presidency. Nothing got done. Now, all they do is stone-wall Trump about the election in 2016. People, we are closer to the 2020 election than 2016. Stop the B.S.! The national debt is at unrepayable levels! Our once beautiful infrastructure is crumbling beneath our vehicles! We have 47-structurally deficient bridges and another 237,000 that need repairs while both are used by 178 million vehicles every day. Nothing is going to change because you call a hearing and Barr or someone else testifies. These people are just like you and playing politics hurts the nation. The Mueller Report resulted in felony charges to 34 people. It's over! Do something positive like addressing immigration, like backing the president in the trade talks to get good, high paying jobs back to America. Did you not read about the GM plant in Ohio? The 6,200 retail businesses that will close their doors in 2019? Stop reading! Just quickly compute how many people will be laid off by this terrible trend that gets worse year-after-year. This is a classic case of lack of leadership by Congress and people in authority. Sit back and look at the big picture. Help states with education no matter if blue or red. Did you not read about another school shooting in Colorado? The Iran tensions? The North Korean mercury man? The idiot socialist in Venezuela? Freaking government!
Bonds...
continue to scream inversion! It is getting like "crying wolf " so many times that no one hears the real thing. Sadly, bond inversions always appear before a recession.
Blue Lander
Amazon is developing a landing craft that could be used to not only shuttle people back-and-forth on the moon, but to colonize it. I give Bezos credit for this type of thinking and investment. With that said, how come Amazon paid no taxes in 2018 with all their profit? Tax the internet on retail sales and give brick and mortar a fairer playing field.
"We don't need no stinking badges..."
"and we don't care about spelling - money is money!" according to an Australian minister who acknowledged a spelling error in new bills of currency that were just printed, but "money is money!"
Naïve Libertarians
The point is made again as Connecticut has taken a lawsuit against the Generic Drug Industry for price fixing. This is why we need laws and government to be a watchdog in society. Man will kill, rob and do whatever for personal satisfaction. The Libertarians want no government regulations. Big Pharma is just another guilty party like the TVA price fixing back in the 1950s and many times before and after that date. I do agree in theory that less rules, less regulations and less government is more ideal. One thought in this point. Have all laws set with a time duration as in sunset laws, especially with bureaucracies. My first pick: sunset the TSA. Can I get an amen?
Colorado Gun Law
Not only violates the second amendment, but a few others along the way like the right to be secure in one's home. This law allows judges to decide if police can not only take away your gun, but to enter your home to search for weapons if the judge feels you are a danger to society. Say something against the government like you oppose war and you are a danger to society. This happened during WWI.
Sandbagging Farm Prices
Planting season has been delayed due to inclement weather and the main source of transportation, the Mississippi River being closed to transport due to flooding. Farmers are also worried about the tariffs on their crops imposed by China with the trade tensions running high. Bottom line: food prices will rise in 2020.
Corrupt Political Parties
We, at Evolution of Democracy feel America desperately needs a third political party as the two that we have are corrupt on so many levels. The latest is the democrats who accused Trevor FitzGibbon of sexual harassment. This accusation popped up after Trevor backed Bernie Sanders over Hillary in the last election campaign. It took a piece of his heart, thank you Janis Joplin, and three years to clear his name. Big business generally uses the law negatively against smaller concerns to cause financial pain to competitors, but this is a new low by our political parties.
Travel Season
No need to remind you of the increase in gasoline, regardless of what the Fed says about inflation. The 43 million cars on the road for the holiday weekend know the story. However, airlines are raising prices for airfares and increasing the cost of a checked baggage. By the way, it has been three months and counting for the quick Boeing fix for its Max 737. Southwest, United and American can read the tealeaves. They have shut down their Boeing jets with a hope for a return by August.
Corrupt Pricing
(TDM) TransDigm was caught overcharging the government, AGAIN! They were caught in 2006 for overpricing a part for the military. This company supplies parts to the military. Anyway, they said that it was a mistake and they are sorry. Problem? They have a short memory. They were not only caught on the same product, but 98 out of 100 bill notices. Libertarians, are you reading this? We need watchdogs to watch the evil side in man's nature. This company should be banned for life for their continual attempts to rip=off the government and taxpayers. Put this together with the lawsuit by Connecticut against Big Pharma and I believe every government contract should be put under the eye of a watchdog.
Fannie Mae & Freddie Mac
… are doing it again. They are buying mortgages (30%) from buyers who are not quailed to purchase a home. The debt ratio of these consumers exceeds 43% when I consider 38% to be the highest grace level. Keep in mind that the treasury still owns 80% of the two firms. Speaking of home sales, they have fallen 4.4% in the latest spring sale reports. The market has declined for 14 straight months as the price for a new home reached a new record at $342,200. Look for my report about housing in Europe which is suffering similar problems as the US market. I will be directly offending the millennials, although I don't mean to be mean. It is not all their fault, but they definitely lack a work ethnic. Until then, peace to all, especially our vets and their families.
Did we call it? No trade deal! Everyone here at Evolution of Democracy agreed that China is like a leopard. The spots of integrity or lack of it when it comes to products, will always appear as theft. These people do not honor patents. The government knows this and until they can change their culture into respect for product development, there can never be a trade deal because this point is ingrained within the habits of the Chinese people. There is a recent example that demonstrates this point. A woman appeared on Shark Tank with an idea for the environmental problem of plastic straws. She has a reusable straw. The idea was well received on the show. It was also watched in China. Within two weeks a Chinses company copied and stole her idea with the new product on the market. These people are deplorable! I don't want to make more of this than it already is, but looking at the historical differences between Asian cultures, specificity, Japanese and China. They don't get along. Could a root cause be dated to historical trade deals between the two Asian powerhouses? Just a thought?
One other point. You have to give it up to the "Donald." By adding tariffs he adds revenues for the government, while at the same time, he calms the markets with positive tweets. The genius of it is that he buys time to collect data on the effects of the tariffs and pushes producers to return to our shores. Of course, this is a two edge sword. The Chinese can shift production to other Asian nations like Vietnam and still avoid paying tariffs while maintaining their economy. This shift will also damper producers to leave Asia to return to America. They can do the same technique. What we will all learn is that this offshore problem cannot be solved overnight.
Freaking Democrats
All they did was complain about the Republicans stone-walling during Obama's presidency. Nothing got done. Now, all they do is stone-wall Trump about the election in 2016. People, we are closer to the 2020 election than 2016. Stop the B.S.! The national debt is at unrepayable levels! Our once beautiful infrastructure is crumbling beneath our vehicles! We have 47-structurally deficient bridges and another 237,000 that need repairs while both are used by 178 million vehicles every day. Nothing is going to change because you call a hearing and Barr or someone else testifies. These people are just like you and playing politics hurts the nation. The Mueller Report resulted in felony charges to 34 people. It's over! Do something positive like addressing immigration, like backing the president in the trade talks to get good, high paying jobs back to America. Did you not read about the GM plant in Ohio? The 6,200 retail businesses that will close their doors in 2019? Stop reading! Just quickly compute how many people will be laid off by this terrible trend that gets worse year-after-year. This is a classic case of lack of leadership by Congress and people in authority. Sit back and look at the big picture. Help states with education no matter if blue or red. Did you not read about another school shooting in Colorado? The Iran tensions? The North Korean mercury man? The idiot socialist in Venezuela? Freaking government!
Bonds...
continue to scream inversion! It is getting like "crying wolf " so many times that no one hears the real thing. Sadly, bond inversions always appear before a recession.
Blue Lander
Amazon is developing a landing craft that could be used to not only shuttle people back-and-forth on the moon, but to colonize it. I give Bezos credit for this type of thinking and investment. With that said, how come Amazon paid no taxes in 2018 with all their profit? Tax the internet on retail sales and give brick and mortar a fairer playing field.
"We don't need no stinking badges..."
"and we don't care about spelling - money is money!" according to an Australian minister who acknowledged a spelling error in new bills of currency that were just printed, but "money is money!"
Naïve Libertarians
The point is made again as Connecticut has taken a lawsuit against the Generic Drug Industry for price fixing. This is why we need laws and government to be a watchdog in society. Man will kill, rob and do whatever for personal satisfaction. The Libertarians want no government regulations. Big Pharma is just another guilty party like the TVA price fixing back in the 1950s and many times before and after that date. I do agree in theory that less rules, less regulations and less government is more ideal. One thought in this point. Have all laws set with a time duration as in sunset laws, especially with bureaucracies. My first pick: sunset the TSA. Can I get an amen?
Colorado Gun Law
Not only violates the second amendment, but a few others along the way like the right to be secure in one's home. This law allows judges to decide if police can not only take away your gun, but to enter your home to search for weapons if the judge feels you are a danger to society. Say something against the government like you oppose war and you are a danger to society. This happened during WWI.
Sandbagging Farm Prices
Planting season has been delayed due to inclement weather and the main source of transportation, the Mississippi River being closed to transport due to flooding. Farmers are also worried about the tariffs on their crops imposed by China with the trade tensions running high. Bottom line: food prices will rise in 2020.
Corrupt Political Parties
We, at Evolution of Democracy feel America desperately needs a third political party as the two that we have are corrupt on so many levels. The latest is the democrats who accused Trevor FitzGibbon of sexual harassment. This accusation popped up after Trevor backed Bernie Sanders over Hillary in the last election campaign. It took a piece of his heart, thank you Janis Joplin, and three years to clear his name. Big business generally uses the law negatively against smaller concerns to cause financial pain to competitors, but this is a new low by our political parties.
Travel Season
No need to remind you of the increase in gasoline, regardless of what the Fed says about inflation. The 43 million cars on the road for the holiday weekend know the story. However, airlines are raising prices for airfares and increasing the cost of a checked baggage. By the way, it has been three months and counting for the quick Boeing fix for its Max 737. Southwest, United and American can read the tealeaves. They have shut down their Boeing jets with a hope for a return by August.
Corrupt Pricing
(TDM) TransDigm was caught overcharging the government, AGAIN! They were caught in 2006 for overpricing a part for the military. This company supplies parts to the military. Anyway, they said that it was a mistake and they are sorry. Problem? They have a short memory. They were not only caught on the same product, but 98 out of 100 bill notices. Libertarians, are you reading this? We need watchdogs to watch the evil side in man's nature. This company should be banned for life for their continual attempts to rip=off the government and taxpayers. Put this together with the lawsuit by Connecticut against Big Pharma and I believe every government contract should be put under the eye of a watchdog.
Fannie Mae & Freddie Mac
… are doing it again. They are buying mortgages (30%) from buyers who are not quailed to purchase a home. The debt ratio of these consumers exceeds 43% when I consider 38% to be the highest grace level. Keep in mind that the treasury still owns 80% of the two firms. Speaking of home sales, they have fallen 4.4% in the latest spring sale reports. The market has declined for 14 straight months as the price for a new home reached a new record at $342,200. Look for my report about housing in Europe which is suffering similar problems as the US market. I will be directly offending the millennials, although I don't mean to be mean. It is not all their fault, but they definitely lack a work ethnic. Until then, peace to all, especially our vets and their families.
Wednesday, May 22, 2019
Watchdogs for the Watchdogs
We, at Evolution of Democracy have advocated for a third party in American politics for a long time. With that said, a third party has arisen from time-to-time. Generally, they don't answer the needs of the country as we see them. We need an anti-military stance, balance budget and protectionism that would makes us self-sufficient again.
At present, there are 24 democratic candidates seeking their parties nomination for the 2020 election, but not one of them has called out the military. When I say the word, "military" I am referring to the Pentagon and the " Deep State."
The military devourers 50% of our budget and they will be the root cause if our country ever goes bankrupt. Thomas Jefferson and Ben Franklin did not want or could they foresee, US military forces in over 100 countries. We have no self-interest in other nation's affairs. No one calls out the military, but every once-in-awhile a glimmer of hope comes to view. I will get to that in a moment. Now, I will direct my attention to a political train of thought as expressed by Libertarians, a third party alternative.
Libertarians
They want less government and less regulations. These people live in a Ivy Tower. Man is capable of not only stealing from his neighbor, but will kill to leave no evidence of his crime. The idea to have a watchdog on government is very, very old. Charlemagne used it back when he was crowned king in 800. The EPA is a watchdog. The problem with modern watchdogs is twofold. One, the party in power will appoint "his" people to run the agency. In essence, they will do nothing. Secondly, the word agency becomes a lie. The program becomes part of the problem with its own budget and power to continue no matter which party wins the national election. It becomes a bureaucracy.
The only positive in all this is the possibility that a good man will come forth and actually do what the intentions of the thinking in forming the agency. We have found such a person in Connecticut.
Attorney General
of the state of Connecticut investigated the costs of medical drugs, notably the generic brand which is suppose to be a cheaper version of a successful brand drug. It takes a long time and money to do these type of investigations which is another reason why so few are successful. He found out that Big Pharma is gouging the public and in some cases, beyond belief. Libertarians are you still with me? This episode will play out in the courts and Connecticut will win. The verdict will be no different than in the 1950s with the TVA and its price fixing scheme. Man will cheat unless he fears getting caught. I may agree with the idea of less government and less regulations, but reality trumps theory.
However, I will offer this idea. Make all laws sunset in nature. Give them a time period to see if they are doing what they intended to do and if they are still needed. We don't need to have unintended consequences of creating a bureaucracy like the TSA. Can I get an amen?
Now, as promised another crook being exposed. I wager to bet that almost every company doing business with the government has cut a corner in the process. Individuals are guilty too. A recent report showed that Social Security checks were being sent to over 12 million people over the age of 105. A lot of people are going to get themselves into trouble over not reporting a deceased patron. This is why I advocate for more watchdogs and even watchdogs to watch the watchdogs.
Brother, Can you spare $4,361?
Lawmakers discovered a bill from TransDigm. It was for a half-inch pin worth around $46 and they were charging $4,361!
Then, digging deeper the review found 98 out of 100 parts that were overpriced. I want to thank Bloomberg News for their part in getting this out to the public. Dear Reader and Libertarians, this particular company first became news in 2006, but no follow-up was done. Maybe because a new administration came to power? Watchdogs for the watchdogs. Maybe the whole affair could be traced to a law in 1994 designed to streamline policy pricing. What it did was to eliminate competitive pricing. Anyway, do any of the 24 candidates call out the 1994 law? The silence in American politics is deafening.
A recent list of TransDigm pricing.
*A retainer worth $32 and they charged $803.
*A "ring" which is like a gasket. The company charges $4,835 and cost around $71.
*A lug or bolt used in the F-15 jet that should cost $3, was billed at $67.
*A valve assembly to check the oil pump, costing around $369 was charging the gov't $8,819.
What I'd like to see...
The CEO get fired and serve jail time! That lawmakers enact my idea related to the individual. If 3x and you are out as a felon, then the same should be true for companies. If they commit 3x felonies, then they should be banned for life from getting a government contract. By the way, here is the follow-up to TransDigm when they made the news back in 2006. The company said that they made a mistake. The cost should have been $287. They are sorry. Yeah, but for how long?
Why, you ask? Because the same exact item was spotted again in a 2017 bill and the company charged $7,325 for the item.
Forget jail, make the CEO be a test subject for Big Pharma's new death drug!
At present, there are 24 democratic candidates seeking their parties nomination for the 2020 election, but not one of them has called out the military. When I say the word, "military" I am referring to the Pentagon and the " Deep State."
The military devourers 50% of our budget and they will be the root cause if our country ever goes bankrupt. Thomas Jefferson and Ben Franklin did not want or could they foresee, US military forces in over 100 countries. We have no self-interest in other nation's affairs. No one calls out the military, but every once-in-awhile a glimmer of hope comes to view. I will get to that in a moment. Now, I will direct my attention to a political train of thought as expressed by Libertarians, a third party alternative.
Libertarians
They want less government and less regulations. These people live in a Ivy Tower. Man is capable of not only stealing from his neighbor, but will kill to leave no evidence of his crime. The idea to have a watchdog on government is very, very old. Charlemagne used it back when he was crowned king in 800. The EPA is a watchdog. The problem with modern watchdogs is twofold. One, the party in power will appoint "his" people to run the agency. In essence, they will do nothing. Secondly, the word agency becomes a lie. The program becomes part of the problem with its own budget and power to continue no matter which party wins the national election. It becomes a bureaucracy.
The only positive in all this is the possibility that a good man will come forth and actually do what the intentions of the thinking in forming the agency. We have found such a person in Connecticut.
Attorney General
of the state of Connecticut investigated the costs of medical drugs, notably the generic brand which is suppose to be a cheaper version of a successful brand drug. It takes a long time and money to do these type of investigations which is another reason why so few are successful. He found out that Big Pharma is gouging the public and in some cases, beyond belief. Libertarians are you still with me? This episode will play out in the courts and Connecticut will win. The verdict will be no different than in the 1950s with the TVA and its price fixing scheme. Man will cheat unless he fears getting caught. I may agree with the idea of less government and less regulations, but reality trumps theory.
However, I will offer this idea. Make all laws sunset in nature. Give them a time period to see if they are doing what they intended to do and if they are still needed. We don't need to have unintended consequences of creating a bureaucracy like the TSA. Can I get an amen?
Now, as promised another crook being exposed. I wager to bet that almost every company doing business with the government has cut a corner in the process. Individuals are guilty too. A recent report showed that Social Security checks were being sent to over 12 million people over the age of 105. A lot of people are going to get themselves into trouble over not reporting a deceased patron. This is why I advocate for more watchdogs and even watchdogs to watch the watchdogs.
Brother, Can you spare $4,361?
Lawmakers discovered a bill from TransDigm. It was for a half-inch pin worth around $46 and they were charging $4,361!
Then, digging deeper the review found 98 out of 100 parts that were overpriced. I want to thank Bloomberg News for their part in getting this out to the public. Dear Reader and Libertarians, this particular company first became news in 2006, but no follow-up was done. Maybe because a new administration came to power? Watchdogs for the watchdogs. Maybe the whole affair could be traced to a law in 1994 designed to streamline policy pricing. What it did was to eliminate competitive pricing. Anyway, do any of the 24 candidates call out the 1994 law? The silence in American politics is deafening.
A recent list of TransDigm pricing.
*A retainer worth $32 and they charged $803.
*A "ring" which is like a gasket. The company charges $4,835 and cost around $71.
*A lug or bolt used in the F-15 jet that should cost $3, was billed at $67.
*A valve assembly to check the oil pump, costing around $369 was charging the gov't $8,819.
What I'd like to see...
The CEO get fired and serve jail time! That lawmakers enact my idea related to the individual. If 3x and you are out as a felon, then the same should be true for companies. If they commit 3x felonies, then they should be banned for life from getting a government contract. By the way, here is the follow-up to TransDigm when they made the news back in 2006. The company said that they made a mistake. The cost should have been $287. They are sorry. Yeah, but for how long?
Why, you ask? Because the same exact item was spotted again in a 2017 bill and the company charged $7,325 for the item.
Forget jail, make the CEO be a test subject for Big Pharma's new death drug!
Wednesday, May 15, 2019
It's Barbecue Season!
and it just got more expensive, although the Fed will never mention this food item in its report on inflation in the US.
Last summer I mentioned in an Odds and Ends piece about a swine flu appearance in Shenyang, China. A small farm had some dead pigs. Before the knowledge of the cause, this highly, contagious disease spread throughout the region. It was not contained. It crossed borders into Mongolia, Vietnam and Cambodia, all pork producing and consuming nations. It was found out to be African swine fever. Its first appearance in China has caught the nation by surprise. China produces half the world's supply and the culling has just begun, but the repercussions could extend for some time.
Year of the Pig
is generally seen as a positive sign in the Chinese zodiac, but sadly, ironically, it will mean higher pork prices for everyone.
Did you notice the cost for your Easter ham? Like I said, the Fed will never address real inflationary costs like food or energy, but the price rose from last year's low, $3.8 per pound to $4.3 per pound. People, that does not sound like much, but by the time you pay at the check-out counter, it is serious dough.
It is getting worse...
China has culled what would be an entire year's production in the US. This action will cause China's pig production to fall by 20% which would be a 17-year low. By the way China is the world leader in production with 50% of global sales. So far, there is no danger of an Ebola type transference to humans, but...
No Bacon for You.
This kills Sundays breakfast. Pork prices have risen by 20% in Spain and 17% in Germany. Prices have risen in other EU nations as well as the US.
Bottom line: China will need to import more pork. This will supersede the trade talks. Tyson has benefitted. The price action of the stock hit a low at $50 along with the rest of the stock market in December 2018. Since that point, it has rise like a rocket to $75. It could approach its high of $82. If it retraces, it usually touches $62 which would be a good entry point.
One last tidbit. Pork is the largest component in China's consumer price basket. This disease will push China's inflationary numbers past 5%. To keep Chinese consumers happy, China will have to import more pork even if the trade talks end with no results. The rally in pork has spread to other meat prices and exports. Australian beef exports rose 67% in the first quarter to China. Brazil stated that they are exporting more to China too, but no numbers were released.
I'll miss my bacon and eggs, however when it is to hot to cook, nothing beats cold cereal and milk.
Last summer I mentioned in an Odds and Ends piece about a swine flu appearance in Shenyang, China. A small farm had some dead pigs. Before the knowledge of the cause, this highly, contagious disease spread throughout the region. It was not contained. It crossed borders into Mongolia, Vietnam and Cambodia, all pork producing and consuming nations. It was found out to be African swine fever. Its first appearance in China has caught the nation by surprise. China produces half the world's supply and the culling has just begun, but the repercussions could extend for some time.
Year of the Pig
is generally seen as a positive sign in the Chinese zodiac, but sadly, ironically, it will mean higher pork prices for everyone.
Did you notice the cost for your Easter ham? Like I said, the Fed will never address real inflationary costs like food or energy, but the price rose from last year's low, $3.8 per pound to $4.3 per pound. People, that does not sound like much, but by the time you pay at the check-out counter, it is serious dough.
It is getting worse...
China has culled what would be an entire year's production in the US. This action will cause China's pig production to fall by 20% which would be a 17-year low. By the way China is the world leader in production with 50% of global sales. So far, there is no danger of an Ebola type transference to humans, but...
No Bacon for You.
This kills Sundays breakfast. Pork prices have risen by 20% in Spain and 17% in Germany. Prices have risen in other EU nations as well as the US.
Bottom line: China will need to import more pork. This will supersede the trade talks. Tyson has benefitted. The price action of the stock hit a low at $50 along with the rest of the stock market in December 2018. Since that point, it has rise like a rocket to $75. It could approach its high of $82. If it retraces, it usually touches $62 which would be a good entry point.
One last tidbit. Pork is the largest component in China's consumer price basket. This disease will push China's inflationary numbers past 5%. To keep Chinese consumers happy, China will have to import more pork even if the trade talks end with no results. The rally in pork has spread to other meat prices and exports. Australian beef exports rose 67% in the first quarter to China. Brazil stated that they are exporting more to China too, but no numbers were released.
I'll miss my bacon and eggs, however when it is to hot to cook, nothing beats cold cereal and milk.
Wednesday, May 8, 2019
OIL: It Gives and It Takes
Greetings and salutations, as I have returned from my journey into my forefathers land. Packed with new insights Dear Reader, I am ready to share with you over the coming months. We begin with the lube of all economies, Texas Tea which can take you from the country hills to Hollywood overnight.
With the Fed on pause and the world trade talks acting like a mini TV series that will never have an ending, it is time to watch the gyrations around oil. When oil is cheap, economies generally expand. When supplies are tight and the prices rise, economies generally contract. We are now in one of those sine waves.
The Fed had the gall to say inflation is below its 2% target rate. We know different. The price of gasoline has risen around .51-cents nationally since the end of February. I could add hosing and food, but why bother since the Fed never considers our daily expenses in their phony matrix inflationary gauge. It is what it is and we have to deal with it. So, at this time I bring to light what Sebastian stated back in January. He said, "Find a good, cheap oil stock and hop on it until the Fourth of July."
I ask, did you?
Oil's Outlook
If you recall, oil bounced around the low $40s until the end of the year 2018. It kept finding resistance at the low $50s. The following chart figures puts the price action in view with a window to where it may return. By the way, the final projection price is what happened during last year's driving season. Oil repeats this price action year-after-year. When oil spikes above $90, a recession soon follows. Something to think about since a red flag in bond rates has appeared.
There are two indexes. One is heavy oil(BRENT) which ironically is priced higher than sweet(WTIC) or American oil. The reason is there is more heavy and factories are set-up for this grade of oil.
* LOW High Projection
$WTIC $42. $66. $75.
$BRENT $44. $74. $86.
The projection is based on past performance. Oil is made into gasoline and it has two blends: winter and summer. We are now in the transition into summer. We are also as a society in transition into summer driving season. This is demand and demand increases the price and thus, oil companies make their profits. This is the thinking behind Sebastian's oil call. I like to trade off the charts, but I also like to blend the fundamentals into the equation. They are shaping up nicely for the sine wave to follow past price actions.
Iran Sanctions
President Trump imposed sanctions again on Iranian oil. This gave oil a price bump due to supply concerns. In addition, civil unrest in Venezuela and Libya offer a positive price fundamentals. Recently, Trump has implored Saudi Arabia to keep the price low and with American production at record levels, oil is retracing in price. This is your opportunity. I like ECA or DVN, but there are many to choose from and all should climb in price going into July. One other point. The trade talks and the prospect of tariffs will have no effect on the present trend. Currently, we have tariffs by every nation in the world, and most, are levied against US products. President Trump is right and someone needs to stand up to China which is the poster child for hypocritical stance on tariffs. However, if the talks escalate into a mean trade war, then the market tanks to which everything goes down.
In a related aspect, the Iranian oil minister recently stated that he feels OPEC could collapse. This announcement is more dissatisfaction by Iran about its fellow club members. In the last period of Iran sanctions OPEC members picked up the slack in oil production and of course, this pissed off Iran. Can it happen again? This is the billion dollar question. Saudi Arabia announced cuts in their last meeting and Russia has agreed to cut production at least until the end of June. Meanwhile, Qatar has quit the cartel. There are other rumblings due to the religious conflict of Sunnies and Shiites. Some people will say that Saudi Arabia is OPEC, but 40% of the world's production can make or break any economy. Keep an eye on OPEC proceedings.
With the Fed on pause and the world trade talks acting like a mini TV series that will never have an ending, it is time to watch the gyrations around oil. When oil is cheap, economies generally expand. When supplies are tight and the prices rise, economies generally contract. We are now in one of those sine waves.
The Fed had the gall to say inflation is below its 2% target rate. We know different. The price of gasoline has risen around .51-cents nationally since the end of February. I could add hosing and food, but why bother since the Fed never considers our daily expenses in their phony matrix inflationary gauge. It is what it is and we have to deal with it. So, at this time I bring to light what Sebastian stated back in January. He said, "Find a good, cheap oil stock and hop on it until the Fourth of July."
I ask, did you?
Oil's Outlook
If you recall, oil bounced around the low $40s until the end of the year 2018. It kept finding resistance at the low $50s. The following chart figures puts the price action in view with a window to where it may return. By the way, the final projection price is what happened during last year's driving season. Oil repeats this price action year-after-year. When oil spikes above $90, a recession soon follows. Something to think about since a red flag in bond rates has appeared.
There are two indexes. One is heavy oil(BRENT) which ironically is priced higher than sweet(WTIC) or American oil. The reason is there is more heavy and factories are set-up for this grade of oil.
* LOW High Projection
$WTIC $42. $66. $75.
$BRENT $44. $74. $86.
The projection is based on past performance. Oil is made into gasoline and it has two blends: winter and summer. We are now in the transition into summer. We are also as a society in transition into summer driving season. This is demand and demand increases the price and thus, oil companies make their profits. This is the thinking behind Sebastian's oil call. I like to trade off the charts, but I also like to blend the fundamentals into the equation. They are shaping up nicely for the sine wave to follow past price actions.
Iran Sanctions
President Trump imposed sanctions again on Iranian oil. This gave oil a price bump due to supply concerns. In addition, civil unrest in Venezuela and Libya offer a positive price fundamentals. Recently, Trump has implored Saudi Arabia to keep the price low and with American production at record levels, oil is retracing in price. This is your opportunity. I like ECA or DVN, but there are many to choose from and all should climb in price going into July. One other point. The trade talks and the prospect of tariffs will have no effect on the present trend. Currently, we have tariffs by every nation in the world, and most, are levied against US products. President Trump is right and someone needs to stand up to China which is the poster child for hypocritical stance on tariffs. However, if the talks escalate into a mean trade war, then the market tanks to which everything goes down.
In a related aspect, the Iranian oil minister recently stated that he feels OPEC could collapse. This announcement is more dissatisfaction by Iran about its fellow club members. In the last period of Iran sanctions OPEC members picked up the slack in oil production and of course, this pissed off Iran. Can it happen again? This is the billion dollar question. Saudi Arabia announced cuts in their last meeting and Russia has agreed to cut production at least until the end of June. Meanwhile, Qatar has quit the cartel. There are other rumblings due to the religious conflict of Sunnies and Shiites. Some people will say that Saudi Arabia is OPEC, but 40% of the world's production can make or break any economy. Keep an eye on OPEC proceedings.
Wednesday, April 17, 2019
Odds and Ends: April 2019
As I write this piece and you read it, the important aspect to keep in mind is the trade talks between the US and China and the US and EU. As JFL stated many times, Brexit will keep being delayed until the status quo gets what it wants. The people's vote is in name only. With that said, there are still many dots that if connected will result in changes, either good or bad. The earning season will only matter as a trend if the talks cannot reach an outcome.
Oil
OPEC's oil restrictions end in May. Do they continue? Does Russia stay with Saudi Arabia with cuts? Can President Trump influence the Saudi's like he did last year to boost production? Many questions. With the summer driving season beginning at the end of May along with the changing to summer blend of gasoline from winter's grade, will cause rising prices. How high depends on the answers to those questions as well as Iran sanctions and the weather. The world's most important commodity affects bottom lines in almost every business and of course, the consumers pocketbook.
Two truths
Jamie Dimon, CEO of J.P. Morgan Chase spoke one truth. He said, "40% of US workers make less than $15. per hour." This is why we sold more new homes with half the population in 1950 than we do today. People cannot afford housing. The purchasing power of the dollar keeps declining due to the Fed and Treasury printing more and more worthless dollars. NASA didn't need to find a blackhole. The government knows where it is. It is the 86 trash-can for reckless spending, especially the military. The other not spoken truth is gold kept the printing press in check, maintained our standard of living and the purchasing power of the dollar. Which is why I say, "End the Fed!"
By the way, even though gold has retraced and it is testing support, the silver/gold ratio has not changed. This is a contrarian play on silver.
1st Signs
We see the first signs of failure with fiat money with federal and state government. It appears as taxes. Taxes drove many businesses out of the northeast into the mid-west. Taxes pushed industry south and some kept going south into Mexico. The latest example is from New York. The state is proposing a golf tax. The tax will be put on the real value of a property as opposed to income. Dear Reader, it is not only the consumer that cannot afford housing, but state governments cannot find enough revenue to operate. They become desperate. They have unfunded pensions. They suffer with mass migration. When this happens, they cannibalize their constituents with tax after tax like in Europe. We saw the first signs in the tax overhaul in the federal government. They capped the tax deduction on state taxes at $10,000. We will see more and more of this type of thinking and action from our government. The national deficit will reach $25 trillion by the 2020 election. This is deep doo-do territory.
What We Need
Sorry about the open question. First off, we always need peace, but I'm talking about our economy and society. A recent report by the people in engineering points to a top concern on our infrastructure. They reported that there are 47 structually defient bridges in the US. In addition, there are 237,000 that need repairs. Now, get this! Both the bridges and roads are still in use by 178 million drivers every day.This is a tragedy waiting to happen.
Mueller Report
The stupid and petty leadership of the democrats cannot move on to real pressing matters. Instead, they keep clamoring about releasing the full report by Barr. Hey, the report revealed that 34 people did something illegal and they have been arrested. How about working on immigration, infrastructure, our deficit and trade relations?
More Retail Gloom
UBS reports that by 2026, another 75,000 stores will be out of business. Multiply that number by the amount of employees in each store and then, consider the related aspects like pensions, loss of revenue and the trickle effect in each region when there is less money in circulation? Not a good forecast. On the flip-side, Amazon had $10 billion in profits and paid no taxes! When is the inept leadership in Congress going to wake-up and tax internet sales? Make it an even playing field for the brick and mortar.
Finally, Did I hear someone say, yea? Wise-guy.
It is a known fact that Americans are very nomadic in nature. We move a lot. The next big nomadic push will come from high tax states to places where there is no state tax like Florida. The first push began because of the loss of work opportunities. We are losing our ability for social mobility. Ray Dalio, CEO of Bridgewater Associates, claims that low wage earners only have a 14% to move up to middle-class. This also reflects that our middle-class is shrinking and from I see with the Mueller Report, the upper class has no morals. Our positive values come from the middle-class. Anyway, people who have lived in the same home for generations are being pushed out by state taxes. In many areas the state tax is more than the original price of the home itself. At present, there are 87 million homeowners in America. Taxes rose on average by 4% in 2018 which is a more realistic inflationary number and higher than wage growth income. Also, taxes increased the average tax burden to $3498. To get a glimpse to this prediction of moving, see how the present fiat money(read worthless) does in taxes over time. We begin our sample with New York and the first county north of the city, Westchester. The average home owner tax is $17,392. OUCH! In Long Island it is $11,708.
Go across the bridge to New Jersey.
*Bergen = $11,771.
*Union = $11,075.
*Morris = $10,507.
*Passaic = $9,988.
Add in this tidbit, it cost $15 to go over the George Washington.
It is not just the northeast to which I did not include Connecticut which is also a tax nightmare. How about the West Coast? Forget housing in San Fran where everything is over a million. Go across the bridge to Marin County. Home taxes average $12,242, OUCH! I don't know the toll price, but I know it is higher than when I lived out there. This is where fiat money is taking us. The road to Zimbabwe. The road to Venezuela. The road to the Weimar Republic. Where's Bob and Bing when you need them?
Note: After this week I will take two weeks off due to Easter. May His Peace Be With You. Maybe make a donation to restore Notre Dame - to master love, you must practice love.
Oil
OPEC's oil restrictions end in May. Do they continue? Does Russia stay with Saudi Arabia with cuts? Can President Trump influence the Saudi's like he did last year to boost production? Many questions. With the summer driving season beginning at the end of May along with the changing to summer blend of gasoline from winter's grade, will cause rising prices. How high depends on the answers to those questions as well as Iran sanctions and the weather. The world's most important commodity affects bottom lines in almost every business and of course, the consumers pocketbook.
Two truths
Jamie Dimon, CEO of J.P. Morgan Chase spoke one truth. He said, "40% of US workers make less than $15. per hour." This is why we sold more new homes with half the population in 1950 than we do today. People cannot afford housing. The purchasing power of the dollar keeps declining due to the Fed and Treasury printing more and more worthless dollars. NASA didn't need to find a blackhole. The government knows where it is. It is the 86 trash-can for reckless spending, especially the military. The other not spoken truth is gold kept the printing press in check, maintained our standard of living and the purchasing power of the dollar. Which is why I say, "End the Fed!"
By the way, even though gold has retraced and it is testing support, the silver/gold ratio has not changed. This is a contrarian play on silver.
1st Signs
We see the first signs of failure with fiat money with federal and state government. It appears as taxes. Taxes drove many businesses out of the northeast into the mid-west. Taxes pushed industry south and some kept going south into Mexico. The latest example is from New York. The state is proposing a golf tax. The tax will be put on the real value of a property as opposed to income. Dear Reader, it is not only the consumer that cannot afford housing, but state governments cannot find enough revenue to operate. They become desperate. They have unfunded pensions. They suffer with mass migration. When this happens, they cannibalize their constituents with tax after tax like in Europe. We saw the first signs in the tax overhaul in the federal government. They capped the tax deduction on state taxes at $10,000. We will see more and more of this type of thinking and action from our government. The national deficit will reach $25 trillion by the 2020 election. This is deep doo-do territory.
What We Need
Sorry about the open question. First off, we always need peace, but I'm talking about our economy and society. A recent report by the people in engineering points to a top concern on our infrastructure. They reported that there are 47 structually defient bridges in the US. In addition, there are 237,000 that need repairs. Now, get this! Both the bridges and roads are still in use by 178 million drivers every day.This is a tragedy waiting to happen.
Mueller Report
The stupid and petty leadership of the democrats cannot move on to real pressing matters. Instead, they keep clamoring about releasing the full report by Barr. Hey, the report revealed that 34 people did something illegal and they have been arrested. How about working on immigration, infrastructure, our deficit and trade relations?
More Retail Gloom
UBS reports that by 2026, another 75,000 stores will be out of business. Multiply that number by the amount of employees in each store and then, consider the related aspects like pensions, loss of revenue and the trickle effect in each region when there is less money in circulation? Not a good forecast. On the flip-side, Amazon had $10 billion in profits and paid no taxes! When is the inept leadership in Congress going to wake-up and tax internet sales? Make it an even playing field for the brick and mortar.
Finally, Did I hear someone say, yea? Wise-guy.
It is a known fact that Americans are very nomadic in nature. We move a lot. The next big nomadic push will come from high tax states to places where there is no state tax like Florida. The first push began because of the loss of work opportunities. We are losing our ability for social mobility. Ray Dalio, CEO of Bridgewater Associates, claims that low wage earners only have a 14% to move up to middle-class. This also reflects that our middle-class is shrinking and from I see with the Mueller Report, the upper class has no morals. Our positive values come from the middle-class. Anyway, people who have lived in the same home for generations are being pushed out by state taxes. In many areas the state tax is more than the original price of the home itself. At present, there are 87 million homeowners in America. Taxes rose on average by 4% in 2018 which is a more realistic inflationary number and higher than wage growth income. Also, taxes increased the average tax burden to $3498. To get a glimpse to this prediction of moving, see how the present fiat money(read worthless) does in taxes over time. We begin our sample with New York and the first county north of the city, Westchester. The average home owner tax is $17,392. OUCH! In Long Island it is $11,708.
Go across the bridge to New Jersey.
*Bergen = $11,771.
*Union = $11,075.
*Morris = $10,507.
*Passaic = $9,988.
Add in this tidbit, it cost $15 to go over the George Washington.
It is not just the northeast to which I did not include Connecticut which is also a tax nightmare. How about the West Coast? Forget housing in San Fran where everything is over a million. Go across the bridge to Marin County. Home taxes average $12,242, OUCH! I don't know the toll price, but I know it is higher than when I lived out there. This is where fiat money is taking us. The road to Zimbabwe. The road to Venezuela. The road to the Weimar Republic. Where's Bob and Bing when you need them?
Note: After this week I will take two weeks off due to Easter. May His Peace Be With You. Maybe make a donation to restore Notre Dame - to master love, you must practice love.
Wednesday, April 10, 2019
Tell Me How?
The latest consumer report confirms what Sebastian has been saying for the last six months, the US consumer no longer has the means to keep buying. So, how is our economy going to grow?
Our consumer economy is slowly becoming a thing of the past. There are many signs. If you connect the various streams of evidence, you can readily understand Sebastian's outlook. Personally, I feel this is for the better, but the cause is not the root that I would like to see.
I Like
the fact that US consumer are finally saving for a rainy day. Maybe their defense mechanism kicked-in when the word got out about the 800,000 furloughed federal workers. These guys generally make middle-class wagers and they were crying the blues by just missing one paycheck. Anyway, consumer saving was up 7.6% since December 2018. This is a turn for the better. Buy real sales, not by impulse.
Same old same old
Lenders keep pushing out credit cards. There are over 430 million cards out there. The average borrower carries a running debt of $5,736. Cards in circulation are up 13% since 2015. Now, consider this survey on Americans using credit cards. Sadly, 40 million say that they expect to miss at least one monthly payment. This translates that 40 m are making the minimum payment. This also means that a $5,000 balance will end up costing the consumer, $6,372. Not good. It gets worse.
Millennials
are not buying starter homes. They are living with their parents longer than any generation. It is not all their fault. The continual depreciation of the purchasing power of the dollar has caused home prices to increase 24% over the last five years while wages are only up 8%. You can put the blame on the government and the military budget which also keeps rising with no comparative increase in wages. In a country of over 300 million, we are barely selling a million new homes a year. How about this mind blowing fact? We sold more home in 1950 with half the population than we sell in the present market. By the way, that figure includes all size homes. Just through natural growth, our population increases 150,000 every month. So, those job growth figures are miss leading also. Anything under 150K is actually revealing a declining economy. Keep in mind, so goes housing, so goes our economy.
Latest Report on Consumer Debt
Here is the most recent breakdown of US consumer debt. It is why I suggest that people are tapped out. Even if we are in transition from a consumer economy and back to a balanced consumer, there is little wiggle room to maintain buying by the consumer.
*Home loans: our mortgage debt is $9.4 trillion.
*Student loans: Kids owe $1.36 billion.
*Auto loans: The average selling vehicle is $33,000 and loans total $1.27 billion.
*Credit Cards: Are you sitting? $834 billion...and rising.
*Personal loans: Using the louse like an ATM. $291 billion.
*Retail Credit: This will eventually go on the personal credit card. More debt of $96 billion.
Out total dent is almost as large as our entire economy.
Total consumer debt= $13.3 trillion
Total GDP = $18 trillion.
Last, but not least - Store Closings
By the last announcement there are 4,810 establishments that are no longer in operation. Multiply that number by the amount of employees and one realizes that the unemployment figures are a sham. Here is a figure that they cannot manipulate. Job layoffs are up 35% in the first quarter. Our consumer can no longer sustain a consumer economy and Congress should wake up and tax the internet to give retail a fighting chance. In addition, our economy can no longer absorb low wage immigration. If this keeps up, sadly we will have civil unrest. This is not anti-immigration. It is reality. At times we can absorb and assimilate and at times we cannot. This is one of those times.
Our consumer economy is slowly becoming a thing of the past. There are many signs. If you connect the various streams of evidence, you can readily understand Sebastian's outlook. Personally, I feel this is for the better, but the cause is not the root that I would like to see.
I Like
the fact that US consumer are finally saving for a rainy day. Maybe their defense mechanism kicked-in when the word got out about the 800,000 furloughed federal workers. These guys generally make middle-class wagers and they were crying the blues by just missing one paycheck. Anyway, consumer saving was up 7.6% since December 2018. This is a turn for the better. Buy real sales, not by impulse.
Same old same old
Lenders keep pushing out credit cards. There are over 430 million cards out there. The average borrower carries a running debt of $5,736. Cards in circulation are up 13% since 2015. Now, consider this survey on Americans using credit cards. Sadly, 40 million say that they expect to miss at least one monthly payment. This translates that 40 m are making the minimum payment. This also means that a $5,000 balance will end up costing the consumer, $6,372. Not good. It gets worse.
Millennials
are not buying starter homes. They are living with their parents longer than any generation. It is not all their fault. The continual depreciation of the purchasing power of the dollar has caused home prices to increase 24% over the last five years while wages are only up 8%. You can put the blame on the government and the military budget which also keeps rising with no comparative increase in wages. In a country of over 300 million, we are barely selling a million new homes a year. How about this mind blowing fact? We sold more home in 1950 with half the population than we sell in the present market. By the way, that figure includes all size homes. Just through natural growth, our population increases 150,000 every month. So, those job growth figures are miss leading also. Anything under 150K is actually revealing a declining economy. Keep in mind, so goes housing, so goes our economy.
Latest Report on Consumer Debt
Here is the most recent breakdown of US consumer debt. It is why I suggest that people are tapped out. Even if we are in transition from a consumer economy and back to a balanced consumer, there is little wiggle room to maintain buying by the consumer.
*Home loans: our mortgage debt is $9.4 trillion.
*Student loans: Kids owe $1.36 billion.
*Auto loans: The average selling vehicle is $33,000 and loans total $1.27 billion.
*Credit Cards: Are you sitting? $834 billion...and rising.
*Personal loans: Using the louse like an ATM. $291 billion.
*Retail Credit: This will eventually go on the personal credit card. More debt of $96 billion.
Out total dent is almost as large as our entire economy.
Total consumer debt= $13.3 trillion
Total GDP = $18 trillion.
Last, but not least - Store Closings
By the last announcement there are 4,810 establishments that are no longer in operation. Multiply that number by the amount of employees and one realizes that the unemployment figures are a sham. Here is a figure that they cannot manipulate. Job layoffs are up 35% in the first quarter. Our consumer can no longer sustain a consumer economy and Congress should wake up and tax the internet to give retail a fighting chance. In addition, our economy can no longer absorb low wage immigration. If this keeps up, sadly we will have civil unrest. This is not anti-immigration. It is reality. At times we can absorb and assimilate and at times we cannot. This is one of those times.
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